Michael Indergaard

Geert Lovink: Lets just start with Michael Indergaard, from New York. He is the Associate Professor at St. Johns University in sociology and anthropology, and we asked him to speak here because he published the history of the New York, New Economy, the so-called “Silicon Alley”. The book is called Silicon Alley, The Rise and fall of a New Media District and in this book he is addressing different issues concerning the New Economy. Apart from Silicon Alley he has another forthcoming book on corporate government and financial crimes. Please Michael Indergaard.

Michael Indergaard: As a sociologist I’m sort of from a different tribe than you, and I was pondering just exactly what tribe do I belong too? I was looking at my very interesting badge which of course is now all over the room; I wasn’t sure if I was representing George W. Bush or perhaps the Pope and both of these aren’t very good choices, so lets just say I’m the sociologist.

I think perhaps these little badges were a device to raise the issue of how does legacy and lineage effect identity. And it turns out that trying to specify the essential character or nature of something, in other words its identity, is a rather difficult thing to do.

My book on Silicon Alley is one of those messy kinds of works that tries to look at many different things and see how they all came together in one clump, namely, how many diverse kinds of actors and social cultural resources, in the city, were organized into this ensemble, under a particular identity.

Here is my thesis: the character of web workers, their work, and even their ideals ends up being shaped ultimately by what it is they are a part of; by what they are connected too. Which means the larger social economic systems. Based on that, I think a lot of the issues that arose in the 1990’s in places like Silicon Alley are still facing people in this field, even as the field changes quite a bit. Part of these issues are this: what will sustain their work, your work, in a material or economic sense? In terms of, who will sign your paycheck or what will pay the bills of the enterprise you work for, whether it’s for profit or not for profit. How will you gain the resources that you need to sustain what you are doing? One of the key ones I will be focusing on is how do you gain a place in the built environment, in the expensive urban real estate. The other issue, I think, is in the networks that web workers belong too. Where is the power, where is the control and how much do you have, how much did you have in the early 90s and how much can you look forward to have in the future? I will probably ask these questions without giving that many answers.

I’m guessing that there are lots of idealistic, young, web designers here. I would like to start out with the ideals and idealistic new media types once found in New York circa 1995, and these ideals you can organize around a set of expectations as well as hopes. For example, that the Internet would allow for the rise of an alternative media, and that, new media producers and users could escape corporate controls. That corporations would have lost their advantages in terms of both production and distribution, and not only that, the new media producers could produce content and expressions that were more creative and more authentic; escaping the whole mass market, mass consumption circle. Finally the New York media claimed that they had a special comparative advantage; that they were creative. That they could excel at making creative content, then in trying to make a more sophisticated version of that, they dubbed this “Creative Commercial Applications”. What they had in mind was; this is our advantage versus the tech heavy West Coast. We have the media; we are the media center of the world.

So I’m going to introduce a young idealistic web designer and I’m just going to kind of loosely follow him. This is one guy I mention in my book. This is a zine he helped found, the guy is Kyle Shannon, he was an unemployed actor who was doing desktop publishing to pay the rent. Around 1995 he formed this web zine called Urban Desires, of which this was one of the covers. The notion was that there is much in the city that is desirable. He first started with a kind of erotic notion and then he went to a more general idea talking about the dark side of our desires and wants. He also formed an association so that he would have like-minded techno bohemians to exchange ideas with and that was called the World Wide Web Artist Consortium. To show the importance of those kinds of networks for supporting these new creative sub-cultures, as well as, their life and work style; one of the people he started to get help from in this association was a fellow named Chan Suh. Within a couple of months they formed a company, a new media startup that they called Agency.com. Basically they did advertising based web design and other services and that probably was the kind of work that Silicon Alley became known for.

Ironically these new media progressives, who were so adept at creating these vivid imagery lost control. They lost control over the images, as well as the identity of the New York new media itself. And that is the story of Silicon Alley. Silicon Alley is a commercial identity.

Originally Silicon Alley was in this corridor along Broadway starting at the Flatiron district and going through Soho and Greenwich Village, the traditional bohemian area of lower Manhattan. But as you can see I have a separate little quadrant towards the bottom of lower Manhattan and this is actually the downtown financial district and this became a second center for them. And that is a somewhat novel twist for the bohemian experience in New York, to end up on Wall Street, in more ways than one.

Where did this commercial identity come from? It was produced largely by real estate interest, as well as, by the financiers, and especially the venture capitalists. With the important collaboration of the media, both the burgeoning new financial media, that we heard and saw so often, as well as Silicon Alley’s own specialized local industry newsletters and online magazines, probably the best known is the Silicon Alley Reporter, which is actually a real paper magazine.

Also contributing was a segment of the new media pioneers themselves. A segment. Those who aspired to be national contenders, if not international, or more specifically those who sought to become new media moguls. To be first movers who can dominate their market segment and be the new Bill Gates.

Now, a quick brief to layout the larger forces that set the scene here. I can only give you a slice of what is in the book of course, but I think it is useful to reflect on the era, these larger forces, and I’ll just do that briefly. One is Neo-Liberal policy in the US. One segment of that and probably the one that is most obvious is this promiscuous deregulation of finance and telecommunications sector, which really together fueled the boom; set it off, as well as the general deregulation of corporate governance. So you can make funny numbers, to make funny money. Not only did Neo-Liberalism entail this deregulation but also it also actively promoted it. That is an important thing to realize about the Neo-Liberal state, it is active. It just doesn’t retreat. In this case their active promotion, this of course was a Democratic President, the Clinton administration, actively promoting finance driven tech development.

A second major force going on was what I call the New Economy and Cultural Mobilization, in which you have these networks of intellectuals and business professors and consultants who are making the brickolage of new sensibilities in the “new rules” for the New Economy. And the one I just want to point to here that really is important in a concrete sense in Silicon Alley is the idea that you need to turn your stock into a currency. That is your weapon for getting big fast, so you can be that first mover.

Back to the local players and the making of Silicon Alley. Since the Federal Government has no direct intervention at the local level you have sort of an institutional vacuum and the two interest that filled this, were as I mentioned before, the venture capitalist and the real estate developers.

Lets take a look at the venture capitalist first. Of course it is well known what their role is supposed to be in these high-risk innovative economies. They are supposed to reduce the risk, because they are smart money on account of their networks and insider connections. But what we found out during the 1990s is that their insider connections meant that they were able to learn how to beat the market regardless of the quality of the firms they had, because they knew the financial system. They know how to shepherd them through. The pioneers in New York are Wall Street veterans who see an opportunity to challenge Silicon Valley, to challenge its flow over venture capital, and they’re thinking it sure would be nice to start directing that flow back to New York, because a lot of that money originates in New York. It just was not being targeted to New York; it was not being applied to New York.

One of them coins the name Silicon Alley in a rather obvious bid to set up this rivalry claiming we have the media, you’ve got the computers, the computers can replace the media but maybe we can compliment each other, and we’ll both be Centers.

One thing I found very interesting is the degree to which the venture capitalist did not just exploit networks they were actively creating them. They in fact helped organize Silicon Alley through connecting the diverse kinds of occupations from the new media people with corporate executives with business professionals, like accountants, as well as, of course the financiers on Wall Street. They formalized that network when they created the New York New Media Association, which I was surprised to find out was a model for a new media association in Amsterdam, but I don’t know if it was as oriented to venture capital. At its high point the New York New Media Association probably had about 8500 members, from a very wide spectrum of professionals; artist to bankers to lawyers to accountants, executives to the venture capitalists and at least one sociologist, which just tagged along of course to get some inside dope! Or I guess I should say some information, being here in Amsterdam.

Let see I… Oh the real estate connection! Well this is the reason why the new media got the foothold in Manhattan in the first place. There was a very bad recession in the early 1990s the city lost something like 300,000 jobs, 10% unemployment. Starving artists experimenting with the digital technology are able to find spaces in lower Manhattan, especially in old industrial lofts, along that Broadway corridor. But the worst area was down town in the financial district. Wall Street had a vacancy rate in 1995 of about 20%. At one point the World Trade Center was 30% vacant. That’s 11 million square feet.

This is how they end up in the financial district. One of the real estate powers down there has an abandoned, an empty 30 story building that he opens up to the new media. And he spends 40 million dollars putting in the wiring, state of the art infrastructure; invites them in, calls it the New York Information Technology Center and also launches a PR blitz and gets a lot of coverage, and that helps put the identity on the map for the general population. That was quite successful, and the public/private real estate promotion group that this guy influenced down there, decided to do a larger program, which they called “Plug ‘n’ Go”, in which they ended up wiring a total of 13 different office buildings. We’re talking office buildings now, not lofts. At the high point they had about 260 new media firms in those buildings. Here you can see in the promotion for this, you can see the commandeering of the new media imagery it is pretty blatant here, entrepreneurship as extreme sport.

I don’t know if this map turns out so well, but this map just gives you a sense of the extent of these “Plug ‘n’ Go” buildings. I think there are only 8 or 9 of them shown here. There are about 4 or 5 more than this. And you can see where it is vis-ˆ-vis the World Trade Center and where it says New York Information Technology Center; well that’s part of Wall Street.

This changes the geography of Silicon Alley at the same time that it reinforces the identity. Greatly reinforces identity. It is reinforcing and spreading this territory. And when the tech stocks later heat up many real estate interests all over Manhattan start using the presence of new media firms to change the imagery.

By late 1998 you have extensive financial networks in place to take new media starts ups to IPO’s, to their stock listed on the stock market. One thing I tried to emphasize in my book was to answer the question, what were they thinking? Were they con artists? Crooks? Were they deluded, and I think the majority of the new media entrepreneurs themselves were none of these. They were not necessarily trying to make a win fall of riches for themselves. They had a very specific set of ideas they were following and this once again couples with this New Economy doctrine: you’ve got to make your stock into a currency, you have to grow really big really fast and then you can dictate the terms of that market niche, when your the biggest fish in that pond. And that was their bid. Now in regards to the financiers I’m afraid it is a different story and that’s the other doctrine: pump and dump.

Well you get a string of huge IPO’s for Silicon Alley firms starting in the fall of 1998 running throughout 1999. In fact they had some record breaking IPO’s in the fall of 1998. They were actually the highest one-day rise in price of the stock compared to Silicon Valley firms. I think it influenced the whole tenor for the whole market and made it much worse. By late 1999 you had 28 firms in Silicon Alley ending up with a value of nearly 30 billion dollars, on paper. These are places where five years before it was two guys and a crappy machine in one room.

Of course this provided new imagery for commentary and for reinforcing the hype. This is from the Silicon Alley Reporter, they were doing a top executives issue every year and for the beginning of 2000 they entered this nice little cover here; it’s a rip off of the Sergeant Peppers Band cover, and what of course is the message here? I guess in the United States I would use the term “a double play”, meaning not only do they have a victory in the capital circuit, they are claiming a victory as cultural authorities. In fact pop culture icons, saying we’re the new wave. What’s interesting in here is the guys that are front and center, taking the place of the Fab Four, (I put in these little signs because I saw this as the value of how one got to this cultural position, noting here the value of their own personal stock in the company they helped fund), the guy over here with the dog is from Razorfish, I’m sure you’ve heard of Jeff Dachis, his amount says 190 million; what he was worth at that time. Candice Carpenter, iVillage… Okay the Double Click guy is something like 750 million. Oh! There are a couple of characters here; you see the Blues Brothers, the sunglasses; Kyle Shannon and Chan Suh. Their company by about this time has about 2000 employees with a dozen offices across the world.

After this IPO run, you have an immense flood of venture capital come into New York. To give you some perspective in 1995 the total amount of venture capital in the United States was something like 4.2 billion dollars, and that would mostly be Silicon Valley. In 2000 New York Internet alone is making that much, which is mind boggling since Silicon Valley had been there for 40 years. The total in the United States in 2000 is about 102 billion. So you know now the flood of capital behind the startup explosion.

This has an effect in terms of having an incredible multiplication of startups in Manhattan and they are starting to eat up all of the space. They’re going everywhere. In fact they are ending up even in mid-town, which is really the biggest business district. Not only did the real estate prices soar, a space crunch started and many small businesses begin to be displaced, businesses that were profitable, and employed many ordinary New Yorkers. This then began to back fire onto the new media itself. It started to become difficult for them to get space. In January of 2000 a new growth coalition formed to specifically address the new media space crunch, and it was formed by a New York Senator, Charles Schumer, and co-chaired by Robert Rubin, the former secretary of treasury under Clinton. It had a great many high-level multi-national corporations on it and it had representatives of 4 Silicon Alley firms including Agency.com.

Despite the fact that the crash came in 2000 before this group issued its report, it still went ahead and said we need massive commercial re-development in Manhattan to create more space, and they pointed to the west side of Manhattan, west of Times Square. But now the purpose was to provide space for corporations, so the whole new media thing had been used, abused and then refused, and tossed to the side and this whole thing ended up to be good old corporate deal. In fact the corporate economy kept expanding, even as new media was sinking after the stock market crash. You also had this terrible commercial and residential gentrification all over Manhattan, which was continuing to push out businesses. The places where that new media types used to live, they became full of yuppies.

The World Trade Center attacks of course changed everything and finally ended the corporate expansion and put New York into a deep recession. It ended any hopes that Silicon Alley was going to rebound and pull through this. Many of these national contenders go bankrupt, others shrink drastically, Agency.com had an interesting fate; they go private. They get purchased by a private interest so they are no longer listed on the stock market and they shrink to 80 employees.

Many of the characteristic Silicon Alley institutions fold. Silicon Alley Reporter and all of the local new media publications like that, the New York New Media Association, folded. The identity pretty much died in a sociological sense. You can say Silicon Alley died as a sociological entity, in terms of that name, that identity, and that particular ensemble with those connections to the media and to the financial district.

At the end of the book I raised the question, I said, there are lots of surviving elements of the new media in the area. There are thousands of computer firms and there are a number of institutional programs that have been started, but how could they be combined in some sort of new ensemble? I think we are starting to get one answer to that on the real estate side. A major trend seems to be this effort of large-scale real estate development projects to build around new media infrastructure and activities. And there is a conference at MIT, right now, called “New Century Cities”, which is a joint project of the Media Lab, the real estate department, and the Urban Planning department. That tells you something. They are suggesting that in many places in the world you now have these new projects that are located at the intersections of technology, urban design, and real estate development. So basically the IT and the media technologies are being woven into the design of cities. So it looks like the web design problematic is morphing, becoming more interesting for an urban sociologist, no doubt, but you have to wonder what does this portend for the people who want to work in this field?

There is a specific project that I am working with that is kind of an example of this thing, a project by the Lower Manhattan Cultural Council. And it kind of embodies the contradictions we saw in Silicon Alley in the 1990s, in that the Lower Manhattan Cultural Council’s agenda is very progressive, yet their biggest backer is that down town real estate interest, because the real estate crisis in down town is accelerating, and when the new World Trade Center is built it is just going to add more surplus capacity. So they figure they have to have and angle. They are going to have to have some sort of major identity for that place, and they are thinking its going to be a 24/7 community, a good place to work, live and play. What the Lower Manhattan Cultural Council is coming up with is, if you have new media used very interactively in the built environment you can gain those qualities. And in terms of the specific goals here you see a lot of progressive elements. They want to bring together many of the different constituencies involved to discuss and plan this, including the new media practitioners and their institutions. Also they are very interested in issues of diversity and sustainability and granting access to this areas activities for groups of people who might usually be excluded. They’ve been doing a battery of activities where they’ve been bringing in interactive artists who do things out in the streets, in interactive art installations, and often times depend upon what the audience is doing. Such as, they project onto a building and then people who walk in front of the projector end up with their images on the building and they can manipulate the images and do little plays and skits and things. This gives you an idea; this is a pitch on one of their posters. The pitch they are trying to make to the general public is; you now live in this new media world, be aware of it, seize it, use it. Very progressive. Yet, a sober reminder of the ability of the elites, when they are in these networks, to swing them to their own designs is now what is finally happening out of that big west side project that started with the mobilization to create new space for the new media. As it is becoming the new engine of New York the city has now morphed into this. An attempt, a highly controversial attempt, to have about a 5 billion dollar development, will have a 600 million dollar public subsidy by the state and city, very corporate oriented office development, maybe up to 28 million square feet and a professional football stadium.

So I think that kind of sketches out a lot of the challenges, questions and issues and thank you.

To read a clarified and extended version of this presentation please see 16 ways of thinking about web design