Comment by dragontamer | Hacker News Reader

Comment by dragontamer | Hacker News Reader

The most plausible theory I've seen floated is that the US Midwest is likely already in a recession. US Manufacturing index weakens AGAIN, which means the midwest isn't making as much stuff as it used to. https://www.instituteforsupplymanagement.org/ismreport/mfgro...

So a local recession is likely already happening. The question is whether or not this spreads to be a full US-scale recession.

I do believe that the technology sector is in the end-stages of a bubble, but whether or not that causes a drop in GDP is another question. The WeWork IPO-failure, as well as Peloton IPO drop, has shown that "tech" companies are not as valuable as VCs thought they were. (WeWork isn't $40 Billion as Softbank expected but is instead ~$10 Billion).

So now what? Well remember: 2008 was a "Great Recession", and 2001 was a recession but mainly isolated to the tech-sector. A recession like `91 (~8% unemployment) is probably what people should be thinking about from history.

There's probably no chance of another 2008-like "Great Recession". But the US economic cycle cannot boom forever, and we've been booming for nearly 11 years now. Some kind of recession is inevitable.

> The WeWork IPO-failure, as well as Peloton IPO drop, has shown that "tech" companies are not as valuable as VCs thought they were.

Would you suppose that the failure of their IPOs points more at the lack of a bubble? I mean to suggest that in a bubble / "irrational exuberance", these IPOs would be more likely to succeed, and after, the value of their public stock would go up dramatically because investors were being overly optimistic and speculative about these companies. Instead investors determined they were overvalued prior to even entering the public market. To me, the failures indicate the lack of a bubble.

Although I wonder about the bubble-iness of the gig economy. I've had increasingly bad experiences with it (more on the side of a customer), and I assume workers have worse experiences. I 'feel' like something's got to give at some point, where you'll see over some short period of time, a ton of people just begin to opt out from the "gig" economy on both sides (as customers and workers), aside from the fact that many workers depend on it.

> I mean to suggest that in a bubble / "irrational exuberance"

Earlier this year, Uber IPO'd and raised $8.1 Billion in public money. It then _immediately_ lost $5.236 Billion in Q2. https://investor.uber.com/news-events/news/press-release-det...

Public investors are weary about giving more money to Silicon Valley startups because the public has already lost so much money this year on other bets.

Yes, "irrational exuberance" is going away today. But there are many, many companies that the public has bought into this year and last year, at HUGE valuations. But this only confirms what I believe to be the deflating of the new-tech bubble.

Uber is laying off staff and cutting costs. Future investors and future IPOs are "poisoned" due to how poorly Uber has done. Anyone else planning on IPOing in this environment is going is going to have more trouble.

The public is going to increase their scrutiny of future tech IPOs. If Uber did that poorly, who else may be a trap?

> If Uber did that poorly, who else may be a trap?

Who isn’t profitable or has razor thin margins? Who is heavily levered up with debt? That’s how you find who will be naked when the ocean goes out.

Honestly nobody should be reading too deeply into the Wework thing. When you take away the name recognition, it' a shared office space that charges 3x it's competitors and is out of coffee creamer 2-3 days a week. Turns out it doesn't have rock solid business value after all. Whoop-dee-doo.

Reply on news.ycombinator.com