The tech sector teardown is more catharsis than crisis

https://www.ft.com/content/6a137523-26d5-4285-8b98-c273f1fb6d1a

by pseudolus • 4 years ago

134 246 4 years ago

ft.com

carride• 4 years ago

Here is the republish without the paywall https://arstechnica.com/information-technology/2022/05/the-t...

austinicholas• 4 years ago

Thanks!

forgotmypw17• 4 years ago

https://archive.ph/TeJGf

JCM92• 4 years ago

There’s a whole generation of tech employees that have never seen a down market. All indications are that these folks are woefully unaware of what’s on the horizon now.

It’s going to be all about cash flow. If you’re burning cash and not making much of it from operations then it’s going to be a bumpy road ahead. Buckle up.

stackbutterflow• 4 years ago

I've heard the argument that the dotcom crash was so catastrophic because the Internet as a market wasn't proven at that point. That'd mean a dotcom like crisis is the lowest point this industry can reach. Which in some way is reassuring.

JCM92• 4 years ago

That was a factor, but more fundamentally it was companies with wild valuations and no realistic prospects of becoming a profitable and self-sustaining business. There is some of that out there right now. Market corrections exist in part to flush those companies out of the system.

RandomLensman3• 4 years ago

Not sure that follows. If (big "if") interest rates go up a lot, then a lot of investors might not reach for VC or PE to enhance their returns at even close to current allocation (and growth would be heavily discounted).

Look at how the telecoms industry looks now compared to the heights of 2003 or so.

version_five• 4 years ago

In the dotcom boom in Canada there was a sub-boom in fiber optics and related stuff in the Ottawa area. Nortel et al were hiring and paying big salaries right out of school, and people got used to it and thought that was how much money they could earn.

For years afterward there were people who had mentally anchored themselves at a certain salary bracket that couldn't find anything (especially in Ottawa) that paid anywhere close.

I always assumed this will happen any time with machine learning, I don't think it will be as bad for software overall though.

chrisseaton3• 4 years ago

and thought that was how much money they could earn

But they were right.

DebtDeflation4• 4 years ago

There’s a whole generation of tech employees that have never seen a down market.

Indeed. I lived through both the 2008 financial crisis and the 2000 dot com implosion (also graduated high school and went off to college right during the 1991 recession). People who entered the job market after 2015 and know nothing except recruiters constantly hitting them up with mid six figure+ job offers are in for a rude awakening IMO.

BoxOfRain• 4 years ago

What advice would you give to people who've not been in the tech industry during a recession yet?

UncleOxidant2• 4 years ago

It's kind of telling that "after 2015" (so 7 years) is considered a whole new generation of people in tech.

plaidfuji• 4 years ago

My biggest question behind all of this is how interconnected is the tech bubble, and how self-perpetuating will a downturn be?

The venture-backed startups that I’ve worked at have themselves utilized tools built by other venture-backed startups. It seems like there’s an entire cottage industry of SaaS tools designed to make it easier to scale up small companies. What will the effect of a startup downturn be on companies like Carta (high revenue but no profit from what I could find, and whose revenue likely comes from other companies with no profit…) How many Cartas are out there, whose customers are primarily unprofitable startups?

LewisVerstappen• 4 years ago

Yeah, the same applies doubly-so for crypto markets (the other area where VCs have been going crazy). A drop in the price of BTC and ETH has massive ripples in the rest of the crypto ecosystem.

kbos87• 4 years ago

The idea that there’s money to be made not in industry X, but supporting industry X has been taken to the extreme in spaces like crypto where that’s pretty much all the space consists of.

I can’t think of more than a few examples of successful, scaling companies that are actually using blockchain as a means to an end that doesn’t come back to “building the infrastructure for the use of blockchain” in some way.

Apocryphon3• 4 years ago

We’re experiencing a glut of shovels.

lumost5• 4 years ago

There are many B2B SaaS which have been negative gross on the theory that they are LTV positive.

If their customers start cutting expenses, we may see the LTV theory break.

Nextgrid• 4 years ago

I definitely think there's an advertising bubble and it's popping.

Lots of startups' "business model" is "growth and engagement" - pump up user and "engagement" numbers and VCs will throw money at you, and maybe you even get a bigger sucker that outright buys you out. Spend all that money on advertising & marketing to keep these "engagement" numbers going up, all while having no actual product users pay for.

This in turn means there are other startups that specialize in providing advertising/marketing services. For example, there are dozens of startups out there who try to reinvent push notifications, even though in practice they make a lot of tasks harder in exchange of features most probably will never need. Those are overvalued and are only propped up by the aforementioned companies' VC money being spent on them to keep the "engagement" coming. Same with analytics which are used by these companies to measure (with dubious degrees of accuracy) the "engagement", which become less necessary if you have a profitable product and the main analytic becomes "how much $$$ has landed in my bank account today?".

Once the music stops, all of that crap will come crashing down.

overgrownzygote• 4 years ago

I definitely think there's an advertising bubble and it's popping.

This is something I’ve been thinking about a decent amount over the past few years. Advertising is the cash cow that underpins a good chunk of tech firms’ value. But the purpose of advertising, ultimately, is to drive sales of real goods and services.

Are those tech firms really driving actual consumption to a degree that justifies their value? I suppose it’s possible, but the massive growth in tech firm valuation doesn’t seem to be paralleled by massive growth in the “real” economy.

riku_iki2• 4 years ago

Lots of startups' "business model"

and what is the share of startups in Ad tech comparing to behemoths like Walmart etc?

EricE3• 4 years ago

"I definitely think there's an advertising bubble and it's popping."

And Twitter is the tip of the pin popping that bubble. Going to be fun seeing Facebook and Google in particular get reset too. I've long considered online advertising to be barely above modern day snake oil.

bogomipz3• 4 years ago

"I definitely think there's an advertising bubble and it's popping."

Isn't online advertising mostly just two companies though - FB and Google? And they have very deep pockets no? Or did you mean more that there's an ad tech bubble?

"Lots of startups' "business model" is "growth and engagement" - pump up user and "engagement" numbers and VCs will throw money at you, and maybe you even get a bigger sucker that outright buys you out. Spend all that money on advertising & marketing to keep these "engagement" numbers going up, all while having no actual product users pay for."

I believe this is what the article referred to as "capital as a strategy."

leroman• 4 years ago

I’ve learned that B2B SaaS are actually a way to scale your company, there aren’t enough really good people to go around, so think of it as outsourcing good skills

SemanticStrengh11• 4 years ago

The only reason there is a recession is because people believe there is a recession

kqr4• 4 years ago

This goes for any social construct, and is just about meaningless to say.

The only reason you have a family is because you believe you have a family.

The only reason you have a manager is because you believe you have a manager.

The only reason you're in a soccer team is because you believe you're in a soccer team.

The only reason you have a grocery store is because you believe you have a grocery store.

And so on.

SemanticStrengh11• 4 years ago

wtf you are totally 100% missing my point, the current recession is a self-fulfilling prophety that is auto-amplified in mediatic echo chambers and by sell feedback mechanism on stock values.

mancerayder• 4 years ago

While stated like fact, you're espousing a relatively radical philosophical perspective about reality. It might drive radical social change (or desire to), but most people don't think like this.

chillingeffect• 4 years ago

Ppl believe there is a recession bc of specific macroeconomic conditions. Iirc you specifically described them a few days ago!

SemanticStrengh11• 4 years ago

the base reasons do not matter much, the effect we will observe is order of magnitudes higher than the original reasons, because of the self fulfilling prophethy of autoreinforcing feedback and mediatic echo chambers. Every media that amplify the fear is responsible for an amount of suffering on earth. The 2008 crisis was mostly an absurdity that hurts the brain in retrospect. Thankfully I will make some money by buying now, afterall under those circumstances, economy is an intelligence market.

athrowaway3z• 4 years ago

I'm not sure how you can belief this terrible cliche to be true.

Without even bringing up money or inflation:

Oil and other products are in much higher demand compared to the supply than the current system can handle right this moment. You can get less of what you used to get and its obvious for everyone.

This has immediate consequences, but also compounding when slower/lower trade directly effects the ability for people to earn enough to stimulate more trade.

The immediate stuff would cause a recession in itself. Period. Nothing about economic beliefs. ( except if you include a desire to nationalize certain parts of the economy ). The compounding stuff can be mitigated in many ways. Personally I don't think its prudent to mitigate it with consumer debt. i.e. the only way I'm able to interpret your suggestion to not belief in a recession.

EricE3• 4 years ago

"Oil and other products are in much higher demand compared to the supply" You mean when you arbitrarily cut off supply to satisfy a fringe element it has repercussions? Who knew?!?

immigrantheart2• 4 years ago

I wish I can create money for myself from my belief.

SemanticStrengh11• 4 years ago

you can certainly destroy money by stopping consumming as a group, which will make enterprises downscale or even go bankrupt, resulting in net losses and autoamplifying effects. Why do I even have to explain that..

WinstonSmith84• 4 years ago

Yes, we were told there was not going to be any consequence of shutting down the entire economy followed by massive QE artificially bringing markets to ATH. And now we are in a QT environment with a few rate hike scheduled, while awaiting a demand crush ... all is fine, there shall not be any recession :-)

Fact is, these last few years have been entirely emotionally and panic driven by old people caring mostly about themselves

Jensson• 4 years ago

No, recessions happens when the economy is out of balance and corrects. Look at this graph for example, there was a huge correction happening in 2008. Currently the graph is much more out of line than it was in 2008, so it would make sense that we would need another recession to turn it back again.

https://tradingeconomics.com/united-states/balance-of-trade

boringg3• 4 years ago

The Fed is hitting the breaks on demand in order to slow down inflation. If they slow the demand side too fast then we enter a recession, if they manage to do a soft landing the pull back demand enough that supply can catch up bringing inflation back down to a 2% range with many a small downturn or short recession.

The goal is too slow down the aggregate demand in the market - whether or not we believe that it is a recession is irrelevant. Money will get more expensive, companies will be more shrewd on their spend & hiring. Whether the economy contracts and enters a technical recession - doesn't really matter - there are actual physical realities to the world and we can't just will our way into a bull or out of a bear market as nice as that sounds.

SemanticStrengh11• 4 years ago

The Fed is hitting the breaks on demand in order to slow down inflation.

Are we watching the same news? The measure to slow down demand is to increase the VAT https://en.wikipedia.org/wiki/Value-added_tax I don't remember what the Fed/SEC did the last months but it was a measure that had for effect to reduce investment in stocks (would appreciate if you could point out the name of the tax fee) Deincentivizing/diminishing investment in companies result in what? In a reduction not of demand but of production.. Enterprises will downscale their productions and are subject to auto amplifying panic hysteria. The panic sentiment do reduce demand from people (non linearly).

The gap between demand and production, which is an absurd inertia that should have been anticipated during covid, is mild and most importantly is reducing quickly as time passe, unless of course media hysteria induce panic buys.

most importantly, the salient absurdity of the thing is the non-locality of the discourse and of the measures. Only a limited set of companies have a deficient offer/demand ratio, e.g. a company can distribute 1 billion software copies just fine. However the panic mediatic fear of market subinvestment affect even the enterprises that have no issues matching demand, which are in fact the majorities of companies (although yes some key fundamental companies might be limited), moreover the FED/SEC measures affect them equally, and therefore the VAT measure I propose to reduce demand ( which seems incredibly more logical) should be applied locally and proportionately to how much a specific company demand/offer ratio is affected.

either I'm wrong either the system is just doing absurd suboptimalities and I'm betting more on the latter than the former but please share your thoughts.

tjpnz2• 4 years ago

There's been a lot of posturing here over the years about how <insert famous tech company> doesn't do layoffs, but we're starting to see that not even they are immune anymore. I hope everyone has some savings put aside if things really do turn to shit.

chrisseaton3• 4 years ago

A hiring freeze isn’t pausing to stand still - as people continue to leave normally. So Meta’s ‘hiring pause’ is really shrinking the company rapidly.

kasey_junk2• 4 years ago

Hiring pause/freeze are not strictly defined terms. Some firms mean true freezes with no further hiring, others allow back fill for any position and still others allow backfill for nominated positions.

I don’t know what Metas rules are but generally speaking strict hiring freezes are the rarest form.

tjpnz2• 4 years ago

Wasn't singling out Meta specifically, but based on how relentless they had been with their recruiter spam there must be a lot of disappointed folk out there.

notacoward• 4 years ago

I predict that some of these companies will try to avoid the taint of layoffs by doing them in sneaky ways. One classic method is using "performance" reviews to reduce/deny bonuses and equity awards, or in some cases simply terminate people whose objective performance is fine. Another is to cancel projects or reorganize, offering the "opportunity" for an internal transfer except that many will be surprisingly unable to find a "fit" before time runs out. Zealous (but selective) enforcement of previously ignored policies is a third. If you currently have a "handshake deal" for a 10-on/4-off schedule, or "business" travel that's really about getting to see your girlfriend more often, or an exemption to some IT policy, watch out.

Driving "natural" attrition isn't hard, as companies like IBM and DEC realized long ago. Anyone working at a FAANG or similar company should get used to watching their steps very carefully, and consciously aligning with the "in" crowd even more than was already the case.

bombcar3• 4 years ago

Given the rapidity which people move around at FAANGs just slowing down hiring can be enough to be an effective reduction in force.

The problem with people leaving voluntarily is that they’re often your best performers (and so have the best outside prospects) whereas the people who “have it good” are less likely to rock the boat.

bearjaws• 4 years ago

I think this is just the correction that was inevitable as hiring had become a cargo cult.

Everyone was hiring so everyone felt compelled to hire, creating a feedback loop of insane wages and offers.

Now its time to pay the bills and many organizations realize the engineers they hired cannot possibly provide the value necessary to keep their job.

I know one individual who got hired as a Sales Engineer for a platform and they have almost no work lined up for him... for 4 months now... He just sits making north of 200k for monitoring slack and answering community questions.

You can tell which companies actually had a cost benefit analysis for their hires and they continue to hire for the roles they need, where as others over extended and have to layoff.

gitfan86• 4 years ago

I has a phone screen at Coinbase and they just threw out 380k as the salary without me saying anything as far as expectations.

This reminds me of the dot com bubble. In 2000 people who had no software background and were making 50k would get offers for 80k, just for showing up at an interview and saying they know Java or HTML

koblas• 4 years ago

Actually just had a discussion about this and putting the dollars out in front in the hiring process is something that more canidates are looking for in this competitive market. I'm sure it was said something like "this title (grade) pays 380k, is that's what you're hired at". Since levels.fyi has this all documented it still comes down to the interview and your ability to pass the interview and meet expectations for the level.

What they're trying to do is get you to continue with the process and potentially slow down any other interviews by putting the total compensation out there at the start.

jonwachob91• 4 years ago

Did they offer you the job or did they just state the expected compensation? b/c those are two different things. They could have told you the position paid $380k, and then assessed you were not qualified for the position and not extended an employment offer.

And when I say you, I don't actually mean you. I mean anyone they held interviews with and stated the expected compensation.

htormey10• 4 years ago

I work at coinbase. We have standardized salary bands, this is just the salary at your level (comp plus equity, not sure if bonus is included). They are letting you know this up front to not waste your time.

One other thing that’s worth noting is that each year they give you a new equity grant. That grant I believe is priced based on the stock price over a period of 30 days in the first quarter.

Handy for limiting your downside if you are bearish about the economy.

ForHackernews• 4 years ago

Huh, I guess this explains why so many otherwise-sceptical and intelligent engineers are so motivated to pretend 'web3' is a thing.

fatnoah• 4 years ago

This reminds me of the dot com bubble. In 2000 people who had no software background and were making 50k would get offers for 80k...

I accepted a $54k SW Eng job offer in 2000. To be fair, I had a Masters, but only 6 months work experience. I didn't break $80k until late 2003. Now I feel bad. ;)

throw8383833jj2• 4 years ago

Just for comparison, I work at a Non-FANG (SWE >10 years) in a expensive COL area and I make less than half that.

I say, you take that offer.

idkyall• 4 years ago

I believe they quoted me the same number recently. From what I recall this was dual purpose - letting you know up front this is the comp range, but I believe the recruiter also let me know that because it was algorithmic(75th percentile for my market/zip code) that it was also a non-negotiable offer.

bitwize2• 4 years ago

The difference is today, they are subjected to a battery of interviews, tests, and rudimentary psychological evaluations to make sure they know Java or HTML, and are a "culture fit", meaning they have the personality of a smiling Alegria person from the company's advertisements and not that of a living human being.

ouid• 4 years ago

I think you're misunderstanding the theory. Hiring without fixed length contract is just interviewing. It's somewhat expensive interviewing, but given the legend of the 10x developer, it is worth risking paying people more than what they are worth to try to identify them.

mirntyfirty• 4 years ago

True, I’d claim that the 10x people exist but would be impossible to spot based upon resumes and many of their resumes would fail to hit the checkbox requirements of the organizations looking for them. Also, in general I’d claim that 10x people aren’t necessary for most projects and tend to get stifled by bureaucracy.

robbomacrae2• 4 years ago

"cannot possibly provide the value necessary to keep their job."

It's actually very much possibly for software engineers, at least, to justify high valuations. As an example when I joined Reddit my first task was to remake a data engineering server in scala that cut down the needed AWS machines by 70%. That cost saving already covered more than my salary in perpetuity and I was only 3 months in.

onlyrealcuzzo3• 4 years ago

The vast majority of startups aren't doing anything remotely complex enough to be able to save money on electricity by paying for developers to write more efficient software. Or if they can - the instances are few and far between.

The vast majority of startups are also heavily cash-flow negative - so anything you do likely won't pay for itself.

It's almost always a bet on a rosy future.

gsibble4• 4 years ago

I was paid $165k a year by a neobank startup to.....build their bank. It's now responsible for over $200mm a year in revenue. I was the sole engineer on the project.

Good engineers are worth their weight in gold.

yobbo• 4 years ago

By that logic, any salary < 70% of AWS cost is justifiable.

In reality there is a job market, and there are office politics. These determine salaries more than "marginal revenue of labour". This means that as long as someone who is employable by office-political standards will do the job cheaper, the salary can be contested.

nemo44x6• 4 years ago

There’s nothing being funded right now. If you didn’t raise before earlier this year (and really late last year) and your runway is < 2 years then you’re in a very precarious position. If you’re hunting for a job, it has gotten very tight over the last month. Lots of pausing on hiring plans as companies adapt.

Reminds me more of 2016 than 2k though.

kasey_junk2• 4 years ago

I switched jobs this month and found it to be the hottest job market I’d ever encountered. That can change quickly but it hasn’t (hadn’t) happened as of a few weeks ago.

anthropodie• 4 years ago

I think we will need another 3-6 month to see full effect of whatever happened in last month everywhere.

nemo44x6• 4 years ago

I think a month ago was a totally different time than today. I know of a few companies that froze most hiring (including in cases where an offer was about to go out) temporarily with the last couple weeks.

Of course I haven’t sampled every company. Just a very sudden defensive position springing up more and more.

1270018080• 4 years ago

I would say things have changed noticeably just in the last 2 weeks (in terms of recruiter engagement, news about funding rounds, news about hiring freezes). If you started interviewing in early April it's a lot different than now.

wooque• 4 years ago

not really, freelance platform I worked on briefly announced $55m series A yesterday, it's slowed down, but there are still money for the right companies I guess

peyton2• 4 years ago

If announced yesterday, it’s likely that deal was done months ago.

mcjkrw• 4 years ago

I think I know what platform you are speaking of. Mind if I ask why your experience there was brief? I have been thinking about applying there later this year.

gadders• 4 years ago

Someone needs to dig out the VC letters from 2007-8 and just change the date and re-publish them.

htormey10• 4 years ago

The macro economic setup doesn’t look good for small tech or growth stocks in general. Big tech I’m less worried about.

We have central banks rising interest rates to fight inflation, caused by wars and massive monetary and fiscal stimulus to fight Covid. these hikes impact valuation multiples used to value tech and unprofitable startups.

We have a supply chain shock caused by war in the Ukraine, the aftermath of Covid and Chinas second lock down which could lead to stagflation.

The only silver lining I see is that big tech prints money, is in many areas essential for cost reduction and has excellent balance sheets.

In summary Im more worried about the general economy tear down than the tech tear down, especially in the later half of this year and 2023.

crate_barre• 4 years ago

Someone needs to explain to me why our tech companies are so tied to interest rates. Are VCs borrowing with home mortgage equity??

wutbrodo• 4 years ago

When interest rates are low, there's a lot more money sloshing around in search of better return, instead of just comfortably getting a high, low-risk return. When more money sloshes around, higher-risk investments like VCs get more money.

kooshball• 4 years ago

here are the basics

https://www.investopedia.com/investing/how-interest-rates-af...

I think the dynamic for private (VC) money and public markets are different

VC money will dry up as endowments look to shift more money into safer asset class when interest rate is high

public markets company valuation models change with interest rates changing. when rate is close to 0 investors are willing to buy asset with a very long term view for expected future profit (say 10 years). when rates go up that time frame shortens since opportunity cost of buying that stock today is now much higher.

tyrfing• 4 years ago

Most of these tech companies build business models around giving away money, with a plan of eventually making a profit. They are affected by interest rates because the higher interest rates you have today, the more attractive it is to have money today instead of tomorrow. Interest rates available today are the discount rate for those future cash flows (profit).

gsibble4• 4 years ago

This. Historically, a company is fundamentally valued by the discounted rate of its free cash flows into the future. The discount rate is decided by several factors including the risk free rate.....which is frequently tied to interest rates. So interest rates go up, the risk free rate goes up, cash flows become worth less, and corporate valuations go down.

throw8383833jj2• 4 years ago

in addition to the article mentioned by the replier, also, keep in mind that the way that equity markets work: it's all about the ratio of buying to selling. if there's even a small skew in buyers to sellers it can send prices up or down by quite a bit. IE: a 10 Billion$ fund, doesn't need to see 2B sold in order to go down 20%, a much smaller amount sold can affect the price quite dramatically, depending on the ratio. So, if a few buyers turn into sellers, it can cause quite the correction.

also, keep in mind that markets are forward looking to about 6 months. right now they're starting to price in a mild recession.

slavoingilizov• 4 years ago

The whole economy is intertwined. This is a very simplistic way of looking at it, but if you can park risk-free capital somewhere which generates high interest, the opportunity costs of investing in tech become higher, so VCs stop investing. Also - you're committing money in a business with a higher risk of not returning them given the economic outlook of their customers and revenue. Tech isn't isolated from the world.

bogomipz3• 4 years ago

"This is a very simplistic way of looking at it, but if you can park risk-free capital somewhere which generates high interest, the opportunity costs of investing in tech become higher, so VCs stop investing."

But if the funds are not investing, that money is not doing any work. How long are investors willing let that cash sit idle before they ask for redemptions?

tschellenbach• 4 years ago

DCF

gsibble4• 4 years ago

A lot of this is because VCs are in bed with the media, especially tech news sites. They've been publicly and loudly unhappy with the prices of rounds for several years now. They raised an enormous amount of capital over the last few years that they are expected to deploy as soon as possible. This is all coordinated with a drop in public markets and, yes, somewhat of a tech bubble, to force valuations down and make them more palatable for VCs.

Source: Former SV startup CEO currently helping with a raise at an AI company. We aren't getting pushback on anything except our valuation which they constantly use the news of the day to try to lower.

It's not like VCs don't have capital on hand and it's not like they will all have big paydays if they don't invest it. They just want better returns and have for a while.

blululu• 4 years ago

I think the VC who runs this site wrote an essay about this tactic a while ago: http://www.paulgraham.com/submarine.html

kriro• 4 years ago

I think the market is just normalizing. The overall climate was pretty insane. Free money (interest rates), stimulus money etc. I found it pretty fascinating that during a time that was pretty tough overall (global pandemic + supply chain issues) the stock market was basically saying we are in a golden age. That felt "wrong" to me but if I had acted on it, I'd be broke now because the market certainly outperformed my wildest expectations.

As a value investor at heart, I still cannot rationally fathom some valuations (Tesla >100 PE). However, most tech companies seem pretty solid fundamentally and not close to .com bubble times. I cannot speak for crypto since I live in a bubble were I ignore it completely.

nemo44x6• 4 years ago

It's really about interest rates. The idea was that there's no way the Fed will be raising rates anytime soon so everything went on sale. Yes, an over extension is a lot of things is probably fair. Snowflake is not a 100B company today, for example.

warent• 4 years ago

People are calling this a correction... I don't understand the first thing about economics. Over the last quarter, the Nasdaq is down 25%. That's a correction? Seems pretty serious

francisofascii• 4 years ago

And the Nasdaq is still up 116% over the last five years. So some would argue, that yes, it was and maybe still is overvalued.

ticviking• 4 years ago

Ultimately probably. There's a lot of "value" that isn't linked to any work someone is actually doing. Eventually the price of companies depending on that illusion has to come down to reflect the reality.

lumost5• 4 years ago

People have called Tech bubbles since 2012, There have been at least 2-3 similar sell-offs over the last decade that simply lead to higher tech valuations within a year or two. Hence the term "correction" is used, this also helps assuage nervous retail investors that another '01 or '08 crash isn't around the corner.

The difference between then and now is that interest rates are blasting through the roof along with inflation. The underlying question that CEO's need to think through is whether this is a long-term shift in the funding environment, or a short-term blip. If the latter, actually taking the foot off the gas instead of saying that you will could lead to missed growth relative to competitors.

Now, in the event that its a long-term shift - there will certainly be firms who run into the wall from not taking their foot off the gas.

__alexs• 4 years ago

The difference between then and now is that interest rates are blasting through the roof along with inflation.

The effective federal interest rate is 0.33% today. It was 2.4% before COVID...

nonameiguess• 4 years ago

It's not, actually. People are just using the wrong term. Finance uses "correction" to mean an at least 10% but not 20% index drawback, with the correction period lasting until a new high is reached. When an index declines by 20%, they call that a bear market. It's just colloquial usage not matching the industry jargon.

khyryk• 4 years ago

Because over the last 3 years just prior to this correction, QQQ (since we're talking about the tech sector here) had a CAGR of around 30%. Had it been climbing up at a CAGR of 10%, we'd be having a different conversation.

qiskit2• 4 years ago

What teardown? Why do newspapers all parrot each other and spout the same fearmongering nonsense? Stock corrections happen. Life will go on.

Animats2• 4 years ago

"Following a series of “super clarifying” meetings with shareholders, Uber’s chief executive Dara Khosrowshahi emailed(opens a new window) employees on Sunday night with an arresting message: “we need to show them the money”."

So the stockholders finally got fed up with Uber's "lose money on every ride and make it up on volume" approach. No surprise. Uber's stock is at an all-time low since the public offering.

This isn't really about the "tech sector", though. It's about Uber. Uber is an over-funded cab company. It's not a tech company. It's a labor-intensive service company with a huge number of low-skill workers.

_tom_• 4 years ago

If they get the self driving cars working, they become a tech company.

Of course, then they won't be able to shift expenses to drivers.

Animats2• 4 years ago

If they get the self driving cars working, they become a tech company.

Uber sold off their self-driving operation years ago.[1] They still issue press releases once in a while, and do some stuff with self-driving startups, but it's not serious.

[1] https://www.cnn.com/2020/12/07/cars/uber-sells-self-driving/...

EricE3• 4 years ago

Uber is the epitome of modern day sharecropping - shift all the risk and expense - many of which are hidden because they are long term or rolling expenses (insurance, maintenance/car replacement/physical security, etc) - to drivers. Waive the allure of immediate cash at people and damn the longer term consequences.

The tech sector teardown is more catharsis than crisis

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