Badass RC Planes

I am giving my son a remote control helicopter (nothing fancy, he’s only 4 1/2) for Christmas. What’s interesting is that when I was a child (or when I was a young version of a child) something like this would be a toy. Today I look at it entirely differently, much in the same way that I would a computer. It’s not a gadget or toy but rather something that could prepare him with skills that could be valuable as he gets older.

200812191436.jpg The X-47 was designed to be adept at long-range surveillance because of its large range and high flight ceiling. And despite being a beast—it will have a 62-ft wingspan and weigh around 45,000 pounds at takeoff—the X-47B is designed for stealth. This aircraft shows the Navy’s growing embrace of unmanned technology, including both unmanned underwater vehicles and aerial vehicles. But the X-47B would be a technological step forward—besides carrying stealth features, it is supposed to have the ability to execute some maneuvers, such as refueling in midflight, autonomously.

[From Northrop Grumman Unveils X-47B Navy UAV – Fighter Plane-Size UAV from Northrop Grumman Unveiled – Popular Mechanics]

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Music Industry to Abandon Mass Suits

It would appear that critics of the music industry’s approach and the music industry itself are in alignment. Someday this will be a case studied in business schools titled “the music industry’s circular firing squad”. It’s hard to imagine an approach that not only did little to address the underlying problem at hand, but at the same time alienated a vast cross section of consumers.

The decision represents an abrupt shift of strategy for the industry, which has opened legal proceedings against about 35,000 people since 2003. Critics say the legal offensive ultimately did little to stem the tide of illegally downloaded music. And it created a public-relations disaster for the industry, whose lawsuits targeted, among others, several single mothers, a dead person and a 13-year-old girl.

[From Music Industry to Abandon Mass Suits – WSJ.com]

SantaCorp Pleads Case For Bailout

Let ‘em eat cake, I say. Santa has a lot of chutzpah to fly around in a private sleigh while the rest of us rubes make due with commercial coach. The old Santa model just isn’t efficient… how can you be competitive delivering on just one day of the year when I can order from Amazon year round?

“You might say it’s a perfect snowstorm,” said Merrill Lynch analyst Jennifer Rothstein. “The youth consumer market is demanding more for less, at a time when the government and courts have forced SantaCorp to lower its ‘good list’ credit rating standards. They face increased non-union competition from the East Pole, and huge increases in fuel prices for magical reindeer flying hay. It’s a hard sell for the investment community.”

[From iowahawk: SantaCorp Pleads Case For Bailout]

More on this topic (What's this?) Read more on 2008 Financial Crisis at Wikinvest

Red Herrings

BusinessWeek gets it wrong, rapidly escalating valuations complicate hiring when looking at stock options alone. Options are priced on actual events, like a financing event, that a company experiences; options are not priced according to what the Board believes they are worth. Therefore, Facebook’s $15b valuation following the Microsoft investment was a bigger hiring issue because options priced at a $15b valuation represent a steep hurdle for employee liquidity.

Declining valuations are throwing a wrench into the gears of Silicon Valley’s wealth machine. In the worst cases, the money dries up and startups are shut down. But even for fortunate companies such as Digg that can still raise money, complications abound. Falling prices can make it harder to attract the best and brightest. Morale can suffer, and workers with stock options underwater may be less likely to stick around. Such pressures can force companies to grant new options at lower prices or reprice existing options, which can infuriate venture capitalists backing the company.

[From A Wrench in Silicon Valley’s Wealth Machine – BusinessWeek]

The issue is really a small distraction right now because I don’t think many people in Silicon Valley are concerned about options value while job losses are dominating the headlines.

At any rate, there are a number of avenues available for a company looking to make employees whole on their options. Repricing is not that complicated and every financing round includes a topping off of the option pool to accommodate new hires and existing employees. BusinessWeek

CalPERS, Another Quasi Governmental Entity Mess

CalPERS has presided over a 24% loss on their investment portfolio in the last 6 months and not surprisingly they don’t wish to draw attention to it. As a result of heavy borrowing to finance real estate investments, CalPERS is actually on the hook for a 103% loss on real estate, in other words these investments are beyond worthless to CalPERS.

At the height of the property bubble, California’s giant pension fund, Calpers, made a fateful decision: It aggressively poured money into real estate. As a result, today it’s one of the biggest owners of undeveloped residential land in America.

[From Risky, Ill-Timed Land Deals Hit Calpers – WSJ.com]

This isn’t the first brush with controversy the Board at CalPERS, a mix of political appointees and state office holders, have found themselves in. Back in the 2002-2004 timeframe the then President of CalPERS decided to take it upon himself to expand CalPERS’ mandate well beyond managing pension money. He was eventually kicked off the board.  

The other corporate governance nightmare in California is the University of California system, which is overseen by a Board of Regents that is, you guessed it, a combination of political appointees, and current and former state office holders. Their pursuit of excessive executive compensation is now the stuff of legend.

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