[colinmorelli]

Because you are fundamentally misunderstanding how interest rates impact companies. No, these companies are not borrowing money to fund salaries.

When interest rates drop, safe investments (such as bonds), become less attractive. The yield on those investments is not high. This means that excess capital gets reallocated towards riskier bets (such as stocks, or venture investing) to try to yield a return that way. More speculative bets happen as a result of free flowing cash to high growth organizations. Companies are willing to lose money in exchange for market share because investors are willing to bet on companies that are losing money on the off-chance that one of them yields a 100x return. This game becomes more attractive when other means of growing investments are harder to come by.

Now, interest rates are higher. I can throw money into a savings account at 4.5% APY. A potential 7% return by throwing it all into high growth stocks (which also carry significant downside risk) is comparatively less attractive. I'm now much more incentivized to invest in companies that are stable and carry less downside risk. Those companies are the ones that are spending more responsibly and generating positive cash flow.

[kevviiinn]

I'm still waiting for some sort of reference about interest rates directly impacting layoff decisions. You can make claims as much as you want but that isn't evidence that you're correct about interest rates being the cause of layoffs

[colinmorelli]

Because, as I just indicated, it's not the interest rates directly. It's indirect. If you don't believe that high interest rates can have a suppressive effect on higher risk investments, then you're just arguing with clear verifiable macroeconomic fact.

If you do understand that higher interest rates suppress higher risk investments, then there's a direct line between that and slowing VC funding and depressed investor sentiment, which is ultimately what's feeding these layoffs.

The indirect link is not always true. Interest rates can be risen in a bull market. When done slowly, this effect is less pronounced. In this case, we massively shifted rates in a short amount of time during a period of high inflation.

[kevviiinn]

I didn't realize EA was getting VC funding. Which round are they in?

You say all of this about economics like the field isn't one of the worst verified "scientific" fields out there

[colinmorelli]

“Depressed investor sentiment” applies to publicly traded companies as well. Profitability is now the focus. Speculative bets are not.

Public markets operate on opinions and feelings more than science. That sentiment of the markets is not high right now is clear. Look at every publicly traded tech company’s performance in the last 12 months.

[kevviiinn]

Science is the observation and analysis of a system, not something to "operate on"

That's nonsense. Do you understand what the scientific method is?

https://en.m.wikipedia.org/wiki/Scientific_method

[colinmorelli]

This level of pedantry is not conducive to healthy conversation. It’s quite clear from my post what I meant: that there are not necessarily rules to how markets react. Instead, events occur, individuals form opinions on what those events mean for the future of their assets, and make bets against those predictions. This means that fears of further increasing rates driving reduced consumer purchasing can cause a suppression in prices. In fact, even the fear that others might have that fear, whether or not you believe it yourself, can drive action. The GME squeeze was a great example of this.

I believe you also understood precisely what I meant, and are trying to form a gotcha.

In any case, I’ve lost the plot on your point here. That interest rates impact spending and corporate decisions is verifiable fact, using the ever-elusive scientific method which you’ve so helpfully educated me about. If you truly believe in this method, I’d suggest you exercise it and watch how interest rate changes shift economies and markets every time they happen in history. It just so happens to be precisely the exact reason why the Fed moves them in the first place. It was widely discussed when rates began rising that the impact would likely be an increase in unemployment. The Fed specifically addressed this point, and stated that while it was not an explicit goal to increase it in this case, it may happen.