Think of debt as a way to gain market leverage. Leverage is good if you are reasonably certain of the outcome. https://news.ycombinator.com/item?id=20942950
Is there any reliable metric to know what reliable means here?
Debt is coming to the tech industry
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Re: Debt is coming to the tech industry
#32If you open graphs over inflation and interest rate since 1971 you will understand why debt is not coming again in nominal terms until the dollar goes away; that is in real value compared to something that you cannot borrow to buy:
https://www.whythings.net/Images/Inflation_chart.jpg
https://beta.theglobeandmail.com/legacy/static/folio/mortgag...
Technology; like money, can't change physics. Just like when you hit a ball; what goes up must come down.
While looking at the graphs, consider that the personal computer and the internet were invented in the 70s. We went to the moon then too.
Virtually nothing in technology has changed since the 80s.
Re: Debt is coming to the tech industry
#33Debt is dumb. The childish glee coming from this author should be ignored. 2008 is coming again soon and debt holders will suffer. Please get/keep your financial house in order. Business debt is just as dangerous as personal debt.
How do you propose solving problems like "buy a house" and "buy a car" without debt? The average person who needs to drive to work has no way to buy a car in cash, at least not early on. If you drop all your savings on a new car and suddenly end up with a hospital bill, that car isn't going to pay for it. I say this as someone who had enough saved to buy a car in cash: Buying it via a loan was the right choice. It bo…
Rent, and, 'cars are bad'. This is written from an urbanist perspective. If you mean it can't scale, well, yes, its target is silicon valley devs.
Either rich enough where it doesnt matter, or poor enough where it doesn't matter.
Re: Debt is coming to the tech industry
#34Earlier quoted context omitted.
> 2008 is coming again soon I have no idea why people __LOVE__ making these statements. 2008 was something that affected mostly the US and while it affected the rest of the world to a certain degree, overall very little changed. Before jumping on my throat, hear me out: There have been several significant financial events since then: the European debt crisis, then Portugal(which is relatively small on a global scale)…
I'm equally perplexed as to why people always seem to think a big downturn is right around the corner. Maybe there are always enough warning signs that someone with a sufficient penchant for confirmation bias will latch on to. Regardless, nobody can tell the future - there are simply too many unknowns to consider. We will certainly have more good times and bad times. As to when they come, predict all you want, but hi…
My point exactly. A broken watch is right twice a day. Let's assume that we are all in a simulation. A statement such as "the entity that created the simulation will pull the plug in what we perceive as two minutes". Well yeah, sure... Is it a valid statement? Yes. Is it accurate? Hell if I know.
Re: Debt is coming to the tech industry
#35Debt financing would be wonderful (note to non-business-savvy readers: this is not even remotely the same kind of thing as personal credit card debt or whatever other completely unrelated thing is making you sanctimoniously kneejerk that "debt is bad". Can we please have an informed discussion of debt as a part of a business capital structure?) for software businesses, which have very predictable capex costs. The iss…
How does debt help deal with "very predictable capex costs"? You would need very predictable revenue to make it work, otherwise equity financing seems like it might be preferable.
Re: Debt is coming to the tech industry
#36“Debt helps you grow faster; debt helps you die faster.” - someone said this to me early in my career and it has stuck with me.
Ditto for equity
Re: Debt is coming to the tech industry
#37Great read, but I had a sneaky suspicion the entire time he was going to just say 'securitise revenue streams', which he finally did.
I just don't think for the most part this will happen in any meaningful way, because high growth companies that need the money just don't have the track record to really underpin the value of said revenue streams.
As for more established tech companies ... surely they must have been doing or at least trying to do this already?
Re: Debt is coming to the tech industry
#38Debt is dumb. The childish glee coming from this author should be ignored. 2008 is coming again soon and debt holders will suffer. Please get/keep your financial house in order. Business debt is just as dangerous as personal debt.
"Business debt is just as dangerous as personal debt."
They are barely related to the point they should probably even be called different things.
Business debt is to buy equipment to make stuff to sell at a profit.
Personal debt to buy a nice boat.
Re: Debt is coming to the tech industry
#39Debt and VC are just sides of the same (multi-sided) coin. The money has to come from somewhere - domestic savings, commercial profit or sovereign wealth. The unicorn phenomenon is easier to explain this way - if you are already a company that can consume huge amounts of debt (you have a business model, product and route to market and just need to replicate) then you used to have one choice - take on debt. Now, where…
> As such the only likely way "debt is coming" is if interest rates climb, giving money an alternative to VC. Surely that's backwards: a lot of money really wants to be invested in debt, and is only doing VC because the returns to debt investing are so bad. Offer those investors a better alternative - comparable returns to a second-tier VC fund (which is not actually that hard), with something they can pretend is a s…
I think we are saying the same thing - at the moment money chooses to be VC funds because normal debt has such low interest rates.
Yes I absolutely think there will be shake ups in VC market meaning smaller more frequent and earlier investment (taking the place of what used to be bank business loans). And I think a lot of money will want to do that.
But both of these are not debt - and until savings rates globally change then there will be plenty of supply of money and interest rates will remain low.
Given that savings rates generally correlate to countries growing in wealth then SEAsia and Africa suggest there will be a long while before interest rates tip up structurally
Re: Debt is coming to the tech industry
#40Debt financing would be wonderful (note to non-business-savvy readers: this is not even remotely the same kind of thing as personal credit card debt or whatever other completely unrelated thing is making you sanctimoniously kneejerk that "debt is bad". Can we please have an informed discussion of debt as a part of a business capital structure?) for software businesses, which have very predictable capex costs. The iss…
I don't think it's only cultural, software businesses also have very few assets that could be liquidated. Volkswagen might finance 2/3 of everything it does with debt, but if it just stopped tomorrow and sold all production facilities then lenders would get more than half their money back. If a typical software startup stops operating and sells off all its assets it gets a bit of spare change and the lenders leave with close to nothing.