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I know it's irrational, but I'm cautious. It has been very consistent in the United States' history: there's a recession roughly every decade at least, and we'r

by tabeth 9y ago

I know it's irrational, but I'm cautious. It has been very consistent in the United States' history: there's a recession roughly every decade at least, and we're overdue. The question is who will be standing up when the music stops? We're all trying to make sure it's not us. Given that Silicon Valley has been responsible for much of the growth in the past decade, it's only natural, if not inevitable that it will be responsible for the collapse, as well. In any case, I'm not sure I buy the article. Banks weren't entirely responsible for the Great Recession (there were actually chains of events the government was responsible for that was simply accelerated by banks). Mortgage banked securities were obviously a creation of finance, but ultimately it was the demand that catapulted what was a terrible idea into something unsustainable AFAIK. Taking this same train of thought: what has Silicon Valley created that's a bad idea that will be abused by regular people in a negative feedback loop that will result in another recession? My money is on advertising, not financial tech.

surfmike 9y ago
If the last recession was 2008 we're not overdue _yet_ are we? :-) Maciej Ceglowski had a good article about the advertising bubble: http://idlewords.com/2015/11/the_advertising_bubble.htm http://idlewords.com/2015/11/the_advertising_bubble.htm
adventured 9y ago
The interesting part about being perhaps due for a recession, is the role of the Fed's hyper low rate policy. The US has never had such low rates for such a long period of time. Will we trade mediocre economic performance for perpetually cheap debt & interest rates, in other words. Huge mountains of debt motivated by its low expense (whether eg at Apple or at the Federal level), sapping economic expansion potential as capital is diverted and mal-invested (eg IBM and GE financial engineering) and debt costs grow ever larger, combined with perpetually low rates that feed a loop of addiction and harm. It's a form of the Japan scenario. Why didn't low rates in Japan spur faster economic expansion and massive inflation? Economic velocity plunged because an ever greater share of their capital available for investment was going to service debt. It explains in part why the US economic 'recovery' has been so slow compared to the past (the early Obama Administration GDP growth forecast projections coming out of the recession, missed by a mile).
hkmurakami 9y ago
The #1 risk for modern SV is likely interest rates. Low interest rates spurred a search for returns by pensions, endowments and SWFs which would unwind to some extent as interest rates return to historic norms, as lower risk yield instruments become viable again. Many startups' growth and hiring are being driven by equity capital rather than operational revenue, meaning that any causes that would undermine the flow of capital from LPs to VCs to Startups would lead to companies folding and increasing unemployment in the region. A negative signal to LPs from an exit outcome standpoint may have an analogous effect. For example, Uber dying would be a very significant negative signal to LPs. What I wonder when thinking of this is what the ratio of startup jobs to bigco jobs looks like these days.

by tabeth 9y ago

surfmike 9y ago

If the last recession was 2008 we're not overdue _yet_ are we? :-) Maciej Ceglowski had a good article about the advertising bubble: http://idlewords.com/2015/11/the_advertising_bubble.htm http://idlewords.com/2015/11/the_advertising_bubble.htm

adventured 9y ago

The interesting part about being perhaps due for a recession, is the role of the Fed's hyper low rate policy. The US has never had such low rates for such a long period of time. Will we trade mediocre economic performance for perpetually cheap debt & interest rates, in other words. Huge mountains of debt motivated by its low expense (whether eg at Apple or at the Federal level), sapping economic expansion potential as capital is diverted and mal-invested (eg IBM and GE financial engineering) and debt costs grow ever larger, combined with perpetually low rates that feed a loop of addiction and harm. It's a form of the Japan scenario. Why didn't low rates in Japan spur faster economic expansion and massive inflation? Economic velocity plunged because an ever greater share of their capital available for investment was going to service debt. It explains in part why the US economic 'recovery' has been so slow compared to the past (the early Obama Administration GDP growth forecast projections coming out of the recession, missed by a mile).

hkmurakami 9y ago

The #1 risk for modern SV is likely interest rates. Low interest rates spurred a search for returns by pensions, endowments and SWFs which would unwind to some extent as interest rates return to historic norms, as lower risk yield instruments become viable again. Many startups' growth and hiring are being driven by equity capital rather than operational revenue, meaning that any causes that would undermine the flow of capital from LPs to VCs to Startups would lead to companies folding and increasing unemployment in the region. A negative signal to LPs from an exit outcome standpoint may have an analogous effect. For example, Uber dying would be a very significant negative signal to LPs. What I wonder when thinking of this is what the ratio of startup jobs to bigco jobs looks like these days.