"At the meeting with employees on Monday, executives tried to assure employees that they wouldn’t be shortchanged by Mr. Musk’s acquisition. Mr. Agrawal told employees that their stock options would convert to cash when the deal with Mr. Musk closes, which he estimated would take between three and six months. Employees would receive their same benefits packages for a year after the deal was finalized and there were no immediate plans for layoffs, he added."
Just as the board and executives has fiduciary obligations to shareholders, employee option holders fall into that population as well. There are legal incentives/threats against not handling it fairly.
It's up to what Musk wants to do with the existing workforce, but 'promising' existing plans/compensations will be upheld for a period gives him time to introduce some kind of option plan in the new Twitter holding company to retain staff he wants/needs and sack the rest before there's an exodus not of his choosing.
YMMV, but that's what lawyers are for. Not the action of a single individual necessarily, but a group of disgruntled employees can pool their resources and hire a law firm to right a wrong. It's usually worth it when the "wrong" is big enough.
There has to actually be a wrong, though. Nobody at Twitter is entitled to their job for any period of time beyond today - anyone except probably the CEO and a few other C-suite folks can be let go with about ten seconds notice. And I'm 100% sure there are clauses in everyone's RSU contracts detailing what happens in the event of an acquisition.
Heh, we all know the truth, hence why the question pop-up in the first place. Elon will cut deep in left and right among employees within an year. I guess only 30% of existing ones will still work at Twitter in a year after deal is done.
IDK why are you getting downvoted. Twitter is barely profitable, so layoffs are definitely in the picture, though I wouldn't go as far as predicting the total percentage of cuts.
(Also, some people may decide that they are no longer a cultural fit and subsequently go elsewhere, where the workplace politics will be closer to their ideals. So there will be certain turnaround of staff just from that.)
As for the top managers, they face a much more uncertain future, given that they are co-responsible for the current unsatisfactory situation.
My limited experience in engineering organizations, I have found that the core task can be accomplished with probably 25% fewer engineers. The rest are working on products that are going nowhere or are generally inefficient at their jobs. It's not even "50% of the people don't do anything, we just don't know what 50%". It's pretty obvious to everyone.
Is this the norm? Are there any eng orgs that exist without this padding? Is that spare capacity working on meaningless projects ever worth it?
25% is if the organization is ultra efficient. I think most organizations other than select FAANG/Stripe are at 75%+. I think pmarca quoted the number to be something like 1:4 which makes the efficiency at 25%, 75% dead weight. FAANG is probably at 50%.
The good big companies are overstaffed by 2x. The bad big companies are overstaffed by 4x or more.
In a situation like this you likely won’t retain those 25%, assuming you can identify them (it’s not always clear who is really making things happen and why).
Those are top performers used to equity based comp. Many will leave.
Scale like Twitter does takes a lot of people to keep it running. You can always trim low performers but that too has a major morale implications. See: Uber
IME the core task can often be accomplished with 1/5th the engineers but
A) most of that is throwing manpower at corporate dysfunction
B) ive never seen an attempt to shed engineers that didnt inadvertently impact the core productive engineers. Worse, sometimes they end up being the first out of the door.
Very lean eng orgs that rely heavily on offshoring. Every software engineer at my work, I know what they do and they're important to our core tasks. But probably 95% of our actual dev is done by offshore project teams, so the eng org itself is very senior/lead heavy and primarily supervises rather than writing a lot of code themselves.
Doesn't it scare you that your actual product is written by someone else? As i am moving away from what is called IC positions in silicon valley, i am increasingly afraid of this. The projects i am passionate about and responsible for are actually developed by other people. And these are people whom I know are at least as good at if not better at the job than me.
What are best practices for offshoring in your estimation?
Does your team work directly with devs or is there an intermediary offshore layer to manage the people actually pushing code? From what I read the variance in quality of offshore engs is huge. I get a lot of connection requests with offshore managers, don't know if they're worth it or you should just hire offshore devs directly and manage them yourselves. Its hard because you don't know the nuances and blindspots of engineers in different countries and cultural issues.
The Twitter app written by one guy did not have scale, analytics, reporting, advertising, compliance, or moderation features.
Engineers are constantly surprised at how necessary it becomes to do those things as a company grows, and how hard it is to do them well. Musk himself has been repeatedly surprised at how hard it is to scale operations efficiently, at both SpaceX and at Tesla.
So without absolving all engineering orgs of all of their inefficiencies forever, let's start with the Bus Factor.
Now, technically the Bus Factor is more about the company completely collapsing, but in an optimal organization, each person is doing something critical to the survival of the company all of each workday. They aren't spending 4 hours on Facebook or creating meaningless menu changes no one cares about. Maybe if one of them were hit by a bus the company wouldn't be completely unable to function, but their coworkers would struggle to continue to keep everything running.
This isn't really a good plan in the long run, even if it is most efficient until someone gets hit by a bus, so instead you over staff a little. You can't quite just hire N extra employees at the company level and expect them to be able to jump in seamlessly to any gaps that appear as other employees quit or retire or die, so you instead end up overstaffing by 10-20%. To every group of five or ten employees, you add an extra whose job responsibilities overlap the rest. Now if someone leaves, you have their replacement already halfway ramped up, and you can spread their responsibilities around without creating too much stress.
Now, you could just let all of your employees work 10% less hard, now that they have someone else to help lighten the load, but that's not really efficient either. Granted, some of them will find a way, and that 40 hours nominal becomes 36 hours real work and 4 hours posting on HN, but you can still add some extra work on top.
So you tell your employees that, in addition to the bread and butter work that pays the company's bills, they also have to Do Something else. Maybe there are some ideas for improving the company's core product, new types of bread, different flavors of butter to try out. Maybe you tell them to spend 20% of their time on bluesky research.
This brings us to the problem of making changes to a big, complicated engineering project. When you are just maintaining a giant piece of software, that's kind of a linear problem -- you assign a person or two to each part of the infrastructure, and they keep it in shape. When you are improving the giant interconnected pieces of infrastructure, it becomes a quadratic -- if someone on Service A comes up with a neat idea for how to make it better, they're going to need people on Database B, Backend C, Frontend D, Logs E and twelve other departments to make corresponding changes to their pieces of the infrastructure as well.
So the end result of this is that you have a piece of software that could be maintained indefinitely by 2 people, you add a third for redundancy, a fourth and fifth to iterate on new features, and three or four more to keep up with infrastructure changes in related projects elsewhere in the company.
And ta-da, your simple project is now overstaffed by 4x.
And if I were a Twitter employee who survived the cuts, I'd still be worried that now I'm working for Elon Musk. Suggest all Twitter employees reach out to the engineering teams at Tesla and ask them how their work-life balance, energy level, and burnout level is. How do decisions get made there, how frequently are they over-ruled? How chaotic are things? How frequent are the angry outbursts? How's overall satisfaction? Do they feel they work in a nice place?
I admire Elon's companies and the achievements they've made, but he has an extreme reputation of riding his employees like horses.
Well that's just impossible bud. The number of twitter employees in 2018 was 4000 and it is about double that now. What on earth do you think they've all been doing? You can't possibly run something like twitter with just 2000 employees like you suggest. The fail whale might reappear.
There is no relationship between total head count and operating work load in most companies. Twitter isn't a factory. They don't need 8000 people to churn out widgets and every extra person means another extra widget they can make per day.
The marginal value of each extra employee is negative but you rake in so much cash from monetising all the free content users are making for you you'd be stupid not to spend it on wild ass bets.
If you have a product that takes 100 people to run but generates billions in revenue it is standard practice in public companies to just hire lots more people. It's mostly speculative in that you hope that one of those thousands of people will come up with something else that makes billions.
Actual question for anyone familiar with the company inner workings: What are those ~8000 people doing at Twitter?!? I guess they do sales and advertising stuff. Would that be a large chunk? The tech doesn't seem that crazy and they don't really ship much so I wouldn't thing they need that many technical people. Is it mostly an army of moderators?
I know nothing of how such massive-scale tech companies work, but just seeing what Twitter does, the ~8000 number seems crazy, doesn't it?
You can have literally infinite numbers of people working on things that might seem like they don’t need that many people from the outside, because every organisation is very different. If you walked into Twitter, and spoke to people, you’d probably find that there’s a justification within the context of Twitter for most people even if a different company could do more with less (or less with more).
Headcount is an artifact rather than a choice, the amount of people working on Twitter will be a consequence of decisions made more than a decade ago, not as a consequence of how many people Twitter needs today to operate as they are today — which is true for all companies.
If we fail to effectively manage our growth, our business and operating results could be harmed.
We continue to experience rapid growth in our headcount and operations, which will continue to place significant demands on our management, operational and financial infrastructure. As of June 30, 2013, we had approximately 2,000 employees, an increase of over 1,800 employees since January 1, 2010.
..As we continue to grow, we are subject to the risks of over-hiring, over-compensating our employees and over-expanding our operating infrastructure, and to the challenges of integrating, developing and motivating a rapidly growing employee base in various countries around the world. In addition, we may not be able to innovate or execute as quickly as a smaller, more efficient organization. If we fail to effectively manage our hiring needs and successfully integrate our new hires, our efficiency and ability to meet our forecasts and our employee morale, productivity and retention could suffer, and our business and operating results could be adversely affected.
Our corporate culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovation, creativity and teamwork fostered by our culture, and our business may be harmed.
Moreover, liquidity available to our employee securityholders following this offering could lead to disparities of wealth among our employees, which could adversely impact relations among employees and our culture in general. Our transition from a private company to a public company may result in a change to our corporate culture, which could harm our business.
While I agree it's silly to think musk is going to fire everyone, Whatsapp hit 1 billion messages a day with only 11 engineers. I certainly think twitter could function at a base feature set with far fewer than 2k.
"Number of engineers" has become another vanity metric in the VC ecosystem and it needs some pushback. I have viewed of a ton of tech leadership job postings in the last year+, and almost all of them have a requirement/bullet of "grew Engineering team from X to XXX", or something like it. As an engineer, building & supporting products with the right / a limited amount of engineers should be the goal. The Whatsapp example is fantastic and should be lauded. It might be extreme, but we need more stories like that, not less.
I get that most view it as a proxy for business growth, but I fear there's a growing group of non-technical investors/leaders/founders who see FAANGs with 4000 engineers, so you're only successful if you have that many too.
If I read him correctly, he is saying that only 30 per cent of current employees will be there in a year.
It is possible that some of them will be replaced by other people who now work elsewhere and who will try their luck with remodeled Twitter.
There will likely be a major cultural shift at Twitter; for someone, deeply repulsive, for other people, possibly very attractive. So there might be significant staff churn even though the total numbers may stay similar.
No offence but that sounds a little naive. Twitter isn't just the app and feed algorithm - I imagine there's more that 500 people needed to run the advertising side of the business alone (multiple countries, different tax regimes, payment processing, big customer relationship managers etc). Even the low level data centre, network engineering will number into the hundreds.
And they'll still have some kind of 'manual censorship organization' to enable them to operate legally in different countries, handling people posting illegal content and responding to law enforcement requests, bot detection, reports of harassment etc - that's going to be more than 500 people, for a company with the number of users Twitter has.
When has that ever worked out for anybody? What are you even saying, life isn't some sort of Joseph Heller novel bucko. This is the big leagues, you need all those people to keep the trains running on time.
Are you seriously trying to tell me that some smooth operator can just come waltzing into a well oiled operation like Twitter Inc and simply purge thousands of highly skilled specialized knowledge workers assigned to an extremely complicated web scale project willy nilly?
What of all the accumulated institutional knowledge. Countless man (and woman) years of code optimizations. The massive ETL pipelines. The company culture. Truly the most valuable asset Twitter has is the talented people that work there. Surely it would all come crashing down.
Depends on the deal, I’ve been a part of a deal where unvested stock converted as if it had vested: depending on how much is outstanding, and the value of the ongoing relationship between the company and employees, you could expect all outstanding options (vested, unvested) to be paid.
That said, in this situation, it’s unclear how Musk will behave: on the one hand, to ensure a smooth transition, it makes sense to maximise the chance that employees stay on — even if he intends to cut them eventually — but also this is Musk and so maybe he’ll see people who won’t be loyal to him self selecting to leave as a bonus and he’ll make it as easy for them as possible (by behaving in the least good way) even if it hurts the company.
Depends on the buyer and nuanced details of how the awards actually work at Twitter. For existing shares vested those will most likely just be paid out in cash into a brokerage account for any shares still held. If the acquisition is a traditional pure cash transaction employees would cease to be shareholders.
On things not vested it’s typically up to the buyer. Obviously some incentive to not just annoy everyone to the point that they all quit, but the new buyer will generally quickly decide who they want to keep and won’t be too fussed if others just get pissed and leave. Reality is in transactions like this the employees are just another company asset for the new owner to sort out what to do with.
> and won’t be too fussed if others just get pissed and leave
I remember when it was so important that financial guys still got their promised bonuses for staying on during the financial crisis. I mean, clearly they were titans of an industry they helped to destroy, saved at the behest of a government they despise, but who could really begrudge them a windfall?
Most agreements have a liquidity event (i.e. an acquisition) clause. They this sort of thing happens, your unvested options can be vested and exercised immediately.
Twitter already had a liquidity event, the IPO. A going-private transaction is unlikely to be contemplated in any existing options or RSU agreement. Unvested options are technically worthless, being an option to purchase securities that will no longer exist (TWTR). In practice it would be very silly to do this to employees unless your explicit goal was to massively reduce headcount.
Lawyers contemplate lots of things in multi-page agreements that most people don't read :-) The two times I've been acquired (by a public company but I think cash deals), unvested stock has been converted to the acquiring company's stock at the equivalent value and on the same vesting schedule. Of course, this will be a private company so the situation is different.
They will be paid out on the same schedule, but as cash (at $54.20). I assume this will also be true of promised grants with a number attached to them that have not yet been converted to a fixed number of shares yet, but that hasn't been fully clarified yet.
There will be no stock in three years if the acquisition goes through. My understanding is that effort is being made to compensate employees in a roughly equivalent manner, albeit without appreciation or deprecation being involved since Twitter will cease to be a public company.
A lot of people in public firm tech have effectively normalized not just large RSU grants but the assumption that they'll significantly rise in value. Twitter may, depending upon the agreements and Musk's wishes if this goes through, pay out unvested shares cash equivalents on their current schedule at the acquisition price. But there will presumably be no further rise and no further RSUs.
Presumably the treatment of unvested shares is somewhere in all the acquisition legal paperwork because it would need to be accounted for.
I don't know why any sane twitter employee would stay on.
Twitter employees have spent years being mocked as useless idiots that can't ship code and are destroying society with "Wokeness". Now they don't have any financial upside to look forward to either.
I follow a bunch of Tesla/Spacex accounts on Twitter and you can plainly see that any dissent from Musks wishes will be punished with online mobs and harassment. Currently they're all laughing at how massive they layoffs will be. I don't know why anyone would subject themselves to this.
It is likely they will try to maintain the total comp levels for at least a year, meanwhile they will reassess the entire talent pool and make whatever correction they deem necessary. Twitter has no meaningful assets other than the talented people that work there. If sufficient number of critical talent leave (intentionally or accidentally), it could hurt twitter significantly in the near term. People from other industries sometimes don't get this – in a live internet app service, software code has very short shelf life. It starts to rot/smell very quickly if there aren't engineers who understand it tending to it. Without engineers who understand the codebase well, it usually results in more frequent outages in production, super slow productivity in adding features, and any feature change resulting in buggy/broken functionality etc. Bringing in new engineers who can dig out a working understanding of the code, then refactor/rewrite the whole thing can be done - but it requires talent that is very scarce and even then it is super slow – likely multiple quarters to couple of years – for any such transition.
Your argument that there are key people at twitter that need to stay on to keep up understanding of the code makes sense to me. But I don't think the following quote is true:
> Twitter has no meaningful assets other than the talented people that work there.
I think the main asset of twitter is their userbase and more importantly their brand. The simple fact that twitter is at the core of politics and the news-cycle is where most of the value at twitter comes from.
Twitter's engineers are vital to keeping twitter running. But that doesn't make it an asset. It's not something you can sell on or somehow convert into cash.
Not to trivialize Twitter's infrastructure and the people who keep it running--remember the fail whale?--but the #1 through #10 reasons of why it would/will be very difficult for anyone/ones to stand up another Twitter is that everyone (to a first approximation) is on Twitter and the vast majority won't move somewhere else or they'll try moving to a bunch of different places.
It will take very little disruption to the service quality (think slow/janky app, service/feature outages, buggy functionality like search/filter not working reliably) for users to flee the service and move on to the next happening thing. The current user base twitter has is a result of key input activities – stable/performant software service at scale, growth hacking and marketing to cultivate/retain high-profile content generators/curators, third party tools ecosystem for whale users etc. Each of these things are not in a stable equilibrium. They need constant attention to keep them working. That requires talent AND understanding of current systems/mechanics. So if I were buying a service like Twitter, I would consider the brand/userbase as output (it is what I'm valuing, but not what I'm buying) and consider the code/mechanics and the talent that goes with it as the input (what I'm really buying).
I’d assume it would allow Musk to restructure Twitter along longer-term goals. My sense is that he will eventually take it public again, but it’s a hard road to make huge changes to a company’s trajectory when your “fiduciary duty” relies on quarterly earnings reports. For example, killing bots will decimate DAU and would tank the stock. But do that and wait a year or two and perhaps Twitter flourishes as a true p2p platform again. Then you can take it public again with a different narrative and trajectory that’s more in your control. If you were public all along you’d get pummeled for the choice because it crushed the DAU KPI.
People kept saying that, if board didn't accept, then they would violate fiduciary duty.
Then, board accepted the first offer without further negotiation. Who does that in a large deal like this? At least, they should have got a few billions more.
No I meant it in a broader sense. Whenever I ask someone why companies are so hyperfocused on growth every single quarter they usually cite fiduciary duty or something. I am not sure if it's a law or a company by law
Companies are hyper focused on growth because growth is priced in to their valuation, either by VCs or the public market. Nobody wants to plunk their money into something that won’t give them a return, and non-growth businesses have to pay investors in things like dividends or royalties to keep their market value.
I believe you can be sued for breach of this, and can certainly lose your board seat. I would guess it will devalue the company if a breach were to occur.
I don't have an answer for this, but the richest person in the world has unique motivations other than maintaining a profitable technology business. What if better technology products could be created when divorced from shareholder profits and therefore the influence of advertising? Or if divorced from any government regulation/oversight?
Now that's a big if but IF you run with that as Musk's motivation, then he doesn't particularly care about making Twitter profitable. It'd be more valuable to him as another lever of influence on society generally.
Could Twitter become more than just a brawling drunken town square? Could it capture public goodwill by eradicating advertising from Twitter and offering an open-source encrypted email and messaging service outside the purview of Five Eyes? Then build off the manufacturing innovations Tesla pioneered and create a cheap open hardware phone?
Public companies have to follow a lot of rules, and have a 'fiducary duty' to shareholders. The rules are annoying and expensive. But the real downside is the fiducary duty. It opens you up to lawsuits, and it means you are legally required to care about your stock price. This can prevent you from making decisions that would drop the stock price. Relatedly, the shareholders can (with lots of difficulty) prevent certain changes being made by changing who sits on the board. This limits what you can do in general.
Going private removes many of these limitations, allowing much more flexibility. Going private does mean you can no longer go to the most liquid market (the public market) for extra equity financing. And of course you need to buy out all the shareholders.
At least one point is control. When you're not beholden to shareholders, you can run a company effectively as you see fit. As an employee, I actually look at whether a company is privately or publicly held because I'm of the (possibly mistaken/excessive?) opinion that you cannot run a truly mission-oriented public company (unless that mission is to maximize shareholder value, I suppose, but that's not a particularly compelling mission for me).
That very much depends on how twitter structured their options and the details of the contract for purchase. I've seen setups where all unvested options vest immediately with a purchase and I've seen setups where the options are gone just like that. There is a whole range of options in the middle that are possible as well.
In the first scenario they only exercise if there is a sale which may or may not be on the horizon when the options plan is set up. It's a way of showing appreciation for employees since there is no guarantee after a sale that the reasons for the company having value will still be in place. If you want to keep people around after a sale it's usually a good idea to reevaluate your options strategy anyway and it's not a good look for options to just vanish after a sale. You want your people to be invested in a sale happening if that is your planned exit. This is a way to sweeten the pot for them.
"At the meeting with employees on Monday, executives tried to assure employees that they wouldn’t be shortchanged by Mr. Musk’s acquisition. Mr. Agrawal told employees that their stock options would convert to cash when the deal with Mr. Musk closes, which he estimated would take between three and six months. Employees would receive their same benefits packages for a year after the deal was finalized and there were no immediate plans for layoffs, he added."