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The layoffs will continue as long as interest rates remain high. Not a lot of people know the relationship between lending and big tech, but suffice to say that

The layoffs will continue as long as interest rates remain high. Not a lot of people know the relationship between lending and big tech, but suffice to say that the bloat we’ve seen from companies with no product except user data will be unsustainable in the face of higher interest rates. Permanently, if they remain high.

solomatov 4y ago
Big tech income depends on the whole economy, most of which interest rate dependent. I wouldn't say that the business model is unsustainable (it's more complicated than you said), it just becomes less profitable (as everything else).
- rabuse 4y ago
  Exactly. Interest rates rising makes pretty much everything less purchasable for people.
- amelius 4y ago
  Not just income, also investments.
- FormerBandmate 4y ago
  The recent hiring has been fueled by record profits from the lightest monetary policy of all time
vineyardmike 4y ago
Most businesses I’ve talked to and worked with that borrow meaningful amounts are not so dependent on rates that increases of this much will meaningfully kill sound businesses. Rate changes as quickly as they are is the dangerous part, because it requires throwing out a lot of their short term plannings. Businesses and business leaders that have been around since the 90s are used to interest rates in excess of the current amount. The economy at large is much bigger concern and impact to businesses. Even land development would continue, with only minor hiccups.
- SQueeeeeL 4y ago
  I think Warren Buffett had a very related take. Basically, in America at least, real businesses which simply make a profitable product well, are no longer viable. The only viable businesses are those which have some "trick" which appeals to the capital owning class, I feel like crypto is a pretty good example of this in action. So we see this endless game of "large" "profitable" companies that are the equivalent of 90s vaporware, doing nothing but shuffling numbers around in a spreadsheet without creating value. But the government is terrified of any form of meaningful regulation (because so much campaign finance is tied into these zombie corporations)
  - PubliusMI 4y ago
kodyo 4y ago
Interest rates will remain high as long as federal spending remains high.
Bubble_Pop_22 4y ago
> The layoffs will continue as long as interest rates remain high Real rates are still negative. Isn't that all that matters?
- CydeWeys 4y ago
  No? High nominal interest rates are clearly themselves still bad for business.
  - Bubble_Pop_22 4y ago
    Only recently turned positive, it was negative until September: https://fred.stlouisfed.org/series/REAINTRATREARAT1YE https://fred.stlouisfed.org/series/REAINTRATREARAT1YE > High nominal interest rates are clearly themselves still bad for business I don't get why nominal matters. Say you borrow 100k and have to pay it back with interest 1 year from now. Inflation rate as measured by CPI/PCE is higher than the interest rate of your fixed rate loan. What you do is basically mobilize that capital and transform it into products and services that you'll sell to customers. Inflation works in your favor because prices of the goods that you sell during the year following you taking a loan, they rise at a higher rate than your fixed rate loan
    - liuliu 4y ago
      Bad for tech business whose cost is aggressively on R&D and revenue not inflation-proof.
    - Moissanite 4y ago
      Great in theory - but in practice you can't manufacture your product due to supply chain issues triggered by economic uncertainty and under-investment by your suppliers. Even if you could get your product out there, consumers aren't inclined to make new non-essential purchases when their household finances are being strained by mortgage and car loan rate rises.
adrr 4y ago
It isn’t even that high. https://tradingeconomics.com/united-states/interest-rate https://tradingeconomics.com/united-states/interest-rate
- miked85 4y ago
  It is relative to zero though, which is when these companies had stock prices go through the roof.

solomatov 4y ago

Big tech income depends on the whole economy, most of which interest rate dependent. I wouldn't say that the business model is unsustainable (it's more complicated than you said), it just becomes less profitable (as everything else).

rabuse 4y ago
Exactly. Interest rates rising makes pretty much everything less purchasable for people.
amelius 4y ago
Not just income, also investments.
FormerBandmate 4y ago
The recent hiring has been fueled by record profits from the lightest monetary policy of all time

vineyardmike 4y ago

Most businesses I’ve talked to and worked with that borrow meaningful amounts are not so dependent on rates that increases of this much will meaningfully kill sound businesses. Rate changes as quickly as they are is the dangerous part, because it requires throwing out a lot of their short term plannings. Businesses and business leaders that have been around since the 90s are used to interest rates in excess of the current amount. The economy at large is much bigger concern and impact to businesses. Even land development would continue, with only minor hiccups.

SQueeeeeL 4y ago
I think Warren Buffett had a very related take. Basically, in America at least, real businesses which simply make a profitable product well, are no longer viable. The only viable businesses are those which have some "trick" which appeals to the capital owning class, I feel like crypto is a pretty good example of this in action. So we see this endless game of "large" "profitable" companies that are the equivalent of 90s vaporware, doing nothing but shuffling numbers around in a spreadsheet without creating value. But the government is terrified of any form of meaningful regulation (because so much campaign finance is tied into these zombie corporations)
- PubliusMI 4y ago

kodyo 4y ago

Interest rates will remain high as long as federal spending remains high.

Bubble_Pop_22 4y ago

> The layoffs will continue as long as interest rates remain high Real rates are still negative. Isn't that all that matters?

CydeWeys 4y ago
No? High nominal interest rates are clearly themselves still bad for business.
- Bubble_Pop_22 4y ago
  Only recently turned positive, it was negative until September: https://fred.stlouisfed.org/series/REAINTRATREARAT1YE https://fred.stlouisfed.org/series/REAINTRATREARAT1YE > High nominal interest rates are clearly themselves still bad for business I don't get why nominal matters. Say you borrow 100k and have to pay it back with interest 1 year from now. Inflation rate as measured by CPI/PCE is higher than the interest rate of your fixed rate loan. What you do is basically mobilize that capital and transform it into products and services that you'll sell to customers. Inflation works in your favor because prices of the goods that you sell during the year following you taking a loan, they rise at a higher rate than your fixed rate loan
  - liuliu 4y ago
    Bad for tech business whose cost is aggressively on R&D and revenue not inflation-proof.
  - Moissanite 4y ago
    Great in theory - but in practice you can't manufacture your product due to supply chain issues triggered by economic uncertainty and under-investment by your suppliers. Even if you could get your product out there, consumers aren't inclined to make new non-essential purchases when their household finances are being strained by mortgage and car loan rate rises.

adrr 4y ago

It isn’t even that high. https://tradingeconomics.com/united-states/interest-rate https://tradingeconomics.com/united-states/interest-rate

miked85 4y ago
It is relative to zero though, which is when these companies had stock prices go through the roof.