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Sunday, November 27, 2016
The Unexpected Management Genius of Facebook’s Mark Zuckerberg
The first time I interviewed Mark Zuckerberg, back in 2005, he was all of 21 years old and could have passed for 16. He had recently dropped out of Harvard to move his startup to Silicon Valley and was obviously enjoying the novelty of being called CEO. Facebook’s website—there was no mobile version yet—had 6 million users and was open exclusively to high school and college students. It had only just added a feature allowing users to upload multiple photos to their profiles. But the company was already a hot commodity, valued at $100 million and coveted by buyers who were willing to pay far more. And despite his callowness, it was obvious that Zuckerberg was an entrepreneur who was, as I wrote at the time, “preternaturally levelheaded.”
If there was one point Zuckerberg was most forceful about that day, it was this: He wasn’t the least bit interested in selling his year-old company. “I’m in this to build something cool, not to get bought,” he said with a bloodless sincerity that was altogether convincing.
Eleven years later Zuckerberg (No. 1, Businessperson of the Year) has built something beyond cool: He has willed into being a global phenomenon. Facebook FB-0.38% is a nearly 16,000-employee media powerhouse worth $350 billion—and also an advertising-technology juggernaut on track to annual revenues of more than $27 billion in 2016 and gaudy profits of $7 billion. Its core product now has 1.8 billion users, and Zuckerberg has shrewdly assembled a portfolio of properties to buttress Facebook. The complete “family of apps” includes the photo-sharing tool Instagram and the communications service WhatsApp, plus two homegrown apps, Facebook Messenger and Facebook Groups. In addition, Zuckerberg believes the company’s Oculus virtual-reality headset represents the next way people will communicate with one another.
Facebook’s immense accomplishments already have conferred superstar status on Zuckerberg, inviting comparisons to the likes of Bill Gates, Steve Jobs, and Jeff Bezos. At 32, he is as fresh-faced and casually dressed as a decade ago, yet today the Facebook CEO is a celebrity wherever he goes. He huddles with Presidents, Prime Ministers, and the pope. He is photographed jogging in Beijing and Barcelona. (This year he ran his first half-marathon.) Together with his physician wife, Priscilla Chan, he has become one of the world’s most ambitious philanthropists, most recently pledging $3 billion to an initiative with an audacious goal: to cure, prevent, or make manageable all diseases in their children’s lifetime.
Zuckerberg is rightly recognized for his outsize success. Nevertheless, he is surprisingly underappreciated for his business acumen. Yes, he has delegated the commercial aspects of Facebook to Sheryl Sandberg, Facebook’s polished chief operating officer, a Harvard MBA who is 15 years Zuckerberg’s senior. Sandberg’s presence has fostered an “adult supervision” narrative familiar to the Valley. But unlike, say, the GoogleGOOGL0.16%founders, who turned over the CEO job to Eric Schmidt for a decade, Zuckerberg has remained chief executive throughout Facebook’s 12-year sprint to greatness. Despite repeated doubts—when Facebook missed the shift to smartphones, when it was thought to have botched its IPO, when it was seen as losing its luster with young people—Zuckerberg has remained the company’s chief product visionary and business strategist. Through bold acquisitions and the articulation of a remarkably constant mission, Zuckerberg has kept Facebook on track in the face of full-frontal assaults from the likes of Google, Twitter TWTR-0.88%, Snapchat, and others.
Admirers attribute Zuckerberg’s business success to his inquisitive nature as well as to his relatively grounded approach to technology. “He’s always been a learn-it-all person, to a level that is sometimes maddening, considering how much more I have to learn from him than he does from me,” says Matt Cohler, a venture capitalist at Benchmark and an early Facebook employee who has remained close to Zuckerberg. “He maintains a relentless focus on innovation, but at the same time he’s an applied-science and engineering guy.”
What Zuckerberg has engineered at Facebook is growth that is astounding considering the size of the company. For four years running, it has grown revenues at a 50% clip, while profits have jumped fivefold. Unsurprisingly, Facebook’s stock has followed suit, doubling in two years. In its most recent quarter, Facebook increased its revenues 56% over the year before and its net income 166%. (And yet the stock dipped on the news, as some investors expressed fears the company won’t be able to keep up the scorching pace.)
Growing at scale is the holy grail of business leadership—and this feat alone makes Zuckerberg an easy choice for Fortune’s Businessperson of the Year for 2016. Facebook’s products are frequently dissected, as are its missteps as a reluctant media titan. (Facebook seems to enjoy the financial fruits of advertising dominance far more than the editorial responsibilities that go with it.)
Yet for all the celebration of Facebook’s success and the adulation of Zuckerberg as a visionary, what’s less well understood is how he goes about his day job as an executive. What makes him so effective as a businessperson? An examination of Zuckerberg’s management approach reveals that his success rests on three pillars: his unique ability to look into the future, his otherworldly consistency, and the business discipline he has nurtured in an industry quite often enamored of bright, shiny objects. A closer look reveals just how levelheaded he has remained over the years.
Being a visionary is harder than it looks.
Mike Vernal graduated from Harvard in 2002, a few months before Zuckerberg arrived on campus, and took a job at MicrosoftMSFT0.22%. Five years later he joined Facebook as an engineer, and later rose to head the company’s search, local, and marketplace product groups, reporting to Zuckerberg. Earlier this year he left Facebook to become a venture capitalist—meaning his new job is to find the next Mark Zuckerberg.
Having watched Facebook’s CEO up close, Vernal believes the key to Zuckerberg’s success is his ability to think for the ages while knowing when to go deep. “One of the things that defines Mark is that he takes a very, very long view of things, almost a geological view,” says Vernal. “Most people think day to day or week to week. Mark thinks century to century.” (Indeed, Zuckerberg’s favorite video game is Civilization, which allows players to consider the vast sweep of history while plotting their next move.)
Somewhat less grandiosely, Vernal cites Zuckerberg’s audacious 10-year-and-beyond quest to connect the half of the planet that doesn’t yet use the Internet. Facebook’s plan to do this involves fixed-wing drones that will deliver connectivity from high above the earth. Vernal says Zuckerberg typically has a pile of books on his desk, visible to all through the glass walls that surround it. “For a while there was a book on free-space optical communications,” says Vernal, referring to a technology Facebook is pursuing that will beam signals from the atmosphere. “It is telling about Mark’s personality that he reads a college textbook on free-space optics.”
An introvert given to long stares and awkward silences, Zuckerberg does more than think deeply. Where CEOs with more emotional intelligence rely on their gifts for gab, Facebook’s CEO attributes his management technique to his training as an engineer. “For me engineering comes down to two real principles,” he told a group of Nigerian software developers this summer. The “engineering mind-set,” he said, dictates thinking “of every problem as a system” and breaking down problems “from the biggest stage down to smaller pieces.” Over time, Zuckerberg told his rapt audience in Lagos, “you get to the point where you’re running a company,” itself a complicated system segmented into groups of high-functioning people. “Instead of managing individuals, you’re managing teams. And if you’ve built it well, then it’s not so different from writing code.”
A consistent message helps rally the troops.
Zuckerberg has proved adept at selecting talent, relying on a core of top executives who have been at Facebook for much of its existence. He claims to draw more inspiration from his coterie of senior managers than from any mentor or adviser. While he retains his reputation as a boy-genius coder, in reality Zuckerberg is something of a grinder—a 99% perspiration guy who has surrounded himself with a group of people he respects and with whom he is constantly stress-testing his hypotheses. “Ideas typically do not just come to you,” he said in a 2014 public Q&A session at Facebook. “They happen because you’ve been talking about something or thinking about something and talking to a lot of people about it for a long period of time.”
At Facebook’s F8 developers conference in April, Zuckerberg laid out the company’s 10-year road map, which includes continued development of artificial intelligence and virtual reality.Photo: Courtesy of Facebook
From such thinking came Zuckerberg’s realization that three broad themes matter most to Facebook: connectivity (his goal of bringing the Internet—and the wonders of Facebook, of course—to those who don’t have it), artificial intelligence, and virtual reality.
What’s more, because he is always pushing, Zuckerberg has shown an ability to recognize big ideas from others early—including when Facebook has been late—and has been able to act with bold conviction to buy what others have created, if necessary. Examples include spending $1 billion to buy photo-sharing site Instagram in 2012; $2 billion for Oculus VR two years later; and $19 billion for WhatsApp, also in 2014. Instagram, with estimated revenues of $2.5 billion this year, already is a runaway success, while at a minimum Oculus and WhatsApp have positioned Facebook to succeed in important areas adjacent to its core product.
One of Facebook’s key business innovations is a “growth team”—today made up of hundreds of people—that designs tactics for various parts of the company, relying on a rigorous set of metrics to gauge success. The unit has broad latitude to weigh in on any aspect of Facebook’s business. “The growth team’s discipline has had as big an impact on Facebook as anything else,” says Vernal, the former top product executive. “The team owns no single product. Instead, it owns any issue that is preventing people from signing up for or using Facebook.”
Silicon Valley companies are now widely replicating the concept of the growth team invented at Facebook.
Patience pays, even for a young company in a hurry.
Facebook has a simple, if grandiose mission: “To give people the power to share and make the world more open and connected.” Zuckerberg, whose wooden public speaking style has improved with practice, is mind-numbingly efficient about slipping the statement into everyday conversation, as well as his speeches and interviews.
The repetition makes for effective external and internal messaging. If something at Facebook can’t be explained by the oft-repeated catchphrase, then it doesn’t fit. Virtual reality has a place because Zuckerberg thinks it’s the next “platform” for communicating, just as the web was when he started Facebook. Spending an outrageous amount of money for WhatsApp—which has challenged Skype as the trendiest free international calling service—was acceptable because it fit into the “open and connected” mantra.
A corollary to staying on message is being patient and disciplined in pursuit of the mission. Zuckerberg was ultra-patient with Instagram, which had no revenues when Facebook bought it but is now booming. He appears to be playing a similarly long game with WhatsApp.
Indeed, Zuckerberg’s achievement in guiding Facebook to where it is today owes as much to what he hasn’t done as to what he has. Unlike Alphabet, Google’s parent, Facebook harbors no separate unit for “moon shots.” It isn’t attempting to reinvent contact lenses or autonomous vehicles. Zuckerberg may have pledged part of his immense wealth to fighting disease—his Facebook stake is worth nearly $50 billion—but his company has no subsidiary attempting to reverse the effects of aging.
So he’s disciplined, collaborative, consistent, generous, and at least outwardly humble. He’s even a progressive role model. When his daughter, Maxima, was born just after Thanksgiving last year, Zuckerberg took a two-month paternity leave.
Zuckerberg is also big on personal goals, having committed in the past to learning Mandarin and this year to designing his own AI-fueled personal assistant, named Jarvis, for his home. He recently told an audience in Rome that through Jarvis he can control the house’s temperature but that “much to the chagrin of my wife,” she cannot, “because it is programmed to only listen to my voice, which is one of the perks of being an engineer.” He added, “I’ll give her access once I’m done.”