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Golden Handcuffs

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Re: Golden Handcuffs

#251

Post by nonameiguess »

sombremesa wrote: post #199
nonameiguess wrote: post #131

Earlier quoted context omitted.

The more amusing (or disturbing thing) is that we have created an environment where, practically speaking, investors have less risk than everyone else. We were just hit with one of the largest global disasters of the past century last year and the immediate reaction was flood equity markets with $3 trillion to prop up financial markets. Owners of capital cannot lose. Even before these last few years of craziness, wha…

> The team sold for 8 times what he originally paid, not because of anything he had done, but just because television contracts for the entire league had become so much more lucrative over that time. And what about your part in this play? The brand is valuable because of its fans. I assume you continued to support this brand, and by extension, this man you seem to despise. People like yourself directly contributed to…

First, this isn't true. The MLB operates like socialism for the owners. The value of the television contracts are overwhelmingly due to a very small number of franchises, but the revenue is split between all owners to subsidize markets with small fanbases. So you don't need to directly support a specific team for the owner of that team to get rich anyway. This is effectively why rich people bother to buy teams like the Marlins and Rays, gut the entire roster, get by paying the minimum payroll the league collective bargaining agreement allows playing to empty stadiums with no fans, and sell for a profit anyway.

Second, I haven't lived in Los Angeles for a long time and have never bothered to pay for any sort of subscription service that allows me to watch the games anyway because they tend to air well past my bedtime, so no, the value of MLB and LAD television contracts is not in any way directly contributed to by me personally.

Re: Golden Handcuffs

#252

Post by PenguinCoder »

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?

I have been asking this question for years, and also been downvoted on multiple sites (including HN) for asking it.

Re: Golden Handcuffs

#253

Post by ghaff »

KaiserPro wrote: post #229
TulliusCicero wrote: post #80

I don't see how 4-year stock grants that steadily vests are golden handcuffs at all, since if you switch to a similar company they'll just give you a new stock grant that also steadily vests. The only part that's like golden handcuffs is the 1-year cliff that's standard, but 1 year ain't bad.

Depends on how big it is. For me, my base salary is quite enormous, but with some work I could find something within 20%. (I am exceptionally lucky, its not skill) However, what I can't replace is the stocks. Depending on performance its ~3-5 times my already vastly over inflated annual wage. So I'm stuck here at the boring FAANG company not achieving very much, because to walk away from a small fortune would be madn…

Add to that the grass isn't always greener. If you've "lucked" into a really lucrative opportunity and you can do fine with sane working hours and a decent if not exciting environment, a lot of people would be advised to think hard and long before heading off.

Re: Golden Handcuffs

#254

Post by banannaise »

vlovich123 wrote: post #193
dahart wrote: post #126

Earlier quoted context omitted.

> 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.

Without the investment funds, where is the startup getting the funds to pay you 100k/year? Some startups take a while to hit big and the only source of funding is investors. Fair or not, there’s a power imbalance and ignoring that seems foolish. Also, the view you have is biased to the rare success scenario. In the failure scenario, the employee comes out ahead since they at least got some amount of their investment…

Loans still exist. They didn't magically disappear with the rise of venture capital.

Re: Golden Handcuffs

#255

Post by banannaise »

alecbz wrote: post #166
alisonkisk wrote: post #163

Earlier quoted context omitted.

This is a Marxist labor theory of value argument, disregarding market forces. For a different supply-demand function, labor could get paid far more than investors (imagine a 0 interest rate environment while inflation is happening.)

Well, sort of. There's an argument to be made that people should realize how much better a deal VCs are getting and stop settling for worse ROI. Part of the problem is exactly that supply is high, possibly because of a lack of knowledge/negotiation leverage.

Labor supply is high because it is forced to be high, in a way that capital supply is not. Investors can stop investing and simply live on their hoards, or even a tiny fraction of their hoards. Laborers cannot stop laboring and do the same.

Re: Golden Handcuffs

#256

Post by sombremesa »

nonameiguess wrote: post #251
sombremesa wrote: post #199

Earlier quoted context omitted.

> The team sold for 8 times what he originally paid, not because of anything he had done, but just because television contracts for the entire league had become so much more lucrative over that time. And what about your part in this play? The brand is valuable because of its fans. I assume you continued to support this brand, and by extension, this man you seem to despise. People like yourself directly contributed to…

First, this isn't true. The MLB operates like socialism for the owners. The value of the television contracts are overwhelmingly due to a very small number of franchises, but the revenue is split between all owners to subsidize markets with small fanbases. So you don't need to directly support a specific team for the owner of that team to get rich anyway. This is effectively why rich people bother to buy teams like t…

When I said "your", I was really talking about the group "lifelong Los Angeles Dodgers fans", and you seemed to include yourself in that group.

However, you raise a good point that people in the same group exhibit different behavior and values.

Re: Golden Handcuffs

#257

Post by lumost »

chris11 wrote: post #216
lumost wrote: post #203

Earlier quoted context omitted.

Early stage startups should be showering employees with high risk equity and paying less cash compensation. This saves the company money and allows them to hire better talent. Having highly skilled engineers/bizops/designers/sales staff who are incentivized to make the company successful is a huge win.

I'm not really sure how options should be valued, and I haven't negotiated from a position of have a ton of unvested equity. But if an engineer got extremely lucky by joining the right startup, say Coinbase, leaving early might mean giving up a few million in unvested equity. That's a lot of equity if the startup treats that lost income as if the engineer had invested that amount in the last fundraising round. Option…

so the key question here is what a "mid-level" engineer can do for your company early. An engineer with 5 years of experience at FAANG will easily make ~200-250k, competitive scaling startups and public companies will compensate equivalently withing ~30% in liquid compensation.

If that engineer instead works for 100k and takes 100k in illiquid equity which may or may not be worth something in 10 years, they are losing well over a million dollars in opportunity. Given that 5 more years at a top-tier firm would double their compensation they could easily be giving up multiple millions. To be employee #5-50 this individual should be getting an equity option that would reasonably be worth millions in an exit scenario for it to make sense.

Most startups simply aren't competitive for this mid-level engineer given current compensation practices. Which leads to a sub-selection of talent for those who for various reasons aren't willing or able to work at a firm willing to pay that level of compensation. Bear in mind, if the engineer had liquid equity from a public corporation they would be able to leave equity in hand after 4 years.

Whether this is a problem or not is an interesting question for startup CEOs. Generally I've found success in software is more closely correlated to the quality of employees than the quantity, and historically companies with generous compensation practices seem to be the successful ones.

Re: Golden Handcuffs

#258

Post by alecbz »

banannaise wrote: post #255
alecbz wrote: post #166

Earlier quoted context omitted.

Well, sort of. There's an argument to be made that people should realize how much better a deal VCs are getting and stop settling for worse ROI. Part of the problem is exactly that supply is high, possibly because of a lack of knowledge/negotiation leverage.

Labor supply is high because it is forced to be high, in a way that capital supply is not. Investors can stop investing and simply live on their hoards, or even a tiny fraction of their hoards. Laborers cannot stop laboring and do the same.

That explanation seems off? (Anyone who has enough to live off of can just do that, witholding both their capital and their labor.)

But anyway I meant supply of labor for startups specifically. Like, people are too willing to forgo FAANG comp for low equity numbers at startups.

Re: Golden Handcuffs

#259

Post by kerng »

No one year cliff good.

New grant (assuming with new price) every year is a joke. Potential for rapid wealth growth is the reason many work for a startup in first place.

Re: Golden Handcuffs

#260

Post by vlovich123 »

banannaise wrote: post #254
vlovich123 wrote: post #193

Earlier quoted context omitted.

Without the investment funds, where is the startup getting the funds to pay you 100k/year? Some startups take a while to hit big and the only source of funding is investors. Fair or not, there’s a power imbalance and ignoring that seems foolish. Also, the view you have is biased to the rare success scenario. In the failure scenario, the employee comes out ahead since they at least got some amount of their investment…

Loans still exist. They didn't magically disappear with the rise of venture capital.

Have you tried to obtain a loan for a startup? I recommend you go try to bootstrap it without collateral & the bank is just happy to eat the loss when it doesn't work out.
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