I couldn't disagree with this article more. The main point is that tech, despite being generally over hiring and having a valuation bubble burst, is going through layoffs just because "everyone is doing it."
There are two, more obvious, reasons for layoffs.
1) The valuation bubble bursting is a big factor. Both high valuations and hiring decisions were made with a certain amount of growth in mind. Now that it's clear that the old level of growth is unrealistic going forward, valuations are coming down to reflect that, as is employee head count. Additionally, employees hired at the sky-high valuations are going to be disgruntled unless they're "made whole". Easier to just let most of them go and top-off the ones you want to keep.
2) There are two types of tech companies. The first is a company like Google, where their tech enables a step-function increase in human productivity. Google Search gave people a super power they never had before. This type of company is extremely valuable as they can capture the value of the productivity they unlock. The second type of tech company is something like WeWork. This type of tech company is essentially a digital version of something that existed previously. These companies can gain traction due to the convenience factor unlocked by the digital transformation, but there isn't much extra value to capture. When interest rates were 0, VCs and the market as a whole were valuing these companies the same as true tech companies. Now that investors are more discerning with their money, the valuations of such companies are popping. The valuations are lower because the true value of the company is low. If you have a low value company, you don't need thousands of employees all earning 6+ figures to run it.
I remember COVID when tech stocks shot right up, probably because everyone was stuck having to use tech and other companies looked in free fall
Then COVID ended and now we’re going back to normal, and tech stocks are also going back to before
If you change your lifestyle because you got a $100k windfall, you are going to realize that your income never changed. Companies that hired because they thought their COVID-inspired valuation was permanent were mistaken
I’m currently working for a tech company that was negatively impacted by COVID, did not get a random influx of cash and so did not hire and so currently does not have to lay anyone off.
The undercurrent of these discussions always bothers me. Wrong decisions are never made, they're always justified by current circumstances or hypothetical future circumstances. Past decisions were never wrong, either, even if current information shows them to be. (Who could have known?)
2021: "we have to overhire! The economy is great and otherwise we'll lose future talent!"
2022: "we have to fire! The economy isn't great and everyone else is firing!"
(In writing this I realize the validity of said decision doesn't matter nearly as much as the perception of the person that made it. Much like Twitter, it isn't just what you say, it's who you are + what you say.)
> Wrong decisions are never made, they're always justified by current circumstances or hypothetical future circumstances.
There are plenty of examples of managers who are simply bad at making good decisions.
Full disclosure: I've worked for a few.
At one company, two consecutive CEOs took the company from turning a fairly healthy profit into voluntary liquidation in a handful of years. The first one quit after a fractious meeting with shareholders, and was replaced with the second, who wasn't any better. I jumped shortly before the liquidation was announced, it came as a complete shock to most of the rest of the staff.
My view is that it's sophistry trying to claim all poor decisions were somehow justified at the time. Some people - including managers - are just inept!
Ineptitude is high on the list. But I would put misaligned incentives pretty high on the list of reasons too. So many executives make decisions that make sense for their bottom line but that may not be good for the company and shareholders long-term. Same goes for the directors. Who cares if you create a long lasting, stable company when you could just win the lottery now, cash out and move on to another conquest.
I still think it’s mostly ineptitude. Hiring a bunch of people only to fire them isn’t gaining you anything.
People are still on a bell curve and most executives are somewhere in the “very average” area, like me and most people. And 50% of people are worse than average.
I remember people loudly exclaiming that people wouldn’t be buying Peletons once people started going back to gyms but the “who could have known?” sentiment appeared anyway after the stock had crashed.
Peloton's fate was obvious to anyone who cared to look.
Some people simply don't care if there is a value proposition because they are investing in market sentiment, not fundamentals.
Other people simply don't bother scrutinizing the value proposition because they dont care about their investment and are comfortable gambling.
I read their Series F pitch deck and the projections were clearly detached from reality. Targets were to basically capture more revenue than the entire gym sector and home equipment sector.
Folks who went for the series F pump and dump lucked out bigtime with the pandemic
Yep. Look at the fate of nearly every piece of home exercise equipment sold in the last 50 years. The vast majority fall into disuse pretty quickly. Who's going to want to keep paying a monthly fee for something they don't use? Hopefully it's easier to cancel than a gym membership.
NordicTrak is doing it too. Businesses love subscriptions, especially for one-time/infrequent purchases - if Sealy could come up with a mattress subscription model they would.
I think an even bigger factor is that people had a shit ton of free time during the pandemic because people were either laid off or working remote. On top of that, a lot of activities weren’t possible anymore.
What do people say they don’t have enough time to do? Work out
So people worked out. Exercise equipment became out of stock, but Pelotons I don’t think did. Hiking trails and campsites got packed too. People were doing all these activities that they never did before the pandemic. The market for exercise — and Pelotons — ballooned.
But obviously once the pandemic ended, people would get jobs back and it was likely that a lot of jobs would go back to the office. People will easily go back to prefer going out instead of working out (not making a value judgement here - you do you). Now no one has time to exercise anymore and the exercise market has shrunk back to “people who make time to workout and want to invest in doing it at home,” which is tiny. The subset of that market that is willing to “drop a few Gs on an exercise bike” is a sliver
Cyclists and runners like paying monthly for fitness apps with a social networking component so it’s not a completely dumb idea. I enjoy paying for Strava for example and to be honest don’t need any new features. They just need to keep it working as it is.
You will love the new proce then…
For me it needs to be more like Zwift to justify paying for it.
Even Zwift is a mediocre game and if you compare it to other non sport games, the subscription price isn’t justified in any way.
So you don’t think it was wrong to assume that the prosperous and highly unusual scenario of the Covid effects would be around for an extended timeframe that legitimately would impact future cash flows that validated the huge increases in the value of almost all tech stocks? It made absolutely no sense to me and many other investors, but so many people drank the koolaid anyway, buying more stocks, hiring more people, pumping up the fervor, etc.
It made perfect sense from an investor‘s point of view.
Buy the stock low, sell it before it drops.
You’re usually investing in large public companies to make money, not “support the long term cause.”
Also it made sense for the time period. Say you already had $10,000 invested in a company that sells restaurant supplies. Are you going to keep it in the company for the entirety of COVID while your money evaporates or put it into a tech company temporarily and then move it back afterwards?
The fact that you're describing it as "drinking the koolaid" goes to show that it was a questionable assumption. Certainly, the worldwide pandemic created an uncertain atmosphere. On the other, everyone knew that the Fed was pursuing some very drastic actions. So why did so many tech companies simply go along with it? Seems like a lack of foresight and lack of willingness to challenge the status quo.
You were right only because covid turned out to be pretty mild (so far) and things pretty much went back to normal. If we were still living in isolation then these increased valuations for Zoom etc made sense.
Zoom stock went from $67 to $512 from Jan 2020 to Oct 2020. Zoom earnings reached around $1 per quarter EPS or $4 per year during its short heyday in 2021-2022. It would take a century of earnings to be worth that price.
I guess I'm not sure what you're referring to here. Almost all the big tech layoffs I saw in 2022 came with an admission from the CEO that, hey, we did make the wrong call and we wish we'd made the right one. When people talk about past conditions, they're just explaining why the wrong calls seemed reasonable at the time.
I'm not saying it is "wrong," I'm just pointing out that world events matter and people should really pay attention and remember what's going on. With COVID, a lot of new stuff happened. We started dining outdoors. Was it going to stay? Maybe, maybe not, but don't just assume it's the new normal.
Just like right now, we still have a war going on, US became the world's natural gas exporter because of the war, how supply chains are still recovering from COVID, and things like that. Suddenly, everything makes a lot of sense with context
It's not so much COVID, it's that essentially what has happened is that the cheap VC investment and loan money dried up, as did the high valuations. That's the simple explanation.
It's been an entire generation of cheap or free credit. There are people who are now adults who have lived their entire lives well beyond their purchasing means because financing was close to zero, letting you live in a bigger house, drive a fancier car and all lifestyle aspects beyond what you could purchase outright. This is not a judgement call but just an observation, and now that interest rates have risen (quite modestly IMO) we're seeing the impact on just about everything. VC funding was not immune and despite the article downplaying cost savings, when employees are your major cost by a margin of 5-10x, lay-offs make an big impact on how long you can stay alive. The costs of lay-offs are overstated here based on my experiences on both sides of a lay-off.
The article might be over-arguing that layoffs are always bad, but it definitely raises responses to the idea that layoffs are always a good tactic:
> Layoffs often do not cut costs, as there are many instances of laid-off employees being hired back as contractors, with companies paying the contracting firm. [...] Companies sometimes lay off people that they have just recruited – oftentimes with paid recruitment bonuses. When the economy turns back in the next 12, 14, or 18 months, they will go back to the market and compete with the same companies to hire talent. They are basically buying labor at a high price and selling low. Not the best decision.
Certainly it's a case-by-case basis, but I definitely remember companies such as Patreon doing layoffs in early 2020, only to be hiring again a few months later in the year.
For example, Tesla’s valuation was probably more dependent on that kind of investment because their valuation was based on the idea that full self-driving AI was achievable. Whereas Google isn’t because no one is waiting for Google to do anything amazing
But I pointed out COVID specifically because it seems tech companies overall benefited from the pandemic. Even I invested extra in tech companies during the pandemic because every other industry was physically being impacted by the virus.
If everyone trips and falls during the race, you’ll get first place, but it wasn’t because you got any better. But wait long enough and everyone will catch up
tech valuations have come down because the Fed has raised rates which long duration stocks like growths tech cos are extremely sensitive to.
when borrowing money becomes more expensive, these companies can no longer fuel business expansion or stock buybacks with cheap debt, and at the same time facing a demand issue because consumers are facing the same phenomenon.
lower growth projections combined with expanding operating costs due to headcount are unsustainable for growthy tech firms that normally burn a lot of cash to fuel growth, so it becomes necessary for these firms to slow hiring and layoff workers to slow their burn and conserve cash.
I did mention interest rates, indirectly: "Now that investors are more discerning with their money [because the risk-free rate of return is now non-zero]..."
Interest rates play a role, but it's not the direct cause you're thinking of. The value of a company is related to the risk-free rate of return, i.e. interest rate set by the government. Lower interest rates produce higher valuations, and higher rates produce lower valuations. But just because a company's market value goes down as the interest rises doesn't mean the company was inherently overvalued at the lower interest rate.
What we saw in the tech market was that companies were overvalued. The change in interest rate was the catalyst for tech's value adjustment, but the companies were overvalued at the old interest rate, too, because their value was based in-part on unrealistic growth expectation. Also, ZIRP really messed with market dynamics. Look at crypto, which is something that has near-zero utility and thus should have near-zero value, especially all the random shitcoins. Many such shitcoins were worth many millions / billions of dollars. The market was clearly irrationally valuing many different types of assets.
How do you know the tech companies were overvalued at the old interest rates, and it wasn't just a due to interest rate changes?
It seems pretty obvious if interest rates are high, tech companies which make most of their profits far in the future were going to be worth less than value companies where most of their profits are in the short term.
> How do you know the tech companies were overvalued at the old interest rates, and it wasn't just a due to interest rate changes?
Obviously I can't know one way or the other, but I laid out my personal belief in the original post. Essentially, many "tech" companies are just digital versions or existing business and products. In such cases, there isn't as much value to capture compared to unlocking massive amounts of human potential like a company like Google. The market, however, was valuing these two types of tech companies the same. Peloton is a good example. Peloton is a great product and can really make a dent in the home-gym market. But the home-gym market is already relatively mature, so Peloton really shouldn't have been commanding such insane multiples on any metric (sales, revenue, cash flow, etc.)
I think the 100's of intelligent sophisticated investors that influence the price of the market didn't suddenly start to understand the fundamentals of companies they didn't before because of a change in interest rates.
It makes much more sense they just plugged in a higher discount rate to their models.
Peloton has fallen because they went from a company with rapidly growing revenue to one falling revenue.
> Peloton has fallen because they went from a company with rapidly growing revenue to one falling revenue.
Exactly. Their growth expectations were unrealistic. They were bringing a marginally better product to a saturated market under the guise of being a tech company. They could be a good business if run lean, but they’ll never realistically command insane multiples on revenue.
i'm confused by this automatic lumping together of "tech" and "growth". Will Google or Facebook make most of their profits far in the future? Is the universal expectation for Google to double next year? and people ran out of patience and dumped Google stock so that it halved in value? of course not, something else drove this.
You don’t need to predict the future. The fair value of a company is the discounted future cash flows. Increase the discount rate and the valuation falls
I think if you're an investor and you value companies not just on how they are doing today but but how you think they will do in the future you will be more successful than if you just look at today's numbers.
Big companies like Facebook aren't funding their operations with debt. They're absolutely flush with cash. Your claim that the fed raising rates is causing layoffs in these large, profitable companies does not hold water.
Does that help to explain a retreat in VC- and other debt-funded entities? Sure. But the headline layoffs we've seen are not in those types of companies.
Now, I do agree that growth projections were revised down, but the explanation for that is much simpler: A lot of companies assumed COVID was going to create a lasting impact on the world that would result in endless growth and revenues for companies like Peloton, Zoom, etc.
Well, that didn't happen, and they are now forced to cut back on staff after over-hiring due to those bad projections.
This pattern is visible across the industry. It's not in the least bit mysterious.
I'm not the GP, but the rebuttal to your point about interest rates is that it is not about using cash vs debt. GP was making the point that interest rates affect NPV calculations ie future cash flows of the company have to be discounted at a higher rate
Discounting NPV of future cashflows affects stock price, and increased interest rates mean a greater discount. No argument there.
Okay.
So what?
Why would a dropping stock price motivate layoffs?
The GP's claim is that it's because it makes debt more expensive (which it does!)
> when borrowing money becomes more expensive, these companies can no longer fuel business expansion or stock buybacks with cheap debt
But unless you're funding your operations with debt, that just doesn't matter that much, and in fact it can have a positive effect because it makes stock buybacks cheaper (looking at you, Apple).
Now, you could make the argument that maybe shareholders see a dropping stock price and push for layoffs to protect their investment.
Okay.
Except a lot of these companies have dual-class shares. Meta can (and does) simply ignore their shareholders. If they're laying people off, it's because Zuck decided they should.
The best explanation I see is bad long-term projections of the fallout of COVID, combined with social contagion as tech would rather sell the idea that there's a major recession imminent and they're cutting proactively, rather than admit they just screwed up and over-hired.
what's weird to me is that this is happening at all kinds of companies, including ones with what I thought was pretty level-headed management. It's not just one company oops screwed up and over-hired, and "tech" is not really a monolith. Yet, they somehow all simultaneously screwed up and over-hired?
Wouldn't NPV of future cash flows dropping mean you may have less cash flow in the future to pay for employees you may have hired anticipating those cash flows?
By the way, you're certainly right that increased interest rates depress the NPV of capital expenditures as the cost of capital increases.
That means businesses planning to, say, open a new factory or expand into a new market, might choose to delay or cancel those plans, and that can certainly impact growth projections.
But the tech megacorps aren't typically growing that way anymore. And even in the case of a company like Meta, which is investing heavily in their "metaverse" vision, they're funding that with cash because they're money printing machines.
So the way interest rates factor into cashflow analysis is in the opportunity cost to the investor of investing in a particular asset. That is, if interest rates rise, that means I can probably find greater yields elsewhere, which for a stock means I should increase my discount rate.
> First, assume that our opinion of future free cash flow doesn’t change so as to isolate the effect that the discount rate will have on value. You can think of the discount rate as the opportunity cost of investing in Stock A over Stock B or Investment C. If interest rates rise, so too should our discount rate since we would have more opportunities to do more with our money elsewhere. And since discount rates and present values are inversely related, value will decline, all else equal, as the result of a rise in interest rates.
> The first way in which interest rates factor into a DCF model is through the discount rate. The discount rate captures the rate at which the value of money declines. Prevailing interest rates are a big factor in opportunity cost. And opportunity cost is an ingredient of the discount rate.
> Calculating the DCF involves three basic steps. One, forecast the expected cash flows from the investment. Two, select a discount rate, typically based on the cost of financing the investment or the opportunity cost presented by alternative investments. Three, discount the forecasted cash flows back to the present day, using a financial calculator, a spreadsheet, or a manual calculation.
So DCF analysis doesn't actually say anything about company's actual future cashflows. It's about the value of those cashflows to the investor when weighing the value of that stock versus other types of investments.
Bringing us back to the topic at hand, that means higher interest rates should depress stock prices because of the increased opportunity cost versus investing in other assets.
Excellent summary. It's always about opportunity cost and relative prices, because people always have options. Employees can go where they are paid more, investors can invest where the returns are higher, consumers can choose the better value. The world is filled with businesses that had positive operating margins but nevertheless declared bankruptcy because their funding costs were too high.
The meme-y-ist of tech stocks like Peloton weren't doing stock buybacks.
The idea that Apple is "taking on debt to buy back stock" is pretty misleading. Sure, Apple has some debt - but it has net cash. Ditto for the rest of the megacap tech stocks.
GP is missing one of the major reasons for tech stocks to fall in a rising rate environment. (They're probably not missing knowing it, but missed saying it explicitly.)
When risk-free rates of return increase, that harms the value of all growth companies by increasing the discount rate applied to future cash flows (while not giving a corresponding "credit" for near-term losses of cash)
Higher interest rate was the catalyst to recognizing reality, not so much a fundamental shift of financials.
Many of these companies were losing money and their future imaginary positive cash flows were wishful thinking given their business models. Higher interest rates accelerated loss in value as the speculative sentiment shifted to a more risk-averse posture once the market accepted the reality that was always there: these companies never exhibited the ability to make any money, plus they were cannibalizing themselves due to the extreme competition from other startups fueled by the huge amounts of money vc’s were able to gather during the zero interest rate mania.
Discounting future negative cashflows was always a foolish game.
I think changing interest rates can easily (and often do) cause a fundamental shift of financials.
If I have a company that will lose 100 units of currency this year and next year, break even the year after that, and then return 20 units of currency for each of the next 17 years, then vanish without a trace, that's worth positive 46 units of currency at a 3% discount, nothing at a 5% discount, and negative 37 units of currency at a 7% discount rate. (Whether you discount the initial losses changes the analysis by only a small amount.)
Discounting of cash flows is not what I consider to be “financials”. Financials are the output / cash flows themselves not the speculative investment calculation of future flows given a determined discount rate.
Initial cash flows weigh much more heavily than later cash flows, so initial losses in a cash flow series have a much larger impact on npv. Therefore, I disagree with the conclusion of your hypothetical.
> these companies never exhibited the ability to make any money
the most talked-about layoffs right now are happening at salesforce, facebook, amazon, etc. I'm not sure what you are trying to convey or which hypothetical companies you are talking about, but these are printing money.
My analysis is not limited to the “most talked-about layoffs” (whatever that means) nor is it limited to some cherry-picked old cash-cow behemoths that are going to have much slower growth rates going forward. Possible exception is Facebook if they can make the VR bet work, but I have serious doubts about VR being commercially profitable within the next 20 years and even more doubts Facebook will be the company to make this happen.
i didn’t say every company was. this is mostly true of the mega cap companies.
and it’s not misleading at all. Apple and Meta are both known to sell bonds aka taking on debt for the primary purpose of buying back their own stock. that doesn’t have anything to do with their multibillion pile of cash.
They got caught in the hype and lost a lot of money.
Apple has many times. I don’t know why this is suddenly a conspiracy that some mega cap tech firms used cheap debt to buy back their stock. It’s not. It’s actually the primary way that these companies hid dilution from investors due to employee stock comp.
> tech valuations have come down because the Fed has raised rates which long duration stocks like growths tech cos are extremely sensitive to.
That's actually not accurate. NTM revenue multiples for software companies peaked at ~12.0x on average in October 2021. The first rate hike in this cycle happened in March 2022.
You're describing part of a tax-management strategy: sell bonds in the US, secured by cash in an offshore tax haven (e.g., Ireland), use the proceeds to return cash to shareholders, pay the bond coupons out of cash flow, and write off the interest payments. It has everything to do with the pile of cash when it's cheaper to use debt secured by the cash than to pay taxes to repatriate the cash. If worse comes to worst, the cash is still there to make bond-holders whole.
The thing about explaining market movements is: you can't. And if you could, you would me making money over fist, not sharing that on some forum.
edit: no, you can't... post hoc correlation analysis is an exercise in obscurity. If there was internal logic to the movements looking back, there would be a possibility of forecasting them.
That doesn't sound right. Nobody could predict that Covid (and reaction to it) would hit worldwide in March 2020. But looking back, you can try to unpack what effect it had on the markets. That's not going to help you predict the next one.
Sounding right, gut feeling, these are staples of bad reasoning. Markets have long term gains and random walks when you zoom in. That's it. Over the past years millions of things happened and hundreds of markets behaved as markets do. Cherry picking is easy, and wrong.
You can't predict, and coming up with an explanation during the fact is very problematic. But it's certainly possible to explain things after the fact.
> The first is a company like Google, where their tech enables a step-function increase in human productivity. Google Search gave people a super power they never had before. This type of company is extremely valuable as they can capture the value of the productivity they unlock. The second type of tech company is something like WeWork.
There’s another distinction to consider: WeWork, Uber, etc. have most of their costs scaling with every customer and limited competitive moat (people who travel heavily might value sticking with one global app, but locals don’t). Google or Facebook have costs to get started but their costs to go from 1M users to 10M aren’t linear, and that’s really what VCs are looking for. A lot of the bubble came from deliberately misrepresenting companies in the former group as having the revenue potential of the latter.
The second type of company will never be sustainably profitable. The barrier for entry is so low that the moment it turns on the profitability levers, some new startup will pop up with a slightly different model.
Happening to Uber in my local market. A new startup (BluSmart) with an all-electric fleet and full-time driver employees showed up. Uber's service quality declined as they started squeezing drivers for profits. The new startup has stolen a big chunk of marketshare (and more importantly, mindshare) and Uber is now considering exiting this market altogether.
If Uber can't make the economics work with an assload of venture capital to be able to take huge losses, how would a (presumably?) less well funded competitor succeed? Uber too big/slow to adopt the second-comer's strategy?
Well, the second comer is raising a bunch of VC funding too (iirc raised $25M so far and in talks to raised $250M more). VCs buy in because "this time, it's different" narrative. Or more likely because they know they can offload their shares to the next VC in the next round (who can then dump on retail).
It's a game of musical chairs with the ultimate goal of dumping on retail investors. If not that, at least dump it on other VCs.
I'll bet that Uber has a lot of waste and bloat that the new guys could avoid
I've heard some horror stories about a rideshare rider paying inflated surge prices while the driver just gets the normal rate, for example. (not sure which service this was)
Theoretically it should be dirt cheap for Uber to leverage its customer service and app for any new market to compete on razor-thin margins, but in practice they could be wasting most of that money and leaving the door wide open to a really lean competitor
- Drivers are full-time employees, not contractors. They don't care about waiting or not showing up for short/long rides - they get paid either way.
- Currently, you can only schedule rides in advance. Rides are available in 15 minute intervals. Doesn't work for a lot of situations but is perfect for going to the airport - the drivers always show up on time and will happily wait (for a small per minute fee) as long as necessary. WAAAAY less hassle than booking an Uber.
- All vehicles are owned by the startup itself.
It's essentially a taxi company with electric cabs and a good app.
I am assuming it is Delhi-NCR in India. I got a chance to use BluSmart this week. I am impressed. The driver was courteous and the cab quality was good compared to the abused vehicles used by Uber drivers in India.
- Also no surge pricing. Pricing is fixed by a rate chart based on KM travelled.
The only issue right now is availability. From Delhi airport it is OK but when I tried to book one from the hotel to a friend's place the earliest availability was after 4 hours whereas Uber was 5 mins.
Yeah, agreed on all points. But if you know you have to be somewhere ahead of time, scheduling rides is such a better experience than the last minute dash for an Uber.
Yes but if you are management and you have been wanting to make changes and cut the fat, it was previously difficult to do layoffs without extensive negative coverage. Now you can do it and fly under the radar so it may be opportunistic in nature.
They retrained and got reallocated to the new hot sectors (how many people work in tech now vs. in 2008?), or they joined the pool of unskilled labor, or they dropped out of the labor force.
The economy is always changing - new more-productive ways of doing stuff get invented, relative prices change, consumer tastes shift. Layoffs & rehiring is the economy's way of redirecting employees away from unproductive, unprofitable work and into new careers that are better adapted to the times. Your mental model of what a career looks like needs to include leaving jobs (and if you don't do it proactively, it may be done for you) and shifting your efforts into new work that is more adapted to the times.
Yes, for the most part new jobs were created and those people eventually got hired. The unemployment rate has been low for several years. But the labor force participation rate did decline slightly. Some people retired early, or chose to stay at home.
I feel like people really just got used to the world after 2008.maybe I'm misremebering. Before 2008 everyone was going to college because it was a guaranteed job after you graduate. Then the financial crash happened and it became hard for everyone to get jobs. Then we got cynical about college
We got cynical about college also because the costs spiraled way faster than incomes or prices for other things were rising. Colleges never lay people off, they keep expanding their administrative bureaucracy, all funded by growing student enrollment and easy student loans.
Student enrollment is going to start falling (demographics as well as more people questioning the value) and colleges are going to be in for a world of hurt because they don't know how to tighten their belts.
University Problem: Students are complaining about insufficient parking on-campus.
University Solution: Wipe out 1/4 of the available parking space to build a shiny new library, renovate the old library - turning it into a "student life center" nobody knew they needed, then triple the price for student parking permits and require all freshmen to live in the overpriced on-campus housing.
that's not how i remember it. we had a whole over employed thing for years, people always said unemployment numbers werent accurate because of that, the meme of people getting degrees and serving coffee etc..
community college and public schools without dorming are ~3k a semester. california is $46/credit for 736 for 16 credits.
RE: 1, that growth was never there IMO, it was all based on acquisition targets and pushing the whole "build a profitable business" onto someone else's shoulders. "Successful startup" meant bleeding enough money to survive until you IPO.
Google completely failed to capture the value they unlocked which is why the pivoted to ads in a way that has greatly diminished the value of their search results.
WeWork is not a digital version of coworking, it is a venture capital version. Without conjured money to make their business operations possible they fail and are currently approaching the end of their runway. Coworking operations that pay for their properties and operations with revenue from members are completely different in almost every way from the locations, the outfitting and maintenance of the spaces, and the various options for payment.
I agree with you, as I was thinking this in November 2021 (when Netflix hit a wall in growth) that the pandemic didn't create tech company growth, it pulled growth forward. What this told me was that the growth in tech was much smaller than people had realized, and that other tech companies were going to hit the same wall within a year. I told my friends to beware of what's coming, and that mass layoffs in tech were likely to happen.
The fact that it all played out just as I thought gives me an indication I was right.
#1, you are spot on, with the free money, and ZIRP, it has created 1000s of zombie companies are a live because they have access to the money. There are two valuations to consider when talking about this bubble.
a. Companies that make zero $$$ or near to it, and worth billions. Those are the ones that are going to be worthless after the bubble pops.
b. Companies that make money, just not enough to be profitable. There are few out there, but they are ones that will get effected the most. Some have valuations that should be significantly higher, but not.
c. Companies that producing $$$ and can cover expenses. PE ratios are out of sync, they are too high for what EPS they give.
What is going to happen? If the ZIRP doesn't come back or too late, you are going to see a lot of money and zombie companies get hurt hard. I think this is necessary, so good companies can transverse to a correct risk vs reward.
The biggest problem people living in the west, US, is the multipolar world is coming. US is not prepared for it, and if anything, resisting. Imagine 50% of the world rejecting the USD. It is not far off. US is now 59% of all global trade. Getting below 50% will have devastating effects. Inflation as you see it now, will be hyperinflation. The world is going multipolar, and US is not prepared.
False. As well there are many companies that would normally raise capital for this time and are unable to. Not just startups. Those companies hired to expand projects assuming when the time came they could raise money. Now there is no money.
I remember when Google/pagerank first came out. My experience at the time is that Google was dramatically and undeniably better than the other search engines of the time (ones that many people can't even name now).
The catalog/directory style sites were instantly made almost valueless by Google's better mousetrap. Google gave better search results than the previous leader, Altavista (IMO).
Whether Google results of 1998 were worse in some measures than Google results of 2023 doesn't say much about whether "giving great search" gave people a super power that they didn't have before. I think it did (though I agree that someone else would have eventually done so, obviously).
While I'm often annoyed if not downright frustrated by Google search results today, it's perfectly clear to me that I wouldn't have the level of career I have if it wasn't for the value Google provided to early internet searches. Compared to the folks who had 10+ years of experience on me in 2000 it certainly felt like a super power.
Google and just the amount of accessible information. I sometimes think that if I were transported back to my pre-web job, the level of sheer frustration I would have at the limited, out-dated information I would have access to for everything would be immense. Of course, most everyone else would be in the same boat but we're accustomed to trivially looking up so much stuff that would have required significant time and/or money to find out--if it were really even available at all.
I do a lot of heavily-NDA'd firmware work during the day and play around with web stuff at night
There's absolutely nothing available for my day job online, so you could say I've been living without Google for a decade. It's not as tough as you'd think. You just have to remember some basic syntax in your head or write it down in your notes, and look up APIs when you use them.
It doesn't honestly take much longer to do something sans-Google at work than it does to cobble web stuff together with Google and StackOverflow's help. It's OK
For most stuff sure. But as soon as you hit an edge case you're kind of on your own. I've been hit by some fairly tough bugs / issues which had ready solutions available a quick search away. When things go wrong is where I think you'll see the most difference in pre and post Google problem solving efficiency.
I didn't and don't do a lot of software development. I was a product manager for a long time and then an IT industry analysts. As a product manager, to pick on one particular point, we had very cursory competitive information. We had some expensive subscriptions to analysts who essentially acted as a clearinghouse for data sheets that companies couldn't get from each other directly. But it tended to be very shallow and out-of-date.
Certainly not everything is on the web with or without paywalls. And, as when I was doing software development at night pre-web, I could just have a library of books. But for a lot of things, you made do with taking longer, being more shallow, and making more mistakes.
What I think people tend to forget in this discussion is the genuine value that google brought when it first came out was not “better search” so much as it was “resilience against gaming”.
The pre-www search engines (gopher, Archie, jughead) were pretty sophisticated by allowing you to combine search expressions “and, or, near, phrase”, in essentially a regex style fashion, and they were getting better and better. Early www search engines followed the same approach, operating in the way that some library catalog systems still do. The problem is that they were easily gamed by bad actors.
This wasn’t an issue for some time, but the very instant making money become a possibility on the internet, everything changed. People remember google trouncing Altavista, but this was the broken Altavista that couldn’t defend against the scammers. The war had been going on for some time by then, with search engines starting well and failing once their weaknesses were discovered and exploited.
That google “topic + reddit” is now a thing says to me that the gamers have again won, and a new search approach is needed.
I do miss the old style directory search engines for the ability to explore them. I could click on a topic and keep drilling down, down, down and endless rabbit hole and learn new things. Now I use wikipedia, but it doesn't quite have that mind blowing feeling I felt as a kid.
> That it devolved into ad-rotten mess is different topic.
I'll bite. Can you take take screenshots from some sample searches to prove this point? Because I don't find it an ad-rotten mess. It's still extremely functional, and fairly clean.
Functional? Do a search for some term that has a few meanings. The first 60% of the page is a summary of wikipedia's article for the wrong meaning, followed by an ad for a competitor of a different meaning of the term followed by a "people also ask" section where the questions are unrelated to what you want.
Then scroll down past 2 or 3 actual web links interspersed with adsense links - none of which apply. Then you have the wierd carousel with a bunch of unrelated vidos and a couple links interspersed with ads.
During your scroll you'll encounter several links/buttons labeled "more", and it's unclear which of those is actually for "more link results" rather than a switch to video search or whatever.
At some point (if you haven't given up in exasperation already) when you decide to refine your search terms, you get the exact same result page, completely ignoring the new terms (although occasionally the ads will change).
I guess its functional for extremely basic use cases, but if you ever need to find some deep knowledge, it's literally useless in 2023. In 2008 it was "you'll find it, but it might be on page 10" rather than "good luck not getting mislead on your way to find that page 10 is literally all bot spam".
Search for any kind of product review for an appliance. i.e Best microwave, washing machine review, anything like that. Virtually all of the results are astroturfing spam.
On my browser (with an adblocker), "best air fryer" gives me a list of review articles and best-of articles from relatively reputable outlets (Good housekeeping, homes and gardens, etc). On my phone, everything above the fold is an ad (a widget with some direct links to places I can purchase one near me -
this is arguably the most useful as links to American stores are useless to me, a review article from a newspaper, and the other Amazon) and tagged as such ("sponsored"), and everything after that is relatively the same results. I don't see how these could be better. A specific article from some "best appliances" ombudsman who can be trusted?
Is it though? Google has dropped so much from its index these days it is no longer "just put that phrase you wrote ten years ago in quotes and the forum post will come right up". Smaller search engines obviously also suffer from this, but I do believe that peak previous gen are better than this
My point is more that google of today undeniably has the resources to be that detailed, but they are actively choosing to dumb things down and use AI to figure out what I meant to search instead of just searching for what I tell it to, and they are actively choosing to drop things from the index when they could afford to index literally everything.
I don't know how to estimate nostalgia but I've absolutely noticed google search results getting worse in the past 6 - 18 months. You'll see that the entire page of results is based off one misreading of a phraseology, not what you actually searched for. It feels worse in a "misguided" way, not in a pure deterioration way.
To be fair, the deterioration of search isn't wholly Google's fault. The web has become less searchable, because people try to game Google's metrics, which leads to Google trying to get clever to provide decent search results, which leads to deterioration of core functionality. I don't really see a good solution short of taking all the "SEO" specialists and their corresponding blogspam and throwing them into a volcano.
Yeah... usually when I'm searching, I'm looking for something deep in the weeds, and what I get are really surface-level results. It's like I'm searching for some deep detail about how 3-phase grid voltage levels react to a severely imbalanced load per phase, and instead I get a bunch of junk about how to plug a lamp into a household socket without electrocuting yourself (totally made up illustrative example!). I truly think 1990s AltaVista was better at this kind of stuff than today's Google (but maybe not early Google).
I'm not arguing that the results are worse. Google is obviously more accurate with a larger index etc. But...
Ads. Google's SERPs are about 75% ads above the fold on a laptop. They're horrible.
Privacy. Everything you do on Google is tracked up the wazoo. It's pretty much impossible to stop too.
Share-ability. You can't share a Google search because personalization means everyone gets different results.
API access. Yahoo in particular had a really good Search API. You could search via the API and do things with the results. Google only allows you to embed an iframe to their site to display the results their way, with their ads. You can't search programmatically any more unless you pay a lot of money.
But since then google has fallen way down, and search is back to being awful and full of chaff. Whether that's because we have higher expectations, or because the chaff producers have adapted and google has failed to adapt to their adaptation doesn't change the fact that search is back to being a chore like it was in 1998.
20+ years ago, I could search for exactly what I wanted. Today's search engines often give me a page or so of irrelevant but popular results before I find what I need.
I think that's a little silly, You can get a google search to look for hyper specific stuff it just requires a little bit of massaging. It was not at all true that there was no massaging required when asking Jeeves for something.
Good luck getting hyper specific stuff now that Google isn't including most of the web in their index anymore. Google quality is the same as AskJeeves was. That's where we ended up with no AltaVista and bing copying results from google.
Maybe I was just too young to know better, but I seem to remember AltaVista being pretty decent. My internet was super slow back then anyway, so the search latency probably didn't make a huge difference.
Google showed no ads for the first several years of it being around. It was still better than everything else at the time for most common use cases.
You trying to say 1997 altavista was better than what google is today? I'm not a fan of google, but that's still a hard strech to make. "by many metrics" = what metrics?
I also remember when Google only used to have ads over to the side. I really don't like Google at all now and I'm switching to either DuckDuckGo or Bing.
There are two, more obvious, reasons for layoffs.
1) The valuation bubble bursting is a big factor. Both high valuations and hiring decisions were made with a certain amount of growth in mind. Now that it's clear that the old level of growth is unrealistic going forward, valuations are coming down to reflect that, as is employee head count. Additionally, employees hired at the sky-high valuations are going to be disgruntled unless they're "made whole". Easier to just let most of them go and top-off the ones you want to keep.
2) There are two types of tech companies. The first is a company like Google, where their tech enables a step-function increase in human productivity. Google Search gave people a super power they never had before. This type of company is extremely valuable as they can capture the value of the productivity they unlock. The second type of tech company is something like WeWork. This type of tech company is essentially a digital version of something that existed previously. These companies can gain traction due to the convenience factor unlocked by the digital transformation, but there isn't much extra value to capture. When interest rates were 0, VCs and the market as a whole were valuing these companies the same as true tech companies. Now that investors are more discerning with their money, the valuations of such companies are popping. The valuations are lower because the true value of the company is low. If you have a low value company, you don't need thousands of employees all earning 6+ figures to run it.