8% return on average is abnormally high.

But, on the other hand - the chance of retaining even 1% of a startup that exits for >50M is very small. By the time of an exit, almost no engineers will have anywhere near that equity.

After accounting for inflation and dividends, 7% is average (historically) for annual returns. So only a little high.

If the parent was not accounting for inflation, 8% is low.

I see the 7% return figure trotted out as average equity returns; but I think that number reflects a lot of “easy money” from the asymmetry of global industrialization in the post-WW2 era. Europe and America spent the 1920s through 1940s building fossil fuel powered heavy industry through a couple of particularly destructive wars. Then we spent the next 50 years spreading it around the globe, with American and European companies collecting a vast majority of the profits.

I’m not entirely sure it’s an assumption that will be correct for too much longer given the industrialization around the globe has increased competition significantly.

I think the true equity growth rate is closer to inflation / population growth rate; especially once we take the costs of climate change into account (think of it as a loan we have to pay back in either remediation of adverse climate effects or decreased future productivity).

Not sure I agree with your premise, but even if it was true, couldn't one simply balance their profile with more stocks from developing markets and be back to average?

Most of those nations didn’t really have viable / accessible public markets until the 90s. So there’s not a lot of reliable data from the first half of the century to go on.

And I’m not saying the US / Europe robbed any of those countries — just that there was a lot of easy growth in those countries in the 20th century, and western companies stepped in to facilitate and got paid a lot of money in the process. That growth is reflected in the stock prices of American and European companies.

My point is that those big, easy growth opportunities aren’t there anymore anywhere; and the growth opportunities in the future will be diminishingly small. We’re no longer bringing a country from the Iron Age mining with hand tools to the industrial era with mechanized mining and smelting; we’re largely just replacing one form of economic activity with another, slightly more efficient version.

401k’s haven been that spectacular for the last 15 years

My Vanguard account, which I've had since 2007, is showing 10.8% returns over the past 10 years.

I think the difference between 10 and 15 is pretty large since the recession started over 10 years ago, but under 15.

You are right, but even 15 year returns are still above 8% with VTSAX.

Exactly my point! We can’t grow at 7% in perpetuity; so at some point it’s going to have to slow down. It feels like that’s starting to happen.

Why can't we? From my point of view, we've just began. Maybe we will see a low decade now, but the decade after that will be incredible.

Also keep in mind we already had a "low" decade... the "lost decade" of 2000 through 2012-ish. That was a bad time for investing.

+1, doesn't it seem like ML can drive just as much GDP growth as the technology that spurred growth over the past decades? it's not clear the US will be at the forefront, but nobody is stopping investors from diversifying their portfolio globally.

Depends on what you're looking at for ETFs and mutual funds, but I think 8%, with a lot of work, CSVs, and tracking performance can be obtained. I know 12% is doable with a lot of work.

How's that? Over a decent period of time (5-10 years), 8% can be obtained with essentially no work just be investing in low cost index funds.

> But if the upside of investing in a startup won't reasonably beat the market then you're essentially taking a pay cut.

Like the OP said, if you look at it only from a financial point of view then joining a start-up is probably a worst financial decision compared to joining an established company.

The OP mentioned that going the start-up way has provided him/her with unique skills that then were of great help in his/her career. I can chime in with my own anecdote and say that joining a start-up/small-ish company has provided me with a greater will to do the actual work, a greater sense of purpose compared to me potentially having chosen to work for en established/bigger company.

I'm in this job (I'm a programmer) for the long run, I genuinely think that had I chosen to work at a big company my mental health would have been in shambles because I would have felt as an insignificant cog in the corporate machine no matter the compensation.

An exit would usually be considered long-term capital gains under the tax code, which luckily tops out at 20% (+ state income tax)

Only if you joined early enough that doing early exercise of stock options is financially viable.

In CA the max marginal rates are close to 40% for long term capital gains and 51% for short term / income tax.

If you exit by cashless exercise of options, it's (usually) then blasted by the full effect of wage/income tax.

This people do not understand the math of startup comp. If you get equity instead of cash, you could have taken that cash and just put it into as high a risk investment as you want. As such, startups are really offering access to an illiquid investment (but how sure are you it's better than other options), and forced risk-taking with some short-term tax benenfits (most people wouldn't put 10-20% of their income into one stock and you pay tax up front). You could go to google, put 30% of your income into crypto, and have some thing a lot like a startup risk/reward profile w/ a lot more liquidity. It's just that that feels riskier to people. Startup is only a great deal financial for the founders.

For early stage startups, consider an 83(b) election for better tax treatment on exit.

How'd you do your math? 50k every year @ 8% would result in 317k and 782k in 5 and 10 years respectively.

“If you put $50k in the stock market every year for 5 years @ avg. 8% return, your have ~$400k. Over 10 years it's ~$900k.”

That’s not always the case. Stock market returns are not guaranteed. If you start in the wrong decade you may be losing money.

startup returns are even less guaranteed. I think the main point is startup risk-adjusted returns are bad for non-founders.