See here for Part 1 & here Part 2.
So it’s been a month since the “largest one day market cap loss in history” which is interesting because it feels like it was a year ago. The news cycle is so fast. Anyway, now the dust has settled I tried to consolidate my current thoughts on Facebook in one slide. See here . I think 1 sliders are very helpful in consolidating your ideas. Don’t tell that to Jeff Bezos though, who thinks no slides are even better. Still on the sidelines, too many question marks and concerns on the “bad news” side of the slide. The other point I rarely see discussed in the investment world is how intertwined some versions of the high engagement that has gotten Facebook this far are connected with negative mental health effects. Mark Zuckerberg (who seems to be a highly underrated CEO to me) seems to have figured this out a long time ago and seems to be focused now on connection 1 billion people through groups and introduced measures to assist user to manage their time on Facebook. I have never completed a Google search and gone “This is really useless and does not feel good” but this seems to happen to me on Facebook platforms all the time (and I stay on anyway 🙂 ).
I have been thinking about 4 possible futures for Facebook:
Future 1: Facebook is the new cigarettes but stockholders make away like bandits anyway.
Future 2: Facebook is cigarettes and through consumer revolt and regulation the business is affected and stockholders either do OK or badly.
Future 3: Facebook makes so many improvements to their platform that the engagement is of high utility to society (more useful connectivity, payments, SMBs advertising assistance, etc/less clickbait) but stockholders do not do great due to the costs involved in deploying the new verticals.
Future 4: Facebook makes so many improvements to their platform that the engagement is of a high utility to society and stockholders do great.
I see myself being long in future 4 only. The good news is Facebook seems to be moving in that direction at a fast pace but going to stay on the sidelines until Scenario 4 crystallizes in my mind.
Some supporting links for my slide:
Ben Thompson’s Facebook Lenses post.
Antonio Garcia Marquez’s Tweetstorm.
Royal Society for Public Health’s #StatusofMind study.
A note on ethics: I do not think refusing to partake in Scenario 1 makes me some type of saint. After much thought it does not seem clear to me that there is an all encompassing moral high ground to stand on as an investor. Like I said on twitter, moral high grounds, especially in investing, are precipices and not summits. For instance, a few years ago I did well owning convenience store operator Alimentation Couche-Tard in the student investment fund I was part of. I did not have any problem making money in a company that is a beneficiary of lotteries and cigarette sales but I clearly will have a problem owning a tobacco manufacturer directly. That does not seem too logical to me. The personal conclusion I have come to for now on ethics in investing is: If a group of people close to me but different in their individual personalities are users of the product in a way that is important to my investing thesis, will that be fine with me? If the answer is no, I will not invest. 2 examples will be useful here. In the tobacco company example, it is obvious I’d be more of a deterrent than an enabler if they are a smoker. The Facebook example is more nuanced. I clearly do not have a problem with people close to me using their products (that’s how we communicate for the most part), but when they use it too much (and it makes Facebook more advertising dollars) and it affects their mental health (especially among the young) I am probably a deterrent to further usage. Not quite John Rawls but this is all I have got on ethics for now.
Security (in) Securities 