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Comment by thrashh | Hacker News Reader

I remember COVID when tech stocks shot right up, probably because everyone was stuck having to use tech and other companies looked in free fall

Then COVID ended and now we’re going back to normal, and tech stocks are also going back to before

If you change your lifestyle because you got a $100k windfall, you are going to realize that your income never changed. Companies that hired because they thought their COVID-inspired valuation was permanent were mistaken

I’m currently working for a tech company that was negatively impacted by COVID, did not get a random influx of cash and so did not hire and so currently does not have to lay anyone off.

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The undercurrent of these discussions always bothers me. Wrong decisions are never made, they're always justified by current circumstances or hypothetical future circumstances. Past decisions were never wrong, either, even if current information shows them to be. (Who could have known?)

2021: "we have to overhire! The economy is great and otherwise we'll lose future talent!"

2022: "we have to fire! The economy isn't great and everyone else is firing!"

(In writing this I realize the validity of said decision doesn't matter nearly as much as the perception of the person that made it. Much like Twitter, it isn't just what you say, it's who you are + what you say.)

I remember people loudly exclaiming that people wouldn’t be buying Peletons once people started going back to gyms but the “who could have known?” sentiment appeared anyway after the stock had crashed.

I think Peletons were just a fad. Who wants an exercise bike with a monthly fee? That's a bad business model.

NordicTrak is doing it too. Businesses love subscriptions, especially for one-time/infrequent purchases - if Sealy could come up with a mattress subscription model they would.

$19/mo: https://www.eightsleep.com/sleepos/ (YC-S15)

Yep. Look at the fate of nearly every piece of home exercise equipment sold in the last 50 years. The vast majority fall into disuse pretty quickly. Who's going to want to keep paying a monthly fee for something they don't use? Hopefully it's easier to cancel than a gym membership.

IOT was largely leveraged as a get rich quick scam... You pay a premium for a device that expires or becomes obsolete one year after it is sold.

There is no need for a toaster to be connected to WiFi, yet somehow, it's fast becoming the only option available.

Cyclists and runners like paying monthly for fitness apps with a social networking component so it’s not a completely dumb idea. I enjoy paying for Strava for example and to be honest don’t need any new features. They just need to keep it working as it is.

You will love the new proce then… For me it needs to be more like Zwift to justify paying for it. Even Zwift is a mediocre game and if you compare it to other non sport games, the subscription price isn’t justified in any way.

I think an even bigger factor is that people had a shit ton of free time during the pandemic because people were either laid off or working remote. On top of that, a lot of activities weren’t possible anymore.

What do people say they don’t have enough time to do? Work out

So people worked out. Exercise equipment became out of stock, but Pelotons I don’t think did. Hiking trails and campsites got packed too. People were doing all these activities that they never did before the pandemic. The market for exercise — and Pelotons — ballooned.

But obviously once the pandemic ended, people would get jobs back and it was likely that a lot of jobs would go back to the office. People will easily go back to prefer going out instead of working out (not making a value judgement here - you do you). Now no one has time to exercise anymore and the exercise market has shrunk back to “people who make time to workout and want to invest in doing it at home,” which is tiny. The subset of that market that is willing to “drop a few Gs on an exercise bike” is a sliver

Peloton's fate was obvious to anyone who cared to look.

Some people simply don't care if there is a value proposition because they are investing in market sentiment, not fundamentals.

Other people simply don't bother scrutinizing the value proposition because they dont care about their investment and are comfortable gambling.

I read their Series F pitch deck and the projections were clearly detached from reality. Targets were to basically capture more revenue than the entire gym sector and home equipment sector.

Folks who went for the series F pump and dump lucked out bigtime with the pandemic

I'm not saying it is "wrong," I'm just pointing out that world events matter and people should really pay attention and remember what's going on. With COVID, a lot of new stuff happened. We started dining outdoors. Was it going to stay? Maybe, maybe not, but don't just assume it's the new normal.

Just like right now, we still have a war going on, US became the world's natural gas exporter because of the war, how supply chains are still recovering from COVID, and things like that. Suddenly, everything makes a lot of sense with context

"I'm just pointing out that world events matter and people should really pay attention and remember what's going on"

This is obvious and extremely vague.

> Wrong decisions are never made, they're always justified by current circumstances or hypothetical future circumstances.

There are plenty of examples of managers who are simply bad at making good decisions.

Full disclosure: I've worked for a few.

At one company, two consecutive CEOs took the company from turning a fairly healthy profit into voluntary liquidation in a handful of years. The first one quit after a fractious meeting with shareholders, and was replaced with the second, who wasn't any better. I jumped shortly before the liquidation was announced, it came as a complete shock to most of the rest of the staff.

My view is that it's sophistry trying to claim all poor decisions were somehow justified at the time. Some people - including managers - are just inept!

Ineptitude is high on the list. But I would put misaligned incentives pretty high on the list of reasons too. So many executives make decisions that make sense for their bottom line but that may not be good for the company and shareholders long-term. Same goes for the directors. Who cares if you create a long lasting, stable company when you could just win the lottery now, cash out and move on to another conquest.

I still think it’s mostly ineptitude. Hiring a bunch of people only to fire them isn’t gaining you anything.

People are still on a bell curve and most executives are somewhere in the “very average” area, like me and most people. And 50% of people are worse than average.

I guess I'm not sure what you're referring to here. Almost all the big tech layoffs I saw in 2022 came with an admission from the CEO that, hey, we did make the wrong call and we wish we'd made the right one. When people talk about past conditions, they're just explaining why the wrong calls seemed reasonable at the time.

I'm thinking out loud...apologies to everyone in earshot. :)

More trying to resolve the dissonance between high-status positions and the ability to discharge accountability.

So you don’t think it was wrong to assume that the prosperous and highly unusual scenario of the Covid effects would be around for an extended timeframe that legitimately would impact future cash flows that validated the huge increases in the value of almost all tech stocks? It made absolutely no sense to me and many other investors, but so many people drank the koolaid anyway, buying more stocks, hiring more people, pumping up the fervor, etc.

The fact that you're describing it as "drinking the koolaid" goes to show that it was a questionable assumption. Certainly, the worldwide pandemic created an uncertain atmosphere. On the other, everyone knew that the Fed was pursuing some very drastic actions. So why did so many tech companies simply go along with it? Seems like a lack of foresight and lack of willingness to challenge the status quo.

You were right only because covid turned out to be pretty mild (so far) and things pretty much went back to normal. If we were still living in isolation then these increased valuations for Zoom etc made sense.

Zoom stock went from $67 to $512 from Jan 2020 to Oct 2020. Zoom earnings reached around $1 per quarter EPS or $4 per year during its short heyday in 2021-2022. It would take a century of earnings to be worth that price.

It made perfect sense from an investor‘s point of view.

Buy the stock low, sell it before it drops.

You’re usually investing in large public companies to make money, not “support the long term cause.”

Also it made sense for the time period. Say you already had $10,000 invested in a company that sells restaurant supplies. Are you going to keep it in the company for the entirety of COVID while your money evaporates or put it into a tech company temporarily and then move it back afterwards?

It's not so much COVID, it's that essentially what has happened is that the cheap VC investment and loan money dried up, as did the high valuations. That's the simple explanation.

It's been an entire generation of cheap or free credit. There are people who are now adults who have lived their entire lives well beyond their purchasing means because financing was close to zero, letting you live in a bigger house, drive a fancier car and all lifestyle aspects beyond what you could purchase outright. This is not a judgement call but just an observation, and now that interest rates have risen (quite modestly IMO) we're seeing the impact on just about everything. VC funding was not immune and despite the article downplaying cost savings, when employees are your major cost by a margin of 5-10x, lay-offs make an big impact on how long you can stay alive. The costs of lay-offs are overstated here based on my experiences on both sides of a lay-off.

The article might be over-arguing that layoffs are always bad, but it definitely raises responses to the idea that layoffs are always a good tactic:

> Layoffs often do not cut costs, as there are many instances of laid-off employees being hired back as contractors, with companies paying the contracting firm. [...] Companies sometimes lay off people that they have just recruited – oftentimes with paid recruitment bonuses. When the economy turns back in the next 12, 14, or 18 months, they will go back to the market and compete with the same companies to hire talent. They are basically buying labor at a high price and selling low. Not the best decision.

Certainly it's a case-by-case basis, but I definitely remember companies such as Patreon doing layoffs in early 2020, only to be hiring again a few months later in the year.

I think COVID profits drove the hiring

But it really comes down to the company.

For example, Tesla’s valuation was probably more dependent on that kind of investment because their valuation was based on the idea that full self-driving AI was achievable. Whereas Google isn’t because no one is waiting for Google to do anything amazing

But I pointed out COVID specifically because it seems tech companies overall benefited from the pandemic. Even I invested extra in tech companies during the pandemic because every other industry was physically being impacted by the virus.

If everyone trips and falls during the race, you’ll get first place, but it wasn’t because you got any better. But wait long enough and everyone will catch up

If everything back to just before pandemic, Amazon has 160K of firing need to happen. Recent numbers are inadequate.

> If everything back to just before pandemic

Of course this isn't the case, we're in 2022 and Amazon has expanded it's footprint. Your point is valid but the assumption is naive and incomplete.

current value = pre-pandemic value + actual growth + pandemic growth

Just because pandemic growth is now 0 doesn’t mean Amazon didn’t have actual growth too

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