Expert Idiots
link The Facebook IPO – US Business News — Facebook Weighs Possible Listing With NYSE: Sources – CNBC.
It’s a heaping double helping of schadenfreude for most people as we witness the colossal cluster eff that the Facebook IPO has become. What was hyped to be the most spectacular public offering in history has devolved into a bad Greek wedding-like fiasco of lies, deceit, finger pointing and likely lawsuits. You can’t make this stuff up.
The game was stacked with star players from the outset. Harvard grad creates world changing software platform. Top echelon investment bank Morgan Stanley advising and underwriting along with the rest of the Wall Street elite. Rock stars and hedge funds allocated founder shares. And of course, a namebrand that virtually everyone knows. Finally, the popular media frothing up the ordinary folk with projections of outlandish valuations. What could go wrong?
Well except for the newly enriched insiders, it all went wrong. The common link connecting all of the participants was plain old simple greed. As Gordon Gekko so elegantly stated in the 1987 film “Wall Street”, “greed is good”. I won’t deny the basic tenet of this argument, since what it really means is that without a desire to achieve more, there exists only a stagnant complacency. This complacency leads to rot and groupthink.
But pairing up greed with complacency, now you’ve got problems. It’s a fair bet that very few people actually read the offering document except the lawyers who were paid to write it. Anyone who has ever seen one of those monstrosities knows that all the caveats and warnings enclosed are about as useful as the warnings on cigarette packages. People buy stocks because they are told to. They rely on the advice of financial advisers, consultants, friends and of course, cab drivers in really bullish markets. As in many aspects of our lives, we rely less on our own common sense and judgement and depend more on ‘experts’ to make decisions for us.
The free market works. It rewards well calculated risk taking but it also punishes ill thought out schemes. All of the current talk about lawsuits about the ‘failed’ offering are ludicrous. As if someone should reimburse you for losing money on an investment. This implies that there should have been a profit and that it should have been guaranteed. Next thing you know, people will be rioting in the streets thinking they have a right to a job making 100k a year. Ivory tower types take note; there are many learned theories of how things work and many of these theories can be made to sound convincing. But the crucible of the real world is where theories are tested. Unfortunately in real life, we can’t just reset the theory by starting over, we live with our mistakes.