Ok, that is helpful. How is the expectation being set? Do you feel like people are lying to prospective employees about the possible value or are the prospective employees lying to themselves?
Lets consider other scenarios, people buying a lottery ticket. They choose to believe that its possible it will be worth millions but the expectation is that it will be worthless. Do we put up a large explanation about how unlikely it is to win anything in the lottery so that people will stop buying them?
I get that especially young people with little experience will delude themselves into believing a big chunk of equity will mean a big payday later, and take a lower salary to secure a larger chunk. But it isn't that anyone has forced them, they are just inexperienced. They will likely not get any extra benefit and the next job they will negotiate harder on the salary and be less swayed by equity. At some point they might be "cash only" type of people, no equity required.
The biggest problem with stock in my mind is that the investors aren't aligned with the company. The investors want a payout, period. If they can fire everyone and sell off the two patents and get 2x their money back, fine, they will do that. They want the company to be successful so that their investment is worth more, but they don't really care how it is worth more really.
Equity "payouts" haven't changed a whole lot in 30 years. There are an extraordinary number of millionaires and billionaires in the tech industry (compared to other industries) because of the wide and generous distribution of shares. Not everyone is a winner, but nobody really works at only one company either. Five to ten companies is more like it, and often the equity grants from one or more of those companies provides additional financial liquidity to the employees.
I'd agree that first time startup employees are often way more optimistic about their stock than more seasoned employees are, but I have never met anyone who has been through 2 or 3 such companies to have unrealistic expectations any more. That is why I have a hard time seeing what we can do to change it, on the job training is on the job training.
Lets consider other scenarios, people buying a lottery ticket. They choose to believe that its possible it will be worth millions but the expectation is that it will be worthless. Do we put up a large explanation about how unlikely it is to win anything in the lottery so that people will stop buying them?
I get that especially young people with little experience will delude themselves into believing a big chunk of equity will mean a big payday later, and take a lower salary to secure a larger chunk. But it isn't that anyone has forced them, they are just inexperienced. They will likely not get any extra benefit and the next job they will negotiate harder on the salary and be less swayed by equity. At some point they might be "cash only" type of people, no equity required.
The biggest problem with stock in my mind is that the investors aren't aligned with the company. The investors want a payout, period. If they can fire everyone and sell off the two patents and get 2x their money back, fine, they will do that. They want the company to be successful so that their investment is worth more, but they don't really care how it is worth more really.
Equity "payouts" haven't changed a whole lot in 30 years. There are an extraordinary number of millionaires and billionaires in the tech industry (compared to other industries) because of the wide and generous distribution of shares. Not everyone is a winner, but nobody really works at only one company either. Five to ten companies is more like it, and often the equity grants from one or more of those companies provides additional financial liquidity to the employees.
I'd agree that first time startup employees are often way more optimistic about their stock than more seasoned employees are, but I have never met anyone who has been through 2 or 3 such companies to have unrealistic expectations any more. That is why I have a hard time seeing what we can do to change it, on the job training is on the job training.