IMO it's far too early for "AI" to have had a meaningful effect on Software company hiring. A more plausible explanation for me is that between roughly 2012 and 2022, there was a tremendous increase in the supply of SWE talent (via undergraduate CS programs massively increasing enrollment, boot camps, immigration, etc), fueled primarily by ZIRP. On the demand side, ZIRPy VC funding primarily went to bullshit Crypto and (to a lesser extent) bullshit Metaverse companies, most of which have not panned out, meaning there is a dearth of late stage and newly public companies to hire said talent.
I agree with all of this, coupled with a decent amount of layoffs from the Mag7s, though I'm not sure how distributed those were in California, necessarily.
And old unicorns like airbnb and uber now having to compete with traditional hotels and taxis again.
I think Elon's takeover of twitter set something of a precedent too: if he could reduce headcount as much as he did and still have a functioning product, then why can't I?
BTW I also don't think it has much to do with that engineering tax deferral code change that people keep talking about. My cynical hunch is that that topic keeps getting seeded by the billionaires who have the most to gain by reversing it, and hey maybe they'll hire an extra engineer or two afterward just to be good sports, but it's not going to reverse any major employment trends.
Yeah, actually it looks like you're right about the tax code impacts. Doesn't seem like it'd be causing layoffs just yet though, but could definitely be putting hiring on pause due to the uncertainty.
It doesn't have to be either-or. I think there are a bunch of factors all contributing to the current state of developer job market:
1. Rise of remote work: sure, it was there in some form. But prior to 2020, state of the remote work tools was abysmal. The prevalent culture was also about hiring the whole teams. After covid, remote work tools are far better. And companies learned to onboard one new remote hire at a time which over time is now allowing them to replace US workers with cheap overseas ones at a manageable pace.
2. end of cheap money - if the risk free rate is 4-5%, the demand from risky ventures like software startups is going to go up. So funding has dried up at the margins.
3. rise in the discount rate - related to the previous point, the discount rate one applies to investments have gone up. That means startups valued at 1B are now valued only at a few hundred millions. So to avoid down or flat rounds, startups have to cut costs drastically and show profitability to justify a higher valuation. Cue all the job cuts, belt tightening and death marches with a skeleton crew.
4. rise of AI - AI is helping with productivity of coding and non-coding tasks. It is also acting as an excuse for #3 when laying people off.
In my experience, all these are meaningful factors for the abysmal state of the developer market.
Definitely agree that it's not mutually exclusive, however I think 4 is likely orders of magnitude less impactful than the others...so far. Which isn't to say the effects won't start to magnify soon.
I think most of the trends we are seeing started around 2022, but if AI delivers on its promise things may accelerate in the coming years.
That's a poster child of a casualty of ZIRP. Hard to imagine an industry any longer duration and hungry for cheap risk.
I'm not sure about the thesis that this is primarily fallout from free money and suppressed interest rates though. That was really a '22 story, and even with long and variable lags, that element has been in play for a while now.
Oversupply of talent definitely sounds like a good argument though. I'll posit there has been some disruption by recent developments in the industry. Also, while metaverse and crypto startups may be passe, the AI scene has disgusting amounts of hype and money, and crypto ain't dead either, which brings me back to the earlier point that I do think some disruption is there to fill the gap in the narrative.
For people I talk, it is the end of ZIRP that caused it. ZIRP ended in April 2022.
Even as interest rates went up the VCs still had committed funds to distribute for a year to 18 months. Then the biotechs had runway for 1-2 years from that. Now that’s all gone, and they can’t raise their next series. In the meantime, C> plus synbio is recently having a lower win rate than hoped for.
That plus all the money that is there is all going to AI companies due to the shorter time to return / higher potential roic / hype.
Zero Interest Rate (monetary) Policy targets short-term interest rates at or near 0% to stimulate economic growth via extremely cheap borrowing, to encourage spending / investing / risk-taking
