Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley

by Antonio García Martínez

The negotiations were way, way, way above my pay grade, so I have no idea how David Ebersman, Facebook’s then CFO, managed to coerce or cajole the bankers into offering a high and fair price, essentially screwing themselves in the process. But he and whoever else on the Facebook side deserve the Nobel Prize in economics for doing so. They even squeezed the bankers on fees. Oh, yes: in addition to fleecing you with overt price manipulation, bankers are paid a flat fee for their exertions. Facebook’s syndicate accepted a modest fee of just over 1 percent, rather than a more typical fee that sometimes runs as high as 7 percent. While the press jeered about the “disastrous IPO,” the feeling inside the company was one of utter triumph. Facebook had gone public without getting skinned alive, and it now had a mountain of money to recruit the best engineers, acquire budding competitors, and outspend rivals on product development, all with minimal dilution of the shareholders (i.e., of us, the employees). Here is your lesson from the Facebook IPO: whenever you see the headline “Stock X Pops on First Day of Trading and Declared a Success,” instead think “Founders and employees just got completely screwed, and the bankers and their wealthy clients made fortunes.” Because that’s what happened, and didn’t happen, in the case of Facebook.