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Yeah I think in a generation we will look back at the ZIRP era and be bewildered by how little we got out of it. Hard physical engineering R&D, physical infras

Yeah I think in a generation we will look back at the ZIRP era and be bewildered by how little we got out of it. Hard physical engineering R&D, physical infrastructure improvements, mass transit, high speed rail, etc? No. We got B2B SaaS apps. If ZIRP wasn't the era we could fund such long payoff projects, then when will there ever be a possibility?

no_wizard 2y ago
For some of this, it shouldn't be private capital (such as infrastructure improvements) funding it, it should be public funds. The venture capital model is not a good fit for that, simply based on the evidence available, IE the distinct lack of funding for non-software solutions in the space. SpaceX is a wonderful example of this as well. Elon Musk funded SpaceX, then investors followed much later, mostly due to StarLink and its potential, I imagine. We need better government funding and we definitely need to re-evaulate how grants are structured, the funding tends to be very narrowly specified that you can't solve adjacent problems with the funding as it would be a violation of the terms of the grant. That sort of thing needs to be better accounted for and it isn't today, at least not always.
- jordanb 2y ago
  I thought one of the underlying reasons for ZIRP was a massive public underinvestment. Basically the supply of government debt was so restricted and the demand for it was so high that people were willing in many cases to pay the government to take their money.
threeseed 2y ago
B2B SaaS has been around for years and genuinely solves a problem i.e. most companies struggle to run on-premise applications well. The issue for me is far more Crypto and AI where ridiculous amounts of money has been spent with little to show for it.
jordanb 2y ago
I suspect it was really a matter of how VC sold itself in a ZIRP environment. They were "the yield guys" in an environment where there was no yield. They could have advertised themselves as "we're making big long term investments in serious innovation that will maybe pay out in the distant future" and they probably could have raised money that way in an environment where money was basically free, but not as much. So instead we got "we're making the world a better place through paxos algorithms for consensus protocols."
throwaway42668 2y ago
I spent all of ZIRP while it was happening being bothered by this. It was insanity inducing to watch huge valuations and associated piles of money chasing the most banal and/or impossibly ridiculous ventures for YEARS. I also used to tell many, many VCs to their face that the only reason they existed at all wasn't because they had any worthwhile insights into investing or innovation, but because tons of massive upstream capital & funds had a choice between definitely essentially losing money investing in bonds or probably losing money funneling it through their brokerage... er... venture fund. The world's least qualified kingmakers minting new American royalty, and we'll all be paying the price for it for decades. To add insult to injury, now huge numbers of those alsoran VCs are pivoting into "deep tech" investing, and brining their inane-SaaS myopia and completely misaligned expectations along with them.
randomdata 2y ago
Why would there be bewilderment? Interest rates are, of course, the cost of money. We saw the cost of money fall to essentially nothing because the demand for money dropped off a cliff. As with anything, the price then fell to compensate. That's your basic supply and demand. But why would the market no longer have a strong demand for money and see money as being essentially worthless? Because nobody knew what to do with it. That's why we got little out of ZIRP. ZIRP was merely a symptom of the populace not having a strong vision or direction in which to use resources. It was in reaction to the environment it took place in. Had we had loftier goals and grander visions we'd have gotten more, but the cost would have also been much higher (i.e. ZIRP wouldn't have happened).
- throwaway42668 2y ago
  That's not why ZIRP happened. ZIRP happened as a long-term back-channel bailout to all the banks & funds holding the downside of the housing & derivatives market collapse. It allowed the financial sector to reinflate several asset classes that should have seen steeeeeeep declines & corrections, so that they didn't have to face insolvency. Then on the back of that there were all these knock-on effects to cheap money, or more specifically net-negative yield on things that historically were supposed to be slow, safe value stores. One of which was epic amounts of money flooding into VC and VC making the attribution error of their access to money being correlated to their access to ability & insight, but in the prevailing environment there was no correcting feedback function for that either. So, cheap-money became dumb-money, but sociologically we attribute lots-of-money to intelligence & capability, and from that a decade of Hundreds of Billions of Dollars of trite visionless total crap was born.
  - randomdata 2y ago
    > in the prevailing environment there was no correcting feedback function for that either. Right. The correcting function should have been everyone else noticing that they could borrow for essentially nothing and use that to fund their grand visions. The increase in demand would have necessitated an increase in interest rates to slow activity. Just as eventually happened when people finally felt they could do something with money (i.e. expansion in economic sectors where supply shocks suggested [no doubt incorrectly – but that will be another problem for another day] that increased production was needed). It didn't happen because the vision was lacking. What was anyone going to do with it? Nobody knew what to do it. As such, nobody was borrowing in any meaningful way. At best they borrowed to buy houses, but certainly not for productive activities. Those with money didn't know what to do with it either. Lending it to those who had a vision wasn't an option. So, they simply plowed it into whatever was fashionable. And as a result, we didn't get much more than fashion in return.
deleted 2y ago
[deleted]

no_wizard 2y ago

For some of this, it shouldn't be private capital (such as infrastructure improvements) funding it, it should be public funds. The venture capital model is not a good fit for that, simply based on the evidence available, IE the distinct lack of funding for non-software solutions in the space. SpaceX is a wonderful example of this as well. Elon Musk funded SpaceX, then investors followed much later, mostly due to StarLink and its potential, I imagine. We need better government funding and we definitely need to re-evaulate how grants are structured, the funding tends to be very narrowly specified that you can't solve adjacent problems with the funding as it would be a violation of the terms of the grant. That sort of thing needs to be better accounted for and it isn't today, at least not always.

jordanb 2y ago
I thought one of the underlying reasons for ZIRP was a massive public underinvestment. Basically the supply of government debt was so restricted and the demand for it was so high that people were willing in many cases to pay the government to take their money.

threeseed 2y ago

B2B SaaS has been around for years and genuinely solves a problem i.e. most companies struggle to run on-premise applications well. The issue for me is far more Crypto and AI where ridiculous amounts of money has been spent with little to show for it.

jordanb 2y ago

I suspect it was really a matter of how VC sold itself in a ZIRP environment. They were "the yield guys" in an environment where there was no yield. They could have advertised themselves as "we're making big long term investments in serious innovation that will maybe pay out in the distant future" and they probably could have raised money that way in an environment where money was basically free, but not as much. So instead we got "we're making the world a better place through paxos algorithms for consensus protocols."

throwaway42668 2y ago

I spent all of ZIRP while it was happening being bothered by this. It was insanity inducing to watch huge valuations and associated piles of money chasing the most banal and/or impossibly ridiculous ventures for YEARS. I also used to tell many, many VCs to their face that the only reason they existed at all wasn't because they had any worthwhile insights into investing or innovation, but because tons of massive upstream capital & funds had a choice between definitely essentially losing money investing in bonds or probably losing money funneling it through their brokerage... er... venture fund. The world's least qualified kingmakers minting new American royalty, and we'll all be paying the price for it for decades. To add insult to injury, now huge numbers of those alsoran VCs are pivoting into "deep tech" investing, and brining their inane-SaaS myopia and completely misaligned expectations along with them.

randomdata 2y ago

Why would there be bewilderment? Interest rates are, of course, the cost of money. We saw the cost of money fall to essentially nothing because the demand for money dropped off a cliff. As with anything, the price then fell to compensate. That's your basic supply and demand. But why would the market no longer have a strong demand for money and see money as being essentially worthless? Because nobody knew what to do with it. That's why we got little out of ZIRP. ZIRP was merely a symptom of the populace not having a strong vision or direction in which to use resources. It was in reaction to the environment it took place in. Had we had loftier goals and grander visions we'd have gotten more, but the cost would have also been much higher (i.e. ZIRP wouldn't have happened).

throwaway42668 2y ago
That's not why ZIRP happened. ZIRP happened as a long-term back-channel bailout to all the banks & funds holding the downside of the housing & derivatives market collapse. It allowed the financial sector to reinflate several asset classes that should have seen steeeeeeep declines & corrections, so that they didn't have to face insolvency. Then on the back of that there were all these knock-on effects to cheap money, or more specifically net-negative yield on things that historically were supposed to be slow, safe value stores. One of which was epic amounts of money flooding into VC and VC making the attribution error of their access to money being correlated to their access to ability & insight, but in the prevailing environment there was no correcting feedback function for that either. So, cheap-money became dumb-money, but sociologically we attribute lots-of-money to intelligence & capability, and from that a decade of Hundreds of Billions of Dollars of trite visionless total crap was born.
- randomdata 2y ago
  > in the prevailing environment there was no correcting feedback function for that either. Right. The correcting function should have been everyone else noticing that they could borrow for essentially nothing and use that to fund their grand visions. The increase in demand would have necessitated an increase in interest rates to slow activity. Just as eventually happened when people finally felt they could do something with money (i.e. expansion in economic sectors where supply shocks suggested [no doubt incorrectly – but that will be another problem for another day] that increased production was needed). It didn't happen because the vision was lacking. What was anyone going to do with it? Nobody knew what to do it. As such, nobody was borrowing in any meaningful way. At best they borrowed to buy houses, but certainly not for productive activities. Those with money didn't know what to do with it either. Lending it to those who had a vision wasn't an option. So, they simply plowed it into whatever was fashionable. And as a result, we didn't get much more than fashion in return.

deleted 2y ago

[deleted]