I’ve been asked this before by folks.
Hey, you know technology, what stock picks would you recommend?
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It’s a tough question, with a lot of intangibles. It’s no wonder people ask friends for advice. You have to think about what matters to you? Your free time? Your income? Your time to commute? What about the team you’re working with? Or what your job contributes to the world?
Many of those I can’t quantify for you. What you can quantify money, so it’s worth doing that!
1. What are their prospects for success?
When asked about the chances of a companies success, knowing the industry may be one small part. You also have to know how many competitors they have, and where they are along in the process. And it’s not just developing technology, but team dynamics that are huge. From what I hear VCs hire more for team than for idea.
What factors outside domain expertise come into play? Lots! The weather, financial markets, or the big guys like google or amazon coming into the market. They may not buy you, they may just replicate your idea. Then where are you?
2. How can I apply mathematics to money?
My answer is always the same, go for the S&P 500. If the S&P beats 90% of all stocks, then nine out of ten times you will win this way. That’s it, calculation done.
Yeah but how does that pertain to joining a startup?
How indeed. I still say invest in the index, not in one pony. So use that advice as you will.
Gambling on one company is something for gamblers. If you want to become a vc, that’s a different question. In that case you would do a lot of due diligence on team and idea, to be sure you’re putting your money in a smart place.
Can’t I do that as an employee? Yes sure, but the intangibles remain strong.
3. How does all this help me?
It leaves out the intangibles. Don’t count paper as part of your compensation package. If money is a key factor, divide the number of hours per year by your salary plus real benefits – health insurance and so forth – to come up with a real number. Compare that to other jobs.
The heck with these finance jobs that pay $200k and offer a $50k bonus, but ask you to work 90-100 hours per week. Why not get two $180k/yr jobs at 45 hours per week? You see the logic right?
And what else? Of course if you’re going to be commuting in to an office everyday, and joining the family, you want to have great coworkers. So make sure you like the place where you’re working. I don’t know how much this is worth to you, but I would say it’s quite valuable!