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> Wanna build a video game that teaches developers how to code and use Twilio? Let's try it! Wanna build an AI application with Tony Hawk and have Tony Hawk de

by acchow 3y ago

> Wanna build a video game that teaches developers how to code and use Twilio? Let's try it! Wanna build an AI application with Tony Hawk and have Tony Hawk debug the code live on stage? Sure! These are the strange effects of ZIRP and infinite QE. Many companies never had to care at all about profit and could just do things "for fun", and still see valuations skyrocket as long as they hired more people. What a time.

fnordpiglet 3y ago
In my 32 years in the industry the best performing companies always did these things regardless of the macroeconomic climate. It’s when you ceded leadership to the accountants and shifted gears to maintenance mode that companies stopped growing. You never did these things for fun, you did these things because they had some knock on effect that made it potentially worth it, and in a portfolio of many small bets some would blow up into your next big product. Even the ones that seem far left field they created an environment where people felt allowed to dream at all, and their knock on effect was in creation of a risk taking culture. Blaming low interest rates on taking risk and doing highly speculative things, and investing in a culture that values that by funding off the wall stuff puts too much emphasis on the capital markets. If the company was a steel producer, fine. If it’s a company that essentially captures the stuff of dreams and produces a service that executes thought stuff in machines, you have to decouple your R&D from capital management to the extent your free cash flow can accept it. Note of course low interest rates and other capital market looseness will create more opportunity for this behavior, and not every company doing these things is doing some is a well managed way. But they don’t have to - that’s the magic of capitalism. Through a Darwinian process only those who strike magic win and survive and the others recycle and try again. This feels like a feature not a flaw of zero interest rates - it creates enormous value by virtue of incentivizing taking risk at a time of high innovation. There are times in history where innovation rates were very low, and zero interest rates would just incentivize broken behavior. But at a time when almost all growth is coming from innovation, maybe loose credit is smart. ml
- ctvo 3y ago
  > In my 32 years in the industry the best performing companies always did these things regardless of the macroeconomic climate. Agreed. Creative, high performing people don't do well in a work environment that's structured like a regional bank. Valve Software -- incredibly profitable, high performing and private company, did fun things like hire economists (and then later Greek prime minister) to study and simulate virtual, in-game economies [0]. Blizzard Entertainment had giant statues of orcs made and fan conventions before their downfall, ya know, in the ZIRP macro economic environment. Google allowed their engineers 20% time. Before ZIRP. 0 - https://en.wikipedia.org/wiki/Yanis_Varoufakis#Academic_career#Academic_career https://en.wikipedia.org/wiki/Yanis_Varoufakis#Academic_care...
  - drzaiusapelord 3y ago
    Just a small correction, Yanis was the minister of finance, under the PM, who at the time was Alexis Tsipras.
  - balls187 3y ago
    > Valve Software ... high performing Depends on how you measure performance. ARPU? Very high. Shipping software? Super low.
    - wintogreen74 3y ago
      what about the hardware that significantly leverages their non-game software? I think the full ramifications of what they're doing with mobile gaming have not yet been felt.
  - hyggetrold 3y ago
    > Google allowed their engineers 20% time. I once heard that this was more like 120% time? Meaning, 'extracurricular activities' on company infra was allowed and encouraged, but not at the expense of regular productivity/output.
- Aurornis 3y ago
  > In my 32 years in the industry the best performing companies always did these things regardless of the macroeconomic climate. My anecdote, FWIW, is that some of the worst performing startups do these tricks too. There's something about flashy events and boondoggles that sound good on LinkedIn that draws bad founders into spending waaay too much on parties and fun activities. Stripe obviously isn't in that category, but never assume that because a company spends a lot on parties and events that they're doing well.
dools 3y ago
QE and ZIRP are deflationary policies because they reduce the amount of interest payments (which are no different from any other transfer payment) paid by the government.
- QuantumGood 3y ago
  • QE = Quantitative Easing • ZIRP = Zero Interest Rate Policy
- 1tao 3y ago
  as a first order effect, sure. but do you agree they have resulted in the inflation which causes our debt-burden/GDP to rise?
  - dools 3y ago
    No I don’t, there was potentially some inflation due to fiscal stimulus but mostly due to supply chain issues. The continuing inflation is caused by interest rate increases, ie. the interest rate sets the inflation rate.
    - dragonwriter 3y ago
      If nothing else, your argument that monetary policy levers work exactly the opposite way that conventional economics says they do is amusing.
      - dools 3y ago
        Even more amusing is that I’m right!
        dragonwriter 3y ago
        If you were right, Fed policy would drive the nation into an unbreakable positive feedback loop (irrespective, really, of preexisting conditions because the conventional economic levers would always drive the nation the exact opposite way intended) until conventional understanding of monetary policy was abandoned. The fact that this hasn't happened pretty clearly disproves your understanding: the conventional understanding may be wrong in some way, but its not inverted.
dasil003 3y ago
I think this is a bit reductive. Sure ZIRP created an environment where people could get away with trying crazy things, but there was still an expectation of growth in pursuit of some longer time-horizon market dominance. These kind of things may be more risky, but they still can be justified in the pursuit of market awareness and growth. Also, when you're building software products, there's real value to engaging the creativity of the team. The fact that the music continued so long and led to incredible valuation inflation over the last 15 years made the excesses look a lot worse, but even in a more sane financial environment I'd argue you'd still want to do these things to be competitive in an attention-economy, just maybe not to the extremes we saw.
lulznews 3y ago
Don’t forget massive PMF in the case of twilio
mise_en_place 3y ago
These are multibillion dollar companies, not your scammy SV dogshit startups. Fun is a rounding error for them.
1vuio0pswjnm7 3y ago
Were companies in other sectors besides so-called "tech" able to disregard profit and just keep hiring as a result of ZIRP and QE. If yes, what are some examples.

by acchow 3y ago

fnordpiglet 3y ago

In my 32 years in the industry the best performing companies always did these things regardless of the macroeconomic climate. It’s when you ceded leadership to the accountants and shifted gears to maintenance mode that companies stopped growing. You never did these things for fun, you did these things because they had some knock on effect that made it potentially worth it, and in a portfolio of many small bets some would blow up into your next big product. Even the ones that seem far left field they created an environment where people felt allowed to dream at all, and their knock on effect was in creation of a risk taking culture. Blaming low interest rates on taking risk and doing highly speculative things, and investing in a culture that values that by funding off the wall stuff puts too much emphasis on the capital markets. If the company was a steel producer, fine. If it’s a company that essentially captures the stuff of dreams and produces a service that executes thought stuff in machines, you have to decouple your R&D from capital management to the extent your free cash flow can accept it. Note of course low interest rates and other capital market looseness will create more opportunity for this behavior, and not every company doing these things is doing some is a well managed way. But they don’t have to - that’s the magic of capitalism. Through a Darwinian process only those who strike magic win and survive and the others recycle and try again. This feels like a feature not a flaw of zero interest rates - it creates enormous value by virtue of incentivizing taking risk at a time of high innovation. There are times in history where innovation rates were very low, and zero interest rates would just incentivize broken behavior. But at a time when almost all growth is coming from innovation, maybe loose credit is smart. ml

ctvo 3y ago
> In my 32 years in the industry the best performing companies always did these things regardless of the macroeconomic climate. Agreed. Creative, high performing people don't do well in a work environment that's structured like a regional bank. Valve Software -- incredibly profitable, high performing and private company, did fun things like hire economists (and then later Greek prime minister) to study and simulate virtual, in-game economies [0]. Blizzard Entertainment had giant statues of orcs made and fan conventions before their downfall, ya know, in the ZIRP macro economic environment. Google allowed their engineers 20% time. Before ZIRP. 0 - https://en.wikipedia.org/wiki/Yanis_Varoufakis#Academic_career#Academic_career https://en.wikipedia.org/wiki/Yanis_Varoufakis#Academic_care...
- drzaiusapelord 3y ago
  Just a small correction, Yanis was the minister of finance, under the PM, who at the time was Alexis Tsipras.
- balls187 3y ago
  > Valve Software ... high performing Depends on how you measure performance. ARPU? Very high. Shipping software? Super low.
  - wintogreen74 3y ago
    what about the hardware that significantly leverages their non-game software? I think the full ramifications of what they're doing with mobile gaming have not yet been felt.
- hyggetrold 3y ago
  > Google allowed their engineers 20% time. I once heard that this was more like 120% time? Meaning, 'extracurricular activities' on company infra was allowed and encouraged, but not at the expense of regular productivity/output.
Aurornis 3y ago
> In my 32 years in the industry the best performing companies always did these things regardless of the macroeconomic climate. My anecdote, FWIW, is that some of the worst performing startups do these tricks too. There's something about flashy events and boondoggles that sound good on LinkedIn that draws bad founders into spending waaay too much on parties and fun activities. Stripe obviously isn't in that category, but never assume that because a company spends a lot on parties and events that they're doing well.

dools 3y ago

QE and ZIRP are deflationary policies because they reduce the amount of interest payments (which are no different from any other transfer payment) paid by the government.

QuantumGood 3y ago
• QE = Quantitative Easing • ZIRP = Zero Interest Rate Policy
1tao 3y ago
as a first order effect, sure. but do you agree they have resulted in the inflation which causes our debt-burden/GDP to rise?
- dools 3y ago
  No I don’t, there was potentially some inflation due to fiscal stimulus but mostly due to supply chain issues. The continuing inflation is caused by interest rate increases, ie. the interest rate sets the inflation rate.
  - dragonwriter 3y ago
    If nothing else, your argument that monetary policy levers work exactly the opposite way that conventional economics says they do is amusing.
    - dools 3y ago
      Even more amusing is that I’m right!
      - dragonwriter 3y ago
        If you were right, Fed policy would drive the nation into an unbreakable positive feedback loop (irrespective, really, of preexisting conditions because the conventional economic levers would always drive the nation the exact opposite way intended) until conventional understanding of monetary policy was abandoned. The fact that this hasn't happened pretty clearly disproves your understanding: the conventional understanding may be wrong in some way, but its not inverted.

dasil003 3y ago

I think this is a bit reductive. Sure ZIRP created an environment where people could get away with trying crazy things, but there was still an expectation of growth in pursuit of some longer time-horizon market dominance. These kind of things may be more risky, but they still can be justified in the pursuit of market awareness and growth. Also, when you're building software products, there's real value to engaging the creativity of the team. The fact that the music continued so long and led to incredible valuation inflation over the last 15 years made the excesses look a lot worse, but even in a more sane financial environment I'd argue you'd still want to do these things to be competitive in an attention-economy, just maybe not to the extremes we saw.

lulznews 3y ago

Don’t forget massive PMF in the case of twilio

mise_en_place 3y ago

These are multibillion dollar companies, not your scammy SV dogshit startups. Fun is a rounding error for them.

1vuio0pswjnm7 3y ago

Were companies in other sectors besides so-called "tech" able to disregard profit and just keep hiring as a result of ZIRP and QE. If yes, what are some examples.