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What is Old is New Again
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๐ Abstract
The article discusses the sudden changes happening across the tech industry and what they mean for the next few years of software engineering. It covers topics such as the impact of interest rate changes, the smartphone and cloud revolutions, the new reality for software engineers, and how history may be repeating itself.
๐ Q&A
[01] What's going on?
1. What are the key changes happening in the tech industry?
- The tech jobs market, VC funding, IPOs, and Big Tech have been heavily affected by the winds of change in the past 2 years.
- There was a hiring crisis in 2021-2022, followed by unexpected layoffs starting in 2022 at both loss-making and profitable companies.
- VC investment has steadily fallen since its peak in 2021, and there were zero tech IPOs in 2022 and only three in 2023.
- Big Tech companies have been doing mass layoffs, even while posting record profits.
[02] Why is it happening?
1. What is the underlying reason for the sudden changes in the tech industry?
- The underlying reason is the rapid increase in interest rates by central banks to combat high inflation.
- When interest rates rise from near-zero to around 5%, it significantly impacts the tech industry:
- Less VC funding as investing in risky startups becomes less attractive compared to safer bank deposits
- Fewer tech IPOs as loss-making companies struggle to attract investors
- Big Tech companies becoming more aggressive in cutting costs to maintain profitability
- Worse job market due to Big Tech layoffs and fewer startups hiring
2. How did the low interest rate environment of the 2010s contribute to the tech boom?
- The combination of the longest-ever period of 0% interest rates and the smartphone and cloud revolutions created a "golden age" for tech startups in the 2010s.
- Startups could raise large amounts of capital and scale quickly using cloud computing, contributing to the growth of companies like Uber, Spotify, Netflix, Airbnb, etc.
[03] New reality
1. What are the implications of the new high-interest rate environment for software engineers and engineering practices?
- It's tougher for software engineers to land jobs, and career advancement is slower.
- Engineering practices will likely see a push towards "boring" technology, more popularity of monoliths, increased use of "fullstack" and Typescript, and more responsibilities "shifting left" onto developers.
[04] History repeating?
1. How does the current situation compare to the Dotcom Bust of 2001?
- Software engineers who experienced the Dotcom Bust of 2001 see similarities between that period and the sudden changes happening in the tech industry today.
- Understanding the underlying forces, such as the end of the 0% interest rate environment, can help software engineers make more considered decisions about their career paths.
Shared by Daniel Chen ยท
ยฉ 2024 NewMotor Inc.