All hail the demise of Adobe-Figma
And: Did the economy just shit the bed?
Welcome to Cautious Optimism, a newsletter on tech, business, and power.
Due to childcare-related matters, I’m writing to you today while the girls nap. So, no Trending Up and Down today. We’ll be back to fighting form on Monday. Hugs — Alex
Did the economy just shit the bed?
As POTUS shook up the global trade landscape with a series of tariffs, tariff threats, chest-pounding, and use of import taxes as a political weapon in the first half of 2025, the economy appeared to shake off the turbulence. Especially in May and June, it seemed that the labor market was holding steady and, despite widespread concern that making it more expensive to source imports would harm business activity and drive inflation, that the economy itself was proving resilient.
It was a good argument for the Fed to hold rates steady; labor appeared stable, and there was reason to worry about inflation.
Yesterday’s July jobs data made it clear that the economic outperformance we had previously seen was more mirage than reality. Here’s what happened last month:
Total nonfarm payroll employment changed little in July (+73,000) and has shown little change since April […] the number of long-term unemployed (those jobless for 27 weeks or more) increased by 179,000 to 1.8 million.
And here’s what the BLS said about May and June data:
Revisions for May and June were larger than normal. The change in total nonfarm payroll employment for May was revised down by 125,000, from +144,000 to +19,000, and the change for June was revised down by 133,000, from +147,000 to +14,000. With these revisions, employment in May and June combined is 258,000 lower than previously reported.
As a result of the new data, the market was informed that the domestic economy has not managed to truck along as if international trade was as free as it was under the preceding administration. Recall as well that inflation picked up a little in the most recent report.
The Fed is now in a quandary. It could lower rates to try and stimulate the labor market, as full employment is one half of its two-part mandate. Or it could hold rates steady — raise them? — to fend off rising prices. Neither option will make everyone happy, and even if JPow decides to trim, it won’t be enough to get POTUS off his back.
Welcome to the joys of central banking.
So, did the economy shit the bed? No, because the phrasing implies a sudden, single, execratory event. We’re instead watching trade policy and geopolitical tensions drain the economy of its vitality, like a gut wound that keeps bleeding at a faster rate.
Note: Health and medical analogies are hereby banned on CO.
The splitscreen here is big tech earnings, which have mostly been crushing. Sure, Amazon disappointed a little, but Microsoft and Alphabet and Meta are trucking along with their AI capex like there’s nothing wrong. And they might be right, from their perspective.
Elsewhere, there more signs of concern. Manufacturing employment has fallen for three consecutive months. Mining and logging employment is falling, and construction job growth is anemic at best. It just doesn’t look very dynamic out there, apart from certain sectors of the economy that are either driving AI adoption (your friendly, local, foundation AI model behemoth), or drafting on its tailwinds (the folks selling data center supplies).
A fun question that I’ve seen bandied about on Twitter in various forms: Sans the current AI buildout, are we in a recession?
All hail the demise of Adobe-Figma
Adobe wanted to buy Figma for $20 billion back in September of 2022. At the time, the deal smelled of an incumbent working hard to take a burgeoning competitor off the table. Figma had announced a $200 million round at a $10.0 billion valuation earlier that year, meaning that Adobe was offering around double what Figma was worth at the time.
My view at the time: Of course the Adobe-Figma deal is anti-competitive
Later, after the deal fell apart, Figma wound up executing a tender offer for existing shareholders at a $12.5 billion price tag. That valuation, set in mid-2024, was considered by some as evidence that government meddling in Figma’s exit path was costing VCs plenty. After all, they could have sold all their stock in Figma at a $20 billion valuation in 2022! Who wants to cash out a smaller portion at a lower price years later?
No one. And they shouldn’t have. Less than three years after the Figma-Adobe deal was announced, and a less than two years since the agreement was called off, Figma is now public and worth $55 billion, per Yahoo finance. All its backers had to do post-Adobe was nothing, and they would be handed ever-greater returns as a thank-you for their patience.
We covered the major shareholders here. Just multiple the value column by a lot to get current returns.
Put another way:
Adobe wanted to use its incumbent status to buy a competing startup, allowing it to avoid competition and reign for another decade.
The government wasn’t sure about that, and the deal eventually fell apart with the potential acquirer (Adobe) paying the acquiree (Figma) a $1 billion breakup fee.
Later, Figma went public at about a flat price to the prior deal value only to watch its value rip higher by more than 100%.
Venture capitalists should therefore be very happy with former FTC head Commissioner Lina Khan, who saved them from selling their shares too early, for too little.
And the good news doesn’t stop there. Adobe now has to compete with a public and indepnednet Figma, which has never been worth more or had more liquid firepower to bring to bear on the market. More competition is more good, as we like to say. The winners, then, of the Figma-Adobe deal falling apart as 2023 came to a close:
Winners: Figma, Figma’s backers, Figma’s employees, Figma’s users (via increased competition).
Losers: Adobe.
Call me nuts, but I view that as a win. And it’s a great reminder why startups should love antitrust. Antitrust is how regulators ensure that there is a shot for small companies to become big. And then take on companies like Adobe that have pernicious pricing policies out behind the woodshed for a thrashing.
Get ‘em, Dylan!