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Comment by ptero | Hacker News Reader

Downturn is still very young. Many unprofitable companies can continue to execute on their previous funding rounds which, raised in the macro environment of zero-cost money, can provide for a year or more of runway. Should this downturn become a fairly severe recession, many more jobs may be hit affecting hiring in skilled tech as well.

Not claiming that this will happen, but many economists agree that it is fairly likely. So even if you are in a very enviable position in a skilled tech role and are inundated with recruiter calls I would prep: take stock of your finances, determine your personal runway (how long can you maintain current quality of life should your paychecks stop tomorrow) and plan accordingly. My 2c.

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I think a lot more interesting things are going on with the "tech recession" than meets the eye.

Unlike the crash in '08 and '01, the economy now has a hard dependency on tech. There is no "going back" to the world of the past. Smartphones aren't going to be "un-invented". People aren't going to give up online shopping. Businesses aren't going to give up targeted advertising and start buying ads on AM Radio or something. If you look at the big picture, and barring any wild developments like general intelligence AI, the demand for skilled tech workers is only going to increase.

I don't think tech workers are invincible but I think tech is now a requirement for economic growth, which poses a problem: Business leaders and investors have been really ticked off by the tech labor shortage. They tried to fix it with H1B, they tried with all these "learn to code" programs. They tried boot camps. They keep trying, and failing, because being a software engineer requires a degree of intelligence and critical thinking and there will always be a limited supply of that kind of labor.

My pet theory is that some portion of the layoffs are being engineered to undermine the remote work revolution, scare people into accepting lower wages, and get back to "how things were". But the economic need for tech is so large and the supply of labor is so limited I don't see much changing.

I feel that there's lot of bubbles which will burst and release plenty of programmers to the job market. It's already happening. And those programmers will not find work, not all of them. We need smartphones, but we don't necessary need all those "old moms social network" apps.

During rich years plenty of people came to the industry. Plenty of them are smart and capable, so competition will lower salaries and push some people from their levels.

And god save us if this AI thing will actually take off. It's dumb but it's progressing.

> And god save us if this AI thing will actually take off. It's dumb but it's progressing.

I don't see how it does anything but progress. I obviously have no idea how long it will take before it can replace a software engineer but after playing around with ChatGPT and seeing the code it can create, it's definitely progressing faster than I thought it would.

I think it's a mix. Companies reacting to markets and targets are cutting costs. Other companies are using the economy as air cover enact employee hostile policies and changes.

For example, when things start recovering, I'm curious how quickly companies will rush to increase comp back to recent levels, bring back cut benefits (or reduce their costs that have increasingly been passed on to the employee), change WFH policies, etc.

My gut says they will only do it when labor has leverage again, which means these companies will try to put their thumb on the scale as hard as they can to make up lost ground and then some.

sounds more like history repeating itself than a pet theory

https://www.washingtonpost.com/news/the-switch/wp/2014/04/23...

There’s a barrier to entry here for businesses to enjoy tech continuum.

Clean books, squeezed operations, cash reserves, and providing critical internet infrastructure you’re likely & able to discount at scale right now as well as foreseeable future.

Most non-tech businesses get by with, and prefer, the platform world that spoon feeds them.

It’s either a good time to be Google, or a self-funded startup. Not much in between.

Those of us that have been through this before won’t be suckered in by it.

Where I am, 2008 wasn’t too bad in tech, but the aftermath of the dotcom bust was like the end of Infinity War, just there one day and then gone.

No-one expects their career to end at the gilded hand of a giant purple alien.

I've been asking around about the dot com bust, trying to get a better picture of it

The problem is that most of the people I've talked to were employed at huge, profitable companies that made actual products. So it was just a blip for them.

I was working on web development after school and got laid off, but all that meant was I had to eat the food my parents made for me instead of eating at fast food places with my friends..

I've actually met a couple of people randomly on flights that worked as software developers until the dotcom bubble burst. They both said they couldn't find anything the following years so they changed careers: one became a carpenter and the other ended up as an accountant.

Finding work was not all that bad depending on your skill set. In fact I started doing consulting after leaving my startup. Was one of the most profitable and enjoyable times of my career. Having been through several downturns in tech I tend to view them as shifts. Early 80's personal computers -> late 80's early 90's connectivity (modems) BBS networks -> 2000 Internet etc.

Understanding and adapting to those changes are key. Next up -> IOT - computers in everything - applying AI - Biotech - ? Generally something expensive has to become cheap for the masses. Hayes modems took $1200 - $2000 devices down to <$300. Ethernet made LANs cheap. Twitter made stupidity availability massively scalable for zero dollars:)

I got laid off twice during the Dotcom bust. Remember that it dovetailed into the post-9/11 stuff too. In Q4 2001, there was just nothing. Intel and Nike were advertising web development positions for $12/hour (not a typo) and were getting flooded with applications. I ended up cold-calling various local businesses, got a freelance php/mysql contract for $20/hour, found a different perl/oracle contract for $55/hour in May of 2002, and worked my way back up from there.

Wow, $55/hour is pretty decent salary in most of the US today, kudos.

For software development, though, $55/hour doesn't seem great in 2022. I was getting $50/hr contracting back in 2002.

Yep I was getting $57/h in the spring of 2001, then the party stopped.

What do you think you’d get today for a similar contract position if you had to guess? Really curious

Sure, but it was framed as a rebuilding step 20 years ago and inflation adjusted its like $165,000/yr. Making that in the trough of a recession after a lay off seems great to me.

It was 1099, not W2. But yeah, that contract is when things started feeling "normal" again.

I got laid off about a week after 9/11 though the writing was on the wall before that anyway. I consider myself super-lucky to land a job in about a month after a lunch discussion I had with someone I knew about 3 days after I was laid off. Nothing else, including discussions with other people I knew, was leading to anything at all.

The workers hit the hardest during the dotcom bust were people who recently skilled-up in HTML/CSS and basic web design. There was a massive hiring spree for people with these skills and a huge number of those jobs completely evaporated by 2001. Many of those people ended up just leaving tech all together.

Those jobs never really came back as websites became more "Dynamic" and CMSes began to proliferate: So rather than hiring 20 web developers converting copy and design to websites you could hire a 1-3 engineer(s) to customize and run your CMS and non-technical people can provide the content.

I had just switched from IBM 370 mainframe assembler to Java in mid-2000, worked for several months at iXL, a then-typical consulting company with high margins and correspondingly high "bling" -- elaborate office furnishings, massive plasma TVs in the conference rooms, massages, beer cart Fridays, et cetera. That got crushed in the dot-bomb, followed soon after by 9/11. I managed not to have to return to my former vertical (airline reservations), but I definitely had to scramble to stay relevant. I work at Amazon now (usual disclaimer; opinions my own, etc.).

Cisco, EMC, Sun... were all huge (and formerly profitable) companies making actual products and got absolutely hammered when dot com busted. Personally I was very lucky--got a job with a small firm whose CEO I knew well and was (at the time) still doing OK though it went through a fairly long rough patch.

But no small number of people, including many who had worked at large firms, basically left tech.

I decided to leave my job of 8 years in July of 2001 (the layoffs in tech had started by then, but really built up momentum a bit after that). At the time I was doing software development for a semiconductor company and it just seemed like after 8 years there I wasn't going anywhere and we'd recently paid off our house so I figured, what the heck, I can find another gig in 6 months, I'll take some time off. When I started looking around in Jan '02 it took several months to find a 3 month contracting gig. After that was over I decided to go back to school and get a masters degree which I did. Had a few conctracting gigs after that but steady work didn't return until '05. So yeah, my timing wasn't great, but I did get my masters degree.

> I was working on web development after school and got laid off, but all that meant was I had to eat the food my parents made for me instead of eating at fast food places with my friends..

A good reminder that economic downturns can be actually healthy for people, families, and the environment. With less money, people will drive less, travel less, drink less, eat less meat, spend more time with loved ones, etc etc

The dot com bust was a bit of a perfect storm, lots of people weren't needed because Y2K was over, lots of dumb ass startups with no product and no revenue disappeared and finally 9/11 gave everyone an excuse to chop heads because the economy was surely tanking. The first two were going to happen no matter what an the third just amplified the situation. Through all of it there was still hiring, the week I got hired the company that hired me laid off 12,000 people.

Kinda interesting that this recession was also accelerated by a violent geopolitical situation.

I don’t work in web development (and didn’t then, either), so this may vary from what others are saying. What I experienced was that there was a downturn in 2001. I was working for myself and had a contract with a Fortune 50 company. They kept us on for about 6 more months after 9/11, then let all of the contractors go. But I had other irons in the fire, so it was fine for a while.

It really hit hard about 2 years later in 2003, when all non-web contract work dried up and clients started having trouble paying for work you’d already done. That was really brutal for me, personally. I was also selling some software in addition to doing the contracting. I got really lucky and someone saw my products and wanted to license them for their particular niche. I was just barely able to hang on until a year later when things mostly returned to normal.

If it hadn’t worked out, I probably could have taken a job doing some development work I hated if I really had to. There were still openings, but they were at places like Accenture, or whatever a small-time version of them would be.

One thing to keep in mind is that in the Dotcom bubble, the web was brand new. On the talent side, we were still figuring everything out. Most software engineers were used to either desktop app development, or expensive enterprise server development. Most designers were print designers, with UX design having not really emerged from the early human-computer interaction days where it was still more technical than humanities.

At the same time, the web had only proven that regular people were willing to try it, but there was no meaningful consumer or advertiser money flowing through it for another ten years. So basically you had a perfect storm of a bunch of people trying to figure out something from scratch and massive over investment from VCs. When the music stopped it was a bloodbath because there was so little actual revenue.

I don't see the same thing happening now because the web is firmly embedded in our lives and someone needs to maintain all this code. I'm honestly more worried about environmental threats and the sustainability of our way of life than the economy per se.

It's a lot like the current crypto scene

> So basically you had a perfect storm of a bunch of people trying to figure out something from scratch and massive over investment from VCs.

This could describe today, with crypto (tech still looking for solutions to problems that aren't scams), AI (great potential but mostly in a gimmick phase right now), and VCs coming from a decade of record-low rates causing extreme valuations across the board ($5M seed rounds, etc).

If you exclude Big Tech (which also took a beating but is managing), the smaller tech scene is ripe for a disruption of a very uncomfortable kind.

Collectively crypto failures might have lost more money than the dot com crash

> crypto, AI and VC

I’m pretty happy for all those sectors to tank, they don’t produce value that people would pay for, while we struggle finding competent people for product startups generating 500k per employee.

Pay them more and you won't struggle.

Hi, union representative!

Do the hard tasks and I pay you exactly this amount. People are, really, so lazy. Yes there is some jQuery in the app, well it’s not the bane of the world, and yes we gotta interact with customers, horror, well deal with it and I pay you exactly the revenue it generates.

But of course everyone wants to have K8s and microservices on their resume, rather than building something people want.

I’ve said almost that to my senior, but he keeps hating the jQuery app. It’s fine with me, but don’t complain.

This makes sense in terms of VC (not to mention broader crypto investors who got hung out to dry by SBF's ponzi scheme), but as far as employment is concerned I am not convinced that crypto represents anything like the marketshare of web startups in 2000.

What “unprofitable” companies are you talking about? Most of the layoffs have come from very profitable companies that trimmed a lot of fat they acquired.

Meta, Amazon, Stripe, Twilio, Salesforce etc are all profitable companies. That’s where the majority of non crypto layoffs came from.

While you're correct about most of those, Twilio has been an epic loss-making machine its entire existence.

$1.1 billion operating loss the past four quarters on a mere $3.6b in sales. $915m operating loss fiscal 2021, $492m operating loss 2020, $369m operating loss 2019, $108m operating loss (on $650m in sales) for 2018, and so on. They have always lost money and are currently gushing red ink.

It's definitely part of the reason their stock has collapsed in such a dramatic way (a particularly unsupported valuation previously). While even most highly profitable tech stocks have dropped by a lot, Twilio's drop of ~89% is largely reserved for the group of very unprofitable extreme valuation tech stocks.

Profitable big tech layoffs are, in my opinion, a different phenomenon. Those companies are trying to get their PE up to be competitive with fixed rate assets. Otherwise, their share prices will suffer even more. For example, Google's PE of 19 is OK in the era of a free money, but not so good when rates are at 5% and defensive sectors yield 7+%. But the key thing is that the layoffs are not an existential question for them -- they are profitable and can continue to run for years even if their shares suffer. It would be a bad business decision, but will not lead to a quick death.

I was talking about smaller, unprofitable, non-market dominating firms. If they are not profitable they will have to raise or die. And raising in the environment of 5+% rates and poor overall tech stock performance may get brutal. Currently, many of those companies still have significant runways (because they were able to raise a lot earlier), but this will start running out in the next several months. This may already be starting: two of my friends who work in such small companies (robotics and lasers) are sensing job uncertainty ahead. My 2c.

It's not an existential question for the companies, but it could be for the people making the decisions. If shareholders aren't happy with the company's performance, the CEO might find themselves getting replaced.

Isn't that exactly the parent's point?

They are saying that many unprofitable companies haven't done their layoffs yet, because they're still coasting on huge funding rounds from 2021. Thus, there are more axes yet to fall.

Not sure how much stock I actually put in that argument -- lots of VC-funded companies are already doing layoffs, too -- but I think you're sort of agreeing with them.

If a company isn’t doing layoffs now, when there is basically a free pass PR wise, they must be extremely over confident or delusional.

Not that you’re wrong, but aren’t you kinda describing the archetypal VC-funded startup founder? :D

If you're describing it as a PR pass they don't have one.

Profitable, but not consumer facing, advertising driven revenues may be volatile, depending on how sophisticated a thief the company is.

Here is graph visualising the layoffs: https://www.visualcapitalist.com/visualizing-tech-company-la...

November appears to be the exception where those profitable big company layoffs dominate but it's still not by much.

The long tail is the king, as always.

The graphs aren’t very accurate. Reports 8k twitter layoffs???

The source (https://www.trueup.io/layoffs) says 3750 FTE and 4400 Contractors were laid off. Which looking around the web seems accurate.

Twilio is NOT profitable

Carvana, Vroom, Bird, Helbiz, FuboTv, Shift, Wework, 23andMe to name a few, theres many more.

Their stocks are either in or dangerously close to penny stock category.

IMO One of the best times to do a startup is during a downturn. Startups typically don't even have a product for some time after beginning. One of the worst scenarios is introducing your product at the beginning of a downturn. Adoption rates tend to be slower then because corporations are reducing spending.

* If you can find funding or self-fund.

One can always look at recently funded startups. Doesn't have to be your own. VC don't necessarily pull back on funding during recessions - using the same reasoning that it is a good time. Starting a new fund can be a problem during that period since many investors become risk adverse.

I still hear a lot of conversations that assume current trends are temporary, that we'll return to an era of free money soon, and we can finally stop worrying about this silly "profit" nonsense to focus again on growth which is much more fun.

I won't believe this is near over until I see worldviews fundamentally change.

There is a lot of room between “era of free money” and 5% rates.

Yes, but every 1% (maybe even 0.5%) of interest rate is it's own metaverse.

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