Letter to Myself in Late 2008
dalton.substack.com
dalton.substack.com
But it shocked me so much that we spent the next four years hunkered down when we should have been marketing and growing.
My advice is to cut like that author is saying, but move on from the cut as if nothing happened.
The 2008 recession clobbered my IT company - most of our customers were in the construction field and many of them went bankrupt.
We did the right thing - we cut deep into the workforce to protect what we could and that was the right thing to do. The remaining employees were able to confidently work knowing that their job was secure.
But the act of cutting deeply, and laying off people I liked and admired cause me to want to act like a turtle and to not want to venture out.
In hindsight, I should have marketed and reached out to new potential customers because other IT support companies were going out of business left and right. I estimate that my timidity after the traumatic cuts cause my company four years of growth.
If I have to do it again, I will. But afterwards I'll act like it never happened - I'll keep growing the company.
The key point: people keep their jobs AND companies keep their trained staff. So when the crisis is over, they are ready to ramp up again. Also, since people keep their jobs, consumption does not drop that low.
This helped the Germany economy massively to recover from the 2008 crisis.
Not sure if it would work the same way for all parts of the economy, but it definitively works for the manufacturing industry.
People are still paid, companies do not have the full burden of wages to pay and especially do not have to go through hiring and training new employees after the episode when they want to ramp up again. It's an awesome tool to deal with a temporary situation and particularly aimed at making recovery from the situation easier (by riding it out instead of first succumbing to it and then having to get back on the feet).
[0] Hear it using the speaker symbol to the right of the german word at https://www.dict.cc/?s=kurzarbeit&=DEEN
PS: I wanted to point others to it a few days ago but unfortunately it did not catch on: https://news.ycombinator.com/item?id=22649108
How does renegotiating a contract look like? I'm picturing a meeting where people haggle over the new price, but that doesn't sound right.
You can explain to your rep what you are dealing with, what your budget is, and make a concrete ask. I get the sense that the larger of a customer you are for someone, the more willing they are to work with you.
I had a colleague once who was an 'office rival', you know the type of person you can't stand and are always one-upping (told you this was going to be petty, but in my defense, he started it). So one day we were moving offices and we needed something for the new office. (Sane companies would have had one person doing this but let's say we were a caricature of 'scrappy startup where everybody wears every hat'). There was one item that is basically like a 'staple' for office furnishing - let's say it was perfectly standardized desks. Or plants to put in the hallways, something even more mundane than desks.
Anyway this other guy had me beat on price from every supplier (everyone in the office was basically one-upping everyone else on how cheap they could get things, to the point where I spend days making my own cat5 cables). But I got the same quotes (within a few percent) from at least 5 suppliers, using just the standard 'what's your best price' beginner negotiation playbook. After that I thought screw this, I'll just lay it out. (let's say this general price was I got around 12k, and the 'other guy' got it for 11k).
So I went to a 6th supplier, let them do their sales spiel in their showroom, and said (pretty much as blunt as I put it here) "Listen, you probably have a great product but I don't care, I'm buying on price. Everyone else like supplier X, Y and Z have given me these and these prices" (I showed him the offers I got). "There is another guy at my office who got prices around 11k. I want to beat this other guy, and you want to sell. The only way you will sell to me is if you can come in with a price below 10k. Let's not do a sales dance here. Can you do this?".
The guy got a bit of a deer-in-the-headlights look, went "to the office to discuss with his boss" (like a car salesman but this time for real I guess) and then came back with a price a hair under 10k.
I got my petty win, then a few months later the company almost went under and the guy who gave me the deep discount called me daily for a month when he was going to be paid until a miracle happened and he got his money, but that's another story.
Anyway, what I took away from this (this was before I had had any sales training or really thought about sales) was that usually, the key to a (hard) discount is to convince the other party that it's better for them to take a smaller profit than no profit at all. And also, that it's better to make it seem that you are not the decision maker or that there is some sort of external price anchor. Not saying this is always the best global strategy; personally I value lasting relationships with good personal rapport over squeezing out every last penny, but in crisis mode it's sometimes just necessary.
That's the Good cop/bad cop" routine.[0]
> O'Brien was the con man, and Hauser the tough guy. A vaudeville team. Hauser had a way of hitting you before he said anything just to break the ice. Then O'Brien [is friendly and encourages cooperation].
However, I'm really interested in hearing how you negotiate that bill again? Are there free AWS credits? The AWS Support seems really hard to reach
Lack of health care during a worldwide medical emergency could outright destroy the lives of those you lay off should they or their families get sick and require medical intervention.
Are you trying to give guidance to startups to lay off? Why not advocate for pay cuts instead, that way they can keep their healthcare? I think most would be understanding.
Lives are worth immeasurably more than the businesses at risk.
I posted an article earlier today about expanded unemployment benefits in the US. It's not a founder's job to provide a nanny state (so to speak). It's the job of government to look out for the people in that way.
> I wrote this letter to myself because I know what I would do differently 12 years ago and I have the benefit of hindsight now.
> keep in mind what ended up happening 12 years ago is that everyone lost their jobs
That's my fear for this pandemic, too. It's a really awful situation.
Stay safe.
Alternatively:
If the business goes under, all employees will suffer. If some are laid off and the business continues to survive, those that make it will be spared.
So from a harm reduction point of view, laying nobody off is probably worse than laying some people off.
Even if you reduce pay, people may not be able to afford housing even though they're still working for you (e.g. in the bay area). And health benefits still cost the same even if you reduce other employee associated costs.
Things are not as simple as (I'm interpreting) you're implying they are. It's not black and white, and the decision needs to be made on a case by case basis.
Is all going down together a better outcome?
If you don't have the money, you don't have the money.
> People are counting on you to do the right thing.
Only because he says this after talking about layoffs as a purely business decision. I have no moral qualms with doing layoffs, and as others discussed it might be better to do one for the moral of the employees than to be stuck with multiple rounds of layoffs. But he talks about having plenty of cash, then cutting more than needed (which is people's livelihood)... then uses the same livelihood as motivation. Am I being overly cynical?
My assumption is that "plenty of cash" is conditional on aggressive layoffs. He says "high burn" early on so I was assuming a scenario of "everyone loses their jobs within 6 months" vs "30% keep their jobs."
https://www.youtube.com/watch?v=bi-Z5uCe7xs
>[Triumph is a plaintiff,] a rubber dog, black and brown in color, that wears a gold bow tie, often smokes a cigar, and interacts with animals and with humans through rude and often vulgar comments, through physical actions and/or attacks.
>[The pets.com sock puppet] is an advocate of pets, the voice of pets, and often interacts and communicates directly with other animals or with humans in order to convey to pet owners how pets feel about various pet related issues.
https://www.youtube.com/watch?v=qgtn7iAXSgc
https://www.latimes.com/archives/la-xpm-2000-may-04-mn-26524...
>“Maybe they see a profit potential in the sock puppet, because they sure aren’t going to make much money overnight shipping dog food to America,” says Bob Garfield, media critic for the industry trade publication Advertising Age.
A startup, by definition, is a group of people searching for a viable business model. It does not look like this in that hard moment where everyone looks at you and faults you for failing, but in the end surviving with a third of employees and potentially helping to rebuild the economy two years later is the ethically and economically preferable alternative imho.
The 'right thing' in this case means something like 'face reality clearly, instead of clinging to fantasy because things are too painful or scary'. If you read to the end where he says "People are counting on you to do the right thing", he's telling founders not to shy away from difficult decisions because they're afraid of what outsiders might say. The point is that if you know deep down what needs doing, you're not helping anyone by avoiding it.
I think he's talking in absolute terms versus relative terms that founders are used to thinking in.
Imagine that you have $3 million in runway, but you are burning $500K a month. That only gives you 6 months of runway.
It takes perspective to zoom out to realise - "Hey, I actually have $3 million in the bank. That's a lot of money. If I can somehow reduce costs to $150K a month, I actually have 20 months of runway to figure things out."
Unfortunately, this means "cutting more than needed".
Any examples come to mind?
https://techcrunch.com/2008/10/24/19683-tech-layoffs-and-cou...
How does one begin to do this? I don't think I can just open a support ticket titled "hey, can I pay less?" Or is this meant to be for startups that have existing contracts with Amazon?
https://news.ycombinator.com/item?id=21784311
tedivm 3 months ago | parent | favorite | on: Why Nukemap Isn't on Google Maps Anymore
I've worked in a lot of startups and have never had to pay that whole price until we had decent revenue. The AWS Activate program [1] has been pretty solid for my current company.
There's a big joke going around that AWS is basically a VC that invests in startups with free services and then makes their money back on revenue once they've grown.
1. https://aws.amazon.com/activate/
>AWS Activate is a free program specifically designed for startups and early stage entrepreneurs that offers the resources needed to get started on AWS
In what universe/conditions would such advice make sense? I’ve never heard such a thing.
Then you can sell the foundation by saying "Look how big of a house could be here!"
I don’t think we’re prepared for the kind of declines we’re going to see if quarantine goes on for more than a few weeks.
1. https://www.cbsnews.com/news/recession-linked-to-more-than-1...
1. https://www.history.com/news/great-depression-economy-life-e...
2. https://medium.com/@tomaspueyo/coronavirus-the-hammer-and-th...
There are lots of good original sources we could be using instead.
Thousands/millions out of work may (or may not) experience morbid effects. They will have a harder time participating in the buy side of the economy and driving demand, and also represent missing productivity. That's nothing to sneeze at.
But thousands/millions dead are guaranteed morbid effects. And dead people are even harder to get back into the demand side of the economy (or productivity) than jobless people.
Also near the peak of an unconstrained pandemic... what should we think people's improvised reactions will look like? Business as usual, no economic impact?
The best way to not have an economic impact was not to have an uncontained epidemic we weren't prepared for. We kinda missed that step. Why would we have a choice not to have serious economic impacts at this point?
>Why would we have a choice not to have serious economic impacts at this point?
That's not really a choice at this point, but we do have two paths with unknown outcomes. We can choose to focus on limiting the spread at all costs (and hitting the economy harder) or we can focus on limiting the economic effects but give up on containing the virus. Neither is a good choice in any capacity, but it could turn out that either one minimizes death in the long-term.
In terms of the first article, it seems to only analyze the effects on longevity in the short-term, whereas I think most of the effects observed as a result of recessions take a few decades to really show up. No idea if that's really the case though.
Could somebody explain the logic behind this? I see Dalton disagrees, but why would anyoneone believe this in the first place?
Is this what "leadership" is all about: just transfer all the pain you're having onto the employees who have been doing all the hard work to build your vanity company?
So not a startup.
Being laid off is horrible, but if I'm one of the lucky ones that remain, I'd much rather know that the company is now sound financially (which the author pointed out).
Your question has the same problem as the modified (blocking the rail with a person) trolly problem. It's a hypothetical so you get to state what's true. In the real world, people have much more limited knowledge.
You get to know whether you're cut or not. You get to know whether another cut was needed or not. You get to know whether the company survived or not.
No one ever gets to know if someone was cut but didn't need to be. Not even in retrospect. Especially if they're "on the bubble".
Do you cut more just to hedge the economy won't recover? I appreciate the philosophy 101 lesson but your premise is completely not true. If you cut the Sr. Manager of XYZ and hire another one 120 days later...you probably didn't need to cut the one you did.
If you make cuts based on a pessimistic projection and the future turns out to be much rosier than you thought, were you wrong? I don't think so. You just had limited knowledge.
This is compounded by an unusually wide spread between pessimistic and optimistic projections during times like this. Will someone find a cure? Will enough ventilators be made? How soon will people be allowed to go back to work? How effective will self-isolation be?
Today, no one knows the answer to these questions. We'll know much, much more in 4 months.
It's just not reasonable to expect that decisions made today will seem perfect 120 days in the future.
I don't know why you called his company a vanity company, but don't see that you have grounds for that.
If a company cannot sustain itself on revenue alone, and if fundraising is going to be difficult, it is absolutely the right choice (and kindest to everyone in the long run) to lay off those not critical to its survival. That does not mean that the choice is easy.
In 2008 I was employed at a company which did technical support for petrol stations. Initially we didn't feel the hit, but a year later our line manager called a meeting and said that during the previous month not a single new petrol station from the companies we serviced had been opened and therefore the company hadn't had any money from its largest source of revenue, so they had to lay off 80% of the non-permanent staff(which included me).
They went bust after a few years, but it was still a better alternative than closing down immediately.
Your employer owes you what you earned. You owe your employer what you have agreed to provide in exchange for payment.
Expecting anything above and beyond that...well THAT is "vanity."
With multiple rounds everyone starts to develop neuroses. Productivity tanks, people have conversations about when the next round will be, whether they will be in it, whether essential team member that management doesn't care for will be next, and what sort of a clusterfuck you'll have to deal with when they aren't keeping the wheels on?
Plus by the second or third round, you're probably getting zero severance at all.
After this experience I had a theory that I wanted to be in the first round of layoffs (especially if the company looked like they would do multiples). I got to test that a few years back and it was awesome. None of those people's problems were my problems anymore. No survivor's guilt, no deathmarch. I sat around on my butt for two weeks doing absolutely nothing, and still had severance money left over when my first check cleared at the new job.
If you are the only company doing layoffs, your employees will be fine. If lots of people are doing layoffs, what is more humane? Laying them off before the market is saturated with people, or waiting until the last possible moment when their prospects are at the absolute minimum?
I hope people don't actually think like you (or follow your advice).
In a time like this, it would make more sense to write about people are not a number, and you should keep your employees because there are more important things than money in life.