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.
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.
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.)
> Wrong decisions are never made, they're always justified by current circumstances or hypothetical future circumstances.
There are plenty of examples of managers who are simply bad at making good decisions.
Full disclosure: I've worked for a few.
At one company, two consecutive CEOs took the company from turning a fairly healthy profit into voluntary liquidation in a handful of years. The first one quit after a fractious meeting with shareholders, and was replaced with the second, who wasn't any better. I jumped shortly before the liquidation was announced, it came as a complete shock to most of the rest of the staff.
My view is that it's sophistry trying to claim all poor decisions were somehow justified at the time. Some people - including managers - are just inept!
Ineptitude is high on the list. But I would put misaligned incentives pretty high on the list of reasons too. So many executives make decisions that make sense for their bottom line but that may not be good for the company and shareholders long-term. Same goes for the directors. Who cares if you create a long lasting, stable company when you could just win the lottery now, cash out and move on to another conquest.
I still think it’s mostly ineptitude. Hiring a bunch of people only to fire them isn’t gaining you anything.
People are still on a bell curve and most executives are somewhere in the “very average” area, like me and most people. And 50% of people are worse than average.
I remember people loudly exclaiming that people wouldn’t be buying Peletons once people started going back to gyms but the “who could have known?” sentiment appeared anyway after the stock had crashed.
Peloton's fate was obvious to anyone who cared to look.
Some people simply don't care if there is a value proposition because they are investing in market sentiment, not fundamentals.
Other people simply don't bother scrutinizing the value proposition because they dont care about their investment and are comfortable gambling.
I read their Series F pitch deck and the projections were clearly detached from reality. Targets were to basically capture more revenue than the entire gym sector and home equipment sector.
Folks who went for the series F pump and dump lucked out bigtime with the pandemic
Yep. Look at the fate of nearly every piece of home exercise equipment sold in the last 50 years. The vast majority fall into disuse pretty quickly. Who's going to want to keep paying a monthly fee for something they don't use? Hopefully it's easier to cancel than a gym membership.
NordicTrak is doing it too. Businesses love subscriptions, especially for one-time/infrequent purchases - if Sealy could come up with a mattress subscription model they would.
I think an even bigger factor is that people had a shit ton of free time during the pandemic because people were either laid off or working remote. On top of that, a lot of activities weren’t possible anymore.
What do people say they don’t have enough time to do? Work out
So people worked out. Exercise equipment became out of stock, but Pelotons I don’t think did. Hiking trails and campsites got packed too. People were doing all these activities that they never did before the pandemic. The market for exercise — and Pelotons — ballooned.
But obviously once the pandemic ended, people would get jobs back and it was likely that a lot of jobs would go back to the office. People will easily go back to prefer going out instead of working out (not making a value judgement here - you do you). Now no one has time to exercise anymore and the exercise market has shrunk back to “people who make time to workout and want to invest in doing it at home,” which is tiny. The subset of that market that is willing to “drop a few Gs on an exercise bike” is a sliver
Cyclists and runners like paying monthly for fitness apps with a social networking component so it’s not a completely dumb idea. I enjoy paying for Strava for example and to be honest don’t need any new features. They just need to keep it working as it is.
You will love the new proce then…
For me it needs to be more like Zwift to justify paying for it.
Even Zwift is a mediocre game and if you compare it to other non sport games, the subscription price isn’t justified in any way.
So you don’t think it was wrong to assume that the prosperous and highly unusual scenario of the Covid effects would be around for an extended timeframe that legitimately would impact future cash flows that validated the huge increases in the value of almost all tech stocks? It made absolutely no sense to me and many other investors, but so many people drank the koolaid anyway, buying more stocks, hiring more people, pumping up the fervor, etc.
It made perfect sense from an investor‘s point of view.
Buy the stock low, sell it before it drops.
You’re usually investing in large public companies to make money, not “support the long term cause.”
Also it made sense for the time period. Say you already had $10,000 invested in a company that sells restaurant supplies. Are you going to keep it in the company for the entirety of COVID while your money evaporates or put it into a tech company temporarily and then move it back afterwards?
The fact that you're describing it as "drinking the koolaid" goes to show that it was a questionable assumption. Certainly, the worldwide pandemic created an uncertain atmosphere. On the other, everyone knew that the Fed was pursuing some very drastic actions. So why did so many tech companies simply go along with it? Seems like a lack of foresight and lack of willingness to challenge the status quo.
You were right only because covid turned out to be pretty mild (so far) and things pretty much went back to normal. If we were still living in isolation then these increased valuations for Zoom etc made sense.
Zoom stock went from $67 to $512 from Jan 2020 to Oct 2020. Zoom earnings reached around $1 per quarter EPS or $4 per year during its short heyday in 2021-2022. It would take a century of earnings to be worth that price.
I guess I'm not sure what you're referring to here. Almost all the big tech layoffs I saw in 2022 came with an admission from the CEO that, hey, we did make the wrong call and we wish we'd made the right one. When people talk about past conditions, they're just explaining why the wrong calls seemed reasonable at the time.
I'm not saying it is "wrong," I'm just pointing out that world events matter and people should really pay attention and remember what's going on. With COVID, a lot of new stuff happened. We started dining outdoors. Was it going to stay? Maybe, maybe not, but don't just assume it's the new normal.
Just like right now, we still have a war going on, US became the world's natural gas exporter because of the war, how supply chains are still recovering from COVID, and things like that. Suddenly, everything makes a lot of sense with context
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.
It's been an entire generation of cheap or free credit. There are people who are now adults who have lived their entire lives well beyond their purchasing means because financing was close to zero, letting you live in a bigger house, drive a fancier car and all lifestyle aspects beyond what you could purchase outright. This is not a judgement call but just an observation, and now that interest rates have risen (quite modestly IMO) we're seeing the impact on just about everything. VC funding was not immune and despite the article downplaying cost savings, when employees are your major cost by a margin of 5-10x, lay-offs make an big impact on how long you can stay alive. The costs of lay-offs are overstated here based on my experiences on both sides of a lay-off.
The article might be over-arguing that layoffs are always bad, but it definitely raises responses to the idea that layoffs are always a good tactic:
> 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. [...] 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.
Certainly it's a case-by-case basis, but I definitely remember companies such as Patreon doing layoffs in early 2020, only to be hiring again a few months later in the year.
For example, Tesla’s valuation was probably more dependent on that kind of investment because their valuation was based on the idea that full self-driving AI was achievable. Whereas Google isn’t because no one is waiting for Google to do anything amazing
But I pointed out COVID specifically because it seems tech companies overall benefited from the pandemic. Even I invested extra in tech companies during the pandemic because every other industry was physically being impacted by the virus.
If everyone trips and falls during the race, you’ll get first place, but it wasn’t because you got any better. But wait long enough and everyone will catch up
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.
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.
How do you know the tech companies were overvalued at the old interest rates, and it wasn't just a due to interest rate changes?
It seems pretty obvious if interest rates are high, tech companies which make most of their profits far in the future were going to be worth less than value companies where most of their profits are in the short term.
> How do you know the tech companies were overvalued at the old interest rates, and it wasn't just a due to interest rate changes?
Obviously I can't know one way or the other, but I laid out my personal belief in the original post. Essentially, many "tech" companies are just digital versions or existing business and products. In such cases, there isn't as much value to capture compared to unlocking massive amounts of human potential like a company like Google. The market, however, was valuing these two types of tech companies the same. Peloton is a good example. Peloton is a great product and can really make a dent in the home-gym market. But the home-gym market is already relatively mature, so Peloton really shouldn't have been commanding such insane multiples on any metric (sales, revenue, cash flow, etc.)
I think the 100's of intelligent sophisticated investors that influence the price of the market didn't suddenly start to understand the fundamentals of companies they didn't before because of a change in interest rates.
It makes much more sense they just plugged in a higher discount rate to their models.
Peloton has fallen because they went from a company with rapidly growing revenue to one falling revenue.
> Peloton has fallen because they went from a company with rapidly growing revenue to one falling revenue.
Exactly. Their growth expectations were unrealistic. They were bringing a marginally better product to a saturated market under the guise of being a tech company. They could be a good business if run lean, but they’ll never realistically command insane multiples on revenue.
i'm confused by this automatic lumping together of "tech" and "growth". Will Google or Facebook make most of their profits far in the future? Is the universal expectation for Google to double next year? and people ran out of patience and dumped Google stock so that it halved in value? of course not, something else drove this.
You don’t need to predict the future. The fair value of a company is the discounted future cash flows. Increase the discount rate and the valuation falls
I think if you're an investor and you value companies not just on how they are doing today but but how you think they will do in the future you will be more successful than if you just look at today's numbers.
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.
I'm not the GP, but the rebuttal to your point about interest rates is that it is not about using cash vs debt. GP was making the point that interest rates affect NPV calculations ie future cash flows of the company have to be discounted at a higher rate
Discounting NPV of future cashflows affects stock price, and increased interest rates mean a greater discount. No argument there.
Okay.
So what?
Why would a dropping stock price motivate layoffs?
The GP's claim is that it's because it makes debt more expensive (which it does!)
> when borrowing money becomes more expensive, these companies can no longer fuel business expansion or stock buybacks with cheap debt
But unless you're funding your operations with debt, that just doesn't matter that much, and in fact it can have a positive effect because it makes stock buybacks cheaper (looking at you, Apple).
Now, you could make the argument that maybe shareholders see a dropping stock price and push for layoffs to protect their investment.
Okay.
Except a lot of these companies have dual-class shares. Meta can (and does) simply ignore their shareholders. If they're laying people off, it's because Zuck decided they should.
The best explanation I see is bad long-term projections of the fallout of COVID, combined with social contagion as tech would rather sell the idea that there's a major recession imminent and they're cutting proactively, rather than admit they just screwed up and over-hired.
what's weird to me is that this is happening at all kinds of companies, including ones with what I thought was pretty level-headed management. It's not just one company oops screwed up and over-hired, and "tech" is not really a monolith. Yet, they somehow all simultaneously screwed up and over-hired?
Wouldn't NPV of future cash flows dropping mean you may have less cash flow in the future to pay for employees you may have hired anticipating those cash flows?
By the way, you're certainly right that increased interest rates depress the NPV of capital expenditures as the cost of capital increases.
That means businesses planning to, say, open a new factory or expand into a new market, might choose to delay or cancel those plans, and that can certainly impact growth projections.
But the tech megacorps aren't typically growing that way anymore. And even in the case of a company like Meta, which is investing heavily in their "metaverse" vision, they're funding that with cash because they're money printing machines.
So the way interest rates factor into cashflow analysis is in the opportunity cost to the investor of investing in a particular asset. That is, if interest rates rise, that means I can probably find greater yields elsewhere, which for a stock means I should increase my discount rate.
> First, assume that our opinion of future free cash flow doesn’t change so as to isolate the effect that the discount rate will have on value. You can think of the discount rate as the opportunity cost of investing in Stock A over Stock B or Investment C. If interest rates rise, so too should our discount rate since we would have more opportunities to do more with our money elsewhere. And since discount rates and present values are inversely related, value will decline, all else equal, as the result of a rise in interest rates.
> The first way in which interest rates factor into a DCF model is through the discount rate. The discount rate captures the rate at which the value of money declines. Prevailing interest rates are a big factor in opportunity cost. And opportunity cost is an ingredient of the discount rate.
> Calculating the DCF involves three basic steps. One, forecast the expected cash flows from the investment. Two, select a discount rate, typically based on the cost of financing the investment or the opportunity cost presented by alternative investments. Three, discount the forecasted cash flows back to the present day, using a financial calculator, a spreadsheet, or a manual calculation.
So DCF analysis doesn't actually say anything about company's actual future cashflows. It's about the value of those cashflows to the investor when weighing the value of that stock versus other types of investments.
Bringing us back to the topic at hand, that means higher interest rates should depress stock prices because of the increased opportunity cost versus investing in other assets.
Excellent summary. It's always about opportunity cost and relative prices, because people always have options. Employees can go where they are paid more, investors can invest where the returns are higher, consumers can choose the better value. The world is filled with businesses that had positive operating margins but nevertheless declared bankruptcy because their funding costs were too high.
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.
GP is missing one of the major reasons for tech stocks to fall in a rising rate environment. (They're probably not missing knowing it, but missed saying it explicitly.)
When risk-free rates of return increase, that harms the value of all growth companies by increasing the discount rate applied to future cash flows (while not giving a corresponding "credit" for near-term losses of cash)
Higher interest rate was the catalyst to recognizing reality, not so much a fundamental shift of financials.
Many of these companies were losing money and their future imaginary positive cash flows were wishful thinking given their business models. Higher interest rates accelerated loss in value as the speculative sentiment shifted to a more risk-averse posture once the market accepted the reality that was always there: these companies never exhibited the ability to make any money, plus they were cannibalizing themselves due to the extreme competition from other startups fueled by the huge amounts of money vc’s were able to gather during the zero interest rate mania.
Discounting future negative cashflows was always a foolish game.
I think changing interest rates can easily (and often do) cause a fundamental shift of financials.
If I have a company that will lose 100 units of currency this year and next year, break even the year after that, and then return 20 units of currency for each of the next 17 years, then vanish without a trace, that's worth positive 46 units of currency at a 3% discount, nothing at a 5% discount, and negative 37 units of currency at a 7% discount rate. (Whether you discount the initial losses changes the analysis by only a small amount.)
Discounting of cash flows is not what I consider to be “financials”. Financials are the output / cash flows themselves not the speculative investment calculation of future flows given a determined discount rate.
Initial cash flows weigh much more heavily than later cash flows, so initial losses in a cash flow series have a much larger impact on npv. Therefore, I disagree with the conclusion of your hypothetical.
> these companies never exhibited the ability to make any money
the most talked-about layoffs right now are happening at salesforce, facebook, amazon, etc. I'm not sure what you are trying to convey or which hypothetical companies you are talking about, but these are printing money.
My analysis is not limited to the “most talked-about layoffs” (whatever that means) nor is it limited to some cherry-picked old cash-cow behemoths that are going to have much slower growth rates going forward. Possible exception is Facebook if they can make the VR bet work, but I have serious doubts about VR being commercially profitable within the next 20 years and even more doubts Facebook will be the company to make this happen.
i didn’t say every company was. this is mostly true of the mega cap companies.
and it’s not misleading at all. Apple and Meta are both known to sell bonds aka taking on debt for the primary purpose of buying back their own stock. that doesn’t have anything to do with their multibillion pile of cash.
They got caught in the hype and lost a lot of money.
Apple has many times. I don’t know why this is suddenly a conspiracy that some mega cap tech firms used cheap debt to buy back their stock. It’s not. It’s actually the primary way that these companies hid dilution from investors due to employee stock comp.
> 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.
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.
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.
That doesn't sound right. Nobody could predict that Covid (and reaction to it) would hit worldwide in March 2020. But looking back, you can try to unpack what effect it had on the markets. That's not going to help you predict the next one.
Sounding right, gut feeling, these are staples of bad reasoning. Markets have long term gains and random walks when you zoom in. That's it. Over the past years millions of things happened and hundreds of markets behaved as markets do. Cherry picking is easy, and wrong.
You can't predict, and coming up with an explanation during the fact is very problematic. But it's certainly possible to explain things after the fact.
> 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.
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.
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?
Well, the second comer is raising a bunch of VC funding too (iirc raised $25M so far and in talks to raised $250M more). VCs buy in because "this time, it's different" narrative. Or more likely because they know they can offload their shares to the next VC in the next round (who can then dump on retail).
It's a game of musical chairs with the ultimate goal of dumping on retail investors. If not that, at least dump it on other VCs.
I'll bet that Uber has a lot of waste and bloat that the new guys could avoid
I've heard some horror stories about a rideshare rider paying inflated surge prices while the driver just gets the normal rate, for example. (not sure which service this was)
Theoretically it should be dirt cheap for Uber to leverage its customer service and app for any new market to compete on razor-thin margins, but in practice they could be wasting most of that money and leaving the door wide open to a really lean competitor
- Drivers are full-time employees, not contractors. They don't care about waiting or not showing up for short/long rides - they get paid either way.
- Currently, you can only schedule rides in advance. Rides are available in 15 minute intervals. Doesn't work for a lot of situations but is perfect for going to the airport - the drivers always show up on time and will happily wait (for a small per minute fee) as long as necessary. WAAAAY less hassle than booking an Uber.
- All vehicles are owned by the startup itself.
It's essentially a taxi company with electric cabs and a good app.
I am assuming it is Delhi-NCR in India. I got a chance to use BluSmart this week. I am impressed. The driver was courteous and the cab quality was good compared to the abused vehicles used by Uber drivers in India.
- Also no surge pricing. Pricing is fixed by a rate chart based on KM travelled.
The only issue right now is availability. From Delhi airport it is OK but when I tried to book one from the hotel to a friend's place the earliest availability was after 4 hours whereas Uber was 5 mins.
Yeah, agreed on all points. But if you know you have to be somewhere ahead of time, scheduling rides is such a better experience than the last minute dash for an Uber.
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.
They retrained and got reallocated to the new hot sectors (how many people work in tech now vs. in 2008?), or they joined the pool of unskilled labor, or they dropped out of the labor force.
The economy is always changing - new more-productive ways of doing stuff get invented, relative prices change, consumer tastes shift. Layoffs & rehiring is the economy's way of redirecting employees away from unproductive, unprofitable work and into new careers that are better adapted to the times. Your mental model of what a career looks like needs to include leaving jobs (and if you don't do it proactively, it may be done for you) and shifting your efforts into new work that is more adapted to the times.
Yes, for the most part new jobs were created and those people eventually got hired. The unemployment rate has been low for several years. But the labor force participation rate did decline slightly. Some people retired early, or chose to stay at home.
I feel like people really just got used to the world after 2008.maybe I'm misremebering. Before 2008 everyone was going to college because it was a guaranteed job after you graduate. Then the financial crash happened and it became hard for everyone to get jobs. Then we got cynical about college
We got cynical about college also because the costs spiraled way faster than incomes or prices for other things were rising. Colleges never lay people off, they keep expanding their administrative bureaucracy, all funded by growing student enrollment and easy student loans.
Student enrollment is going to start falling (demographics as well as more people questioning the value) and colleges are going to be in for a world of hurt because they don't know how to tighten their belts.
University Problem: Students are complaining about insufficient parking on-campus.
University Solution: Wipe out 1/4 of the available parking space to build a shiny new library, renovate the old library - turning it into a "student life center" nobody knew they needed, then triple the price for student parking permits and require all freshmen to live in the overpriced on-campus housing.
that's not how i remember it. we had a whole over employed thing for years, people always said unemployment numbers werent accurate because of that, the meme of people getting degrees and serving coffee etc..
community college and public schools without dorming are ~3k a semester. california is $46/credit for 736 for 16 credits.
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.
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.
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.
#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.
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.
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).
While I'm often annoyed if not downright frustrated by Google search results today, it's perfectly clear to me that I wouldn't have the level of career I have if it wasn't for the value Google provided to early internet searches. Compared to the folks who had 10+ years of experience on me in 2000 it certainly felt like a super power.
Google and just the amount of accessible information. I sometimes think that if I were transported back to my pre-web job, the level of sheer frustration I would have at the limited, out-dated information I would have access to for everything would be immense. Of course, most everyone else would be in the same boat but we're accustomed to trivially looking up so much stuff that would have required significant time and/or money to find out--if it were really even available at all.
I do a lot of heavily-NDA'd firmware work during the day and play around with web stuff at night
There's absolutely nothing available for my day job online, so you could say I've been living without Google for a decade. It's not as tough as you'd think. You just have to remember some basic syntax in your head or write it down in your notes, and look up APIs when you use them.
It doesn't honestly take much longer to do something sans-Google at work than it does to cobble web stuff together with Google and StackOverflow's help. It's OK
For most stuff sure. But as soon as you hit an edge case you're kind of on your own. I've been hit by some fairly tough bugs / issues which had ready solutions available a quick search away. When things go wrong is where I think you'll see the most difference in pre and post Google problem solving efficiency.
I didn't and don't do a lot of software development. I was a product manager for a long time and then an IT industry analysts. As a product manager, to pick on one particular point, we had very cursory competitive information. We had some expensive subscriptions to analysts who essentially acted as a clearinghouse for data sheets that companies couldn't get from each other directly. But it tended to be very shallow and out-of-date.
Certainly not everything is on the web with or without paywalls. And, as when I was doing software development at night pre-web, I could just have a library of books. But for a lot of things, you made do with taking longer, being more shallow, and making more mistakes.
What I think people tend to forget in this discussion is the genuine value that google brought when it first came out was not “better search” so much as it was “resilience against gaming”.
The pre-www search engines (gopher, Archie, jughead) were pretty sophisticated by allowing you to combine search expressions “and, or, near, phrase”, in essentially a regex style fashion, and they were getting better and better. Early www search engines followed the same approach, operating in the way that some library catalog systems still do. The problem is that they were easily gamed by bad actors.
This wasn’t an issue for some time, but the very instant making money become a possibility on the internet, everything changed. People remember google trouncing Altavista, but this was the broken Altavista that couldn’t defend against the scammers. The war had been going on for some time by then, with search engines starting well and failing once their weaknesses were discovered and exploited.
That google “topic + reddit” is now a thing says to me that the gamers have again won, and a new search approach is needed.
I do miss the old style directory search engines for the ability to explore them. I could click on a topic and keep drilling down, down, down and endless rabbit hole and learn new things. Now I use wikipedia, but it doesn't quite have that mind blowing feeling I felt as a kid.
> That it devolved into ad-rotten mess is different topic.
I'll bite. Can you take take screenshots from some sample searches to prove this point? Because I don't find it an ad-rotten mess. It's still extremely functional, and fairly clean.
Functional? Do a search for some term that has a few meanings. The first 60% of the page is a summary of wikipedia's article for the wrong meaning, followed by an ad for a competitor of a different meaning of the term followed by a "people also ask" section where the questions are unrelated to what you want.
Then scroll down past 2 or 3 actual web links interspersed with adsense links - none of which apply. Then you have the wierd carousel with a bunch of unrelated vidos and a couple links interspersed with ads.
During your scroll you'll encounter several links/buttons labeled "more", and it's unclear which of those is actually for "more link results" rather than a switch to video search or whatever.
At some point (if you haven't given up in exasperation already) when you decide to refine your search terms, you get the exact same result page, completely ignoring the new terms (although occasionally the ads will change).
I guess its functional for extremely basic use cases, but if you ever need to find some deep knowledge, it's literally useless in 2023. In 2008 it was "you'll find it, but it might be on page 10" rather than "good luck not getting mislead on your way to find that page 10 is literally all bot spam".
Search for any kind of product review for an appliance. i.e Best microwave, washing machine review, anything like that. Virtually all of the results are astroturfing spam.
On my browser (with an adblocker), "best air fryer" gives me a list of review articles and best-of articles from relatively reputable outlets (Good housekeeping, homes and gardens, etc). On my phone, everything above the fold is an ad (a widget with some direct links to places I can purchase one near me -
this is arguably the most useful as links to American stores are useless to me, a review article from a newspaper, and the other Amazon) and tagged as such ("sponsored"), and everything after that is relatively the same results. I don't see how these could be better. A specific article from some "best appliances" ombudsman who can be trusted?
Is it though? Google has dropped so much from its index these days it is no longer "just put that phrase you wrote ten years ago in quotes and the forum post will come right up". Smaller search engines obviously also suffer from this, but I do believe that peak previous gen are better than this
My point is more that google of today undeniably has the resources to be that detailed, but they are actively choosing to dumb things down and use AI to figure out what I meant to search instead of just searching for what I tell it to, and they are actively choosing to drop things from the index when they could afford to index literally everything.
I don't know how to estimate nostalgia but I've absolutely noticed google search results getting worse in the past 6 - 18 months. You'll see that the entire page of results is based off one misreading of a phraseology, not what you actually searched for. It feels worse in a "misguided" way, not in a pure deterioration way.
To be fair, the deterioration of search isn't wholly Google's fault. The web has become less searchable, because people try to game Google's metrics, which leads to Google trying to get clever to provide decent search results, which leads to deterioration of core functionality. I don't really see a good solution short of taking all the "SEO" specialists and their corresponding blogspam and throwing them into a volcano.
Yeah... usually when I'm searching, I'm looking for something deep in the weeds, and what I get are really surface-level results. It's like I'm searching for some deep detail about how 3-phase grid voltage levels react to a severely imbalanced load per phase, and instead I get a bunch of junk about how to plug a lamp into a household socket without electrocuting yourself (totally made up illustrative example!). I truly think 1990s AltaVista was better at this kind of stuff than today's Google (but maybe not early Google).
I'm not arguing that the results are worse. Google is obviously more accurate with a larger index etc. But...
Ads. Google's SERPs are about 75% ads above the fold on a laptop. They're horrible.
Privacy. Everything you do on Google is tracked up the wazoo. It's pretty much impossible to stop too.
Share-ability. You can't share a Google search because personalization means everyone gets different results.
API access. Yahoo in particular had a really good Search API. You could search via the API and do things with the results. Google only allows you to embed an iframe to their site to display the results their way, with their ads. You can't search programmatically any more unless you pay a lot of money.
But since then google has fallen way down, and search is back to being awful and full of chaff. Whether that's because we have higher expectations, or because the chaff producers have adapted and google has failed to adapt to their adaptation doesn't change the fact that search is back to being a chore like it was in 1998.
20+ years ago, I could search for exactly what I wanted. Today's search engines often give me a page or so of irrelevant but popular results before I find what I need.
I think that's a little silly, You can get a google search to look for hyper specific stuff it just requires a little bit of massaging. It was not at all true that there was no massaging required when asking Jeeves for something.
Good luck getting hyper specific stuff now that Google isn't including most of the web in their index anymore. Google quality is the same as AskJeeves was. That's where we ended up with no AltaVista and bing copying results from google.
Maybe I was just too young to know better, but I seem to remember AltaVista being pretty decent. My internet was super slow back then anyway, so the search latency probably didn't make a huge difference.
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?
I also remember when Google only used to have ads over to the side. I really don't like Google at all now and I'm switching to either DuckDuckGo or Bing.
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.
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.
> 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.
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.
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"
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.
And what if all of those presumably smart people are literally running off a cliff? Like we saw just this with companies investing in obviously deadend technology like NFTs or the metaverse.
When I see these layoffs I see the exact same thing as the above. CEOs pretending that they know what they're doing, then other CEOs also imitating that, followed by driving off a cliff.
On the other hand, if you ran a company and didn’t overhire in the past few years to the extent of necessitating layoffs, you would have been going against the herd and been right, supposedly.
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.
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.
> 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.
I agree that the article seems overly dismissive about the macro changes, but I think your argument (like so many other comments dismissing the article itself in this thread) is orthogonal to its point, which is arguing against the concept of layoffs itself. If you actually read the article, its whole point is challenging that layoffs should be the hammer that companies reach for in the toolbox whenever recessions (or at the present, rumors of recession) loom.
The social contagion theory in the article applies both to whether there's a reason to do layoffs at all (which you and many others disagree with, that's fine) and whether layoffs are the appropriate response (which I'm not seeing many responses to, other than the discussion of doing company-wide compensation cuts as an alternative to layoffs).
If you actually read the article, it's mostly arguing against using layoffs even if there might be something to respond to:
> Academic studies have shown that time and time again, workplace reductions don’t do much for paring costs. Severance packages cost money, layoffs increase unemployment insurance rates, and cuts reduce workplace morale and productivity as remaining employees are left wondering, “Could I be fired too?”
> 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.
And so on. The article definitely cites more than one source for that, even some of it is anecdotal, such as Southwest not doing layoffs after 9/11, or the words of this CEO or not. But the point is that your criticism misses the point of the article.
If I were to write an article about a current hot topic and the title is a question, such as "Why are there so many individuals abusing opiates, should we be worried?". Then, in the first paragraph I said, "the answer is simple, copycat behavior". I would not expect anyone read anything beyond that point.
The main question has been answered, in the worst kind of way. This isn't a black and white issue caused by a single thing. It is laughable really.
I think the article has flawed framing and it is rather sensationalist journalism in that respect. I disagree that, even in that flawed frame, that the main question has been answered. Even if the cause of layoffs is not copycat behavior, the article attempts to argue that the use of layoffs (as opposed to cutting wages, etc.) is copycat behavior.
And it does feel convincing in the sense that it seems like many companies are choosing to respond to a problem in an identical way, which rather undercuts the tech industry's claims and culture of innovation and disruption and out of the box thinking.
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).
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.
I can't speak to what the OP is referring to, though I have seen some rumors that Meta is supposedly hiring again, and on LinkedIn I continue to see openings at Stripe, Robinhood, and Zillow despite their high-profile layoffs. I do remember in early 2020 tech companies doing layoffs, only to be hiring again several months later. Patreon stands out in my mind.
It seems like a lot of companies are perpetually hiring. However the unspoken part is that they're only hiring people who they can underpay and only if they're a perfect match for a hard to hire position.
I don't think having a opening on Linkedin necessarily means they are hiring. It also works as a form of advertising. I saw several job postings for generic software engineers from multiple companies while they were doing layoffs.
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.
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.
> 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.
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
Absolutely agree. The challenge is that increasing rates did nothing for e.g. home affordability. In fact, by increasing rates they caused builders to abandon some projects because they couldn't get funding.
To do that, it would require congress to actually legislate or the exec branch to issue some executive orders that addressed market conditions like price gouging other than the big interest rates switch.
ZIRP was a horrible policy and I'm glad it's not being continued.
Home prices are in decline, and new home construction (SFH + MFH) is at an all time high (though dipped a bit recently). Rents are actually in deflation mode the past few months. If rates stay high, home prices will fall, absolutely. Unemployment will rise too.
Agreed that congress can do more to help though. Incentives are poorly structured to promote housing affordability.
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.
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.
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.
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?
yes, in this situation the economy is literally self combusting, funnily enough this number is actually real just a few months ago in a significant sized economy.
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
Compared to 2001 & 2008, the 2020 recession was a blip on the radar. I graduated high school in 2009. My entire adult life to this point has been in a prosperous economy. COVID felt "different" (it was a pandemic, 100 year event kind of thing) to now. These layoffs have me worried for my family and what it could mean for our future.
It really is amusing to see how much HN thinks that times are tough right now and the talk of the current economic conditions as a recession. It seems like the majority of HN weren't graduated from college in 2008 yet or else they've somehow managed to forget what that was like or just weren't paying enough attention. And the ones that just found it hard to get a job out of college probably weren't watching the stock market closely and don't seem to remember how bad things got after the Bush administration let Lehman collapse and when we nearly "broke the buck" and Congress had to act to prevent a total financial collapse. We have 3.5% unemployment right now, not 6% and rising 0.4% every month.
At the same time nobody seems to be paying attention to how rapidly the Fed raised rates this time compared to the build-up to 2006-2008, and while everyone talks about low rates for over a decade caused malinvestment nobody seems to be doing the very obvious math of what is going to happen when higher rates destroy it all.
2009 was not a prosperous economy. The economy was quite bad until late 2011.
You started off your adult life in a pretty bad recession.
Maybe college insulated you from that.
2020 was shorter than 2001 - but MUCH worse. 2001 wasn't very bad unless you worked in tech in The Bay or invested your life savings in Internet meme stocks.
Because HN is basically filled with Boomers at this point, maybe most commentators don't realize that there are different segments of young people.
Those who were in the Class of 2020 and above got FUCKED big time hiring wise.
Those who were in the Class of 2008-2011 got FUCKED big time hiring wise.
Everyone who started their career between 2012-2019 (like me) have had an amazing ride. We could jump companies at the drop of a hat and 1.5x-2x our TC, stocks were constantly rallying, and it is this group that started to enter middle management and/or build startups with YC. And it is this group that has never experienced a real recession.
PS. What is happenning in tech right now is nowhere near a recession. I've seen the stress my parents had during the Dot Com Bust and 2008. What's happening right now is nowhere near that bad.
And hopefully it won't get anywhere near dot bomb levels for tech.
I was very lucky to find a new (lower paying) position during that era and the company I joined subsequently barely got through some of the aftermath. But I knew a lot of people from technology companies who basically got out of the industry and, for at least some of them, their careers/finances never really recovered.
At least talking to people who went through 2001 and 2008, it looks like there are more opportunities across the board now. If you got laid off from $randomYCStartup as a SWE or SRE, you can still land a decent paying IC role at one of the 100s of upper market companies that exist. BoA, Honeywell, Target, etc are still hiring SWEs and paying decent salaries, as are the hundreds of upper market B2B tech companies (eg. Okta, Meraki, Oracle, etc). It may not seem sexy like working at Google or Meta, but it ain't a bad living either. Sadly, a lot of my peers have this sense of hubris that anything less than FAANG or a late stage startup spending tens of millions of dollars in PR is career suicide, which is honestly stupid in an industry as skill oriented as ours
Fibber Magees, Mountain View (now St. Stephen's Green). Out of work people in tech at the pub at 2 in the afternoon. On their right, a beer. On their left, a pager that isn't buzzing (hoping for a message from a recruiter).
Talking to the guy who got a job serving gelato next door and a guy who is about to start work 3rd shift at Blockbuster as a cashier. They've got masters degrees in CS but when the company closed up quickly, they had to find a job quickly that paid some of their bills (rent in Mountain View wasn't cheap).
Those were not happy times.
I was fortunate. My manager had previously worked at Apple in the bad years and at the first signs of future possible problems had gotten two open reqs for our team approved all the way up the chain to the C level. While the reqs were approved she really dragged her feet on writing up the job position and after a bit, HR got tired (I presume) asking her and then we had a hiring freeze and well, that was the end of that... except that we had two C level approved reqs that were unfilled. Then contractors weren't renewed... and then contracts were ended early. When the layoff happened she was told to lay off two people from a team of four. She laid off the open reqs and pointed out that if the director levels were to force her to lay off some from the team, she would immediately rehire them back in to those open reqs. So, our team survived intact. That was 2001. However, in 2009 she wasn't my manager anymore (and had gone to do other things).
I graduated from Software Engineering in 2001. Doing a 3 year postgrad degree was one of the best options work-wise at that dark time. We are not that deep, for now, at this time.
Fortunately, I never needed to come up with a Plan B as I fairly quickly landed a job with someone I knew at a small competitor of the the company I was laid off from (which was still doing OK although that changed). But I never got so much as a nibble from anyone else.
>Because HN is basically filled with Boomers at this point, maybe most commentators don't realize that there are different segments of young people.
Generalizing 'boomers' as over 30 and giving a lecture about it while at the same time complaining about people not recognizing segments of other generations is an amusing lack of self-awareness.
Gut feeling and general tone. I'm Gen Z and the way people talk on this forum is tonally and syntactically different from my cohort. Also, ime, most early career peeps prefer subreddits to HN - HN has a bit of a smartass/toxic quality to it that has turned off just about every friend of mine below 27 who I've tried to evangelize HN to. Also, down the grapevine at least, most YC people don't really use HN anymore - they have their own private Founder Board that they prefer perusing now.
Are you emulating the way people write in this forum? Because I'm not detecting those syntactic differences in your own posts. It looks like normal English to me.
Well millennials aren't boomers, but I agree Gen Z is a minority here. Reddit also has "smartass/toxic" covered but I'd welcome any subreddit suggestions.
There has been a semantic shift with the word boomer - for older people it means the baby boomer, but for much younger people (like Gen Z) it just means anyone 30 or above.
For dumber people it means that, not for younger people.
Younger is not a synonym for dumber.
There are young people who look up words and use them correctly, and there are old people who just ape other people's random shifts and misuses of a word in order to fit in.
You can't really moralize linguistic drift. By that standard your usage of "dumber" is grammatically incorrect with the 19th century English usage of the word Dumb. Language changes, grow up.
It's not genuine linguistic drift. You and few people have your own meaning for widely used term (which you're entitled to have), and you're knowingly using that meaning in a situation where you know you are not surrounded by those people.
You made a comment elsewhere in the thread saying that HN was full of boomers.
Now it is clear you just actually meant people over thirty, which makes it true. Your usage of "boomer" has not yet passed into the main stream; it is not comparable to "dumb". Google Books easily finds a 1930's reference for the usage of someone "getting dumber and dumber".
I'm not moralizing, by thew way; dumber isn't a moral flaw. (By the mainstream definition of moral; maybe you have your own version of that too).
The boomers were born just after WW2. Most of them are going to be 60+ and many are going north of 70. I highly doubt the majority of HN are that old, or even a large segment (33% or more).
Gonna be a lot of Gen X and Millennials, probably a disproportionate number of < 35 tech bros
There has been a semantic shift with the word boomer - for older people it means the baby boomer, but for much younger people (like Gen Z) it just means anyone 30 or above.
Inflation is a measure of how certain products and services go up in price, but not all, your product might be out of
demand as people’s stagnant wages are consumed by rent and food increases. And then there is the issue of costs going up!
That said: There will be opportunities if you can borrow at 10% and stay solvent to invest in something well through in this extreme
case.
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.
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.
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
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.
> [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”.
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.
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?
“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?
> 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.
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.
I guess/thought the context of this was around 'big economic events' like people are predicting for 2023 - big economic downturn/recession.
I generally agree that it's not something most people would be on board with most of the time. Extreme/national/global circumstances, yeah. If few are hiring, everything's paused, etc... taking 10% pay cut seems reasonable. If the cuts are just because the company isn't run very well... yeah... move on to something else if you can.
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.
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.
> Teams can be high performing, but high performing individuals are often built by the environment.
This is a common bias I experience in American corporate culture and it drives me nuts. Viewing things at the individual level makes it really difficult to understand and cultivate productivity in a sustainable way.
Often I find it more useful to look at productivity at the team level. It tends to have more explanatory power than at the individual level because it gets more into psychological safety, communication, attributes that are crucial for high performing teams but are difficult to suss out if you are just focused on individuals. Like you, I have seen way too many smart people stuck in situations where their skills and talents were completely underutilized. Vice versa there's way too many politically adept but inept individuals out there who have the companies that employ them in a stranglehold. All they do is empty these companies of resources, time and money while bringing nothing of value in return.
Amusingly I was also quite unaware of this historical footnote until I listened to this song [1] from a Putamayo album that mentioned Stakhanovism and had to look it up.
> 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.
Sure, but during mass layoffs, those high performers are a lot more replaceable, and they themselves would know as well, and be disincentivized to walk.
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.
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.)
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.
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.
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.
I totally agree that companies may not get the right people. They also may not intend to get those people. A lot of companies get rid of teams they don't need rather than individuals. Sure, it would be more efficient to lay off dead weight from all teams, and reassign the remainder of the teams you don't want, but higher ups don't have the time for that.
And I was affected by a layoff just recently, but layoffs don't really hurt good engineers. You just find another job. My whole team was nuked back in November. But I found a new job within a month, and at a 25% pay increase. So taking a cut would have been a terrible deal. They say the market is bad, but I think that just means bad for bad engineers. Whereas quality really didn't even matter a year 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
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.
"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.
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.
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.
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.
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.
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.)
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.
> 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.
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.
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.
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.
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!
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?
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.
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.
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.
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.
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.
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.
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.
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.
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?”
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.
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.
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.
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.
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.
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
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.
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.
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.
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.
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.
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.
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.
"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.
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!
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
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".
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.
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.
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.
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.
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.
Yeah that's a really weird critique -- the linked article from November says they have sources telling them that Google was going to adjust their PIP so that 6% instead of 2% of people fall into the lowest category. Then in December, Google gave details of their new ranking system --- and 6% of employees will fall into the lowest ranking category (https://www.cnbc.com/2022/12/22/google-tells-employees-highe...). I guess you could argue they didn't "announce layoffs" like the others, but when you start shuffling tens of thousands of employees into a PIP, is the result not the same?
2% are expected to be in the lowest bucket. 4% are expected to be in another "below normal" ratings bucket. Neither of these ratings are tied to PIPs. Even in the old system, most people who received "Needs Improvement" ratings were not given PIPs.
Google also gave details of the rating system and expected distributions in March, not December.
A few months ago there was a Forbes contributor article (e.g., blog post) that claimed that Google was going to lay off 10,000 people (6% of the company). Their argument for this was that Google introduced a new performance review system in 2022 that changed the expected ratings distributions such that roughly 6% of the company was expected to receive either of the two ratings below the baseline "significant impact" rating.
From this, oodles of news outlets reported the headline: "Google plans on laying off 10,000 people."
The new performance review system was created in 2021 and announced in like March 2022. It is independent of the current context of tech layoffs. Maybe Google will lay people off, I don't know. But the original post is just baseless nonsense and it is frustrating to see it repeated all over the place.
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.