Tuesday, August 16, 2016

Review of Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley by Antonio Garcia Martinez

We've been consistently skeptical of Facebook, a view which has been wrong so far, although the stock price increase has brought the valuation to almost 100x net income. (Meanwhile, the cumulative profits of the company are about half of what they spent to buy "WhatsApp" in 2014.)

Since we're also skeptical of the Techbubble 2.0 more generally, it seemed like it would be worth reading the new Chaos Monkeys, about some lame startup whose author was acqui-hired by Facebook.

I won't rehash the author, Martinez's, story, because who cares? The only thing I thought was interesting about the book was what happened to him after he landed at Facebook.

He did an odd deal where he and his two co-founders sold their startup to Twitter, but he went to work for Facebook instead of joining Twitter with the other two. He got a signing bonus which was a multi-million dollar amount of stock that would vest monthly over four years. (Note: if you have to work to get the money, it's a salary not a signing bonus.)

When Martinez joined FB, they had yet to figure out an ads strategy. The ads team ended up dividing into two camps regarding the details of how to target ads. A "friend of Zuck" in upper management was brought in to settle the dispute, and decided against whatever Martinez was advocating.

The very next day, Martinez was sacked (he says he was going to quit anyway) and lost half of his unvested stock "signing bonus".

Remember Tinker Tailor? If you work in a big organization, your real enemies are inside the organization. I observed the same principle at work in my review of Innovator's Dilemma:

Companies fail to innovate because "they are focused on maximizing the present value of their salaries, which means making sure Bob's division doesn't try to get you fired" for "disrupting" the product that Bob's division makes.
That's why people start startups. But if you start one, and get acqui-hired and negotiate for stock that will take time to vest, keep your head down. Be like Bighead at Hooli.



CP said...

Martinez lives aboard a boat in the Bay after he separates from his girlfriend / children's mother. Here's a helpful thought about sailing:

From watching various YouTube channels made by people sailing around the world, such as the excellent S/V Delos channel, I've learned that if you want to be a sailor you have to really enjoy boat maintenance. If you're one of those people who would fix crap on a boat and do small engine maintenance for fun in your spare time and even go down to the local machine shop and learn how to custom make parts just cause you liked it -- if hauling your boat out of the water to sand it and paint it while wearing protective gear makes you feel proud -- then sailing is definitely for you.


And I suppose that, similarly, racing cars is for people who like working on cars.

Taylor Conant said...

Wow, his "girlfriend/children's mother"... I bet they're going to be raised to be great little people!

High Plateau Drifter said...

This story tells me that FB "creative" employees operate in a culture of fear, where it is more important to create something that pleases Zuk than it is to create something that works. The trick in such situations is to acquire access to the Zuk or reliable indirect access to his ideas. Do not expect creativity to survive in this environment.

CP said...

This guy lost millions of dollars in unvested stock by picking a side in a dispute that was of no economic importance to him. Perhaps he thought that his side would win and he would make more money by raising his stature in the company, but he risked millions and lost. It sounded like the people in the company who have been there for any length of time are savvier about staying on the payroll.

P.S. Facebook's R&D + SG&A expense is $9 billion dollars. They wouldn't have cared about his puny remaining vested stock but he made too many enemies.

Taylor Conant said...

You should take a run at the author. Point out that he seems to need help managing his wealth given his hasty decision that cost him millions and offer your services. The worst that can happen is he says no!

Anonymous said...

Just finished Chaos Monkeys. This book was one giant exercise in burying the lede. He dives into the minutia of the battle between his FBX team and the Custom Audience team to generate ad revenues. His team loses a petty battle. Only in the appendix does he even mention Newsfeed ads, which were developed at the same time he was fighting with the CA team. Why doesn't he discuss their development? Because he wasn't involved/aware or because it kills the drama of his story? Either way, Newsfeed ads have been a massive success that dwarfs FBX & CA combined.
With this in mind, another way to read the whole drama is that Zuck & Sheryl *appropriately* did not care about FBX or CA because they already saw they had a winner in Newsfeed ads.