[gretch]

Federal reserve interest rates.

When interest rates are low, money flows more freely. When interests rates are up, it's harder to lend/borrow, money flows less freely, and the economy cinches up as a whole. This is a major simplification to a very complex system, but it happens because e.g. as someone with money, you'd rather just put it into a government bond that will for sure pay you 4%, rather than chasing speculative investments. When that same bond is only paying out 1%, you might be more inclined to put your money in a start up and see what happens.

[mym1990]

If this is the case, why are layoffs currently mostly in the tech sector and not everywhere? Unemployment budged .2% from Jan - Feb but this is hardly indicative of anything.

[tobyjsullivan]

Is the commonality tech companies or high-growth companies?

(Virtually all high-growth companies are tech companies but I don’t think the inverse is true - unless that’s how we define “tech” now which is plausible.)

High-growth companies include both those that plan to grow fast and those that are growing fast. The general theory is nobody really knows how big such a company can grow. (eg, Amazon circa 2006 is dominating e-commerce. Can it get any bigger? Spoiler: yes it can.)

So these companies offer an opportunity: invest money to build more teams doing effectively random trials and see what sticks.

This is the investment opportunity the parent comment described and that’s the calculus that’s changed.

What I find interesting is the same trade-off applies to both profitable and unprofitable companies. Unprofitable startups are deciding where to burn their runway, weighing against the projected cost of raising on more. Profitable companies are deciding where to re-invest profits or whether to pay dividends to shareholders.

[pyuser583]

A lot of tech companies have been pretending to be high growth startups, but are really utilities.

[gretch]

Because tech ballooned the most during the covid reaction.

e.g. META has roughly doubled in headcount since 2020. Now it is laying off a fraction of that new headcount.

I'm sure there's a similar stat for Amazon/Twitch.

And think about how much stuff people were buying on Amazon when everything was closed. Think about how many hours of twitch were watched when it was illegal to do anything else.

You can't look at e.g. Walmart and say "hey they doubled in 2 years". Thus, no lay offs needed

[mym1990]

Everyone responded with essentially the same thing: that tech over hired, which is not something I am disputing. But parent comment mentioned the economy cinching up as a whole when interest rates rise, but we are not seeing that(yet).

[coredog64]

The tech sector is doubly impacted. First, a lot of these ZIRP jobs are in technology as that’s where the returns are. Second, there’s another class of tech jobs that are themselves dependent on tech companies (Cloud providers, managed SaaS products, etc.)

[rossdavidh]

1) more excessive hiring during 2020-2021-early 2022 in tech than in most sectors 2) some sectors such as domestic manufacturing are ramping up capacity, thus need more people than they expected to, whereas tech companies that thought pandemic-induced changes would stick need fewer people than they expected to 3) lots of excess liquidity went to investors who liked to invest in tech, hoping to get the next FB/Apple/etc., thus it is more of a change for them when that stops happening 4) let's face it more bogus business ideas in the last 10 years were tech than anything else; when interest rates go up is when they face a reality check

[yieldcrv]

because tech was was the biggest beneficiary of monetary expansion, at least by percentage gains in a sector, and would have to be a close second in absolute dollar amounts if not first.

basically TINA principle: there is no alternative, which means that an infinite amount of money was created for a finite amount of assets, people that are paranoid about beating a couple months of high inflation didn’t know where to put the money

established industries with clear revenue trends already had stretched and unattractive valuations

real estate already went to unconscionable price levels

government bonds at record prices and lowest yields, in Europe people would accept negative interest rates literally willing to pay the government instead of investing in unproven businesses

but between the unproven entrepreneur there was still lots of big tech that was the recipient of cheap money and high valuations.

now people are rebalancing. new money isn't being created and existing money is purchasing treasuries at 5%

[Aperocky]

Not just your money, renting money is so much cheaper when you only need to pay 0.25% per year against the firehose known as the Fed.

[pcurve]

How does the fed rates impact game streaming revenue? Were they not profitable?

[sokoloff]

Same way Google and Facebook are hit by the reduction in advertising spend. Twitch is, from a business perspective, an advertising company. The streaming is a means to that end, just as search or social media is for Google and Facebook.

[Ekaros]

And their other side is discretionary spending. Probably of the lowest order as many are likely to pick other discretionary things over donations to streamers. How many will pick donating to streamer instead buying maybe a cheeseburger or some other treat...

[gruez]

businesses feeling pinched and cut down on ad spending.