It Burns! It Burns!

Burnt questions and burnt thoughts from Wes Chow.

Nov 14
“One of my favorite stories is boy in Texas, when the teacher asked the class the following question. There are nine sheep in pen, and one jumps out, how many are left? Everyone got it right, and said eight are left. The boy said none are left. The teacher said you don’t understand arithmetic, and he said ‘no you don’t understand sheep’.” Reflections on Value Investing: 2008 Wesco Shareholder Meeting: Detailed Notes

Nov 4

CARDBOARD a cardboard animation! (via svervoor)


Oct 29
“Wal-Mart, based in Bentonville, Ark., quietly put up about 15 caskets and dozens of urns on its Web site last week.”

Wal-Mart starts selling caskets, urns online - Forbes.com

The ultimate health care hedge: buy Walmart.


Oct 28

Oct 26

Oct 25

Oct 24

Le Grand Content (via enlarge)


Oct 22

Oct 20
CEO Compensation Contest Winner | GOOD
Ok, I have to point something out about this CEO compensation nonsense. Of the folks I’ve read who complain about compensation, not one has yet to propose a sane framework from which to derive appropriate salaries.
Let’s take Oracle as an example. This company makes $5 billion in revenue per year. If the sheer strength of Larry Ellison’s CEO abilities produces an extra, say, 3 percent of revenue, then he is worth $150 million per year more than the next guy. Given he’s paid a bit more than half that amount, maybe his inflated compensation is appropriate?
The real issue at hand here is not what we pay the CEOs. We always want to be able to attract CEOs who can provide more value than they cost. The real issue is that we want CEO interest to be aligned with the long term interest of the shareholders.
One way of doing this is to limit the CEO’s cash compensation to a number that supports a reasonably good lifestyle, say 10 times the median household income (roughly half a million). The rest of compensation should be given via stock (not stock options, mind you — those have problems of their own) with time restrictions attached, so the CEO can not dump it in the short term.
Warren Buffett, in fact, self imposes these sort of restrictions. His yearly salary is set around $100,000, and the rest of his compensation is in stock, which he has committed to never selling (he recently pledged it to charity).
We ideally want compensation structures to tie CEO interest with investor interest.

CEO Compensation Contest Winner | GOOD

Ok, I have to point something out about this CEO compensation nonsense. Of the folks I’ve read who complain about compensation, not one has yet to propose a sane framework from which to derive appropriate salaries.

Let’s take Oracle as an example. This company makes $5 billion in revenue per year. If the sheer strength of Larry Ellison’s CEO abilities produces an extra, say, 3 percent of revenue, then he is worth $150 million per year more than the next guy. Given he’s paid a bit more than half that amount, maybe his inflated compensation is appropriate?

The real issue at hand here is not what we pay the CEOs. We always want to be able to attract CEOs who can provide more value than they cost. The real issue is that we want CEO interest to be aligned with the long term interest of the shareholders.

One way of doing this is to limit the CEO’s cash compensation to a number that supports a reasonably good lifestyle, say 10 times the median household income (roughly half a million). The rest of compensation should be given via stock (not stock options, mind you — those have problems of their own) with time restrictions attached, so the CEO can not dump it in the short term.

Warren Buffett, in fact, self imposes these sort of restrictions. His yearly salary is set around $100,000, and the rest of his compensation is in stock, which he has committed to never selling (he recently pledged it to charity).

We ideally want compensation structures to tie CEO interest with investor interest.


Oct 15
“The schools pledged sums to private equity that far exceeded their investment targets. Although Virginia set a target of investing 20 percent of its endowment in private equity, it committed 35 percent, or $1.8 billion. The rationale was that the actual investment wouldn’t substantially exceed 20 percent because as the outside managers gradually drew down the money, the university’s coffers would be replenished by returns from IPOs of companies that the funds had bought. This approach, says an endowment insider, “is precisely why we are where we are today—why UVA is crunched.”

Cash Me If You Can - Executives - Portfolio.com

Does this sound familiar?


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