Pretend all you want but interest rates make a ton of difference.
If you can make a safe, compounded, perhaps leveraged 5% from treasuries the financial bar that a successful startup has to pass is so much higher
Interest rates are like a dial which turns economic activity up and down.
I’ve always understood that in theory but it’s the first time I’ve actually lived through it and it’s wild.
A few years of higher rates and half of the tech industry and the people who buy tech seems to be on hold.
It makes me realise how vacuous the last decade was and how a lot of our jobs and businesses existed because of dirt cheap money. I’m glad I saved some money rather than thinking it was going to last forever!
If you were older, you would still consider current rates low and recent past an obscurity that couldn't last long. I can say that definitely about Europe, ie here in Switzerland interest rates used to be around 7% for quite some time and economy was doing fine, then it dropped to negative and afterwards people complained when they rose to 1-2%. 0.4% now, not complaining.
If you're that old, you probably already have a house when it was much cheaper relative to income levels. Now, a tiny shift in interests rates affects not only the general economy, but people paying back mortgages which can take a significant chunk out of your income.
Yep. When we bought our first house (mid-1990s), interest rates were over 7%.
The future is hard to know, but demographic changes are going to move a lot of money out of the stock market (because retiring boomers and soon gen-xers will want safer investments). At the same time, labor will itself become more valuable, because the same forces are going to tighten the labor market. To me that is suggestive of an environment where the rewards of startups vs. engineering jobs are weaker.
To really drive the nail in... consider what advances have been made in software over the past 30 years. In software specifically, NOT software enabled by faster hardware.
What can we do now in software which would not have been possible in 1995, even if we were to somehow make our hardware today usable by programmers then?
I realize that you are asking a rhetorical question, as the answer is supposed to be a bit obvious and maybe even mind-blowing... but I actually struggle to come up with really good examples. Most of what I come up with are places where math struggled to keep up, notably in cryptography and consensus (and thereby, quite powerfully, in the intersection of these we have cryptocurrencies). Oh, here's one great such example: compression algorithms!!
However, the vast majority of the crazy things I feel like I'm able to do in software today aren't really because the software is--or even the protocols are--better, but that I'm capable of executing so many instructions in so little time on such vast quantities of stored data while communicating massive results over large distances reliably using computers that are so cheap and so small that virtually everyone in every financial class is surrounded by them.
Hell: even with large language models and the recent birth of working/useful AI, we are right on track for the timeline for progress along the road towards the singularity laid out in the late 1990s by Ray Kurtzweil, who was merely looking at computation per dollar, working off of the expectation that if the hardware can do it the software will figure it out. I could go back in time with the code for a modern LLM and I'd still have to wait for 2020 to deploy it.
When you consider that the dot com era had mortgage rates similar to or maybe even higher than now, and same with federal rates, I tend to think there's a combo of recent startups having poor/LCD ideas w/ recency effect leading to overvaluing current rates against potential growth.
Absolutely, and in practice it's not a well analyzed spreadsheet problem with a smooth transition. The change in interest rates moved necessary payoffs from the "later" bucket to the "soon" bucket.
A whole segment of product stories only worked when investors wanted to believe in them so that they could park their money there. With everything oversubscribed, products would get investment as long as success wasn't provably impossible - so CEOs and PMs optimized for inscrutability and constant pivots. More thoughts here:
