Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

The Equity Equation

paulgraham.com

Post reply on HN
Print view View original

121–130 of 160 posts

Re: The Equity Equation

#121

Post by euccastro »

palish wrote: post #117
staunch wrote: post #105

Earlier quoted context omitted.

You're wrong to tell people they're wrong to publicly tell people they're wrong. Most mature and intelligent people love it when someone is able to offer useful critiques of their work, as long as they're civil about it. For example: http://en.wikipedia.org/wiki/Socratic_method

I don't see in there where you should prefix everything with "What an oversimplification! You're wrong, wrong, wrong!" Seriously, would you want this guy making a few million? Not only would he be a douche, but he'd be a rich douche. Imagine how he'd treat his waitresses and waiters then. Or his local cops. Or anyone not as smart as he is, which is, apparently, EVERYONE. I'd even call him a detriment to our society,…

I would want this guy making a few million, if he doesn't steal them. His waitressers and waiters can quit anytime if their alternatives are overall better.

(Kudos for being able to imagine a Paris Hilton with brains.)

Re: The Equity Equation

#122

Post by palish »

euccastro wrote: post #121
palish wrote: post #117

Earlier quoted context omitted.

I don't see in there where you should prefix everything with "What an oversimplification! You're wrong, wrong, wrong!" Seriously, would you want this guy making a few million? Not only would he be a douche, but he'd be a rich douche. Imagine how he'd treat his waitresses and waiters then. Or his local cops. Or anyone not as smart as he is, which is, apparently, EVERYONE. I'd even call him a detriment to our society,…

I would want this guy making a few million, if he doesn't steal them. His waitressers and waiters can quit anytime if their alternatives are overall better. (Kudos for being able to imagine a Paris Hilton with brains.)

That's exactly the problem, a reward in the face of repugnant behavior. I wasn't going to respond, but I found this comment pretty depressing so I have to ask you: You seriously believe being rich is a license to be a douche? Or that everyone's allowed to act however they want to food service workers, or the people that guard you while you sleep? Or anyone at all? What if, for example, someone had to be a waitress to save up money for college? Sure, she could start a business, but what if she has literally zero money and no contacts, and she was just born like that?

What's depressing is how often people don't think of other people.

Re: The Equity Equation

#123

Post by euccastro »

palish wrote: post #122
euccastro wrote: post #121

Earlier quoted context omitted.

I would want this guy making a few million, if he doesn't steal them. His waitressers and waiters can quit anytime if their alternatives are overall better. (Kudos for being able to imagine a Paris Hilton with brains.)

That's exactly the problem, a reward in the face of repugnant behavior. I wasn't going to respond, but I found this comment pretty depressing so I have to ask you: You seriously believe being rich is a license to be a douche? Or that everyone's allowed to act however they want to food service workers, or the people that guard you while you sleep? Or anyone at all? What if, for example, someone had to be a waitress to…

Being rich in this case wouldn't be a reward for his attitude, but for solving the problem of people who want secure, usable backup systems.

I'm not saying being rich would entitle him to any particular behaviour; they're orthogonal things.

About the hypothetical waitress, either she could find another job to pay for college, or otherwise her ability to go to college depends on cperciva getting rich.

There are other examples where you could argue that raw capitalism may not be in the general interest. Think, for example, of real state; that's more of a zero sum game. In my area, rich foreign people are buying most of the real estate for summer houses they'll visit once every other year or so, while locals have a hard time to find a first accomodation due to pumped prices. Many people have to migrate to save up for a house here. Since the utility of that real estate is way lower for the foreign rich than for the local poor, I claim that in this case raw capitalism is reducing overall value.

Re: The Equity Equation

#124

Post by mynameishere »

cperciva wrote: post #66
waleedka wrote: post #63

Earlier quoted context omitted.

I think it's a good idea, but already done, though. I use Carbonite to keep an online remote backup of my hard drive. They charge a fixed rate regardless of the capacity of the drive. Of course there is always space for competition, so if you think you can improve on their offering, then go for it.

If you use Carbonite, you're considerably braver than I am. Carbonite has no effective technological security, so you'd better hope that nobody breaks into their offices, none of their employees "go bad", and they're never confronted by a subpoena or have the PATRIOT act invoked against them; and they only keep the latest version of any file, so if you ever accidentally mangle a file you'd better hope that you can re…

_none of their employees "go bad"_

This won't happen to you? Okay. I trust you.

_never confronted by a subpoena_

If you get a subpoena for a passphrase for a client, you will give it up. Yes you will. Now, if someone was holding terroristic bombcodes or whatever and REALLY didn't want people getting them, they ain't backing up anything online. The same people who need real security aren't going to be uploading their data anywhere .

Re: The Equity Equation

#125

Post by pg »

euccastro wrote: post #118
pg wrote: post #111

Earlier quoted context omitted.

No, I don't think they contradict one another. The reason is that the most likely outcome is just to the right of the step. Most startup founders (initially at least) hope to get a few million, and wouldn't risk that to get a few billion. That's the step. And the most common form of liquidity event is a small-scale acquisition that gives the founders just that level of wealth, since otherwise they won't sell. So in t…

"The reason is that the most likely outcome is just to the right of the step." " So in the most common (and most commonly hoped for) good outcome [...]" Isn't the omission of good in the first paragraph a lapsus, i.e., do you mean most founders think success is the most likely outcome? Or do you mean founders should ignore the possibility of failure for the purposes of making these decisions about stock?

Yes, sorry, I meant good outcome.

Re: The Equity Equation

#126

Post by pg »

cperciva wrote: post #110
pg wrote: post #99

Earlier quoted context omitted.

Suppose your present hope of future utility from your startup varies linearly with the number of shares. (This is not a radical assumption; essentially all startup shareholders feel this, at least for numbers near that of shares they own.) Suppose you trade 6% of your stock in a deal that will increase your average future utility by 6.4%. You've made a straight trade of hope of future utility for future utility. We d…

IF the expected utility varies linearly with the number of shares (and thus the expected amount of money received in the end), you're absolutely right. But does it? For large investment or VC funds, the utility-of-money function associated with any particular investment is almost linear. There's a very good reason for this: As far as Sequoia is concerned, a dollar earned from their Google stock is pretty much equival…

Yes, for most founders hope of future happiness varies linearly with the number of shares-- at least, in the region of the number of shares they have. If someone gave them 10% more stock, they'd feel 10% richer-on-paper. (There are anomalies at the extremes. E.g. if you got 100% of the stock, your cofounders wouldn't be motivated, and that would decrease the value of your shares.)

Re: The Equity Equation

#127

Post by cperciva »

mynameishere wrote: post #124
cperciva wrote: post #66

Earlier quoted context omitted.

If you use Carbonite, you're considerably braver than I am. Carbonite has no effective technological security, so you'd better hope that nobody breaks into their offices, none of their employees "go bad", and they're never confronted by a subpoena or have the PATRIOT act invoked against them; and they only keep the latest version of any file, so if you ever accidentally mangle a file you'd better hope that you can re…

_none of their employees "go bad"_ This won't happen to you? Okay. I trust you. _never confronted by a subpoena_ If you get a subpoena for a passphrase for a client, you will give it up. Yes you will. Now, if someone was holding terroristic bombcodes or whatever and REALLY didn't want people getting them, they ain't backing up anything online. The same people who need real security aren't going to be uploading their…

"I trust you"

"If you get a subpoena for a passphrase for a client, you will give it up."

Not if I don't have it. This is the point of strong security -- you don't NEED to trust me, because I am not technically capable (nor, unless I'm quite mistaken, is the NSA) of decrypting data backed up using tarsnap.

Re: The Equity Equation

#128

Post by menloparkbum »

palish wrote: post #117
staunch wrote: post #105

Earlier quoted context omitted.

You're wrong to tell people they're wrong to publicly tell people they're wrong. Most mature and intelligent people love it when someone is able to offer useful critiques of their work, as long as they're civil about it. For example: http://en.wikipedia.org/wiki/Socratic_method

I don't see in there where you should prefix everything with "What an oversimplification! You're wrong, wrong, wrong!" Seriously, would you want this guy making a few million? Not only would he be a douche, but he'd be a rich douche. Imagine how he'd treat his waitresses and waiters then. Or his local cops. Or anyone not as smart as he is, which is, apparently, EVERYONE. I'd even call him a detriment to our society,…

If cperciva is Paris Hilton with brains, I sure hope someone doesn't email me the video...

Re: The Equity Equation

#129

Post by euccastro »

euccastro wrote: post #123
palish wrote: post #122

Earlier quoted context omitted.

That's exactly the problem, a reward in the face of repugnant behavior. I wasn't going to respond, but I found this comment pretty depressing so I have to ask you: You seriously believe being rich is a license to be a douche? Or that everyone's allowed to act however they want to food service workers, or the people that guard you while you sleep? Or anyone at all? What if, for example, someone had to be a waitress to…

Being rich in this case wouldn't be a reward for his attitude, but for solving the problem of people who want secure, usable backup systems. I'm not saying being rich would entitle him to any particular behaviour; they're orthogonal things. About the hypothetical waitress, either she could find another job to pay for college, or otherwise her ability to go to college depends on cperciva getting rich. There are other…

(PS: I misread 'waitress' as home servant.)

Re: The Equity Equation

#130

Post by edfrench »

For me, the question that the startup should ask more critically is around the total dilution-to-exit. If taking Paul's money for 6% now reduces the dilution at some subsequent round from, say, 40% to 30%, then by my reckoning the founders end up with 66% instead of 60% of the final position. Key here is usually a combination of the value-add from the VC, and their ability to underwrite/cornerstone a good part of that follow-on round. (Although obviously this is only relevant if a larger follow-on round is going to be needed!)
Post reply on HN