What the The end of 0% interest rates means for software engineers

https://ogletree.com/insights-resources/blog-posts/u-s-emplo....

The fear, uncertainty and doubt over the economy serves to make everybody else fear that the pie could disappear completely. And so they're happy they still get scraps, leaving enough for those CEOs - for now.

Lately I keep thinking about Mr Buffett's remark about class warfare...

Exactly. So we had ~14ish years of effectively 0% interest rates. That's never happened before in history. Now that we're going back to normal rates, we're discovering that some things we did when rates were 0 aren't actually feasible anymore.

That's what ZIRP is. It's a decade and a half of 0% coming to an end.

What we are really seeing is massive extrapolations from 2020 and 2021 being completely off and companies having to manage more realistic growth expectations.

Interest rates dropped from previous highs in 1990 and have stayed down. The current interest rate is about equal to the mean and median for the 90s, and is near the peak of interest rates we've seen in that time.

45% of the US population is age 34 or younger. So for nearly half of the country's population, interest rates are nearly as high as they've ever been.

So calling it "not very high" is misleading; you're comparing now to back before nearly half the country was born.

Tech CEOs don't control the interest rates. The interest rate effects their ability to get free and cheap money.

Is there some article that coined the term or uses it prolifically? I liked your explanation of it.

Cloud was a ZIRP, unless they drastically change pricing and billing.

So yeah, definitely got harder I'd say.

Unemployment can be low statistically, but for those 10s of thousands who find themselves unemployed it seems like a rough job market.

I have posted this comment before on HN, but ~8-9 months ago we posted a job for a lead engineer at my company - we got 3 applicants (this was for a fortune 50 company, and comp, while not FAANG, was very respectable with good benefits and decent bonus and stock options to boot).

~5-6 months after that we added another exact same position, and advertised it in the exact same places and got over 300 applicants - many ex-FAANG which we never used to get.

So based on my personal experience, there are a lot more people looking and applying for jobs and a lot less jobs to choose from - and like I said, if you are dead-set on being remote, it is even harder - my most recent employer (100k+ employees) will no longer allow hiring managers to interview people who state they are only looking for remote (they don't have to, plenty of people are willing to show up at the office because they have rent/mortgage and bills to pay).

Absolutely true. It's the worst I've seen. I'm looking to fill 5 positions at our place and the scene is just sad. People out of work since feb-june of last year, highly senior engineers unable to land interviews because they want fully remote, leads having their work outsourced, heads unable to find head positions and having to settle for senior roles.

The worst ones hit are the ones that have spent a decade working in ibm/oracle/vmware stacks, now, due to layoffs, entering this new k8s dominated ecosystem, where they're finding their skillset to be undesired, even by big institutions as those have too begun migrating to k8s/cloud.

You would not think that there would be much difference between a city with a 50-50 gender ratio and 52-48 (theoretically). But if you assumed that 80% of people are in relationships (1-1), and 20% are looking, suddenly that 4% difference turns into 33% more of one gender than another (hypothetically with 100 people, it would be 12 of one vs 8 of the other). So the culture between those two similar looking cities will be completely different.

A similar thing happens with jobs. Going from 99% employed to 98% employed without changing number of jobs available can completely change the employment market dynamics overnight.

Now a 5% interest rate seems high, since people were used to the ZIRP.

I lose so very much time to not just the ceremonies, but to wrestling-with/losing-things-in all these bafflingly complex tools like Jira or Asana or "Azure Devops" and such.

Most places I've been use Github or Gitlab. The issue trackers there are fine. They're close to the code, and in a site I'm already using. They're easy to have conversations in. They work well with built-in review processes, and with pull/merge requests. They don't permit enough strict structure that one worries about smashing some PM's carefully-constructed sandcastle by just trying to use them, but have enough filters and tagging and such that you can apply every bit as much logical structure as I've ever seen in Jira and friends, if you want to, it just won't also make it horrible to use when you do.

I wonder sometimes what % of productivity companies are losing by letting PMs pick where tickets & communication about tickets live. Plus the extra cost of the tools themselves.

The list makes sense from the bottom, where the goal is to get stuff done. The list makes no sense from the top, where the goal is to make sure the right stuff gets done. Without a lot of those, you end up either with:

- 1000 employees moving in 1000 directions

- 1000 employees working from home doing nothing

... or similar pathologies.

Organizational alignment is hard. I would have written a similar list to yours two decades ago, but right now, I see just how much effort it takes to make sure things don't go in the _wrong_ direction.

The good stuff on your list to eliminate are management layers, excessive features, and promotions / performance reviews / stack ranking.

Most of the things designed to provide communications, alignment, and transparency (e.g. documentation, spreadsheets, blog posts, many types of internal tooling / dashboards, backlogs, retrospectives, minutes, agendas) are very much necessary evils. There might be better ways to accomplish some of those same goals, but if you just cut them, organizations break, and break very badly.

You definitely can (and should) do without those at 1-5 people, and possibly up to 30. It's worth noting "people" here often includes external stakeholders, such as investors.

Sit down with your risk or compliance officer for a couple of hours and thoroughly explain the ins and outs of your complex CI/CD pipeline to them. Your whole team will be up shit creek by end of the week.

But we don't have those discussions.

Yeah, I think "no more ZIRP" is a stand-in for "the economy is changing". And, that much is true. We just went through record-low rates for a record length of time, straight into the fastest hikes in history. That has repercussions, and I don't think anyone knows what they will be yet (oh and there are some interesting geopolitics as well).

But I can't help but think most of these layoffs are also a return to "normalcy". The pandemic job market was, literally, insane. But even before that, it was hard to get development work; prices were astronomical if you could even find people at all. For the tech ecosystem as a whole, there are advantages to salaries and wages coming down. That shifts around cui bono, but it allows for more ideas to see the light of day...maybe.

All this is to say I don't think it's doom and gloom. We'll have a period of transition and realignment, but tech skills will always be in demand.

I am not saying that doom is the correct outlook here but I do think it’s a good idea to really think about what a prolonged down market would mean personally. That’s especially true if you were, say, flying high at Google until a layoff and now are looking at things like a public sector job which is quite stable but has no prospect of paying better than half of what you used to make.

Keeping these fundamentals in mind, it's likely Silicon Valley will see an outflow of workers over the next couple of years, and salaries will be depressed in other cities due to the moving labor supply. Then once easing begins, we'll see that trend reverse yet again.

Why? Interest rates are the cost of money. If money doesn't cost anything/much, you don't have anywhere else to park money, and you can take longer bets! VC funded startups going a decade with no revenue or no profit is something you can tolerate in that environment.

What else are you going to do, put the money in a bond paying 0.5%? After a decade your $100 is now.. $105 in nominal terms, and a loss in real inflation adjusted terms assuming essentially any inflation.

So you gamble that 5% of the 100 companies you invest in will be worth 25-50x what you invested, in 10 years. You end up with $125-150 in nominal terms after a decade for every $100 you started with. A lot better than $105! It is 5-10x the safe return.

Now, when you run the math again with available no/low risk investments yielding 4%, you suddenly need a much higher hit rate and/or much higher return. Simply putting the money in a 4% yield for 10 years gets you $148, the top end of the prior ZIRP era VC return example.. uh oh!

So what do you do, as an investor who still wants to get paid for taking VC risk? To get 5x the safe bond return, you need 25% of your book to return 25-50x, or 10% to return 62.5-125x, or 5% to return 125-250x.

Everything is much harder and you need more of your investments to work, and for the ones that work to return far more.

So tolerance for profitless unicorns for a decade is dramatically reduced.

By contrast, interest rates went from 0.1% to 5.5% in the past 18 months. Even if you add the prime rate, the cost of capital tripled, from around 3% to around 9%. That's an unprecedented financial shock for pre-revenue companies.

I'm soon to graduate and constantly worry about the future of my career.

I was lucky to get some experience while studying, and I also have something to work on right after graduating, but the future just sounds scary to me.

I met lots of my nieces and nephews over christmas break and was surprised to see every single one of them studying comp sci.

There is no evidence or reason to expect this to be true. The evidence points to the opposite, such as https://www.axios.com/2023/06/01/sp500-tech-companies-stock-...

It comes with a fraction of the confusion from offshoring to APAC wrt timezones, business culture, language barriers, and so on.

2. What does ZIRP do to stock appreciation? Does it tend to suppress it or enhance it?

3. What massive profits?

Real income inequality comes from wealthy 0.01% bribing politicians.

Not 0.1% VC giving some money to 10% developers so that we can get some innovations every once and then.

Getting rid of VC money will just slow down innovation, entrenching existing players in their current positions and allowing even more capital to flow into bribing politicians.

Politicians in turn will need to steal even more, through inflation and taxes the really wealthy can avoid, from the middle class.

We'll shrink the middle class even more. Almost nobody will be able to afford a house. Homeless will just die.

One step closer to current South America, which I reckon is some 20 years away for the USA and maybe even for Europe.