Of course I have seen people lose. I've personally lost on options as well. I didn't make the assertion that you can't lose. With options, you are betting that the company will not fail and that it will become much more valuable. Both are statistically unlikely. You are also betting that you won't leave or be otherwise eliminated before the exit.
Mainly I'm framing this in comparison to additional salary which is also unlikely to generate significant wealth unless you are very good or very lucky (Probobally both) at managing your money.
How much is needed for something to qualify as "significant wealth"? You seem to be dismissing differences in salary as unimportant, so it's fine to take a pay cut in exchange for even a small chance at significant wealth, because that's all that matters.
Let's say the salary difference is $50,000/year. Over 20 years, that's maybe half a million dollars, post tax, that you gain by ditching options. Maybe that's not significant to you, but it seems to me to be a pretty rational decision to prefer a relatively certain half million dollars over a low chance of some substantially higher payout.
In my experience the salary difference isn't usually that large. Sometimes it is, and some companies do pay unusually low salaries in exchange for options, obviously increasing risk, perhaps to an undesirable level.
I'm CEO and co-founder of a funded company. We pay competitive salaries + options. I don't begrudge someone who isn't interested in options. Options are actually expensive to me. We are still fairly early stage (Series A funded) so the founders own most of the company and the option pool primarily dilutes the founders. I want to give options to someone who wants them. I'm fine paying more salary in lieu of of options.
I think of options like a profit-sharing plan in a mature company. If the company does very well then the employees should share in that success. Some folks feel that paying very low salaries and heavy options breeds loyalty. I personally don't subscribe to that. I prefer to pay something competitive and have options as nice upside for the employee.
> In my experience the salary difference isn't usually that large.
Speaking as someone who recently did a round of interviewing with a mix of established companies and startups, $50k is a _very_ conservative guess. The difference between my Google offer and the highest startup one was ~$100K - if you drop to the average startup offer, it goes up to ~$150k. And that was at ~3.5 years of experience - it gets worse as you become more experienced.
It's hard for me to imagine how sure of a bet a startup would have to be for their equity to be worth $150k/year.
Interesting data point. Thanks for sharing. I'm no longer in SF so may be out of touch with current salary gaps.
That said, this is makes sense to me. Google's stock options aren't making employees wealthy these days. Yet it's still a fantastic company and obviously compensates with salary. On the other hand, no startup that I know of can pay 3-400K salaries for 3-4 years exp.
Also it should be said that the type of work you likely do and the culture at a large public company will likely be very different from a small startup. Culture, ability to influence direction, large potential upside (though unlikely) are reasons people continue to pick startups despite lower salaries.
For a new grad several years ago comparing offers between say Uber, Airbnb, Stripe, Google, and Facebook, the mid-stage private companies like Uber/Airbnb/Stripe are likely paying $100K, while Google/Facebook offer barely more at $120K or so.
However, the Google/FB overs likely include RSUs valued at $400K that vest over 4 years, while the private companies offer options (at the time) "worth" (at current company valuation) ~$300-400K, with incredibly low strike prices since the 409a can be much lower than the preferred valuation. It really depends on how well the company has down, but since the last 3 years those private companies have doubled to 8x in value (see Uber), and thus the Uber employee's shares would be worth $2.4M-$3.2M. Google also appreciated (+50%) making the RSUs worth $600K, but still has not appreciated as much. Of course, this is just one example, picking the most successful companies, but it is illustrative of the general principle: if 20-30% of the time you can get on a rocketship, you can be +EV but with higher variance.
I'm merely assuming that your working life is at least that long, and that the salary/options tradeoff is something you can make throughout, as you change jobs.
If you go hardcore for options, then you might take every job with a reduced salary and a chance of striking it rich. If you're totally against then you might take every job with a more established company (or unconventional startup) that pays better. The tradeoff of potential riches versus more certain earnings is as I described.
You're one lucky person to know!