The past has a past. Ponder that for a second and then continue reading. In spite of the conscious knowledge that conditions and circumstances change in ways that we never could have predicted prior to a major shift, there are those that insist on making linear projections of the current state of things into the future.
The latest example that I’ve come across is James B. Stewart who writes for SmartMoney magazine (I’d love to know his stock picking track record to see just how smart his money is) and has made a celebrity guest appearance in the Wall Street Journal. His article is here.
The basic idea is that Facebook is worth the $50 billion value that the current level of equity investment implies and more. While I won’t pretend to have any idea whether or not this is the proper value, Stewart’s reasoning is a bit flawed. The main thrust of his argument is that since it has achieved dominance in terms of the amount of users, it has a kind of natural monopoly based on its ability to exploit this data to adapt to the needs of users better than anyone else could. He cites Google as an example, which is currently under siege from competitors such as Bing.
There are a few assumptions that I believe he is making that open up the article for criticism. One is that Facebook will continue to make all the right moves to keep their customers satisfied based on all the “information” that Facebook can collect. If there is anything that I have learned about the human mind is that more information does not necessarily lead to better decisions. We can’t process all this information and neither can the management team as a collective whole. Zuckerberg’s belief system will enter into the equation on major strategic decisions, potentially going in the wrong direction. Past good decisions may have been lucky, or may have worked in the environment in which they were made…either way, the hot streak could end on any big decision.
He assumes that there will be no major paradigm change (I must be intelligent…I used ‘paradigm’ in place of ‘model’!) in the way we interact online. What about the potential for second life to take over? Something else not yet invented? Many possibilities here. In a world of continuing decentralization of content, any platform to deliver that content is subject to abrupt obsolescence.