Just because something is (even incredibly) risky doesn't mean its value is zero.
Most private equity is worthless in a couple of years. Most companies crash before any liquidity event. Those that don reach an event, have such a preference stack, and so for such a pittance, the options are underwater.
It’s a mindset.
You should absolutely understand the very large chance that your equity is worthless. You should absolutely 100% not plan any part of your life around the equity being worth something. You should understand that, even if the equity is ever worth something, it won't be liquid for a very, very long time.
...but all of that is different than it being worth nothing. I feel like the "your equity isn't worth anything" mindset leads to employees allowing startups to give them smaller amounts of equity than they should. It leads to employees not questioning bad practices (like 3x preferred participating shares) as much as they should.
I've had people quote the "equity is worth $0" thing to me in negotiations about equity/reups. In my head: "Oh that's actually great! You can just give me your equity then instead of me having to negotiate a reup with the company."
Said another way: let's say you find out your startup's VCs have participating preferred shares. There's a world where that's fine -- you just now need more equity to get to the same place as you would in a company that had non-participating preferred. But you need to reason about the value of your equity to reach that conclusion. "Equity is worth $0" discourages thinking about that stuff.
I've always considered illiquid equity lottery tickets. Yes, playing the lottery is stupid because the expected value is so small. At the same time, I am absolutely buying into the company lottery pool, and want to maximize the number of tickets I get. If it pays off, wonderful. It it doesn't, whatever, because I never counted on the money to begin with.
Maybe this has to do with the contexts I've heard it in, but my gut is that it too often deters people from thinking more critically about their equity and whether they're being treated fairly. If someone new to startups read just the comment I originally replied to and not any of this follow-up, would they have understood what you're trying to say?