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> Are $500k+ yearly salaries in SV really that usual? Salaries? Not at all. Total compensation? Well, it depends. Software engineers with < 10yrs of experienc

> Are $500k+ yearly salaries in SV really that usual? Salaries? Not at all. Total compensation? Well, it depends. Software engineers with < 10yrs of experience routinely make this much at FAANG. The total compensation number usually includes the following: * Salary * Bonus (anywhere between 15-25% of salary) * Initial grant that vests over 3-4yrs * Stock "refreshers" that you get annually * General equity appreciation due to a bull market For senior engineers, the equity portion of their compensation far outweighs their salary.

naveen99 6y ago
I wouldn't count the equity appreciation as compensation. you already own the capital, its your own capital gain, not income from employer at that point.
- conro1108 6y ago
  I'd argue that if we're talking about unvested equity, counting appreciation as a comp increase rather than capital gain is reasonable.
- logicslave12 6y ago
  It’s basically guaranteed at this point. And you don’t own the capital, you don’t start getting the massively appreciated grants until you are a few years in
- blawson 6y ago
  Yes and no. When your RSUs are granted at 100k and then vest a few years later at 300k, from yours and the IRS' perspective you made whatever + 300k.
  - vkou 6y ago
    Yes, but you should value them at 100k, because it is the functional equivalent of getting a 100k cash bonus, that you (instead of diversifying) foolishly spent on buying a single company's stock. You don't actually need to work at Facebook to sink 100k into buying Facebook stock (That you then forbid yourself from selling for 4 years).
    - stale2002 6y ago
      > that you (instead of diversifying) foolishly spent on buying a single company's stock So, it is actually a bit more complicated, and better than that, and long term stock grants act as a psuedo stock hedge. This is a simplification, but imagine that there is stock worth X, that hs a 50% chance of the stock doubling in value, and a 50% chance of it crashing to 0$. You might think that this would be equivalent in expected value to X, but that is not true. It is not true, because if the stock goes way down, you don't have to "accept" those losses. Instead, you can jump to another company, mid way through, and get back your previously high salary. In that way you can capture the upside potential, while also being protected against the downside losses, in that if the stock goes down, you just jump ship, and get a high salary somewhere else.
      - naveen99 6y ago
        hedging is not arbitrage. There is no free lunch.
        stale2002 6y ago
        In this case it is free arbitrage. This is because if the stock goes way down, and you are 1 year into your 4 year vest, then you can leave the company, and get a high compensation package somewhere else. Do you understand how this makes it so you have free downside protection, from those other 3 years, because you can leave and get the high salary somewhere else, if the stock crashes?
        vkou 6y ago
        Since RSUs vest over time, the penny-for-penny equivalent financial transaction for receiving $100K worth of RSUs over 4 years, would be for me to receive $100K of cash compensation over 4 years, and using it to buy stock (That I can't sell for X months). There's no advantage to RSUs. Cash is better in every way, because, at worst, you can invest it in the exact same allocation that your RSUs are invested in. Any gain from them rising in price could have been realized by investing cash. Any loss from them falling in price is a real, not a paper loss. [1] I'll take $100 of cash over $100 of RSUs any day. I probably wouldn't take $80 of cash over $100 of RSUs, though. [1] Unless for some weird reason, you are accounting your personal finances, where a 4-year stock grant is realized in year 1. If you are doing this, you should stop, because it is not an accurate way to do accounting.
- opportune 6y ago
  You actually do not own the capital until it vests, and the amount that vests (which could have greatly appreciated) is all taxed as income.
  - MagnumOpus 6y ago
    That's just accounting treatment. Doesn't change the financial fact that it can be replicated with a cash bonus the same size as the original grant.
    - opportune 6y ago
      No, it can't because you lose unvested shares if you leave before they vest. Have you ever been granted RSUs?
Phlarp 6y ago
>* General equity appreciation due to a bull market This one can theoretically cut both directions
- outworlder 6y ago
  Theoretically. In practice, for the past century, there has been only one direction, provided you are patient.
tigershark 6y ago
I guess that when the market will finally correct because of all the mess that we are having in 2020 their salary may get quite a downturn if they are including the increasing values of the stock market as part of their compensation..

naveen99 6y ago

I wouldn't count the equity appreciation as compensation. you already own the capital, its your own capital gain, not income from employer at that point.

conro1108 6y ago
I'd argue that if we're talking about unvested equity, counting appreciation as a comp increase rather than capital gain is reasonable.
logicslave12 6y ago
It’s basically guaranteed at this point. And you don’t own the capital, you don’t start getting the massively appreciated grants until you are a few years in
blawson 6y ago
Yes and no. When your RSUs are granted at 100k and then vest a few years later at 300k, from yours and the IRS' perspective you made whatever + 300k.
- vkou 6y ago
  Yes, but you should value them at 100k, because it is the functional equivalent of getting a 100k cash bonus, that you (instead of diversifying) foolishly spent on buying a single company's stock. You don't actually need to work at Facebook to sink 100k into buying Facebook stock (That you then forbid yourself from selling for 4 years).
  - stale2002 6y ago
    > that you (instead of diversifying) foolishly spent on buying a single company's stock So, it is actually a bit more complicated, and better than that, and long term stock grants act as a psuedo stock hedge. This is a simplification, but imagine that there is stock worth X, that hs a 50% chance of the stock doubling in value, and a 50% chance of it crashing to 0$. You might think that this would be equivalent in expected value to X, but that is not true. It is not true, because if the stock goes way down, you don't have to "accept" those losses. Instead, you can jump to another company, mid way through, and get back your previously high salary. In that way you can capture the upside potential, while also being protected against the downside losses, in that if the stock goes down, you just jump ship, and get a high salary somewhere else.
    - naveen99 6y ago
      hedging is not arbitrage. There is no free lunch.
      - stale2002 6y ago
        In this case it is free arbitrage. This is because if the stock goes way down, and you are 1 year into your 4 year vest, then you can leave the company, and get a high compensation package somewhere else. Do you understand how this makes it so you have free downside protection, from those other 3 years, because you can leave and get the high salary somewhere else, if the stock crashes?
        vkou 6y ago
        Since RSUs vest over time, the penny-for-penny equivalent financial transaction for receiving $100K worth of RSUs over 4 years, would be for me to receive $100K of cash compensation over 4 years, and using it to buy stock (That I can't sell for X months). There's no advantage to RSUs. Cash is better in every way, because, at worst, you can invest it in the exact same allocation that your RSUs are invested in. Any gain from them rising in price could have been realized by investing cash. Any loss from them falling in price is a real, not a paper loss. [1] I'll take $100 of cash over $100 of RSUs any day. I probably wouldn't take $80 of cash over $100 of RSUs, though. [1] Unless for some weird reason, you are accounting your personal finances, where a 4-year stock grant is realized in year 1. If you are doing this, you should stop, because it is not an accurate way to do accounting.
opportune 6y ago
You actually do not own the capital until it vests, and the amount that vests (which could have greatly appreciated) is all taxed as income.
- MagnumOpus 6y ago
  That's just accounting treatment. Doesn't change the financial fact that it can be replicated with a cash bonus the same size as the original grant.
  - opportune 6y ago
    No, it can't because you lose unvested shares if you leave before they vest. Have you ever been granted RSUs?

Phlarp 6y ago

>* General equity appreciation due to a bull market This one can theoretically cut both directions

outworlder 6y ago
Theoretically. In practice, for the past century, there has been only one direction, provided you are patient.

tigershark 6y ago

I guess that when the market will finally correct because of all the mess that we are having in 2020 their salary may get quite a downturn if they are including the increasing values of the stock market as part of their compensation..