News for hackers. Stuff that matters.

A comment on A Good Way to Grant Equity to Your Employees. Parent comment

Re:A Good Way to Grant Equity to Your Employees by CalChris on Wednesday November 02, 2016 @08:13PM (#12860559)
You're taking a huge risk not working for Cisco, Oracle, Google

No, this is not risk. This is opportunity cost.

  When referring to finance or economics, risk describes
  the possibility that an investment's actual and projected
  returns are different and that some or all of the
  principle is lost as a result. Opportunity cost concerns
  the possibility that the returns of a chosen investment
  are lower than the returns of a necessarily forgone
  investment.
http://www.investopedia.com/ask/answers/041015/what-differen...

A VC can lose their cash money investment in StartUpCo. That's risk. An engineer choosing between StartUpCo and Cisco faces a choice between two opportunities. The cost of choosing one opportunity is the other. That's an opportunity cost.

[ Parent | on HN ]
Re:A Good Way to Grant Equity to Your Employees by barrkel on Wednesday November 02, 2016 @09:19PM (#12860862)
I think you're being pedantic. Let me explain why.

Given a choice between two alternatives, one with high variance and low median return, and another with low variance and high median return, it is perfectly sensible to use the English language (as opposed to investment jargon) term 'riskier' to describe the first alternative, if maximizing return is the goal.

[ Parent | on HN ]
Re:A Good Way to Grant Equity to Your Employees by shostack on Thursday November 03, 2016 @07:14AM (#12862958)
The risk comes in from the fact that a startup has a decent chance of flaming out and ceasing exist in less than a year in which case you are out of a job.

While you could still lose your job at a big company, they are generally more stable with billions in the bank.

[ Parent | on HN ]
Re:A Good Way to Grant Equity to Your Employees by morgante on Wednesday November 02, 2016 @10:25PM (#12861150)
Sure, and if my opportunity costs exceed your offer then I won't work for you. BATNA is what drives compensation, and the risk of you ceasing operations definitely factors into that.
[ Parent | on HN ]
Re:A Good Way to Grant Equity to Your Employees by module0000 on Wednesday November 02, 2016 @10:20PM (#12861125)
Good point, opportunity cost describes it perfectly.
[ Parent | on HN ]