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There is a huge financial incentive in the form of diversification. You'll own stock in 3 potential unicorns instead of 1, tripling your chances of getting rich

by abalone 11y ago

There is a huge financial incentive in the form of diversification. You'll own stock in 3 potential unicorns instead of 1, tripling your chances of getting rich. Because it's early stage, even just one year's vesting is enough to get you rich if the company makes it. So do you stay and triple down on one stock or spread it out? Especially when equity is such a large component of your compensation at that stage of company? Investment diversification is a rational economic decision that a lot of smart people will make. The current system forces teams to stick together until IPO/acquisition, maximizing the chances of the options ever being worth something. It should be made more explicit, but it's not necessarily a bad thing (for employee options holders who want them to be worth something).

mahyarm 11y ago
There are (few) people who do this today. They find angel-level companies as a contractor, get paid in stock + a little bit of cash upfront and do about 10 companies a year. It's the employee equivalent of angel investing. SV law firms do a form of this too. I can't do something like that due to immigration, but I envy the flexibility.
st3v3r 11y ago
No. You are vastly overestimating this "diversification" thing. We're not talking about a portfolio here, we're talking about someone's day job. Most people are not going to want to job hop that often unless they hit upon a string of really crappy companies. And quite frankly, you're basically saying that the company should not have to compete for employees. Which is such an absolute shit of an opinion that I can't even begin to tell you why.
- abalone 11y ago
  When 20-50% of your compensation is stock then absolutely diversification becomes a consideration. While you may consider it a "day job" separate from "a portfolio", smarter economic actors may see otherwise. (Your latter comment makes no sense.)

by abalone 11y ago

mahyarm 11y ago

There are (few) people who do this today. They find angel-level companies as a contractor, get paid in stock + a little bit of cash upfront and do about 10 companies a year. It's the employee equivalent of angel investing. SV law firms do a form of this too. I can't do something like that due to immigration, but I envy the flexibility.

st3v3r 11y ago

No. You are vastly overestimating this "diversification" thing. We're not talking about a portfolio here, we're talking about someone's day job. Most people are not going to want to job hop that often unless they hit upon a string of really crappy companies. And quite frankly, you're basically saying that the company should not have to compete for employees. Which is such an absolute shit of an opinion that I can't even begin to tell you why.

abalone 11y ago
When 20-50% of your compensation is stock then absolutely diversification becomes a consideration. While you may consider it a "day job" separate from "a portfolio", smarter economic actors may see otherwise. (Your latter comment makes no sense.)