Category: Mac Blogs

Options are fun when you get a friend to play!

The Macalope responds to MacJournals News.

MacJournals News responds to the Macalope’s response to their post about Mark Anderson’s post about Apple’s stock options.

The game is afoot! Let the response to the response to the response to the response to someone else’s post begin!

So MJN did not miss the point as the Macalope said, so much as it chose to discount it.

MJN also provides some history on Graef Crystal and seems think he’s largely just interested in bashing Apple executives as being overpaid. Indeed, Crystal does engage in some truly tasteless construction.

Apparently, an option of that size didn’t stir Jobs to new heights of performance. On the contrary, he fell on his face, with the stock price plummeting to $18.30 a share by Oct. 19, 2001.

It was on that latter date that Apple’s board decided that he needed more motivation. So he was handed a second option grant, this one covering 7.5 million shares and carrying a strike price of $18.30.

Hmm. Why would that be? Well, it could have something to do with the iPod, which was announced on…

October 23, 2001.

Hmm.

HMM!

Starting an entirely new line of business, the company might have decided Jobs needed to have his compensation structure tied to that. And, of course, in retrospect Crystal’s caterwauling about Jobs’ performance is pretty embarrassing.

Give Steve a minute, dude. He’s just warming up.

So the Macalope will concede that the messenger has an agenda, but from what he’s read, it comes from a general dislike of large compensation packages for corporate execs, not a dislike of Apple per se. Also, it doesn’t mean he’s wrong about everything.

Such as how the company valued the shares Jobs received in March of 2003 in exchange for his options.

MJN’s believes that, because Steve Jobs can’t trade his stock options to anyone, they’re worth nothing.

Jobs was not “given the present value for the options in March 2003 using an industry-standard means of calculation” anywhere but in Graef Crystal-world, where he’s been inventing fantasy numbers for Jobs’ compensation since 2000.

Crystal and other critics continually try to value Jobs’ options using the Black-Scholes method of determining the present value of a future asset.

Uh, that’s probably because it’s an industry-standard means of calculating the present value of stock options.

Well, you keep saying that, Macalope, but how “industry-standard” is it?

It’s so industry-standard it was one of the two models that the Financial Accounting Standards Board (the accounting rule makers in the U.S.) had proposed should be required for calculating how to expense stock options when they tried to make that the law of the land in the early 1990s (before congress gallantly stepped in and insisted that options not be required to be expensed).

It’s also so industry-standard that a 2002 Ernst and Young report (PDF) said:

As indicated in our past surveys, the overwhelming majority of companies use the Black-Scholes option-pricing model for determining the fair value of employee stock options. A small minority of companies uses the binomial pricing model.

So, that’s how industry-standard it is.

Thanks for asking, Billy.

That was Billy, the artificial argument construct, ladies and gentlemen. Let’s give him a hand.

[Yay, Billy!]

Now, one could argue it’s not the right model to use. Indeed, it has since been seen as having the tendency to overvalue the options and the FASB has advised companies take care in using it. But it’s still the primary one that has been used at least until recently and not just by people who want to beat Steve Jobs over the head as MJN implies.

But as experts like Crystal continually refuse to tell their readers, Jobs can’t trade his stock options. If they’re worth US$523 million, they’re worth that only to Steve Jobs [in his own personal satisfaction]. Apple employees and directors cannot transfer their stock options; they can only sell the shares themselves once the stock options are exercised. Remember that: those 27,500,000 shares are worth exactly US$0 to anyone other than Steve Jobs.

Actually, that’s not true. They’re also worth something to Apple and consequently its shareholders. And the reason experts “refuse to tell their readers that Jobs can’t trade his stock options” is probably because it seems so darned obvious.

MJN, the Macalope is left to surmise, believes Apple took the options back solely to reduce exposure and then gave Jobs an unrelated $75 million for his troubles, a number the company just pulled out of its ass*.

Their value on the “open market” is manifestly irrelevant because they could not be traded on the open market.

This is absurd. The options’ value is tied to Apple’s stock which is traded on the open market. If Apple had had to expense the options (which, ironically, is pretty much exactly what they ended up doing by allowing Jobs to trade them in for directly-owned stock), it would have valued them based on either the Black-Scholes model or the binomial model and expensed that amount.

It’s perfectly possible that Crystal botched one or both of his calculations of Jobs’ options (as MJN shows, he came up with two different numbers) or that he used different inputs for the model each time, either based on better information the second time or a desire to get it to come out closer to $75 million.

To quote Monty Python, “It’s only a model.” The results are going to vary drastically depending on the inputs (and the competency and intentions of the modeler). As for Crystal’s numbers, it’s probably best to point out that one could get those results from the Black-Scholes model and Occam’s razor being what it is…

The Macalope would fall down dead, his hooves sticking straight up in the air if he were to find that Apple didn’t derive the $75 million figure by modeling the present value of Jobs’ options in March of 2003. And he thinks it’s highly likely the company used the Black-Scholes model.

It’s an industry standard, don’t you know. Just ask Billy.

The Macalope’s only real error below is that he failed to add a qualifier such as “highly likely” to his comment that Jobs was given the present cost based on an industry-standard model.

It is theoretically possible Apple just pulled the number out of its ass. It’s just really unlikely.

* The use of “pulled the number out of its ass” in this piece is a deliberate exaggeration.

Apple rumors raw and uncut!

Think Secret launches Secret Notes, a shoot-from-the-hip companion blog.

As many of the news tips on Secret Notes will be works-in-progress that are not yet ready for the front page of Think Secret, they should be read with more skepticism than regular stories.

Thank god someone will finally be cutting out all that heavy-handed editing and fact checking and double-sourcing and…

Wait, what?

David Pogue is a pussy

But his post is still worth a read.

David Pogue pens a hilarious walk down memory lane with all those brilliant prognosticators who sagely predicted Apple’s imminent demise in the mid-1990s.

The Macalope’s only complaint: other than Microsoft’s Nathan Myhrvold , Pogue doesn’t name names.  [Correction:  he also mentions David Winer – so Microsoft and bloggers are fair game, but not journalists… hmm…]

Ah, the privileges of membership in the big media boys and girls club.

C’mon, Pogue! Bwaaak-buck-buck-buck-bwaaaaa!

That’s a chicken sound, in case you can’t tell.

A Note About Corrections

Some comments on how the Macalope rolls.

The Macalope’s still getting his feet wet in this whole blogging thing, but he’s a little confused by the varying standards for corrections.

Two polar opposites seem to be George Ou and Victor Keegan (or, rather, the Guardian).

Say what you want to about Ou (the Macalope certainly does), but he notes corrections in situ (like a man!), which is the policy the Macalope intends to follow.

And there’s good precedent for it. In an email, John Gruber notes:

if it’s a correction, or a significant addition, or somehow changes the meaning, then I call it out somehow. My rule of thumb is — if it’s a change that I would like people who have already read the article before to notice if they happen to skim it again, I’ll call it out.

To the Macalope, that’s the most sensible policy and it was rather startling to him that when Victor Keegan corrected the two mistakes in the online version of his column, the mistakes were “disappeared.” 86-ed. Flushed down the memory hole. Anyone reading the article now would never know there was were any errors. Anyone reading pissy blog posts about the errors (cough) might wonder what they were talking about.

In fairness to Keegan, it’s probably the Guardian’s policy that online content be corrected in this manner rather than his and it’s not at all unusual for the big media companies. It is a little schizophrenic, though. Print journalists have traditionally been brow-beaten over corrections, which are often used as a metric in annual reviews. But while journalists may still get dinged for them, many of the papers have thrown the transparency out the window in moving to online media. Just because you can magically correct something doesn’t mean you should.

Further, using the number of corrections as a basis for performance seems overly draconian.  It’s not that the Macalope doesn’t think sloppy reporters should be held accountable – they should. But people make mistakes and it’s likely that some reporters are going to get called on them more often than others. A simple counting system doesn’t work.

A political reporter – for example – is going to get heated calls more often than someone covering the local flower show (“Those were dahlias, god damn it! DAHLIAS!”).  Likewise complex tax regulations or the nuts and bolts of technology are going to be easier to make a mistake on than coverage of the county fair. And if readers don’t complain, reporters have zero incentive to correct a story if it’s going to pop up on their annual review.

The papers have made a decision to try to reduce the number of corrections instead of trying to increase overall accuracy.

Anyway, all of this is a long way of saying that the Macalope will be providing corrections where the errors appeared – sometimes right next to the error and sometimes at the end of a post, depending on how it affects readability and whether or not the error is isolated or throughout.

Also, on the advice of Gruber, the Macalope won’t be calling out spelling corrections anymore. There’s a fine line between diligent and being pedantic. No one cares if the Macalope has a problem with homonyms, they just care if the information is wrong or misleading.

This has been a public service announcement. We now return you to Mac news, rumors and silly pundit take-downs.

In A Word, "Wrong."

The Macalope is misidentified.

Does the author of JackWhispers (correction: the site’s called Fix Your Thinking) really think the Macalope is George Ou? As an addendum to his list of the Goons of the Mac World, Philip writes:

George Ou started a new Mac blog on August 30th called, The Macalope: Covering the mythical Mac User – very goonish!

Now, the Macalope tried to find the irony in there, but after about three hours of sitting and staring blankly at it and shaking his be-horned head, he was unable.

So, let’s get a few things straight.

First of all, Philip, you got the subhead wrong. See above. Second, did you actually read the entry you linked to and decide George Ou is filled with self-loathing? Third, you don’t need that comma after “called.”

And finally…

Does George Ou have antlers?

No. I believe he does not.

You know, you don’t grow a rack like this overnight. So, this whole thing is kind of insulting.

UPDATE 9/5:  The author responds in comments, claiming to have fixed the post, and deletes the Macalope’s comment from his blog.

For the record, what the Macalope’s comment said was:

The Macalope is decidedly not George Ou.

Did you even read the post you linked to?

[Actually, the Macalope found a cached copy and “even” wasn’t even in there.]

Not exactly Alec Baldwin’s monologue from Glengarry Glenn Ross.  The “correction” now reads:

A blog post about George Ou has been started called, The Macalope: Covering the Mythical Mac User – very goonish!

But that’s still not right.  And now it doesn’t even make any sense.

Well, the Macalope doesn’t want to make a whole “thing” about this.  On the whole, he agreed with the list, he was just flabbergasted at being mistaken for the man he just spent the better part of a week skewering.

[Edited for grammar.]

UPDATE 9/6: The Hatfields and the McCoys. Moby and Eminem. The Macalope and Fix Your Thinking.

Fix Your Thinking responds.

The Macalope responded in email thusly:

The Macalope certainly didn’t expect to start the firestorm he did with his post. It was certainly *not* intended to portray Fix Your Thinking as a “freak show.” On the contrary, he quite enjoyed the rest of the post.

There has been no effort to try to “discredit you.” The Macalope pointed out a mistake that he felt besmirched his name in the very early days of his blog. He did not want people to think he was George Ou’s sock puppet or that he was anti-Mac. First impressions are important (we can certainly see that now) and your mistake, the Macalope felt, would have given people exactly the opposite idea about his blog. In retrospect, his response may have been heavy-handed, but he thought that someone who’s been around the Mac blogosphere as long as you could take a little heat in stride. All he expected was a “Whoops! Misread the post!” correction.

As for the name of your site, your HTML title is “Jackwhispers – Fix Your Thinking”. Jackwhispers is first, leading one to believe more important and once you scroll past the banner, the HTML title is all you can see. The Macalope will correct the post, however, noting the mistake.

Finally, I fail to see why the Macalope should apologize when you haven’t apologized for your mistake. Corrected, yes. Apologized for, no.

Now, the Macalope has not *asked* for an apology. Merely an appropriate correction. As that has now been done, and you have asked for his apology, the Macalope will apologize for some specifics.

First, he regrets not mentioning that he enjoyed the rest of the “Goons” post. That could have gone a long way to softening the tone. Second, he regrets the punctuation crack. That was piling on. We *do* all make grammar mistakes and the Macalope will surely make his fair share in the future.

Sometimes he feels that if he mixes up “its” and “it’s” one more time he’s going to jump antlers-first into the venison grinder.

So, for those two things, he apologizes.

He does not, however, apologize for responding via post rather than email. The Macalope believes blog readers have a right to see our mistakes, know our flaws. Your first correction did not note any error on your part. While everyone has different styles, the Macalope believes blogs should adopt a newspaper approach – mistakes should be noted and corrected, not disappeared. But, your blog, your rules.

Hopefully this will put the issue behind us.

Regards,
The Macalope