Last week, Facebook held a big IPO “kick-off” meeting for investment banks and analysts, in which company management gave Wall Street a closer look at the company.Facebook’s CEO, Mark Zuckerberg, didn’t attend the meeting.
Predictably, Wall Street’s already bitching about that.
“We don’t think that he should be hiding from the investors,” the chief investment strategist for the Teamsters union complained to Reuters. “He wants investors to put their money behind him, with the confidence in him personally, as the person who built this company and who’s going to lead it and control it. He should be accountable to those people who are investing.”
“Investors are crazy to want to get in bed with a company where the guy who controls it doesn’t even pretend to care about the rest of the shareholders,” a second investor, Greg Taxin of Spotlight Advisors, told Reuters.
And so on.
As we explained last week, Mark Zuckerberg was smart to skip the IPO kick-off meeting.
Because it just wouldn’t have been a good use of his time.
In fact, for those who want to invest in Facebook, as opposed to just buying the stock in the hope of a short-term pop, Mark Zuckerberg’s decision to skip the kick-off meeting is actually encouraging.
Because it shows he has his priorities straight.
Although it may seem startling to some folks on Wall Street, the way to create the most long-term value is not to spend time sucking up to investors. It is to spend time building the best products and company that you can. And that’s exactly what Mark Zuckerberg is spending his time doing.
Also encouraging for those who want to see Facebook succeed over the long haul is that Mark Zuckerberg doesn’t give a crap about going public. If Facebook didn’t have to go public, it would never go public. And it’s not as though it needs the money.
What Mark Zuckerberg cares about is Facebook’s product and mission. As he stated clearly in his first letter to shareholders–which is available to all shareholders to read anytime they feel like it–he views the business as a way to fuel the development of Facebook’s product, not vice versa.That attitude, of course, is anathema to many investors. Many investors believe a CEO’s only mission in life should be to “produce shareholder value”–which, in their view, usually means delivering short-term results. The investors are a company’s owners, after all. The CEO “just works there.”
This attitude might have some merit in theory, but in practice, it is both destructive and absurd. (And it’s particularly absurd at Facebook, where Mark Zuckerberg owns 57% of the voting stock.)
This attitude is destructive because public-market investors often have very different conceptions of “shareholder value” than visionary CEOs. And it’s absurd because public-market investing has, for the most part, become such a short-term game that most of the investors who are bitching about “shareholder value” today won’t even be shareholders if and when it is eventually created.
What most public-market investors mean by “produce shareholder value,” after all, is “make the stock go up.” And because investors are measured on daily, monthly, quarterly, and yearly results, what it really means is “make the stock go up now.”
Unfortunately, as visionaries like Mark Zuckerberg figured out long ago, making decisions necessary to “make the stock go up now” is often destructive to a company’s long-term success. Managers who become beholden to public-market shareholders and obsessed with short-term stock performance often cut corners, under-invest in long-term projects, or become so desperate to meet near-term targets that they destroy the company’s innovation and culture.
Obsessing about short-term results, in fact, has likely destroyed much more shareholder value than it has created. And, in many cases, it is the CEOs who have largely ignored Wall Street and focused on executing a long-term vision–like Amazon’s Jeff Bezos–who have created the most value over the long haul.
Like Jeff Bezos, Mark Zuckerberg focuses his time on Facebook’s product, not its business or finances. He has a clear vision for the company, which he has articulated time and again for anyone willing to listen. He has done a spectacular job of defining Facebook’s mission and hiring great people to execute that mission. And he has delegated responsibility for Facebook’s IPO and business operations to extraordinarily talented executives, including CFO David Ebersman and COO Sheryl Sandberg.In short, prospective Facebook investors have more than enough information to decide whether or not to invest in Facebook–even if they never see hide nor hair of Mark Zuckerberg.
If they don’t like the fact that Facebook’s CEO is focused on building the company instead of kowtowing to them, then they can skip it.
Or, if, like some of Wall Street’s smarter investors, they see Mark Zuckerberg’s choice of priorities as an asset, instead of a flaw, they can invest knowing that their CEO won’t get distracted by whiny short-term shareholders.
Fortunately, there are some of these folks on Wall Street. And one of them even talked to Reuters:
“I would always like access to the CEO, but the best use of his time is in running the company,” said Dan Niles, chief investment officer at AlphaOne Capital Partners. “I worry more about a CEO who seems to spend too much time talking to Wall Street and the media.”
Mark Zuckerberg is focused on exactly the right things: Establishing Facebook’s vision and making sure the company has the best people in place to execute it. Every minute that he spends holding investors’ hands is a minute that could have been better invested elsewhere.
More CEOs should follow his example.