Recent searches
Search options
Cannot tell you how much I hate the word zirp. Also the concept. Also the willful blindness to the nature of power and capital that it requires to be satisfied with "zirp" as an answer to questions about why venture capital backed firms act the way they do
Hey, question: If the "phenomenon" was due to the zero interest rate, which is the same for everyone, why don't we see the same patterns in other sectors?
"Zero interest rate phenomenon"
@jenniferplusplus I think the concept of ZIRP argues that venture funded tech had unique dynamics for its growth potential relative to other sectors, which is why money raced in abundance and even stupidity
And it was this abundance that created certain strategies that are no longer valued, while influencing behavior from FAANGS who had to compete with startups more aggressively for talent as the money flowed
@danilo Finance, biotech, pharmaceuticals, and renewables had at least similar prospects. What's different about tech?
@jenniferplusplus none of those have the low marginal cost scale advantages of tech. Hell, renewables and pharma require manufacturing.
Automating middle management and taxi dispatch in San Francisco can scale to as many cities in the world as you can manage to capture. VCs can sell you metastatic growth
@danilo Pharmaceuticals are dirt cheap to manufacture. The bottom fell out of the manufacturing cost for renewables a decade ago and we still haven't hit ground.
To answer my own question, I think the difference is that venture funding has produced a binge/purge staffing dynamic in tech that has nothing to do with interest rates. That binge/purge was the main driver suppressing labor power, and pandemic lockdowns broke the cycle.
@danilo Now tech is working through a backlog of mass firings, that have nothing to do with interest rates. A thing they started doing while the interest rate was still zero.
@jenniferplusplus pharmaceuticals are dirt cheap to manufacture after YEARS of research, studies, trials, and regulatory approvals, and other adherence to protocol
all requiring YEARS of specialist study and advanced degrees
You're allowed to modify and impact humans without anything close to the same level of scrutiny or oversight in software. These economics just aren't comparable, even if the long term margins are competitive
@danilo I think you're overestimating what pharma spends on research and regulatory work, but ok, let's ignore them.
All these other sectors with enormous growth potential + low and falling infrastructure costs still don't react the same way to interest rates. It's not the interest. It's the lack of counterbalancing power.
@danilo Actually, this might be the one thing crypto is good for. Crypto is finance minus regulation. It attracted venture funding and behaved exactly like any other venture backed sector.
@jenniferplusplus definitely! Reactionary Charlie Brown gave away the game when he said software was eating the world
nothing to stop its ravenous march!
@danilo So, these things people keep calling a "zero interest rate phenomenon" are really more of a "zero regulation phenomenon"
@jenniferplusplus certainly, though you need multiple components for the combustion here
LPs want gains, they can't get guarantee them under a low rate environment, so they give them to speculators who find tech that can frontrun regulation
The Lime scooters are kind of a proof of this, actually. There’s terrible margins on hardware, but no regulation against littering the city with e-waste, so the speculators rush in
It's a marriage. No point to doing it if you can just guarantee 4.5%
Price to earnings multiple of public companies.
Like, I think it's fair to say that there are other factors that go into WHY the P/E in software was so distorted, but (speaking as a former financial services employee working with investor-relations-relevant data), the P/E multiples were what the money people cared about.
This is also why having a nebulous software component tacked on to a traditional business (e.g. Uber) led to inflated valuations. It affected what "bucket" analysts put you in and the algorithm they used to predict lifetime value of the investment was sensitive to that bucket.
Is this stupid? probably. Did it happen? ABSOLUTELY, I've been in those rooms.