You’re joining a startup and getting stock options, and the founder says, “This company is going to be worth $1 billion, and I’m giving you 0.1% of the company; therefore, you’re getting $1 million worth of stock.”
The founder is negotiating based on what it’s going to be worth in the future. You have to figure out what it’s worth today by applying a discount rate, or an interest rate, that accounts for the massive risk startups face.
You’ll end up with the amount the company is actually worth today. That’s the price at which a venture capitalist would invest in the company.
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Once you’ve been in a good relationship with somebody for a while whether it’s business or romantic life gets a lot easier because you know that person’s got your back.
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A startup is so difficult to pul...
Price discrimination means you can charge people based on their propensity to pay.
You can’t charge people different amounts just because you don’t like them. You have to offer them something extra. Something rich people care about.
It works because rich people are willing to pay more...
It is a game theory by Thomas Schelling. It’s about multiplayer games where people respond based on what they think the other person’s response will be.
How do you get people who cannot communicate with each other to coordinate?
Seems impossible, but you can use social norms to conve...
The Kelly criterion is a popularized mathematical formulation of a simple concept: Don’t risk everything. Stay out of jail. Don’t bet everything on one big gamble. Be careful how much you bet each time, so you don’t lose the whole kitty.
The number one way people get ruined in modern busine...
Consumer surplus is the excess value you get from something when you pay less than you were willing to pay.
I’ve made some money and get a lot of joy from my Starbucks coffee. So if my coffee cost $20, I would pay it.
But Starbucks can’t price the coffee at $20 just for me, because ...
Negotiations are won by whoever cares less. Negotiation is about not wanting it too badly. If you want something too badly, the other person can extract more value from you.
If someone is taking advantage of you in a negotiation, your best option is to turn it from a short-term game into a ...
An externality is where there’s an additional cost imposed by whatever product is being produced or consumed, that’s not accounted for in the price of the product.
The environment is finite and precious, so we have to price the product properly and fold that back into the cost of products....
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