The Four Horsemen of the Tech Recession
stratechery.com
stratechery.com
This notion of people just balling because their stimulus checks is increasingly tiresome, has always been disconnected from reality, needs to die. How far do you think those things went? You know, for normal people? I only ever see this comment from folks (mostly Republican politicians until now) with zero understanding of the subject. Boggling.
I kind of feel this way, but about the free money given to corporations that didn't really need it -- not individuals.
But it has.
I'm pretty sure that has stopped by now too, though.
Edit: https://www.investopedia.com/federal-pandemic-unemployment-p... - ended Sept 2021
There were plenty of posts about small businesses being unable to compete with unemployment because of this back when it was active. In past experience, this is usually what they're referring to.
What's mind mindbogglingly disconnected from reality not understanding that people will absolutely spend a $1k (or whatever) stimmy payment the just like they would a tax return or bonus.
That said, the stimulus bucks disbursed to individuals were absolutely not enough to matter to the macroeconomic picture. It was basically like having a year with two tax return seasons.
The PPP loans, the changes in unemployment benefits, the people using home equity to buy garbage they don't need, all had a much bigger impact.
The idea that pumping ~$800 billion into the economy wouldn't affect inflation and the economy in general seems unlikely.
https://files.stlouisfed.org/files/htdocs/publications/revie...
Not $800 Billion, rather $8000 Billion
What did that do to the economy/prices/inflation and why isn't that headline news every day for 20 years?
It seems likely the blood and treasure squandered on those unnecessary wars held back growth by misdirecting investment money into war rather than being traditionally inflationary (as it was, say, in Viet Nam or WWII).
Now the US is spending on the order of $0 on the UKR war for an enormous IRR, and that's controversial.
You build a bomb, you blow up the bomb, that’s money that’s just gone for good.
You give people money, along with negative interest rates so they don’t just hold on to the money, and that money spread out into the whole economy causing the price of goods to increase because of more competition for a finite amount of resources needed to produce said goods.
That being said, that 8 trillion dollars could have undoubtedly been spent in a more productive manner but that’s not the world we currently find ourselves in.
The bomb is gone, the money isn't. It's still circulating, because the people working for the defense contractors who built the bomb got paid.
The money was also created by the government borrowing it (As the war was financed by deficits). In our current financial system, loans expand the money supply.
There's no significant difference in the impact on the economy between paying defense contractors money to build a bomb that you then explode, and paying them to sit around and pick their nose.
[0] https://www.stlouisfed.org/publications/regional-economist/2...
Their link does not create a bright line, instead it commingled both programs (and any other increased governmental spending).
This is an anecdote, but I feel like it holds true for many small businesses. I personally know a person whose business received $160k in PPP loans and after it became clear that this was not a "loan" but a "cash payout", he went out and bought two new cars and a nice new house. His business was never really at risk due to COVID, since most of his workers work solo in the field where they never have to interact with others (I used to work for him).
The whole PPP process was a shame. There was very little oversight and it's becoming clear now that it was designed up front to be a giveaway to business owners. Businesses should have been forced to pay those loans back.
For reference, the documentation requirements that I see talk about demonstrating your expenses, but I don't see anything about demonstrating you actually needed that money and couldn't pay those expenses yourself. Was that a requirement?
https://www.sba.gov/funding-programs/loans/covid-19-relief-o...
The loans should have been loans -- not payoffs. If a business took a loan and still could not pay it back, they should have declared bankruptcy.
It was entirely a corrupt endeavor and everyone knew it. The subsequent write-offs of the loans was also predictable.
The plan was to get the money out the door as fast as possible to stem the pandemic recession, which is important for stimuluses to work right, based on history. If you add all kinds of paper-work to reduce fraud, it slows down the process.
It was a hybrid in terms of "just send out a check" and a business loan. Perhaps in the future they should just send out a check to all businesses having a threshold # of employees.
There were programs aimed at individuals, though, such as ERAP for rent payment relief.
I am sure similar scenario would have happened for a lot of people and at the same time some businesses would have taken undue advantage of this as well.
But as you acknowledge, I'm sure there was abuse. I'll bet there was a lot of it. Gov't needed to get the money out the door fast, and it did, at the cost of some oversight. Hopefully next time we'll do it smarter.
I'm not sure how much smarter you can get. Fighting fraud and security in general is a cat-and-mouse game with a fundamental trade-off of convenience/expeditiousness vs. preventing fraud. When you need to get large amount of money out to a nation in a very small span of time, there might just be an unavoidably high floor on the amount of fraud that will happen.
Because otherwise you get flooded with all sorts of heart-breaking stories of people who were denied money due to some bureaucratic inconvenience put in place to fight fraud.
Heart-breaking stories aside, it would have taken far more time and money to roll out a new government bureaucracy merely to duplicate a vetting service banks already provide.
More importantly, embedded in your claim is the assumption that comparing two different states with multiple order-of-magnitude differences in size and complexity should be accepted without question. Imagine deploying a solution for a class of 32 students in two weeks. Now imagine you have to do that for an entire university community of 8,000 people including all faculty, staff, and administration. You must account for on-campus and off-campus students; part-time, full-time, and remote employees; labor-oriented staff who do never use computers at work, multiple languages, bureaucratic restrictions to account for, politicking within different departments, and so on. Here's the kicker: you still have the same two weeks you had for the classroom project.
It's an absurd comparison that should never be made without clear disclaimers, caveats and careful specificity about the point.
Imagine if every state issued their own digital ID that was part of a national federated system of PKE. That is, each state trusts the certificate authority in each other state, and the fed trusts the states. There's some mechanism to sign into a federal website and to transfer money to a bank account, or perhaps a mechanism involving showing up to a postal office, who knows. Compare this to dispersing funds quickly but without any verification of identity.
By doing the work up front to be able to quickly verify identities it means that the fraud prevention happens before the fact.
Do you think the $76 billion would have been better spent on digital infrastructure or written off as fraud? And what about the next time there's a need for helicopter money?
You know the DoD is fazing out CAC and there's a lot of very cheap tooling around PKE digital IDs...
1. https://www.politico.com/news/2020/04/07/trump-removes-indep...
Yes. The goal was to put money into the economy to help absorb the shock caused by short-term COVID restrictions that would otherwise have caused businesses to fail permanently. The point was to allow more businesses to "weather the storm" than otherwise. You can argue about the extent to which businesses should invest in "pandemic insurance" (however you want to define that), but the government does have an interest in stability and preventing a vicious cycle leading to economic collapse.
The obvious point was to leverage the resources already available at banks to vet loan applicants and to reduce the total number of applicants in the first place. It's not perfect, but it's a reasonably good idea given the urgency. Sometimes it's reasonable to accept that some people are going to get away with cheating the system. Do the best you can and move on.
Can you imagine how much MORE it would have cost and how much more money would have gone to waste, had the government just said up-front that it was free money for businesses? How much would it have cost the government to arrange for approving applicant businesses? Was it even feasible given the desired timeline?
The net result was that between 2016 and 2021, my compensation increased a whopping 460%. I know I'm far from alone in that as well. If anyone was ballin', it was (IMHO) far more related to the bull market than anything else.
Not everyone lives on the coasts and makes SWE money.
Those stimulus checks ALONE were a TON of money for most people. For the average American just the checks were an entire extra month of net income (avg household = $71K and has two earners). Over 24 months it's $75 of additional spending per consumer per month, which when I was making $30K would have doubled my disposable income per month. Double spending. For two years.
AND stimulus checks weren't even half the of the amount that went out. AND the other half was even more disproportionately allocated to marginal consumers.
Enhanced UI, in particular, played a huge role. Combine that with stimulus checks and a lot of under the table untaxed work (done under the table to keep EUI eligibility), and people were doubling or tripling their net income for a year or more. The general asset bubble and explosion of retail investing didn't help.
It all adds up to a shitload of money in many parts of the country.
I know a good number of people in rural WV who are still living off of savings accrued during 52 or so weeks from 2021 to 2022. I'm willing to bet a much much larger number of people spent the last 2 years returning to the labor force but spending beyond their going-forward means.
I don't understand how you think it's reasonable to compare "a ton", as a large amount of weight, to checks that did not cover a month of living expenses.
PPP loans were a nontrivial amount for businesses.
> a lot of under the table untaxed work (done under the table to keep EUI eligibility), and people were doubling or tripling their net income for a year or more
Which could be done before and after. Suggesting that no new conditions somehow tripled income makes no sense.
> I know a good number of people in rural WV who are still living off of savings accrued during 52 or so weeks from 2021 to 2022.
Probably not.
Literally impossible.
US median individual income is $44,000, net $30K, monthly net $2.8K; stimulus checks were $3.2K. For the Average American, your assertion is mathematically impossible, which means that for a third of America your claim is outrageous.
If you're making $30K/yr, and depending on how you define "living expenses" vs "other expenses", the stimulus checks covered several months of living expenses. (eg: I now consider a car loan a "living expense" but when I made $30K the paid-off beater car was definitely a luxury expense and there were months when I left it parked and relied on a bad bus system because I couldn't afford the registration fees or an oil change.)
> PPP loans were a nontrivial amount for businesses.
Agreed. Nothing about Stimulus and EUI should detract from the massive handout that was PPP. Particularly because Stimulus and EUI at least went to people who weren't already doing very well.
> Which could be done before and after. Suggesting that no new conditions somehow tripled income makes no sense.
No. This totally misunderstands a few really important changes.
1. UI is hard to get, TEMPORARY, and not a lot of money. The additional $ and time from EUI changes the calculus pretty substantially.
2. lots of people already lost their job; picking up under-the-table work when you're already unemployed is different from making the choice to leave a job for UI and under-the-table work.
3. there was a definite social contagion effect.
4. huge parts of the economy shut down but a lot of that economic activity didn't stop. The government shutdowns created a huge black market for entertainment-related services.
>> I know a good number of people in rural WV who are still living off of savings accrued during 52 or so weeks from 2021 to 2022.
> Probably not.
EUI + continuing to work + some gambling wins = you can double your income for a year.
If you own a home and a car in good condition in rural WV, you can keep living expenses below $10K. So if you were making $50K and double that for a year, you're in a place where you can take a year or three off. Or blow a shitload of cash on Amazon or whatever.
Or $0 if you're a SWE living on the coasts.
I realize we make a lot, but we pay a lot in taxes. Just send the $3,000 check to millionaires and don't worry about it. I'm getting frustrated with the government telling me I'm rich while I can't afford an upper middle class home.
I hear ya, brother :)
What is the answer to these questions from people who have understanding of the subject?
First is the Hardware cycle which the author admitted himself is a stretch. Because it is. So not sure why it is there
Second, the slower growth of AWS and Azure, how can we be sure if it's because of increased interest rates and not because of big numbers laws? AWS itself generated $21 billion in Q4 2022. How fast can you grow at that size? I am sure interest rates have some impact but it should not be the sole reason for slower growth. AWS is still growing and very profitable.
Third, claiming ATT fixed a problem that doesn't exist is not correct. Surveillance tracking without user consent is a real problem.
Last, when Jassy said advertising, did he mention mobile advertising though? Mobile advertising does not mean every type of advertising. If there is no data, how does he know ATT's impact was underestimated? Financial Times ran an article claiming that ATT's impact on FB was about $10 billion. There was no link to the research or article for that number. FB ran away with that number and made the same claim. But even if that number were true, FB still has billions of users and generates a lot of money. Plus, they already lapped the period impacted by ATT. What investors were worried about is Mark's obsession with VR and the big investments into the field. The layoff is FB's attempt to be leaner and recover investor trust. So I am not sure why ATT is even in the discussion.
Feels like some of these points are forced...
More generally there are two types of growth - market growth (new customers) and net-zero growth (taking customers from the competitor). The hyper growth generally comes from both of those being quite high, but almost by definition the net-zero growth one will eventually shrink to zero. Likewise, market growth will slow down after all the low hanging fruit for market growth are exhausted (this is generally conversion from existing older tech for efficiency gains).
Jassy himself has said numerous times in public that less than 5% of all IT spend is on any cloud provider.
He also mentioned that Dell has a much higher revenue than AWS. In the grand scheme of things, AWS’s revenue is not that large.
Disclaimer: Jassy is my (skip * 7 manager). I work at AWS.
Who is harmed?
I mainly share this observation because in my experience, us tech types (probably like all humans) have a propensity to subconsciously assume everyone experiences existence in about the same way as we do.
I know you didn't mean it this way, but my morning brain read "high tech industry" as a "high elf vs regular elf" thing and it made it sound pretty funny. I could totally see some sector of tech considering itself the "high tech industry".
I mean... a good chunk of Silicon Valley does live in a fantasy world. ;)
(I wrote this joke and then realized that it's actually probably kind of true...)
Not that anyone losing a job is ever a good thing, but I think a lot of news stories make it seem like a mass-extinction of fullstack devs, when the reality is more complex.
Smartest sentence I’ve read on this site.
But if you are an expert, you notice that Ben is often very wrong in his analysis. Makes you question your trust in the rest of this views.
If not, they seem to fall under the category of IYI which NNTaleb talks about.
And certainly many pundits have predicted a tech recession for a long time. If anything, it's the safest thing to predict, because there will always be one coming in the future.
NNTaleb: Naseem Nicholas Taleb
But beyond that: interest rates are far and above the most responsible for the current hits. This has been the case for a long time - https://seekingalpha.com/article/4479097-the-real-reason-tha.... The other three reasons are sort of secondary to this.
A general theme I see is that, while a lot of businesses did accelerate digitization in various ways (much of which isn't obvious to consumers), in general, a (mostly) post-COVID world looks a lot more like a pre-COVID world than a lot of people expected. Travel's pretty much back to 2019 levels. People who weren't getting groceries delivered or picking up curbside pre-COVID, pretty much aren't today. Traffic is as bad as ever. Etc.
Turns out the official book name is indeed singular, and in fact I tracked this singular usage all the way back to Athanasius 39th festal letter in AD 367, listing the accepted books of the New Testament - "the Revelation of John".
"The Revelation" is also the first word of the book in greek. (Ἀποκάλυψις or apokalypsis)
So thanks for the enjoyable rabbit trail.
Small/mid sized adtech (and eventually any not directly attached to a platform) can't do shit anymore. Small/mid sized customers therefore have to go to the bigger platforms (YouTube and Facebook, notably) to get anything decent.
They're paying more for less, and power is concentrating in the big adtech players further. The flip side is, security of personal data is on average significantly better. But overall privacy seems like a wash or marginally worse, to become significantly worse once monopoly abuses kick in.
Is there some waste? Sure. But certainly no worse (and likely better) than small businesses who don't have the volume who are paying for clicks without proper incrementality based measurement.
They're just a different channel.
That conversation you overheard in the elevator? That 'chance' youtube video linked to you? Some on twitter making an off hand remark? That visit to a website or a physical store with your smartphone?
All of these and more are part of paid campaigns.
I hope I'll never see it happen.
Also, I don't trust any brands. Maybe that's because I was born and live in a post-soviet country but I assume everyone wants to rip me off.
"Fun" fact: (part of?) Tim Cook's incentive plan is based on the delta between Apple and the S&P 500 index.
Just looking at the long-term effects, it seems like covid could be the driver for (healthcare) economy for the decade onwards
I don't blame the over-reaction that happened early on when the pandemic first began and people were unsure of what it really was; but it became very obvious after just a few months that young, healthy people were at minimal risk. Still, the politicians decided that it was a 'crisis that couldn't go to waste' and exploited it to the max. We are still suffering, not from COVID itself, but from the reaction to it.
In case you didn't notice, the over-reaction (including shutdowns) caused the stock market to rise significantly during the first two years of the pandemic so the opposite of your comment actually happened.
Having kids wear masks in school is exactly helping part of the most vulnerable group.
You know who spreads more germs? Fucking kids. You know where large groups of people who are good at spreading germs and often times have nothing else in common outside of that place? Grade schools. A descent population of elementary school teachers are in the upper age ranges.
Grandparents (group in vulnerable range) often take kids to school/pickup and help take care of the children.
So you really need to stop and think what in the hell you are saying acting like elementary school kids should not have been wearing masks.
Outside of institutional investors, most old people are the most invested in the markets compared to young people so they have an interest in seeing the market go up.
To do what? Crash their local economies?
https://www.statista.com/statistics/525353/sweden-number-of-...
It's weird how the 'Sweden does it better' argument always gets meaningful traction when it comes to lockdowns, but never with healthcare, or civics, or gun culture.
Again, Sweeden didn't have a low excess death rate because they didn't do lockdowns, they had a low excess death rate because people in Sweeden acted responsibly to control the spread. Instead of harping on about lockdowns, why aren't we harping on about developing social responsibility, instead?
(The answer is obvious - it's in direct contradiction to the 'ME, ME, ME' culture we put on a pedestal here.)
[1] Even in theory, they were not meaningful. China had meaningful lockdowns, ours looked more like someone LARPing at doing a lockdown.
https://www.healthline.com/health-news/heres-what-happened-i...
That article is from 2020. Today Sweden is 44th in deaths per million, behind the US, UK, France, Spain, Portugal, Greece, Italy, etc (https://www.worldometers.info/coronavirus/).
Meanwhile the US and UK couldn't be bothered to continue lockdowns, France's anti-vax issues became important as vaccines became available etc etc.
From wiki:
>On 18 December 2020, Stefan Löfven, the prime minister of Sweden, announced new and tougher restrictions and recommendations including the use of face masks in public transportation and closure of all non-essential public services.[103] In January 2021, a new pandemic law was passed that allows for the use of lockdown measures and legally limited some gatherings.[104] Further measures were introduced in July and December 2021, such as vaccine passports.
>Reception for the government's response has been mixed. An independent commission was launched to evaluate the measures taken by the government, the administrative health authorities, and regional municipalities.[105] The commission criticized the response of the government, citing among other things a failure to protect the elderly population,[105] that the Swedish response was marked by slowness, with initial measures "insufficient to stop or even substantially limit the spread of the virus in the country," and that the Swedish healthcare system would face long-term consequences due to "the price of extreme pressure on staff and of cancelled and postponed care."[106] In their final report, the commission described Sweden not introducing lockdowns as "fundamentally correct" for maintaining personal freedoms, but were critical of the decisions not to introduce "more rigorous and intrusive disease prevention and control measures" in February and March 2020.[107] https://en.wikipedia.org/wiki/COVID-19_pandemic_in_Sweden
You are absolutely correct. We are suffering from the reaction of selfish people who can't even put on a god damn mask or take a vaccine to help someone else and act like children spouting out "mah freedom!" because they can't possibly imagine doing something to help others.
Selfish prick.
It wasn’t about who was entitled to live but to keep the hospitals from getting overwhelmed and having people dying off from perfectly treatable causes.
I had to get my gallbladder removed during Covid and that wouldn’t have happened if the ER was completely overrun with old people dying. As it was they sent me home to die the first time I went in and the second time I had to argue with them to admit me because they were only taking critical cases.
The very fact they made special hospitals is telling in itself…