
Interesting conversation between Dave McClure and DHH about Facebook - revorad
http://bettween.com/davemcclure/dhh/Jan-02-2011/Jan-03-2011/desc
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swombat
This mostly demonstrates that Twitter is a very poor medium for complicated
conversations. I'm sure the conversation would have gone very differently if
they had used, say, IRC.

Twitter seems to make it astonishingly easy to have a dialogue of deaf people,
where each side fails to hear what the other side is saying. Throw in the fact
that both sides are, to some extent, posturing to their audiences, and you
have a recipe for a non-conversation.

~~~
Confusion
I find it a typical conversation between someone healthily skeptical of
capitalism and someone unwilling to _really_ consider its downsides. Twitter,
irc or posturing have nothing to do with it. I fully understand what DHH is
trying to make clear to McClure, while the latter is channeling the naive view
that has become American gospel, where downsides are continuously swept aside
with a 'meh, worksforme'.

~~~
davemc500hats
I totally get downside, but it's somewhat limited if FB is making $500m on $2b
in 2010, and 100%+ growth in ann revenue, along with likely biz model
improvements & increase in per-user economics.

reasonable floor is prob $20-30B, whereas upside could be $100-250b if growth
& profits hold up.

downside at .5x vs upside at 2-5x seems like a reasonable bet to me.

DHH seems to ignore most of these metrics, except for saying that 100 P/E
ratio is high. however that doesn't really acknowledge growth or biz model
changes that will bring down P/E ratio over next few years.

to say it's high is perhaps reasonable. but to ignore that they are dominant,
that multiple market participants have set a value (not just GS), and finally
to call Rushkoff's recent article about Facebook "fading" a "thoughtful"...
all of these strike me as more biased than not.

of course my opinions are biased as well -- I've worked with Facebook running
their incubator program in 2009, and I used to work for Founders Fund, one of
their early investors.

anyway I thought it was fun back & forth, given the limitations of the medium.

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armandososa
I can't comment on the conversation itself because I don't understand (the
subject) well enough. But I found the tool very interesting. This is the kind
of thing that twitter should have natively.

I don't know if the bettween guys posted this, but if they did, then I say
it's a brilliant promotion.

[edited for typos]

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joshu
i agree.

a while ago i proposed to twitter that urls of the form:

twitter.com/username,username,username/startid-endid

to display a series...

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revorad
I wish someone would whisper Paul Buchheit's advice into Twitter's ears: "it's
better to make a few people really happy than to make a lot of people semi-
happy."

Instead of trying to be as big as possible, if they just worked on improving
the website, it would be a lot more useful.

~~~
jacobbijani
Being as big as possible seemed to work out, though.

~~~
revorad
I'm not sure what you mean by that. What I mean is that, at least now, they
could focus on improving their product for the existing userbase.

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vitolds
The nice thing about markets is that people can put their money where their
mouth is. I wonder if DHH, assuming he had an opportunity, would short
facebook at $50 billion valuation. Investment banks have talented people
working for them, and they have excellent knowledge on how different assets
are priced, they may be wrong but it's very hard to tell exactly when they are
wrong. I guess betting against them would be rational if DHH had some unique
insight as to why $50B is too much. However a claim about the bubble 2.0 or
frothy markets is not something unique -- I'm sure they have already priced
this public sentiment into the deal.

~~~
danenania
Well, his whole point is that Goldman isn't value investing, but hoping to
profit as a market maker. Goldman may believe the stock is basically worthless
but still think they can make big profits on the deal.

As for "people can put their money where their mouth is" and shorting:

"Markets can remain irrational longer than you can remain solvent." -Keynes

~~~
edge17
shorting means you have to also be able to stomach the upside pain. Maybe
it'll end low, but you have to have enough capital to float against margin
calls while it climbs. I know people that got eaten alive for shorting yahoo
back around 2000 - they were certain it was overvalued and rode short
positions from $40 till over $100. Then their wives made them liquidate the
positions; if they'd held out a little longer they would have won... shorting
isn't all about being right - you also have to have enough capital.

The above quote is very apt. Even if I didn't believe in FB's valuation, I
wouldn't short it because I doubt I have the financial fortitude to take the
pain.

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endlessvoid94
I can never tell if DHH is trolling or not.

~~~
DrJosiah
My first thought was that DHH was being reasonable and rational in his
skepticism. Then my thoughts about fees, etc., were mirrored and confirmed
[http://www.businessinsider.com/facebook-now-it-all-makes-
sen...](http://www.businessinsider.com/facebook-now-it-all-makes-sense-2011-1)
.

It smells like a money grab for GS, and even at $2B in revenue for 2010, still
seems at least a little over-valued.

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stretchwithme
The bubbles they lament are caused by the Federal Reserve's subsidy of debt.
All that extra liquidity does not flow evenly through the economy; it flows
faster into those areas that have been rising, buoying the returns of earlier
investors and creating an even steeper price increases.

And this will continue until everyone that could possibly buy in finds they
find no one to sell to.

Granted such a pattern is inevitable to some degree, but all this hot money,
which we all pay for indirectly through inflation, blows them all out of
proportion.

~~~
drusenko
Moderate inflation is actually a good thing. Without inflation, there is no
reason to invest your money -- the incentive is to hoard wealth, like in the
Middle Ages.

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jrockway
I wish there was a "reply to multiple comments" button, because there are
about eight where the reply should be, "well yeah, it's a Twitter
conversation". People are expecting PhD-level discourse over people tapping
out messages on their phone while they're using the bathroom. This apparently
leads to disappointment. :)

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CEZEALAH
Isn't the term "value" derived from how much a particular item is worth to
someone else?

Having said that, I cannot understand why people say that "Goldman may know
the shares are worthless but are hoping to profit from the deal". If people
are willing to pay for it, it has value.

As far as Facebook's valuation, the old model of figuring out a company's
worth by is revenue is not applicable. Why is a company worth $50b if it
produces $2b in revenue? There is no guarantee that it will make even $1 the
next year. Whereas, just because a company produces $1 in revenue does not
make it worthless because whose to say it wont produce $2bln next year.

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joshu
i don't think dhh actually understands what a marketmaker does.

~~~
tptacek
I bet you're wrong, based on what little I know of his social circle in
Chicago.

But (sincere question): what's the thing he said that tripped your alarm?

~~~
joshu
A marketmaker is someone who stands ready to both buy and sell at some
published price.

They're aggregating a deal which they are then reselling. That's more like a
broker-dealer, I guess. Taking principal risk in what might eventually IPO is
more of an underwriter.

Actual marketmakers tend to try to go home with no risk on the books, because
they have no interest in exposing themselves to gap risk.

I think lots of people have casual understandings of what financial terms mean
and then just sort of guess the rest of it (much like people think
SecondMarket is the secondary market; it's not.)

~~~
tptacek
All I'll say in direct response to this is that Chicago is not a trading
backwater, especially at the small-scale entrepreneurial level. I'd put money
on him passing the Joshua Schacter Trading 101 exam. (Seriously, it sounds
like a fun bet.)

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duairc
I can't understand why dhh keeps saying capitalism is so great. Is it because
he has loads of money?

~~~
xal
Is it not the greatest idea we have ever come up with? Sure there are tons of
issues with it but it also converted the planet from tribal warfare to
incredible prosperity over the last hundreds of years.

~~~
Andys
Where "the planet" is only a subset of the planet.

~~~
mishmash
My guess would be that "the planet" would have preferred the tribal warfare
way of life... just a hunch.

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Qz
If you didn't know who these people were, which would you guess was the
programmer and which would you guess was the investor?

~~~
davemc500hats
altho I'm primarily an investor now, I was also a programmer from around 1980
thru 1995.

that said, I'm sure DHH can/could code rings around my sorry ass.

still, that has limited bearing on our respective positions.

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rhizome
That bettween page doesn't degrade gracefully at all.

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revorad
Do you know of a better tool like this? I've been searching but this is the
best I could find.

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samlevine
Forums, message boards, IRC, etc. ;)

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revorad
haha i meant a tool for following a twitter conversation between two people.

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rhizome
The weird thing is that it shouldn't be hard to create an eminently readable
thread out of an arbitrary number of @tags. I have to think it already exists
somewhere.

~~~
revorad
Well that's what I thought and this is the only one I found which just worked
(sort of).

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Charuru
The colors are incorrect on the bottom. Green and blue should be reversed.

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modoc
AFAICT: they are correct, the colors are related to the @XXX (i.e. tweets
directed at the other person) so it seems backwards.

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Charuru
Thanks you're right. But still bad usability regardless.

~~~
smokinn
Agreed. Adding an arrow for direction would fix that entirely.

