It's also silly to discount the value of non-liquid equity to zero, unless you think there is literally zero chance of experiencing a liquidity event.

If only 1 out of 10 startups “succeed” where success is defined by “the investors got their money back”. What are he chances for you as an employee getting any meaningful returns? The investors are well diversified, you aren’t as an employee.

Besides that, it takes the average startup 7-10 years to exit. As opposed to a public company where you can diversify your risk every three to six months depending on your vesting schedule.

It’s also incorrect to assume the expected value of the equity is zero. It’s much more useful to model it as E(x)=x*p(x), especially if you have some useful information on estimating p(x) that a person working at a startup might.

Every startup thinks their company is going to be successful. No matter what the person thinks who is working their, they don’t know when the investors will cut their losses or when the market isn’t hungry for money losing startups and the VCs have to put off going public…like now.

Paper equity for late stage startups can be traded for cash in secondary markets like EquityZen

If your company allows it and it will probably be at a discount.

Only if the company allows it. Many don’t.