‘The Social Network’ – a Free Market Classic

The Social Network is a wonderfully entertaining film. It may also be – and if it is, it will only have been by accident – the most pro-market film ever produced.

The film tells the story of the origins of Facebook and the social networking and interactions that brought it into existence. That it is a prettied-up version of events I have no doubt.

But what is important about the movie is that it is a case study in entrepreneurship and entrepreneurial vision. At the very core of what made Facebook was the vision of its founding genius, Mark Zuckerberg. What he wanted was to make it into not just the vast networking social phenomenon it turned out to be, but also, in itself, the essence of cool. In the way the story is told, Facebook was an outcome waiting to happen with lots of people trying different variants, but it was this one in particular that actually found the mark.

That there was skulduggery along the way, and that several of those involved tried to get the best deal for themselves while cutting others out, is nothing new. In building the great railroads or steel mills, or Standard Oil, there was no doubt the occasional bit of sharp practice. But out of each of these, and now Facebook, we all benefit from the fantastic entrepreneurial drive that has brought us the products we have.

And that is what the film so wonderfully shows. It shows how we live in the kind of society where anyone can have an idea and turn it into a vast ocean of wealth – although this example is clearly at the extreme end of such possibilities. Facebook is now worth $25 billion. My dad, in humbler times, used to say that if you want to be a millionaire, find something for which a million people will each give you one dollar. That is, adjusting for inflation and the numbers involved, what Zuckerberg and his cohorts did, and they did it from their dormitory while students at Harvard.

The film also shows the importance of what I think of as the fifth factor of production, after the traditional four which are usually listed as land, labour, capital and entrepreneurship. And that fifth factor is finance. Without finance nothing can go forward. Understanding the importance of finance and debt in the corporate world is one of the essentials and something not typically well handled by economics. It was fascinating to see how the importance of access to funds, and how well it is emphasised as an integral part of the story, adds to the educational value of the film.