A number theorist said something about math that’s stuck with me, something like “I wouldn’t know what a proof of Goldbach’s Conjecture would look like . . . I just don’t have any framework for approaching a problem like that.”
That pretty well summarizes my feelings on Facebook’s purported $10B valuation. To be sure, it seems insane to value a site with 70M users at $10B (although, to be fair, a lot of this figure must be based on anticipated growth), but I just don’t have the framework for deciding what the market cap should be. Facebook (and similar technologies, like MySpace, YouTube, and Digg) are uncharted territory. How do you model Facebook’s potential? How do you estimate the likelihood of students continuing to use the technology when nothing like it has ever existed before?
And the analysts who come up with these figures . . . do they have any idea themselves?
September 28, 2007 at 2:12 am
Such a valuation could easily be a catastrophe waiting to happen – a modern day Titanic about to hit an iceberg. George Santayana said, “Catastrophes come when some dominant institution, swollen like a soap-bubble and still standing without foundations, suddenly crumbles at the touch of what may seem a word or an idea, but is really some stronger material force”. My question is, “What foundations do they have for guaranteed future success?” Ties in with your question: “How do you model potential?”
December 22, 2008 at 10:36 am
Gilbert F…
Hello, just stopped by….