Mark Zuckerberg Asserts Control of Facebook, Pushing Aside Dissenters
wsj.com
wsj.com
They are there for the proximity to power. They scheme, connive, and work to improve their own position.
In the court of Zuckerberg, the courtiers exist at his behest, and his only. The directors who forget this are banished.
In other courts, the courtiers have more power because they can remove the CEO.
But even in courts where all of the power isn't concentrated in the CEO, heads can roll, and sycophants can be installed. Steve Jobs' return to Apple comes to mind.
More generally, you could say that board members are just representatives of blocks of shareholders (sometimes representing themselves). ...and that all of them are in the same financial boat, and so work towards a common goal.
We can use all the same facts to paint a much more collaborative and friendly picture.
Which is more correct? Well, I suppose we'd need some facts, right? It's emotionally easier to imagine a sinister group if you're not part of that club, right?
It is a negative connotation, but that could be because it is negative[0].
[0] https://ndpr.nd.edu/news/private-government-how-employers-ru...
wow.
Speaking of which, I don't have a subscription and I think they paywall these things. Does anyone have a summary so we can figure out why it's on the front page?
Thank you for the reminder.
We have to remember that often, articles of "information" present themselves as such, when in reality, they're intentionally manipulative (in terms of misleading titles, etc.) simply to profit from human behavior (manipulates attention -> clicking). Sad that this is what the news & media industry has devolved into.
They are driven by their own needs for people to click. Not needs to share accurate or new information... but rather, they must simply do enough to keep their lights on, regardless of presence of merit.
I guess this means good journalism will stand out much easier now because we are so used to click-bait that good writing should really stand out now. When everything is indexed and searchable human curation becomes even more important and good journalists can start filling this role if they are an expert in some domain.
You are painfully uninformed as to how journalism works. Yes, there are publications -- Buzzfeed, Vice, etc. -- that feed on clickbait, but many are still doing important work. The Facebook story might look hark on the "same theme" but the fact a polarizing figure like MZ still fully controls a problematic product is still worth reporting on. It's about accountability.
The difference, if there is one, is that dissenters are not by and large absent from the board (except marca). But this doesn't really affect his level of control of Facebook.
The truthiness of these alleged conflict in closed rooms is probably impossible to know.
Is it possible for founders today to retain the same level of control, or do VCs outright refuse to fund such companies?
Are there good reading materials or strategies for maintaining control all the way through possible IPO?
How did Travis Kalanick and Adam Neumann get removed? Did they not have the same level of control that Zuckerberg did? Couldn't they have told their dissenters to fuck off? Or could the same fate befall Zuckerberg should he fall out of good graces or become involved in some controversy?
He had a very popular product and everyone wanted in on the action. They were willing to accept founder friendly terms so they could get in the deal.
If you're got majority voting power to start with then you can at every step use the majority voting power to vote to maintain your majority voting power in any deal you offer.
Step 1: build a company with the growth trajectory of Facebook
The rest is easy: set up dual voting class structure in which your shares have 10x the votes of everyone else. Don’t accept any investment deals that reduce your voting power to less than 50%.
See, e.g. Sherman Act. See also, bans on organ sales and indentured servitude.
It is perfectly legitimate to say "this is a kind of agreement that should be enforced by the state." It is quite another thing to say (as you have), "a transaction happened in the market so this is legitimate."
Limited liability did not exist as a legal concept in the United States until 1811. It is really strange that people now seem to view limited liability legal forms as an unqualified right, whose scope and governance can be defined by private contract without constraint.
Investments offer different terms to different customers. Those with fewer privileges are worth less, and you should be willing to pay less or not at all. This is not employment, or personal housing, this is a purchase purely for future financial gain, for which markets offer countless alternative offerings.
Basketball teams sell different tickets and offerings, some are restricted to specific customers. You pay for the level of experience you want.
Facebook's multi-class-voting share structure is an artifact of Delaware corporate law. The DGCL changes all the time.
The fact that some group of investors agreed to that structure in 2012 does not mean that Delaware is obligated to lend its coercive power to enforce it in perpetuity. In fact, Delaware is under increasing pressure to void such arrangements by amending its corporate law [1].
[1] https://corpgov.law.harvard.edu/2019/09/24/letter-to-delawar...
Could this be handled at the exchange level? Can they set voting requirements for the kinds of stocks they will make available?
Is there an SEC angle to this as well in how they classify public companies?
It just seems very weird to me that a particular business arrangement which is well-understood and non-predatory would need to be outlawed.
Example 1: California will not enforce non-compete covenants. What it means to enforce such covenants is that company A can have police physically prevent you from working for company B if company A requests such intervention. Refusing to grant that privilege to company A is not outlawing anything.
Example 2: There is a 300 year old legal doctrine called "the rule against perpetuities" whose history and rationale may answer some of your questions. [1]
[1] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3128375
MZ didn't actually have majority control through every funding round. They key is that other investors (e.g. Sean Parker, Accel Partners, etc) gave voting control of their shares to MZ.[0]
So the ingredients to maintain control (or eventually consolidate majority control) is to have leverage in some way. Multiple forms of leverage:
+ startup has real revenue and is cash flow positive and thus is not desperate for VC funding: Microsoft profits in 1981 would be an example. They didn't actually need David Marquardt's VC money before their IPO in 1986.
+ startup has exponential growth: Facebook is an example. Facebook was so popular that Accel Partners sought out MZ and not the other way around.
+ demonstrate amazing management skill: Jeff Bezos would be an example. He doesn't have majority voting power via dual-class share structure. Instead, other investors let JB control their votes. Even his ex-wife who he cheated on recognizes that her Amazon shares she got in the divorce settlement would be worth less if someone else besides her ex-husband ran Amazon. So she signed over her voting rights to him.
Another thing that worked out for MZ was the older Sean Parker acting as a defacto "consigliere" to warn him how VCs strip power away from founders. And as noted earlier, when Sean was kicked out of Facebook, he turned over his voting rights to MZ.
[1] https://www.nytimes.com/2019/01/09/business/jeff-bezos-wife-...
He got caught texting his girlfriend while having a wife, his wife divorced him and took $38 billion.
Call it whatever you want but he smeared his own reputation.
He made one of the worst social, moral, & financial decisions you could make all at the same time.
Can we please acknowledge it for the euphemism that it is: Total control by the executive to enable a narrow set of goals while tolerating greater losses for those at the bottom of the chain, in order to achieve a narrow, high priority objective at the expense of everything else (like "don't be evil" or "ethics")
Who are you referring to here? Employees? Americans? Everyone in the world? The poor?
https://www.cnbc.com/2019/09/27/facebook-employee-death-was-...
> There are rumors that Qin may have endured bullying at Facebook, Young said. However, Young is not an employee at the company and he said that most of the protesters did not work there, either.
Actual war: line soldiers - higher losses are acceptable for critical objectives. See: D-Day.
Against a virus: Workers - higher losses are acceptable for things deemed "Essential" for society to operate. See: Grocery workers.
Profitability / Monopoly in tech: Privacy - higher losses are acceptable if another objective (revenue) is deemed critical. See: the current internet.
Profitability in general: Employees - dissatisfaction and retention doesn't matter as much as revenue so it is easiest to push policies that hurt employees to help profitability. Customer satisfaction also sometimes sacrificed here.
Hostile Take-over: Employees / Investors? Dunno what happens here but folks seem to be referred to as "on war footing" when this kind of thing happens.
If Zuckerberg undermines the leadership of his operators some of them will move on to other companies.
It's not feasible to run an enterprise as large as Facebook as 1 person at the top, so you need leaders with mutual trust to execute in their department.
In Facebook's case, Zuck already has control of the company but "asserts control" through strategic moves at the board level by "firing" Hastings and Bowles (who both disagreed with his fumbling on political ads). Outside the company he "asserts control" thanks to his increased acrimony towards regulators while appeasing the Trump circle.
A board member who goes after Zuckerberg not only risks getting fired from the board but also getting heat from the White House. This is a very unusual situation for a company in a democracy and in the tech sector.
If some of these board members are well connected to lobbyists in Washington, they can change the balance of power.
Facebook's dominance is completely dependent on cheap fiat currency issued by banks at low interest rates. If the economic and political environment changes, Facebook may not survive.
Facebook was founded on an unsound economy where popularity is valued much more highly than profits. In a sound economic environment, popularity by itself is a fickle thing which cannot be relied upon (without it being supported by real net value), but in our new economic age with massive fiat money printing, companies like Facebook have found a way to monopolize user attention and control it in a predictable way.
I’d say FB reaching 1/3 of the worlds population, allowing advertisers to target very specifically whom they spend money on and giving metrics that are more understandable and ROI-relatable than TV/print make them pretty strong.
Oh, and a 30% or so operating margin, 20% YOY growth are generally kind a strong and beyond most business performance...
See: https://www.businessinsider.com/facebook-q1-earnings-2020-4?...
Having a 'visionary' in charge is often a benefit, so I would imagine many would prefer to have Zuckerberg in charge rather than a board of activist investors.
Of course but not necessarily because he's 'visionary'. Rather he's shown a considerable willingness to put any moral concerns aside in the interest of increasing profits. If you have any doubts think of how many times he was forced to come public with statements like "we'll do better" without actually doing better. So it makes sense for many to hitch their wagon to him instead of some dissident who may alleviate some of the moral issues at a cost.
> My goal for the next decade isn’t to be liked but to be understood.
EDIT: I see, you fell victim to CNET's "infinite scrolling." You scrolled into another article. Furthermore, they're not sequencing human DNA in that article you stumbled on, they're sequencing the virus. Furthermore, Facebook doesn't own this, it's a group funded by Mark's charitable donations.
AFAIK it's the group led by Joe DeRisi[1]. For those interested in further details, there[2] is an absolutely fantastic interview with DeRisi that's worth every minute of your time.
[1] http://derisilab.ucsf.edu/
[2] https://www.tested.com/old-categories/podcasts/854328-scarie...
Very relevant discussion of viruses with his snake story and randomly finding Ebola variations and referencing his work on coronavirus (show was from 2018).
Id love to hear his views on the recent stuff that's happened.
This is the perfect kind of guy you want to give lots of money to do random research and see what he comes up with. I'm happy Zuckerberg found him.
[paywall] Mark Zuckerberg Asserts Control of Facebook, Pushing Aside Dissenters
It would be very helpful to avoid getting irritated by the paywalls. And maybe collectively we could ignore paywalled sources.
Someone usually posts a link to the workaround in the comments, i.e.:
https://news.ycombinator.com/item?id=23030502
https://news.ycombinator.com/item?id=23028577
It's not ideal, but better than banning every site that might ever have a paywall, which, aside from leading to the loss of a big chunk of quality content, would create confusion relating to the fact that paywalls behave differently based on regions, previous site visits, click origins etc.
So it's the least-worst solution.
Tagging an article as paywalled would imply that it's inaccessible to non-subscribers, which isn't true; inaccessible content is banned from HN.
Paywalled content is only allowed if the paywall can easily be bypassed, so tagging it as paywalled would just cause more confusion, not less.
Everyone accepts it's an imperfect situation. But it's still the least-worst situation.