Facebook Fiasco: The Relationships Between Business, Technology and Ourselves
“In the business world, the rear view mirror is always clearer than the windshield.”
“A nickel ain’t worth a dime anymore.”
At the time of this writing (late August, 2012), Facebook was estimated to have lost over 50 BILLION dollars in market capitalization since the time it “went public” on May 18. Now barely above half of its initial value, Facebook is the worst performer among all Dow Jones, Standard & Poor’s 500, and Nasdaq stocks since its IPO three months ago. This isn’t just a story about a stock meltdown— it unearths some realities about the relationships between business, people, and digital technology that we’d better start paying attention to.
Comments of a young entrepreneur
When Facebook stock first became available, one young investor was asked about his rationale for putting virtually everything he had into the stock. His rationale was clear, to the point, and complete: “Facebook rocks!” That was the extent of his “analysis.” As an “insider,” he couldn’t legally he unload his holdings until last week, which he did at a big loss. He’s still confused as to what went wrong.
This kind of thinking is rampant in the ranks of young entrepreneurs who swear by social media, and a lot of them are staking their futures almost exclusively on it. Many don’t realize that it’s embedded in a larger context of business, a fact that must be reckoned with. The situation involving Facebook exemplifies what happens when you don’t consider the big picture.
What happened with Facebook?
People were star struck by its popularity. Facebook has over 955 million users worldwide, which led many to assume that buying it at 38 bucks a share was going to make them an immediate fortune. There was only one direction it could go, and that would be up— or so they thought.
The more prudent investors hesitated to get involved. Having their doubts, they took a “wait and see” approach.
The skeptics were right
Numerous financial analysts warned us about this. It wasn’t clear how Facebook was going to produce an immediate profit. The advertising revenues that were assumed to start rolling in once it went public were by no means guaranteed. Anyone with a solid grounding in market research could see what might happen, but obsessions with technology have a way of disabling people’s better judgment.
Advertising is only profitable when carefully designed for specific demographic groups and then shown to be capable of stimulating buying behavior in its target audiences. This is painstaking and expensive work, and given the diversity within the population of Facebook users, this is not an enterprise from which anyone should have expected immediate gratification.
The analysts who harbored doubts about the soundness of Facebook’s business model saw its limitations, while those most enamored with it could not. Granted, Facebook will see better days as the bugs get worked out, but the current situation exemplifies the problems associated with “knee jerk” responses in the domain of business.
Another Facebook story
I recently met with another young entrepreneur (thirtyish in age) who specializes in doing customized Facebook pages for small business owners. In an attempt to boast, he described to me what he tells prospective clients who ask him to explain why he should be hired over his competition.
He seems rather proud of his stock answer, which is (and I kid you not), “One, I have a background in art, and two, they (his competition) suck!” As it turns out, his business is not doing well, which he attributes to deficiencies in the decision making of those who choose not to buy his services.
Signs of the times
I’ve been seeing a lot of this lately. People who themselves are avid users of social media rush into that market assuming that they can make big bucks off it, only to struggle or wash out completely. Many of them seem unable to “get outside of themselves” long enough to develop a functional business plan that would make it work. Some just don’t seem to think at all.
Failures in critical thinking
Digital technology, originally designed to be the means to achieve other ends, is increasingly becoming regarded as an end in itself. As this happens, people cease to engage in the critical thinking necessary for distinguishing between productive and unproductive courses of action. In business, operating in this mode can be very costly.
Take the case of Facebook stock. A lot of people simply did not ask themselves serious questions about its potential limiting factors. They entertained a naïve view that Facebook could dictate its own the future rather than being subject to other market forces, and they got burned in the process. Facebook may “rock,” but it still has to “roll” with the market forces that determine outcomes in the real world of business.
Some very disturbing societal trends
We’re now seeing cases of people are addicted to social media. This has become a focal point for research in the behavioral sciences in recent years, and some disturbing results have begun to emerge. First, it’s very real, and it functions like many other addictions. It interferes with the ability to think critically, make sound judgments, and carry on what used to be considered “normal” (face to face) social relationships.
Second, it’s prolific, occurring on a scale large enough to be of concern to parents, educators, and employers. Some are referring to its proliferation as “alarming.” Experts on personal growth and development are warning us that it is now a common time waster, a vehicle for procrastination, and is accounting for a substantial amount of waste in work settings.
Third, it’s now coming out that social media, a domain in which being “cool” is regarded as of the utmost importance, is an ideal medium within which narcissistic tendencies can find expression, fester, and grow. Just take a look at the pictures that appear on a lot of Facebook users’ pages—you’ve got to wonder what some of them are thinking.
In a recent book called The Narcissism Epidemic, psychologists Jean Twenge and Keith Campbell describe a wealth of reliable research on this syndrome, which is characterized by (1) extremely high levels of self-centeredness, and (2) a sense of entitlement.
Twenge and Campbell also tell us that measures of narcissism show that it is currently rampant in our society, and is indeed strongly concentrated in those populations that are the most avid users of social media.
Narcissism is bad for business
The sense of entitlement in particular is an exceedingly bad sign, because it predicts a lot of poor judgment and errant decision-making. This can be particularly deadly in the realm of business, as we’ve so frequently seen. The boys who ran Enron into the ground were highly narcissistic (Jeff Skilling, in particular), as was Bernie Madoff in his heyday.
Anything that might encourage narcissistic tendencies, whether that would be misguided “self esteem” curricula in our schools, or the self-promotion that so characterizes people’s use of social media, is something we need to look at very seriously.
Using social media wisely
A lot of users of social media are neither addicts nor obsessive narcissists. Many are using it to build their businesses in constructive ways— to those who are, I would offer my heartiest endorsement. Coupled with common sense and a degree of humility, it can really help business owners to establish a presence on the Internet and get on the “radar” of prospective clients.
We have however, seen the effects of social media on people are not all good, and that it has been associated with everything from bad business decisions (e.g., Facebook stock) to “cyber-bullying” among children. We do need to take its downside seriously, and never underestimate its potential for making people even more callous and shortsighted than they already are.
We’re in a society in which self-promotion is so prolific that we need to start admitting its potentials for contributing to dysfunctions that we already have enough of. Arrogance, cruelty, and entitlement have characterized the declines of the great civilizations of the past, and we shouldn’t see ourselves as exempt from their destructive effects.
Actively acknowledging the potential contributions of social media to our own demise is just as important as touting its virtues. We need to be doing both, and there is no enforcement system outside our own good judgment that we’ll be able to rely on. If we’re willing to heed the warning signs and act in accord with them, the economic hardship wrought by the Great Facebook Fiasco of 2012 will not be something that happened in vain.
It presents a real opportunity to ask ourselves some serious questions about the debacle, what it tells us about ourselves, and where we’re headed as a society. We’re sitting on a 50 billion dollar lesson here. If we don’t take advantage of it, we’re only headed for more trouble.