(2010-05-01) Tim Oreilly The Oracle Of Silicon Valley

Tim O'Reilly: The Oracle of Silicon Valley. ...he is both -- at once Silicon Valley's leading intellectual and the founder of a growing and profitable publishing company, O'Reilly Media.

O'Reilly is worth listening to because he has been on top of nearly every important technology development of the past three decades.

Today, the future is something O'Reilly is calling Gov 2.0.

O'Reilly thinks they are the beginning of something big. "We've come to think about government as a kind of vending machine -- we put in our taxes and we get out services... But there are better things we can build than vending machines.

The vast majority of businesses are created not to produce as much wealth as possible but rather to give their founders a pleasant life and a sense of personal satisfaction. Yes, most entrepreneurs want to make money, but they are perfectly happy without making billions of dollars a year. They are not predators; they are farmers.

Read most corporate histories and you are left with a sense of the founder as master of the universe, not a mere lifestyle entrepreneur... "This is a lifestyle business that got out of control," O'Reilly said when we first met.

"My original business model -- I actually wrote this down -- was 'interesting work for interesting people.'" (interestingness)

O'Reilly's work has inspired an entire generation of entrepreneurs -- and his blog posts and essays can push big companies to drastically change course. "Tim really can make a whole industry happen," says Google CEO Eric Schmidt, who credits O'Reilly with helping to popularize the Web and says he expects O'Reilly to pull off the same trick with Gov 2.0.

Thompson, who had always imagined O'Reilly as a sort of mystic, was positively giddy. "Whenever people ask, I always describe him as the Oracle in the Matrix movies," he says. The Oracle is a humble but wise old lady who bakes cookies and has a mysterious ability to predict the future. "That's Tim," Thompson says.

Tim was a voracious reader, of historical novels, of Aristotelian philosophy, and, to his father's horror, of science fiction. At age 20, while majoring in classics at Harvard and studying ancient Greek, O'Reilly rebelled further, marrying a non-Catholic woman seven years his senior... The marriage caused a rift: He did not return home for years.

O'Reilly coped by seeking out father figures: first George Simon, a practitioner of a New Age philosophy called general semantics, which stresses a kind of introspective observation.

For much of the 1980s, O'Reilly & Associates, as it was called, was not so much a company as a collective. O'Reilly hired people like himself: smart, young generalists who seemed as if they might enjoy the challenge of learning something new. There were no full-time employees besides the founder -- just contractors, who would show up at his home when there were consulting jobs. "It was a mix of kindergarten and grownups," says Dale Dougherty, an aspiring writer whom O'Reilly brought into his tribe in 1980 and who would eventually become a 15 percent partner in the business. (O'Reilly owns the remaining 85 percent.)

O'Reilly never raised outside capital (OPM, bootstrapping); he funded his projects through profits. "There is a wonderful rigor in free-market economics," he wrote in an early company manual. "When you have to prove the value of your ideas by persuading other people to pay for them, it clears out an awful lot of woolly thinking."

Like almost everything O'Reilly Media has done since, the fortuitous decision to enter the book business -- which coincided with the rise of the personal computer and, therefore, an explosion in the market for computer books -- happened thanks to the founder's observational acuity and a series of happy accidents. O'Reilly began offering discounts to clients who allowed him to retain the copyright to the manuals he was writing for them.

As early as the late 1980s, O'Reilly was pretty sure his consulting clients would eventually want their manuals available on computer screens as e-books, and he and Dougherty began investigating ways to make that happen

In 1992, O'Reilly published The Whole Internet User's Guide & Catalog.... To market a general-interest book from a small publisher about a relatively obscure topic, O'Reilly devised a novel marketing strategy: He would turn himself into an activist. He hired the former director of activism from the Sierra Club and devised a campaign that treated the adoption of the Internet like the effort to save the rain forests. He mailed copies of the book to every member of Congress and then went on a media tour in New York City and Washington, D.C. "I was saying, 'The Internet is coming; the Internet is coming,' " he says. And O'Reilly Media had the only book that could explain it to you.

The Whole Internet sold more than a million copies, a huge windfall for the tiny publisher.

In 1992, Dougherty decided that a good way to market The Whole Internet would be to place computer kiosks in bookstores to show people what the Internet looked like. Unfortunately, there wasn't a whole lot on the Internet to see. So O'Reilly hired a team of five people to build the world's first commercial website. It featured a boxy design, multiple fonts, cheesy clip art, and advertising from the likes of MasterCard. The chief attraction was a directory of useful websites... The Global Network Navigator...It cost $2 million -- an enormous sum for a company with $7 million in revenue -- and it ate up all the company's profits for two years, causing tensions between book publishing employees and the new Web team.

he barely had enough money to run GNN, so he began meeting with venture capitalists about a possible investment. But the more VCs he talked to, the more he worried that taking other people's money might either force him to pursue uninteresting things or cause him to lose the business altogether. In 1995, O'Reilly negotiated the sale of GNN to AOL for about $14 million in stock and cash.

"Money is like gasoline during a road trip," he says. "You don't want to run out of gas on your trip, but you're not doing a tour of gas stations. You have to pay attention to money, but it shouldn't be about the money."

Chemical reactions, he says, require activation energy in order to begin, but once that happens they tend to proceed on their own. "I think there is that quality in this company," he says. "Right now, the industry is getting really excited about e-books, but we've been working on e-books for 23 years."

Overall, revenue at the company is up 20 percent from 2000, when the market for computer books peaked.

At the nadir of the dot-com bust, O'Reilly launched a subscription service called O'Reilly Safari, which allowed users to pay a monthly subscription fee to read books online. He persuaded his largest competitor, Pearson, to finance the project, and it was launched as a 50-50 joint venture. It now offers e-books from dozens of publishers and attracts tens of thousands of individual consumers who pay up to $42 a month and thousands of corporate clients that pay more.

In 2005, O'Reilly promoted his chief financial officer, Laura Baldwin, to chief operating officer and started turning over operational responsibilities.

Today, he spends most of his time gathering information -- reading blogs and webpages, checking Twitter, and taking pitch meetings with entrepreneurs. O'Reilly says his process is to look for patterns -- "faint signals," he sometimes calls them -- and to figure out what those patterns say about the future. Then he launches businesses: a conference or a new line of books. He invests in start-ups through his venture capital firm, O'Reilly AlphaTech Ventures.

Gov 2.0 is a case in pattern recognition

He published a book -- Open Government, by Daniel Lathrop and Laurel Ruma -- and launched a conference, at $995 to $1,495 a head, that attracted a sellout crowd in Washington, D.C., last September.

Beyond getting the word out about any particular idea or trend, O'Reilly says he has tried to use his company to demonstrate that being an entrepreneur can represent a means of exploring the world, one that is just as profound as religious inquiry or Greek philosophy or New Age introspection.

The real wisdom in O'Reilly's work is found in the company newsletters he wrote when O'Reilly Media was still small and its influence still slight. The best of these is a short meditation on the nature of business, published in February 1995, just as excitement about the Internet was heating up.

the banker chastises him with a metaphor. "You don't fish with strawberries," the banker says. "Even if that's what you like, fish like worms, so that's what you use."

'But that's just what we've always done: gone fishing with strawberries,' " he writes. " 'And it's worked!' "

"We seek to find what is true in ourselves...trusting that resonance to lead us to kindred spirits in the world, and them to us," O'Reilly writes.