So Facebook’s just 3 days into its IPO and already lostalmost 20% of its valuation. I’d been talking to a few co-workers about this
last week, predicting there was no way it could keep a 100 billion dollar
valuation. But nobody wants to see this. In a struggling economy, Facebook was
looking to be a sign that things are good, that big moves can still happen,
that wealth was still being created. And then to have such a dismal Initial
Public Offering – it’s just another massive turd to pile onto the heap of shit
we currently call Wall Street. But it harkens back to another post I wrote
about how things have changed. How virtual everything is, how companies no
longer need to make physical products or even income to be worth absurd amounts
of money. The thing is, recently the Interweb has been sprouting a whole lot
of new billionaires. And I can't help but think that perhaps Facebook is just the first sign of a redux of the original great dot-com bubble (there's a reason Warren Buffett won't touch 'em) where companies were worth tens and hundreds and even thousands of their annual income.
In that post I talked about how the previous generation had to build something, something physical, a product or commodity that was worth only what the most basic formula for determining worth could illustrate - namely, how much it cost to build its product subtracted from how much the product sold for which is then multiplied by how many products were sold. As much as everybody tries to find new ways to get around this, tries to discover new shortcuts, invent fancy ways to create value and wealth virtually based on such unquantifiable factors as reach and cultural importance, it always comes back to this.
Let's take a company like Apple, the current business king (which had a stutter a few months back and now is blasting full speed ahead, though it stock is falling). Apple can get over hiccups because it made $26 Billion in profits in 2011 and has just had the best quarter to date. Apple's money is tied to a physical product it builds and sells to consumers. So if people want to lower Apple's values by trying to manipulate stock price by selling a bunch of shares or the price gets freakishly low due to generally incorrect human psychology, Apple can just buy them back. The basic functioning of Wall Street is that money is put into companies to make them better.
Now let's take Facebook. They made $1 Billion dollars in profits in 2011. Even more, that money isn't paid by consumers but by advertisers. Does anybody know what the first line item is to get cut in a struggling company? That's right, its ad budget. Also, has anybody heard of marketing metrics? Basically there are ways to measure how much of an impact ad have, especially over the internet. Even more, people use Facebook to talk to friends and look at pictures. It's not like an online magazine or blog where somebody is reading about something this person might decide to buy because of the content, in which case an ad for said product appearing nearby would make sense. No, Facebook is where people go to connect, not shop for shit they don't need. That's why GM is pulling their ads from Facebook.
So Apple $26B. Facebook $1B. Apple is worth about $520B. Facebook is worth $100B (per IPO). Which means people are trying to say in spite of Apple pulling in 26 times more money a year than Facebook, it's only worth 5 times more. Which is just wishful bullshit thinking.
Now yes there are a lot of other factors. Google makes its money mostly off advertising and they have nothing to worry about (though there is a growing contingent of naysayers out there). And Apple's stock has been diving as a correction of their freakish 93% rise over the past year (which one can say Facebook's drop is merely a correction to its oversized IPO valuation). But there's a very basic lesson here: Steve Jobs' Apple goes for product over hype. Their software is simply to support their hardware. The real bread and butter, the place where they've been best recognized for innovation and forward movement is in building new products that hold the software more stable, that allow accessibility anywhere, that increase creativity and possibility. A lot of people have said that Steve Jobs is the new Thomas Edison but he isn't. For all intents and purposes, Steve Jobs is more like the new Nikola Tesla but this time around, he got the credit he deserved. And, to be honest, comparing Jobs to Tesla is giving the man too much credit. Tesla is perhaps a bit closer to Leonardo Da Vinci but without the painting.
Just a few things Tesla invented: AC power. The radio. The remote control. Wireless electricity. A machine that could create lightning. The first real X-ray machines. The modern electric motor. As well as the basis for modern radar systems. Ideas for communication with extraterrestrials. He was even working on a paper about gravity (which as of yet nobody has fully explained) which was never found when he died before completion.
Tesla was born to Serbian parents to Austria. He tried his hand at formal education but found himself unable to finish. Instead he dropped out, much to the dismay of his family, traveled around, read and memorized whole books, and disowned his family (similar to Jobs' disowning his longtime girlfriend/baby mama and mostly running away from his adoptive parents). Unlike Jobs, though, Tesla had the colorful tinge of madness at all times which, when combined with genius, usually makes one's contributions less like a creative spark and more like a multi-directional explosion. He studied engineering. He traveled around, to Budapest where he worked for a telephone company. He invented whole worlds in his brain, preferring that to writing the ideas down. He invented what some think might have been the first loudspeaker. Then he moved to America where, with little more than a letter of recommendation, he got a job with Thomas Edison. Edison apparently said "If you can improve my motors and generators, I'll give you $50,000." Tesla did this and Edison said he was just joking, bestowing instead of the fifty grand a ten dollar raise. Like Jobs who was forced out of the company he made into the super force it was, Tesla wouldn't take this insult lying down and quit, preferring to dig ditches and live like a common immigrant than work for the bastard.
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| Tesla and his coil |
Tesla then started his own light bulb company and was kicked out by the investors when he kept harping on his crazy ideas about alternating current electricity (versus Edison's more-accepted direct current). He created the Tesla coil, which Frankensteins used to shoot electricity through their monsters. He experimented with vacuum tubes and discovered and experimented with early X-rays though he lost most of his research and some dude named Roentgen a few years later got the credit for inventing them.
Then Tesla really went crazy. He just couldn't stop. He invented wireless energy transmission as part of experimentation with electromagnetic energy, eventually creating the first radio transmission which was quickly covered up by the much more charismatic (read: not crazy mad scientist) Giuseppe Marconi. Tesla, almost 10 years before Marconi made his big splash, was mostly thought to be insane - I mean imagine, transporting sights and sounds through airwaves?
Eventually Tesla, now an American citizen, finally got the patents to experiment with and create powerful alternating current electricity. As the country worked on implementing a power grid, Tesla went head to head with his asshole old boss Edison. Edison had mocked Tesla's alternating current pipedream. Yet AC power could produce much more energy that could travel over much larger distances with much thinner cables. This lead to the epic War of Currents during which Edison went head to head with Westinghouse backing Tesla. Edison did everything to disprove him, from lobbying congress to executing stray dogs and cats and horses, even an elephant with AC power lines to try and show the danger of AC power. Eventually, thanks to these propaganda films America adopted the electric chair as a form of execution, even though Edison preached that he was against execution. What a dick. Yet in the end Tesla did win, one of his few victories. Tesla even pioneered hydroelectric power, helping set up an AC plant at Niagara Falls that powered the city of Buffalo, which back then was actually a happening metropolis (versus the ghost town it is now). Today AC power is used in all power lines, DC relegated to small distance-based products revolving around batteries and such.
Tesla laid the groundwork and built early induction motors. In 1898 or so he showed the US Military a boat he controlled by radio waves, thinking they might want to use it for torpedoes or such and built robots that could be controlled similarly; that is, he invented remote control. The military wasn't smart enough to begin adopting it until after WWI but as such imagine how it helped our targeting and spy tech during WWII. Tesla made a spark plug to start up internal combustion engines which is still how we start our cars.
Tesla moved to Colorado Springs to send wireless telegraphs to Paris (what a crazy idea! the predecessor to the cell phone) and experiment with the sending electricity through the ionosphere and communicating with aliens.
He made charged particle beams (like laser guns or ion cannons) and had a machine that could shoot 100+ foot bolts of lightning by tapping into the earth. He patented an idea for a vertical take off and land planes and had all the details worked out on a full theory of gravity. He became madly OCD and holed himself up in the Waldorf Astoria (would this have been Jobs' end had he lived to older age or had he never received the credit he was due - it should be noted Tesla never received the Nobel for Physics, though Marconi won it in 1912 for inventing the Radio, interesting since in 1943, a few months after Tesla's death, the US Office of Patents upheld Tesla's claim that he, in fact, was the first to invent radio, only admitting such to avoid paying Marconi's company for usage of Marconi's radio patent).
He wrote articles about science and about Post WWI Europe; rallied against the League of Nations and translated Serbian poetry. This man contributed so much to our modern era in the worlds of both theoretical and functional science, war technology and consumer technology, art and philosophy and yet people hardly know his name. He died alone in a New York hotel having received credit for easily less than half his contributions to the modern world. But he wasn't in it for glory or money, seemingly; he was in it for the love of science, for the exploration of what's possible.
Today such a man would be great, somebody truly needed to help move us forward and yet such a man doesn't seem to exist. Partially it's because of men like Tesla and Edison - these guys advanced so many brilliant ideas that to move them forward scientists feel they must specialize in one area. Also, society doesn't like the idea of a general renaissance man. Everybody speaks about specialization. Just look at schools - less and less often do they allow varying undergraduate degrees for advanced degrees and yet for your degree to be worth anything it must be particular and limited (think "Degree in Marketing" instead of "Business Degree" and, increasingly, "Degree in Business Practice in Emergine Markets"). There is hope, though. Websites like Innocentive that understand our embrace of specialization won't advance humanity since often it's hard to see clearly the object so close under your nose; that understand our drive to specialization could actually have been retarding us and are now trying to allow people from various knowledge-sets to cross-inspire. Tesla jumped around, looking to make great new products and experiments and inventions. Jobs invented the personal computer, studied with Ram Dass, created various software companies, helped pioneer computer animation, and studied calligraphy before returning to that original company which he transformed into something new and fresh and ground-breaking only thanks to having been and seen so many other things. But most important was his application to our modern lives, to making accessible all these ground-breaking innovations and such that he saw in his LSD-fueled visions (Tesla found a lot of his ideas in visions also, though his were more often associated with temporary insanity). And not only do these innoventions apply to how we currently live but also to how we should live. We should all be a bit more creative. We should be able to bring our tablets with us (while I still prefer to carry notebooks and draw by hand, I can embrace the fact that most have grown up on and prefer the computer). We should be able to share ideas through as many avenues and apps as possible. The computer and the iPhone are simply tools for improving the world around us - how many young animators and filmmakers came up creating on MacBooks (Final Cut Pro, anybody?) and how many more will begin newer, fresher artistic quests now as it becomes easier and more accessible?
Which brings me back to Facebook. What is Facebook? It enhances our life in that it allows us to communicate with each other but it's not really a good place for communicating complex ideas. That's still better done in person or over the phone. It allows us to see what the other person's up to. But is virtual socialization little more than reading a picture book published about somebody? We know what people are up to but we no longer know who they are. Which is the whole point of socialization, reaching out to somebody else's identity. Tesla didn't go for socialization, at least not as a goal. It was a means to an end. He made many interesting and diverse friends but he shared ideas and experiences and ambitions and brilliant ramblings with them. Not just a few binary-encoded quips and pictures of him on vacation that he tried to pass off as socialization. I do this, yes, this Facebook thing. And I'm not saying it's bad. It has given me access to a lot of people I would've lost complete touch with. But this online socialization cannot be everything. Facebook is a tool. Not a valuable commodity.
And now to the final point. Facebook's value. Facebook is not worth $100 billion dollars. It does not create anything. It does not advance the world. It allows for a shared narcissism coupled with a new alternative of communication, of course important. But the fact that Mark Zuckerberg, no doubt a genius, has made only one thing - a communication tool - and is now resting mostly on his laurels is surely due to the fact that he's been told this one thing is so god-awful invaluable as to ensure a legacy; that is, as inventor of Facebook he never has to do another damn thing for the rest of his fucking life. Tesla revolutionized communication by inventing the radio. Then he went on to revolutionize medicine (X-Ray). And both military and recreation in one fell swoop (radio control). And the way we power the world (just imagine what the fuck you would do if the electrical power grid shut down - food goes rotten in a few days, no more Facebook to communicate or Google to find things, hell no more cellphones). And laid the groundwork for what we currently take for granted (radar, electromagnetic understanding, communication and how Wall Street can be utilized for innovation if the bastards just would use it as such).
Facebook by itself is just one little tool. It will be replaced soon if it stays as it is. And nobody will miss it when something better comes along - and something better always comes along in the internet world. So Mark Zuckerberg, here's MY ADVICE for you:
1. Take that buttload of money you have now and that brain of yours. And start investing in real, substantial concrete-infrastructural products. A more efficient trans-continental cargo train. Better synced traffic lights. A type of annular fusion powered by plastic waste and even the waste of its own process (thanks INFINITE JEST).
2. Buy Innocentive if you wanna buy something. Because you will never be able to support your company with Instagram and other profit-less websites that, while fun, do nothing that a bunch of other applications can't do just as easily.
3. Take Facebook from being little more than a tool for virtual back-slapping and voyeurism and figure out some way for people to really share ideas, concepts, experiments over it; like a global conference room think tank limited only by the vast universe of the internet and Facebook's global reach. It's not an end but a means. Don't forget it. This is a valuable tool and you're letting it stay little more than a kid's gossip tool.
And maybe, maybe, by learning from great men like Tesla and Jobs, Zuckerberg will be able to stave off the collapse of Facebook's stock. Because the loss of $100,000,000,000 worth of valuation is the best way to ensure you return to being that geek standing outside Porcellian Club.
- Ryan
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