Paul Graham on Startups, Innovation, and Creativity (2009) [audio]

I had one former colleague turn down my request because his current company gives great health insurance and 401k contributions. I was like "you are 22 years old! Take a tiny risk!"

Don't you realize you've contradicted yourself here? Perhaps you've failed to consider that great health insurance and 401k plans are part of the total compensation package. If you're matching base salary but ignoring other benefits, you're not matching anything.

Granted, you could be the next Google/Facebook... whatever, but the smart odds are generally on the safe company with the better overall package. I bet that company also doesn't require working weekends (something most employees would rather not).

I'm curious what exactly you mean by this. Let's say an engineer's current compensation consists of:

- $N cash per year, and

- A single stock grant of shares in a publicly traded company (worth $4N at today's closing price), vesting linearly over 4 years

So the engineer's total annual compensation is worth $2N ($N cash, plus $N worth of stock vesting at the end of the year).

When you say you'll pay as much as her current company (and that she 'will get much more equity'), are you saying you'll match her current liquid compensation (cash plus vesting of marketable securities) or just the cash portion?

If the latter (you're only matching the cash portion) then, even if her compensation has 'strictly better expected value' (based on a coon understanding of the probability distribution of outcomes), she may still prefer to avoid the 95% chance that her new compensation turns out to be worth only half of her current compensation.

Once the prospective hire also factors in the common startup expectation that you sign over all your waking hours to the company, the surprisingly substantial value of benefits, and the added risk that the startup goes belly-up or can't make payroll regularly at some point, that offer of matching salary starts to look much less attractive.

Not saying that your frustration isn't warranted, or that all of these factors necessarily pertain in your startup - just that there are entirely valid reasons why the person on the other end of the table might refuse. (After all, the thing that makes much of modern economics / commerce possible is that risk is subjective.)