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Comment by mabbo | Hacker News Reader

Ignore the fluff piece. The reality is you're being laid off because the company can make more money by taking your salary and buying government bonds.

When your team got spun up to work on this project, interest rates were low and it was a sound investment to try this project out. If it was successful, it might have made/saved a moderate amount of money. It made sense to invest in it, compared to all the other options available at the time.

But alas, inflation soared and interest rates rose faster than predicted, so now the bonds are a better bet than you and your team doing whatever it was you were doing. According to this spreadsheet, it wasn't nearly as profitable as the bonds.

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Government bonds yield 3-4%. I don't think they ever calculated with a margin of just 4%. It's true that liquidity has dried up to some degree and companies have alternatives what to do with their money, but it's not like they though they'd yield only 3% by hiring more people.

Closer to 5% now

What maturity? I'm only seeing 3.XX% here: https://www.treasurydirect.gov/marketable-securities/treasur...

back down to 4.3 for short term t-bills

yields dropped almost 1 point after depositor bailouts for SVB. the running belief is that the fed will slow down in response to fixed-income positions held by banks.

I think this is really good intuition on what the Fed effectively does. When it's really easy to teleport money from the future, all that money competes in the present for a limited supply of good. This causes inflation and reduces margins and can cause profitable endeavors to become non-profitable "hobbies."*

Increased interest rates suck up this money because now there is something better to do with that money. Why "Do Stuff" when the returns on doing stuff is less than the ultra high savings yield you are now being offered.

It's virtuous when the stuff being done actually is destructive due to easy access to capital (e.g. 100 Ramen shops driving each other into further and further debt) but it's also a ham-fisted solution. It disrupts long term planning, even relatively conservative ones like "buy government bonds", and also just punts the problem b/c it's reducing demand by... promising more money in the future.

If I am a Meta investor, and I see they use my capital to buy government bonds, why would I invest in them? I'd just buy the bonds myself.

Meta is supposed to be a Tech company and invest the capital they have in technology plays

I believe that is the point the OP was making. If you're ROI on employee X is 3% of the investors' dollar, the investor would simply buy a bond since the ROI on the bond is higher. Because of this discrepancy it no longer makes sense to keep employees or business units with a 3% ROI or an ROI lower than what the expected return on a bond is.

Hard to make money adjusted for inflation buying government bonds that are still negative in real terms...

Also, FB isn't buying treasuries...

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