5 ms·

Honestly what's wrong with just paying people a lot of cash? Why the swindling with securities? Because that's all it is -- look at a 10 year timespan between

by ihsw 10y ago

Honestly what's wrong with just paying people a lot of cash? Why the swindling with securities? Because that's all it is -- look at a 10 year timespan between two developers, one making cash and one making cash+options, and you will see a difference in how much they take home. Stock options are all smoke and mirrors, nine times out of ten. I'm all for giving people more financial opportunities that integrate with their lifestyle and risk tolerance but come on, people are being ripped off on the promise of "options" and gauging how much "faith" someone has in a company. Screw faith, just give me cold hard cash!

jasode 10y ago
>Honestly what's wrong with just paying people a lot of cash? The context of the blog post is "startups". Startups without significant revenue don't have a lot of cash to pay high salaries. Another reason for stock compensation is to tap into the power of incentives. Hopefully, the potential equity upside attracts employees who think their work contributions can boost the value of the company (and hence their stock options) rather than mercenaries who just want a paycheck. Paying with 100% cash doesn't easily differentiate those 2 groups.
- ihsw 10y ago
  So what if there is a lack of cash? Keep demanding more. If and when the cash comes, will your real salary increase? No! Of course not! You will be the last to know and this information asymmetry is the reason the rules are stacked against you, which is why you should never stop asking for more money. If the company tanks then so what? Not your problem, you're a developer. The premise of my argument is that the separation between the two groups you mentioned is so temporary that it doesn't even matter -- and not only that but whether you're a mercenary is not up to you, it's up to your employer. You might as well get paid fairly to reduce your risk surface.
  - jasode 10y ago
    >So what if there is a lack of cash? Keep demanding more. That's fine, but you're changing the subtopic of your text that I was specifically responding to. You asked, "what's wrong with paying a lot of cash?" What's wrong with it is that the fledgling startups do not have "lots of cash" to pay so playing dumb about why they aren't paying it is a non-productive conversation. Sure, as a future potential employee, demand all you want -- and renegotiate for higher salary next year -- or quit for a better job -- or start your own damn company -- or don't take the job at all. All that empowerment cheerleading is fine but it's from the perspective of the "employEE" so it's changing the subject. My answer was specifically explaining the perspective of the "startup employER" -- and that's who you had asked about. >The premise of my argument is that the separation between the two groups you mentioned is so temporary that it doesn't even matter It can take several years for startups to receive revenue and profitability and therefore, the recruiting mindset will favor one group vs the other over a long ramp up period. This hiring strategy is unavoidable when the startup does not have a lot of cash. >whether you're a mercenary is not up to you, it's up to your employer. Btw, I wasn't using "mercenary" in a derogatory manner. It's a label I often proudly wear and being fabulously compensated with cash never flipped a switch in my head from mercenary to loyal employee. I was mercenary to the bone. Anyway, I make the distinction about mercenaries to highlight that some employees' incentives may not be aligned optimally for a cash-strapped startup. Therefore, perhaps the mercenary should restrict his criteria for employers to be the more mature companies who pay high market-rate salaries and very little in stock. That strategy seems more productive than wondering why Microsoft pays "lots of cash" but startup XYZ does not. The blog was about startups and not companies like Microsoft/IBM.
- stevenwiles 10y ago
  > Hopefully, the potential equity upside attracts employees who think their work contributions can boost the value of the company (and hence their stock options) rather than mercenaries who just want a paycheck. It's hard to believe companies genuinely want this when offering 0.025% of common stock to your early engineering hires has become common practice.
  - jasode 10y ago
    > offering 0.025% of common stock to your early engineering hires has become common practice. Well, you have to add extra information to that 0.025% figure to determine if that seemingly "low percentage" of equity became decent money. As an example, it looks like Chris Cox, an early 2005 hire of Facebook[1] and now Chief Product Officer got ~0.025% of Facebook stock. (~600k of 2.5 billion shares.) He started unloading some of them in 2014 (2 years after the IPO).[2] That 0.025% in 2016 now worth ~$77 million. Of course, not every startup will become a Facebook with a market cap of $350 billion. So instead, let's say we can work backwards from a "nice" target number such as $5 million. For 0.025% stake to be worth $5 million, the company has to grow to a $20 billion valuation. That's still a big number but building a company worth multiple billions is an aspiration for many startups. The pontential employees have to consider if the "lottery tickets" with a payout of $0 to millions is worth the lower salaries. If a startup sets aside 10% stock for employees' pool, have other companies proven that you'll get better results by granting more than 0.025%? Should they have given Chris Cox 1% so other subsequent employees get less % or none at all? Lots of potential game theory questions to ponder. [1]https://en.wikipedia.org/wiki/Chris_Cox_(Facebook) https://en.wikipedia.org/wiki/Chris_Cox_(Facebook) [2]https://www.insidermole.com/insider/cox-christopher-k/transactions/?page=3 https://www.insidermole.com/insider/cox-christopher-k/transa...

by ihsw 10y ago

jasode 10y ago

>Honestly what's wrong with just paying people a lot of cash? The context of the blog post is "startups". Startups without significant revenue don't have a lot of cash to pay high salaries. Another reason for stock compensation is to tap into the power of incentives. Hopefully, the potential equity upside attracts employees who think their work contributions can boost the value of the company (and hence their stock options) rather than mercenaries who just want a paycheck. Paying with 100% cash doesn't easily differentiate those 2 groups.

ihsw 10y ago
So what if there is a lack of cash? Keep demanding more. If and when the cash comes, will your real salary increase? No! Of course not! You will be the last to know and this information asymmetry is the reason the rules are stacked against you, which is why you should never stop asking for more money. If the company tanks then so what? Not your problem, you're a developer. The premise of my argument is that the separation between the two groups you mentioned is so temporary that it doesn't even matter -- and not only that but whether you're a mercenary is not up to you, it's up to your employer. You might as well get paid fairly to reduce your risk surface.
- jasode 10y ago
  >So what if there is a lack of cash? Keep demanding more. That's fine, but you're changing the subtopic of your text that I was specifically responding to. You asked, "what's wrong with paying a lot of cash?" What's wrong with it is that the fledgling startups do not have "lots of cash" to pay so playing dumb about why they aren't paying it is a non-productive conversation. Sure, as a future potential employee, demand all you want -- and renegotiate for higher salary next year -- or quit for a better job -- or start your own damn company -- or don't take the job at all. All that empowerment cheerleading is fine but it's from the perspective of the "employEE" so it's changing the subject. My answer was specifically explaining the perspective of the "startup employER" -- and that's who you had asked about. >The premise of my argument is that the separation between the two groups you mentioned is so temporary that it doesn't even matter It can take several years for startups to receive revenue and profitability and therefore, the recruiting mindset will favor one group vs the other over a long ramp up period. This hiring strategy is unavoidable when the startup does not have a lot of cash. >whether you're a mercenary is not up to you, it's up to your employer. Btw, I wasn't using "mercenary" in a derogatory manner. It's a label I often proudly wear and being fabulously compensated with cash never flipped a switch in my head from mercenary to loyal employee. I was mercenary to the bone. Anyway, I make the distinction about mercenaries to highlight that some employees' incentives may not be aligned optimally for a cash-strapped startup. Therefore, perhaps the mercenary should restrict his criteria for employers to be the more mature companies who pay high market-rate salaries and very little in stock. That strategy seems more productive than wondering why Microsoft pays "lots of cash" but startup XYZ does not. The blog was about startups and not companies like Microsoft/IBM.
stevenwiles 10y ago
> Hopefully, the potential equity upside attracts employees who think their work contributions can boost the value of the company (and hence their stock options) rather than mercenaries who just want a paycheck. It's hard to believe companies genuinely want this when offering 0.025% of common stock to your early engineering hires has become common practice.
- jasode 10y ago
  > offering 0.025% of common stock to your early engineering hires has become common practice. Well, you have to add extra information to that 0.025% figure to determine if that seemingly "low percentage" of equity became decent money. As an example, it looks like Chris Cox, an early 2005 hire of Facebook[1] and now Chief Product Officer got ~0.025% of Facebook stock. (~600k of 2.5 billion shares.) He started unloading some of them in 2014 (2 years after the IPO).[2] That 0.025% in 2016 now worth ~$77 million. Of course, not every startup will become a Facebook with a market cap of $350 billion. So instead, let's say we can work backwards from a "nice" target number such as $5 million. For 0.025% stake to be worth $5 million, the company has to grow to a $20 billion valuation. That's still a big number but building a company worth multiple billions is an aspiration for many startups. The pontential employees have to consider if the "lottery tickets" with a payout of $0 to millions is worth the lower salaries. If a startup sets aside 10% stock for employees' pool, have other companies proven that you'll get better results by granting more than 0.025%? Should they have given Chris Cox 1% so other subsequent employees get less % or none at all? Lots of potential game theory questions to ponder. [1]https://en.wikipedia.org/wiki/Chris_Cox_(Facebook) https://en.wikipedia.org/wiki/Chris_Cox_(Facebook) [2]https://www.insidermole.com/insider/cox-christopher-k/transactions/?page=3 https://www.insidermole.com/insider/cox-christopher-k/transa...