Facebook and the new paradigm on profits in the Knowledge Society

The remark made in Mark Zuckenberg's letter to future shareholders, stating Facebook does not make good products to earn money, but earns money to make good products - something Steve Jobs would have completely agree - changes one of the main paradigms in business as we have looked at, up to now: "making money" is no longer the driver. Transcending, making cool stuff, doing it better that the competitors is. The business theory is shifting from “I´m in for the money, which makes me transcend”, to “I´m to transcend, and it brings money”. Money is the consequence, not the goal.

Profits still are a performing index that indicates you are doing right things right. But they are not a goal, they are a consequence. When Twitter founder Jack Dorsey first met potential shareholders he did not know yet which would be the income driver. Venture capitalists didn´t care. They saw the potential of the networking idea and funded the startup. Of course, they were in for the money, but also for participating in “the next big thing”.

During my whole professional life since I took my MBA degree, the central idea in business had been “how do I make money”, and all efforts and focus were in finding where and how. It could not be otherwise. That was incompatible for me with deeper needs such as making this a better world just because I want to live in a better world. “Business is business” would be the remark to remember you that one thing is what you do to earn money and a totally different thing is what you do to change the world or have fun at what you work. The business theory was that you are here to make money, and if by the way you have fun, much the better. I was miserable, running the “hamster wheel” over and over. Only when I changed that perception into making things I like, whatever the consequences, did things become to go Okay.

This change in the reason why you do business brings another paradigm change. We were trained at MBA schools to make a good allocation of “resources”, meaning capital, labor and work. We had to be efficient in that. Yet, nothing was said of allocating talents. Talents were not in the management formulas, nor in the Balance Sheet. But in order to make cool stuff and transcend they are key. Finding, retaining and empowering talent is a must in the new economy. Knowledge is the main resource, not capital. And knowledge is produced by talented, motivated people.

I am pretty sure all employees with stock options at Facebook are thrilled at their new financial situation, but as it has been written in many places, many of them will want to take the money to start another cool thing, just for the sake of doing it. Profits? Sure, they will “show I was right”. But that´s it. I’m in for the next cool thing.

I learned at my MBA School that there are three reasons someone would want to work. First, extrinsic motivation, that is, the rewards that the work will have on me (money, fame, recognition…).  Second, intrinsic motivation: the rewards that I get in just doing the work that I do (the typical “I love what I do”). And third, transcendent motivation: the rewards I get by seeing the rewards of what I do upon others. Profit-centered business has to do mainly with extrinsic motivation. Knowledge-based business has to do more with intrinsic and transcendent motivations. Intrinsic and transcendent motivations have an economic effect: they boost intellectual productivity and lower intellectual costs. And, being knowledge economy the incarnation of post-capitalist society, these new management best practice rules are much welcome.

Alfredo Barriga