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Comment by game_the0ry | Hacker News Reader

I can't read WSJ while at work, but after checking on the financials for both Meta and Alphabet, I do not understand why either would be cutting staff. Both look pretty strong, so I am not sure how cuts are justified or why Zuckerberg has a negative outlook, especially since 2021 was such a great year for both.

Do American executives, investors, and start up owners not have the guts for even a moderate stock price drop? I guess the reaction is to cut staff, or threaten to, when there is a whiff of negativity. Fuckin weak.

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My current theory on this, particularly for Google, is they're just taking advantage of the macroeconomic moment to cut some fat. Slowing growth or outright letting people go is a no-go in times of macroeconomic growth. Big companies, even if not strictly needed, can be opportunistic here and make some cuts they wouldn't be able to in other circumstances.

Yep. The hiring market has shifted from ultra-competitive during the COVID economic boom to being much tighter and more competitive during this economic downturn. You can't hire at Meta and Google scale without collecting some mis-hires and poor performers.

When the hiring market is tight you might keep them on longer and try to mentor them up to par, but when the hiring market shifts and there are a lot of great candidates on the market it's better to let the underperformers go and re-fill those jobs with great performers who are back on the market for whatever reason.

They're still hiring. This is more like cycling out hires that didn't work AND some collateral employees who unfortunately got lumped into those teams and cancelled projects. Often, the great employees who get "laid off" are quickly scooped up by other teams within the company who need their talent. It's not good business to let great engineers go.

> This is more like cycling out hires that didn't work AND some collateral employees who unfortunately got lumped into those teams and cancelled projects

I see - if they are cycling out the lower performers and hire recently laid off people on the market for a bargain, then that kind of makes sense, assuming they are not in a hiring freeze.

If they are laying off their poor performers so they can hire the laid-off from other companies, wouldn't they just be trading lemons?

The strategy probably works regardless of macro economic conditions assuming you let go of "lemons" at a greater rate than you hire them, but it seems easier when the market isn't being flooded. You could maybe argue that layoffs at other companies are reducing the proportion of lemons, but it's not clear to me.

I think reducing headcount gives an immediate outlook of lower expenses without affecting revenue in the medium term. Tons of employees at these companies aren't working on projects that will have monetary significance within several years if ever.

> so they can hire the laid-off from other companies

They don't only hire recently laid off people. Most people who apply do that for other reasons I think. Also, maybe eg Google s recruiting accuracy is better than other companies lay-off accuracy

Is there data suggesting comp bands are reducing as a result of the hiring climate? Cost of living is still through the roof, so while companies should pay based on value, there will presumably still be pressure based on that.

I'm confused. It was ultra-competitive before and now it's more competitive?

Given the context of their message, I think the parent switched perspectives mid-stream: ultra-competitive from the perspective of the employers (very hard to hire) to competitive from the perspective of the employees (somewhat hard to be hired).

I can't speak formally for any of the companies, of course, but I suspect like another commenter said, its an opportunity to cut fat. Beyond that, the last two years saw many tech companies grow stupid-fast. For example, Snap hired more than 50% of their pre-layoff workforce since start of the pandemic. Google, Meta have both doubled headcount in a similar (slightly longer) time scale.

I suspect that despite being rich, headcount is expensive. If the median googler makes 300k, it probably costs Google 500k to employ. A team of 100 is $50M! A news article claimed google hired 10k people in Q2, so that'd be $5B in commitment (probably actually less, but on that scale). Doesn't take many quarters of that sort of growth to outpace income.

> If the median googler makes 300k

The median googler does not make 300k. The median Google engineer/manager in the US might make 300k but Google hires plenty of people in other roles and in other countries.

> Google parent Alphabet Inc. GOOG -1.79%▼ and Facebook Meta Platforms Inc. had the highest-paid median workers, at almost $300,000.

Actual number was 295,884

I chose a round number. Wasn’t too far off.

https://www.wsj.com/articles/what-alphabet-meta-and-other-s-...

Your number was accurate to 2 significant digits, which is more than good enough.

Google's profits dropped last quarter, and that is a rare occurrence for them. Metas revenue actually fell last quarter, with profits dropping 35%. IIRC, that's the first revenue drop they have had since going public.

This isn't about stock prices, this is about the strength of the underlying business.

>Google's profits dropped last quarter, and that is a rare occurrence for them.

Google's net income went from $16.4B Q1 to $16B Q2. Such an insane amount of money.

[Q1]: https://abc.xyz/investor/static/pdf/2022Q1_alphabet_earnings...

[Q2]: https://abc.xyz/investor/static/pdf/2022Q2_alphabet_earnings...

Judging by the financials, the underlying business for both is strong, especially relative to many other kinds of businesses. The drop, still, does not look fatal when considering how much growth there was in 2020 and 2021.

I agree, I mean the businesses overall are very strong. That said, as a shareholder, watching Google and FB's headcount soar over the last 5-10 years to stratospheric numbers, they have to have a point where they sit down and take a hard look at what everyone is doing and be realistic about whether the projects make sense. I am all about R&D and experimentation and moonshots and the like, but the sheer number of bodies, especially in relation to "hits" that have been made, it all feels very low. The latest Pixel phones come to mind as a real home grown hit at Google, but so many of their products seem rudderless and the result of a sprawling bureaucracy[1]. It certainly feels to me that at least 20% of the workforce could be cut with probably a net gain to the organization overall. Is it fatal? Of course not- but it could be if you just let the rot sit around.

FB/Meta is the same- They have made some low key progress with Groups, have essentially wiped out craigslist as a marketplace, made some great strategic investments like WhatsApp, and essentially cut their potential replacements off at the knees by quickly copying snapchat and to some extent tik-tok, but Meta also seems poised to throw billions and billions of dollars into this Metaverse furnace, and I just don't see that working out.

I say this as a shareholder of both firms, that I have held since their IPOs or shortly thereafter.

[1] Take their home products for instance. There are nNest protects (smoke detectors/motion detectors), thermostats, cameras and doorbells... its an absolute layup to turn this into a security system far better than the crap ADT pushes. Yet... they just haven't for over 10 years now. And then they try to force a shitty subscription on you to use their cloud features that are really worthless, and have cut off APIs to third parties so I can no longer have my doorbell play through my Sonos. Its kind of maddening to watch.

> That said, as a shareholder, watching Google and FB's headcount soar over the last 5-10 years to stratospheric numbers, they have to have a point where they sit down and take a hard look at what everyone is doing and be realistic about whether the projects make sense.

As an employee, shareholders have to remember that sometimes stock prices go down, instead of hoping for cost cutting via layoffs.

Shareholders have had it good for a long time, especially during covid, with stock prices higher now then before the pandemic. Time to pay back karma.

Agreed - stock price is irrelevant for the most part - it's the actual business and cash flows that are suffering and I think it's long past time there was some correction in the number of projects and people working on them.

Check my post history and you will see I wholly agree that stock price is an irrelevant metric.

Sure but the future is uncertain and when you’re selling ads it’s hard to control revenue. It’s much easier to control expenses.

> the future is uncertain

much less uncertain than any other companies IMO. They're printing money.

Today sure. But remember you have to boil the frog slowly lest it jump away.

They've pretty much thrown the frog straight into the boiling pot havent they?

In april they held a private concer featuring lizzo, then in july tell employees to increase productivity.

From lizzo to layoffs in two months.

I mean how? Advertising expenses drain much faster in down turn.

They have much better insight than the rosy numbers put forth in their quarterly earnings. I think they are sensing rough waves ahead.

Even if the economy overall chops along with small (but positive) real GDP growth, persistently high (relative to the last decade) interest rates are devastating to growth stock valuations

Also, financial indicators are a lagging metric. If companies are anticipating a recession and cutting advertising and marketing budgets, that will impact G/FB's future revenues. If they hired anticipating 20% YoY growth, this is the time to cut.

Maybe Meta and Alphabet has gotten to the point where they don't need more people? The return from adding another guy optimizing ads isn't that high when you already have 10 000 people doing it.

Google has 3x more people today than when I worked there, and those people are working on the same products as back then. There must be some point which it no longer makes sense to hire more people.

Ah yes, that one manager and their 10,000 direct reports.

Moderate stock price drop? Facebook is down 63%.

Yes, stock is down, but financials and income are strong.

The market is more volatile and less rational.

I can’t speak for Meta. But Google has the focus of a crack addled flea. They probably have four or five teams working on separate messaging apps. They could probably drop a third of their teams and it wouldn’t affect their successful products

Maybe if a third of their teams are 3 person teams working on moonshots and the other 2/3rds are 20 person teams working on Ads, Search, Cloud, & Android...

>Do American executives, investors, and start up owners not have the guts for even a moderate stock price drop?

But why should they? If staff being cut is low performers, as companies stated, then it would be equivalent to burning money for no reason.

They don’t have useful things for those employees to do.

And why would they need justification? They don’t owe anyone permanent sinecures.

Growth slowing = repricing from growth basket to value basket = 70% stock price cut

It doesn't even have to be slowing growth: it can just be slower relative to interest rates

Layoffs are a way to get rid of low performers without legal issues.

I worked doing layoffs and you always say to the press you are removing low performers because what else are you going to say?

In reality that’s not what happens. Instead you get rid of teams, roles or high cost individuals. Why? Because it is much easier to deal with the work the let go individuals are doing and it impacts morale less.

I never saw a stack ranked layoff. The closest was demanding teams all lose someone. But that leaves teams with really good people getting rid of good people and teams full of dogs retaining them.

Thats what a PIP is for. Layoffs are for firing a lot of people at once. Doesn’t have to be due to performance.

PIPs require a tremendous amount of effort and work. It also doesn't guarantee that the person would be fired. There are many times where the employee might do just enough to get off the PIP, but still be a really low performer.

It also sucks for the employee, a PIP is really stressful not knowing what will happen next, will you get fired, should you start looking for a new job.

In addition, the PIP can take months to get to the finish. Maybe even six months in some cases.

A layoff takes way less time, but it does suck for the employee. I don't know which is worse. But if you have a good employer, you still might be able to transfer to another part of the company. Being on a PIP usually means your only choice is looking outside the company for a new job.

Layoffs always hit good and low performers, there is no way it can't. But if a company wants to get rid of a number of low performers at the same time, PIPs are not the way to go.

PIPs are lawsuit fodder. A general layoff where a bunch of people are let go at the same time makes it a lot harder for the person who was let go say it was targeted at them.

Why do you think PIPs are lawsuit fodder?

They're generally used to prevent a lawsuit, but they do not prevent lawsuits. A layoff on the other hand...

Because no matter what you write in a PIP someone could turn around and sue you for it and have a good enough case to at least force a settlement. Everyone has some sort of "protected class" they are part of.

But with a layoff it's really hard to prove the layoff was targeted unless everyone in the layoff happens to be part of the same protected class.

That is definitely not what PIPs are for

Google and Meta doubled head count during covid. They probably just realize they don't have the ability to productively manage that many people/the unique opportunities covid presented are gone, so they're trying to get back to a more manageable size.

I'd suggest the Mythical Man-Month. I feel like many big techs would be way more productive with fewer employees. 5-person-teams seem most efficient.

Is WSJ blocked by your employer? Or would you rather not have such an icky source showing up in your browsing logs?

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