Economic Progress

This is what a conversation between Facebook co-founder Chris Hughes and Mark Zuckerberg can teach you about negotiation

Chris Hughes, co-founder of Facebook, speaks at the Charles Schwab IMPACT 2010 conference in Boston, Massachusetts October 28, 2010.   REUTERS/Adam Hunger (UNITED STATES - Tags: SCI TECH BUSINESS)

Facebook co-founder Chris Hughes recalls a negotiation he had with Mark Zuckerberg in college about Facebook Image: REUTERS/Adam Hunger

Richard Feloni
Writer, Business Insider
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Economic Progress

One rainy night in March 2004, Chris Hughes had a conversation with his Harvard roommate that would radically change the course of his life.

His roommate was Facebook CEO Mark Zuckerberg, and the conversation would lead to Hughes making half a billion dollars eight years later.

Hughes is one of the four cofounders who helped turn one of Zuckerberg's dorm projects into a real company, and despite working on the site for three years, he's come to terms with the major role luck has had in his life.

It's a theme he explores in his new book "Fair Shot," and one he discussed with us for an episode of Business Insider's "Success! How I Did It" podcast.

Hughes, 34, explores how his unlikely and sudden rise from a privileged but solidly middle class upbringing to a spot among the United States' wealthiest has recently made him reconsider his role in the world — and it's why he's now advocating for a guaranteed income for working low-income Americans.

He told us he has firsthand knowledge of how the wealth gap in the US can seem so illogical.

"But that is how the economy is working today," he told us. "These small decisions, small conversations like the one I talk about in the book, where Mark Zuckerberg and I went on a walk a couple of months after Facebook had launched and we had an equity conversation," are all that it sometimes takes to separate the 1% from the rest.

The night of that conversation, Hughes was working his $10/hour job at the Hicks House library, checking student IDs. He and Zuckerberg were chatting over AOL Instant Messenger about Facebook, which was about to expand beyond Harvard to new schools. They decided to discuss Hughes' ownership stake in person.

Hughes grabbed his umbrella and met Zuckerberg by their dorm entrance and, sharing the umbrella, went for a walk — it was a conversation they needed to have in private, without risk of their roommates overhearing.

"I came out of the gate saying, 'I want 10% of the company,'" Hughes told us. "He was stressed; I was stressed. It was not the best setup."

Hughes had helped with the site's user experience, and as the cofounder Zuckerberg had deemed him the most socially adept, helped with marketing and arranging the company's earliest media coverage. He felt the 10% ask was "ambitious, but not entirely unreasonable."

As Hughes remembered it in his book, Zuckerberg replied: "I just don't think you've earned that much. I appreciate what you are doing, and I think you could do a lot more as we grow the site, but I need to keep control. And the others need fair equity too."

Hughes said he stayed in silent thought, considering that the conversation might be more important than friends discussing just another startup. The rain was coming down heavily, and they walked quickly under the single umbrella around campus.

"I am conflict-averse by nature," Hughes wrote, and realized he wasn't as confident about his request as he thought, noting that "my role was secondary and I knew it. I wasn't in a position to make demands, but I was anxious to become more involved."

Hughes made a case for himself as they walked, but caved by the time they reached Harvard's central library, Widener.

"Just give me what you think is fair," Hughes remembered telling Zuckerberg. "I know it's hard to balance all of us." Zuckerberg replied with just an "OK" and walked off into the rain, without even a hood on.

A few weeks later, Hughes discovered Zuckerberg gave him 2%, the lowest stake of the cofounders by multiples, and the stake would shrink a bit when Facebook was reincorporated later in the year.

This stake, however, still brought Hughes about $500 million after the company's IPO in 2012. He told us that for that reason, that discussion in the rain "was at once a spectacular failure of negotiation and also the most successful conversation of my life."

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He's reflected on it lately, extrapolating it to the rest of American society. "But what keeps happening in this economy is these small chance events have these outsized impacts, because there's a snowballing effect, because of the winner-take-all kind of system," he said.

"So that what seemed like passing conversations in the rain, in college, can have these outsized effects. That's a new phenomenon. Never before in history have 20-somethings been able to create these companies."

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