Posts Tagged ‘facebook’

The aboriginal man, primitivity notwithstanding, probably learnt about the direct relationship between risk and reward. Sit atop a tree, never venture down to hunt and he probably realised that he would be alive and well. Until hunger, or a snake, snared him. Gradually he expanded his sphere of movement and risk reduced, as awareness grew. Now risk lay in the unknown regions beyond aboriginal man’s sphere of influence.

This idea of risk-reward has since been passed on generationally to the present day. But as with serial mutations, the basic idea underwent an evolution of sorts. With survival issues taken care of, man turned his attentions towards recreational aggrandizement. Means took a backseat as ends assumed center-stage.

So it came to be that there are pursuits where one’s pay-off bears no relationship to the risks assumed. Seemingly useless professions have turned out to be incredibly indispensable, in the larger scheme of uselessness. What’s more, riches beckon to those smart enough to embrace these endeavours.

A short primer on how to make a living by indulging in these wondrous professions follows, for the interested. Parent readers might consider sharing this with their children. Others might consider a life-altering career change. Your gratitude shall be well received.

There exist today a battery of vocations that project an illusion of accomplishing a social relevant and useful objective. Mastering this art of illusion is of utmost importance, gaining precedence over everything else. A sample collection of professions is presented below.

Generally, examples of such pursuits abound in service-oriented pursuits; such as Consulting and Economics.

Consulting, first. A coup of gargantuan proportions can be achieved by those adopting this lucrative line of endeavour. The basic dynamics are quite simple. A glossy B-school degree is a great starting point. Demographically, great care should be taken to ensure that the protagonist’s age is on the right side of 25, under 20 is better. Miniscule(/no) knowledge of the real world is a marvellous quality to possess, for this profession. Only familiarity with manufacturing needed is in the important area of enthusiasm. Talent in believing in (and spreading) delusion ranks highly, in the hierarchy of importance.

Investments in ornate adornments, a shiny wardrobe, is a prerequisite. Some familiarity with exotic pursuits – art, wines, single malts, global warming – is desirable, as they have been known to be worthy catalysts in professional advancement. Finally, a set of clients, reasonably schooled in ignorance, would round out the coup. It is of critical importance for 20-and some’s to sermon industry veterans, who have often spent more time in their industries than the tyros have spent on Mother Earth.

Next, is Economics. A PhD in Combinatorial, Fractal, Mental Econometrica is Holy Grail enough. Talents in Confusopoly and sustained usage of terrifying jargon would confer an impregnable moat. Professionals should then master the art of recommending the opposite of whatever is rationally desirable. This has the effect of transferring the burden of the counterfactual on the receiver (who incidentally, pays liberally for this service). Since the professional would make good moolah irrespective of the quality of their track record, risk is minimal for a very fat pay-off. Experience in engendering economic disasters would help in brandishing a colourful resume. Humans are generously endowed with short-term memory, especially with respect to undesirable outcomes. This is the professional’s strongest USP.

Social media pursuits of various kinds come next. One might consider building an ‘app’ that lets users click pictures, then turn them into appropriately grainy masterpieces that no one can decipher, and lo! the Internet Picassos stand to make a fortune. It is not just imperative for the company to generate no revenue whatsoever; it should carry a credible promise of never generating revenue, let alone profits, in the foreseeable future. A company like a Facebook might find it very valuable to buy this invaluable company out for a couple billion papers-of-value.

Second and higher order professions – some cynics refer to these as parasitic professions –  are another promising area. News-makers, media fall under this category. In the only known exception to the Laws of Conservation of Physics, an ability to create something from nothingness is a peerless trait to possess. On this measure, psychiatry may also be considered, though the pay-off is likely to be gradual and plateau beyond a point. Needless intrusion into others’ lives and making them feel it is a moral obligation for them to participate is another art form that needs mastery. Finally, would-be parasites should be able to convince the source that it is the parasite that is superior.

The above suggested pursuits share common characteristics. They are indispensable in the larger scheme of uselessness, project a credible illusion of societal utility, offer fat pay-offs for little or no risk and reasonable certainty of recurring cash flow, over long periods.

Going to/sending your children to the battle front is a monumentally stupid endeavour, carrying huge risks for no reward (very often), often ending in death. In the same breath, devoting one’s life to medical research directed at eradicating dreaded diseases is another useless endeavour. This is generally true for research of any kind aimed at community benefit. Pay-off is dismal and there is no certainty of a successful find that could, in the very least, lead to a Nobel.

Finally, there are professions that carry little or no risk, for little or no reward whatsoever.

If nothing else works, one could always become a blogger.

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Apple was unhappy. Despite giving the world a slew of droolable products and doing its bit to improve quality of human life, there seemed to a growing chorus of voices against the technology industry. Stung by what it thought were unfair allegations, Apple came to believe that this wave of vilification was perpetrated by the Finance industry.

After years of being castigated publicly, Finance had fallen in the eyes of the world. Apple thought that in a bid to redeem its deteriorating image, Finance was inappropriately employing tools of new-age technology – its own products, Facebook, Twitter – to spread the Word. Something had to be done before matters got out of hand.

Apple had nearly $100 billion in cash in its bank. On desultory evening walks, it frequently scratched its half-bitten head for avenues to put this money to work. During one such errand, Apple bumped into Facebook. After hastily exchanging pleasantries, an evidently excited Facebook filled Apple in on its upcoming share offering. Would Apple be interested?

A plan took shape in Apple‘s smart head. It seemed the perfect idea. So designed that all parties involved would walk away with a smile. And, Finance would be dealt a striking blow. As Finance was using Technology to spread its word, Apple decided to employ complex Finance to exact revenge. It felt that the best strike against Finance would be to employ speculation for immediate gains, at the expense of folks who took the opposite side in the proposition. Finance would then be blamed.

Apple suggested that it would be interested in taking Facebook‘s entire share issue on offer. Facebook gloated but it didn’t appear to express much gratitude.

Facebook was looking to raise $10 billion. Apple would spend $10 billion acquiring this stake, a fraction of its $100 billion cash hoard. Things seemed simple so far. But motivated by considerations of vengeance, it decided to unleash complex instruments of Finance. Apple thought of Exchangeable Bonds*.

* Exchangeable Bonds are debt instruments that pay a coupon/interest, and give bondholders the option of converting the bonds into shares of a company nominated by the issuer. Apple, in this case, would be the issuer.

Apple would then make an offering of Exchangeable Bonds for $14 billion. Further, it would offer holders the right to convert their Exchangeable Bond into shares of the hot Facebook. Facebook‘s happiness grew some more on hearing this. Apple investing in Facebook would further fuel euphoria. Besotted by the prospect of its IPO, Facebook did not pause to appreciate Apple’s ingenuity in this innocuous offer. For the Exchangeable bondholders, this would be an indirect way of getting their hands on Facebook‘s shares, which would otherwise be difficult to obtain given the euphoria. Moreover, Apple would pay them (interest payment) to have the right of owning Facebook shares!

Apple felt this would be a coup. Scores of eager beavers wanted a piece of Facebook‘s IPO. Euphoria was so high that no price was deemed too high for Facebook’s shares. The shares would sky-rocket, when they began trading. As shares soared, Apple would let its exchangeable bondholders have their Facebook shares. Meanwhile, it would have discovered a way of making $4 billion without investing a dime ($10 billion spent on Facebook, offset by $14 billion received from its Exchangeable Bond). The money made could be fuelled to creating new products that would sell on (more) euphoria.

To execute these transactions, they would engage every known investment banking company on the planet. Always warm to the prospect of making doubloons, no investment bank would spurn their proposal.

Apple would be happy. Facebook would be happier, and Apple’s shareholders would be the happiest. An alluring prospect, indeed.

The strategy played out as planned. To a point.

…then everything began going awry.

The numerous Likers on Facebook grew tired and spent less and less time on it. Its shares tanked.

Apple’s ingenious transaction was predicated on Facebook‘s shares rising in value. When the share price fell, Apple was in a hole. Its $10 billion investment in Facebook‘s shares went underwater; and it had to pay interest on its Exchangeable Bond plus the $14 billion principal when it fell due.

Apple had orchestrated a euphoric strike on Finance but was promptly consumed by it. As revenge overcame reason, Apple failed to consider the consequences if things went wrong. Finance provided a means of laying off this risk, but in an atmosphere of euphoria, prudence died a quiet death.

The world, once again, pilloried Finance as the Great Evil. Anti-Finance voices added adherents and decibels. The same voices chorused against Facebook and Apple. The latter were blamed for fanning hype and euphoria, leading to widespread distress.

In the Great Battle of Technology and Finance, there was no winner.

Meanwhile, the central protagonists in the drama of euphoria, who were now railing against the above ills, never paused to point a finger at themselves.

True to its dour and slow-changing character, Cement, belatedly opened a Facebook account to sample the world of virtual intimacy. Facebook – in typical non-intrusive fashion – kept a watchful eye on Cement’s ‘Likes’. As humour ranked highly, it helpfully pointed Cement to avenues which catered to its personal tastes.

One fine day, Cement was surprised to see Facebook presenting itself.

The ramrod of relevance, paragon of privacy, social networking priest was in the market. Seeking $100 billion in market valuation from folks that ‘Liked’ it compulsively, every single day.

Would Cement be interested in investing?

Facebook humbly presented its alpha-CV. 850 million users, $4 billion in revenue, $1 billion in profit, in less than a decade. Stupendous growth in the number of users that liked Liking and paying real cash for virtual games. On this last mention, Zynga jumped in with gusto, indulged in some chest-thumping and encouraged Cement to play Cityville. Cement gently reminded Zynga that it indulged in playing real Cityville everyday. Zynga appeared displeased.

Facebook continued. It believed in a more open world where everyone was connected with everyone else, however meaningless the interactions might be. Ever the helpful Samaritan, it would sell highly relevant advertising. A great bulk of its revenue stream was tied intimately to the growth in online advertising, which was the future. It pegged the potential global advertising industry size at $600 billion.

Being a well-wisher, Cement felt compelled to consider the merits of Facebook’s plea.

It considered the possibility of every earthling using Facebook. How much would Facebook earn, if this materialised? Currently, earnings/user stood at ~$1. Allowing for Facebook’s remarkable appeal, Cement assumed earnings/user to grow to $5, in 5 years. 7 billion earthlings would help Facebook generate earnings of $35 billion, 5 years down the line. Today’s value of these juicy profits was about $15 billion. This valued Facebook at under 7 times earnings. Cheap, no? Never mind if only 2 billion earthlings currently used the internet.

Facebook made a mental note to make an earnest plea to every earthling alive…and considering what was needed to sustain the stock price, it contemplated soliciting support from dead earthlings and non-earthlings as well.

Cement then allowed for the possibility of Facebook capturing half of the global advertising market, a long long shot. This would put Facebook’s revenues at $300 billion, nearly 3 times Apple’s and 8 times Google’s current revenues. If past profit margins persisted over the next 5 years – another long shot – earnings would be $75 billion. Today’s value of this Alice-in-Wonderlandish situation was $30 billion. This valued Facebook at a paltry 3 times earnings. Cheap, indeed.

Stiff requirements but this was Facebook. Nothing seemed beyond the realm of possibility.

Potential investors would be betting on (praying for) Facebook to be the next Apple/Google, several times over.

As a well-wisher however, Cement reminded Facebook of the Greater Fool Theory and to never underestimate the power of irrationality and herd-behaviour. It also lauded Facebook on timing the public offer to perfection. It was sure to warm existing sellers’ hearts.

At this juncture, the ghost of Orkut manifested and quivered resignedly. It served as a shining example of how social networking could go wrong, when competition exposed its many hidden weaknesses. MySpace, on life support, too made a guest appearance and shared how it lost 95% of market value since 2006.

Facebook, undaunted, focused on subtly appealing to the greater fool. It tried to forget that it might need every earthling to sign up and swim in Facebook for the next 5 years, or be immensely profitable in the very least; to justify the price it was requesting from investors.

On returning to its dusty milieu, Cement wondered how real users shelled out real cash for playing virtually, often for little real rewards. Zynga’s coup was praiseworthy indeed. Credit was due to Facebook for its tremendous growth in the past and its achievements but partaking in the business at its offered price was a completely different proposition.

Cement grinned at the oddity of life. A brick and mortar entity – Cement – was sometimes valued at less than the cost of tangible assets; while GenX intangible offerings carrying the promise of stupendous growth were welcomed warmly. The world and investor Likes had changed. Hard asset plays often landed on hard asses.

As a nearly extinct Facebook user, Cement wished Facebook and, more importantly, its eager prospective investors the very best and promised to hit at least 5 Likes everyday, which was higher than the current average Like hit-rate (3 Likes/user/day).

As for its participation in the public offer, Cement’s Like was unLike-ly.