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Comment by aresant | Hacker News Reader

Dagnabit. Here we go again - this is a fantastic, pragmatic amendment to those notes ->

https://dalton.substack.com/p/letter-to-myself-in-late-2008?...

For a taste:

"Doing multiple small layoffs is a form of cascading failure. Do one layoff, but much much deeper than seems correct. Do it decisively. Do it so that you get profitable. In your case that is something like a 70% cut, not a 5-10% cut. Yes you read that right: a 70% cut. Cutting once and cutting hard allows you to reassure the people that are still here that you are truly profitable and won’t need to do it again. Doing a layoff and remaining unprofitable and counting on fundraising to save you is a stupid plan."

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> a 70% cut...Cutting once and cutting hard allows you to reassure the people that are still here that you are truly profitable

If your employees are dumb enough that they interpret a 70% cut of the workforce as a sign that your company is stable, you're doomed. It's hard to imagine the dumbest person in the world interpreting that as a sign of stability.

It's a sign that you intend the company to survive.

As someone who has witnessed such a deep layoff and was left in the 30%, I began job hunting and moved on soon after.

When I eventually quit, senior management then explained how I was part of their grand comeback plans and offered a salary bump, and in my mind, all I could think of was how they were trying to balance a cost equation.

People far more talented than me had landed pink slips, presumably because of how "expensive" they were for their "output".

That may be the right call for longevity of the business, but I could easily be the one being disposed after my valuable output is put to use and my expense-output is reconsidered.

>As someone who has witnessed such a deep layoff and was left in the 30%, I began job hunting and moved on soon after.

As someone who has witnessed repeated smaller rounds of layoffs, I also began job hunting after the pattern was evident. A layoff is an inherit signal that management made mistakes. Sure, there are probably better ways to handle it than others. However there is no getting over the fact that prior mismanagement now necessitates drastic measures to recover from it. That is going to be enough to get some people looking for an escape regardless of your approach.

I was at a startup during the .com bust. I survived 3 rounds of layoffs over the space of ~18 months. I like everyone remaining at the company, could see the writing on the wall and I was spamming resume's to anyone who looked like they were hiring. Zero responses, pretty much no one was hiring except when it was an emergency. The big/profitable companies were bolting down the hatches, and everyone else was cutting to stay afloat.

I was genuinely scared when my time came, and it took another 4 months, but I consider myself lucky but am uncomfortable with the fact that a previous manager of mine at one of those large/profitable companies which had one of those fishing job postings, saw my resume and swapped me for one of his under performers (aka someone got laid off at the end of the fiscal year, and I got hired). And I took a ~40% pay cut for the privilege.

Literally the only people who were getting hired in my area where situations like that. Never assume you will get hired during a downturn unless you have a really solid network of people who will risk their own positions for you and/or work at companies that treat people like cogs to be replaced if they can get a cheaper/more effective cog.

I was at another stable but small company during the 2008 downturn, and I sadly had to turn away a lot of people I would have loved to work with again, but we were on a hard hiring freeze (the ones where upper mgmt breaths a sigh every-time someone leaves of their own volition because it gives them a bit more breathing room). So these times hurt no matter which end of the table your on.

So, don't assume the job market will remain the way it is today.

Which raises the question of when to jump ship, doesn't it? If your current employer is looking like lay offs and bad times are a head, and the market is really good, do you stay and wait or do you start looking now? You defenitley shouldn't wait to be last one to tirn of the lights, because at the very least your gonna compete with your former co-workers.

If you plan to move in the next 6-12 months, you are probably better off moving now.

Pretty much, if you can choose the parts of the company which are profitable and self sustaining. If given the choice, avoid profitable businesses that rely on other companies growth projections (aka ads)

I'm looking at a non zero propability of having to do that in the next 12-18 months. Not disclose too much, let's say it is funding related and has nothing to do with me.

Now my problem is that I have to move to something, and not away from something. If the company and job aren't intriguing I have a tendency to perform not as good. And I still like my employer and manager, the latter more than the former. Plus, I need to be able to show something before switching jobs.

Something to think about on the next weeks and months, especially with a family and commitments. As I said, the market is good. I wouldn't have much trouble finding something if I really wanted to. On the other hand, having a stable income after a failed attempt on a start-up is quite nice, and I'm out of the probation period.

"If you must panic, panic early. Be scared when you can, not when you have to. " @nntaleb

I was an independent consultant from a 2001 dot-bomb layoff to the beginning of 2008. I saw hard times coming and took a job with the most bomb-proof client I had, and it worked out really well.

I was in the same boat, and this is right on. The founders assumed everyone who got spared was going to be so happy they stayed with the ship until it went down. In reality, we experienced a combination of survivor's guilt for our unemployed friends, burnout at the increased workload, and anger at the founders for making choices that led to that situation. The remaining people on my team just used the reprieve to find new positions while being able to pay their bills, and we all quit, coincidentally on almost the same day.

The founders did not adequately think through the ramifications of their decisions, and it did seem (as another commenter in this thread succinctly put it) that they viewed everyone as very predictable NPCs in their narrative.

As someone who has had to execute large layoffs before — hindsight is 20/20. It’s easy to identify bad decisions after the fact. I’d have loved a crystal ball that could have told me half our customers were going to go out of business, the remainder would almost all cancel their projects, and we wouldn’t be able to close a new deal for at least the next six months. It was a really bad year, and I laid myself off at the end of it. It took me two years to get over it.

I'd just assume the company's already dead and someone's trying to suck some remaining value out of it or make a hail-mary acquisition deal to bail out their investor pals (at no return to employee stock holders, I'm sure) if that happened. I'd be working on my résumé on the "work" day when that's announced, for sure.

The CEO should be able to spreadsheet an argument at the all hands meeting to the remaining employees that they are now profitable and/or have 48 months of runway. Of course, employees are always unrestricted free agents. They can weigh this with the prevailing economic outlook and make their own decisions. Remember, YC's letter is to founders and not employees.

I believe Ben Horowitz made a similar decision and a similar pitch to his employees that he recounted in The Hard Thing About Hard Things. I don't remember Horowitz getting into the depth of the cut but I remember survivability being a stressed point.

If your talking to employees who care at all about the supposed equity they were given, then you need to be prepared to reset the employee equity pool to be meaningful.

In particular, many of the employees will have options that are obviously underwater. Any belief they had in dreams of billion dollar valuations will be gone.

> suck some remaining life out of it

It’s almost as if the blog poster would have a vested interested in seeing a massive cut.

I mean, if there is some transparency and the numbers add up, and 70% cut appears to do the trick, then it would be pretty awesome being in the 30% with a real chance to shine. I imagine there would be a big increase in stock and pay to put things in motion too. Sounds great!

Now if the plan is going to end in flames anyway, it still seems like a great reason to stick around and absorb the knowledge and experience.

I'm a fix-it person and would love the opportunity to turn a company around - it's like the ultimate challenge.

Here‘s the deal: The mere mortal „stock package“ got pretty much worthless the day the „bridge financing“ (which actually was a down-round) got announced.

Recovering from a 70% layoff only happens once in a blue moon, and usually only when a founder led company that has already reached revenue and product-market fit makes a well executed hard cut that does an exceptional job at keeping and supporting the core team amd managing emotions.

In any other more chaotic situation, the product/emotion/revenue death spiral ensuing is usually impossible to stop.

In increase in pay? During a layoff where they're trying to save money?

And then there's the 3x increase in workload.

If the numbers add up to justify the layoff, then doesn't that mean that in the time leading up to the layoffs the numbers didn't even come close to adding up? I'm not sure the transparency and fiscal competence the company demonstrated to justify its layoffs would dazzle me enough to make me miss the fact that they had overhired by 3x or more.

You're too focused on the 70% used for effect. The point is to make a single cut that puts the company profitable, so there is a chance to survive. And even then it's going to be hard, but gives the company a chance.

No person should have assumed stability in a company that was not yet turning a profit. I'm not saying they are bad companies to take a gamble on, but understand they were/are a gamble. VC money suddenly drying up was part of the that gamble.

Even a 20% cut tells you that management is incompetent. If you're a CEO and you can cut 20% of your staff without destroying the business, why on earth did you hire all those extra people and add all that expense in the first place?

Put another way, if you couldn't staff right in the good times, why would remaining employees trust that your "one big cut" will work now? Hint: they won't

Cuts are done because the business has changed. Some part of the business was destroyed by external factors, and now the company needs to adjust to the new reality. It could be that VC money dries up or that customers stop spending. It doesn't mean that 20% wasn't required in the past, only that they are not required now.

This is also why a company should cut a little more than needed, so they have some cushion for things to get worse before getting better again.

I think what you're saying is true in the best run businesses, but that's not what we're seeing right now. We're seeing cuts from business that were hiring like crazy a few weeks ago.

I took the opposite approach around 2010. I was one of the survivors of the mass layoff and I didn’t think about looking for another job.

I did build up my savings, actively engage my network “just in case” and updated my resume.

Once the final hammer hit and we got acquired for our customer list and everyone got laid off. We went to lunch, hung out in the office after our layoffs and from looking at LinkedIn, everyone had a job within a month.

At each round of layoffs, people reached out to their network and had jobs quickly.

I met a recruiter for lunch that following Monday and had an offer Thursday.

No matter how your company is doing, you should always “keep your running shoes around your neck”.

It doesn’t take much research to verify the writer’s complete lack of business acumen.

I cannot imagine a way I would interpret a 70% layoff as anything other than the CEO/management team being incompetent. I mean, if you can actually execute with 70% less, why did they hire in the first place?

The only way this might work is if a company was expanding into a completely new market and pivots away from that (ie, software startup gets a hardware division going, etc)

> I mean, if you can actually execute with 70% less, why did they hire in the first place?

Hiring and onboarding takes awhile. VC-funded companies are intended to grow quickly. Those two things put together means you need to hire for where you want to be in a year or two and not where you are right now.

The actual goals & constraints have changed.

When you hired those people your goal was scaling up as quickly as possible and your constraint was having enough people (in this scenario, money is not one of your constraints).

In the new world, the goal is "stay alive" and the gating constraint is runway.

So, no, the fact that you can survive after large staff cuts doesn't mean the CEO was incompetent. It might, but it might also just be a function of the goals/constraints/execution strategy/environment having all changed.

A very good example of how easy it is to assume incompetence when you don’t understand the constraints.

>Cutting once and cutting hard allows you to reassure the people that are still here that you are truly profitable and won’t need to do it again.

Famous last words. I'm pretty sure that companies always believe this (or at least tell their staff such), whether cutting 5%, 25% or 75%.

The thing that's interesting to me, is that this guy's company was imeem, https://en.m.wikipedia.org/wiki/Imeem, which was sold to MySpace for reportedly less than $1 million in 2009.

I know nothing about the company, but they seemed to have a decent go at it, founded in 2003. At the end of the day, though, I just can't imagine their business model succeeding, Great Recession or not.

Sure, perhaps they could have pivoted into basically something completely different, but at that point, if they were a 5-year old company, how much value would they really have been able to salvage? Given he talks about high burn rate and one of his bullet points is "Renegotiate all of your contracts with the music industry.", my guess is that their model was just fundamentally unprofitable given how much they were paying for licenses.

You'll hear lots of stories and theories about what companies could have done to save themselves, but recessions also serve a very important function of really sussing out who was selling dollars for 90 cents, and honestly that's what it sounded like his company was doing.

A 70% cut is a great way to kill your company once the remaining 30% start jumping ship. Either because of the destroyed morale or because they're doing a lot more work in a higher stress environment.

I mean, losing money is a great way to kill your company. What's better: cut 10%, lose money, people leave, cut 10% more, still losing money, more people leaving, cut 10% more, still losing money, more people leaving. Likely at 50% now with no pivot and bad morale. Compare to cut 70% + some people leave, but now you can hopefully do a major pivot and do better?

Could anyone give, say, 3 examples of that happening?

I don't know what "that" refers to, but I was at Nokia for a long time while they did 5,10,15% layoffs and it did destroy the morale, people started running for the hills as soon as they could.

AirBNB did a 25% one-off layoff and is now doing fine.

I don't know of any 70% layoffs but I tend to agree that cutting once and hard is the best approach, given what I experienced with paper-cut layoffs.

Hopper during the pandemic cut down 70% in multiple layoffs. Later that year they hit $3.5B valuation https://techcrunch.com/2021/08/17/hopper-raises-170m-on-3-5b...

Have you not been through one of these cycles before? When things get bad, there is nowhere to jump ship to, for quite some time.

Hopefully we're not heading there, but as the message says, "things don't look good".

I've been through multiple of these cycles, thank you. I don't need someone to try and explain what I've experienced.

There's almost always better opportunities for an experienced dev because there are plenty of industries better suited to weathering out a recession.

I called it: https://news.ycombinator.com/item?id=31422495

“Race, don’t chase.” Find a way to profitable — default alive — and grow from there. Don’t lie bleeding and default dead. Sounds like Dalton could’ve used this podcast at the time…

https://www.manager-tools.com/2008/10/race-don’t-chase-part-...

what if they try repeated 70% cuts?

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