Facebook and Mark Zuckerberg

By James Kwak

I must admit that I find Facebook’s impending glory a bit awkward, as it touches on two themes I have written about previously. One is that I just don’t like Facebook. And, I confess, I don’t really understand it. I sort of understand why people like it, but I don’t really understand why it’s going to be the most valuable technology company on the planet in a few years. I don’t understand why anyone would ever click on an ad within Facebook (or why anyone would even see them, since you could just use AdBlock), since I don’t understand why you would want your shopping choices to be dictated by who is willing to spend the most money for your attention. (When I want to buy something, I prefer using organic Google search results, since at least they aren’t affected by ad spending.) Maybe I’m just too old.

At the same time, it’s pretty clear by now that Facebook does whatever it is that it does pretty well. $1 billion in annual profits is impressive, and it’s also considered a pretty good place to work. And who is the CEO of Facebook? A twenty-seven-year-old kid with no other work experience. So while, as a customer (“user,” in software industry parlance), I’m less than thrilled, I can’t deny that Zuckerberg is doing something right as a CEO. Which is further evidence that the myth of the experienced CEO and the cult of the generalist manager are just a myth and a cult, as I’ve written about before. According to Reuters, Zuckerberg will soon be the fourth-richest person in America, after Bill Gates, Warren Buffett, and Larry Ellison. Which means that, like Gates and Ellison, it’s a good thing he never let anyone convince him that his company needed an experienced CEO.

49 thoughts on “Facebook and Mark Zuckerberg

  1. James – I feel the same way as you about not-clicking on ads, and about using “organic” Google search results as opposed to Google’s sponsored ad results, so I don’t really understand Google either – but they make craploads of money… Someone is clearly clicking on those ads.

  2. I live in DUMBO, in Brooklyn, which has been a very hot digerati hive. Within two blocks are office buildings within which, three or four kids with a few chairs. a few computers, seems, very week it seems, sell out for several hundred million dollars. What appears to be driving all this, of which FB is the paramount scale-out, is a conviction on the part of older business managers that they HAVE to have an online presence, although if you ask them “why,” they talk in pretty banal generalizations. Few seem able to put a yield number on their FB or other online “buy.” They just HAVE to be online – maybe because everyone else they know is. I use FB but I’ve never clicked an ad or a promotional site. What is needed, as we did back in the old days with the airlines, is a careful comparison of revenue seat-miles with available seat-miles.

  3. Facebook and twitter are nothing more than advertizing hype, they show where and when, and to whom advertizers should target, nothing more, nothing less. With a little window dressing and some fluff you can sell popsicles to eskimos in the winter. Who don’t really need the popsicle, but wants to keep up with the Jones and die with the most stuff. Its multi-profitable too, go figure.
    Tax reform, beginning with the ability of a lawmaker to do his/her own taxes, if you can’t do your own taxes, you can’t be elected, see how simple and easy that was.

  4. Wow, two major blog dudes back to back in comments. You have lots of reserves of blog love credit built up Mr. Kwak, and it’s nice to see.

    For whatever it’s worth, I 100% agree with you on the mysterious value (societal value that is) of Facebook. Although seeing that I agree with you is probably where your first inklings of self-doubt should kick off. My pet peeve is how people sign over their personal spending and viewing behavior so easily.

    Bottom line is this: Mr. Zuckerberg comes from a long genetic line of extremely intelligent people from Moses to Jesus, Einstein to Oppenheimer, from Barney Frank (the only left handed “homo” to make it to the halls of Congress that I know of, and that’s intended as compliment as it couldn’t have been an easy climb)….. we then go on to President Obama’s old “Get it done guy” Rahm Emanuel, to President Obama’s new “Get it done guy” Jacob Lew….. to many of the folks who have benefited from the 2008 Credit Crisis including Goldman Sachs, John Paulson (not because they are “inherently evil” but as they were sharp enough to pull it off)…to the last 2 dudes heading the Federal Reserve Bernanke, Greenspan…to now the soon to be crowned “King of TechWorld”……… Zuckerberg. These folks have travelled to nearly every country on planet earth and like the cream always does, risen to the top. I have no doubt they will continue to do so.

    Some will no doubt label me the “R word” for the above. That’s fine. I call it a general ability to observe the matter-of-fact laid out plain in front of my nose.

  5. Agree about the value and appeal of Facebook. More than that, because it is a closed system I find it to be a threat to the open web. And I was a little disturbed when I learned that they had moved into Sun’s old digs in Menlo Park. Something just not right about that.

  6. Customer and user are in often cases worlds or “classes” apart. For example, I am not a customer of health care plans, but I am a user. Or, I am not a user of hellfire missiles, but I am a customer.

  7. I also agree about the value, ‘utility’ being added by Facebook, although I do check in to share articles a few times per week. Side, maybe TMI, but it’s one of the best bathroom partners around, mindless stuff for an important task. However, I do feel Twitter can add much more value than FB. I’ve been cultivating a Twitter for about the past year, probaly follow around 300 newspapers, economists, bloggers, etc. and it’s a great way to catch up on news in a short time span. a lot of the noise can be filtered out, unlike FB where you’re always seeing posts/updates on tons of useless stuff, guess you could block everyone’s feed, but then what’s the point. bottom line is I would actually pay for a twitter acct where I would not pay a $1 for FB access. John

  8. Any idea what the value is of all the free advertising given to Facebook (and Twitter) by pretty much every other consumer-facing business in the developed world? (Not to mention all the free media….)

    It reminds me a lot of the bad old days of the late ’90s when everyone and his brother was tripping over themself to promote their “AOL Keyword”.

  9. The proposition that “organic Google search results” are not influenced by advertising spending strikes me as a tad naive.

  10. Actually, the “weaknesses” you mention are really strengths, because FB is best positioned to overcome those weaknesses. First, let me mention that I dislike FB, but because of implementation, and not concept. Let me start by what I understand is the basic concept.

    I think the best explanation for that is the old Nokia tagline “Connecting People”. Except, for real this time. Facebook forms the kind of connections between people no one else has come close to achieving. It is a single listing of all your friends. It is a fantastic way to find friends of friends. It is a great place to add people you may have met at the bar the previous night.

    Once you form the connection, Facebook forms great stickiness by its sharing features. You can share thoughts, ideas, events, photograpsh, videos, music. It is a conversation starter, a great way to keep in touch, setup meetings and events, share memories and experiences with friends and family.

    However, at the end of the day, what makes it really powerful is that it is a platform for connections which other 3rd party folks can tap into.

    With that in mind, you can discuss their revenue options:

    1) You are focusing on ads. Which will probably be the predominant revenue source for FB. However, unlike standard websites, they are not restricted to banner ads. They can also insert ads in your “Wall”, and your “News Feed”. So the fact that adblock can block other people’s ads, makes this space even more valuable, as it will be very hard to block.

    2) Again, as a networked platform, they are the go to platform for creating any sort of social 3rd party app. The classic example is Zynga, which has made billions by simply tapping facebook’s social opportunities.

    3) They have an amazing amount of information about people, including what they like, dislike, where they live, their age, their friends, their friends’ likes and dislikes, what events they visit, what concerts they visit, etc. If you dont think this is valuable, consider that currently all marketing is targeted usually towards “Male, 18-25”. Facebook allows Nike to target marketing of their latest Air Jordans towards everyone who has Michael Jordan as a favorite athlete. That is tremendously powerful. The targeted nature of the ads means the ads are more useful to the consumer also, which means that unlike other advertising, it’s possible that over time they will actually benefit from the advertising.

    Basically, we might reach a point where FB users will say “Hey FB, you know everything about me…Now tell me what I want to buy/do/travel to, so that I will enjoy it”.

  11. Facebook reminds me of “Playboy” of the Fifties – actual playboys were out with real women, while middle aged guys and teenage boys were looking at pictures of women. At some point, the Facebook users will discover that BEING with friends is more real than the ersatz Facebook experience.

  12. It is an interesting fact that Facebook has created a tracking and tracing system for a process that is as old as the oldest profession: and pretty much does the same thing only in reverse. If people were told they had to register their “face” along with their entire entourage of friends and family into a data base of open (and exploitable) access, they would start distributing NRA literature and talking about a Stasi State. The capacity of this system could not have ben planned and plotted, but it does have a friend to friend (peer driven) incentive…and perhaps a bit of lust and luster to its promise of internet intimacy. Nevertheless, some interesting details about “How” to grow a Global” grid were neatly solved by encouraging and facilitating this network of unconditional surrender.

    Consider these realities”

    “Network centric warfare can trace its immediate origins to 1996 when Admiral William Owens introduced the concept of a ‘system of systems’ in a paper of the same name published by the Institute National Security Studies. Owens described the serendipitous evolution of a system of intelligence sensors, command and control systems, and precision weapons that enabled enhanced situational awareness, rapid target assessment, and distributed weapon assignment.
    Also in 1996, the Joint Chiefs of Staff released Joint Vision 2010, which introduced the military concept of full-spectrum dominance. Full Spectrum Dominance described the ability of the US military to dominate the battlespace from peace operations through to the outright application of military power that stemmed from the advantages of information superiority.”


    “Network-centric warfare was followed in 2001 by Understanding Information Age Warfare (UIAW), jointly authored by Alberts, Garstka, Richard Hayes of Evidence Based Research and David S. Signori of RAND. UIAW pushed the implications of the shifts identified by network-centric warfare in order to derive an operational theory of warfare.
    Starting with a series of premises on how the environment is sensed, UIAW posits a structure of three domains. The physical domain is where events take place and are perceived by sensors and individuals. Data emerging from the physical domain is transmitted through an information domain.
    Data is subsequently received and processed by a cognitive domain where it is assessed and acted upon. The process replicates the “observe, orient, decide, act” loop first described by Col. John Boyd of the USAF.
    [edit] Power to the Edge
    The last publication dealing with the developing theory of network centric warfare appeared in 2003 with Power to the Edge, also published by the CCRP. Power to the Edge is a speculative work suggesting that modern military environments are far too complex to be understood by any one individual, organisation, or even military service.
    Modern information technology permits the rapid and effective sharing of information to such a degree that “edge entities” or those that are essentially conducting military missions themselves, should be able to “pull” information from ubiquitous repositories, rather than having centralised agencies attempt to anticipate their information needs and “push” it to them. This would imply a major flattening of traditional military hierarchies, however.
    It is not yet clear whether the vision of Power to the Edge is realisable, although Alberts and Hayes argue in the book that the establishment of the Global Information Grid is the first step to accomplishing it.
    Power To The Edge’s radical ideas had been under investigation by the Pentagon since at least 2001. In UIAW, the concept of peer-to-peer activity combined with more traditional hierarchical flow of data in the network had been introduced.”

    Network-centric warfare/operations is a cornerstone of the ongoing transformation effort at the Department of Defense initiated by former Secretary of Defense Donald Rumsfeld. It is also one of the five goals of the Office of Force Transformation, Office of the Secretary of Defense.
    See Revolution in Military Affairs for further information on what is now known as “defense transformation” or “transformation”.
    Related technologies and programs
    The US DOD has mandated that the Global Information Grid (GIG) will be the primary technical framework to support US network-centric warfare/network-centric operations.


  13. I, like James, don’t really understand Facebook. To the extent that I can find people I’ve lost touch with and would like to renew connection I can see appeal. The ability to communicate with a set of people with a particular purpose, fb seems especially functional. However, the whole ‘like’ thing strikes me as adolescent, trite and superficial. How many persons can be true friends. Well, I guess we can have multiple communities. This is still at a superficial level of human interaction. Finally, if the Zuckerberg concept is to make the world smaller, more intimate, friend-lier… that happens when people get together in the same physical space, not through any media, all of which are ultimately means of communication. Email, text messages have antecedents: multiple daily mail deliveries, telegrams. The arc is toward faster delivery rather than greater closeness. What about Facebook; its long-term value; its durability. Unless it evolves into a greater, value added service it will go down as a tech fad and fade like AOL. More likely it will re-establish as primarily an advertising medium, which will alienate some of its base, and will be subject to competition by some of the next bright dropouts’ concepts. The cycling of intellectually based tech implementations is rather rapid. This is true of most if not all services in the modern world. Tangible products have longer legs. Some advise to those who invest; don’t buy fb for at least two years, unless you’re among the privileged few with access to the IPO, in which case sell out the next day.

  14. Gees Bruce, just what are we gonna do without the jobs, and without the gates, it will take an eternity to try that again, and of course by then the resistance factor will have increase exponentially too.

  15. Here is an excerpt covering commercial exploits on-line written prior to the year 2000. (It is NOT about Fakebook, but it could be easily adjusted …and then some…to make a case):

    “…the old consumers-as-commodity model that works for mass-market magazines. You use the services and contents of the magazine or television network (or online service) to draw a large population of users, who give you detailed information about their demographics, and then you sell access to those users to advertisers. You tailor the content of the magazine or television program or online service to attract large numbers of consumers with the best demographics, you spend money on polls and focus groups to certify the demographics of your consumers, and then advertising agencies buy access to the attention of those consumers you’ve “captured.” This is the economic arm of the broadcast paradigm, extended to cyberspace,…” http://www.rheingold.com/vc/book/10.html
    from Howard Rheingold’s
    The Virtual Community
    chapter 10
    Chapter Ten: Disinformocracy
    “Virtual communities could help citizens revitalize democracy, or they could be luring us into an attractively packaged substitute for democratic discourse. A few true believers in electronic democracy have had their say. It’s time to hear from the other side. We owe it to ourselves and future generations to look closely at what the enthusiasts fail to tell us, and to listen attentively to what the skeptics fear (Ibid).”

  16. Considering the Information Technology Age…and the arrogant presumptions of information as = understanding…there is an abhorant degree of ignorance about the foundation of the “net”…
    consider: http://www.rheingold.com/vc/book/intro.html

    The Net is so widespread and anarchic today because of the way its main sources converged in the 1980s, after years of independent, apparently unrelated development, using different technologies and involving different populations of participants. The technical and social convergences were fated, but not widely foreseen, by the late 1970s.

    The wide-area CMC networks that span continents and join together thousands of smaller networks are a spinoff of American military research. The first computer network, ARPANET, was created in the 1970s so that Department of Defense-sponsored researchers could operate different computers at a distance; computer data, not person-to-person messages, were the intended content of the network, which handily happened to serve just as easily as a conduit for words. The fundamental technical idea on which ARPANET was based came from RAND, the think tank in Santa Monica that did a lot of work with top-secret thermonuclear war scenarios; ARPANET grew out of an older RAND scheme for a communication, command, and control network that could survive nuclear attack by having no central control.

    From Howard Rheingold’s
    The Virtual Community
    electronic version

  17. Once upon a time…there were Fakebooks for musicians….and the Headhunters were a popular band….

    Now there is facebook,…just a gallery of shrunken heads.

  18. One final statement from the same source worth noting (especially since it was stated over a decade ago):

    “Panopticon was the name for an ultimately effective prison, seriously proposed in eighteenth-century Britain by Jeremy Bentham. A combination of architecture and optics makes it possible in Bentham’s scheme for a single guard to see every prisoner, and for no prisoner to see anything else; the effect is that all prisoners act as if they were under surveillance at all times. Contemporary social critic Michel Foucault, in Discipline and Punish, claimed that the machinery of the worldwide communications network constitutes a kind of camouflaged Panopticon; citizens of the world brought into their homes, along with each other, the prying ears of the state. The cables that bring information into our homes today are technically capable of bringing information out of our homes, instantly transmitted to interested others. Tomorrow’s version of Panoptic machinery could make very effective use of the same communications infrastructure that enables one-room schoolhouses in Montana to communicate with MIT professors, and enables citizens to disseminate news and organize resistance to totalitarian rule. With so much of our intimate data and more and more of our private behavior moving into cyberspace, the potential for totalitarian abuse of that information web is significant and the cautions of the critics are worth a careful hearing.”
    from the Introduction:
    Howard Rheingold’s
    The Virtual Community
    electronic book edition

  19. Zuck has got the well-qualified Sheryl Sandberg in as chief operating officer, implying she is more or less running the company day-to-day (apparently the IPO banks primarily pitched to her)and is playing the professional manager role – maybe the real myth might be the myth of the one-man band once a company gets to a certain size?

  20. I think Facebook is going to be both extremely overvalued at first, and yet still potentially very valuable. Take for example Amazon’s marketing with the Kindle. I love my Kindle, and when I log on to the “store” I get suggestions of other books I might like. It’s not perfect, especially since my daughter used my kindle to read the last two Lemony Snicket books, but some of the suggestions turn out to be really good books and I bought them. I still like browsing in Barnes and Noble, and I still like browsing on Amazon on my desk top from time to time, but stuck at an airport, Amazon thinks I’ll like X and it’s only $5.99, why not. Facebook has such an amazing capacity to do the same thing in a much more complete and targeted way. Not banner ads, but actual content suggestions – you might like X, your favorite musician is Dave Matthews, he’s on tour near you etc. I’m not sure they can pull it off, it’s going to be a tightrope between being a valuable service that people like (I have certain authors that Amazon tells me when they have a new book out for example – love it) vs. becoming annoying and having people drop. That’s the opportunity Facebook has, they can do the customized marketing better than any platform ever developed, doesn’t mean they do it well and succeed. That’s what people have to understand, they are just as likely to screw it up as to not.

  21. http://www.msnbc.msn.com/id/3036789/#46250359

    3 minutes in – “…prepare the American People…”

    The guy saying it doesn’t appear to have the bona fides to prepare toast for himself in the morning – so how do these *yappers* (Grandpa’s word for them) get on TV….can we at least move them to over to in-your-face lalaland to *prepare the American People* for yet another war $$$$ adventure in the ME…?

    Foreclosures is the way they keep getting the fiat $$$$ – cash out American’s dream (100 to 1 leverage – that’s chutzpah – I’ll give Moses that point) and re-invest home ownership in *existential threat* elimination…

    Seriously, why is this whole situation with nukes NOT in the context of Mutually Assured Destruction (MAD) treaties…?

    Unbelievable censorship!!! Probably the EASIEST court case to PROVE is the *discrimination* leveled against anyone who says that what is crazy – IS authenticated *crazy* from a scientific and COMMON SENSE viewpoint…

  22. I don’t know why people take the panopticon thing seriously. That particular prison was never built and no prison functions on the basis of the panopticon. In point of fact, prisons actually function like a perfectly Hobbesian world and the guards either guard the interface between that world and the rest of society or they participate in it (or both). Foucault obviously thought it was a nifty image of modern society which, in part, is suggestive of how little he actually understood what was happening in the California society of the underclass at San Quentin about 15 miles from where he was a visiting professor.

  23. “Maybe I’m just too old”

    Everyone I know under a certain age spends enormous amounts of their time information into Facebook, not simply consuming passively, but literally collaboratively building whatever it is the kids in there are building.

    From my understanding that will be the greatest treasure trove of information in the world. Something very valuable in this mid-information age.

  24. I found this on Kid Dynamite’s twitter feed. Roughly around the 1:19 mark tells you all you need to know as an investor. And believe me, the C.h.inese are experts on crappy investments. They have a populous nation whose entire substructure is based on crappy investments.

  25. We old-timers have scrap-books, filled with photos and other personal memorabilia that were compiled well-prior to the electronic formats being offered. I’m a tactile geezer and prefer the old-fashioned media.

    having said that, to each his own…..

  26. @woop – LIVE in the moment, in the world of *information* –

    this story is MOST telling about how EASY it has become to *snark* anyone to death with psychobabble and twisted rationalizations when at the CORE of all the comments on huff-‘n-post about this 10 year old is naked hatred.

    Look how far the *adults* went with getting the Supreme Court to concoct the *ruling* of United Citizens vs. Hillary Clinton…! Hatred gone wild!

    The kids only KNOW a *virtual* life online where, unless they are the first to DESTROY anything good and NORMAL in another kid in their classroom through vicious and stupid mouth-off gossip, they will not win the game – it’s an ethical and moral nightmare – even Dante’s imaginary trip into the most hellish aspects of human iniquity didn’t imagine the hell of *virtual*…read the COMMENTS about the 10 year old – it’s a sick world…


  27. Hi Annie, lots of mean-spirited *information* bandied about on the internets :)…..that’s for sure.

    In our day, the meanness was generally limited to the classroom, playground, or clique. Now, the electronic revolution has provided a widely-enhanced dispersal, and sometimes unsettling one, for parents, especially.

    Huff and Puff has grown so banal its’ tough reading any reader comments, but even so, a little gracious reflection on the fifth grader’s achievement shouldn’t be a difficult stretch for sensible people with a bone of kindness in them.

  28. @Woop – It’s *legal* to be the bully – and even better, a collective of bullies (communism?) is now a supreme being, of sorts, a *person* with First Amendment Rights.

    My observation is that such an irrational and illogical decision had to have an irrational and illogical *feeling* (an idea-log) at it’s core…


    Agreed that parents are having a hard time explaining *adult* playground rules to kids…

    …in the meantime, I’ll place my bet that it won’t be the 10 year old girl who gets the Noble Prize for the molecule :-) even though it’s been temporally documented on the intra-nets that she put it together herself –

    that pesky time-space continuum….*cut and paste*, then *ctrl – alt- delete* and it’s MINE MINE MINE.

  29. Facebook’s revenue model is basically a high-powered, high-targeted advertising tool. It’s a great tool for small businesses, esp. those with a unique and niche audience; they can specifically target their advertising spend to reach their customers e.g. if someone on facebook talks about redecorating plans an ad for a local paint store or interior designer might come up. So the core offering that everyone thinks about – i.e. social networking, is basically just a platform for information collection, that information is the most valuable part of facebook the business. I think it is, on balance, a good development for business in terms of reducing search costs and more efficient advertising, and facebook the business has interesting potential…

  30. High target advertising is for the high income person, without the correct time slot you might as well howl at nite like an Indian looking to scare someone off. I’m certain they could use the nite time change to target all those midnite warriors moneys, but its just like payin cable co. a fat check each month when you only watch 3-5 channels of the 100+ they make you pay for.

  31. James,

    Surely you aren’t naive enough to think that organic Google search results aren’t affected by ad budgets. There is as much, if not more, money being poured in by retailers and service providers to get themselves to the top of the organic rankings as there is in paid ads. I used to do that for them. Trust me – it works/pays.

  32. http://www.economywatch.com/in-the-news/mark-zuckerberg-faces-2-billion-tax-bill.06-02.html
    Mark Zuckerberg Faces $2 Billion Tax Bill
    By: EW News Desk Team Date: 6 February 2012

    “At present, Zuckerberg owns more than 413 million class B shares in Facebook. Additionally, the Facebook co-founder also received options to buy an additional 120 million shares at 6 cents a share back in 2005. With the shares presently valued at more than $40 each, Zuckerberg could stand to earn a profit of up to $5 billion with his stock option, which would result in about $1.5 billion in federal income taxes, plus another $500 million in California income tax.”

  33. most of the value is facebook is created by the user community
    seems to me 50% gross of the IPO proceeds should be returned to users, maybe on a number of months of activity, eg you get x pennies/month of activity
    Alternatively, the users could vote to give the money to some charity

    gotta wonder why all those PC eco friendly OWS save the baby seal facebookers arn’t up in arms about how the nasty capitilists are ripping them off…

  34. By your logic I guess you never understood the success of Google, either. So the most plausible explanation is, as you said, you are too old.

    Your argument about experienced CEO is also ridiculous. These few people were all _founders_ of the company. The success of their companies can mostly be attributed to their brilliant ideas, not their great management (and when you consider how many start-ups actually failed, luck might have played a bigger role than both idea and management). Trying to use them to prove that firms like IBM or Disney don’t need seasoned executive is just, you know, nonsense. And since you didn’t like these companies, I suppose you also are not familiar with the instrumental role played by Eric Schmidt and Sheryl Sandberg, both seasoned executives.





  36. There is this whole big thing about FB being a utility and that lost of smaller web properties now depend on FB’s infrastructure to operate. I am no techie so I can only go by what they are saying but what I do know is that while people will always have a need to “connect & share” with each other, there will be newer \, more effective means that will be developed eventually ……bottom line FB can be usurped. It only takes a better mousetrap and someone somewhere is tinkering away at it.

  37. On the fallacy of “organic Google search results” see Eli Pariser on “filter bubbles.” Your Google results are not the same as everybody else’s:

Comments are closed.