[Compassionate] Conservative

How fitting for President’s Day to write a piece about the presidential election going on in 2012.

Do you remember the 2000 presidential election? The phrase of the campaign for George W Bush was ‘Compassionate Conservative’. I think it had something to do with the fact that being just plain ole conservative was mean spirited and curmudgeonly. W put a Texas grin and a maloprop in action and talked about being a Compassionate Conservative.

Now, I have not been following the cooky Republican Primary with much attention, but I don’t think I have heard the word “compassion”, much less the more descriptive phrase of ‘Compassionate Conservative’ from any of the candidates. From my vantage point it seems that you have to be CONSERVATIVE to be in the Republican Party and the meaner, more conservative you can be on issues for women, immigrants and the poor the better! Who decides this stuff for the republicans, anyway?

I have said this privately to a few and I’ll go on record today that I predict Obama wins in a landslide. Not that Mr. Obama isn’t vulnerable on certain issues, but the Republicans are in disarray and the President has a few winning hands that he will and should play.

Happy President’s Day!

Thoughts On A Sunday – 2/5/12

I’m in London this week. I had a wonderful play on literature this week on Twitter with my pictures for “My Tale of Two Cities”. SF was gorgeous and sunny and warm and then I landed in London on Sunday that had just experienced 4-6 inches of snow.

I had plenty of time to have a few thoughts twirl around so let’s get on it.

#1 – Facebook, FBook, $FB.
Thank god they finally filed their S-1. Tons of side stories around it, but the tidbit I found interesting was Zuck’s upcoming tax bill from options he will exercise. First off, it seems pretty unusual to me that a founder would be granted such an enormous option. I know absolutely nothing of the backstory on this situation, but if I had to guess I would say that the investors and Mr. Z were trying to ex-post facto get him ownership at the expense of prior common shareholders (i.e. Early shareholders and other founders). The movie ‘The Social Network’ touched on some issues around founder ownership, but I’m not sure I would trust a movie for fact checking.

#2 – Stock Options
Mark Zuckerberg’s $1.5 Billion tax bill is the headline, but there is a real story here about how screwed up our tax system is when it comes to stock options.

Zuck is going to exercise his option grant which means to say that he is going to write a check to Facebook to become the legal owner of those shares. He is going to pay a small amount relative to value, but realize that the only act he is taking is to purchase the stock.

The IRS, however, sees it a little differently. If an option holder exercises their right to acquire the underlying common stock, then a tax calculation kicks in that says the differential b/t the exercise price and the then current Fair Market Value is 100% taxable income (short term capital gains, I believe).

In the case of stock options, purchasing the underlying stock triggers a tax due AS IF you had sold the shares, not bought them. Down is Up, Right is Wrong, and Buying is Selling.

The effect of this tax ruling is that people are forced to do a ‘same day sale and exercise’ or they take on debt to pay the tax. One can do a same day sale only if there is someone to buy your stock. Zuck will be just fine because of the IPO, but note that he is waiting till the very end of the IPO process to exercise (he can’t afford to exercise and not sell a portion of his stock). What of the tens of thousands of option holders who are being denied the opportunity to be a stakeholder in their company because they do not wish to or can not go into debt to pay a tax bill. The benefits of the ‘Ownership Society’ require you to own the underlying asset. Unfortunately, I see this dynamic all too often in our underlying portfolio companies.

So, ‘What Do I Want’?
This post is not the equivalent of a Tea Party Rant against taxes. I want what is Fair. Exercising your option to purchase common stock is NOT the same as selling a security that you own. When a person sells stock for a gain and receives the cash, then a taxable event has occurred.

That is what I want.

Thoughts on a Sunday – 1/22/12

It’s a football Sunday here in San Francisco.

Thought #1 – High Speed Rail
A High Speed Railroad system in California. I cannot believe that we are having to fight for this one here in California. I lived in Baltimore, MD for about one year in the ’99/’00 timeframe. I loved the MetroLiner railroad system they have on the East Coast. My family and I could jump on the train and get to NYC in 2.5 hours. We would never have done so many trips if we had been required to take a plane. I really don’t care what the cost is for the system. It will be expensive, it will cost more than what we are told/want and it is still worth it. The downstream benefits of that system running in California is huge.

Thought #2 – Taxes
The talk of taxes is in the air. The ‘Romney Effect’ is in full view, especially after his discussion about how he probably is closer to 15% for his tax rate. I’ll leave aside the carried interest discussion for a later day. I think a more interesting line of discussion is around 1) Why do we tax capital gains differently than wages/salary?; 2) Why do we tax short term capital gains differently than long term capital gains at the federal level? As an aside, California state taxes are the same for both; and 3) Since when is 12 months considered long term? I remember when long term cap gains was 3 years then it became 2 years and then we got to 12 months.

Follow my logic here: we tax long term capital gains at a lower rate than wages b/c it it promotes an economic ‘good’ i.e. Investment. We wish to promote long term thinking so we discriminate b/t long term and short term gains. Long Term = ‘Good’ and Short Term = ‘Not As Good’. In a completely arbitrary assessment, Congress has decided that 12 months is the demarcating line b/t short term and long term capital rates.

It seems to me that increasing the time required to hold securities before qualifying for long term rates would go a long way in reorienting the discussion around what matters most. Long term capital that creates new businesses is an absolute ‘Good’, but we shouldn’t kid ourselves that 12 months is enough time for that societal good to be realized and warrant a much lower tax rate.

Christopher Dean – Taking Flight With Urban Airship

One of the real joys of being in the early stage venture business is that I deal with numerous companies that are rapidly growing AND hiring. As such, I love helping people that I know find the right company and position within our portfolio.

The most recent example for me is the announcement last week by our portfolio company, Urban Airship, that Christopher Dean has joined as Chief Revenue Officer. The company’s blog post is here: http://urbanairship.com/blog/2012/01/06/a-warm-ua-welcome-to-our-new-cro-christopher-dean/

Christopher (aka “CD”) and I have kids that attend school together and so we have known each other casually for years. When I heard about CD being allowed to “pursue opportunities outside of Skype”, I was early in calling him about what he wanted to do next. I was thrilled that he was on the market.

I literally had 5 companies that I thought would be interesting to him and I arranged for him to meet the founders. Some were a fit and some were not, but in the end he joined Urban Airship as CRO. Here is my favorite line from him during this process (I’ll paraphrase): I really like revenue. I like big revenues.

Well CD, I like big revenues too! You have joined a ‘True’ Rocket Ship and the sky is the limit. Good luck to you!!

Thoughts on a Sunday – 1/8/12

First of the new year.

Thought #1
Service Economy = Service Government? Everyone talks about how the US economy is dominated by services. Why is it then that the first thing anyone says about government stimulus involves some type of “shovel ready” project? Let’s invest in our Service Government. What would that look like? Well, how about your local Post Office (it’s getting gutted and we will lose a day of service soon)? Your local national park (trails and entire parks are being closed)? Your local DMV (state versus federal, I realize)? How about the national equivalent of the 311 service that some major cities have rolled out? How about Americorps with an expanded vision? The great thing about stimulus for service jobs is that almost all the money is taxable wages. The last time I checked, a hunk of concrete didn’t pay taxes. So, let’s invest in our service economy, versus just thinking we can build enough bridges or roads to fix a troubled economy.

Thought #2
I recently bought a bike and I looked high and low for a frame that was manufactured here in the United States. I could not find one and I wanted a list of companies that built their bikes here in the US. The answer may in fact be zero for bike frames, but then, I got to thinking that I would love to have a database of companies and the major products that are made here in the States. I may be in the minority here, but I will gladly pay a premium for USA products of equivalent or better value if they are manufactured in the states versus China. Get consumers the information about the provenance of products and then we can decide where and what we will buy.

Happy New Year everyone!

It’s 2012 – The New Year Has Begun

Let’s start off the year with a quote that I have come across from a blog post that I found via wordpress.com. (As an aside and to be fully transparent, I recently clicked on one of the wordpress.com highlighted blogs–www.readingmichael.com–and then eventually clicked on http://www.defendmichael.com/?p=456 which got me to the quote that I really liked).

I am told that I have a 1/32nd or 1/16th portion of my lineage from the Cherokee tribe so I presume that I might be slightly biased :).

Here it is:

There is a story of an old Cherokee who told his grandson about a battle that goes on inside of every person – it is a battle between two wolves. One wolf is life-taking: it is anger, envy, jealousy, sorrow, regret, greed, guilt, arrogance, self-pity, resentment, inferiority, lies, and ego. The other wolf is life-giving: it is joy, peace, love, hope serenity, humility, kindness, empathy, generosity, truth, compassion, and faith. The grandson thought about it for a minute and then asked his grandfather which wolf won. The old Cherokee simply replied, ‘The one you feed’. I am working on only feeding the wolf who gives life.

Let us all think about the wolf we choose to feed as we start our new year.
Happy New Year folks.

Forbes 30 Under 30 List

It must be the end of the year, because I keep seeing all these lists of the “Best of….” One list that I did care to look at was the Forbes 30 Under 30 list http://www.forbes.com/special-report/2011/30-under30-12/30-under-30-12_land.html. However, they give 12 separate categories of 30, so I guess it’s really the Forbes 360 under 30 list, but that doesn’t roll off the tongue that well.

I was very pleased to see that @trueventures had 4 Founders represented. Jack Abraham of Milo (now eBay) and Jon Oberheide of Duo Security in Technology and Matt Mullenweg (@photomatt) of Automattic and Brian Wong (@brian_wong) of Kiip in Social & Media. I am personally pleased about those last two because I am a member of their board of directors and I invested in Matt and Brian as they were forming their respective companies. They are truly remarkable Founders and I could not think of anyone else more deserving. Congrats!