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How tech’s defiance of economic gravity came to an abrupt end
- ed-209 4y agoThis impending downturn is why I've tolerated a most unsexy project reassignment from my current employer over the last 9 months. Instead of data-driven green-fielding in AWS I've been brown-fielding in Azure where the current priority is dictated by the shifting demands of a single large customer. This all promises to be a nightmare if product doesn't realign and snap out of their identity crisis.
- cliftonk 4y agoMost of the losses were from earnings multiples reverting back to historical norms… which is healthy.
- ColonelBlimp 4y agoSeveral people in this thread have mentioned oat milk lattes as an apparently relevant piece of information to understand or rather legitimise their understanding of what’s happening in the tech sector.
- ElfinTrousers 4y agoPerhaps that's why I've never made serious money, I don't like oat milk.
- lucasyvas 4y agoI'm pessimistic long term on tech, but specifically our current flavor of tech. Most of us work for companies that deliver or indirectly deliver economic value to other office workers (or promote gig economy crap that undermines worker rights - the list goes on). The current machine is a totally broken model though. We have optimized to sell software to each other thats sole purpose is to just make more money on what already exists. We haven't invented anything to the betterment of mankind in quite a while. I'm sorry, but making software (for example) that makes someone else's mundane job easier is not revolutionary - it's a low effort cash grab. There is so much potential for tech growth in things the world needs, like energy, climate technology, feeding people, battery efficiency, sustainability. That stuff offers real value. For example, if you're building another ad delivery platform or PaaS, give your head a shake. It might be a great idea, but we do not need your intellect to solve this problem. We need you to put your entrepreneurial gifts to solving real problems that the world has. There is room for both - but what I'm trying to say is that if you have the means, please try to solve the hard problems instead. Because we really need someone to step up and 99% of what I see is missing the mark. Tesla and its CEO is a dumpster fire right now, but EVs are a good example of a hard problem that is valuable. If technology itself were like a stock portfolio (to a degree it is), what we are building is heavily skewed to junk status. Most of the money is in garbage reinventions of the wheel that are just padding the pockets of people that already have too much. The web services era needs to die in a fire for now - we need better physical technology / hardware solutions for the next chapter.
- nh23423fefe 4y agoThis sounds like empty moralizing. Someone somewhere should do things I think are "good" not things I think are "bad" because "we" need "good" things. And "good" things are easy to objectively identify like <list>. > If technology itself were like a stock portfolio (to a degree it is), what we are building is heavily skewed to junk status. Posit a distribution, while providing no measure.
- givemeethekeys 4y agoWhen the DotCom bubble burst, and after 2009, traffic in the Bay Area cleared up. Commuting time got cut by half. Homes in many neighborhoods, apart from the very best school districts, became attainable. This has yet to happen. Unemployment is still quite low. The music is just starting.
- starkd 4y agoIs unemployment still really low? Job growth was less than it was originaly reported. By a lot. From 1M to just 10K. https://nypost.com/2022/12/22/biden-administration-overstated-q2-job-growth-by-1-million-philadelphia-fed/ https://nypost.com/2022/12/22/biden-administration-overstate...
- laidoffamazon 4y agoThe fact that this Philadelphia FRED link keeps getting passed along indicates the people passing it along don't really understand it. What exactly is the unemployment rate if it's not ~3.7%?
- prottog 4y agoThe labor force participation rate, for one, still hasn't recovered to pre-pandemic levels, and has been dropping every single month since August.
- laidoffamazon 4y agoRetirements are up. It's not a conspiracy, it's the population pyramid.
- spaceman_2020 4y agoThe dominant narrative among investors and funds, at least in my domain (web3, tech investing) has been that "Fed will pivot soon, and the party will start anew". As long as that narrative remains strong, nobody will dump everything. New investment might stall, but no panic in the ranks. The real panic will set when the pivot does not happen. Or if it does happen and inflation comes roaring back, leading to a longer and deeper rate hike.
- mrhektor 4y agohttps://archive.ph/MmQ3Y https://archive.ph/MmQ3Y
- ram_rar 4y agohttps://archive.md/MmQ3Y https://archive.md/MmQ3Y
- patientplatypus 4y ago[dead]
- fragmede 4y agoHas it? Capitalism is based on supply and demand, and where those two lines intersect is where the magic happens. Except that we've never adapted it to the reality of, well, computers and the Internet. The price of duplicating a pile of bits, whether it be a Linux ISO, Windows 11, or the latest Disney movie is effectively zero*. Or textbooks to spread human knowledge around. A graph of supply and demand, where supply is a vertical line is broken! Copyright tries to be this end run around this basic fact, when what's really needed is a fundamental rethinking of the entire system. * Hosting a file < 10 GiB via Cloudflare's zero egress fee R2 and sending across the Internet, once for every human costs approximately $3k - https://www.wolframalpha.com/input?i=number+of+humans+alive+*+%28%24.36%2Fmillion+people%29 https://www.wolframalpha.com/input?i=number+of+humans+alive+.... Distribution costs via Bittorrent are even cheaper! I don't actually how much it costs to run a DHT node, or even who's paying for them today, but spreading a magnet link around is really close to free!
- anacrolix 4y agoI'd like to see you try to send a 10 GB file to every human on the planet through Cloudflare.
- fragmede 4y agoI mean, that's their claim, not mine. It terms of bandwidth, it might take a week or two, plus I don't have distribution rights to any 10 GiB files that the world wants, to actually try, so I've no way to verify their claims. I'd love to try, so hmu if you have such a 10 GiB file! Email's in my profile.
- davidhunter 4y agoThe marginal costs of production are near zero effectively. The marginal costs of acquiring and retaining a customer are far from zero for a lot of overvalued enterprise saas companies.
- hestefisk 4y agoIndeed. The economics that OP stipulate, do not factor in interest rate and cost of labour (engineers).
- Haga 4y ago[dead]
- ReptileMan 4y agoBefore reading the article - interest rates. After reading it - yup interest rates.
- aplummer 4y agoHonestly 12 months is too short a time period to be looking at companies like Apple, which is larger than the whole ASX or FTSE100. It’s even with 2 years, it’s up 4x on 5 years ago.
- mkl95 4y agoOne of our non unicorn competitors just raised ~200M in a niche where 100M+ seed rounds are usually something you raise after you become a unicorn in a series D or something. There still are crazy investors out there but they are crazy about more specific things than say three years ago.
- kingkongjaffa 4y agoM&A and Private equity activity is down at the moment but it’s only down from the record high of post-covid liquidity. We had a year of uncertainty and semi stockpiling and then when the recovery steps were clearer a huge amount of pent-up investment happened in the following 12-18 months. Sentiment is mostly negative right now but deals are still being made, where they make sense.
- lmeyerov 4y agoThere is down and there is cratered 80% YoY: https://news.crunchbase.com/venture/global-vc-funding-monthly-recap-november-2022/ https://news.crunchbase.com/venture/global-vc-funding-monthl... So the question is what happens to VC-dependent companies - do exuberant times return and they continue their addiction, do they do even deeper cuts, wash out, ...?
- georgebarnett 4y agoWith all industries are converting to software and every person on the planet moving towards owning a smartphone it surprises me that there’s an ongoing narrative that tech is collapsing.
- hef19898 4y agoTech =|= software =|= start-up. Those three things are unrelated, and the tendency to equate tech with software let a lot of issues on all fronts in the last decade or so.
- georgebarnett 4y agoI disagree - tech _is_ software and it’s so ubiquitous that it’s essentially invisible.
- Avicebron 4y agoPlanes, trains, and automobiles are tech. Software is a specific subset, software is a subset of tolling and techniques that's applied to "tech" no more than circuit boards, wires, or the wheel. It doesn't have a special elevated status. The more people understand that the faster people will stop hero worshipping it.
- closeparen 4y agoIt has special elevated status economically because of near-zero marginal cost. Circuit boards, wires, and vehicles are brutally competitive businesses where you try to squeeze $/performance out of Mother Nature like blood from a stone. Software is so far from these physical frontiers that that incredibly wasteful architectures can create enormous amounts of business value.
- ChrisMarshallNY 4y ago> stop hero worshipping it I guess that's the case for software-centric platforms. It was not my experience. I worked for hardware-centric corporations, for most of my career, and became used to having software treated as a "nice to have, but not essential" part of the product. In many cases, my work (and myself) were treated with contempt. I got used to being sneered at. In my experience, this was a disastrous attitude, because, despite lots of folks wishing it weren't so, hardware, these days, is software. Software pervades everything, from the compiled silicon on peripheral ASICS and FPGAs, to the firmware that drives said chips. In my experience, firmware was treated as hardware, and the same rigid, waterfall process was applied to firmware, that was done for the hardware. Worked great. Until it didn't. Software is a drastically different beast from hardware. I won't bother going into the reasons. Anyone with a smattering of knowledge in the area, can list them. In any case, the hardware folks would treat any attempt to leverage the flexibility that software allows as "cowboy, low-quality, laziness." It was Waterfall, or you were a "bad engineer," and "lazy and undisciplined." I'm really big on Disciplined software development. That does not make me popular with this crowd. It also does not mean Waterfall. In my opinion, there's no way to avoid the difficult parts of engineering, but it's also important to be adaptive, responsive, and, dare I say it, "agile."
- imtringued 4y agoIsn't it kind of odd how everyone shouts that inflation is good for stocks, etc when the Fed is known for raising interest during times of high inflation? By that I mean if something grows faster than inflation plus earnings and it is an inflation hedge or at least the revenue is dependent on inflation and therefore it's valuation grows with inflation, then it must come down at some point and here is the kicker, only businesses that actually manage to sell products and generate revenue are actually benefiting from that inflation. So when faced with higher interest rates, only those business will have an easy time. So what matters here is nominal revenue and nominal interest, not the actual real interest rate. 4% interest at 8% inflation still has a big impact, even though in real terms it is still negative.
- ngoilapites 4y agoDefine economic gravity.
- RyanShook 4y agoI see more layoffs in Meta's future.
- ianai 4y agoHere’s a Fed analyst policy briefing on market valuations today and going forward: https://www.federalreserve.gov//econres/notes/feds-notes/the-coming-long-run-slowdown-in-corporate-profit-growth-and-stock-returns-20220906.html https://www.federalreserve.gov//econres/notes/feds-notes/the... It’s an insight into how they’re thinking for one. For two, the conditions that led to the current economic situation are unlikely to be present in the future. In many cases those situations can’t be reproduced because they would require highly unlikely situations (another pandemic) or impossible situations like the fed going to negative interest rates or near zero tax rates. Further, population growth is one solid, bedrock economic growth truism. Some of this could be ameliorated by the US taking a “send us your weak, your poor, etc” mindset to immigration. This is how things were pre-2010, ish.
- fallingknife 4y agoPopulation growth is great for GDP growth, but not necessarily quality of life.
- anm89 4y agoCrazy to me that this is downvoted. It's the core truth of our debt based economic system. Our economic system will explode violently in a default cascade without population growth or productivity growth and we haven't been able to figure out ways to consistently increase productivity, which is to say we need population growth to sustain our way of life. It's why deflation is the boogeyman. Deflation is basically a win in a society with zero debt. Deflation is a humanitarian crisis at 130% public debt to gdp and whatever ~300% total debt to gdp we are at. But population growth is a net loss for most of us. More plastic waste. More energy consumed and emissions created, more space taken up etc. There's already more than enough of us by any metric except the amount of gdp growth required to keep our economy running.
- zirgs 4y agoThe population of my country has been falling for 30 years in a row and yet its GDP is rising. How could that be?
- benreesman 4y agoAlternate hypothesis: tech is still a great sector but as monetary policy has moved away from “money printer go brrr” growth equities have predictably been hit harder than most. We were running ZIRP and some insane level of QE that’s a bit of a puzzle to even measure. Yeah, equities markets were more than a little overheated. The notional values may have re-scaled a bit but I’ll go out on a limb and venture that Alphabet is still a great business.
- screye 4y agoI believe the doom-n-gloom around all of tech is rather overblown. There are sectors of tech that will absolutely struggle. Gig-economy companies won't ever meet their valuation. Negative PE ratio startups are realizing that hyper-scaling is not as infinite as they believed, and that means their earnings might never catch up to their price. Social media companies are finally facing stiff non-American competition (Tiktok). Lastly, it is nice to see the crypto scams be snuffed out. But, people have been calling all 4 of these out since before Covid. Now, the biggest movers in tech seem to be in a healthy position. AMZN*, MSFT, AAPL and GOOG sit comfortably at the same average PE ratio as the S&P500. Those are value stock numbers for companies that are all leading innovation while having solid unit economics. They are front runners in areas that are their biggest risks (AI, Silicon) and their current offerings are essential tools to everyone globally. AFAIK, the adoption rates for cloud compute and mobile-silicon devices is only going to go up from here. [AMZN] - AMZN does the weird profit-reinvesting thing, so they report lower margins on the highest revenue across tech. Thus the lower PE ratio. See it as you wish.
- laidoffamazon 4y agoFrom the way people talk on this forum about economic conditions in this country you'd imagine the unemployment rate is 10%, nobody is hiring, and the market is down 50%.
- cplusplusfellow 4y agoThe media consumed by the typical member of this audience would lead you to believe that. For some reason, everyone is trying to organize a recession.
- SantalBlush 4y agoThe recession talk is delusional. Every economic metric but inflation is in good shape. These people don't know what they're talking about.
- fullshark 4y agoInflation means interest rates will be up, which is bad news for silicon valley and profitless startups in particular. The economy might be ok (very debatable) but if interest rates stay high and the VCs pump and dump of unprofitable unicorns on the public markets has ended...
- Pasorrijer 4y agoI really hope this drives "My tech delivers value!" instead of the asinine "We're going to burn money until we're a monopoly!" strategies.
- birdymcbird 4y agoLatter statement you quoted accurately describes VC and start up world. Big tech was even worse than this. Monopoly? That implies a vision and proper focus to achieve business goals. My take is far less generous. This was one of the biggest grifts in recent times. the professional managerial class obsessed not with their products or services but instead on increasing headcount, building empires, and getting promotions. Office politics and political games played by people who produced little to no economic value.