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Capital Inefficiency
- bugglebeetle 3y agoThe current market conditions in the US seem more like a Capital strike than “Capital inefficiency”: https://en.m.wikipedia.org/wiki/Capital_strike https://en.m.wikipedia.org/wiki/Capital_strike The pandemic created both labor shortages (and thus higher wages) and improved conditions for many workers. Capital owners are now doing everything in their power to claw back those gains, though not without newly-emboldened resistance from organized labor.
- readthenotes1 3y agoYou left off that the response to the pandemic in the US revived a marker for capital that hadn't existed for 15 years, and made all other risk taking much more expensive
- bugglebeetle 3y agoHigh interest rates are certainly erasing some forms of irrational allocation that can’t be sustained under them (e.g. all the crypto stuff), but the collusion between firms on things like return to office, wage suppression, and price gouging is largely independent of them.
- yibg 3y agoYou keep talking about collusion. Do you have any supporting data to back this up?
- bugglebeetle 3y agoEvery FAANG simultaneously decided they needed to layoff roughly the same percentage of workers, and even more through return to office, with no justification or demonstrated impact on profits, productivity etc, they share large investors, and oh, yes, they all got busted for colluding in the past? It’s all pretty much out there in the open.
- IX-103 3y agoNot to mention they're immediately hiring to replace those workers that they laid off. The management is either incompetent or they're trying to depress wages. They openly admit they're trying to achieve "durable savings" which seems like it may be an MBA code word for depressing wages.
- soupfordummies 3y agoWhat if it’s not a decision made in a smoky back room behind closed doors but rather monkey-see-monkey-do/“hey we can get away with it”? Definitely is weird to say the least. Even small companies often have HUGE investment firms behind them of course.
- thrway63245 3y agoThis is exactly what you would have said the last time there was proven collusion. It takes a while for the proof to come out, but as the sibling comment says: it's awfully convenient that all the RTO policies and layoff ratios are in alignment.
- alexashka 3y agoCollusion is the default human condition. It is absence of collusion that has to be proven. Or are we assuming governments around the world are effectively preventing collusion of multi-national corporations? Now that would require incredible proof.
- braelen7 3y ago[flagged]
- nyssos 3y agoThose things don't constitute a capital strike. Businesses don't suppress wages to strongarm the government, they suppress wages because they want higher profits. Likewise with prices. Return to office might be more organizational pathology than rational self-interest, but it's still not an attempt to influence policy.
- sharts 3y ago> Businesses don't suppress wages to strongarm the government, They do threaten to relocate operations overseas. And when they do, the wages paid may indeed be "higher" than average in the new regions.
- bugglebeetle 3y agoMaybe, but there was also bipartisan legislation to crush the rail strike, simultaneous dismantling of pandemic protections on the state and national levels, the removal of the child tax credit, and so on and so forth.
- anon1199022 3y agoThat crypto part is an assumption. If you want real irrational allocation, check back to office and how and of capital overlords are pushing it for no rational reason.
- bugglebeetle 3y agoI would say it’s more rational than crypto as the tech companies investors and commercial real estate investors have a significant degree of overlap. Crypto was little more than digital tulip mania.
- anon1199022 3y agoyou know that's exactly what they said in 2017 about crypto and now Blackrock is pushing an ETF. what a tulip that was pushed by biggest financial org. isn't it. 0 handsight about future
- bugglebeetle 3y agoThere’s a sucker born every minute.
- tyrfing 3y agoHere's the problem: "crypto stuff" is just the easy, low hanging fruit. That went away when the Fed began hiking. We're long past that now, with 30 year treasuries at 5%, and venture capital defines itself by extremely long duration speculative investment. That's irrational allocation in a world with high real rates.
- willcipriano 3y agoMargins are up across the board from 2021 onward: https://fortune.com/2022/03/31/us-companies-record-profits-2021-price-hikes-inflation/ https://fortune.com/2022/03/31/us-companies-record-profits-2... There is room for workers wages to go up but right now the higher prices are mostly benefiting investors and owners.
- cperciva 3y agoMargins need to be up in order to pay for the increased cost of capital.
- hotnfresh 3y agoYou don’t pay costs out of margin. That’s what‘s left after costs.
- marcosdumay 3y agoOwn capital costs are exactly the thing that margins pay for.
- willcipriano 3y agoIf they were paying lots for capital, they'd have lower margins.
- mr_toad 3y agoOnly if it’s debt financed.
- roenxi 3y agoAdding in that the economy was partially parked up through COVID and the risks of being shut down by the government turn out to be much higher than people realised hitherto. Margins need to go up in that sort of environment to push everything back to how things were pre-pandemic, otherwise nobody will bother. Not many are crazy enough to put lots of money into low-margin businesses that are at high risk of being shut down. Capitalists are greedy but not stupid.
- pc86 3y agoThis seems like an overly simplistic "capital owners greedy/labor-good-capital-bad" kind of take. I don't know if you've applied for any tech jobs recently but at least outside of super-senior and FAANG positions that I'm familiar with, it's pretty brutal. When I applied for my current role I was basically going against 3-4 other people and we all matched about 80% of the qualifications for the role. My boss is hiring right now and within a day received over 100 applications, and as of last week he has at least dozen who fit 100% of the qualifications for a comparable role to mine.
- bugglebeetle 3y agoThat’s not really in conflict with anything I wrote? Firms are colluding on layoffs to force these kinds of conditions and drive down wages.
- Plasmoid 3y agoWhat do you mean by collusion? Do you mean an explicit agreement like the old FAANG no poaching agreement? Or something more subtle?
- bugglebeetle 3y agoReturn to office is largely layoffs in disguise, all of FAANG is doing it, and have more or less explicitly stated that they have no rationale beyond “we can make you do this, so we are.” As you pointed out, they already conspired in the past with their no poaching agreements, so draw your own conclusions.
- IX-103 3y agoYep. Not too mention the actual layoffs that are going on. If you actually look at the hiring for the companies with these layoffs then you find that they are actually growing their workforce while still announcing layoffs. That seems almost designed to depress wages...
- debarshri 3y agoIt is interesting because right before the macro conditions went haywire, when we were raising capital for our current startup, we often got responses like, Oh, well, you guys are not from SF, or you should build your team in SF; all the action is here. It is true that action is still in SF. But suddenly, the VC ecosystem has started appreciating capital efficiency as we are building quite a large team in India. It has its own issues, but overall, you can be really competitive with a Bay Area startup. A 2 million-dollar venture may take two years for a Bay Area startup, whereas if you have a team in India or elsewhere, it goes way further. People talked about moat, hype etc. before the downturn now everything is talking about capital efficiency (which I think is good)
- RivieraKid 3y agoRegarding worsening conditions for tech workers - my theory is that this is because tech is particularly sensitive to interest rates. Software developers are often building products that will start making money in the distant future. With interest rates going up, the present value of these future cash flows goes down.
- yowlingcat 3y agoVery nice way to explain a concept that usually takes me several paragraphs.
- sharts 3y agoHopefully this will result in a more conservative approach to tech with a greater focus on immediate needs vs long-shots in the distant future which tends to result in winner-take-all for the victors.
- slothtrop 3y agoSomething tells me this won't impact the AI race, but otherwise I think you're right.
- ramesh31 3y ago>Hopefully this will result in a more conservative approach to tech with a greater focus on immediate needs vs long-shots in the distant future which tends to result in winner-take-all for the victors. Hopefully it doesn't, as that sounds really depressing.
- layer8 3y agoI don’t follow. Wouldn’t the future value (actual future benefit) of the product be independent of inflation, and when expressed in terms of eventual future pricing, simply increase with inflation?
- technotony 3y agoFuture revenues are discounted to present value using a discount rate that increases as interest rates increase. This is called a discount cash flow model. Initiatively this makes sense because if a future dollar was the same as a today dollar you could just invest today's dollars in treasuries and have more in the future.
- ramesh31 3y ago>Developers: "Am I a good developer? Are there 10x developers? Were those high-profile things I worked on now on the cutting room floor worth it? What does it mean to be an effective developer these days?" This hits hard. Along with the "please don't fire me" line at the end. After spending so many years watching so many people do such great work together which amounted to nothing, I'm left wondering where to go at this point.
- philipov 3y agoWhen he writes: "X is a bit toxic. What should we do? ..." I really feel like he's talking about the company formerly known as Twitter.
- simne 3y agoThis is pseudo-scientific BS. But must admit, named right factors, just they linked into BS scheme. What really happen, first, in 1920s, 90% of population working in agriculture, mostly without any tech, and things slowly moving to current state, only 5% in agriculture, and more than 60% in services. Transition from agriculture to modern, was slow and biased, so first transit most active people (entrepreneurs) and preferred smart people, because bright perspectives, etc, but we see from modern side, there was not computers on agriculture side, so our vision biased. Also important, US was one of first countries made transition, started in 1920s, and for example, China started transition in 1978, HALF HUNDRED years later. What world looks like for modern underdog, yes, we long time see many bright persons, who make things right, or even more, in some cases looks like friendly aliens with incredible technologies. And even, when in West, transition mostly complete in 1980s-1990s, in Asia it was just started in late 1970s, and peak was in 2000s. What this mean, even when smart people sources in US agriculture already exhausted, appear smart immigrants from Asia, for some time feed with fresh minds already stagnating system. Than, transition complete in current state, agriculture exhausted, grow ends, and now appear generation of ordinary people. To return old good times, we need some Great frontier, like Mars colonization, so again, will be spend huge resources on huge investments and again, smart people will got great salaries and will have motivation to work there.