IMO the "vibecession" meme explains what's going on within tech a bit better. Tech CEOs and VCs have decided that the tech industry had to shrink, notwithstanding that the wider economy was and is doing fine.
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.
This time period is coming to an end, we're once again looking at real metrics and seeing that some sectors of tech had none. In the end, this will probably be good for the industry - but it will be an unpleasant transition.
I'm saying that having 0% rates for 10+ years resulted in a lot of behavior that is largely impossible in a normal non-zero environment and we're just beginning to fully discover what those behaviors were.
What we are really seeing is massive extrapolations from 2020 and 2021 being completely off and companies having to manage more realistic growth expectations.
Mark Zuckerberg is not laying people off because "higher interest rates => no one wants to invest in Meta any more". He's laying people off because he has found the excuses he needed. Rightly or wrongly, he simply wants to follow Elon in building a much leaner organisation.
They really did think that nobody would be going outside ever again...
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.
I just disagree with the characterization of current interest rates as "not very high" when higher interest rates happened so long ago nearly half of us weren't alive. It's important to contextualize when we use the past as a learning tool.
For example, this article is thinking about how low interest rates affected the tech sector. When interest rates were much higher than they are now, the internet did not yet exist.
Tech CEOs don't control the interest rates. The interest rate effects their ability to get free and cheap money.
The "by any metric" statements seems false. A "not doing fine" does not have 54-year low unemployment rate @ 3.4% [1]
US GDP growth for since 2022 Q3 has been in the 5% range (very strong) [2]
Median individual income is at an all time high, poverty rate is at a 10 year low (2% decrease from 2014 to now, not huge percentage wise, but that is still 6 million people)
On the flip side - yes, home sales are at a low. Increased interest rates and a real estate market that saw a price correction in 2011 and 2020 with the corresponding economic recessions, has not made housing any more affordable at all.
> Tech CEOs don't control the interest rates. The interest rate effects their ability to get free and cheap money.
True, though that free & cheap money means more people can start companies, grow their companies faster - and that in turn creates bottom-up economics where more people have more disposable income and can then buy homes.
My second mortgage is now absurdly expensive.. But yeah, we are seeing the result of the Fed policy to try and _cool_ the economy as much as they can. One of the big levers they have - interest rates. The Fed intentionally made mortgages more expensive.
Further yet though, housing inventory is a big factor, which you then need to look at local governments and zoning restrictions for why there is not more housing built.
In sum, the wider economy IS doing fine by several metrics. Inflation AFAIK was not really a factor for home prices to increase. That was caused by the Fed, a a deep pandemic-induced recession, and all of the same forces that have caused housing prices to increase since essentially the 70s & 80s [4].
[1] https://www.commerce.gov/news/blog/2023/02/news-unemployment...
[2] https://www.bea.gov/news/2024/gross-domestic-product-fourth-...
[3] https://datacommons.org/place/country/USA?mprop=amount&popt=...
So the average working person is in fact worse now economically than they were 2-3 years ago. It's not just a subjective feeling, and the other positive metrics don't change that.
Though, I was responding to specifically: "by any metric", and the presence of one poor metric does not justify that statement.
> So the average working person is in fact worse now economically than they were 2-3 years ago.
I don't think that logic holds. Real wages is not _the_ one measure of economic health. I would agree that it is likely a significant portion. I would posit that whether you are employed or not is another significant measure, as would be things like net household wealth (which are back to early 2022 levels) [1]
> It's not just a subjective feeling
To some extent, the metrics do not show that to be an objective feeling. For example, real wages are back to 2020 levels, would we expect consumer confidence to be at the same level? If real wages and economic health strongly correlate, I would suspect consumer confidence would as well.
The data shows we're a good bit under 2020 and are at confidence levels of 2017 [2]
On the other hand, economic sentiment _is_ subjective. For example, if you and everyone in your town is in the 30th percentile of the economy, it's not going to feel like things are going well. Which is to say, no one person can easily get enough anecdotal experience for it to be statistically significant.
What's more, economic health is hard to measure. $30/hour might be great if you live with parents & have no debt, but it could be crushing if you have children and rent. Which is to say, I'm quite sure you can't therefore accurately say 'in fact worse now economically' based on one measure.
[1] https://fred.stlouisfed.org/series/BOGZ1FL192090005Q
[2] https://www.conference-board.org/topics/consumer-confidence
Keep believing in the unemployment rate despite massive layoffs bro. Just one more quarter bro. People won't be unemployed bro everyone is working!
Is there some article that coined the term or uses it prolifically? I liked your explanation of it.