> Same reason anyone wants a union: to reduce structural asymmetry. In this case, the asymmetry in question is information. Think of the hypothetical union as you and your coworkers all pitching in to get a really good lawyer to review your employment contracts and vesting terms.
That's fine for those other people. And a common fund for a lawyerly review might be an interesting idea. In general, I don't want to pool my negotiations with other people, though.
> More importantly, because of the issues with equity, even those scarce observations are fuzzy. Comparing two equity packages from non-public companies is hard, and it's ridiculous (or, depending on your interpretation, cunningly malicious) to put that burden on every single employee individually. You're paid to be an expert in software engineering and a partial domain expert in whatever the company does; having to also be an expert in finance and obscure tax law to even know how much you're getting paid is unreasonable.
I resolve that difficulty by valuing all equity (or options etc) of non-public companies at a huge discount when comparing offers.
I don't treat exactly as if they were worth zero, but pretty close.
> In general, I don't want to pool my negotiations with other people, though.
Do you not believe that a hundred people can do more work than one person? That a hundred people have more buying power than one person? That a hundred processors can do more work than one?
βI have as much bargaining power as N people combined, no matter how big N isβ is like believing that P=NP.
Donald Knuth believes P=NP. So I would be in rather exalted company. I don't see how it's relevant to the discussion at hand?
> Do you not believe that a hundred people can do more work than one person?
In total, yes. Per person, no.
> That a hundred people have more buying power than one person?
What do you mean by buying power? Googling for the term suggests that it's a synonym for amount of money available to buy stuff ('purchasing power'). But I don't think that's what you mean?
> That a hundred processors can do more work than one?
In total, yes. Per processor, no.
Basically, when I am negotiating as part of a large group a few things happen, amongst them:
(1) The negotiating won't be about anything that makes me special compared to those other people.
(2) The company needs to be much more careful about overpaying. Granting a single high compensation to an outstanding candidate is much easier to get through the bureaucracy than a single high salary.
That's fine for those other people. And a common fund for a lawyerly review might be an interesting idea. In general, I don't want to pool my negotiations with other people, though.
> More importantly, because of the issues with equity, even those scarce observations are fuzzy. Comparing two equity packages from non-public companies is hard, and it's ridiculous (or, depending on your interpretation, cunningly malicious) to put that burden on every single employee individually. You're paid to be an expert in software engineering and a partial domain expert in whatever the company does; having to also be an expert in finance and obscure tax law to even know how much you're getting paid is unreasonable.
I resolve that difficulty by valuing all equity (or options etc) of non-public companies at a huge discount when comparing offers.
I don't treat exactly as if they were worth zero, but pretty close.
Slightly more specialised: in tech it seems to be common to grant employees at-the-money call options. The put-call-parity is your friend here (https://en.wikipedia.org/wiki/Put%E2%80%93call_parity).
A special case for that parity equation is:
put option + equity = call option + cash (at current price of equity)
In our case with both put and call having a strike at the current price of the equity.
More or less it says that a call option is exactly as useful as the insurance against the company going bust, ie the put option.
There are basically two ways for the call option to be worth more than peanuts:
- Either, the founders were idiots and sold the last round of equity too cheap (ie the strike of the call option is too low)
- Or, the share price is fair, but the company has a very high risk of going belly up (ie the put is worth a lot)