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Speaker 1: Hi everyone, welcome to the podcast. My name is Chris Poulett.
Speaker 1: I'm an editor here at How Stuff Works, and sitting
Speaker 1: next to me as usual as senior writer Jonathans Rackland. Hello. There.
Speaker 1: The economy has been in the news a lot lately. Yeah,
Speaker 1: not not in a good way. Well, now it depends
Speaker 1: on who even even the good stuff about the bad
Speaker 1: stuff is still bad stuff, so just blew my mind. Yeah,
Speaker 1: well there there goes that. All right, Well, thanks for listening. Now, Um,
Speaker 1: we were we were talking about the economy and how
Speaker 1: it has been affecting the tech sector, and uh, you know,
Speaker 1: there are a lot of different things that if you
Speaker 1: go through the news and and specifically look for tech stuff,
Speaker 1: you can find in an entire range of how the economy,
Speaker 1: the troubles with the economy are affecting tech stuff if
Speaker 1: you I mean just taking it on the surface level.
Speaker 1: A lot of the companies that are you know, that
Speaker 1: are mainly affected are the financial organizations Shanks, investment banks,
Speaker 1: UM and uh. You know an article I read in
Speaker 1: the in the Guardian from October two, the British newspaper
Speaker 1: UM said that one of the things that you know
Speaker 1: you would look for, companies are cutting back on discretionary spending.
Speaker 1: So that's a lot of tech hardware. People are gonna
Speaker 1: stick with older computers. They're not going to run out
Speaker 1: and and buy a lot of new machines UM and
Speaker 1: you know, smartphones, things like that. Things that people would
Speaker 1: normally you know, go ahead and invest in for their
Speaker 1: companies to keep them going and and say, oh, well
Speaker 1: we've got a new way to stay connected to our employees.
Speaker 1: They're not going to go out and spend money on that. So,
Speaker 1: you know, while the tech companies are not the ones
Speaker 1: leading the headlines right now, they are directly affected by
Speaker 1: by that sort of behavior. Yeah, they kind of lagged
Speaker 1: behind both economic downturns and upturns. You if you look
Speaker 1: at the tech industry for a while, even before we
Speaker 1: had the the massive drops in and consumer confidence and
Speaker 1: the stock markets around the world. Even before that happened
Speaker 1: in September, we had people kind of shouting out warnings
Speaker 1: about the economy. Sure, you know, you had the whole
Speaker 1: reduced economic growth. We're not in a recession. We just
Speaker 1: have reduced economic growth. Yea. For months they were debating
Speaker 1: whether it was a recession or and and the thing
Speaker 1: about the tech industry was a lot of people out
Speaker 1: there were saying, Hey, you know, it hasn't affected us
Speaker 1: at all. We're still going strong. We've got all these
Speaker 1: different companies that are starting up. Um, we've got just
Speaker 1: success story after success story. Well, here's the thing is
Speaker 1: that when the economy takes a downturn, tech may not
Speaker 1: be hit immediately. But look at the tech industry three
Speaker 1: or six months down the line and see how it's
Speaker 1: affected at that point, because that's really when these sort
Speaker 1: of things that Chris has talked about about, you know,
Speaker 1: the reduced purchases, that's where it really when you're gonna
Speaker 1: start seeing that appear in their financial statements. Sure, if
Speaker 1: you're um, if you're a techie listening to this podcast,
Speaker 1: it's our you know, our audience I guess, um, you
Speaker 1: may be saying, well, you know we're involved in I T.
Speaker 1: You know we'd recession proof everybody needs computers. Well, that's true.
Speaker 1: But if companies are starting to cut corners and they
Speaker 1: start looking at things like job growth and whether or
Speaker 1: not there's any room to hire additional i T staff, um,
Speaker 1: they may be looking at ways to cut addition I
Speaker 1: T staff. Um spending on external I T. If you're
Speaker 1: contracting with if you've outstoresd um your I T or
Speaker 1: you know, tech support, Um, you may be looking at
Speaker 1: cutting down on on those expenditures too at your company,
Speaker 1: and small vendors especially are more likely to feel it
Speaker 1: than than some of the big guys. Uh, you know,
Speaker 1: depending on how much of the fat they can trim.
Speaker 1: You know, I'm sure big companies probably could let go
Speaker 1: of more people. That will probably be a smaller percentage
Speaker 1: of the overall workforce. Actually, I that kind of segues
Speaker 1: nicely into a discussion about the the Internet giant Google. Oh, yes,
Speaker 1: I think I've heard of them. Yeah, you may have
Speaker 1: heard a kind of things about Google. So Google recently
Speaker 1: it's stock fell to more than it fell down to
Speaker 1: hit the of what its highest amount was so so
Speaker 1: like billion dollars to share more like, but um, it's
Speaker 1: still a lot of money for share. But it really
Speaker 1: did take that, Like by the time October rolled around,
Speaker 1: it had taken about a hit off of its top
Speaker 1: market price. Um. That wasn't all at once or anything
Speaker 1: or else. You really hear about it on the news
Speaker 1: all the time. But over time it is lost value.
Speaker 1: And this is a concern for a Google. Uh. And
Speaker 1: it's a concern for Google shareholders, which brings us to
Speaker 1: another important distinction is that if a company is publicly traded,
Speaker 1: they have to answer to the people who hold shares
Speaker 1: in that company. They can't just make decisions willy nilly,
Speaker 1: because the shareholders will definitely make it known that that's
Speaker 1: not acceptable. Um. So you have a responsibility to your
Speaker 1: shareholders if you're a public company. And Google is a
Speaker 1: public company. So I was reading an article, uh, and
Speaker 1: actually a few articles about Google, and there were some
Speaker 1: nice interesting points about what might happen to a Google
Speaker 1: in the future if they aren't able to turn this
Speaker 1: around and get regained their their dominant position in the market.
Speaker 1: Really yeah, so here's here's some points. Okay, so they
Speaker 1: could share holders could pressure management to be more forthcoming
Speaker 1: about how they're spending Google's astronomical R and D budgets.
Speaker 1: Are we talking about cutting the free food to possibly
Speaker 1: the fruit? Well, the free food actually has already been
Speaker 1: had a cutback. Know that that the engineers still get it. Um,
Speaker 1: And actually I think everyone still gets breakfast in lunch.
Speaker 1: It's just dinner now that only the engineers are that's
Speaker 1: a shame because you know, they got to keep the
Speaker 1: engineers there as much as possible to get this stuff
Speaker 1: out right, So you don't cut their food because otherwise
Speaker 1: they might leave to go eat. Um. I love Google,
Speaker 1: by the way, but some of their some of their
Speaker 1: practices do seem a little kind of manipulative, let's say.
Speaker 1: But r indeed, so we're talking about like everything in
Speaker 1: Google labs. Um, think about the twenty percent time that
Speaker 1: people get of their time to work on personal projects. UM,
Speaker 1: projects that could eventually become something that Google invests in. Uh.
Speaker 1: But if shareholders are saying, hey, why aren't you concentrating
Speaker 1: on your core business and regaining this great market share
Speaker 1: price that you used to have, Why are you concentratings
Speaker 1: down this little twenty percent time thing, you might see
Speaker 1: that go away. But you might also see things like
Speaker 1: you might see uh employee cutbacks where they have to
Speaker 1: layoff employees. Um that you might see other benefits start
Speaker 1: to get the squeeze. We've already seen some of that
Speaker 1: at Google too, with the the childcare brew. I'm using
Speaker 1: brewha a lot recently. I think that's my new term. Yeah,
Speaker 1: it's very technical, yes, sure is. And another concern is
Speaker 1: that if Google continues to struggle, then some of the
Speaker 1: top talent a Google will leave the company. They've there
Speaker 1: have been some instances of that already, and that it's
Speaker 1: kind of one of those you know, rats abandoning the
Speaker 1: sinking ship kind of thing. It's not necessarily that Google sinking.
Speaker 1: No one thinks that Google is going away. They just
Speaker 1: think Google is going to have to slow down, and
Speaker 1: that a lot of the people who are really you know,
Speaker 1: kind of those brains behind Google, who really push what
Speaker 1: Google is doing, They're gonna think, you know what, this
Speaker 1: isn't much fun. Cleaning this up would be a lot
Speaker 1: more fun doing something new and exciting and jump into that.
Speaker 1: I don't really want to spend my time fixing problems.
Speaker 1: I want to spend my time doing new stuff, so
Speaker 1: you might see more people from Google who are really
Speaker 1: the creative types, uh, kind of look around for other opportunities.
Speaker 1: So I mean this so it can affect the big
Speaker 1: guys Google. You don't get much bigger than Google when
Speaker 1: it comes to Internet companies. That's true, that's true. You know,
Speaker 1: speaking of stock price. Um, an article in Business Week
Speaker 1: was mentioning that, you know, with the investment banks closing
Speaker 1: a lot of these investment of banks were the ones
Speaker 1: who helped launch, uh, the I p o s of
Speaker 1: people like Yahoo and Google. Uh, so they've been historical
Speaker 1: supporters of the tech industry. They are you know, responsible
Speaker 1: for for these companies being on the stock market essentially. Now.
Speaker 1: I mean there are other people who can do that.
Speaker 1: But you know that's one thing that's that that is
Speaker 1: going to hurt them in finding funding, finding funding. That's fun. Um,
Speaker 1: you know in the future is that that the banks
Speaker 1: are not, as you know, readily available. And uh, some
Speaker 1: are concerned that venture capital could be drying up right,
Speaker 1: And venture capital is one of those interesting things about
Speaker 1: the Internet where the more you learn about the more
Speaker 1: you start saying this really this this works how again?
Speaker 1: So venture capital is sort of it's it's a risk.
Speaker 1: I mean, it's when you are investing millions of dollars
Speaker 1: into a company with the hopes that of eventually this
Speaker 1: company is going to turn around become profitable, and because
Speaker 1: you're essentially, you know, an early investor, you're gonna see
Speaker 1: a huge return on that investment. Yeah. Um. And there
Speaker 1: are a couple of different ways that companies can actually
Speaker 1: turn this around and make this happen. They can they
Speaker 1: can find a way to actually make money off of
Speaker 1: whatever it is they're doing. Or they can get bought
Speaker 1: up by a larger company, which you know, if you
Speaker 1: give enough attention, eventually Google or Yahoo's gonna buy you,
Speaker 1: or maybe Microsoft. So so the idea there is that
Speaker 1: even if the company itself doesn't really get off the
Speaker 1: ground financially, you might still see a return on your
Speaker 1: investment because someone else went and bought them. Um. And
Speaker 1: and here's the interesting thing about the Internet is that
Speaker 1: you've got engineers, not not economists, who are driving innovation.
Speaker 1: So these engineers are figuring out new services and programs
Speaker 1: and applications things that make the Internet really really cool,
Speaker 1: and they do some really neat things. But the engineers
Speaker 1: aren't thinking in terms of how do I make money
Speaker 1: from this? It's more like, how can I accomplish this
Speaker 1: knowing what I know? And so then they accomplish it,
Speaker 1: and then it comes time to figure out, well, how
Speaker 1: do I make money from this? And and not everyone
Speaker 1: has an answer for that, and some people are proud
Speaker 1: of the fact that they don't have an answer for that.
Speaker 1: I'm sorry. For some reason, I was hearing Twitter in
Speaker 1: my hand. Twitter. Yeah, yeah, you used companies like Twitter
Speaker 1: and and for a while Facebook, you had people specifically saying, hey,
Speaker 1: we don't have a business plan, and we're okay with
Speaker 1: that because what we're doing is we're providing a great
Speaker 1: service and people are willing to use it and people
Speaker 1: would be upset if it went away. And all of
Speaker 1: those things are true, but it doesn't mean that you're
Speaker 1: making money. And without money, you can't keep you can't
Speaker 1: keep going because there are costs associated with these services,
Speaker 1: and whether it's the server cost or renting the space
Speaker 1: or the power or that you can continue to do,
Speaker 1: all these things cost money. And you can't just sit
Speaker 1: there and say, oh, I'm going to be truistic and
Speaker 1: offer this up for free, because that's not the way
Speaker 1: the world works, there's no there are no free lunges
Speaker 1: and uh so well okay except at Google, I'm gonna
Speaker 1: hit you so hard. So so, venture capital is one
Speaker 1: way these companies stay alive. You have people who are
Speaker 1: actually it's really organizations. Usually it's not normally people. Well,
Speaker 1: occasionally you might have some multi millionaire who wants to
Speaker 1: invest in a company, but usually it's it's organizations and
Speaker 1: financial companies that kind of thing. Um. They'll pour money
Speaker 1: into a business to keep it afloat, to keep it innovating,
Speaker 1: and to um to hopefully reach a point where it
Speaker 1: turns a profit, it finds a way to generate revenue. Um.
Speaker 1: But without this venture capital, these companies just can't exist.
Speaker 1: They don't have anything else generating revenue. So if venture
Speaker 1: capital drives up, drives up for something like Twitter, as
Speaker 1: soon as that money runs out, you can bet Twitter
Speaker 1: is gonna go away because it can't run other wise,
Speaker 1: it can't run on its own. It's funny though, Um,
Speaker 1: if you really look at all the different articles about
Speaker 1: the economy and especially the tech stuff, Um, it's obvious
Speaker 1: that people are sort of throwing guests out there. Because
Speaker 1: I saw another article that suggested that venture capital actually
Speaker 1: it's a good time for tech companies because venture capitalists
Speaker 1: have money on hand and other investments are drying up,
Speaker 1: so they're gonna look back at tech you know tech
Speaker 1: um operations and go, hey, you know they look good there.
Speaker 1: That's an opportunity to make some money. And that that
Speaker 1: may be good, especially in the rebuilding effort, because there
Speaker 1: are going to be a lot of companies that are
Speaker 1: restructuring their businesses and business operations, and they may be
Speaker 1: looking at new kinds of technology to help them do
Speaker 1: that more efficiently. Is saying, well, you know, we have
Speaker 1: this crash, We're gonna have to redo some things in
Speaker 1: order to survive another one. UM. And I think I
Speaker 1: saw that in the info world. Yeah, the dot com
Speaker 1: crash was was a different animal. Uh, there are a
Speaker 1: lot of people who are looking at this time and
Speaker 1: they're they're kind of pointing back to the dot com crash. Um,
Speaker 1: but dot Com that bubble burst mainly because people were
Speaker 1: pouring so much money into unproven uh services and technologies,
Speaker 1: and uh, it just it just went way too fast.
Speaker 1: People are a little more savvy now, they are a
Speaker 1: little more cautious. It may not seem that way when
Speaker 1: you start reading about these venture capital deals, but there
Speaker 1: it's not the kind of wanton spending that was going
Speaker 1: on back in two thousand that led to the bubble bursting.
Speaker 1: And then I was just dreadful here in Atlanta. It
Speaker 1: was pretty tough. We have a lot of tech companies
Speaker 1: here in Atlanta that folded um after that happened, um
Speaker 1: and and you know, it was a real wake up
Speaker 1: call for a lot of people. Now we're kind of
Speaker 1: gotten back to sort of a complacent state of mind
Speaker 1: in the tech industry a little bit um for a
Speaker 1: long time, Like in the nineties, late nineties, early two thousand,
Speaker 1: if you were an I T guy, you know, the
Speaker 1: sky was a limit. You could jump from job to job,
Speaker 1: getting increasingly better salary and benefits, and there was no
Speaker 1: sense of job loyalty, nothing like that. Sometimes months at
Speaker 1: a time, you know, yeah you might, yeah you might
Speaker 1: work at a company for a couple of months and
Speaker 1: then immediately get hired away for twice the salary somewhere else.
Speaker 1: And that's not an exaggeration. That really did happen. Um.
Speaker 1: And then that that obviously came to a stop after
Speaker 1: the bubble burst and all these companies went out of
Speaker 1: business and suddenly being an ide guy was not necessarily
Speaker 1: the best thing in the world. Um, but it steadily
Speaker 1: it got better, and UM, I don't think we're quite
Speaker 1: at the point where we're gonna have to worry about
Speaker 1: other dot com bust And there's still people who are
Speaker 1: investing venture capital, like like you you know, like some
Speaker 1: people are saying this is the right time. Dig got
Speaker 1: a twenty eight point seven million dollar ventury capital deal
Speaker 1: just a couple of weeks ago. So it's still happening.
Speaker 1: It may not happen as often, and it may be uh,
Speaker 1: people might be much more picky when it comes to
Speaker 1: figuring out what they're going to invest in. It's not
Speaker 1: just going to be a oh well that sounds like
Speaker 1: that's interesting, throw money at it kind of approach. So
Speaker 1: people aren't just gonna be spending willy nilly on a
Speaker 1: lot of expensive items that they don't need. Oh, that's
Speaker 1: always gonna happen. That's always gonna happen. In fact, you
Speaker 1: know what I can tell you about an interesting item
Speaker 1: that you might you technically need it, but you don't
Speaker 1: necessarily need this particular version of it. Oh yeah, yeah,
Speaker 1: and it's pretty expensive. But first we'd like to thank
Speaker 1: our sponsor, Audible. You can sign up for an account
Speaker 1: over at audible dot com slash stuff, which actually gives
Speaker 1: you a of your first download for free. And we
Speaker 1: thought we'd recommend a couple of books that relate to
Speaker 1: this topic. Chris, you've got a recommendation for our listeners. Yeah, Personally,
Speaker 1: I would advocate trying to stay out of this bind
Speaker 1: in the first place. And uh, I was thinking of
Speaker 1: the Rich Dad series, which is, you know, a very
Speaker 1: popular way to um get a little bit better at
Speaker 1: managing your money. And uh, the latest is Robert Kiyosaki's
Speaker 1: Rich Dad's Increase your Financial i Q gets Smarter with
Speaker 1: your Money. Oh okay, that's a good one. I've got.
Speaker 1: I've got a recommendation as well. This comes from the
Speaker 1: writer Chris Anderson, who you may know from Wired um.
Speaker 1: He has this book called The long Tail, Why the
Speaker 1: Future of Business is selling less of more Now. The
Speaker 1: long Tail kind of goes into this whole web two
Speaker 1: point oh model of web economics, and so if you
Speaker 1: are at all confused about web economy, I would recommend
Speaker 1: reading this book. Getting it off Audible take a take
Speaker 1: a good listen, and that explains a lot of why
Speaker 1: these companies are interested in getting into venture capital in
Speaker 1: the first place. Um and you can find both of
Speaker 1: those at audible and like we said, sign up at
Speaker 1: audible dot com slash stuff. You can get your first
Speaker 1: download for free. Okay. So we're gonna talk about an
Speaker 1: item that's expensive and necessary, but you don't necessarily need
Speaker 1: this brand. Okay. Have you heard of bling? Uh? Yeah,
Speaker 1: I had to, you know, take all my bling off
Speaker 1: so I didn't rattle right, No, okay, gangs to see.
Speaker 1: It's not that kind of bling. Now there's this. There's
Speaker 1: this kind of designer bottled water known as bling and
Speaker 1: has crystals on it. That's spill up bling. Okay, So
Speaker 1: so hang onto your heads, folks. If you haven't heard
Speaker 1: about this. This water is um on average, fifty five
Speaker 1: dollars a bottle of water from Tennessee. We lived two
Speaker 1: hours from Tennessee. Chris. We could go and make a
Speaker 1: mint right now, I mean granted, okay, when you figure
Speaker 1: gas gas prices into it, all right, maybe half a mint,
Speaker 1: but still half a mint, Chris, that water just sitting there.
Speaker 1: Just give me a bedazzler and some plastic bottles and
Speaker 1: we will be in business. Yeah, you would like to
Speaker 1: learn more about bling and all the wonderful facts and
Speaker 1: figures of surrounding it, You can read this great article
Speaker 1: written by John Fuller. It's called Would You Pay Dollars
Speaker 1: for a Bottle of Water? That's live right now at
Speaker 1: how stuff works dot com and we'll talk to you
Speaker 1: again soon. Let us know what you think. Send an
Speaker 1: email to podcast at how stuff works dot com. Brought
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Speaker 1: are you