4 ms·

For the causes of R&D layoffs, I'm curious about the split between (a) increased interest rates, vs. (b) changes to U.S. tax code that disallow 5-year amortizat

For the causes of R&D layoffs, I'm curious about the split between (a) increased interest rates, vs. (b) changes to U.S. tax code that disallow 5-year amortization of software-development costs. I'm only hearing people mention (a). So maybe (b) is less relevant than I'm imagining? CORRECTION: I think I stated (b) exactly backwards. IIUC, previously a company could fully expense the cost of software development in the year it occurred, but now it must be amortized over 5 years.

hawk_ 4y ago
Isn't (b) forcing 5 year amortization? Which I believe doesn't affect large long running steady businesses. It's mostly about cashflow.
- CoastalCoder 4y ago
  Sorry, I think you're right. I've updated my original comment.
- Tyrek 4y ago
  This change will have a real impact to cashflow, in the sense that you are paying more (in taxes) in the first year than you would under the previous model. And cashflow is incredibly important, Free Cash Flow metrics etc. are all fairly critical within the investing world.
tough 4y ago
Now that you put it that way, maybe (b) is the ugly truth, and (a) is just the prettier (everyone else is doing it) scape goat. I see interest rates being the number 1 excuse for layoffs, but there has to be something else on why Software is getting screwed so much in this down cycle. I used to think AI/LLMs, but who knows. Im not seeing as many layoffs internationally but that might be biased, one would thought climbing interests rates would have more of a first order global effect
- morpheuskafka 4y ago
  But why would companies want to say (a) and not (b)? Seems like “you lost your job because the government raised taxes” would be a pretty popular explanation and PR strategy to get the change reversed.
  - susumukodai 4y ago
    1: "government" would likely be a large customer, and putting blame on one of your large customers is not a good business plan. 2: As much as we know the Biden Administration is largely responsible for our rampant inflation, to point out their significant part into our trashed economy only invites retaliation from them and their cronies. This administration is quick to attack anyone who even slightly besmirches or questions them (much like their masters in the CCP).
    - freedomben 4y ago
      Just some friendly advice for the future, statements like this do much damage to your credibility. > (much like their masters in the CCP).
- steveBK123 4y ago
  Conversely, I think it should make sense that the growthiest of growth areas, tech, would see the biggest pullback once money starts costing money again. A lot of loss-making / future growth speculative tech business models make a lot less sense when you can make about 5% risk free. It doesn't get discussed much, but during the boomiest tech hiring days of COVID.. interest rates weren't just 0%.. they were, in real terms, negative. Circa 2021 the treasury/risk free rate was about 1.5% while inflation ended the year at about 7%. So you were getting paid 5.5% to take risk. This incentives speculation as parking your money in a safe CD/bond/whatever loses real-money with time. Now inflation & risk free rate are at about parity.
- jstarfish 4y ago
  AI is too nascent to be the sole reason for so many layoffs. Emulating HR is about all it can be trusted to do autonomously. Old people (50+) and troublemakers (PIPs) comprised the entirety of my own company's most recent layoff round. They're not even trying to hide it anymore. My hunch is that [America] is laying off domestic engineers so we can outsource more of the positions to India during the next hiring phase. If anything, AI is playing middleman in flattening a lot of the communication hurdles.
hn_throwaway_99 4y ago
There is so much misunderstanding about the amortization of software dev costs rule (and yes, I see your correction). I've worked in large and small companies in my career, and nearly every large company desperately wanted devs to count as much time as possible as capex (vs. opex). Reason being that, if you're a growing software company, counting dev salaries (often your largest expense) as capex can make you look a ton more profitable, which is of course good for your stock price and valuation (indeed, counting opex as capex is one of the oldest frauds in the book - it's what brought down WorldCom 20 years ago). It's just that, in a modern software company, it's really hard to separate any individual dev's time into separate capex vs opex buckets. The reason I hated capitalizing my time as a software engineer is because the line between capex vs. opex is gray beyond belief for modern SaaS companies that do continuous delivery.

hawk_ 4y ago

Isn't (b) forcing 5 year amortization? Which I believe doesn't affect large long running steady businesses. It's mostly about cashflow.

CoastalCoder 4y ago
Sorry, I think you're right. I've updated my original comment.
Tyrek 4y ago
This change will have a real impact to cashflow, in the sense that you are paying more (in taxes) in the first year than you would under the previous model. And cashflow is incredibly important, Free Cash Flow metrics etc. are all fairly critical within the investing world.

tough 4y ago

Now that you put it that way, maybe (b) is the ugly truth, and (a) is just the prettier (everyone else is doing it) scape goat. I see interest rates being the number 1 excuse for layoffs, but there has to be something else on why Software is getting screwed so much in this down cycle. I used to think AI/LLMs, but who knows. Im not seeing as many layoffs internationally but that might be biased, one would thought climbing interests rates would have more of a first order global effect

morpheuskafka 4y ago
But why would companies want to say (a) and not (b)? Seems like “you lost your job because the government raised taxes” would be a pretty popular explanation and PR strategy to get the change reversed.
- susumukodai 4y ago
  1: "government" would likely be a large customer, and putting blame on one of your large customers is not a good business plan. 2: As much as we know the Biden Administration is largely responsible for our rampant inflation, to point out their significant part into our trashed economy only invites retaliation from them and their cronies. This administration is quick to attack anyone who even slightly besmirches or questions them (much like their masters in the CCP).
  - freedomben 4y ago
    Just some friendly advice for the future, statements like this do much damage to your credibility. > (much like their masters in the CCP).
steveBK123 4y ago
Conversely, I think it should make sense that the growthiest of growth areas, tech, would see the biggest pullback once money starts costing money again. A lot of loss-making / future growth speculative tech business models make a lot less sense when you can make about 5% risk free. It doesn't get discussed much, but during the boomiest tech hiring days of COVID.. interest rates weren't just 0%.. they were, in real terms, negative. Circa 2021 the treasury/risk free rate was about 1.5% while inflation ended the year at about 7%. So you were getting paid 5.5% to take risk. This incentives speculation as parking your money in a safe CD/bond/whatever loses real-money with time. Now inflation & risk free rate are at about parity.
jstarfish 4y ago
AI is too nascent to be the sole reason for so many layoffs. Emulating HR is about all it can be trusted to do autonomously. Old people (50+) and troublemakers (PIPs) comprised the entirety of my own company's most recent layoff round. They're not even trying to hide it anymore. My hunch is that [America] is laying off domestic engineers so we can outsource more of the positions to India during the next hiring phase. If anything, AI is playing middleman in flattening a lot of the communication hurdles.

hn_throwaway_99 4y ago

There is so much misunderstanding about the amortization of software dev costs rule (and yes, I see your correction). I've worked in large and small companies in my career, and nearly every large company desperately wanted devs to count as much time as possible as capex (vs. opex). Reason being that, if you're a growing software company, counting dev salaries (often your largest expense) as capex can make you look a ton more profitable, which is of course good for your stock price and valuation (indeed, counting opex as capex is one of the oldest frauds in the book - it's what brought down WorldCom 20 years ago). It's just that, in a modern software company, it's really hard to separate any individual dev's time into separate capex vs opex buckets. The reason I hated capitalizing my time as a software engineer is because the line between capex vs. opex is gray beyond belief for modern SaaS companies that do continuous delivery.