I’m happy to see this being noticed more and more. Google wants to destroy the open web, so it’s a lot at stake.
Google basically says “Trust us”. What a joke.
I’m happy to see this being noticed more and more. Google wants to destroy the open web, so it’s a lot at stake.
Google basically says “Trust us”. What a joke.
I’d be interested to hear more of your theory on this:
I think this article from the Verge explains it pretty well.
tl;dr:
Online services cost a lot of money. People don’t realize how much because VCs and corpos w/ deep pockets have been subsidizing most major services for a long time. Now that the free money period is more-or-less over, these services need to start paying the bills with their users - commence enshittification
Well it’s not that they “need to pay bills” they make plenty money to pay bills with the revenue they already earn. The issue is that capitalism demands not just profits, but continually increasing profits each quarter.
To put thing in perspective and trying to not use too obscure financial terms:
There’s some extra maths here because different companies split iownership in a different number of stocks but the basic principle is that the total value of all stocks in the company at the current stock price are related to its yearly profits.
Now, run-of-the-mill companies (say, traditional automakers, energy companies and so on) have P/E ratios around maybe 20 or 30 (it varies from company to company and depends on the general stockmarket mood, going up when people are more hopeful - i.e. bully - and down when they’re less hopeful - i.e. bearish).
By comparison Tech companies (and that includes automakers who managed to pass themselves as Tech companies, such as Tesla) have P/E ratios of around 80, 120 and going all the way at times to infinity for companies not making profits (Twitter for a long time was losing money and had a P/E of infinity).
By the way, this is how Tesla manages to have a higher total market worth (the price of each stock times the total number of stock) higher than companies which sell 10x+ more cars: it’s treated as Tech, hence gets this magical boost to stock price.
So, what’s the stated reason for this: well, those holding those stocks at such prices claim it’s because the growth prospects of such companies are huge.
In reality (IMHO) a lot of it is just speculation, and now that holding stocks at inflated stock prices whilst you wait for a bigger sucker to buy them from you for even more money is something that might actually loose you money (unlike before with zero interst rates, now that interest rates are back up you often could be making more money from it if you bought treasuries instead) the speculative “hold, wait and see if they grow massivelly” posture on stocks (which was even done with lent money on which 0% interest was paid) isn’t anywhere as appealing so it’s unravelling.
So all of the sudden Tech companies are having to justify stock prices the same way as traditional companies do: by having profits that justify them, hence lowering their P/E ratios from la-la-land values to something more realistic.
I’m just a layman, but it has been nagging my brain how all these big tech companies seem to be turning shitty all at once. I’ve seen others propose similar explanations, but the basic idea is that the historically low rates got them addicted to “free” capital. Now the faucet has been slammed shut and they have to make up for the shortfall.
Also, it’s not just big tech at fault. The massive worldwide inflation we’ve experienced happened for the same reason - shortsighted greed.
It’s definitely the high interest rates. All of tech has been built on venture capitalist money with “grow at all costs” as the primary strategy. With sustained higher interest rates, VC money is much harder to get. The focus has gone from “grow at all costs” to “become profitable at all costs.” It’s jarring, and it’s happening everywhere at the same time.