[aclements18]

Question: If you were to have a CS grad from Stanford offer you 50% of all of his income for the rest of his life. How much would you pay in one lump sum? $100? $1 million? Probably more… Point is, you would agree the number is not zero.

He doesn't have a job yet (and never had a job before), but by any measure everyone that knows him says he's extremely talented. And now he's even getting huge job offers from Google and Facebook.

Would you say that you wouldn't make that investment? Is he worthless cause he has an upcoming rent payment due and also has to feed himself?

[greenyoda]

It would be an extremely risky bet which I would never make. There's no guarantee that the grad wouldn't take your money and live the rest of his life as a heroin addict -- lots of smart people don't live up to their potential. Also, he might get hit by a bus tomorrow.

Similarly, lots of companies run by smart people don't live up to their potentials, or are not lucky enough to be popular long enough to make billions of dollars.

[aclements18]

To be clear, you wouldn't pay $100 to get half of his signing bonus at Facebook?

All of those factors (risks) have to be taken into consideration, and you price it as such. It's still a > zero figure.

[XorNot]

Definitely not, because at that valuation the offer is suspiciously too cheap - in fact it's so cheap it's unlikely he'll pay out because the first thing he'll do is hire a lawyer to get out of that contract.

[Anderkent]

You're nitpicking. It's a hypotethical. He's trying to show how something that is not profitable right now might still have positive value.

The point of the question is whether you expect the person to earn enough that getting 50% of their life income would be worth 100, 1k, 10k etc. today, not 'how likely that person is to actually keep the deal'.

[XorNot]

But that's exactly relevant to the point - the issue is that the details of the arrangement matter, which is relevant to the wider point: how are we expecting profit to be made? Gesticulating to size doesn't actually monetize something.

[RokStdy]

I'm sorry, but your hypothetical is bad for this scenario.

This only works if, in addition to all of the other possible risks we all face in life, this CS grad could simply disappear because a CS student in the new freshman class is more interesting.

Snapchat is risky because it's audience is as fickle as they come.

[aclements18]

I would actually argue that there are more top tier Stanford CS grads than there are startups with Snapchat's engagement numbers. The value of the student should be discounted more than the value of snapchat from a competition standpoint.

In either case the point was to illustrate that, all risks considered, snapchat is still worth a lot of money. I have yet to see anyone (HN commenters, tech press) argue about what their valuation should be, which seems like the reasonable follow up to "It should not be $3 billion".

We can agree that its not zero, then what basis can we use to agree that $3 billion is inaccurate?