P.S. You Should Know... | Issue #362
Double checking
my story 🚀
i’ve been thinking 💭
Examining my reaction. The lawyers who got Elon Musk's stock options voided for being excessive want a $6 billion fee. Despite the fact that this is probably all over news and newsfeeds, I can’t help but comment. WTF?! That was my first reaction. Let’s dig in. First, Musk was not an original founder of Tesla (despite the Judge’s ruling mislabeling him as such, understandably because history has been rewritten on Tesla’s website). He joined as a major investor and chairman during their Series A fundraise. He proceeded to mold it into the only successful new car company in America. In 2012 the board approved an incentive comp package for Musk that required meaningful product development, production and financial outcomes that were all uncertain. By 2018, it has worked! The stock was up more than 10x, and the board approved a new stock incentive comp package with even more upside and even more risk. Shareholders overwhelmingly (73%) approved it —Musk and his brother did not vote. Then, an enterprising law firm agreed to bring suit on behalf of a holder of 9 shares. Recently, the judge ruled to void the comp package entirely — thanks for playing, Mr. Musk. Naturally, for this service to Tesla shareholders the attorneys have asked for payment of $6 billion worth of Tesla Stock.
Alright, I’m fired up. I don’t actually have a dog in this race though — I’m not a Tesla shareholder, except via mutual/index funds. Is there possibly merit to the court’s ruling and I’m just jumping to a conclusion? I went looking for the other side. Gibson Dunn (a law firm I had never heard of them, but turns out they’re pretty big) posted a summary as content marketing to their Delaware corporate clients. I believe the key points are that 1) the shareholder vote wasn’t fully informed because the voting materials didn’t mention Musk was buddies with lots of board members and 2) that he had outsized influence with the compensation committee. Further, 3) the opinion of the court is that Musk might have worked for free given he already owned ~20% of the company, and 4) that there was no risk that he was going to leave the company. Finally, 5) they also say that the performance conditions were not actually ambitious. I guess these seem like reasonable points!
I did a double-take on that last one about ambitious performance. Growing a valuation from $60 to over $600 billion sure seems ambitious. What the court really said is that the defendants didn’t prove that these were ambitious targets. The court referenced 2017 projections of 2020 financial results to make the claim that the business was already expecting a ton of growth.
My conclusion after my light reading and cooling-off period is that this is a bad outcome for everyone except the lawyers who might become $6 billion richer. I will now go back to my happy life not caring about any of this. If anyone wants to hire me as a compensation consultant to write a fairness opinion for them, I may be up for the job — for a fee.
fun facts 🙌
Find everything humans know about… This is a very cool new tool that takes any topic and creates a branching hierarchy of related concepts that serves as a very quick primer. It is especially great because for many of the topics it’ll include images that make the whole thing quite scannable. ~ learn more
Ink drama gripping the fountain pen community. “A manufacturer reintroduced Dark Lilac, a limited-edition ink, to great fanfare. The only problem? The color had changed.” ~ learn more
A $1 billion donation to make medical school tuition-free. This seems admirable! “The 93-year-old widow of a Wall Street financier has donated $1 billion to a Bronx medical school, the Albert Einstein College of Medicine, with instructions that the gift be used to cover tuition for all students going forward.” ~ learn more
How to “wire” a photo in 1937. A nine minute video explaining the technology that allowed newspapers to publish and distribute photos nearly real-time. ~ learn more
oh, chicago 🏆
Comparing Chicago to its peer cities. “A host of characteristics make cities vibrant, desirable and high-profile. No one has everything, but some have more than others. Over time, some lose their edge. Others, through vision and planning, manage to raise their profiles. Here are cities Crain's staff deemed to be comparable in some ways to Chicago.” ~ learn more
Crain’s says Chicago needs a rebranding. “With the Democratic National Convention coming to town this summer, Chicago has a rare opportunity to regain its swagger and reposition itself as a global city at the top of its game, a city second to none as a place to live and work.” I hope this works out! But also not holding my breath. ~ learn more
The Cook County State’s Attorney race. A post from Chicago business leader Chris Deutsch about Eileen O’Neill Burke, who left her judgeship to running for this state’s attorney position. “I’m an outspoken proponent of Eileen, and although there are many reasons, this less than 2 minute video I took does an incredibly good job of explaining why, and directly from her own mouth, so please watch it" ~ learn more
oh, austin 🤠
The Travis County District Attorney’s race. With very strong echoes to the Chicago race above, Daniel Lubetzky (KIND bar founder) posted about the race to unseat Jose Garza from his role as Distict Attorney. In both cases, it seems to be that one side wants to extend an olive branch to alleged criminals while the other wants to throw the book at them. I am not pleased with the strawman here of “a rampant rise in crime” when the official police data do not support that. However, I don’t believe much in the olive branch approach here. ~ learn more
tech, startups, internet ⚡
Why this VC founder doesn’t believe in cash bonuses. The founder of Mercury (which is a startup bank for startups but don’t call it a bank because it’s not really) thinks all forms of cash bonuses are a bad idea. His view is that equity is the only good long-term incentive alignment tool. I agree with part of his message: a company-wide discretionary performance bonus is more like a holdback of salary that employees come to expect. But I disagree with him on individual performance bonuses and the universal applicability of equity. ~ learn more
The unit economics of AI. “If you’ve already put two and two together, you understand this: the cost of knowledge work has just decreased by orders of magnitude. Why? The floor has dropped out on the price of information.” ~ learn more
better doing 🎯
How to trick yourself into doing things. “After the past few years of barely doing any exercise, I started a routine working out M-F morning for 30 min. It's awful and I hate it. But here's how I've been framing it in my head…” ~ learn more
Be good-argument-driven, not data-driven. “There’s nothing wrong with a fondness for data. The trouble begins when you begin to favor bad arguments that involve data over good arguments that don’t, or insist that metrics be introduced in realms where data can’t realistically be the foundation of a good argument.” ~ learn more
How to write stuff no one else can. “Almost as a rule, he tried to avoid talking to big, well-known names. Instead preferring the people who were deep in the trenches, had lots of experience, and almost zero attention. He wrote what no one else could because he looked where no one else would.” ~ learn more
retail therapy 💸
Acquirer of profitable retail businesses winds up in bankruptcy court. Ah, the great pandemic ecommerce boom. It was a wild time. Companies raised big money at VC valuations to buy profitable small retail businesses at main street multiples. But the hot money ecommerce spending reverted back to normal, and it turned out operating hundreds of disparate brands was hard, and now Thrasio — the top dawg who had raised $3.4 billion — is working through a bankruptcy process. ~ learn more
thoughts of food 🍔
100-calorie foods. “A breakdown of 100-calorie foods, from one spoonful of peanut butter to 100 radishes.” ~ learn more
Soybean oil causes genetic changes in the (mouse) brain. This is from an animal study published in 2020 by UC Riverside researchers. “Used for fast food frying, added to packaged foods, and fed to livestock, soybean oil is by far the most widely produced and consumed edible oil in the U.S., according to the U.S. Department of Agriculture. In all likelihood, it is not healthy for humans.” But wait! “Do not throw out your tofu, soymilk, edamame, or soy sauce,” said Frances Sladek, a UC Riverside toxicologist and professor of cell biology. “Many soy products only contain small amounts of the oil, and large amounts of healthful compounds such as essential fatty acids and proteins.” ~ learn more
Haha thank you for summarizing the Tesla Lawsuit fairness piece. Had no idea this was going on and you looked into it more than I would have. Good take!