What You See Ain't What You Get

I've always enjoyed business; I like stories about what and how business functions. I have no interest reading about celebrity and political scandals, but I have to admit that business scandals hold a certain fascination.

I spent more than 20 years living and working in the San Francisco/Silicon Valley area, mostly with startups, so I'm particularly partial to stories about startups. I've seen a lot of strange stuff over the years, some of it up front and very personal—especially in the talent area.

Recently, two stories caught my eye.

Finding and acquiring talent has always been difficult, but when the market heats up and there are new technology skills that everybody's chasing difficult becomes crazy.

The newest twist involves buying young startups for their talent, not their products. Worse, the products are usually dumped or left to wither from lack of attention.

Companies like Facebook, Google and Zynga are so hungry for the best talent that they are buying start-ups to get their founders and engineers — and then jettisoning their products.

The long term result? Reduced job creation, assuming at least some of these companies would succeed.

The second was more troubling.

At LinkedIn's IPO the stock gained over 90% from the offering price of $45.

Admittedly, financials aren't my strong point, but considering the media frenzy around the IPO I found myself wondering why the stock hadn't been priced higher.

I kept thinking about Google's Dutch auction, with a self-set offering price of $85/share, in 2004 when the bears were roaming.

Then, I saw something at Time.com analyzing the same thing.

Business Insider's Henry Blodget explains:

By underpricing the stock, Morgan and BOFA gave their best institutional clients a gift of at least $175 million. And that money came out of LinkedIn's pockets and the pockets of the LinkedIn shareholders who sold on the deal.

Of course, the "pop" also benefits the investment banks who launched the IPO, since they typically hold onto a portion of the shares as part of their fee.

Two actions that seem positive, but with the same outcome—killing a bit of the future.