Quote of the Day: Mark Zuckerberg's "Charity" as Tax Shield

Like any parent, they want their child to grow up in a better world.

And they outlined their vision to make this happen, including taking risks and making long-term investments, building technology, and backing strong, independent leaders and visionaries.

This sounds conspicuously like the mission statement for any number of high-end Silicon Valley venture capital firms.

In a way, this is what the Zuckerbergs have created.

At the end of the letter, they pledge to contribute 99% of their Facebook shares, currently worth about $45 billion, to “advance this mission”.

The New York Times jumped on this immediately: “Mark Zuckerberg vows to donate 99% of his Facebook shares for charity.”

Incorrect. This isn’t charity.

The Zuckerbergs formed a limited liability company (LLC). It’s not a non-profit or charitable trust.

The Chan Zuckerberg Initiative is a for-profit, privately held vehicle that’s intended to make investments that will advance their vision.

Over the course of their lives, they’ll transfer Facebook shares to the LLC.

But as that transfer is considered a donation, the Zuckerbergs will be able to completely eliminate capital gains tax from their Facebook shares.

Plus they’ll be able to shield billions of dollars of other income from tax by writing off the donation as a charitable contribution.

Perhaps the biggest benefit is that the Facebook shares could now entirely avoid US federal estate tax.

At the end of the day, Mr. Zuckerberg gets to retain -control- of his fortune and shares, directing funds as he sees fit into for-profit, private investments, while drastically reducing his tax bill.

This is no surprise. Zuckerberg has already proven tremendously adept at minimizing taxes.

Facebook paid $178 million in net tax on pre-tax profit of $4.91 billion in 2014, an effective tax rate of 3.6%.

And there is no shortage of critics who have a major problem with this.

These hopelessly delusional and misguided people still actually believe that the way to make the world a better place is to give incompetent, corrupt politicians more money.

And in a height of arrogance, they think they are entitled to some claim on Mark Zuckerberg’s wealth.

Sorry, but this is complete lunacy.

This excerpt is from Sovereign Man founder Simon Black's latest article at his website.

The establishment of the Chan-Zuckerberg Initiative charitable trust represents a deft and an ingenious move: conversion of the Zuchkerberg's Facebook assets to a tax shield which was publicized as charity. It's like hitting two birds with one stone: The move, through PR means, reduce the populist politically incorrect rap on them, as well as, to starve ever esurient Leviathan beast

Politics a Key Factor for Facebook Unfriends

From Slate

Spouting off about political issues on Facebook and other social sites may be bad for your friend count, according to a new study released Monday by the Pew Internet & American Life Project.

Eighteen percent of the 2,253 adults surveyed by Pew said they had blocked, unfriended, or hidden a friend on a social network over a political post. It isn’t hard to see why: The Pew survey found that because people who post about politics tend to be very liberal or very conservative, the offending posts are more likely to be out of line with other people’s views. Indeed, only one in four users surveyed by Pew said they "usually" or "always" agree with their friends’ political posts; 73 percent said they only sometimes or never do.

Though most people—roughly two in three—take no action over political posts they disagree with, some 28 percent said they counter with a comment or competing post, another behavior the Pew survey said leads to friends going their own way.

My experience says that this is very true.

First of all, you can’t please everyone. Second, the truth hurts or stings the ego. Third, I am not after social desirability or about “friend count” or after "likes". I can say stupid abstract emotional themes, which isn't really me, or popular positions based on economic nonsense, just to get the "likes". But I am after speaking the truth from where I see it or where I stand. Lastly, for many politics IS a religion.

Facebook Launches Organ Donation Program

Facebook will use its social networking platform to facilitate a global organ donation program.

From abcnews.go.com

Conversations over the dinner table with his med-student girlfriend helped Mark Zuckerberg formulate his latest big idea — harnessing the power of Facebook to help eliminate the critical shortage of organs for patients desperately in need of life-saving transplants.

And it was his friendship with Apple founder Steve Jobs, whose life was extended by years following a liver transplant, in part, that spurred the 27-year-old Facebook founder and CEO to help put that idea into practice.

“Facebook is really about communicating and telling stories… We think that people can really help spread awareness of organ donation and that they want to participate in this to their friends. And that can be a big part of helping solve the crisis that’s out there,” Zuckerberg told ABC’s Robin Roberts in an exclusive interview at the company’s headquarters.

Starting today, users in the United States and U.K. will be able to add that they’re organ donors to their Timelines, and if they’re not organ donors, they can find links to official organ donation registries and instantly enroll.

This has just been one of the many social benefits that accrue from the information age and from laissez faire capitalism.

Graphic: Has Facebook been Reconnecting Past Colonial Ties?

Interesting observation from the Economist

The Economist writes

EIGHT years ago Facebook launched as an online social network connecting a small college community from a dorm room at Harvard University. Today the company has 845m active users across the globe and a wealth of data. One aspect of these data, which Facebook has shared with The Economist, shows a rough correlation between current global Facebook friendships and the old boundaries of once-mighty European empires.

The maps below rank 214 countries according to the strength of their ties to Britain, France, Spain and Portugal respectively. The darker the blue the higher the fraction of foreign Facebook connections with the imperial power in question. (Facebook has not shared the underlying percentage data, just the ranking.) These closely correspond to countries or territories which were, whether wholly or in part, at one point under British, French, Spanish or Portuguese rule, as seen in the bottom set of maps.

Australia, New Zealand and swathes of east Africa hold the strongest ties to Britain. West African Facebookers have most connections with France. Spanish-speaking Latin America is most strongly tied to Spain. Brazilians remain firmly linked to Portugal, as do people in Mozambique, Angola and Guinea-Bissau.

For the complete view of the graph, proceed to the Economist original site here

Incredible Facebook Statistics

From the Economist,

AFTER eight years, scores of lawsuits and a blockbuster movie, Facebook is going public. It is seeking to raise $5 billion from its initial public offering, which would give it an estimated market capitalisation of $80-100 billion—similar to that of fast-food chain McDonald’s. The social network employs only around 3,000 staff, giving it an average revenue of $1.2m per person in 2011. Analysts are quick to point out that the site’s users effectively act as employees, adding content and value for others. Its actual staff and private investors stand to make a small fortune from the floatation. Mark Zuckerberg, the company’s founder and CEO, owns a 28% stake, which will be worth about $28 billion. Facebook’s value is largely derived from its ability to hone adverts to the specific interests of its users. Someone who posts a lot of comments about, say, an engagement, can expect to see more ads for caterers and wedding dresses.

Facebook’s penetration level has been swiftly growing and now approaches the population of India—a manifestation of the snowballing uptake of the internet.

The company’s dynamic advertising based business model—particularly “site’s users effectively act as employees, adding content and value for others” or interactive commerce, exhibits how technology has been changing the business landscape. In the advertising arena, we are clearly witnessing a transformation from mass advertisements to custom based advertisements.

Lastly, you can see the remarkable difference of social media based business in term of employees. Technology companies (Facebook, Google, Amazon and Apple) shows how innovation can bring about the “small means big” impact/value.

Emblematic of the decentralization dynamic from technological advances, information age companies, whom caters to niche markets, have been highly specialized.

These companies provides us a clue of how organizations will be structured overtime. Also these are indications of how technology will continue to put pressure on vertical based organizations, like governments. Such organizations would need to streamline and adapt a flatter structure or go out of business.

On Facebook Friends

Recently I have been receiving some friend requests on my Facebook account from persons whom I am not familiar with or from outside the groups where I am part of. [Mutual friends is an indicator of this.]

While I used to accept anyone, now at least I want to get to know a little about who my prospective online friends are. I don’t like to pad up on my friends list just for the sake of a numbers game to generate ‘status’ or for mass 'networking'. [As an aside, Dunbar's number or the number of friends a typical person can have is 150 according to Seth Godin]

Particularly, I want to know who referred them or if they are readers of this blog or from the stock forum (Stock Market Pilipinas) where some of my articles have been cross posted or elsewhere.

I am open and would be glad to have new online friends, most especially if they belong to a tribe—a group with shared interests—which I am part of.

But at least I would like to get some introduction.

The Philippine Government’s War Against Facebook

The Philippine government has initiated its stealth war against social media.

From the Philippine Inquirer,

Be wary of foreigners suddenly “liking” you on Facebook or other social networking sites, an official of the Philippine Drug Enforcement Agency (PDEA) advised netizens.

PDEA spokesperson Derrick Carreon said many drug mules or persons used to transport drugs through international borders were befriended and recruited online.

The Philippine government is on a slippery slope towards social media censorship and has used its war against drugs as justification.

It’s best to know that there are two different issues: war against drugs and war against social media.

Slippery slope simply means the government uses the war on drugs as a launching pad to expand political control over social media. They start with “warnings” first. Later this will be buttressed with statutes. Interventionism begets interventionism.

The war against social media is aimed at restricting the flow of information that runs against the interest of the government—via censorship.

Governments have been reeling from spontaneous People Power movements abroad fueled by social media, thus sees this information medium as a threat which must be neutralized.

For now, the so-called “warnings” are directed at the recruitment of drug Mules or carriers.

Shown below from PDEA (2008),

Drug mules have been exploding, the chart has not been updated. Yesterday’s TV news program reported 600+.

The propaganda: social media will be a major tool for the growth of drug abuse, thus must be controlled. Creeping government interventionism starts with public conditioning by indoctrination.

The Philippines is now among the top 10 major Facebook users (checkfacebook).

This means that the sin of 1,000 or less, will be used as an excuse to control the activities of 22 million Filipinos. As usual, interventionists apply the fallacy of composition to justify their actions.

Yet PDEA does NOT explain why from 20,000 reported cases of drug abuse in 1972, in 2004, the year Facebook was launched, drug usage has exploded to 6.7 million. (PDEA timeline)

The Philippine population in 1972 was 38.7 million, in 2004, the number of Filipinos grew to 83.9 million: this means about 8% of Filipinos are drug users (as of 2004), despite the statutes RA 9165, EO 218.

In short, drug trade and use has been flourishing in spite of Facebook. Facebook as a social medium functions as aggravating factor rather than the root cause.

However, Facebook will likely bear the brunt of the government [regulatory] failure (drug war) and the attempts to curtail the freedom of speech and expression.

Incentives Driving People To Social Networking As Facebook

Adam Hartley at the MSN says that having thousands of Facebook friends don’t reflect on the friendship in the traditional sense because our capacity to have friends is limited.

Mr. Hartley who calls Facebook friend acquisition as “Friend Farming” writes,

According to evolutionary anthropologist Robin Dunbar, 150 is the largest number of people that you can share trust and obligations with, explains psychologist Dr Rebecca McGuire-Snieckus.

That magic number of 150 friends is thought to be a cognitive limit to the number of friends we can maintain, the psychologist adds. "While people can boast hundreds and thousands of friends on Facebook, Dunbar would say that it is impossible to feed and nourish all of these relationships."

So having friends in excess of the Dunbar 150 suggests that social networking has hardly been about friends but about something more.

Mr. Hartley adds, (bold highlights mine)

Recent academic research suggests there are four primary motivations for going on social networking - social (meeting friends, having an online community); information (finding jobs and useful knowledge); entertainment (FarmVille!) and self-status seeking. It is this latter urge that drives friend farming.

Well different people have different incentives to join Facebook or other social networks.

To my account, some of my non-traditional friends, who shares the same ideas, ideals, values or philosophy as I, have been a fountain of informational wealth. In short, I learn alot from them and I am very appreciative of that.

Of course shared interest also means an online community, which is what I have been saying all along as the vertical flow of communication and knowledge dispersion. People with shared interest can exchange ideas directly which results to increased knowledge. Local knowledge is now globalized through Facebook and Twitter. Our personal interests are channeled by niches or by specialization. We form tribes despite the geographical distance.

And there are others whom I also gladly got to know through online games.

And importantly, they connect me real time to my family wherever they are.

While it may true for some or for many where adding or farming friends could be a form of status signalling, I find the zeitgeist of social network sites as expanding the human experience.

And it is why social networking will change the way we live.

Facebook’s Genesis: A Sensually Inspired Success?

This looks like an interesting trivia about the origins of Facebook.

From Naresh Vissa of Minyanville

Facebook founder Mark Zuckerberg started the site in his Harvard dorm room, though not to make money or get famous. Zuckerberg built several programs while attending high school at Phillips Exeter Academy in New Hampshire. He even had a seven-figure offer from Microsoft (MSFT) upon his high school graduation, but turned it down.

Ben Mezrich chronicled Zuckerberg’s journey in his best-selling novel, The Accidental Billionaires: The Founding of Facebook -- A tale of sex, money, genius, and betrayal. To Zuckerberg, it was never about money, rather his passions. More than anything else, he wished to get laid.

Zuckerberg should have thousands of friends, but social-networking’s father is far from social. After the woman of his dreams rejected him during his sophomore year, Zuckerberg sought revenge. He stole pictures from Harvard’s database and created Facemash, a site for users to rate girls against farm animals. Within a day, his server crashed due to high traffic, so then-Harvard President and President Obama’s former top economic advisor Lawrence Summers placed him on probation and even threatened expulsion. Zuckerberg’s dopamine levels rising through the roof, Facebook’s genesis was established.

It’s one of the unique moments were sensuality seem to have inspired a monumental productive idea.

Quote of the Day: The Power Of Slow Change

Seth Godin, my favorite marketing guru, recommends that we need to watch the power of slow change,

``Cultural shifts create long terms evolutionary changes. Cultural shifts, changes in habits, technologies that slowly obsolete a product or a system are the ones that change our lives. Watch for shifts in systems and processes and expectations. That's what makes change, not big events.”

Take Facebook.

Facebook only emerged barely 6 years ago, now it has over 500 million active users. It’s a slow, but massive change.

In the same context these changes will certainly affect almost every aspect in people’s lives, i.e. people’s way of conducting commerce, personal relationships and even laws and regulatory regimes.

The point is people who value the conditions of the present without putting into perspective the underlying paradigm shifts in the system will underestimate change. They will be left behind the curve.

I am not like them, are you?

Has Quitting Facebook Been Gaining Steam?

There are some permabears who believe that moods drive people's action. According to this school, negative mood prompts people to cloister or become less open.

And in spotting few instances of people deactivating their Facebook accounts, such permabears declare a generalized trend towards social insulation.


Unfortunately this is simply not true or could be discerned as a fallacy of composition (making mountain of an anthill).

The chart from Nielsen/Marketingcharts.com shows that Facebook has been generating most of the recent gains among social media outfit in the US last March. In addition, the gains of Facebook has surged (and not collapsed) in spite of the 2008 crisis.

Where Facebook has reached more than 400 million members worldwide, see Facebook's statistics here, it would be natural for some among the huge number of people to become discontented enough to prompt them to quit for one reason or another.

But the point is to see whether trends in membership are NET positive or negative. The generalized net positive gains, so far, debunks the negative social mood outlook.

Anyway ABC News has an interesting article about Quitting Facebook.

Filipinos Adore Facebook and Is "Asia's Social Media Network Capital"

Developments in the cyberspace is only confirming what the world knows about the Philippines, our addiction to "connectivity".

In the SMS sphere, we have claimed the title as the "text capital of the world" (wikipedia.org), whereas in the cyberspace, the Philippines appears to annex the title as the "social media network capital of Asia" with particular particular preference for "Facebook". (how about Facebook capital of Asia?)

This from Comscore, (bold highlights mine)

``In February 2010, Internet users in the Asia-Pacific region averaged 2.5 hours on social networking sites during the month and visited the category an average of 15 times. Across markets, the Philippines showed the highest penetration of social networking usage with more than 90 percent of its entire Web population visiting a social networking site during the month, followed by Australia (89.6 percent penetration) and Indonesia (88.6 percent penetration).

``Social networkers in the Philippines also showed the highest level of engagement on social networking sites averaging 5.5 hours per visitor in February, with visitors frequenting the social networking category an average of 26 times during the month. Strong engagement was also exhibited by Internet users in Indonesia (5.4 hours per visitor and 22 visits per visitor), Australia (3.8 hours per visitor and 20 visits per visitor) and Malaysia (nearly 3.8 hours per visitor and 22 visits per visitor)."

As discussed in How The Information Age Is Changing Our Lives, the growing use of social media worldwide is also a phenomenon being unraveled in Asia and the Philippines. Otherwise said, the information age is clearly becoming the "new norm".

For the Philippines, this only means that our political economy will increasingly be influenced by the rate of scalability of our adaption to the information age, and this should prove positive for free markets, as our social nexus to the world percolates.

Wikinomics: The Exploding Growth In Social Networking Media

We are witnessing a growth juggernaut in social networking.

In the US social networking among broadband users have soared by 93% according to a new report from Netpop Research, LLC that delves into social networking trends and habits (Marketing Charts).

And talking, sharing, and providing opinions and perspectives have been taking up the "new" form of entertainment displacing the traditional forms as shown below. (All charts from Marketingcharts.com)

Of the 105 million US users, a big majority or 76% are counted as active participants to social media.

This implies of the sundry roles of contribution: upload audio/video, post to wiki, publish a blog, upload photos or podcasts, publish websites, tag articles or vidoes, post to microblog, send/forward email, live in a virtual world, post to blog or forum, rate or review products, P2P file sharing, publish personal pages...see below

Meanwhile, WEB 2.0 is being shaped at the margins.

Web 2.0 is defined by wikipedia.org as the ``perceived second generation of web development and design, that facilitates communication, secure information sharing, interoperability, and collaboration on the World Wide Web. Web 2.0 concepts have led to the development and evolution of web-based communities, hosted services, and applications; such as social-networking sites, video-sharing sites, wikis, blogs, and folksonomies.”

This means less than 10% of US broadband users are “heavy” social media contributors, concentrating their activities to at least 6 applications- such as blogging, microblogging, social networking and photo/video sharing - and connect with 248 people on a one-to-many basis in a typical week (marketing charts.com).

And which is the most used social networking media?

According to Marketingcharts.com which quotes Hitwise it is still MySpace, ``MySpace accounted for 52.21% of those visits, the highest in the category, despite a decrease in visits of 28% compared with February 2008.” Albeit MySpace appears to be losing out to competitors.

Nonetheless, while MySpace is where Americans spent more time among the most visited media: “with 29 minutes and 38 seconds - though this represents a decrease of 2% compared with February 2008”, the fastest growth was seen in Facebook and Tagged.

Again from Marketing Charts, `` In contrast to MySpace’s negative growth, US visits to Facebook increased 149% in February 2009 compared with February 2008. The site received the second-highest market share of US. visits for the month, with 36.03%. Tagged received 2.47% of visits in February 2009, the third-largest number, and had the largest percentage gain in market share of visits among the top five visited websites increasing 280% compared with February 2008.”

Yet based on demographics, Facebook appeals more to older users…

``Looking at the demographic breakdown of visitors to MySpace and Facebook, users between the ages 18-34 still dominate, as 58.81% and 53.91% of US visits, respectively, came from those combined age groups in February 2009. This represents a 2% growth for MySpace and a 14% decline for Facebook in terms of year-over-year percentages. Visitors to the sites who are age 35+ have increased 23% to Facebook in February 2009 compared with February 2008, while visitors from that age group to MySpace have declined 2%.” reports the Marketingcharts.com

All of these underscores of the exploding social networking business model of Wikinomics (openness, peering, sharing and acting globally). This means that from an investment point of view companies actively exploiting these opportunities could be tomorrow’s bonanza.

Importantly we can take note of additional social networking data from Marketingcharts.com:

Additional findings about Chinese users:

-China has a sizable proportion of social media contributors who participate in many Web 2.0 activities, including blogs, micro-blogs, social media, video and photo sharing

-43% of Chinese broadband users (105 million) contribute to forums and discussion boards.

-Young professionals ages 25-29 are the most active users of social media in China. They use more online modes of communication more often than any other age group.

-37 percent of bloggers, or 29 million bloggers, post to blogs on a daily basis.

-41 million Chinese are heavy social media contributors (6+ activities) who connect with 84 people on a ‘one-to-many’ basis in a typical week.

For Chinese Netizens, Netpop said, social media add exponentially to the sources and perspectives available online and represent a new experience for a country accustomed to a single source for media and information.

A global growth juggernaut indeed.