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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Mama Bear who wrote (83009)	8/16/2000 3:12:43 AM
From: Bilow	Read Replies (1) \| Respond to of 132070

Hi Mama Bear; Re if you sold half your hot dog stand ... you'd be in the same boat. That would depend very much on what you did with the money you got from selling half the business. Suppose you used it to buy gold, or half of the espresso stand down on the corner. Options have a value, even though it is one that is difficult (or more likely impossible) to calculate. There is no easy answer to the question of whether it was a good idea or not to give employees stock options. As for now only netting 10k per year, I got lost. What were we calculating? I had assumed that all the costs in the business would scale with inflation. Under this assumption, you would make just the same after inflation as before, according to the percent you owned the business. One of the problems with giving options to people who can influence your business is the chance that they will end up altering their behavior in ways you did not expect. Example: You give Nathan III, who studied probability and statistics in college (but not well enough to get a good job doing it), an option to buy half the business. Nathan took all the money that you were going to use to buy pork hearts, cow cheeks and chicken necks (for use making hot dogs), and instead placed it on 3 consecutive rolls at the roulette wheel. (Or something more legal, but with the same kind of risk/reward return.) In the event that Nathan III is lucky, he gets half of a business worth much more. In the (more likely) event that Nathan loses, he goes on to do the same deal with another employer. Nathan's expected winnings are handsome, but he has brought no expected earnings to the business as a whole. (And don't laugh, I know people who have collected stock options from a new company per year for quite nearly a decade.) -- Carl