6 ms·

The best part is stock options. Not only are you not diversified, now you get to concentrate your portfolio by buying stock in the company that provides your in

The best part is stock options. Not only are you not diversified, now you get to concentrate your portfolio by buying stock in the company that provides your income. Stock options: for concentrating your income and your investments when you're excited and biased.

JohnFen 8y ago
Decades of experience has taught me that stock options are essentially wallpaper. Sure, if a company wants to give me options, I'll take them -- but they are in no way a substitute for real compensation, and I won't accept them in lieu of something real. That said, if a startup is doing something that really turns my gears and I like the company, then I'm absolutely willing to work for less pay in order to be a part of that.
- deanmoriarty 8y ago
  Something I never understood about this attitude ("... then I'm absolutely willing to work for less pay ...") is: why there are almost no examples of such behavior in other highly paid professions, such as physicians or lawyers? Very rarely you'll find physicians saying "I really want to become a brain surgeon, I'll happily take 40% less than my market rate". You'll certainly find physicians doing volunteering, but that's another thing. In software instead, that's incredibly common: several of my coworkers (late stage private company) are in mostly for the thrill of working on our technology since we operate in some interesting niche, and I know for a fact they are paid much less than me (30%+), even if they have a bigger impact than me on the company (and they are also older, with more experience!). It's so common that many times employers use it at their advantage, by preferring people that can be sold purely on the tech rather than the tech AND the market rate for the position. To me, both the financial aspects and the technical challenges must be absolutely satisfied in order to join a company. Maybe I'm too practical because I'm not a trust fund kid and grew up dirt poor, so I know that in my limited ~20y engineering career (assuming ageism) I need to make enough so that I will be able to retire comfortably, while making sure I work on stuff that stimulates me so I can give my very best.
  - the_jeremy 8y ago
    I think there are. Teachers (pretty much as a whole) and public defenders seem to fit here. I know multiple photographers whose passion is landscapes/nature and only grudgingly supplement that income with weddings/portraits.
    - deanmoriarty 8y ago
      With regards to teachers or photographers, that's not a fair comparison in my opinion: in those cases, low wages are mostly dictated by high supply vs low demand, so from an economic point of view it "makes sense". That's much different than software engineering or medicine, where there is a scarcity of supply (and the only reason why software salaries are in the 6 figures). In other words, teachers are not willingly giving up a portion of the compensation that they could otherwise be making doing the same job somewhere else. In software instead, that happens ("Oh, you work on FOO v2.0, I'll happily take 40% less than what I could otherwise be making doing this job in another company"). I don't know about public defenders, you might have a point there.
      - apersona 8y ago
        From my perspective it looks like a good amount of teachers decided to give up a portion of the compensation earlier (i.e. they gave up good pay not when they're looking for another job in an industry they're already in, but they decided to give up good pay upon joining the industry). It's like how artists/writers/game developers/etc. decide to go into their field even though they know that they could be making much more money in any other field.
      - BigJono 8y ago
        It's still just supply and demand. Sexier products draw more candidates. The only reason you're taking 40% less to work on something cool is because if you don't, someone else will. Most people eventually have to decide whether they want to make 150k writing CRUD apps or 90k writing algorithms.
    - joe3774 8y ago
- fgonzag 8y ago
  If Google or MS give you options, or RSUs, or whatever, they are essentially cash. You'll be able to liquidate them at market price as soon as you vest. So in those companies stock options are a real form of compensation. For startups whose stock has 0 actual value in a market, then yeah stock options are worth nothing.
  - alex_young 8y ago
    Stock Options are just that - an option to buy a share of stock at a future date. They are a bet on a future outcome which contains lots of risk. Restricted Stock Units are cash. They are new shares issued to you with restrictions on exercising them. Once they vest, there is no value in not selling them immediately. The tax consequences are the same if you hold them, and you gain the value of diversification by selling. The above should tell you something about the calculation you are espousing. Yes, the very risky asset called stock options is much less likely to hold any future value. The risk implied should also tell you that for a rare good pick with lots of well managed influence to the outcome, you can succeed with fantastic gains where you cannot simply by holding public shares. YMMV. The only way to win the startup lottery is to work very hard to influence the outcome. I can't think of any other lottery like that.
    - sokoloff 8y ago
      > The tax consequences are the same if you hold them The gains that occur after vest-and-release are capital gains. Capital gains for assets held over a year are much lower than ordinary income rates for most people receiving RSUs. (It's still reasonable advice to diversify in the typical case.)
      - alex_young 8y ago
        I think I'm either misreading your comment, or there's a misunderstanding here. When RSUs are issued, they typically appreciate in value due to either an increase in share price or a discount or both. When the RSUs vest, one of 2 things happens: either the number of shares is reduced by a sum equivalent to pay income taxes, or (more rarely) income taxes are paid by the recipient later at tax time. In either case, the shares didn't exist in the recipient's account before that vesting date. If the shares are sold, those funds can be used to buy other shares if desired. If they are held, they are just normal shares in that company. In either case, they appreciate as capital gains instead of income, starting with the point in time when they were either purchased or vested whichever the case may be.

JohnFen 8y ago

Decades of experience has taught me that stock options are essentially wallpaper. Sure, if a company wants to give me options, I'll take them -- but they are in no way a substitute for real compensation, and I won't accept them in lieu of something real. That said, if a startup is doing something that really turns my gears and I like the company, then I'm absolutely willing to work for less pay in order to be a part of that.

deanmoriarty 8y ago
Something I never understood about this attitude ("... then I'm absolutely willing to work for less pay ...") is: why there are almost no examples of such behavior in other highly paid professions, such as physicians or lawyers? Very rarely you'll find physicians saying "I really want to become a brain surgeon, I'll happily take 40% less than my market rate". You'll certainly find physicians doing volunteering, but that's another thing. In software instead, that's incredibly common: several of my coworkers (late stage private company) are in mostly for the thrill of working on our technology since we operate in some interesting niche, and I know for a fact they are paid much less than me (30%+), even if they have a bigger impact than me on the company (and they are also older, with more experience!). It's so common that many times employers use it at their advantage, by preferring people that can be sold purely on the tech rather than the tech AND the market rate for the position. To me, both the financial aspects and the technical challenges must be absolutely satisfied in order to join a company. Maybe I'm too practical because I'm not a trust fund kid and grew up dirt poor, so I know that in my limited ~20y engineering career (assuming ageism) I need to make enough so that I will be able to retire comfortably, while making sure I work on stuff that stimulates me so I can give my very best.
- the_jeremy 8y ago
  I think there are. Teachers (pretty much as a whole) and public defenders seem to fit here. I know multiple photographers whose passion is landscapes/nature and only grudgingly supplement that income with weddings/portraits.
  - deanmoriarty 8y ago
    With regards to teachers or photographers, that's not a fair comparison in my opinion: in those cases, low wages are mostly dictated by high supply vs low demand, so from an economic point of view it "makes sense". That's much different than software engineering or medicine, where there is a scarcity of supply (and the only reason why software salaries are in the 6 figures). In other words, teachers are not willingly giving up a portion of the compensation that they could otherwise be making doing the same job somewhere else. In software instead, that happens ("Oh, you work on FOO v2.0, I'll happily take 40% less than what I could otherwise be making doing this job in another company"). I don't know about public defenders, you might have a point there.
    - apersona 8y ago
      From my perspective it looks like a good amount of teachers decided to give up a portion of the compensation earlier (i.e. they gave up good pay not when they're looking for another job in an industry they're already in, but they decided to give up good pay upon joining the industry). It's like how artists/writers/game developers/etc. decide to go into their field even though they know that they could be making much more money in any other field.
    - BigJono 8y ago
      It's still just supply and demand. Sexier products draw more candidates. The only reason you're taking 40% less to work on something cool is because if you don't, someone else will. Most people eventually have to decide whether they want to make 150k writing CRUD apps or 90k writing algorithms.
  - joe3774 8y ago
fgonzag 8y ago
If Google or MS give you options, or RSUs, or whatever, they are essentially cash. You'll be able to liquidate them at market price as soon as you vest. So in those companies stock options are a real form of compensation. For startups whose stock has 0 actual value in a market, then yeah stock options are worth nothing.
- alex_young 8y ago
  Stock Options are just that - an option to buy a share of stock at a future date. They are a bet on a future outcome which contains lots of risk. Restricted Stock Units are cash. They are new shares issued to you with restrictions on exercising them. Once they vest, there is no value in not selling them immediately. The tax consequences are the same if you hold them, and you gain the value of diversification by selling. The above should tell you something about the calculation you are espousing. Yes, the very risky asset called stock options is much less likely to hold any future value. The risk implied should also tell you that for a rare good pick with lots of well managed influence to the outcome, you can succeed with fantastic gains where you cannot simply by holding public shares. YMMV. The only way to win the startup lottery is to work very hard to influence the outcome. I can't think of any other lottery like that.
  - sokoloff 8y ago
    > The tax consequences are the same if you hold them The gains that occur after vest-and-release are capital gains. Capital gains for assets held over a year are much lower than ordinary income rates for most people receiving RSUs. (It's still reasonable advice to diversify in the typical case.)
    - alex_young 8y ago
      I think I'm either misreading your comment, or there's a misunderstanding here. When RSUs are issued, they typically appreciate in value due to either an increase in share price or a discount or both. When the RSUs vest, one of 2 things happens: either the number of shares is reduced by a sum equivalent to pay income taxes, or (more rarely) income taxes are paid by the recipient later at tax time. In either case, the shares didn't exist in the recipient's account before that vesting date. If the shares are sold, those funds can be used to buy other shares if desired. If they are held, they are just normal shares in that company. In either case, they appreciate as capital gains instead of income, starting with the point in time when they were either purchased or vested whichever the case may be.