Facebook and GS tie-up may be unholy disaster


Saint Wolfgang and the Devil, by Michael Pacher.

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Facebook have been “valued” by banksters Goldman Sachs at an outrageous amount but, on a couple of levels, this may be just a step too far:

Facebook has already lost some of its appeal. It has become less “personal”, more confusing and complex with the addition of more and more features.   

Then there was the underhand way in which the privacy debacle was handled.

Facebook are only where they are now because of the phenomenal growth of its membership and it has been becoming more “monetized” (that’s commercial for us Brits).

Now it’s Facebook v Google.

How many people are  interested in taking sides, if it came to that? If presented with that choice I suspect that, given similar functionality, less commercial (or more personal) would be a major factor.

But, wait a minute, even with this huge investment from GS I have an inkling that success or failure will be determined by the memberships reaction to a deal, done with a firm, who were at the very centre of dodgy multi-billion dollar “off-book” deals, lies to Regulators, pressure on rating agencies, lying to and cheating clients, etc.      Of course GS weren’t  the only guilty firm responsible for saddling much of the current and future generations of potential Facebook members with debt that is not theirs and that they may never be free of.

Want some insight into why or how they have such a bad rep? Here’s what a former MD of GS had to say on their modus operandi:

…get the business, rake in the fees—and pawn off the overpriced goods on the clients (even the “shitty deals” so Goldman’s not holding the bag. That dirty formula cost Goldman a $550 million fine less than six months ago.

Yet the Facebook phenomenon shows us that nothing has changed. Goldman again moved aggressively to get the business—investing $75 million into Facebook early, at a low valuation,

through one of its hedge funds, in the same way it used to get CDOs rolling—again will rake in the fees (to the tune of $60 million—upfront) and again will pawn off the overvalued results to its clamouring clients, who don’t have nearly as much information as Goldman.

If you’re one of those investors, here’s the deal in a nutshell: You get to buy shares, forking over 5 percent of any possible gains, on top of a 4 percent placement fee and a 0.5 percent expense reserve fee (so you’re down 10 percent before the game starts) in a private company that doesn’t have to disclose any pertinent financial information to you or any regulator for 15 months. For the privilege, Goldman gets its eight-digit windfall.

So the assumption is that an unbelievably successful social media phenomenon goes totally mainstream. Joins forces with a bank whose track record, close Government ties and apparent (virtual) immunity from prosecution is going to be readily accepted by an increasingly knowledgeable, dissatisfied and vocal citizenship who are about to experience the real pain of recession! Frankly, despite all the figures on current Facebook revenues, I’m not convinced.

Undoubtedly globalisation has been underpinned by web advancements. But, whilst there may be well-founded concerns about the future of global business, as a result of economic (trade and currency) issues, that should not present a threat to friendships. However, not all nations have a positive view of what the internet gives to its citizens. Particularly if it is a means for like-minded to vocalise and co-ordinate objections to Government policies associated with any of the following, or similar scenarios: other the impact of socialised bank debt, civil liberties, loss of or failing Public Services, rising costs, falling wages, inflation – deflation – hyperinflation, human rights,  war, terrorism, food shortages, trade embargoes, religious persecution, handling of natural disasters,  etc.

These are uncertain times and we may, yet, see further loss of liberty for for global citizens. Even if we aren’t talking about  the possibility of a “post critical society” much of what we currently take for granted my, even temporarily, be lost.

I sometimes wonder how many people have actually ever thought about how long they would manage if all that they had was the cash in their pocket and the food in their home! Fortunately very few of us will have had to contend with such hardship…and hopefully never will.

Don’t get me wrong  am not trying to weave Facebook and GS into some doomsday scenario here! I want to keep things in some kind of perspective BUT to provide some thought-provoking material.

I should have a sponsorship deal involving payment every time I promote the names of guys like Clay Shirky and Joseph Tainter but I don’t and just to show there are no hard feelings here I go again.

Tainter’s book “The Collapse of Complex Societies” illustrates, from history, the processes that lead to collapse. Interestingly parallels can be drawn between ancient civilizations and large Corporations…see where I am going with this…and Facebook are now top of the pile with GS pretty high up on many people’s “hate lists”.

In theory, individually, both appear to be in pretty unassailable positions. Together…hmmm?

Here are some extracts from an excellent Clay Shirky blog referring to the book. See what you think about our subjects in this context but, as you do so, please think  about your business, employers business, your nation because we can learn so much from history and from what we now know about Complex Adaptive Systems:

Large, multi-functional, organisations are dynamic complex systems: Robust yet fragile

One of the interesting questions about Tainter’s thesis is whether markets and democracy, the core mechanisms of the modern world, will let us avoid complexity-driven collapse, by keeping any one group of elites from seizing unbroken control. This is, as Tainter notes in his book, an open question. There is, however, one element of complex society into which neither markets nor democracy reach—bureaucracy.

Every system is a delicate balance of chaos (entropy) and structure (complexity). Unmanaged the system can shift suddenly from an apparently stable to a chaotic state. A system has a limit (critical complexity) beyond which it loses function 

Bureaucracies temporarily suspend the Second Law of Thermodynamics. In a bureaucracy, it’s easier to make a process more complex than to make it simpler, and easier to create a new burden than kill an old one.

Complexity can be created by additional, “man-made”, processes or routines intended to maximise return to system owner/operators 

When ecosystems change and inflexible institutions collapse, their members disperse, abandoning old beliefs, trying new things, making their living in different ways than they used to. It’s easy to see the ways in which collapse to simplicity wrecks the glories of old. But there is one compensating advantage for the people who escape the old system: when the ecosystem stops rewarding complexity, it is the people who figure out how to work simply in the present, rather than the people who mastered the complexities of the past, who get to say what happens in the future.

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