Thread by @patio11

Some business topics are misunderstood because they're complicated and do not align with the community's perception of their interests.

Stripe Atlas worked with Human Interest on a comprehensive guide to retirement plans for U.S. companies: stripe.com/atlas/guides/r…

My thoughts:

"Isn't IPOing the retirement plan?" is the snap reaction from most startup people on this topic. That reaction feels socially mandatory; you're supposed to believe in the superposition that startups are insanely hard/risky and that your success is practically in the bag.

If asked, this would be justified as "take a bit more risk to increase your chance of a stupendous outcome." I think that's likely incorrect: rounds-to-trivial amounts of attention to retirement planning improves one's chance of business success, over timescale of a career.

Entrepreneurship is a career path, much like e.g. engineering is a career path, but it is a very *high variance, path-dependent* career path relative to joining AppAmaGooBookSoft four days out of undergrad.

You're not guaranteed to have a very stable financial situation in your formative years. Many of your choices will intentionally pessimize for the stability of your situation in those years; you *want* the extra risk early.

Some folks in the community say that when you're young is the perfect time to make tradeoffs like that. You might not notice the present-day income hit given the compensating differentials of enjoyment and skill growth you get from being an early-career entrepreneur.

True. But:

You have some extremely finite number of days prior to retirement, and every day that passes is one that you don't get back. (True of life generally.) Because of the magic of compound interest, those first days are the most expensive ones in this calculus.

If you wake up 10~15 years into your career without yet having had a very successful outcome, the combination of major life events driving up your personal expenses plus the inexorable retirement math means you might have to take "a real job" to get back on track.

Warren Buffet has said you basically get 10 shots at a big investment in your life. A similar logic applies to founding companies: you *probably* have career bandwidth for between 5 to 10. You can sacrifice ~3 of them by neglecting retirement planning at the start of your career.

So what do you do? Simple: take advantage of tax-advantaged retirement plans to sock away a not-terribly-onerous amount of money every month. You and your business won't notice it's gone; you will very likely notice it 15 years from now.

"What should I invest in for retirement?" Low-cost index funds. This could be the best studied result known to science.

(I mean that entirely literally. Most papers don't carry a multi-billion dollar bounty available to anyone who demonstrates they don't replicate.)

Guess what isn't an option in many people's retirement accounts due to principal/agent problems? Low-cost index funds.

Here's what happens:

1) Employers are insufficiently attentive to contents of plans
2) Retirement account providers can get kickbacks from mutual funds for steering assets
3) The most expensive funds can afford the largest kickbacks
4) Not "Employee has best possible outcome"

Startup founders are in a much better position than most employers on this score, because they tend to be relatively numerate and because they don't have the principal/agent problem early in the life of the company. It is easy to keep doing the right thing; much harder to start.

Anyhow: the technology of money is endlessly fascinating. If there are particular business-adjacent parts which seem mysterious to you, drop us a line; we love ideas for new things to write about.