Growing up around people who lost everything, job and savings, working at Enron, you should take all the money they’ll let you. You are structurally long your company already, because if they struggle you could lose your job. Diversify your wealth away from that concentrated position as much as possible if you’re offered a fair price.
I disagree. The answer for me is always half. And then next time, half again. Always take some out and leave some in, and an easy way to hedge your bets is to make both amounts half.
You are welcome to your own perspective. I just want to point out to others that having even half of what was presumably a large fraction of your net worth in any single company is not considered well diversified, especially when you rely on that same company for your paycheck.
Yes, same principle. And with RSUs you can be even more confident that you’re selling at market rate than you can with a tender offer for illiquid equity.
> The interesting discussion is how much you should take off the table if the offer is uncapped.
50% for security, let the remaining 50% run. We can spend countless hours modeling the risk and return delta of various percentages and against non correlated asset classes you might diversify into once liquid, but most of life is luck; you can do everything right and still lose. This makes it easy, imho.
Another voice in favor of "money today good" (though not from personal experience).
I'd even go so far as to recommend putting that money specifically into things that promote your long-term economic stability, e.g. is it enough to let you buy a home that's going to have monthly expenses below what you're paying in rent? There's plenty of economic uncertainty out there right now, but I feel confident in one thing: Even if the entire economy goes into the crapper rent will not go down. In addition the real estate market is pretty soft right now because of uncertainty, so if you're in a position to purchase that may let you basically lock in your monthly housing costs for a decade or more.
100% correct. Taking 10% away to remove downside risk of the remaining 90% is an absolute no-brainer, especially if it is a meaningful sum of money to you.
Indeed; I can't imagine a world where 11% higher gains makes a significant difference. Either that 11% is a large number in an absolute sense, in which case the 89% you retained is also VERY large; or it's not that big of an absolute number and doesn't matter that much anyway.
Obviously you are guessing probabilities to plug in but they can be based on other exits etc. Someone in the know on startup equity could offer this as a consultation service.
I participate in a personal finance sub-reddit, and there is often a question of whether someone should pay off their mortgage (completely, or make some lump sum payments).
The mathematical answer is that if your interest rate is lower than the expected returns of some kind of portfolio you have, than you'll make more money investing.
But I like to bring up what Morgan Housel, author of the book The Psychology of Money, said on paying down his mortgage:
> It just increased our independence, even if it made no sense on paper. So that's another element of debt that I think goes misunderstood. And a lot of that for both of those points is this idea that people don't make financial decisions on a spreadsheet. They don't make them in Excel. They make financial decisions at the dinner table. That's where they're talking about their goals and their own different personalities and their own unique fears and their own unique skills and whatnot. So that's why I kind of push people to say like, it's okay to make financial decisions that don't make any sense on paper if they work for you, if they check the boxes of your psychology and your goals that makes sense for you. And for me, extreme aversion, what looks like an irrational aversion today, and I would say is an irrational aversion to debt, is what works for me and what makes me happy, so that's why I've done it.
Cash flow is another facet of paying off your mortgage early, and I think it’s underrated. Eliminating thousands of dollars from your monthly expenses dramatically increases your flexibility. Since most people have “cash / reserve fund” and “retirement investments (do not touch)” as their major financial categories, it optimizes the one you interact with the most. You don’t need to always make the maximum possible to keep a comfortable amount of cash on hand, which gives you more flexibility to take time off between jobs, or tank a layoff, or take that startup job that pays less (but damn if it doesn’t look fun). Personally I recently bought a second apartment adjacent to my first in order to combine them into a 3br. Paying off the first mortgage years ago was the difference between being able to afford the monthly expenses and not.
Obviously you need to consider both net worth and cash flow when making a decision like that, but don’t underrate the difference that improved cash flow makes!
Owing no one anything is incredibly liberating. It changes how you behave and what you are risking.
Sure, I’d be richer on paper if I had kept the first house and rented it out, buying the second house with debt. But the worry and hassle and was my concern and I’m far happier. Perhaps 20 years from now my position would be different.
If my federal money market account at one of the largest, most respected financial institutions in the world collapses, I don't know that the piece of paper saying this house belongs to me is going to be worth all that much anyway.
I mean there are other factors right? How long the rate is fixed for, penalty for paying off early, what you think the rate will be after term is over, you and your family's circumstances etc.
Just to reiterate the point the person above you made, but in far simpler terms: independence can be far greater return on your personal well-being then maximizing gains. I'm willing to "lose" out on $50-$100k over the lifetime of my mortgage in exchange for never needing to make a payment on the house again
> The mathematical answer is that if your interest rate is lower than the expected returns of some kind of portfolio you have, than you'll make more money investing.
Paying off if possible, but I'd not put everything into paying it down. Pay a chunk of it down for comfort, and put some into emergency reserves with some reasonable level of return that could be accessed in the future in case of need. Early payments don't really matter that much if you have a period of unemployment/underemployment before it's fully paid off.
IMO always take the money. Money to me is like water. If you're dying of thirst, that first glass of water is extremely important, the 100th, not so much. You really only need enough money to do the things you want, raise your kids, and retire. The money after that isn't going to bring nearly as much happiness as that first bit.
Think of it this way: Given any company in the world to invest that money, do you think it's best invested in your company or some other? Because if there's another one (eg nvidia, apple etc) then you should take the money out and move it into stocks in that one
1) Making money & keeping money are 2 different skillsets. You've made some $$$, now learn how to keep it.
2) Time is far more valuable than money. If you can take life-changing $$$ off the table in exchange for time, do so. The 2nd $1M buys you a tiny proportion of the benefits that the first $1M did.
3) You have a v. high risk concentrated portfolio that is aligned with your income. That's massive risk.
4) Taking it now buys you time & optionality. Leaving some still buys you blue sky. Best of both worlds.
I would recommend Taleb's book Skin In the Game for this type of question. The best choices are highly dependent on the individual's preference for risk and whether or not they count their existing stock as "extra" or as "income."
There's a crucial extra factor that isn't in the original article, but ought to be: Money's ability to buy great experiences decreases as you get older. I've seen this with beach vacations, road trips to see a favorite band, fast cars, ski trips, etc.
Seize the moment, friend! What you can do NOW with that 10% slice will never exactly be on your possibilities map again.
I think you're hitting on something that very rarely gets discussed, at least in the US and maybe some other Western societies. I wonder if it's just simple depreciation or compound depreciation (or whatever the opposite of compound interest would be).
Me finding the money to climb Kilimanjaro at 23 is different than me having the money at 40 but worse knees.
Thank you for pointing this out and I hope someone formalizes it more.
This is why I love old tech like my 40 year old car (bmw e30 325is) and analog camera and whatnot. You have way more control because of less external dependencies and simplicity, and the prices are still decent compared to what you'd get now for vastly more money. $70k dogshit unwrenchable SUV or $10k 80's car that works like a dream and is built like a thinkpad? It's so relaxing working with older things. Hearing old peoples stories are wild, like just crossing the border with a 6 pack of beer no passport no nothing and having a good time on the weekend. Now my asshole is getting scanned down to the submillimeter and sitting in a palantir database just so I can go on a vacation.
Maintenance is great. I've only had to do minor things to it. Since I'm 6'5 I did have to re-weld all my stalks to be 30 degrees back and do a bunch of work on the steering column and wheel to bring it forward 8 inches and up 2, some stuff on the throttle body from coolant leaks, but other than that it's been great. I've put 100k+ km on it in just the past two winters since I live up in the boonies. I'm alerted of oil changes by the lights in the centre of the dash as well. I haven't done much of any work at all except what I mentioned since buying it and it's been smooth sailing for multiple winters now. The M20B25 is built like a tank. I have it sitting on B8's on H&R sports springs so the handling couldn't be better, and I did some minor ECU tuning on it to give me a little more power on the low end. The idle has remained at a perfect 750 as well, and I can get it down to 6.8L/100KM if I baby it. It's the perfect car [0]. I've even binned it a few times and it's still going strong.
I've also got a period correct radio in there from bmwradios.com (radio wizard from estonia) who gave it bluetooth functionality along with a period correct panel in the console for a microphone, so I can talk hands free while I'm driving. He also modified the radio for me to read out the different GTA 3/4/5 radio stations and I can switch them around as I only listen to GTA radio and commercials when driving [1]. Besides it being 900kg with no airbags, it's the perfect car.
Between e30zone, the bentley manual, and realOEM [3] amongst the other infinite amount of resources it's impossible not to do your own work on it and it's usually easy. It really is a thinkpad in car form. Most parts are still produced and if they aren't you can get any number of things from third party shops like e30garage.no [4] if it's not on FCPEuro. Lot's of parts are also plug'n'play between different BMW models like steering racks which are quite easily swappable.
We were in our 20's when my friend said 'A day in your 20's is worth a year in your 30's, a day in your 30's is worth a year in your 40's, etc...' Now in our 60's we're a little less adamant - every day is worth something.- but it has been a useful perspective.
A day in my 20s was worth nothing. I went and flipped burgers for $4/hr, then probably went out for beers at a dive bar that night. Just living day to day.
Physically, I don’t feel a lot different than in my 40s. ( I’m pretty firm in my exercise schedule. ) But looking over almost anyone in their 80s, I’m reminded that the 60s likely kicks off ‘the fourth quarter’, to use sports parlance.
Time to let it all hang out, leave nothing on the table.
I took a few months off intentionally in between jobs to hike and camp and hang out with my kids. Now that my kids are older my only regret is that I didn't do it for longer.
> Money's ability to buy great experiences decreases as you get older.
Excellent point. You may have just talked me into retiring.
> What you can do NOW with that 10% slice will never exactly be on your possibilities map again.
Maybe not... but "once in a lifetime chances" come around more often than you think. You don't have to take every one right now. (As you get older, options narrow, as you said.)
Read it earlier this year and it definitely changed some of my thinking along those same lines.
My loose summary of the book:
"Any money left in the bank when you die is essentially wasted - you could have used it to have experiences when you were alive, or given it to family / charity earlier when it would have had more benefit. Figure out what major experiences and memories you want to have in life, plan to do them earlier when you have health and time, and build up memories for later in life."
I didn't find the discussions of how to plan out retirement savings very useful - there's a lot better info on withdrawal approaches in various FIRE-related groups.
But the "be willing to spend now on activities you might not be able to do later / don't hold off on 'living' until you're retired" argument made a _lot_ of sense to me for a variety of reasons, and it was a major factor in researching early retirement a few months later (and deciding to make that a new goal. along with taking more vacations before then).
I don't agree. How can wasting your money in your twenties and thirties be more valuable than saving for an early retirement. Imagine being able to retire at 40 and do whatever you want. If you weren't stupid, your health should be good enough. Why prolong the time you have to do stupid chores for other people when you can be strategic and opt out as early as possible.
You can take once-in-a-lifetime experiences in your 20s and still save for retirement. I went to Burning Man and traveled to Amsterdam in my 20s and that didn't impact my savings.
I should point out that it's cheaper to travel when young: Back then I stayed in a tent in the desert and in a friend's room near Amsterdam. If I did the same trip today, I'd have my family in tow, and would need more comfortable accommodations.
I should also point out that startup equity is not retirement savings. Selling 10% of your equity, investing most of it, and then doing something that you won't be able to do when you're old is a very wise and mature decision.
Taking some time off to travel when you're young is much more than a beach vacation. You meet people (sometimes you meet your future wife), that can become lifelong friends. You learn what you like and don't like; and that the world is infinitely more complicated and beautiful than what you could imagine through books and watching youtube.
After 40 you've already made many of your major life decisions - career, partner, education, kids etc. There's less room for new experiences to alter that trajectory meaningfully.
One thing I've also realized through being lucky enough to enjoy some "semi-retirement" between work is having a healthy balance makes me appreciate both work and "leisure" more. It gets pretty boring to go to the beach every day, it turns out. I was itching to get back to building something by the end.
I don't think it's an either or proposition. You can both retire early AND take a nice vacation. Sure it delays your retirement date by a couple of days, but I think that's a good tradeoff generally. I'm approaching 40 and even now, the vacations I took when I was 10 years younger were different than now, I could cram more in, do more things without being as sore the next day, etc. And I haven't had kids yet, that would definitely change vacations.
Kids is one big reason. You can have totally different experiences before you have kids, once they arrive your outlook on life changes, risk tolerance changes etc.
If you can retire at 40 having lived your 20s/30s to the fullest then game on, but it would be crazy to sacrifice that time when you are so free and full of energy otherwise IMHO.
FWIW I am fortunate enough to have really enjoyed by earlier years and be mostly retired in my early 40s.
That advice also serves INHO well regarding angel investments and potential secondaries. If you made some x in a short time, take the money and run and leave the risk to institutional VCs who are not investing their own money.
In my 15 year software engineering career, the most money I could have cashed out was around $110k in crypto space; that was the value my crypto peaked at but it would have required unlocking my tokens which would have lost me my forging position and the $4k per month which came with it... I ended up not selling and earning about $20k to $50k per year for 4 years so it has been a good decision... Also, it was not possible to unlock my tokens without a 1 month delay and token prices were fluctuating wildly... Moreover, due to my public position on the project, and the public nature of Blockchains, my unlocking of tokens would have been seen by community and possibly triggered a project-ending sell-off.
So basically the only time I had the opportunity to theoretically earn $110k, at the peak of my 15 year career after working insanely hard including nights and weekends, was not even feasible in practice and it turned out that I earned more money holding and forging over the following 4 years than I would have gotten for selling.
But damn, when I see some of these corporate 9-to-5'ers sitting on $1 million+ which they got after only 5 years or so and they're not selling because they think they deserve more. It seems insane to me. It's a lot of money, they can sell anytime, probably still keep their job. As they say in crypto, I would dump the shit.
"Jim Bennett: I've been up two and a half million dollars.
Frank: What you got on you?
Jim Bennett: Nothing.
Frank: What you put away?
Jim Bennett: Nothing.
Frank: You get up two and a half million dollars, any asshole in the world knows what to do: you get a house with a 25 year roof, an indestructible Jap-economy shitbox, you put the rest into the system at three to five percent to pay your taxes and that's your base, get me? That's your fortress of fucking solitude. That puts you, for the rest of your life, at a level of fuck you. Somebody wants you to do something, fuck you. Boss pisses you off, fuck you! Own your house. Have a couple bucks in the bank. Don't drink. That's all I have to say to anybody on any social level. Did your grandfather take risks?
Jim Bennett: Yes.
Frank: I guarantee he did it from a position of fuck you. A wise man's life is based around fuck you. The United States of America is based on fuck you. You're a king? You have an army? Greatest navy in the history of the world? Fuck you! Blow me. We'll fuck it up ourselves."
Take the money. These things are 10x bets. You won't be sad that you got 7.5x instead of 10x (which is what happens if you take the 25% of your stake off the table). If you flip it, you'd have 10x instead of 7.5x. It's not meaningful.
Each time you get money you get to deploy that elsewhere. If you have super risk tolerance, push $25k cheques as seed.
I believe the complete opposite. If someone is willing to buy your business, no matter the amount, it’s because it’s worth MUCH more than what they’re paying. It’s illogical for them to pay less than its real value. It’s even illogical to think they’d pay exactly what it’s worth. Why would somebody bother buying a company if they were only going to break even?
This assumes risk appetite is the same. For instance, insurance works this way - in expectation you’d pay less yourself, but a 3 sigma event can bankrupt you. You willingly pass on this risk for a price.
No, it means they buyer thinks it is worth more than what they are paying. It doesn't mean they are right. It also means that this is the only buyer who thinks the company is worth that much, because if someone was willing to pay more, the company would be selling to them instead.
Ideally startups are about creating value, and making a return on that value, but more and more they look like they are instead selling hype to a series of investors who are trying not to get stuck with the hot potato.
I worked for a company that had a buyout offer for 8 or 9 figures that they turned down. After I left the company ended up collapsing with no exit. It happens frequently.
The reason anybody is willing to buy and sell anything is because there's no single "real value" of anything. Value is contextual. When the grocery store gives me a cake in exchange for $20, it's because the value of the cake, to them, is less than $20. Conversely, the value of the cake to me is more than $20, otherwise I wouldn't be buying it.
If you sell your business, it's because the value of the business to you is less than the purchase price. Likewise, the value to the buyer is greater than the purchase price.
Sure, what I'm getting at is that in your hands, or in the buyer's, the value can go to zero or multiply. If they buy, it's because they assess that the chances of it multiplying are greater than it going to zero. Why sell in that case?
The buyer is not assessing that way. The buyer has a diverse portfolio where they only need 10-20% of their bets to succeed. The math is not in your favor as an employee.
Your intuition is wrong here. Check out the Kelly criterion and do a little math - by my math, when you have modest personal assets <$1m, if you expect a 200x return from today, and you think there's a 1% chance that'll happen, you should sell 99% of your current stock and only hold the 1%. This maximizes the preservation of your net wealth.
VCs have MUCH larger bankrolls and so their Kelly bet is proportionately larger, but not percentage larger.
A 10% tender offer isn't really an interesting discussion. You should take definitely take 10% off the table unless you're already pretty wealthy.
The interesting discussion is how much you should take off the table if the offer is uncapped.
Growing up around people who lost everything, job and savings, working at Enron, you should take all the money they’ll let you. You are structurally long your company already, because if they struggle you could lose your job. Diversify your wealth away from that concentrated position as much as possible if you’re offered a fair price.
I disagree. The answer for me is always half. And then next time, half again. Always take some out and leave some in, and an easy way to hedge your bets is to make both amounts half.
You are welcome to your own perspective. I just want to point out to others that having even half of what was presumably a large fraction of your net worth in any single company is not considered well diversified, especially when you rely on that same company for your paycheck.
Would you apply that similarly to RSUs at a public company as well? i.e. always sell your stock grant and diversify regardless of the company?
If they gave you cash instead, would you use it to buy stock in the company? That should answer the question.
Yes, same principle. And with RSUs you can be even more confident that you’re selling at market rate than you can with a tender offer for illiquid equity.
> The interesting discussion is how much you should take off the table if the offer is uncapped.
50% for security, let the remaining 50% run. We can spend countless hours modeling the risk and return delta of various percentages and against non correlated asset classes you might diversify into once liquid, but most of life is luck; you can do everything right and still lose. This makes it easy, imho.
(not investing advice, just a rando, n=1)
Edit: noir_lord indeed! Good eye. https://www.youtube.com/watch?v=1TCX90yALsI
Another voice in favor of "money today good" (though not from personal experience).
I'd even go so far as to recommend putting that money specifically into things that promote your long-term economic stability, e.g. is it enough to let you buy a home that's going to have monthly expenses below what you're paying in rent? There's plenty of economic uncertainty out there right now, but I feel confident in one thing: Even if the entire economy goes into the crapper rent will not go down. In addition the real estate market is pretty soft right now because of uncertainty, so if you're in a position to purchase that may let you basically lock in your monthly housing costs for a decade or more.
https://www.youtube.com/watch?v=XamC7-Pt8N0 (NSFW language, first 45 seconds is the relevant part)
> you can do everything right and still lose.
ST:TNG fan? - That was an important lesson for me as a kid.
“It is possible to commit no mistakes and still lose. That is not a weakness; that is life.” - Picard
100% correct. Taking 10% away to remove downside risk of the remaining 90% is an absolute no-brainer, especially if it is a meaningful sum of money to you.
Indeed; I can't imagine a world where 11% higher gains makes a significant difference. Either that 11% is a large number in an absolute sense, in which case the 89% you retained is also VERY large; or it's not that big of an absolute number and doesn't matter that much anyway.
https://en.wikipedia.org/wiki/Kelly_criterion
Obviously you are guessing probabilities to plug in but they can be based on other exits etc. Someone in the know on startup equity could offer this as a consultation service.
I participate in a personal finance sub-reddit, and there is often a question of whether someone should pay off their mortgage (completely, or make some lump sum payments).
The mathematical answer is that if your interest rate is lower than the expected returns of some kind of portfolio you have, than you'll make more money investing.
But I like to bring up what Morgan Housel, author of the book The Psychology of Money, said on paying down his mortgage:
> It just increased our independence, even if it made no sense on paper. So that's another element of debt that I think goes misunderstood. And a lot of that for both of those points is this idea that people don't make financial decisions on a spreadsheet. They don't make them in Excel. They make financial decisions at the dinner table. That's where they're talking about their goals and their own different personalities and their own unique fears and their own unique skills and whatnot. So that's why I kind of push people to say like, it's okay to make financial decisions that don't make any sense on paper if they work for you, if they check the boxes of your psychology and your goals that makes sense for you. And for me, extreme aversion, what looks like an irrational aversion today, and I would say is an irrational aversion to debt, is what works for me and what makes me happy, so that's why I've done it.
* https://rationalreminder.ca/podcast/128
* https://www.youtube.com/watch?v=NSaRb-iFwPA&t=12m48s
Cash flow is another facet of paying off your mortgage early, and I think it’s underrated. Eliminating thousands of dollars from your monthly expenses dramatically increases your flexibility. Since most people have “cash / reserve fund” and “retirement investments (do not touch)” as their major financial categories, it optimizes the one you interact with the most. You don’t need to always make the maximum possible to keep a comfortable amount of cash on hand, which gives you more flexibility to take time off between jobs, or tank a layoff, or take that startup job that pays less (but damn if it doesn’t look fun). Personally I recently bought a second apartment adjacent to my first in order to combine them into a 3br. Paying off the first mortgage years ago was the difference between being able to afford the monthly expenses and not.
Obviously you need to consider both net worth and cash flow when making a decision like that, but don’t underrate the difference that improved cash flow makes!
If you have a 2.6% mortgage which is less than inflation, then you are making money from the bank. Paying that off would be ridiculous.
The point being made is good though.
Owing no one anything is incredibly liberating. It changes how you behave and what you are risking.
Sure, I’d be richer on paper if I had kept the first house and rented it out, buying the second house with debt. But the worry and hassle and was my concern and I’m far happier. Perhaps 20 years from now my position would be different.
Paying your mortgage off comes with no risk, it’s not going to come back again. Meanwhile your investments could collapse tomorrow.
If my federal money market account at one of the largest, most respected financial institutions in the world collapses, I don't know that the piece of paper saying this house belongs to me is going to be worth all that much anyway.
> […] then you are making money from the bank.
Yes, that is the mathematically correct answer.
I mean there are other factors right? How long the rate is fixed for, penalty for paying off early, what you think the rate will be after term is over, you and your family's circumstances etc.
Just to reiterate the point the person above you made, but in far simpler terms: independence can be far greater return on your personal well-being then maximizing gains. I'm willing to "lose" out on $50-$100k over the lifetime of my mortgage in exchange for never needing to make a payment on the house again
The gov and insurance company will still want their taste. I think my escrow portion is probably at least 1/5 of my mortgage payment.
> The mathematical answer is that if your interest rate is lower than the expected returns of some kind of portfolio you have, than you'll make more money investing.
You maximise expected value not by putting everything into the single highest-EV bet, but by sizing your bets according to https://en.wikipedia.org/wiki/Kelly_criterion
Paying off if possible, but I'd not put everything into paying it down. Pay a chunk of it down for comfort, and put some into emergency reserves with some reasonable level of return that could be accessed in the future in case of need. Early payments don't really matter that much if you have a period of unemployment/underemployment before it's fully paid off.
IMO always take the money. Money to me is like water. If you're dying of thirst, that first glass of water is extremely important, the 100th, not so much. You really only need enough money to do the things you want, raise your kids, and retire. The money after that isn't going to bring nearly as much happiness as that first bit.
Think of it this way: Given any company in the world to invest that money, do you think it's best invested in your company or some other? Because if there's another one (eg nvidia, apple etc) then you should take the money out and move it into stocks in that one
1) Making money & keeping money are 2 different skillsets. You've made some $$$, now learn how to keep it.
2) Time is far more valuable than money. If you can take life-changing $$$ off the table in exchange for time, do so. The 2nd $1M buys you a tiny proportion of the benefits that the first $1M did.
3) You have a v. high risk concentrated portfolio that is aligned with your income. That's massive risk.
4) Taking it now buys you time & optionality. Leaving some still buys you blue sky. Best of both worlds.
I would recommend Taleb's book Skin In the Game for this type of question. The best choices are highly dependent on the individual's preference for risk and whether or not they count their existing stock as "extra" or as "income."
https://en.wikipedia.org/wiki/Skin_in_the_Game_(book)
There's a crucial extra factor that isn't in the original article, but ought to be: Money's ability to buy great experiences decreases as you get older. I've seen this with beach vacations, road trips to see a favorite band, fast cars, ski trips, etc.
Seize the moment, friend! What you can do NOW with that 10% slice will never exactly be on your possibilities map again.
I think you're hitting on something that very rarely gets discussed, at least in the US and maybe some other Western societies. I wonder if it's just simple depreciation or compound depreciation (or whatever the opposite of compound interest would be).
Me finding the money to climb Kilimanjaro at 23 is different than me having the money at 40 but worse knees.
Thank you for pointing this out and I hope someone formalizes it more.
Die With Zero by Bill Perkins talks at length about this concept (it's a nonfiction book, so suffice to say it could've been an essay.)
As someone who is not so young anymore, but also not old, I think it is compound depreciation.
But… you can pay someone to carry your pack, and lie in a comfortably bed at night (you won’t sleep though, that ability vanishes at 40).
The shiite travel arrangements young people will tolerate are truly hilarious.
> you won’t sleep though, that ability vanishes at 40
I’m not sure why you say that.
If one takes care of themselves in terms of diet and exercise, good sleep should be a thing for most of their life.
I’m in my 50s, and I sleep about as well as I did in my 20s (possibly better).
For me, diet and exercise seem unhelpful in the face of even minor stress.
Being exhausted when I go to bed helps and I ride a bike to get that, but having the time to get my milage high enough isn’t always possible.
> For me, diet and exercise seem unhelpful in the face of even minor stress.
Good point.
I probably should have written something like “…diet, exercise, and mental health”.
This is why I love old tech like my 40 year old car (bmw e30 325is) and analog camera and whatnot. You have way more control because of less external dependencies and simplicity, and the prices are still decent compared to what you'd get now for vastly more money. $70k dogshit unwrenchable SUV or $10k 80's car that works like a dream and is built like a thinkpad? It's so relaxing working with older things. Hearing old peoples stories are wild, like just crossing the border with a 6 pack of beer no passport no nothing and having a good time on the weekend. Now my asshole is getting scanned down to the submillimeter and sitting in a palantir database just so I can go on a vacation.
Great car! How’s maintenance?
Maintenance is great. I've only had to do minor things to it. Since I'm 6'5 I did have to re-weld all my stalks to be 30 degrees back and do a bunch of work on the steering column and wheel to bring it forward 8 inches and up 2, some stuff on the throttle body from coolant leaks, but other than that it's been great. I've put 100k+ km on it in just the past two winters since I live up in the boonies. I'm alerted of oil changes by the lights in the centre of the dash as well. I haven't done much of any work at all except what I mentioned since buying it and it's been smooth sailing for multiple winters now. The M20B25 is built like a tank. I have it sitting on B8's on H&R sports springs so the handling couldn't be better, and I did some minor ECU tuning on it to give me a little more power on the low end. The idle has remained at a perfect 750 as well, and I can get it down to 6.8L/100KM if I baby it. It's the perfect car [0]. I've even binned it a few times and it's still going strong.
I've also got a period correct radio in there from bmwradios.com (radio wizard from estonia) who gave it bluetooth functionality along with a period correct panel in the console for a microphone, so I can talk hands free while I'm driving. He also modified the radio for me to read out the different GTA 3/4/5 radio stations and I can switch them around as I only listen to GTA radio and commercials when driving [1]. Besides it being 900kg with no airbags, it's the perfect car.
Between e30zone, the bentley manual, and realOEM [3] amongst the other infinite amount of resources it's impossible not to do your own work on it and it's usually easy. It really is a thinkpad in car form. Most parts are still produced and if they aren't you can get any number of things from third party shops like e30garage.no [4] if it's not on FCPEuro. Lot's of parts are also plug'n'play between different BMW models like steering racks which are quite easily swappable.
[0] https://i.imgur.com/kjt2ATf.jpeg
[1] https://i.imgur.com/uenzzLq.mp4
[2] bonus winter video: https://i.imgur.com/KG2IlgN.mp4
[3] https://www.realoem.com/
[4] http://e30garage.no/
Fuckin A
We were in our 20's when my friend said 'A day in your 20's is worth a year in your 30's, a day in your 30's is worth a year in your 40's, etc...' Now in our 60's we're a little less adamant - every day is worth something.- but it has been a useful perspective.
A day in my 20s was worth nothing. I went and flipped burgers for $4/hr, then probably went out for beers at a dive bar that night. Just living day to day.
I imagine your 70 or 80 year-old self would think that a day like that in your 20s is worth the moon.
I’m ten years away from that age. I’d never go back, unless I could take what I’ve learned since then with me.
I’ve just started my 60s.
Physically, I don’t feel a lot different than in my 40s. ( I’m pretty firm in my exercise schedule. ) But looking over almost anyone in their 80s, I’m reminded that the 60s likely kicks off ‘the fourth quarter’, to use sports parlance.
Time to let it all hang out, leave nothing on the table.
Also you might get sick. Getting sick is like going 30 to 80 in 60 seconds.
I took a few months off intentionally in between jobs to hike and camp and hang out with my kids. Now that my kids are older my only regret is that I didn't do it for longer.
> Money's ability to buy great experiences decreases as you get older.
Excellent point. You may have just talked me into retiring.
> What you can do NOW with that 10% slice will never exactly be on your possibilities map again.
Maybe not... but "once in a lifetime chances" come around more often than you think. You don't have to take every one right now. (As you get older, options narrow, as you said.)
That's one of the main theses of the book "Die with Zero":
- https://www.diewithzerobook.com/welcome
Read it earlier this year and it definitely changed some of my thinking along those same lines.
My loose summary of the book:
"Any money left in the bank when you die is essentially wasted - you could have used it to have experiences when you were alive, or given it to family / charity earlier when it would have had more benefit. Figure out what major experiences and memories you want to have in life, plan to do them earlier when you have health and time, and build up memories for later in life."
I didn't find the discussions of how to plan out retirement savings very useful - there's a lot better info on withdrawal approaches in various FIRE-related groups.
But the "be willing to spend now on activities you might not be able to do later / don't hold off on 'living' until you're retired" argument made a _lot_ of sense to me for a variety of reasons, and it was a major factor in researching early retirement a few months later (and deciding to make that a new goal. along with taking more vacations before then).
Experiences are overrated.
Then how do you rate 'experiences'?
I don't agree. How can wasting your money in your twenties and thirties be more valuable than saving for an early retirement. Imagine being able to retire at 40 and do whatever you want. If you weren't stupid, your health should be good enough. Why prolong the time you have to do stupid chores for other people when you can be strategic and opt out as early as possible.
You can take once-in-a-lifetime experiences in your 20s and still save for retirement. I went to Burning Man and traveled to Amsterdam in my 20s and that didn't impact my savings.
I should point out that it's cheaper to travel when young: Back then I stayed in a tent in the desert and in a friend's room near Amsterdam. If I did the same trip today, I'd have my family in tow, and would need more comfortable accommodations.
I should also point out that startup equity is not retirement savings. Selling 10% of your equity, investing most of it, and then doing something that you won't be able to do when you're old is a very wise and mature decision.
Taking some time off to travel when you're young is much more than a beach vacation. You meet people (sometimes you meet your future wife), that can become lifelong friends. You learn what you like and don't like; and that the world is infinitely more complicated and beautiful than what you could imagine through books and watching youtube.
After 40 you've already made many of your major life decisions - career, partner, education, kids etc. There's less room for new experiences to alter that trajectory meaningfully.
One thing I've also realized through being lucky enough to enjoy some "semi-retirement" between work is having a healthy balance makes me appreciate both work and "leisure" more. It gets pretty boring to go to the beach every day, it turns out. I was itching to get back to building something by the end.
> Imagine being able to retire at 40 and do whatever you want. If you weren't stupid, your health should be good enough.
Do you really believe people who have health issues at an early age are simply stupid?
There is probably a stronger argument that health issues later in life a due to being ‘stupid’.
I don't think it's an either or proposition. You can both retire early AND take a nice vacation. Sure it delays your retirement date by a couple of days, but I think that's a good tradeoff generally. I'm approaching 40 and even now, the vacations I took when I was 10 years younger were different than now, I could cram more in, do more things without being as sore the next day, etc. And I haven't had kids yet, that would definitely change vacations.
Kids is one big reason. You can have totally different experiences before you have kids, once they arrive your outlook on life changes, risk tolerance changes etc.
If you can retire at 40 having lived your 20s/30s to the fullest then game on, but it would be crazy to sacrifice that time when you are so free and full of energy otherwise IMHO.
FWIW I am fortunate enough to have really enjoyed by earlier years and be mostly retired in my early 40s.
You don't have to take all the money off the table; in fact you usually can't. Take some off to have your cake and eat it too.
Another way to think about it is, take the dollar amount if you sold it all.
Then consider it as an offer to buy into the startup at the same dollar amount.
Would you invest?
Not selling is the same as investing in the startup.
This same logic applies to stocks you are holding.
That advice also serves INHO well regarding angel investments and potential secondaries. If you made some x in a short time, take the money and run and leave the risk to institutional VCs who are not investing their own money.
For those like me that had never heard of of Zenefits.
https://en.wikipedia.org/wiki/TriNet_Zenefits
In my 15 year software engineering career, the most money I could have cashed out was around $110k in crypto space; that was the value my crypto peaked at but it would have required unlocking my tokens which would have lost me my forging position and the $4k per month which came with it... I ended up not selling and earning about $20k to $50k per year for 4 years so it has been a good decision... Also, it was not possible to unlock my tokens without a 1 month delay and token prices were fluctuating wildly... Moreover, due to my public position on the project, and the public nature of Blockchains, my unlocking of tokens would have been seen by community and possibly triggered a project-ending sell-off.
So basically the only time I had the opportunity to theoretically earn $110k, at the peak of my 15 year career after working insanely hard including nights and weekends, was not even feasible in practice and it turned out that I earned more money holding and forging over the following 4 years than I would have gotten for selling.
But damn, when I see some of these corporate 9-to-5'ers sitting on $1 million+ which they got after only 5 years or so and they're not selling because they think they deserve more. It seems insane to me. It's a lot of money, they can sell anytime, probably still keep their job. As they say in crypto, I would dump the shit.
"Jim Bennett: I've been up two and a half million dollars.
Frank: What you got on you?
Jim Bennett: Nothing.
Frank: What you put away?
Jim Bennett: Nothing.
Frank: You get up two and a half million dollars, any asshole in the world knows what to do: you get a house with a 25 year roof, an indestructible Jap-economy shitbox, you put the rest into the system at three to five percent to pay your taxes and that's your base, get me? That's your fortress of fucking solitude. That puts you, for the rest of your life, at a level of fuck you. Somebody wants you to do something, fuck you. Boss pisses you off, fuck you! Own your house. Have a couple bucks in the bank. Don't drink. That's all I have to say to anybody on any social level. Did your grandfather take risks?
Jim Bennett: Yes.
Frank: I guarantee he did it from a position of fuck you. A wise man's life is based around fuck you. The United States of America is based on fuck you. You're a king? You have an army? Greatest navy in the history of the world? Fuck you! Blow me. We'll fuck it up ourselves."
https://www.youtube.com/watch?v=XamC7-Pt8N0
Take the money. These things are 10x bets. You won't be sad that you got 7.5x instead of 10x (which is what happens if you take the 25% of your stake off the table). If you flip it, you'd have 10x instead of 7.5x. It's not meaningful.
Each time you get money you get to deploy that elsewhere. If you have super risk tolerance, push $25k cheques as seed.
A+ advice.
TL;DR: don't be greedy, guaranteed a lot now is better than highly unlikely more in the future
When money is growing on trees, pick it.
A bird in the hand.
A sparrow in hand is better than a pigeon on the roof.
And where does the stone fit in with these two birds?
It's rolling into a mossy gander, or something.
gotta wait til one of them gets the worm, then you find out
I never heard of sparrow pie.
Pigs get fat, hogs get slaughtered.
AKA quit while you're ahead
I believe the complete opposite. If someone is willing to buy your business, no matter the amount, it’s because it’s worth MUCH more than what they’re paying. It’s illogical for them to pay less than its real value. It’s even illogical to think they’d pay exactly what it’s worth. Why would somebody bother buying a company if they were only going to break even?
This assumes risk appetite is the same. For instance, insurance works this way - in expectation you’d pay less yourself, but a 3 sigma event can bankrupt you. You willingly pass on this risk for a price.
great example, thanks
No, it means they buyer thinks it is worth more than what they are paying. It doesn't mean they are right. It also means that this is the only buyer who thinks the company is worth that much, because if someone was willing to pay more, the company would be selling to them instead.
Ideally startups are about creating value, and making a return on that value, but more and more they look like they are instead selling hype to a series of investors who are trying not to get stuck with the hot potato.
I worked for a company that had a buyout offer for 8 or 9 figures that they turned down. After I left the company ended up collapsing with no exit. It happens frequently.
Everything you said is true. It doesn't refute that you should sell the 10% though. You're describing commerce.
not getting it.
The reason anybody is willing to buy and sell anything is because there's no single "real value" of anything. Value is contextual. When the grocery store gives me a cake in exchange for $20, it's because the value of the cake, to them, is less than $20. Conversely, the value of the cake to me is more than $20, otherwise I wouldn't be buying it.
If you sell your business, it's because the value of the business to you is less than the purchase price. Likewise, the value to the buyer is greater than the purchase price.
what if the buyer has something that can add value to the business?
Almost all startups go to zero, meaning every cent what VCs paid for stock, at any price, did not end up being worth more than they paid.
Sure, what I'm getting at is that in your hands, or in the buyer's, the value can go to zero or multiply. If they buy, it's because they assess that the chances of it multiplying are greater than it going to zero. Why sell in that case?
The buyer is not assessing that way. The buyer has a diverse portfolio where they only need 10-20% of their bets to succeed. The math is not in your favor as an employee.
Your intuition is wrong here. Check out the Kelly criterion and do a little math - by my math, when you have modest personal assets <$1m, if you expect a 200x return from today, and you think there's a 1% chance that'll happen, you should sell 99% of your current stock and only hold the 1%. This maximizes the preservation of your net wealth.
VCs have MUCH larger bankrolls and so their Kelly bet is proportionately larger, but not percentage larger.
You're selling only 10%, you still get to see the other 90% go up in value, but that 10% you sold protects you from a wipe-out.
You are ignoring the risk aspect. There is a chance that it is worth more than they are paying, but there is also a chance it will be worth less.
Selling a part of your business can help spread risk to a new investor reducing your own personal risk.
what I'm saying is the buyers are subject to the same risks, I'm not ignoring them
But obviously an investor with $XYZ under management that can make N bets is better equipped to handle that risk than you, an individual with 1 bet.
fair point :)