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To: Oeconomicus who wrote (145473)	8/14/2002 12:43:01 PM
From: H James Morris	Respond to of 164684

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To: Oeconomicus who wrote (145473)	8/14/2002 12:47:18 PM
From: H James Morris	Respond to of 164684

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To: Oeconomicus who wrote (145473)	8/14/2002 12:48:57 PM
From: H James Morris	Respond to of 164684

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To: Oeconomicus who wrote (145473)	8/14/2002 1:21:21 PM
From: GST	Read Replies (2) \| Respond to of 164684

The timing of recognition of income by the employee has nothing to do with the timing of the recognition of the expense by the company. The confusion of the two is all yours. No wonder you are having trouble with this.

To: Oeconomicus who wrote (145473)	8/14/2002 2:41:49 PM
From: Lizzie Tudor	Read Replies (1) \| Respond to of 164684

Actually, Liz, where his analogy falls apart is where he assumes they would sell the option in the market and give you all the proceeds, no strings attached. Since the options would be subject to vesting, the cash equivalent would be to promise you a cash bonus plan to be paid out over the next 3 or 4 years, but only if you stick around and earn it. It amazes me that he can't see this simple principle. I realized after I got (foolishly) drawn into that discussion with him- that he doesn't appear to be familiar with options as compensation from a personal perspective. Before I ever received options at work, I also thought they were similar to stock options you buy and sell on the CBOE. I thought they gave them to you in an account when you were hired, strike price whatever and you watched them move with the mkt. This is a common misconception for people who have no familiarity with actual ISOs or NSOs, I believe. Maybe some bullet-points as to what the differences are might be helpful in these further discussions (not w/me though, I'm tired of this issue). assumes they would sell the option in the market And I'll take it one step further, the pre-ipo companies' options (who grant the largest amt of options) truly have no value even if they were to follow GST's logic. My last startup company had .35 stock. Expense away! I'm sure thats not what Buffett has in mind. Anyway no matter I think Chambers handled the issue beautifully in his cc and there isn't enough agreement about approach on either side to do too much strongarming. I don't think the Black Scholes approach will fly, being so inaccurate. L