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I'd say the expected value is almost certainly higher for an employee career, assuming some financial discipline. After 10 years so in the industry, you should be able to get $100k/year, more in high expense areas. That's $5.8k/month after taxes (assume 30%). Assuming you are single, at $1k/month rent, $300/month food, and $700/month for other things, you have $3.8k/month left over. That's about $45k/year you can save, say $50k for easy math. So in 20 years, you can save $1 million, buy some large-cap stock at 3% dividend and have $30k/year for free (more if you buy a higher-yield utility-type stock like AT&T or Verizon). But the stock market grows by 6 - 8%, on average. If you invest in large, "safe" companies, or in an S&P 500 index fund, at 7%, you'll double your money in 10 years, so you'll end up with $2 million (I did the math on a spreadsheet: yearN = yearN-1 * 1.07 + $50k). That's $60k/year at age 50 (not including 401k matching, and assuming that ages 20 - 30 are years of profligate spending with no saving), about as risk-free as you get.

Compare that with a statistical 90% of failure starting a company, but frequently resulting the loss of the founder's savings due to having invested it in the company. Basically the startup should give at least $50k/year of increase (above the cost of living), plus a 7%/year growth, so for two years doing a startup, you need to walk away with a little over $100k. At a 90% failure rate, you need to exit at $1 million for the expected value to break even. If you are not the sole owner and/or with VC funding it will need to be even higher. (If you are an early employee getting 1% or something you'd need about a $1 billion exit for a positive expected value.) That's some pretty uncompelling math. It gets even worse if you have a family.



> After 10 years so in the industry, you should be able to get $100k/year, more in high expense areas.

Indeed it's higher in some areas. In Metro Boston, that's not uncommon compensation 10 seconds into your career.

You might find this blog entry interesting and on the same line of thinking you laid out above: http://www.mrmoneymustache.com/2012/01/13/the-shockingly-sim...




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