Why Mark Zuckerberg Might Be Too Successful

The Facebook CEO may be a giant case of hubris in the making.

By SHARE
FE_DA_120411facebook.jpg

In its brief, eight-year history, Facebook has become one of the all-time legendary success stories. But there's still one thing missing from founder Mark Zuckerberg's resume: A prominent failure to learn from.

[Photos: Occupy Wall Street: Fighting or Floundering?]

Of course, we'd all avoid failure if we could. But setbacks happen to just about everybody, and they often turn out to be the most instructive experiences we ever go through. "Ask one hundred people, 'What have you learned from success?' and most of them will just look at you," former Coca-Cola president Don Keough told me while I was researching my book Rebounders: How Winners Pivot From Setback To Success. "But ask, 'What have you learned from failure?' and you'll get lots of answers."

Setbacks usually don't feel so illuminating when they're happening, and some people don't even like to admit when something goes wrong. But just about every business involves some kind of risk, which makes flops and failures inevitable. That's especially true in Silicon Valley, where investors routinely take big risks on startups.

As a rule of thumb, about 40 percent of startups funded by venture capitalists fail, 40 percent are successful enough to return their initial investment, and only 20 percent turn out to be good investments that return a healthy profit. And only a fraction of those enjoy the staggering success that Facebook is poised to enjoy in its huge public offering.

With a high risk of failure, venture capitalists don't worry so much about preventing it. Instead, they try to spot failures early, so that resources aren't wasted beyond the point of no return. They also intently study failures in order to make sure there's no missed opportunity or new direction that might be more productive.

As many investors know, for example, Viagra was initially developed as a hypertension drug that didn't pan out. Only by accident did researchers notice that it seemed to enhance the sexual potency of male rabbits, leading to its development as a treatment for erectile dysfunction.

[See 6 reasons America will rebound.]

Savvy investors also value failure as an essential ingredient in the seasoning needed to develop capable business leaders. "When considering investing in a company, I always ask a CEO, 'Tell me about your failures,'" says one prominent venture capitalist. "If you haven't had a failure, you don't have your strength. Somebody who has only experienced success is likely to be so convinced they're brilliant that it never occurs to them they might just be lucky."

Mark Zuckerberg is probably both brilliant and lucky. He's clearly a visionary who figured out new ways to use technology to connect people. He's also lucky he became a programmer just as the Internet became the backbone of mass communication. Talent and luck can be a pretty awesome combination, so it's no surprise Zuckerberg is already a technology titan and billionaire before his 30th birthday.

But he may also be a massive case of hubris in the making. Zuckerberg has structured Facebook so that he'll retain an extraordinary degree of control, even after five percent of the shares go public. He negotiated the recent $1 billion acquisition of Instagram almost entirely on his own, over a weekend, with minimal input from his board or other senior executives. Facebook's registration statement with the Securities and Exchange Commission even states that Zuckerberg and his family and friends can fly on company-financed planes, for personal use, with the cost accounted for as Zuckerberg's "other compensation." It's hard to think of another sizeable company so dominated by one person, especially one so untouched by marketplace ups and downs.

[See why Apple could get even bigger.]

If Zuckerberg's meteoric success convinces him that he's infallible, Facebook will be in trouble. Richard Fuld of Lehman Brothers seems to have developed a sense of invulnerability, which prevented him from spotting what was really wrong with his firm—and possibly saving it—before it went bankrupt.

Rupert Murdoch's sense of omnipotence may have led him to believe his company, News Corp., could break the law and get away with it. Yet the phone-hacking scandal at Murdoch's British papers has damaged the entire company. Many other corporate titans fumbled because they became too convinced that they could do no wrong.

Setbacks leaven that type of arrogance. When I was researching Rebounders, Tim Westergren, the founder of Internet radio company Pandora, told me about the difficulties he faced in two prior careers before he got the idea for Pandora, and the several near-death experiences Pandora had while he was trying to get it off the ground.

Those challenges gave Westergren the opportunity to use and build his talents, but they also revealed the limits of his abilities.

"I'm in the church of humility," he told me. "If you're humble, you don't get caught up in the trappings of success, which can be very corrupting for most people. You can get drunk on that if you're not humble."

We now get to see whether Mark Zuckerberg can beat the odds, and stay sober-minded in spite of his gargantuan success.

Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.