How tech’s defiance of economic gravity came to an abrupt end • Hacker News Board

Re: How tech’s defiance of economic gravity came to an abrupt end

#121

Post by mjr00 » Mon, Dec 26, 2022, 4:38 PM UTC

birdymcbird wrote: post #106

screye wrote: post #86

I believe the doom-n-gloom around all of tech is rather overblown. There are sectors of tech that will absolutely struggle. Gig-economy companies won't ever meet their valuation. Negative PE ratio startups are realizing that hyper-scaling is not as infinite as they believed, and that means their earnings might never catch up to their price. Social media companies are finally facing stiff non-American competition (Tik…

Overly rosy take on big tech. I’ll use Google as example. Their execs are in full panic right now over OpenGPT. What was last major innovation at Google.. chrome? 20% of company drives profits while 80% is a decorated R&D lab chock full of benefits, upset about cutbacks in their free oatmilk lattes, even though they’re not coming to office anyway. these guys will double their attrition targets if not have full blown…

> What was last major innovation at Google.. chrome? 20% of company drives profits while 80% is a decorated R&D lab chock full of benefits, upset about cutbacks in their free oatmilk lattes, even though they’re not coming to office anyway.

This has been a major part of the FAANG strategy: crush competition by giving people who might work for or become potential competitors an offer they can't refuse. 80% of the company ostensibly produces minimal value, but the real reason you're giving them huge compensation and oat milk lattes is to make sure they don't work for, or found, a Google competitor at some point in the future.

This has led to a perpetual feedback loop: FAANG company gives their engineers big stock grants, which ensures no competition in their markets, which increases the value of their stock due to no competition, which allows them to hire more engineers with big stock grants, etc...

We're suddenly entering an era where FAANG stocks aren't continually moving upward. This is largely unprecedented territory; these companies have never experienced an extended downturn since this became the industry hiring strategy.

If the recession continues through 2023, I would not be surprised to see these companies abandon this strategy and only retain necessary talent. Would not be surprised to see 50%, even 75% staff cuts at Goog and Meta specifically.

Re: How tech’s defiance of economic gravity came to an abrupt end

#122

Post by Kiro » Mon, Dec 26, 2022, 4:43 PM UTC

pigsty wrote: post #40

georgebarnett wrote: post #27

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.

The fact everything uses software doesn’t mean Slack, a generic chat platform with dozens of absolutely identical products, being acquired for 27.7 billion dollars ever made sense. That generic software company was valued higher than entire industries that supply components that all hardware depends on. Tech isn’t collapsing. But valuations were and continue to be fuckin nuts for a lot of companies and are coming dow…

Out of all companies you choose Slack, the only one that I actually think deserves an insane valuation. So many products that are just Slack integrations and that companies fully rely on. Have you worked at a big company and seen what happens when Slack goes down?

Re: How tech’s defiance of economic gravity came to an abrupt end

#123

Post by lumb63 » Mon, Dec 26, 2022, 4:44 PM UTC

screye wrote: post #86

I believe the doom-n-gloom around all of tech is rather overblown. There are sectors of tech that will absolutely struggle. Gig-economy companies won't ever meet their valuation. Negative PE ratio startups are realizing that hyper-scaling is not as infinite as they believed, and that means their earnings might never catch up to their price. Social media companies are finally facing stiff non-American competition (Tik…

I agree that those companies are in “a healthy position”, but there are massive risks to their operations:

AMZN: IIRC, AWS is the majority of their profit. This is web infrastructure; all the negative PE ratio startups and gig economy companies going under will hurt AWS. They have similar risks to GOOG (see below).

MSFT: Does anyone have a clue how MSFT is making money? The last few Windows updates have been free, and I would guess they are buttressed by Office 365. How they convince IT departments to adopt this buggy, slow, expensive software, is beyond my comprehension. What’s the sales pitch? “Hey, have you ever wished you could pay every month for Office? It will have similar functionality to Office from 20 years ago, and you can pay us every single month!”

On second thought, their Azure services probably have similar profitability and risks to AWS; maybe that’s what is keeping them afloat.

AAPL: At least Apple produced physical products, but we have seen their products, e.g the iPhone 14, hurt by supply chain issues and lower demand in the face of a recision and high inflation. They’re not innovating; the iPhone 14 was mocked for being the same as the previous model. If frugal consumers go by the wayside, who is driving profits? The (now-laid-off) tech employees who make enough to afford their luxury products? Maybe some, but less than at present.

Apple has made efforts to grow their SaaS revenue the last few years and that is prone to risks from lower consumer demand. A budget-minded consumer will not be paying for all the Apple services when they are hurt by layoffs.

GOOG: Ah, my favorite. Let’s set aside the legion of small companies they bought to fuel growth and decrease competition, e.g. Nest, Fitbit, Waze, YouTube, etc. Corporate Alphabet is producing the majority of profit by ad revenue. What happens when demand for advertising decreases due to lower consumer demand? They’re also trying to enter the cloud space, but are far behind AWS and Azure.

There are also broad risks facing tech company. The main ones which come to mind are data privacy and other regulations, anti-trust actions.

If future events do not favor big tech, those companies could have a long way to fall.

Re: How tech’s defiance of economic gravity came to an abrupt end

#124

Post by bee_rider » Mon, Dec 26, 2022, 5:37 PM UTC

cjbgkagh wrote: post #98

bee_rider wrote: post #91

Earlier quoted context omitted.

In order to negotiate, both parties need to be able to offer concessions. What concessions could Russia possibly offer the US, related to the Ukraine situation, that the US would be motivated to take? Our people aren’t dying and our territory isn’t threatened. Because we’re, as you pointed out, not paying the price for the conflict, we don’t have any incentive to try and stop it… we can’t negotiate in good faith beca…

The US is spending a great deal of money, those are chips, and not having to spend money is a concession. Your framing of the situation makes little sense to me and appears to be angling towards the conclusion of unlimited support for Ukraine until their 'inevitable' victory. I'm less optimistic about Russia collapsing and also not optimistic about America's continued support for Ukraine, they wouldn't be the first c…

There definitely is a limit to US support for Ukraine, but currently Ukraine’s only hope is that Russia’s willingness to fight will run out before either US support or Ukrainian willingness to fight does. So, hopefully we’ve had serious discussions behind closed doors with Ukraine about how far we’re willing to go. But signaling that publicly would weaken Ukraine’s position (by giving Russia a light at the end of the tunnel).

My understanding of the situation is that realistically the US has a lot of latitude to influence Ukraine, but should not go behind their back and negotiate with Russia. Any diplomacy that routes around Ukraine means their priorities will be given less emphasis. Since they are the ones actually paying in blood and human suffering, we owe them deference when it comes to when and how to negotiate. We’re spending money but it is the sort of spending we can handle for a while.

Re: How tech’s defiance of economic gravity came to an abrupt end

#125

Post by Tanoc » Mon, Dec 26, 2022, 5:38 PM UTC

lumb63 wrote: post #123

screye wrote: post #86

I believe the doom-n-gloom around all of tech is rather overblown. There are sectors of tech that will absolutely struggle. Gig-economy companies won't ever meet their valuation. Negative PE ratio startups are realizing that hyper-scaling is not as infinite as they believed, and that means their earnings might never catch up to their price. Social media companies are finally facing stiff non-American competition (Tik…

I agree that those companies are in “a healthy position”, but there are massive risks to their operations: AMZN: IIRC, AWS is the majority of their profit. This is web infrastructure; all the negative PE ratio startups and gig economy companies going under will hurt AWS. They have similar risks to GOOG (see below). MSFT: Does anyone have a clue how MSFT is making money? The last few Windows updates have been free, an…

As far as I know for Microsoft, a large chunk of their revenue comes from the licensing for Visual Studio, the Azure service and the fees required for certification, and surprisingly the Xbox division. Corporate entities buying licenses for Visual Studio would likely be tens of thousands of dollars each since the Enterprise level license starts a little under two grand. And Xbox with it's recent push into mobile style games likely makes Microsoft unimaginable amounts of money. Roblox in 2021 is estimated to have made $1.9b based on it's microtransaction model, and Microsoft gets a cut of that. The FIFA games generate an average of $1.5b every year. With the recent acquisition of Activision-Blizzard and thus mobile giants like King Games, it's likely that Microsoft could rake in $30b a year from the Xbox division, an increase of seven or eight billion. And with the autonomy model of the owner, publisher, developer ladder Microsoft likely has to do little to no investment as the parent company in order to receive that income.

Re: How tech’s defiance of economic gravity came to an abrupt end

#126

Post by scarface74 » Mon, Dec 26, 2022, 5:41 PM UTC

svnt wrote: post #104

scarface74 wrote: post #78

Earlier quoted context omitted.

Everyone says this narrative. But 10 years ago. - Google was the most popular search engine. Had a dominant position in adTech and YouTube was popular - Apple became the most valuable company in the US and the iPhone was sucking up most industry profits. - Amazon was by far the most dominant electric retailer and AWS was taking off (disclaimer: my current employer) - Microsoft had been the dominant operating system f…

Disruption can happen but it is the exception that feeds the narrative. In order for these acquisitions to have high valuations, big companies must fear being replaced. It is in VC’s interest to stoke that fear. They do this by the threat of replacement at least as much as through funding for actual replacement. VCs don’t have to care whether disruption happens, but they do have to care about their IRR, and will say…

Most of the acquisitions that happen aren’t because of fear of “disruption” which is a very overused and misunderstood term - especially when defined like Clayton Christensen.

They are bought to be an accretive to an existing business or the acquiring company thinks they have scale advantage to multiply the value of the acquisition.

Another way to put it, that these are “sustaining innovations”.

Re: How tech’s defiance of economic gravity came to an abrupt end

#127

Post by ROTMetro » Mon, Dec 26, 2022, 5:55 PM UTC

cjbgkagh wrote: post #98

bee_rider wrote: post #91

Earlier quoted context omitted.

In order to negotiate, both parties need to be able to offer concessions. What concessions could Russia possibly offer the US, related to the Ukraine situation, that the US would be motivated to take? Our people aren’t dying and our territory isn’t threatened. Because we’re, as you pointed out, not paying the price for the conflict, we don’t have any incentive to try and stop it… we can’t negotiate in good faith beca…

The US is spending a great deal of money, those are chips, and not having to spend money is a concession. Your framing of the situation makes little sense to me and appears to be angling towards the conclusion of unlimited support for Ukraine until their 'inevitable' victory. I'm less optimistic about Russia collapsing and also not optimistic about America's continued support for Ukraine, they wouldn't be the first c…

Of the USAs 700 Billion yearly defense budget, we spend around 150 billion to contain Russia, and we've spent that or more since the 1950s (so over 10 trillion dollars). We aren't spending new funds to support Ukraine. Most of the 'spend' so far has been moving numbers from under 'In XYZ DoD warehouse' to 'Transfered to Ukraine' in an accounting spreadsheet. When we are sending Ukraine more than 150 billion a year and exceeding what we typically spent on containing Russia then America might START to think about the costs of this war. Maybe we should be scared the we no longer have a surplus of Javelins in case we need them to blow up Russian tanks, because they have been used to...blow up Russian tanks...but that's a hard fear to sell.

Re: How tech’s defiance of economic gravity came to an abrupt end

#128

Post by throwaway_75369 » Mon, Dec 26, 2022, 5:56 PM UTC

birdymcbird wrote: post #103

bee_rider wrote: post #91

Earlier quoted context omitted.

In order to negotiate, both parties need to be able to offer concessions. What concessions could Russia possibly offer the US, related to the Ukraine situation, that the US would be motivated to take? Our people aren’t dying and our territory isn’t threatened. Because we’re, as you pointed out, not paying the price for the conflict, we don’t have any incentive to try and stop it… we can’t negotiate in good faith beca…

> we don’t have any incentive to try and stop it Inaccurate. Russia is getting backed into a corner, where they believe the wests goal has been to destabilize and break Russia all along. The more desserts they get more likely they are to use a thermonuclear weapon in Ukraine. The increasing probability of nuclear war should be sufficient motivation for america to broker a peace deal. Instead we’re sending more weapon…

> The more desserts they get more likely they are to use a thermonuclear weapon in Ukraine.

I'm still confused when people assert there's any chance Putin will use a nuke in Ukraine.

I'm far from an expert on Russian politics, so I imagine I'm missing something in terms of reputation or intimidation or face saving, but I always figured that Russia wanted to own/control Ukraine, since it's a fertile, resource-rich part of the former USSR (it's a huge grain exporter; consider all the famine warnings since the war began?)

Why would they choose to destroy this thing they want to control? Using a thermonuclear weapon specifically seems really counter-productive. If I stretch I could imagine a future where they deploy some tiny tactical nuke for intimidation/escalation, but same logic applies, I don't think they want to destroy the thing they're trying to conquer, so they'd want to limit collateral damage.

Re: How tech’s defiance of economic gravity came to an abrupt end

#129

Post by birdymcbird » Mon, Dec 26, 2022, 6:04 PM UTC

danaris wrote: post #113

cjbgkagh wrote: post #61

Earlier quoted context omitted.

Putin was always willing to negotiate and there have been attempts at negotiation before and during the conflict, what matters are the pre-conditions to negotiations. If the pre-conditions are too strong then in effect it blocks negotiations and it means the overtures to negotiate are simply done for political reasons. We’re being told that only now Putin is ready to negotiate so I’m assuming that means the pre-condi…

Putin's version of "negotiations" has always been "give me what I want, and I might not kill thousands of you." If Ukraine is "pressing its advantage", it's to take back the territory that Russia has illegally attempted to annex. Please stop spreading Russian propaganda.

Which part of ops statement is Russian propaganda?

At the onset of the current war, Russia and Ukraine met in Turkey immediately to begin diplomatic talks. You do realize we intervened and told Ukraine to walk away?

This whole narrative that Putin is irrational, that Russia is just plain evil, and any contrary perspective is “Russian propaganda” reminds me of 2003 when questioning the Iraq war effort would get you labeled as a terrorists sympathizer.

This war is far more nuanced than the US government-backed narrative being pushed in the mainstream media. That itself is propaganda.

And what’s truly embarrassing is people like yourself actively try to shut down any discussion or contrarian views. If it doesn’t conform to your view of the world, it’s propaganda.

Re: How tech’s defiance of economic gravity came to an abrupt end

#130

Post by cjbgkagh » Mon, Dec 26, 2022, 6:05 PM UTC

bee_rider wrote: post #124

cjbgkagh wrote: post #98

Earlier quoted context omitted.

The US is spending a great deal of money, those are chips, and not having to spend money is a concession. Your framing of the situation makes little sense to me and appears to be angling towards the conclusion of unlimited support for Ukraine until their 'inevitable' victory. I'm less optimistic about Russia collapsing and also not optimistic about America's continued support for Ukraine, they wouldn't be the first c…

There definitely is a limit to US support for Ukraine, but currently Ukraine’s only hope is that Russia’s willingness to fight will run out before either US support or Ukrainian willingness to fight does. So, hopefully we’ve had serious discussions behind closed doors with Ukraine about how far we’re willing to go. But signaling that publicly would weaken Ukraine’s position (by giving Russia a light at the end of the…

As my quote points out, the US has a long history of abandoning ‘friends’ after they’ve outlived their usefulness. I’d be surprised if Ukraine is any different.