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Omar Diab's avatar

I agree with the ultimate point that it’s all about finding a way to raise birth rates, and investing in clearly useful industries like energy buildout (and on-/friend-shoring those supply chains) makes a lot of sense. (Now if we can just convince the US government to not keep their heads in the sand…)

Though on some specifics, RE why startups went off a cliff from 2020-2023, you mention the Fed rates as one factor but not fully explanatory of the decline - doesn’t that explain most of it? As an entrepreneur myself I hear from other founders that it’s hard to raise money these days, along with general worry about not being able to bounce back if they don’t make it - a riskier environment to make a startup.

(I’m insulated from this since my company is bootstrapped, outside of the SV tech bubble, and taking a small business early profitability approach, but maybe that’s just another reflection of a more risk-averse approach to business creation 🤷)

And I haven’t really heard of people seeing a lucrative acquisition as being a bad outcome for a startup that would drive them to not want to build one altogether (though I agree that it’s not great for the ecosystem of jobs and competition). After all if a company felt that they could get a better outcome by not taking an acquisition, they could just not take it, but they are (especially in this market).

RE hiring young people for cheaper with the expectation of growth in the world of software, it seems like the age of LLMs isn’t helping, where an LLM can take a newbie to being a more productive but still junior engineer, whereas it takes a knowledgeable and motivated senior to being a 10x developer—which in my case means getting away with a much smaller and manageable team. Seems nobody wants to hire junior developers anymore, to the industry’s long-term detriment, though I think this has little to do with retirement ages or social security spending, at least in software.

Anyway thanks for the post!

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Moses Sternstein's avatar

I think you're missing a lot of nuance in this story, and the focus on antitrust is a hammer in search of a nail.

--during the labor shortage, two things happening at-once: (1) massive boon to lower-wage service workers, as non-college unexpectedly retired. These aren't "entry level" jobs in the sense of 'climbing the corporate ladder' so much as waiters, drivers, home healthcare aids, retail clerks, etc.--largely filled by "foreign born" workers; and (2) massive influx of cheap capital that super-charged company formation, and 'white collar' hiring in tech, finance, etc.

The latter ended when cheap capital ended. All companies, but especially tech companies, started to cut burn, headcount, etc. Companies got lean.

The former hasn't fully 'ended' because as we age, the share of non-workers will grow, putting pressure on the bodies that we have...but it's still not going to benefit 'entry level' college grads, unless they decide to enter the skilled trades (which perhaps they should).

Importantly, the gap is worse for men than it is for women. Why? Because healthcare (again, aging) is an increasingly large share of the economy, and healthcare skews female.

All of which is to say that the reason hiring has slowed is because *growth* has slowed. Data Centers are basically the only pro-cyclical sector that's in expansion right now. Healthcare is acyclical, it's growing, and its hiring.

Antitrust have very little to do with any of this, other than likely hurting more than it helps.

--re. antitrust, a big part of why companies stay private longer is because the regulatory burden of going public is too costly, relative to privates. Enough capital has been raised on the private side that the best companies no longer need to go private. If you want more public cos, you need less regulation, not more

--pe is extremely competitive, so the idea that pe ownership somehow creates a cartel on company formation is just wrong. if anything, it's the opposite, where pe capital is perhaps more money than good risks to chase. if certain wages fall post PE acquisitions it's mostly likely because *all costs fall* because that's part of what PE does--they find operational efficiency, which yes, includes trimming the fat. And achieving economies of scale through consolidation isn't anti-competitive, and is extremely pro-consumer.

--in fact, the antitrust crackdown on ad tech acquisitions, for example, crushed the ad tech startup landscape, bc building and exiting to Meta, Google, etc. was a path to monetization. Instead of having to look over their shoulders at upstarts, Meta etc. breath easy bc antitrust regulators killed the competition, they didn't help it.

At the end of the day, there is no bigger cartel (literally) than the US government. The notion that a singular body with nationwide jurisdiction and no competition can and should by horizontal integration determine the business outcomes for every business, shareholder, worker, and consumer in the country in *furtherance of competition* is a contradiction in terms. If you see cartelized activity as bad because without competition, firms are less responsive to consumers and lack the incentives to deliver optimal goods and services, then consider how that logic applies to the FTC and its provision of goods and services.

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