Tech companies keep falling for the forever fallacy

https://www.inc.com/jason-aten/tech-companies-keep-falling-for-forever-fallacy-why-smart-leaders-should-know-better.html

by samwillis • 3 years ago

121 235 3 years ago

inc.com

neonate• 3 years ago

https://archive.md/P28Wb

Dalewyn• 3 years ago

Some additional context, hidden six paragraphs down to enable the clickbait:

I call it the "forever fallacy." It's really quite simple. The forever fallacy is the belief that the circumstances that led to extraordinary growth will continue indefinitely, even when they obviously aren't. It's the idea that growth, no matter how irrational, will continue because the change in circumstances that caused it is permanent.

hackernewds• 3 years ago

call it the pandemic + massive money printing example. a lot of companies have their reckoning coming

nine_zeros• 3 years ago

Oh, they all know it's not going to last. But they cannot say it out loud. Why? Because the stock price will be punished and because someone's empire building promotion will be blocked if they don't agree.

Until they keep rewarding bullshit management practices, nothing will change. If the incentive system asks managers to build empires to get promoted, that is exactly what they will do. No manager is asked to be thought leaders. No manager is rewarded for making good calls.

Management in tech is quite literally babysitting engineers.

justinclift• 3 years ago

s/keep bullshit management/stop bullshit management/ yeah?

juunpp• 3 years ago

I don't know, seems like a weak article. It just names the obvious examples of companies ("tech"!) that over-hired and all that. Others still celebrated the increased demand but also planned ahead, and not everyone has laid off. Guess they don't talk about those.

not2b• 3 years ago

The companies that celebrated the increased demand but planned ahead did not fall for the forever fallacy. They took advantage of the increased demand but didn't overhire to nearly the same extent. Apple did a much better job at this than Google and Meta.

renewiltord2• 3 years ago

Interesting, so it appears that you advocate expanding contractors and then firing them over full-time employment like with Apple.. I think it's likely we'll move to that environment naturally.

iepathos3• 3 years ago

Yeah, also doesn't mention the super low 3.4% unemployment rate the US still has. Most of the people being laid off are being re-hired within a very short timeframe. The Fed has wanted unemployment back up to ~6% for over a year and can't get it.

gtirloni3• 3 years ago

The Fed has wanted unemployment back up to ~6% for over a year and can't get i

Why is the Fed interested in that and why does it want that number to be higher?

tjpnz2• 3 years ago

How do you achieve infinite growth on a planet with a finite population and resources? It should be obvious to most, yet the supposed "smartest guys in the room" are the first to stumble through it.

kibwen• 3 years ago

Nobody ever got rich by questioning the wisdom of "line go up".

LapsangGuzzler5• 3 years ago

The Big Short guys would vehemently disagree with this.

shuckles• 3 years ago

How many tons of coal do we burn when we take advantage of an invention like language?

fnord77• 3 years ago

miniaturize !

srackey• 3 years ago

People can make babies, and we’re not limited to a one planet ;)

operatingthetan• 3 years ago

An organism with a tendency for unchecked colonization might attract the wrong kind of attention.

bdw5204• 3 years ago

The mistake people who ask this question make is assuming that growth must be contained on a single planet. As they used to say in a previous generation, mankind's destiny lies in the stars. And we don't get there by worrying about limits or by rejecting the idea that a better future is possible. Stagnation is a choice. Decline is a choice.

majormajor2• 3 years ago

Really, we should be buying Google/Meta/Microsoft/etc stock because they will have interplanetary profits in [future]? I think there's a lot of other companies (both existing and not-existing-yet) that would capture a bunch of that growth first anyway.

Nah, the mistake people make is assuming that everyone actually believed all these companies would grow forever.

A huge part of recent tech valuations has been driven by "greater-fool" type pumping of selling questionable business models and half-baked ideas as fast as possible.

brigadier1322• 3 years ago

How do you achieve infinite growth on a planet with a finite population and resources?

Efficiency gains. How many "resources" are consumed by a piece of software relative to the "growth" that resulted from it? I can now have a machine generate 100 mediocre pieces of art for $20, two years ago each one would have cost $100 and taken a week for an actual artist to produce.

lib-dev• 3 years ago

Don't you reach a point of diminishing returns even with that?

stkdump2• 3 years ago

If efficiency gains were the secret go (infinite) growth, then companies would be able to grow their business without growing their workforce, building more factories, warehouses, etc.

nicoburns• 3 years ago

You can some gains this way, but they're limited in a couple of ways:

1. Yes, the resources consumed to make software are smaller, but they're still non-zero and will never be zero. So ultimately you're still limited by finite resources.

2. Many things just can't be implemented in software. I would point to A. Housing and B. Food production as things that are pretty hard to optimise. That isn't to say that we can't optimise them at all. We can build smaller houses or taller buildings. And we can transform energy from fossil fuels into fertiliser that increases yields. But growth in these areas is still very much constrained.

And these things are key human needs.

tjpnz2• 3 years ago

What if the metric driving your stock is engagement and you've managed to somehow maximise it? How do you continue to grow when there's a finite number of people in the world and a finite number of hours in the day? There's also a finite number of ads you can show before you've enshitified your product and start shedding users, and a finite number of ways you can make efficiency gains when it comes to serving them (including layoffs).

drewcoo• 3 years ago

How do you achieve infinite growth on a planet with a finite population and resources?

Wrong question. That's systems thinking.

We're dealing with capitalism. You only need to run faster than the slowest competitor to not be eaten by the bear.

boringg• 3 years ago

Its easy. There are finite limits but if you aren’t near the limits your growth is indeed unconstrained especially if the pool of resources is incredibly deep.

Mistletoe• 3 years ago

I’ve always liked this article for a reality check.

https://www.cold-takes.com/this-cant-go-on/

userbinator• 3 years ago

You squeeze people into living in conditions that make cattle in a factory farm today look good. As for convincing them? That's what propaganda is for.

crazygringo• 3 years ago

Growth doesn't intrinsically have to have anything to do with population or resources. Growth is fundamentally about ingenuity.

If you develop a microchip that delivers the same performance but takes 50% less material and energy and cost to manufacture and use, that's growth. 2x growth in that area, to be precise.

As long as we keep thinking of cleverer ways to do things, we keep growing economically. So it's really whether you think human ingenuity will come to a dead end?

somedude895• 3 years ago

If that was the case then GDP wouldn't be able to grow faster than the population. The fact that GDP per capita growth is a thing disproves that idea. And no, the GDP per capita growth of the past 50 years wasn't by simply using more natural resources either. Efficiency gains and new technologies and ideas can lead to growth as well.

hardware2win2• 3 years ago

Theres still growth potential as of today.

stainforth• 3 years ago

Most people haven't even sold one organ yet, and they could

alentred• 3 years ago

How do you achieve infinite growth on a planet with a finite population and resources?

For the sake of the argument below, consider that there are two types of growth: 1) "evolutionary" - as you correctly observe it is limited by the availability of the known resources, and 2) "revolutionary" - which discovers entirely new growth potentials.

History teaches us that so far the growth was not limited, but innovation was always a prerequisite for the growth and often unlocks new resources.

Now, it is true that in the past couple of centuries humanity was gifted, through a lot of human effort, with a series of innovations that were accelerating the growth ever since. Truly, we don't know if this will continue as such, or slow down, or accelerate even more, or if we are going to hit a wall before the next scientific revolution.

Finally, indeed it appears that resources are limited at some point (importantly: according to our current understanding of physics). But I trust that for all observable future there is still a seemingly unlimited potential for the growth, as long as we continue to innovate and don't destroy the resources. Sustainability (between the scientific revolutions?) appears to be a new part of the equation and we must take it seriously.

BeFlatXIII• 3 years ago

A whole bunch of fantasy hokum about the unlimited power of human ingenuity.

LapsangGuzzler5• 3 years ago

They did exactly what any company would do in their position as publicly traded companies. This finger-wagging from a free market magazine is dripping in hypocrisies.

If the author didn’t like how companies over-hired and built unsustainable labor forces, then they should criticize the market that creates these incentives. Of course, the day that Inc magazine becomes socialist is the day that Hell freezes over.

Don’t hate the player, hate the game.

WalterSear• 3 years ago

Hate them both: the game is a reason, not an excuse.

LapsangGuzzler5• 3 years ago

The real problem that author doesn’t call out is that at the end of the day, the people in charge don’t get hurt from these irresponsible boom and bust hiring practices. These companies knew the growth wouldn’t last, nothing lasts forever.

They all maintain control while the little people suffer. The dream is to become insulated from the economic storms like they are.

notho2• 3 years ago

“Hurting” the elite has always been up to the public.

Teacher strikes and unionization efforts have been winning; the financiers know nothing about self sufficiency. They know they rely literally on someone else to grow the food, kill the steaks.

The white collar public have a credibility problem; they want to be served and not serve themselves.

There is zero reason for most tech workers to login tomorrow; the vast majority will never move the needle. Yet they’ve learned helplessness and don’t know what to do.

We carry on about ills of LLMs hallucinating while westerners hallucinate the they can just do data entry work and someone else will wear out their bodies procuring food.

Our AI is more like us than we want to admit, which is why they’re so terrible.

whitemary2• 3 years ago

Teacher strikes and unionization efforts have been winning

Citations needed

jgalt212• 3 years ago

Agreed. Another way to justify this behavior is that "pessimists don't get promoted" So you're either a growth CEO or a restructuring CEO. Wall Street has no interest in administrator CEOs.

Freedom2• 3 years ago

CEOs are definitely something we should reconsider in this day and age. There's something about the kind of fiefdom that they command that I don't really know the term for it - immoral? Unnatural?

underratedbug• 3 years ago

You are presupposing that boom and bust hiring is bad, and worse than a more steady state approach. If one assumes perfection is impossible, it seems you suggest erring on the side of perpetually under-hiring as opposed to ever over-hiring. Why is that better?

rcme• 3 years ago

A boom/bust cycle is over-hiring to the point that you need to lay people off. You can over-hire or under-hire in moderation.

LapsangGuzzler5• 3 years ago

Why is that better?

Because it doesn't create unnecessary suffering for the unfortunate people who find themselves out of a job because some executive over-allocated for a particular role or department. Fundamentally, we want people to still participate in the capitalist system and not reject it because they're constantly treated like cattle.

Tade0• 3 years ago

People often have to uproot their lives to get into a new role. It's only ultimately worth it if it's a long-term commitment on both sides.

Also later in life having to suddenly switch jobs is neither easy nor desirable.

AmericanChopper• 3 years ago

Why would it be reasonable to expect that employment rates remain steady in cases where demand for labor fluctuates downwards? A CEO isn’t failing by implementing a layoff any more than they’re failing when they increase headcount, they’re simply responding to market conditions. The real problem is viewing employment as some sort of charity businesses grant to employees, or even worse, an entitlement that people should receive even when a business no longer needs them. Employment is driven by ordinary supply and demand, and when demand goes down, so does employment. This isn’t a failure of leadership.

tschellenbach2• 3 years ago

Would you propose that companies should pay below market rates to create a buffer against these cycles?

Or perhaps not engage in competition with their competitors?

I think the conclusion here is that companies don't control this. If the market pays people more, they pay more. If there's heavy competition they compete and hire aggressively.

You can't predict these cycles. If you could you'd be a billionaire trading on the stock market. So anyone who says that now is just suffering from hindsight bias.

I think the root cause here is government action on monetary policy and interest rates.

oxfordmale• 3 years ago

The problem is worse. Those in power actually benefit from such booms in form of performance bonuses.

They may have a bad year or two as the markets crash. However, a crash gives new opportunities for growth, and associated performance bonuses.

listenallyall2• 3 years ago

Not sure I'd characterize ex-FAANG employees, who are still likelier to get future job opportunities than people who loyally stuck it out at No-name Software Co in Des Moines, and who probably made 200k+ for a while, "little people".

samsari• 3 years ago

You are doing their job for them. A worker with slightly better prospects than others is still just a worker and ultimately still in the same precarious situation as they must still seek employment to earn a salary to live.

ElFitz2• 3 years ago

It really depends on what your reference is.

Compared to the average American? No, indeed, you wouldn’t.

Compared to the CEOs and major shareholders of the biggest companies out there? Yes, one could make the argument.

There’s a bigger financial gap between someone with 1 billion, or even 100 million, in the bank and someone making 200k than between someone working at minimum wage and someone making 200k.

Although there are other relevant factors that would be worth taking into consideration when making such comparisons (quality of life and financial security come to mind), most of us actually are very small fry compared to them.

tombert17• 3 years ago

Yeah; the thing that kind of triggered me on this was the Google CEO saying in December or January that he "takes full responsibility" for all these layoffs.

"Full responsibiliyt"? Really? How are you doing that exactly? By still getting your full paycheck and bonus while you fired twelve thousand humans because you didn't consider that the economy after years of a pandemic might be volatile?

whstl• 3 years ago

Well, this is the equivalent of saying "it's not you, it's me" when breaking up. It's just a way of avoiding a discussion.

DrScientist• 3 years ago

By saying that he is directing internal heat ( and external heat - like yours ) to himself, rather than HR, or middle managers etc in Google.

I suspect that's the reason for saying that. If you feel the need to blame somebody - blame me ( not other people or external conditions or shareholders ).

Ultimately it is his fault - even if it was forced on him be shareholders - he'd have the option of resigning ( following orders isn't a good excuse ).

In terms of the effect on him - you are assuming he isn't somehow human, and somehow these decisions aren't personally very hard to take.

In the end it comes down to whether you have a company culture of firing people the first mistake they make or not. Most people would suggests that's a bad company culture.

Whether they should have chased unsustainable growth is an interesting matter. I think the culture damage that large layoffs can have, particularly to companies that previous have always been growing, is substantial and underestimated.

ie the people left are often demotivated.

I once worked at a startup that let ~20 people go ( just under 10% ). The company was reasonably successful in keeping the best people in the short term, but motivation was right down and many of them drifted away over the next year or so.

dools2• 3 years ago

That's what private companies are supposed to do though. They exist to make a profit. The type of people working for Google will be the first to get hired when the economy picks up again, if you really care about the impacts of boom and bust don't worry about what the private sector is doing, think about advocating for a federal Job Guarantee which helps those who need it most:

http://www.jobguarantee.org/

scarface747• 3 years ago

Would those 12 thousand people at Google have been better off if they hadn’t work there? Would you have not taken a job at Google if you knew that you would be laid off four years later or would you have saved aggressively and been preparing for your next role?

5040• 3 years ago

One is tempted to contrast this with a similar move made by Nintendo some years ago:

Nintendo CEO Satoru Iwata will slash his pay in half for the next five months, following disappointing financial results for the Wii U and 3DS maker.
Other members of the Nintendo board will take a pay cut ranging between 20 and 30 percent of their salary.

https://www.gamespot.com/articles/nintendo-ceo-slashes-salar...

lopis• 3 years ago

They gamble with high risk and no stakes. If it works out, get win big. It it fails, they get to layoff people, restructure the company, and earn a small millionaire bonus. There's literally no losing for them.

mensetmanusman3• 3 years ago

After a certain amount of accumulated wealth, there is no losing.

The trick is to apply this to your life and be willing to live well below your means to get there.

mschuster91• 3 years ago

The real problem that author doesn’t call out is that at the end of the day, the people in charge don’t get hurt from these irresponsible boom and bust hiring practices. These companies knew the growth wouldn’t last, nothing lasts forever.

It's one thing for small companies (such as Peloton) - for them, "overhiring" or "overbuilding" can indeed be fatal.

But companies like Google, Microsoft, Facebook? They all were wildly profitable - there was no need to reduce headcount other than making beancounters and stock markets happy. They could have simply cut goose-chase projects and rerouted the staff towards stuff making money without letting a single person go.

sharemywin• 3 years ago

But that's the bigger problem for stock prices. There are no more monopolies to conquer

singpolyma32• 3 years ago

No job can or should last forever. Being laid off is of course unfortunate, but suggesting that never hiring them in the first place would have been better seems... wrong?

scarface747• 3 years ago

It is naive for anyone to view a job as anything but transactional. Do you expect your employer to isolate you from economic storms? Would the people who worked at BigTech during the boom times have been better off not getting hired and making at least 3x-5x the median wage?

I was hired at BigTech in 2020 going straight there from a 60 person company. I have used every single penny of my signing bonus + RSUs since then to improve my financial condition. I kept my resume up to date and my network strong.

ragnot• 3 years ago

A part of me thinks that many have failed to educate themselves about the realities of life. People are dicks (generally) and if they can step on you to better themselves they will. It's why capitalism works.

gabrielsroka• 3 years ago

2022

paulpauper2• 3 years ago

I call it the forever fallacy. It's really quite simple. The forever fallacy is the belief that the circumstances that led to extraordinary growth will continue indefinitely, even when they obviously won't. It's the idea that growth, no matter how irrational, will continue because the change in circumstances that caused it is permanent.

The financial media writes this exact same type of article every time there is a correction, like in 2020, 2022, 2012, 2016, 2009, etc. And then as always, when least expected, prices come roaring back. Meta stock is up more than 130% from the lows of 2022. Same for Netflix, also up huge. Or NVidia. It generally pays to be optimistic and stay invested. It's always the same pattern. Price fall fast but then recovers so fast too. Yeah, maybe extraordinary growth will not continue indefinitely, but so what.

gamerDude• 3 years ago

I feel like the author here is not thinking through the opposite. What happens to the CEO if they plan for the market to stagnate and then it doesn't? Then they look like fools as their competitors take market share and then they get replaced.

The incentives just aren't designed to plan for decline.

jm20• 3 years ago

I think you’re right. It’s irresponsible/dangerous for a business not to try to grow as fast as it can, especially in as cutthroat a market as tech can be. Just how the system works, for better or worse.

However the “poor CEO gets fired with only a $10MM golden parachute” angle doesn’t play as well with the average reader

lmpdev• 3 years ago

The incentives just aren't designed to plan for decline.

I wonder how managed printing service companies deal with this

I brokered a five year deal earlier this year, and all vendors put a 7% yoy decrease in print volume

I wonder what it looks like at the top of these companies like Fujifilm or Ricoh for printing sales people - are they diversifying or trying to converge on a sustainable level of revenue?

parlortricks• 3 years ago

They are moving print to digital

Thorrez• 3 years ago

Apple hasn't done layoffs.

batmenace• 3 years ago

Your comment supposes that it has to be extreme -- rapid growth or stagnation. Why do you think a responsible CEO / management team cannot plan for a 'moderate growth' pathway that sees steadier levels of hiring and firing more akin to what the rest of the industry shows?

I wonder if for tech companies part of the answer is also that moving people around is an 'easy' way to play with numbers. You go to the market / to your investors and say ''Hey, we've hired 1,000 people over the last 12 months, we must be doing so well [give us money]'', and likewise ''We're gonna lay off 1,000 people soon so we're all good here [give us money]''

rat9988• 3 years ago

They don't have a crystal ball. They study each possible conjecture, and then try to minimize risk maximize reward. Moderate growth might lead you to be eaten by a rapid growth. It's not a duality rapid growth or stagnation we are talking about. It's the risk of being eaten and left for dead in a competitive space.

beefman• 3 years ago

(July 2022)

ftxbro2• 3 years ago

"Just the law of large numbers says that eventually you reach all of the people who are likely to be your customers and you stop growing"

is that what the law of large numbers means

slopbop• 3 years ago

This stuck out to me too, glad someone else noticed it. Just in case people aren't aware, the law of large numbers is a phenomenon related to repeated random experiments, saying that the incidence rate of any particular event will tend towards the probability of that event. Referencing it in this context is a total non-sequitor.

ftxbro2• 3 years ago

I think they are using a big brain generalization of the law of large numbers, where it now means any limit involving a stochastic process

tschellenbach2• 3 years ago

If you can predict boom and bust cycles you can become very rich trading on the stock market.

alberth• 3 years ago

Isn't it much simpler.

Given that Tech, compared to other industries (Mining, Energy, etc) is still in its early years - most tech companies optimize for Growth.

While more established industries optimize for profitability / stability.

What's happening now in Tech is that companies are beginning to graduate to these later years where they run into natural total address market plateaus where they need to shift from Growth to Profitability/Stability.

(Think Netflix).

And this transition from being a Growth company, to a matured business - is a hard transition for any company.

zer0tonin• 3 years ago

Tech has been around for more than a century. IBM was founded in 1911.

renewiltord2• 3 years ago

Ideally, then, perhaps the laid-off workers should not be hired. It is better that they are jobless today lest we hire them only to fire them tomorrow.

irjustin• 3 years ago

I disagree w/ the premise of the article. It's oddly assuming that leaders of these huge tech companies have no knowledge that the pandemic would end. Effectively calling them dumb.

It's just wording. I think reworded in the spirit of the article is "Leaders should _do_ better" and be more steady/stable with their project and hiring practices.

But it's simply good capitalism. You should grow and shrink with the times all while building a massive store of cash. The problem is, good capitalism makes people get used/burned and ignores... well people.

blueboo• 3 years ago

Yep, this is a problem in tech. Anyway I'm just going to pop out to the A&P after stopping by Borders and Sears while wearing my Lehman Bros fleece

knallfrosch• 3 years ago

Everyone laughs at an empty factory and a warehouse full of products that won't sell.

However the damage from two factories that didn't get built and an empty warehouse that can't deliver more product can be even larger, even though it's usually hidden to outsiders.

thriller• 3 years ago

The problem I have with some layoff articles like this, is that they ascribe mass hiring during the pandemic to a CEO or single 'throat to choke'.

My experience is hiring decisions are primarily political in nature. Head of a team and salary/revenue ratios are solid? Better make a convincing but ultimately flimsy business case to get more heads. Otherwise, your fellow empire builder in another department will be more than happy to take that headcount. Multiply this by a few hundred teams and you see the magnitude of the problem.

Once you've played the game, grown your team with no real appreciation of thinking like an owner, you can ruthlessly mow down 10 percent of your team or seek that new role while Rome begins to burn.

berkethegrizzly• 3 years ago

The article is missing a huge point. The companies mentioned in it did not lose anything at all, or an amount that is negligible.

They took advantage off the boom and made more money than they could in a normal situation.

They did not lose anything (at least the companies mentioned in the article) in my point of view.

They already knew they were going to fire the staff they hired. But they also knew that they had to hire more staff to take advantage of the situation.

gtirloni3• 3 years ago

They already knew they were going to fire the staff they hired. But they also knew that they had to hire more staff to take advantage of the situation

Exactly. People keep either saying CEOs are playing 5D chess or that they are fools... when reality is much simpler.

singpolyma32• 3 years ago

So much this, they didn't "over" hire, they hired who they needed at the time. That they don't need them anymore does not mean they didn't need them previously.

zanderz• 3 years ago

Agree. Hindsight is 20/20. A conservative CEO who pulls back and doesn't lean into a growth cycle will be criticized even more for leaving money on the table.

Whether the entire economy should be structured to incenivize all this instability is a separate question. Don't hate the player, hate the game!

ImHereToVote• 3 years ago

But I do hate the game. Why are we letting natural selection control our societies?

auggierose4• 3 years ago

Just the law of large numbers says that eventually you reach all of the people who are likely to be your customers and you stop growing (see Netflix).

That has nothing to do with the law of large numbers. That's just discrete and strictly monotonic growth hitting any upper bound eventually.

What a bullshitter.

permanent• 3 years ago

Agreed. Truly despise when otherwise smart tech bloggers use jargons (incorrectly) to appear authoritative

stavros• 3 years ago

Ahh, the Baader-Meinhof phenomenon.

vrc• 3 years ago

Did you mean monotonic growth or actually tedious/lacking in variety? Both hold once the growth machine hits steady state.

auggierose4• 3 years ago

Thanks, updated it.

dboreham• 3 years ago

To be fair, I've heard the term mis used like this numerous times on business news tv (CNBC for example). So it's possible in that context they've appropriated the term for a new meaning (basically they're talking about a logistic curve).

staunch• 3 years ago

In the great tradition of correcting someone only to be corrected ;-)

... strictly monotonic growth ...

Their growth is hardly "strictly monotonic" since their growth can fluctuate up and down, as can their subscriber count.

auggierose4• 3 years ago

What I cited is just the mathematical reason why Netflix (or any company, really) cannot grow strictly monotonic in perpetuity. In reality, this is the reason why Netflix's curve will NOT be strictly monotonic, as you rightly pointed out.

wokwokwok• 3 years ago

eh. Who cares?

Come on, thats a fallacy right there. One of the classic ones right? Instead of countering the argument by the opponent, you just pick one little part that you can nit-pick some element of and attack that instead.

Suuurrreee... the law of large numbers isn't a thing. So what?

What a bullshitter.

Hm.

Call it whatever you want, secundum quid, inductive fallacy, faulting forecasting... who cares.

There's a point being made here and it's got nothing to do with the specifics of what the curve is called.

It was bad, incorrect and incompetent forecasting to speculate that sudden sharp trends will continue as the 'new normal'. That's what people did, and it's blown up in their faces.

The point being made by this article is not that a bunch of people screwed up, it is:

Your job isn't to assume things will always continue just as great as they are now. Your job is to be realistic about the future and position your company for whatever comes next.

Doesn't seem that unreasonable.

Seems like the sort of thing a whole lot of people in senior roles could have done a better job at.

Seems like advice that people right now should be paying attention to.

auggierose4• 3 years ago

The point made by the article is valid. It is also entirely trivial, but indeed, who cares? Certainly not the CEOs or companies who ignored this point this time. I doubt that the CEO of Google is not smart enough to take this trivial point into account when contemplating his actions, so he must have ignored it for reasons other than ignorance.

ChrisMarshallNY• 3 years ago

(2022)

photochemsyn• 3 years ago

Investment capitalism is a pretty flawed economic model - the shareholders will always want more, more, more. In the tech world, once the market is saturated their only options are to (1) degrade quality of service but cutting costs in 'non-growth sectors' like customer service, or (2) cut labor costs by offshoring or importing cheap labor, or (3) merge competing companies for form monopolies that can set prices well above what a healthy competitive market would converge on. The executives will do all they can to game the system by investing in stock buybacks to raise stock prices (because that's the metric that controls their bonuses), rather than investing in R & D or similar.

This is the result of the wholesale financialization of the economy under the rubric of neoliberal policy over the past 40 years. The outlook is not very good.

lasereyes136• 3 years ago

It isn't a fallacy, it is due to incentives. The stock market reacts to the stories companies tell them and well received stories lead to higher stock prices in the short run so executives cash out during the good times, either by selling stock or demanding higher compensation.

As always, incentives matter.

ta988• 3 years ago

Reminds me of the infinite attention fallacy, where you show a video while someone is trying to read your article.

julienreszka• 3 years ago

This website is unusable on mobile

shever73• 3 years ago

Agreed. I’m so grateful to whoever posted the archive link. The site is a god awful mess of pop up videos, scroll hijackers and overlays.

bell-cot• 3 years ago

FWIW - does anyone know of a tech employee who took this fallacy into account when making a career decision? Say, they looked at a company, concluded that it was over-hiring during a boom, and would likely be cutting heavily during the inevitable bust. So - they didn't apply, or told the recruiter "sorry", or rejected the job offer, or made a career move to a more-stable ship?

the_only_law• 3 years ago

Maybe not in the past, but I sure as hell as now.

giraffe_lady• 3 years ago

I know people who accounted for this but took the offers anyway. For mid-level engineers during the pandemic the jumps in pay were absurd. So I definitely had friends who took a 40% bump knowing a layoff was possible/likely in a couple years but figuring it would still be worth it.

Tech companies keep falling for the forever fallacy

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