Facebook With A Feel Good Story

Say what you want about Mark Zuckerberg, the guy is very smart. He also knows how to play the game.

A hot topic of late is minority and female owned business. The idea is to get more support, especially financially for them. Just like the ESG investing, people like to bring their social movements into the business and investing world. Major corporations are, of course, brought into the fold by suffering negative publicity if they do not participate.

Presently, ESG is all the rage. This is really affecting portfolios with money managers all jumping on board. Of course, this is nothing new. We saw this in the past as these types of pushes are made periodically. The reason why they fail is money needs to generate a return. If it does not, investors are unhappy. For example, do you think that retired school teachers will accept having their pensions cut due to lackluster returns? After all, we did invest in social conscious projects.

Of course not. While people care about different issues, when it comes to money and having their returns cut, money managers are given a short leash. If the returns are not there, the money they are managing starts to dwindle as investors pull it.


Getting Money Into People's Hands

There is little doubt, the way to grow an economy is to get money into people's hands. This is something that many overlook. Nevertheless, since there is a lending coupled with a USD crisis, people will realize soon enough what happens when money does not flow into the economy.

Getting money into the hands of minority and women owned businesses can be a profitable endeavor. Many have the ability to produce returns and grow, just like any other business. In addition, most small businesses tend to suffer from cashflow issues. It is simply the plight of companies that do not have the revenues along with profitability to have a tremendous war chest.

Enter Zuckerberg and his white knight approach. Make no mistake, this guy is very accustomed to controversy and Facebook seems to be getting deeper into it. That said, Zuckerberg is able to read the political and social environment. Hence, he is taking advantage of the present winds to garner himself some good publicity.

Here is what Facebook is doing according to an article put out on CNBC:

Facebook this week announced a $100 million commitment to a program that supports small businesses owned by women and minorities by buying up their outstanding invoices.

That is very generous of the company. Facebook is going to give 30K small business money from the $100 million is earmarked for this project.

Who is going to object to that?

The reality of the situation is that most people will not understand what is taking place. To get an idea, let us delve further into the article.

Businesses can submit outstanding invoices of a minimum of $1,000, and if accepted, Facebook will buy the invoice from the small business and pay them within a matter of days. The customers then pay Facebook the outstanding invoices at the same terms they had agreed to with the small business. For Facebook, which generated nearly $86 billion in revenue in 2020, waiting for payments is much less dire than it is for small businesses.

So as we can see, this is not Facebook giving these small businesses money to pay the invoices they owe. Instead, it is payment on invoices that are outstanding to the small business. This is a huge difference.

Buying Of Receivables

This is a practice that is known as "buying up receivables". Anyone who fell behind on some bills will know about this.

Companies often sell receivables owed to them to entities that specialize in collecting. This is what is known as "being turned over to collections". While it is not known whether Facebook is buying up presently due receivables or ones that fell behind, all is not what is seems.

The key to understand is that the purchase of the outstanding receivables is done at a discount. Of course, the amount discounted depends upon the type of receivable and how likely the companies doing the purchasing are to collect. The more out of date, ie further behind, the less money paid.

Make no mistake about it, this is big business. Companies often purchase these receivables at a significant discount. That is why people receive those letters offering a big reduction for immediate payment. If the company got the invoice for 25 cents on the dollar, they can easily come out ahead if they slash the amount owned by 50%.

This is precisely what Facebook is doing. They are not donating $100 million to minority and female owned businesses. Instead, they are buying up receivables at a discount and will become a collection agency. This is an interesting twist because it is easy to imagine any company that does not pay Facebook the money owed will have their accounts closed down. If this is a serious part of their business, it could really hurt.

Here we have to give some kudos to Zuckerberg. By digging into their cash holdings, they get some great PR. Odds are they will make back every penny spent on the project and then some. Facebook has a lot of ways to leverage companies that owe the outstanding debt.

Certainly they are providing a service to these business. There are, however, companies out there that already do this. Is Facebook offering a better than market rate on the receivables? We cannot answer that question.

Nevertheless, Zuckerberg is simply providing a service albeit one that is highly targeted. At the end of the day, he is going to get the PR out of while also likely turning a profit.

Most will just read the headline and believe that Facebook donated $100 million to minority and female owned businesses. That is not the case but few will take the time to figure it out.

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Yes i understand what you're saying. The way a corporation is often times generally setup. Is legally you have to make shareholders money. You can't make decisions that purposely caused your shareholders to lose money. So yes facebook is going to be less than altruistic in that sense. However i do feel Mark Zuckerberg is on to the right mindset of the type of economy we're going to need to pursue in the 21st century.

We have a very shortsided view of how an economy works. An economy at the end of the day is nothing more than this interwoven ecosystem that impacts us all. So we can go on about nobody willing to do anything unless there is profit. However in the grand scheme of things you have to care about economic inequalities because they create unstable economies. You have to care about jobs being provided for communities. You have to care about the well being of citizens for crime and development of civilization.

So it's very myopic to think and thus every action taken has to result in someone gaining a profit or a system can't work. There are many examples where that's not true. So i view this thought processed as a less evolved economic thought process.

In a small business especially a minority based business there are companies that do this but their requirements are very very hard for many of these businesses to meet. I've looked into such companies that often times don't even deal with businesses unless they already have good earning records and balance sheets. Whereas facebook is saying we'll start buying them up at minimum $1000. Some requirements are about 5x that or around $5000.

Now that kinda money for midsized businesses or companies is nothing. For a small minority business struggling to stay afloat and needing to collect on their invoices. It could be live saving. So i don't see facebook or Mark Zuckerberg as benevolent but it's sure offering more than many of the capitalistic economic ideas of profit is the motivation for everything you do.

I certainly don't think this venture from zuckerberg is so much about profit motive. Mark Also gave some compelling speeches for ubi. I just don't think all of that is a ploy to make a more profitable facebook. Again there are legal requirements where many of these capitalistic corporate models which are installed in by the system and the structure which is again back to capitalism not mark zuckerberg. The law says mark has to do things that make his shareholders profit.

Now you don't have to create a good company just based on profit motive. It's many examples thats not even necessary. however notice its the law lol. THere are examples of the idea of the " social company" that cares about customers first and workers over profit and down the line that can translate to profit although indirectly. We're fixed on old 20th century models of what we think erroneously creates economic prosperity and stability and sustainability.

However let's look at the data. The data has shown since 1960 many families have gotten poorer in our standard economic models. Forget inventions and tablets and microwaves we are poorer. Doesn't mean anything if i can use a kool tablet but not be able to learn from the tablet because my belly is not feed. So we should stop confusing invention for economic prosperity there aren't always synomous. This is not a participatory economy. This is an economy where few people benefit in the whole.

So that's what never gets cleared up. So i don't think it's so much about facebook being the boogey man. i think facebook is one of those type things where you don't have to throw the baby out with the bathwater. Those minority businesses will be helped more by facebook than many other capitalistic models we praise. So i'm not going to condemn facebook for its more recent ideas. I think it's more recent ideas is better than many other system past ideas and present ones. Who don't do this. Who do nothing.

The profit model is not the end all be all anymore. I'll give you an example. A guy decides to dump toxic waste in my backyard to avoid a $10,000 disposal fee because for him profit is more important than the overall farreaching effects of what he's doing to our ecosystem. That's the problem with you all and capitalism. That the form you all are using is outdated it doesn't really work for the 21st century. These companies now understand they have to conform to models that don't transfer us to a neofeudalistic economy and get confused as some type of good capitalism

They understand they have to help to support our ecosystem not out of altruism or benevolence but simply because that's how economies work. We have to provide jobs and sustenance and a means of living for million and billions of people. It's not just a matter of everybody gets up in stride and runs. We can't call it capitalism in that sense because we got way too much government interference in what we call capitalism its just now that it's reaching its implosion point.

So people really need to take the time and understand this no longer some type of libertarian freedom of everything landscape. We're living in perilous times now where many of us will just be able to survive the system yet along prosper form it. those days are moving further and futher behind. this donald trump make america great type thing is just rhetoric and i can tell you why it's that.

Before trump became president he said the job employment numbers were false. When he became president he said they were real. Why? because no president wants to report bad job numbers or bad anything lol. So trump played the game. The reality is the game is still bad. The game needs changes. It's reached its zenith and i want us to be realistic about who the true beneficiaries end up being in all this and who aren't. It's not the people who should be the benefactors it seldom is.

One way i wanna help change this is by straightening these false narratives. I wanna do that with data and its not hard to do that. When we go to families especially across america it's quite easy to do it because they don't experience many of the ideas some of you all put out there. They know its all baloney. So we gotta be straight with these people. Tell them our version of capitalism is fake it's false.

That most will end up unemployed and we gotta find a way to deal with that upcoming crisis. That its went pretty much beyond repair. I hate to be that harbinger but acceptance of this reality only prepares us more for this problem that we have to deal with.

People like me and Peter Schiff always warning you guys lol.. it's human nature to wanna act when it's too late. I would imagine that will be the situation this time around. So we have to take it as it comes.

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It was fully expected to generate revenues. None of them are really in the process of tossing it down to investments that aren't likely to generate revenues. After all, the numbers are what matters so they can prove their worth to the investors.

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well played Mr Zukerberg

I see what your saying.
I had thought about this as a business model, but never executed. Glad to know I wasn’t alone in thinking this was a good business model

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