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> good growth potential and those options work out in your favor, which is actually typically the case

Typically the case? I'll wager that greater than 70% of startup employee options never pay out.

Or have them taken back if they leave or get fired.

If you're going to limit the discussion to startups (I did not), then we need to have a different discussion. I imagine all Facebook employees with an employee number less than #1000 are quite happy with their options. As with all things investing related, risk is proportional to reward. So, those 70% that aren't paying off are offsetting the 30% that are paying off massively.

If you don't want to take this risk, choose a different industry. Traditional corporations issue options all the time that pay dividends that consistently net positive value. You may only get a few hundred/thousand per year, but you can depend (somewhat) on the income they generate.

"30% pay out" is not the same as "30% pay out massively"

You misspelled pedantic.

even less than that. if 1 in 10 startups survives the first year and 1 in 100 goes to ipo, stock options are just a trick to underpay engineers.

now, if one really is a 'key player' and a 'cornerstone', then equity is where the game's at.

You're pretty optimistic. I was going to guess more like 90% never pay out.

And for a good rest of the other 10%, you'd have been better off investing in something else.

I agree with everything you said except for this part:

> "Not directly, no. Neither is health insurance, 401k, company provided meals or other benefits, but all of these things are perceived by most to have at least some marginal value."

Stock options are, 99% of the time, worth $0. Perks, benefits, retirement options, all have intrinsic monetary value.

> Stock options are, 99% of the time, worth $0.

They are also, 1% of the time, worth >$100K.

Some people have a tough time valuing volatile assets and end up making statements like this.. "they're not really worth anything" or "treat them like they're $0". But it's utterly wrong to say they have no intrinsic monetary value. It's more correct to call them volatile assets -- or even more correctly, a risk-free (in terms of capital) option to purchase a volatile asset.

In a startup, you may be right, though I suspect you chose 99% for hyperbole. Maybe it's more likely 80% of the time or 70% or 98.7%.

In an existing public company, as someone pointed out, the value of the company should be captured by the stock price, according to the efficient market hypothesis. As such, if the price is just as likely to go down as to go up, this should mean that stock options are merely worthless 50% of the time. Before you get into your ability to choose the sale date (subject to trading windows).

So really, unless your public company ONLY goes down from the date you start (excepting really weird scenarios where it goes up, but is always negative relative to your strike price during trading windows), you stand to make money from your options. Maybe not much, but something. And you can't LOSE money from them, unless you do something stupid related to taxes, or something stupid like buy-and-hold. (buy-and-hold for certain values of 'stupid'; I actually did this once in order to swing a lower tax rate and it happened to work, but I could have lost my proverbial shirt).

> efficient market hypothesis

absolutely does not apply in private-company stock.

Absolutely. That's why I only mentioned it in reference to an existing public company.

As I mentioned, in a private company, it could well be possible that 99% or 97% or whatever of stock options prove to be worthless.

I think this is the case of the startup world ignoring things outside their bubble. At most companies, options are issued are against stocks that pay dividends, vest at a discounted rate (sometimes $0), and are generally net positive. Yes, in the startup world it's basically like a kickstarter for total compensation, but that's "99% of the time" not how options are used/viewed and a specific silicon valley corner case.

> > What's the point of stock options? > > I know it's hip with the kids to be cynical these days, but surely you jest...

I've seen so many startups' career pages mention stock options as noteworthy alongside perks. Stock options are like a reservation at a poker table where you're allowed to join the game.

> agreeing to something they don't understand

it's more likely the bling of a startup overshadowing everything and that it's mostly less experienced and young people.