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Comment by 0xDEAFBEAD | Hacker News Reader

It basically comes down to interest rates right? If interest rates are low, the discounted-cash-flows analysis will favor maximizing long-run profitability. If interest rates are high, you can do better by squeezing the business in the short term and placing the money you obtained into some sort of high-yield, low-risk investment vehicle.

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The positive argument about PE adding value is around efficiency of processes and scale. Interest rates can make a difference however in reality I doubt that it effects the outcome in most cases. Companies have already invested in staff with certain type of expertise and they are unlikely to change their plans or rehire based on the interest rates in short run.

It's not always "efficiency".

My PE is SaaS heavy portfolio. Pricing strategy, GTM, product roadmap; companies have rev, good moat, good customer base. But clear opportunity to grow rev.

Many companies are held by original founders. Leadership teams in eng and product have been the same for a decade+; lacking exposure to how the industry is shifting. AI, for example, has slow adoption in some cases.

When interest rates are low, it's most profitable to invest in extremely high risk, extremely high reward unicorn startups. That makes way more money on average than any long-run profitability. In fact, long-run profitability is basically never the most efficient use of money regardless of market conditions.

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