6 ms·

I thought this would be bad. The start with security stuff isn't my vibe. But then I kept reading it and the storytelling kept me. The econ stuff, parallels, et

I thought this would be bad. The start with security stuff isn't my vibe. But then I kept reading it and the storytelling kept me. The econ stuff, parallels, etc. It ended up capturing perfectly a bunch of ideas I've been having for a few months now. ZIRP was toxic. It made us bad and lazy. Identifying the phenomenons and explaining their mechanisms has been a useful exercise. I think this post will stay in my brain for a long while. I'm at this point in life and this resonates a lot. I want to build useful stuff with intrinsic value and I'm sick of the BS that exulted in the last decade. In my own way I'm trying to start ventures, so it's a good motivating call. Slow start but damn solid article.

set5think 2y ago
agreed, wholeheartedly.
coldpie 2y ago
> ZIRP was toxic. It made us bad and lazy. Yes. It makes me really nervous to see people celebrating the fed talking about lowering rates. Maybe rates should be lowered a bit, sure, I don't know. But please, please don't ever let us go back to zero-interest. As a person who works with technology, that era was so incredibly depressing. So much waste. I'm on the verge of leaving the tech industry because of what happened over the past 10 years. City bus drivers don't have to share an industry with SBF and Juicero and Elon Musk, you know?
- dgb23 2y ago
  I'm only starting to learn about these things. From the data I've seen and read it seems like low interest rates are (politically) alluring, because of short term metrics, but will bite back via inflation and bubbles bursting very consistently. Is there any wisdom and data that challenges or expands on this that a layman can understand?
  - antishatter 2y ago
    https://www.amazon.com/Price-Time-Real-Story-Interest/dp/0802160069 https://www.amazon.com/Price-Time-Real-Story-Interest/dp/080...
  - pas 2y ago
    So, bubbles are hard, especially when the underlying fundamental thing does not respond well to price increases (NIMBYism, zoning, weaponized environmental legislation, etc.) https://www.fullstackeconomics.com/p/the-2000s-housing-bubble-was-greatly-exaggerated https://www.fullstackeconomics.com/p/the-2000s-housing-bubbl... Tech bubbles are doubly so, because now that "total addressable market" has exploded thanks to the internet everything is a bubble. (Starting with the good old dot-com one, and crypto, and AR/VR/Metaverse, and now AI. Folks are comparing Nvidia stock graphs to Cisco around 2000.) .... Likely the HN crowd overestimates the effect of ZIRP on tech, because how crazy the last 10-15 years have been. (But we see that the economy in general performed extremely well, real wages increased, etc.) Yes, of course there were (and are) a lot of scummy ventures, but there will be more. ... Regarding rates, the picture is a bit more complex. So coming out of the 2008 crash the Obama/ARRA fiscal stimulus was too small. (And of course it got hyper-over-politicized on "both sides".) And the monetary response was also lackluster. But we also know now (benefit of hindsight!) that the rates before 2008 were too low. https://www.caixabankresearch.com/en/economics-markets/monetary-policy/great-recession-today-mistakes-monetary-and-fiscal-policy https://www.caixabankresearch.com/en/economics-markets/monet... One important take-away is that of course everyone wants growth, more growth would help lower taxes, inflate away deficits, yey! Prosperity is good! But ... we can't simply buy growth with endless loans from our future selves. Real economic growth requires increasing productivity, which requires applying new (better, more suited to the situation, more profitable) technologies, which requires changes (duh), but an aging population is very change-averse. The US with the political gridlock tends to go on wild goose chases, spending enormous amounts of money on bullshitting instead of picking better technology. (And here technology includes social technology too. From the things like "lack of funding reform for fire departments leads to them going with too large firetrucks everywhere to be able to bill a lot, which leads them to not sign-off on thinner roads, which leads to too wide roads where motorists drive too fast, which leads to too many injuries and fatalities" to all the usual like lack of gun control and bribery rules for the courts.)
- rvense 2y ago
  Not a fan of the terminology that corporations are people, but stacks of free money will mess up a company much like it will a person.
- immibis 2y ago
  The long term trend for the Fed is that it raises rates somewhat, and then lowers them even more. There is no reason to think this won't happen again this time, landing squarely in negative rates. It only stops when US dollars are worthless because any Tom, Dick and Harry can get a billion of them for free and even get paid for doing so. So far, the Fed does a good job of gatekeeping normal people out of the negative rate market even when rates are negative - only rich people are allowed to benefit.
- phkahler 2y ago
  >> It makes me really nervous to see people celebrating the fed talking about lowering rates. One thing I've often thought true but not confirmed is that lowering interest rates has it's own effect on top of the lower rate itself. Lowering rates leads to refinancing for example which is not a thing in a steady state. I'm inclined to think most of the benefit of a rate lowering is in fact transient, while the effects of having low rates are permanent and there are similarly transient costs with raising rates. It's a trap.
  - schmidtleonard 2y ago
    You talk about low rates like they are a choice. That's mostly not true. A better way to think about it is that low rates are a consequence of "lots of savings chasing few investment opportunities." Sure, the fed can buy and sell treasuries and use its magical balance sheet to push/pull on treasury yields, and these in turn are the lowest risk and most liquid mechanism for duration transformation so they tend to serve as a baseline / comparison point for every other kind of investment, transmitting monetary policy into the real economy. However, the fed's magical balance sheet has limits: if they push or pull on treasury yields too hard for too long, people will stop using them as a default point of comparison and put their money somewhere else. See: Bank of Japan and the JPY Carry Trade that everyone became an expert in about 3 weeks ago. Point is: the fed can push and pull, but it can't fight the market-determined macro and win. Not for long, anyway. Low rates are inevitable between growth sigmoids. Unless you think we can exponentially grow forever, we need to figure out how to cope. What would that look like? How could we possibly cool off the economy without paying people to not invest? Well, I mean, we could raise taxes and spend that on the people who got left behind on the last growth sigmoid, but I can hear the "boos" and "hisses" already. Hey! Tomatoes are for eating, not throwing! Guys, come on! You know it's true.
    - dgfitz 2y ago
      > Well, I mean, we could raise taxes and spend that on the people who got left behind on the last growth sigmoid, but I can hear the "boos" and "hisses" already. I mostly agree. The issue comes from how the money gets spent. It costs money to collect money, it costs money to spend money. Most of the spent money is used to "buy solutions" from private industry, so the rich still get richer, and nothing really changes. Baltimore, MD, USA, spends more per student [1] than almost any other city in the country, and nothing changes. Oh well actually, there is a lot of corruption in the city council and I think over half of the past few mayors have been arrested on criminal charges. [1] https://foxbaltimore.com/news/project-baltimore/in-baltimore-city-65-of-public-schools-earn-lowest-possible-scores-on-maryland-report-card https://foxbaltimore.com/news/project-baltimore/in-baltimore...
- underdeserver 2y ago
  Lowering rates is fine. Lowering them to zero is bad. Economists generally believe the baseline, target rate should be around 2-3%. Zero interest rate is like steroids. You can take them for a while to pick you up and help fight a bug (like the 2008 crash), but if you don't stop taking them, you'll need a long, painful, 5.5% interest rate rehab.
  - wrycoder 2y ago
    And, if you were to balance the Federal budget, you would inflate away 75% of the national debt in 50 years at 3% inflation. But, only a balanced budget amendment to the Constitution could accomplish that.
    - mdorazio 2y ago
      How are you calculating that? The national debt itself currently has an average interest rate higher than 3%.
      - AnthonyMouse 2y ago
        "Balanced budget" presumably includes paying the interest on existing debt in the current year rather than recapitalizing it.
  - schmidtleonard 2y ago
    > Zero interest rate is like steroids. The problem with your analogy is that paying interest is an active measure. It takes effort. The higher the rate*(outstanding debt), the more effort. This isn't a choice between injecting nothing vs injecting steroids, it's a choice between injecting sedatives vs injecting nothing. Raising the interest rate is like injecting a sedative. How much sedative should we inject? How much sedative can we inject?
    - Vegenoid 2y ago
      I disagree, as this implies that an interest of zero is the normal default. Why would it be? Why would someone lend someone else money, when they get nothing for it?
- bboygravity 2y ago
  Elon Musk is very wasteful selling waste due to low interest rates? Please explain or make your point? I don't get how he relates to the rest of your post?
- btown 2y ago
  I have a slightly different view on this. ZIRP allowed companies to do crazy things when it came to tech investment. For instance, would Kafka (and by extension, Confluent, and much of the distributed-systems landscape) exist if LinkedIn hadn't decided: "you know, let's not think too hard about whether building a custom queue system is fully economically rational, let's just let our engineers do it, and we'll be able to spin it to investors/shareholders as a good use of capital." It's no coincidence that this happened in 2010, the first year that the interest rate dropped below 1% (and substantially so). https://www.rtinsights.com/the-technical-evolution-of-apache-kafka-from-linkedins-need-to-a-global-standard/ https://www.rtinsights.com/the-technical-evolution-of-apache... https://fred.stlouisfed.org/series/FEDFUNDS https://fred.stlouisfed.org/series/FEDFUNDS Were the people who worked on that project value-optimal for LinkedIn? Maybe, maybe not. Were they "lazy" and a "waste" in the value they brought to society overall, especially including the spin-offs and startups that members of these teams would go on to build? I don't think that's an accurate characterization. Zero-interest was an effective way to incentivize public companies, VC-backed companies, and their LPs to spend large amounts of money on speculative engineering work - speculative enough that one might even call it research, but the fact that we could call it something other than research is the entire point. It's far from the only such incentive, and it came with many, many downsides, including the creation of many over-funded startups that over-promised and caused harm in their under-delivery. To be sure, startups aren't going anywhere. There are surprisingly fun challenges when profitability and sustainable growth are core requirements for every project, both macro and micro, and it's just an evolution of our hacker mentality to have to deal with these new constraints. But I fear that we've lost the incentive to have companies invest speculatively in crazy projects without having a sufficient replacement for ZIRP, and it may take a generation before we understand how that will have affected the rate of innovative output for the entire world.
  - coldpie 2y ago
    It's a fair perspective, but I'd counter by bringing up the opportunity cost we spent on the incredible amount of trash startups that ZIRP produced. Those Juicero & crypto & NFT people could've been doing something productive with their lives instead of whatever that mess was. Was Kafka worth that cost? I dunno. But seeing the obvious waste and the clowns who profited from it made me, personally, really depressed at the state of our industry. A system that so blatantly does not distribute rewards for real, valuable work really discourages one from bothering to even try putting in the work.
easterncalculus 2y ago
Feel basically the opposite, in fact I would go to say this takeawway is the wrong one - the article is titled "Calling All Hackers" but can't go three headings without talking about shitcoins and venture capital. There's the HN definition of hacker and the infosec one, and phrack is for the latter. "High tech, low life" hackers don't have obsessions with venture capital.
- rnewme 2y ago
  At one point you grow up and realize the fastest way to your goals is using money, and best bet to get lots of money fast is the VC game.
  - stavros 2y ago
    Your argument has a logic leap in it: The fastest way to your goals is using money, but that doesn't mean you need lots of money to achieve your goals.
    - freeqaz 2y ago
      All things in balance. It's often easier to get stuff done with more hands, and it's a lot easier when you're able to pay for people's time. There are plenty of counter-examples to this (writing OSS software, farming your own land with a commune, etc), but in general it's easier to get stuff done when you can throw cash at it, at least in late stage capitalism. It'd be hard to build a company like SpaceX without a boatload of cash!
      - stavros 2y ago
        Again, though, not everyone's goal is to build SpaceX. Some people just want to have a small shop that makes their local community happy and serves it, and that doesn't take a boatload of cash.
- mplewis 2y ago
  Agreed. Remember when hacking was about meddling with systems of global finance rather than engaging with them earnestly? This guy doesn’t.
derangedHorse 2y ago
Intrinsic value, like all value, is subjective. Always look for an audience that will value whatever it is you're making. When you use what you intrinsically value as a proxy for what a loosely-defined demographic values, it can lead you down a long road of building things that no one but you thinks is useful.

set5think 2y ago

agreed, wholeheartedly.

coldpie 2y ago

> ZIRP was toxic. It made us bad and lazy. Yes. It makes me really nervous to see people celebrating the fed talking about lowering rates. Maybe rates should be lowered a bit, sure, I don't know. But please, please don't ever let us go back to zero-interest. As a person who works with technology, that era was so incredibly depressing. So much waste. I'm on the verge of leaving the tech industry because of what happened over the past 10 years. City bus drivers don't have to share an industry with SBF and Juicero and Elon Musk, you know?

dgb23 2y ago
I'm only starting to learn about these things. From the data I've seen and read it seems like low interest rates are (politically) alluring, because of short term metrics, but will bite back via inflation and bubbles bursting very consistently. Is there any wisdom and data that challenges or expands on this that a layman can understand?
- antishatter 2y ago
  https://www.amazon.com/Price-Time-Real-Story-Interest/dp/0802160069 https://www.amazon.com/Price-Time-Real-Story-Interest/dp/080...
- pas 2y ago
  So, bubbles are hard, especially when the underlying fundamental thing does not respond well to price increases (NIMBYism, zoning, weaponized environmental legislation, etc.) https://www.fullstackeconomics.com/p/the-2000s-housing-bubble-was-greatly-exaggerated https://www.fullstackeconomics.com/p/the-2000s-housing-bubbl... Tech bubbles are doubly so, because now that "total addressable market" has exploded thanks to the internet everything is a bubble. (Starting with the good old dot-com one, and crypto, and AR/VR/Metaverse, and now AI. Folks are comparing Nvidia stock graphs to Cisco around 2000.) .... Likely the HN crowd overestimates the effect of ZIRP on tech, because how crazy the last 10-15 years have been. (But we see that the economy in general performed extremely well, real wages increased, etc.) Yes, of course there were (and are) a lot of scummy ventures, but there will be more. ... Regarding rates, the picture is a bit more complex. So coming out of the 2008 crash the Obama/ARRA fiscal stimulus was too small. (And of course it got hyper-over-politicized on "both sides".) And the monetary response was also lackluster. But we also know now (benefit of hindsight!) that the rates before 2008 were too low. https://www.caixabankresearch.com/en/economics-markets/monetary-policy/great-recession-today-mistakes-monetary-and-fiscal-policy https://www.caixabankresearch.com/en/economics-markets/monet... One important take-away is that of course everyone wants growth, more growth would help lower taxes, inflate away deficits, yey! Prosperity is good! But ... we can't simply buy growth with endless loans from our future selves. Real economic growth requires increasing productivity, which requires applying new (better, more suited to the situation, more profitable) technologies, which requires changes (duh), but an aging population is very change-averse. The US with the political gridlock tends to go on wild goose chases, spending enormous amounts of money on bullshitting instead of picking better technology. (And here technology includes social technology too. From the things like "lack of funding reform for fire departments leads to them going with too large firetrucks everywhere to be able to bill a lot, which leads them to not sign-off on thinner roads, which leads to too wide roads where motorists drive too fast, which leads to too many injuries and fatalities" to all the usual like lack of gun control and bribery rules for the courts.)
rvense 2y ago
Not a fan of the terminology that corporations are people, but stacks of free money will mess up a company much like it will a person.
immibis 2y ago
The long term trend for the Fed is that it raises rates somewhat, and then lowers them even more. There is no reason to think this won't happen again this time, landing squarely in negative rates. It only stops when US dollars are worthless because any Tom, Dick and Harry can get a billion of them for free and even get paid for doing so. So far, the Fed does a good job of gatekeeping normal people out of the negative rate market even when rates are negative - only rich people are allowed to benefit.
phkahler 2y ago
>> It makes me really nervous to see people celebrating the fed talking about lowering rates. One thing I've often thought true but not confirmed is that lowering interest rates has it's own effect on top of the lower rate itself. Lowering rates leads to refinancing for example which is not a thing in a steady state. I'm inclined to think most of the benefit of a rate lowering is in fact transient, while the effects of having low rates are permanent and there are similarly transient costs with raising rates. It's a trap.
- schmidtleonard 2y ago
  You talk about low rates like they are a choice. That's mostly not true. A better way to think about it is that low rates are a consequence of "lots of savings chasing few investment opportunities." Sure, the fed can buy and sell treasuries and use its magical balance sheet to push/pull on treasury yields, and these in turn are the lowest risk and most liquid mechanism for duration transformation so they tend to serve as a baseline / comparison point for every other kind of investment, transmitting monetary policy into the real economy. However, the fed's magical balance sheet has limits: if they push or pull on treasury yields too hard for too long, people will stop using them as a default point of comparison and put their money somewhere else. See: Bank of Japan and the JPY Carry Trade that everyone became an expert in about 3 weeks ago. Point is: the fed can push and pull, but it can't fight the market-determined macro and win. Not for long, anyway. Low rates are inevitable between growth sigmoids. Unless you think we can exponentially grow forever, we need to figure out how to cope. What would that look like? How could we possibly cool off the economy without paying people to not invest? Well, I mean, we could raise taxes and spend that on the people who got left behind on the last growth sigmoid, but I can hear the "boos" and "hisses" already. Hey! Tomatoes are for eating, not throwing! Guys, come on! You know it's true.
  - dgfitz 2y ago
    > Well, I mean, we could raise taxes and spend that on the people who got left behind on the last growth sigmoid, but I can hear the "boos" and "hisses" already. I mostly agree. The issue comes from how the money gets spent. It costs money to collect money, it costs money to spend money. Most of the spent money is used to "buy solutions" from private industry, so the rich still get richer, and nothing really changes. Baltimore, MD, USA, spends more per student [1] than almost any other city in the country, and nothing changes. Oh well actually, there is a lot of corruption in the city council and I think over half of the past few mayors have been arrested on criminal charges. [1] https://foxbaltimore.com/news/project-baltimore/in-baltimore-city-65-of-public-schools-earn-lowest-possible-scores-on-maryland-report-card https://foxbaltimore.com/news/project-baltimore/in-baltimore...
underdeserver 2y ago
Lowering rates is fine. Lowering them to zero is bad. Economists generally believe the baseline, target rate should be around 2-3%. Zero interest rate is like steroids. You can take them for a while to pick you up and help fight a bug (like the 2008 crash), but if you don't stop taking them, you'll need a long, painful, 5.5% interest rate rehab.
- wrycoder 2y ago
  And, if you were to balance the Federal budget, you would inflate away 75% of the national debt in 50 years at 3% inflation. But, only a balanced budget amendment to the Constitution could accomplish that.
  - mdorazio 2y ago
    How are you calculating that? The national debt itself currently has an average interest rate higher than 3%.
    - AnthonyMouse 2y ago
      "Balanced budget" presumably includes paying the interest on existing debt in the current year rather than recapitalizing it.
- schmidtleonard 2y ago
  > Zero interest rate is like steroids. The problem with your analogy is that paying interest is an active measure. It takes effort. The higher the rate*(outstanding debt), the more effort. This isn't a choice between injecting nothing vs injecting steroids, it's a choice between injecting sedatives vs injecting nothing. Raising the interest rate is like injecting a sedative. How much sedative should we inject? How much sedative can we inject?
  - Vegenoid 2y ago
    I disagree, as this implies that an interest of zero is the normal default. Why would it be? Why would someone lend someone else money, when they get nothing for it?
bboygravity 2y ago
Elon Musk is very wasteful selling waste due to low interest rates? Please explain or make your point? I don't get how he relates to the rest of your post?
btown 2y ago
I have a slightly different view on this. ZIRP allowed companies to do crazy things when it came to tech investment. For instance, would Kafka (and by extension, Confluent, and much of the distributed-systems landscape) exist if LinkedIn hadn't decided: "you know, let's not think too hard about whether building a custom queue system is fully economically rational, let's just let our engineers do it, and we'll be able to spin it to investors/shareholders as a good use of capital." It's no coincidence that this happened in 2010, the first year that the interest rate dropped below 1% (and substantially so). https://www.rtinsights.com/the-technical-evolution-of-apache-kafka-from-linkedins-need-to-a-global-standard/ https://www.rtinsights.com/the-technical-evolution-of-apache... https://fred.stlouisfed.org/series/FEDFUNDS https://fred.stlouisfed.org/series/FEDFUNDS Were the people who worked on that project value-optimal for LinkedIn? Maybe, maybe not. Were they "lazy" and a "waste" in the value they brought to society overall, especially including the spin-offs and startups that members of these teams would go on to build? I don't think that's an accurate characterization. Zero-interest was an effective way to incentivize public companies, VC-backed companies, and their LPs to spend large amounts of money on speculative engineering work - speculative enough that one might even call it research, but the fact that we could call it something other than research is the entire point. It's far from the only such incentive, and it came with many, many downsides, including the creation of many over-funded startups that over-promised and caused harm in their under-delivery. To be sure, startups aren't going anywhere. There are surprisingly fun challenges when profitability and sustainable growth are core requirements for every project, both macro and micro, and it's just an evolution of our hacker mentality to have to deal with these new constraints. But I fear that we've lost the incentive to have companies invest speculatively in crazy projects without having a sufficient replacement for ZIRP, and it may take a generation before we understand how that will have affected the rate of innovative output for the entire world.
- coldpie 2y ago
  It's a fair perspective, but I'd counter by bringing up the opportunity cost we spent on the incredible amount of trash startups that ZIRP produced. Those Juicero & crypto & NFT people could've been doing something productive with their lives instead of whatever that mess was. Was Kafka worth that cost? I dunno. But seeing the obvious waste and the clowns who profited from it made me, personally, really depressed at the state of our industry. A system that so blatantly does not distribute rewards for real, valuable work really discourages one from bothering to even try putting in the work.

easterncalculus 2y ago

Feel basically the opposite, in fact I would go to say this takeawway is the wrong one - the article is titled "Calling All Hackers" but can't go three headings without talking about shitcoins and venture capital. There's the HN definition of hacker and the infosec one, and phrack is for the latter. "High tech, low life" hackers don't have obsessions with venture capital.

rnewme 2y ago
At one point you grow up and realize the fastest way to your goals is using money, and best bet to get lots of money fast is the VC game.
- stavros 2y ago
  Your argument has a logic leap in it: The fastest way to your goals is using money, but that doesn't mean you need lots of money to achieve your goals.
  - freeqaz 2y ago
    All things in balance. It's often easier to get stuff done with more hands, and it's a lot easier when you're able to pay for people's time. There are plenty of counter-examples to this (writing OSS software, farming your own land with a commune, etc), but in general it's easier to get stuff done when you can throw cash at it, at least in late stage capitalism. It'd be hard to build a company like SpaceX without a boatload of cash!
    - stavros 2y ago
      Again, though, not everyone's goal is to build SpaceX. Some people just want to have a small shop that makes their local community happy and serves it, and that doesn't take a boatload of cash.
mplewis 2y ago
Agreed. Remember when hacking was about meddling with systems of global finance rather than engaging with them earnestly? This guy doesn’t.

derangedHorse 2y ago

Intrinsic value, like all value, is subjective. Always look for an audience that will value whatever it is you're making. When you use what you intrinsically value as a proxy for what a loosely-defined demographic values, it can lead you down a long road of building things that no one but you thinks is useful.