#14 The Accidental Billionaires The Founding of Facebook A Tale of Sex, Money, Genius, and Betrayal



In the early days of Facebook, Eduardo Saverin, a Harvard student, noted Mark Zuckerberg's extraordinary computer skills, including creating software like Synapse and CourseMatch. Despite Eduardo's initial impressions and their shared Jewish fraternity ties, their partnership soured as Facebook expanded. Zuckerberg, alongside Dustin Moskovitz and Sean Parker, drove the company's growth in Silicon Valley, while Saverin, preoccupied with an internship and studies in New York, became increasingly sidelined. The tension culminated in Saverin's dramatic dilution and expulsion from the company, illustrating the ruthless business decisions that can underpin the rise of tech giants.

Summary Notes

Introduction to Mark Zuckerberg

  • Mark Zuckerberg, a sophomore at Harvard, was known for his skills in computer science.
  • Eduardo had limited personal interaction with Mark despite attending social events together.
  • Mark's reputation as a computer genius was well established.

His name was Mark Zuckerberg. He was a sophomore. And although Eduardo had spent a fair amount of time at various Epsilon PI events with him, along with at least one pre punch Phoenix event that Eduardo could remember, he still barely knew the kid.

This quote introduces Mark Zuckerberg and sets the stage for his relationship with Eduardo, indicating that while they had been in the same social circles, they weren't close.

Mark Zuckerberg's Background and Skills

  • Mark grew up in an upper-middle-class family in Dobbs Ferry, New York.
  • He was a reputed master hacker in high school and supposedly made it onto an FBI list.
  • Mark created a computerized version of the game Risk and software called Synapse at Exeter.
  • Synapse, an mp3 player plugin, attracted attention from major companies, including Microsoft.

A computer science major who lived in Elliott House, Mark had grown up in the upper middle class of Dobbs Ferry, New York, the son of a dentist and a psychiatrist in high school, he's supposedly been some sort of master hacker, so good at breaking into computer systems that he ended up on some random FBI list somewhere.

This quote provides background on Mark's upbringing and his early reputation as a talented hacker, highlighting his potential from a young age.

Mark Zuckerberg's Innovations

  • Mark turned down a significant offer from Microsoft to continue his work independently.
  • He developed Course Match at Harvard, which gained popularity among students.

Rumor was Microsoft had offered Mark between one and $2 million to go work for them. And amazingly, Mark had turned them down.

The quote underscores Mark's decision to decline a lucrative offer from Microsoft, reflecting his confidence in his own projects and vision for the future.

Eduardo's Perspective on Mark Zuckerberg

  • Eduardo Saverin became friends with Mark through their shared interests and fraternity.
  • Eduardo was the first co-founder of Facebook.

Okay, so that was Eduardo's impressions of Mark when he first met him. They wind up hanging on the same kind of geeky Jewish fraternity. They ran similar circles, and they wind up becoming friends. And Eduardo becomes the first co-founder of Facebook.

This quote captures Eduardo's initial impressions of Mark and their path to friendship and eventual partnership in creating Facebook.

The Making of FaceMash

  • FaceMash was a controversial project by Mark Zuckerberg before Facebook.
  • Mark's personal blog entries provided insight into the creation of FaceMash.
  • Mark's motives for creating FaceMash were partly driven by personal frustrations.

Behind every great fortune there lies a great crime. If Balzac had somehow risen from the dead to witness Mark Zuckerberg storm into his Kirkland dorm room that monumental evening during the last week of October 2003, he might have amended his famous words.

This quote introduces the controversial nature of FaceMash's creation, alluding to the idea that great success often has dubious beginnings, in this case, a college prank.

Mark Zuckerberg's Relationship with Computers

  • Mark had a strong affinity for computers and coding from a young age.
  • He preferred control and found comfort in the digital environment.

He never seemed happier than when he was looking through his own reflection into the glassy screen. Maybe deep down it had something to do with control. With the computer, Mark was always in control.

The quote emphasizes Mark's connection with computers, suggesting that it provided him with a sense of control and belonging that he didn't find elsewhere.

Development of FaceMash

  • Mark used his coding skills to hack into Harvard's house Facebooks to gather photos.
  • The concept of FaceMash evolved from comparing people's photos to farm animals to a Turing test-like comparison between two individuals.

12:58 a.m. Let the hacking begin. First on the list is Kirkland. They keep everything open and allow indexes in their Apache configuration. So a little magic is all that's necessary to download the entire Kirkland Facebook. Child's play.

This quote demonstrates Mark's hacking abilities and the process he went through to collect the images needed for FaceMash, highlighting his technical prowess and determination.

Authentication and Access to Student IDs

  • Speaker A discusses the need for authentication and accessing student IDs.
  • They mention a "housewives master" that has access to student IDs.
  • Speaker A plans to get a matching name and student ID from Lowell to gain access.
  • This sets the stage for further manipulation of the system.

"So what does each student have that can be used for authentication that the housewives master has access to student ids."

This quote highlights the speaker's recognition of the need for authentication and their plan to use student IDs, which the "housewives master" has access to, as a means to authenticate.

Scripting to Automate Image Collection

  • Speaker A finds the process of saving pictures from different pages tedious.
  • They decide to write a Perl script to automate the saving of images.
  • Speaker B confirms the use of the script for Adams and Leverett.
  • Speaker A adapts the script for Leverett's directory to download images more efficiently.

"I'm way too lazy to go through all of them and save each one writing a perl script to take care of that seems like the right answer."

This quote explains the speaker's motivation for writing a Perl script—to avoid the laborious task of manually saving images.

Challenges with Different Directories

  • Speaker A encounters different levels of security and limitations across various house directories.
  • Quincy has no online Facebook, Dunster has a restrictive search function, and Leverett allows an empty search but limits image viewing.
  • Speaker A uses Emacs to modify the Perl script for Leverett's directory.
  • They express determination to overcome these challenges and gather the needed data.

"Dunster is intense. Not only is there no public directory directory, but there's no directory at all."

This quote illustrates the specific challenge Dunster's directory presented, with its lack of a public directory and restrictive search function.

The Concept of Facemash and Its Evolution to Facebook

  • Speaker A reflects on the popularity of Facemash and its implications for online social interaction.
  • They note the interest in viewing and judging classmates online.
  • Mark, as discussed by Speaker A and B, considers the potential of an exclusive online community based on real-world social circles.
  • The idea evolves into a social network with user-generated profiles and the ability to invite friends, which Mark calls "the Facebook."

"Perhaps Harvard will squelch it for legal reasons without realizing its value as a venture that could possibly be expanded to other schools, maybe even ones with good looking people."

This quote expresses Mark's anticipation of potential legal challenges from Harvard and his vision for expanding the concept beyond Harvard.

Development and Launch of Facebook

  • Mark is described as deeply invested in the programming process, sacrificing sleep and risking academic performance.
  • He uses innovative methods to manage his coursework, such as creating an online study tool for an art exam.
  • Thefacebook.com is meticulously prepared, with considerations for server capacity and traffic management.
  • Eduardo and Mark decide to target the Phoenix club members first to leverage their social influence and spread the website quickly.

"Mark had been working so hard, the hours must have blended together in one blur of pure programming."

This quote captures Mark's intense focus and dedication to the development of Facebook, to the point where time became a blur.

Strategy for Promoting Facebook

  • Mark and Eduardo use strategic thinking to promote Facebook.
  • They recognize the importance of social influence and decide to target members of the Phoenix club to disseminate the website.
  • The decision to use the Phoenix club's social reach is contrasted with the limited impact of Mark's personal contacts.
  • The Kirkland house email list provides another avenue for promotion within legal boundaries.

"These guys are all members of the Phoenix. If we send it to them, it'll get spread around pretty fast."

This quote demonstrates the strategic approach to leveraging social networks to promote Facebook by targeting influential groups on campus.

Launching of Facebook

  • Eduardo sends out a mass email to introduce Facebook and links to the site.
  • Eduardo suggests celebrating with drinks, but Mark prefers to stay and focus on the computer screen.
  • Mark's dedication and work ethic are highlighted as he had been working non-stop for the launch.
  • Eduardo acknowledges Mark's right to enjoy the moment in solitude after his hard work.

"Let's get a drink. It's time to celebrate. No, I'm going to stay here." This quote indicates the difference in priorities between Eduardo and Mark at the moment of Facebook's launch. Eduardo wants to celebrate, while Mark is more focused on the project.

"Mark had been working around the clock to get the Facebook ready for this launch." This quote emphasizes Mark's commitment and the effort he put into preparing Facebook for the launch.

Mark's Sense of Humor

  • The Facebook team is growing, and they're assigning titles to each other.
  • Eduardo is CFO, Dustin is Vice President and head of programming, Chris is director of publicity, and Mark humorously labels himself as "founder, master, and commander and enemy of the state."

"And Mark, founder, master, and commander and enemy of the state. Mark's words." This quote shows Mark's sense of humor and perhaps a self-awareness of his disruptive role in the tech industry as he labels himself in a tongue-in-cheek manner.

Meeting Sean Parker

  • Facebook is spreading across multiple schools, and Mark Zuckerberg meets Sean Parker for the first time.
  • Eduardo is not a fan of Sean Parker, while Mark idolizes him.
  • Sean Parker makes a dynamic entrance, demonstrating his charisma and networking skills.
  • Sean and Mark connect over discussions of Facebook's growth and strategies.

"Sean Parker. You must be Eduardo and Kelly. And of course, Mark." This introduction sets the stage for the significant impact Sean Parker is about to have on Facebook and its founders.

"To Mark, Sean Parker was a God." The quote captures the immediate admiration Mark has for Sean Parker, indicating the start of a significant relationship for Facebook.

Facebook's Growth Strategy

  • Eduardo and Mark discuss Facebook's strategic growth, particularly the Baylor University story.
  • They talk about the viral spread of Facebook at Stanford, with a quote from the Stanford Daily highlighting its impact.
  • Sean Parker and Mark Zuckerberg's connection grows stronger, while Eduardo feels sidelined.

"The facebook.com craze had swept through the campus." This quote from the Stanford Daily illustrates the rapid adoption and intense engagement of Facebook among students at Stanford.

"Sean wasn't purposely ignoring Eduardo, but he definitely was paying a lot more attention to Mark." This quote reflects the beginning of the divide between Eduardo and Mark, with Sean Parker's influence becoming more apparent.

Mark and Eduardo's Diverging Paths

  • Mark takes a sabbatical from Harvard and moves to California, where Facebook's success accelerates.
  • Sean Parker becomes increasingly involved with Facebook, staying at the Palo Alto house and later becoming the first president.
  • Differences between Mark's and Eduardo's roles and contributions to Facebook become more pronounced.

"Mark Zuckerberg was living it. He had the drive, the stamina, the ability." This quote highlights Mark's passion and capability, which were critical to Facebook's success.

"But where was Eduardo?" This quote raises the question of Eduardo's role and presence during the critical growth phase of Facebook, foreshadowing the eventual conflict and separation between him and Mark.

Early Success and the Move to California

  • Founders of Facebook moved to California with a vision of success independent of traditional education.
  • Eduardo Saverin remained in New York, balancing an internship and advertising sales for Facebook.
  • The divide between Eduardo's commitment and the rest of the team's all-in approach foreshadows conflict.

None of the true success stories out here had gotten where they were by taking classes. They became successes by coming out here, sometimes with just a duffel bag on their back and a laptop in their hand.

This quote emphasizes the Silicon Valley ethos of success through innovation and risk-taking, rather than formal education.

So all the Facebook employees at the time and the interns are out in California with Sean, and Eduardo's in New York trying to take an internship, and he's getting ready to go back to Harvard in the fall and selling advertising.

This quote highlights the geographical and focus divide between Eduardo and the rest of the Facebook team, setting the stage for future disagreements.

Reincorporation and Share Redistribution

  • Facebook received investment from Peter Thiel, prompting reincorporation as a corporation.
  • Share redistribution was planned to include new investors and reward contributions.
  • Eduardo Saverin was initially to retain a 30% stake, but the new structure meant performance-based dilution.
  • The evolving company structure necessitated new rules for equity and investment.

Reincorporating was necessary. Both Theo and he had agreed Facebook had to become a new entity, shredding its dorm room genesis and moving into a sort of New Testament status.

The quote explains the necessity of reincorporation to reflect the company's growth and the new phase of its development.

People had to be given shares based on the amount of work any particular individual gave to the company.

This quote details the rationale behind the new share distribution, which was based on individual contributions to the company's success.

The Fracturing of Founders

  • Disagreements between Mark Zuckerberg and Eduardo Saverin escalated.
  • Eduardo's actions, seen as jeopardizing the company, led to a rift with the other founders.
  • Mark Zuckerberg's dedication to Facebook contrasted with Eduardo's divided attention.
  • Eduardo's unwillingness to leave Harvard was seen as a lack of commitment to Facebook.

Mark didn't seem to hate Eduardo for it. What they're talking about here is Mark and Eduardo were getting into fights.

This quote captures the interpersonal conflict between Mark and Eduardo, hinting at the deteriorating relationship.

To Mark and Dustin and Sean, Facebook was everything... But Eduardo, well, from what Sean knew of the kid, Eduardo would never quit school.

This quote contrasts the priorities of the Facebook founders, with Eduardo's divergent path becoming increasingly clear.

Betrayal and Dilution

  • Eduardo Saverin was confronted with legal documents indicating his significant dilution in Facebook.
  • The issuance of new shares to other founders and investors reduced Eduardo's stake dramatically.
  • The dilution was framed as a necessary step for company growth, but it blindsided Eduardo.
  • Eduardo's refusal to accept the dilution led to his complete removal from the company.

Then there was a second action, dated March 20, eigth issuing up to 20 million shares. And then there was a document allowing the issuance of 3.3 million additional shares to Mark Zuckerberg, 2 million additional shares to Justin Moskovitz to Dustin Moskovitz, and 2 million additional shares to Sean Parker.

This quote details the specific share issuances that diluted Eduardo's stake, demonstrating the scale of the reorganization.

No. Eduardo heard his own voice reverberate through his head... He refused to sign away his ownership of Facebook.

This quote captures Eduardo's shock and refusal to accept the dilution of his shares, which he saw as a betrayal of his role in the company's founding.

Conclusion and the New President

  • Eduardo Saverin's realization that he was no longer part of Facebook was a profound shock.
  • The exclusion from Facebook's future was not just a business loss but a personal betrayal.
  • The identity of the new president of Facebook, presumably Sean Parker, was a final blow to Eduardo.

Eduardo was no longer a member of Facebook. He was no longer part of the management team, no longer an employee, no longer connected in any way.

This quote signifies the finality of Eduardo's removal from Facebook, severing all ties with the company he helped create.

Who the hell was the new president of Facebook? When he thought about it, he realized he already knew the answer.

The quote reflects Eduardo's realization of the extent of the changes at Facebook and the identity of the new president, adding to the sense of betrayal.

What others are sharing

Go To Library

Want to Deciphr in private?
- It's completely free

Deciphr Now
Footer background
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon

© 2024 Deciphr

Terms and ConditionsPrivacy Policy