Some more on Facebook and Goldman Sachs

Reading John Battelle, who accused all of us who wrote on this yesterday of missing the point, in his post "What Everyone Seems to Miss In Facebook's Private or Public Debate...

...is the core reason it makes sense for Facebook to be public: Accountability to its customers. The rest of this debate is simply financial folks arguing amongst themselves.

Facebook is the greatest repository of data about people's intentions, relationships, and utterances that ever has been created. Period. And a company that owns that much private data should be accountable to the public. The public should be able to review its practices, its financials, and question its intentions in a manner backed by our collective and legally codified will. That's the point of a public company - accountability, transparency, and thorough reporting.

If Facebook wants to stay private and not be part of the social mores which we've built that govern major corporations (flawed though they may be), well I think that would be a major strategic blunder, one that would ultimately doom the company.

I was going to take him to task on what I thought was a combination of naivete and idealism, but the commentators on the blog got there first on the naivete part - Matt Terenzio first:

I appreciate your point, but implying that going public will somehow make our data safer from moral transgressions, or Facebook more accountable is laughable, no? You are one of the smartest guys I read, but a Facebook IPO does nothing for the users.

Dan Farfan takes up the cudgel

Are you seriously considering "the public" Facebook's "customers?"

Well at least you threw in "Period." so we'd know you were... "serious." (ha)

"And a company that owns that much private data should be accountable to the public."

"Should be," "that much," huh? Based on what? Can you cite any examples that set a precedent for this imaginary, less than poetic, far from specific principle you are so certain of? Apparently not since your argument went circular instead. (double ha)

Let me help you sleep better at night. Your entire (2 minute) thesis is based on a supremely flawed premise. When 580,000,000+ users render information to Facebook (and their only real customers aka advertisers) it ceases to be private. When you check-in, it ain't private. When you "like" and "poke" and "friend" and whine that Suzy wouldn't kiss you after the dance, it ain't private.

If it's a principle to modernize you seek, I suggest this one:

"Knucklehead beware."
(Latin translation pending

Dan is echoing our view of these services that "if you ain't paying, you ain't the customer" - and "users are there to be used". The history of public companies is hardly one to make us believe that going public per se will help. But I do think the current picture is far worse. I can't believe that an environment with minimal regulation, minimum disclosure and valuations based on microstakes is a healthy alternative. The last time too-big-to-fail banks were allowed to package and sell on very large but untested assets didn't exactly end well......

As another of the commentators notes, this situation should be temporary:

The Goldman deal will not hold up if the SEC is anything but sleeping (again!). The creation of a partnership for the some purpose of investing in a specific pre-identified company at pre-identified terms is a fundamentally different animal than a VC partnership deciding to invest into a company after the LPs committed capital -- and therefore clearly violates the SEC's 499 shareholder guidance. Anyone not seeing this got carried away a bit... So the SEC, if it is up to it's job, will soon require FB to file statements in which case they nay as well trade public.

We shall see.....all the kings horses and men have so far failed to rein in the banking system, 2 years after the Great Recession started.

But I think that John's more idealistic point is valid, ie: given the immense amount of data held on so many people, is a corporate structure - private or public - fit for purpose for such an enterprise? Should entities like Facebook not be truly publicly accountable in some way, as the potential for harm from misuse of that sort of data is something too big to ignore. A small number of very powerful people having unfettered and unmeasurable access to that data is not the ideal position, we would argue.

Incidentally, I read quite a few arguments last night in the vein that since these were private investors being allowed to pony up for an inflated asset, this was not a "bubble" per se, and even that the SEC should not be involved. This only 2 years after The Crunch..... those who cannot recall the past are doomed to be repeat it.

Update - on the last point, I think Mark Benioff (Salesforce CEO) said it succinctly re Facebook and private shareholdings - "It's already a public company. It's just unregulated" - (on WSJ)