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Golden Handcuffs

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Re: Golden Handcuffs

#121

Post by rickspencer3 »

drewg123 wrote: post #22

One of the things that I love about working for Netflix is that they just pay you every 2 weeks and that's basically it. There are no RSUs that are stacking up, no yearly bonus, etc. No smoke and mirrors. No internal websites to calculate the value of your compensation like at Google. I remember how much trouble the yearly bonuses caused when I worked at Google. In the fall, some people would become much less active…

From what I have seen, if you can be well paid, and put a significant portion of your salary into index funds, over the years, you will generate a modest nest egg, and have choices in your late middle age or retirement. This is a different path than betting on a startup you joined, and hoping that your options end up paying out, but, it is not a bad path.

Re: Golden Handcuffs

#122

Post by analyst74 »

conjecTech wrote: post #99

This is horrific for employees. Ben Kuhn already nailed the math here[1]. The optionality embedded in long-dated grants is a huge fraction of total comp at high-growth companies and represent almost the entire right tail of outcomes. It also requires assumptions about the future, which is why companies generally abstain from quantifying what it's worth. It seems like the companies doing this are trying to arb that un…

This is no different from how Amazon does targeted compensation, where rising stock price means you get less/no refresher and raises, or all-cash comp at Netflix.

It's catering to more risk-averse candidate pool.

Re: Golden Handcuffs

#123

Post by daveidol »

heavyset_go wrote: post #89
choppaface wrote: post #4

The C-level to IC comp ratio is still way too astronomical. If a VC is telling you he feels there’s a better way to comp, he has a financial interest in ensuring your loss. Do not support investor-focused comp models like backweighted vesting (Amazon) or outright fraud like a start-up giving you a stock offer with no percentage or no 409A. Employees deserve high-quality equity on par with investors. The OP’s suggesti…

> Employees deserve high-quality equity on par with investors. There is no reason that labor and time couldn't build equity, it's just that our current system favors those who use capital to build wealth over those who need to sell their time and labor to build wealth. A common reason I hear for the fact that investors get more equity is because of the "risk" they take on, as if losing some money is the only risk on…

> When a business goes under, the employees have just lost their abilities to feed themselves, keep a roof over their heads, see doctors, buy medicine and provide for their families.

Yes, but that's always the risk of working at any company (and it's a risk the investor may also have if the company goes under). You can typically just get a new job and get these things back.

I think an even more compelling argument here is the one of opportunity cost when working for a startup vs big FAANG company.

Early startup tech employees not only invest their time but also lose out on real money they would have earned at another (bigger) company.

Re: Golden Handcuffs

#124

Post by ithkuil »

ska wrote: post #119
ithkuil wrote: post #116

Earlier quoted context omitted.

Playing devil's advocate: But the employee's time is a replenishable resource (1 second per second). The Total risk is not losing your job. It's losing your job + struggling strongly to find another one (considering loss income while searching, stress, ...). Or workplace injury / death. An investor, while facing low to none risk of workplace injury / death, can permanently lose the investment and won't recover it eve…

> It's losing your job + struggling strongly to find another one (considering loss income while searching, stress, ...). This is what severance clauses are for. > Or workplace injury / death. This is what insurance is for.

That was exactly my point. They are part of your compensation package. Surely there is a risk that the severance is not enough to cover for coping with a depressed job market.

Investors operate outside of these parameters. When it works out well , lucky you; but if it doesn't work you lose. The parameters to make this a worthwhile venture must be set so that the reward is higher than when you risk less.

Re: Golden Handcuffs

#125

Post by CerealFounder »

heavyset_go wrote: post #89
choppaface wrote: post #4

The C-level to IC comp ratio is still way too astronomical. If a VC is telling you he feels there’s a better way to comp, he has a financial interest in ensuring your loss. Do not support investor-focused comp models like backweighted vesting (Amazon) or outright fraud like a start-up giving you a stock offer with no percentage or no 409A. Employees deserve high-quality equity on par with investors. The OP’s suggesti…

> Employees deserve high-quality equity on par with investors. There is no reason that labor and time couldn't build equity, it's just that our current system favors those who use capital to build wealth over those who need to sell their time and labor to build wealth. A common reason I hear for the fact that investors get more equity is because of the "risk" they take on, as if losing some money is the only risk on…

Your moralizing a non moral argument. Its simply harder to get access to someone else's capital than someone else's time. So people can charge a premium for the capital.

I do believe that premium is probably a bit higher than it should be because it used to be EVEN HARDER to get that capital so people are pointing out the slightly outdated examples of cost in order to gain negotiating leverage.

In the end our time and money have no intrinsic value, but try asking a friend to help you move and then try asking your friend to loan you money to hire movers and see which they are more likely to do.

Re: Golden Handcuffs

#126

Post by dahart »

heavyset_go wrote: post #89
choppaface wrote: post #4

The C-level to IC comp ratio is still way too astronomical. If a VC is telling you he feels there’s a better way to comp, he has a financial interest in ensuring your loss. Do not support investor-focused comp models like backweighted vesting (Amazon) or outright fraud like a start-up giving you a stock offer with no percentage or no 409A. Employees deserve high-quality equity on par with investors. The OP’s suggesti…

> Employees deserve high-quality equity on par with investors. There is no reason that labor and time couldn't build equity, it's just that our current system favors those who use capital to build wealth over those who need to sell their time and labor to build wealth. A common reason I hear for the fact that investors get more equity is because of the "risk" they take on, as if losing some money is the only risk on…

> Sometimes, those workers are paid below market rate

I like this justification above all the others; it seems both fair and easy to reason about. If I quit a $200k/yr job to work at a startup for $100k/yr in cash comp, then my time investment, or risk, is $100k/yr, and my stock compensation should reflect that financial value based on today’s valuation of the stock.

Re: Golden Handcuffs

#127

Post by B4CKlash »

lukevp wrote: post #115
heavyset_go wrote: post #89

Earlier quoted context omitted.

> Employees deserve high-quality equity on par with investors. There is no reason that labor and time couldn't build equity, it's just that our current system favors those who use capital to build wealth over those who need to sell their time and labor to build wealth. A common reason I hear for the fact that investors get more equity is because of the "risk" they take on, as if losing some money is the only risk on…

I think you’re hand waving away that money is a store of value, and indirectly of time spent. The money investors have also came from them creating value by doing some activity. It doesn’t materialize independently. And it is still a risk to lose that money that they earned by trading their own time in the past.

Another term for VC is risk capital. A diligent investor will only put what they can safely risk into the market. While your correct that money indirectly represents time, you’re overlooking the incremental utility of money. An investor logically values each incremental dollar less, purely evidenced by the fact they were willing to risk it. An employee on the other hand will turn those funds directly into shelter/food/health.

Seems like a false equivalency to value investment assets at the same level as the money you need to survive.

Re: Golden Handcuffs

#128

Post by [deleted] »

daveidol wrote: post #123
heavyset_go wrote: post #89

Earlier quoted context omitted.

> Employees deserve high-quality equity on par with investors. There is no reason that labor and time couldn't build equity, it's just that our current system favors those who use capital to build wealth over those who need to sell their time and labor to build wealth. A common reason I hear for the fact that investors get more equity is because of the "risk" they take on, as if losing some money is the only risk on…

> When a business goes under, the employees have just lost their abilities to feed themselves, keep a roof over their heads, see doctors, buy medicine and provide for their families. Yes, but that's always the risk of working at any company (and it's a risk the investor may also have if the company goes under). You can typically just get a new job and get these things back. I think an even more compelling argument he…

[deleted]

Re: Golden Handcuffs

#129

Post by sokoloff »

kelnos wrote: post #70
joshuamorton wrote: post #67

Earlier quoted context omitted.

Why? Say you live in or near Atlanta, the rate paid to (on site) employees in Atlanta is less than the rate paid to (on site) employees in SF (I think this is true for pretty much every FAANG). Why should a remote employee in Atlanta make more than an onsite one?

> Why should a remote employee in Atlanta make more than an onsite one? Not more, but why shouldn't they be paid the same if they're doing the same work?

If there are more people who are equally qualified and willing to do the job remotely for less than the on-site team in Silicon Valley is, then the market for remote people to do the job is more employer-favorable than the on-site market.

Why should they pay person X more than needed to get the level of talent they want under the conditions they're willing to offer?

Re: Golden Handcuffs

#130

Post by ska »

dahart wrote: post #126
heavyset_go wrote: post #89

Earlier quoted context omitted.

> Employees deserve high-quality equity on par with investors. There is no reason that labor and time couldn't build equity, it's just that our current system favors those who use capital to build wealth over those who need to sell their time and labor to build wealth. A common reason I hear for the fact that investors get more equity is because of the "risk" they take on, as if losing some money is the only risk on…

> Sometimes, those workers are paid below market rate I like this justification above all the others; it seems both fair and easy to reason about. If I quit a $200k/yr job to work at a startup for $100k/yr in cash comp, then my time investment, or risk, is $100k/yr, and my stock compensation should reflect that financial value based on today’s valuation of the stock.

> based on today’s valuation of the stock.

This is the tricky part, especially if you are very early.

Really what you want is the (statistical sense) expected value of the equity be something like the opportunity cost, for it to make sense for you. But until the company has been around for a while and through a few rounds, valuation is mostly a fantasy...

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