Just like you're blindly copying what you read others say about "cheap money", EA is just blindly copying what others are doing and laying off employees
No business is an island.
I'm not parroting what I've read others say. I'm sharing my LIVED EXPERIENCE from a company that is like EA. Go look at my profile and look at the news.
This place used to feel like we had some nerds that really wanted to understand business. I'm sad that acknowledging simple macro trends is not considered table stakes anymore.
"The current macroeconomic environment is tough, and as a result, companies are still spending but they are taking a more conservative approach to software investments and are taking more time to make purchasing decisions."
Do you think that's a lie? Some businesses have stacks of dollars, but how fast will that value be inflated away? Some businesses don't and rely on credit to cover payroll. That just got more expensive due to interest rates. Our CEO said "Businesses are making decisions differently". Or said another way:
The Macro environment has effects to all businesses.
Your original dunk attempt was "everybody, myself included is just parrotting and blindly following" and I attempted to explain to you that everyone is in this new macro environment (driven by the changes to cost of money, as well as increased money supply) together and is adjusting business expectations accordingly.
Do you think interest rates and the influences to macro env are not the driving factor impacting business decisions right now? Would love to hear what your contrary thoughts are beyond "business leaders are all sheep, myself included".
- What is driving the cost of salaries raising?
In "normal times" you might say competition and cost of living. Cost of living is... inflation.
Right now, with our increased money supply, inflation is much higher than it's been for a while, and that is a large driving factor for people demanding more salary. This is where interest rates play in to layoffs. This concurs with your points that laying off people could create more competition in the market which means some folks may consider a job for slightly less pay vs. no job at all.
But you've run circles trying to pretend like interest rates are not a factor in this, and I'm not gonna waste any more of my time explaining that to you. There is enough commentary from others here and everywhere else, you are just refusing to believe it.
Inflation is being driven by corporations who have been increasing prices since the pandemic, they've had record profits at the expense of everyone's cost of living [0,1] and even landlords have been colluding [4] to raise rents on people even though they can't afford it, I mean where will they go as one property management company asked in a business call [3]. Even Forbes doesn't take the opportunity to blame the fed in this instance, which is kinda funny to me, but being a mouthpiece for capital they of course point the finger at supply constraints with some fancy graphs [2].
[0] https://abcnews.go.com/US/record-corporate-profits-driving-i...
[1] https://abcnews.go.com/US/record-corporate-profits-driving-i...
[2] https://www.forbes.com/sites/georgecalhoun/2022/09/30/what-i...
[3] https://www.bloomberg.com/graphics/2022-evictions-monarch-in...
[4] https://arstechnica.com/tech-policy/2022/10/company-that-mak...
And this is all ignoring the fact that you insinuate that your own conclusion is wrong with the line :
>In "normal times" you might say...
An increase in the money supply.
The Fed did that. I’m not arguing the morality of it. It’s what happened. Do we agree the Fed printed more money?
The way the fed combats that decision to increase the money supply is an increase in the interest rate. Do we agree that the way the fed decreases the money supply is raising interest rates?
Everything you point to, all of the sub effects and greed, are because more money exists in the system now. People are spending $7 on eggs instead of EA games because of the egg co’s greed, but that greed is fueled by more money existing now. There is some “natural” higher price that I’m sure you and I could agree on because more money exists and we both agree — some companies are being greedy. That’s not the cause of Inflation.
If the fed were not raising the interest rate, businesses would not be under the pressures they are to work differently. Some businesses don’t need to raise prices but are being greedy. Others can’t survive so they are making changes to attempt to survive.
You: look at all these businesses that are making decisions that are making inflation harder felt for no good reason! It’s greed!
Me: yes, they are being greedy. The only reason they can attempt this is more money exists. The fed will slurp that money back up by raising the interest rates and we are all left to pick up the pieces.
My premise: if the fed keeps raising rates, that it will have continued deeper effects on more businesses. Do you agree?
(And my follow up premise: the fed have to raise interest to fight their prior money printing but if you disagree with that I’m really interested in learning how you think the Fed solves it.)
Or are you still convinced it’s just greed? (I agree greed is a factor, but that’s a result of the feds actions, not the root.)
https://fred.stlouisfed.org/graph/?g=11EzJ - money supply. Notice it starts shrinking Mar ‘22
https://fred.stlouisfed.org/graph/?g=11EzX - interest rates. Notice it start’s materially raising Mar ‘22
https://www.pbs.org/newshour/show/why-corporations-are-reapi...
For most technology companies, salaries and compensation are one of if not the top line item in the budget. And during a time of cheap money (which is objectively true - this is not someone regurgitating other comments), companies invest in new initiatives.
So when headcount is the top line item, and new initiatives are less desirable as capital becomes more expensive…it’s pretty clear that there’s a small set of viable options to make the math work again.
When interest rates drop, safe investments (such as bonds), become less attractive. The yield on those investments is not high. This means that excess capital gets reallocated towards riskier bets (such as stocks, or venture investing) to try to yield a return that way. More speculative bets happen as a result of free flowing cash to high growth organizations. Companies are willing to lose money in exchange for market share because investors are willing to bet on companies that are losing money on the off-chance that one of them yields a 100x return. This game becomes more attractive when other means of growing investments are harder to come by.
Now, interest rates are higher. I can throw money into a savings account at 4.5% APY. A potential 7% return by throwing it all into high growth stocks (which also carry significant downside risk) is comparatively less attractive. I'm now much more incentivized to invest in companies that are stable and carry less downside risk. Those companies are the ones that are spending more responsibly and generating positive cash flow.
If you do understand that higher interest rates suppress higher risk investments, then there's a direct line between that and slowing VC funding and depressed investor sentiment, which is ultimately what's feeding these layoffs.
The indirect link is not always true. Interest rates can be risen in a bull market. When done slowly, this effect is less pronounced. In this case, we massively shifted rates in a short amount of time during a period of high inflation.
You say all of this about economics like the field isn't one of the worst verified "scientific" fields out there
Public markets operate on opinions and feelings more than science. That sentiment of the markets is not high right now is clear. Look at every publicly traded tech company’s performance in the last 12 months.
That's nonsense. Do you understand what the scientific method is?
I believe you also understood precisely what I meant, and are trying to form a gotcha.
In any case, I’ve lost the plot on your point here. That interest rates impact spending and corporate decisions is verifiable fact, using the ever-elusive scientific method which you’ve so helpfully educated me about. If you truly believe in this method, I’d suggest you exercise it and watch how interest rate changes shift economies and markets every time they happen in history. It just so happens to be precisely the exact reason why the Fed moves them in the first place. It was widely discussed when rates began rising that the impact would likely be an increase in unemployment. The Fed specifically addressed this point, and stated that while it was not an explicit goal to increase it in this case, it may happen.