To sound a note of caution... I spent a number of years acquiring various kinds of non-monetary capital that are useful for startups. Looking back with my current state of theoretical knowledge and memories, I suspect I may come to see this period as involving too little caution. The key concept acquired between then and now is Kelly Betting.

I still haven't worked through the applications of this concept to startups in a way that I feel is "settled", but depending on the precise nature of the risks and rewards and the bankroll of the typical person accepting startup equity in place of cash, the Kelly Criterion may indicate that startups should usually not be more than hobbies for "normal" (non-rich, non-certainly-immortal, declining-utility-in-dollars) humans. Note that if startups are roughly as risky as a simple Kelly calculation says they should be, this might still be cause for concern because most people who raise theory/practice issues with Kelly say that it over invests in risks.

I'm still exploring ways that the theory might line up with reality, but even my limited state of knowledge has caused me to scale back my startup enthusiasm in the last year or so. The math might come out more positive if you value the knowledge capital gained through startup work in the correct way, for example, but that's particularly tricky to calculate. If anyone else has thoughts on this subject I would love to read or hear them.

For reference, Robin already wrote about Kelly betting to claim that the present era is visibly unstable because most investment firms, and the economy in general, seems not to be engaged in a Kelly strategy at the present time. In some sense, Robin claimed, a financial system not dominated by Kelly-following-financial-entities would probably be a system that has no significantly old Kelly-following-financial-entities, because in the long run they "win" at finance.

Another source on Kelly betting that is directly applicable to startups flows with the "invest in the team, not the idea" dictum. The post "Optimal startup burn rate and the Kelly criterion" is no longer available in the wild but is retained on archive.org and discussed the optimal team size and experimental product cycle given a starting bankroll. (The blog is LaserLike and is not itself down.)

For what its worth, I'm not totally bearish on startups, and sort of have one cooking... I'm just trying to pursue startup stuff with an eye on keeping a bird or 6 in the hand while pursuing startup stuff in parallel. In this vein, if anyone is or knows a solid hardware hacker with RFID experience/interest, especially if they are ethical, planful, world-savey, "rational", and/or live in (southern?) California, I'd appreciate hearing from you. No particular startup interest or equity tolerance is important -- just hardware skills, character, and an interest in educational conversation :-)