Facebook IPO and the Fate of Our Economic Recovery

I’m going to be watching the Facebook IPO closely. I feel the underpinnings of our fragile economic recovery rest on Facebook’s success. I know many people are hoping for Facebook to fail and come crashing down from the stratosphere. Maybe they don’t like Mark Zuckerberg, or Facebook’s privacy policies, or maybe they just feel the platform is ruining our culture. Whatever the reason I would suggest those folks take a cold and detached view of how Facebook can effect our economic recovery before wishing too hard.

There is no doubt that Facebook’s IPO is one of the most hotly discussed initial public offerings in recent memory. It will be very closely watched and by most estimates it is expected to do well at open. However, reviews are mixed on the long-term success. I argue we all need to be hoping it is successful whether you like the company or not.

If it is successful at IPO, and maintains its value over the next 12-18 months, there will be a large new crop of millionaires spinning out of the company. If past patterns hold, a percentage of these individuals will take their new found wealth and invest it in tech startups. We’ve seen this most recently with Google’s crop of new millionaires, but have seen it over and over again with IPO’s dating back to the original dot com boom.

Think about that within the context of our economy. Right now a large part of the success of our struggling economic recovery is credited to the growth of startups, and most of these are technology-based companies. If the Facebook IPO succeeds there will be more encouragement to continue investing in these startups and more people with the cash to make those investments.

If the IPO fails that investment money will dry up as quick as a drop of water evaporates on hot pavement. And when that happens the red-hot tech startup scene likely withers and the rest of the economic recovery will likely follow.

So go ahead and continue hating Facebook and wishing that Zuckerburg gets knocked down a notch with the failure of an IPO, but be careful what you wish for.