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We're going to use concrete numbers to ground these intuitions. Let's say you have an implicit valuation of $50m for an early-stage startup. That is, you would exchange $500k for 1% of the equity in the startup, and you're relatively indifferent between the two.

Now let's say you're considering working at this startup, with a standard 4-year vesting schedule with 1-year cliff. They offer you 1% of the company, so you'll sign and get 0.25% per year for 4 years. Naively, you would expect that if 1% of the company is worth 500k in EV to you, the expected value of getting this equity over 4 years is $125k/yr; assuming that you're perfectly risk-neutral you would expect to think about it as an extra 125k of salary.

Let's now examine a somewhat extreme case. Say the reason the startup is worth $50m in your mind right now is that you expect a 5% chance that it'll go to a billion dollars in a year (and not move after that) and a 95% chance that it'll go to zero, so the options look like the following:

5% chance: you work there for 4 years, your equity is worth $10 million
95% chance: you work there for 1 year, your equity is worth $0

In expectation, you're working there for 1.15 years and getting $500k worth of equity, so your equity compensation is worth about $434k/yr—a far cry from the 125k we calculated earlier.

A friend recently commented on a seed-stage startup that had extremely high volatility within the next 3-4 months. Rerunning the same calculations (a 5% chance of it going to a billion in 3 months and a 95% chance of it going to 0), the expected time there becomes 5.25 months for the same $500k worth of equity for an expected equity compensation of $1.14 million dollars per year; ten times the naive calculation!

The potentially massive difference is because of an embedded call option. Because you can leave at any point if the startup is not doing very well, you have the right but not the obligation at every point on the curve to continue purchasing the equity with your time, instead of walking away. It's like if you were investing in a company, but you got to lock in a specific price to invest at every 3 months for 4 years, and you could walk away at any point!

There are obviously other factors involved. Startup equity is extremely risky, and likely to make up the majority of your net worth, and so if you're at all risk averse you should discount these numbers by risk aversion. Cash compensation is obviously also significant. Volatility is scary, and working at a company that has stable increasing lines on a graph is psychologically less taxing. Finally, you don't fully have an embedded option because your employer can technically also fire you at any point (though it is sufficiently rare for them to fire you for other-than-legitimate-reasons when the company is succeeding that you can mostly discount this—rising tides lift all ships, etc etc).

But from a pure time-adjusted returns perspective it matters a lot how much volatility the startup you are considering joining will experience, because you, at a given actual expected company value, gain a lot from more vol.