Tuesday, April 29, 2008

Working for a Starup - One more take

In a previous post I talked about the opportunity costs of quitting what you are doing now and joining startup. If you evaluated the total costs and the possible scenarios and decided that joining the startup gave you the highest expected value over other options including staying in your current job, then consider this.

Would you consider then a new scenario? Here, instead of quitting your current job and joining the startup, you invest an amount equivalent to the total opportunity cost and you continue in your current job. With opportunity costs, it is not an accounting cost and you won't see that as a line item, but now I ask you to take a loan out for that amount and invest that on the startup. This cannot be worse than the one you chose and could be better sine you keep your current job and cash flow.

Pushing this further, if you look at this as an investment decision, what other investment options are available and how does this one compare against the rest? Does the startup still provide the maximum expected value?

Why or why not?

Do you see inconsistency in this argument?

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