The ability to look at a singular data point (or small number of data points) -- particularly on topics with emotional or social ramifications -- and not lose sight of the bigger picture is one of Matt's best skills. It also drives some of his critics crazy.
Every couple weeks one of the real estate reporters in my medium-sized metro area (Minneapolis) writes the same article (with different numbers) about some very specific monthly statistic in the metro area housing market. Apartment construction plummets! Housing starts skyrocket! Development is moving to the suburbs! [Insert neighborhood here] is booming! People share the articles and argue about the implications in the comments.
Most of the numbers are meaningless? Month-to-month numbers don't mean anything when a couple large apartment buildings here or a new subdivision there throws everything off. Five new units in March, eight new units in April, 238 new units in May?! Or comparing rates of increase or decrease from the same time last year, with that same issue. A city is booming after not growing for a while! Or did the last farm finally sell to a developer? This neighborhood is being revitalized! Or is it just one new apartment building?
A lot of the time it feels like "data" has made a lot of people dumber.
My first thought on reading this piece was that Matt was going to be dragged in the Twitter sphere for being a heartless neoliberal who thinks that downsizing is good.
Much like sales of whole turkeys before Thanksgiving, a full 30% of burritos in the US are sold in the seven days running up to and including May 5, which necessitates burrito growers ramping up production in the preceding quarter to avoid last minute shortfalls in supply.
In that blessed week, the Alameda-Weehawken Burrito Tunnel[0] runs 24/7, burrito after burrito making a transcontinental journey in under an hour, the likes of which the Boring Company (and Amtrak) could only dream of.
> Meanwhile, the tech companies doing widely covered layoffs are still employing more people than in the recent past.
This is the key point for us to keep in mind when considering these recent tech layoffs. In my opinion, this is just a correction to the extreme hiring binge of these tech companies during the pandemic. There was a massive increase in the demand for tech services and they hired aggressively to capture that.
There was also a hope that the changes in consumer and business behavior during the pandemic would lead to a permanent structural change in the economy. For example, consumers would continue to use online shopping at a much higher rate than pre-pandemic. Similarly, remote work would stick and businesses would need substantially more digital collaboration tools like Slack and Zoom.
This hope was dashed as tech usage normalized a fair bit in 2022. At most it appears that the pandemic pulled forward some growth. Eg, streaming usage exploded initially but is now growing slower than pre-pandemic such that it appears to be reverting to the projected trajectory of 2019.
Tech companies are recognizing the reality of tech usage and adjusting their business plans and staffing accordingly. Yet the economic impact and employee count of these firms still exceed pre-pandemic levels.
It was also probably a good thing that tech had the opposite dynamic to the rest of the economy during the pandemic - booming while everything else was crashing and then correcting course while everything else was hiring enthusiastically.
One thing I'll add here is that the digital tech sector more broadly isn't even shedding employees yet—the latest numbers show employment in software publishers, data processors/hosting, and internet publishing/broadcasting/web search portals all at essentially record highs still. Right now it's mostly a story about lower net compensation in the industry and falling job counts at a few companies. https://twitter.com/JosephPolitano/status/1620041573735202818
On a related note, it does appear layoffs are concentrated among the tech sector’s biggest B2C companies. I think there’s some availability bias at play here -- you just don’t see the same panic in observability, data ingestion, etc., but tech coverage doesn’t pay nearly as much attention to these sub-industries.
“Big Tech” might be hurting, but “Tech” as a broad institution seems okay.
Totally anecdotal: I work for a largish (2,000 employees ) B2B software company and we recently had a round of layoffs but this was ring-fenced to corporate recruiters. That being said, I wouldn't be surprised if a larger round occurs later in 2023 but this would almost assuredly not include engineers.
With the news of these layoffs, I keep thinking about the convo I had here in these comments a few months ago with someone (apologies, I can’t remember who) who insisted it was totally normal and fine for his buddies to make 6 figures in tech for 2 hours of work a week. It just doesn’t pencil out.
Twitter took out 2/3 of its employees - not all tech / dev. but still - and this degree of waste is the only explanation that makes sense on how that's even possible. I've been involved in broad cost cutting initiatives ~ my entire career. The biggest targets I've ever seen are 20%. This is crazy.
Games can be like this, especially at the beginning. When the pipelines are getting sorted and your experimenting with assets. It just depends where you are in the ecosystem. That doesn’t last through. They get extremely intense toward the end.
To borrow and alter a phrase, in video games there are weeks when nothing happens and then there are days where weeks happen.
> I get it, but this logic is very odd to me. I work for an old-school industrial company that’s quite sclerotic but always trying to get with the times. But the idea that more headcount=growth=good is strange and backwards to me. If business is good, and we have more work to do, we have to hire more people- usually reluctantly. But the demand comes first- specific projects that don’t have enough people to accomplish them. Though when we work on govt-funded projects, things can get upside down and we staff up to match a budget then scope the work from there. Is the problem that these tech companies are over-valuated, and have more money than they know what to productively do with?
>> I’m not exactly sure why this happened, but roughly a year ago there was a substantial vibe shift in Silicon Valley which holds that most large technology companies are massively overstaffed.
> Many, if not most, tech companies are extremely reluctant to fire engineers for performance reasons until they run into a cash flow issue and have to do layoffs. You’ll find this general consensus across tech forums (e.g., Hackers News). I believe this is the case for a multitude of reasons.
Some of this is just "big company" culture - people have performance issues, and the question their manager asks is not "is this person producing below the median for their role" but rather "does this person provide positive value at all balanced against the risk/cost of rolling the dice on a new hire".
Add to that the inherent ambiguity in even measuring engineer performance (lines of code? design docs? launched features? bugs fixed? hours spent mentoring junior engineers? project management?) plus a skill set that is in high demand in the market, and you have a recipe for making it challenging to identify and manage low performers.
This is why tech firms focus so much on "rewarding high performers" - because in general it's way easier to identify high performers than low ones.
Also ... MSFT in the 2000s was a spectacular failure. To the extent Travis Cole's comment is representative of the Ballmer-era culture ... then yeah, no surprise they struggled as much as they did.
I work in State IT, and agencies are having a very hard time hiring qualified technical and Project Management staff. Sure, working in Sacramento -- or Harrisburg or Albany -- for state government is not as exciting, cutting edge, or high-paying as working in SF or NY for a start-up, but it is work that will pay more than enough to live comfortably.
Well, ok, I don't disagree, but -- and I can only speak to my own experience in California -- I worked for some very large IT firms with names that are three-letter acronyms, and adjusted for inflation, I make slightly more now what I did in essentially the same positions back then. And corporate IT life is no picnic. Long hours, elimination of benefits (401k matching and stock purchase plan, and training, to name a few), and quarterly layoffs: those are not a feature of my current position.
Moreover, consider the full compensation package. I have an actual pension plan, excellent medical, sane work hours (40 hours, max), vacation AND sick days (none of that "PTO" BS), and the opportunity to seek other positions in state government without fear of reprisals. Maybe I'm just old, but this adds up to being a pretty good deal to me.
I don't understand this - I loved switching from vacation AND sick days to PTO. I'm rarely sick and appreciated getting more time off that I would actually be able to use.
Where I work, you can also combine it and get more per month. You may be young and or healthy. This probably works for you but I’m older and I’d like to reduce my risk. Also, we can cash out our sickleave at retirement.
I still don't understand. I used to have 4 weeks of vacation, a week of sick time and 5 personal days. Now its just have 6 weeks of PTO which is the same time off and I don't have to "pretend" to be sick if I just want the last week off.
I am somewhat puzzled by why tech compensation is so much higher than other white collar work, but given that it is, IMO governments should compete with the actual alternatives these workers have.
Governments don't have the ability to raise prices (taxes) without political consideration. Makes it more diffiicult to pay higher wages in some circumstances.
Government seems to frequently overspend on IT projects (I think by hiring too many people? Not sure). Also, it’s not like companies can trivially raise wages either.
Most agencies aren't overstaffed; they typically have enough people to run current systems, not develop new ones. Therefore, very few large IT projects in my state are done by state staff. It is all done by contractors. The competitive procurement of IT contractors takes a long time, as does the implementation. And very few agencies factor in (or fund) process re-engineering, which is often necessary to realize the full benefits of new systems.
I bet they’d do better to have more staff in-house and rely less on contractors. My wife used to work in federal government IT and my impression was that procurement was not working well (and even in the best case contracting out to a whole other organization sounds like a nightmare).
By “hiring too many people”, I meant “too many people working on the projects”. I guess those people are mostly contractors not actual government employees. (Although do they actually ever work on non-government projects? I don’t know much about these companies, but my impression is they are effectively very indirectly managed arms of government that are “off the books”, so they can do things like pay competitive software wages)
There’s a lot of people out there who take a pay cut in order to choose their employer based on social impact, including me. I just fear that working in government will be slow and bureaucratic and I won’t actually make any impact. But I would love to be convinced otherwise!
Much of government service does have a social impact. I worked on the State-run case management system for child welfare services, and the mission and work was rewarding.
But it was by its nature slow and bureaucratic -- federally funded, administered by the State, and implemented in each of the 58 counties' child protective services departments. Cutting through the BS and delivering a useful system was tedious, difficult, and at times frustrating. Not for everyone, but it was important work and I am proud of the work our project did.
Funding in California for big IT replacement projects requires legislative approval. It is a hard sell to replace a "working" system, unless it can realize additional revenue generation. So...in California, upgrades to tax agencies (FTB, CDTFA) that promise collecting missed or overlooked revenue are easy to sell to politicians (and to the general public), while upgrading the statewide system that tracks child abuse (CWS/CMS) took over 12 years to get budget approval. I could go on and on, but you get the idea.
I work for the City of Philadelphia and specifically represent its Department of Revenue, which recently transitioned from a truly ancient (command-line/mainframe) system to a modern COTS web-based system. So I have some insight on what keeps government IT held back:
(1) Budget is a big problem. This upgrade, to my understanding, required a specific budget line-item request from the Commissioner to the Council. As Rick Alfaro mentioned, this is for a system that should save the City money and also help it collect more. But the up-front cost was a concern.
(2) Transition issues. The thing about these ancient systems is that because they are ancient, they hold a lot of old info--but info that is still useful to us. Like, it matters to us that someone made an agreement with us in 1999 to pay off their Use and Occupancy Tax debt for 1992-97 in installments over 2 years, made a few payments, and then stopped before they finished paying. That tax debt is still outstanding and we probably have a judgment against them for it. (The way we do long-term agreements, the taxpayer stipulates to judgment if they breach.) If they then try to sell their property, we need to be able to say "Yeah, they didn't finish paying their U&O agreement from 20 years ago, so you'll need to pay us the balance out of the sale proceeds." But as we discovered, it's really hard to actually get that information into the new system. They managed it, but it took a whole year after the new system went live to work out a way that worked.
Hoo-boy, can I relate to 2). Yet another aspect to the cost and complexity of upgrading ancient systems is that critical data is in formats and structures that do not easily migrate to modern systems. Even worse, older systems often did not enforce strict rules around data, so a boatload of clean-up has to be done. This is often centers around poorly enforced rules about things like date or address fields, and can take a long time and a lot of money to repair.
Trying to explain this to politicians, bean-counters, and the public -- who view this as a lot of blah, blah, blah -- is nearly impossible, so when discussed in public or the media it's reported as cost or schedule overruns. Then everyone bitches about how the government can't do IT, and why can big companies like Google or Amazon manage big systems, but government can't?
Tell me about it. Especially on the names thing. We have an aging-but-serviceable system for our municipal water billing (also COTS, it's a Java-based interface/etc. centering on an Oracle database), instituted around 2007-08. It's mostly pretty good (in need of upgrades, but to my understanding this can be done easily as the developer has actively upgraded the product over the years and so it's just a matter of tweaking those updates to our unique needs). But naming is extremely unpredictable--the same person might be listed as "JOHN SMITH" on one property "SMITH JOHN" on the next and "JOHN A SMITH" on a third. Why? Because when they migrated the names from the old database that had been in place since the 80s, and that system didn't have a standard format for the name. (Addresses are a bit better, I think the new(er) system forced rigor on that.)
One lovely little nugget of Trump's tax cut bill was a change to 26USCs174(c), which describes how you can amortize R&D expenditure, including engineering salaries. Its repeal was (and still is) widely and bipartisan-ly expected, but when the clock struck midnight on 1/1/23, lots of software companies (my employer included) acquired an exciting new tax liability for the year 2022. For us, this was very roughly 5-10% of what we spend on total salary.
The reality is that the TCJA wasn't nearly as bad as the reporting around it would lead one to believe. It raised some taxes, lowered others and was beneficial most income groups. Plus it lowered corporate tax rates, making US companies more competitive. The estate tax changes are the worst part, in my view.
I'm probably one of the few lefty people who had any good things to say about the 2017 tax cut. I still think it was bad for reasons I'll get to but there were some decent things including changing the mortgage interest tax deduction and state and local tax deduction. The mortgage interest deduction creates terrible incentives (As Matt has written about) and any moves towards eliminating or lowering it I'll support (even if it was done for the most asinine reasons).
Having said that I think you're giving short shrift to the perverse incentives created by changes to the "pass through" income (this is probably one of the biggest sources of tax chicanery). Second, it's really not at all clear to me lower taxes for corporations were making much difference to their investment decisions and instead just a giveaway to shareholders (I say this as someone with a pretty diversified stock portfolio).
My last point is sort of my biggest gripe with the law, the opportunity cost. It just...wasn't needed and was clearly just a way to make sure GOP donors would keep opening up their wallets (Matt notes that the tax law was wildly unpopular, but if I'm not mistaken Trump's approval ratings rose from mid to high 30s to just over 40 and remained almost hilariously at exactly just above 40% rest of his Presidency right after the law passed. My point is this seems very likely to be an uptick in support from the donor class who got their "reward"). I know "infrastructure week" became a running joke, but it seems inarguable to me the money sent out in tax cuts would be better served on an infrastructure bill or a myriad of other uses. It's not 1980 anymore, the economic case for supply side tax cuts should at least have some connection to the actual underlying economic conditions of the moment.
I think the right way to look at it is that the TCJA was the least regressive (most progressive?) tax reform one could expect from a Republican Congress & President.
The "Tax Cuts for the Rich and Deficits Act of 2017" was terrible becasue it failed to recoup in personal income taxes what it reduced in business taxes. And if we want State and Local governments to rely less on the Federal government for financing we ought to restore SALT deductions (which also slightly nudges the Federal income tax toward a progressive personal consumption tax).
But trying to use fiscal policy to affect macroeconomic outcomes whether "stimulus" or "deficit control" is a mistake. That's what we have a Fed for. We want taxing and spending to increase the efficiency of the economy a largo plaza and redistribute consumption.
You've been on this kick for some time and I am inclined to simply say "no" and move on.
It's demonstrably divorced from reality, wherein monetary policy is neither sufficiently well-equipped nor sufficiently independent to simply take a sitting government to task and say "nope, we're using our power to override whatever you've just done."
A central Bank should not say anything at all. It should just set its policy instruments to achieve its flexible inflation target. What those setting are will depend on a multitude of factors including the fiscal deficit. And as far as I can tell that is exactly what Powell has done. I do not think the Fed's delay in raising interest rates after September 2021 was trying to do any favors for Biden; it just miscalculated. And by the same token if we slip into recession this year, it will not be the Fed deciding to punish Biden for ARA, it will just be another miscalculation.
Expenditures should be limited to those in which NPV>0. If there is unemployment and borrowing costs are low, more expenditures and some short term tax reductions will pass this text. If THIS is what you mean by "stimulus," then that's fine. Fiscal policy guided by efficiency and redistribution will run higher deficits in recessions than during non-recessions. I'll grant that in 2017 TIPS was below the inflation target; the Fed, shamefully, was failing at it's job as is had been since 2008, so NPV of some expenditure and temporary tax reductions were in order, but not the structural tax changes actually enacted.
The estate tax exemption was raised from like $5 million to $10 million (or something close to that).
What really should have happened is the corporate income tax should have been eliminated and the capital gains tax rate should have been raised, so the owners of corporations pay all the tax. The estate tax should have also been eliminated and instead the cost basis of all inherited assets should be deemed $0, so when sold capital gains taxes are paid on the full sale price.
What happens when the assets are not sold, but just used to produce income indefinitely? I'm happy to see wealthy people ensure their children are comfortable, but I'm not a fan of plutocratic dynasties. At least for truly large fortunes, it's appropriate for the state to take a cut (perhaps treat legacies as income to the inheritor if that's more efficient than an estate tax).
I forget if it was Matt Y. who raised this before, but the way truly dynastic wealth tends to dissipate is through dilution, not taxes, as far as I can tell. (Not that I'm against estate taxes, just not sure they will be enough on their own to accomplish this.)
How does that work for assets that people wouldn't sell or at least not during their lifetime? E.g. why would the Walton family sell their stock when they could simply live off the dividends?
Or alternate - Musk gives his kids one billion each. They borrow against it over their lives, but never sell anything and end up spending a billion dollars. At a 4% real return rate, they start with one billion, 60 years later have 10 billion. Upon their death, they sell the billion to cover their life's expenses and pass on 2 billion each to 4 kids, who do the same and end up with 20 billion. During their lives, they never pay a dollar in income tax, capital gains, nor estate tax.
How many children of truly massive fortunes sit around doing nothing? I'm sure Rob Walton had to sell a lot of Walmart stock to buy the Broncos. The Buffett children all run large philanthropic organizations of their own. The Ellison children work in Hollywood. One of the Gates children is a physician. I care more about what people do, rather than how much tax they pay. Taxes are a way to raise revenue for the government and modify economic incentives, not a way to bestow moral value on people. Children of people with massive fortunes are more likely than not to also inherit a strong work ethic and drive for success.
“How many children of truly massive fortunes sit around doing nothing?”
It’s a big country and an even bigger world, and the number of immensely wealthy people might surprise you. Forbes says there are 735 billionaires in the US, which is about a quarter of all billionaires in the world. There are something like 22,000,000 millionaires in the US, though most only have a few million - and most of that wealth is tied up in their house and 401(k). An article on Investopedia says there are around 215,000 ultra-high net worth people in the US, defined by $50 million or more in wealth.
I don’t know what you meant by “truly massive fortunes,” but surely a number less than $1B would qualify?
As far as how many “sit around doing nothing,” that number might surprise you as well. I work in an office in Downtown Miami, with a view of Biscayne Bay - just a few hundred meters away from the Intracoastal Waterway. There is an astonishing number of yachts that ply the Intracoastal this time of year - not all are owned or chartered by Americans to be sure, but many are. I’ve seen a yacht owned by a member of the Walton clan - it’s massive. A couple weeks ago Jerry Jones’s 109 meter yacht, the Bravo Eugenia - which Wikipedia says is the 44th longest yacht in the world - was at a slip in a marina across the way. When I started composing this comment, the Utopia IV sailed south in the Intracoastal, then hung a left in the main shipping channel and out to the Atlantic. The Utopia IV is a charter - a cool $505,000 per week.
The yachting set isn’t literally sitting around doing nothing - they’re out having a good time and spending money. That money makes its way into the pockets of restaurant workers and DJs, and into the small businesses that line part of the Miami River offering yacht dry dock services, maintenance and overhauls, and provisioning.
Then there are the more modest, and more numerous, trust fund kids who live here. Some are pretty chill gym rats who sleep late - some party, some don’t - and others are strutters with their $1,000 sunglasses, Louis Vuitton purses (and I am talking about the men), and garish Lamborghinis. They’re obviously spending money, too, and helping to create jobs: servers and kitchen staff, Lamborghini mechanics, and commissioned sales staff at Saks.
Would we be better off taxing away the vast fortunes of the wealthy when they die and letting the federal government “redistribute” the money in welfare payments? Maybe. Maybe not.
"How many children of truly massive fortunes sit around doing nothing?"
I don't know. Do you? One of the things about family wealth is that we don't really know how often this happens. We notice heirs who make a name for themselves, but much less about people who don't.
"Taxes are a way to raise revenue for the government and modify economic incentives, not a way to bestow moral value on people."
I couldn't agree more. One of my frustrations with the inheritance tax is that its framed as double taxation, when in reality almost all income is taxed at each point its received. And more specifically, I don't understand why we wouldn't apply an even more progressive structure to inheritance taxes than other income given that I would incentivize working, saving, and investing.
"why would the Walton family sell their stock when they could simply live off the dividends"
I believe at the income levels you'd likely be talking about for the Waltons, the tax rate for qualified dividends and capital gains would be the same, and dividend income is less subject to accounting tricks than capital gains.
Yes, they'll pay income on dividends, but not on the inheritance. If you win the lottery and invest all the money, you pay taxes on both winnings and on the interest you make later.
The human impulse to leave an inheritance behind for one's family has been built up over thousands of years of civilization. Fighting against it is incredibly difficult if not impossible. And taxing inheritance has the same valuation problems as wealth taxes. I'm fine with taxing cash inheritance as income, but it would be simpler to tax inherited assets only when their value is realized, again starting from a cost basis of $0.
"The human impulse to leave an inheritance behind for one's family has been built up over thousands of years of civilization. Fighting against it is incredibly difficult if not impossible."
Obligatory Frederic Bastiat quote:
The Organizers thus lack the force to submit humanity to their experiments. Should they win over to their cause the Russian Autocrat, the Shah of Persia, the Khan of the Tartars, and all the heads of nations who exercise an absolute empire over their subjects, they would still not have at their disposal a force sufficient to divide men into groups and series and abolish the general laws of property, exchange, inheritance, and family, since, even in Russia, Persia or Tartary, account still has to be taken to a greater or lesser degree of the men concerned. If the Emperor of Russia took it into his head to wish to modify the moral and physical constitution of his subjects, he would probably be promptly ousted and his successor would not be tempted to continue the experiment.
From "Natural and Artificial Organization" in "Economic Harmonies".
I'm fine with reinstating the SALT deduction if it's paired with a revenue-positive increase in the top marginal rate (TCJA did the reverse). I want rich people paying more taxes in total, but I don't care if it's rich people in NY or rich people in FL, and I can sort of see the logic for why in relative terms we should increase the latter's share over the former's.
Eh. The exact numbers are more important to me than the structure of the tax code. It's good when states tax their rich, and it's good to make it easier for them to do that. Obviously not worth it if it costs the federal government money or increases inequality, but if it's done in a revenue-positive (or even revenue-neutral) way, then it won't.
> A boom in startups and an expansion of technical talent outside the “tech” sector, meanwhile, would lay the foundations for a stronger economy over the long run.
I agree that this normalization of the tech labor market will be good for the economy as a whole, and I further believe it will benefit the tech industry in the long term. I say this as a software engineer who has benefited from the extremely tight labor market and will likely face slower compensation growth and fewer competing employment opportunities due to the correction.
Entrepreneurs and startup engineers on forums like Hacker News have long complained about FAANG firms hoarding talent with their high salaries and ever increasing stock prices (a good portion of senior tech worker comp is in stock that vests over four years.) While it’s easy to dismiss these “woe is me” complaints from startup execs and venture capitalists, this fierce tech labor competition almost certainly suppressed the formation and growth of startups. We can see this in the continued dominance of incumbent tech firms and the lack of competition from rising startups.
Ultimately, tech needs the creative destruction process of disruptive new startups to advance. It will be good in the long term (possibly even medium term) for tech workers to take a slight bit of pain in order for some of us to found or join new startups. While most of the new ventures will fail, the survivors will offer radically new products and create even more impactful (and lucrative) employment opportunities.
The timing is great with the current excitement around recent AI advances. While there is a lot of wishcasting and overall BS with many of the prognostications of how AI will revolutionize the world, there certainly appears to be some real potential for radically new tech products. The hype will drive a lot of experimentation across a plethora of new startups. Most will fail and if any succeed they will change the world in ways that we can’t really predict.
Further, I also think that the tightening of financial conditions and the resulting correction in tech firm valuations will actually be beneficial to these startups. While many are bemoaning the pullback in tech investment and the increased challenges in raising venture capital, I think we need this correction; similar to how we need the tech labor market normalization. There was previously too much money chasing too few opportunities and this led to numerous bad investments. Eg, the countless crypto ponzis. The return of VC investment discipline will focus capital on discerning more promising opportunities and force entrepreneurs to be more efficient in how they deploy these funds.
Overall, as a tech worker, I’m quite excited for these corrections, even if I might face a slight bit of pain in the short term.
Biotech seems to be having some real pain there as well as the IPO market, all due to higher interest rates. The net effect seems to be slowing start up formation and growth in bio.
It's much quieter than it had been, but given that VCs had been chasing socially-useless (at best) web3/crypto/ponzi startups for the past couple of years, that's not necessarily a bad thing. The sharp decrease in cost at small scale that you get with public cloud vs. having to buy & run your own hardware also means you don't need to raise as much money to prove out an idea --- and decreased salaries helps on that front --- so while it's unclear what the net will be, I think there's a reasonable case that it's not awful.
I feel like a big part of the coverage of these layoffs - more so in tech than in media - is that it's bursting a perception that jobs in tech are eternally secure, upwardly mobile, and highly prestigious. While this was probably never totally true, the average person looking at the tech industry since the mid 2000s probably felt those people had made it. They were paid far above media income and often had generous stock options in a market that only kept going up from companies that only kept going up even more. If you got a job a Google or Facebook or whatever, then there was this sense from the outside that no matter what, you were an in-demand smart person who's going to always have employment in a big company like that.
To put it differently, big corporate-style layoffs were not supposed to happen to *these people* because they were society's meritocratic winners. I know it gets laughed at now, but "learn to code" was earnest advice for most normies. There's a reason town after town attempted to create a Silicon Bayou, Alley, or Holler.
There's also a similar cadre of people posting on social media and in substack comments who have been laid off and feel aggrieved because they also believed that learning to code was somehow going to make them immune to market forces.
But hey, they could always become a cop. We need a larger, more educated police force. Perhaps this is a great time for Matt to create Police for America?
I guess we do need more cops, librarians, and teachers. Here in Asheville, NC, half the force quit, making national news, and we remain very understaffed, to the point where crime is beginning to escalate and the liberal leaning public is having a tough reckoning that laws are actually important. All that said, out of curiousity, I peaked at starting pay for a cop in Asheville, and it's low 40s, in an area with a median wage near 60k. We're in the midst of a housing shortage that has driven rents for a 1br apt. up to near 2k a month. This housing crunch, already significant when it was just retirees gobbling up the housing stock, has been excellerated in the last 2 years by tech bros moving here to WFH. They're rich by Asheville standards. I am watching them with bated breath to see how many get laid off and have to sell, but so far everyone I know that has been laid off is landing on their feet.
So what in the actual fuck? I like your explanation that this isn't supposed to happen to 'these people.' But from what I've seen, it's still not actually 'happening'. It's still tech bros gobbling up the housing stock and cops and teachers getting paid 40k. Makes me want to reach for my D. Graeber.
A lot of blue cities in purple/red states have been dealing with this. When I was in Bozeman, MT, the locals had plenty to say about rich Californians moving in. Austin may be the prototype.
As Matt said, these remote workers will probably just find other tech jobs. And I'd assume a number of new startups will be fully remote from the beginning so they have no reason to leave (if anything more people will leave coastal Northern California). Might as well soak them for tax revenue and redistribute (and build enough housing).
“given that the labor market probably needs to get less strong for the Fed to achieve its target of 2% inflation”
Why should the target be 2%? Not only would it be nice to avoid a recession, slightly higher inflation (eg 3%) has real benefits:
1) inflation makes it easier for firms to nudge out inefficient workers by not giving them raises. pay cuts are so contentious they are rare.
2) it decreases the real value of the national debt
3) it shoves it to bond holders who try to collect rents without assuming risk
4) it encourages people to put capital into real estate and equities, the value of which tends to increase with inflation
A bit of inflation makes the dead hand of the past lighter. It prioritizes present economic activity over the economic achievements of one’s ancestors. It also seems to correlate with decreases in inequality.
Most of your comment is pretty good. But highlighting that higher inflation "shoves it to bond holders" seems out of place with the others. I've never understood why providers of capital in the form of a loan are viewed so much worse than providers of capital in the form of equity.
Its also not accurate. Current bond holders will get screwed, but future bond holders will simply demand higher interest rates to compensate for higher inflation. Treasuries paid 10-15% in the in the late 70s and into the 80s.
I’m not so sure that real interest rates will remain stable over time. Europe has shown that negative interest rates are possible. Economists may not yet fully understand the implications of fiat money. When a government can buy its own debt with newly created money, capital can be so plentiful that there is a negative real interest rate. Over time, a negative real interest rate on bonds would create a more egalitarian distribution of wealth.
That only works if there is a significant demand shortfall. Otherwise, why would you hold money or instruments thereof if your value is going to decrease overtime? Maybe you absolutely have to in some cases, but otherwise you would almost certainly take every scrap of money you could and use it to purchase goods (land, gold, etc.) whose value are less likely to decrease. Long term negative real interest rates create demand and exacerbate inflation significantly.
The idea that bond holders do not assume risk would surprise most bond holders that I know. Or that they collect “rents” in one of the most liquid and competitive markets ever devised!
I agree that we should increase the inflation target. We just can’t do that while failing to hit our current target. If the central bank is willing to increase to 3% now, would we not expect them to increase it again should they find it challenging to hit that new target?
Central bank credibility is a real thing and the Fed losing it in the 70s likely explains a lot of the macroeconomic chaos in that time period. They only regained that with the Volcker shocks and the associated deep recessions.
Financial markets need to believe that a central bank can and will keep its promises. Otherwise, in the face of uncertainty, investors will be more aggressively hedging and speculating on volatile inflation and interest rates. That raises the cost of borrowing, including corp bonds and mortgages, which introduces its own flavor of economic pain. Similarly, sophisticated corporations will be more prone to continuously increasing prices if they fear price instability more than the risk of losing market share.
This uncertainty resulting from the loss of central bank credibility creates a lot of economic volatility and pain that ultimately impacts households; both as workers and as consumers. Hence the Fed has to prove that they can keep their previous promises before promising something different in the future.
The Fed’s credibility is more robust than you suggest. Yes, inflation expectations can become a problem and were indeed a problem in 1981. However, it took almost a decade of inflation in the 5-12% range for that to happen.
It’s obvious to any sophisticated observer that the 2022 inflation was caused by pandemic stimulus. If inflation falls to 3% by summer and stays there, the fed will be quite credible. Sure, there will probably be another year of inflation next time there is a major pandemic or war, but anyone who understands economic history expects that.
No the 2022 inflation was the Fed failing to rates rates soon enough. TIPS was signaling in September 2021 that bond holders were expecting inflation to exceed the target. The Fed's JOB is not to allow fiscal policy to affect macroeconomic aggregates.
Many did speak up. The Fed listened and acted with their Aug 2020 revised monetary policy named Flexible Average Inflation Targeting. [1] Brookings assessment of FAIT describes it as, [2]
> The Fed’s new framework—known as Flexible Average Inflation Targeting (FAIT)—grew out of a period in which inflation fell short of the 2 percent target and inflation expectations drifted down, despite very low interest rates and much lower unemployment than had previously been thought consistent with low, stable inflation. Keeping expectations from moving below 2 percent is especially important when the real equilibrium interest rate appears also to be quite low, making the zero low bound (ZLB) an increasingly salient policy constraint.
> The FAIT framework is well designed to counter the disinflationary bias imparted by policy being constrained by the ZLB from time to time. FAIT promises to make up for inflation below 2 percent by aiming to run it “moderately above 2 percent for some time”—a flexible form of price-level targeting. That implies easier policies for longer than if the Fed were simply aiming to return inflation to 2 percent without the makeup. The point of the averaging is to make sure expectations are indeed anchored at 2 percent. In effect, deliberately aiming for inflation to exceed 2 percent for some time and likely allowing the overshoot of maximum employment necessary to achieve that results in an upward inflation bias that offsets the downward bias arising from the ZLB.
> But there are other asymmetries in the new framework that lean toward taking upside risks on inflation and raise questions about how well adherence to the framework would anchor expectations in circumstances in which inflation wasn’t so quiescent.
Central banks have to be slow and methodical in revising their monetary policy frameworks. Yet they listen, learn—including their own inhouse research and academic collaborations—and eventually act.
I used to like it well enough, but there are only three Qdoba within 100 miles of me (including at the airport). There are three Chipotle within 2 miles.
When I moved away from Boston and could no longer get Anna's Taqueria burritos, it was a long search for a replacement and Chipotle was the clear winner. Even if people like to dunk on it.
The one thing I learned in my 2 weeks as a Chipotle employee is that it’s a massive pain to roll a burrito with more than 2 sauces. Also the sofritos are nasty, I’ve seen how they’re made.
If you were only at Chipotle for two weeks, I respectfully think that wasn't enough time to really master burrito crafting, Milan. (I'm genuinely not kidding when I say that I wince when I see a new face at the final assembly station at my area Chipotle because I know it's going to mean a sloppily wrapped burrito, up to and including needing to call in the dreaded Second Tortilla to save the situation. I think it takes at least three months to optimize one's burrito wrapping skills.)
They used to be pretty good. Several years ago I started having experiences with chewy beef burritos there. Now it's stabilized some, but I get the occasional stinker at Chipotle.
And when a burrito is like 1,000 calories, it's a shame when most of your food for the day isn't particularly good. Especially when it's like $11-12 and you could go to a real Mexican place for that.
DC in the early 2010s was a gold rush of fast casual restaurants, perfect for your Obama era downtown office lunch. There was definitely a lot of discourse about them.
Also, RIP ShopHouse, we hardly knew ye, Asian inspired chipotle sibling.
Good sense as usual. For me, your most provocative point is the way that the media focus on its own experience (in this case, layoffs) leads to systematic distortions of perceived reality.
I am actively hiring software engineers and other related positions. There has been absolutely zero downward pressure on salaries despite the recent layoffs at the tech giants. The big picture remains incredibly robust for people with these job skills.
I’ll be interested to see if big tech compensation comes down enough that other employers (government, non-tech, etc) actually match it. I doubt it.
I’ve been baffled for years about how/why tech company salaries are so much higher. I wish the government would pay competitively so we’d have top people working on the most important stuff. (Which is more important, Google search ads or the unemployment system? According to the job market, Google ads, and it’s not close)
How much of tech compensation is in wages v. equities? I know wages are relatively high, but how much higher are they than other jobs that also require a bachelors degree? I suspect a big difference in compensation is stocks.
Stocks are relevant though, because they don't come out of a companies operating budget and don't cost the company money, and other sectors like government and non-profits can't offer them.
Public company stock is pretty much the same as cash, since you can sell it immediately. Instead of paying stock, these companies could sell the stock themselves and pay more cash. So that’s why I don’t think it’s much of a difference.
For private companies, especially early startups, it’s more different.
"Public company stock is pretty much the same as cash"
Not exactly. You can put all kinds of restrictions on company stock that you can't (or its MUCH harder) on cash. Also - companies can always create more of their stock, raising cash is harder and usually comes with paying more fees to banks.
There might be good enough reasons to require cash anyway, but there are important differences.
Hit levels.fyi, they're the best public source I know for data about compensation breakdown in tech, broken down by company and salary/equity/bonus; it varies widely between companies and seniority.
Not the main point, but why are Netflix and SalesForce tech companies? I used to find it interesting that Dell was a tech company but Ford Motor was not, even though both mainly assembled something from parts they bought. Ford recently had a patent issue called "Methods of non-destructive residual stress measurement using barkhausen noise and use of such methods." I have no clue what "barkhausen noise" is, but it sounds like advanced mechanical engineering.
I assume “tech” is used to mean predominantly electrical engineering and computer science. Mechanical engineering (which is my field) is not considered “tech” in the 21st century sense... even though it’s certainly technical, and we still do advanced stuff 😄
When I was in high school, I told my dad (a naval architect) that I thought maybe I’d like to be a civil engineer. He told me in no uncertain terms that civil engineers were lame, and that I should do mechanical engineering, because if you can make something that moves, you can make something that doesn’t move. I’d say the advice held up.
I can't find it in their revenue statement , but I imagine a good chunk of Dell revenue is supporting their hardware for corporate clients and helping them implement and roll out appropriate solutions for their needs. I don't think they are just a distribution center shipping assembled computers that they receive from China manufacturing.
The ability to look at a singular data point (or small number of data points) -- particularly on topics with emotional or social ramifications -- and not lose sight of the bigger picture is one of Matt's best skills. It also drives some of his critics crazy.
Every couple weeks one of the real estate reporters in my medium-sized metro area (Minneapolis) writes the same article (with different numbers) about some very specific monthly statistic in the metro area housing market. Apartment construction plummets! Housing starts skyrocket! Development is moving to the suburbs! [Insert neighborhood here] is booming! People share the articles and argue about the implications in the comments.
Most of the numbers are meaningless? Month-to-month numbers don't mean anything when a couple large apartment buildings here or a new subdivision there throws everything off. Five new units in March, eight new units in April, 238 new units in May?! Or comparing rates of increase or decrease from the same time last year, with that same issue. A city is booming after not growing for a while! Or did the last farm finally sell to a developer? This neighborhood is being revitalized! Or is it just one new apartment building?
A lot of the time it feels like "data" has made a lot of people dumber.
My first thought on reading this piece was that Matt was going to be dragged in the Twitter sphere for being a heartless neoliberal who thinks that downsizing is good.
i'm excited for burrito season
My big takeaway from this piece is that burritos are seasonal
Much like sales of whole turkeys before Thanksgiving, a full 30% of burritos in the US are sold in the seven days running up to and including May 5, which necessitates burrito growers ramping up production in the preceding quarter to avoid last minute shortfalls in supply.
Let’s not forget the traditional Presidential Pardoning of the Burrito on May 4th.
This year’s candidates are Pinto and Cilantro, but let’s be honest… he always pardons both.
Don't they both get adopted and end up living at a cruelty-free taqueria upstate?
In that blessed week, the Alameda-Weehawken Burrito Tunnel[0] runs 24/7, burrito after burrito making a transcontinental journey in under an hour, the likes of which the Boring Company (and Amtrak) could only dream of.
0: https://idlewords.com/2007/04/the_alameda_weehawken_burrito_tunnel.htm
I seriously thought about mentioning the Alameda-Weehawken Burrito Tunnel!
Wow…
It's always burrito season in California.
Nothing like having a farm-fresh burrito right off the vine.
> Meanwhile, the tech companies doing widely covered layoffs are still employing more people than in the recent past.
This is the key point for us to keep in mind when considering these recent tech layoffs. In my opinion, this is just a correction to the extreme hiring binge of these tech companies during the pandemic. There was a massive increase in the demand for tech services and they hired aggressively to capture that.
There was also a hope that the changes in consumer and business behavior during the pandemic would lead to a permanent structural change in the economy. For example, consumers would continue to use online shopping at a much higher rate than pre-pandemic. Similarly, remote work would stick and businesses would need substantially more digital collaboration tools like Slack and Zoom.
This hope was dashed as tech usage normalized a fair bit in 2022. At most it appears that the pandemic pulled forward some growth. Eg, streaming usage exploded initially but is now growing slower than pre-pandemic such that it appears to be reverting to the projected trajectory of 2019.
Tech companies are recognizing the reality of tech usage and adjusting their business plans and staffing accordingly. Yet the economic impact and employee count of these firms still exceed pre-pandemic levels.
(If this comment looks familiar to anyone, it’s because I’m largely copying my earlier comment on this topic when Noah Smith covered these tech layoffs a week ago, https://noahpinion.substack.com/p/the-big-tech-layoffs-are-a-turning/comment/12137020)
It was also probably a good thing that tech had the opposite dynamic to the rest of the economy during the pandemic - booming while everything else was crashing and then correcting course while everything else was hiring enthusiastically.
One thing I'll add here is that the digital tech sector more broadly isn't even shedding employees yet—the latest numbers show employment in software publishers, data processors/hosting, and internet publishing/broadcasting/web search portals all at essentially record highs still. Right now it's mostly a story about lower net compensation in the industry and falling job counts at a few companies. https://twitter.com/JosephPolitano/status/1620041573735202818
On a related note, it does appear layoffs are concentrated among the tech sector’s biggest B2C companies. I think there’s some availability bias at play here -- you just don’t see the same panic in observability, data ingestion, etc., but tech coverage doesn’t pay nearly as much attention to these sub-industries.
“Big Tech” might be hurting, but “Tech” as a broad institution seems okay.
Totally anecdotal: I work for a largish (2,000 employees ) B2B software company and we recently had a round of layoffs but this was ring-fenced to corporate recruiters. That being said, I wouldn't be surprised if a larger round occurs later in 2023 but this would almost assuredly not include engineers.
Mmm, PagerDuty's layoff memo is ... something else.
Yep, my large B2B tech company didn't even do a hiring freeze, let alone layoffs.
The market is taking these layoffs as good news.
With the news of these layoffs, I keep thinking about the convo I had here in these comments a few months ago with someone (apologies, I can’t remember who) who insisted it was totally normal and fine for his buddies to make 6 figures in tech for 2 hours of work a week. It just doesn’t pencil out.
Twitter took out 2/3 of its employees - not all tech / dev. but still - and this degree of waste is the only explanation that makes sense on how that's even possible. I've been involved in broad cost cutting initiatives ~ my entire career. The biggest targets I've ever seen are 20%. This is crazy.
Games can be like this, especially at the beginning. When the pipelines are getting sorted and your experimenting with assets. It just depends where you are in the ecosystem. That doesn’t last through. They get extremely intense toward the end.
To borrow and alter a phrase, in video games there are weeks when nothing happens and then there are days where weeks happen.
Is this the thread you’re thinking about? https://www.slowboring.com/p/elon-musk-needs-to-make-twitter-better/comment/10141589
> I get it, but this logic is very odd to me. I work for an old-school industrial company that’s quite sclerotic but always trying to get with the times. But the idea that more headcount=growth=good is strange and backwards to me. If business is good, and we have more work to do, we have to hire more people- usually reluctantly. But the demand comes first- specific projects that don’t have enough people to accomplish them. Though when we work on govt-funded projects, things can get upside down and we staff up to match a budget then scope the work from there. Is the problem that these tech companies are over-valuated, and have more money than they know what to productively do with?
Is a reply to a long comment from myself starting with, https://www.slowboring.com/p/elon-musk-needs-to-make-twitter-better/comment/10138366
>> I’m not exactly sure why this happened, but roughly a year ago there was a substantial vibe shift in Silicon Valley which holds that most large technology companies are massively overstaffed.
> Many, if not most, tech companies are extremely reluctant to fire engineers for performance reasons until they run into a cash flow issue and have to do layoffs. You’ll find this general consensus across tech forums (e.g., Hackers News). I believe this is the case for a multitude of reasons.
> …
Some of this is just "big company" culture - people have performance issues, and the question their manager asks is not "is this person producing below the median for their role" but rather "does this person provide positive value at all balanced against the risk/cost of rolling the dice on a new hire".
Add to that the inherent ambiguity in even measuring engineer performance (lines of code? design docs? launched features? bugs fixed? hours spent mentoring junior engineers? project management?) plus a skill set that is in high demand in the market, and you have a recipe for making it challenging to identify and manage low performers.
This is why tech firms focus so much on "rewarding high performers" - because in general it's way easier to identify high performers than low ones.
Yes, that day/sentiment, though it was this comment in particular that has stuck with me: https://www.slowboring.com/p/elon-musk-needs-to-make-twitter-better/comment/10144911
And the replies from Morpho suggesting I was engaging in "cheap moralizing" for being surprised that companies were being run this way.
Also ... MSFT in the 2000s was a spectacular failure. To the extent Travis Cole's comment is representative of the Ballmer-era culture ... then yeah, no surprise they struggled as much as they did.
https://www.statista.com/chart/1399/microsoft-stock-under-steve-ballmer/
I work in State IT, and agencies are having a very hard time hiring qualified technical and Project Management staff. Sure, working in Sacramento -- or Harrisburg or Albany -- for state government is not as exciting, cutting edge, or high-paying as working in SF or NY for a start-up, but it is work that will pay more than enough to live comfortably.
IMO state governments who want to hire qualified people should pay competitive (not just “comfortable”) wages.
Well, ok, I don't disagree, but -- and I can only speak to my own experience in California -- I worked for some very large IT firms with names that are three-letter acronyms, and adjusted for inflation, I make slightly more now what I did in essentially the same positions back then. And corporate IT life is no picnic. Long hours, elimination of benefits (401k matching and stock purchase plan, and training, to name a few), and quarterly layoffs: those are not a feature of my current position.
Moreover, consider the full compensation package. I have an actual pension plan, excellent medical, sane work hours (40 hours, max), vacation AND sick days (none of that "PTO" BS), and the opportunity to seek other positions in state government without fear of reprisals. Maybe I'm just old, but this adds up to being a pretty good deal to me.
"vacation AND sick days (none of that "PTO" BS)"
I don't understand this - I loved switching from vacation AND sick days to PTO. I'm rarely sick and appreciated getting more time off that I would actually be able to use.
Where I work, you can also combine it and get more per month. You may be young and or healthy. This probably works for you but I’m older and I’d like to reduce my risk. Also, we can cash out our sickleave at retirement.
I still don't understand. I used to have 4 weeks of vacation, a week of sick time and 5 personal days. Now its just have 6 weeks of PTO which is the same time off and I don't have to "pretend" to be sick if I just want the last week off.
It’s helpful if the competitive wage is general white collar wage rather than tech with a money faucet wage.
I am somewhat puzzled by why tech compensation is so much higher than other white collar work, but given that it is, IMO governments should compete with the actual alternatives these workers have.
Governments don't have the ability to raise prices (taxes) without political consideration. Makes it more diffiicult to pay higher wages in some circumstances.
Government seems to frequently overspend on IT projects (I think by hiring too many people? Not sure). Also, it’s not like companies can trivially raise wages either.
Most agencies aren't overstaffed; they typically have enough people to run current systems, not develop new ones. Therefore, very few large IT projects in my state are done by state staff. It is all done by contractors. The competitive procurement of IT contractors takes a long time, as does the implementation. And very few agencies factor in (or fund) process re-engineering, which is often necessary to realize the full benefits of new systems.
I bet they’d do better to have more staff in-house and rely less on contractors. My wife used to work in federal government IT and my impression was that procurement was not working well (and even in the best case contracting out to a whole other organization sounds like a nightmare).
By “hiring too many people”, I meant “too many people working on the projects”. I guess those people are mostly contractors not actual government employees. (Although do they actually ever work on non-government projects? I don’t know much about these companies, but my impression is they are effectively very indirectly managed arms of government that are “off the books”, so they can do things like pay competitive software wages)
There’s a lot of people out there who take a pay cut in order to choose their employer based on social impact, including me. I just fear that working in government will be slow and bureaucratic and I won’t actually make any impact. But I would love to be convinced otherwise!
Much of government service does have a social impact. I worked on the State-run case management system for child welfare services, and the mission and work was rewarding.
But it was by its nature slow and bureaucratic -- federally funded, administered by the State, and implemented in each of the 58 counties' child protective services departments. Cutting through the BS and delivering a useful system was tedious, difficult, and at times frustrating. Not for everyone, but it was important work and I am proud of the work our project did.
Funding in California for big IT replacement projects requires legislative approval. It is a hard sell to replace a "working" system, unless it can realize additional revenue generation. So...in California, upgrades to tax agencies (FTB, CDTFA) that promise collecting missed or overlooked revenue are easy to sell to politicians (and to the general public), while upgrading the statewide system that tracks child abuse (CWS/CMS) took over 12 years to get budget approval. I could go on and on, but you get the idea.
Long-term thinking is not a strong suit in this country. It usually takes a disaster before some systems are replaced.
I work for the City of Philadelphia and specifically represent its Department of Revenue, which recently transitioned from a truly ancient (command-line/mainframe) system to a modern COTS web-based system. So I have some insight on what keeps government IT held back:
(1) Budget is a big problem. This upgrade, to my understanding, required a specific budget line-item request from the Commissioner to the Council. As Rick Alfaro mentioned, this is for a system that should save the City money and also help it collect more. But the up-front cost was a concern.
(2) Transition issues. The thing about these ancient systems is that because they are ancient, they hold a lot of old info--but info that is still useful to us. Like, it matters to us that someone made an agreement with us in 1999 to pay off their Use and Occupancy Tax debt for 1992-97 in installments over 2 years, made a few payments, and then stopped before they finished paying. That tax debt is still outstanding and we probably have a judgment against them for it. (The way we do long-term agreements, the taxpayer stipulates to judgment if they breach.) If they then try to sell their property, we need to be able to say "Yeah, they didn't finish paying their U&O agreement from 20 years ago, so you'll need to pay us the balance out of the sale proceeds." But as we discovered, it's really hard to actually get that information into the new system. They managed it, but it took a whole year after the new system went live to work out a way that worked.
Hoo-boy, can I relate to 2). Yet another aspect to the cost and complexity of upgrading ancient systems is that critical data is in formats and structures that do not easily migrate to modern systems. Even worse, older systems often did not enforce strict rules around data, so a boatload of clean-up has to be done. This is often centers around poorly enforced rules about things like date or address fields, and can take a long time and a lot of money to repair.
Trying to explain this to politicians, bean-counters, and the public -- who view this as a lot of blah, blah, blah -- is nearly impossible, so when discussed in public or the media it's reported as cost or schedule overruns. Then everyone bitches about how the government can't do IT, and why can big companies like Google or Amazon manage big systems, but government can't?
Tell me about it. Especially on the names thing. We have an aging-but-serviceable system for our municipal water billing (also COTS, it's a Java-based interface/etc. centering on an Oracle database), instituted around 2007-08. It's mostly pretty good (in need of upgrades, but to my understanding this can be done easily as the developer has actively upgraded the product over the years and so it's just a matter of tweaking those updates to our unique needs). But naming is extremely unpredictable--the same person might be listed as "JOHN SMITH" on one property "SMITH JOHN" on the next and "JOHN A SMITH" on a third. Why? Because when they migrated the names from the old database that had been in place since the 80s, and that system didn't have a standard format for the name. (Addresses are a bit better, I think the new(er) system forced rigor on that.)
One lovely little nugget of Trump's tax cut bill was a change to 26USCs174(c), which describes how you can amortize R&D expenditure, including engineering salaries. Its repeal was (and still is) widely and bipartisan-ly expected, but when the clock struck midnight on 1/1/23, lots of software companies (my employer included) acquired an exciting new tax liability for the year 2022. For us, this was very roughly 5-10% of what we spend on total salary.
This number seems not coincidental.
Here's a short CRS writeup, so I'm not #bias: https://crsreports.congress.gov/product/pdf/IN/IN11887
The reality is that the TCJA wasn't nearly as bad as the reporting around it would lead one to believe. It raised some taxes, lowered others and was beneficial most income groups. Plus it lowered corporate tax rates, making US companies more competitive. The estate tax changes are the worst part, in my view.
I'm probably one of the few lefty people who had any good things to say about the 2017 tax cut. I still think it was bad for reasons I'll get to but there were some decent things including changing the mortgage interest tax deduction and state and local tax deduction. The mortgage interest deduction creates terrible incentives (As Matt has written about) and any moves towards eliminating or lowering it I'll support (even if it was done for the most asinine reasons).
Having said that I think you're giving short shrift to the perverse incentives created by changes to the "pass through" income (this is probably one of the biggest sources of tax chicanery). Second, it's really not at all clear to me lower taxes for corporations were making much difference to their investment decisions and instead just a giveaway to shareholders (I say this as someone with a pretty diversified stock portfolio).
My last point is sort of my biggest gripe with the law, the opportunity cost. It just...wasn't needed and was clearly just a way to make sure GOP donors would keep opening up their wallets (Matt notes that the tax law was wildly unpopular, but if I'm not mistaken Trump's approval ratings rose from mid to high 30s to just over 40 and remained almost hilariously at exactly just above 40% rest of his Presidency right after the law passed. My point is this seems very likely to be an uptick in support from the donor class who got their "reward"). I know "infrastructure week" became a running joke, but it seems inarguable to me the money sent out in tax cuts would be better served on an infrastructure bill or a myriad of other uses. It's not 1980 anymore, the economic case for supply side tax cuts should at least have some connection to the actual underlying economic conditions of the moment.
I think the right way to look at it is that the TCJA was the least regressive (most progressive?) tax reform one could expect from a Republican Congress & President.
The "Tax Cuts for the Rich and Deficits Act of 2017" was terrible becasue it failed to recoup in personal income taxes what it reduced in business taxes. And if we want State and Local governments to rely less on the Federal government for financing we ought to restore SALT deductions (which also slightly nudges the Federal income tax toward a progressive personal consumption tax).
But trying to use fiscal policy to affect macroeconomic outcomes whether "stimulus" or "deficit control" is a mistake. That's what we have a Fed for. We want taxing and spending to increase the efficiency of the economy a largo plaza and redistribute consumption.
You've been on this kick for some time and I am inclined to simply say "no" and move on.
It's demonstrably divorced from reality, wherein monetary policy is neither sufficiently well-equipped nor sufficiently independent to simply take a sitting government to task and say "nope, we're using our power to override whatever you've just done."
A central Bank should not say anything at all. It should just set its policy instruments to achieve its flexible inflation target. What those setting are will depend on a multitude of factors including the fiscal deficit. And as far as I can tell that is exactly what Powell has done. I do not think the Fed's delay in raising interest rates after September 2021 was trying to do any favors for Biden; it just miscalculated. And by the same token if we slip into recession this year, it will not be the Fed deciding to punish Biden for ARA, it will just be another miscalculation.
Expenditures should be limited to those in which NPV>0. If there is unemployment and borrowing costs are low, more expenditures and some short term tax reductions will pass this text. If THIS is what you mean by "stimulus," then that's fine. Fiscal policy guided by efficiency and redistribution will run higher deficits in recessions than during non-recessions. I'll grant that in 2017 TIPS was below the inflation target; the Fed, shamefully, was failing at it's job as is had been since 2008, so NPV of some expenditure and temporary tax reductions were in order, but not the structural tax changes actually enacted.
The estate tax exemption was raised from like $5 million to $10 million (or something close to that).
What really should have happened is the corporate income tax should have been eliminated and the capital gains tax rate should have been raised, so the owners of corporations pay all the tax. The estate tax should have also been eliminated and instead the cost basis of all inherited assets should be deemed $0, so when sold capital gains taxes are paid on the full sale price.
What happens when the assets are not sold, but just used to produce income indefinitely? I'm happy to see wealthy people ensure their children are comfortable, but I'm not a fan of plutocratic dynasties. At least for truly large fortunes, it's appropriate for the state to take a cut (perhaps treat legacies as income to the inheritor if that's more efficient than an estate tax).
I forget if it was Matt Y. who raised this before, but the way truly dynastic wealth tends to dissipate is through dilution, not taxes, as far as I can tell. (Not that I'm against estate taxes, just not sure they will be enough on their own to accomplish this.)
How does that work for assets that people wouldn't sell or at least not during their lifetime? E.g. why would the Walton family sell their stock when they could simply live off the dividends?
Or alternate - Musk gives his kids one billion each. They borrow against it over their lives, but never sell anything and end up spending a billion dollars. At a 4% real return rate, they start with one billion, 60 years later have 10 billion. Upon their death, they sell the billion to cover their life's expenses and pass on 2 billion each to 4 kids, who do the same and end up with 20 billion. During their lives, they never pay a dollar in income tax, capital gains, nor estate tax.
How many children of truly massive fortunes sit around doing nothing? I'm sure Rob Walton had to sell a lot of Walmart stock to buy the Broncos. The Buffett children all run large philanthropic organizations of their own. The Ellison children work in Hollywood. One of the Gates children is a physician. I care more about what people do, rather than how much tax they pay. Taxes are a way to raise revenue for the government and modify economic incentives, not a way to bestow moral value on people. Children of people with massive fortunes are more likely than not to also inherit a strong work ethic and drive for success.
“How many children of truly massive fortunes sit around doing nothing?”
It’s a big country and an even bigger world, and the number of immensely wealthy people might surprise you. Forbes says there are 735 billionaires in the US, which is about a quarter of all billionaires in the world. There are something like 22,000,000 millionaires in the US, though most only have a few million - and most of that wealth is tied up in their house and 401(k). An article on Investopedia says there are around 215,000 ultra-high net worth people in the US, defined by $50 million or more in wealth.
I don’t know what you meant by “truly massive fortunes,” but surely a number less than $1B would qualify?
As far as how many “sit around doing nothing,” that number might surprise you as well. I work in an office in Downtown Miami, with a view of Biscayne Bay - just a few hundred meters away from the Intracoastal Waterway. There is an astonishing number of yachts that ply the Intracoastal this time of year - not all are owned or chartered by Americans to be sure, but many are. I’ve seen a yacht owned by a member of the Walton clan - it’s massive. A couple weeks ago Jerry Jones’s 109 meter yacht, the Bravo Eugenia - which Wikipedia says is the 44th longest yacht in the world - was at a slip in a marina across the way. When I started composing this comment, the Utopia IV sailed south in the Intracoastal, then hung a left in the main shipping channel and out to the Atlantic. The Utopia IV is a charter - a cool $505,000 per week.
The yachting set isn’t literally sitting around doing nothing - they’re out having a good time and spending money. That money makes its way into the pockets of restaurant workers and DJs, and into the small businesses that line part of the Miami River offering yacht dry dock services, maintenance and overhauls, and provisioning.
Then there are the more modest, and more numerous, trust fund kids who live here. Some are pretty chill gym rats who sleep late - some party, some don’t - and others are strutters with their $1,000 sunglasses, Louis Vuitton purses (and I am talking about the men), and garish Lamborghinis. They’re obviously spending money, too, and helping to create jobs: servers and kitchen staff, Lamborghini mechanics, and commissioned sales staff at Saks.
Would we be better off taxing away the vast fortunes of the wealthy when they die and letting the federal government “redistribute” the money in welfare payments? Maybe. Maybe not.
"How many children of truly massive fortunes sit around doing nothing?"
I don't know. Do you? One of the things about family wealth is that we don't really know how often this happens. We notice heirs who make a name for themselves, but much less about people who don't.
"Taxes are a way to raise revenue for the government and modify economic incentives, not a way to bestow moral value on people."
I couldn't agree more. One of my frustrations with the inheritance tax is that its framed as double taxation, when in reality almost all income is taxed at each point its received. And more specifically, I don't understand why we wouldn't apply an even more progressive structure to inheritance taxes than other income given that I would incentivize working, saving, and investing.
"why would the Walton family sell their stock when they could simply live off the dividends"
I believe at the income levels you'd likely be talking about for the Waltons, the tax rate for qualified dividends and capital gains would be the same, and dividend income is less subject to accounting tricks than capital gains.
Yes, they'll pay income on dividends, but not on the inheritance. If you win the lottery and invest all the money, you pay taxes on both winnings and on the interest you make later.
The human impulse to leave an inheritance behind for one's family has been built up over thousands of years of civilization. Fighting against it is incredibly difficult if not impossible. And taxing inheritance has the same valuation problems as wealth taxes. I'm fine with taxing cash inheritance as income, but it would be simpler to tax inherited assets only when their value is realized, again starting from a cost basis of $0.
"The human impulse to leave an inheritance behind for one's family has been built up over thousands of years of civilization. Fighting against it is incredibly difficult if not impossible."
Obligatory Frederic Bastiat quote:
The Organizers thus lack the force to submit humanity to their experiments. Should they win over to their cause the Russian Autocrat, the Shah of Persia, the Khan of the Tartars, and all the heads of nations who exercise an absolute empire over their subjects, they would still not have at their disposal a force sufficient to divide men into groups and series and abolish the general laws of property, exchange, inheritance, and family, since, even in Russia, Persia or Tartary, account still has to be taken to a greater or lesser degree of the men concerned. If the Emperor of Russia took it into his head to wish to modify the moral and physical constitution of his subjects, he would probably be promptly ousted and his successor would not be tempted to continue the experiment.
From "Natural and Artificial Organization" in "Economic Harmonies".
100% doesn't make sense. You'll just have people game the system really hard. I think lowing the exemption and making it count as income is fine.
I'm fine with reinstating the SALT deduction if it's paired with a revenue-positive increase in the top marginal rate (TCJA did the reverse). I want rich people paying more taxes in total, but I don't care if it's rich people in NY or rich people in FL, and I can sort of see the logic for why in relative terms we should increase the latter's share over the former's.
Eh. The exact numbers are more important to me than the structure of the tax code. It's good when states tax their rich, and it's good to make it easier for them to do that. Obviously not worth it if it costs the federal government money or increases inequality, but if it's done in a revenue-positive (or even revenue-neutral) way, then it won't.
Bonus depreciation in 2023 getting phased out may also be yuge if not changed.
> A boom in startups and an expansion of technical talent outside the “tech” sector, meanwhile, would lay the foundations for a stronger economy over the long run.
I agree that this normalization of the tech labor market will be good for the economy as a whole, and I further believe it will benefit the tech industry in the long term. I say this as a software engineer who has benefited from the extremely tight labor market and will likely face slower compensation growth and fewer competing employment opportunities due to the correction.
Entrepreneurs and startup engineers on forums like Hacker News have long complained about FAANG firms hoarding talent with their high salaries and ever increasing stock prices (a good portion of senior tech worker comp is in stock that vests over four years.) While it’s easy to dismiss these “woe is me” complaints from startup execs and venture capitalists, this fierce tech labor competition almost certainly suppressed the formation and growth of startups. We can see this in the continued dominance of incumbent tech firms and the lack of competition from rising startups.
Ultimately, tech needs the creative destruction process of disruptive new startups to advance. It will be good in the long term (possibly even medium term) for tech workers to take a slight bit of pain in order for some of us to found or join new startups. While most of the new ventures will fail, the survivors will offer radically new products and create even more impactful (and lucrative) employment opportunities.
The timing is great with the current excitement around recent AI advances. While there is a lot of wishcasting and overall BS with many of the prognostications of how AI will revolutionize the world, there certainly appears to be some real potential for radically new tech products. The hype will drive a lot of experimentation across a plethora of new startups. Most will fail and if any succeed they will change the world in ways that we can’t really predict.
Further, I also think that the tightening of financial conditions and the resulting correction in tech firm valuations will actually be beneficial to these startups. While many are bemoaning the pullback in tech investment and the increased challenges in raising venture capital, I think we need this correction; similar to how we need the tech labor market normalization. There was previously too much money chasing too few opportunities and this led to numerous bad investments. Eg, the countless crypto ponzis. The return of VC investment discipline will focus capital on discerning more promising opportunities and force entrepreneurs to be more efficient in how they deploy these funds.
Overall, as a tech worker, I’m quite excited for these corrections, even if I might face a slight bit of pain in the short term.
How does the tech VC market look?
Biotech seems to be having some real pain there as well as the IPO market, all due to higher interest rates. The net effect seems to be slowing start up formation and growth in bio.
It's much quieter than it had been, but given that VCs had been chasing socially-useless (at best) web3/crypto/ponzi startups for the past couple of years, that's not necessarily a bad thing. The sharp decrease in cost at small scale that you get with public cloud vs. having to buy & run your own hardware also means you don't need to raise as much money to prove out an idea --- and decreased salaries helps on that front --- so while it's unclear what the net will be, I think there's a reasonable case that it's not awful.
I feel like a big part of the coverage of these layoffs - more so in tech than in media - is that it's bursting a perception that jobs in tech are eternally secure, upwardly mobile, and highly prestigious. While this was probably never totally true, the average person looking at the tech industry since the mid 2000s probably felt those people had made it. They were paid far above media income and often had generous stock options in a market that only kept going up from companies that only kept going up even more. If you got a job a Google or Facebook or whatever, then there was this sense from the outside that no matter what, you were an in-demand smart person who's going to always have employment in a big company like that.
To put it differently, big corporate-style layoffs were not supposed to happen to *these people* because they were society's meritocratic winners. I know it gets laughed at now, but "learn to code" was earnest advice for most normies. There's a reason town after town attempted to create a Silicon Bayou, Alley, or Holler.
There's also a similar cadre of people posting on social media and in substack comments who have been laid off and feel aggrieved because they also believed that learning to code was somehow going to make them immune to market forces.
But hey, they could always become a cop. We need a larger, more educated police force. Perhaps this is a great time for Matt to create Police for America?
"There's a reason town after town attempted to create a Silicon Bayou, Alley, or Holler."
And yet until now, no one has had the brilliant idea of a Silicon Skid Row!
"Silicon Skid Row" seems to capture the description of tech companies located in downtown San Francisco.
Silicon Yoknapatawpha
Silicon favelas as far as the eye can see.
Why all low altitude options? Why not Mount Silicon? *grimaces at phrasing*
remember, silicon ≠ silicone.
One keeps getting bigger at an alarming rate every year, the other follows Moore's law.
I guess we do need more cops, librarians, and teachers. Here in Asheville, NC, half the force quit, making national news, and we remain very understaffed, to the point where crime is beginning to escalate and the liberal leaning public is having a tough reckoning that laws are actually important. All that said, out of curiousity, I peaked at starting pay for a cop in Asheville, and it's low 40s, in an area with a median wage near 60k. We're in the midst of a housing shortage that has driven rents for a 1br apt. up to near 2k a month. This housing crunch, already significant when it was just retirees gobbling up the housing stock, has been excellerated in the last 2 years by tech bros moving here to WFH. They're rich by Asheville standards. I am watching them with bated breath to see how many get laid off and have to sell, but so far everyone I know that has been laid off is landing on their feet.
So what in the actual fuck? I like your explanation that this isn't supposed to happen to 'these people.' But from what I've seen, it's still not actually 'happening'. It's still tech bros gobbling up the housing stock and cops and teachers getting paid 40k. Makes me want to reach for my D. Graeber.
A lot of blue cities in purple/red states have been dealing with this. When I was in Bozeman, MT, the locals had plenty to say about rich Californians moving in. Austin may be the prototype.
As Matt said, these remote workers will probably just find other tech jobs. And I'd assume a number of new startups will be fully remote from the beginning so they have no reason to leave (if anything more people will leave coastal Northern California). Might as well soak them for tax revenue and redistribute (and build enough housing).
“given that the labor market probably needs to get less strong for the Fed to achieve its target of 2% inflation”
Why should the target be 2%? Not only would it be nice to avoid a recession, slightly higher inflation (eg 3%) has real benefits:
1) inflation makes it easier for firms to nudge out inefficient workers by not giving them raises. pay cuts are so contentious they are rare.
2) it decreases the real value of the national debt
3) it shoves it to bond holders who try to collect rents without assuming risk
4) it encourages people to put capital into real estate and equities, the value of which tends to increase with inflation
A bit of inflation makes the dead hand of the past lighter. It prioritizes present economic activity over the economic achievements of one’s ancestors. It also seems to correlate with decreases in inequality.
Most of your comment is pretty good. But highlighting that higher inflation "shoves it to bond holders" seems out of place with the others. I've never understood why providers of capital in the form of a loan are viewed so much worse than providers of capital in the form of equity.
Its also not accurate. Current bond holders will get screwed, but future bond holders will simply demand higher interest rates to compensate for higher inflation. Treasuries paid 10-15% in the in the late 70s and into the 80s.
I’m not so sure that real interest rates will remain stable over time. Europe has shown that negative interest rates are possible. Economists may not yet fully understand the implications of fiat money. When a government can buy its own debt with newly created money, capital can be so plentiful that there is a negative real interest rate. Over time, a negative real interest rate on bonds would create a more egalitarian distribution of wealth.
That only works if there is a significant demand shortfall. Otherwise, why would you hold money or instruments thereof if your value is going to decrease overtime? Maybe you absolutely have to in some cases, but otherwise you would almost certainly take every scrap of money you could and use it to purchase goods (land, gold, etc.) whose value are less likely to decrease. Long term negative real interest rates create demand and exacerbate inflation significantly.
The idea that bond holders do not assume risk would surprise most bond holders that I know. Or that they collect “rents” in one of the most liquid and competitive markets ever devised!
I agree that we should increase the inflation target. We just can’t do that while failing to hit our current target. If the central bank is willing to increase to 3% now, would we not expect them to increase it again should they find it challenging to hit that new target?
Central bank credibility is a real thing and the Fed losing it in the 70s likely explains a lot of the macroeconomic chaos in that time period. They only regained that with the Volcker shocks and the associated deep recessions.
Financial markets need to believe that a central bank can and will keep its promises. Otherwise, in the face of uncertainty, investors will be more aggressively hedging and speculating on volatile inflation and interest rates. That raises the cost of borrowing, including corp bonds and mortgages, which introduces its own flavor of economic pain. Similarly, sophisticated corporations will be more prone to continuously increasing prices if they fear price instability more than the risk of losing market share.
This uncertainty resulting from the loss of central bank credibility creates a lot of economic volatility and pain that ultimately impacts households; both as workers and as consumers. Hence the Fed has to prove that they can keep their previous promises before promising something different in the future.
The Fed’s credibility is more robust than you suggest. Yes, inflation expectations can become a problem and were indeed a problem in 1981. However, it took almost a decade of inflation in the 5-12% range for that to happen.
It’s obvious to any sophisticated observer that the 2022 inflation was caused by pandemic stimulus. If inflation falls to 3% by summer and stays there, the fed will be quite credible. Sure, there will probably be another year of inflation next time there is a major pandemic or war, but anyone who understands economic history expects that.
No the 2022 inflation was the Fed failing to rates rates soon enough. TIPS was signaling in September 2021 that bond holders were expecting inflation to exceed the target. The Fed's JOB is not to allow fiscal policy to affect macroeconomic aggregates.
I agree. I just wish all the folk who worry about Fed credibility had spoken up during 2008-2020 when it was failing below its 2% target.
The time to raise the target -- if it needs raising -- is when meeting it.
Many did speak up. The Fed listened and acted with their Aug 2020 revised monetary policy named Flexible Average Inflation Targeting. [1] Brookings assessment of FAIT describes it as, [2]
> The Fed’s new framework—known as Flexible Average Inflation Targeting (FAIT)—grew out of a period in which inflation fell short of the 2 percent target and inflation expectations drifted down, despite very low interest rates and much lower unemployment than had previously been thought consistent with low, stable inflation. Keeping expectations from moving below 2 percent is especially important when the real equilibrium interest rate appears also to be quite low, making the zero low bound (ZLB) an increasingly salient policy constraint.
> The FAIT framework is well designed to counter the disinflationary bias imparted by policy being constrained by the ZLB from time to time. FAIT promises to make up for inflation below 2 percent by aiming to run it “moderately above 2 percent for some time”—a flexible form of price-level targeting. That implies easier policies for longer than if the Fed were simply aiming to return inflation to 2 percent without the makeup. The point of the averaging is to make sure expectations are indeed anchored at 2 percent. In effect, deliberately aiming for inflation to exceed 2 percent for some time and likely allowing the overshoot of maximum employment necessary to achieve that results in an upward inflation bias that offsets the downward bias arising from the ZLB.
> But there are other asymmetries in the new framework that lean toward taking upside risks on inflation and raise questions about how well adherence to the framework would anchor expectations in circumstances in which inflation wasn’t so quiescent.
Central banks have to be slow and methodical in revising their monetary policy frameworks. Yet they listen, learn—including their own inhouse research and academic collaborations—and eventually act.
[1] https://www.federalreserve.gov/monetarypolicy/review-of-monetary-policy-strategy-tools-and-communications.htm
[2] https://www.brookings.edu/opinions/assessing-the-federal-reserves-new-monetary-policy-framework/
Well, yes. That why I put an end point at 2020. But TIPS did not reliably stay near 2% PCE until Feb 2021.
“it shoves it to bond holders who try to collect rents without assuming risk”
I.e., it creates risk, thereby increasing the cost of capital. That conflicts with your stated desire to prioritize “present economic activity.”
“Put capital into real estate”, is that bid up existing properties or build new ones?
Adorable little girl animated GIF: Why not both?
Do a shot, everyone. Matt mentioned Chipotle
The most important company in America
Qdoba erasure.
Wack.
I used to like it well enough, but there are only three Qdoba within 100 miles of me (including at the airport). There are three Chipotle within 2 miles.
Sorry, but their rice is just too bland!
who needs the beige book, just track Chipotle's hiring plans for an economic indicator
When I moved away from Boston and could no longer get Anna's Taqueria burritos, it was a long search for a replacement and Chipotle was the clear winner. Even if people like to dunk on it.
When I moved to Boston and could no longer get California burritos, Anna’s taqueria was the clear winner, even if people like to dunk on it.
Yeah I’m living in the Mid Atlantic, not exactly the center of the burrito universe! But Anna’s is good.
The one thing I learned in my 2 weeks as a Chipotle employee is that it’s a massive pain to roll a burrito with more than 2 sauces. Also the sofritos are nasty, I’ve seen how they’re made.
If you were only at Chipotle for two weeks, I respectfully think that wasn't enough time to really master burrito crafting, Milan. (I'm genuinely not kidding when I say that I wince when I see a new face at the final assembly station at my area Chipotle because I know it's going to mean a sloppily wrapped burrito, up to and including needing to call in the dreaded Second Tortilla to save the situation. I think it takes at least three months to optimize one's burrito wrapping skills.)
Nah, I've been nice at rolling.
Oh really?? I get them sometimes. Maybe not any more??
We need to know the truth about sofritos! I like the vegetarian option at a fast food place.
I missed when this became a thing? (I don't think of Matt mentioning Chipotle -- America's finest burrito chain -- with undue frequency.)
They used to be pretty good. Several years ago I started having experiences with chewy beef burritos there. Now it's stabilized some, but I get the occasional stinker at Chipotle.
And when a burrito is like 1,000 calories, it's a shame when most of your food for the day isn't particularly good. Especially when it's like $11-12 and you could go to a real Mexican place for that.
You could switch to a burrito bowl -- saves 200 calories skipping the tortilla, although it generates a lot more waste.
I think years ago I first learned of Chipotle from one of Matt’s blogs.
DC in the early 2010s was a gold rush of fast casual restaurants, perfect for your Obama era downtown office lunch. There was definitely a lot of discourse about them.
Also, RIP ShopHouse, we hardly knew ye, Asian inspired chipotle sibling.
"I can’t guarantee that the economy will be all flowers and sweets across the course of 2023."
"flowers and sweets"?
That sounds like it crawled out of the uncanny valley of English idioms. Don't we usually say something like that, but not that?
Shits and Giggles?
It's like "all sweetness and light" got hybridized with "a rose garden."
"Candy and roses" maybe? I'm pretty sure I've heard it used that way, but now I'm doubting myself.
"sweetness and light"?
"strewn with rose petals"?
"sunshine and rainbows"?
Sunshine and rainbows
Good sense as usual. For me, your most provocative point is the way that the media focus on its own experience (in this case, layoffs) leads to systematic distortions of perceived reality.
I am actively hiring software engineers and other related positions. There has been absolutely zero downward pressure on salaries despite the recent layoffs at the tech giants. The big picture remains incredibly robust for people with these job skills.
I’ll be interested to see if big tech compensation comes down enough that other employers (government, non-tech, etc) actually match it. I doubt it.
I’ve been baffled for years about how/why tech company salaries are so much higher. I wish the government would pay competitively so we’d have top people working on the most important stuff. (Which is more important, Google search ads or the unemployment system? According to the job market, Google ads, and it’s not close)
You can make money making ads. Unemployment services are a service.
How much of tech compensation is in wages v. equities? I know wages are relatively high, but how much higher are they than other jobs that also require a bachelors degree? I suspect a big difference in compensation is stocks.
I don’t think it is useful to break apart wages and stock. Better IMO to just consider total compensation. Am I wrong?
That said: It starts out mostly wages and then moves to mostly stocks as you get promoted. Probably mostly stocks overall?
Stocks are relevant though, because they don't come out of a companies operating budget and don't cost the company money, and other sectors like government and non-profits can't offer them.
Public company stock is pretty much the same as cash, since you can sell it immediately. Instead of paying stock, these companies could sell the stock themselves and pay more cash. So that’s why I don’t think it’s much of a difference.
For private companies, especially early startups, it’s more different.
"Public company stock is pretty much the same as cash"
Not exactly. You can put all kinds of restrictions on company stock that you can't (or its MUCH harder) on cash. Also - companies can always create more of their stock, raising cash is harder and usually comes with paying more fees to banks.
There might be good enough reasons to require cash anyway, but there are important differences.
> Stocks are relevant though, because they don't come out of a companies operating budget and don't cost the company money
Stock options and share grants are absolutely on an income statement, albeit not on a cash flow statement.
Hit levels.fyi, they're the best public source I know for data about compensation breakdown in tech, broken down by company and salary/equity/bonus; it varies widely between companies and seniority.
Not the main point, but why are Netflix and SalesForce tech companies? I used to find it interesting that Dell was a tech company but Ford Motor was not, even though both mainly assembled something from parts they bought. Ford recently had a patent issue called "Methods of non-destructive residual stress measurement using barkhausen noise and use of such methods." I have no clue what "barkhausen noise" is, but it sounds like advanced mechanical engineering.
I assume “tech” is used to mean predominantly electrical engineering and computer science. Mechanical engineering (which is my field) is not considered “tech” in the 21st century sense... even though it’s certainly technical, and we still do advanced stuff 😄
Woe to the poor unappreciated mechanical engineers...
It is why I switched to software systems.
Also civil engineers, but no one likes civil engineers.
When I was in high school, I told my dad (a naval architect) that I thought maybe I’d like to be a civil engineer. He told me in no uncertain terms that civil engineers were lame, and that I should do mechanical engineering, because if you can make something that moves, you can make something that doesn’t move. I’d say the advice held up.
But as a civil engineer you can run a rentier consulting firm and Seattle will pay you all the monies to advise the construction of defective bridges
As I was told in my intro-to-engineering class when they were trying to describe what each discipline did: "CivE make targets. MechEs blow them up."
I can't find it in their revenue statement , but I imagine a good chunk of Dell revenue is supporting their hardware for corporate clients and helping them implement and roll out appropriate solutions for their needs. I don't think they are just a distribution center shipping assembled computers that they receive from China manufacturing.