Comment by AYBABTME
1 year ago
I thought this would be bad. The start with security stuff isn't my vibe. But then I kept reading it and the storytelling kept me. The econ stuff, parallels, etc.
It ended up capturing perfectly a bunch of ideas I've been having for a few months now. ZIRP was toxic. It made us bad and lazy. Identifying the phenomenons and explaining their mechanisms has been a useful exercise.
I think this post will stay in my brain for a long while. I'm at this point in life and this resonates a lot. I want to build useful stuff with intrinsic value and I'm sick of the BS that exulted in the last decade. In my own way I'm trying to start ventures, so it's a good motivating call.
Slow start but damn solid article.
Feel basically the opposite, in fact I would go to say this takeawway is the wrong one - the article is titled "Calling All Hackers" but can't go three headings without talking about shitcoins and venture capital. There's the HN definition of hacker and the infosec one, and phrack is for the latter. "High tech, low life" hackers don't have obsessions with venture capital.
Well isn't that the thesis of the article? It's meant to be an explanation of the modern startup economy (HN) for the capital-H Hacker.
> My point is, it is not just about computers. It's about understanding how the world works. The world is made up of people. As much as machines keep society running, those machines are programmed by people--people with managers, spouses, and children; with wants, needs, and dreams. And it is about using that knowledge to bring about the change you want to see.
> That is what being a hacker is all about.
Agreed. Remember when hacking was about meddling with systems of global finance rather than engaging with them earnestly? This guy doesn’t.
At one point you grow up and realize the fastest way to your goals is using money, and best bet to get lots of money fast is the VC game.
Your argument has a logic leap in it: The fastest way to your goals is using money, but that doesn't mean you need lots of money to achieve your goals.
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That's the vibe I would have if I didn't read past the first third of the post.
> "High tech, low life" hackers don't have obsessions with venture capital.
This sounds like you're conflating aesthetics with what the article is actually discussing.
> ZIRP was toxic. It made us bad and lazy.
Yes. It makes me really nervous to see people celebrating the fed talking about lowering rates. Maybe rates should be lowered a bit, sure, I don't know. But please, please don't ever let us go back to zero-interest. As a person who works with technology, that era was so incredibly depressing. So much waste. I'm on the verge of leaving the tech industry because of what happened over the past 10 years. City bus drivers don't have to share an industry with SBF and Juicero and Elon Musk, you know?
Lowering rates is fine. Lowering them to zero is bad.
Economists generally believe the baseline, target rate should be around 2-3%.
Zero interest rate is like steroids. You can take them for a while to pick you up and help fight a bug (like the 2008 crash), but if you don't stop taking them, you'll need a long, painful, 5.5% interest rate rehab.
> and help fight a bug (like the 2008 crash)
That was not a "bug." That was a parasite. If you take steroids with a parasite you might just make the parasite stronger.
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> Economists generally believe the baseline, target rate should be around 2-3%.
The problem with that is (as we found out) that does not leave you much room to cut without going to near zero rates.
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> Zero interest rate is like steroids.
The problem with your analogy is that paying interest is an active measure. It takes effort. The higher the rate*(outstanding debt), the more effort. This isn't a choice between injecting nothing vs injecting steroids, it's a choice between injecting sedatives vs injecting nothing. Raising the interest rate is like injecting a sedative. How much sedative should we inject? How much sedative can we inject?
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> Zero interest rate is like steroids
More like adding fat and never burn it. Zero interest means everything stays around, no pressure to produce since there is no expectation of ROI, and then when you suddenly add that pressure a lot of stuff collapses under their own weight since they don't have anything to keep it up.
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> Economists generally believe the baseline, target rate should be around 2-3%.
If it's lower than inflation, the government is just giving free money to the corporations with access to interbank settlement loans.
And, if you were to balance the Federal budget, you would inflate away 75% of the national debt in 50 years at 3% inflation. But, only a balanced budget amendment to the Constitution could accomplish that.
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>> It makes me really nervous to see people celebrating the fed talking about lowering rates.
One thing I've often thought true but not confirmed is that lowering interest rates has it's own effect on top of the lower rate itself. Lowering rates leads to refinancing for example which is not a thing in a steady state. I'm inclined to think most of the benefit of a rate lowering is in fact transient, while the effects of having low rates are permanent and there are similarly transient costs with raising rates. It's a trap.
You talk about low rates like they are a choice. That's mostly not true. A better way to think about it is that low rates are a consequence of "lots of savings chasing few investment opportunities."
Sure, the fed can buy and sell treasuries and use its magical balance sheet to push/pull on treasury yields, and these in turn are the lowest risk and most liquid mechanism for duration transformation so they tend to serve as a baseline / comparison point for every other kind of investment, transmitting monetary policy into the real economy. However, the fed's magical balance sheet has limits: if they push or pull on treasury yields too hard for too long, people will stop using them as a default point of comparison and put their money somewhere else. See: Bank of Japan and the JPY Carry Trade that everyone became an expert in about 3 weeks ago. Point is: the fed can push and pull, but it can't fight the market-determined macro and win. Not for long, anyway.
Low rates are inevitable between growth sigmoids. Unless you think we can exponentially grow forever, we need to figure out how to cope. What would that look like? How could we possibly cool off the economy without paying people to not invest? Well, I mean, we could raise taxes and spend that on the people who got left behind on the last growth sigmoid, but I can hear the "boos" and "hisses" already. Hey! Tomatoes are for eating, not throwing! Guys, come on! You know it's true.
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The long term trend for the Fed is that it raises rates somewhat, and then lowers them even more. There is no reason to think this won't happen again this time, landing squarely in negative rates. It only stops when US dollars are worthless because any Tom, Dick and Harry can get a billion of them for free and even get paid for doing so.
So far, the Fed does a good job of gatekeeping normal people out of the negative rate market even when rates are negative - only rich people are allowed to benefit.
I'm only starting to learn about these things.
From the data I've seen and read it seems like low interest rates are (politically) alluring, because of short term metrics, but will bite back via inflation and bubbles bursting very consistently.
Is there any wisdom and data that challenges or expands on this that a layman can understand?
https://www.amazon.com/Price-Time-Real-Story-Interest/dp/080...
So, bubbles are hard, especially when the underlying fundamental thing does not respond well to price increases (NIMBYism, zoning, weaponized environmental legislation, etc.)
https://www.fullstackeconomics.com/p/the-2000s-housing-bubbl...
Tech bubbles are doubly so, because now that "total addressable market" has exploded thanks to the internet everything is a bubble. (Starting with the good old dot-com one, and crypto, and AR/VR/Metaverse, and now AI. Folks are comparing Nvidia stock graphs to Cisco around 2000.)
....
Likely the HN crowd overestimates the effect of ZIRP on tech, because how crazy the last 10-15 years have been. (But we see that the economy in general performed extremely well, real wages increased, etc.)
Yes, of course there were (and are) a lot of scummy ventures, but there will be more.
...
Regarding rates, the picture is a bit more complex. So coming out of the 2008 crash the Obama/ARRA fiscal stimulus was too small. (And of course it got hyper-over-politicized on "both sides".) And the monetary response was also lackluster.
But we also know now (benefit of hindsight!) that the rates before 2008 were too low.
https://www.caixabankresearch.com/en/economics-markets/monet...
One important take-away is that of course everyone wants growth, more growth would help lower taxes, inflate away deficits, yey! Prosperity is good!
But ... we can't simply buy growth with endless loans from our future selves. Real economic growth requires increasing productivity, which requires applying new (better, more suited to the situation, more profitable) technologies, which requires changes (duh), but an aging population is very change-averse. The US with the political gridlock tends to go on wild goose chases, spending enormous amounts of money on bullshitting instead of picking better technology.
(And here technology includes social technology too. From the things like "lack of funding reform for fire departments leads to them going with too large firetrucks everywhere to be able to bill a lot, which leads them to not sign-off on thinner roads, which leads to too wide roads where motorists drive too fast, which leads to too many injuries and fatalities" to all the usual like lack of gun control and bribery rules for the courts.)
I have a slightly different view on this. ZIRP allowed companies to do crazy things when it came to tech investment. For instance, would Kafka (and by extension, Confluent, and much of the distributed-systems landscape) exist if LinkedIn hadn't decided: "you know, let's not think too hard about whether building a custom queue system is fully economically rational, let's just let our engineers do it, and we'll be able to spin it to investors/shareholders as a good use of capital." It's no coincidence that this happened in 2010, the first year that the interest rate dropped below 1% (and substantially so).
https://www.rtinsights.com/the-technical-evolution-of-apache...
https://fred.stlouisfed.org/series/FEDFUNDS
Were the people who worked on that project value-optimal for LinkedIn? Maybe, maybe not. Were they "lazy" and a "waste" in the value they brought to society overall, especially including the spin-offs and startups that members of these teams would go on to build? I don't think that's an accurate characterization.
Zero-interest was an effective way to incentivize public companies, VC-backed companies, and their LPs to spend large amounts of money on speculative engineering work - speculative enough that one might even call it research, but the fact that we could call it something other than research is the entire point.
It's far from the only such incentive, and it came with many, many downsides, including the creation of many over-funded startups that over-promised and caused harm in their under-delivery.
To be sure, startups aren't going anywhere. There are surprisingly fun challenges when profitability and sustainable growth are core requirements for every project, both macro and micro, and it's just an evolution of our hacker mentality to have to deal with these new constraints.
But I fear that we've lost the incentive to have companies invest speculatively in crazy projects without having a sufficient replacement for ZIRP, and it may take a generation before we understand how that will have affected the rate of innovative output for the entire world.
It's a fair perspective, but I'd counter by bringing up the opportunity cost we spent on the incredible amount of trash startups that ZIRP produced. Those Juicero & crypto & NFT people could've been doing something productive with their lives instead of whatever that mess was. Was Kafka worth that cost? I dunno. But seeing the obvious waste and the clowns who profited from it made me, personally, really depressed at the state of our industry. A system that so blatantly does not distribute rewards for real, valuable work really discourages one from bothering to even try putting in the work.
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I suspect that Kafka paid off for linkedin long before the authors left to start a Kafka company.
RabbitMQ et al were so hard to scale/operate at volume.
Not a fan of the terminology that corporations are people, but stacks of free money will mess up a company much like it will a person.
Elon Musk is very wasteful selling waste due to low interest rates? Please explain or make your point? I don't get how he relates to the rest of your post?
Intrinsic value, like all value, is subjective. Always look for an audience that will value whatever it is you're making. When you use what you intrinsically value as a proxy for what a loosely-defined demographic values, it can lead you down a long road of building things that no one but you thinks is useful.
agreed, wholeheartedly.