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Facebook: The IPO of the Virtual Passport

On the eve of the biggest IPO in history, that of social media giant Facebook (NYSE:FB), everyone is thinking about it in terms of the size.  Can Facebook justify the valuation that is being implied by the IPO?  In essence, that’s what all the verbiage boils down to.  And, as an investor, that is the ultimate question one has to answer before putting in your order to your broker. 

But, I’m not asking that question today.

I’m asking a completely different question.  Facebook, and social media in general, means different things to different people.  For most it is a way to create community without being constrained by geography, where you bring the world to you without, in some ways, having to actually go there in person.  For others it’s a way to promote their business, book, band or farm; interact with customers and build a relationship that goes beyond the next sale. 

So, what?  We know all that.  Yes, we do, and living in Vietnam having grown up in Canada I see Facebook and other social media networks in a different way.

The International Passport

There exists in places like Vietnam a gray market for citizenship outside of a person’s home country.  There is such a strong desire among large segments of the population to have what the West has (and in many ways is squandering) that a young U.S. male can make a lot of money marrying a young Vietnamese girl.  I’ve heard of amounts as high as $40,000, for a U.S. husband.  This ‘dowry’ is a payment to grant her an opportunity for a better life.  It’s the price of instant citizenship in the husband’s home country.

On the other hand some South Korean and Singaporean men will pay up to $10,000 for a young Vietnamese bride.  There the men are looking for something they can’t get in their home countries due to lopsided birth ratios or socioeconomic status. 

The point is, though, that much like the transnational physical infrastructure, i.e. pipelines and railways, are breaking down the barriers of arbitrary political borders, the internet is breaking down cultural and interpersonal barriers created by geography and for some countries, those very same political borders.  Facebook and other social media networks, like the erstwhile Yahoo 360o was in Vietnam, are giving young people virtual passports that allow them access to the things that were unavailable to previous generations. 

The Next Step Forward

For those that grew up without even the internet, your first e-mail address was a huge leap forward, things like USENET and message boards were the Facebook and Twitter for the generation that came before me.  There is something very powerful about having an account that unlocks so much of the world for you with a single identity. 

With Facebook or LinkedIn there is no hiding behind a handle or some crafted persona that one might create for a blog.  Your Twitter persona can be the best of both, creating a public persona or brand around your identity.  It’s globalization without all the nasty colonialism, cash-cropping and debt-slavery. 

So, on the eve of Facebook’s IPO when everyone else is wondering if they can justify the valuation and where they are going to find ways to monetize it all, I’m thinking about how much Facebook is grinding down the arbitrage between the perception of value associated with being whisked away to foreign land for a young Vietnamese girl and the reality that she already has much of what she was willing to pay for in the first place.

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Peter Pham is an author, international fund manager, and a registered financial director by the Cayman Monetary Authority (CIMA). In 2013 he published his first book entitled, The Big Trade: Simple Strategies for Maximum Market Returns. He currently manages the portfolio of a global hedge fund and runs an asset management company, Phoenix Capital.  (read more)

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