Even Bigger Nightmare On Tech Street

19 thoughts on “Even Bigger Nightmare On Tech Street”

  1. Everything is crunched, but I think that weblogs, and the internet in general, isn’t going to get a big blow like hardware, real estate, and banks of course…
    The .com bubble belongs to the beginning of the decade. We are now at the end.
    I wouldn’t worry about this site…

  2. Don’t worry, Om. You’re going to survive and thrive.

    Man, China though. They’ve enjoyed quite the decade of prosperity. My worry is the state of their political-economic situation. Everything is hunky dory in their weird psuedo communistic capitalistic system when their economy is on the up and up. What happens when their economy really starts to feel the weight of this global economic downturn?

  3. Small business with greedy owners will not be affected by this financial disaster. Also the outsourcing companies will be the most important players in the next years, because everyone will want to cut their costs. In this situation I think that the competition on the outsourcing side will lower the fees. And in this case the amount of money in the IT industry will be much smaller that these last years.

  4. Just passing on some Yahoo tips for Monday. At this moment in time, however bad things are – they are. Perhaps is helpful at difficult times to deal with the environment in it’s declining condition, instead of to dwell in it:

    http://biz.yahoo.com/tm/081219/18598.html?.v=1

    Notably we are hearing announcements about Land Rover Jaguar in the UK. Millions definitely to be pumped in. But notably not billions. They earned £750m profits last year (I believe), and would have increased this year should we not have had so many crooks for bankers (and politicians). Anyhow – they sold every single Jaguar XK made, and sales on Land Rover’s increased.

    http://motortorque.askaprice.com/dealer-news/auto-0804/jaguar-and-land-rover-profitable-in-2007-report-tata.asp

  5. Nightmare? No, it’s more like we’re finally waking up from a really great dream that ended in a nightmare.

    Let’s look at the facts: for decades, the central banks of the world (especially the US’s Federal Reserve) have been cranking out liquidity, i.e. printing money or allowing the banks through low reserve ratios to create debt. This is the Austrian School definition of inflation: the increasing of the money supply.

    Inflation has two effects: it makes prices go up faster than wages, and it gives people reason to make malinvestments. When people have all this “new” money, they ignore the fact that their old money (401ks, stocks, savings) is worth less. They take this new money and spend it, usually in the wrong way.

    Some people buy houses that are overpriced because of all this new money. Some people invest in markets that are overheated because of all this new money. Some people go out and buy a $1000 cell phone or a $2000 notebook or a $5000 TV. These are all malinvestments.

    As the Austrian School economists show, time and again, since 1920, malinvestments cause bubbles, and bubbles cause busts which are really in fact just reality coming in full force.

    There’s a solution: end central banking. End fractional reserve banking. This way, with a fixed money supply that is backed by SOMETHING, people will see their money growing in value over time, rather than falling. Their wages will be realistic when they change (they’ll go up if you become more efficient in the market, they go down if you become less efficient in the market). People will see their money gains value over time even if it sits in the mattress. This causes them to rethink spending it like a bunch of soldiers on leave before a huge battle coming ahead.

    I’m so happy that my competitors are all over-leveraged with debt and bad assets. I have savings, and now I can buy those malinvested assets at pennies on the dollar. I can hire those who are unemployed at reasonable wages based on their value to the market, and not based on what their over-debted ex-employers were willing to pay. Consumers can now consume what they truly want and need, not what they think they “must have” because their over-indebted neighbors bought something nice.

    You don’t need a new car every 3 years, unless you really can afford it. You don’t need a new TV every 2 years, or a new PC every 12 months, or a new cell phone every 24 months, again unless you can afford it. When people see value in saving, they can buy things that are affordable rather than go into debt and cause prices to skyrocket for those of us who save.

    This is a GOOD THING. Markets should tank, because the markets pay no real dividend on average. Companies that NEVER issue a sane dividend are NOT PROFITABLE. Eventually, all that capital investing crashes when a competitor takes over the market. Issue dividends, and people like me will invest again. Stop destroying the value of our currency, and people will start hiring again at reasonable wages.

    I love the site, Om, but I detest the idea that falling prices is bad for people. I detest the idea that punishing malinvestors is a bad idea. Recessions are the BEST for the wise investors, because they can buy discounts when for years their money was worth less and less due to the morons who went bat-crazy buying whatever they could.

    I’m excited. I’m expanding. And I’m still saving my money for the next boom-bust craze.

  6. Consider that the US represents 4% of global population and 5x relative share (20%) of the global economy. The other Developed nations reflect a similar imbalance in varying degrees. Ghana, Africa generates a 1/10th share of the global economy relative to its population. The other undeveloped nations reflect a similar poor showing at about 2% the per capita economic contribution of the US. The over zealous extension and subsequent collapse of credit will force the US and other developed nations to contract, but there exists a vast growth potential among developing nations that deserves attention.

    See – Telerupted: Africa, the Last Infotech Frontier
    http://gigaom.com/2008/10/16/telerupted-africa-the-last-infotech-frontier/

  7. I doubt this is a moment of “peak waste” as Tim O’Reilly writes in his response to your post. Or even that this is a bad thing, except in the short term, for the tech sector. The good thing about downturns is that they shake out weak players. Companies that shouldn’t be able to survive will finally collapse. The remaining ones will become stronger. Rationality (except where government intervention occurs) will determine which companies, like Apple, will continue to sell products like the brilliant iPhone and which ones, like RIM, will be forced to admit that their products (Storm) need to be entirely rethought… and others (LG Voyager?) will just go away all together.

    This is a flight to quality across the entire economy. Bad businesses will be vanquished by good ones – we should rejoice.

  8. It’s called creative destruction and we’re a couple of decades over due. Central banks, especially the US Fed, decided to avoid recession at all costs…very similar to when the US Forest Service decided to suppress forest fires…with very similar results…huge amounts of undergrowth was allowed to grow up, so now, we have a dozy of a forest fire on our hands.

    Forest fires are natural and very necessary to the proper functioning of the forest ecosystem. Through thier destructive power, dead wood and undergrowth are burned away, allowing new life to spring forth. By suppressing the forest fires, the US Forest service allowed so much undergrowth to develope, the eventual fire destroyed far more than it would have otherwise.

    Likewise this reccession is going to be a dozy…but the end result will be great opportunity for many and the end of the road for many others…

  9. The system is severely out of balance. We work to much & things are overpriced.

    If every year things become more automated, and we learn how to create the necessities of life with less effort, and
    the infrastructure in countries moves from a development phase to simply a maintenance phase,
    wouldn’t it make sense that the demand for labor and the work available would shrink? Our increases in productivity should be creating more and more time for recreation. Unfortunately the cost of living has been forced upwards largely from an oversupply in credit. There needs to be a major deflation in prices (scary to employees), or a major influx of capital to consumers (scary to anti-government republicans), to restore a healthy balance.

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