
Letter to Myself in Late 2008 - baxtr
https://dalton.substack.com/p/letter-to-myself-in-late-2008
======
benjohnson
Can I _possibly_ expand. 2008 happened and I cut drastically and laid off 60%
of my employees - that was good and smart.

But it shocked me so much that we spent the next four years hunkered down when
we should have been marketing and growing.

My advice is to cut like that author is saying, but move on from the cut as if
nothing happened.

~~~
sg_gabriel
This is an interesting counter-point. Can you elaborate?

~~~
benjohnson
Sure!

The 2008 recession clobbered my IT company - most of our customers were in the
construction field and many of them went bankrupt.

We did the right thing - we cut deep into the workforce to protect what we
could and that was the right thing to do. The remaining employees were able to
confidently work knowing that their job was secure.

But the act of cutting deeply, and laying off people I liked and admired cause
me to want to act like a turtle and to not want to venture out.

In hindsight, I should have marketed and reached out to new potential
customers because other IT support companies were going out of business left
and right. I estimate that my timidity after the traumatic cuts cause my
company four years of growth.

If I have to do it again, I will. But afterwards I'll act like it never
happened - I'll keep growing the company.

~~~
turbinerneiter
In Germany, and other European countries, there is a tool called "Kurzarbeit".
It allows a company to reduce the workforces hours and temporarily cut pay.
The state supports it with tax breaks. The result is that a worker only works
i.e. 60%, income drops to 80% (bc of the tax breaks) and the company saves a
lot of money.

The key point: people keep their jobs AND companies keep their trained staff.
So when the crisis is over, they are ready to ramp up again. Also, since
people keep their jobs, consumption does not drop that low.

This helped the Germany economy massively to recover from the 2008 crisis.

Not sure if it would work the same way for all parts of the economy, but it
definitively works for the manufacturing industry.

~~~
_Microft
I'm German, so I might be biased but I think _Kurzarbeit_ (for our non-german
speakers, it is pronounced: koorts-arbite [0]) (short-time working) is as
close as possible to an economic wonder weapon during a recession:

People are still paid, companies do not have the full burden of wages to pay
and _especially_ do not have to go through hiring and training new employees
_after_ the episode when they want to ramp up again. It's an awesome tool to
deal with a _temporary_ situation and particularly aimed at making recovery
from the situation easier (by riding it out instead of first succumbing to it
and then having to get back on the feet).

[0] Hear it using the speaker symbol to the right of the german word at
[https://www.dict.cc/?s=kurzarbeit&=DEEN](https://www.dict.cc/?s=kurzarbeit&=DEEN)

PS: I wanted to point others to it a few days ago but unfortunately it did not
catch on:
[https://news.ycombinator.com/item?id=22649108](https://news.ycombinator.com/item?id=22649108)

------
dalton
Hi, I am the author of this post. As I said at the top my intent was not
initially to publish it widely, but here we are. If anyone has questions about
what I wrote I'm happy to answer them here.

~~~
Tade0
Perhaps a naive question, but I'm not in this business:

How does renegotiating a contract look like? I'm picturing a meeting where
people haggle over the new price, but that doesn't sound right.

~~~
roel_v
Maybe I can offer an experience that made me 'see the light' (well, _some_
light) accidentally on how sales (re)negotiations work. I'm going to be vague
because this is going to make me seem petty.

I had a colleague once who was an 'office rival', you know the type of person
you can't stand and are always one-upping (told you this was going to be
petty, but in my defense, _he started it_ ). So one day we were moving offices
and we needed something for the new office. (Sane companies would have had one
person doing this but let's say we were a caricature of 'scrappy startup where
everybody wears every hat'). There was one item that is basically like a
'staple' for office furnishing - let's say it was perfectly standardized
desks. Or plants to put in the hallways, something even more mundane than
desks.

Anyway this other guy had me beat on price from every supplier (everyone in
the office was basically one-upping everyone else on how cheap they could get
things, to the point where I spend days making my own cat5 cables). But I got
the same quotes (within a few percent) from at least 5 suppliers, using just
the standard 'what's your best price' beginner negotiation playbook. After
that I thought screw this, I'll just lay it out. (let's say this general price
was I got around 12k, and the 'other guy' got it for 11k).

So I went to a 6th supplier, let them do their sales spiel in their showroom,
and said (pretty much as blunt as I put it here) "Listen, you probably have a
great product but I don't care, I'm buying on price. Everyone else like
supplier X, Y and Z have given me these and these prices" (I showed him the
offers I got). "There is another guy at my office who got prices around 11k. I
want to beat this other guy, and you want to sell. The only way you will sell
to me is if you can come in with a price below 10k. Let's not do a sales dance
here. Can you do this?".

The guy got a bit of a deer-in-the-headlights look, went "to the office to
discuss with his boss" (like a car salesman but this time for real I guess)
and then came back with a price a hair under 10k.

I got my petty win, then a few months later the company almost went under and
the guy who gave me the deep discount called me daily for a month when he was
going to be paid until a miracle happened and he got his money, but that's
another story.

Anyway, what I took away from this (this was before I had had any sales
training or really thought about sales) was that usually, the key to a (hard)
discount is to convince the other party that it's better for them to take a
smaller profit than no profit at all. And also, that it's better to make it
seem that you are not the decision maker or that there is some sort of
external price anchor. Not saying this is always the best global strategy;
personally I value lasting relationships with good personal rapport over
squeezing out every last penny, but in crisis mode it's sometimes just
necessary.

~~~
mirimir
> And also, that it's better to make it seem that you are not the decision
> maker or that there is some sort of external price anchor.

That's the Good cop/bad cop" routine.[0]

0)
[https://en.wikipedia.org/wiki/Good_cop/bad_cop](https://en.wikipedia.org/wiki/Good_cop/bad_cop)

~~~
BostonFern
Haha, did you really need to link to a Wikipedia article for that one?

~~~
sbierwagen
HN has many non-native English speakers. Including a Wikipedia link for
English idioms is handy for them.

------
echelon
Dalton,

Lack of health care during a worldwide medical emergency could outright
destroy the lives of those you lay off should they or their families get sick
and require medical intervention.

Are you trying to give guidance to startups to lay off? Why not advocate for
pay cuts instead, that way they can keep their healthcare? I think most would
be understanding.

Lives are worth immeasurably more than the businesses at risk.

~~~
dalton
That's a fair point, and there are a number of situation dependent factors. I
wrote this letter to myself because I know what I would do differently 12
years ago and I have the benefit of hindsight now. Obviously the crisis is
different today, we didn't have a pandemic in 2008, there is definitely no
one-size-fits-all advice, and every company needs to be figuring out the right
thing to do right now. But keep in mind what ended up happening 12 years ago
is that everyone lost their jobs. The letter is my thoughts about what could
have prevented that outcome back then, at least partly.

~~~
taurath
I have to say, it’s sad to me that your lesson to your past self was to act in
a more ruthless and uncaring manner.

~~~
popinman322
Laying people off is always a large burden. Laying off multiple flights of
people with latency and inducing stress (e.g. "will I be next?") is probably
worse.

Alternatively:

If the business goes under, all employees will suffer. If some are laid off
and the business continues to survive, those that make it will be spared.

So from a harm reduction point of view, laying nobody off is probably worse
than laying some people off.

Even if you reduce pay, people may not be able to afford housing even though
they're still working for you (e.g. in the bay area). And health benefits
still cost the same even if you reduce other employee associated costs.

Things are not as simple as (I'm interpreting) you're implying they are. It's
not black and white, and the decision needs to be made on a case by case
basis.

~~~
taurath
Certainly not thinking things are simple, or that any of your points are
innacurate. I’m sure it is very tough, and maybe even the right call for the
goals at that moment in 2008. My criticism was that through this lens and with
the audience the OP has, the lessons of an economic downturn being basically
“lay off more people” is incredibly sad from a humanistic point of view.

------
my_usernam3
I'm probably looking to be combative due to this social isolation, but one of
the last lines irked me:

> People are counting on you to do the right thing.

Only because he says this after talking about layoffs as a purely business
decision. I have no moral qualms with doing layoffs, and as others discussed
it might be better to do one for the moral of the employees than to be stuck
with multiple rounds of layoffs. But he talks about having plenty of cash,
then cutting more than needed (which is people's livelihood)... then uses the
same livelihood as motivation. Am I being overly cynical?

~~~
blast
I think maybe a little. His point is that doing multiple small layoffs to
avoid pain and failure ended up causing more pain and failure. He's not saying
he should have cut more than needed, he's saying he _needed_ to cut more,
because fundraising wasn't going to happen and getting profitable was the only
way to survive. But presumably he didn't admit that until it was too late.

The 'right thing' in this case means something like 'face reality clearly,
instead of clinging to fantasy because things are too painful or scary'. If
you read to the end where he says "People are counting on you to do the right
thing", he's telling founders not to shy away from difficult decisions because
they're afraid of what outsiders might say. The point is that if you know deep
down what needs doing, you're not helping anyone by avoiding it.

~~~
digitaltrees
Multiple lay offs creates constant fear. It destroys morale and team culture
right when those are crucial for the fight for survival. But this really
missed the point. The key insight Dalton offers (correct me if I am wrong
Dalton) is: Get Profitable. It’s not about the cuts themselves. It’s about
getting to a sustainable break even cost structure so that you survive.

------
ttul
This downturn is vastly sharper and more unexpected than 2008. Time to roll
out the Plan B budget and cash flow model where you lose that big customer and
everyone else delays their repayment. Oh, also forget adding new logos for six
months. Large companies are in a state of paralysis while they try to figure
out what to do and when this will all end. You should be too.

------
weitingliu
Question: for companies that actually acted decisively and cut their workforce
significantly in 2008, did any of them end up having a great outcome?

Any examples come to mind?

~~~
wilde
Meraki got bought by Cisco?

[https://techcrunch.com/2008/10/24/19683-tech-layoffs-and-
cou...](https://techcrunch.com/2008/10/24/19683-tech-layoffs-and-counting/)

------
nexuist
> For example, startups today can renegotiate their AWS costs by ~50% if they
> push.

How does one begin to do this? I don't think I can just open a support ticket
titled "hey, can I pay less?" Or is this meant to be for startups that have
existing contracts with Amazon?

~~~
DonHopkins
tedivm kinda summed it all up and shared the link to AWS Activate where you
can apply for grants (I know people who got $5k aws credit grants right away):

[https://news.ycombinator.com/item?id=21784311](https://news.ycombinator.com/item?id=21784311)

tedivm 3 months ago | parent | favorite | on: Why Nukemap Isn't on Google Maps
Anymore

I've worked in a lot of startups and have never had to pay that whole price
until we had decent revenue. The AWS Activate program [1] has been pretty
solid for my current company.

There's a big joke going around that AWS is basically a VC that invests in
startups with free services and then makes their money back on revenue once
they've grown.

1\. [https://aws.amazon.com/activate/](https://aws.amazon.com/activate/)

>AWS Activate is a free program specifically designed for startups and early
stage entrepreneurs that offers the resources needed to get started on AWS

------
gumby
> “don’t take too drastic of measures to get profitable because then you won’t
> be able to sell the company”. Definitely ignore those people and this
> garbage advice.

In what universe/conditions _would_ such advice make sense? I’ve never heard
such a thing.

~~~
amflare
I imagine a lot of actions you would have to take to make a small company
profitable would make it be unappealing to a company with more money. Better
to burn the cash and lay a giant foundation rather than just build a tiny
house.

Then you can sell the foundation by saying "Look how big of a house could be
here!"

~~~
gumby
Having done a few aquisitions (on both sides of the transaction) over the
years it's really easy to dictate terms when the company being bought lacks
room to maneuver.

------
nostromo
In the 2008 recession US GDP went down by only about 3%. During the Great
Depression it went down 10%.

I don’t think we’re prepared for the kind of declines we’re going to see if
quarantine goes on for more than a few weeks.

~~~
nv-vn
Agree. The scary thing here is that we're talking about completely pausing the
world economy for one quarter? Or two quarters? Or a year? There's really no
way of knowing what the effects will be and the longer this gets stretched the
more drastic the economic effects will be. I don't know what perspective your
comment comes from but I think it's important to open a discussion on the long
term effects of this type of quarantine. For example, if this leads to an
unprecedented level of recession it's very possible that more people end up
dead due to the quarantine.

~~~
notabee
You actually can't assume that will be the case, based on longevity data from
the Great Depression[1]. If Covid runs rampant and collapses the medical
system the U.S. is facing anywhere between 500,000 to 10 million dead based on
current understanding of the numbers[2].

1\. [https://www.history.com/news/great-depression-economy-
life-e...](https://www.history.com/news/great-depression-economy-life-
expectancy)

2\. [https://medium.com/@tomaspueyo/coronavirus-the-hammer-and-
th...](https://medium.com/@tomaspueyo/coronavirus-the-hammer-and-the-dance-
be9337092b56)

~~~
wwweston
This.

Thousands/millions out of work _may_ (or may not) experience morbid effects.
They will have a harder time participating in the buy side of the economy and
driving demand, and also represent missing productivity. That's nothing to
sneeze at.

But thousands/millions _dead_ are _guaranteed_ morbid effects. And dead people
are even harder to get back into the demand side of the economy (or
productivity) than jobless people.

Also near the peak of an unconstrained pandemic... what should we think
people's improvised reactions will look like? Business as usual, no economic
impact?

The best way to not have an economic impact was not to have an uncontained
epidemic we weren't prepared for. We kinda missed that step. Why would we have
a choice _not_ to have serious economic impacts at this point?

~~~
nv-vn
The scary thing is that many of the deaths are more or less guaranteed even if
we try to treat them, until the point a cure or vaccine is developed.

>Why would we have a choice not to have serious economic impacts at this
point?

That's not really a choice at this point, but we do have two paths with
unknown outcomes. We can choose to focus on limiting the spread at all costs
(and hitting the economy harder) or we can focus on limiting the economic
effects but give up on containing the virus. Neither is a good choice in any
capacity, but it could turn out that either one minimizes death in the long-
term.

------
thomk
Can you talk about the copyright infringement lawsuit and how you guys
navigated that?

~~~
thomk
This was a genuine question although I see how it can read like I was poking
at the guy.

------
aty268
"don’t take too drastic of measures to get profitable because then you won’t
be able to sell the company"

Could somebody explain the logic behind this? I see Dalton disagrees, but why
would anyoneone believe this in the first place?

~~~
H8crilA
When the market makes no sense by keeping non-economic entities that pretend
to be companies - you "have to" make no sense along with it. It's the ages old
false dichotomy between "growth" and "value". As if growth companies didn't
have stable cash flows (they do!).

------
czep
> Do one layoff, but much much deeper than seems correct.

Is this what "leadership" is all about: just transfer all the pain you're
having onto the employees who have been doing all the hard work to build your
vanity company?

~~~
ahuth
I'm not familiar with the author, but doing one layoff seems much kinder to
everyone than multiple over time. And the company not surviving doesn't help
anyone.

Being laid off is horrible, but if I'm one of the lucky ones that remain, I'd
much rather know that the company is now sound financially (which the author
pointed out).

~~~
texasbigdata
I agree with you but here's the counterpoint: if you were on the bubble and
the CEO decided to cut into the bone and perhaps you didn't need to be let go,
how would you feel?

~~~
nordsieck
> if you were on the bubble and the CEO decided to cut into the bone and
> perhaps you didn't need to be let go, how would you feel?

Your question has the same problem as the modified (blocking the rail with a
person) trolly problem. It's a hypothetical so you get to state what's true.
In the real world, people have much more limited knowledge.

You get to know whether you're cut or not. You get to know whether another cut
was needed or not. You get to know whether the company survived or not.

No one ever gets to know if someone was cut but didn't need to be. Not even in
retrospect. Especially if they're "on the bubble".

~~~
texasbigdata
No real problem that happened this week. Business had precipitous revenue
decrease. Could get better, could not. Had to cut employees. Do you cut 35% or
40% of corporate?

Do you cut more just to hedge the economy won't recover? I appreciate the
philosophy 101 lesson but your premise is completely not true. If you cut the
Sr. Manager of XYZ and hire another one 120 days later...you probably didn't
need to cut the one you did.

~~~
nordsieck
> If you cut the Sr. Manager of XYZ and hire another one 120 days later...you
> probably didn't need to cut the one you did.

If you make cuts based on a pessimistic projection and the future turns out to
be much rosier than you thought, were you wrong? I don't think so. You just
had limited knowledge.

This is compounded by an unusually wide spread between pessimistic and
optimistic projections during times like this. Will someone find a cure? Will
enough ventilators be made? How soon will people be allowed to go back to
work? How effective will self-isolation be?

Today, no one knows the answer to these questions. We'll know much, much more
in 4 months.

It's just not reasonable to expect that decisions made today will seem perfect
120 days in the future.

------
digitaltrees
Dalton is a sage. Listen to him.

------
nkkollaw
> Doing multiple small layoffs is a form of cascading failure. Do one layoff,
> but much much deeper than seems correct.

I hope people don't actually think like you (or follow your advice).

In a time like this, it would make more sense to write about people are not a
number, and you should keep your employees because there are more important
things than money in life.

