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Comment by JumpCrisscross | Hacker News Reader

> 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.

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> 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.

> 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.

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.

While I agree with the general gist of what you're getting at, I think you're stating it much too strongly. In a sufficiently volatile and capital-starved environment, I think a straight majority of current businesses would be unviable. Stability, safety, and sustainability I think is not given nearly as much emphasis as it should but I wouldn't want to eg. condemn the entire restaurant industry (volatile economy => not a lot of disposable income => nobody can afford restaurants => restaurants go out of business).

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