The REAL Reason Tech Hiring Has Slowed Down (Surprising)

Summary

The video discusses the misconception that AI and automation are the primary reasons for the current slowdown in tech hiring. It argues that despite advancements in AI, such as GitHub Copilot and GPT-3, they are not yet capable of fully understanding or editing complex codebases. The real economic drivers behind the hiring downturn are the end of the zero-interest-rate era and changes in tax code, specifically Section 174, which affects how software development costs are treated for tax purposes. The video suggests that if these factors change, tech hiring could rebound quickly. It also advises aspiring developers not to give up on learning and recommends interview preparation for those seeking opportunities in the tech industry.

Takeaways

• 🚫 The notion that AI and GPUs are replacing coding jobs is premature, as AI tools like GitHub Copilot and GPT-3 still struggle with complex coding tasks.
• 📉 The tech hiring downturn is not driven by AI advancements but rather by economic factors, specifically the end of the zero-interest-rate era and changes in tax code.
• 💰 The low-interest-rate environment previously encouraged riskier investments like Venture Capital, which significantly contributed to tech industry growth and high salaries.
• 📈 Inflation and subsequent rate increases have had a downstream effect on tech hiring, as less money is available for investment and more is流向 risk-free investments.
• 🔄 Section 174 of the tax code changes have made software development costs more expensive for companies by requiring amortization of R&D expenses over time, impacting startups and the overall industry.
• 🌐 The pressure on the tech industry may be alleviated if Section 174 is repealed or amended, potentially leading to a surge in hiring.
• 🤖 AI is expected to enhance productivity in software development but is unlikely to eliminate software engineering jobs; it may simply change the nature of coding work.
• 🌟 Despite the current challenges, the tech industry is expected to recover, and those who continue to learn and prepare for a career in tech could be well-positioned for future opportunities.
• 📚 For those pursuing a career in tech, it's crucial to prepare thoroughly for interviews and consider comprehensive programs like Interview Kickstart to maximize the chances of success.
• 🔍 AI's role in coding is currently limited to assisting with error detection and minor improvements in efficiency, rather than taking over the majority of development work.
• 🔄 The ideal use of AI in coding currently involves generating starter functions or boilerplate code, while more complex tasks still require significant manual work and understanding.

Q & A

What are the two main reasons tech hiring is struggling, according to the speaker?

The two main reasons are the end of the zero interest rate phenomenon (zerp) and changes to the tax code under Section 174, which affects how software development costs are treated for tax purposes.

Why does the speaker believe that AI and automation are not currently the primary drivers of the tech hiring downturn?

The speaker argues that AI, such as GitHub Copilot and Chat GPT, are still in their early stages and struggle with basic programming tasks like closing parentheses correctly, let alone understanding and editing large code bases.

How has the zero interest rate phenomenon (zerp) influenced tech industry salaries and investment?

The zerp led to cheap borrowing costs, encouraging more risky equity investments like venture capital, which in turn inflated the tech industry and increased salaries for software engineers and developers in the US.

What is the impact of Section 174 on software development costs and how does it affect startups and larger companies?

Section 174 requires software development costs to be amortized over time, which means that companies cannot fully deduct developer salaries as a tax expense in the year they are paid. This puts short-term financial pressure on companies, especially startups, as they have to pay taxes on the undeducted portion of salaries.

What is the speaker's view on the potential of AI in the future of software development?

The speaker believes that AI will continue to improve and could potentially double productivity for developers, but it will not eliminate software engineering jobs. Instead, the nature of coding jobs may change, similar to how new programming languages and frameworks have historically increased productivity.

What advice does the speaker give to those considering entering the tech industry despite current challenges?

The speaker suggests that individuals should continue to learn and prepare for a career in tech, as they could be well-positioned for opportunities when the industry recovers. They also emphasize the importance of taking interview opportunities seriously and investing in comprehensive interview preparation.

How does the speaker describe the current limitations of AI in code generation?

The speaker points out that while AI can generate code that is mostly correct, it often lacks the final 5% needed for perfect accuracy. This is problematic because a single line of incorrect code can cause the entire program to fail, and AI is currently unable to understand and debug code at the level required.

What is the speaker's recommendation for preparing for technical interviews?

The speaker recommends a multi-month program like Interview Kickstart, which is developed by Fang-level software engineers and offers personalized help from a team of mentors and instructors from top tech companies.

How might the potential repeal or amendment of Section 174 impact the tech industry?

If Section 174 is repealed or amended, it could relieve some of the financial pressures on the tech industry, potentially leading to a surge in hiring and investment in software development.

What is the speaker's perspective on the role of AI in the evolution of software development?

The speaker sees AI as a tool that will help developers become more productive but does not believe it will replace the need for human developers. They predict that as AI continues to improve, established software engineers will be able to use it effectively to adapt to the evolving landscape of software development.

What does the speaker suggest is the best approach to learning and preparing for a career in tech during the current climate?

The speaker encourages individuals to go against the crowd, continue learning, and invest in serious interview preparation to be ready for opportunities when the tech industry recovers.

Outlines

00:00

🚀 Economic Factors Affecting Tech Hiring

This paragraph discusses the misconception that AI and GPUs are the primary reasons for the struggle in tech hiring. It highlights two economic factors that are actually driving the downturn: the end of the zero-interest-rate era ('zerp') and the changes to the tax code under Section 174. The speaker explains how low interest rates previously led to an influx of money into the tech industry via venture capital, inflating salaries. The current shift towards higher interest rates has reversed this trend, affecting the budget for hiring developers. Additionally, Section 174 now requires companies to amortize software development costs over several years, increasing the short-term financial pressure on companies and startups.

05:01

🌐 Impact of Section 174 and Potential Repeal

The paragraph delves deeper into the impact of Section 174, a tax code change that has significantly affected the tech industry. It explains that this legislation requires companies to amortize software development costs over a longer period, increasing taxes in the short term and putting pressure on companies' finances. The speaker mentions a movement to repeal or amend this legislation, which, if successful, could relieve some of the financial pressure on the industry and potentially lead to a surge in hiring. The paragraph emphasizes the importance of keeping an eye on these economic factors for those looking to break into the tech industry.

10:01

🤖 AI's Role in Software Development and Interview Preparation

This paragraph addresses the role of AI in software development, clarifying that while AI can assist with catching errors and potentially increasing productivity, it is not yet capable of replacing human developers. The speaker argues that AI can generate code but struggles with understanding and debugging complex codebases. The paragraph also emphasizes the importance of preparing for interviews, suggesting a comprehensive program like Interview Kickstart for those serious about entering the tech industry. The speaker advises viewers not to give up on the potential of AI in the future, suggesting that established software engineers may be well-positioned to leverage AI advancements.

🔍 The Reality of AI in Coding and Future Outlook

The final paragraph focuses on the current limitations of AI in coding and the nature of software development work. It explains that AI is far from being able to understand and work with large, complex codebases, and that debugging and making meaningful changes to existing code remain human tasks. The speaker suggests that AI might reach a plateau in productivity gains within coding, similar to how new programming languages and frameworks have increased productivity in the past. The paragraph concludes with a hopeful analysis, encouraging viewers to gain confidence and stay informed about economic factors affecting the tech industry.

Keywords

💡Tech Hiring

Refers to the process of recruiting and hiring employees in the technology sector. In the video, the speaker discusses the challenges currently facing tech hiring, including economic factors and the impact of AI on job opportunities.

💡AI and Coding

Artificial Intelligence's role in the field of coding, including tools like GitHub Copilot and GPT-3, which are designed to assist with coding tasks. While these tools can help with certain aspects of coding, they are not yet capable of fully replacing human developers.

💡Zero Interest Rate Phenomenon

A period of extremely low interest rates,近乎零利率, which has made borrowing money very cheap and encouraged riskier investments like venture capital. This has historically inflated industries like tech, leading to higher salaries for software engineers.

💡Section 174 Tax Law

A change to the U.S. tax code that affects how companies can deduct expenses related to software development. Under Section 174, these expenses must now be amortized over several years, increasing the short-term tax burden on companies and potentially discouraging hiring.

💡Venture Capital

A type of financing where investors provide capital to startups and early-stage companies in exchange for equity or a stake in the company. Venture capital has been a significant driver of growth in the tech industry, especially in software development.

💡Inflation

The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. In the context of the video, inflation has led to higher interest rates, which in turn has affected the flow of money into the tech industry.

💡Software Engineering Jobs

Positions that involve the application of engineering principles to design, develop, maintain, and test software. The video discusses the future of these jobs in the context of AI and economic factors.

💡Interview Prep

The process of preparing for job interviews, which often includes practicing common interview questions, learning about the company, and honing technical skills. In the video, the speaker recommends a comprehensive program for those looking to break into the tech industry.

💡AI Productivity

The efficiency and output that AI can bring to productivity tasks, including coding. The video discusses the current limitations of AI in terms of productivity within coding and the potential for future improvements.

💡Legacy Code Bases

Existing collections of code that have been used and maintained over time, often within established systems. Legacy code bases can be challenging to work with due to their size and complexity.

💡Economic Drivers

Factors that influence economic activity and decision-making, such as interest rates and tax laws. The video identifies two economic drivers that are currently impacting the tech industry: the end of the zero interest rate phenomenon and changes to the tax code under Section 174.

Highlights

Tech hiring struggles are not due to AI advancements as commonly believed, but rather economic factors.

Nvidia CEO's claim that AI will replace coding is premature, as current AI technologies like GitHub Copilot and GPT still struggle with basic coding tasks.

The downturn in tech hiring is primarily driven by economic factors, specifically the end of the zero-interest-rate era and changes in tax code under Section 174.

Low interest rates previously led to an influx of money into the tech industry, inflating salaries and investment.

Rising interest rates to combat inflation have a downstream effect on tech hiring and investment.

Section 174 of the tax code now requires companies to amortize software development costs over several years, increasing the short-term cost of hiring developers.

The changes under Section 174 have made software developers more expensive from a tax perspective, especially impacting startups.

There is a movement to repeal or amend Section 174 due to its negative impact on the tech industry.

AI technologies are improving but are still far from replacing human developers, as they require human oversight and cannot yet understand or debug complex code.

AI may increase developer productivity but is unlikely to eliminate software engineering jobs, similar to how new programming languages and frameworks have historically improved efficiency.

Despite current challenges, the tech industry is expected to recover, and those who continue to learn and prepare for a career in tech may be well-positioned for future opportunities.

Interview preparation is crucial for those looking to break into the tech industry, with comprehensive programs like Interview Kickstart offering structured guidance.

AI's role in coding is currently limited to generating simple code snippets or functions, rather than managing larger, more complex projects.

The human element in coding remains essential, as AI-generated code often requires manual debugging and refinement.

AI's potential in coding is compared to the assembly line, where it can produce near-perfect results but still requires human intervention for the final touches.

The current state of AI is not yet capable of understanding and working within large, legacy codebases, limiting its utility in real-world development scenarios.

The speaker advises against giving up on learning to code due to AI advancements, as the technology is still developing and has not yet reached a point where it can replace human developers.

The video encourages viewers to stay informed about economic factors affecting the tech industry and to be prepared for the eventual recovery of the market.

Transcripts

it's surprising to me that no one's

talking about the two real reasons Tech

hiring is struggling because despite

what the Nvidia CEO is telling you don't

even learn to code anymore because you

could just use our gpus and write

everything with AI That's not a reality

yet because GitHub co-pilot and Chad GPT

they have a hard time closing

parenthesis for now let alone editing a

code base and understanding it a million

lines and being able to reli make

changes that actually work so we're a

long way off from that and that is not

currently at least driving the tech

hiring downturn which has been going on

for quite a while now so the things that

most people aren't talking about which

are the clear economic drivers of this

which if their reverse can overnight

really turn things around are number one

the end of zerp or the zero interest

rate phenomenon and number two something

barely anyone even knows about which is

section 174 the change to the tax code

now we're going to get into both of

these because if you're trying to break

into the industry if you're deciding

whether it's worth it to still learn

then it's really important to have your

eye on these two things because again if

they change it can have an overnight

surge back to hiring and in fact we'll

talk about the AI thing a bit more but

we do have reason to believe that if

anything that's going to expand the tech

industry and while each developer will

of course become more productive as they

already have this may actually change

the nature of what coding jobs are to an

extent but doesn't necessarily mean that

software engineering jobs are going to

be eliminated they're just going to be

slightly altered in the way that new

programming languages new Frameworks and

paradigms have made people more

productive in the past so let's start by

quickly touching on zerp interest rates

were near zero for a long time so the

cost of capital was very cheap it was

basically free to borrow money with debt

and your risk-free return that is with

treasury bonds and similar was basically

zero so that combination led to people

making slightly more risky Equity style

Investments namely Venture Capital which

drives a huge part of the tech industry

this is the big reason salaries in the

US are much higher than other countries

when it comes to software engineering

software developer salaries because the

industry is basically inflated by all

this money flowing into it now when

there's less overall money coming in of

course that's less of a budget for

spending on developers reinvesting and

similar and more of that money is

Flowing to the risk-free Investments

because when you do the calculation on

return you of course have to factor in

the risk and we can get mathematical

about it but that is the high level

overview and this has been well

documented across history where lower

interest rates basically mean that

certain industries get inflated now the

cause of this of course inflation was

high the rates went up to combat that

and therefore you know it has this

Downstream impact however this is not a

permanent state of things ideally

speaking if things were to return to

their let's say last 30 years average

then that Trend could be reversed now

the other economic pressure is the

section 174 tax lot now just to briefly

cover it basically there was a change to

the tax code where software engineering

uh salaries and any investment into

software development is now counted as

R&D that has to be amortised now what

this means is even as crazy as it sounds

developer salaries you cannot deduct

them as a tax expense so if you're a

startup and you want to hire one

developer at 100K a year and you make

100K profit in the past you could fully

deduct that salary meaning you'd have

zero profit for that year and pay zero

taxes however under Section 174 you have

to deduct that salary over 5 years so

you can only deduct 20K in year one

meaning you have to pay tax on the

remaining 80k in that first year

therefore let's say your tax rate is 40%

on that 80k you have to pay around

33,000 of taxes meaning now you would

have a loss of

33k rather than a break even profit so

of course you can deduct it in the

following years how however that's very

difficult as a startup and it's even

difficult as a larger company though

there can be certain you know tax

benefits to this style of amortization

it puts a lot of short-term pressure on

how much you can actually spend all this

is to say that this is an additional

pressure driver on the industry at large

because now you have to think long term

and really second guess how you're

reinvesting your profits and your

Revenue because there are more tax

implications so this is particularly

devastating to startups however it again

puts that pressure on the entire

industry where now a software developer

in the short term is much more expensive

from an overall cost standpoint you

might be thinking okay companies are

just going to go overseas however for

overseas development work you have to

amortize it over 10 years so it gets

even worse there is a movement let's say

to repeal or edit this nonsensical new

legis ation that went into an effect

right around when the tech layoffs

started that was tax year 2022 so people

are moving to repeal it to change it

because the implications are pretty

devastating however that still hasn't

happened so if we cross our fingers keep

an eye on it this could also relieve

some of that pressure on the industry

bring back a surge of hiring and similar

so what exactly do you do at this point

because of course these two things seem

pretty bad you could just look at the AI

stuff completely give up however at this

stage I don't think that's a great idea

still number one because what's really

your alternative AI is putting pressure

on every industry and while yes software

development breaking into the industry

before was almost too good to be true

where you could just not have a degree

teach yourself and then break in and be

earning 100K it's still good it's still

possible however yes in the current

state of things it is a bit harder that

is also affecting the supply side though

people's sentiments around it have

changed boot camp Admissions and signups

have gone down so if you're kind of

willing to go against the crowd at this

point if you're willing to bet on the

recovery and still learning now you

could be in a very good position in the

near future for breaking in once things

do recover which I do think will happen

now before we talk about AI there is

simply one thing that I have to be blunt

about now more than ever when you get

those interview opportunities if you're

spending all that time applying when you

get your shot you cannot waste it rather

than casually doing Le code programs and

watching videos on YouTube I do think

it's a great idea to do something a

little bit more serious and

comprehensive like interview prep by

interview Kickstart this is a

multi-month program that will really

take you through each step that's needed

to Ace the interviews they are the top

market leader in the US for Tech

interview prep the platform is developed

by Fang level software Engineers hiring

man managers and similar and they have a

large team of mentors and instructors

from Fang companies that are going to

help you out personally with over 20,000

students and great reviews this is the

highest probability way to make sure you

don't miss your shot and that you're

fully prepared so take a minute check

out interview Kickstart see if it looks

great for you and they're going to make

sure that you get the result you want or

you're going to get half your money back

so check out the link and now let's

continue on talking about the industry

specifically AI let's talk a little bit

about AI which I fully believe it will

continue to improve it will let's say

help developers catch their errors as

they're going but it's more to the

degree of 2x in the right hands maybe

it'll speed up your work by 50% that

human element is still required the way

I'm thinking about it too is there's

sort of an ASM toote line for AI

productivity within coding what you see

even in the image and video generation

is it's like 90 to 95% perfect but

there's always a few things wrong and

it's the same with text generation llms

there will be one or two things off and

as suitable as AI is for code generation

that missing 5% which I think is going

to be very hard to get you know that

last 5% actually perfect which is what

we've seen so far that's a big issue

with coding because if one line doesn't

compile if one line doesn't work then

the whole thing breaks so you can't just

be generating code without understanding

in it because then you can't debug

things that are wrong you can't identify

them in a perfect world the AI would be

reading your entire you know 100,000

line code base and you could just tell

it hey I want to add this feature and it

would go and do that but as any

developer working with AI now would tell

you number one it can't do that at all

so you can't really feed it in a large

input even a full long file it won't

accept and even if you could it would

probably have a few of those errors

slash not really match your naming

patterns or conventions make certain

things up so you'd still have to go in

and fix it which could in the current

state even take longer than just writing

it yourself so the ideal way to use it

now is to maybe just generate a starter

function some boiler plate or complete a

line where it's already very clear what

you're going to write however for those

larger tasks it's still very manual and

the reality of working as a developer is

most of it is editing code is reading

understanding and changing things that

are already written to fix bugs make

small changes and similar that's the

reality of how things work now so with

the AI not being able to understand code

in the way that a human can it is still

a very long way from doing the majority

of development work especially when

you're dealing with production code if

you're dealing with a you know fun

sample project completely different

story it can probably build something

for you pretty quick but especially

within companies Legacy code bases huge

repositories it's not really doing the

heavy lifting for you it's just doing a

small sub routine so that's my uh

assessment of the current state of AI I

would not at this point in time listen

to the Nvidia CEO other Tech influencers

saying well it's over stopping to make

videos completely because of this we're

just not there yet and once we do get

there hopefully you could already be in

a position to take advantage of it where

you're maybe already an established

software engineer 5 10 years down the

road and then you already have that kind

of credibility you've mastered The Meta

programming aspects and you can just use

it as a tool to ride the wave of the way

software evolves that's my analysis not

a Doomer analysis more a hopeful one and

I hope you've gained a bit of Confidence

from this video um let me know what you

think of these economic factors I

mentioned of course section 174 is is

crazy do you think this is purely driven

by interest rates or do you think

there's other factors I didn't really

cover let me know in a comment what you

think and I'll see you in the next video