Why just being young is not a reason to doubt Facebook
There are a lot of pundits and experts who are suggesting that Mark Zuckerberg and Facebook itself is just too young to trust. That's just silly – there are a lot of ways to bring wisdom and experience into an organization without everybody having to have grey in their temples.
For one thing, there is some interesting research in the works of creative artists that led to an idea called the Old Masters and Young Geniuses theory. This theory suggests that people either work painstakingly over a lifetime to achieve mastery; or that their inspiration and creative gifts begin early. If Zuckerberg is an early genius, he NEEDS to be young!
Any high-potential new area is going to be massively uncertain. If you want to have a big-stakes win, you’re going to have to be prepared to deal with the risk that comes from not knowing. By the time you’re in the world of the tried and true, you are eliminating the risk premium that you could get. The smart way to do this, as I've argued for some time, is to have options. Like venture capitalists, you need to realize that there isn't much you can do about failure rates, but what you can control is the cost of failure and the discipline you apply to making investments. The rules?
- Make sure there is a big upside
- Limit the cost of the downside
- Cut losses on losers early
- Spread risks across a portfolio and;
- Make sure you have an exit strategy.
In most industries, there is the need for a fair amount of experimentation before we figure out what the business model really is. If you want to participate in the ultimate win, you have to be there from the beginning.
I would also editorialize that the stock market’s fascination with steady-state performance is suitable to the ‘exploitation’ phase of a competitive advantage and not very suitable for rapid growth and scaling or for restructuring – there are horses for courses, even in the financial markets.
And remember – by the time Alexander the Great turned 30, he had conquered most of the known world!
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