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Critically, tech workers are compensated highly because they are working on investments. We're not laying bricks where it's easy to measure what we accomplished
by drc500free 4y ago
Critically, tech workers are compensated highly because they are working on investments. We're not laying bricks where it's easy to measure what we accomplished in a given day, we are usually building products and tech stacks that are projected to bring in FUTURE cash.
When interest rates were held low, the planning horizon was very long and we got a huge expansion in future-looking projects. Now that horizon is shrinking and disproportionately impacting the jobs that are associated with future investments rather than ongoing operations.
- ketzo 4y agoThis is a really good take, and I wanna expand it further: when interest rates are lower and planning horizons are longer, valuations get bigger. If you think of a company’s market capitalization as a rough measure of its future cash flows, that valuation is gonna be a lot higher when those future cash flows don’t have to fight much future interest. Higher future valuations means it’s worth paying more NOW to capture a slice of that valuation.
- drc500free 4y agoThe cynic in me would say that the valuations were driven more from the cash-supply side, which allowed a lot of people to play "VC investor" or "VP with a sexy R&D portfolio." No one really leads with a low-level analyst's DCF model in real life, it's backfitted to justify an investment that feels right at the multiple that has comps. I think this is going to be less about the academic economics, and more of a baseball card bubble bursting around software products that promised free growth at 100% unit margins. The cash is still there, and still wants to be invested, but everyone's a little timid and doesn't want to look irresponsible.