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That first point is key, and I think they're being... less than honest. The reality is there's very little evidence for an actual "broader slowdown". GDP grow

That first point is key, and I think they're being... less than honest. The reality is there's very little evidence for an actual "broader slowdown". GDP growth in the US was decent in the last quarter despite a huge decline in home sales and headwinds from inflation, and unemployment remains at record lows. There's certainly some signs for concern, but the only real, persistent decline has been in the stock market (which, honestly, is why this whole period is kinda weird). The truth, when I look at these stories, is many of these tech companies expected the major changes during COVID, which lead to huge boosts in revenue for a lot of tech companies, to persist post-COVID, and that simply didn't pan out. The result is a lot of businesses with bloated workforces predicated on long-term financial projections that haven't panned out. But, Stripe can't admit they made a major strategic blunder--the exact same blunder made by companies like Peloton--so they have to blame it on "a broader slowdown" since then they have an exogenous factor they can point to rather than admitting they were just caught up in the techno-optimism of a transformed post-COVID society.

650REDHAIR 4y ago
Anecdote here, but I sell vintage clothing, electronics, and furniture on the side and have noticed a substantial downturn in sales this year. Lower than pre-pandemic levels.
jesuscript 4y ago
The stock market didn’t really decline. There was a speculative play at the beginning of the pandemic that allowed the shitheads that run that game to do a reallocation of capital from “pandemic hit” industries to tech. That’s why tech ballooned to stupid levels. I say speculative because while it may have been right to reallocate away from, say, Airlines stocks, there was no good reason to run up tech to those absurd levels. Tech didn’t get hit by interest rates, it’s just a reallocation of that influx of money back to other sectors. People didn’t stop using tech. Now they reallocated out of tech (the way it was supposed to be around 2019), and all these shithead companies are saying “we’re fucked, our stock tanked”. No, your stock went back to healthy levels, your stock was just a bank for two years, that’s all.
- deleted 4y ago
  [deleted]
- BaseballPhysics 4y ago
  Yup, good points. The stock market has been pretty damn volatile, which is to be expected given the broader geopolitical context, the chaos of the post-COVID recovery, etc, but the stock of a ton of these tech companies just reverted to the mean, which is exactly what you'd expect if the changes during COVID failed to persist.
austenallred 4y ago
> But, Stripe can't admit they made a major strategic blunder They quite literally say that? “In our view, we made two very consequential mistakes, and we want to highlight them here since they’re important: We were much too optimistic about the internet economy’s near-term growth in 2022 and 2023 and underestimated both the likelihood and impact of a broader slowdown. We grew operating costs too quickly. Buoyed by the success we’re seeing in some of our new product areas, we allowed coordination costs to grow and operational inefficiencies to seep in.”
- deleted 4y ago
  [deleted]
- xadhominemx 4y ago
  There has not really been a broader slowdown in credit card processing volumes. Visa and MasterCard had good earnings and guidance last week. What’s really happened is exactly what BaseballPhysics said - the pace of Stripes share gain has slowed dramatically post-COVID.
  - higlen22 4y ago
    How do you know more than Stripe's entire leadership team? Someone should hire you.
    - giantrobot 4y ago
      What senior management says publicly, what they say internally, and what the actual truth is are not necessarily the same thing. The GP I think is suggesting what they're saying publicly is not necessarily the truth.
      - ergocoder 4y ago
        So, you are saying there is no economic slowdown? Have you looked outside?
fullshark 4y ago
I think the fact that they used "internet economy" and not "economy" in their letter is basically a shorthand way of conveying exactly what you say here, though in a less self-flagellating way.
mbreese 4y ago
> The reality is there's very little evidence for an actual "broader slowdown". GDP growth in the US was decent in the last quarter despite a huge decline in home sales and headwinds from inflation, and unemployment remains at record lows. I thinks as a payment processor, they are in a better position than most to predict sales trends. This effect might be restricted to their segment of the market. But if the payments they process are down significantly, then does it matter (to Stripe) if parts of the economy that they aren’t involved in are more robust? I’m not excusing actions, but they have more data on the economy than most, just from their position in it. They may have thought (their part of) the market was going to keep growing (the mistake), but that doesn’t change the fact that it isn’t. I just feel bad for everyone affected.
- spamizbad 4y ago
  Stripe’s reach as a processor probably isn’t broad enough to see those kinds of trends. Their processing fees are quite high so there’s huge industry sectors that will just never touch them.
  - bastardoperator 4y ago
    I don't know why you're getting downvoted because everything you said is 100% true. Stripe is small time when it comes to merchant services.
  - tomnipotent 4y ago
    Stripe processes in the area of $350-400bln annually, which is equivalent to about 1/10th the GDP of the U.K. That's absolutely enough volume to see macro trends as it relates the classes of merchants they support.
    - spamizbad 4y ago
      FIS, which I don't even think is one of the largest, does over 600B per quarter in the globally and 12 figures yearly. Stripe needs to 6-7x its processing to be one of the largest.
ulfw 4y ago
Agree 100% with you. Also having talked to recruiters there I found them absolutely disorganised. At least here in APAC. Might be better stateside. They gave me the impression of not really knowing what org to build and job descriptions/titles/org changed wildly during talks (and then abruptly ended, leaving me with a terrible impression). The one thing they kept going on about though is how they're the biggest bestest most promising of unicorns and how much they'd be in 'super growth mode'
pixl97 4y ago
>The reality is there's very little evidence for an actual "broader slowdown". I'm not sure about 'broader slowdown' but in the industry I'm in we've seen a massive slowdown in signups and expansions in the existing customers. When we speak with our customers, especially banks, they are seeing massive slowdowns on their side. Someone has bad metrics here, and when most of our customers across a wide range of industries are laying off, then I'd say that's pretty broad.
- ryandrake 4y ago
  I always wonder if the chicken or egg comes first. Maybe I'm living in a bubble, but I didn't see any broad slowdown until companies started laying off, saying there's this broad slowdown that's totally coming soon. Now, with people being laid off and tightening their spending, leading to an actual slowdown, the prophecy is fulfilled! The last recession had a pretty clear cause you could point your finger at: The collapse of subprime mortgages. This one (presumably we're about to experience one) and the first dot-com crash didn't seem to be caused by anything besides a critical mass of businessmen agreeing "Well look at that, we're headed into an economic slowdown!"
  - pixl97 4y ago
    Inflation came first. Then the controls to slow Inflation raise the cost of borrowing money. We're seeing the fallout of that now.
    - theGnuMe 4y ago
      Corp greed came first I think.. inflation due to covid was transitory.
      - donedealomg 4y ago
      - umeshunni 4y ago
        Lol, ok, Bernie.
chasd00 4y ago
One thing that i think hits Stripe harder than most is all the people who quit their jobs to do their own thing. You know they all setup Stripe accounts for e-com and other invoice/payment functionality. I think reality is pushing them back to regular day jobs and those new Stripe accounts are going to sit with zero transactions.
- waprin 4y ago
  The blog post literally says Stripe has higher transaction volume than ever. Anecdotally my indie friends all report modest revenue growth this year while my big tech friends report more work for less money (due to equity grants decline). From the data I see, the “reality” is not the failed indie dev but the failed inefficient big tech company.
meragrin_ 4y ago
> The reality is there's very little evidence for an actual "broader slowdown". I wish I could be in your bubble. In mine, people have been spending more on less month after month. Businesses are seeing slowdowns. Things are going to be even worse when the winter heating starts.
chaos_emergent 4y ago
Beyond pc explicitly admitting that they made the mistake you're saying they didn't, Stripe and other payment processors, especially internet payment processors, are extremely sensitive to economic forecasts. I can think of three obvious reasons that current market conditions would tell them to prepare for a macroeconomic downturn: 1) The housing market is the largest asset base in the world's wealthiest country and changes in that market reliably predict macroeconomic downturns (1). 2) E-commerce transactions are supported more than the economy as a whole by discretionary income. Interest rates drastically change consumers' spending habits; when rates rise, discretionary spending drops as consumers save more (2). You can infer that the GDP of e-commerce decreases at a rate higher than the larger economy because of that drop in spending. 3) Stripe has a very high retention rate for its customers. That counterintuitively increases the volatility of its stock because of increasing interest rates (3) Beyond the appeal to intuition you made around tech companies assuming that post-COVID demand would remain, there are plenty of reasons that a payment processor that primarily services e-commerce would need to downsize. They are simply more sensitive to macroeconomic conditions. [1] https://seekingalpha.com/article/4535186-how-to-predict-a-recession https://seekingalpha.com/article/4535186-how-to-predict-a-re... [2] https://www.investopedia.com/ask/answers/071715/how-do-changes-interest-rates-affect-spending-habits-economy.asp https://www.investopedia.com/ask/answers/071715/how-do-chang... [3] https://whoisnnamdi.com/high-retention-high-volatility/ https://whoisnnamdi.com/high-retention-high-volatility/
DebtDeflation 4y ago
>GDP growth in the US was decent in the last quarter......and unemployment remains at record lows. That is correct. However, I work as a consultant and deal with a lot of senior execs at large companies (mostly non-tech) and I can tell you that they are all in a panic right now and expect an absolute economic bloodbath next year. It's going to become a self-fulfilling prophecy. It really feels like Wile E Coyote after he's run off a ledge but hasn't realized it or started falling yet. Very weird.

650REDHAIR 4y ago

Anecdote here, but I sell vintage clothing, electronics, and furniture on the side and have noticed a substantial downturn in sales this year. Lower than pre-pandemic levels.

jesuscript 4y ago

The stock market didn’t really decline. There was a speculative play at the beginning of the pandemic that allowed the shitheads that run that game to do a reallocation of capital from “pandemic hit” industries to tech. That’s why tech ballooned to stupid levels. I say speculative because while it may have been right to reallocate away from, say, Airlines stocks, there was no good reason to run up tech to those absurd levels. Tech didn’t get hit by interest rates, it’s just a reallocation of that influx of money back to other sectors. People didn’t stop using tech. Now they reallocated out of tech (the way it was supposed to be around 2019), and all these shithead companies are saying “we’re fucked, our stock tanked”. No, your stock went back to healthy levels, your stock was just a bank for two years, that’s all.

deleted 4y ago
[deleted]
BaseballPhysics 4y ago
Yup, good points. The stock market has been pretty damn volatile, which is to be expected given the broader geopolitical context, the chaos of the post-COVID recovery, etc, but the stock of a ton of these tech companies just reverted to the mean, which is exactly what you'd expect if the changes during COVID failed to persist.

austenallred 4y ago

> But, Stripe can't admit they made a major strategic blunder They quite literally say that? “In our view, we made two very consequential mistakes, and we want to highlight them here since they’re important: We were much too optimistic about the internet economy’s near-term growth in 2022 and 2023 and underestimated both the likelihood and impact of a broader slowdown. We grew operating costs too quickly. Buoyed by the success we’re seeing in some of our new product areas, we allowed coordination costs to grow and operational inefficiencies to seep in.”

deleted 4y ago
[deleted]
xadhominemx 4y ago
There has not really been a broader slowdown in credit card processing volumes. Visa and MasterCard had good earnings and guidance last week. What’s really happened is exactly what BaseballPhysics said - the pace of Stripes share gain has slowed dramatically post-COVID.
- higlen22 4y ago
  How do you know more than Stripe's entire leadership team? Someone should hire you.
  - giantrobot 4y ago
    What senior management says publicly, what they say internally, and what the actual truth is are not necessarily the same thing. The GP I think is suggesting what they're saying publicly is not necessarily the truth.
    - ergocoder 4y ago
      So, you are saying there is no economic slowdown? Have you looked outside?

fullshark 4y ago

I think the fact that they used "internet economy" and not "economy" in their letter is basically a shorthand way of conveying exactly what you say here, though in a less self-flagellating way.

mbreese 4y ago

> The reality is there's very little evidence for an actual "broader slowdown". GDP growth in the US was decent in the last quarter despite a huge decline in home sales and headwinds from inflation, and unemployment remains at record lows. I thinks as a payment processor, they are in a better position than most to predict sales trends. This effect might be restricted to their segment of the market. But if the payments they process are down significantly, then does it matter (to Stripe) if parts of the economy that they aren’t involved in are more robust? I’m not excusing actions, but they have more data on the economy than most, just from their position in it. They may have thought (their part of) the market was going to keep growing (the mistake), but that doesn’t change the fact that it isn’t. I just feel bad for everyone affected.

spamizbad 4y ago
Stripe’s reach as a processor probably isn’t broad enough to see those kinds of trends. Their processing fees are quite high so there’s huge industry sectors that will just never touch them.
- bastardoperator 4y ago
  I don't know why you're getting downvoted because everything you said is 100% true. Stripe is small time when it comes to merchant services.
- tomnipotent 4y ago
  Stripe processes in the area of $350-400bln annually, which is equivalent to about 1/10th the GDP of the U.K. That's absolutely enough volume to see macro trends as it relates the classes of merchants they support.
  - spamizbad 4y ago
    FIS, which I don't even think is one of the largest, does over 600B per quarter in the globally and 12 figures yearly. Stripe needs to 6-7x its processing to be one of the largest.

ulfw 4y ago

Agree 100% with you. Also having talked to recruiters there I found them absolutely disorganised. At least here in APAC. Might be better stateside. They gave me the impression of not really knowing what org to build and job descriptions/titles/org changed wildly during talks (and then abruptly ended, leaving me with a terrible impression). The one thing they kept going on about though is how they're the biggest bestest most promising of unicorns and how much they'd be in 'super growth mode'

pixl97 4y ago

>The reality is there's very little evidence for an actual "broader slowdown". I'm not sure about 'broader slowdown' but in the industry I'm in we've seen a massive slowdown in signups and expansions in the existing customers. When we speak with our customers, especially banks, they are seeing massive slowdowns on their side. Someone has bad metrics here, and when most of our customers across a wide range of industries are laying off, then I'd say that's pretty broad.

ryandrake 4y ago
I always wonder if the chicken or egg comes first. Maybe I'm living in a bubble, but I didn't see any broad slowdown until companies started laying off, saying there's this broad slowdown that's totally coming soon. Now, with people being laid off and tightening their spending, leading to an actual slowdown, the prophecy is fulfilled! The last recession had a pretty clear cause you could point your finger at: The collapse of subprime mortgages. This one (presumably we're about to experience one) and the first dot-com crash didn't seem to be caused by anything besides a critical mass of businessmen agreeing "Well look at that, we're headed into an economic slowdown!"
- pixl97 4y ago
  Inflation came first. Then the controls to slow Inflation raise the cost of borrowing money. We're seeing the fallout of that now.
  - theGnuMe 4y ago
    Corp greed came first I think.. inflation due to covid was transitory.
    - donedealomg 4y ago
    - umeshunni 4y ago
      Lol, ok, Bernie.

chasd00 4y ago

One thing that i think hits Stripe harder than most is all the people who quit their jobs to do their own thing. You know they all setup Stripe accounts for e-com and other invoice/payment functionality. I think reality is pushing them back to regular day jobs and those new Stripe accounts are going to sit with zero transactions.

waprin 4y ago
The blog post literally says Stripe has higher transaction volume than ever. Anecdotally my indie friends all report modest revenue growth this year while my big tech friends report more work for less money (due to equity grants decline). From the data I see, the “reality” is not the failed indie dev but the failed inefficient big tech company.

meragrin_ 4y ago

> The reality is there's very little evidence for an actual "broader slowdown". I wish I could be in your bubble. In mine, people have been spending more on less month after month. Businesses are seeing slowdowns. Things are going to be even worse when the winter heating starts.

chaos_emergent 4y ago

Beyond pc explicitly admitting that they made the mistake you're saying they didn't, Stripe and other payment processors, especially internet payment processors, are extremely sensitive to economic forecasts. I can think of three obvious reasons that current market conditions would tell them to prepare for a macroeconomic downturn: 1) The housing market is the largest asset base in the world's wealthiest country and changes in that market reliably predict macroeconomic downturns (1). 2) E-commerce transactions are supported more than the economy as a whole by discretionary income. Interest rates drastically change consumers' spending habits; when rates rise, discretionary spending drops as consumers save more (2). You can infer that the GDP of e-commerce decreases at a rate higher than the larger economy because of that drop in spending. 3) Stripe has a very high retention rate for its customers. That counterintuitively increases the volatility of its stock because of increasing interest rates (3) Beyond the appeal to intuition you made around tech companies assuming that post-COVID demand would remain, there are plenty of reasons that a payment processor that primarily services e-commerce would need to downsize. They are simply more sensitive to macroeconomic conditions. [1] https://seekingalpha.com/article/4535186-how-to-predict-a-recession https://seekingalpha.com/article/4535186-how-to-predict-a-re... [2] https://www.investopedia.com/ask/answers/071715/how-do-changes-interest-rates-affect-spending-habits-economy.asp https://www.investopedia.com/ask/answers/071715/how-do-chang... [3] https://whoisnnamdi.com/high-retention-high-volatility/ https://whoisnnamdi.com/high-retention-high-volatility/

DebtDeflation 4y ago

>GDP growth in the US was decent in the last quarter......and unemployment remains at record lows. That is correct. However, I work as a consultant and deal with a lot of senior execs at large companies (mostly non-tech) and I can tell you that they are all in a panic right now and expect an absolute economic bloodbath next year. It's going to become a self-fulfilling prophecy. It really feels like Wile E Coyote after he's run off a ledge but hasn't realized it or started falling yet. Very weird.