The book: “Chaos Monkeys …” is a fascinating look into Facebook and the world of forming and selling start-up companies. It should be on the must read list of those considering a start up endeavor or interested in Facebook or other social media companies and how they operate in order to make money and stay in business.
This reviewer found the book to have two minor shortcomings (some might call features) of the Kindle version of the book. Several portions of the book came pre-highlighted, which shared what the author or publisher fond important but might be problematic for some readers. The author, while writing in a colorful and entertaining manner, more often than not used language “that would make a sailor blush”. Be forewarned. Nonetheless the book is worth purchasing and reading.
Illustrative of the material in the book and the author’s style, language aside, Martinez writes: “The events described in this work, with the exception of one scene in New York, occurred between roughly March 2010 and October 2014, in and around the San Francisco Bay Area… I’ve done my level best to capture the spirit and significance of every scene depicted… I invite you to write your own competing account. Together we may arrive at the set of mutually agreed-upon lies called history… Note: Some names have been omitted to protect the truly guilty… Dedication To all my enemies: I could not have done it without you.”
Martinez writes: “As the debate about the future of Facebook monetization grew more polarized and heated… and the IPO was imminent… The company’s senior leadership had called on the Ads team to dream up something fast to revive the lagging fortunes of the enterprise.”
Martinez writes: “When you load a page in your browser, everything you see (and most of the things you don’t) is not from the company whose “. com” address you’ve entered. The way the modern Web works, different elements come from different places. Every element you load, whether you like it or not, touches your browser, and is allowed to read data in the form of what’s known as cookies… As you browse the Web far and wide, from shoe shopping on zappos.com to news reading on nytimes.com… Facebook sees you everywhere… Facebook’s terms of service had so far prohibited the use of the resulting data for commercial purposes, but this bold proposal suggested lifting that self-imposed restriction. [But] it was not guaranteed to succeed, as the actual value of that data was unknown… I had been hired as Facebook’s first product manager for ads targeting, charged with converting Facebook’s user data into money by whatever legal means available. This task [was]… difficult … The… conclusion was that Facebook… did not in fact have much commercially useful data at all.”
About transparency and the markets, Martinez writes: “many markets were and are inefficient, because that inefficiency is very profitable to those running the market, even if only in the short-term”
About advertising, Martinez writes: “Internet advertising [resembles] newspaper advertising that preceded it. The first such ads were run in… a Parisian paper, in 1836. Advertisement was originally a scheme to lower the paper’s selling price… it was soon copied by all newspapers… During the early days of Internet advertising, the publisher played a critical and powerful role. In the aughts, websites like Yahoo had an entire sales force (as newspapers still do) that sold those little squares of characters and images directly to advertisers.” And goes on to write: “[what] companies like Amazon know… about you—is more valuable than most any publisher data...”
Martinez writes: “… every time you go to Facebook or ESPN.com or wherever, you’re unleashing a mad scramble of money, data, and pixels that involves… everything that is known about you by greedy strangers. Every. Single. Time… The magic of how this happens is called “real-time bidding” (RTB) exchanges...”
Martinez writes: “Real-life experience is instructive, but the tuition is high.” And goes on to write: “Here’s the lesson: when the company’s employee retention strategy is cultivating Stockholm syndrome, you’re in the wrong company… That very afternoon, I pulled the classic move you too should use to seduce a potential cofounder into leaving his or her steady-paycheck job. I gave Argyris a physical copy of “How to Start a Startup,” a blog post by Paul Graham, which is the crack-like gateway drug to the startup addiction.” And continues to write: “But man invented language in order to better deceive, not inform… Thus the best deceivers are called articulate, as they make listeners and readers fall in love with the thoughts projected into their heads… To quote one Valley sage, if your idea is any good, it won’t get stolen, you’ll have to jam it down people’s throats instead.”
Martinez writes: “Skilled immigrant tech workers in the United States have effectively one method of entry: the famous H-1B visa. Capped at a small yearly number, it’s the ticket to the American Dream for a few tens of thousands of foreigners per year. Lasting anywhere from three to six years, the H-1B allows foreigners to prove themselves and eventually apply for permanent residency, the colloquial “green card.””
Martinez writes: “How does Google manage to generate yearly revenues of $ 70 billion… Google invites you to click on an ad. Its cash register rings every time you click... It simply holds an auction… at the moment the query occurs. The net result is that billions of times a day, Google runs an auction of keywords and accompanying bids. By looking at the bid…, Google … picks the highest…”
Martinez writes: “technology entrepreneurs are society’s chaos monkeys, pulling the plug on everything from taxi medallions (Uber) to traditional hotels (Airbnb)… Silicon Valley is the zoo where the chaos monkeys are kept… there is no shortage of bananas to feed them. The question for society is whether it can survive these entrepreneurial chaos monkeys intact, and at what human cost.”
Martinez writes: “most everything we know as modern banking originated in the northern Italian city-states of the early and mid-Renaissance. The bankers of the day were Jews; many were… fleeing the 1492 expulsion order from Spain’s Reyes Católicos. The church disallowed Christians from practicing usury, granting Jews an unexpected windfall in the form of a religiously ordained monopoly on moneylending. They were otherwise persecuted and oppressed… and barred from living inside the city walls. By 1516 the Jews… were granted living rights in a dirty, gritty part of the city named the Ghetto Nuovo… Locked behind the ghetto’s walls at night, the Jews plied their moneylending trade during the day, with Christians traveling to the otherwise rancid part of the city to borrow cash.”
Martinez writes: “The lifelong Machiavelli fan in me remembered that memorable line from The Prince: war is never avoided; it’s only postponed to someone’s advantage… As Sun Tzu informs us, no matter how cowardly by nature, anyone fights to the death when his back is against the wall. A wise combatant always allows his opponent a way out… There was still the little issue of payment, though. Ted liked us, but… billed out at something like… $ 700 per hour.”
Martinez writes: “shipped in the IBM PC as DOS (Disk Operating System). Gates, correctly suspecting that other hardware companies would copy IBM’s approach of bundling software separately from hardware, retained copyright over this hacked and copied DOS. As a result, the proceeds from the new computing world where hardware was interchangeable, but software was not (rather than the reverse… ), accrued to Gates and Microsoft rather than IBM… To quote Balzac, “The secret of great fortunes without apparent cause is a forgotten crime, as the crime was properly done.”… If I were to even attempt a brief account of Jobs’s crimes, based on his well-documented biographies, it would fill the rest of the book… and Zuckerberg?... the Facebook idea… was stolen from a pack of entitled Ivy League brats… who had contracted him to implement it. He implemented, but then decided he rather liked the idea and ran with it. Eventually, Facebook would pay tens of millions in damages to the aforementioned Ivy Leaguers… ” You’ll have to trust me on this: the story of just about every early-stage startup is peppered with tales such as mine. Backroom deals negotiated via phone calls to leave no legal trace, behind-the-back betrayals of investors or cofounders, seductive duping of credulous employees so they work for essentially nothing… In the startup game, there are no real rules.... In the end, success would forgive any sins, as it did for Gates and Jobs, and continues to do for countless startup entrepreneurs.”
Martinez writes: “Never ignore people who can write really big checks… Walking into any meeting, you should know every… thing there is to know about the other person; if you don’t, you’re failing… Total commitment, like unconditional love, is the only type that matters… The ones who could pass for a homeless person, though, those are the startup kamikazes who will give everything for the entrepreneurial cause, and are stopped only by death or jail… Before you sit down with people on whom your entire financial future… will depend, you should know them better than their mothers do. Know what they want—…—and you can predict 90 percent of what they eventually do.”
About lawyers, Martinez writes: “we needed a lawyer… skilled in the polite work of corporate governance… Like the best Valley law firms, they played the long game, and were big believers in the “first dose is free” business model. They knew that down the line there’d be expensive legal work in the offing… Here’s another lesson for the aspiring startupista: don’t skimp on lawyers. An error at the hour of signing a big contract, or negotiating an acquisition, could easily cost you millions... Get the best legal guns you can pay for, [or] convince them to accept something other than money in exchange… Trust, but verify—and keep a loaded shotgun under your bed.”
About agreements between two parties, Martinez writes: “…Turkish artillery was using Vienna for target practice as late as 1683, and only last-minute alliances kept the Islamic world from extending clear to Bavaria… More than a mere interpreter, the dragoman was a cultural matchmaker who selectively (mis) translated missives in order to achieve a desired diplomatic result (often unknown to either communicating party)… The Silicon Valley world is an almost perfect analogue, and we have deal dragomans of our own.”
Martinez writes: “Twitter owed us an answer of some sort, either yea or nay, preferably with a dollar sign attached… The day before, Facebook had emailed, proposing we come in and meet some of the Ads team… Five million dollars!”
Martinez writes: “Want to know what it’s like getting bought by a company like Facebook? Here’s how it works: Since this sort of early-stage “acqui-hire” is more “hire” than “acqui,” every employee Facebook cares about must go through the usual hiring screen you’d experience if you had simply applied individually. The fact that you come bundled just changes the economics… What if some of you do well in the interviews, but some do not? … a candidate’s alignment with that culture is overwhelmingly important. Being handy with the C + + programming language isn’t good enough—you also have to be one of us in… spirit.”
Martinez writes: “Ten million dollars. Twitter… had finally come back with a real offer… [At the same time] We want you to come and join the Facebook Ads team… everyone really felt you were an extremely strong candidate.”… As part of our push to woo Facebook, I had been getting Google Alerts on the company for months. One in particular had caught my attention. In October 2010, a mother in Florida had shaken her baby to death, as the baby would interrupt her FarmVille games with crying… Products that cause mothers to murder their infants in order to use them more, assuming they’re legal, simply cannot fail in the world. Facebook was legalized crack, and at Internet scale. Such a company could certainly figure out a way to sell shoes… Facebook it was. But Twitter had come up with the solid offer”
About the author and his two partners: “I looked from one to the other: they seemed tired and worried and done with the startup went to Facebook and the boys to Twitter was absolutely the best possible outcome for AdGrok… You pay a pittance for the company, engineering it such that investors get little, and then pack the real value into the hiring offers for the employees… I needed to accept Facebook’s offer immediately, but before that, an employment lawyer needed to look it over… Silicon Valley job offers can be so complex— that there was an entire class of lawyer who just helped you negotiate the sale of yourself… An hour went by, and finally my lawyer emailed back. “You need to accept the Facebook offer immediately. You also need to resign beforehand, or you’ll break [non-competes] in both contracts.”
On joining Facebook, Martinez writes: ““What is Facebook? Define it for me,” “It’s your personal newspaper.” “Exactly! It’s what I should be reading and thinking about, delivered personally to me every day.”… Facebook was the New York Times of You… Delicately, but unambiguously, our HR Man stated that we could ask a coworker out once, but no meant no, and you had no more lets after that… Next was a warning to the womenfolk. Our male HR authority, with occasional backup from his female counterpart, launched into a speech about avoiding clothing that “distracted” coworkers.”
Martinez writes: “And as with most employees, my equity compensation vested over four years, with one-fourth coming after exactly one year, and then 1/ 16th coming every financial quarter after that….”
Martinez writes: “In 1956, the sociologist Leon Festinger published a landmark study of a cult formed around a Chicago housewife named Dorothy Martin. Martin channeled messages from extraterrestrial beings… Her messages predicted a catastrophic flood that would destroy the United States on December 21, 1954… When the flying saucers and ensuing apocalypse failed to appear on the appointed date, the cult’s believers did not lose faith… This study would lay the groundwork for Festinger’s theory of “cognitive dissonance”: the mental stress people suffer when presented with realities contrary to their deeply held beliefs. The key takeaway is that humans naturally avoid this discomfort, skirting situations that aggravate it, or ignoring data that make their mental contradiction more apparent.
Every large company has languished in the delirious trance of some product folly, waking with an urgent start only when reality finally catches up with delusion.”
Martinez writes: “personal information is stored in a database, along with the browser cookie that corresponds to it, forming a bridge from real-world you to the browser version of you… That join, between a cookie and personal information, is then sold and resold a bazillion times a day to whoever is willing to pay for it… In our mediated age, we’ve gotten to the point that a Facebook or Google user ID is a better way of reaching you than a name or physical address… The advantage that Facebook and Google have over the regular data on-boarders is twofold: they have much more of your personal data, and they see you online all the time… Facebook, Google, and others have achieved the holy grail of all marketers: a high-fidelity, persistent, and immutable pseudonym for every consumer online… Incidentally, this is all public, and fully documented... ”
Martinez writes: “Churchill once noted in a parliamentary speech, “It has been said that democracy is the worst form of government except for all those other forms that have been tried from time to time.”… Similarly, capitalism is the worst form of managing the means of production, except for yet worse ways… That’s the smoldering ambition of every entrepreneur: to one day create an organization that society deems worthy of a price tag.”
Martinez writes: “Facebook would always aim to create monopoly pricing power and maintain information asymmetry, rather than drive true innovation. If Facebook played with the outside world, it always played with loaded dice.”
Martinez writes: “Any idea who Malcom McLean was?... I bet not. But that one man changed our economy more than practically anyone else in the twentieth century. McLean was the inventor of the intermodal container, those metal boxes piled into immense heaps on the cargo ships coming from China. The genius of the container is that the entire workflow around transporting physical goods is standardized on the same 8 × 8 × 40 box. Manufacturers load goods onto eight-foot-wide palettes straight into the box. The box becomes a freight car when loaded onto railroad wheels, and once it arrives at a ship, it is directly hefted aboard via those immense cranes that dot every modern port… It’s universal: whether the ship docks in Singapore or Oakland, its cargo will be swiftly loaded and unloaded via the magic of containerization. Intermodal containers make our global supply chain possible… What’s that got to do with ads? Modern digital advertising has also settled on a containerized box—or, rather, a set of them. They’re known as Internet Advertising Bureau (IAB) ad units for desktop ads, and Mobile Marketing Association (MMA) ad units for mobile. They come in the standard sizes, measured in pixels—the standard sizing means the ad that runs today on time.com can also run on Yahoo Finance or the New York Times site tomorrow… It’s containerization applied to paid media, and in general, it works.”
Martinez writes: “Why do ad servers matter?... Look: the advertiser doesn’t trust its agency… The only thing that keeps this dishonest world honest is the existence of an agreed-upon source of truth… the ad server… The ad server [is] also the accounting system that decides what gets delivered when, to whom, how often, and where on the Internet….”
Martinez writes: “So what became of it all?... The Great Facebook Ads Debate of 2013 ended up being moot... Facebook’s ever-addictive News Feed and ads inventory on the Facebook mobile app, instead of the desktop site. That’s it: ads in News Feed, while the user was on his or her mobile device—that’s what saved Facebook… easy to say all this now, retrospectively. It certainly was not clear in the spring of 2013…”
Martinez summarizes by writing: “That’s the nature of Valley success, however: you try ten things, based mostly on random hunches, a few key product insights, and whatever internal mythologies your culture reveres. Seven of them fail miserably, are discontinued, and are soon quietly swept under the rug of “forever today” forgetfulness. Two do OK, for more or less the reasons you thought, but they don’t blow the doors off your success metric. And one, for reasons you discover only after the fact, becomes a huge, transformational success.”
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