4 ms·

#2 is the dominant point. One of the subtle points on diversification is that it's ok to take less returns if they are uncorrelated to your other investments -

#2 is the dominant point. One of the subtle points on diversification is that it's ok to take less returns if they are uncorrelated to your other investments - you want things that go up when your main investments go down. Even if you're 90% sure that Google will beat the market, you want protection for the 10% case. (And yes - your human capital will take the upside when Google continues to do well)

jon_richards 8y ago
It's not like you're taking much career risk by working at google, so you don't really need to diversify it away. It's much more important for smaller companies.
- rjtavares 8y ago
  I'm sure people an Enron and Lehman Brothers thought the same. Even if it's a one in a billion chance, you should be protected for that.
- slivym 8y ago
  The problem isn't how risky your career at Google is, it's about the correlation of that risk with the risk of your investments. The most likely risk of working at Google is if you lose your job. Well losing your job is highly correlated with whether Google lays loads of people off. Which is highly correlated with the share price collapsing. Which is highly correlated with the tech sector crashing. So most likely scenario for that risk to materialize involves: Google runs into trouble so needs to lay people off. So at that point, you've lost your job, and all your investments in Google are down for the same reason you lost your job, and because Google is such a large company it's layoffs mean a flood of talent into the labor pool so your future job prospects are effected. So your safety net of savings becomes far less valuable at exactly the time you use it most. It almost doesn't matter how safe you think Google is - because by working there you're already massively more invested in it than almost any investor would be.
  - jon_richards 8y ago
    That's sort of my point. It pretty much takes the entire tech sector collapsing for you to lose your job and (the value of your) shares. Something to think about, but not even close to the same league as working for a ~200 person startup or putting money in the investment banking institution you work for. I'll also admit there's no reason I know of to keep your money in google stock if you work there, but that goes with point #1, not point #2.
    - TheCoelacanth 8y ago
      The entire tech sector doesn't have to collapse for Google stock to go down and for Google to need to lay people off. Google could easily become the next IBM and fail to keep up with rest of the industry or even worse it might become the next Enron and be completely destroyed by bad leadership. Both IBM and Enron were extremely successful companies in their day.
      - mamon 8y ago
        Are we suddenly living in some alternate universe where former Google engineers have any trouble finding a new job? They are after all top 1% (of the top 1% :) of the talent pool. So what you say might make sense for smaller/less respected companies, but certainly not for FAANG.
        TheCoelacanth 8y ago
        You could have said the same thing about IBM or Enron at some point. Things can change.
mbesto 8y ago
This is not investment advice - but the other personal finance protip I've learned is - don't put a high percentage of your high net worth in the success of your immediate work. This is why you see SV-elite raising rounds (Levchin - Affirm, Moskovitz - Asana, Williams - Medium, etc) and not just using their own capital. It feels very counterintuitive if you're a founder, because you likely made a large portion of your net worth due to investing in your own merits.
- rhombocombus 8y ago
  This reminds me of the number one rule I hear from old-money types: never touch the capital.

jon_richards 8y ago

It's not like you're taking much career risk by working at google, so you don't really need to diversify it away. It's much more important for smaller companies.

rjtavares 8y ago
I'm sure people an Enron and Lehman Brothers thought the same. Even if it's a one in a billion chance, you should be protected for that.
slivym 8y ago
The problem isn't how risky your career at Google is, it's about the correlation of that risk with the risk of your investments. The most likely risk of working at Google is if you lose your job. Well losing your job is highly correlated with whether Google lays loads of people off. Which is highly correlated with the share price collapsing. Which is highly correlated with the tech sector crashing. So most likely scenario for that risk to materialize involves: Google runs into trouble so needs to lay people off. So at that point, you've lost your job, and all your investments in Google are down for the same reason you lost your job, and because Google is such a large company it's layoffs mean a flood of talent into the labor pool so your future job prospects are effected. So your safety net of savings becomes far less valuable at exactly the time you use it most. It almost doesn't matter how safe you think Google is - because by working there you're already massively more invested in it than almost any investor would be.
- jon_richards 8y ago
  That's sort of my point. It pretty much takes the entire tech sector collapsing for you to lose your job and (the value of your) shares. Something to think about, but not even close to the same league as working for a ~200 person startup or putting money in the investment banking institution you work for. I'll also admit there's no reason I know of to keep your money in google stock if you work there, but that goes with point #1, not point #2.
  - TheCoelacanth 8y ago
    The entire tech sector doesn't have to collapse for Google stock to go down and for Google to need to lay people off. Google could easily become the next IBM and fail to keep up with rest of the industry or even worse it might become the next Enron and be completely destroyed by bad leadership. Both IBM and Enron were extremely successful companies in their day.
    - mamon 8y ago
      Are we suddenly living in some alternate universe where former Google engineers have any trouble finding a new job? They are after all top 1% (of the top 1% :) of the talent pool. So what you say might make sense for smaller/less respected companies, but certainly not for FAANG.
      - TheCoelacanth 8y ago
        You could have said the same thing about IBM or Enron at some point. Things can change.

mbesto 8y ago

This is not investment advice - but the other personal finance protip I've learned is - don't put a high percentage of your high net worth in the success of your immediate work. This is why you see SV-elite raising rounds (Levchin - Affirm, Moskovitz - Asana, Williams - Medium, etc) and not just using their own capital. It feels very counterintuitive if you're a founder, because you likely made a large portion of your net worth due to investing in your own merits.

rhombocombus 8y ago
This reminds me of the number one rule I hear from old-money types: never touch the capital.