[lumost]

For early/mid stage startups - this is an awful position to take. These orgs are heavily influenced by who they hire - what you pay defines your incentive structure.

Does the world class engineer or business development lead just take it easy and travel around after they join?

Does the new manager push the team and business forward or prioritize stability?

Do engineers spend their time on reactors and impressive sounding projects or figuring out what customers need?

Do people feel lucky to have a seat in the org or do they spend their time complaining and looking for the exits?

Money isn't the only lever, but its a strong one - startups will never compete with established firms on cash outlays.

[shortrounddev2]

People are paid salary and awarded equity based on supply/demand for labor, the marginal product of that labor, and the amount of risk engineers are willing to accept by joining a startup. It's an economic transaction, the same as buying office equipment and signing contracts for cloud resources. Trying to imbue mysticism into it is just asking to be lied to by your employees

[lumost]

There is no mysticism in incentive structures. My point was rather that if you provide strictly below market compensation (as most startup equity is positioned these days). You are likely to get below average talent, or below average results from poor incentives.

[shortrounddev2]

Im not saying that you should pay below market rates, im just saying that the equity calculation is just about supply and demand. It has nothing to do with fairness

[lumost]

It's not so much a question about fairness, just that the employee and employer are playing different games. Acknowledging this and devising a compensation strategy which aligns incentives is important.

Employers play an iterated game where they will hire/release/develop many workers, Employees play a single game where they choose the firm that maximizes their compensation offer.

Once the employee joins, the incentives flip - employers can take advantage of the fact that employees can't move in less than a year to maximize output, while employees can take advantage of their influence on the organization to minimize expectations.

Hence employers offer strong bonuses, or pay above market to avoid this behavior. Supply/Demand influences what companies pay - but isn't the only influence.

Thinking that you can stiff your employees on equity compensation and have it go unnoticed is imaginary. Employees convinced of outsized valuations for equity compensation will quickly become disillusioned.