Keep in mind, this is also a great time to leave FB, there is a talent crunch in the tech world and sometimes the easiest way to advance your career is to go to another company. If your goal is to be a CEO, you will never get there by staying at FB.
As expected. Many people have and will leave Facebook.
They came to cash-out thats what they did after the IPO.
And now they are off to new ventures.
Same has happend and will happen to all big hits who go IPO.
You will lose a lot of talent. Maybe this was one of the reasons they pushed out the IPO date so many times.
I think that it is inevitable execs and talented developers will leave an organization at some point because there is only so much value you can get by sticking around indefinitely. The issue here is the timing of when they are leaving. You can't ignore the signals that Zuckerberg is in way over his head. He did a great job getting the company to this point but perhaps the next major departure/reassignment is his. It is not unprecedented to have the board of a public company replace the founder with a more experience CEO and that is what it seems like is needed in this case.
>You can't ignore the signals that Zuckerberg is in way over his head.
Yeah, you can. You can chalk them up to statistical noise resulting from a few engineering and business model problems that need to be solved, which shouldn't be surprising in the relatively early days of a unique new business model like Facebook.
Just ignore the Silicon Valley and Wall Street news industry echo chamber, their fundamental business model is about turning statistical noise into ad impressions and cash flow. This too will pass.
>He did a great job getting the company to this point but perhaps the next major departure/reassignment is his. It is not unprecedented to have the board of a public company replace the founder with a more experience CEO and that is what it seems like is needed in this case.
As pointed out above, Zuck owns a controlling interest, so this won't happen. But more importantly, there no CEO alive with more experience in this domain than Zuck.
Who are you thinking of, Tom the Myspace founder? An ex-Yahoo CEO? There's still no one better than Zuck for this, so even if he could be replaced it would be foolish to do so.
By most accounts Sheryl Sandberg is handling most of the traditional CEO duties. Zuck has the benefit of being a founder CEO, with an experienced exec in Sandberg to help. Any issues Facebook faces, won't be because Zuck is in over his head.
The problem that Zuck (and Facebook at large) face is that there's a rift between expectations (100 Billion+ valuation) vs reality (it's a profitable, but much smaller business). Facebook needs to either change their belief (or expectations) or reality (somehow morph into a 100 Billion+ company). Neither is easy to do, but now that Facebook is a public company, they've at least got a chance. Market forces can help guide them to a realistic valuation, and given enough time as a profitable but lower valued company, it's possible they'll reset their expectations to something more realistic. Or they could finally pull the rabbit out of the hat and become a 100+ billion dollar company.
I'm not saying Zuckerberg should be replaced - I don't know nearly enough to even have an opinion, yet alone one that I think is correct, and if I did think he should be replaced I'd have no idea who would be a good replacement.
However I disagree with "There's still no one better than Zuck for this".
You were right that nobody has has much experience in specifically this area, however that doesn't mean there is nobody who could do his job better. It just means there's nobody who you can glance at and say "based on the headlines in their CV, they clearly have more practice doing this and their past results look good".
An incredibly over the top example of my point: If tomorrow Zuckerberg introduced a company policy of "no black staff, no black facebook members" I would definitely argue there are people who could do his job better based on that one policy alone. However the question of "most experience" would not have gained a new answer overnight.
>"But more importantly, there no CEO alive with more experience in this domain than Zuck."
This is a big mistake in the corporate world: thinking that you need a CEO with specific experience. On that high of a level, business is business. There are plenty of corporate executives who could do as good a job or better at running Facebook.
But that's not to say Zuck doesn't have unique advantages having built the company. He is also going to learn as he goes; no one is born with CEO experience.
Now, I have about as much experience at that level as you likely do, which is to say, none, but one of the primary functions of a leader is choosing empoloyees. And it takes one to know one.
I'm sorry, but it's extrordenarily difficult to hire outside of what you know. Do you know how many people have approached me /this week/ as an expert? I mean, I laugh, but I really am the best those people could find. This wasn't due to lack of money; this was because they didn't have much knowledge of my field, and because I'm loud. (I mean, some of that has value; I do write better than most people. I am more outgoing and have more tolerance for bullshit than most people that are actually experts. But that is mostly bullshit.)
I mean, sure, get a trusted co-founder or what have you. but if you don't have those skills? you won't know if that co-founder is a real expert... or me.
>"but one of the primary functions of a leader is choosing empoloyees."
With you 110%. This is, really, the role best filled by the leader.
>"And it takes one to know one."
Nope, disagree here. I am fully confident that I can hire a great rocket scientist, especially with the resources of a major corporation. And I'm most certainly not a rocket scientist.
We're disagreeing on the fundamentals here. I believe that a good CEO knows that he doesn't need to understand the engineering of a social network in order to run a social network. At all. He has to put together the right strategy and the right team. It's not easy to accomplish, but it's certainly not complicated.
>Nope, disagree here. I am fully confident that I can hire a great rocket scientist, especially with the resources of a major corporation. And I'm most certainly not a rocket scientist.
How would you hire a rocket scientist?
I mean, I'd go ask a friend who is one, but that's... largely blind luck. I mean, I know the guy is smarter than I am; I can tell he knows more physics than I do. but that's not saying a whole hell of a lot. And even if my friend is a good rocket scientist, I then have to trust he's good at picking other good rocket scientists.
It's a similar problem to how I'd hire an accountant. I mean, super important job, right? keeps me outta jail. Me? I found someone that ran a public q/a site. I knew she was good at explaining things, and I know she had certain certifications... but really, I had no idea (and still have no idea) if she's really doing the acccouning correctly. I mean, I have refered her to a few friends, who all have said positive things about her, so it sounds like I made a good choice, but I don't really know. I can't, at least until I get audited.
I mean, picking good people is a skill; sharing a knowledge base with the role you are picking is not sufficent to pick someone good. I have a very good friend that is a much better programmer than I am. But, her initial impressions, like most people's, mostly focus on confidence. She was interviewing for her boss, and was very excited about one prospect. "I think he's better than I am" she gushed. But, being a rational person, she gave some take-home work. The next day I got a call. "Would a person fail a take-home test on purpose?" Turns out, the guy was just a big talker. But still; the take home test saved her from an embarrassing co-worker. If she didn't have the knowledge to make and judge that test? she would have ended up hiring the idiot.
Without getting bogged down with literals, I'd do my best to determine what constitutes a good rocket scientist, and work away. I suppose I'm just confident I could do it. I've had to hire good people in my field (pharmacy), but I have no formal connection to the industry. Sure, maybe if I was a rocket scientist, I'd have a slight edge in this specific case. But don't forget, being a CEO doesn't mean you're hiring all rocket scientists (or in FB's case, engineers). You have to hire people of all types, so you lose any competitive advantage rather quickly.
>CEO doesn't mean you're hiring all rocket scientists (or in FB's case, engineers). You have to hire people of all types, so you lose any competitive advantage rather quickly.
eh, but depending on the company, some roles are more important than others. I mean, in facebook's case, it'd be marketing. Facebook, really, doesn't need top of the world Engineers; paying 5x what they would otherwise on infrastructure won't kill them. (they do need good people for the places where Engineering and Marketing colide. They need people that are good at psychology and at least mediocre programmers.) But marketing is what they /do/ - their business plan and their P/E is predicated on capturing a huge percentage of the world's advertising dollars. without best in the world marketing types, they are sunk.
This is why having even a relitively small edge in hiring the best people in one particular area can make such a huge difference, and one of the major reasons why I think CEO experience is not particularly portable across fields.
You do know that Zuckerberg has majority voting stock right ?
So it doesn't matter whether the board thinks he should be replaced. He will be CEO until he is either sick of the job or unwell. But either it will be at his choosing.
And people need to remember that there is a lot of very rich people at Facebook now. It wouldn't surprise me if we see a lot more people resigning to create their own startups or buy an island.
Microsoft's market cap grew slowly compared to Facebook, so even if you joined the company 5 years after the IPO there was still a lot of headroom in the stock. But once it hit $200 billion (or whatever they top end was), potential new hires started wondering what the upside was. It's not likely to become a trillion dollar company, so you're looking at a max multiple of 4-5. But back when it was at $20 billion it was a little easier to drink the koolaid and imagine a higher multiple.
I think there's always a risk of an outflow of people once their stock options hit.
That being said, the article actually makes the point that for two of these departures they may be leaving not because of hitting it in the SV lottery but because they're not going to see a payout because their options were priced in at an overly high valuation.
Facebook may get hit from both ends, those who have been there 3-4 years ago may be cashing out, those that joined in the last 1-2 years may be leaving because they won't see any return on their options.
Sorry, I actually wasn't thinking of the board forcing Zuckerberg to step down. I was more thinking about the Google situation where Schmidt took over CEO for a couple years while Larry Page hung around doing something else.
I think now more than ever Mark would want to maintain it's majority share, otherwise the board might start considering replacing him if things keep going downhill from here.
You're misunderstanding the breadth of what marketing is at Facebook (and most modern consumer software companies). It certainly isn't "if we aren't getting downloads, go buy some ads". It's about increasing the rate of acquisition (inbound and outbound marketing), improving activation (signup to active user), increasing the rate of sharing (viral), increasing the rate of conversions from sharing, internationalization, etc. Check:
It's a boon of new money and fresh funded interests to the community. Better for everyone but I would not have gone public. (limited actual knowledge of real world pressures.. but still. They were not in control and give up more.
It is not your thing if it's everyone's thing and when everyone is bored of their thing. Well...
It's relevant that they can sell their shares after they leave, but if they continue working at FB they have to wait a few more weeks to months for the lock-up period to expire. Maybe they're scared about the stock and want to prevent further losses.
Just curious, why do you say this? Most lockups are structured in such a way that they are binding whether or not you continue to be employed by the company. Your shares can only be sold via the company stock plan manager (often the underwriter) and they will enforce the agreement.
Is there any reason you believe FB's lockup is structured differently?
Many corporate employment agreements have two stock sale requirements of note:
1. You can only trade during certain "windows" per quarter. The rest are all blacked-out dates - for example leading up to earnings announcements.
2. Under some employment contracts, you may not benefit from any trading strategy that is contingent on the stock falling in value. In other words, you cannot short nor directly hedge against the stock of your own company.
Specifically what this means is that an executive couldn't short, buy puts, buy a cashless collar, or any direct hedging strategy unless they leave the company.
Leaving the company has its own issues:
1. You may leave large unvested options and/or RSUs on the table. This is very hard and nearly impossible for most people to stomach. Golden handcuffs.
2. If you do leave, you are still not free and clear to do as you please with your stock. If your stock is unregistered, you must ask the company and its investor team, legal team, transfer agent, and often the SEC for authorization to deposit the stock into a trading account.
Finally, for any significant equity position, there are significant tax consequences to each strategy. Read about people being underwater on taxes after exercising ISOs during the dotcom bubble.
Good. Less management, more engineers. Facebook is profitable, and Zuckerberg has 56% voting stake in the company, so screw everyone else. I say let Mark do whatever he and his engineering team want to do, and don't bow down to people who would rather make a quick buck than build a great company.
