[repsilat]

Risk (well, "variance") increases the value of optionality.

Assume that there is a job market with lots of jobs. Each will hire you for your market-rate total compensation, no stock cliffs, no job-seeking costs. Spherical cow. Say also that you can tell the variance on stock compensation, but you can't guess at future performance.

One strategy might be to go to an all-cash job and make your market rate forever. That's a lower-bound on the best expected future earnings. But a better strategy is,

- Join a high-variance company,

- If/when your pay drops below the market, find another high-variance company.

With this strategy your expected earnings are higher than your market rate, even if the expected earnings at every job is the same. And the outperformance scales up with the variance.

[jedberg]

Yes, mathematically in a perfect spherical cow world, you are correct.

But I live in the real world. And in the real world, you can't switch jobs instantaneously back and forth, like you can trade stocks. In the real world there may not be a job available at the market rate. In the real world it takes months to find a new job even if there is one, and then it's even harder to actually get market rate.

So in the real world it make more sense to discount stock compensation compared to cash compensation to account for all of these things and the risk you take on by accepting stock based compensation.