Recently, we have been shocked by news from several start-up companies or startups that have laid off their employees. This event is associated with the bubble burst phenomenon.
What is bubble burst, anyway?
It is a phenomenon of economic growth which is characterized by a rapidly rising value but also experiencing a rapid decline. Just imagine, when we blow a bubble, the bubble will quickly expand but also burst easily, right?
According to Investopedia, an American economist, Hyman P. Minsky, was one of the first to explain the development of financial instability and its relationship to the economy. In his book, Stabilizing an Unstable Economy (1986), Minsky describes the five stages of a typical credit cycle.
These stages also describe the basic pattern of bubble occurrence.
1. Displacement
This shift occurs when investors are attracted by the new paradigm. For example new technology or low interest rates.
2. Boom (Explosion)
When the price starts to rise, then more investors enter the market. Then many buy assets because there is a fear of missing out on a great opportunity that may only come up once in a lifetime.
3. Euphoria
At this stage the price of the asset soared. The idea arises that no matter how much it costs, there will always be buyers who are willing to pay more.
4. Profit-Taking
Able to identify when the bubble will burst. But, if you can read the signs, you can make a lot of profit by selling your holdings.
5. Panic (Panic)
In the panic stage, the asset price reverses direction. Prices fall as fast as they go up. Makes investors want to sell all assets to pay creditors at any price. The cause of the sharp fall in asset prices was because supply was higher than demand.
Bubble burst is also considered to occur whenever the price of goods rises far above the real value of the goods. This phenomenon is usually associated with changes in investor behavior.
Relation to Layoff Cases at Startups
Now, in the midst of the hectic discussion about the bubble burst phenomenon, not a few observers have revealed that what is happening in startups cannot be called a bubble burst.
If I look at it, it's not the bursting of bubbles, but rather that the bubbles are starting to leak. If it breaks, all startups fall, but this slowly falls apart.
According to him, this condition is driven by the fact that it is difficult for startups to find funding at this time. The average startup must 'burn money' to reach users. Well, that's why we often get tempting promos.
"Funding here is also increasingly difficult, especially for services that have passed their growth phase such as e-commerce, digital payments, travel and education, being replaced by new startup directions that carry artificial intelligence, big data analytics, internet of things, and the metaverse," continued Heru.
Heru added that currently many startups have proven consistent profits, but the journey is still tough because there is a return of funding to investors. With this condition, layoffs are considered to be one of the options and solutions for startups to survive.
"LinkAja, Zenius, is indeed quite difficult because the main players are already far ahead. If you want to progress, you have to be strong and burn money," he said.
That's the definition of the bubble burst phenomenon, the 5 basic patterns of this phenomenon, and the opinion of an expert regarding the bubble burst. Talking about economic problems can often feel scary because it concerns the interests of many people.
We pray that the news of massive layoffs will not happen again and those who have been laid off can get a new source of income soon!