3 Business Lessons from “The Social Network”
The Social Network is an intriguing story about the early beginnings of Facebook. Although certain facts are in dispute, the movie is largely based in reality. And while many people are currently flocking to theaters for entertainment value, this film is filled with juicy business lessons. My top three:
1. Ideas are important. Execution more so.
The movie focuses quite a bit on a feud between Mark Zuckerberg, Facebook's CEO, and the Winklevoss brothers. All being students at Harvard at the time, the Winklevoss brothers claimed that Mark stole their idea. The Winklevoss's had the idea to create an exclusive, Harvard-only social network. Mark got wind of this, and within months, executed on this idea on his own. The Winklevoss brothers then spent the next few years of their lives pursuing every possible course of action to halt Mark's progress. All the while, Mark was too busy concentrating on making sure Facebook would be the biggest thing since sliced bread.
Ethically speaking, Mark could have gone about the situation in a more respectable manner. But from a business standpoint, it goes to show that while ideas are a dime a dozen, proper & efficient execution is rare. Some people, like the Winklevoss's, spend far too long focusing on the things that don't matter - like refining the idea, or chasing down people that do them wrong - while others, like Mark Zuckerberg, spend every minute focusing on the things that do matter - like making good ideas amazing realities. The people that win - hell, the people that deserve to win - are the ones that bring ideas to life. Even if those ideas are ripped off.
2. Love of the game is the only way to succeed at a massive scale
A lot of people think they can have a great idea and get rich executing on it. Problem is, if you don't love the idea yourself - if you don't live and breathe the idea - it will show. Mark Zuckerberg and the rest of the team were Facebook. That's why, during legal meetings, Mark cared more about what was going on back at his office than the lawyer's. And that's why his programmers were "wired in" to their work, ignoring the outside world for hours on end. Without those sorts of personalities, Facebook would have never gained this level of notoriety.
3. Acquiring a ton of sudden venture capital funding is more exciting than achieving slow and modest profit, but is not to be mistaken for building a real business
The movie wasn't intending to make this point, but I certainly saw it sitting there, clear as day. There is a relatively new problem in business. Modern tech companies are built to gain valuation, and eventually sell. They're not built to be sustainable, long-term operations. Think Twitter, MySpace and nearly every other "fun" web 2.0 company.
Facebook's valuation is through the roof. And it's achieved vast amounts of VC funding. But from a profitability standpoint, their expenses are sky high, and they have virtually nothing to show for any of it. They're more transparent about the number of active users they have (500 million) than how much revenue they bring in. The reason is simple: the latter statistic isn't as overwhelming. They have a huge asset in their astounding user base, but fail to capitalize on that asset in any kind of significant way.
As it turns out, Eduardo Saverin, Facebook's original CFO, was onto something. He had a lot of intense debates with Mark Zuckerberg early on, claiming that it was important to get Facebook to begin paying for itself by exploring advertising opportunities. It's true that Facebook needed to "stay cool" and advertising could have potentially hurt that. And it's also easy to assume that Mark Zuckerberg was right and Eduardo was wrong. After all, look at Facebook's success thus far.
But we must remember that the story of "the social network" isn't over. What happens when the all the funding and inflated valuation disappears? Call Eduardo. He may have some ideas.
