[dustingetz]

it's financially brilliant from the kid's perspective, assuming she is successful. she gets a 5-year head start in business. compound that head start all the way to retirement, and its surely worth more than she paid.

http://www.paulgraham.com/equity.html

[mattm]

There's a lot of assumptions that need to go correctly for this agreement to work. In my experience, assumptions like this rarely work out.

It's very dangerous to enter into an agreement where you are assuming that things will go well. If your assumptions don't pan out, you will be in big trouble.

She shouldn't just look at the upsides but also the downsides. If things don't work out, does the person really want to be paying 6% of their meager retirement income when she's 80?

I think it's pointless to even plan more than 6 months ahead as priorities and situations change. I cannot imagine entering into an agreement for a lifetime.

Money is a very psychological thing. There's a big reason why people get paid after they have delivered work and not before.

A graduate student in her 20s does not have the experience to see all the potential downsides of an agreement like this. That is what makes it dangerous.