I work for non-tech generating 100million+ in revenue. Cushy job, fully remote, good pay and full autonomy with flexible hours working as an IC.
I recently talked to a startup, similar pay, culture would be a better fit since it was mostly techies and I'm a nerd by nature.....but things just got awkward as soon as I asked about their revenue....they were bleeding money and I was told they were being acquired by a big corp. Also, the tone worried me, the confidence the CEO presented early in the call disappeared.
I also tried digging deeper into their business and what they were selling, as I have interest in that space due to my hobbies. I literally didn't see a need for their startup to exist. But I'm just an average developer what do I know.
Across every investment class there has been a trend of buyers needing to become more financially irresponsible in order to participate in the market.
Need to buy a house? bid 20% more than asking, if you don't - someone else will.. in cash.
Need to build a ride-hailing app? prepare to pay people to ride indefinitely.
Need to own a growth stock? prepare to pay upwards of 100x multiple on revenue.
All around, there have been too many dollars chasing too few assets. I suspect the pendulum is swinging now that housing got to the price point where employees demanded equivalent pay increases to housing cost increases.
This is also a central banking fail in so far that there's that much liquidity in the market that can't find a productive outlet.
There's a lot of money, but also not enough concentrated in one spot to do really useful ventures like large infrastructure projects. So instead the money is distorting everything.
Imagine if lending was less cheap for home owners but it was still cheap for governments or really large companies to be able to build train lines or advanced manufacturing or affordable medium density housing.
I see the problem as too much credit is able to be spent with too little focus. So silly stuff is being funded because the money is becoming meaningless.
The money can find a productive outlet, it’s just that for the last 5 years or so, speculative investments (that weren’t productive) had a much higher rate of return. Which is too bad as the productive investments like building a solar power plant really benefitted from the low interest rates that drove the non-productive speculative bubble.
non-productive Speculative investments tend to get punished at the end of the cycle by losing all value, thus punishing those invested in it and restoring order. But that often only happens when you increase interest rates above that which productive investments like solar power plants often need. And so you get contraction as even the productive investments are starved of funding. Oh well, at least the solar power plant hasn’t lost all its value.
> non-productive Speculative investments tend to get punished at the end of the cycle by losing all value, thus punishing those invested in it and restoring order.
To be precise, the investors who are left holding at the end of the cycle get punished. The early investors who got out make out like robbers.
We could allocate resources to productive assets by fiscal spending, but that is prevented by politics. Only when "the market" gets its cut can any infrastructure be built in the US. That's also true for much of the medical establishment and pension/retirement systems. If the market was efficient, we wouldn't be complaining about it. Unfortunately, a "free market" and an efficient market (and you could argue whether infrastructure or medicine or income insurance even make sense as markets) are not the same. Most markets that have many individual consumers require regulation to be even close to efficient. Like political and financial enforcement they are too easy to manipulate and the consequences of malfeasance are substantially less than the profits to be made.
What sucks is that fiscal policy, ie government spending, is also often not very efficient. Even when rampant corruption doesn’t destroy efficiency, crushing bureaucracy or just plain incompetence will. (Is the DMV a model of efficiency?)
So you need a smart balance. And you need competent, honest people in both business AND government.
I don’t think that government necessarily is inefficient. The DMV could be a very efficient place. The fact that it isn’t should cause at least some pause for those advocating more government spending (such as myself).
And the same is true for business. Comcast is terrible. But it doesn’t HAVE to be. Rent-seeking and anti-competitive behavior makes it terrible.
People keep using the DMV as an example of government inefficiency, but my state has made it run so painlessly I don't think I've spent more than 15 minutes in an office over the last 5 years. I think government can be efficient if you put technocrats in charge of implementation rather than elected officials who are subject to the electoral whims of the uninformed masses.
The problem with the above is it weakens democratic institutions by removing the exercise of power from the people the population select to lead.
Inefficiency to me can not possibly be more clearly demonstrated than by ape pictures losing hundreds of thousands of dollars for their purchasers. But we also have examples like Uber spending cash on hand to drive competitors under without having a plan to maintain their own services without heavy subsidy.
The DMV in my state requires you make an appointment 4-6 months out right now. Walk-in appointments are unavailable or only available during a few hours a few days a week, if they happen to have staff that day. Good luck if you have your drivers license stolen.
I sold a car of mine to Carvana in October. I returned the license plate to the DMV immediately, which is how they're notified that you no longer own the vehicle, waited 7 days, then cancelled my insurance policy on that car. A month later, I got a letter from the DMV that it is a crime to not carry insurance on my vehicle and I will have to reinstate the insurance and pay a $70 fine for letting it lapse. On the car I no longer own, that was now titled in another state and resold by Carvana already.
It took 2 more months and 3 different forms to get the DMV to accept that I no longer owned the car and to stop pursuing me for this "crime".
>The DMV in my state requires you make an appointment 4-6 months out right now. Walk-in appointments are unavailable or only available during a few hours a few days a week, if they happen to have staff that day. Good luck if you have your drivers license stolen.
Sounds like your state has a big problem.
In my state (New York), appointments are generally available within a week and walk-ins are welcome, but those with appointments get priority.
I've never spent more than 30 minutes or so at a NY DMV location and most transactions are available online, including replacement of lost/stolen licenses.
In fact, I decided on Wednesday (11 May 2022) that I wanted to trade in my license for an "Enhanced Driver's License"[0] (EDL) which, among other things, will be required for domestic air travel[1] in a year or so.
That's one of the few transactions that must be done in person. I went online to book an appointment and was presented with a whole bunch of appointment times next week. I chose Thursday (19 May 2022) as it worked best with my schedule, but I could have gone on the 16th if I'd wanted.
So, no. Not all DMVs are a pain or inefficient. Want to make that better in your state? Elect people who will work for you. Just a crazy thought.
>An EDL is not required to fly domestically, which is good because only 5 states offer the option. An EDL includes the Real ID benefits which includes domestic travel, but also acts as a passport when traveling by land or sea with Canada/Mexico/some Caribbean nations.
Yep. Which is why I said:
...I wanted to trade in my license for an "Enhanced
Driver's License"[0] (EDL) which, *among other things*,
will be required for domestic air travel[1] in a year or
so.
Upon reflection, I can see how that kind of puts the cart before the horse, but it isn't really incorrect as an EDL incorporates the RealID.
I suppose I could have clarified that the EDL provides RealID and additional functionality as you describe, but I figured that "among other things" and links describing both RealID and EDL, folks could find out for themselves what "among other things" meant.
Perhaps that overestimates the reading comprehension of some folks, but I prefer to give people the benefit of the doubt and not assume they're morons.
Perhaps that's a mistake, but if so, it isn't my first and won't be my last.
I thank you for clarifying and I'm sure the morons out there will thank you for your pedantry as well.
I'd further point out that this was just a real-life example of a service which must be provided in person and not online and my experience with scheduling an appointment. It could just as easily have been any of several different services which require actually going to the DMV, but that's the one that is relevant to my life at the moment.
As such, even if I'd claimed that an EDL gets me free blowjobs at Federal buildings, I still made the point I was attempting to make.
WTF? This must be because of willful political sabotage?
The license plate should follow the car and ownership should be changed online as part of the transaction. It sounds incredibly wasteful that every time a car changes ownership the seller must hand over the plates in person to the DMV. And is there no national registry of cars or data sharing between states? Strange that a car can be registered twice.
If your drivers license is stolen you should be able to just order a new one online and have it delivered in the mail. I have been inside the building of our DMV equivalent two times. One time when I did theoretical exam to be allowed a practical driving test, and once for the driving test. I got a temporary license when I passed and the proper license in the mail the next week. This was 20 years ago.
> WTF? This must be because of willful political sabotage?
It's not sabotage, it's the fact that the government wants a leash on you. I had an experience in the past with the CA DMV where simply forgetting to "de-register" a broken, non-functional motorcycle resulted in the state levying my bank account for hundreds of dollars in registration fees. The FTB had the money debited right out of my account, no different than if someone committed wire fraud.
I have to assume that you don't live in the US. The license plate can't always follow the car: each state has its own license plate(s) and DMV and rules, etc. e.g., I got a nastygram from New York state when I moved out of state and didn't turn in my plates. OTOH, in Minnesota, they tell you to do whatever you want with them: turn them in, throw them out in the recycling, etc. Some people have license plate collections on their garage walls.
If a license is stolen, You need to go into the DMV because they'll have to take a new photo. There was a temporary exception due to COVID, but I think that's no longer available since I had to go into the office when my license expired.
>The license plate should follow the car and ownership should be changed online as part of the transaction. It sounds incredibly wasteful that every time a car changes ownership the seller must hand over the plates in person to the DMV.
There's too many personalized plates and other exceptions in the US to make that viable.
The plates go with the vehicle in California most of the time. It just gets complicated when you sell to someone out of state because you have to turn the plates in yourself. If you a used car in CA, it's not unusual for the plates to be the same plates the car had since it was first registered in the state.
We bought our last family car from enterprise and one day this family walked by while my mom was waiting for me in the store parking lot. The kid recognized our car as a rental they had on a road trip once and got excited about it. Awkward. xD
Custom plates are weird. You can either give them to the new owner or transfer them to another vehicle or return them to the DMV.
Do you know how'd it'd work for plates like ham radio ones where you CAN'T transfer them to another another person, but it'd also make no sense to turn them in? Can you keep them to use on another car eventually?
This whole "turn in the plates or we'll go after you for not having insurance" seems completely insane. I've never turned in plates and no one's cared.
Except that’s exactly how it works in many states. If you want to keep your personalized plate, you have to jump through hoops, but it defaults to go with the car in the two states I’ve lived in.
Interesting, it's actually not allowed in the 3 states I've registered a car in. In NJ, they wouldn't even allow transferring a regular plate from our old volvo (registered in my dad's name) to our new town and country (registered in my mom's), because they were owned by different people as far as the state was concerned.
That's an awful setup. More states need to get DMV mostly online. I just go to their website when I sell my car and tell them I've sold it. No sending back plates (which is good, I keep my plates when I sell a car, because I like them).
What state is this? I always thought it was illegal to drive on public roads without insurance, not simply own an uninsured vehicle. From the farm, to the drag strip to the 4x4 trail, tons of people own uninsured vehicles that are not driven on public roads.
I have bought 3 used cars and gotten 2 teenagers thru permit and drivers test and license. Never had any appointments except for the driving test, and never had any long waits. All waits were much shorter than when I transferred my out of state license to CA in 2008 or 2009. Impressively well run bureaucracy, I'd say. And this with covid precautions to work around. Much better than the several east coast states I had prior experience with.
Now I do chose the office to visit with some care, and also (as an "elite WFH software engineer") time it so that the lines are likely to be shorter, so YMMV.
You definitely can return plates in California. They just don’t ask for them as a due course for any normal processes. But, you can choose to mail them in or turn them over to the clerk.
If they’re paying the highest price (and have the greatest convenience) to buy an asset I’m selling, they’re going to be the proud new owner. Same story if Blackrock wants to bid the most on my house.
If they have a better mousetrap, good for them. If they don’t and are just overpaying for cars, well, good for me.
Almost all DMV problems are due to understaffing, not any laziness or incompetence on the part of the people who work there.
In California the DMV experience was greatly improved by having appointments, and for walk in, you get a number and at least have an idea when you'll be called, so you can sit in a waiting area, not have to stand for hours.
COVID has reduced staffing so that makes appointments harder to get.
Also, imagining that corporate offices are models of efficiency is an error.
>Also, imagining that corporate offices are models of efficiency is an error.
Absolutely!
I used to work for a Fortune 50 company (that shall remain nameless here) and was moving various groups (mostly marketing and research) away from mainframe batch processing (this was the mid 1990s) toward distributed (Unix) systems.
The inefficiency and waste were just unbelievable. The corporation had tried to move their customer service reps off IBM 3270[0] terminals which were locked in to a single application (with significant retraining required for different apps) with X terminals (what they used to call thin clients) that scraped database queries and stored them in a local database and had a unified UI across all apps.
The app was complete, the roll out team purchased ~USD$300,000,000 worth of systems and infrastructure, and then realized that it would cost USD$150,000,000/year to support/maintain the environment.
So the project was canceled, with hundreds of millions of dollars in Unix boxen and related hardware sitting in warehouses, now without a clear purpose.
When moving folks off of the mainframe, we always pushed them to use the hardware already purchased (a sunk cost). All a group needed to to was put the capital depreciation for whatever equipment they used on their budget lines.
The vendor (again who will remain nameless) priced out equipment (on purpose, I'm sure) so it was cheaper (on the budget line) than the depreciation on the equipment the corporation already owned. In every single case, these groups chose to spend real money buying new equipment rather than taking on the depreciation of the equipment already purchased.
What's more, when evangelizing these changes, I was strongly cautioned to never use the phrase "increased productivity," as that (apparently) made the heads of these groups concerned about losing head count.
tl;dr: The corporation was so fractured and inefficient that group heads would waste corporate dollars in the millions just to maintain their budget and headcount.
I'd love to hear about something like that happening at the DMV or other government office. But I won't, because if folks in the public sector pulled shit like that, they'd be hounded out of their departments.
There are a lot of ways to compare these numbers, and I think "absolute dollar amount" is not particularly enlightening among them.
On a per-project percentage basis, the parent's story wasted ~100% of the project's budget. The same number for California's unemployment fraud is less than 2% (the program totaled about $110B).
$300M was wasted in an organization that serves (completely spitballing here) maybe ~500k people among all its customer organizations?
The California government serves ~40M California residents.
In any case, government waste is likely orders of magnitude more easily uncovered than even public companies' waste. And when we find out, we can lobby for change and vote for policies that adjust the process to hopefully result in less waste.
But when Coca-Cola overpays 10x for some highly-connected contracting firm to build them some shoddy CRUD software for an internal process we'll probably never heard about it due to a combination of lack of transparency and lack of reporting interest. If we do hear about it, there is no real avenue for lobbying for the change of Coca-Cola policy.
That's not even mentioning that Coca-Cola's entire existence could be (rightfully, in my mind) considered corporate waste because their products actively harm the world, which is a claim much more difficult to apply to the DMV or the California government as a whole.
That was during an unprecedented event, when March/April/May 2000 saw millions of UI claims filed in a very short period.
Eventually it was sorted out but at considerable human cost. As of Jan 1 2021 something like 1.5 million claimants had their benefits stopped until they had shown proof of identity. It took months to get it all straightened out, especially for people who didn't have drivers licenses, for example.
My dad worked at a public university where his department would charge for services provided to other departments at the university.
At the end of the year the department's surplus went to a general fund (and I think this was also a factor in deciding future budget allocations for the department).
So everyone in his department was incentivized to buy equipment they didn't actually need so that they didn't "lose" their money.
The old, perfectly working, hardware would be put out into hallways and get thrown away in the trash.
Granted a public university is a lot different from an actual government department.
My point wasn’t to say DMV is ALWAYS inefficient but just that the DMV is a good litmus test for efficiency. Sounds like in your state, the DMV is efficient and therefore perhaps fiscal policy would be well-spent!
> People keep using the DMV as an example of government inefficiency, but my state has made it run so painlessly I don't think I've spent more than 15 minutes in an office over the last 5 years.
It's totally baffling to me when there's 'the DMV' in US films/tv, because that's just not a place (nor anything equivalent) we have to go to, whether it's 'only fifteen minutes' or more.
(Sure, when my driving licence expires in 10y, or I change address, I'll need to spend a minute or so on an online form.)
That's why 'the DMV (groan)' is the meme it is in the US: it's one of the few interactions most upper-middle class individuals have with government services.
I've had other interactions with state/local government services over the past couple years, and they've all been pretty bad. It's like anything else: there are helpful, compassionate people you occasionally speak with, but it's easy to get buried in the complexity and ridiculous inefficacy.
Federal (and state for that matter) tax returns are a good example. Something that every citizen of working age technically has to deal with are incredibly complex.
Thirty years ago in Massachusetts, if you had DMV business, you just walked in, waited half an hour, and conducted your business. And we complained about that.
i think the OP's efficiency reference isn't talking about the user's efficiency in using the service, but the cost-based efficiency; aka, how much budget the DMV has, vs how much "work" they produce.
See I wish. The DMV near me has been merged with other offices (probably in some lazy attempt to “reduce spending”) and you better make your appointment a month or two out because there won’t be any availability otherwise.
Which state? DMV is my favorite example of government because everything they do is required and everything they do is done terribly. I’ll have to revise if I meet a DMV I like.
>Which state? DMV is my favorite example of government because everything they do is required and everything they do is done terribly. I’ll have to revise if I meet a DMV I like.
Move to New York. I recommend NYC, as the food is fabulous.
I think bureaucracies do tend to suck, but I also think there are often people who stand to gain from making a bureaucracy suck.
For that reason, I suspect it's good idea to leave interpretive space for the possibility that a given bureaucracy has been intentionally hamstrung, or is Kafkaesque by design.
I suspect calling Comcast is miserable because the process is designed to exhaust and manipulate you out of quitting, for example.
I suspect it's possible to build systems that enable you to ensure an ER visit will cost $500 instead of $10000--but our insurance companies may feel like the uncertainty deters people from seeking care.
I think by the time you're saying "my system depends on the people in it being honest and competent" you've kind of already lost. Some people are competent, most aren't. Many people are honest, but some aren't. You aren't going to change that so you have to be resilient to it.
Every system works better with honest and competent people. That’s my point!
Some systems are more resilient to dishonesty and incompetence than others. I suspect a mixed system is the most resilient. But we CAN change the behavior by choosing to reward competence and honesty by who we elect, who we hire, and who we do business with.
What's with the hate for DMVs? Maybe they're bad in some US states, but in mine (Massachusetts), I really can't imagine a better-run business, private or public, that accomplishes so much with so little investment.
You can do most things online with a much better UX than most commercial websites. No crappy ads or pop-ups. Plus when you do need to go in, you book a time slot at a DMV center online.
Recently I had to bring my daughter for a driving license to the one in Brockton, MA. When you go in, they give you a token number. The currently processing token number is shown on a huge LED display on the wall. Hundreds of customers are in there, many of them don't speak much English, etc., but things move pretty smoothly and fast. Very efficient.
The DMV outsourced it's service in some areas. Service improved. So it's possible to benefit from the benefits of public spending and private efficiencies. It's a pretty common method for governments to spend money.
I wonder if the DMV is a bit of a special case, not necessarily a good example of government bureaucracy. The customers are almost universally resentful, because they are paying the government money to let them drive. They're angry because it's slow, and it's slow because the process requires bringing in third-party paperwork (e.g. insurance, sales receipt, dealer paperwork, whatever) and there's a lot of opportunities to get it wrong. So it often involves more than one trip.
If I had to deal with customers at the DMV, I think I'd be grouchy too.
Another reason to try and get as much of it online as possible, which I think is most of it nowadays.
I know people reactively complain about Comcast, but in my area they do a great job. It's not cheap due to lack of competition, but no complaints about service.
Their prices are high and punitive to existing customers. Their customer service is laughably bad.
One of my requirements of a retirement destination is municipal broadband. No BS, just a fair price for a service that's actually treated like a utility.
This is due to tax policies reducing the revenue pool. This makes it easier to judge individual divisions of the total because there are necessarily fewer outlets, and since it's a smaller pool there's more reason to fight.
The idle rich who can't find anywhere worthwhile to play with their nearly-free money (until recently ZIRPish) are a bug in the system. Oh, but lets pretend we are captains of industry by saturating the world with sure-failures. "I wEnT tO GsB!"
And government is absolutely inefficient, which is a good thing actually. Despite the efforts of conservatives, government still has to account for many many corner cases and special needs. Ask any Agile TDD aficionado how this affects velocity.
I don’t think the government being inefficient is good. It gives ammo to those who are ideologically opposed to government doing things. We should strive to improve government efficiency, especially those of us who think the government should be taking on more tasks.
Ideological opposition to extensive government is because government is inefficient. See the Laffer Curve. Actual demonstrated inefficiency is the proof, not the justification.
You see the moral hazard of electing people to run government who have a vested interest in being proven right about government being inefficient, don’t you?
I am fine with people who are realistic about government being inefficient, but I insist that they nonetheless try their very best to improve that efficiency (fully considered efficiency, not just making life worse for government workers or people seeking government services). The problem is when you elect people who have an interest in making sure the government is inefficient because then they can use that as justification to enact their ideological goals of cutting government services.
When you buy/sell crypto - money changes hands. That money wasn't really "allocated" to crypto, beyond miner fees, just redistributed. That cash still exists.
The resources being allocated are graphics cards, human time, and electricity AFAICT.
The power usage of crypto is relatively small compared to other active human endeavors. It's power usage doesn't approach other arbitrary value stores like gold and government backed fiat markets. Could it go somewhere else? Yeah - but could we reasonably produce enough to offset it in a positive sum game - definitely. As long as renewables are cost efficient (read: truly competitive with non-renewables) and are net-zero on emissions this misallocation of resources would be allocated to renewable power production in an efficient market.
Graphics cards being misallocated... I'm not sure saying markets are inefficient because a financial market is outbidding video gamers is a compelling argument. Scientific use of graphics cards seems like a small part of the market, but I may be mistaken here.5
Those other endeavors scale significantly more efficiently and are a necessity.
Gold is a requirement for industrial purposes, for jewellry, for chemical processes for medication.
Visa/Mastercard perform many hundred of thousand transactions per second.
BTC is limited to 350k per day, and consumes the equivalent CO2 impact as Austria. It can't and won't ever scale, which leaves it open to market manipulation and centralization as transactions move off-chain.
It's not a small amount of energy wasted, and there are significantly more valuable uses for that energy, such as aluminum production or water desalination.
That might be true but 46.64% of gold demand is for "investment", and a further 8.58% is for "central banks". In other words, most gold produced is hoarded and not used for anything productive. If you're against bitcoin because you think it's a non-productive use of energy, you should also be against investment/central bank use of gold.
Even if hoarded at the moment, energy spent mining the gold was not lost. Gold can be sold tomorrow for its practical uses. Energy powering Bitcoin transactions is gone. (Like the the energy powering bank servers)
A quick trip to Wikipedia's bitcoin page yields[1], which, among other comparisons, compares bitcoin's consumed energy to countries. At 145.9 TWh yearly, it's less than Egypt and Poland and greater than Ukraine and Norway. This is up from the 2021 estimates[2] of 121 TWh yearly, larger than the countries of Argentina and Netherlands.
Bitcoin is intentionally wasteful, and I say this as a technical admirer. Its genius is the extremely simple idea of making writes to a distributed database so unimaginably harder than reads, so that untrusted network peers behave themselves and don't invalidate the state of the shared ledger. The network literally just asks you to spend your time counting to N at the top of your lungs so you don't cheat, if that's not waste then I don't know what is waste.
This 'waste' is necessary when you don't trust your peers, you're buying trust with it, cold hard trust, as rock solid as P != NP. But look at the sheer hype crypto has amassed since 2017 and tell me with a straight face that all those "applications" need trustless distributed peers. NFTs literally store the actual data of the token on centralized servers that can go down or go wild with your data at any moment they goddamn please, the NFT on the blockchain is merely a thin reference.
The ideal path for distributed trustless blockchains would have been as a small niche, an "elite shock trooper" technique when distributed trust among trustless peers is absolutely necessary. Ideally, miners would understand the simple fact that it's of no use to keep bringing better and better silicon to the arena, as the network swallows all in its big mouth anyway, and the network would then grow naturally so that it's approximately the power of NETWORK_SIZE * CURRENT_PC_POWER at any current year, instead of a never ending race to the bottom of sacrificing more and more silicon to the God Of The Hash.
Alas, from the crooked timber of humanity no straight thing was ever made.
IIRC, the energy use for crypto as a whole is on par with the energy use of the fiat currency system, if not higher. I don't know how gold mining ranks, but it may be well below crypto mining in energy use or well above. Mining energy use depends a lot on asset price, and gold prices are comparatively low (compared to other asset classes).
Silicon and other electronic parts also get dumped into this market, when the capacity used to build those devices could be used for other things.
I meant total energy spend for both systems. Despite the transaction volume being minuscule, crypto likely burns a similar amount of energy to the energy consumption of the global finance industry today.
A good reference to compare bitcoin to gold mining (and other human endeavors like brewing tea): https://ccaf.io/cbeci/index
Gold mining and bitcoin are currently roughly on-par. But gold's energy usage isn't just mining. It's the entire supply chain from Cash 4 Gold stores, long term storage, smelting/recycling, etc. I don't have a good reference for the total cost of gold.
Oh, that is only for bitcoin mining. Is there a source for the entire crypto ecosystem since you want to compare bitcoin mining to the entire gold supply chain? I would suspect that if you include shipment and storage, you are still under bitcoin mining for the entire gold supply chain.
However, the point still stands. Datacenters in the US use total energy less than 2 bitcoins. How many of those datacenters are moving fiat around? Way less than half?
Things like brewing tea and heating houses take a ton of energy. Moving money around doesn't!
Crypto is a huge waste, and that site does not suggest otherwise.
> Most markets that have many individual consumers require regulation to be even close to efficient.
That is not true from what I see (modulo contract enforcement and policing of anti-social elements). There are many examples of smoothly functioning markets. With my economics geek hat on the things required for a market include:
* All participants must have choice, be able to enter and leave in the medium term.
* There must be clear information available about the properties of the goods and/or services
* There must be clear information about the prices.
The first condition (choice) can be rough on suppliers. The "choice" for a coffee shop is closing or bankruptcy. But for the supplier of electricity from a hydroelectric dam the choice is different. There are no clear boundaries.
For the consumer they can substitute potatoes for kumera but there is no substitute for food. Everybody must eat.
So: Reticulated water and electricity are bad things for markets. Vegetables (except during famine) and entertainment services are good
The government has heavy handed regulations distorting the market and spent the last years creating money out of thin air and killing small businesses.
The government propping the market up during the pandemic kept alive the myth that the market is always growing but also caused a terrible inflation.
Now that the market is going back to reality the government can't just print more money again - or inflation will kill the entire country.
The incoming crash will hopefully pop some of the bubbles the government created in the last 20 years. But it will be painful.
>"We could allocate resources to productive assets by fiscal spending, but that is prevented by politics. Only when "the market" gets its cut can any infrastructure be built in the US. That's also true for much of the medical establishment and pension/retirement systems"
I'm trying to follow this but not understanding it. What do you mean by " Only when "the market" gets its cut". A you referring to public/private partnerships here or pork barrel politics? Something else entirely?
We don't need solar, wind, nuclear, hydro, water reclamation, on shore chip foundries, manufacturing, battery chargers, non-crumbling bridges, manufacturing, paved raids, public transit, or working airports. We need more crud apps and adtech! More stock options and stock buybacks!
You're being sarcastic, but we probably don't need that stuff either. We're eventually going to run out of resources to make all that at some point (we're already starting to run out of sand[1], which we use in modern cement, for glass, and for the silicon in computer chips, for an example -- and before anyone goes 'deserts are full of sand!' they are, but it's the wrong type to make these things).
Probably should start putting some energy into getting ready for pre-industrial age living again.
Ah yes, that old study/book "The Limits to Growth" from 1972. How it haunts me still. Along with the first IPCC report I read 10 years ago. I do wonder what the future (present) holds. Of course, you're right about running out of sand. I hope our standard of living doesn't fall that much. In my lifetime. As was said by everyone for a century.
I believe we reached peak earth in the last two years. It's not just sand or food but also the logistics - people say it's the pandemic stupid or it's obviously the war - but these are all just catalysts.
Too many people just want too much shit. 7 billion people are really not that many - but 7 billion people who wants to live like Westerners that's a big problem.
All the while we are still living in the age of exploitation. We can build marvelous things now but our recycling is still stuck somewhere in the medieval ages...
This whole party can only last if the recycling of an iPhone becomes as financially sexy as building one...
What's wrong with CRUD apps? They may be boring to develop, but they tend to be the most useful.
Every single one of those industries uses multiple CRUD apps in the course of their business operations. The database is one of the most important technologies of our civilization.
I used to enjoy MMOs too. I stopped playing and took up gardening of all things :). I'm still not sure what the economic value of web2 is yet, but if you find out I'll attend your showHN.
Also, arguably the most socially productive outlets would have been public goods, like major infrastructure investments and public education and health initiatives. But that's evidently politically untenable.
Central bank intervention herded all investors into equities which obviously contributed to the post-2008 bull market, but also distorts price discovery.
But hey, at least the Fed hasn't started buying equities too, like the BOJ.
This was a really interesting thread. I see what you guys are talking about all around me, the mis-used liquidity or whatever you want to call it. I don't know anything about finance, so I don't know how to respond to the people, but I feel like saying all the time, "Hey you know someday you're gonna need that money."
Why can't we have preferential interest rates for certain class of projects (infrastructure, renewables) and those types of projects to be backed/insured by government. Like in some countries the first home loan is is backed by the government.
> Imagine if lending was less cheap for home owners but it was still cheap for governments or really large companies to be able to build train lines or advanced manufacturing or affordable medium density housing.
I see the problem as too much credit is able to be spent with too little focus. So silly stuff is being funded because the money is becoming meaningless
Jesus yes. Economists treat all spending like it is equal in value. Stupidity.
One thing I've been a long-time advocate for is States setting up their own banks akin to that of North Dakota's. If for no other reason than to have a way to leverage national monetary policy for regional aims, so that when the Federal government rushes to the aid of Wall Street (e.g. by flooding it with cheap liquidity) there's a way for State governments to more directly interact with those mechanisms themselves for their benefit.
I strongly suspect significant challenges in setting up effective and responsive governance and incentive structures to keep such things from not becoming their own instruments of abuse, but ever since watching 2008 unfold it's bothered me how easy it is to leave States twisting in the wind while the balance sheets of financial institutions are made whole by feeding at the Fed liquidity trough.
One of the basic premises of "States rights", as it were, is that it's supposed to offer lots of little "laboratories of democracy", but as it stands right now there's no good way to actually finance those laboratories to invest in ambitious things. So, what we mostly end up with instead is only the downside of using "States rights" in the only way that it's cheap to do so, which is usually by restricting or denying things. It's much harder to get the upside of investing in things without all the latitude that the Federal government enjoys financially.
Indeed, and since it is a privately owned entity [1] with a figurehead appointed by a politician to give the illusion of public accountability, the Fed has very little incentive to do anything but enrich its shareholders: private banks.
"Liberal Democracy" is all theatre, all the time. It is a plutocracy with an extremely advanced propaganda arm designed to fool even the most intelligent observer, as can be seen by the high degree of trust placed in the system by my esteemed colleagues here at HN.
Congress has the power to monitor and "regulate" The Fed. That is, The Fed is not - or isn't supposed to be - completely autonomous. It has oversight, or should.
The reality is, it does not. Congress lets The Fed run wild. That might be the status quo, but it's not how it legally needs to be.
So yes, Congress isn't doing their job. And no one (read: the media) is questioning that negligence.
Again, only in America. << That's not editorial. It's a statement of fact.
Not a down-voter and I agree with your positions, but why stop at congressional oversight? Why should a private company [1] be controlling a nation's money supply?
The fire him, Wall Street and the rest panics. They keep him and we get more insanity.
He was interviewed on Marketplace (NPR) this past week and he should be a politician. Tons of half answers and such. Another disconnected elite with zero affinity for accountability.
I can't speak for Europe, but Congress does have the power to put The Fed on a leash and they don't. The conflict of interest is blinding. We The People in the darkest dark. Again.
That's the scope of Only in. America, in this case.
This is mostly a central banking failure. Take a look around the world, for decades the only thing the central banks have been doing is printing money. If that is ever going to work, put swines in their seat would do their jobs perfectly.
To me printing money should only be used as emergency measure just like administering of adrenaline in emergency room and must be reviewed afterwards. Unfortunately such instrument has been abused for a prolonged period as central banks saw no inflations. Of course there was no inflations in central banks' eyes. The first thing was that the definition of CPI was biased and not considering assets.
Secondly in a global economy, inflation can happen elsewhere. So in the past decades, China actually absorbed lot of the actual inflations. And lastly and most importantly, the printed money went into the wrong hands. The extra printed money goes to the banks first, then goes to the rich in the form of loans. There is so much money in the market and it would be nice and easy to make money by bumping the assets prices up. So why would anyone put money into anywhere but virtual economies? That's pretty much what happened in recently decades, properties, shares etc. skyrockets but what really make their value changed so much? Nothing but too much money. For the poor, obviously they can hardly get any loans, so they only get their normal pay which would be diluted over time.
Crisis happens mostly because the poor doesn't have enough money to spend. Printing money obviously cannot resolve the problem, but it do be able to maintain the momentum a little bit longer by making it worse. The burst got delayed but eventually will come back harder, sooner or later.
What does it mean when inflation happens elsewhere? Isn't that kind of a good thing (if not hostile) - because we can buy stuff from "elsewhere" for cheaper?
This happened during the Asian financial crisis of the late 1980s, late 90s, and early to mid 2000s, depending on the country. Some people speculate that the currencies were manipulated to crash so that people could swoop in and buy assets for cheap in Asian countries. Samsung to this day has large foreign investor ownership for example.
It shouldn't have stopped them from maintenance though; they just didn't feel like doing maintenance. If a company wants to spend money on something they can always get a loan for it and consider issuing the shares out again later if needed.
The problem with a share buyback is if you do it and then the share price falls again.
>The problem with a share buyback is if you do it and then the share price falls again.
how's that a problem? I get it might seem like you're back to square one if you did a buyback early this year, and the recent market crash brought the share price to before the buyback, but you still permanently:
1. paid out money to the shareholders who sold
2. increased the ownership stake of the remaining shareholders
If it falls again, it's not value neutral anymore - it's a transfer to whoever sold. So then the complaint that you could've used the money on maintenance against poisoning babies becomes true.
> really useful ventures like large infrastructure projects
give me an example of large infrastructure projects like this. The only examples i can think of are things which gov't fund via tax payer money, and don't expect to be able to reap private profit off; things like roads, rail, electrification of the grid etc.
Wasn’t that the Soviet double ruble system? Whenever the Politburo wanted to find a mega project the money was wished into existence and things happened (just as it’s done today) yet it was illiquid and only usable in a sealed silo, separate from the normal exchange ruble.
That's not what the parent comment is talking about. Berezka stores were originally created to earn dollars by selling Soviet wares to tourists, and later gradually reoriented towards the few Soviet citizens who earned dollars and looked for some way to spend them. Not to be confused with other special stores unavailable to ordinary citizens that supplied party members.
What parent comment is talking about was the system of cash and cashless (безнал) roubles. Cashless roubles were used for industry purposes and couldn't be converted to the ordinary roubles available to the population. When USSR allowed cooperation (primitive private business) in the late 80s, it was used by many officials as a tool to convert the cashless roubles from the organization's they controlled into real currency in their private pockets. And a lot of oligarchs (including Khodorkovsky) got their fortunes that way.
It's ironic that now ordinary Russians blame the chaos and injustice of the 90s on capitalism and free market, whereas a lot of that was created by a state economy system and exploited by corrupt beurocracy of a communist party.
There would need to be some tight regs to make that work, or else large companies would buy up all the housing supply and force everyone to pay them rent.
I think individual home ownership is important, and thats not where I'd want to start cutting.
Credit for second homes being less cheap - totally onboard.
In my view, it's not a failure of any central bank. The additional liquidity is generated by other banks, in the form of overvaluations and financial constructions that allow loans without backing securities.
Governments as a whole have a lot of different hammers for monetary policy. It's just that every other one depends on the Congress understanding the problem and cooperating.
Technically they are (everybody who works for the Fed or the Bank of England gets a governmenT paycheck) and in a technical sense they aren’t, or try not to be (independent balance sheets).
But they are involved in policy decisions, being consulted and themselves asking. They do t have an independent mission the way, say, a trucking company does.
it's just as much government as the supreme court. senate confirmed presidential appointees. they have a dual mandate (price stability and low unemployment)
No they are not, though it's easy to understand the confusion. From the SF Feds website:
The Board of Governors—Located in Washington, D.C., Board members are appointed by the U.S. President and confirmed by the U.S. Senate. Board members and staff are civil service employees.
The 12 regional Reserve Banks—Located around the country, the 12 Federal Reserve Banks are chartered as private corporations. Employees are not civil service.
The Federal Open Market Committee (FOMC)—Composed of the Federal Reserve Governors and the Federal Reserve Bank presidents, the FOMC is charged with conducting monetary policy.
Yes, I'm aware of the legal fiction that they are not part of the government. But they are, as they are run by people appointed by the government, and therefore serve the government.
I rather think the fiction is that they serve the government, but I also have The Creature from Jekyll Island in the backseat for light reading so my perspective probably is heavily biased.
You aren't biased at all [1]. Our dear colleagues (along with the majority of the American populace) are just deeply ideologically committed to the idea of the Federal Reserve being a public institution, because they've been told this implicitly all their lives.
The truth, which is difficult to uncover and requires digging into some legislation, is of course unsettling, because it points to the nature of the American system and which institutions have power. Hint: if an institution is immune to bankruptcy or prosecution, it's probably the one in charge.
Right. It’s really up to businesses and governments. Businesses to make productive investments and governments to make the appropriate counter-cyclical investments (beyond just interest rates) to keep the productive investments more attractive than the non-productive speculative ones for businesses.
Simple: It is not the responsibility of the Fed to evaluate and empower or degrade certain markets according to what "smart investments" should be. This is ultimately up to the banks that receive the money and the people who come up with investment ideas.
Housing always lags, usually by 18-24 months. Real estate transactions are slow - they require a bunch of research, non-fungible goods in an illiquid market, physically scoping out properties, financing sources that are notoriously sluggish and thorough in their diligence, and a slow closing process. And the sellers don't need to sell - they can just hold onto their places and live in them or rent them out. That means that when money dries up in the housing market, liquidity dries up before prices drop: people just hold onto their houses and don't sell them rather than take the loss.
This also means that housing is pretty resilient to recessions that last < 1 year. Nationwide the '73, '80, '82, '91, and '01 recessions were barely blips to housing prices [1]. It takes a sustained downturn of > 4 years or so in a regional economy to make a serious dent in housing prices.
Hard to say, but it has always been like that. Housing prices are extremely sticky. With corrections most of the work ends up being done by inflation while prices stagnate. One peculiar advantage to the burst of inflation is that it could help the housing bubble correct itself relatively quickly.
Yes, you need some level of financial creativity to justify buying into one of the many bubbles. But that's where the timeless Buffett quote[0] on Ted Williams and batting comes in, there's no called strikes in securities markets. Mr. Market doesn't force you to do anything at all, we're all free to ignore the speculation and focus on proper cash flowing businesses at reasonable valuations. The more boring the better (tho there are opportunities even with exciting companies these days), but just wait for the right pitch, no need to force it. You'd need a gun to my head if you wanted me to hold a portfolio of cash burning (even generating for that matter) businesses with valuations based on 5-10 year outlooks.
>The trick in investing is just to sit there and watch pitch after pitch go by and wait for the one right in your sweet spot. And if people are yelling, ‘Swing, you bum!,’ ignore them.
Sitting in cash is not a defensive position, it's offensive and a highly risky one at that. When fiat, is losing 5-6% on average every single year, you can't afford to wait for the right moment to jump into equities. You have to be in it now, whether the valuation suits you or not. This of course exacerbates risk for everyone and forces everyone into risky positions because cash is now more risky than nearly all the other risky bubbles out there.
...or housing will drop as interest rates go up. And a non insignificant number of folks were over extended in leverage.
I know too many folks who did 7/1 ARMs cash out refi to purchase another home in a 7/1 ARM loan, banking not on cashflow but appreciation.
I know of folks who bought homes using margin loans in their stock portfolio.
If housing stagnates, there will be margin calls, leading to supply shock, and price declines. Especially now that mortgage interest rates have nearly doubled year to date.
>I know too many folks who did 7/1 ARMs cash out refi to purchase another home in a 7/1 ARM loan, banking not on cashflow but appreciation.
I know of folks who bought homes using margin loans in their stock portfolio.
If housing stagnates, there will be margin calls, leading to supply shock, and price declines. Especially now that mortgage interest rates have nearly doubled year to date.
I can't be alone in wishing that would happen. Yes, people would lose a lot of money (potentially everything), but they played stupid games.
Margin loans for house purchases isn't as insane as it might sound - assuming your financials are there. Margin interest is deductible against investment gains, house interest may not be for many earners.
But not refinancing afterwards into a low fixed rate may come back to bite them, and soon.
>> Margin loans for house purchases isn't as insane as it might sound
I understand the tax logic you are speaking about, but I think tax benefits are sometimes oversold to convince people to buy things (like homes and investments). You aren't a corporation, your liability isn't limited. Trying to shave a bit off taxes may have less benefit to you than the peace of mind of not having to juggle debt. You seem like you understand that when you talk about refinancing asap, so I think you know what you are talking about as well.
In the typical scenario, I could have sold my stocks and incurred a 20-39% tax on the gains.
The other option was to instead take a margin loan out at a hair over 1% blended which is tax deductible and incur no tax bill.
There was a bit of risk in this yes, but I came out way ahead despite there being a pretty sharp pullback right after I closed on my house. I wasn't leveraged to the hilt at all, I think I had a loan equivalent to about 25,maybe 30% of my portfolio when the market pulled back.
If you have significant assets this is something you should be considering. This is imho one of those "rich guy" things that's available at a relatively low level of wealth, and the risk associated with it is well worth it in most cases.
Rising interest rates don't typically signify lower home prices because rising interest rates are usually a biproduct of a hot economy that needs to be tempered. With the exception of 2008, home prices have almost never gone down. Now, it may be different this time. There is tons of speculation now and you are starting to see some sectors show big cracks. There was also a massive re-allocation of capital during the pandemic as people moved from high COL places to more reasonable locations(due to remote work), in turn making those new location high COL places.
My theory is that eventually the unemployment rate will start rising, and people who lose their jobs that just got a 600,000$ 2/1 will be in a pretty tight spot. It would lead to either cutting consumption in other parts of life, defaulting on the house, or selling for a loss. And so on and on...
>"I know too many folks who did 7/1 ARMs cash out refi to purchase another home in a 7/1 ARM loan, banking not on cashflow but appreciation."
What's the strategy behind the "7/1 ARMs cash out refi" and the second homes?
It's curious that would people do an ARM when interest rates were at historic lows no? Were these second home as in part vacation home, part AirBnBs lets?
Rising interest rates are starting to slow the housing craziness, at least where I’m at. I was regularly seeing 20-27% over asking with limited to no inspections, new listings going in hours. Nuts.
All-cash is basically the new norm. Two years ago that was an issue for regular buyers, but it’s workable now since lenders have jumped into the mix, more and more offer an all-cash option - they make the purchase and transfer it to you under a traditional mortgage. You still have an appraisal gap to contend with, sine they’ll only pay what the place appraises for, but anyone who qualifies for a loan can probably qualify for the all-cash option.
Where I'm from (EU) experts say that prices will stagnate amd the market will slow down.
On one hand the high inflation pushes out lots of buyers -- they can't or don't want to pay the high interest rates. This lowers demand and prices.
On the other hand global supply chain issues (which got much worse with the war) lead to material shortages and rising material costs. This pushes up housing prices.
The net result is likely stagnation -- few houses are built and few exchange owners. But prices stay high.
Except if there will be a large recession causing people to loose their jobs and unable to pay their mortgages. This will crash the housing market, but looks unlikely now.
Definitely looks that way in the UK - I've been watching my local housing market like a hawk because I'm looking to buy soon. Houses are staying listed a lot longer, a fair few getting reduced, and newer listings are coming in at more reasonable prices (as much as over £100k is reasonable for a 1 bed flat miles into poverty stricken suburbia).
I think people are feeling more risk adverse cost of living etc and want to hold onto money and stay put where they are.
> I was regularly seeing 20-27% over asking with limited to no inspections, new listings going in hours.
Another way say "20-27% over asking" is "an agent underpriced it by 20-27%". Surely good for their marketing materials, but it comes at the cost of withdrawn information from the seller.
Well, only if you ignore how we got there. Housing output took far too long to recover after 2008, and on top of that, many homeowners felt entitled to the gains they lost during the recession because that is what the American Dream promised.
We could also pull on the demographic weirdness of the moment as Baby Boomers only finally cede political power, skipping a generation. What have all are priorities concerned since they came of voting age? Should we be surprised our recent policies continued to favor older people who owned homes over young people deciding the shape of our next generation? And to be clear, I'm not blaming any motives. I'm saying much of this can be explained by an "accident" (or maybe "conclusion") of demographics.
The worst is if our incentives are for lazy capital returns (like rapidly rising residential real estate) for retirees the people who benefit in the younger generations are not going to be the people taking risks like starting businesses.
In the long term, housing should always return to the cost of building it plus the cost of land, that's the long term trend line. Now, why this trend line is increasing so fast is the real reason why housing is so expensive (something no one ever talks about), everything else is just incidental and or temporary effects.
> It’s paradoxical that all-cash became the norm in a period where mortgage rates were at all time lows…
Cash transactions have less friction and chance of falling through, so it makes sense that sellers prefer cash purchases. Consequently, you see cash offers because buyers know that sellers prefer - you essentially jump to the front of the line.
I guess my core question is: do they keep the cash in the house, or do they use cash just as a vehicle for the purchase, and then finance the cash out of it?
Because there was a concurrent trend to refinance houses at 2% loans and put the cash in the stock market, which is assumed to beat that 2% over the duration of the loan.
And just to make the connection explicit: if lots of buyers are making competitive offers because rates are low and money is cheap, then that's going to encourage the people who can afford to pay cash to make an all-cash offer where otherwise they might not have.
This was driven by extended 0-ish% interest for an entire recession cycle. Unable to get "safe" returns, money chased more dangerous classes of assets and inflated prices.
Inflation and a return to nonzero interest means capital gets to retreat to safer ground, pulling the rug out of stupid unprofitable startups that can only make money with head-in-the-clouds IPO valuation or FAANG acquisition.
That is illogical. Money-less economic models are unable to predict structural unemployment. In fact Say's law predicts that a theoretical barter economy is always at full employment.
Of course the modeling flaw is that money is saved as a goal in itself so it will cease to circulate at some point which is the real source of unemployment.
It's not irresponsible to bid 20% over asking. Asking is deliberately underpriced, because it is excellent advertising in a hot RE market.
It's irresponsible to bid 20% over what the house is worth (which has nothing to do with asking price), just because you got emotionally attached to the house, and started a bidding war with another person emotionally attached to the house.
It bears repeating that there is no "what the house is worth" in the abstract. If you somehow know that other bidders will pay at most $X for it, then of course you'd never bid $X * 1.2 -- you'd bid $(X+1). And if lots of people are (or can be made) emotionally attached to a house and pay an apparently unreasonable amount, that is what it's "worth."
It is basically true for sellers markets, because it gives more advantage to the seller. being a sellers market doesn't make it an irrational housing market.
During a buyers market, prices usually approach the list or go under.
This reflects the fact there is how much the house is worth to the seller, and how much it is worth to the buyer, and neither of these are the sale price.
It's not "emotionally attached", it's that it's been impossible to buy a house for a while if you're not willing to pay more than it will appraise for. You'll repeatedly lose to buyers who will do that, with cash offers to boot.
This has been true even in many cities that aren't trendy, and have been building housing like crazy for a decade.
Maybe you could think of it like a PE on a growth stock - people expect the house to go up due to inflation of cost of goods as well as all the money that was printed - they are willing to take a punt on the house value in the future, similar to many stocks.
There's also sunk cost in the effort of finding a house you want and reluctance to keep looking.
Boring Midwestern City that's not even a 3rd-tier tech hub. Other boring Southern city that's also not even a 3rd-tier tech hub. Buyers are having to take on the risk of having to cover any extra over appraisal in cash, consistently, while that used to be rare (and, yes, usually for "I am super invested, emotionally, in getting this particular house" reasons).
My unremarkable suburban house in a boring city that's been building housing constantly and extensively for the last 10 years, is up like 25% in value over the last 2 years. We thought, based on extensive experience in this market, that we were already paying a bubble-induced premium of 15-20% when we bought it (possibly no longer true—thanks inflation). WTF.
I think the appraiser is doing you a favor by not appraising it for the contract price in this case. Why would you want to overpay for a house and have to cover the financing shortfall yourself? Especially in a market that traditionally has slow RE price appreciation.
Let the cash buyers suffer the losses. You'll thank yourself later.
Not assuming that at all. I'm saying that if the appraisal doesn't go through, then the lender won't cover the remainder of the purchase price, and then the buyer will have to make up the difference out of his/her own pocket. At that point, I'd bail, because the appraiser is raising a red flag.
But since you mention it, in the slower market being discussed here, I would definitely not waive an appraisal contingency.
> At that point, I'd bail, because the appraiser is raising a red flag.
The point is, in a lot of markets, if you bailed on offers over this in the last couple years, you wouldn't be winning any bids in the first place, and wouldn't have been able to buy a house at all. The winning bids include guarantees that the buyer will cover the difference. If you won't do that, you'll lose to an all-cash offer from someone who will. If you're lucky, you won't be competing against superior offers that also waive all contingencies.
I have no idea where all these people are coming from with hundreds of thousands in cash and the ability to cover several thousand more on top of the appraisal value, but they seem to be involved in damn near every sale the last 2ish years. Given how many are OK waiving inspections and such, I have to assume they're institutional buyers who can spread that risk around, not individuals who could be ruined by that kind of thing.
Something seems a bit off, then, because if the market is appreciating, then the appraisers should be taking that into account. As another commenter said, they were certainly doing that in hot West Coast markets like SF and Seattle. Both houses I purchased (each in those locations) appraised at the contract price, and I bought them both within the last 7 years.
They do, but it lags. If prices are going up fast enough, given the way these things are determined, it can easily be the case that damn near every house isn't appraising at what it sells for.
The "solution" to this, in the run up to the '08 crisis, was for appraisers to "help out" by fudging their figure to make it match the sale price. I know this because a real estate agent whose husband was a loan officer, told me so. "I know they were just trying to help out with these new regulations, but it's had the unintended consequence that appraisers can't fudge their numbers slightly higher to match an offer that's only a couple percent above the natural appraisal, like they used to". LOL, yeah, the exact thing they were trying to accomplish was an "unintended consequence". Talk about not being able to understand something because your paycheck depends on it.
Possibly some appraisers in at least some markets have figured out ways around this, and are back to fudging numbers. I dunno.
It comes down to what the appraiser is really saying with their appraisal. Are they saying that in today's market this is what the house could go for or are they predicting the future value outside of a bubble
“Appraised at contract price” tells you how a bit about how grimy that process (that you’re paying for) is.
My appraiser (on a refi) was walking around the house with me and basically asked what I thought the place was worth. That was what it appraised for. (The contract price on an original sale has the same property: what the buyer thought it was worth.)
Ideally those are tethered, but the appraisals didn’t give me a great sense of independence.
If appraisals were arranged and paid for by lenders, I think appraisals would become a lot more honest. But most lenders these days will only perform due diligence to the extent Fannie Mae/Freddie Mac require (and they already have a lot of requirements, which is why the underwriting process is so maddening), so the onus is really on the backers to require appraisers have some sort of fiduciary duty to them.
Counterpoint: as home prices keep climbing, many of the kind of things that would be caught by a home inspection become less and less financially relevant. When you're buying a million dollar house, 20K for a new roof is in the noise
> It's irresponsible to bid 20% over what the house is worth . . . emotionally attached
If you are young it can be perfectly sensible to bid far more for a home you love. An “overpayment” is paid over many years of happy living, which can be a worthwhile trade.
Living in a cheap economically sensible shithole for too many years is a bad idea, unless you have no other choice financially. The problem is making sure you buy a home that makes you happy. Overcapitalisation is sensible if you can afford it, and if you truely do get valuable pleasure from living in your home.
Yes, do take care to avoid the mistake of buying a home and getting chained into a situation you end up hating.
Tell me you're in real estate without telling me you're in real estate.
I think most people are better off just renting until this madness blows over. God knows I am much better off for having rented and plowing my money into investments for about a decade before I bought my place.
Houses keep up with inflation over the long run, while stocks have returned ~ 7% after inflation. If housing is an investment, it's a poor one, and you should invest only what is absolutely required to have what you need not want.
I think you are committing the error I am trying to point out: don’t treat your living requirements 100% as an investment.
That said, your living choice always has an investment decision component, because most of us need one roof over our head. If renting, you are shorting the home ownership market (a renter owns zero bedrooms but needs one bedroom). Making the decision to rent is either (a) betting against the real estate market (shorting), or (b) betting that one can make better returns through other investments.
The deeper point is that we should try to optimise for our internal joy, and nobody should measure their success only in metric dollars.
No broker in their right mind is deliberately underpricing the homes they represent. Why would they? A homeowner talks to another broker and they say they can get 20% more than the first one. Who is the seller going to go with?
When we sold our house the broker put it at a fair price. Then along came a couple that’s been outbid a number of times and offered 30% over within 24 hours of listing.
Was the home underpriced? Maybe, but the housing market is such that it doesn’t have to appeal to hundreds of people. Just one.
Looking at the people going through the home most of them were using flyhomes.com (they operate as sort of a “we will pay cash for the house and then you pay us back”) and probably had no intention of living there.
"Price to Entice" is a very real thing where I live. It's basically a way of getting your listing seen by more people, and increasing the chances of a bidding war pushing up the final sales price.
They set the price well under market in order to generate interest and visits. Next, in the same time interval multiple people bid, and you get a bidding war. Alternatively, price it at what you want it, and let it sit however long it takes. For hot markets, the former is what is done, in the US at least
If you think the house will sell for $1.01M, you should absolutely list it just under $1M (so it hits the screens of shoppers who are only looking at $700K-1M houses).
Part of this is because bonds have been out of the picture. Bring bonds back as valid investment vehicles, which impacts many other parts of the economy, and we'll see more assets going to "useful" investment like roads, power lines, and so on.
Well, if you're in California and don't own a house, you move. It's not a great option if you were raised here, but a whole bunch of people can take a small pay cut (especially thinking about down equity and inflation) to move back to their hometowns right now. For me, a home (3/2, 1500sqft) in the neighborhood I'd move to in my hometown (US city; 1 mil metro area) is less than my household income, which we'll realistically keep 80+% of when we move. I'd wager a healthy segment of Bay Area mid-level, domestic-born engineers fit this profile. I'd wager that holds true in many metro areas, even those we don't consider tech hubs because it is all relative.
I wouldn't want to be a mid-level Bay Area manager in my 40's with a mortgage on the peninsula right now. Who is coming to buy that house? Who is going to train all the 22 year olds moving here?
EDIT: And I didn't even think about all the early retirees the major changes to the workplace will obviously prompt. Who wants to spend the last couple years of their career re-learning how to do a job you've done for decades and have been well-compensated for? I'd be at the beach.
Mid-level Bay Area manager in my 40s with a mortgage on the peninsula here. Why would I want to sell my house? We bought it because we have kids that we want to raise in the Bay Area.
There are plenty who would have chosen the Bay Area anyway, but for me who is younger and aware of how similar those suburbs are to any others in the country, I was dreading having to commit to the jobs a Bay Area mortgage require. I’m glad you’re already in your location of choice, but I’m sure you know most people move here for the jobs and would be elsewhere if the jobs moved.
I moved from the US to Canada, and got a new offer at a publicly-traded US company recently.
In the US, pay is around $215k total comp ($175k base, $40k RSUs). Because, I'm in the Toronto (which is more expensive than most of the US), they said my pay would get a circa $111k USD base ($145k CAD base).
Adjusted for inflation, I'm earning less than what I was making when I was 25 years old. Now, at age 32, I'm struggling to pay significant debts on this salary.
Yes, you're getting paid less, but you've moved from a broken democracy to a functioning one. You also happen to be in one of the few nations on earth that will net benefit from climate change.
Actionable advice? Get a remote position and get the heck out of Toronto to a more LCOL Canadian location with decent internet
Best explanation I've seen of this phenomenon, why it's bad for all involved parties, and knock him effects. It's focused on place making/urban development, but it lines up completely. https://podcast.strongtowns.org/e/strip-mall/
It would be very useful to have a one or two paragraph summary here. I think that very few people are going to listen to an hour long podcast without knowing something more about the ideas.
That's fair. Unfortunately I missed the edit window.
It talks about the phenomenon (relevant to places that don't seem to be thriving more than to hot cities) of a new strip mall bring built next to a mostly vacant strip mall that's fairly new itself. It explains that this is a developer cashing in on the glut of money chasing returns. He talks about how any business that pretends to be legitimate gets funded, and the competition to loan money to actual functioning enterprises becomes so intense that the eventual owners/lenders/etc. end up having something that looks like a malinvestment because they were the people who predicted the lowest risk and highest returns (in the context of all the other insane things being funded.)
I listen to between 300 and 500 podcasts annually and, despite having a backlog of 175 episodes of various things right now, this one was worth the re-listen (at 1.5x speed, of course.)
> All around, there have been too many dollars chasing too few assets.
You can thank the central banks for this. They seem to be too focused on propping up the wrong metrics. Meanwhile the real economy - and the real people in it - are limping like a three-legged dog.
Yet the top layer ignores the messages (e.g., in the USA, Trump being elected, and perhaps re-elected) and persists with the insanity. This cycle - and the associated level of denial - is not sustainable.
Saying that paying 20% more than asking is irresponsible depends on whether asking was a fair price. If someone was always willing to pay 20% more then it wasn’t a fair price in the first place, and really people are just under listing for some reason.
In cash meaning you don’t make the offer contingent on financing, and you can document the sources of payment (balance sheet, statement from bank or accountant, etc).
Even if you get the mortgage, it's the same as cash to the seller. The bank just cut's them a check right away. The mortgage is between the bank and the buyer.
>>Even if you get the mortgage, it's the same as cash to the seller.
Not really, pay in 'cash' and you can close in days, pay with a mortgage and it might take weeks to months. Sellers always prefer cash buyers if they are in a hurry to sell.
No. In the US standard housing purchase agreements are drawn up contingent on financing - and standard bank financing has a lot of hoops and procedure to go through - it usually takes at least a month and of course it may fall through. During that time the seller is basically sitting on their ass and can’t advertise the property.
An all cash deal means the seller does not have to wait once the parties have a mutual purchase agreement.
Sure if everything works out then the seller gets the same, but there are many more reasons a financed offer will fall through versus an all-cash offer.
I just bought a house in cash, the seller wasn't willing to accept any non-cash offers. With a cash offer the seller and buyer can close in a significantly shorter amount of time than with a mortgage.
The owner equivalent rent measure that the Fed uses in the US has been decoupled from Housing prices for a long time. House price increases or rent increases don't necessarily have an impact on inflation if few are paying the marginal rate, and they choose to eat the higher cost rather than asking for more money.
When a critical mass of individuals pay the marginal rate for housing, and they choose to demand more for their services to compensate - then it will show up in the inflation reports. I'd argue that it was a miss for the Fed to focus on owner equivalent rent rather than a broader measure of what consumers are paying for housing as the overall mix of housing has also been changing as the number of investment properties increases.
If your monthly payment stays the same and the interest rate is lowered you pay less interest to the bank which means the seller gets your money instead. The price increase literally doesn't matter to you.
This depends. Housing cost if you're considering the price of owning a home is not part of CPI for the same reason that stocks are not a part of CPI, that being they are considered assets.
If you talking about specifically renting housing, then correct(in US).
That depends. Here in NL, housing costs are explicitly excluded from the official inflation numbers, presumably because housing is still seen as an investment rather than a short.
And for these reasons I question the whole concept of money, working for it, and saving for whatever dream. Flood of money can be so easily created but you have to work for it? Then you have to max out on debt, speculate and risk your hard earned funds, otherwise you are falling behind. Central banks have stuffed this one up and I it is a much bigger problem than inflation.
The markets are efficient but they aren’t perfect. In any situation the markets will do the best to optimize but will always fall short of perfection . Since markets aren’t perfect that’s why you can make money by speculation.
> In any situation the markets will do the best to optimize but will always fall short of perfection
The problem with markets is a "market efficient" outcome can be catastrophic for social welfare.
During the Irish potato famine the markets allocated food away from Ireland because there were not many there who could afford it. They starved. The market functioned perfectly.
Markets find equilibriums. Total collapse is an equilibrium. Starvation can happen at equilibrium.
You can have 100_000 homeless people at market equalibrium
I'm actually saying the reverse and agreeing with you that there are market efficient outcomes that should have been considered or done . In the Irish Potato famine around 1-2 million people left the country. Instead of preserving the workforce they opted for a short term market equilibrium of selling the food to people that could pay and not performing some kind of tax that would feed the needy. The previous Tory government tried to do some charity but then the incoming government did a more of a hands off approach which is an incorrect response. So yes the Irish Potato famine was the result of a market efficient equilibrium that shouldn't have been allowed to occur.
Indeed. The "Free Market" can elevate a ruthless plutocracy of robber barons with private armies far longer than the little people can stay alive.
As the Bezos Battalion, the Zuckerberg Zealots and the Musk Machines close in around your hometown's lithium supply, you can of course die with pride knowing that you believed in the Constitution and lived as the Founders intended.
(plz no ban, I love Free Markets, I'm just working on my creative writing)
I don't think it's housing. It's just that the market had a boom during the bored pandemic times and now that that is over (except in china) the market is readjusting. The market is highly leveraged by psychology over the short term, but in the end even the most exuberant people have to face reality and tighten their belt. Housing will flat line or decrease now as well, since people realize the cost of mortgages is too damn high. Also with lumber and other prices falling that will help new home builds. If Russia ever stops the attempted genocide of Ukraine then markets will probably soar as gas prices come back down instead of increasing.
Tangential. But I work in corporate finance. I'm generally privy to a large amount of information about the companies I work for. If there's something I don't know, I ask for it and people share because of my role. If I'm interviewing, we discuss a lot more than most people would about the health of the company that I would be joining. It's normal.
That said. I'm obviously heavily biased but I have realized MOST non-finance employees know very little about the financial health of their employer or even how the business model operates, or even what is the current/future strategy of the company.
When something MAJOR is announced, M&A/leadership changes/etc, the questions the room typically ask are: 1) will we still get 401k match 2) will we get fired 3) will the office relocate. People don't really care too much about the company, they care about how it's volatility impacts them. I don't think it's such a bad thing, but just pointing it out. In startup land, volatility is huge and the highs and lows can occur with rapid frequency. You have to be an assessor of risk when changing any jobs and this is part of it.
I may be unusual but I've always found it prudent to ask my CEO about things like rate of corporate growth, funding and customer revenue generation, M&A, etc.
Because if I am a vesting or fully-vested employee, then that's my own future at stake. The 401(k) can be dwarfed by many times by a successful stock worth millions, or, in a badly run or positioned company, the stock could be worthless underwater paper shares and I become dependent exclusively on the 401(k) for my sunset days.
The financial literacy of many workers is low though. They don't understand what options are or what it means to really be a shareholder.
When I was at Cisco — I'm talking in the 1990s — we used to describe what we called "stockholder angry." This was when a fully-vested employee heard a VP or above talking about some idea so stupid it would literally cost the company a penny per share or more. That's when the old dogs would get "stockholder angry" and propose alternatives, or ask people to stop ideas that were retrograde for the sake of the company's valuation. Because we knew what a penny per share meant to each of us.
I believe it is valuable for employees at all levels to be able to know the state of their company's health, and then, with an informed mind, be able to voice their opinion on the fate of their organizations.
Definitely agree. In my role it effects my day to day work (sales cure all, etc). And it's definitely a little different when folks have stock. I mostly work in an industry where the average employee has no stock or options. They may be curious, but they don't really ask many questions unless there has been a sizable culture of that. Otherwise, it's like talking money is bad manners.
Options and the various schemes can be confusing. What's worse to me is many people in middle manager type roles that run a department/unit, are responsible for a budget, they can not read a basic income statement. They don't know how or what levers move the needle or in which direction. Some are very good, but many are very, very bad given their level of responsibility I've seen. I've been in many meetings even in my days as a junior analyst explaining to seasoned executives how volume doesn't cure an issue with unit economics. Separating out variable costs and explaining that if you can't cover those, you'll never cover the fixed costs... Those types of things. It's job security for me, but still shockingly common.
It’s funny as that was my experience interviewing with companies between 1998-2000. Just insane business models but brazen confidence in themselves.
I remember interviewing with a company in 2000 that had burned through like $40 in two years. This was New York and they hired IBM. I don’t remember their product but it was stupid. They had paid IBM to build their own custom app server for Java because their requirements were too specific for WebSphere that IBM made. They built their own internal Java app server from scratch.
So that was stupid.
Also the interview was on a Tuesday or something and they said that they were out of money on Friday but were confident they would get more money on Monday.
They wanted me to start immediately and when I turned them down because of the funding, they asked if I would start on Monday.
It was such a surreal experience that a whole organization could be so crazy.
> Also the interview was on a Tuesday or something and they said that they were out of money on Friday but were confident they would get more money on Monday.
> They wanted me to start immediately and when I turned them down because of the funding, they asked if I would start on Monday.
Is is straight out of a comedy sketch, I feel like you could take that to an open mic night and kill with it.
Building a custom server does not sound so crazy. If you ever used Websphere you would probably think the same. I was at one of those crazy Internet startups you referred to and we ran a trial of Websphere for a while. It was some of the slowest, most resource-intensive software I've ever used. By the end we all referred to it as "the pig."
Interestingly, I've heard many instances where interviewees asked startups about their revenues and the startups just wouldn't tell them, saying that it's growing, or some other vague nonsense. Even in the case of inquiring about the amount of equity one gets, many startups would not tell them the actual percentage of the company they'd get, instead opting to tell them the number of shares, without actually telling them the total number of shares. Well, 1000 shares out of 10k is very different than 1000 out of 10MM.
This is a huge red flag in my eyes, of not being open enough to see the books. It signals that something is quite wrong at the company, and even if it weren't, that they are not truly honest with their employees.
One time I had a CFO yell at me for asking questions like you mention. I obviously passed on the job. The hiring manager called me soon after and said he respected my professionalism and understood my decline of their offer. They were out of business < 6 months later.
It's a huge red flag, and it's a hugely common red flag.
A startup was peeved I valued their equity at zero when they wouldn't share. I got strong hints my equity was worth at least $100k in extra annual salary, but they wouldn't budge on disclosing anything I could hold them accountable to. I think they were being honest, but I didn't take the job.
I did take a previous job like that, and when the company sold, we were all surprised management was honest. Management gave a used-car-salesman vibe, which was just wrong. I think with transparency, people would have worked much harder.
I don't have insights as to the reason for the extreme opacity.
The reason for the opacity is obvious, they want you to think the equity is worth more than it is.
People constantly assume good faith in these things when they shouldn’t.
Obviously number of outstanding shares is a bare minimum, but things like cash reserves and cash flow should also be shared but they don’t want to share that information, often times because it’s not good, they just wasn’t people who believe in the “mission” or that it’s a rocketship or whatever.
The secondary reason is that there are still too many naive engineers who assume good faith, drink the startup koolaid, and take these offers . Sometimes even declining public RSU grants to do so. One company out of ten thousand have ISOs that are worth anything but those are the only company in the headlines so the mystique continues.
The only solution is education. ISO (Incentive Stock Options) are one of the biggest scams of all time and you’re financially illiterate if you value them more than zero. They are carefully designed by venture capitalists to screw employees. NFTs of monkey pictures are infinitely stronger financial assets than startup ISO - I mean, as least the monkey jpegs have liquidity and volume, and no liquidation preference coded in to screw you over.
That's the thing, though. It's not always a scam. You never know whether you're being scammed. I /didn't/ get scammed, but everyone working at my first company out of school thought we /would/ get scammed. We've all seen a lot of people get scammed.
> ISO (Incentive Stock Options) are one of the biggest scams of all time and you’re financially illiterate if you value them more than zero. They are carefully designed by venture capitalists to screw employees
Given the number of millionaires and billionaires who can credit ISOs for their current wealth, I think that's too broad a statement. At the end of the day, a well-run company that can eventually go public because they have a strong business can be worth joining and the ISOs can be worth something someday. Admittedly, many will not, but if you pick the right one, you could do well.
* If I had taken the offer, the stock would have been worth between 50k and 150k per year, depending on when I sold it. Their estimate of 100k per year was spot-on.
So they were being honest. Good to know! They were late enough stage when I was applying that they could do a fairly reasonable valuation. I think I would have been much more likely to take the offer if I had information like this in writing.
I still think I was right to value the equity much lower, since I had no way to know if they were being honest at the time.
The job I have now includes options. When the job offer was being negotiated, the recruiter called the options "monopoly money"- worthless and having no known value. Just 1000 pieces of nothing. I was frustrated at the time, and negotiated purely on salary.
Ultimately, I came to respect their opacity. They didn't try and deceive me into "millions that could be mine if only X happens"
I have been in this situation post-hire. I asked for outstanding shares and other documentation about my options. I never received anything. Just a single "You have X options" line on my pay summary.
Unsurprisingly, my options turned out to be the typical startup-style employee incentive options which were invalidated/worthless upon the company being acquired.
I was young and new to the industry so didn't know any better at the time.
Experienced basically this while working for a startup. Equity turned into shares, which turned into "incentive points" that could be revoked at any moment and for any reason and were otherwise worthless. Same deal, 15k "incentive points" out of some unknown number. We pressured them on that for a while, because it was completely unacceptable for the amount of work we'd done for them, but then the entire dev team left.
And what if that company with 5 million in revenue has a net profit margin of 20% and the company with 50 million in revenue has a negative profit margin?
There are a lot of what-ifs. The point is you can only decide on information you have access to, not on secret information you dont have access to. The best thing would be to know someone at the company who can share more details informally.
It also comes from feeling financially secure enough to be comfortable asking those questions. Early in my career I wouldn't have, but at this point I have enough money that I can afford to be more discerning.
Ultimate test of a good place though if you ask when young.
I asked for my first grad role. I asked a lot of probing questions. 3 years in I was running teams and setting up operations for the business in another country for them. I even told them I’d be leaving to start my own business after this job (and did). This resonated because I was speaking to their founder at the time and knew we’d be cut from the same clothe.
Holding yourself back at a young age can just stunt your career development. Asking such questions will appeal to the right employer.
Unsurprisingly this one went from 35 to 150 staff, profitably in the 3 years I worked there. I was 22 when setting up other parts of their business. I’d started at 19.
I wouldn’t advise folks to avoid such questions just because they’re young or “need the job”. Stand out! You’re even more likely to get the job.
As noted by others here: if they react poorly to this in the interview, you already won by dodging a bullet.
I think you missed my point, some (possibly most) literally can't afford to do what you're suggesting early in their life. It comes from a place of financial and psychological security.
I suppose it also depends on your country, but at least here in the USA, that's hard to come by (especially for the lower / middle class).
Being able to be discerning about a job is a privilege that not everyone has. As someone who finally can, I'm happy to acknowledge that rather than pretend other folks are doing something wrong.
I don't disagree that they'd be dodging a bullet, but some folks have to take a bullet to get health insurance, pay the bills, and god knows what else given their circumstances :)
Why? I work to exchange labor for money. They hired me because I generate more value than they are paying me. The company doesn’t “care” about me. It’s purely transactional.
If I got hit by a bus tomorrow, they would send flowers and “thoughts and prayers” to my wife and have an open req before my body got cold.
I agree. I've had a couple of stints as a manager, now as a CTO for a small startup, and it's giving me so much insight into thinking about engineering from a business perspective. As an IC it's hard to get that birds eye view, but it's possible.
1. A developers job is not to write code. You happen to write code as part of your job, but your core responsibility is to implement solutions to business problems. Sounds simple, but it's harder to realize in practice. Case in point was a recent freelance job I took on. This client had paid some devs for months of work on a Stripe integration. They had built all this custom code on the front-end and back-end. I came in, read the docs since I was new to Stripe, and quickly learned that a custom solution puts the company on the hook for 300+ security requirements for PCI compliance. I scrapped all the code and directed users to Stripe's own checkout page. Not as nice of a UX, but that company's customers are now much more secure, there is less code to maintain, and the client is happy.
2. Your managers aren't perfect people, but their livelihood is in your hands. It's incredibly stressful to be a manager, so try to have compassion and empathy for the position they're in. They have to explain to the executive team the progress you're making, and if no progress is being made, they take the blame.
3. If you can't connect the dots between what you're doing on a daily basis, and the overall trajectory of the company, then something's wrong. There's a broken connection somewhere, and no one other than you is going to realize it. Speak up if you don't think what you're doing is useful.
> . A developers job is not to write code. You happen to write code as part of your job, but your core responsibility is to implement solutions to business problems.
My job is to write code. Nobody is interested in my opinions about business problems.
I have to be aware, of course. I propose code to write some times, and I have to have some idea that it is a vaguely practical thing in business terms. I want to write code in groovy system A but mundane system B has a better chance of success then my desire for system A goes by the wayside.
Code is an expression of a business solution. The meat of any application is in the business rules it enables and enforces. In a very well oiled machine it might be possible to just receive some behavioral requirements and get to it, but in my experience that isn't the norm. To be an effective engineer, you need to have a solid understanding of how the code you're writing solves the needs of the company.
At some very high level that may be true. The person who makes the final decision on what code I work on (who happens to be the brother of the CEO, poor fellow!) may have to consider "business requirements", but only lightly. We implement what we are told to implement. I am a worker.
> The meat of any application is in the business rules it enables and enforces
No. That is crazy, and very high level. Where I work the "meat" is tight loops, memory allocation, network latency, data reliability....
> To be an effective engineer
I have not been to Engineering School. I am not an engineer. Engineers are people who have been to engineering school. I am a computer programmer working on low level iOS plumbing. "Engineer"? Huh! Putting on airs, I do not do that.
> To be an effective engineer, you need to have a solid understanding of how the code you're writing solves the needs of the company.
To be an effective computer programmer I have to understand the requirements that my firm has of the hardware. I can give very good advice about whether the hardware can be persuaded to do what they want. I cannot give (good or valuable) business advice about whether the things the firm wants are the correct things.
I understand a lot of people here really want to be successful "founders" and come at it from an engineering perspective. Very good. It is different for them than for me.
A lot of us (at least one of us...) here are workers who want to do a job, for a salary. Happy to work for one of those founders if the money is right. (I have to make a business decision about who I work for, in the best scenario. In my case I took what I could get, and got lucky - thank you universe!) I am not qualified (I am actually, another story) and am not employed to give business advice, or to care. I am more valuable to everybody if I stick to my knitting.
You’re not unpacking anything in what I said, you’re just disagreeing with each point, and each disagreement is mostly rooted in a misunderstanding of what I’m saying.
My point is that the code, and all it’s material constructs that you pointed out (loops, allocation etc), do not exist apart from the business, because it’s the only reason those things exist in the first place. I’m not sure how much experience you have, but if you have enough, you should know how easy it is for an engineering team to become disconnected with the goals of the company. I’ve seen devs waste literal months on things that, had the primary stakeholders known about it, they’d never have agreed to.
Now, you could look at that situation and envy the job security. Sure you could just see yourself as just a cog in the machine, with no responsibility whatsoever in wondering why the fuck you’re doing what you’re doing. But I certainly would not hire you.
> code, and all it’s material constructs that you pointed out (loops, allocation etc), do not exist apart from the business, because it’s the only reason those things exist in the first place. I
What else is that true for? All the way down. Biology, chemistry, physics, quantum physics.... All that we work on exists in those contexts too. Yet we just swim in the sea and ignore the water. The same is true of business matters. They are the ocean I swim in
> I’ve seen devs waste literal months on things that, had the primary stakeholders known about it, they’d never have agreed to.
That is poor communication. Communication is a necessary skill for all cooperative endeavours.
I am a cog in a machine. Unusually for some one in my position I actually have a good understanding of business (studied it for years) and I prefer computer programming. Having computer programmers stick their oar in over financial matters, unasked, is not good. So I do not do it. I know my place, I like my place.
Do you honestly think I’m being so literal when I use the term “business” that I’m talking about devs getting involved in financial matters? I’m talking about developers approaching their job with the understanding that they work for a business, and that their output is intended to drive business results. If they don’t understand how their work affects the business, there is an issue.
> That is poor communication.
…yes…as I said, there needs to be a tight chain of command with clear directives at each layer, in other words, good communication. When there is a break in the communication chain, the only thing you can rely on is an individual developers judgement.
> Sure you could just see yourself as just a cog in the machine, with no responsibility whatsoever in wondering why the fuck you’re doing what you’re doing. But I certainly would not hire you.
But there are lots, and LOTS of people who would, and want EXACTLY THAT. They want people to be told what to do, and do it, and not question why.
Yep, and maybe I was being too harsh in how I said it. It's an understandable sentiment; I've just never seen it work in practice. Inevitably, the team (over time) begins to move orthogonally to the company. Like I said above, you'd need a very well-oiled machine, ala a super tight chain of command with clear directives at each layer.
I see it in the same way I see security. A company is only as secure as its most vulnerable employee, so everyone must be vigilant about their own personal security practices. Same goes for "product security" - ensuring that the micro-actions taken by each IC reflect the company's objectives. It's an all-hands-on-deck practice.
If you're going to be paid in equity and not asking those questions, unless it's a publicly traded company (where you have these answers ahead of time) or you are getting compensated well above average in cash equivalents, it would be just plain irresponsible to not ask those questions.
Even if you are getting paid an extremely good salary, who wants to start working for a company that's potentially months or a year from becoming insolvent? The fact that this might not be standard due diligence as suggested by your comment is mind boggling to me.
I'm average and have always asked these questions :) When I got my CS undergrad I almost had a minor in business, so that side has been an interest from the start.
How the company is doing, what is their core business, and how will my position fit in that business have always been key questions for me when interviewing a company.
I don't really "care" about the business, not in any sense similar to the founder or CEO at the very least, but as a contractor who usually works long-term for one client, I always make it a point to ask what their runway is during the interview process as that will pretty clearly tell me how long, in the worst case scenario, I will have this client for.
I feel like people are going to keep using FAANG for a good while just because 1) MAMAA is not as recognizable yet, and 2) FAANG has the generalized meaning of "big tech company" and most people get that
Same thing happened to me. There's a company in Dallas that had a website that basically presented users who were searching for a product type with a list of products along with their ratings. Apparently they were supposed to make money off of affiliate links. The website was buggy and slow, and also... Google does that already.
So they pivoted, and now they've aimed their engine at CBD reviews or something. I still don't see the point.
I wish people would just build solutions to actual problems they have that other people also confirm to have.
Not everyone is a visionary like Steve Jobs or whatever, and that’s okay. Just build something that solves your problem and helps others who also deal with it.
The desire is there, but the idea(s) aren't and it's not for lack of trying. I've been reading that "ideas are cheap" for over a decade now, but I can honestly say that I haven't once come up with an idea that would make any money.
> I've been reading that "ideas are cheap" for over a decade now, but I can honestly say that I haven't once come up with an idea that would make any money.
Ideas are cheap.
Good ideas are darned hard to find and even harder to recognize.
Idk either and I’m in the same situation trying to find something that will stick (I think they call it product market fit?) and people/businesses will pay for. I’m sure I’ll figure something out eventually.
One thing you can try is just talk to everyone. Literally everyone. I’m a super introvert and socially awkward, but if I’m standing at the bus stop or in a Starbucks I’ll talk to people and 9/10 times they will talk. Sometimes they’re people who run or work at companies in industries unfamiliar to me (construction materials, biologist, textile) and they complain about what sucks. Just keep an open ear and hopefully you can find something interesting and compelling that you can build for. Good luck!
Is there any growing startup that's not bleeding money? Isn't what the seed and Series A and maybe B funding is about? After series A funding I'd expect some revenue stream, but not enough to pay expenses, after B series, they should have a plan to profitability and some proven customers that show that they can actually get that revenue, and after C I'd expect them to be executing to that plan.
If bleeding money scares you, then a startup is probably not the right fit, a huge number of startups fail.
There are. It happens when you hit high level of product market fit with a lean team and don’t go on a massive hiring spree after but keep growing the team at a measured pace.
I think Github, Notion, Retool, Slack, probably Figma, hit revenues quite quickly as they launched and became profitable or at least close to breakeven.
You mention Slack, but they had losses of $140M/year prior to IPO:
Slack says it may not turn profitable; IPO filing reveals $139 million in losses, Microsoft primary competitor
The Slack IPO filing shows annual revenue of $400.5 million, up 60% from the prior year, with a net loss of $138.9 million, for the 12-month period that ended Jan. 31. Slack's actual fiscal year-end date has yet to be determined.
Actually the Slack I remember from when it first came out is more or less the same product they have now. I'm not really sure what all of those people were doing for all of those years.
Most people don't get to choose, in my case, it's our corporate IM system, so I have to use it whether I want to or not.
It's got a lot of enterprise features that companies like, like SSO integration, message retention policies, security certifications like HIPAA and FedRAMP, and more.
There are also a lot of pre-made apps for integrating with corporate apps like Jira, Gmail, Salesforce, etc.
It's fine, I haven't looked at a lot of other options, but it seems more usable than Google Hangouts (or messenger or whatever they call it now) or Microsoft Teams.
The big sells for Hangouts and Teams is that they have video. Slack doesn't so you have to find a video conference provider as well like Zoom. Also Teams integrates more easily with the existing Microsoft stack (office, outlook, etc.) that a ton of non-tech companies are on.
I think a lot of tech companies struggle to break into the non-tech world. Slack might be ubiquitous for SWEs but my SO who works in traffic engineering will probably never use it (they use Teams).
There was some technical evaluation done, but some features like retention policies and SSO were deemed requirements. Not sure what all of the criteria were or what all of the candidates were, it was a while ago.
You realize that there is a lot of stuff that goes on behind the scenes, right?
They need to scale their systems, maintain reliability, scale their processes, build internal tools, run experiments, work with 'legacy' code and within the existing architecture, etc.
It's not surprising product development has slowed down. In almost all cases it seems like the speed of product development is asymptotic.
Hiring too many people is still the number one thing that can kill your growing business. The communication costs alone eat a bunch of headcount so if you don't desperately need the people then you shouldn't hire them.
The problem generally starts when you hire a bunch of people without fixing broken processes first, these people then push back against fixing said processes, and the rot sets in.
You're right - it's pretty definitionally hard for businesses to be profitable early on. The problem is that this unprofitable period has been extended towards ludicrous ends.
It used to be that you spend your Series A and B figuring out the business, and from Series C forward you've got your unit economics dialed in and are just pushing the "growth" button as hard as you can.
Nowadays you get all the way to IPO without ever achieving positive unit economics: Uber, Lyft, DoorDash... You have companies raising (or trying to raise) Series E, F, G while they lose money on every transaction and make it up in volume.
I suspect OP is talking more about that phenomenon - companies that are way too far along to not have positive unit economics on their core business.
Yes I am sure a lot of companies are building things that aren't required. But there are so many things were indeed better solutions are required, and if they exist would be worth investing in.
Replies so far are responding to the startup path to profitability question, but just how good are the usual IT jobs in companies where that's a cost center??
In all the ones I've experienced or looked at, not hardly as good as tech companies pre-FAANG, your "cushy job, fully remote, good pay and full autonomy with flexible hours" strikes me as an uncommon situation.
I was in the same boat as you. I was about to accept an offer, then I had a chat with their CTO and I asked some hard questions about their strategy (compelling product - but their vision was becoming a "platform" as a lot of startups do). Think I threw them for a loop and didn't get a great answer. Ultimately changed my mind on joining.
Knew someone at a Startup with a product & storyline that would make for a comedy fiction show.
Their CTO called me, enjoyed a convo, and offered me some untitled job - no interviews, no game plans. But full on salary match, equity, whatever… (I make mid 6 figures)
But I’ve been so entrenched in real business that the whole thing just seemed completely off to me.
What profit does your company generate? I wouldn't call anything 'cushy' or stable until there's a reliable way to cover all expenses and investor expectations--especially given how badly company have exploited Goodhart's Law with respect to revenue.
I recently talked to a startup, similar pay, culture would be a better fit since it was mostly techies and I'm a nerd by nature.....but things just got awkward as soon as I asked about their revenue....they were bleeding money and I was told they were being acquired by a big corp. Also, the tone worried me, the confidence the CEO presented early in the call disappeared.
I also tried digging deeper into their business and what they were selling, as I have interest in that space due to my hobbies. I literally didn't see a need for their startup to exist. But I'm just an average developer what do I know.