4 ms·

Lesson number 1 is unequivocally wrong and contradictory with the start of the article. He says you shouldn't invest your money in single stocks, but then advo

Lesson number 1 is unequivocally wrong and contradictory with the start of the article. He says you shouldn't invest your money in single stocks, but then advocates for you to invest your money (by way of forgoing salary in favor of equity) into a start up company with (by definition) no track record of success or guaranteed future. Not to mention that when the start-up tanks (which it will do statistically) you will both lose your salary and your investments/equity will be worthless.

burnstek 12y ago
The assumption is that you work for the startup and have a critical enough position to earn equity, and therefore have more influence over its performance than that of a public company.
- tempestn 12y ago
  Exactly. There's a big difference between investing time and money in a venture where you have some control over the outcome and unnecessarily concentrating your passive investments in a single company (or even in anything less than the broad market, given the ubiquity of low-cost index funds). And even then, assuming your startup succeeds, you wouldn't want to wait too long before diversifying some of the profits (which the article supports).
- Matt_Cutts 12y ago
  That's right. In the same way that Buffett can select a company that he believes in and then drive it forward with a strategic investment, you're trying to do the same thing with the startup that you select and drive forward. And "startup" doesn't have to be 3-4 people. I remember trying to recruit an engineer when Google was maybe 150 people. I tried to convince the engineer that Google was doing well and it wasn't as risky as it looked, but she decided to go work for Siebel instead. In other words, don't waste money/time/effort on things where you can't make a big difference. Find an area where you can have a lot of leverage or expertise and put your chips there.
  - ryandrake 12y ago
    I question the amount of influence one can actually have on the the trajectory of a start-up, even if you are an early employee. Before I wised up and joined BigUltraMegaCorp, I worked for a number of small companies, and shared offices with brilliant, hard-workers, and we all moved mountains to try to make things work, but at the end of the day, no dice. I'm pretty much convinced at this point that start-up success is almost 100% luck, and you might as well play roulette instead of trying to pick the right one to work for early on. Hindsight being 20/20, for every "She turned down being employee number 151 at Google to work for Siebel LOL" story, there are 10,000 (maybe 100,000) "I took a chance with Pets.com and they still owe me 6 months of back pay" stories.
    - cma 12y ago
      Pets.com had a successful IPO, seems it could have easily beat out the Seibel career.
      - ryandrake 12y ago
        Possibly bad specific example, although they didn't survive even a year after their IPO. The point remains though. For every start-up success story, there are thousands of failures. Who's smart enough to pick the successes ahead of time AND get a job with one of them?
Patient0 12y ago
My thoughts exactly when I read this article.
ploxiln 12y ago
If we all lost our money in our own startups, instead of to money-managers on Wall Street, I think the world would be a better place. My 2c
prostoalex 12y ago
Instead of buying a bunch of lottery tickets he suggests getting a decent salary and a lottery ticket.
- deleted 12y ago
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deleted 12y ago
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orblivion 12y ago
I noticed the same thing. One difference I came up with is that you get to buy low, long before any of the professional traders get a chance.
dredmorbius 12y ago
It's a mix. When you're playing the stock market, going for single stock picks is a really bad idea. Diversification -- even modest diversification of a few companies, but preferably in different markets, hugely reduces your volatility risk. Tech is highly volatile -- investing in Microsoft, Google, Apple, Cisco, and Oracle would be nominally diversified (and there were a couple of huge winners there over the past 10-15 years), but you also incorporate a large sector risk. When you're working for a start-up, the key is that you're moving beyond simple punch-the-clock (or per-month) income. You're not just earning a wage or salary, but there's some upside potential in the company itself. Of course, that is a tremendous risk, and the odds are good that any given company won't pay off. There are also multiple ways in which that bet is rigged, including options vesting and the fact that your employer can effectively claw back your earnings by firing you (for any or no reason, at any time) before your options vest. You've also got to have the cash to actually buy out your options. There are other ways of building equity, one of which is to invest in your own business, venture, real estate, etc., outside of your employer. Buying investment rental property, for example. The key though is that you want to move beyond just "I'm a wage / salary owner" status.

burnstek 12y ago

The assumption is that you work for the startup and have a critical enough position to earn equity, and therefore have more influence over its performance than that of a public company.

tempestn 12y ago
Exactly. There's a big difference between investing time and money in a venture where you have some control over the outcome and unnecessarily concentrating your passive investments in a single company (or even in anything less than the broad market, given the ubiquity of low-cost index funds). And even then, assuming your startup succeeds, you wouldn't want to wait too long before diversifying some of the profits (which the article supports).
Matt_Cutts 12y ago
That's right. In the same way that Buffett can select a company that he believes in and then drive it forward with a strategic investment, you're trying to do the same thing with the startup that you select and drive forward. And "startup" doesn't have to be 3-4 people. I remember trying to recruit an engineer when Google was maybe 150 people. I tried to convince the engineer that Google was doing well and it wasn't as risky as it looked, but she decided to go work for Siebel instead. In other words, don't waste money/time/effort on things where you can't make a big difference. Find an area where you can have a lot of leverage or expertise and put your chips there.
- ryandrake 12y ago
  I question the amount of influence one can actually have on the the trajectory of a start-up, even if you are an early employee. Before I wised up and joined BigUltraMegaCorp, I worked for a number of small companies, and shared offices with brilliant, hard-workers, and we all moved mountains to try to make things work, but at the end of the day, no dice. I'm pretty much convinced at this point that start-up success is almost 100% luck, and you might as well play roulette instead of trying to pick the right one to work for early on. Hindsight being 20/20, for every "She turned down being employee number 151 at Google to work for Siebel LOL" story, there are 10,000 (maybe 100,000) "I took a chance with Pets.com and they still owe me 6 months of back pay" stories.
  - cma 12y ago
    Pets.com had a successful IPO, seems it could have easily beat out the Seibel career.
    - ryandrake 12y ago
      Possibly bad specific example, although they didn't survive even a year after their IPO. The point remains though. For every start-up success story, there are thousands of failures. Who's smart enough to pick the successes ahead of time AND get a job with one of them?

Patient0 12y ago

My thoughts exactly when I read this article.

ploxiln 12y ago

If we all lost our money in our own startups, instead of to money-managers on Wall Street, I think the world would be a better place. My 2c

prostoalex 12y ago

Instead of buying a bunch of lottery tickets he suggests getting a decent salary and a lottery ticket.

deleted 12y ago
[deleted]

deleted 12y ago

[deleted]

orblivion 12y ago

I noticed the same thing. One difference I came up with is that you get to buy low, long before any of the professional traders get a chance.

dredmorbius 12y ago

It's a mix. When you're playing the stock market, going for single stock picks is a really bad idea. Diversification -- even modest diversification of a few companies, but preferably in different markets, hugely reduces your volatility risk. Tech is highly volatile -- investing in Microsoft, Google, Apple, Cisco, and Oracle would be nominally diversified (and there were a couple of huge winners there over the past 10-15 years), but you also incorporate a large sector risk. When you're working for a start-up, the key is that you're moving beyond simple punch-the-clock (or per-month) income. You're not just earning a wage or salary, but there's some upside potential in the company itself. Of course, that is a tremendous risk, and the odds are good that any given company won't pay off. There are also multiple ways in which that bet is rigged, including options vesting and the fact that your employer can effectively claw back your earnings by firing you (for any or no reason, at any time) before your options vest. You've also got to have the cash to actually buy out your options. There are other ways of building equity, one of which is to invest in your own business, venture, real estate, etc., outside of your employer. Buying investment rental property, for example. The key though is that you want to move beyond just "I'm a wage / salary owner" status.