"Does the expected payoff from the tiny equity share justify the insecurity / lower comp / lack of benefits etc.?" -- No. Ask any veteran of the valley (bonus points if they were around for both bubbles,) and they will tell you that the money isn't the reason to join a startup.
So what's left? Is working in someone else's startup a way of "paying dues" to get connected with people necessary to form your own? Suppose that people believe that working for someone else's small company will get them connections to form their own - is this realistic? Is this a typical outcome or is it rare and only read about in post hoc businessweek articles?
You're asking me why people work at startups? It has cultural cache, a more relaxed/crass work environment, junior people can work on harder problems than they would otherwise, you wear "many hats", less large-company bs (though you trade that for small company bs,) and so on. There is an article on the front page about working for startups as a means of networking to eventually found your own, but that is a pyramid scheme.
