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Debt is coming to the tech industry

alexdanco.com

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Re: Debt is coming to the tech industry

#191

Post by citrablue »

ghastmaster wrote: post #169
katzgrau wrote: post #18

Earlier quoted context omitted.

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…

Time and date may not be predictable, but the simple math behind the modern monetary system of central banks is quite clear. Print or die. Inflation or recession. When the F.R.B. of the USA stops printing the market crashes. You can watch it happen if you are watching what they do. Since they are now wholly locked in a corner they only have the two options. Inflation or depression. Soon they will purchase stocks outr…

If time and date are unpredictable, what's the use? Suppose you switch to conservative investments now -- say, bonds. You're going to be hit less hard by the recession, but you also will have missed out on gains.

So, unless you believe you can time the market, it doesn't appear like there is much to do except to make sure you have a rainy day fund.

All my other money goes into the system.

Re: Debt is coming to the tech industry

#192

Post by citrablue »

ghastmaster wrote: post #170
kevingadd wrote: post #8

Earlier quoted context omitted.

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…

Look up the word "savings". It is possible to rent a cheap apartment, buy a used car, and wait until you can afford better things. Obviously some people are going to run into financial difficulties if they have unexpected extraordinary bills. The vast majority of things in life are however, expected. Nothing is new under the sun. The overwhelming debt of the world increases costs. Additionally, debt temporarily trick…

Of course, you miss out on real estate for a number of years while you do this. Time in market and leverage are important.

Re: Debt is coming to the tech industry

#193

Post by aussiegreenie »

fragmede wrote: post #174
csomar wrote: post #154

Earlier quoted context omitted.

> Not all companies want to be yoked with the burden of continuous economic growth, always beholden to the irksome shareholder. Then I don't think this whole thing is about you (that is the SM enterprise). Although, you can make a point that the commoditization of IT (like Amazon or more standard ERP systems) can make lots of these small companies obsolete and unable to compete. (you practically can't start a mobile…

> you practically can't start a mobile phone company that makes its phone hardware and software today and expect to make enough to keep the lights on That's fascinating. I agree with you, but I'm wondering - how would the world have to change to make that possible? Or maybe, what's possible in today's world? Starting an MVNO (aka pay T-mobile/others to use their towers) is capital intensive, but still far cheaper tha…

It could / would be done in Shenzen for a few thousand dollars.

Re: Debt is coming to the tech industry

#194

Post by happyrock »

ThrowAwayGlen wrote: post #153
gerdesj wrote: post #148

> Debt is going to finally come to the tech industry Bear in mind that the tech industry exists in all countries with a population greater than 10. Also consider that this: > When people in tech want to sound smart, one name you can drop is Carlota Perez. ... is probably nonsense or at best pointing out another point of view. Not all companies work the way you think they do. Not all companies want to be yoked with th…

Thank you. I read this article twice, thought I was completely missing something. No, it's a pretty obvious statement wrapped around pseudo-intellectual ideas of Carlota Perez and presented in an Emperor's New Clothes style where if you disagree with it you're an idiot ("Maybe not all investors get this, but the smart ones do"). Alex was previously at Social Capital, a fund with amazing PR and huge egos combined with…

> awful morals

Care to elaborate?

Re: Debt is coming to the tech industry

#195

Post by eru »

pmart123 wrote: post #190
eru wrote: post #163

Earlier quoted context omitted.

The article seemed pretty straightforward. Perhaps a bit too excited. But the fundamental thesis that the predominance of equity financing in tech is an aberration and will likely come to an end, seems rather plausible.

This is not new though. Robert Smith pioneered the idea that while software companies didn’t have tangible assets, they had stable cash flows. In the public markets, data providers like IHS Markit, MSCI, etc. have used some debt to rise the returns on equity. At the end of the day, it’s more about where you define “tech” as cutting edge, or as a software or data business.

Yes.

And the elephant in the room is differing tax treatments for returns on equity vs returns on fixed income. Most jurisdiction allow you to pay interest with pre-tax income but profits are taxed and then used to pay dividends or buy back stock.

(Which is pretty silly and self-contradicting, if you combine it with regulation _against_ leverage. Government, please make up your mind which capital structure if any you want to prefer.)

Re: Debt is coming to the tech industry

#197

Post by ec109685 »

nemothekid wrote: post #188
ec109685 wrote: post #173

Earlier quoted context omitted.

You need the money to scale sales operations to the level of revenue.

Right, but if you were profitable and, I’m assuming the reason you needed the money was sound; you’d have to be incredibly unlucky if the only outside capital you could raise was a down round. You usually only hear downrounds from companies that are struggling to keep the lights on

Selling equity dilutes, whether it is an up or down round. That sold equity is potential appreciation that the firm selling won’t participate in.

With debt, you promise a fixed rate of return instead, so the benefits are capped for the purchaser.

Re: Debt is coming to the tech industry

#198

Post by ghastmaster »

kevingadd wrote: post #184
ghastmaster wrote: post #170

Earlier quoted context omitted.

Look up the word "savings". It is possible to rent a cheap apartment, buy a used car, and wait until you can afford better things. Obviously some people are going to run into financial difficulties if they have unexpected extraordinary bills. The vast majority of things in life are however, expected. Nothing is new under the sun. The overwhelming debt of the world increases costs. Additionally, debt temporarily trick…

How do I rent a cheap apartment and buy a used car without a job? The job I need a car to drive to? What am I supposed to save, exactly? The allowance I get from my presumably rich parents? In my case, my first job (at 14) required getting a ride to from a coworker with a car. Getting to university for my job working in the computer lab + my courses required either a car ride from a neighbor or 3 hours on the bus. Af…

>How do I rent a cheap apartment and buy a used car >without a job?...

You answered your question with the second paragraph...?

>In my case, my first job (at 14) required getting a ride to from a coworker with a car...

You chose to go to university in lieu of financial stability. That is how savings is not acquired. Save the money, then go to school. Buy things you can afford, including school.

>Money doesn't come out of thin air. Not everyone starts their working life with access to enough money to just buy a car (even used!) and rent an apartment.

Babies are born without jobs or means to clothe and shelter themselves, but we have what are called families, communities, and society. Each melds together to form a fabric of civilization that provides in one way or another the necessities of life. Start working as young as possible, save up, spend thrift.

Re: Debt is coming to the tech industry

#199

Post by ghastmaster »

citrablue wrote: post #191
ghastmaster wrote: post #169

Earlier quoted context omitted.

Time and date may not be predictable, but the simple math behind the modern monetary system of central banks is quite clear. Print or die. Inflation or recession. When the F.R.B. of the USA stops printing the market crashes. You can watch it happen if you are watching what they do. Since they are now wholly locked in a corner they only have the two options. Inflation or depression. Soon they will purchase stocks outr…

If time and date are unpredictable, what's the use? Suppose you switch to conservative investments now -- say, bonds. You're going to be hit less hard by the recession, but you also will have missed out on gains. So, unless you believe you can time the market, it doesn't appear like there is much to do except to make sure you have a rainy day fund. All my other money goes into the system.

Your sentiments contribute to the bubble. It is possible to live without forking your money over to the stock market. It is harder to grow great wealth, but that is phony wealth at the moment or soon enough. If everyone invested in themselves, demanded a stable gold or gold backed currency, and eschewed the bubble gains in the markets, the gains would not be there and the manipulation would not be possible. That would reflect the reality of our current situation. Times will get tougher the longer we wait to see reality.

Re: Debt is coming to the tech industry

#200

Post by ghastmaster »

jariel wrote: post #38
ghastmaster wrote: post #2

Debt 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.

The end goal is the same. The boat. I see no difference.
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