Even Billionaires Want to be Accepted

The Zuckerbergs bought 11 homes in Palo
Alto to construct their compound.

Where does a billionaire live?

(It's the answer to the old elephant joke riddle "where does an elephant sit"?)

Answer: anywhere he wants.

In Mark Zuckerberg's case he and his wife Priscilla Chan want to live in Palo Alto in the Crescent Park neighborhood, which lies between Highway 101 and Stanford University.

he’s attempted to placate the surrounding community with an assortment of gifts.

Zuckerberg — who’s now worth approximately $257 billion — sent Krispy Kreme donuts, sparkling wine, chocolates and noise-canceling headphones to his neighbors as a form of consolation. Zuckerberg’s press representatives did not confirm to SFGATE which brand of wine and chocolate he gave to neighbors by the time of publication.

Though Zuckerberg’s $110 million project started in 2011, neighbors are reportedly concerned that it’s slated to continue. In total, he reportedly purchased 11 homes, sometimes offering owners up to $14.5 million to vacate their properties along Edgewood Drive and Hamilton Avenue. One of these properties, which operated as a small private school that included his two kids, reportedly violated city law. (In Palo Alto, a school or business cannot function inside of a home if employees do not live there and it creates substantial traffic).

Priscilla Chan and her statue (Artnews)

Overall, Zuckerberg’s luxe compound is anything but modest: it reportedly features a seven-foot-tall statue of his wife, Priscilla Chan, in a silver flowing robe, along with a pickleball court and several guest houses.

At least three Bay Area billionaires--Mark Zuckerberg (Facebook), Sergey Brin (Google), Lauren Powell Jobs (Apple)--have chosen to live in Palo Alto.

Not for them the big house on the hill; within walking distance they can mingle with the normals in downtown Palo Alto and Stanford Shopping Center. Some of the wealthy--think of Warren Buffett--don't want to lose touch with their humble origins. And they can live anywhere they want.

A Roman Tradition

Mark Zuckerberg commissioned a seven-foot sculpture of Priscilla Chan, 39, his wife of 12 years:

The statue, commissioned by Zuckerberg, was created by New York-based artist Daniel Arsham and placed next to a tree in what appears to be a lush garden.

...The statue’s design, with its flowing silver garment, looks like a mashup of ancient Roman Sculpture and the T-1000 from Terminator 2. According to Zuckerberg, the inspiration came from the former: he captioned the photo “bringing back the Roman tradition of making sculptures of your wife.”

Priscilla Chan

Having been married nearly half a century, I've run out of ideas for gifts (that I can afford) for my wife.

Mark Zuckerberg, currently worth about $185 billion, doesn't have my problem.

Urban Decline and Fall

From a Chronicle analysis of San Francisco out-migration

In a survey of demographic trends--specifically the exodus from cities--San Francisco is again number one:

For sheer lunacy, it is impossible to beat San Francisco, the pri­mary breeding ground for well-financed digital start-ups. The city continually places new taxes and burdens on tech firms, rejecting even their charity. The San Francisco Board of Supervisors recently voted ten to one to officially condemn Mark Zuckerberg for donating $75 million to a hospital. As observer Michael Solana suggests, activists now blame Zuckerberg and other oligarchs for having somehow “ex­tracted” their wealth from the terroir of San Francisco, and they deserve to be “demonized, scapegoated, and punitively targeted.” Of course, some tech firms are oligarchical and often socially insensitive, but scores of other communities, in Texas or elsewhere, are happy to welcome similar wealth “extraction.”

The old standard: people who didn't express gratitude had bad manners. The new standard: "condemn" gifts from the rich.

Hey, oligarchs, I know plenty of cities and people--including me--who will be happy to send you a thank-you note for amounts much less than $75 million.

They Will Never Forgive

In 2015 Mark Zuckerberg and his wife Priscilla Chan donated $75 million to the SF General Hospital's foundation. The hospital was renamed the Priscilla Chan and Mark Zuckerberg San Francisco General Hospital and Trauma Center.

Sasha Cuttler, a nurse at SF General, has protested the name change because of Facebook's past mishandling of user data and alleges that his managers have retaliated against him.

According to Cuttler, hospital managers pressured him to stop criticizing the addition of Zuckerberg’s name to the hospital. When he did not, supervisors retaliated against him by removing him from internal boards and denying him transfers and promotions, he alleges in the complaint. During this time, Cuttler also raised concerns about the hospital’s staffing and its reporting of data on patient falls.

For some, money directed at a worthy cause will never buy expiation from past sins, though these "sins" were not illegal and may not even be sins in the eyes of many others. From Sasha Cuttler's Facebook page:

Since the "Trumpocalypse" began I have helped SEIU to defend immigrants right to care, and the Patient Protection and Affordable Care Act. I have also led the effort to get the "Zuckerberg" off of San Francisco General Hospital.

Facebook employee contributions are made overwhelmingly to Democrats, but progressive true believers will never forgive the social media giant for its perhaps-unwitting contribution to the election of Donald Trump. The revolution eats its own.

Facebook and Its Problems

An example of a link I did NOT click on.

Some of the Facebook contacts in my demographic--baby boomer, college-educated--post all the time, but most, like me, seem to be infrequent users. (I suspect that we registered initially to snoop check in on our children and grandchildren.) I still log in to view photos of family and friends, especially baby pictures, but I haven't posted anything for many months.

What's become bothersome is the political obsessions of a few. I have friends on both left and right, and, to be clear, I don't mind reading their original opinions and haven't un-friended anyone. But the constant linking to conservative and progressive propaganda is more and more irritating. I get my news from traditional publications, not from advocacy groups.

Wired's 2/12/18 cover

All these concerns and more are covered in the February 12th issue of Wired. The fifth most valuable company (behind Apple, Google/Alphabet, Amazon, and Microsoft) in the world has come under fire from all sides of the political spectrum because of the blatant disinformation that Russian operatives placed, possibly affecting the 2016 elections.

Yet efforts to solve the problem of "fake news" are fraught with obstacles. For example, who decides fact from fiction? Isn't it the mission of Facebook to allow users to disseminate what is interesting to them? If Facebook is not merely a platform but has some responsibility for news content, then doesn't it open itself to liability?

Mark Zuckerberg has many quirks but I get the feeling he's trying to be fair, even to those he vehemently disagrees with. He, along with Donald Trump, are billionaires who I feel a little sorry for, something I could not have imagined saying 20 years ago.

Tim Cook Speaks

Apple CEO Tim Cook speaks to Brian Williams
About television: "It's a market that we see that has been left behind.....It's an area of intense interest. I can't say more than that."

About resuming manufacturing in the U.S.: "Next year we will do one of our existing Mac lines in the United States."

About Apple's mission: "Our whole role in life is to give you something you didn't know you wanted. And then once you get it, you can't imagine your life without it."

Okay, so the company isn't the same without the guiding hand of its founder. Yet, who other than Tim Cook should be at the helm?

Bill Gates, whose once-dominant enterprise has been struggling just to hold onto second place, Google's Page and/or Brin who are brilliant but maybe a tad unfocused, Mark Zuckerberg, whose company has yet to fulfill the extraordinary promise of its IPO multiple, or John Chambers or Larry Ellison, both of whom are experts at marketing to businesses, not so much to consumers?

Billionaire CEOs or former CEOs all, their companies' shares have not appreciated as much as Apple's since Steve Jobs died fourteen months ago.

Lowered Outlook

We were skeptical of Facebook's valuation last February. We knew that the $38 per-share IPO price was too high.

However, at some lower price we would get in because of Mark Zuckerberg. As we wrote in May,

If Mark Zuckerberg has just a fraction of Jobs-like genius--which I think he does possess--then Facebook is cooking up a few (pleasant) surprises that no one outside the company is expecting. If the price falls to $25 I'll be interested, and at $20 I'm definitely a buyer.

But I didn't buy FB, even when it dropped to $17.55. I've had to adjust my sights downward because of a lowered growth outlook, caused specifically by FB's inability to glean advertising dollars from consumers' shift to mobile. Barron's said today that Facebook shares are worth $15:

At its current quote [$22.86 at Friday's close], Facebook trades at 47 times projected 2012 profit of 48 cents a share and 36 times estimated 2013 earnings of 63 cents. Compare that with Google and Apple, two proven technology growth stories, which both trade for about 16 times estimated 2012 earnings. Facebook is valued at $61 billion, or $53 billion excluding its estimated $8 billion in cash. That's more than 10 times estimated 2012 revenue of $5 billion. Google trades for half that valuation.

What are the shares worth? Perhaps only $15. That would be roughly 24 times projected 2013 profit and six times estimated 2013 revenue of $6 billion, still no bargain price. Wall Street's consensus estimate for 2013 shows earnings rising 31%, to 63 cents a share.

If the above explanation is confusing, just focus on the two numbers circled in the "Current Year" column:

Earnings per share are expected to grow from 43 cents in 2011 to 49 cents in 2012. The six-cent increase represents a 14% growth rate. A good rule of thumb is never to pay a price-earnings multiple that is more than two times the growth rate (in other words, the so-called PEG ratio should be two or less). $0.49 [2012 EPS estimate] x 28 P/E = $13.72. In that light Barron's $15 is defensible.

If one believes that the projected 2013 EPS of 63 cents is reasonably solid, then one should probably buy Facebook even at Friday's $22.86. Paying 36 times earnings ($22.86/$.63) for a company growing at 31% is a value proposition. The price should settle in the mid- to high-30's, and the fact that it's not that high shows that most people don't believe the projections either. © 2012 Stephen Yuen

"Mark Zuckerberg is the One"

The biggest reservation I have about investing in Facebook is not discussed in the post below: Mark Zuckerberg controls the company through its tiered-stock structure. When you buy Facebook, you're investing in him, not only his technical genius but also his management prowess as a CEO. If he mismanages Facebook, he can't be removed.

Some are on board with this set-up:

“I think Mark Zuckerberg is ‘The One,’ ” says Roger McNamee, a longtime Valley venture capitalist whose firm, Elevation Partners, is an investor in Facebook. “Like Bill Gates and Steve Jobs, he has set a tone that everyone else has lined up behind.”

This Bloomberg News article describes how Mark Zuckerberg avoided strategic missteps along the way to tomorrow's largest IPO in stock market history. It should be comforting to investors how he

1) Foresaw Google as the main competitor back in 2007 and allied with Microsoft;

2) Brought in foreign investors who allowed him much more freedom than American venture capitalists;

3) Hired a complementary Chief Operating Officer, Sheryl Sandberg, instead of a seasoned "wise head" [think how Steve Jobs and Tim Cook complemented each other in different areas];

4) Stuck to his vision by adding features (e.g., news feed, status update, "Like" button, login to other sites using  the Facebook ID) that eventually brought more users to Facebook;

The fifth factor is idiosyncratic for a billionaire CEO who has important things to do: he's again writing code. It's grunt work, but it brings him closer to Facebook's engineering talent and may inspire future products. I like how he thinks.

The 1990's and 2000's were the decades of Bill Gates and Steve Jobs, respectively.  The 2010's could turn out to be the decade of Mark Zuckerberg. He just may be the One.