In some circles, it is considered the height of impertinence – make that
uncoolness – to suggest that Facebook is anything other than the most wondrous
happening in recent human history. But even if it is no more than a significant
social development – one that plays a role in the lives not only of untold
millions of individuals but also of nations, as the last year seems to have
proven – it is still one that is embodied in a specific corporation.
such, it can be measured in the standard framework of corporate analysis, in
terms of revenues, profits and so on.
From there, it is a short and
almost inevitable move to the world of finance, via a listing of the company’s
shares on the stock market – and here we are.
There was a time when this
progression, from college-dorm start-up to mega-billion market cap, would be
hailed as the very epitome of the American dream. An unknown, but smart kid,
with a great idea rises to fame and riches, indeed ultra-fame and super-riches,
by dint of providing people with something that they find sufficiently useful
that they are willing to pay for it. In the face of this sweeping, many people
want to do more than merely benefit from the idea by being customers of the firm
that sells it, they also want to become partners by investing in it (i.e. by
buying shares in the wonder-company).
However, experience demonstrates
that there are very few companies that “go public” to great fanfare and that go
on to meet the inflated expectations placed in them – or even to provide a
positive return to the investors who bought their shares via the “initial public
offering,” as it is called.
All too often, the opposite is the case – by
the time the “hot” company comes to market, its valuation has soared to levels
from which it is objectively very difficult to generate significant further
value. Such has been the experience of almost all the social networking
companies brought to market over the last year or so, but the phenomenon is much
older than social-networking and characterizes every craze, fad and mania to
sweep the stock markets of America, England and Holland over the last four
Thus, with regard to the new persona of Facebook as a
publicly-listed company, it is more likely that instead of making its investors
rich, or at least richer, it will inflict on them a loss. With regard to the
older persona of Facebook as a social development, it is safe only to say that
the jury is still out, and it should stay there a long time.
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that vast numbers of people think Facebook is great is, if anything, grounds for
suspicion that it is nothing of the sort and perhaps even the opposite. However,
the case of the Facebook detractors, that it is a mechanism for overindulgence
in ephemeral twaddle, is also unproven.
But there are other issues that
arise from the Facebook IPO, or that have been attached to this event. One is
the complaint that the slew of recent public offerings of the social networking
companies, over and above their failure from the investment perspective, have
served to highlight the fact – highly negative in this view – that these are the
kind of companies that America now specializes in – the achievement of smart
kids with clever apps, but ultimately without substance.
This argument is
part of a wider one that says, “America must regain its manufacturing
pre-eminence,” or at least some measure of manufacturing capability, if it is to
remain an economic great power – let alone the top dog. In this view,
manufacturing means making “things,” and things means physical objects, not
virtual services such as Groupon, and even Google.
Is this view
anachronistic and hence silly? Is value increasingly to be found in the virtual
world, rather than the physical one? Or is it all too valid, because if you
can’t produce goods, then you are doomed in the long run – which is what the
late Steve Jobs reportedly told US President Obama, when asked whether Apple
products could be “Made in the USA.”
Jobs said that the skills needed to
make these products have long since departed American shores and, in his
opinion, would never return. The loss of many millions of manufacturing jobs has
already changed the American economy and society – for the worse, in this view –
but if the country’s engineering and creative skills will follow them, the
implications are dire.
True believers in globalization maintain that a
developed country can leave “mere” manufacturing behind and live and prosper by
honing its ability to generate high-value elements of the corporate food-chain,
such as design, marketing, etc. The Apple that Jobs left behind is the epitome
of this vision, with its manufacturing off-shored to the developing world, but
its critical creative heart safely ensconced in California.
America – and
other developed countries, notably Israel – are currently hoping that this is a
model that can work in the long-run, but the truth is that no-one knows how the
post-industrial/ technological era will play out. For that reason alone, the
fear of over-reliance on virtual companies that sell services and have no
physical presence is understandable and probably
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