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My "Crack Theory That Everyone Is Going To Hate": the tech industry as we know it arose out of the Great Financial Crisis and was a way to ensure that people wi

• sandworm101 3y ago
  To add to the concept, how a tech company today makes money is very different than in the past. Profit doesnt matter anymore. It is all speculation against the dream of future profits once a tech company dominates a market. Money people will pay the kids because in faint hope of being on the ground floor of the next facebook or microsoft. But with entrenched companies now dominating tech, nobody will be the next microsoft. Investors are starting to realize those days are gone. Tech companies will be started and many will succeed, but now must actually compete with each other, often in courtrooms, to justify why they should be allowed into existing markets. Look at nokia. A few decades ago anyone with a billion dollars could start making cellphones. Good luck with that today. You would need a hundred billion, and a few decades of IP lawyering, before being allowed to compete with the likes of apple/samsung. If your device has a touch screen and connects to the internet, you will suffer innumerable patent issues.
  • brigadier132 3y ago
    > Profit doesnt matter anymore Uh, you might have not been paying attention to it but profit does matter now. If you look out the window you can see all the startups doing mass layoffs or going out of business.
  • infecto 3y ago
    Profit has always mattered. The only change in attitude was because of historically low rates, it was easier to get more funding. Cheap rates = cheap money, investors are more willing to part ways.
    • jt2190 3y ago
      Yes, cheap money literally means “profitable next year” becomes “profitable _someday_”. To people who have only been in the tech industry for the last decade this feels like “profits don’t matter” because it’s never been “someday” in their entire careers, but now with interest rates back up “someday” is coming very fast at many companies (and has maybe already arrived at some).
  • javcasas 3y ago
    > Profit doesnt matter anymore. It is all speculation against the dream of future profits once a tech company <fill stuff here>. Oh, this time is soooo different to the dotcom crash, where it was speculation on companies, where profits didn't matter because it was the dream of future profits once a tech company <fill other stuff here>.
    • EVa5I7bHFq9mnYK 3y ago
      I remember large celebrations of a first ever profit eked out by an internet company, namely Yahoo.
  • BlueTemplar 3y ago
    That's what IBM thought. And this doesn't even take into account the possibility of these companies getting forcibly shut down / competitors coming in from outside. The only question is how long will this take ?
  • cmrdporcupine 3y ago
    > Profit doesnt matter anymore. Until it does. Also, Google etc clearly are profitable. Insanely profitable. The question is... how? I think people are right to question whether the majority of the employees are engaged in work which ensures this profitability. But that's not the same as saying there's no profit. It's all built on an edifice of advertising, which feels like a bit of a sandcastle to me. But I am also of the .com generation that saw the whole beach wash out into the ocean once already, and never understood how the advertising thing actually ended up yielding profits, and was initially quite pessimistic about the Google IPO (though was happy to take money from them by working there for a decade). I've seen the CPMs and the CPCs from the inside. I don't get it. I worked on ad servers and in realtime ad bidding. But I still don't understand why ads make money.
    • gosub100 3y ago
      > But I still don't understand why ads make money. total guess here, but instead of thinking of an ad as something that actually converts someone into a paying customer, maybe it's more about buying "mental real estate"? If nobody knows your brand, you have almost no sales. If you're at least in the neighborhood, then by pigeonhole principle, at least some customers will stop at your property. So maybe ads are a sort of dilemma that (with very few exceptions), your business must burn money on advertising just to stay in business?
      • cmrdporcupine 3y ago
        Absolutely, I get this impressions-as-marketing thing. But this also seems remarkably vulnerable to recession economics. Back when I worked in ads, the line was always that digital ads budget were still a fraction of what was being spent in traditional media, and so there was huge room to grow. I'm kinda guessing this is no longer the case.
    • rwmj 3y ago
      I worked on the other end of this as a buyer of Google Ads for some large travel companies in the UK. For all the craziness and disfunction that I saw at those companies[1], fundamentally the adverts did end up selling holidays to customers, and that was why they spent the money with Google. [1] https://news.ycombinator.com/item?id=21046731 https://news.ycombinator.com/item?id=21046731
  • packetlost 3y ago
    > But with entrenched companies now dominating tech, nobody will be the next microsoft. Idk, wasn't this the sentiment 30-40 years ago towards IBM?
  • kakwa_ 3y ago
    > A few decades ago anyone with a billion dollars could start making cellphones Did you mixed-up million and billion? A billion dollar is a gigantic pill of money. This feel a bit like saying "anyone with a British crown on his head can reign over the UK". Also, looking at Fairphone, they operate with a fairly reasonable budget: all revenue, including phone sells in 2022 are around $60M, and if we exclude production, ~$17M are needed to pay for product development, marketing, support and all other expenses for a year. At 2 years to create a phone, that's ~$30M.
• niodnyod 3y ago
  >"Crack Theory That Everyone Is Going To Hate" Because you're going to have to explain how it works. >way to ensure that people with the "right" educational and professional pedigree were getting the spoils of the money-printing that was preventing the utter collapse of our economy. How is giving money to the "right" people supposed to do that? >tech workers are just a convenient receptacle to prevent a wage-price spiral in the broader economy. How is giving money to these people in particular different than giving money to, say, nurses?
  • badcppdev 3y ago
    It's because the tech economy is a new pathway for money to flow. The wage inflation spiral that terrifies economists is where current jobs start paying more which leads to inflation in prices for goods and services which leads to the requirement for higher wages... I think that's the theory of the wage spiral. So OPs theory is that the government can print money, boost GDP, and pay out profits to the owners/shareholders but not trigger the inflation... until now
    • yterdy 3y ago
      Correct. The people we're talking about - Ivy League alums, the children of professionals, immigrants, and people who want to be like them - are much likelier than the average American to drive their wealth into assets and savings. Housing prices, stock prices, retirement portfolios would balloon, not (for the most part) the prices of everyday goods. Which is what happened; the wage-price spiral that we did see was largely localized to Silicon Valley/San Francisco (and, to a lesser extent, a few big cities). Until the Sept. '19 repo crisis and then the pandemic, of course.
  • tl 3y ago
    > How is giving money to the "right" people supposed to do that? According to various studies there is a limit to how much money per year changes your base happiness. The ones I have read say $80,000 but inflation probably makes that a dated number. Everybody meaningfully burning more than that is either a member of the upper class buying superyachts or stuck in a red queen race like a speculative real estate market or collectibles. The ones who make more than the happiness threshold who don't have some other sink for it (the majority) prudently lock it into index funds where it's made available to the people who didn't want to lose control in the first place. That is the "how". > How is giving money to these people in particular different than giving money to, say, nurses? Canonically, there are three competing types of people getting paid out with some overlap: 1. Small business professionals. The standard here is your family doctor or dentist. Restaraunt owners also qualify. These groups deal with fairly intense regulation / "insurance" policies to limit how successful they are. 2. High-end white collar workers. Prior to the tech bubble conscripting software engineers, the usual suspect was lawyers. Lawyers have a wide gulf in compensation between "Ivy League Grads at BigLaw" and everyone else. That trend mirrors the current trend of BigTech vs. everyone else as described in the "Crack Theory". Look up "bi-modal salary" for more details. 3. Strikers. The halls of power are more than willing to max out the happiness threshold of anyone from auto workers in the 50s to airline points in the 90s who can make a credible threat that the spice will not flow. Power is willing to do this because they have spare money to print and the ability to strip the compensation long term by shifting jobs around. Based on current events in NJ, you may or may not get to watch this pay out in real time with your nurses.
• infecto 3y ago
  The only reason people might hate it is because it has no proof or defense of the argument. Its a narrative that would require so many steps that its hard to imagine being true. How about a simpler reason. During the mortgage crisis/recession the fed rate dropped to historical lows. Cheap money is good for startups. The economy was doing well for a decade and towards the end of that decade rates started to creep up and we got hit by a black swan, a pandemic. Rates crashed again + stimulus money and incredibly strong consumer spending and we now have high inflation. The rates go back up and its less attractive for startups/tech companies.
  • yterdy 3y ago
    You're right, it's a holistic rather than analytical argument. I would at least say that part of the "proof" is in the fact that it's trying to explain what's in the article it's responding to, which we've taken to be true on its face. That's the mechanical action, but I agree that it's difficult to show the intent I accuse tech boards ad C-suites of. All a bit circumstantial, innit? >Cheap money is good for startups. We're talking about MEGAMAN (E stands for "Everyone else that fits the definition in my head"). Big, relatively established corporations. I would also counter that real income didn't budge after the GFC, so saying that "the economy was doing well" is stretching things.
  • randomdata 3y ago
    > stimulus money and incredibly strong consumer spending Seems like you are ultimately operating on the same theory: That tech was used to keep the "Great Financial Crisis" money away from the broader economy in order to prevent an inflationary spiral. It is unlikely that it was fully pre-meditated in exacting detail, but it is clear that the money 'printed' was directed to interests that would not spend it on bread, so to speak. The pandemic stimulus changed that. It saw 'printed' money flow to regular average Joes who would spend it on bread, and thus consumer inflation took hold. That is what earlier stimulus packages were trying to avoid.
• brianolson 3y ago
  I have heard many times: Google hires good engineers not to _do_ things, but to _not do things elsewhere_. (even if 80% of Google engineers are 'productively' working on products Google cares about, thats thousands of grade-A engineers spinning their wheels, and given the rate Google discontinues and replaces its own software, 80% is certainly high)
  • cmrdporcupine 3y ago
    I have propagated this meme. It's only partially true. SREs at Google are generally an insanely good use of Google's resources in keeping actually profitable services (like ads, search, cloud, etc.) running and running at a standard that I think few non-Googlers on this forum really have a concept of. But the bulk of SWEs are working on developing things which are not part of those Product Areas. I actually don't think the discontinuation thing is the main problem. The problem is that outside of Search, Ads & Cloud, pretty much nothing else at Google is really a profitable revenue generator. But you don't need >100k engineers to make the profitable stuff run. There's only so many ways to sling ads and report on them and build the infra for them. But Google's conundrum is that if they just focused on those areas, someone would eventually come along with something that would eat their lunch. So in the past Google would prefer to a) hire those people and shower money on them to stop them from doing that and b) farm out a bazillion "bets" and projects to try their hand at that stuff in the hopes of striking a vein of gold again, like they did with AdWords 20+ years ago. Cancelling projects is the byproduct of this continual search for new gold veins. Also a lot is changing now. SV execs seem to have made a gentleman's agreement among each other to tighten the labour market. Anyways, I think Meta is in more trouble than Google, long run. They're in a much riskier, shakier position.
    • red-iron-pine 3y ago
      > Also a lot is changing now. SV execs seem to have made a gentleman's agreement among each other to tighten the labour market. Nah. They tried that and there was an anti-trust case. I think this time everyone is 1) recovering from COVID and Inflationary Money Printing, and 2) not hiring more because AI is coming and they'd rather hold their breath.
• MicolashKyoka 3y ago
  This is nonsense. How are multibillion dollar companies accountable to shareholders and other owners willingly giving away money for some nebulous principle such as having the "right" people make money. Conspiracies should at least be based on some tangible elements. Fringe roles are too few to be seriously considered. The reality is that it's all a matter of supply and demand. Ofc, there is waste, but any industry having margins like google are bound to excesses eventually if leadership doesn't intervene.
  • yterdy 3y ago
    >How are multibillion dollar companies accountable to shareholders and other owners willingly giving away money for some nebulous principle such as having the "right" people make money. Because of the specter of the alternative, once QE et al. started. Proven by the fact that it straight-up started happening anyway when the (completely justified) COVID helicopter money started flying. Of course, there were other options: >Vacuuming up the excess money supply through taxation before it became a pillar of an entire sector's business model >Accept lower profits, executive compensation, and asset returns by letting worker pay rise without raising prices But those are anathema, I suppose. Which is why it didn't take a conspiracy for everyone to act in such a way that what's described came about.
• AnimalMuppet 3y ago
  In addition to what others have said: > Now, we are on the verge of another massive deflationary crisis for which we don't have any solution once the ball gets rolling... Um, what? Deflation? No, that is not the crisis that we're on the verge of.
  • yterdy 3y ago
    Well, the jury's still out, but the important thing to consider is what credible threat is keeping Powell from going full-Volcker and slamming on the brakes. I wouldn't say that we're on the verge of an inflationary crisis because we've been in one, which we do actually have tools necessary to try to thread the needle. However, China, Japan, and the US commercial real estate market loom ominously over proceedings (and also that one thing no one is thinking of).
    • AnimalMuppet 3y ago
      Going full Volcker is not called for. Inflation hasn't been building for nearly two decades; it's been nearly nonexistent for nearly two decades. Inflation hasn't reached 14%, nor anything close. They are, as you say, trying to thread the needle. That's still an option, and a less damaging one than going full Volcker. > and also that one thing no one is thinking of Don't vaguepost. If you've got something to say, say it.
      • yterdy 3y ago
        >Going full Volcker is not called for. Inflation hasn't been building for nearly two decades; it's been nearly nonexistent for nearly two decades. Inflation hasn't reached 14%, nor anything close. It's actually about 20-30% since 2020, if you measure the way they used to. People at the bottom are hurting, but the goal is to prevent full institutional collapse, so they get sacrificed in a slow walk to stabilization that risks hyperinflation, versus just getting it over with and starting on a recovery. >a less damaging one than going full Volcker. Well, a lost generation or two begs to differ. >Don't vaguepost. If you've got something to say, say it. Unknown unknowns. I have no idea where a hypothetical sucker punch is coming from because it's a sucker punch.