Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

The tech sector teardown is more catharsis than crisis

ft.com

Post reply on HN
Print view View original

221–230 of 258 posts

Re: The tech sector teardown is more catharsis than crisis

#221

Post by yobbo »

robbomacrae wrote: post #140
bearjaws wrote: post #22

I think this is just the correction that was inevitable as hiring had become a cargo cult. Everyone was hiring so everyone felt compelled to hire, creating a feedback loop of insane wages and offers. Now its time to pay the bills and many organizations realize the engineers they hired cannot possibly provide the value necessary to keep their job. I know one individual who got hired as a Sales Engineer for a platform…

"cannot possibly provide the value necessary to keep their job." It's actually very much possibly for software engineers, at least, to justify high valuations. As an example when I joined Reddit my first task was to remake a data engineering server in scala that cut down the needed AWS machines by 70%. That cost saving already covered more than my salary in perpetuity and I was only 3 months in.

By that logic, any salary In reality there is a job market, and there are office politics. These determine salaries more than "marginal revenue of labour". This means that as long as someone who is employable by office-political standards will do the job cheaper, the salary can be contested.

Re: The tech sector teardown is more catharsis than crisis

#222

Post by nemo44x »

ramesh31 wrote: post #187
nemo44x wrote: post #87

Earlier quoted context omitted.

Save money and have enough to live on for awhile. If you don't have savings then immediately cut your cost of living down. If you do lose your job then don't just accept anything (remember, you have savings + unemployment + severance to live on for awhile) and use this time to sharpen skills and learn new things. Make yourself more valuable. I can't see the future but I don't think it's going to be a bloodbath like t…

> If you do lose your job then don't just accept anything (remember, you have savings + unemployment + severance to live on for awhile) and use this time to sharpen skills and learn new things. This is terrible advice. An employment gap will make you radioactive to hiring managers during a recession. Even a terrible job will keep you in better standing for negotiation.

It could be but I’m not sure. Your CV displays your pedigree much like the name of your university. You’ll also be very unhappy just jumping into a bad situation you are not enthusiastic about.

I’d rather have a 4-6 month gap than taking on a bad job right away.

But you do have a valid point that it’s easier to find a job when you have one.

Re: The tech sector teardown is more catharsis than crisis

#223

Post by kwertyoowiyop »

bitwize wrote: post #201
lemonlime wrote: post #198

Earlier quoted context omitted.

Yeah when I read takes like the guy you're responding to, I have to wonder: where should the money go if not to the people that built the product? Management? Shareholders? You can say that but those people are doing less work for more money already, so I don't buy it. Engineers like many people that build useful things, provide orders of magnitude more value than what they get for their labor.

You know who else asked themselves that same question? Karl Marx.

The Workers control the deployment to Production!

Re: The tech sector teardown is more catharsis than crisis

#224

Post by gsibble »

IMTDb wrote: post #217
lemonlime wrote: post #198

Earlier quoted context omitted.

Yeah when I read takes like the guy you're responding to, I have to wonder: where should the money go if not to the people that built the product? Management? Shareholders? You can say that but those people are doing less work for more money already, so I don't buy it. Engineers like many people that build useful things, provide orders of magnitude more value than what they get for their labor.

Well...op left the company, so why should he still get a cut of their current revenues ? That does not seem very fair to the current engineers who a currently able to manage the $200 MM. As far as we know, the company really started working well when they were finally able to replace his crappy code with a better implementation. The money probably goes to management, who stuck during the entire story - which OP didn'…

Actually no. They replaced me with 9 engineers to do the same amount of work and had to delay the project 6 months because they had me working 100 hours a week and renegged on a raise and a vacation.

Re: The tech sector teardown is more catharsis than crisis

#225

Post by justsomehnguy »

gsibble wrote: post #224
IMTDb wrote: post #217

Earlier quoted context omitted.

Well...op left the company, so why should he still get a cut of their current revenues ? That does not seem very fair to the current engineers who a currently able to manage the $200 MM. As far as we know, the company really started working well when they were finally able to replace his crappy code with a better implementation. The money probably goes to management, who stuck during the entire story - which OP didn'…

Actually no. They replaced me with 9 engineers to do the same amount of work and had to delay the project 6 months because they had me working 100 hours a week and renegged on a raise and a vacation.

This one.

I did unimaginable things for one company, only to understand the value years later.

Re: The tech sector teardown is more catharsis than crisis

#226

Post by bogomipz »

Nextgrid wrote: post #63
plaidfuji wrote: post #9

My biggest question behind all of this is how interconnected is the tech bubble, and how self-perpetuating will a downturn be? The venture-backed startups that I’ve worked at have themselves utilized tools built by other venture-backed startups. It seems like there’s an entire cottage industry of SaaS tools designed to make it easier to scale up small companies. What will the effect of a startup downturn be on compan…

I definitely think there's an advertising bubble and it's popping. Lots of startups' "business model" is "growth and engagement" - pump up user and "engagement" numbers and VCs will throw money at you, and maybe you even get a bigger sucker that outright buys you out. Spend all that money on advertising & marketing to keep these "engagement" numbers going up, all while having no actual product users pay for. This in…

>"I definitely think there's an advertising bubble and it's popping."

Isn't online advertising mostly just two companies though - FB and Google? And they have very deep pockets no? Or did you mean more that there's an ad tech bubble?

>"Lots of startups' "business model" is "growth and engagement" - pump up user and "engagement" numbers and VCs will throw money at you, and maybe you even get a bigger sucker that outright buys you out. Spend all that money on advertising & marketing to keep these "engagement" numbers going up, all while having no actual product users pay for."

I believe this is what the article referred to as "capital as a strategy."

Re: The tech sector teardown is more catharsis than crisis

#227

Post by lumost »

ffggvv wrote: post #213
__alexs wrote: post #112

Earlier quoted context omitted.

> The difference between then and now is that interest rates are blasting through the roof along with inflation. The effective federal interest rate is 0.33% today. It was 2.4% before COVID...

The current fed funds rate is 1% (0.75-1.0) the next 2 meetings they plan to raise it by 0.5 each meeting. and then 0.25 each meeting after that until inflation is gone. in 2019 they started lowering it because they crashed the market by raising it to 2.5. which proves the point trajectory matters alot.

Unless we believe in magic monetary fairy dust, it’s reasonable to assume that the fed cannot wish economic growth into existence.

Without real growth, we cannot have wage increases and asset price increases - one must take from the other. So far the fed has chosen asset appreciation over wage increases, we’ll see how things play out this cycle.

Re: The tech sector teardown is more catharsis than crisis

#228

Post by bogomipz »

gsibble wrote: post #191
tyrfing wrote: post #116

Earlier quoted context omitted.

Most of these tech companies build business models around giving away money, with a plan of eventually making a profit. They are affected by interest rates because the higher interest rates you have today, the more attractive it is to have money today instead of tomorrow. Interest rates available today are the discount rate for those future cash flows (profit).

This. Historically, a company is fundamentally valued by the discounted rate of its free cash flows into the future. The discount rate is decided by several factors including the risk free rate.....which is frequently tied to interest rates. So interest rates go up, the risk free rate goes up, cash flows become worth less, and corporate valuations go down.

>" Historically, a company is fundamentally valued by the discounted rate of its free cash flows into the future."

Could you elaborate on this, is this a metric that VCs use in their valuations? How is the discount amount determined?

Re: The tech sector teardown is more catharsis than crisis

#229

Post by refurb »

RandomLensman wrote: post #100
refurb wrote: post #96

Earlier quoted context omitted.

If interest rates go up and inflation stays high then real returns stay low. I don’t see VC/PE investment dropping as a percent of investments since it’s a unique high risk/high return investment than 5% bonds can’t match.

Quite a few large institutional investors have surprisingly low nominal target returns, so 4-5% can be enough (in mainland Europe, for example)

If any fund has a nominal return target, then I’d question their abilities.

Nominal means nothing.

Re: The tech sector teardown is more catharsis than crisis

#230

Post by bogomipz »

slavoingilizov wrote: post #143
crate_barre wrote: post #62

Someone needs to explain to me why our tech companies are so tied to interest rates. Are VCs borrowing with home mortgage equity??

The whole economy is intertwined. This is a very simplistic way of looking at it, but if you can park risk-free capital somewhere which generates high interest, the opportunity costs of investing in tech become higher, so VCs stop investing. Also - you're committing money in a business with a higher risk of not returning them given the economic outlook of their customers and revenue. Tech isn't isolated from the worl…

>"This is a very simplistic way of looking at it, but if you can park risk-free capital somewhere which generates high interest, the opportunity costs of investing in tech become higher, so VCs stop investing."

But if the funds are not investing, that money is not doing any work. How long are investors willing let that cash sit idle before they ask for redemptions?

Post reply on HN