Common sense tells us the typical non-production line TSLA employee probably doesn't cash out all (or even most of) their options-based compensation as soon as they can do so. I think if we exclude production line employees, the effect of a two-year drop in share price is a net positive to employee's net worth for the same reasons it's a net positive to an investor who is accumulating shares over time as they can afford to do so.
There does exist a probable consequence or after-effect of this drop in price that could negatively impact these employees' long term financial position in life. And that is a human tendency to become financially "shell-shocked". It's unavoidable that many employees who saw the worth of their options go to zero will come out of it with a distorted view of the long-term value of their options. Emotional pain has a way of making people wary. It's natural they will think they should sell them off before the same thing happens again. But this will probably result in leaving millions on the table.
Investors need to caution themselves from falling into the same trap. As we climb out the other side, there will be a tendency for investors who have been financially "shell-shocked" to get out at a small profit, maybe only 1.2X of their cost basis, which will provide some relief to what they are feeling but that is likely leave the bulk of their potential future gains on the table. The hunger to take profits on a portion of their shares will be overpowering for many after such a prolonged period of what they experienced emotionally as "financial pain". Many will sell with relief, even though they don't need the money or have any plan on spending it.
I have not felt much emotional or financial pain through this, so I'm not worried about myself, but I see the pain so many here are experiencing, and they will be at the greatest risk of making the most harmful financial decision of their lives. The way they will rationalize these sales will make perfect sense to them at the time, even though it will make no rational sense at all. And, as it becomes apparent that they have left huge sums on the table as Tesla continues to rise, they will feel more pain of a different sort. But they will rationalize that away as well. This rationalizing of financial mistakes has the unfortunate effect of "hardening" people to the world. They will get by, as all of us will, but it will be far from optimum and leads to a reduced sense of worth that manifests itself in other ways that are not flattering.
The way to avoid investing pitfalls that are so common because we are human is to be conscious of how emotions affect investing and guard against it. The best way is to learn how not to be emotional about things that are financial in nature in the first place. Although that is in your best interest, it's not always possible. The next best thing is an awareness and acceptance of the fact that you have been financially "shell-shocked" because that can help prevent premature selling simply by understanding the risk, how it's caused by the human brains tendency to find relief from emotionally traumatic events. Be aware that the effect is so strong that simple awareness of it may not be able to prevent you from doing it. A concerted effort to not let your guard down at any time will likely be required, a determination to succeed and not fall into known traps.
To be perfectly clear, I'm not saying people should never sell, I'm saying they shouldn't sell for emotional reasons, while justifying it with other "sensible" reasons that may only sound sensible to them at the time. Because this is how the human mind works, it can make almost anything sound sensible if it wants to. It's necessary to understand these self-protective mechanisms, to be aware of them, in order to have a fighting chance of avoiding their pitfalls.
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