Its a pretty sobering time.
"Under the Constitution, bankruptcy is a power entirely reserved to the federal government. An American bankruptcy is overseen in federal court, by a federal judge, according to federal law. That’s why federal law can allow U.S. cities to go bankrupt, as many have done over the years. That’s why the financial restructuring of Puerto Rico can be overseen by a federal control board. Cities and territories are not sovereigns. Under the U.S. Constitution, U.S. states are.
Understand that, and you begin to understand the appeal of state bankruptcy to Republican legislators in the post-2010 era."
https://www.theatlantic.com/ideas/archive/2020/04/why-mitch-...
These pensions and their medical side are the reason why the ACA did not touch golden medical plans because the vast majority are in this area along with certain other larger private pension systems. By the way, the House silently dropped that provision entirely from the ACA in 2019 so they any taxation of them is gone.
My favorite story to fall back on is provided below... and there are other states worse off. This type of largess should never have been allowed nor should the tax payer bail them out. People bemoan the pay of executives at private companies, well guess who is right up there in many cases.
https://www.forbes.com/sites/adamandrzejewski/2018/10/26/ill...
We just fired our cleaning crew this morning and cut hours for the entire shop floor. We are a mid-size, midwestern diesel repair shop similar to Western Truck Exchange. I used to just do valve work and major overhauls, now I carry garbage to the dumpster and fix the copiers in the front office too.
>alternative work is limited
non-existant out here really, but the real thing no one seems to be covering is crime seems up. We had two break-ins this month, one stole all our nitrile gloves, another took our air conditioner and a tool box.
>the unemployment systems in many states are either broken or running out of funding.
LOL this is a massive understatement. I applied a month ago for limited unemployment and got a voice message telling me the system was overloaded after I had completed the 40 minute call. the next day the line didnt even answer and the website was still down two weeks later. I finally stood in line for an hour at the unemployment office to be told I had to call the number "when it comes back up." Oh, those Trump Bucks? the $1200? Not me or a single person ive talked to has gotten that money.
>the federal governments indicated desire to let blue states go bankrupt
Just the blue ones? I'm in a red one and so far its starting to feel like we're all up shits creek. The local Sheriff wanted us to do oil changes on their patrol cars because we're part of a city contract for fire truck maintenance and they dont have the budget for regular service anymore. the motor pool for the county just cancelled their snow plow rebuilds, the county schools cancelled their bus maintenance and wanted to know if we would buy about 15 of them. The local water company asked if we could do their pump house generator maintenance on a net 120 or a payment plan.
>a depression.
I remember living out of my truck during the 2008 financial "downturn" and freezing all through November. I think the government may be vastly over-estimating the social credit they have with the people of this great nation if they think another round of "austerity" is going to sit right with us while all the banks get bailouts and the rich get richer.
That's awful. In Canada, most people got their CERB money within a week. It took 2 days if you already had direct deposit info on there. Some people are refusing to go back to work after the relaxed lockdown because the CERB is more than they make working a few shifts a week.
It's a bit frustrating that part-time workers are getting more than if they would work, but I'm happy that everyone is taken care of.
Has there ever been a time in US history that the federal government has been so openly antagonistic and overtly willing to attack opposite-party state governments? If so, what were the outcomes? If not, is there anything even close?
Current question - what is the endgame for those who what blue states to go bankrupt? What do they get if that happens, outside of talking points? I assume they profit off of it (because that's the reason anyone does anything that I can tell), but how?
GOP knows they're gonna lose the election. They want to hand the dems the worst economy possible.
Then, 4 years down the road, they can start campaigning against "do-nothing-dems" and point to the horrible economy they had to start fixing.
It might be straight-up politics. But there is a real situation where state governments have been financially mismanaged. Should the "working class" person in Alabama without any retirement prospects be forced to bail out (via the Federal Gov't) the state of California's very generous pensions that were not fiscally sustainable in the first place?
There's a caveat here that the Federal laws will need to change a bit to allow States to go into packaged restructuring. And to ensure that we are bailing out specific individuals to ensure that they are not too negatively affected.
One of the strongest arguments against "bailouts" of large corporations is that it negatively impacts price discovery. More specifically, it removes a company's ability to thrive in certain extreme conditions from the pricing equation entirely. An example: Amazon is at all-time-highs right now, and it's because it's proven itself to be a hugely important institution, both during wartime and peacetime. Its market price should reflect this value. Airlines, OTOH, are an institution that can be prone to failure when some things go wrong (exogenous or otherwise), and the price should reflect that. A theoretical airline doing $1B in revenue should be worth less than a theoretical Amazon doing $1B in revenue, even if both have identical profits, growth, balance sheets, etc. The net effect of this is inefficient and poor capital allocation, where more capital would be allocated towards airlines than warranted, and that capital could be allocated elsewhere in more productive / less risky endeavors.
This may come across as overly fundamentalist about the market, but where this really manifests is in the Fed's bailout of junk bonds, which is absolutely nuts. The whole point of junk bonds (I.e. the type of a loan that WeWork would have to take) is that it's default risk is high, but the yield is also high. If junk bonds are bailed out, then that means that we all ought to go and buy junk bonds. High yields for everyone! The Fed is going to bail you out no matter what. This, then, overly inflates the demand (and price) for junk bonds, and you now have a total capital mis-allocation, with a lot of capital going into AirBNBs and WeWorks of the world, rather than the Amazons of the world.
How does this relate to States? Taxation is the price we pay to live in a society, and States are a really underrated way we can accurately come up with the correct "price" for the correct basket of services society might offer. This is the Charles Tiebout school of thought. Bailing out states with shitty fiscal policies is 1) a moral hazard and 2) messes with the long run calculation of the optimal level of taxation.
Okay great, so then what happens if we just let States "fail", like we might let Corporations fail? If we allowed States to declare bankruptcy, the bond-holders won't get paid, and the State credit ratings will shift to reflect their true creditworthiness. In this regard, bailing out bad States is no different from bailing out junk bonds — the only difference is that today State bond-holders don't know that they're holding onto junk bonds — most States have a generally high credit rating (except Illinois, because, well lol)[1]. The only mechanism we know of for the system to correct the ratings of these bonds is to 1) let States relieve themselves of their debt obligations, and 2) organically allow the bonds for those States to become more high-yield.
You might argue that this makes it difficult for States to fund infrastructure projects and safety nets. Yes, it makes it difficult to finance projects in the short run, because the bond failures are reflective of the quality of the current governance. Who comprises the government, who is running things can change democratically — if citizens want more infrastructure projects / better development, they will have to vote for better policies and better representatives. It's the democratic equivalent of swapping out the entire executive team at WeWork with the executive team at Amazon. The alternative is that you never see these governance changes at the State and local levels, and you have the same problems in perpetuity because the same people are always in power, and we never learn from mistakes — institutional rot. Better governance might be to restructure bad pension systems, or raise their own State taxes (IMO State taxes are far too low).
TL;DR — the best argument for letting States go bankrupt is that it's an effective way to weed out institutional rot in the long run, and come up with the optimal level of taxation for the optimal basket of State provided services. Such a scheme can only work if individuals continue to be bailed out so that they are not caught in the onslaught.
[1] https://en.wikipedia.org/wiki/List_of_U.S._states_by_credit_...
Bottom line is that they want rich people (their primary donors) to get richer and don't care about poor or middle class. They are very open about it now and still somehow supported.
This is a good read on it:
https://www.theatlantic.com/ideas/archive/2020/04/why-mitch-...
Vaccination certificates and debt forgiveness incoming? Who knows anymore - what harm is there in being ready?
Trump is just a spiteful moron but not even he would let New Mexico, Wyoming, North Dakota, Alaska, Louisiana, Oklahoma, and Kansas all fail.
Ultimately, no one knows what the best strategy is, maybe the 'Swedish approach' maybe right, or not...,time will tell.
Amazon could bundle rides with package deliveries and get the pre-existing driver and passenger network from Lyft. Lyft was actually telling drivers to work with Amazon when the pandemic started (1).
Waymo could take Lyft’s aggregated rider demand. They already have a partnership to transfer autonomous rides from Waymo to Lyft during bad weather situations and refer Lyft riders to Waymo vehicles (2).
Edit - links below.
(1) Amazon - https://www.theverge.com/2020/3/27/21197699/lyft-amazon-coro...
(2) Waymo - https://www.fool.com/investing/2019/05/08/waymo-lyft-partner...
...What would they do with it? The business model (also uber) as-is makes a loss.
Uber/Lyft's initial proposition was that once ride sharing incumbents were established, they'd have a software-ish monopoly and margins. This did not work out. Now the proposition is "When driverless cars get invented..."
If google had a car that can drive itself, they can figure out an app. They can get to a customer base. The driverless car is the important part.
Amazon otoh... deliveries maybe? If they could figure out a way to do deliveries in a lyft/uber model... that's valuable to amazon.
I think Uber/Lyft's customer bases are definitely valuable. There's a real business there post Covid-19. I'm not sure what the margins would look like though. I think an acquisition might be a good idea if it was cheap enough and it looked like competitors wouldn't be able to use vc money to offer rides below cost.
Uber's ride-hailing business is profitable. They lose money because they subsidize Ubereats.
If they can make a better self-driving car than anyone else, they will win the ride-hailing market. People have no loyalty to Lyft or Uber. They will use whatever is the cheapest/most convenient.
Or maybe Apple.
Apple has been pouring millions into improving its street views in Apple Maps. It should buy Lyft. Pay the drivers an extra $x/mile to clamp the Apple Maps image gathering device to the roofs of their cars.
The drivers win because they get a bump in income in an industry that's already hurting.
Apple wins because it gets up-to-date information about the places where people go most.
Even better: Apple could pay them $x/mile to drive to specific areas where the data is stale or missing.
As a former Uber/Lyft driver, I'd be all over this like Oprah on a baked ham.
Scenario 1 (buy Lyft): So if Lyft has around 1 million drivers in USA [1], and Apple will pay them an average of $50/month to use the device + the cost of the device/installation (around $100) that would cost around $150,000,000 on top of the acquisition price. And you cant really be sure that they covered all roads.
Scenario 2 (hire drivers): US total road length is about 4 million miles, average driver can cover about 160 miles a day (8 hours * 20Mph). If you want to drive through all of the US in 30 days you would need around 800 drivers. If you pay them $5000/month to do that, that would cost you "just" $4 million.
[1] https://investor.lyft.com/news-releases/news-release-details...
Consider the Apple retail experience. Retail is relatively easy to train for, there's a big labor pool to pick from, and with Apple's revenue/sq.ft. they can afford to compete for good staff.
Now consider the sum of your Uber/Lyft experiences and the scale of the problem. Is it reasonable to expect an Apple retail level experience in the ride app space? Even with a tolerable up-charge?
Retail experiences have always varied with some brands able to offer consistently stellar experiences. Tiffany comes to mind. In all my adult years hailing a car has always been a total shit show except at the most extreme price points. I won't speculate as to why, I'm just saying, the quality problem of mass small auto ride hailing has yet to be fixed by anyone.
1) You don't explain how in monetary terms Apple having that better data would offset its additional costs since Lyft does not derive a profit.
2) This comment was mean-spirited and completely unnecessary:
> As a former Uber/Lyft driver, I'd be all over this like Oprah on a baked ham.
Apple is already doing this - my iOS Maps has real time traffic in areas where I know that they're only getting this information from other iOS users, not from reporting devices.
Why bother paying them? If they own the company, just make it a condition of the contractor agreement.
Why? It's a low-margin, money losing business. On top of that it's operating in a space with a lot of legal risks, regulations and competition.
They might as well buy a cheese company that is in financial trouble.
So speculators don't get dumped on by employees with RSUs all day every day, and the business prospects are not adversely impacted any more than they already were. Thats when you pay more for shares.
Layoffs are proactive for investors, not an omen for investors, don't get that confused.
[0] https://techcrunch.com/2020/04/28/warren-ocasio-cortez-pande...
and buy what exactly? Uber and Lyft aren't very valuable businesses, especially as their mythical ability to corner the supply (drivers) hasn't materialized at all.
IMHO both of those companies are destined to shut down or survive in a much more limited fashion, as unicorns they make no sense.
Not in the US, but I'm not sure someone unemployed and out of medical insurance can tell much of a difference between "red" and "blue" right now.
For most younger people here this may come as a shock but tech jobs can disappear, for years.
The job market in 2019 felt a lot like the job market in 1999, people rushing to get upskilled so that they could get into software and make ridiculous money. After the dotcom burst huge number of people left tech, or at least left the world of software development. Salaries also went way down for nearly a decade.
A common comment here on HN with layoffs is "well they're just getting rid of superfluous employees, so this is no big deal". This assumption is both ridiculously callous about real people losing job, it also underestimates how much work is superfluous in SV.
It is very possible that tech will take a serious hit this time, and that the total number of software engineers, data scientists, dev ops people etc will go do... for years. And likewise salaries will also drop (TC automatically does this thanks to the magic of RSUs).
Certainly people will need software and software engineers, just likely not nearly as much as they do now. Once FAANG realizes there's no longer a need to keep talent off the market, expect salaries to take a dive.
Wariness about the future, spiced with a tinge of schadenfreude.
- before Coronavirus, there was a shortage of people to work in software (if you believe BLS)
- software employment represents a very small portion of the labor force
- there are many problems that have just happened that will require software to solve
- while there are undoubtedly industries that will be hard hit, there are many software-intensive sectors that will see growth as a result of the crisis (ecommerce for one)
- the world in 1999 was much different. the internet was a curiosity, now it's essential.
- and finally, companies that are looking to implement efficiencies (read: lay people off) turn to .. software
edit, one more:
- many software positions over the past decade+ have been filled by immigrants. Going forward the US is going to be much less friendly to immigration, so competition for jobs will go down for US workers
I'm guessing I, as a lowly, humble, SWE from an investment bank, would be easily looked over in favor of those aforementioned veterans/alumni of highly regarded Silicon Valley companies. Unless if I make a lateral jump to another bank or hedge fund, which I have no desire to do so.
One obvious counterpoint to this argument is that this recession was not caused by markets realizing that many publicly listed tech companies actually had no market and no path to profitability.
Also, non-tech companies took on a large number of engineers in the late 90s to address Y2K - many of whom got laid off afterwards. Not an issue here.
So was wework by many. Facebook/google cannot be more different from uber/airbnb/lyft.
FB/G are in high margin business, operating largely in virtual space, where scaling to new markets has low marginal costs.
Uber/airbnb/lyft are in historically low margin, capital intensive space, where scaling to new markets has very high marginal costs. Same as wework is an office rental with an app, so is uber, a taxi with an app. App part is cool, and gives them meaningful advantage, but it's still a taxi business, and they were not able to change that.
I got rejected by Uber, was too scared of rejection to try Airbnb or Lyft. But I considered all three a tier (or more) above WW.
I'd have hands down, without hesitation, accepted a job from Uber even if I would have been laid off at some point down the road. Having Uber (or Lyft, or Airbnb) on the resume would open doors I imagine having WeWork (even disregarding the whole scandal) would not.
But, i wonder, in general, if all these layoffs are to some degree something overdue that companies wanted to do anyways and are now just taking the opportunity to do it whilst still saving face.
I think you're also going to see management at surviving businesses exploit the downturn to their advantage. Lots of rationalization as to why you won't see raises, why you'll need to work more to pick up the slack, lots of "be greatful" (there's some validity here), lots of pay/hour cuts, etc. that will likely perpetuate long after the crisis has rebounded and balance sheets are in the green again. Its funny how quickly businesses react to cut costs but are slow to react to shore up their current employees.
You're also going to see employers who lay-off yet justify continual hiring in this marketplace. Businesses will try to capture high quality labor talent at reduced costs (due to competition) and lock in those rates for awhile (hoping some will stay and be happy with modest raises on their significantly reduced labor rates).
One place I work with, management claims everything is fine and they've locked down all non-essential hiring, but I keep active monitoring on popular labor marketplaces for them and see continual updated advertising, even after they've claimed to stop hiring. Some of it's automated but I know for a fact a few places manually renewed listings intentionally. They're not locking hiring, they're looking for discounts right now because they know they're financially solid and will weather this storm just fine.
I love many aspects of technology but am really growing to hate industry practices to the point of looking at career changes.
1) Those little docks like in Venice (cf. "Let me off at this jetty" in The Last Crusade).
2) The jetty server library that Jenkins uses which shows up in error messages.
The whole point - the only purpose of a codename is that it doesn't give the game away.
A:
If I learned that the accidentally visible filename of the PowerPoint in that meeting was “EjectorSeat.pptx”, I’d be some combination of angry and alarmed about management’s attitude. That would be a definite “update my resume and call up some former colleagues for lunch” kind of moment at the very least.
I think people reasonably expect that when a company makes a serious decision that affects hundreds of people’s livelihoods, that they effect a pretty somber tone.
One thing that's common is that they're both unprofitable and have both been racing to burn cash for years and unfortunately they are now making difficult cuts to save themselves. But the true picture will be revealed on May 6th in their Q1 earnings call.
EDIT: Q1 Earnings call on May 6th, not Q2.
(Also, aren't Q2 earnings are usually in July?)
Uber operates globally (and owns minority stake wherever it doesn't operate), so as the world begins to gradually re-open, Uber will capture that revenue even if the US is still fucked.
Uber has $8B cash.
Uber rides were "adjusted EBITDA" profitable for 2 straight quarters before this — take "adjusted EBITDA" with a grain of salt, but it's also not "nothing".
I wonder if a giant will scoop up one of these companies after they are beaten to the point of death?
“Bringing People Closer Together”
Seems to fit...
- They also are in industries that entirely use gig workers with personal contact in 90% of their services(airbnb the least of these).
- I don't see other tech companies getting hit this hard(the sky is not falling!).
- I really, really hope these laid off engineers find other jobs quickly and land on their feet.
Ask people at Sun how relying on the .com economy worked out for the company, as one example.
Conversely, it's helped some tech companies (Amazon and Zoom) so who knows how this all shakes out.
I don't see them winning the self driving car battle. Tesla / Google have better brands and better salaries, that probably would keep the best talent away from Uber.
I guess I'm glad I don't work there right now.
Aren't executives mostly paid in stock and bonus?
I'm fortunate to have a lot of liquid saved but I'm feeling for engineers with families and not as much saved.
Stay positive!
If headcount is not directly helping that then it should not be an indefinite relationship.
Also, I'm available for hire as a CFO or board member if you think your company has challenges with adopting this market-relevant predilection and needs to make "the hard decisions".
As a result of the 2008 crisis, the US Government / Fed started pumping money. The market bottomed out just before they started pumping money in March of 2009 and then started recovering.
Someone in June of 2009 would have experienced the same emotions that you're experiencing now because foreclosures continued to mount, maxing out in the second half of 2009 with a significant number of foreclosures occurring in 2010 as well.
I read somewhere that the economy didn't fully recover until 2015. By then, stocks were already quite expensive.
This is probably what has been driving many people to buy stocks now. That and being bored at home.
I've read other articles which say that essentially we're losing the ability to really valuate equities because of all this free money being injected into junk bonds etc hides the true valuation.
As far as I can tell, stocks are more valuable, but only numerically, they're actually more worthless than before because the company and the economy as a whole has stopped.
This will allow both companies to trim the fat and (hopefully) regain the move fast mentality that is necessary for a startup. This can be Uber and Lyfts time to shine.
See here: https://twitter.com/haddartha/status/1255559084012699650
Also, there are alumni facebook groups and slack channels. If those are for you, email me: ivan.kirigin@gmail.com
Do we have a list of affected individuals listed to work on interesting projects?
Wish HN can curate a Database of individuals open to working on special projects that could lead to a YC submission
