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Investors diversify their portfolios by investing in a number of startups and also in more reliable investments like well-established companies. You can't treat

by Kluny 10y ago

Investors diversify their portfolios by investing in a number of startups and also in more reliable investments like well-established companies. You can't treat a job that way - there's no way to diversify the hours of day into several different companies with different risk levels. What the author describes is gambling. You bet all your resources (time, in this case) on one horse and hope it pays off big. That's not a good strategy. If you want to "invest in startups", then do that. Use Republic or start a VC. Don't gamble on a single startup and lie to yourself that it's an investment - treat it as a gamble, and only bet as much as you can afford.

wolfgke 10y ago
> Investors diversify their portfolios by investing in a number of startups and also in more reliable investments like well-established companies. You can't treat a job that way - there's no way to diversify the hours of day into several different companies with different risk levels. It is definitively possible to diversify: Just do an agreement with other programmers to put all (or, say, 50%) your incomes into a common pot and distribute the content of the pot among all peers. Just set up terms and conditions and let everybody who is part of this agreement sign them.
- samuraig 10y ago
  That would totally NOT end up in court when one of the programmers hits the Startup Lottery and everybody wants a piece of their stock options.
  - wolfgke 10y ago
    The parent wanted to diversify. Diversifying means that one gets a smaller part of the winning ticket - not nothing, but also not the complete piece (just as the investor only gets some smaller part of the profit than if he invested all the money in the winning company). If this is not what one wants, one should not claim that one wants to "diversify the job among many opportunities", but instead honestly say that one is simply jealous of the success of other people that got the better ticket.
abraae 10y ago
Gambling and investing are just points at each end of a continuum. Just because you can't diversify doesn't mean its not still a good idea to pick your employer in the same way an investor would.
- pesfandiar 10y ago
  If you want to treat job selection like a long-term investment, you should be getting a consistently high-paying job at BigCo instead.
- cortesoft 10y ago
  I am not sure it is a good idea to pick your employer like an investor would. An investor in startups is going for high risk, high reward investments. For every individual investment they make, the chance of any sort of return is quite low; they make up for this because the rare startups that succeed make enough to compensate for this low success rate. Since they are making a lot of these high risk/high reward 'bets', they can be fairly assured they will receive the expected value in return. As an individual, you only get to place one bet on your employer. For most startup employees, that means they are very unlikely to get any sort of payout because of company success. It doesn't matter that the 'expected value' of working for a more-likely-to-hit-it-big startup is higher than for another company, since the probability is that you will not hit it big. As an individual, you are more concerned with things like salary, working conditions, and personal enjoyment of the work. Those are the things you are CERTAINLY going to experience; the tiny chance of huge success is most likely not going to affect you. I think there is a good analogy to poker here; in Texas Hold'em, two aces are the best starting hand. There is almost no situation where it is best to fold them before the opening flop; your expected value is always positive against ANY other combination of opponent hands. However, there are a few cases where even though you have the highest expected value for your hand, it is in your best interest to fold. One such case is if you are playing in a tournament, you are in the money, and two people with much larger stacks have already gone all-in. In that case, your best bet is likely to fold; even though you have the highest odds of winning the hand out of everyone, if you LOSE, you are out and can't keep playing. Even if you win, you will still have the smallest stack and are unlikely to move up any spots and win more money; if you fold, though, someone else is likely to be knocked out and you can move up. It seems counter intuitive, but this holds because expected value only works as your primary decision making point when you can make many bets; if you only get one bet, lower risk with lower reward is often better for you even if the expected value is lower. Think about it this way; lets say you only have $1,000, and you need it to pay your monthly rent (if you don't pay, you will be kicked out and be homeless). Someone comes up and offers you a bet; you bet $1000, and you get a 1% chance of winning $200,000. In terms of expected value, this is a great deal! If you made the bet many times, you will expect to win $1000 for each bet made! However, 99% of the time you are going to be homeless. For most people, the choice is to go against the expected value and play it safe.
freddyc 10y ago
I had a friend who moved from start-up to start-up every 12 months after his initial tranche of options vested. He knew how much cash he required to live (with a little buffer for emergencies) and then traded cash for more equity in his salary negotiations with a view to building a diversified portfolio via sweat equity. He did this for 5-6 years, and one of the companies has already exited with another looking likely within the next 12 months. He obviously left a lot of (potential) money on the table by walking away at the one year mark, but he figured having a handful of smaller bets was better than going all in on one company and it looks like that strategy is going to work out pretty well for him!
- Kluny 10y ago
  That sounds smart! It would take a stern constitution to cope with such frequent changes, but it sounds like a decent way of diversifying if you can stick to the strategy.
  - freddyc 10y ago
    Towards the end he did admit that he was overlooked for a number of roles because of the "flight risk" warnings on his resume, but the market was frothy enough that it didn't impact him too much given he was damn good at what he did and companies needed talent.

by Kluny 10y ago

wolfgke 10y ago

> Investors diversify their portfolios by investing in a number of startups and also in more reliable investments like well-established companies. You can't treat a job that way - there's no way to diversify the hours of day into several different companies with different risk levels. It is definitively possible to diversify: Just do an agreement with other programmers to put all (or, say, 50%) your incomes into a common pot and distribute the content of the pot among all peers. Just set up terms and conditions and let everybody who is part of this agreement sign them.

samuraig 10y ago
That would totally NOT end up in court when one of the programmers hits the Startup Lottery and everybody wants a piece of their stock options.
- wolfgke 10y ago
  The parent wanted to diversify. Diversifying means that one gets a smaller part of the winning ticket - not nothing, but also not the complete piece (just as the investor only gets some smaller part of the profit than if he invested all the money in the winning company). If this is not what one wants, one should not claim that one wants to "diversify the job among many opportunities", but instead honestly say that one is simply jealous of the success of other people that got the better ticket.

abraae 10y ago

Gambling and investing are just points at each end of a continuum. Just because you can't diversify doesn't mean its not still a good idea to pick your employer in the same way an investor would.

pesfandiar 10y ago
If you want to treat job selection like a long-term investment, you should be getting a consistently high-paying job at BigCo instead.
cortesoft 10y ago
I am not sure it is a good idea to pick your employer like an investor would. An investor in startups is going for high risk, high reward investments. For every individual investment they make, the chance of any sort of return is quite low; they make up for this because the rare startups that succeed make enough to compensate for this low success rate. Since they are making a lot of these high risk/high reward 'bets', they can be fairly assured they will receive the expected value in return. As an individual, you only get to place one bet on your employer. For most startup employees, that means they are very unlikely to get any sort of payout because of company success. It doesn't matter that the 'expected value' of working for a more-likely-to-hit-it-big startup is higher than for another company, since the probability is that you will not hit it big. As an individual, you are more concerned with things like salary, working conditions, and personal enjoyment of the work. Those are the things you are CERTAINLY going to experience; the tiny chance of huge success is most likely not going to affect you. I think there is a good analogy to poker here; in Texas Hold'em, two aces are the best starting hand. There is almost no situation where it is best to fold them before the opening flop; your expected value is always positive against ANY other combination of opponent hands. However, there are a few cases where even though you have the highest expected value for your hand, it is in your best interest to fold. One such case is if you are playing in a tournament, you are in the money, and two people with much larger stacks have already gone all-in. In that case, your best bet is likely to fold; even though you have the highest odds of winning the hand out of everyone, if you LOSE, you are out and can't keep playing. Even if you win, you will still have the smallest stack and are unlikely to move up any spots and win more money; if you fold, though, someone else is likely to be knocked out and you can move up. It seems counter intuitive, but this holds because expected value only works as your primary decision making point when you can make many bets; if you only get one bet, lower risk with lower reward is often better for you even if the expected value is lower. Think about it this way; lets say you only have $1,000, and you need it to pay your monthly rent (if you don't pay, you will be kicked out and be homeless). Someone comes up and offers you a bet; you bet $1000, and you get a 1% chance of winning $200,000. In terms of expected value, this is a great deal! If you made the bet many times, you will expect to win $1000 for each bet made! However, 99% of the time you are going to be homeless. For most people, the choice is to go against the expected value and play it safe.

freddyc 10y ago

I had a friend who moved from start-up to start-up every 12 months after his initial tranche of options vested. He knew how much cash he required to live (with a little buffer for emergencies) and then traded cash for more equity in his salary negotiations with a view to building a diversified portfolio via sweat equity. He did this for 5-6 years, and one of the companies has already exited with another looking likely within the next 12 months. He obviously left a lot of (potential) money on the table by walking away at the one year mark, but he figured having a handful of smaller bets was better than going all in on one company and it looks like that strategy is going to work out pretty well for him!

Kluny 10y ago
That sounds smart! It would take a stern constitution to cope with such frequent changes, but it sounds like a decent way of diversifying if you can stick to the strategy.
- freddyc 10y ago
  Towards the end he did admit that he was overlooked for a number of roles because of the "flight risk" warnings on his resume, but the market was frothy enough that it didn't impact him too much given he was damn good at what he did and companies needed talent.