[usaar333]

It's a probabilistic model. It assumes (correctly) that the low probability of a home run times the home run's valuation is quite large ("expected returns" in the probabilistic sense).

> this argument reads to me like "the returns on a Powerball win are so much higher than your projected lifetime earnings that playing the lottery is a smart financial move".

That's stronger claim than it is making, but yes in a sense it is saying the lottery can be a good move because the expectation is large - that's what VCs do after all.

Note that all the model aims to do is value the equity package. If a public company is offering more than what this model values the startup equity package as (and this often is the case!), it isn't worth it financially to work at that startup.