This is just so short sighted from Jack and other such CEOs.
The letter says that the takeaway at the executive level is a greater emphasis on building an all-weather business.
But frankly, investors often don't want an all-weather business. Lattice is a venture-backed startup. Having an all-weather business means being more risk-averse than you otherwise could be, which limits growth in the good times. Investors want a company that can quickly shed excess weight during a recession and then quickly grow again when conditions are favorable. That's how you get the high growth that attracts VCs.
Something tells me that most CEOs who commit to running an all-weather business during this period of contraction will conveniently forget about it when times are better.
In fact, they may use similar justification, that their hands are tied. During the downturn, it's "We had to lay these people off to make sure the larger organization can survive," and during a bull market, it's, "We had to grow rapidly to secure additional funding, which is necessary to make sure the larger organization can survive."
This may be true for some investors, but the largest hedge fund in the world Bridgewater) is famous for their all-weather fund.
That means that those investors do exist.
If you take that into account, that means that they chose investors who do not want an all-weather company, and thereby gambled not only with their own personal well-being, but with other people's career's and incomes on a risky bet -- as the top comment said, it was obvious that these rates wouldn't stay the same.
The dichotomy of "higher risk vs higher reward", however, isn't as real as people feel it is. There are low-risk & high rewards style investing (it's the base premise of value investing, whether focused or not). VCs do not want you to lose their money, and so doing something that is predictably bad is not what they want.
They do want you to go for moonshots... but again, this is predictably bad. I think you'll be harder pressed to find a company that has continued to do well by over-hiring through pandemic times.
First google'd item on the subject: https://www.yahoo.com/video/warren-buffett-huge-structural-a...
Bingo.
It will be very interesting when the interest rates climb back down, to see how many CEO's will actually be hiring conservatively. One nice thing: we now have public documentation of their apology letters, so it will be quite a PR exercise to go back on their words. But I'm sure the consultants they hire will come up with the right kind of spin.
As a perennial negative Nancy, I'm pretty skeptical of this over "irrational exuberance". Every five to ten years everyone thinks that they are at the start of a brand new normal, where everything will be up and to the right forever, and then, oops that wasn't right.
People were being a little silly about the pandemic boom, we should just say that and not give out passes for being a part of the crowd.
So many of these startup aren't build around a solid sustainable business model but around an exit. Fuck the employees, fuck the customers, all leadership cares about is making it to an exit so they can all cash out. They all saw an opportunity to accelerate that cash out during the free money, everyone is a unicorn years, unfortunately most of them were never going to cash out and now that no one is throwing free money at them to keep their pipe dreams afloat, the employees and customers take the brunt of their greed while they waltz off to their next boondoggle.
Raise large amounts of money Grow exponentially Have a sweet exit for the investors
Nothing that happened is surprising in this light. Even with a "nice" CEO and generous layoff terms, the simple issue is that the market for any given company can only ever be so big and the CEO doesn't get to choose "less growth" with investors breathing down their necks.
Investors in private and public businesses demand growth, so naturally executives will optimize for that. I'm currently at a Series B company that has a product, growing customer base, strong revenue, etc. and we're starting the Series C process. We've crafted a plan for responsible organic growth by investing in efficiency and growing lines of business with a lower cost to serve, but even in this environment, a significant number of investors are still looking for a "pump in the cash and grow fast" story.
This is a common part of the boom-bust cycle of many corporate firms. They use cheap money and labor to reposition / grow / etc., then when the work is done and wages start increasing, they cut back on staffing and reap the profits of their new position with a skeleton crew.
Was it fear of being left out of the free-money-on-the-table if they didn't keep telling everyone growth would last forever, thus justifying investing more money in them to capitalize on that growth? I always have to keep in mind that public statements companies make are at least equal parts fire-for-effect as declaration of truth; they are bound by law to make some true statements, but they also pepper statements heavily with words chosen to illicit the desired behavior in investors (current and potential) and competitors.
"Money, it's a hit; Ah, don't give me that do-goody-good bullshit; I'm in the high-fidelity first class travelling set; And I think I need a Learjet"
In particular, I would say its not malicious, but just how society works. If you see your peers (other CEO's), the people you respect and report to (VC, investors) all saying similar things and nudging you to go in a specific direction, its easier to think you're on the right direction, easier to ignore signals that might point to the fact that your decision making is flawed.
The unfortunate truth is that they have the "excuse" that everyone around them was caught by surprise, so its "not their fault" (i.e. they're still a good leader) and investors will buy it. The people that lose out are the affected employees; they just need to be nice and polite, apologize profusely and move on, while its the employees that lose the most.
I suppose activist investors who pushed for aggressive growth strategies because of the FOMO environment will be losing a lot of money, but that's little comfort to the people losing their jobs.
Right, and I see little in the news about investors taking responsibility for misreading the market and losing value, all the fault appears to rest with the CEO's for hiring aggressively and for employees not being productive enough.
In a certain sense, I think we need more journalists that cover tech, so that we can get deep dives and some real answers. What we currently have is "journalists" whose main source of news is going to events/parties, socializing with the elite and then parroting their perspectives. There is very little "hard" journalism happening here, its more "access" journalism.
There seem to be some resemblances to religion here: the downturn indicates that the gods are angry, and must be appeased through sacrifices. The CEO acts as high priest, carrying out the sacrifice, absorbing the blame generated by it. That may seem like a far-fetched analogy, but there's a certain liturgy to the whole process.
It illustrates the popularized image of CEO as fully-realized alpha male who answers to no one is naive at best. Almost everyone has to answer to someone. And that definitely impacts how they make decisions.