Picture taken from their Twitter
Is it just me or are all big companies killing themself right now?
Yeah, inflation rate is high, so central banks are trying to counteract that by basically slowing down the economy, so that our normally scheduled inflation countermeasures kick in appropriately. Well, and the usual way to slow down the economy is to make it more costly to loan money, i.e. increase interest rates. Which means investors can’t just pump money into any company anymore, they want that money to actually pay out to cover those interest rates. And that means companies need to actually be profitable to get money to finance their operation.
So does that mean all these businesses were always doomed to fail anyways, just living on borrowed money/time, and now the bill comes due, they’re all fucked?
Eh. Most of these companies were profitable. Just not seeing the exponential growth that the stock market dictates when interest rates are high. Unity, not so much, but its revenue was always fine, its just a really poorly run company. Who knows where they piss the kind of money they are pulling in to.
I’d guess that companies that failed to turn profit when money was cheap are most likely doomed. However not all of the hype companies are like that. Some could be barely profitable, but shareholder pressure might push them to heavier monetization practices.
A lot of the wealth created by venture capital and the service economy were only ever possible with the help of what is essentially free money. With the increase in interest rates and the collapse of a major venture capital bank, those corporations dependent on low interest payments are going to collapse as well.
As interest rates climb and venture capital dries up, the companies who were just scraping by, or dependent on debt loading during development have had their runway cut short.
We are getting to the point where companies aren’t going to be utilize fronting a huge amount of debt as a strategy for long term growth.
Unity looks to be one of the companies who wanted to utilize the slow boil tactic perfected by the likes of Google or Amazon. Where they front the cost of tons of free and convenient services, hoping that companies become dependent on them, slowly creating fees over time until they become profitable.
If I were a guessing guy, they’ve hit the end of their run way, and have failed to secure a new injection of capital sufficient enough to make the payments on their loans. Likely their options have come to find a way to make your payments, or you’ll be giving your entire operation to a bank.
This would make sense if Unity increased their fees, but it doesn’t make sense to invent a new revenue stream based on a metric you can’t even accurately measure. That’s profit-seeking.
I’m guessing it’s their last ditch effort to remain in good solvency. A board member making trades before a big change is almost always a sign of the rats abandoning the ship.
And it’s most costly to increase interest rates not because those directly affect the investors, but because those interest rates affect the borrowers since the borrowers will need to make more and more money to be able to pay back the initial injection + interest.
If borrowers don’t think they can pay back, then they probably won’t borrow in the first place. If they do borrow but don’t make enough to pay back those loans + interest, then the investor loses out.
And if borrowers don’t borrow in the first place, then investors sit on their money when they could theoretically inject it into other businesses so they can earn on what they own, and not just let their assets stagnate (or decay). To investors, this might also be perceived as a loss.
Do I have that right?
In principle, yes, although two things to note:
-
Borrowing isn’t always the active part. When a company is listed on the Stock Exchange, then investors play the active role by buying or selling their stock.
-
Most investors don’t just have tons of money laying around. They have property, which they can list as security when borrowing money from banks. And then they lend that borrowed money to companies seeking(/allowing) investment. That means:
a) With high interest rates, investors do have a need for their lent money to pay out, too. As do the banks, because they borrowed it from the central bank.
b) Ultimately, lots of money will be given back to the central bank. The money is effectively removed from the economy then. If you’ve ever heard that inflation comes from too much money being in circulation, that’s how that ties back in.
I’m no expert either, though. I’m just summarizing what makes sense to me and what I’ve learnt from making this post a few weeks ago: https://feddit.de/post/2514573
I’ve said this for about a decade now: I firmly believe this world we live in now is the inevitable, unavoidable result of having every company run by people with business degrees and no passion for the businesses they run. When your entire education was focused on how to extract one more penny from customers and how to psychologically make addicts out of everyone, this is what we end up with. I fucking hate it. Everything is enshitified and it sucks.
Agreed, VC have poured free money into excellent, but unsustainable businesses trying to chase ‘growth’ long enough that they can sell out just before everyone realizes that it won’t make money. It’s just a scam of rich people preying on other rich people.
Instead of trying to build a self sustaining company to begin with (which requires hard work to balance revenue against customer needs and desires) they build ‘free’ products that people love, but can’t make money, only to switch the company to crappy products that people hate, but now are trapped into using.
Our entire digital economy is built on these bait and switch companies and it sucks
I disagree. This is all the system working as expected. There is no such thing as infinite growth and yet we are conditioned to always need it or else it’s a failure.
We are on an ever accelerated race to the bottom.
The definition of success is woefully broken.
result of having every company run by people with business degrees and no passion for the businesses they run
You’d think that even soulless business ghouls would’ve learned somewhere along the way to put a price tag on things like long-term customer loyalty and the soft power of your brand. So either they’re too dumb to take all the variables into account or they’re looking only at short term gains.
Short term gains, every time. These people will take a dollar today over ten tomorrow every chance because they have tunnel vision and only focus on immediate profits happening RIGHT NOW. Ironically the people most likely to drone on about investments are the least likely to really understand their functionality and what investing time or money into something is supposed to mean and accomplish. Most companies these days feel like their just trying to gobble up enough cash to survive their impending failure, it feels so bleak.
Sort of but not exactly, the recent shift is because money has gotten expensive and now investors are wanting to take a profit rather than tossing money around hoping to get lucky. So now these business types are scrambling to do anything that makes the business profitable when their entire business plan was unsustainable without the constant influx of money keeping them afloat under the guise of “growth”.
The poor guys just want to fulfil the infinite company growth expectations of their stakeholders.
Eat the rich. ALIVE.
What really bugs me is that it’s not even infinite growth they’re after. What they want is as high growth as possible as soon as possible. Planning a sustainable long term profit business would mean great employee benefits to attract and keep the best, a ton of funding for new product development, and building things slightly more expensive so that they last longer.
There is no financial analysis that would say cutting safety measures is a net positive to your money in the long run. The bill will come due and you’ll lose an extraordinary amount of money when things blow up or derail. If I make a change that raises my risk to 1% over a year to have a safety incident which would cost me 5 billion, I’d have to save more than 50 million each year with that decision for it to make me more money. Plus it would take 100 years for the realized savings to cancel out the event. If it happened before 100 years, I’m at a net negative.
All of that is to say that the stakeholders aren’t just greedy bastards, they’re also dumb as fuck. But that’s not surprising – the type of person with that much money didn’t get it from consistently working over time. They think playing fast and loose will work in their favor always.
Publicly traded companies*
Private ones dont always have CEOs chasing every penny looking for only short term gains.
Not just companies, but countries too. We’ve apparently reached the Age of Idiocy where everyone that got big is just doing these epic face-plants. I don’t know if it’s desperation, arrogance, greed, or a combination, but so many shitty decisions coming out left and right all over the place.
Late stage capitalism. You can’t expect year over year growth for eternity without running into a resource cap. Profit growth is all the shareholders care about because it’s literally written into United States economics laws that investors get paid first. All these dirty tricks and bad decisions are coming from CEO’s with limited understanding of the effects of their policies, trying to push for an extra 2% on top of their already obscene margins
