Tech can't remember what to do in a down market
axios.com
axios.com
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.
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.
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.
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.
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.
Appealing to crowdsourcing you are just saying that you hope less sophisticated and seasoned investors (the crowd) is willing to give you money while professional investors that are paid to assess risk (the VC) are not.
For the second and subsequent attempts, bootstrapping makes way more sense than any other means of funding.
Capital is cheap when business viability is high. If there is economic downturn and demand deceases, fewer businesses are viable in the new conditions.
If aggregate demand decreases ROI from ideas decreases.
While that may be true, might it not also be the case that the relationship is the reverse, or circular - ie. some businesses are viable only because capital is cheap. Again, I wouldn't consider a business sustainable, or 'good' in the sense I intended it, if it can only survive because of cheap capital.
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?
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?
https://blockchain.news/analysis/the-birth-of-the-coronaviru...
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.
* Markets took a dive in late 2018 on recession fears, only to come roaring back. * Today's financial world is still awash in cash, which could provide a calming buffer. The venture capital world is still looking to invest huge amounts: Per Pitchbook, funds raised a record $88.3 billion and $75.5 billion in 2018 and 2019, respectively. * In some cases, smaller companies started laying people off even before this market drop, so they might be able to weather it more easily."
Not that I'm sure this is one, but I love the term.
The ideal time to call whether this is an up or down day is probably around 4:01pm EST.
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.
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.
Surely you can still "experience life" in your 20s and 30s while saving something for a rainy day/when you can no longer work.
For example, if you have money saved up and excellent credit you sit on the cash and wait for a crash. During the crash you purchases houses, apartment buildings....this would actually allow you to build wealth. I know people who bought manufacturing equipment during 2008 crash for scrap value.
Plus, not everyone who is wealthy wants to be a rockstar. It is such an ignorant opinion, people may have much greater goals in life and money might just be a byproduct.
Ah, market timing. You realize this is contrary to mainstream investing advice, right?
> During the crash you purchases houses, apartment buildings
I forgot, the American dream is to own someone else's house. The only way to get rich to be a land lord anymore. Plenty of people get burned playing this game as well, and the advice doesn't work in every market.
> I know people who bought manufacturing equipment during 2008 crash for scrap value.
Oh, so not you?
> such an ignorant opinion
Is it ignorant just because you disagree with it? Look around yourself. How many people are driving a Mercedes or BMW? How many people are wearing designer clothes and jewelry? How many people have an iPhone when a $150 android will do just fine?
Most people I know will never save money. They'll never have a new car, they'll never have a 4000sqft home. They're 100% going to be on government assistance in old age. They should enjoy themselves now, go bankrupt as often as legally possible.
So people should either be buying a house that they can afford not to lose in a downtown, and/or put some good money in their RRSP. The earlier, the smarter.
I don't know, I'm just old I guess, because I don't understand that thinking.
It's a lot like Skydiving. People do it so they can have the adoration of others. They want to be able to impress their friends that they did some super cool thing. It's why the iPhone has 17 cameras or whatever it is now. People need the latest, greatest thing to continually get adoration.
It's like people that win the lottery and go broke. They finally acquire and get to do whatever it is they always wanted. Maybe they just wanted to live richly for 8-24 months. What's the point of having all that money if you can't have fun?
Personally, I don't live this way, but many people do. I've just decided to stop looking down my nose at those people. They are optimizing for their own happiness.
Canada has universal healthcare, but the "socialism" you think it has ends there. If you lose your job, you'll qualify for a few months of unemployment insurance and then you're on your own. There are no food stamps and welfare is about $800/month in Ontario and is incredibly difficult to qualify for.
The 18% number is mostly useless because it's a textbook example of selection bias.
Isn't the same bias present in ILI (influenza-like illness) statistics?
[1] https://arstechnica.com/science/2020/02/coronavirus-spread-i...
"The claim was quickly challenged by an infectious diseases expert who serves on a committee that advises the WHO’s health emergencies program.
Gary Kobinger, director of the Infectious Disease Research Center at Laval University in Quebec, said it would be highly unusual for there not to be mild or symptom-free cases that are being missed. He pointed to the fact that outbreaks have popped up in countries far from China — including Iran and Italy — because people with mild infections were not detected and traveled to other places.
'There are mild cases that are undetected. This is why it’s spreading. Otherwise it would not be spreading because we would know where those cases are and they would be contained and that would be the end of it,' said Kobinger, who insisted that mild, undetected infections cannot be ruled out until people who haven’t been diagnosed with the illness can be tested for antibodies to the virus.
'As long as we do not have good serology data, I think that it is completely speculative to say that there are no undetected cases,' Kobinger said."
What Dr. Aylward says makes no sense and reads more like a PR fluff piece designed to praise China to keep them happy, and as Kobinger points out he's probably wrong. From the same press conference he says this "If I had COVID-19, I’d want to be treated in China."
Which is obviously bullshit.
1. For most people symptoms are so minor that they don't go to the hospital at all and don't get counted in the reporting stats. This means that the 18% number is higher than reality. How much higher we don't know.
2. The disease disproportionately affects older people: If you're between 0-50 your chances of dying are ~0.2%. From what I can tell these mortality odds are better than if you have the regular flu.
https://www.worldometers.info/coronavirus/coronavirus-age-se...
More deadly and more easily transmitted.
Also, people of all ages are dying.
If you're over 50, male, have a weakened immune system, and live in a location with high population density, there may be reason to be concerned.
We also have no idea if it's more transmissible than seasonal flu -- https://sph.umich.edu/pursuit/2020posts/how-scientists-quant...
Also, "the flu" covers a lot of ground, mortality-wise, as the history of 1918-1919 should remind us. Even in nations like Spain that were not in WW1, the flu of that season was a major deal, and if coronavirus turns out to be that bad (still an open question), it would be really, really bad.
No it hasn't. I can't find good numbers for China, but 80,000 died of the flu in the US in 2018 and china's population is about 4x higher.
>SARS
That's meaningless, SARS was contained without spreading to nearly as many people. It tells us nothing about the mortality rate, or the severity.
>We have some idea. It's a bad one, at least.
What I said was we have no idea if it's 20x as deadly. It's likely not 20x as deadly.
How can you make this statement? A lot of papers claim mortality (accounted for asymptomatic patients) to be around 5% (100x worse than flu) and 1% (20x worse than flu). What evidence do you have that these papers don't?
https://smw.ch/article/doi/smw.2020.20203
"The resulting number, however, does not represent the true case fatality rate and might be off by orders of magnitude. "
"The true number of exposed cases affected in Wuhan may be vastly underestimated. With a focus on thousands of serious cases, mild or asymptomatic courses that possibly account for the bulk of the 2019-nCoV infections might remain largely unrecognized, in particular during the influenza season.
Under-detection of mild or asymptomatic cases may be further fueled after further growth of the outbreak, as healthcare-facilities and testing capacities in Wuhan have reached their limits."
Are you also aware that seasonal flu doesn't completely take out medical systems? (see Wuhan)
2. All 4 people who died were in their 80s. Cruise ships skew much older than the general population, so there is limited information to learn from this.
3. If every single person who had cold or flu symptoms panicked and went to the ER, it most certainly would overwhelm medical systems.
4. I never said this wasn't worse than the flu, just that it seems likely that it's not 20x as deadly.
1. 4/700 is only the initial figure. Likely more people will die from cruise ship, COVID-19 takes about 2 weeks to develop severe pneumonia.
2. Since these patients are now not categorized as Diamond Princess, instead they're categorized under their countries' stats, likely we will never hear from them again in such an isolated fashion.
2. I'm sure all of their names are out there, and someone will eventually put together a study once it's been long enough to know their outcomes.
Note: data is from current cases, may vary as more data is accumulated.