Rotten Capitalism

Why the Facebook IPO is good capitalism

The IPO of Facebook is now all over in the media and with Facebooks valuation going all crazy, we would need to print some new bills if we actually wanted to see the money in cash.

We all know these young guys who invested in the company will be making whooping profits. Is this also rotten capitalism that some individuals can earn these inapprehensible amounts of money? No, its not.

Three reasons why the Facebook IPO is good capitalism:

1. They took the risk
   Starting a new company is a big risk and even for a young student its at the very least the time he invests into this. Of course, one might argue that VCs like Peter Thiel who will turn his $500k invested into something like $2.55 billion (its called “googleplexing” an investment) did not really take a risk. However, still, the system of venture capitalism provides young innovative companies the needed money to get going. At the very end it is also the promise about never ever to have to work again who keeps people taking these risks.

2. They kept innovating
   Its was not the only social media network (remember: MySpace and Orkut?), but by far the most innovative. New features are added constantly and sometimes it took even a while until the community understood what they were good for. For example the tremendous switch from making status reports instead of profile pages the central aspect of the social media experience. One can only hope, that after the IPO Facebook can keep this pace of innovation.

3. They added value
   You don’t get over 800 Million users if you don’t do something which makes a difference. Facebook has become part of our lives and our identity, with all the risks and benefits included. I think I don’t have to explain any further. Yes, its a profit-driven business, but it offered a product the world seems to like.

So far Facebook is good capitalism, lets just hope its investors make something meaningful with their acquainted riches.