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Comment by gonehome | Hacker News Reader

Counted on no, but you should try to value it and try to pick winners if you can.

Just pretending it’s $0 is a mistake.

I live in Palo Alto and I’ve seen many people get rich through equity, people who just read HN outside of startups don’t think it’s possible, but it is.

I didn’t realize how possible until I moved out here. FAANG salaries have tempered that a bit since you can just get rich on that income, but even a lot of that comp is equity too (and most of the people I know got most of their wealth from that equity).

I’m just telling people reading this in college to take equity value seriously and not dismiss it as worthless because people on HN say to do that all the time.

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> I’m just telling people reading this in college to take equity value seriously and not dismiss it as worthless because people on HN say to do that all the time.

The vast majority of those people who you are giving that advice to will be played for suckers. It is good advice only for a tiny fraction that have the capacity, the opportunity, and the resources to negotiate a non-exploitative equity package. It is terrible advice for all the rest.

Maybe he only talks to people going to Stanford - he lives in Palo Alto after all. The people going to Stanford tend to have such incredible privilege that they might just be the right people for his advice.

I mean it might be rude to say "if you're able to get hired at top startups of a certain kind the equity might be nonzero" but for the people that applies to, it's not terrible advice. Like, high school kids in general should not assume they can count on a career in the NBA, but if you're a 7' tall human male you have a >10% chance of playing in the NBA in your lifetime, so for them knowing that they have greater odds of success could be valuable information.

> for the people that applies to, it's not terrible advice.

The advice being dispensed is superficially applicable to everybody who gets offered an equity package, and it is terrible advice for most of those people.

It's like giving high school basketball players advice which assumes they'll make it to the NBA.

This is kind of true. I went to a not-quite Stanford college and knew a good number of people who went to work at startups while I worked at big companies. Some of the smartest people I knew were going to startups. Those people by and large did better than me financially, although there were exceptions. I used to believe that they were making a statistically worse decision but from the data points I have now, I am beginning to doubt it.

I think a lot of it just depends on intangible, hard to define things like how good of a candidate you are (are you going to a startup that competes with top tech companies for talent, or one that isn't) and what type of companies you want to work for (for example, a boring ecommerce or enterprise SAAS company with revenue very early on is probably more likely to pan out than a self driving car startup or anything long-time-prerevenue). So while it might be true that in general startup equity and options are going to end up being worth little to nothing, it might be the case that for you and the companies you're trying to work at, you have much better odds.

Public companies are completely different from private companies though (by definition). In public companies, employees can liquidate vested shares immediately to cover any tax liability.

With RSUs in public companies, it's essentially (if not entirely) impossible to lose money. With RSUs in private companies, it's very much possible to be worse off than if you didn't have those RSUs to start with. Namely, if you pay the taxes out of pocket and the shares end up being worth less than what you paid in taxes (or are even completely worthless).

Options make the math even more complex regarding taxes/potential upside or downside.

FAANG equity - like RSUs at any other stable public company - is almost as reliable as getting paid in cash. There is some risk, as with all market-based compensation, but the risk of $FB or $APPL going down by a few percent in a bad year is nothing like the risk of a startup being worthless, or the risk that strange fine print or tax trreatment makes your private equity end up literally worthless (or worse) even if the company succeeds.

The most important thing is that, with public equity, you can tell when it's happening. If you work for a public company and the stock price goes down, that's public information, and you can readjust your valuation of your future compensation and react accordingly. If you're getting paid in funny-money private options, that doesn't work for two reasons. First, the value of your future compensation can change without your knowledge (e.g., with the introduction of preferred investor classes). Second, the value of past compensation can effectively change post-facto if you're forced to hold options for a significant amount of time.

Most companies don't have a liquidity event therefore most equity isn't really worth anything. Yes, in the Valley many companies have IPOd or been bought out but many more haven't and never will.

I think there's a difference between thinking options are worth zero, and not buying them or going to companies you expect to be worthless.

I doubt most people go to a company they expect will literally have no value. If you're going to a private company it's either because you think it will be valuable, you think the work is interesting which could possibly make it valuable, you get an insane salary offer or because you can't find another job.

In basically every case, you understand the company has possible value, which could translate into increased wealth.

The idea is simply that its not worth anything until it is. Once you're in the company and can feel out the actual trajectory and faith in the business, you can decide if you want to buy the shares.

Nearly everyone I've worked with across multiple companies have purchased up most or all their shares, even when they expressed how little faith they had in the company. If you're doing that, what does it matter if you sat down and crunched the numbers? You still got the lottery ticket.

FAANG income certainly isn't "rich". Maybe you recognize this and I'm just picking semantics, but I've noticed this annoying trend of FAANG engineers who crack $1m at 29 acting like they are a member of the rich when their just a person with a great job. To get rich comes from investments over time, or an impressive startup exit, or starting a business, or getting lucky. Nobody gets rich on the standard FAANG salary until they've been there for 20 years.

You and I have very different perspectives on what rich is. If you're 29 years old with >$1M in personal wealth, you're rich. That net worth would put you firmly in the top 1% of net worth at that age.

https://dqydj.com/net-worth-by-age-calculator-united-states/

Apparently so. I don't disagree that you'd be well-off, but you couldn't never work again without a very frugal life, you couldn't vacation every month, you're entire subsistence is still tied to your job you must work to survive, and so on. Certainly in a great position, but being rich is very different

It sounds like your definition of "rich" is actually "independently wealthy". To me those are different. You can still have a job (and need a job to sustain your lifestyle) and still be rich.

Living in a 5000 sq ft luxury apartment in Manhattan makes you rich whether you rent it, own it and regardless if you need to work to afford it.

What the flying fuck. I've never had more than $10k in my life, and that's a recent accomplishment -- most of my life was a single missed-paycheck away from financial insolvency, and for a brief period, I was actually homeless.

For 14 months I lived on a $2,250/mo salary in downtown Boulder, CO. That meant trying to scrounge free meals from meetups or wherever else would feed me.

The idea of having a million dollars, or even making 200-300k a year is so insane to me. If that isn't rich maybe I missed a memo somewhere.

virtually no one feels rich. for the simple fact that you achieving it also normalizes it in your own brain. and the more wealthy you are the more wealthy(-er than you) people you tend to know, so your position relative to your peer group stays largely the same.

i'm not arguing these people aren't rich. just trying to help illuminate why they never feel rich (and therefore don't seem to acknowledge that very obvious fact about themselves).

It's pretty obvious. If you don't know many people who are less wealthy than you then you have no frame of reference to consider yourself wealthy.

That's only a small part of it. Most of the people are the richest in their extended family, and tons of friends from HS, college, etc. so they do know people who are not in their income bracket.

I'd say it's more related to the imposter syndrome. IE if I got here and I'm just ok, clearly this wasn't too hard a level to reach.

That and "well I used to work with so-and-so, and we're about equal, but they're making $800k while I'm stuck making $400k, so I'm clearly failing". Or even $2M vs $10M, etc.

Again, it's crazy, because both people are clearly actually "rich", I'm just trying to explain the mechanics of why so few actually feel that way.

Since it's so similar in expected behavior to a lottery ticket, I'd value it like a lottery ticket. Mega Millions costs $2 per ticket, so I'd value an equity package at a startup at $2 instead of $0.

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