High interest rates. They built up the entire industry on the concept that they would have access to cheap capital forever. Now they don’t, so they’re squeezing their userbases – who they’ve already been squeezing even with low interest rates – from absurdly greedy to Saturday morning cartoon villain.
That, and probably investment in commercial real estate, which of course tanked because of WFH, which is also why so many companies are forcing people back into the office.
In an attempt to reboot the global economy, central banks slashed interest rates to almost zero, resulting in an era of cheap money.
This resulted in two things. First, it incentivized investors to fund promising (and, in many cases, not so promising) young tech companies. But it also allowed for the emergence of business models that, in any other circumstance, would be completely unviable.
High interest rates. They built up the entire industry on the concept that they would have access to cheap capital forever. Now they don’t, so they’re squeezing their userbases – who they’ve already been squeezing even with low interest rates – from absurdly greedy to Saturday morning cartoon villain.
That, and probably investment in commercial real estate, which of course tanked because of WFH, which is also why so many companies are forcing people back into the office.
Do you have any further reading on this? I’d love to learn more about how we got here
I first got exposed to the problem from this Adam Conover interview with Dan Olson: https://m.youtube.com/watch?v=4aU-QkJfgGw
This article is also a nice encapsulation of the problem, even though it focuses on financial technology only, it applies to other tech companies as well:
https://www.yahoo.com/news/fintech-faces-reckoning-only-matter-133006783.html
So buy very long puts on Chime is my take away from that Yahoo article.
Edit: Nevermind… Chime is still private. They keep pushing back their IPO because fintech stocks keep declining…