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Downturn is still very young. Many unprofitable companies can continue to execute on their previous funding rounds which, raised in the macro environment of zer

by ptero 4y ago

Downturn is still very young. Many unprofitable companies can continue to execute on their previous funding rounds which, raised in the macro environment of zero-cost money, can provide for a year or more of runway. Should this downturn become a fairly severe recession, many more jobs may be hit affecting hiring in skilled tech as well. Not claiming that this will happen, but many economists agree that it is fairly likely. So even if you are in a very enviable position in a skilled tech role and are inundated with recruiter calls I would prep: take stock of your finances, determine your personal runway (how long can you maintain current quality of life should your paychecks stop tomorrow) and plan accordingly. My 2c.

time_to_smile 4y ago
I still hear a lot of conversations that assume current trends are temporary, that we'll return to an era of free money soon, and we can finally stop worrying about this silly "profit" nonsense to focus again on growth which is much more fun. I won't believe this is near over until I see worldviews fundamentally change.
- bobthepanda 4y ago
  There is a lot of room between “era of free money” and 5% rates.
  - barrenko 4y ago
    Yes, but every 1% (maybe even 0.5%) of interest rate is it's own metaverse.
VirusNewbie 4y ago
What “unprofitable” companies are you talking about? Most of the layoffs have come from very profitable companies that trimmed a lot of fat they acquired. Meta, Amazon, Stripe, Twilio, Salesforce etc are all profitable companies. That’s where the majority of non crypto layoffs came from.
- adventured 4y ago
  While you're correct about most of those, Twilio has been an epic loss-making machine its entire existence. $1.1 billion operating loss the past four quarters on a mere $3.6b in sales. $915m operating loss fiscal 2021, $492m operating loss 2020, $369m operating loss 2019, $108m operating loss (on $650m in sales) for 2018, and so on. They have always lost money and are currently gushing red ink. It's definitely part of the reason their stock has collapsed in such a dramatic way (a particularly unsupported valuation previously). While even most highly profitable tech stocks have dropped by a lot, Twilio's drop of ~89% is largely reserved for the group of very unprofitable extreme valuation tech stocks.
- ptero 4y ago
  Profitable big tech layoffs are, in my opinion, a different phenomenon. Those companies are trying to get their PE up to be competitive with fixed rate assets. Otherwise, their share prices will suffer even more. For example, Google's PE of 19 is OK in the era of a free money, but not so good when rates are at 5% and defensive sectors yield 7+%. But the key thing is that the layoffs are not an existential question for them -- they are profitable and can continue to run for years even if their shares suffer. It would be a bad business decision, but will not lead to a quick death. I was talking about smaller, unprofitable, non-market dominating firms. If they are not profitable they will have to raise or die. And raising in the environment of 5+% rates and poor overall tech stock performance may get brutal. Currently, many of those companies still have significant runways (because they were able to raise a lot earlier), but this will start running out in the next several months. This may already be starting: two of my friends who work in such small companies (robotics and lasers) are sensing job uncertainty ahead. My 2c.
  - TheCoelacanth 4y ago
    It's not an existential question for the companies, but it could be for the people making the decisions. If shareholders aren't happy with the company's performance, the CEO might find themselves getting replaced.
- ketzo 4y ago
  Isn't that exactly the parent's point? They are saying that many unprofitable companies haven't done their layoffs yet, because they're still coasting on huge funding rounds from 2021. Thus, there are more axes yet to fall. Not sure how much stock I actually put in that argument -- lots of VC-funded companies are already doing layoffs, too -- but I think you're sort of agreeing with them.
highwaylights 4y ago
Those of us that have been through this before won’t be suckered in by it. Where I am, 2008 wasn’t too bad in tech, but the aftermath of the dotcom bust was like the end of Infinity War, just there one day and then gone. No-one expects their career to end at the gilded hand of a giant purple alien.
- Firmwarrior 4y ago
  I've been asking around about the dot com bust, trying to get a better picture of it The problem is that most of the people I've talked to were employed at huge, profitable companies that made actual products. So it was just a blip for them. I was working on web development after school and got laid off, but all that meant was I had to eat the food my parents made for me instead of eating at fast food places with my friends..
  - haakonhr 4y ago
    I've actually met a couple of people randomly on flights that worked as software developers until the dotcom bubble burst. They both said they couldn't find anything the following years so they changed careers: one became a carpenter and the other ended up as an accountant.
  - strangattractor 4y ago
    Finding work was not all that bad depending on your skill set. In fact I started doing consulting after leaving my startup. Was one of the most profitable and enjoyable times of my career. Having been through several downturns in tech I tend to view them as shifts. Early 80's personal computers -> late 80's early 90's connectivity (modems) BBS networks -> 2000 Internet etc. Understanding and adapting to those changes are key. Next up -> IOT - computers in everything - applying AI - Biotech - ? Generally something expensive has to become cheap for the masses. Hayes modems took $1200 - $2000 devices down to <$300. Ethernet made LANs cheap. Twitter made stupidity availability massively scalable for zero dollars:)
  - tunesmith 4y ago
    I got laid off twice during the Dotcom bust. Remember that it dovetailed into the post-9/11 stuff too. In Q4 2001, there was just nothing. Intel and Nike were advertising web development positions for $12/hour (not a typo) and were getting flooded with applications. I ended up cold-calling various local businesses, got a freelance php/mysql contract for $20/hour, found a different perl/oracle contract for $55/hour in May of 2002, and worked my way back up from there.
strangattractor 4y ago
IMO One of the best times to do a startup is during a downturn. Startups typically don't even have a product for some time after beginning. One of the worst scenarios is introducing your product at the beginning of a downturn. Adoption rates tend to be slower then because corporations are reducing spending.
- deleted 4y ago
  [deleted]
- ethbr0 4y ago
  * If you can find funding or self-fund.
  - strangattractor 4y ago
    One can always look at recently funded startups. Doesn't have to be your own. VC don't necessarily pull back on funding during recessions - using the same reasoning that it is a good time. Starting a new fund can be a problem during that period since many investors become risk adverse.
oceanplexian 4y ago
I think a lot more interesting things are going on with the "tech recession" than meets the eye. Unlike the crash in '08 and '01, the economy now has a hard dependency on tech. There is no "going back" to the world of the past. Smartphones aren't going to be "un-invented". People aren't going to give up online shopping. Businesses aren't going to give up targeted advertising and start buying ads on AM Radio or something. If you look at the big picture, and barring any wild developments like general intelligence AI, the demand for skilled tech workers is only going to increase. I don't think tech workers are invincible but I think tech is now a requirement for economic growth, which poses a problem: Business leaders and investors have been really ticked off by the tech labor shortage. They tried to fix it with H1B, they tried with all these "learn to code" programs. They tried boot camps. They keep trying, and failing, because being a software engineer requires a degree of intelligence and critical thinking and there will always be a limited supply of that kind of labor. My pet theory is that some portion of the layoffs are being engineered to undermine the remote work revolution, scare people into accepting lower wages, and get back to "how things were". But the economic need for tech is so large and the supply of labor is so limited I don't see much changing.
- vbezhenar 4y ago
  I feel that there's lot of bubbles which will burst and release plenty of programmers to the job market. It's already happening. And those programmers will not find work, not all of them. We need smartphones, but we don't necessary need all those "old moms social network" apps. During rich years plenty of people came to the industry. Plenty of them are smart and capable, so competition will lower salaries and push some people from their levels. And god save us if this AI thing will actually take off. It's dumb but it's progressing.
  - mehphp 4y ago
    > And god save us if this AI thing will actually take off. It's dumb but it's progressing. I don't see how it does anything but progress. I obviously have no idea how long it will take before it can replace a software engineer but after playing around with ChatGPT and seeing the code it can create, it's definitely progressing faster than I thought it would.

by ptero 4y ago

time_to_smile 4y ago

I still hear a lot of conversations that assume current trends are temporary, that we'll return to an era of free money soon, and we can finally stop worrying about this silly "profit" nonsense to focus again on growth which is much more fun. I won't believe this is near over until I see worldviews fundamentally change.

bobthepanda 4y ago
There is a lot of room between “era of free money” and 5% rates.
- barrenko 4y ago
  Yes, but every 1% (maybe even 0.5%) of interest rate is it's own metaverse.

VirusNewbie 4y ago

What “unprofitable” companies are you talking about? Most of the layoffs have come from very profitable companies that trimmed a lot of fat they acquired. Meta, Amazon, Stripe, Twilio, Salesforce etc are all profitable companies. That’s where the majority of non crypto layoffs came from.

adventured 4y ago
While you're correct about most of those, Twilio has been an epic loss-making machine its entire existence. $1.1 billion operating loss the past four quarters on a mere $3.6b in sales. $915m operating loss fiscal 2021, $492m operating loss 2020, $369m operating loss 2019, $108m operating loss (on $650m in sales) for 2018, and so on. They have always lost money and are currently gushing red ink. It's definitely part of the reason their stock has collapsed in such a dramatic way (a particularly unsupported valuation previously). While even most highly profitable tech stocks have dropped by a lot, Twilio's drop of ~89% is largely reserved for the group of very unprofitable extreme valuation tech stocks.
ptero 4y ago
Profitable big tech layoffs are, in my opinion, a different phenomenon. Those companies are trying to get their PE up to be competitive with fixed rate assets. Otherwise, their share prices will suffer even more. For example, Google's PE of 19 is OK in the era of a free money, but not so good when rates are at 5% and defensive sectors yield 7+%. But the key thing is that the layoffs are not an existential question for them -- they are profitable and can continue to run for years even if their shares suffer. It would be a bad business decision, but will not lead to a quick death. I was talking about smaller, unprofitable, non-market dominating firms. If they are not profitable they will have to raise or die. And raising in the environment of 5+% rates and poor overall tech stock performance may get brutal. Currently, many of those companies still have significant runways (because they were able to raise a lot earlier), but this will start running out in the next several months. This may already be starting: two of my friends who work in such small companies (robotics and lasers) are sensing job uncertainty ahead. My 2c.
- TheCoelacanth 4y ago
  It's not an existential question for the companies, but it could be for the people making the decisions. If shareholders aren't happy with the company's performance, the CEO might find themselves getting replaced.
ketzo 4y ago
Isn't that exactly the parent's point? They are saying that many unprofitable companies haven't done their layoffs yet, because they're still coasting on huge funding rounds from 2021. Thus, there are more axes yet to fall. Not sure how much stock I actually put in that argument -- lots of VC-funded companies are already doing layoffs, too -- but I think you're sort of agreeing with them.

highwaylights 4y ago

Those of us that have been through this before won’t be suckered in by it. Where I am, 2008 wasn’t too bad in tech, but the aftermath of the dotcom bust was like the end of Infinity War, just there one day and then gone. No-one expects their career to end at the gilded hand of a giant purple alien.

Firmwarrior 4y ago
I've been asking around about the dot com bust, trying to get a better picture of it The problem is that most of the people I've talked to were employed at huge, profitable companies that made actual products. So it was just a blip for them. I was working on web development after school and got laid off, but all that meant was I had to eat the food my parents made for me instead of eating at fast food places with my friends..
- haakonhr 4y ago
  I've actually met a couple of people randomly on flights that worked as software developers until the dotcom bubble burst. They both said they couldn't find anything the following years so they changed careers: one became a carpenter and the other ended up as an accountant.
- strangattractor 4y ago
  Finding work was not all that bad depending on your skill set. In fact I started doing consulting after leaving my startup. Was one of the most profitable and enjoyable times of my career. Having been through several downturns in tech I tend to view them as shifts. Early 80's personal computers -> late 80's early 90's connectivity (modems) BBS networks -> 2000 Internet etc. Understanding and adapting to those changes are key. Next up -> IOT - computers in everything - applying AI - Biotech - ? Generally something expensive has to become cheap for the masses. Hayes modems took $1200 - $2000 devices down to <$300. Ethernet made LANs cheap. Twitter made stupidity availability massively scalable for zero dollars:)
- tunesmith 4y ago
  I got laid off twice during the Dotcom bust. Remember that it dovetailed into the post-9/11 stuff too. In Q4 2001, there was just nothing. Intel and Nike were advertising web development positions for $12/hour (not a typo) and were getting flooded with applications. I ended up cold-calling various local businesses, got a freelance php/mysql contract for $20/hour, found a different perl/oracle contract for $55/hour in May of 2002, and worked my way back up from there.

strangattractor 4y ago

IMO One of the best times to do a startup is during a downturn. Startups typically don't even have a product for some time after beginning. One of the worst scenarios is introducing your product at the beginning of a downturn. Adoption rates tend to be slower then because corporations are reducing spending.

deleted 4y ago
[deleted]
ethbr0 4y ago
* If you can find funding or self-fund.
- strangattractor 4y ago
  One can always look at recently funded startups. Doesn't have to be your own. VC don't necessarily pull back on funding during recessions - using the same reasoning that it is a good time. Starting a new fund can be a problem during that period since many investors become risk adverse.

oceanplexian 4y ago

I think a lot more interesting things are going on with the "tech recession" than meets the eye. Unlike the crash in '08 and '01, the economy now has a hard dependency on tech. There is no "going back" to the world of the past. Smartphones aren't going to be "un-invented". People aren't going to give up online shopping. Businesses aren't going to give up targeted advertising and start buying ads on AM Radio or something. If you look at the big picture, and barring any wild developments like general intelligence AI, the demand for skilled tech workers is only going to increase. I don't think tech workers are invincible but I think tech is now a requirement for economic growth, which poses a problem: Business leaders and investors have been really ticked off by the tech labor shortage. They tried to fix it with H1B, they tried with all these "learn to code" programs. They tried boot camps. They keep trying, and failing, because being a software engineer requires a degree of intelligence and critical thinking and there will always be a limited supply of that kind of labor. My pet theory is that some portion of the layoffs are being engineered to undermine the remote work revolution, scare people into accepting lower wages, and get back to "how things were". But the economic need for tech is so large and the supply of labor is so limited I don't see much changing.

vbezhenar 4y ago
I feel that there's lot of bubbles which will burst and release plenty of programmers to the job market. It's already happening. And those programmers will not find work, not all of them. We need smartphones, but we don't necessary need all those "old moms social network" apps. During rich years plenty of people came to the industry. Plenty of them are smart and capable, so competition will lower salaries and push some people from their levels. And god save us if this AI thing will actually take off. It's dumb but it's progressing.
- mehphp 4y ago
  > And god save us if this AI thing will actually take off. It's dumb but it's progressing. I don't see how it does anything but progress. I obviously have no idea how long it will take before it can replace a software engineer but after playing around with ChatGPT and seeing the code it can create, it's definitely progressing faster than I thought it would.