29 October 2010
The Social Network may be one of the best films ever made about the birth of a business, but it only tells a tiny part of the Facebook story. Its main theme is the friendship between Mark Zuckerberg and Eduardo Savarin that was a casualty of the business’s explosive growth, with the aggrieved Winklevoss twins providing comic relief.
The movie, like Ben Mezrich’s Accidental Billionaires on which it is based, is seen mainly from Savarin’s point of view, and he comes across as a normal, sympathetic human being, where Zuckerberg is arrogant, charmless and unscrupulous. This view is not inconsistent with David Kirkpatrick’s more detailed and much more sympathetic account in The Facebook Effect, written with the company’s encouragement. As Saverin gave Zuckerberg crucial moral and financial support in the early days, he had every reason to feel aggrieved.
However, there is little doubt that if he had remained Zuckerberg’s partner – had been more than the nominal CFO – the business would never have taken off in the way it did, and he would have had 30% of nothing, instead of 5% of $30 billion. For him this was a part-time project, which he had no intention of diverting him from completing his education. He stayed on the East Coast, when Zuckerberg and his team had moved to California and were working round the clock. Savarin’s ideas on the importance of generating advertising revenues quickly would have made perfectly sense if this had been a normal business, but Facebook was not remotely normal. It still isn’t.
Facebook in 2004 was growing at breakneck speed, faced enormous strategic challenges, and could easily have been wiped out. Saverin, in the withering Silicon Valley phrase, ‘didn’t get it’. That’s no reflection on him – hardly anyone else got it then either – but Zuckerberg did and so did Sean Parker, who supplanted Saverin. The only way that Facebook could win the race to become the mass market social network was through massive expansion of capacity and continuous development of the service. This would require, amongst other things, serious amounts of capital, and Parker knew how to obtain it. The angel investor he persuaded to put up the first, crucial, $500,000 of funding was someone who understood more about network dynamics than probably anybody else – Peter Thiel, the founder of PayPal and the godfather to Linked-In, Slide and Yelp. Saverin was a bright college kid, but with no understanding of the networked economy and completely out of this league.
The remarkable thing is how far-sighted and single-minded the 20 year-old Zuckerberg was, not unlike another bright young nerd who dropped out of Harvard thirty years earlier, Bill Gates. Most entrepreneurs who build something substantial are driven far more by a vision of what they are trying to achieve than by dreams of enormous riches. Like Zuckerberg, they can be obsessive to the point of becoming obnoxious. In that they are no different from highly ambitious people in most milieus – big business, politics, media. Entrepreneurs however only succeed if they are able to build teams of people who are almost as committed to the vision as they are. That may make them slightly less ruthless on average than those whose careers can only advance at the expense of their rivals.
Zuckerberg’s sin, according to The Social Network, was his betrayal of his friendship, but almost certainly this was not deliberate. He was completely obsessed by Facebook, whose scale and scope were constantly changing, and he certainly needed to give stakes in it to new investors and crucial collaborators like Parker. There was no way that Savarin in late 2004 could have justified having 30% of what was now a completely different company, to which he was making no creative contribution. Zuckerberg handled the situation dreadfully, but it would have required exceptional social skills to have handled it well, and Zuckerberg had virtually none of those.
Similar stories to this could be told of the birth of other businesses. Apple too was born out of a friendship that went sadly sour, but this was a partnership where both Steve Jobs and Stephen Wozniak were essential to success. Ironically in view of his current iconic status, Jobs was often accused of taking the credit for Woz’s brilliant technical innovations and of treating colleagues appallingly. For years, Jobs’ reputation amongst engineers was that of an egotistical, manipulative shyster. There was probably some truth in that but, as with Zuckerberg, it was far from being the whole story.