I work in tech. I manage developers. There’s no world where AI would let me get by with fewer developers. Even if I thought it made them meaningfully more effective, we have no end of productive work for them to do.

I can sort of imagine things like content moderation needing fewer employees. But even there, do we really think companies have found all the Nazis? It seems to me like the current state of content moderation is not one where we think, “this is good enough”, it’s more “this is the most we can justify doing” — against the cries of users, especially those who are harassed.

I don’t think AI has anything to do with layoffs. This is a very boring story about interest rates. Money isn’t cheap any more— it takes much higher returns to beat zero risk investments, so there’s less money to be spent on risks. Investment is risk. Tech companies aren’t willing to invest in new and growing revenue streams. Investors are less likely to back your risky startup or reinvest before you’ve figured things out.

Lots of experiments with potentially long return horizons or with potentially lower rates of return are no longer worth investing in. Lots of investments that had growth rates that are worth it at 0% are no longer worth it at 5%.

What’s happening in tech is a lot of CEOs and companies are admitting that some of the things they’ve spent money on aren’t likely to going to make very much money and they don’t yet have better alternative ideas.

Many products and services these companies have tried all seem pretty stupid from the outside. But here’s the thing, if you’re incredibly profitable and there’s very little risk-free return out there, it’s worth trying a bunch of things that are silly, some of which may turn out to be a huge deal. Tech companies get sky high valuations because they’re really good at trying things that seem silly and have very low costs to scale. The unit economics are great, if they work. Most traditional companies don’t get the same multipliers because they tend not to compete in winner-take-all markets, with zero marginal cost products, and a track record of success finding or creating new markets.

The math has changed. These companies (big tech) still (mostly) print money, but they’re no longer (as) good places to spend it.

As inflation eventually cools, if the world doesn’t set itself on fire, and interest rates begin to creep downwards, we’ll see further adjustments. Capital will get deployed into more, riskier businesses. New company formation will go up. Existing companies will do more M&A and take more risks seeking new revenue streams. Hopefully, this time, they’ll be a little more cautious on the way up. A lot of ideas the last time didn’t really pan out.