Effect of the Depression on Technology | Hacker News Reader

Effect of the Depression on Technology

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21 pointsnreece34 comments

He sure seems to know a lot of things that other people aren't sure about:

* It's a recession for sure, but depression? No one knows. Here's one guy who says no: http://online.wsj.com/article/SB122333679431409639.html

* "this adds up to difficult times for business in America for at least three years and possibly longer." Three - not two, not four, but three. Hrm.

* "with the US dollar in the gutter" - it's actually been climbing lately: http://finance.yahoo.com/q/bc?s=EURUSD=X&t=3m&l=on&#... No idea if that will last - I don't pretend to have a good understanding of why it would be rising right now, but it is, for the moment.

I guess his points about open source and other cost savers doing well in a recession are valid, but the reddit-bait title and other stuff put me off.

Without figures, you're correct: His estimates are worthless. But if the US government stays the course and puts money up for all of the failing US companies, which seems to be the plan, the dollar will be in the gutter. Can't just print money, after all.

I think your analysis is somewhat facile, and unsupported by the facts: the dollar hasn't dropped at all because of the 'bailout' - quite the contrary, it has done well over the past few days.

But once again, that's why this is hacker news, and not economic news: our area of expertise is not in economics, with a few exceptions (that certainly do not include me).

"the facts: the dollar hasn't dropped at all because of the 'bailout' - quite the contrary, it has done well over the past few days."

The bailout doesn't go into effect for at least a month.

And as far as expertise goes, your website could use a few Exceptions ("printDate() is not defined") - sorry, couldn't resist.

The bailout doesn't go into effect for at least a month.

That doesn't mean it can't have an effect on current prices. Market actors are capable of anticipating future market events. What is your take on Osborne Computer? Was it simply a coincidence that the market value of its then-current computer-model dropped when an improved model was announced?

http://en.wikipedia.org/wiki/Osborne_effect

Is it simply coincidence -- rather than market anticipation -- that every time a corporate buyout at a specific price is announced, the stock price of the target company instantly jumps to, and flatlines at, the buyout price?

Have you considered that this is foreign territory for investors, most of whose opinions regarding the efficacy of Paulsen's measures have yet to crystallize? Right now, this is beyond a bear market and people are acting on negative impulses: The government's doing something? Buy. Bad financial news? Sell. It's when the former becomes "sell" that inflation will become rampant.

Well, not literally; capital losses will likely cause serious deflation if the stocks really crash. But I don't see how a government pumping funny money into the market on this scale can do anything but devalue its currency severely.

The parent is leaving out the demand side of supply and demand for the dollar. If one increases the money supply ceteris paribus then one may expect prices to rise and the value of a currency to fall. However, if foreign investors' expectations of the future performance of the US economy improve, then there will be more demand for the dollar and its value will rise on international currency exchanges. This reduces the price of foreign goods and combats inflation.

In practice, it is possible to engineer a short-term economic boom by increasing the money supply, so the supply and demand of dollars work against each other and it is impossible to say where its value will go. In the long term, the purchasing power of the dollar has dropped constantly since it went off the gold standard. However, nominal income and wealth has increased faster than the dollar's decline, so our living standards have increased.

I'm not an expert, so it's possible I am missing some big factor. However, I do have some training in the field, so I hope I am more right than wrong.

You're no expert, but you slanged some Latin in there, so I'll give you credit for talking over my head :^)

I'm no expert either, and I appreciated that you clarified my views a bit. That's pretty much in line with my feelings about the effects this sort of action can have on an already suffering economy.

ceteris paribus == all other things being equal

How unnecessary...I assumed it was one of those Latin idioms that takes a sentence or two to explain.

It's pretty unnecessary, but it gets thrown around from day 1 in Econ classes so you get kind of used to it.

cerebris palin == a hockey mom with a brain. Latin Oxymoron ;)

As near as I can tell, noone's area of expertise is economics. Hackers seem to have just a good a handle on matters as the "experts". If you really want to feel "safe" do a little research and see what "Greenspan's" PhD thesis was about. Spoiler hint: You won't find it. Folks that have studied his background believe he was "gifted" his PhD in effort to allow his rise in the government. I'm not supporting this viewpoint, just pointing out the uncertainty. To add irony, Barron's thinks they found a copy and the 1977 thesis was about a housing debacle!!! http://online.barrons.com/public/article/SB12091741904904680...

You may not like that someone thinks its a depression and not a recession. You may not like that someone thinks its 3 years, not 1 or 5. But hey, their guess is as good as the "pros" at this point.

And noone can explain the little raise in the dollar the last week. These little hiccups are almost unpredictable in a complex global economic realignment.

So you may not agree with certain words such as "recession" vs. "depression" or someone's guess as to how long it will last or even if the U.S. will ever recover. But I think the non-quantitative predictions in the article are solid nonetheless.

> You may not like that someone thinks its a depression and not a recession. You may not like that someone thinks its 3 years, not 1 or 5. But hey, their guess is as good as the "pros" at this point.

What I don't like is people pretending it's anything but a wild guess.

You're right that the discussion of how the downturn will affect software and open source is better. That's because it's something Nat clearly knows a great deal about. He should have stuck with that.

If a recession becomes severe enough, there is the risk of deflation--nobody wants to buy anything, so vendors keep slashing prices to try to unload their inventory and workers are willing to take lower wages to avoid unemployment. To counteract that cycle, dumping lots of money into the economy (as long as it's not too much) is just what Dr. Keynes ordered.

I've also heard the argument that since businesses spent the last few years acting as if the weird bonds in their portfolios were as good as cash, then if the Treasury replaces those bonds with actual cash, it won't have a net inflationary effect. (Although I fear that Wall Street is going to take its bailout money and use the proceeds to create a silly bubble in some other asset; localized inflation, so to speak.)

Personally, I just blew 4 months operating expenses on new server parts in preparation for launching a 'value for the dollar' initiative, so I obviously agree that businesses will become more cost sensitive. I wasn't thinking about the capex vs opex change, but that's good for me, too.

Interesting times indeed.

It's a depression now?

Yes, and apparently the national debt and the trade deficit are the same thing.

(Not that the article is bad, but I found the intro confusing.)

In the headline to attract clicks, it's a 'depression'. In the text, it's still a 'recession'.

Everyone's a sensational-headline click-whore now, it seems.

I would argue there will soon be an even larger proportion of users that will never, ever pay for anything, making Wesabe a bad investment.

I will take this opportunity to pose a question I've been wondering for a while.

It seems that there is an increasingly ubiquitous attitude that if a product or service can be delivered free of charge, then it should be delivered free of charge.

Is this really the best road to be walking down? Why or why not?

If you don't, one of your competitors will.

This is true.

But you don't always want bottom-fishers as customers.

It all comes down to a trade: your app's perceived value versus the user's time/money. You can try to fake-out the trade by making it a free app, but then a) you're just competing for eyeballs, which makes you a media company, and b) any incremental improvement will also be seen as free by the end-user.

It's a lot harder to price up from free to one dollar than to price up from one dollar to ten dollars. And maybe you're the coolest media content provider out there, but I'd rather compete on value rather than on attention span. It's more comfortable for this nerd :)

It's all based on advertising. Advertising will tank. So the "can" will go away.

There is a large segment of the young people who grow up with access to video, games and music for free and who don't really have a lot of money so they feel that it is wrong if these things aren't available to them.

Second the price for a given item (when traded freely in a free market) is generally declining over time and since the marginal price of all most all web offerings are zero (for all practical purposes) it is possible to underbid the competition all the way down to zero, landing it in the same category as the aforementioned music.

And I don't know if that is a good thing or not (though I suspect it isn't, at least for most start ups) but if that doesn't matter if that is the direction we are heading.

Yes, commoditization and "normal profits" of perfect competition. I think it's more your second point: it's not that someone should offer it for free if they can - but that someone will.

Open source is part of this too: e.g. the eeePC has linux and openOffice. MS responded by offering low-end XP and low-end office for $40 on the eeePC. It's heading to $0. Also, WINE runs most windows apps on linux. When money is tight, these non-ideal options become more attractive.

I think this is inevitable in all markets, with the old answer: offer something valuable and unique.

Lower-end products (A "Word Lite", etc.) will be big business for budget-conscious consumers who will never see "OpenOffice - FREE" on a shopping comparison.

I'm an open source guy, but at $20 a pop the Gnumeric guys would be rich. I know I'd buy in.

That's a distribution channel problem if they'd "never see" it.

Gnumeric could just package up and sell via that channel. It would seem weird to them ("huh? you just download it"), but if you're right, it would make a huge difference. Then you've got brand-name issues and packaging and the whole business thing which they aren't interested in, not good at, and MS is brilliant at.

Then call it shareware and never actually ask for money. They'll think that they're getting expensive software for free. If someone tries to enter a fake activation key more than a few times (they'd all be fake, logically), actually make it shareware and charge $49 after thirty days.

I must be misunderstanding something, because I thought that the problem you noted was that they wouldn't see the open source version on a shopping comparison. Wouldn't the same problem apply to shareware?

It depends on what market you are thinking of, ie. where they would see (or not see) the offering. I thought you meant physical retail outlets. What did you have in mind?

Shareware has a price attached. With a price attached (and presumably some sort of marketing) it would show up in these results. Those people who still buy software are already well past worrying about lack of a hard copy, and the rise of iPhone and co. has ensured that this distribution model will become the norm. All of the software I've purchased in the past few years has been without a hard copy.

thanks, now I see a price attached makes a difference; else it's not "shopping", so won't show up in a shopping comparison. Yes, just making it shareware would fix that.

I'd guess they'd want to keep it open source: they could dual license it - but there might be a backlash if buyers find out they could have got it free (ironically...) so perhaps some trivial glossy addition to the shareware version, so there's a sense you're getting something for your money... mail you a USB drive with it installed? (very cool). mail you a printed manual? (old skool) or, maybe include a bunch of glossy templates, by a paid pro graphic artist (I like this, because (a). digital, auto-delivery; (b). not code).

I'm assuming they're not in it for the money so it doesn't matter if they only break even (as long as it's not a hassle to provide); it's just a device to promote adoption (as you say).

The point is you never actually ask for money. Have fine print that it's a donation if they do pay anything, but the program works perfectly with no warnings or anything of the sort, completely free. It's all a clever scheme though, and I didn't mean it in any seriousness.

Now, back to my original comment, people tie prices closely to expectations as well as perceived quality.

From Varian and Shapiro's "Information Rules" (http://www.squeezedbooks.com/book/show/7/information-rules-a...):

> Information commodities trend towards the marginal cost: zero, meaning that selling information commodities is not likely to be successful in the long run.

The important thing is the marginal cost, not the cost of creating the thing in the first place.

I'd highly recommend the book.

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