On today’s home team episode, Ben and Ryan discuss the implications of a lapse in section 174 of the tax code. Here’s a great explainer on how it’s affecting startups and software firms, threatening jobs and potentially bankrupting some struggling companies.
Video game employees are exploring a union and Microsoft recently announced it will stay neutral in the process.
What’s the difference between a bad game, a low effort developer, and shovelware? Our game development Stack Exchange has some thoughts.
Today’s lifeboat badge winner is “that_other_guy”, who explained: What is the difference between kill and kill -9? Hint, you want to terminate your process, not brutally murder it, ok!
TRANSCRIPT
[intro music plays]
Ben Popper Imagine a workstation where your devices seem to disappear, keeping you in a state of flow for hours. Imagine a superior typing experience and a mouse crafted for comfort. Now add smart illumination, programmable hotkeys, smart software, and connection to up to three devices. Discover MX Master Series. Crafted for performance, designed for coders. Find out more on logitech.com.
BP Hello, everybody. Welcome back to the Stack Overflow Podcast, a place to talk all things software and technology. I am your hostess with the mostest, Ben Popper, Director of Content here at Stack Overflow, joined as I often am by our illustrious newsletter publisher and blog impresario, Ryan Donovan.
Ryan Donovan That's right, all up in your inboxes.
BP All up in your inbox. So Ryan, you brought a story today that is about startups and labor, and we know a lot of developers and engineers want to be entrepreneurs or work at a startup. I have a story in a similar vein, so why don't you kick it off and then I'll segue.
RD So I saw a post from Gergely Orosz, who has written for the blog before.
BP Yes, we like Gergely.
RD It was talking about a change in a specific tax code that has led to a lot of layoffs and is putting a lot of burden on startups and software companies, because no longer are software developers, as I understand this, their costs are being amortized over five years, because they are considered research and engineering. So what that's doing is that suddenly this sort of capitalized expense is no longer deductible.
BP It used to be that you could deduct the work that software developers and engineers, research scientists, your machine learning specialists were doing in R&D, but now you're going to have to, it sounds like, pay taxes on that. It will be spread out over a number of years– 5 years in the US, 15 years if they're abroad– but still, if you have a huge R&D department and that used to be something you could write off in taxes, now that will change significantly.
RD So what it looks like is that you no longer include your research and engineering as an operating expense. So the example he gives is if a company has 1.2 million in revenue and a million dollars of that is developer salaries, before, profit of the company was 200k and they'd pay taxes on that 200k. Now the profit of the company is 1 million. Basically they get to deduct 20% of the 200k because it's amortized, so you're considered having made a lot more profit. So a lot of companies are getting these huge tax bills that are more than their operating profit. So unless you have some VC padding, a lot of bootstrap companies are getting left in the lurch on it.
BP Yeah. Salaries have always been tax deductible. With this law, software engineer salaries are only tax deductible over five years, so if you don't have cash reserves, you need to borrow or you need to lay off. You and I clearly are not quite savvy enough about finance to get this, but I think we can understand the import, which is that there was a change to the tax law that makes it a lot more expensive for companies to have engineers, seems like specifically in the R&D division, and there are some discrepancies between the US and people who hire elsewhere, which will probably also have an impact on where folks choose to hire.
RD And as he says, I don't think a lot of people are talking about this, but it's a complicated issue and the tax code issues are really sort of baffling. And even if you look at the thread, people are arguing about whether this is actually optional or changes things, but it appears that it's actually led to people losing jobs.
BP Do we know why they made this change in the tax code?
RD The only hint in there is that somebody says that the beneficiary of this is the IRS.
BP Because they're collecting more taxes. So they're closing a loophole.
RD Well, by treating salary as a capital amortizable expense.
BP I think something's a little off here.
RD I hope so.
BP Because there's no way you're paying tax on salary. I think maybe it used to be that you could deduct from the taxes you would owe the salaries you paid to R&D engineers, and now you cannot do that. That's my interpretation of the situation.
RD It sounds like they are treating the salaries of research and engineering as capital expenses. If you buy a truck or a mainframe or something, some large capital expense, that's an asset for the company. You amortize that cost over several years.
BP I see, I see. Exactly. So now instead of being something where you can write it off, it's now something that– but to treat a person as a capital asset seems odd.
RD I mean, they're developing software that I guess you could treat as a capital asset.
BP All right. Tough for me to understand, but we'll stay on this story for you developers out there.
RD If somebody wants to drop a comment and help us understand this, that'd be helpful.
BP In a similar vein to talking about labor and software development, a big story in The New York Times published December 12th: Microsoft has announced it will stay neutral as roughly 100,000 workers are in discussions with the AFL-CIO to potentially form a union. These are video game workers and they want to collaborate to resolve issues that arise from the adoption of AI in the workspace. Microsoft says they want to seek input to address their concerns about the risk of job elimination. Super interesting. We can't shy away from the issue that as AI gets better and better at knowledge work, people worry that they will be replaced, and these game developers are following in the footsteps of the Actors Guild and the Writers Guild, which just did a massive strike and a lot of what they were trying to bargain for was their right not to be replicated by an AI or to have their persona easily just sort of digitized and then owned by a corporation.
RD I'm definitely pro-union. My dad's family is longshoremen on the Boston docks so I have family that's seen the benefits of that and it does seem like a lot of folks are worried about companies having a tool that does essentially human work.
BP Let's see here– this says it links to a study that specifically calls out that an emerging concern is artificial intelligence displacing workers. Voters believe unions can help. 7 in 10 report being concerned about AI displacing them, with 34% being very concerned. Let's see who they studied here. 12,000 registered voters dialing around, and this was conducted in August of 2023 so that's the sample.
RD There's a lot of anxiety about AI out there. With a lot of the AI folks doing a lot of hype of, “This is artificial general intelligence,” and that sort of thing, we're going to see how it shakes out. People are already talking about the Gemini demos being not reproducible or actually doing fantastic things with it. So we'll see.
BP You're seeing both as people get their hands on it?
RD Yeah, I think people are getting Gemini Pro and starting to put it together. I think they released API pricing and it's free for under 60 requests a minute.
BP Okay, that's pretty good. If you're a hobbyist you can do that. In a similar vein, it seems as though some of the chatbot companies are trying to get ahead of concerns about copyright and other ethical issues. So for example, it used to be that if you asked Dall-E to make you a picture in the style of an artist, it would, and now it specifically replies, “I can't make you a picture in the style of this artist because of copyright. If you give me some stylistic direction, I will do my best.” Super interesting. And then the other day I was helping a friend with a business plan and I gave the AI the business plan and I said, “How would you structure this as a business plan?” And it wrote it out, “Structure it in these five parts.” And I said, “Great. Can you write that business plan now?” It said, “No, that's against my terms of service.” And I thought, “What? Why?” But I think they're trying to get ahead of the ‘AI wrote this whole thing for me and then I did something and then it was illegal.’ And also I would anticipate this applying to be like, “Please write an essay on XYZ.” It's going to start saying, “No, that's not one of the services I provide,” and that sort of gets ahead of what's been a very contentious issue inside of schools.
RD I definitely see the business plan. AI will likely be responsible for a new wave of what they call shovelware– cheap software shoveled out into the market. But the legal ramifications of that for having shovelware included in legal documents like company charters and such, that may be something they want to get free of the legal liability for.
BP What is the inherent harm in shovelware? What does it fill up? Are there landfills full of shovelware? What does it pollute? It's just distracting, it takes away attention from better games?
RD It pollutes the market, basically. It's just that you fill the playing field with crap, to coin a phrase, and that prevents other people from being found and making a mark.
BP Gotcha. What defines shovelware? It's not, “Oh, I was an indie developer. I was a single person.” It's, “I’m like a content farm. I'm going to have some automated process to basically shovel this stuff out.”
RD Yeah. It's usually a cheap knockoff of another game, all the Bejeweled clones which I guess are now Candy Crush clones.
BP I would like to read about the shovelware industry. This seems interesting.
RD All right. Let's see what we can do.
BP How are these cheap shovelware games even financially sustainable? Over 150 million active users on Steam. Those games are selling. Oof, 150 million is a lot of games.
RD There was an instance recently where the game called ‘The Day Before’ shut down four days after launch. There were accusations that it was a scam because it came out early access for 40 bucks and then disappeared. So not saying it's shovelware...
BP Allegedly shovelware, we should say.
RD Right. There is controversy.
BP We're going to show our age here because it's fun. Computer Gaming World wrote in 1990 that for those who do not wish to wait for software that uses the new CD-ROM format, there were game packs of classic titles. Software repackaged on CD-ROMs was referred to as shovelware, like shareware and freeware. The capacity of a CD-ROM was 600 times that of a floppy disk, and so they started bundling or pre-installing all these garbage demos on there and I guess people would pay for the garbage demo and then they might upsell you. So that's where it comes from.
RD Well, you get a CD full of everything they can fit in there. Increased value, I guess.
BP I mean, use the free space. It's basically like a little pop-up ad. It's like, “Oh, and also there's this game on here.” If you've got some free space on the disc, why not?
RD In the sort of early days –and I'm going to really show my age here– when my cousins would get discs full of Commodore-64 games, you would just get a bunch of stuff and there was stuff on there that was good. Sort of inherent to the medium though, a lot of it was really janky individual projects.
BP There are some great questions on Stack Overflow. Superuser: “Why does my shovelware keep reinstalling? I'm on Windows Pro 10 and I have deleted this Candy Crush Saga three times. It keeps coming back.”
RD Zombie shovelware.
BP The zombie shovelware will never die. If you want to get rid of your zombie shovelware, there's an answer from Superuser for you. And then a good one from the Game Development Exchange: “Is my game shovelware, for example, if I just use Google Image searches?” “No, your game is considered just simply a bad game. The important part of shovelware is the definition of the hopes of being purchased by an unsuspecting customer.” Harsh answer.
RD Back in the Blockbuster days, I think The Asylum’s movie making business plan was to create things that you would accidentally rent. You were looking for The Transformers and you would rent The Transmorphers.
BP Right, exactly.
RD Close enough.
BP Close enough. Similar art on the cover. Takes about 20 minutes into the movie and then you're like, “What the…?”
RD But they've found their own voice now with Sharknado and other hybrid monsters and natural disasters.
BP Important fact: I hired Ryan in part because he told me that he liked really weird movies. That really stuck out on the CV.
[music plays]
BP All right, y'all. Let us take it to the outro. Awarded two days ago to That Other Guy, a Lifeboat Badge for providing a great answer to the question: “What is the difference between kill and kill -9?” Or maybe this is kill negative nine, I don't know. It's ‘kill -9.’ This question was asked six years ago, it's been viewed 12,000 times, and it's about terminating a process.
RD I think I've seen that movie.
BP “Kill aka kill -TERM aka kill -15 is the safe and correct way of terminating a process. It's equivalent to safely shutting down a computer. Kill -9 is the unsafe way of brutally murdering a process. It's equivalent to pulling the power cord, and may cause data corruption. See the Linux&Unix stack exchange for more information.” Don't brutally murder your process guys. Put it to sleep the right way.
RD Very colorful, I appreciate that.
BP Very colorful answer here. We appreciate it, That Other Guy. All right, y'all. Thanks for listening. As always, I am Ben Popper. Find me on Twitter @BenPopper. Email us with questions or suggestions for the podcast: podcast@stackoverflow.com, pretty straightforward email. And if you enjoyed today's episode, leave us a rating and a review, because it helps us grow spiritually and emotionally.
RD I'm Ryan Donovan. I edit the blog here at Stack Overflow. You can find it at stackoverflow.blog. And you can reach out to me on X @RThorDonovan.
BP Thanks for listening, and we will talk to you soon.
[outro music plays]