Elon Musk Sued by S.E.C

Elon Musk, quoted in a New York Times article from Auguest this year by David Gelles, James B. Stewart, Jessica Sliver-Greenberg and Kate Kelly.

“There were times when I didn’t leave the factory for three or four days — days when I didn’t go outside,” he said. “This has really come at the expense of seeing my kids. And seeing friends.”

There seems to be a strong possibility that Elon Musk could add “…and losing my company” to that list.

Mathew Goldstein and Emily Flitter write for The New York Times that Musk is being sued the S.E.C:

“Elon Musk, Tesla’s chief executive, was accused by federal regulators on Thursday of misleading investors with false public statements, a move that could force him out of the company’s leadership.”

Update: Elon Musk and the S.E.C have settled. Details of the settlement can be found here. Amongst other things, Musk will step down as chairman.

Facebook Breach

Mike Isaac and Sheera Frenkel writing for the The New York Times about a Facebook security breach that exposed the personal information of nearly 50 million users:

“The breach, which was discovered this week, was the largest in the company’s 14 years history.”

The Cambridge Analytica scandal, that exposed the data of 87 million of Facebook’s users, from earlier this year, was not a breach. This is.

The article ends with:

“Users who posted breaking stories about the breach from The Guardian, The Associated Press and other outlets were prompted with a notice that their posts had been taken down. So many people were posting stories, they looked like suspicious activity to the systems that Facebook uses to block abuse of its network.

‘We removed the post because it looked like spam to us'”

Think about this for a moment: Facebook removed legitimate news posts from legitimate news outlets about the largest breach in its history on its own platform.

WhatsApp Founder Speaks

Parmy Olson, in an interview for Forbes, quoting Brian Acton, one of the founders of WhatsApp:

“They [Facebook] are businesspeople, they are good businesspeople. They just represent a set of business practices, principles and ethics, and policies that I don’t necessarily agree with.”

What strikes me about the quote above is that, with the exception of people – practices, principles, ethics and policies are the building blocks of a company. At the time the deal was announced, it was clear that Facebook would (eventually) pressure the WhatsApp founders on monetisation and privacy topics. It would have been incredibly naive of Acton (and founder Jan Koum) to think otherwise.

The article does not get into the reasons why Koum and Acton accepted the offer. If you discount the practices, principles, ethics and policies which drove them out. What are you left with apart from money and growth avenues?

The article says only that Zuckerberg made them an offer they couldn’t refuse.

And who amongst us would refuse $22 billion?

I am sure everyone working at WhatsApp at the time benefited beyond any reasonable expectation.

While it is interesting to read Acton’s side of the story, he does not paint the full picture. I find it hard to sympathise with him. If his ethics and motivations were so strong, surely he and Koum could have remained true to their principles while building a profitable business themselves?

Failing that, we already know Google was interested in an acquisition. Facebook was not the only deal in town. Granted, it is doubtful a Google deal would have turned out any differently. But if Google and Facebook were interested, it is likely there were other acquirers (no doubt with less billions). Maybe WhatsApp could have found a buyer more suited to both their profit and ethical motives?

It is all speculation though.

In the end, this is a question that many successful founders will need to answer for themselves: sell or build?

Whichever you do, own it.

Because that #deletefacebook tweet was weak.

Instagram Founders Leave

The news, reported by Mike Isaac at The New York Times, that Kevin Systrom and Mike Krieger are leaving Instagram was inevitable.

The same can be said of the departure earlier this year of Jan Koum, founder of WhatsApp, from Facebook. Neither Instagram, nor WhatsApp, both built through the development of thoughtful and deliberate products as they were, had meaningfully embarked on enabling an effective, large scale business model at the time of purchase.

Yes, you paid a dollar a year for WhatsApp, but was that going to keep the wheels of growth turning as fast as they needed to?

Ben Thompson highlights in his excellent article, Instagram’s CEO:

“Technically speaking, Instagram was a company. In practice, though, Instagram was a product, and its business model was venture capital funding. “

As Ben points out, moving to Facebook allowed Systrom and Krieger to focus on the product and not on the building of the large scale business Instagram was going to need to become.

The WhatsApp and Instagram stories would likely have been more akin to Twitter or Snapchat’s had they refused Zuckerberg’s offers. Despite being engaging products, both Twitter and more recently Snapchat, have faced significant struggles in converting an excellent product into an excellent business. Much of the glamour has been stripped from the Twitter and Snapchat stories in recent years. Much as the glamour has been stripped from Facebook itself. The benefit afforded to Instagram and WhatsApp to remain true to the product and vision was paid for by Facebook’s success as a business. Instagram and WhatsApp did not have to deal with paying for all that growth. In essence, they could remain product darlings. To steal a phrase from from John Gruber – it is the heaviness of Facebook, that allowed Instagram (and WhatsApp) to remain light.

The minute that acquisition cheque is signed and deposited, the keys to the car are handed over. You still get to drive it on a daily basis, and have the unique responsibility of making sure it runs smooth and fast. In short, you get to enjoy the ride, without having to pay for the gas.

Reasons for the departure of Systrom and Krieger will likely emerge over the next few days and weeks. The departure was inevitable because when things get sticky, you don’t have much say if you object to where the money comes from or the manner in which it got there.