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Couldn’t you use the 200k cash alternative to buy AAPL, theoretically, and end up in the same boat? And in that case you can also buy a mix of other stocks to d

Couldn’t you use the 200k cash alternative to buy AAPL, theoretically, and end up in the same boat? And in that case you can also buy a mix of other stocks to diversify instead of having it all in one company. I’d take cash any day personally.

marcinzm 4y ago
No, the future unvested RSUs increase in value with the stock price. Your cash comp doesn't. If you got cash then you'd have made $200k the first year, $200k the second and $200k the third. If you got RSUs then you'd have made $350k the first year, $660k the second and $800k the third.
- spaceywilly 4y ago
  No I would make 400k the first year. It’s cash as an alternative to the RSUs, not just deleting the RSU part entirely
  - marcinzm 4y ago
    That wasn't the example I gave to simplify things but sure if you want that then: If you got cash then you'd have made $400k the first year, $400k the second and $400k the third. If you got RSUs then you'd have made $550k the first year, $860k the second and $1000k the third.
    - tharkun__ 4y ago
      That assumes you just keep the cash. I think what they meant was: First year make 400k, buy 200k worth of something that is not just one egg basket. But because it's salary you do that every ~2 weeks so you end up with hopefully more than 200k by end of year already too. Continue example over the other 3 years. Yes the upside is smaller as I would assume the broader market part would return less in the upside case. The point is that your downside is 'better'. Instead of your tech stock tanking over proportionally you'd be down less or be even or could decide to stay in cash mid year as markets tank and interest rises or buy something else like a house. It basically allows for better 'control' and a less bad worst case at the cost of being able to 'win the lottery'. Of course you are right that just buying one stock, even if not your own company from the cash is actually worse overall. If you were gonna do that, just get the RSUs.
      - travisjungroth 4y ago
        They asked if you could "end up in the same boat" by getting paid the same amount in cash as RSUs. You can't. There's a common misconception that RSUs are only more restrictive than cash, that if you got paid in cash you could just use the cash to buy the stock and end up in the same position. This is just not true. RSUs have downsides. That was never in question in this thread (as much as people keep affirming it). RSUs also have financial upside over the equivalent amount of cash. That's the thing people keep trying to explain but also seems to get brushed off. $100k cash and $200k RSUs per year in a stock that increases by 10% each year: after 4 years I have $400k cash and $1.171mm in stock. $100k cash and $200k cash given to me at the beginning of the year to buy the same stock for 4 years: $400k cash and $1.021mm in stock. They're just not the same. RSUs have leverage. They have upside and downside.
        tharkun__ 4y ago
        Fair enough on the exact same boat. Very unlikely given the companies that usually have RSUs in that value range. You would have to get RSUs in a company that is less likely to go up than what you could invest in with the cash. For a less sky rockety company that still offers RSUs I would take my chances with the cash and actually ending up in a better boat.
      - marcinzm 4y ago
        You can also invest the RSUs that vest or keep them. In my example I assumed you cashed them out instantly and did not invest the resulting cash. So while the cash looks better with investments so do the RSUs. That also means the risk of RSUs is also not as high as you paint it out since you don't keep them for 4 years. After the 1 year cliff you can sell them as they vest. So you're only risking future money rather than money you've already gotten. Unless the stock goes below the original stock price then you're still ahead. If it does then you either get a top up or find a new job.
        tharkun__ 4y ago
        I see it this way: with RSUs you are betting on one egg. Your company. There are things about RSUs that make them more attractive than getting cash and betting on another single egg. If I can get cash instead I will. I don't count the RSUs as a decider in that sense. Given my risk tolerance I'll take extra cash if I can and invest it into multiple eggs instead. Over the past 10 years that probably would have made me loose out on money. We will see how it goes in the next few. When all tech stocks are tanking I bet it's going to be hard to switch to another company where things would be better. Having bought stocks that have paid dividends through many years of recessions with the cash I got seems better to me. Of course you could have sold those sweet RSUs and bought more of those same dividend paying stocks than I can. Power to you if you did. Somehow I doubt most people that choose the RSUs have done that and instead only cashed out to buy a house or a Tesla etc. Not saying that's you or everyone. I drive a 11 year old car I bought used. And would even if I had taken RSUs ;)
- organsnyder 4y ago
  Your unvested RSUs also decrease in value with the stock price. That was my position as a fairly recent Shopify hire.
idontpost 4y ago
> Couldn’t you use the 200k cash alternative to buy AAPL, theoretically, and end up in the same boat? No you couldn't. You'd have to put in several years of 200k of cash up front to end up in the same boat.
- bombcar 4y ago
  I assume you could leverage options to get something similarish but with a larger downside.
  - idontpost 4y ago
    That's still not "ending up in the same boat".
potatolicious 4y ago
No, because in order to achieve the same outcome you'd need to have $800K to buy AAPL in 2019. Taking your $200K in cash each year will result in buying $200K of AAPL in 2020, $200K of AAPL in 2021, etc... which bypasses a great deal of the gains. Part of the power of RSU packages is that is equivalent to a very large stock purchase that is a multiple of your earning power that you earn out of over time. So yes, if you have a lot of liquid capital, taking a $200K/yr stock package from Apple in 2019 is "equivalent" to putting $800K into AAPL all at once. The trick is that more people can do the former than the latter.

marcinzm 4y ago

No, the future unvested RSUs increase in value with the stock price. Your cash comp doesn't. If you got cash then you'd have made $200k the first year, $200k the second and $200k the third. If you got RSUs then you'd have made $350k the first year, $660k the second and $800k the third.

spaceywilly 4y ago
No I would make 400k the first year. It’s cash as an alternative to the RSUs, not just deleting the RSU part entirely
- marcinzm 4y ago
  That wasn't the example I gave to simplify things but sure if you want that then: If you got cash then you'd have made $400k the first year, $400k the second and $400k the third. If you got RSUs then you'd have made $550k the first year, $860k the second and $1000k the third.
  - tharkun__ 4y ago
    That assumes you just keep the cash. I think what they meant was: First year make 400k, buy 200k worth of something that is not just one egg basket. But because it's salary you do that every ~2 weeks so you end up with hopefully more than 200k by end of year already too. Continue example over the other 3 years. Yes the upside is smaller as I would assume the broader market part would return less in the upside case. The point is that your downside is 'better'. Instead of your tech stock tanking over proportionally you'd be down less or be even or could decide to stay in cash mid year as markets tank and interest rises or buy something else like a house. It basically allows for better 'control' and a less bad worst case at the cost of being able to 'win the lottery'. Of course you are right that just buying one stock, even if not your own company from the cash is actually worse overall. If you were gonna do that, just get the RSUs.
    - travisjungroth 4y ago
      They asked if you could "end up in the same boat" by getting paid the same amount in cash as RSUs. You can't. There's a common misconception that RSUs are only more restrictive than cash, that if you got paid in cash you could just use the cash to buy the stock and end up in the same position. This is just not true. RSUs have downsides. That was never in question in this thread (as much as people keep affirming it). RSUs also have financial upside over the equivalent amount of cash. That's the thing people keep trying to explain but also seems to get brushed off. $100k cash and $200k RSUs per year in a stock that increases by 10% each year: after 4 years I have $400k cash and $1.171mm in stock. $100k cash and $200k cash given to me at the beginning of the year to buy the same stock for 4 years: $400k cash and $1.021mm in stock. They're just not the same. RSUs have leverage. They have upside and downside.
      - tharkun__ 4y ago
        Fair enough on the exact same boat. Very unlikely given the companies that usually have RSUs in that value range. You would have to get RSUs in a company that is less likely to go up than what you could invest in with the cash. For a less sky rockety company that still offers RSUs I would take my chances with the cash and actually ending up in a better boat.
    - marcinzm 4y ago
      You can also invest the RSUs that vest or keep them. In my example I assumed you cashed them out instantly and did not invest the resulting cash. So while the cash looks better with investments so do the RSUs. That also means the risk of RSUs is also not as high as you paint it out since you don't keep them for 4 years. After the 1 year cliff you can sell them as they vest. So you're only risking future money rather than money you've already gotten. Unless the stock goes below the original stock price then you're still ahead. If it does then you either get a top up or find a new job.
      - tharkun__ 4y ago
        I see it this way: with RSUs you are betting on one egg. Your company. There are things about RSUs that make them more attractive than getting cash and betting on another single egg. If I can get cash instead I will. I don't count the RSUs as a decider in that sense. Given my risk tolerance I'll take extra cash if I can and invest it into multiple eggs instead. Over the past 10 years that probably would have made me loose out on money. We will see how it goes in the next few. When all tech stocks are tanking I bet it's going to be hard to switch to another company where things would be better. Having bought stocks that have paid dividends through many years of recessions with the cash I got seems better to me. Of course you could have sold those sweet RSUs and bought more of those same dividend paying stocks than I can. Power to you if you did. Somehow I doubt most people that choose the RSUs have done that and instead only cashed out to buy a house or a Tesla etc. Not saying that's you or everyone. I drive a 11 year old car I bought used. And would even if I had taken RSUs ;)
organsnyder 4y ago
Your unvested RSUs also decrease in value with the stock price. That was my position as a fairly recent Shopify hire.

idontpost 4y ago

> Couldn’t you use the 200k cash alternative to buy AAPL, theoretically, and end up in the same boat? No you couldn't. You'd have to put in several years of 200k of cash up front to end up in the same boat.

bombcar 4y ago
I assume you could leverage options to get something similarish but with a larger downside.
- idontpost 4y ago
  That's still not "ending up in the same boat".

potatolicious 4y ago

No, because in order to achieve the same outcome you'd need to have $800K to buy AAPL in 2019. Taking your $200K in cash each year will result in buying $200K of AAPL in 2020, $200K of AAPL in 2021, etc... which bypasses a great deal of the gains. Part of the power of RSU packages is that is equivalent to a very large stock purchase that is a multiple of your earning power that you earn out of over time. So yes, if you have a lot of liquid capital, taking a $200K/yr stock package from Apple in 2019 is "equivalent" to putting $800K into AAPL all at once. The trick is that more people can do the former than the latter.