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?
Kind of. In the past investors were willing to be more patient, and company values were artificially high, because they were based on potential profits rather than actual profits. That’s shifting a bit as interest rates go up.
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.
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.
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.
I find it interesting how common it is to blame executive greed/stupidity, as if we all merely got super unlucky when companies were picking their CEOs. Every CEO is different, yet the outcome is almost universally the same: when company longevity and quarterly profits come into conflict, profits win.
The CEO of the modern public corporation embodies that conflict of interest, which is perhaps why they are so hateable – the job is inherently two-faced – but at the end of the day they’re just a face, a name, and a bundle of core competencies. No matter how many CEOs we go through, there will never be one who could satisfy the unending hunger of the public stock market. You will never find one who is not ultimately enthralled. The fundamental concept of know-nothings owning everything is just outright broken.
I don’t know if I think we should burn it all down, but one thing I’m sure of is that the problems won’t stop until we bring the people with investment money into close alignment with the long-term interests of the corporations they own (and/or oust/eat them)
Simplified: If you can borrow 1 Million USD for 0% apr and earn 1000 USD with that, you have 1000 USD in profits.
Now change the apr to 5% and you are 49,000 USD in the red.
You are not logged in. However you can subscribe from another Fediverse account, for example Lemmy or Mastodon. To do this, paste the following into the search field of your instance: [email protected]
Welcome to the largest gaming community on Lemmy! Discussion for all kinds of games. Video games, tabletop games, card games etc.
Rules
1. Submissions have to be related to games
Video games, tabletop, or otherwise. Posts not related to games will be deleted.
This community is focused on games, of all kinds. Any news item or discussion should be related to gaming in some way.
2. No bigotry or harassment, be civil
No bigotry, hardline stance. Try not to get too heated when entering into a discussion or debate.
We are here to talk and discuss about one of our passions, not fight or be exposed to hate. Posts or responses that are hateful will be deleted to keep the atmosphere good. If repeatedly violated, not only will the comment be deleted but a ban will be handed out as well. We judge each case individually.
3. No excessive self-promotion
Try to keep it to 10% self-promotion / 90% other stuff in your post history.
This is to prevent people from posting for the sole purpose of promoting their own website or social media account.
4. Stay on-topic; no memes, funny videos, giveaways, reposts, or low-effort posts
This community is mostly for discussion and news. Remember to search for the thing you’re submitting before posting to see if it’s already been posted.
We want to keep the quality of posts high. Therefore, memes, funny videos, low-effort posts and reposts are not allowed. We prohibit giveaways because we cannot be sure that the person holding the giveaway will actually do what they promise.
5. Mark Spoilers and NSFW
Make sure to mark your stuff or it may be removed.
No one wants to be spoiled. Therefore, always mark spoilers. Similarly mark NSFW, in case anyone is browsing in a public space or at work.
6. No linking to piracy
Don’t share it here, there are other places to find it. Discussion of piracy is fine.
We don’t want us moderators or the admins of lemmy.world to get in trouble for linking to piracy. Therefore, any link to piracy will be removed. Discussion of it is of course allowed.
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?
Kind of. In the past investors were willing to be more patient, and company values were artificially high, because they were based on potential profits rather than actual profits. That’s shifting a bit as interest rates go up.
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.
Barely profitable? Even massively profitable companies indulge in rent seeking behaviour. Line must always go up!
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.
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.
deleted by creator
I find it interesting how common it is to blame executive greed/stupidity, as if we all merely got super unlucky when companies were picking their CEOs. Every CEO is different, yet the outcome is almost universally the same: when company longevity and quarterly profits come into conflict, profits win.
The CEO of the modern public corporation embodies that conflict of interest, which is perhaps why they are so hateable – the job is inherently two-faced – but at the end of the day they’re just a face, a name, and a bundle of core competencies. No matter how many CEOs we go through, there will never be one who could satisfy the unending hunger of the public stock market. You will never find one who is not ultimately enthralled. The fundamental concept of know-nothings owning everything is just outright broken.
I don’t know if I think we should burn it all down, but one thing I’m sure of is that the problems won’t stop until we bring the people with investment money into close alignment with the long-term interests of the corporations they own (and/or oust/eat them)
Simplified: If you can borrow 1 Million USD for 0% apr and earn 1000 USD with that, you have 1000 USD in profits. Now change the apr to 5% and you are 49,000 USD in the red.
Welcome to capitalism.
We’ve had capitalism on a gold standard and before circular debt creation too, it’s not that simple.