Courtesy of Steven Levy via Wikipedia, let us briefly define the hacker ethic:
- Free access to [devices]
- World Improvement
While technically true (competing ad inventory suppliers), this overlooks the very real fact that Google and Facebook are run by brothers in an antifragile "hacker religion". For the decision makers managing these companies, the business model is secondary (like a rummage sale at a church).
Religions become stronger in the face of persecution or adversity; Google and Facebook share a common enemy, which is social and intellectual disengagement. For hackers (and the elite club known as United States of America National Academy of Engineers) Paradise is a Turing-test-competitive social graph. No wonder Taleb hates Kurzweil so much; he fears Kurzweil's eminently antifragile religious power.
Information is a discernible weapon, so unification of hackers makes the status quo quite uncomfortable. What do we do when something makes us uncomfortable? We ignore it. We engage in wishful thinking.
When the layman looks upon hacker culture, he is viscerally repulsed, as if seeing something vulgar. To the 99%, software eating culture represents infringement on human ego, which is held sacred. Facebook and Google as a team with a political endgame is a discomforting thought. It becomes even more discomforting if the 1% of infidels expands to 10%.
So: no surprise the vast majority of press treatments attempt to marginalize these two companies--by presenting them as competitors--rather than high priests in a politically violent (not physically violent) hacker cult.
Google is more focused on intellectual (understanding); Facebook on social (discovery), but the contingent politics of these companies are undeniable. For the long-term big-picture view, Face-oogle's "competing" "services" should be seen as compliments more than substitutes. Side note:
If you don't think these two companies' politics matter, ask yourself why Google spends so much money on lobbying. Obama gave an interview to hacker haven Reddit--maybe because he uses the service himself for fun. Is Obama a hacker? In book Confidence Men Ron Suskind notes Obama has a preferred approach to solving problems. This approach is reminiscent of reverse engineering (hacking):
Systemic problem, integrated solution. This kind of thing [gets Obama] fired up.[...]
[Obama's] favorite [solution is an] integrated solution
Obama is also known for ruthless pragmatism and speaking in monotone, other characteristics of hackers like Zuck or Musk.
Which leads us to his administrations' FTC, which recently and expectedly gave Google a verbal warning, telling the world it won't intervene to protect competitors from monopolies that prioritize consumers.
This brings us to LinkedIn (LNKD) and Yelp (YELP). It's quite clear the FTC has no plans to heed a yelp for help. So let's say Facebook goes after them and steals user share. What happens to the stocks if they have a broken user story in market perception?
Ender of LinkedIn
What happens is, you get a Price-to-Book valuation of 1 which is what happened to Zynga (ZNGA)--or 4 which happened to Facebook. LinkedIn has a Price-to-Book ratio of 15.
In my mind, I don't see how the Myspace of professionals is any more competitive than Zynga in the long term. Wilson and Wenger correctly assert we have quite possibly passed peak employment.
So if you like LinkedIn stock right now, you should be loading up on Zynga. If you think Zynga is a buy but not a steal, you should be shorting the heck out of LinkedIn. Here is an info-graphic to explain why a user-base thesis for this short is so powerful.
By the way, LinkedIn's revenue is slowing down.
Yelp isn't as richly valued right now but is also a strong sell as it resides in a ville' coincident with the destruction path of Zuck's social crusade.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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