Why are there so many tech layoffs, and why should we be worried?

https://news.stanford.edu/2022/12/05/explains-recent-tech-layoffs-worried/

by tim_sw • 4 years ago

233 316 4 years ago

news.stanford.edu

jt2190• 4 years ago

From the article:

[Melissa de Witt] Do you think layoffs in tech are some indication of a tech bubble bursting or the company preparing for a recession?
[Professor Jeffrey Pfeffer] Could there be a tech recession? Yes. Was there a bubble in valuations? Absolutely. Did Meta overhire? Probably. But is that why they are laying people off? Of course not. Meta has plenty of money. These companies are all making money. They are doing it because other companies are doing it.

This may be true, but I’m not sure how we escape this: The market has different expectations now, leadership has to be sensitive to the expectations of the market, etc.

“Making money” has a direct correlation with “risk taking”: When you have money pouring in it’s easy to allocate some to “moon shot” projects. Less money coming in and you can still make “improvements”. When money starts drying up you can only do “maintenance”.

Our_Benefactors• 4 years ago

I just don’t buy the argument of companies are doing it because other companies are doing it.

Overhiring issues + popped bubble valuations + tech recession = you’re doing layoffs because you’re greedy? Really? It doesn’t add up.

clint• 4 years ago

To my mind its the only thing that adds up.

Apocryphon14• 4 years ago

It definitely makes them seem hiring and short-sighted in retrospect for overhiring during the bubble. Shouldn’t corporate leadership be as aware that the Fed injected an insane amount of money as the layman, that it was unsustainable? What happened to following Buffet’s dictum about being fearful when others are greedy?

kypro• 4 years ago

Not completely relevant to your comment, but I personally I think the word "bubble" is a really bad label for what happened during 2020-2021 and redirects blame away from those responsible.

It assumes there was some irresponsible multi-asset speculative boom in various markets including, government bonds, housing (gloally), crypto and stock valuations all conveniently around the same time in late 2020/ early 2021 when central bankers were doing trillions of QE and governments were injecting similar amounts of fiscal stimulus into the economy, fuelling a general demand boom and pushing the risk-free rate to near-zero. And top on of this central bankers were completely wrong / lying about the path of inflation and rate hikes in the coming years miss leading investors and businesses about the environment they would be operating in going forward.

I guess my point is that if tech companies "over hired" they only did so because the risk-free rate being near-zero devalues profits and incentivise growth. And meanwhile they had a massive demand boom to service caused by the insane fiscal stimulus. They were arguably just doing what they had to given the macro environment governments and central bankers created.

The "bubble" might as well have been government policy. Investors / businesses were just responding as you would expect given the economic conditions.

Were we to drop the risk-free rate to zero and pump $2T in the economy again this year exactly the same thing would happen again.

frgtpsswrdlame• 4 years ago

I mean certainly some of it is social contagion but what kicked off the contagion? I feel like in an article talking about why tech is laying people off surely interest rates should at least appear as a possible reason.

notadev• 4 years ago

Just speculating here, but I think Musk gutting Twitter staff was the catalyst. Layoffs were already happening, but Musk went to the extreme and it worked, at least from the outside looking in. A day after his initial layoffs is when Meta and Amazon both made the news for upcoming layoffs.

1234letshaveatw• 4 years ago

By what measure did it work? I am curious if you are going by share price, or ROI or Revenue per employee? or uptime?

fragmede• 4 years ago

that's a difficult pill to swallow, but I think you're right.

mrandish• 4 years ago

It may have been a catalyst for the timing of accelerating the announcements slightly but I doubt it was a catalyst for the layoffs directly. Large public companies consider the perceptual impact of negative announcements on the stock and brand and there's some benefit to being perceived in a trend vs an outlier.

rcme5• 4 years ago

I couldn't disagree with this article more. The main point is that tech, despite being generally over hiring and having a valuation bubble burst, is going through layoffs just because "everyone is doing it."

There are two, more obvious, reasons for layoffs.

1) The valuation bubble bursting is a big factor. Both high valuations and hiring decisions were made with a certain amount of growth in mind. Now that it's clear that the old level of growth is unrealistic going forward, valuations are coming down to reflect that, as is employee head count. Additionally, employees hired at the sky-high valuations are going to be disgruntled unless they're "made whole". Easier to just let most of them go and top-off the ones you want to keep.

2) There are two types of tech companies. The first is a company like Google, where their tech enables a step-function increase in human productivity. Google Search gave people a super power they never had before. This type of company is extremely valuable as they can capture the value of the productivity they unlock. The second type of tech company is something like WeWork. This type of tech company is essentially a digital version of something that existed previously. These companies can gain traction due to the convenience factor unlocked by the digital transformation, but there isn't much extra value to capture. When interest rates were 0, VCs and the market as a whole were valuing these companies the same as true tech companies. Now that investors are more discerning with their money, the valuations of such companies are popping. The valuations are lower because the true value of the company is low. If you have a low value company, you don't need thousands of employees all earning 6+ figures to run it.

Blackstone4• 4 years ago

Yes but if you are management and you have been wanting to make changes and cut the fat, it was previously difficult to do layoffs without extensive negative coverage. Now you can do it and fly under the radar so it may be opportunistic in nature.

jcadam3• 4 years ago

A lot of this occurred in 2008 as well. Many of those jobs simply never came back, even after the economy recovered.

onion2k2• 4 years ago

Google Search gave people a super power they never had before.

There were lots of search engines before Google. By many metrics they were better than what Google is today. They certainly showed fewer ads.

karlshea3• 4 years ago

By what metrics? Just ads? Even with the deterioration of Google Search it’s still WAY better than anything from the AltaVista/Ask Jeeves era.

sokoloff4• 4 years ago

I remember when Google/pagerank first came out. My experience at the time is that Google was dramatically and undeniably better than the other search engines of the time (ones that many people can't even name now).

The catalog/directory style sites were instantly made almost valueless by Google's better mousetrap. Google gave better search results than the previous leader, Altavista (IMO).

Whether Google results of 1998 were worse in some measures than Google results of 2023 doesn't say much about whether "giving great search" gave people a super power that they didn't have before. I think it did (though I agree that someone else would have eventually done so, obviously).

KptMarchewa2• 4 years ago

Previous search engines couldn't really find shit. Google was miles better. That it devolved into ad-rotten mess is different topic.

icedchai2• 4 years ago

Search before Google was awful. Remember Altavista?

jononomo2• 4 years ago

I remember the feeling of magic when Google search first arrived.

lowercased4• 4 years ago

Google showed no ads for the first several years of it being around. It was still better than everything else at the time for most common use cases.

You trying to say 1997 altavista was better than what google is today? I'm not a fan of google, but that's still a hard strech to make. "by many metrics" = what metrics?

thrashh7• 4 years ago

I remember COVID when tech stocks shot right up, probably because everyone was stuck having to use tech and other companies looked in free fall

Then COVID ended and now we’re going back to normal, and tech stocks are also going back to before

If you change your lifestyle because you got a $100k windfall, you are going to realize that your income never changed. Companies that hired because they thought their COVID-inspired valuation was permanent were mistaken

I’m currently working for a tech company that was negatively impacted by COVID, did not get a random influx of cash and so did not hire and so currently does not have to lay anyone off.

wyclif2• 4 years ago

It's not so much COVID, it's that essentially what has happened is that the cheap VC investment and loan money dried up, as did the high valuations. That's the simple explanation.

mattgreenrocks2• 4 years ago

The undercurrent of these discussions always bothers me. Wrong decisions are never made, they're always justified by current circumstances or hypothetical future circumstances. Past decisions were never wrong, either, even if current information shows them to be. (Who could have known?)

2021: "we have to overhire! The economy is great and otherwise we'll lose future talent!"

2022: "we have to fire! The economy isn't great and everyone else is firing!"

(In writing this I realize the validity of said decision doesn't matter nearly as much as the perception of the person that made it. Much like Twitter, it isn't just what you say, it's who you are + what you say.)

homeland221• 4 years ago

If everything back to just before pandemic, Amazon has 160K of firing need to happen. Recent numbers are inadequate.

candiddevmike• 4 years ago

RE: 1, that growth was never there IMO, it was all based on acquisition targets and pushing the whole "build a profitable business" onto someone else's shoulders. "Successful startup" meant bleeding enough money to survive until you IPO.

tfandango• 4 years ago

As much as I grump about not having enough people to do what is being asked of us, I'm also thankful that we run leaner than most in times like this.

tempsy3• 4 years ago

you’re confusing cause and effect.

tech valuations have come down because the Fed has raised rates which long duration stocks like growths tech cos are extremely sensitive to.

when borrowing money becomes more expensive, these companies can no longer fuel business expansion or stock buybacks with cheap debt, and at the same time facing a demand issue because consumers are facing the same phenomenon.

lower growth projections combined with expanding operating costs due to headcount are unsustainable for growthy tech firms that normally burn a lot of cash to fuel growth, so it becomes necessary for these firms to slow hiring and layoff workers to slow their burn and conserve cash.

onlyrealcuzzo6• 4 years ago

The meme-y-ist of tech stocks like Peloton weren't doing stock buybacks.

The idea that Apple is "taking on debt to buy back stock" is pretty misleading. Sure, Apple has some debt - but it has net cash. Ditto for the rest of the megacap tech stocks.

rcme5• 4 years ago

I did mention interest rates, indirectly: "Now that investors are more discerning with their money [because the risk-free rate of return is now non-zero]..."

Interest rates play a role, but it's not the direct cause you're thinking of. The value of a company is related to the risk-free rate of return, i.e. interest rate set by the government. Lower interest rates produce higher valuations, and higher rates produce lower valuations. But just because a company's market value goes down as the interest rises doesn't mean the company was inherently overvalued at the lower interest rate.

What we saw in the tech market was that companies were overvalued. The change in interest rate was the catalyst for tech's value adjustment, but the companies were overvalued at the old interest rate, too, because their value was based in-part on unrealistic growth expectation. Also, ZIRP really messed with market dynamics. Look at crypto, which is something that has near-zero utility and thus should have near-zero value, especially all the random shitcoins. Many such shitcoins were worth many millions / billions of dollars. The market was clearly irrationally valuing many different types of assets.

namaria2• 4 years ago

The thing about explaining market movements is: you can't. And if you could, you would me making money over fist, not sharing that on some forum.

edit: no, you can't... post hoc correlation analysis is an exercise in obscurity. If there was internal logic to the movements looking back, there would be a possibility of forecasting them.

airstrike• 4 years ago

tech valuations have come down because the Fed has raised rates which long duration stocks like growths tech cos are extremely sensitive to.

That's actually not accurate. NTM revenue multiples for software companies peaked at ~12.0x on average in October 2021. The first rate hike in this cycle happened in March 2022.

BaseballPhysics5• 4 years ago

Ah, I see we're buying into Elon's logic, here.

Big companies like Facebook aren't funding their operations with debt. They're absolutely flush with cash. Your claim that the fed raising rates is causing layoffs in these large, profitable companies does not hold water.

Does that help to explain a retreat in VC- and other debt-funded entities? Sure. But the headline layoffs we've seen are not in those types of companies.

Now, I do agree that growth projections were revised down, but the explanation for that is much simpler: A lot of companies assumed COVID was going to create a lasting impact on the world that would result in endless growth and revenues for companies like Peloton, Zoom, etc.

Well, that didn't happen, and they are now forced to cut back on staff after over-hiring due to those bad projections.

This pattern is visible across the industry. It's not in the least bit mysterious.

__derek__• 4 years ago

You're describing part of a tax-management strategy: sell bonds in the US, secured by cash in an offshore tax haven (e.g., Ireland), use the proceeds to return cash to shareholders, pay the bond coupons out of cash flow, and write off the interest payments. It has everything to do with the pile of cash when it's cheaper to use debt secured by the cash than to pay taxes to repatriate the cash. If worse comes to worst, the cash is still there to make bond-holders whole.

david38• 4 years ago

False. As well there are many companies that would normally raise capital for this time and are unable to. Not just startups. Those companies hired to expand projects assuming when the time came they could raise money. Now there is no money.

autokad• 4 years ago

I agree with you, as I was thinking this in November 2021 (when Netflix hit a wall in growth) that the pandemic didn't create tech company growth, it pulled growth forward. What this told me was that the growth in tech was much smaller than people had realized, and that other tech companies were going to hit the same wall within a year. I told my friends to beware of what's coming, and that mass layoffs in tech were likely to happen.

The fact that it all played out just as I thought gives me an indication I was right.

spaceman_20205• 4 years ago

The second type of company will never be sustainably profitable. The barrier for entry is so low that the moment it turns on the profitability levers, some new startup will pop up with a slightly different model.

Happening to Uber in my local market. A new startup (BluSmart) with an all-electric fleet and full-time driver employees showed up. Uber's service quality declined as they started squeezing drivers for profits. The new startup has stolen a big chunk of marketshare (and more importantly, mindshare) and Uber is now considering exiting this market altogether.

wnolens• 4 years ago

If Uber can't make the economics work with an assload of venture capital to be able to take huge losses, how would a (presumably?) less well funded competitor succeed? Uber too big/slow to adopt the second-comer's strategy?

gumby• 4 years ago

The second type of tech company is something like WeWork

Perhaps you can edit to find a better example? There is no more technology in WeWork than there is in a corner sandwich shop.

anonuser123456• 4 years ago

Which is parent posts point. A lot of unicorns are “we marginally improve user experience via technology with a low barrier to entry”.

This was the .com era all over; people believed that the first company to own “pet food.com” would somehow corner the market on pet food exclusively.

cesarvarela• 4 years ago

This works only under the assumption that markets are rational.

m0llusk• 4 years ago

Google completely failed to capture the value they unlocked which is why the pivoted to ads in a way that has greatly diminished the value of their search results.

WeWork is not a digital version of coworking, it is a venture capital version. Without conjured money to make their business operations possible they fail and are currently approaching the end of their runway. Coworking operations that pay for their properties and operations with revenue from members are completely different in almost every way from the locations, the outfitting and maintenance of the spaces, and the various options for payment.

acdha• 4 years ago

The first is a company like Google, where their tech enables a step-function increase in human productivity. Google Search gave people a super power they never had before. This type of company is extremely valuable as they can capture the value of the productivity they unlock. The second type of tech company is something like WeWork.

There’s another distinction to consider: WeWork, Uber, etc. have most of their costs scaling with every customer and limited competitive moat (people who travel heavily might value sticking with one global app, but locals don’t). Google or Facebook have costs to get started but their costs to go from 1M users to 10M aren’t linear, and that’s really what VCs are looking for. A lot of the bubble came from deliberately misrepresenting companies in the former group as having the revenue potential of the latter.

JediPig• 4 years ago

welp time for the pig to talk about reality.

#1, you are spot on, with the free money, and ZIRP, it has created 1000s of zombie companies are a live because they have access to the money. There are two valuations to consider when talking about this bubble.

a. Companies that make zero $$$ or near to it, and worth billions. Those are the ones that are going to be worthless after the bubble pops. b. Companies that make money, just not enough to be profitable. There are few out there, but they are ones that will get effected the most. Some have valuations that should be significantly higher, but not. c. Companies that producing $$$ and can cover expenses. PE ratios are out of sync, they are too high for what EPS they give.

What is going to happen? If the ZIRP doesn't come back or too late, you are going to see a lot of money and zombie companies get hurt hard. I think this is necessary, so good companies can transverse to a correct risk vs reward.

The biggest problem people living in the west, US, is the multipolar world is coming. US is not prepared for it, and if anything, resisting. Imagine 50% of the world rejecting the USD. It is not far off. US is now 59% of all global trade. Getting below 50% will have devastating effects. Inflation as you see it now, will be hyperinflation. The world is going multipolar, and US is not prepared.

gibsonf1• 4 years ago

Hmm, economy not a factor at all as with the dot com crash in layoffs...??? Sounds a bit too academic and disconnected from the actual cause of the layoffs.

TrueGeek2• 4 years ago

I might be really naive and I don’t know a lot about finance. But the fed has said unemployment is too high and their goal it to raise it by 1 percent. Does it just work like that scene in Fifth Element where some important person in the government calls some CEO and says “hey, please do a round of lay offs?”

umeshunni• 4 years ago

But the fed has said unemployment is too high and their goal it to raise it by 1 percent.

I think you mean that employment is too high.

badcppdev• 4 years ago

If "Layoffs literally kill people, he said." then why are they just talking about the Tech Layoffs.

Interesting links to a report that has US Job cuts back to 1989:

https://omscgcinc.wpenginepowered.com/wp-content/uploads/202...

https://www.challengergray.com/blog/the-challenger-report-jo...

irrational• 4 years ago

These things go in cycles. Remember all the layoffs during the tech bubble burst in the early 2000s? Then another round of layoffs around 2008. The another round around 2015. Now, here we are again in 2022. Boom and bust. Over and over and over again.

matwood• 4 years ago

A bust would be dropping below the start of the boom, which is not happening at all here. Nothing goes straight up, and these layoffs so far have been what I could consider normal growth.

manicennui2• 4 years ago

This is just what large public companies do. The pattern at the last company I worked at (100k+ employees) was to perform layoffs and a hiring freeze every fall and winter after assuring everyone that there wouldn't be a layoff early in the year. Then they'd hire a bunch of people in the first couple of quarters. It is so obviously done to make financial numbers better for the end of the year.

stevehawk• 4 years ago

but the end of the year for all of these companies was October, the end of the fiscal year. Yet companies are still doing it as we head into Q2 of 2023.

manicennui2• 4 years ago

I think some of the big tech companies in particular are starting to hit the end of the easy endless growth.

kubb• 4 years ago

I wish they fired me.

avgDev8• 4 years ago

This is coming from a "Stanford scholar", yikes.

What explains why so many companies are laying large numbers of their workforce off? The answer is simple: copycat behavior, according to Jeffrey Pfeffer, a professor at the Stanford Graduate School of Business

Since the answer is so simple I stopped reading the article. Obviously companies should not care about the their stock dropping massively in the last year, rates going up and consumer spending reducing. The layoffs is just copycat behavior. /s

Man, this guy must have predicted 50 of the last 2 recessions.

Edit: This is such a bad take I would expect to read it on r/investing in a most downvoted comment. A "scholar" should know rarely things are black and white. There isn't a simple to answer to literally anything in macroeconomics, or just in life in general really.

sam0x175• 4 years ago

Regarding the copy-cat behavior, the types of personalities that tend to be OK with working for FANG (external locus of control individuals who are likely to conform) aren't going to put themselves out there and do what they think is best for the company when they can just copy what [other FANG] is doing. They view these situations as "omg, amazon is doing X, how can I justify to my boss not also doing X"

ghaff6• 4 years ago

On the one hand, it's easy to be critical of herd behavior. On the other hand, when all (or most of) the other presumably smart people are heading in a different direction than you are, you should probably seriously consider the possibility that you're the one that may be wrong.

prions• 4 years ago

The author also cites this paper as support:https://www.jstor.org/stable/2580324?origin=crossref#metadat...

Instead of bashing the author and his credentials, maybe you should engage with the argument hes making instead?

tsimionescu• 4 years ago

Note that this is business and economy academia, not real science. It's usually scientism at its peak: mathy explanations that use complex equations to describe poorly modeled phenomena and arrive at the previously decided on conclusion that the authors wanted to show. There's few other domains quite as smoke-and-mirrors as this (social sciences probably being the other, though they tend to at least steer clear of the complex math).

avgDev8• 4 years ago

I have been following the market. Some of the most popular tech stocks have dropped back to pre-covid levels. During covid my inbox was blowing up from Meta, Amazon, Microsoft recruiters. This behavior clearly correlates with the stock evaluation. Literally everyone I know in tech was able to make good moves or get raises. Uncool companies had a hard time competing with SV giants.

I can cite the hiring frenzy, the stock evaluation, HUNDREDS of articles that disagree with his "SIMPLE" answer.

roncesvalles2• 4 years ago

Really? I thought it was fairly obvious from the beginning that this is hysteric copycat behavior. To me the smoking gun was how suddenly in a brief period of time, every tech company CEO was making absolutely certain predictions about economic headwinds in 2023, up to 6 months before the end of 2022. Nothing qualifies them (or anybody for that matter) to assert that. It doesn't even make sense to do layoffs today when you expect trouble 6-12 months later.

That and the panic from tech stock prices being decimated after 10+ years of growth. The layoffs felt like Boards and CEOs were smashing the controls until the numbers went back up again.

onlyrealcuzzo6• 4 years ago

It doesn't even make sense to do layoffs today when you expect trouble 6-12 months later.

I hope you realize this is subjective, and the CEOs and boards obviously feel differently...

avgDev8• 4 years ago

When you expect trouble in 6 months, you prepare TODAY, not in 6 months.

The FED has spoken. The market has spoken. The inflation is high. It is a risky environment, layoffs are extremely reasonable after the hiring frenzy we experienced.

lowercased4• 4 years ago

To me the smoking gun was how suddenly in a brief period of time, every tech company CEO was making absolutely certain predictions about economic headwinds in 2023, up to 6 months before the end of 2022.

This has to have had a somewhat self-fulfilling prophecy effect. When you start predicting 'downturn' and your solution is "lay people off", then yes... economic activity will slow (from your former staff) and... that spreads around. It can't not be having some impact, and as more and more places do it, it compounds.

spacephysics• 4 years ago

An even more sophisticated yet still simple potential justification is simply the rule of 40 [0] is now not hit for many of these tech companies.

So now they have to cut costs to be considered above this threshold, which makes shareholders happy among other benefits.

Sure there will be copy cats, but this just seems like some correlation equals causation rationale.

[0] https://www.mckinsey.com/industries/technology-media-and-tel...

yucky• 4 years ago

  > It doesn't even make sense to do layoffs today when you expect trouble 6-12 months later.

It makes perfect sense. In fact, it would be crazy to wait until a bad thing happens to prepare for it.

throwawaysleep• 4 years ago

Then why are so many of them back to hiring after massive layoffs jsut a few months ago?

avgDev8• 4 years ago

The answer is simple: copy cat behavior. /s

rat9988• 4 years ago

It seems you disagree with the author and all you got to say is that it's a stupid take. Maybe you want to give some evidence, as counterclaim to the author's " Layoffs are ... are not particularly evidence-based.". From my opinion, it seems it is you who are simplifying the current state of research, while the author seems a bit more knowledgeable. He at least has cited some reference for his point of view.

avgDev8• 4 years ago

The author said, it's a simple copycat behavior. I presented several factors which can be easily confirmed. There are hundreds of articles confirming what I have said.

RumPumpkin• 4 years ago

"social contagion" is not the cause of tech layoffs. The cause is depressed valuations, and investors focusing investments away from tech (impacting private and public companies alike).

When more cash is readily available, companies spend more freely. When it's less available, companies tighten spending. The "social contagion" here is a basic understanding of finance.

lowbloodsugar• 4 years ago

Companies were having a hard time hiring and keeping talent. Many got retention bonuses.

Something had to be done.

One year later, the situation is the opposite: employees are “lucky” to have a job.

The economy is working well. For the people who run it.

Barrin92• 4 years ago

Not sure I buy this thesis of layoffs just as imitation behavior. There's been a pretty incredible increase in headcount at many tech companies over the last three years.

Facebook in 2019 had 44k employees, 71k in 2022. Google went from 118k to 160k over the same timespan, and I don't really see for what reason. If anything I'd say the agressive hiring was the herd behavior, the layoffs seem more like a justified course correction. Tech companies are always crazy paranoid about slurping up talent, I don't think they're too keen on paying severance for people they just hired.

rightbyte• 4 years ago

Facebook in 2019 had 44k employees, 71k in 2022. Google went from 118k to 160k over the same timespan

Those are insane numbers. Imagine the chaos internally with so many newcomers.

fiat_fandango• 4 years ago

IMO the folks at the All In podcast nailed this - at work so I don't have time to find the exact clip but basically their synopsis went like this:

When money was cheap to borrow, borrowing against stock and increasing headcount was seen as a metric that could pump stock price. Hence, hire as much as possible (especially engineers since they drive the most value at many of these huge tech orgs). Problem is, money is no longer cheap to borrow and real revenue is king now - having excess headcount that isn't resulting in clear value (something these companies are exceedingly good at measuring) means layoffs to reach the prior equilibrium of "real revenue" generated per engineer.

MuffinFlavored• 4 years ago

Problem is, money is no longer cheap to borrow and real revenue is king now

Real revenue and no profit or real revenue that leads to profit?

The narrative seems to be that the day of awakening for "dump money with no expected ROI" style projects/companies is here when https://www.investing.com/economic-calendar/interest-rate-de... is 4.5-5%

onlyrealcuzzo6• 4 years ago

This notion that money isn't cheap doesn't make sense to me.

If interest rates are 2% and inflation is 2% - borrowing money is free.

If interest rates are 10% and inflation is 80% - you get paid to borrow money - which seems cheaper than free.

We're obviously not in that situation - but we had interest rates at 2% with inflation at 10% - this was the cheapest money was in a long, long time.

Now we have (short term) interest rates at 4% - and inflation is >4%.

I get that it's not as cheap as 2021 - which would be necessary to maintain the asset bubble. But we still have negative real interest rates (at least short term). So money is still cheap, right?

KptMarchewa2• 4 years ago

If interest rates are 10% and inflation is 80% - you get paid to borrow money - which seems cheaper than free.

You still have to generate that 10% return.

sam0x175• 4 years ago

We also have a bunch of young people who have never seen a recession in these positions now, something to consider. FUD

nverno• 4 years ago

The higher they go, the riskier it gets, though. You wouldn't want to take a loan out at the peak and be left holding the bag.

phpisthebest• 4 years ago

The risk with these business loans is they are short term, and often are just rolled over and over again at newer rates

So with the fed indicating they will keep raising rates in order to invert that statistic it would not be a good idea to incur massive amounts of debt you can not pay off when rate go more than inflation, which they will have to do

quickthrower22• 4 years ago

Inflation doesn’t pay you. Revenue does.

dylan604• 4 years ago

If you depend on sales to consumers, then that 80% inflation might have a very negative impact on those sales to consumers so that 10% interest is unobtainable.

SpicyLemonZest2• 4 years ago

Businesses don't transact in inflation-adjusted dollars, so this analysis doesn't work with respect to the practical decisions they face. When you go to get a loan at 4% (plus whatever spread), the interest you're paying on that loan doesn't "adjust against" any price increases you charge to your customers or have to pay to your suppliers. This is especially true because those price changes are 4% only on average; your costs might go up 10% rather than 4% and your customers might not accept any increase.

nfRfqX5n• 4 years ago

you have to be careful listening to those guys because they are all VCs who can benefit greatly from pushing the narrative of companies needing to cut costs

infamouscow2• 4 years ago

This is analogous to being suspicious of a "drink water and stay hydrated in hot weather" sign next to someone selling water bottles on the street.

VCs and investors are not charities, they want to turn a profit on their investment. You only make a profit if the founder(s) succeed. Cutting costs increases the probability of success by giving a longer runway.

caporaltito• 4 years ago

When did this guy actually worked in the tech industry again?

zwieback3• 4 years ago

Just looked at his bio: never.

marktangotango• 4 years ago

I have been interested to see some factual discussion about the current environment around layoffs compared to previous down turns in tech, but this isn't it. In fact this reads a little wierd. Example:

Could there be a tech recession? Yes. Was there a bubble in valuations? Absolutely. Did Meta overhire? Probably. But is that why they are laying people off? Of course not. Meta has plenty of money. These companies are all making money. They are doing it because other companies are doing it.

When stock prices and earnings are down one of the surest ways to boost earnings is reducing head count. This has been true forever. It doesn't matter how much money Meta (or whoever) has, it's the quarterly numbers that matter to investors, and companies act accordingly.

ojbyrne• 4 years ago

He’s an Organizational Behavior prof. I think one of these gets trotted out by journalists every time there are mass layoffs. You would likely get a different perspective from a Finance or Accounting prof.

theGnuMe• 4 years ago

Man nobody reads the articles anymore. I think the Prof is correct. This is a social contagion all the way from Wall Street. Arguably the contagion trigger was the Fed raising interest rates. But that doesn't mean layoffs are eminent especially in cash rich businesses.

I remember being in high school and some girl freaked out about not getting the grades to get into Stanford etc... Guess what, that anxiety spread through the class and it was never the same again.

As smart as we are, we do not think for ourselves and let social cues manipulate us.

From the article:

"What are some myths or misunderstandings about layoffs?

Layoffs often do not cut costs, as there are many instances of laid-off employees being hired back as contractors, with companies paying the contracting firm. Layoffs often do not increase stock prices, in part because layoffs can signal that a company is having difficulty. Layoffs do not increase productivity. Layoffs do not solve what is often the underlying problem, which is often an ineffective strategy, a loss of market share, or too little revenue. Layoffs are basically a bad decision.

Companies sometimes lay off people that they have just recruited – oftentimes with paid recruitment bonuses. When the economy turns back in the next 12, 14, or 18 months, they will go back to the market and compete with the same companies to hire talent. They are basically buying labor at a high price and selling low. Not the best decision.

People don’t pay attention to the evidence against layoffs. The evidence is pretty extensive, some of it is reviewed in the book I wrote on human resource management, The Human Equation: Building Profits by Putting People First. If companies paid attention to the evidence, they could get some competitive leverage because they would actually be basing their decisions on science.

pm90• 4 years ago

Yes, looking at all the comments it’s pretty clear nobody reads the article or stops reading as soon as they read something that goes against what they already know. He even suggests methods to avoid layoffs: broader cuts in staff compensation in lieu of letting people go.

The most trotted reason for layoffs (“market conditions have changed”) isn’t really being justified with any kind of numbers so I find this argument unconvincing. While I understand layoffs may be required for companies that aren’t profitable and low on financing it makes little sense for highly profitable ones like Meta.

logicalmonster• 4 years ago

Anything approaching an explanation resembling the Austrian Theory of the Business Cycle would probably be persona non grata to a good percentage of people on HN, but I'd strongly suggest looking at monetary policy in the last few years for clues. Due to the (IMO extreme over-) reaction to Covid, governments spent money and made it available like drunken sailors. Businesses overhired, were able to get insane valuations, and a lot of excess cash made its way into the markets and overinflated everybody's valuations.

The problem is, there ain't no such thing as a free lunch. Now we're reaping the predictable contraction.

zxcvbn4038• 4 years ago

Some of it is overdue, but most of it is spending slowdown, driving by the rapidly increasing inflation, which is causing interest rates to go up. But should you be worried? Not at the moment, US unemployment is still very low, a lot of tech people being laid off are being snatched up fairly quickly at the moment.

chaostheory• 4 years ago

I really disagree with the article’s conclusion. This is not simply about being a copycat

We have tech layoffs because even the tech giants are reliant on new startups. Startups in general are suffering because leverage is no longer cheap, and startups are extremely cash hungry. Demand destruction affects everything and not just consumers

mensetmanusman• 4 years ago

“If layoffs don’t work, what is a better solution for companies that want to mitigate the problems they believe layoffs will address?

One thing that Lincoln Electric, which is a famous manufacturer of arc welding equipment, did well is instead of laying off 10% of their workforce, they had everybody take a 10% wage cut except for senior management, which took a larger cut. So instead of giving 100% of the pain to 10% of the people, they give 100% of the people 10% of the pain.

Companies could use economic stringency as an opportunity, as Goodnight at the SAS Institute did in the 2008 recession and in the 2000 tech recession. He used the downturn to upgrade workforce skills as competitors eliminated jobs, thereby putting talent on the street. He actually hired during the 2000 recession and saw it as an opportunity to gain ground on the competition and gain market share when everybody was cutting jobs and stopped innovating. And it is [an opportunity]. Social media is not going away. Artificial intelligence, statistical software, and web services industries – none of these things are going to disappear. “

If this was true, all that is missing is true leadership. Would people here take a 10% pay cut if it meant their colleagues weren’t fired?

cj2• 4 years ago

I'll take the unpopular opinion and say I don't think the occasional team/company shakeup is always bad.

Often times, the resulting team can be stronger than it was before. Particularly if the organization just went through an extremely ultra-fast hiring spree where it's likely low quality candidates were hired.

The "cut 10% of my pay to save my coworkers" works well if you have a high performing team/company. If you don't, the high performers may become resentful if they start to feel like they're subsidizing the salary of low performers.

iso16312• 4 years ago

Particularly if the organization just went through an extremely ultra-fast hiring spree where it's likely low quality candidates were hired.

The trick is identifying those low quality candidates. You can try to measure them, but once you measure them they become a target, and you get to the equivalent of the person who takes all the easy jobs from a queue because they then think they'll be higher in the value queue.

Apocryphon14• 4 years ago

If you don't, the high performers may become resentful if they start to feel like they're subsidizing the salary of low performers.

But then they can always walk, and be replaced by high performers who were axed at other companies.

r00fus5• 4 years ago

I am truly amazed at the mythology of "high performers" as separate from the org. Teams can be high performing, but high performing individuals are often built by the environment.

Yet, in the US we have this almost Stakhanovite mythology where a single worker can pull an entire organization.

I have worked with individuals who had been pariahs in the previous org (got that info over beers with the individual) but were rockstars in our org. Also with so-called high-fliers from other teams/companies who just cratered when they joined our group.

Personally I think cutting 10% pay is preferable because a) the work doesn't go away - if 10% are let go, I'll probably end up doing 10%+ more work. b) it's a commitment by the organization and that shows they care enough to not unilaterally make a decision.

fallingknife3• 4 years ago

I can't think of a single company I've ever worked at, including small startups, where there wasn't at least 10% of the employees who were pure dead weight, and cutting them would either have no effect or improve productivity. I would absolutely not consider any type of cut on behalf of letting these people keep their jobs.

quelltext• 4 years ago

What qualifies you to make that determination of 10% being dead weight? But let's say the assessment is correct, the problem is that layoffs are often a bit random.

The company won't actually be able to identify these 10% you mention, or when it does they might keep them because they are cheaper than you.

In the end you are looking at good people or even yourself being affected by layoffs. I'd take the pay cut over the risk of losing my job or well performing coworkers.

dbancajas• 4 years ago

Yep. As long as there is clear path to get that 10% back. Problem is most companies still have record years and fire people.

notch656c• 4 years ago

A pay cut is a constructive dismissal. You've already effectively been fired with an offer to rehire at another lower paying job. Thanks but no thanks.

ghaff6• 4 years ago

Depends what the market is like. I took a pay cut during dot-bomb and there really was very little out there. My compensation did creep back up over time but it did take a long-term hit until I eventually went elsewhere. (Other than low comp, I did enjoy the work for the most part.)

thedorkknight• 4 years ago

Would people here take a 10% pay cut if it meant their colleagues weren’t fired?

Yes, especially if the executives are taking disproportionately larger cuts. Knowing that the people up top aren't as sociopathic as more typical "leaders" who feel nothing when axing thousands while getting massive bonuses is going to boost my own morale a lot. Also, even if I survive the layoffs, the thought that I'm probably next is going to weight a ton on my psyche, like the article mentions

lowercased4• 4 years ago

Would people here take a 10% pay cut if it meant their colleagues weren’t fired?

I knew a few people who went through this at the beginning of covid.

One case, a friend had just been hired in Feb 2020. March/April, everything went sideways. May, they announced a 10% pay cut to everyone (owners may have taken larger cut), with promise to get back to original pay by end of 2021. That seems a long time, but at the time of that plan, there were just so many unknowns.

They did end up getting rid of a couple of folks later in 2020, but they were sort of 'on the cards' before covid, and they weren't wanting to fire folks right as this pandemic was starting. Small company (~50 people, IIRC) and it just felt too personal at the start of the pandemic.

They also got everyone back to original pay by Q2 2021 - ahead of schedule.

Other was family member - CFO-level. Company had everyone take 10% pay cut - SVP and C-suite took 30% cut. They rode that out for more than a year, and I think got 'back' to early 2020 levels by end of 2021.

Neither of those are great options, but we had a pretty big global problem going on that few could escape.

Would I do it? If I knew it was 10% across the board (and/or even more for C-level), yes, I'd support that sort of a move, to prevent layoffs. I would also like to know the timeline that was in place.

I freelance, and early 2021, a client 'slowed' down work. I'd been ~20/hrs/week - that go reduced to ~5, but... there was no communication (to me) about expected timeline. Had I known it was only scheduled for a quarter, I would have relaxed a bit. I didn't, and took on other work, then initial client ramped back up and I was... overwhelmed. A bit of communication goes a long way.

cableshaft• 4 years ago

The beginning of Covid was somewhat of a unique time. It made sense to accept wage cuts because the entire world economy was a big question mark at the time, and the likelihood of you finding another job at that point wasn't great.

My own partner accepted getting cut down to only two workdays a week at 40% of her pay, for over six months, before she finally found another job. She would have been better off furloughed like most of the rest of the company (they were in the events industry, the company made almost $0 revenue in 2020) because she would have been eligible for the extra unemployment.

But I think a 10% across the board wage cut is risky when you're not in the midst of a big recession/depression. You'll have your best employees that could have probably left and gotten a 10-20% increase elsewhere already, have now lost 10% of their wages at your company and now can get a 20%-30% bump if they leave.

People won't be loyal and stay just because you're hurting the company evenly. Speaking from experience, at a previous company we had frozen raises and removed 401k match and worse healthcare and we saw steady and significant attrition just from that. Cut salary by 10% would probably have similar results.

clusterhacks• 4 years ago

I remember SAS openings in the 2000/2001 recession - I had reliable information that every opening at SAS was getting around 1,000 applicants.

Keep in mind that SAS is privately held and seems to mostly ignore conditions that make publicly-traded companies go a little bonkers.

everforward• 4 years ago

It's a no for me. The first part is that a 10% paycut could be a couple years of raises to get back to. Even if previous wages are restored a year later, that's a year of raises missed out on and pay is still lower due to inflation.

The second is that I don't think it's a good idea to signal that they can keep 100% of the labor for 90% of the pay. Firstly, it signals that this is something workers will accept, which is a dangerous line. Secondly, it means workers are assuming some of the risk the business is exposed to without a commensurate benefit.

The company needs to have a tangible and commensurate pain as well. A 10% decrease in pay for a 10% decrease in working hours is a maybe. Changing 10% of my salary over to company stock at a preferential rate (to compensate for risk) is a maybe. Some kind of contract stipulating that employees will be paid back double what they lost in pay is a maybe.

I'd rather roll the dice on layoffs than send the message that risks in the market can be offloaded onto employees.

zwieback3• 4 years ago

... says the guy who has spent his entire career in academia.

fallingknife3• 4 years ago

Speaking of industries that need to do layoffs...

zwieback3• 4 years ago

No kidding, not happy about how my kids' tuition is used for bloated university operations.

twawaaay• 4 years ago

IMO there are two simple reasons:

1) Companies really, really don't want to be doing layoffs. It signals they are in a weak position. But when bunch of other companies do this it becomes a much more available option as there is something to blame ("Recession!")

2) Companies compete fiercely and up until recently they tried to hire as much people as they could. But now they are finding they onboarded a lot of people and possibly a lot of people they do not want to have and became less efficient in the process. Normally, it is pretty difficult to fire people and it takes a long time and resources to get them on PIP and then push them out. But, hey, there is a faster solution -- just blame recession!

I am looking closely at this recession as I am trying to navigate it financially and professionally and I came to conclusion that it is to a large extent fiction. It is mostly just a bunch of companies jumping on a bandwagon because it is convenient for them for one reason or another. There is no real underlying reason for all this. And if you are not convinced, other than couple tech companies that were just mismanaged and other than valuations, companies seem to be in a better shape overall than ever.

shartshooter• 4 years ago

This is my perspective as well. Using Salesforce as an example(having cut 10% of their workforce just a week ago).

Their Q3 2022 results - “We had a solid quarter with revenue of $7.84 billion, up 14% year-over-year or 19% growth in constant currency, and record operating margin,” said Marc Benioff, Chair & Co-CEO, Salesforce.

- “We delivered another quarter of double-digit top and bottom line growth,” said Amy Weaver, President and CFO, Salesforce.

In my opinion, they're laying folks off because they can conveniently get away with it without too much blowback.

And best of all, their stock is up 6% in the past five days so the folks they're really catering to are happy as a clam.

explorer83• 4 years ago

I can confirm number 2 is extremely real.

r00fus5• 4 years ago

I am looking closely at this recession as I am trying to navigate it financially and professionally and I came to conclusion that it is to a large extent fiction

The recession was essentially caused by the "OMG inflation!!" moves by the US Federal Reserve and companies just raising prices "because we can" while increasing massive profits.

That it will result in millions of workers getting laid off & companies exiting the market doesn't even matter to those captains of industry & economy.

adam_arthur2• 4 years ago

Yeah, we should pull a Turkey and cut rates instead!

It's very clear from history that managing the economy with short sighted principles ends in poor outcomes. Too bad the Fed didn't consider this when they were doing QE and ZIRP for years too long. Now we pay the price of that short sighted failure

theonething• 4 years ago

Normally, it is pretty difficult to fire people

I was under the impression that it's not too difficult, at will employment states like California.

red-iron-pine2• 4 years ago

All states are "at will" except for Montana. And Montana isn't especially worker friendly, just not exactly "at will".

It can be difficult to fire people in big layoffs because 1) you want to make sure they don't sabotage things (or just walk out with details that they didn't write down), and 2) because it's really easy to stumble into "protected class" issues, e.g. 10% of your workforce is POC but 30% of those laid off identified as POC, etc.

portpecos• 4 years ago

Normally, it is pretty difficult to fire people

How is it difficult to fire people? These tech companies are using at-will employment agreements.

In United States labor law, at-will employment is an employer's ability to dismiss an employee for any reason (that is, without having to establish "just cause" for termination), and without warning,[1] as long as the reason is not illegal (e.g. firing because of the employee's gender, sexual orientation, race, religion, or disability status). When an employee is acknowledged as being hired "at will", courts deny the employee any claim for loss resulting from the dismissal.

netfortius• 4 years ago

Another US biased "research", exposing unemployment as cause of morbidity and mortality. Of course you will have people getting sick, undergoing degrading health and even dying, with worse health insurance than when employed, tech or not, you, geniuses!

stevev• 4 years ago

This was an opinion piece with no backing or supported evidence for it’s claims.

Excluding the consequences of being laid off, the author’s opinion is that the tech layoffs are strictly a copycat move. Since others are doing it, we might as well. One would expect an establishment as such to provide better evidence or support for its claim.

Historically layoffs occur due to unforeseeable labor market situations, reduced spending and economic constraints.

No one rolls the dice when it comes to potentially saving money and going under. Some economists are saying that we’re only at the beginning of a recession here in the US.

whispersnow• 4 years ago

Take away from the article's airplane example: FANG are laying off. Who is hiring? I am gonna buy their stocks!

leesec• 4 years ago

Isn't there still an abundance of tech positions open? From this article (1),

"according to the U.S. Bureau of Labor Statistics, there’s plenty to go around. The Bureau finds that openings for software engineers and similar jobs are projected to grow 22 percent from 2020 to 2030 – much faster than the average for all occupations – estimating about 189,200 new openings every year on average.

The Bureau also estimates that in 2020, there were 1.4 million more software development jobs than applicants who could fill them."

So I guess who cares if the industry shrinks by 10-20%? Isn't there still a vast shortage?

1. https://www.hackreactor.com/blog/open-coding-jobs

moneywoes• 4 years ago

Heavily low paying jobs, yes

confidantlake2• 4 years ago

Thank you for providing a source. I went to the website. They themselves don't give any sources and they are a coding bootcamp with an incentive to talk up a shortage of developers for obvious reasons.

I went on the US Bureau of Labor statistics (BLS) and found this page(1). There is no mention of 1.4 million unfilled software jobs. To me this doesn't pass the smell test. There are currently 1.6 million developers according to the BLS. Can someone really say with a straight face there should be 2x that? If that were true there wouldn't be 4 rounds of leetcode and system design for every generic developer job.

1. https://www.bls.gov/ooh/computer-and-information-technology/...

trashface• 4 years ago

I think the number of openings is quite inflated especially at small companies. They often have multiple listings on their web page or job sites that they never interview for, the purpose is to just make the company look healthy.

unity10012• 4 years ago

These articles miss a big elephant in the room:

All of these tech companies are releasing legions of capable, experienced people into the market who will end up becoming their competitors. The layoffs are so large that entire networks of interconnected professionals are being released in one go. Many potential new start ups.

In a few years, many of these companies may wish that they had had cut back on other stuff (including the shareholder expectations) rather than releasing all of these people to become their competitors.

Apocryphon14• 4 years ago

The problem is, in this environment, where, with these new startups get their funding? At the same time it is certainly said that in bad times, the best new companies will flourish. Survival of the fittest.

unity10012• 4 years ago

The problem is, in this environment, where, with these new startups get their funding?

As the other commenter in this thread said - there would be many among them who have enough runway to try something for a few years. Couple this by the many already well-off employees who resigned since the great resignation started, you have a lot of potential small startups.

Moreover, remote work is well established now. People don't have to cram into expensive urban locations like SF and have to shoulder outrageous real estate and living costs. Also the cloud provides easy way to build scalable apps now, they are also well covered in respect to startup infra.

What's left is ideas, reaching to the right audience and iterating. With many tens of thousands of people being laid off, there will eventually be startups that hit big on various things and take market share from their earlier employers.

neilv• 4 years ago

And a lot of those people have war chests from years of high TC, and can afford to self-fund "garage" startups for awhile.

OTOH, it might be that these big companies select for people who'll jump through the hoops for interview rituals and KPIs/OKRs/promotions while leaning on company inertia, and so be unfamiliar with startup-like thinking and skillsets. (I mean the kind of startup that has to ship and sell and operate viable product, until the VC party resumes -- not the kind of startup that can just play along with a VC investment scheme by manufacturing signals of "growth"/potential.)

mywacaday• 4 years ago

Tech still hasn't had its own version of the "Industrial Revolution", I don't think its a factor this time but it will come. As tech becomes a more and more off the shelf commodity the amount of engineers required to build will reduce and the skills required to be a maintain and integrate will reduce, become lower paid and will require less people to maintain. There is a difficult road ahead and its not as far away as we'd like to believe.

2devnull• 4 years ago

It’s like this person has never heard of macroeconomics.

“Yes. Was there a bubble in valuations? Absolutely. Did Meta overhire? Probably.”

Could that have been the result of overly loose monetary and fiscal policy?

Only an ostrich would think otherwise.

gbajson• 4 years ago

Lay-offs?

Companies are hiring people as fast as they can! I am writing from Poland.

dadjoker• 4 years ago

"Research – by him, and others – has shown that the stress layoffs create takes a devastating toll on behavioral and physical health and increases mortality and morbidity substantially. Layoffs literally kill people, he said."

Which is why the forced layoffs because of overwrought COVID fears were so destructive, and the "cure" was worse than the disease.

spaceman_20205• 4 years ago

There are so many tech layoffs because there were way too many tech hires during the pandemic. And despite the layoffs, most of these companies are still far above the pre-pandemic employee count

leetharris• 4 years ago

There's something at play here that I haven't seen anyone talk about: we have a LOT of new talent entering the tech industry in the last 5 years.

On average, the quality of devs, PMs, designers, etc has gone down in my experience. Companies expanded massively and when we ran out of seasoned employees, we started to hire people with very low qualifications.

I think a lot of these layoffs are driven by correcting not only for increased headcount, but for decreased quality. A lot of tech companies are looking to up their average employee by culling the bottom performers.

friend_and_foe• 4 years ago

They're really making the argument that these big companies full of engineers that engineered much of modern life over the last 20 years are just blindy laying people off like some kind of social contagion? That's not how it works. Companies that big and that reliant on data don't make big decisions without some team of eggheads showing them the numbers and telling them they have to.

And layoffs are a bad idea? Always? Even when sunsetting multiple large projects and downsizing your speculative endeavors? There are whole teams at these companies who's jobs just simply aren't needed anymore. It sucks for them, but to say it's a bad idea for a company to lay off people is just nonsense, there are times when you have to unfortunately.

Apocryphon14• 4 years ago

These corporations all blindly overhired in the years prior because they just went along with Fed policies even though every financial news outlet in the world was saying more money has been printed than decades back put together. Surely that is a sign of groupthink and not thinking ahead.

Even when sunsetting multiple large projects and downsizing your speculative endeavors?

Those same data-reliant companies initiated those projects!

jedberg• 4 years ago

Layoffs literally kill people, he said.

In the USA. It stresses people because they suddenly lose their health care and income with no safety net. In most civilized countries, it's far less stressful because the employee knows they can still get health care, they can still get food, they probably won't lose their home, etc.

DannyBee• 4 years ago

At a base level, the cause of letting people go is volatility and unpredictability. Not just because of valuations popping or whatever. Good things or bad things happening is not, itself, the direct cause.

If you can say "18 months from now, the world will look like this", you can plan for this, good or bad.

Maybe you get to "we will run out of money" (or whatever) and have to let people go.

Maybe you get to "everything will be great" (or whatever) and you decide to hire despite things sucking now.

It is only partially relevant what the world looks like right this second. It depends what you can float, the risk of floating, etc.

But with things relatively volatile, you have to plan for unpredictably bad scenarios, or repeatedly lay people off if reality gets worse. Even if you have some idea "the economy will get bad", that isn't enough when the error bars are so high.

In these situations it is usually better to overshoot than undershoot - overshooting is painful but "understandable" . Undershooting causing repeated layoffs is usually not.

tmnstr85• 4 years ago

I graduated in May of 2008 and only managed my way into the bowels of a large bank due to the fact I had interned there over the summer and spring. This big bank was allowed under state law to pay us "premium pay", it was 50% of what we usually made after 40 hours, we were grinding 70 hours in 12 hour shift due to how badly the recon was after the crisis. By October of 2009, I had watched 4 or 5 colleagues with 25 year careers get carried off the floor due to the shock of losing their jobs. This stuck with me as I prepared for secondary school and decided to go with a master in applied technology, I was the only white kid in the program. Since then I've slowly accepted that I have a skill set that will keep me employed for years to come. Will it fill my pockets with the riches, not really, but it will keep me from getting the type of eviction notices I found on my dad's rental as a teen. Everything is relative - for those who do get laid off, I feel for you and want you to know that this too, shall pass.

DimitriPetrova• 4 years ago

I don't understand why you point out that you "were the only white kid in the program."

Why is this significant and what was the race of the other students?

0xbadcafebee• 4 years ago

We should be worried because it's evidence of a tech bubble. I mean, this is obvious, as almost every major tech company has been operating at a loss since their inception, and are propped up by investors anyway, because it inflates their stock price, and if you sell at the right point, you can get rich. It might destroy the world economy, but hey, shit happens.

libdjml• 4 years ago

This entire piece and author lost me within the first paragraph.

“and soon Google” links to a complete unsupported fluff piece from November, drawing a loose connection to an activist investors letter.

jmyeet• 4 years ago

I somewhat agree that layoffs are copycat behaviour but this misses the mark a little. It's virtue signalling to the market. It's telling the market "we are going to cut costs". That is the prime reason so yeah, there's some copycat element in that message.

It's worth noting that advertising spend tracks GDP pretty well. In a recession, GDP shrinks and so does ad spend. Companies like Google and Meta are highly dependant on ad revenue so a recession quite literally signals a reduction in revenue is coming.

But here's why this is all so much posturing. Meta laid off what? 17,000 people? Assuming an average of $300k pa each (they're not all engineers) that's around $5 billion a year in savings or $1.25B a quarter on revenue of $17B+ and net income of $4B+. So the cost here isn't zero but it's certainly a cost the company could bear if they wanted to. It's a choice to get rid of these people.

Also remember that while these people were costing $5B/year, they were still obviously producing something too. It's not like this was 17,000 people sitting around doing nothing. That value is also gone.

Lastly, for Meta in particular, they're spending a literal fortune on the Metaverse, something that's unproven in any kind of product-market fit and doesn't seem to be a thing anyone actually wants. That's costing way more than the laid off workers.

If Meta really was batoning down the hatches, they'd kill the metaverse and cut down their expenses to support their core businesses: IG, FB, WA and ads for all of these.

So copycat? Kinda. Posturing and virtue signalling? Absolutely.

taylodl• 4 years ago

Layoffs have always been a part of tech. I've been laid-off three times during my nearly 40 year career: in 2 instances the company folded and in the other the project was cancelled and everybody working on it was let go.

That's the nature of this beast. Companies get bullish on the future and over hire, then they have to layoff. Completely new bet-the-company projects get launched and then turns out to be a bigger bite than the company could chew. It happens.

The rule-of-thumb I was always taught growing up in tech (and I started in the mid'80's) was expect to be laid-off at some point in your career and always make sure you have six months of expenses on hand to weather a layoff. It was good advice then, and it's good advice now.

ttul• 4 years ago

Inflation, tightened consumer spending, and geopolitical uncertainty have led to a decline in the value of high-growth companies that have remained unprofitable. To combat this, some companies have cut back on side projects and laid off employees. Factors such as geography, sector, and size will likely determine which companies are better able to weather the downturn. Consumer-facing tech companies have seen a decline in sales, while business software companies like Adobe and Salesforce are expected to fare better. Additionally, larger firms, with more cash on hand, are expected to be more resilient during the downturn. The shake-up of the tech industry may help larger firms grow even bigger in 2023.

Source: https://www.economist.com/graphic-detail/2022/12/14/after-a-...

UltraViolence• 4 years ago

Obviously layoffs are bad for people's health (both mental and physical), but they're an integral and important part of our capitalistic society. Companies need to respond to market and financial pressures and layoffs and hiring (the latter is almost always not being reported) are the tools for this.

I personally believe that Big Tech put on lots of flab during the pandemic. Now they need to get rid of it to weather the downturn.

captainbland• 4 years ago

It seems odd that these layoffs come around the time that some of these companies are struggling to enforce return to office policies. It seems like part of the motivation for these layoffs is likely is to undermine the confidence of tech workers who are resistant to the whims of management types who'd like to smash the WFH status quo where it still exists.

anonreeeeplor• 4 years ago

I believe that Jerome Powell wants to gaslight United States employers into shaking off excess and over hired workers.

The strange thing is I believe the economy is better than it is being portrayed as.

The unemployment rate indicates that the economy is strong. And going into 2023, most of the headwinds like ukraine war and energy inflation don’t look so bad.

And China is turning a bit less crazy and opening borders.

These are all good.

I think perhaps having all these big tech companies over hire and over spend on talent is prematurely screwing smaller businesses and startups.

Powell and his big business friends are highly aligned to scare employers and give them air cover for agressive lay offs.

I believe 2023 will be far better economically than people think, and that the situation is not as bad as it is being portrayed.

They want to scare you into laying off to increase economic dynamism which is better for everyone.

A lot of people are getting paid way too much and afraid to ever quit because they can’t get a better job. That prevents innovation and growth.

The solution to scare everyone into firing helps everyone.

sacnoradhq• 4 years ago

Spot-on, in most regards.

I work at a MAANG company that, for the past 5-10 years, has been hiring like OpEx was free and spending money without organizational budgets. This is an unsustainable cultural attitude using capital inefficiently by promoting lavish expenses and unbounded CapEx projects, neither of which necessarily translate into business value (or investor returns). Hiring or spending on assets with hockey stick trajectory doesn't necessarily translate into "build it, and they (customers) will come (and spend money)".

There is a reasonable balance between a budget process that is overly strict which hamstrings productivity and spending money without any cost controls.

The knee-jerk tendency to cut staff and budgets in perceptions of macro downturns in business may be harmful to current and future operations, especially if done without proper priorities such as sabotaging current and future cash cows.

TL;DR: Don't cut staff or budgets because everyone else is out of fear. Look at the numbers, and explain to equity owners the decision analysis of to cut or not to cut, and where and why.

PS: Obliquely, Stanford University enacted blanket budget cuts in the past to "virtue signal" an image of fiscal responsibility to peers and donors, but their finances and endowment were such that they were unnecessary.

additall• 4 years ago

I have a rule for reading materials: I read them till the first BS sentence. This one made me stop at: "Most problematic, it’s a behavior that kills people".

incomingpain• 4 years ago

The 2022, presumably it will continue into 2023, layoffs are because of the Ukraine/USA/EU war with Russia and China.

The people being laid off are >80% green cards. https://www.wncw.org/2022-12-07/sweeping-tech-layoffs-are-hi...

The majority of the people I'm sure aren't even a threat; but I guess nobody really wants to talk about the xenophobic reality of national security.

Why are there so many tech layoffs, and why should we be worried?

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