“Today I cut my pay to $0. I'm committed to laying off 0 of our employees.” • Hacker News Board

Re: “Today I cut my pay to $0. I'm committed to laying off 0 of our employees.”

#161

Post by pdeuchler » Sun, Mar 29, 2020, 9:14 PM UTC

ttul wrote: post #108

pdeuchler wrote: post #104

Earlier quoted context omitted.

If a 50% drop in expected revenue _growth_ causes you to default on your debt you are either a startup that had trouble raising money, in which case now you know that you do not have a viable business plan, or you are running a completely unsustainable business that only existed because of easy access to cheap debt the past couple of years.

Common misconception. It’s not uncommon for companies to use leverage to fuel growth. High yield venture debt is often tied to growth metrics. It’s not a mistake to operate a company using venture debt. In a highly competitive market, if you don’t lever up, your competitors will eat your market.

> It’s not uncommon for companies to use leverage to fuel growth. High yield venture debt is often tied to growth metrics.

This is, of course, exactly my point. "High yield venture debt" only exists due to absurdly low interest rates and an abundance of capital being driven out of public markets and into private ones. Now that the free lunch is over do not be surprised that your lenders come calling now that your "high yield" (read: risky) loan is no longer profitable under current market conditions.

> In a highly competitive market, if you don’t lever up, your competitors will eat your market.

I.E. When capital is cheap and abundant it is possible to burn cash on an unsustainable business plan for marketshare, but when the entire market itself rapidly shrinks your business plan is horribly unviable.

Re: “Today I cut my pay to $0. I'm committed to laying off 0 of our employees.”

#162

Post by [deleted] » Sun, Mar 29, 2020, 9:19 PM UTC

twblalock wrote: post #156

wool_gather wrote: post #152

Earlier quoted context omitted.

Why does this rationale apply to businesses but not to individual employees? The government forced them to stop working.

They are also getting help from the government, in addition to the normal unemployment benefits which have always been available. It's not like nothing is being done for them. Both businesses and workers are getting some help, which may not be enough. But let's not act like the government is only helping businesses.

[deleted]

Re: “Today I cut my pay to $0. I'm committed to laying off 0 of our employees.”

#163

Post by wool_gather » Sun, Mar 29, 2020, 9:20 PM UTC

twblalock wrote: post #156

wool_gather wrote: post #152

Earlier quoted context omitted.

Why does this rationale apply to businesses but not to individual employees? The government forced them to stop working.

They are also getting help from the government, in addition to the normal unemployment benefits which have always been available. It's not like nothing is being done for them. Both businesses and workers are getting some help, which may not be enough. But let's not act like the government is only helping businesses.

All right, I misunderstood what you were saying.

Re: “Today I cut my pay to $0. I'm committed to laying off 0 of our employees.”

#164

Post by mistermann » Sun, Mar 29, 2020, 9:22 PM UTC

ttul wrote: post #155

mistermann wrote: post #146

Earlier quoted context omitted.

> It’s not uncommon for companies to use leverage to fuel growth. Seems true. > High yield venture debt is often tied to growth metrics. Seems true. > It’s not a mistake to operate a company using venture debt. Is this true, or might it be more accurate that particular people, depending on their situation, would like to have us believe it is true? If a company is operating using venture debt, or operating in any arbi…

Companies aren’t going hat-in-hand. Governments are rightly bridging companies if they agree to not fire people.

You can assign whatever label you want to it, but it's odd how difficult to agree on what is happening here, or if anything of significance is even happening at all.

Is there a flow of funds from government to one or more corporations involved in the scenario being discussed? YES/NO?

Is there a risk that the government may not get all of this money back? YES/NO?

Have we seen a scenario resembling this before? YES/NO?

Do (or has there even been instances in the past) American citizens in any way have the right or privilege to use the full powers of the United States Government to forcibly transfer money from the bank accounts of corporations into those of citizens, despite the corporations being guilty of no fault? YES/NO?

Is there a broadly held consensus that all parties involved in this scenario are being "plausibly fairly" compensated/punished for the role they have played in the events leading up to this scenario, and does the American public have the right to view 100% of the documentation that substantiates that claim? YES/NO?

Does the American public have the right to view 100% of the documentation involved in this scenario, so that they can confirm for themselves that not one single cent is being misallocated? YES/NO?

If an omniscient third party (literally, a God) was evaluating this scenario, are we absolutely certain that they would be unable to find the slightest fault, however small, in this scenario? YES/NO?

Re: “Today I cut my pay to $0. I'm committed to laying off 0 of our employees.”

#165

Post by edanm » Sun, Mar 29, 2020, 9:24 PM UTC

pdeuchler wrote: post #104

ttul wrote: post #99

Earlier quoted context omitted.

Business owner here. First, let me dispel the myth that business owners are wealthy. All of my friends from school have more liquid assets than I do. I am utterly broke unless you count for the paper wealth of my company shares. When COVID hit, within a week we had customers dropping out of our sales funnel. Half of our expected revenue growth disappeared as customers decided to reduce risk and stick with existing so…

If a 50% drop in expected revenue _growth_ causes you to default on your debt you are either a startup that had trouble raising money, in which case now you know that you do not have a viable business plan, or you are running a completely unsustainable business that only existed because of easy access to cheap debt the past couple of years.

> or you are running a completely unsustainable business that only existed because of easy access to cheap debt the past couple of years.

Or you planned for revenue growth by doing things like buying extra equipment, hiring more workers, increasing office space, etc.

When operating a business, you have to plan for growth, or lack of growth, or even for revenue to fall. And your planning often costs money, or commitments to pay money. If reality suddenly doesn't match your planning, then you are in trouble.

And I totally don't get why people are so negative on debt. If I'm running a relatively new company, and realize I have a good product that is going to increase in demand next year, but I don't have the money to build out a new factory - I can get a loan. If I happen to be, say, Apple, I don't necessarily need a loan - I can finance it myself using cash reserves from previous years. Why is it better to live in a world where the only companies who can build up for future growth like this are huge companies like Apple?

Re: “Today I cut my pay to $0. I'm committed to laying off 0 of our employees.”

#166

Post by pdeuchler » Sun, Mar 29, 2020, 9:32 PM UTC

edanm wrote: post #165

pdeuchler wrote: post #104

Earlier quoted context omitted.

If a 50% drop in expected revenue _growth_ causes you to default on your debt you are either a startup that had trouble raising money, in which case now you know that you do not have a viable business plan, or you are running a completely unsustainable business that only existed because of easy access to cheap debt the past couple of years.

> or you are running a completely unsustainable business that only existed because of easy access to cheap debt the past couple of years. Or you planned for revenue growth by doing things like buying extra equipment, hiring more workers, increasing office space, etc. When operating a business, you have to plan for growth, or lack of growth, or even for revenue to fall. And your planning often costs money, or commitme…

Uhhhhhh, are you talking about bank term loans? Bank term loans have repayment periods over decades (usually), and use the physical assets as collateral. Not what OP is talking about.

Re: “Today I cut my pay to $0. I'm committed to laying off 0 of our employees.”

#167

Post by SpicyLemonZest » Sun, Mar 29, 2020, 9:49 PM UTC

kitotik wrote: post #135

SpicyLemonZest wrote: post #86

Earlier quoted context omitted.

I don't think it's fair to call it a trickle-down experiment. We're bailing out companies because we think it would be bad for society if they all went bankrupt, not because we expect that money to trickle down as such.

How is propping up the “top” of the economy not a trickle down approach? It’s the definition. The opposite approach would be “bottoms up” aka propping up the workers. It will be bad for society if the companies at the top all go bankrupt. It will likely be worse for society if the results are even remotely similar to the previous crisis: further concentration of assets/wealth resulting in increased income disparity a…

I'm not sure there's a clear definition of "trickle down". When people say that, I normally imagine something like a huge tax cut for the rich, and people arguing "well maybe they'll use that money to create jobs or something". It's a very different story to say "you know, many businesses are being legally mandated to shut down, let's give them some life support so they'll be there for all the workers they employ".

Re: “Today I cut my pay to $0. I'm committed to laying off 0 of our employees.”

#168

Post by mam2 » Sun, Mar 29, 2020, 10:17 PM UTC

pdeuchler wrote: post #161

ttul wrote: post #108

Earlier quoted context omitted.

Common misconception. It’s not uncommon for companies to use leverage to fuel growth. High yield venture debt is often tied to growth metrics. It’s not a mistake to operate a company using venture debt. In a highly competitive market, if you don’t lever up, your competitors will eat your market.

> It’s not uncommon for companies to use leverage to fuel growth. High yield venture debt is often tied to growth metrics. This is, of course, exactly my point. "High yield venture debt" only exists due to absurdly low interest rates and an abundance of capital being driven out of public markets and into private ones. Now that the free lunch is over do not be surprised that your lenders come calling now that your "hi…

Honestly most companies, not startups only, run on the idea that if you don't have debt, you're doing something wrong. It's not entirely false when the economy is neutral at least.

Re: “Today I cut my pay to $0. I'm committed to laying off 0 of our employees.”

#169

Post by kitotik » Mon, Mar 30, 2020, 12:28 AM UTC

tomp wrote: post #138

kitotik wrote: post #80

Earlier quoted context omitted.

The U.S. could give each household ~$15k instead of trying the trickle-down experiment again. This is not a bailout, it’s another transfer of wealth using the same model that was prototyped during the last financial crisis.

Guess what happens when everybody has $15k more money to buy stuff and there's no companies left to produce said stuff...

Some people will invest portions of that $15k to produce things that other people in their community need. Isn’t this how capitalism is supposed to work?

Instead, we will artificially prop up large corporations.

Re: “Today I cut my pay to $0. I'm committed to laying off 0 of our employees.”

#170

Post by kitotik » Mon, Mar 30, 2020, 12:29 AM UTC

SpicyLemonZest wrote: post #167

kitotik wrote: post #135

Earlier quoted context omitted.

How is propping up the “top” of the economy not a trickle down approach? It’s the definition. The opposite approach would be “bottoms up” aka propping up the workers. It will be bad for society if the companies at the top all go bankrupt. It will likely be worse for society if the results are even remotely similar to the previous crisis: further concentration of assets/wealth resulting in increased income disparity a…

I'm not sure there's a clear definition of "trickle down". When people say that, I normally imagine something like a huge tax cut for the rich, and people arguing "well maybe they'll use that money to create jobs or something". It's a very different story to say "you know, many businesses are being legally mandated to shut down, let's give them some life support so they'll be there for all the workers they employ".

There is a fairly clear definition. You either support the supply-side, and hope their prosperity ‘trickles down’ to the proletariat, or you support the demand side, and let supply meet the needs.