All That Glitters...

Here’s a cliché for you — perception is reality.

It’s a cliché that needs to be understood, and maybe feared, by every businessperson, politician, celebrity — every person — who seeks in any way to engage the public.

But here’s the thing about clichés: they lose their sting, they cease to impress, they become just so much background noise.

So let’s try coining new descriptors — non-clichéd versions of the same stark truth: Perception has consequences. Reality can break you.

Or maybe a real-time case study will be convincing enough. So please bear witness to the bruising of Goldman Sachs, and see what lessons you might draw — and what lessons GS is refusing to draw — about the power of perception.

What’s vital to understand is that, as of this moment, it’s nearly irrelevant whether GS brokers were truly snickering and calling their clients “muppets” while conspiring to wring every last dime from them. And it doesn’t much matter whether GS was an architect of the housing crisis, a sinister, greedy manipulator, or whether they were just along for the ride like the rest of us.

The truth of these things doesn’t really matter because the perception about them has already gelled. It’s solidified into reality.

Goldman Sachs never put much work into image rehabilitation, even as they were pilloried by Congress and paid out half a billion to settle a SEC fraud suit. They’ve remained wildly profitable so they evidently didn’t see the need. But this stance left them ill-prepared for the late-breaking revelations from Greg Smith, who resigned from the company quite publicly and railed in a New York Times op-ed about a culture of corruption and duplicity.

Goldman Sachs can deny and refute, but that’s irrelevant too. Their new reality has already arrived. They lost three-and-a-half percent of their market value in a little under two days.  

Or if you need a more direct, cliché-free accounting of the cost of perception: about $2.2 billion and rising.

The C4:

1. Goldman Sachs stands accused of profiteering at the expense of their clients and of society at large. A former London-based employee named Greg Smith recently started a firestorm by publicly indicting the company’s culture.
2. Goldman Sachs has weathered economic challenges well, remaining consistently profitable throughout the financial downturn.
3. The company has shown little awareness, maybe even less concern, about their worsening public image.
4. Perception is reality, and a poor public image erases market share. Always has, always will.

Crazy? Yep!

You in?

Since 10% of the world’s population is already on Facebook, saying that Facebook is going public is a little like saying Charlie Sheen is going crazy.

But from a business perspective, it’s true (the Facebook part, that is — Sheen’s nuttiness, like Sheen himself, is irrelevant).

Facebook filed paperwork last week for an upcoming IPO. Analysts are predicting the largest tech-sector public offering of all time, maybe even the largest-ever stock launch, period.

We shall see. But what we’ve learned so far, from Facebook’s SEC filings, is in turn instructive, intriguing and even a little bewildering.

The facts: Facebook valuates itself at between $75 and $100 billion. They’re seeking a $5 billion cash infusion, with which they plan a series of strategic acquisitions. And current holders of Facebook stock options, including secretaries, custodians and the graffiti artist who painted their lobby, are about to become millionaires.

But that’s where things get weird.

Facebook stock options have always been a valuable recruiting tool, enticing the industry’s best programmers, designers and engineers. Facebook stock has long been privately traded, so the options have been paying off nicely until now.

But future options, after the IPO, will be seriously devalued, which will in turn hobble Facebook’s ability to bring in new talent. Is Facebook really risking that to raise just five percent of their (assumed) total net worth?

Doubtful. Especially considering that their revenue has grown by double digits every year of their existence. Last year it was a jaw-dropping 84%. This company is not cash-poor.

Something else is going on here, and we will delight in digging deep and discerning what it is. We’ll do so respectfully of course, because we know Mr. Zuckerberg is even now reading these words (Hi, Mark!).

The C4:

1. Facebook, a social media and advertising powerhouse unlike anything ever seen, has filed paperwork for a $5 billion IPO.
2. A successful stock launch will enrich hundreds of Facebook employees who have benefited from deferred options.
3. Future stock options may be diluted due to the millions of new shares about to be issued. This will surely impact Facebook's ability to attract new talent.
4. We're puzzled and intrigued, and watching closely to see who gets egg on their Facebook.