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Earlier quoted context omitted.
> When the DotCom bubble burst, and after 2009, traffic in the Bay Area cleared up. Commuting time got cut by half. Homes in many neighborhoods, apart from the very best school districts, became attainable. It was the same in 2001, BTW.
DotCom bubble == 2001
Has it? Capitalism is based on supply and demand, and where those two lines intersect is where the magic happens. Except that we've never adapted it to the reality of, well, computers and the Internet. The price of duplicating a pile of bits, whether it be a Linux ISO, Windows 11, or the latest Disney movie is effectively zero*. Or textbooks to spread human knowledge around. A graph of supply and demand, where supply…
The cost of reprodcuing a pile of bits is quite unimportant compared to the cost of producing that pile of bits the first time around. This dynamic is poorly captured by supply/demand, and this is where copyright laws have always come in. While they are being abused with absurd expiry limits, they are a necessary part of any kind of money-based society.
Without copyright, for-profit companies would insist on ever more draconian DRM and software obfuscation technologies to replicate similar systems, while liberally taking any piece of code they can get their hands on - whether open-source or from another company with inadequate copy protections.
This basic problem would remain true even if all software and media companies were worker owned syndicalist co-ops.
We had a year of uncertainty and semi stockpiling and then when the recovery steps were clearer a huge amount of pent-up investment happened in the following 12-18 months.
Sentiment is mostly negative right now but deals are still being made, where they make sense.
Earlier quoted context omitted.
The marginal costs of production are near zero effectively. The marginal costs of acquiring and retaining a customer are far from zero for a lot of overvalued enterprise saas companies.
Indeed. The economics that OP stipulate, do not factor in interest rate and cost of labour (engineers).
Say we've got this mp4 file that everyone wants. Let's use bittorrent for our digital distribution. So we need to: create a torrent, upload it, and then keep their computer on for a couple more hours? Let's pay $400 for the job. I think it's well within the realm for a clever teenager to do it, or a rando you find off of Upwork or Fiverr, that who knows what they're doing, to finish the first two steps in an hour, so I think that rate is plenty generous. But let's also pay for their Internet connection for the month ($100), and a cheapo laptop to do this work on ($500). This brings our digital distribution costs including the cost of labor, using bittorrent, to be able to make billions of copies to be... $1000?
Even if you pay an engineer to do that job, labor doesn't get residuals, so aren't paid for each copy made, so the cost of labor, whatever it is, is essentially flat. Compared to if you were trying to copy and distribute a physical good, the more copies you make, the higher your costs and $1000 just isn't going to get you far at all.
I'm more interested in what you mean by interest rate though, mind explaining how that fits in here a bit further?
By that I mean if something grows faster than inflation plus earnings and it is an inflation hedge or at least the revenue is dependent on inflation and therefore it's valuation grows with inflation, then it must come down at some point and here is the kicker, only businesses that actually manage to sell products and generate revenue are actually benefiting from that inflation. So when faced with higher interest rates, only those business will have an easy time.
So what matters here is nominal revenue and nominal interest, not the actual real interest rate. 4% interest at 8% inflation still has a big impact, even though in real terms it is still negative.
With all industries are converting to software and every person on the planet moving towards owning a smartphone it surprises me that there’s an ongoing narrative that tech is collapsing.
When the DotCom bubble burst, and after 2009, traffic in the Bay Area cleared up. Commuting time got cut by half. Homes in many neighborhoods, apart from the very best school districts, became attainable. This has yet to happen. Unemployment is still quite low. The music is just starting.
The dominant narrative among investors and funds, at least in my domain (web3, tech investing) has been that "Fed will pivot soon, and the party will start anew". As long as that narrative remains strong, nobody will dump everything. New investment might stall, but no panic in the ranks. The real panic will set when the pivot does not happen. Or if it does happen and inflation comes roaring back, leading to a longer…
This happened in the late 70s/early 80s. Volcker made this mistake and had to jack rates a second time leading to a second recession deeper and longer than the first.
The current Fed has referred to this in recent speeches. I don’t think they’ll make the same mistake.