[fizwhiz]

> Are $500k+ yearly salaries in SV really that usual?

Salaries? Not at all. Total compensation? Well, it depends.

Software engineers with < 10yrs of experience routinely make this much at FAANG. The total compensation number usually includes the following:

* Salary

* Bonus (anywhere between 15-25% of salary)

* Initial grant that vests over 3-4yrs

* Stock "refreshers" that you get annually

* General equity appreciation due to a bull market

For senior engineers, the equity portion of their compensation far outweighs their salary.

[naveen99]

I wouldn't count the equity appreciation as compensation. you already own the capital, its your own capital gain, not income from employer at that point.

[conro1108]

I'd argue that if we're talking about unvested equity, counting appreciation as a comp increase rather than capital gain is reasonable.

[blawson]

Yes and no. When your RSUs are granted at 100k and then vest a few years later at 300k, from yours and the IRS' perspective you made whatever + 300k.

[vkou]

Yes, but you should value them at 100k, because it is the functional equivalent of getting a 100k cash bonus, that you (instead of diversifying) foolishly spent on buying a single company's stock.

You don't actually need to work at Facebook to sink 100k into buying Facebook stock (That you then forbid yourself from selling for 4 years).

[stale2002]

> that you (instead of diversifying) foolishly spent on buying a single company's stock

So, it is actually a bit more complicated, and better than that, and long term stock grants act as a psuedo stock hedge.

This is a simplification, but imagine that there is stock worth X, that hs a 50% chance of the stock doubling in value, and a 50% chance of it crashing to 0$. You might think that this would be equivalent in expected value to X, but that is not true.

It is not true, because if the stock goes way down, you don't have to "accept" those losses. Instead, you can jump to another company, mid way through, and get back your previously high salary.

In that way you can capture the upside potential, while also being protected against the downside losses, in that if the stock goes down, you just jump ship, and get a high salary somewhere else.

[naveen99]

hedging is not arbitrage. There is no free lunch.

[stale2002]

In this case it is free arbitrage.

This is because if the stock goes way down, and you are 1 year into your 4 year vest, then you can leave the company, and get a high compensation package somewhere else.

Do you understand how this makes it so you have free downside protection, from those other 3 years, because you can leave and get the high salary somewhere else, if the stock crashes?

[logicslave12]

It’s basically guaranteed at this point. And you don’t own the capital, you don’t start getting the massively appreciated grants until you are a few years in

[opportune]

You actually do not own the capital until it vests, and the amount that vests (which could have greatly appreciated) is all taxed as income.

[MagnumOpus]

That's just accounting treatment. Doesn't change the financial fact that it can be replicated with a cash bonus the same size as the original grant.

[opportune]

No, it can't because you lose unvested shares if you leave before they vest. Have you ever been granted RSUs?

[tigershark]

I guess that when the market will finally correct because of all the mess that we are having in 2020 their salary may get quite a downturn if they are including the increasing values of the stock market as part of their compensation..

[Phlarp]

>* General equity appreciation due to a bull market

This one can theoretically cut both directions

[outworlder]

Theoretically. In practice, for the past century, there has been only one direction, provided you are patient.