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Has There Ever Been a Higher Valuated Company With Fewer Employees Than Facebook?

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With a potential $100 billion valuation, Facebook could be the apotheosis of the new US employment landscape reality in which tech companies create enormous wealth but few jobs.

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All eyes have been on Facebook this week as the world's largest social network made its much-ballyhooed S-1 filing with the Securities and Exchange Commission for its initial public offering.

In case you haven't already been oversaturated with Facebook-related news stories, The Economist recently posted a very nifty infographic, in which some statistics on the rising tech giant really pop.



What really stands out in this chart is Facebook's employment numbers. Among the seven companies listed in the chart, all of which have market capitalization of $50 billion or more, Facebook has by far the least number of employees.

With around 3,000 staff, Facebook has only about one-tenth the employees of tech behemoth Google (GOOG) and one-twentieth the employees of Apple (AAPL).

Keep in mind that Apple has long been the poster boy of those who lament the fact that technology firms can never create as many jobs as manufacturing companies can. Henry Blodget of Business Insider, for example, opined in an article from November that "Apple's extraordinary ~25% profit margin means that the benefits of its success accrue primarily to a relatively small group of (rich) shareholders rather than a broad base of (middle-class) employees."

Apple, for all the flack it gets about not employing more people, has 60,000 workers, which makes Facebook's payroll look positively anorexic. It could be said that Facebook is the apotheosis of the new US employment landscape reality in which tech companies create enormous wealth but few jobs.

Needless to say, tech companies like the aforementioned three will never, ever reach work force sizes of old-school manufacturing-focused firms like Boeing (BA), with 172,000 employees, or Toyota (TM), with 322,000. No. 1 by a large margin on the chart is McDonald's (MCD), with 1.7 million employees, but of course, the quality of many of those jobs would not be considered satisfactory for sustaining a middle-class lifestyle.

As Jon Gertner of the New York Times explains in an August 2011 article titled "Does America Need Manufacturing?":
The fundamental appeal of expanding manufacturing is jobs. It is a curiosity of modern life that information companies can create extraordinary social disruptions and vast shareholder wealth but relatively few jobs. Facebook has about 2,000 employees worldwide. Google has about 29,000. Even in its new, slimmed-down state, General Motors (GM), a decidedly less valuable company, has about 200,000 employees. What's more, that number represents only a fraction of the people behind the production of a G.M. car. "When you're manufacturing anything, even if the work is done by robots and machines, there's an incredible value chain involved," Susan Hockfield, the president of M.I.T., says. "Manufacturing is simply this huge engine of job creation."

Of course, one could argue that the over 800 million Facebook users are actually also the company's employees, since we help create the content that Zuckerberg and Co. then sell to advertisers, who are its real customers (In which case, shouldn't we all be entitled to a portion of its profits?).

That's not to say that we should frown upon the success of companies like Facebook or Google. The fact is that the world has changed dramatically with the digital revolution, which has made entrepreneurs phenomenally much more efficient, such that wealth is concentrated in far fewer hands than ever. Innovation throughout history has always cost jobs as processes develop and become more capital-, rather than labor-intensive.

Also, there is a case to be made that these companies have created plenty of jobs, albeit indirectly -- think Apple or Facebook app creators, designers, parts suppliers, router makers, etc. However, surely companies like Boeing and Toyota also have a halo effect on jobs in related sectors, while simultaneously having a lot more direct employees.

Simply put, our unemployment woes will not be solved by companies like Facebook. We are going to need an industrial and tax policy that entices manufacturers to build factories inside our borders and be the cornerstone of our economy. Without a bustling market of goods and services to sell, Facebook would be nothing more than the site it was when you entered college: a collection of faces and names. And I can guarantee you that the Facebook you knew as a freshman was not worth $100 billion.
No positions in stocks mentioned.
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