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The math is too complex to really know, because of all the other factors. Among them, 1) Your chances of becoming a millionaire through stock options are likel

The math is too complex to really know, because of all the other factors. Among them, 1) Your chances of becoming a millionaire through stock options are likely higher in silicon valley. Evaluating the optionality value of stock options at various companies isn't something a journalist can do. 2) If you are able to save 20% of your salary in Omaha, but only 15% in San Francisco, you are likely to save much more in San Francisco. Then there is all the questions of quality of life, where it's easier to find new jobs in your field, where you are more likely to meet and work with the best in your field, etc.

mikestew 9y ago
1) Your chances of becoming a millionaire through stock options are likely higher in silicon valley. And your odds of winning the lottery are better if you play Ohio Lotto rather than California Lotto. However, we're kind of ignoring the big elephant in the room... Evaluating the optionality value of stock options at various companies isn't something a journalist can do. A journalist can probably do a better job of investigating that than your average tech employee. If you are able to save 20% of your salary in Omaha, but only 15% in San Francisco, you are likely to save much more in San Francisco. And if a frog had wings, it wouldn't bump its ass when it hops. From what I'm hearing, having never lived there but having investigate the possibility, saving anything at all while paying SF housing prices can be difficult. Sure, you can save a few bucks renting with six house mates, but then we're back to QOL. Because I don't know if you've ever played the "what could we get somewhere else for what our current house is supposed worth?" game. In our case we could exchange the 1200 sq. ft. house in Redmond, WA for a 5400 sq. ft. house on a couple acres in a swank suburb of Indianapolis. I don't think we'd have any problem making the payment on Indianapolis wages, either. The difference is that you'll probably be working for an insurance company doing LOB apps. But, hey, it's a living and you get to go home to a 5400 sq.ft. house. Now, despite all my contrariness, I'm in full agreement that it's hard to quantify beyond a gut feeling. For instance, we used to live in the Indianapolis of my example above. Notice that we don't live there anymore. Some of it is subjective, because some like the hussle and bussle of a big city like SF, others (like me) would do it only because that's where the money is at. But if the money is getting eaten up by housing costs, but OTOH what about the opportunity cost of living in Ohio and not SF...argggh, you could drive yourself crazy. I think at the end of the day, live where you want to be at the moment. A software techy isn't going to starve no matter where in the U. S. they live.
- valuearb 9y ago
  Your odds of making significant money off stock options are far higher than the lottery. I know no lottery winners, but i know a half dozen former coworkers who became millionaires through stock options, and dozens who’ve made hundreds of thousands. On the contrary, employees are far better suited to value options than journalists. Journalists can’t value options because these companies are private, they can’t know average option grant, vesting period, strike value, total share count, company fair market value, etc, etc. They have no way of comparing the typical option value in silicon valley to other businesses, they can only compare cash comp. Employees can know what their companies last valuation was, what about yay means per share, and reasonably estimate it’s future value if it succeeds, and roughly estimate how likely that is. If you think you need $150K in silicon valley to match the $85K you make in the heartland, if some silicon valley company offers you $150K plus 1% of the company you don’t know exactly how much the stock is worth, just that its a lot. For example a simple calculation goeslike this. Let’s say you think it’s a 1 in 10 shot get company succeeds, and it will be worth on average $400M if it does. That’s means $4M for you if it does or $1M a year, assuming vesting over 4 years. The 10% chance of success says you be zero most of the time, but your options value still works out to be worth an average value of $100K/year. So when a journalist says engineers who make $150K in SV would have a higher standard of living in the heartland making $85K, that’s because they don’t have a clue what those options are worth.

mikestew 9y ago

1) Your chances of becoming a millionaire through stock options are likely higher in silicon valley. And your odds of winning the lottery are better if you play Ohio Lotto rather than California Lotto. However, we're kind of ignoring the big elephant in the room... Evaluating the optionality value of stock options at various companies isn't something a journalist can do. A journalist can probably do a better job of investigating that than your average tech employee. If you are able to save 20% of your salary in Omaha, but only 15% in San Francisco, you are likely to save much more in San Francisco. And if a frog had wings, it wouldn't bump its ass when it hops. From what I'm hearing, having never lived there but having investigate the possibility, saving anything at all while paying SF housing prices can be difficult. Sure, you can save a few bucks renting with six house mates, but then we're back to QOL. Because I don't know if you've ever played the "what could we get somewhere else for what our current house is supposed worth?" game. In our case we could exchange the 1200 sq. ft. house in Redmond, WA for a 5400 sq. ft. house on a couple acres in a swank suburb of Indianapolis. I don't think we'd have any problem making the payment on Indianapolis wages, either. The difference is that you'll probably be working for an insurance company doing LOB apps. But, hey, it's a living and you get to go home to a 5400 sq.ft. house. Now, despite all my contrariness, I'm in full agreement that it's hard to quantify beyond a gut feeling. For instance, we used to live in the Indianapolis of my example above. Notice that we don't live there anymore. Some of it is subjective, because some like the hussle and bussle of a big city like SF, others (like me) would do it only because that's where the money is at. But if the money is getting eaten up by housing costs, but OTOH what about the opportunity cost of living in Ohio and not SF...argggh, you could drive yourself crazy. I think at the end of the day, live where you want to be at the moment. A software techy isn't going to starve no matter where in the U. S. they live.

valuearb 9y ago
Your odds of making significant money off stock options are far higher than the lottery. I know no lottery winners, but i know a half dozen former coworkers who became millionaires through stock options, and dozens who’ve made hundreds of thousands. On the contrary, employees are far better suited to value options than journalists. Journalists can’t value options because these companies are private, they can’t know average option grant, vesting period, strike value, total share count, company fair market value, etc, etc. They have no way of comparing the typical option value in silicon valley to other businesses, they can only compare cash comp. Employees can know what their companies last valuation was, what about yay means per share, and reasonably estimate it’s future value if it succeeds, and roughly estimate how likely that is. If you think you need $150K in silicon valley to match the $85K you make in the heartland, if some silicon valley company offers you $150K plus 1% of the company you don’t know exactly how much the stock is worth, just that its a lot. For example a simple calculation goeslike this. Let’s say you think it’s a 1 in 10 shot get company succeeds, and it will be worth on average $400M if it does. That’s means $4M for you if it does or $1M a year, assuming vesting over 4 years. The 10% chance of success says you be zero most of the time, but your options value still works out to be worth an average value of $100K/year. So when a journalist says engineers who make $150K in SV would have a higher standard of living in the heartland making $85K, that’s because they don’t have a clue what those options are worth.