Facebook and the Ford Pinto
Originally from: Steve's Blog.
Cold-blooded Calculations for Corporate Profit
The truth is, it is neither a corporation's mission nor its obligation to serve its customers. A corporation exists as a soulless synthetic legal entity whose singular purpose is to maximize its shareholders' wealth. This is something the public too often and so easily forgets in the wake of the mind-numbing marketing created specifically to cause us to misunderstand the corporation's true raison d'être.
McDonald's doesn't serve hamburgers to feed us, they feed us to serve themselves.
When tension arises between the needs, rights, and expectations of the corporation's customers and that corporation's goal of wealth maximization, simple economics prevails: “What will make the company the most money?”
Anyone who was at least a teenager in the early 1970′s will recall the rather horrific case of the Ford Pinto: When the Pinto was “rear ended” in an auto accident, sharp pieces of the rear bumper system often pierced the gasoline tank, located just inboard of the rear of the car, causing it to catch fire and often incinerating the car's occupants.
When this seemed to be happening more often than it “should,” it came to light that Ford's management had long known of this literally fatal design flaw in their car. But many of these defectively designed Pintos had been manufactured and sold. Ford's infamous “cost-benefit analysis” — subsequently obtained by the press — revealed that the company would be more profitable if it paid the statistically predicted number of wrongful death claims that it knew were likely to arise in the future, rather than recall the Pintos for an $11-per-car modification. That must have been some board meeting.
What does any of this have to do with Facebook?
Just this: Facebook is not working for the interest of its 400 million users. Facebook is a corporation like any other, whose sole mission is to maximize its corporate profits. Unfortunately, the only “asset” Facebook has to monetize is the wealth of personal information that has been poured into the system by every one of those 400 million users. Facebook has understood this from day one, its user community has not.
The public relations disaster Facebook brought upon itself by overreaching and overstepping might not have occurred. They might have gotten away with it. Or it might not have been so bad. Or it might have blown over. Or, or, or. But you can bet your last dollar that what just happened wasn't a mistake. This was a calculation like any other — a calculated asset leveraging they hoped to get away with.
What was their mistake? They were too impatient. They pushed too far too fast. In retrospect, they would have been wiser to creep these changes out incrementally and more slowly, allowing each one to be digested and giving the world time to grudgingly accept the creeping loss of Facebook privacy and control.
So, that's what they'll do now, they'll fall back to Plan ‘B’.
Facebook still has only one asset — its community's personal information. Sooner or later that asset will be fully monetized. It now looks like its going to be a little bit later.