
Tech can't remember what to do in a down market - JumpCrisscross
https://www.axios.com/tech-cant-remember-what-to-do-in-a-down-market-ca1e8750-f9f9-4461-97c4-710b9de0e9cc.html
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bryanlarsen
In 2001 tech ran almost exclusively on recycled VC/IPO money. A company got VC
or IPO money, they spent money on ads, the ad company spent money on hardware,
the hardware company spent money on ads, and around in a circle it went. When
cheap capital disappeared, so did the whole industry.

In 2020 there's a lot more VC money, but there's also a lot more real money. A
recession isn't going to stop people from buying diapers on Amazon.

So I don't think the next crash will be as bad for tech as 2002 was. It is
going to be a lot worse than 2008, though.

~~~
zozbot234
Plot twist: Amazon was around in 2001, too. No diapers yet, but they were
selling plenty of books.

~~~
smhenderson
Entertainment, even books, are the first things people start to slash though
when their money gets tight. Diapers and other essentials on the other hand
not so much. People might go for cheaper options but if you have a baby you
need diapers!

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guiriduro
The question should really be: why should the availability of cheap capital
condition whether a tech business is viable or not?

That's not to say that coronavirus doesn't pose systemic risks by itself and
can have significant effects on consumer behaviour regardless of the VC rumour
mill and financial market sentiment; just that these are increasingly
irrelevant since bootstrapping, crowdsourcing and lean startup provide better
incubation for good tech business ideas than the more capital intensive
planning that went on in the dot com boom/bust.

~~~
JumpCrisscross
> _why should the availability of cheap capital condition whether a tech
> business is viable or not?_

Cost of capital, fundamentally, measures forward-looking risk. (Ideally,
unavoidable risk.) A business that would succeed in a stable environment may
not in a volatile one.

Set the rate too low and you waste resources. Set the rate too high and you
pass on good opportunities. Hence society's interest in measuring this metric
accurately.

From a microeconomic perspective, cutting lean when your competitors are
buying market share is risky if the next few years will run smoothly.
Likewise, burning cash while your competitors build balance sheet is risky if
a recession is around the corner.

~~~
guiriduro
> A business that would succeed in a stable environment may not in a volatile
> one.

True, but specifically a good tech business would be one that ought to at
least survive in a volatile and capital-starved environment. Treating "good"
here in a self-confirmatory sense, which I accept is something of a True
Scotsman argument.

~~~
JumpCrisscross
> _a good tech business would be one that ought to at least survive in a
> volatile and capital-starved environment_

Good businesses should be able to survive a normal recession. Start-ups aren't
good businesses.

They may _aim_ to become good businesses. But if their first customer cohorts
go bust, or their bank goes under in a country without deposit insurance, or
their employees--who have to be on site to do their job--can't get to work
because of transit strikes, _et cetera_ , _et cetera_ , they're not going to
make it. Irrespective of how prudent they were.

~~~
fjp
But if they offer an equal or superior product at lower price, they would have
a fundamental advantage: people/businesses would be more incentivized to
switch to them when money gets tight, when previously it may not have been a
priority.

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ttul
The reason the 2008 recession didn’t impact Silicon Valley very much is
because tech was still struggling to come back from the devastation of the dot
com bust. In 2002, I recall there being 50% office vacancy in the valley in
some areas. It was scorched earth.

~~~
PopeDotNinja
As a former tech recruiter, I can say that March of 2009 was not a pretty time
to be looking for work. A lot of people got the axe, and developer supply
outstripped demand for a time. I remember posting one ad on craigslist for a
Sr. Software Engineer for a seed stage startup in Mountain View and getting 66
applications within a very short period of time, and the candidates were
mostly pretty good. Getting that many qualified candidates was very unusual at
that time.

~~~
LarryDarrell
I have my own anecdotes, but maybe some one here knows more...

Is the tech stack in Silicon Valley that's used by the most recession
vulnerable companies wildly different from what "boring" companies are using?

I see C#/Java and SQL used a lot at companies that are not trying to change
the world. Is there going to be a great big skills mismatch?

~~~
PopeDotNinja
I'm not sure. I would expect that mature, older companies would be using less
exotic tech on average: PHP, Java, C#, etc. Newer companies would be more
likely to be using something more niche I think. It newer companies are more
volatile, it may be that when funding dries up, the new company folks may have
less tech overlap with the mature, older companies. I suspect this would have
been more of an issue in 2009 and 2020. It felt like it was much more common
to ask developers to be full stack specialists a decade ago. These days most
jobs seems to expect one to know multiple languages regardless of what you're
doing. Keep in mind 10 years ago I was a recruiter, and now I'm a developer,
so my perspective then & now use different lenses.

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rchaud
Only the FAANG companies and some enterprise-focused businesses (Salesforce),
all formed > 15 years ago, can be said to be 'booming'. The rest can't
feasibly be profitable without ducking municipal and labor regulations (Uber,
Airbnb), or requiring eye-watering sums of money to establish the monopoly
position they need to take themselves into the the black (WeWork, Uber).

Is it still a 'boom' if valuations can collapse on the opinions of a single
large investor (Softbank)? Or if Uber walks back its glittering visions of
self-driving cars to focus on e-scooters and food delivery?

~~~
Ididntdothis
It’s really weird that tech is in a state where almost all of the stars even
after being 10 or more years old still don’t have the slightest idea how they
could make money. Things won’t be pretty once the investor money stops
flowing.

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LarryDarrell
B2C idea that might be robust: Subscription based flu mask delivery service.

~~~
BubRoss
Or a crypto currency backed by tamiflu.

~~~
kgwgk
There is one “backed” by the virus, whatever that may mean...

[https://blockchain.news/analysis/the-birth-of-the-
coronaviru...](https://blockchain.news/analysis/the-birth-of-the-coronavirus-
backed-coronacoin-amid-quarantining-banknotes-in-china)

------
jameslk
> Advertising and media: Marketing budgets are easy to cut fast, and media
> outfits dependent on those budgets feel the pain the fastest.

If a recession materializes, it will be interesting to see what happens to the
advertising revenue-reliant companies stock prices of Google, Facebook and to
some degree Amazon. It will also be interesting to see what happens to the
home prices in the Bay Area if salaries paid in equity in these companies are
no longer going up, but going down instead.

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yellow_lead
The implication that this is a down market after a few days of down movement
is laughable. Could be a self fulfilling prophecy if the media keeps fear
mongering this way.

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thrower123
Is it a down market? The bounce is already starting after two days of panic.

~~~
untog
The only true answer is “TBD”. By all indicators the coronavirus has the
potential to have a huge impact on people’s lives and the ability for markets
to function, but it’s not yet clear how much of that potential will become
reality.

~~~
gnulinux
This is just the beginning. Some models estimate the climax of the pandemic
will be April.

------
hylaride
Articles like this make me think. There is most certainly a generation of tech
workers that have not truly experienced a recession or bad times.

I came of age in 2000, but missed the worst of that crash as I was in school.
When I graduated in 2004 things were starting to pick up where I lived
(Toronto), but it was nowhere near like it has been for the past 5 years where
simply updating your LinkedIn profile would cause a flurry of recruiters to
inundate your inbox. The 2008 recession both didn't hammer Canada as bad
(especially outside of traditional manufacturing) nor tech really much at all.

My generation of tech workers have simply not known hard times. Many of my
college colleagues are obviously not saving and drive $90K Mercedes and live
in very nice houses that would stretch tech salaries (Toronto is a bit insane
with housing prices right now).

I have no idea if coronavirus, Trump, or what will cause the next recession
nor do I know how bad it will be, but if it does impact tech workers, a lot of
them are going to be unprepared, I think.

~~~
linuxftw
> My generation of tech workers have simply not known hard times. Many of my
> college colleagues are obviously not saving and drive $90K Mercedes and live
> in very nice houses that would stretch tech salaries (Toronto is a bit
> insane with housing prices right now).

Why should they save and live frugally? Canada is very socialist, their
quality of life will be maintained by the government when things go south. The
point of being rich is to live like a rock star. If you can already live like
a rock star, you can skip the getting rich part.

But let's say they do save money. It's just going to get eaten away by
inflation. If they buy property, it's going to get taxed.

You can either live now, or save lots of money and so stuff in old age. Of
course, you'll never get to have the time back, and I'd much rather experience
life in my 20's and 30's than in my 60's and 70's.

~~~
trengorilla
Ahh, to be a teenager again.

~~~
emerongi
I think people just live differently and have different values. Nothing wrong
with it, really.

~~~
bpt3
There is something very wrong with this mindset, as it causes all sorts of
negative externalities that impact those of us without that mindset.

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bedhead
Folks, it's the flu. We don't have a cure for the flu either. You catch it,
you feel awful, your immune system fights it, after a few days the virus runs
its course, and then you're fine again. The people who are die from the flu
are some combination of old and already infirmed. Same as coronavirus. And
every year something like 10-15k people die from the flu but we manage to keep
our cool. The disconnect here is really wide. I'm not worried about the
coronavirus, I'm worried about all the alarmism and the overreaction it might
cause.

~~~
samvher
18% of cases end up serious or critical. Out of cases with an outcome, for 8%
the outcome is death. [1] It's not just the flue. I agree that there should be
no overreaction and that that part might be more worrying but it's pretty
serious.

[1]
[https://www.worldometers.info/coronavirus/](https://www.worldometers.info/coronavirus/)

~~~
learc83
18% of cases, where the infected person both sought treatment and was actually
tested. It is _very_ likely that there are far more asymptomatic and mildly
symptomatic people out there.

The 18% number is mostly useless because it's a textbook example of selection
bias.

~~~
JumpCrisscross
> _where the infected person both sought treatment and was successfully
> tested_

Isn't the same bias present in ILI (influenza-like illness) statistics?

~~~
learc83
We've had time to do large population studies and build models to somewhat
correct for this. Most of the death rates you're seeing throw around for
COVID-19 are just naive number_dead / confirmed cases.

