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By Paolo von Schirach
May 17, 2012
WASHINGTON – I am quite uneasy with the hype surrounding the Facebook IPO. I thought I was in a minority of one when I saw an equally skeptical The Wall Street Journal op-ed piece by Rich Karlgaard, Forbes publisher. (The Future Is More Than Facebook, May 17, 2012). Well, at least some seasoned observers are also not so enthused.
Facebook is the story
Facebook is “the” story. And this is all what the business media have been talking about. Saturation coverage on Bloomberg TV and CNBC. It is assumed that the IPO will be a smashing success, bringing the company to a market capitalization of over $ 100 billion. Mark Zuckerberg, Facebook founder and CEO will be worth $ 18 billion. This is truly astonishing for a company that does not make anything.
Well, not so, others would argue. “This is yet another American story of entrepreneurship appropriately rewarded”. Well, if money is the standard, that’s what it looks like. But I am still uneasy because Facebook is all about fluff. No doubt, given its exceptionally high number of users, Facebook is a great platform allowing people to socialize (I have an account). So, let’s stipulate that it is useful in creating valuable connections, and may be more. Still, Facebook is not a “product”. It does not help the economy. It does not increase productivity. Sure, you may argue that precisely because it is a neutral platform it will allow people to use it creatively and do great things through it. Who knows, may be so.
We used to reward those who made things
And yet there is a difference between this and what we used to call successful enterprise. America used to celebrate innovation that brings real economic value. As Karlgaard pointed out in his WSJ piece, Bill Gates was another young entrepreneur who became fabulously rich at an extremely early age. But he created the first mass produced operating system for personal computers. And Microsoft products have been and still are key components of the incredible IT revolution that has revolutionized most economic sectors and introduced unthinkable efficiencies worldwide. Now, this is “value”.
More recently, the more eccentric yet incredibly creative Steve Jobs revolutionized the phone and tablet experience with products that blend in all sorts of magic features. Some fluff there too, but also real value. Apple “makes things”.
Facebook is a social media platform. I do not know; but I can hardly believe that a vehicle for chatting and exchanging pictures is the best of the American innovation genius and this is why it will be so handsomely rewarded by investors who really want to have a piece of it.
the ongoing energy revolution does not get the same coverage
I can think of other industries we should be focusing on. As we speak, in the US we have a major hydrocarbon revolution. (I have written a lot about it). “Hydraulic fracturing” allows the exploitation of natural gas and oil trapped in rock formations. Thanks to “fracking” North Dakota with an oil output above 500,000 a day is now the second oil producer in America. And abundant natural gas, (a lot of it in Pennsylvania, Ohio, West Virgina and New York), is already driving down the cost of electricity, with economic benefits for tens of millions of consumers and key industries that are large users of electricity (steel), not to mention others (petro-chemicals and plastics) that use natural gas as feedstock.
And finally inexpensive natural gas will soon be used as transportation fuel, allowing America to save billions on imported oil. Now, this is big stuff. “Fracking” is a revolutionary technology that transformed the oil and gas industries. But, beyond the experts, few people know about any of this. It does not get major media coverage. Sure there is plenty of money in energy and some companies and investors are getting rich. But the hype is not with the energy that literally powers the nation. It is with Facebook, as if creating platforms for social interaction is really America’s future. Quite frankly, I hope we have more to offer.
Vertical farming
And others are offering. But nobody pays much attention. Think about those who are experimenting with vertical urban farming, a truly revolutionary way to grow food right in the middle of the cities where people live. This way we will spare the environment, minimize (precious) water consumption, while cutting down all the cost related to food production, storage, transporation and distribution. Now, this is a big deal, potentially a revolution. Ad yet, hardly a mention in the media. At best it is treated as a curiosity promoted by some eccentric people.
Too much value for a platform
Look, I do not want to diminish the importance of any innovation that may indeed enhance the quality of our lives by improving social interactions. Facebook has earned its rightful place in this sphere. Still, too much hype and too high a valuation for a company that does not make anything and does not have any content.