Q: Where do the competent go?

A: Away

The other day we had the random good fortune of meeting a young couple and having them share some refreshments with us at our big ass dining room table. (Click here to see the big ass dining room table.)

Turns out that the husband is a former aeronautics engineer turned filmmaker.

We got to talking about the aeronautics engineering business.

He told me a story. It goes like this:

It was his review time at his employer, a very, very big company that put satellites into orbit. His boss sat him down and gave him a marginal raise.

My new guest was taken aback.

He said to his boss, “Look, I do just as much work as anybody here and I am paid less than most of them. I could easily go to your competitor and get 20% more than what I make here. And, then in a year or two you’ll try to hire me back and have to pay me another 20% more. So why don’t you just save yourself 40% and give me a decent raise now?”

His boss replied, “Look, if I bump you up to what you are really worth, I’ll have to bump everybody up. And, that’s not something that I am willing to do. Anyway, when you come back you’ll be more valuable.”

At that point my guest decided to quit aeronautic engineering and go to film school. He just didn't want to be in a business where, if you are at all competent, the only way you can realize your worth is to keep moving around to the highest bidder.

Makes sense to me.

So the next time that some recruiter calls me up and puts me in touch with an HR person that wants so know why I move around so much, I’ll have a ready answer: “… because I am competent.”

Q: Where does logic run insane?

A: On Wall St.

This is a story about a stock, James River Coal Company.

James River Coal Company mines coal. It is a pretty big, not the biggest, but big enough. (It takes a lot of bulldozers to mine coal.)

The company employs about 1600 people and at the end of 2007 had a negative net income of $63 million dollars. JRCC lost money. Its nearest competitors made money.

There’s nothing too dramatic about this story: small size mining company loses money. Happens every day.

But, let’s pause for a moment and look at its stock price.

• On March 24th, 2008 JRCC stock sold for $14.60 a share.
• On April 24th, 2008 JRCC stock sold for $24.00 a share.
• On May 23rd, 2008 JRCC stock sold for $35.87 a share.
• On June 24th, 2008 JRCC stock sold for $62.48 a share.

That’s a 427% increase in the price of the stock in 90 days.

You’d think that the company was pumping out 4 times as much coal, or had done some reorganization magic and increased its profit margin from the 7.76% to the industry average of 27.92%.

Nope, not at all.

Why has the stock price of JRCC increased fourfold?

Well, let’s look at the price of oil during the same period or thereabouts.

• Mar-2008: $96.87 a barrel
• Apr-2008: $104.31 a barrel
• May-2008: $117.40 a barrel
• June 2008: $122 a barrel
• July 3 2008: $145 a barrel

OK, oil is going up in price, about 66%.

So let’s see, the price of oil goes up 66% and the stock price of a mediocre mining company goes up 427%. Sounds sort of whacky doesn’t it? We’ll it is whacky.

So what happened? Here is what I think happened. Some whacky analysts somewhere said something like, "Oh shit, the price of oil is going up. In no time at all the \whole world is going to favor coal. There will be a huge demand for coal. The price of coal will go up. All the coal companies will make a fortune. Let’s buy all the in coal company stock that we can, balance sheets be damned."

Never mind that the sun has not yet come up on a day in the last fifty years that anybody has favored coal over oil. Jeepers, even nuclear's gotten a better rap.

And Wall Street does what it always has: take a morsel of logic and go insane.

Sort of makes the current banking situation looks well thought out doesn’t it?

Oh yeah, Apple sold a million iPhones over the weekend. The price of its stock dropped 2.44% today.

If this is not insanity, then tell me what is?

Q: What’s the difference between a real friend and a virtual friend?

A: A real friend gives you a ride to the airport.

I’ll be honest. I’ve been having a lot of trouble ‘getting’ FaceBook, MySpace and all those other social networking sites. Yeah, I belong to LinkedIn and it has been sort of neat getting back in touch with all those people that I went to college with thirty years ago.

I get a list of people who were former classmates. I contact them. They contact me. I find out they have a kid in college. They find out I have a kid in college. Some have come over to the dark side as software developers. A few own a small business. Few have gone on to the Big Time.

Great information! Then I never hear from them again.

I have a hundred people on my ‘direct network’. About half of them would be able to pick me out of a crowd in an elevator or recognize my voice on the phone. The others have not shared a meal with me in a long, long time.

Of the 2,965,200+ people in my extended network, I think that few would know enough about me or my whereabouts to turn me into the FBI if there was a million dollar reward on my head.

But still, this bunch of virtual friends and contacts have a lot of value to people who buy, sell and operate social networking sites. In fact Linked In has been valued at $1 billion USD. (That’s a thousand million dollars folks!)

So where does that leave us? We have ‘communities’ of people who know each other as web sites, emails and interactive avatars. Jeepers, for all we know, Bill Joy might be right! Maybe there is nobody there. Maybe our virtual friends are nothing more than a collection of very smart computer programs that know how to behave as that which we assume to be a person.

So how do you tell your real friends?

It’s simple. The next time that you have to take a plane trip and you want to avoid paying for a cab or airport parking, put an alert out on your social network seeking a ride to the airport. Any one who responds is a real friend. Because as we all know, a real friend is someone who will take you to the airport when you need a ride.