> Thus lower startup costs have a double impact. First, they lower the price of the option, making them more attractive. Second, the crowded startup market that results is more volatile, increasing the value of the option.

I see what the author is going for but this seems like a pretty weak argument. But this line:

> Second, the crowded startup market that results is more volatile, increasing the value of the option.

doesn't seem to hold. More startups doesn't necessarily increase the volatility at all. Its entirely possible to have more start ups and less volatility. Whether or not that's true I'm not sure.

Furthermore, even if you subscribe to the market being more volatile, Black scholes isn't interested in the volatility for the market, but just for the individual stock/company. Which isn't guarenteed to go up at all either:)

And then there is this "cover my ass" tidbit...

> According to Black-Scholes, all other things being equal, increasing volatility increases the price of the option.

This is basically saying, there are many factors that affect the outcome of a startup, I'm only going to chose one of them and assume the others stay the same. Furthermore I"m going to assume that the one variable I'm going to chance will move in a direction that supports my claim and not in any other direction.

This claim strikes me as being a bit dubious.

I do think this is an interesting thought experiment though:)