[csomar]

There is nothing to understand. There are two classes: Shareholders and Employees. Always been. One take the risk and reward and one take a fixed salary. Some people want to have their cake and eat it too (ie: take a fixed/stable salary while also a slice of the profit).

[Hermitian909]

I don't know that's a fair characterization of risk profiles.

As an employee you're still taking a risk at the company. It falls over you are out 100% of your pay + your health benefits. As an employee I absolutely take this risk into account when evaluating an employer.

Shareholders sometimes take a similar risk, but are often reasonably insulated from major downside via financial mechanisms of varying complexity, from index funds to complex options contracts.

[ericd]

An investment that’s insulated from risk generally has a negative real return (at least as long as the risk-free rate is negative). Insurance via options is very expensive.

[Hermitian909]

The idea I'm trying to convey is not no risk it's risk capped at tolerable levels for plausible outcomes (index funds can go to zero in principle). The latter is often an option that is available to capital holders.

Employment conversely, is almost always placing all your eggs in your employer's basket. If the basket tumbles many employees will lose their shirt in a big way.

[ericd]

Ah ok. Software engineers typically make enough relative to cost of living to sock away quite a bit of savings, though? So losing their job and having to find a new one isn’t usually enough to lose their shirt.

And I feel like the recent bull run has made people forget that stock as a class can be extremely risky. Like the entire market going to 1/10 its former value risky (peak to trough in the Great Depression, the indices lost 90% of their value).