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Comment by insane_dreamer | Hacker News Reader

This comment from a NYT opinion piece by former Slack CPO added some clarity as to one reason why tech companies are doing this: pressure from investors to keep the share price up. Public companies lose that freedom to do whatever they want even if they have tons of money in the bank.

> Meta and Salesforce combined lost more than $700 billion in market cap last year. Both companies are now dealing with activist investors who have taken prominent positions in their stocks. The activists have called for the companies to slash costs, reduce nonstrategic investments and, notably in Meta’s case, aggressively reduce its work force.

edit: link to article: https://www.nytimes.com/2023/01/19/opinion/tech-layoffs-meta...

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Google don't have to worry about such activist shareholders in the same way that other companies do. Larry Page and Sergey Brin have the controlling share in Alphabet thanks to their Class B shares. They only have a fiduciary responsibility to the other shareholders.

So does Zuckerberg. But while he and Page/Brin may have a controlling interest in _voting_ stock, they own a much smaller amount of overall shares. Sure, activists can't control the board, and Zuck/Page/Brin are not in danger of being ousted, their fiduciary duty is to the shareholders not just those with voting rights.

Facebook, nor Google, is firing people because of activist investors. They're firing them because they just way over hired people recently, and they have way too many people for what they can adequately put to good use given their size now.

Feels like everyone wants to put a semi "conspiratorial" twist on these announcements when it's pretty obvious what the underlying driver is.

> They're firing them because they just way over hired people recently, and they have way too many people for what they can adequately put to good use given their size now.

I'm not sure that's the case. They didn't hire just to have people twiddle their thumbs, but rather to engage on projects they believe may have some worth. But when the share price drops, investors/Wall Street/media start clamoring for "action", and an easy action is to trim those projects that may or may not work out and that aren't core. But it's not like Meta/Google/Msft are in danger of losing money any time soon -- they're still making $Bs in profit every quarter, but the expectations continue to rise as people buy the stock and expect it to keep going up.

You’re way overestimating the amount of clarity and thought in hiring plans during panic hiring like we had.

Management was overwhelmed and just spending money on anything plausible sounding (even if not really plausible) because they could.

Now there is an accounting happening, and the BS is being found out, and here we are.

Also, new hires have been extremely difficult to onboard (or figure out if they are stuck or not) with remote work, making many of these folks only clearly ‘problems’ a year or so later.

Classics

> Management was overwhelmed and just spending money on anything plausible sounding (even if not really plausible) because they could

This is the crux of it. At any company there are always more projects and ideas than there are people to work on them. Limits on hiring force the business to carefully choose what to work on. Not every pet project gets staffed/funded.

> Now there is an accounting happening, and the BS is being found out, and here we are.

I cannot wait to come back to this in 1 year.

> You’re way overestimating the amount of clarity and thought in hiring plans during panic hiring like we had.

you may be right; I don't work at one of those companies or have any special insight into them

The underlying driver is also wage suppression. Why retain overpaid employees when you can collectively fire people and suppress the market wages? The added benefit would be that the rest would work twice as hard.

Well, look like they’re working twice as hard anyway.

I think tech is laying people off for the same reason activist investors are so active.

As interest rates increase, more investment money is leaving the stock market and entering the bond market. Companies have to sell their stock harder than ever before. This is part of their strategy to sell their stock to investors.

ok?

there's no fiduciary duty to do a dumb thing just because Amazon did the same dumb thing, and saying "we've got loads of cash, we're going to expand and hire the great people Amazon and Meta just stupidly let go and enhance shareholder value in the long term" is a perfectly cromulant thing to say.

Fiduciary duty is more what you call guidelines than rules. It’s there to a) prevent blatant fraud; misguided/rash/anti-shareholder-sentiment decisions are not prosecutable, and b) give a board a reason to oust someone. The former requires a paper trail along the lines of “I’m liking my own pockets at the expense of other shareholders”, and as you said the latter is not a danger for them.

In fairness, neither did Meta. Zuckerberg has a similar dual class structure through which he can control the company.

Not directly, sure. But in this case the activist shareholders desires are aligned with what's best for the compensation of execs who are mostly paid in RSUs

Perhaps there is an large internal pressure from the employees themselves?

If many employees have a large amount of salary dependent on the stock price, then those employees will really care about GOOG falling in price on the market.

I lurk on all the generally open Google-internal fora, and I think I have only heard one person try to make this case. The vast majority of employees who say anything about this are opposed to layoffs to increase the stock price.

If there is internal pressure from everyday employees advocating to accomplish this, they are being extraordinarily quiet. Unlike basically every other cause for which employees try to pressure the company. Google is quite open internally to people saying we should change this or that. It's almost a past time.

So I think this explanation is very unlikely.

I've never seen anyone directly make this case. Most people seem to want their colleagues (many of whom are friends) to keep their jobs more than they want the stock price to go up.

It's a serious problem for retention when people's total comp drops by a large amount, and some companies (e.g. Doordash) have given people extra stock to make up for it.

Still there is pressure to bow to big money investors to continue having access to investment capital.

> Still there is pressure to bow to big money investors to continue having access to investment capital.

what "investment capital"? Facebook and Google aren't making up new stock to sell to banks or hedge funds or whatever.

actions like this are to keep the existing stock price up, which doesn't benefit the company directly at all, except indirectly by not pissing off employees with number-of-share-denominated stock grants and not having "wall street analysts" claim a company failed for not making it's numbers match the numbers the analysts made up and publicised before results came out.

This is definitely the case. I was just talking with a Googler after the Microsoft layoffs about how Google is (now was) one of the last big tech companies avoiding layoffs, and Pichai was fighting investors like hell to keep it that way. He supposedly literally told them "these are real people" out of frustration at some point.

It's hard to look at that incredibly generous layoff package an not see it as a "fuck you" to investors telling him to slim down, after forcing his hand.

Who are these investors that he’s fighting?

https://www.reuters.com/technology/hedge-fund-tci-says-alpha...

Says that they have a $6 billion stake. Google's market cap is 211x that. If I owned 0.47% of a startup company, would they even take my phone call to listen to my "opinion" on any matter? Something doesn't add up here. Or perhaps this theory is correct, a company that owns 0.47% of Google gets to call the shots. Really makes you think twice about taking investment money.

Meh. Saying this is a new "era" and the old ways are over is nonsense. We're entering what is likely a mild recessionary period with less flowing capital. It's a market correction. The "era" will last maybe 2 years. Then the upward trajectory will hit again and tech workers will get drone shuttles to work or something by 2030.

Remind me, what happened after the DotCom bubble imploded?

It was the period when people started building real companies that created real value and made money instead of bullshit pump and dump IPO schemes. Some of the talented people being laid off right now could create the next wave of innovation that the MAANGs are too ossified for.

The companies that had real objectives instead of pure speculation went on to become multibillion dollar companies?

Tech sector recovered to astronomical new heights?

> We're entering what is likely a mild recessionary period with less flowing capital. It's a market correction.

If this was the case Google could have done an insane mount of other strategies to cut costs, of course why would they when they made $68B last quarter?

Didn’t work that way for the chip companies.

Those highly paid jobs pretty much just ceased to exist.

Seems like it just changed companies - Google/Apple/Nvidia saw an opportunity and poached a lot of them to death.

Nope, completely different people and skills.

Original silicon valley was actual making chips, silicon type. And there were a ton of folks here who were expert at it.

When it moved to Taiwan, those jobs disappeared from here.

The types of jobs you're talking about (high level design layer) didn't exist then.

When was this?

Another comment on this: don't forget that no matter what these CEOs say about their workforce, we're family blah blah blah, they are first and foremost beholden to their shareholders. The very purpose of a capitalist corporation is to serve the interests of its shareholders, aka make more money; everything else is secondary.

This is called "shareholder primacy" and it's more of an ideology than an actual legal requirement. It's going to be true to the extent that the company leadership believes it's true, and a lot of different strategies could be justified as serving the shareholders in the long run.

Matt Levine has written a few columns about how this works out in practice, or doesn't.

But the company leadership either has to be able to convince shareholders to stay the course (as Amazon famously did for years without generating profits as it grew), or has to have enough power to ward off the investors (bearing in mind that most investors are institutional not retail) because of the way the company is structured that he's not in danger of being ousted if the board (which represents the shareholders, not the company) doesn't like the company's performance.

Yes, shareholders can sometimes exercise power over a company via its board, but it doesn’t follow that shareholders necessarily want to maximize the value of that company’s shares, or at least not right away. Shareholders often have other interests. For example, they usually own shares in other companies. Also, ESG is big these days.

This can make deciding what a company should do a messy political process when there’s disagreement about what shareholders want or should want. Like, some shareholders may decide to buy a coal plant to shut it down, others to keep it running as long as possible.

Unless the bylaws and structure are explicitly setup to be different, the shareholders elect the board, and the board appoints the corporate officers.

So any board that doesn’t get the shareholders what they want doesn’t last long.

And any corporate officers that don’t get the board what they want don’t last long either.

Of course, many opportunities for ‘capture’, owner/agent issues, market perception and ‘fog of war’, etc.

It’s an ideology for a reason, it’s the naive truth.

Costco seems to do a pretty good job at saying no and they have not had repercussions.

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