Subject: Re: Make Berkshire Compound Again!
I see the argument, but I can only partially agree with it, because it seems like assigning fault because the firm did extraordinarily well.

Two then-identical companies ten years ago granted equal-sized equity awards to employees. Firm A muddles along without ever increasing stock price. Firm B quintuples in value. Yet we get mad at Firm B because their ex post equity awards turned out to be incredibly valuable. Seems not quite right.

Hmmm, I don't see it that way.

Sure, there is a pretty reasonable case for options in lieu of some salary for start-ups and early stage firms, when cash is tight, outcomes are wildly unpredictable, and the difference in opinion about the future lets one party do a deal with another very willingly.

But none of that reasoning applied to Alphabet 10 years ago, as it was then and remains one of the most spectacularly successful and profitable firms and cash generative firms of all time (or Microsoft 10-20-30 years ago, for that matter). It was and remans swimming in cash, so there was no shortage of cash to pay people. It was painfully obvious a decade ago that the 10 year value growth of a share would be very large, in the same way that it's painfully obvious now. This is a very, very profitable firm. So the true cost of those shares to the company was not the then current quote, but the long run essentially certain value.

The only motivation for this wheeze at a big profitable firm is to screw and fool shareholders by treating compensation as a shell game, taking the real (and gigantic, in the case of stock comp) economic cost of the comp substantially off the books and flattering short term results. Period. It's common and accepted and legal, but it's odious. The agency problem writ large.

I dare someone to go through the calculations I suggested. That will show the real staff costs, NOT in any material way dependent on a lucky unpredictable outcome invisible without hindsight, and the degree to which the true long run staff costs for continuing shareholders were obfuscated.

Jim