7 ms·

There’s a whole generation of tech employees that have never seen a down market. All indications are that these folks are woefully unaware of what’s on the hori

by JCM9 4y ago

There’s a whole generation of tech employees that have never seen a down market. All indications are that these folks are woefully unaware of what’s on the horizon now. It’s going to be all about cash flow. If you’re burning cash and not making much of it from operations then it’s going to be a bumpy road ahead. Buckle up.

stackbutterflow 4y ago
I've heard the argument that the dotcom crash was so catastrophic because the Internet as a market wasn't proven at that point. That'd mean a dotcom like crisis is the lowest point this industry can reach. Which in some way is reassuring.
- JCM9 4y ago
  That was a factor, but more fundamentally it was companies with wild valuations and no realistic prospects of becoming a profitable and self-sustaining business. There is some of that out there right now. Market corrections exist in part to flush those companies out of the system.
  - tluyben2 4y ago
    Some of that? There are a lot of companies that raised 20m+ without any hope of ever paying that back and actually heavily depending on new rounds of funding to survive at all. This was all wrapped up as ‘pump everything in growth’ which works as long as it works and that was no different in 1999 when companies were also just buying users (one of my clients at the time gave away free groceries the first month of your membership; guess what the retention was after that month) with investor money. When that dried up, all users left in a a few months and the companies were gone. This will happen again. Everyone I know (business and personal) uses a lot of freemium services from startups they will never pay for; they will simply leave the second they have to pay or when ads appear. And that has to happen for these companies to have a chance at all.
- RandomLensman 4y ago
  Not sure that follows. If (big "if") interest rates go up a lot, then a lot of investors might not reach for VC or PE to enhance their returns at even close to current allocation (and growth would be heavily discounted). Look at how the telecoms industry looks now compared to the heights of 2003 or so.
  - marcosdumay 4y ago
    This. What happened in 2000 was that interest rates got up and money became scarcer, so there was nobody willing to put any money into more risky investments like VCs. Today we are in a completely different realm of money availability, but it is becoming scarcer again.
  - DebtDeflation 4y ago
    >If (big "if") interest rates go up a lot It's not a "big if" at all. Zero nominal rates and negative real rates are an anomaly in economic history over the last few centuries. Rates are headed higher, much higher. The Fed has been holding off in the hope that inflation would be "transitory" but it's now been a year and a half of >7% CPI increases with no sign of abating.
    - RandomLensman 4y ago
      Agreed on the long history. I'd still argue there is sizable "if" as one way to reduce government debt would be to use inflation (just like in the 1950s). So while rates will go up, the question is how much they will go up and if the level they reach will be high enough to cause substantial portfolio reallocations.
      - weatherlite 4y ago
        Agreed. It's not only government debt - everyone is indebted (people, businesses) at a historical high. How much can you raise interest rate without crushing them I don't know. On the other hand how much can you let inflation go up without crushing the working class and emerging markets indebted in USD? It's an impossible situation.
version_five 4y ago
In the dotcom boom in Canada there was a sub-boom in fiber optics and related stuff in the Ottawa area. Nortel et al were hiring and paying big salaries right out of school, and people got used to it and thought that was how much money they could earn. For years afterward there were people who had mentally anchored themselves at a certain salary bracket that couldn't find anything (especially in Ottawa) that paid anywhere close. I always assumed this will happen any time with machine learning, I don't think it will be as bad for software overall though.
- chrisseaton 4y ago
  > and thought that was how much money they could earn But they were right.
  - kgwgk 4y ago
    Until they were wrong. There is an implicit “forever” - or “they would always be able to earn” - in the statement you reply to.
  - mdoms 4y ago
    They sure were! No need to read the rest of the comment!
DebtDeflation 4y ago
>There’s a whole generation of tech employees that have never seen a down market. Indeed. I lived through both the 2008 financial crisis and the 2000 dot com implosion (also graduated high school and went off to college right during the 1991 recession). People who entered the job market after 2015 and know nothing except recruiters constantly hitting them up with mid six figure+ job offers are in for a rude awakening IMO.
- BoxOfRain 4y ago
  What advice would you give to people who've not been in the tech industry during a recession yet?
  - nemo44x 4y ago
    Save money and have enough to live on for awhile. If you don't have savings then immediately cut your cost of living down. If you do lose your job then don't just accept anything (remember, you have savings + unemployment + severance to live on for awhile) and use this time to sharpen skills and learn new things. Make yourself more valuable. I can't see the future but I don't think it's going to be a bloodbath like the .com crash. Engineers in particular are valuable assets for a company and expensive to recruit. Expect companies to cut back on perks and possibly raises for awhile if it gets bad. But I don't think we're going to see massive layoffs across the board. There's still a ton of money in the VC world. They just aren't spending right now.
    - csmpltn 4y ago
      > "I can't see the future but I don't think it's going to be a bloodbath like the .com crash." The world has gone ever more dependent on tech since then. Tech is used everywhere now, pervasively. They're not re-introducing cash in cash-free economies. People aren't going back to carrying physical documents around and stashing them in high cabinets. Shopping online has only gotten more popular. Hanging out online, too. Agriculture, warfare, industry, you name it... it's not all "Uber, but for %s" out there. Somebody has to keep the lights on, right?

by JCM9 4y ago

stackbutterflow 4y ago

I've heard the argument that the dotcom crash was so catastrophic because the Internet as a market wasn't proven at that point. That'd mean a dotcom like crisis is the lowest point this industry can reach. Which in some way is reassuring.

JCM9 4y ago
That was a factor, but more fundamentally it was companies with wild valuations and no realistic prospects of becoming a profitable and self-sustaining business. There is some of that out there right now. Market corrections exist in part to flush those companies out of the system.
- tluyben2 4y ago
  Some of that? There are a lot of companies that raised 20m+ without any hope of ever paying that back and actually heavily depending on new rounds of funding to survive at all. This was all wrapped up as ‘pump everything in growth’ which works as long as it works and that was no different in 1999 when companies were also just buying users (one of my clients at the time gave away free groceries the first month of your membership; guess what the retention was after that month) with investor money. When that dried up, all users left in a a few months and the companies were gone. This will happen again. Everyone I know (business and personal) uses a lot of freemium services from startups they will never pay for; they will simply leave the second they have to pay or when ads appear. And that has to happen for these companies to have a chance at all.
RandomLensman 4y ago
Not sure that follows. If (big "if") interest rates go up a lot, then a lot of investors might not reach for VC or PE to enhance their returns at even close to current allocation (and growth would be heavily discounted). Look at how the telecoms industry looks now compared to the heights of 2003 or so.
- marcosdumay 4y ago
  This. What happened in 2000 was that interest rates got up and money became scarcer, so there was nobody willing to put any money into more risky investments like VCs. Today we are in a completely different realm of money availability, but it is becoming scarcer again.
- DebtDeflation 4y ago
  >If (big "if") interest rates go up a lot It's not a "big if" at all. Zero nominal rates and negative real rates are an anomaly in economic history over the last few centuries. Rates are headed higher, much higher. The Fed has been holding off in the hope that inflation would be "transitory" but it's now been a year and a half of >7% CPI increases with no sign of abating.
  - RandomLensman 4y ago
    Agreed on the long history. I'd still argue there is sizable "if" as one way to reduce government debt would be to use inflation (just like in the 1950s). So while rates will go up, the question is how much they will go up and if the level they reach will be high enough to cause substantial portfolio reallocations.
    - weatherlite 4y ago
      Agreed. It's not only government debt - everyone is indebted (people, businesses) at a historical high. How much can you raise interest rate without crushing them I don't know. On the other hand how much can you let inflation go up without crushing the working class and emerging markets indebted in USD? It's an impossible situation.

version_five 4y ago

In the dotcom boom in Canada there was a sub-boom in fiber optics and related stuff in the Ottawa area. Nortel et al were hiring and paying big salaries right out of school, and people got used to it and thought that was how much money they could earn. For years afterward there were people who had mentally anchored themselves at a certain salary bracket that couldn't find anything (especially in Ottawa) that paid anywhere close. I always assumed this will happen any time with machine learning, I don't think it will be as bad for software overall though.

chrisseaton 4y ago
> and thought that was how much money they could earn But they were right.
- kgwgk 4y ago
  Until they were wrong. There is an implicit “forever” - or “they would always be able to earn” - in the statement you reply to.
- mdoms 4y ago
  They sure were! No need to read the rest of the comment!

DebtDeflation 4y ago

>There’s a whole generation of tech employees that have never seen a down market. Indeed. I lived through both the 2008 financial crisis and the 2000 dot com implosion (also graduated high school and went off to college right during the 1991 recession). People who entered the job market after 2015 and know nothing except recruiters constantly hitting them up with mid six figure+ job offers are in for a rude awakening IMO.

BoxOfRain 4y ago
What advice would you give to people who've not been in the tech industry during a recession yet?
- nemo44x 4y ago
  Save money and have enough to live on for awhile. If you don't have savings then immediately cut your cost of living down. If you do lose your job then don't just accept anything (remember, you have savings + unemployment + severance to live on for awhile) and use this time to sharpen skills and learn new things. Make yourself more valuable. I can't see the future but I don't think it's going to be a bloodbath like the .com crash. Engineers in particular are valuable assets for a company and expensive to recruit. Expect companies to cut back on perks and possibly raises for awhile if it gets bad. But I don't think we're going to see massive layoffs across the board. There's still a ton of money in the VC world. They just aren't spending right now.
  - csmpltn 4y ago
    > "I can't see the future but I don't think it's going to be a bloodbath like the .com crash." The world has gone ever more dependent on tech since then. Tech is used everywhere now, pervasively. They're not re-introducing cash in cash-free economies. People aren't going back to carrying physical documents around and stashing them in high cabinets. Shopping online has only gotten more popular. Hanging out online, too. Agriculture, warfare, industry, you name it... it's not all "Uber, but for %s" out there. Somebody has to keep the lights on, right?