Does Facebook make the world a worse place?
I’ve been thinking a lot about off balance sheet liabilities lately (aka an extremely large negative externality). Essentially, this is a fancy financial way of saying karma. Should $FB have a large off balance sheet liability? The easy answer is yes. Facebook largely ignores many of its problems unless those problems make it more money.
Facebook has serious negative externalities. The Cambridge Analytica scandal alone is pretty terrible and that is just the tip of the iceberg. However, when you start to zoom out, I see a different story. I see Facebook Marketplace being a far more effective (and safer) than Craigslist. I see millions of people registered to vote. I see a network connecting people to things. It might be controversial, but I think these positive externalities FAR outweigh the negative. Facebook makes the world a far better place!
Did Zuck create (steal) $FB to create positive externalities? No, he is a ruthless capitalist whose sole goal is to maximize $FB’s market cap, but that doesn’t mean these positive externalities don’t exist. Positive externalities are the benefits of networks and Facebook is a massive and effective network. Does this mean we should absolve Facebook of all the negative externalities? No, but it should change the way we view Facebook.
I don’t view the future of Facebook as social network, I view it as a network. I think this subtle difference makes a huge difference in its stickiness. Networks have moats, social networks don’t. Facebook’s future is connecting individuals to businesses, Marketplace, Shops, etc… Competing with Facebook on social media is tough, but possible. Creating a network to compete with Facebook however is far tougher. In many ways, Facebook is a value and growth stock at the same time.
I think for the aforementioned reasons, $FB could 10x from 2020 – 2025. It sounds crazy to say $FB will be a $7T company, but $AAPL just went on a similar run. I don’t think this kind of run is likely, but it is possible. The offset to this huge upside is that $FB brings serious risk. Offsetting negative externalities isn’t eliminating negative externalities. It doesn’t matter how strong your network is if the government decides to bring it down. Either way, I think the reward is worth the risk.
NOTE: I don’t have a Facebook. I don’t want to network (on Facebook). I prefer to keep my network small with those I know and large with those I don’t. I’m not normal.