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I remember the dot-com crash of 2001 and seeing companies close so fast, they didn’t their employees a final paychecks; I remember one day, after the dot-com co

I remember the dot-com crash of 2001 and seeing companies close so fast, they didn’t their employees a final paychecks; I remember one day, after the dot-com collapse a position I was qualified for got filled within three hours. As someone who has seen this before, things are looking ominous: The stock market drop of late 2018 reminded me of the stock market drop we had in 2000, about a year before everything fell apart. The yield curve inversion doesn’t look good, nor does the problems with the German economy. Uber posting a multi-billion dollar loss and Tesla having a hard time getting income remind me of the very same issues during the dot-com bubble, where highly valued companies weren’t actually earning money. Moviepass’s debacle reminds me of Webvan; a company which tried to get VC by having a business model which was hemorrhaging money. I hope I am wrong, but I predict a tech sector crash in late 2019 or early-to-mid 2020.

almost_usual 7y ago
The hyper growth of the dot-com crash was way different than today. Are there companies that are outrageously unprofitable today and over-valued? Yes. But it's nowhere near the dot-com hysteria. I doubt a tech sector 'crash' is going to occur but I wouldn't be surprised if a correction happens.
- doctorpangloss 7y ago
  Facebook and Google make their money off businesses buying advertising, people rightly see their profits as being very fragile.
  - bduerst 7y ago
    Advertising is a half a trillion dollar market - how is that fragile?
    - doctorpangloss 7y ago
      They said the same thing about mortgages, CDOs, etc.
      - bduerst 7y ago
        By that logic every major industry is fragile.
chronotis 7y ago
I'm not sure whether to feel vindicated to see someone else echoing my own internal thoughts, or to feel nauseous about reliving those years. I was fortunate enough to have been at a company that was making money, but I still remember growing from 500 employees to 4000 or so in 2 years...and then dropping back down to 1500 two years later. We bought a small software company for the talent, and 3 months later was told to layoff the entire team. Many great colleagues left tech at that point to become Realtors, landscapers, accountants. This is not to say that we are destined to relive exactly the same fate, but it's good to remember that rapid change is always a possibility.
- asdf21 7y ago
  500 employees to 1,500 in 4 years is still extremely solid growth. Markets have corrections, if your company is providing something of value I'm sure things will be okay.
  - pm90 7y ago
    Value is relative. If consumer spending drops it’s going to hurt a lot of services that rely on it.
    - at-fates-hands 7y ago
      Consumer spending remains strong. . . From July: Real GDP grew above market expectations in the second quarter of 2019, according to the advance estimate released this morning from the Bureau of Economic Analysis (BEA). Growth was particularly strong in real consumer spending, which rose 4.3 percent at an annual rate in the second quarter of 2019. This increase is notably higher than the 2.5 percent pace set in the preceding four quarters. https://www.whitehouse.gov/articles/strong-consumer-spending-supports-steady-growth-second-quarter-2019/ https://www.whitehouse.gov/articles/strong-consumer-spending... Also, if the unemployment numbers continue at record lows, I would expect consumer spending to remain positive. A lot of the market instability has been due to the shaky trade stuff going on with China.
  - chronotis 7y ago
andy_ppp 7y ago
I'm not 100% sure this is true, there are a few big high profile companies that will need to substantially restructure to achieve profitability, however there are loads of companies with lots of customers and growth that can be turned into profit. I would actually argue that this recession is hugely policy based and we should worry that The Donald in charge of these systems will lead to more instability. It isn't tech being over valued that will bring the system down. I'm not sure software will stop eating the world in a recession, the almost religious belief that more software will make your business better is something everyone has bought into. There might not be any other jobs however.
ttul 7y ago
"Tech" is another way of saying "risk" in the eyes of investors. When the yield curve inverts, it means investors - as a herd - are turning away from risk in the short term. Tech being a manifestation of risk is going to take a short term hit in the form of more difficult capital raising. It's probably too early to roll this out, but for those who didn't live through 2008, I present Sequoia Capital's "RIP Good Times" deck from that period: https://www.dropbox.com/s/2m3d0s0n2q8a23z/RIP%20Good%20times.pdf?dl=0 https://www.dropbox.com/s/2m3d0s0n2q8a23z/RIP%20Good%20times...
- andy_ppp 7y ago
  For me that Deck basically says what I think will happen now and what happened in 2008. Some people will lose money, governments will panic, people with normal jobs will have a harder and harder time and people in IT will get richer as if there is no recession even happening. It will also push automation to happen much faster meaning an even bigger underclass of people. And finally you will still be able to raise shedloads of money (if your business is good) but it will cost you more of your business. Poor you.
ummonk 7y ago
I think the difference this time around is that the largest tech companies (Apple, Google, Facebook, Microsoft, to a lesser extent Amazon) are generating healthy profits. So while there is likely an issue with a lot of the unprofitable unicorns, the industry as a whole won't collapse.
- SketchySeaBeast 7y ago
  While they will survive, there's a ton more people in the rest of tech, and if they don't have jobs and are desperate that's going to change the lives of Google employees.
- theli0nheart 7y ago
  Well, two of those companies survive largely on the basis of advertising, which is in turn financed through the Silicon Valley Venture Capital Machine. If that dried up, it would be Bad News.
  - ummonk 7y ago
    How is advertising financed through the SV VC machine? Most advertisers are ordinary companies, not tech startups.
- losteric 7y ago
  However, the collapse of unprofitable unicorns will propagate across tech. Reduced investments in start-ups and tech companies with risky ventures translates to increased labor supply, which means downward pressure on compensation across the industry (even at the healthy big-5 tech). Housing prices near tech hubs will also pop. Here in Seattle, housing prices are propped up by tech-couple mortgages with high stock-based compensation - which will suffer even at companies with healthy fundamentals. SFO housing is further inflated by IPO speculation.
  - ummonk 7y ago
    Yeah, I mean as a software engineer as long as job availability doesn't reduce too much, I don't mind compensation reducing if housing prices go down with it...
8ytecoder 7y ago
First of all predicting a crash is a fool’s errand. It as much about emotions as it is about fundamentals. There’s a perfectly valid explanation for the valuation of Startups and the availability of capital for startups in the last 9 or so years. After 2008 crash, markets were stagnant until 2012. At the same time capital was being eased by govts worldwide. This capital has to flow somewhere. Tech startups were ripe at this crucial juncture for investments - we had seen enough successes with the likes of Facebook, Amazon and Google - and tech had a major point in its favour in terms of being able to scale easily. Now, in hindsight (personally i never thought it could work as claimed) this is emphatically not true for the sharing economy. Plenty of articles have been written about it 2-3 years ago. We all have short term memory and are forgetting this. Every major tech publication predicted a crash in the startup economy. It never came about. None of this related to the macro environment we are at. Trade wars wreak havoc on the sentiment of business than the actual supply chains themselves. Which is what seems to be happening now.
- refurb 7y ago
  This is an insightful comment. The reason why tech has done so well in the past 10 years is partially due to luck. While investment dollars continued to pile up post-2008, tech was one industry who had recently shown really impressive returns. As such, that's where the dollars flowed. My concern is what happens when a few of those unicorns fail (e.g. Uber)? If sentiment shifts enough, you might see tech suddenly become the ugly duckling. Companies that in reality are doing reasonably well will be painted with the same brush. When people start to see Uber failing and other unicorns struggling, it just become a self-fulfilling prophecy - "I knew a recession was coming". People get risk adverse, company's stop hiring and it spreads to the economy as a whole.
  - hindsightbias 7y ago
    How many employees does Uber need to operate? They could probably lay off 80% of their staff, keep the lights on, and the stock price will soar.
    - 7y ago
batmansmk 7y ago
I heard a few key thinkers predicting a larger recession due to our inability of getting more energy out. GDP and energy seemed to be correlated so far, as if our growth is directly or indirectly fueled by the cheap labor of machines and automation. Gas and electricity production reached a peak which can only go down in a finite world. With a constrained energy supply, GDP should go down. At least that's what happened so far since the 1800s. Germany and UK entered recession the last quarter.
- earnubs 7y ago
  UK has not entered recession, UK has 1 negative quarter, a recession is 2.
- Nasrudith 7y ago
  That model seems incomplete given the lack of efficiency as a variable. Home energy usage went down in spite of growth in electronics and power mainly due to better lighting efficiency alone. While it can help it doesn't drive all. One common mistake in economic growth modeling is thinking only in terms of bulk. We are far richer than bronze age herdsmen but very few of us have tens of thousands of livestock.
ashelmire 7y ago
I don't think it's a tech crash at all. Sure, we've got companies being propped up by VCs that are doomed to fail (Uber, etc), but the fundamentals of other big tech companies are sound. They have customers, they sell products, and demand for some of those (advertising and support services) are and will be perpetual. The signals for the downturn don't really seem to have anything to do with tech in particular. In a crash, I'd expect the VC money to become more cautious... for a bit. But that can be a good thing, too, because it means you aren't competing with garbage companies that are always operating at a loss.

almost_usual 7y ago

The hyper growth of the dot-com crash was way different than today. Are there companies that are outrageously unprofitable today and over-valued? Yes. But it's nowhere near the dot-com hysteria. I doubt a tech sector 'crash' is going to occur but I wouldn't be surprised if a correction happens.

doctorpangloss 7y ago
Facebook and Google make their money off businesses buying advertising, people rightly see their profits as being very fragile.
- bduerst 7y ago
  Advertising is a half a trillion dollar market - how is that fragile?
  - doctorpangloss 7y ago
    They said the same thing about mortgages, CDOs, etc.
    - bduerst 7y ago
      By that logic every major industry is fragile.

chronotis 7y ago

I'm not sure whether to feel vindicated to see someone else echoing my own internal thoughts, or to feel nauseous about reliving those years. I was fortunate enough to have been at a company that was making money, but I still remember growing from 500 employees to 4000 or so in 2 years...and then dropping back down to 1500 two years later. We bought a small software company for the talent, and 3 months later was told to layoff the entire team. Many great colleagues left tech at that point to become Realtors, landscapers, accountants. This is not to say that we are destined to relive exactly the same fate, but it's good to remember that rapid change is always a possibility.

asdf21 7y ago
500 employees to 1,500 in 4 years is still extremely solid growth. Markets have corrections, if your company is providing something of value I'm sure things will be okay.
- pm90 7y ago
  Value is relative. If consumer spending drops it’s going to hurt a lot of services that rely on it.
  - at-fates-hands 7y ago
    Consumer spending remains strong. . . From July: Real GDP grew above market expectations in the second quarter of 2019, according to the advance estimate released this morning from the Bureau of Economic Analysis (BEA). Growth was particularly strong in real consumer spending, which rose 4.3 percent at an annual rate in the second quarter of 2019. This increase is notably higher than the 2.5 percent pace set in the preceding four quarters. https://www.whitehouse.gov/articles/strong-consumer-spending-supports-steady-growth-second-quarter-2019/ https://www.whitehouse.gov/articles/strong-consumer-spending... Also, if the unemployment numbers continue at record lows, I would expect consumer spending to remain positive. A lot of the market instability has been due to the shaky trade stuff going on with China.
- chronotis 7y ago

andy_ppp 7y ago

I'm not 100% sure this is true, there are a few big high profile companies that will need to substantially restructure to achieve profitability, however there are loads of companies with lots of customers and growth that can be turned into profit. I would actually argue that this recession is hugely policy based and we should worry that The Donald in charge of these systems will lead to more instability. It isn't tech being over valued that will bring the system down. I'm not sure software will stop eating the world in a recession, the almost religious belief that more software will make your business better is something everyone has bought into. There might not be any other jobs however.

ttul 7y ago

"Tech" is another way of saying "risk" in the eyes of investors. When the yield curve inverts, it means investors - as a herd - are turning away from risk in the short term. Tech being a manifestation of risk is going to take a short term hit in the form of more difficult capital raising. It's probably too early to roll this out, but for those who didn't live through 2008, I present Sequoia Capital's "RIP Good Times" deck from that period: https://www.dropbox.com/s/2m3d0s0n2q8a23z/RIP%20Good%20times.pdf?dl=0 https://www.dropbox.com/s/2m3d0s0n2q8a23z/RIP%20Good%20times...

andy_ppp 7y ago
For me that Deck basically says what I think will happen now and what happened in 2008. Some people will lose money, governments will panic, people with normal jobs will have a harder and harder time and people in IT will get richer as if there is no recession even happening. It will also push automation to happen much faster meaning an even bigger underclass of people. And finally you will still be able to raise shedloads of money (if your business is good) but it will cost you more of your business. Poor you.

ummonk 7y ago

I think the difference this time around is that the largest tech companies (Apple, Google, Facebook, Microsoft, to a lesser extent Amazon) are generating healthy profits. So while there is likely an issue with a lot of the unprofitable unicorns, the industry as a whole won't collapse.

SketchySeaBeast 7y ago
While they will survive, there's a ton more people in the rest of tech, and if they don't have jobs and are desperate that's going to change the lives of Google employees.
theli0nheart 7y ago
Well, two of those companies survive largely on the basis of advertising, which is in turn financed through the Silicon Valley Venture Capital Machine. If that dried up, it would be Bad News.
- ummonk 7y ago
  How is advertising financed through the SV VC machine? Most advertisers are ordinary companies, not tech startups.
losteric 7y ago
However, the collapse of unprofitable unicorns will propagate across tech. Reduced investments in start-ups and tech companies with risky ventures translates to increased labor supply, which means downward pressure on compensation across the industry (even at the healthy big-5 tech). Housing prices near tech hubs will also pop. Here in Seattle, housing prices are propped up by tech-couple mortgages with high stock-based compensation - which will suffer even at companies with healthy fundamentals. SFO housing is further inflated by IPO speculation.
- ummonk 7y ago
  Yeah, I mean as a software engineer as long as job availability doesn't reduce too much, I don't mind compensation reducing if housing prices go down with it...

8ytecoder 7y ago

First of all predicting a crash is a fool’s errand. It as much about emotions as it is about fundamentals. There’s a perfectly valid explanation for the valuation of Startups and the availability of capital for startups in the last 9 or so years. After 2008 crash, markets were stagnant until 2012. At the same time capital was being eased by govts worldwide. This capital has to flow somewhere. Tech startups were ripe at this crucial juncture for investments - we had seen enough successes with the likes of Facebook, Amazon and Google - and tech had a major point in its favour in terms of being able to scale easily. Now, in hindsight (personally i never thought it could work as claimed) this is emphatically not true for the sharing economy. Plenty of articles have been written about it 2-3 years ago. We all have short term memory and are forgetting this. Every major tech publication predicted a crash in the startup economy. It never came about. None of this related to the macro environment we are at. Trade wars wreak havoc on the sentiment of business than the actual supply chains themselves. Which is what seems to be happening now.

refurb 7y ago
This is an insightful comment. The reason why tech has done so well in the past 10 years is partially due to luck. While investment dollars continued to pile up post-2008, tech was one industry who had recently shown really impressive returns. As such, that's where the dollars flowed. My concern is what happens when a few of those unicorns fail (e.g. Uber)? If sentiment shifts enough, you might see tech suddenly become the ugly duckling. Companies that in reality are doing reasonably well will be painted with the same brush. When people start to see Uber failing and other unicorns struggling, it just become a self-fulfilling prophecy - "I knew a recession was coming". People get risk adverse, company's stop hiring and it spreads to the economy as a whole.
- hindsightbias 7y ago
  How many employees does Uber need to operate? They could probably lay off 80% of their staff, keep the lights on, and the stock price will soar.
  - 7y ago

batmansmk 7y ago

I heard a few key thinkers predicting a larger recession due to our inability of getting more energy out. GDP and energy seemed to be correlated so far, as if our growth is directly or indirectly fueled by the cheap labor of machines and automation. Gas and electricity production reached a peak which can only go down in a finite world. With a constrained energy supply, GDP should go down. At least that's what happened so far since the 1800s. Germany and UK entered recession the last quarter.

earnubs 7y ago
UK has not entered recession, UK has 1 negative quarter, a recession is 2.
Nasrudith 7y ago
That model seems incomplete given the lack of efficiency as a variable. Home energy usage went down in spite of growth in electronics and power mainly due to better lighting efficiency alone. While it can help it doesn't drive all. One common mistake in economic growth modeling is thinking only in terms of bulk. We are far richer than bronze age herdsmen but very few of us have tens of thousands of livestock.

ashelmire 7y ago

I don't think it's a tech crash at all. Sure, we've got companies being propped up by VCs that are doomed to fail (Uber, etc), but the fundamentals of other big tech companies are sound. They have customers, they sell products, and demand for some of those (advertising and support services) are and will be perpetual. The signals for the downturn don't really seem to have anything to do with tech in particular. In a crash, I'd expect the VC money to become more cautious... for a bit. But that can be a good thing, too, because it means you aren't competing with garbage companies that are always operating at a loss.