Governments worldwide are trying to shore up pension systems by pushing back retirement ages. But cost-saving measures has a lot to do with gutting the future tax base, as well
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.
Thanks for the thoughtful response! A few *very* quick points:
On Fed rates: They explain the 2020-2023 timing, but the structural trends (public companies declining from 8,090 to under 4,000, establishment entry rates falling since the 1980s) span decades across multiple rate cycles. The consolidation forces create the underlying vulnerability that rate hikes expose.
On acquisitions: Individual founders acting rationally doesn't mean the system works well (think collective action problem!). When 60% of acquired tech products get discontinued, that's value destruction at the end of the day. The issue isn't founders making bad choices, it's that the incentive structure channels talent toward building acquisition targets instead of genuine competitors. The FTC blocked Adobe from acquiring Figma ended up causing Figma to IPO is a good example
On LLMs: That might explain some tech hiring patterns, but doesn't account for 7.2% unemployment among electricians and plumbers, or graduate unemployment hitting record highs across sectors, especially in electrical or mechanical engineering. The promotion bottleneck affects industries where AI isn't a factor.
On your approach: Your bootstrapped, profitable, non-SV model actually proves the point, you had to explicitly opt out of the VC system to build a real business. The fact that this feels "risk-averse" shows how distorted the baseline has become.
The cyclical factors (rates, AI) matter, but they're operating on top of structural changes that have been building for decades.
Again, thanks for the response and I hope you subscribe!
I agree with Omar RE the point on startup creation. When I look at technical college grads looking at all the startups getting acquired for 8-9 figures by big tech companies, they’re certainly not dissuaded and seem encouraged to go into startups. It doesn’t seem plausible to me that the M&A environment is itself leading to fewer startups being created.
This doesn’t detract from the points around value destruction / the types of businesses being created and persisting which are interesting.
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.
Wouldn't removing the cap on earnings that are taxed for SS also help a lot for closing the funding gap, or should we just admit that the Congress will never ever go for that and pursue other options?
I mean yeah if you raise the marginal tax rate on people earning over $180k a year or whatever it is you get more money, but i don’t think phrasing it as “ending the cap on SS” makes it any different then any other debate about top marginal rates. Do we want to keep raising taxes to pay for old people pensions?
I loved this article, but did find myself confused by one specific point. Why do you see raising birth rates as a response to what you're describing?
As you note, what this is is the result of intentional decision-making and policy, not some kind of basic natural law of markets playing out. I'm not following how increasing the supply of young workers addresses this problem, seeing as part of the problem is a lack of supply of quality jobs for existing rates of youth entering the workforce.
Great question, and I am glad you love the article!
At the end of the day, you still need people to build out infrastructure, fund programs and debt obligations. Because of the system's failures, people just aren't affording kids, despite wanting more kids. You can't pour in more workers in a broken system like you said, the only way forward is to fix as much as you can.
The retirement/financial impact on young is a very salient point. I've also thought that this does naturally tend to increase the amount that goes into social security (with less labor, each unit of labor should get paid more). The cost is lower productivity/lower innovation as young people are more likely to be innovative.
On the M&A point - I've been leaning to the side that antitrust is ill-equipped to model which markets get impacted by an acquisition. Especially with tech, what is a relevant tech market becomes less clear, meaning both regulations and judges are not set up to effectively regulate. A crude rule - like if you have revenues of X, you cannot acquire - might be intense but could be economically justified.
It gets even crazier the more you dig in. Stephen Gross, a former chief actuary of SS, was trying to get people serious about rising inequality in younger people's wages (which could be explained a lot by late retirements)
The problem isn’t that we want more 60 something’s working. They are still young enough to enjoy some life and probably help take care of grandkids.
It’s that we want more 80 something’s dying. Life basically isn’t worth living at the end, but it’s super expensive. we don’t want them blowing up our budget living out their last days miserably and expensively in nursing homes or hospitals or shoving juniors payroll taxes down the slot machine while they rot in a chair.
I’d like to cut benefits at the end of life not the beginning of retirement.
As to means testing I’m against it but think it would be fair for the childless olds. If you didn’t contribute to creating the generation paying for your SS then you ought to get a smaller check.
> Chinese manufacturers pay $0.09/kWh while California companies pay $0.24/kWh. When electrons cost three times more on one side of an ocean, industrial capacity goes to the other side. A massive American energy buildout targeting $0.01/kWh electricity would create millions of jobs across skill levels
Print it on a million paper airplanes and swarm the capitol buildings with them.
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!
Thanks for the thoughtful response! A few *very* quick points:
On Fed rates: They explain the 2020-2023 timing, but the structural trends (public companies declining from 8,090 to under 4,000, establishment entry rates falling since the 1980s) span decades across multiple rate cycles. The consolidation forces create the underlying vulnerability that rate hikes expose.
On acquisitions: Individual founders acting rationally doesn't mean the system works well (think collective action problem!). When 60% of acquired tech products get discontinued, that's value destruction at the end of the day. The issue isn't founders making bad choices, it's that the incentive structure channels talent toward building acquisition targets instead of genuine competitors. The FTC blocked Adobe from acquiring Figma ended up causing Figma to IPO is a good example
On LLMs: That might explain some tech hiring patterns, but doesn't account for 7.2% unemployment among electricians and plumbers, or graduate unemployment hitting record highs across sectors, especially in electrical or mechanical engineering. The promotion bottleneck affects industries where AI isn't a factor.
On your approach: Your bootstrapped, profitable, non-SV model actually proves the point, you had to explicitly opt out of the VC system to build a real business. The fact that this feels "risk-averse" shows how distorted the baseline has become.
The cyclical factors (rates, AI) matter, but they're operating on top of structural changes that have been building for decades.
Again, thanks for the response and I hope you subscribe!
I agree with Omar RE the point on startup creation. When I look at technical college grads looking at all the startups getting acquired for 8-9 figures by big tech companies, they’re certainly not dissuaded and seem encouraged to go into startups. It doesn’t seem plausible to me that the M&A environment is itself leading to fewer startups being created.
This doesn’t detract from the points around value destruction / the types of businesses being created and persisting which are interesting.
Section 174 is going to get repealed, so we may see software employment tick back up- companies can write off 100% of their salary every year again.
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.
Wouldn't removing the cap on earnings that are taxed for SS also help a lot for closing the funding gap, or should we just admit that the Congress will never ever go for that and pursue other options?
It would! It could also lead to other programs like funding child benefits also!
But yeah, Congress as it stands isn't going to do it
I mean yeah if you raise the marginal tax rate on people earning over $180k a year or whatever it is you get more money, but i don’t think phrasing it as “ending the cap on SS” makes it any different then any other debate about top marginal rates. Do we want to keep raising taxes to pay for old people pensions?
I loved this article, but did find myself confused by one specific point. Why do you see raising birth rates as a response to what you're describing?
As you note, what this is is the result of intentional decision-making and policy, not some kind of basic natural law of markets playing out. I'm not following how increasing the supply of young workers addresses this problem, seeing as part of the problem is a lack of supply of quality jobs for existing rates of youth entering the workforce.
Great question, and I am glad you love the article!
At the end of the day, you still need people to build out infrastructure, fund programs and debt obligations. Because of the system's failures, people just aren't affording kids, despite wanting more kids. You can't pour in more workers in a broken system like you said, the only way forward is to fix as much as you can.
Thanks for reading, and I hope you subscribe!
The retirement/financial impact on young is a very salient point. I've also thought that this does naturally tend to increase the amount that goes into social security (with less labor, each unit of labor should get paid more). The cost is lower productivity/lower innovation as young people are more likely to be innovative.
On the M&A point - I've been leaning to the side that antitrust is ill-equipped to model which markets get impacted by an acquisition. Especially with tech, what is a relevant tech market becomes less clear, meaning both regulations and judges are not set up to effectively regulate. A crude rule - like if you have revenues of X, you cannot acquire - might be intense but could be economically justified.
It gets even crazier the more you dig in. Stephen Gross, a former chief actuary of SS, was trying to get people serious about rising inequality in younger people's wages (which could be explained a lot by late retirements)
https://www.plansponsor.com/inequality-worse-for-social-security-than-low-birthrates-chief-actuary-says/
On the M&A point, I am going to refer back to Erez Maggor's work on how becoming more M&A focus ended up having negative downstream effects.
The problem isn’t that we want more 60 something’s working. They are still young enough to enjoy some life and probably help take care of grandkids.
It’s that we want more 80 something’s dying. Life basically isn’t worth living at the end, but it’s super expensive. we don’t want them blowing up our budget living out their last days miserably and expensively in nursing homes or hospitals or shoving juniors payroll taxes down the slot machine while they rot in a chair.
I’d like to cut benefits at the end of life not the beginning of retirement.
As to means testing I’m against it but think it would be fair for the childless olds. If you didn’t contribute to creating the generation paying for your SS then you ought to get a smaller check.
> Chinese manufacturers pay $0.09/kWh while California companies pay $0.24/kWh. When electrons cost three times more on one side of an ocean, industrial capacity goes to the other side. A massive American energy buildout targeting $0.01/kWh electricity would create millions of jobs across skill levels
Print it on a million paper airplanes and swarm the capitol buildings with them.