A Picture of Overconfidence and Recklessness

Take a cold, hard look at that picture. Do so especially if you're ever in the market to build a business, a website or -especially- a start-up development company. That picture was taken at Monday's auction of 38 Studios' effects and exactly demonstrates the overconfidence and spending recklessness that you should avoid.

Everyone by now knows of 38 Studio's fate. They were a decent studio with poor management that went down under the inquisitive eye of the Federal Government for unpaid state loans. That they went down so spectacularly is not rare; that they went down that way after the lessons of the past decade is. It happened like dominoes during the dot com crash. 20 somethings who were suddenly given millions of dollars and made CEO's overnight, spent their way into oblivion. What's mostly surprising is that those lessons were not engraved with a hot iron into the brain of anyone even thinking of touching a computer with investors money.

That picture says it all. A start-up with an unfinished game spending on graven digital countdown clocks and watches.

And it wasn't just that. In Jason Schwartz's “End Game”, a fantastic expose' on what actually happened during that time, he wrote...

The CEO also tried to rein in Schilling’s spending, doing away with ideas for company cars and cell phones. But Schilling was adamant about the rest of the perks. According to the case study, between fiscal years 2007 and 2008, the company spent more than $705,000 on “travel and entertainment,” a sum Scherlis, the former Turbine CEO, calls “wildly high.”

“It never had the culture of a startup,” says one former employee. “The message was being sent…that there was plenty of money.”
….
Schilling, meanwhile, kept up his free-spending ways. This past Christmas, he personally bought every staffer a computer tote bag with the 38 Studios logo. Add in the company’s high staffing levels, frequent gratis lunches and dinners, and big travel budget, and it was easy to forget the whole thing was a startup. “We never had that sense of urgency or panic,” Schilling tells me. “I think there was a sense of invulnerability — I don’t want to say invulnerability, but I think we were comfortable.”

And there you have it. A dead studio, it's employees literally thrown out of work, and all that is left is a headstone made up of digital countdown clocks and embroidered PC totes.