[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.