The initial public offering for Facebook, scheduled for May, says much about the American economy. It’s the most anticipated business event of the year. Yet amid the largest unemployment crisis since the Great Depression, Facebook will create few if any new jobs. The social networking company employs 3,200 mostly highly skilled workers, largely in Silicon Valley. By comparison, Microsoft employs 40,000 in the Seattle area alone. General Motors has more than 200,000 employees across a range of skills. These are companies that actually make productive things. Facebook provides an online forum in which we amuse ourselves and check on former girlfriends and boyfriends. Once it must dance to Wall Street’s tune, Facebook will be under relentless pressure to hold down or even cut the number of employees.
In a nation with retrograde socio-economic mobility in America, the IPO will result in the usual group of winners. A lucky 1,000 Facebook employees who own shares will become millionaires. Depending on the deal’s valuation, the investment banks on Wall Street will pocket $500 million in fees, nearly half of Amtrak’s annual subsidy. As usual, average shareholders will be virtually shut out of whatever quick profits come from the early days of the offering.
(Here’s Wired’s annotated version of Mark Zuckerberg’s “open letter”).
We keep being told that America is “broke.” Hardly. The Facebook IPO is expected to raise $5 billion from the capital markets, even as productive small businesses continue to struggle to find lending. This is investment looking for a quick payoff so it can move on to the next speculation.
The famous Zuckerberg and his colleagues certainly deserve a payoff for the risks they took — and luck they had — in creating a site that now has some 845 million users. But it would be a more hopeful sign about the future prospects of the economy if it were but one of many big IPOs anticipated this year, and most of those ones that would create large numbers of middle-class jobs, capital investment, 21st century innovation and export muscle here at home. But that’s not how the game is played.
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Today’s Econ Haiku:
Whether we like it or not