I would not agree, as these sorts of things were frequent before the latest round of ZIRPs:
* Uber IPOed in 2019, had a loss of $8.5b that year; interest rates were around 2%
* YouTube was acquired by Google for $1.65B in 2006, it lost ~$350m in the year before and the entire music industry was suing it; interest rates were around 4%
* Facebook bought Instagram for $1b in 2012, which at that point had no revenue and no plan how to achieve it; this was smack in the middle of the previous ZIRP cycle, however I don't think anyone would say that Instagram wasn't a huge success either for the founders or for Facebook
I would agree ZIRP fuels those things (to unhealthy levels), but not that it's always the root cause.
> I would agree ZIRP fuels those things (to unhealthy levels), but not that it's always the root cause.
It you were to set a house on fire with just a lighter in your hands, you would not succeed. If you have a lighter and a tank of gasoline, you might probably succeed. ZIRP was the fuel, the lightener and your will are the "root causes". But with no fuel, no fire.
>ZIRP was the fuel, the lightener and your will are the "root causes". But with no fuel, no fire.
But the "Z" in "ZIRP" is literally zero% interest so your reply doesn't seem to address the gp's counter-examples of >0%. Other examples of non-zero% interest rate time periods include 1990s high-interest rates of +5% with Amazon in 1994 losing money for 7 years, PayPal 1998 losing money for 3+ years, Google 1998 losing money for 3+ years.
Those counter-examples means the simplistic narrative of "ZIRP is The Reason" does not explain everything. Those non-profitable companies were immediately scaling out to win the market and didn't wait for year 2008 ZIRP to do it.
Today, OpenAI (and other AI startups) are losing billions and expect to lose more billions in the upcoming years even though the current interest rate is ~4%.
>Today, OpenAI (and other AI startups) are losing billions and expect to lose more billions in the upcoming years even though the current interest rate is ~4%.
AI stuff is little different. If OpenAI and others hit AGI or anything remotely near it, the money is in theory massively endless. So investing when you could get 4% in a company that would return 10000% makes sense.
However, 4% in a company growing 15% in their field with profit margin of 10% means if only 1 in 5 survive, you have lost money so investors pull back.
In the interest of clearly communicating:
I used "fuel" in the meaning "to make people's ideas or feelings stronger, or to make a situation worse", not "a substance that is burned to provide heat or power", see https://dictionary.cambridge.org/dictionary/learner-english/...
I did provide two quick examples of these effects happening in the absence of ZIRP, so it is clearly not always required.
As, sadly, is not a tank of gasoline or ill intent to set a house on fire - these things can happen by accident, often a single spark is enough.
There's plenty of literal fuel beside gasoline, and there's plenty of "startup growth at all costs" fuel beside ZIRP.
I would consider the few unicorn examples provided to be outliers.
For most of the 2010’s ZIRP created a startup gold rush with everyone trying to leverage the same “burn money, get users” strategy you’ve outlined.
Excepting the current AI bubble, you cannot play that strategy today. Investors started demanding real results in the post COVID inflation years and continue to do so today, or else don’t invest at all in high-risk ventures with no tangible results.