Going Public Means Never Admitting You’re Wrong

The author makes the point that companies don't admit mistakes because they fear the stock would plummet. I don't think that is entirely accurate, or if it is, the stock plummet is incidental to the actual risk that comes from admitting mistakes: investor lawsuits.

And regarding start-ups and their propensity for owning up and apologizing, I've never really seen much in the way of sincerity from the likes of Path or those in similar flare ups. It's just that an apology is the quickest and cheapest form of damage control when the fickle masses and page view hungry tech bloggers are crucifying you on twitter.

Usually I dismiss posts like this. And I have to admit -- I browsed the frontpage several times without clicking on it.

But I think this is very cogent, and one I had totally forgotten about in the whole FB media circus. But this is a rare opportunity for FB to reject precisely the parts of public company SOP that doom them to lack of understanding with their customers, etc.

FB has a hacker / break things culture. Public companies can't admit these things to the public.

Public companies often stagnate by not being able to relate to customers via the full feedback loop that admitting mistakes includes. Some companies get lucky because they insist on getting in touch with what the customer wants in other ways (e.g., through data at Google or through Lean Startup and two-pizza-size teams at other companies, etc.)

But it is an opportunity for FB to buck the norm and continue to take open risks and admit when they make mistakes. It is an opportunity to transform the culture of public companies.

Isn't this conflating Morgan Stanley (and Nasdaq) with Facebook? One could also blame the media for generating an inordinate amount of hype, and then turning around in a day to call the IPO a failure. But, a failure to whom? Most of what I've read here recently suggests that a successful IPO for a company means leaving as little money on the table as possible, which means a stock price that stays relatively flat (or even goes down a tiny bit). Because everyone expected a pop, the IPO is considered a flop. One could look at the situation from another angle and say that Facebook did what was best for themselves, not the share price – which could be seen as a positive signal for people who don't think that companies should be ruled by the short-term ups and downs of the market. I mean, when the valuation of a company is based on an extremely long outlook and yet-to-be-determined strategies and pivots, what do people expect?

In general, I tend to think of startups as children, in or around their creative prime. They are still leaning, often naïve, and are expected to make a lot of mistakes (and also expected to handle them well). It seems reasonable to apologize often to potential customers because they are taking a risk and experimenting with you and your service/product. You're not so much apologizing as you are thanking them for helping you determine your target customer and their needs.

There are a lot of reasons why mistakes happen, but for many reasons the startup stage is a good time to make mistakes.Especially before reaching critical mass, at least from a business perspective, I believe it's easier to justify upsetting a few thousand people if it means obtaining learnings which can impact tens or hundreds of thousands of the _right_ customers (and help you serve them better) down the road. I think the smartest startups are able to minimize their mistakes by practicing due dilligence and learning from others who have made similar mistakes.

Large, public corporations, in many ways, face a different set of challenges.They are expected to understand their target customer, deliver product(s), maintain revenue growth, all in the face of one other interesting challenge. When you take your company public, a core group of your customers changes roles from consumer to investor. Different customers have different needs and expect different things. Some need fault tolerance, some crave features, some need speed. Because you don't necessarily choose your 'investors' at this stage, there's no saying your expectations will be aligned.

One challenge of running a company is, not all 'ethical' strategies (such as apologizing, if it can be considered as such) result in either maximizing revenue or maximizing customer happiness. When you have millions of customers, I imagine every important decision can be construed as a mistake by some subset of customers.

We live in a Peter Pan world where many startups wants to stay young forever and never sacrifice their ideals. The truth is, a company is about serving customers well, making a promise, and delivering on it. In order to do that, you need to grow with your customer base and respond to the challenges this entails.

Special thanks to zephyrp for editing.

As a counter example to the point made in this article, coming from none other than Microsoft, is the following blog post detailing a leap year bug in Windows Azure that caused downtime recently:

http://blogs.msdn.com/b/windowsazure/archive/2012/03/09/summ...

I still remember this: http://news.ycombinator.com/item?id=2545823

The FB IPO was not a mistake for FB - all the money went to the company instead of the insiders. The idea that the stock for an IPO has to soar on opening day is flawed - if this happens, the company should have charged more.

When many own one, no one is to blame.