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— Joey Politano🏳️🌈 (@josephpolitano.bsky.social) January 1, 2025 at 3:15 PM
They got wealthier than most humans ever have and all assumed it was proof of their genius, when a real thinker who doesn’t spend their entire day with their head shoved up their own ass knew that this run was propped up by government handouts to the investing class that we will likely never see again. Below is a chart of the Effective Federal Funds rate since 1955 to illustrate my point. Focus on the circled area starting in 2008.
Notice how there are no other areas on the chart, save for the 2020 crisis, that reach that extremely low level? In response to the 2008 Great Financial Crisis, the Federal Reserve lowered their rate to nearly zero. This had dramatic effects on the market that drove all sorts of investment that in a world anywhere else on that chart, would have never happened. That circled area is the genesis of the Silicon Valley capitalist class’s delusion.
Interest rates are important because they’re the price of money. If you want to take out debt to say, invest in a new startup or gamble on shitcoins, the price of that debt is very important. If you take on more debt than the investment can make me in revenue, then you shouldn’t take out debt. This is why the Fed raised rates to try to combat inflation and reduce investment from 2022-2024 to cool the economy.
Lowering rates, like in the circled ZIRP world, has the opposite effect. Debt is effectively free, and so the amount of risk you can take is near-infinite if you can carry it. This spurred an entire generation of rent-seeking products that people like smooth-brained Andreessen invested in which rarely generated a profit and kicked that fundamental can down the road to someone smarter in the future. Not only was the debt of these ZIRP-driven businesses cheaper than debt has ever been, but those lower interest rates made tech companies look more desirable than they would be under higher interest rates.
The price of a stock is (theoretically) the value of its future cash flows, and valuing any companies’ future cash flows is simple. You stick the cash in the numerator, and then one plus the risk-free interest rate to the power of time in the denominator. Let’s do some simple math to show how these Silicon Valley types are ZIRP-created frauds who built their supposed genius around businesses heavily reliant on historically low interest rates.
A million dollars five years from now when interest rates are four percent is worth $821,927 in present day value ($1 million/(1.04^5)).
A million dollars five years from now when interest rates are 0.1 percent is worth $995,014 ($1 million/(1.001^5)).
This company didn’t even have to do anything, and the present value of their future cash flow just increased by 21 percent, all because of the magic of interest rates.
Frauds!
This is the story of Silicon Valley since 2008. Facebook is the poster child of it, as the major companies’ greatest developments were stealing and/or buying other people’s ideas. Innovation at tech titans and major VC firms has ceased to be a thing on the level that their own lofty rhetoric places it at, and the AI cult that has sprung up in the Valley could be seen as cope from a bunch of people desperate to return to their ZIRP safe space where any schmuck could delude themselves into being a genius. If these people had any kind of real sense of the world, they would market AI as the useful tool for specific tasks it has proven to be, not a deity they created that’s about to take over the planet just so long as you give them another $7 trillion.
The fact is that every venture capitalist in Silicon Valley from 2008 onward was investing under the easiest conditions in the history of the planet. You could have trained a dog to click accept on every pitch that hit its inbox, and it would have performed similarly to these VCs from 2008 to 2016. Debt was practically free, and every bad idea had millions tossed at it because of the asymmetric upside of taking one of these companies to market and paying for all your other bets. Now that interest rates are back up near historical norms, nearly the entire Silicon Valley capitalist class has fully given into their fascist impulses as this environment forces them to build businesses that create value and make money, things they have spent the post-2008 era proving they struggle to do when the whole world isn’t designed to support their titanically fragile egos.
They were happy to pretend they were part of society when the government was giving them a world-historic handout, but now that they actually have to think about how companies make money, these dumbfucks joined Trump on the dais, all while they lecture us with tired cliches about a trillion-dollar product that China just bested with $6 million and some open-source code while speaking in tones and cadence that border on self-parody. Meanwhile, by all available reporting, these dolts are high on drugs all the time, which definitely explains how alien so many of them seem when they try to talk like the rest of us humans. The “good times create weak men” meme that Silicon Valley types love to share with each other could have very easily been written about Silicon Valley this century.
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