The current layoffs were orchestrated by hedge funds | Hacker News Reader

The current layoffs were orchestrated by hedge funds

m6n.io

169 pointsdavidgerard185 comments

This November '22 letter [1] from TCI has even more details.

Their argument sounds quite compelling, to be honest:

  As detailed in Alphabet's Schedule 14A filing, median compensation totaled $295,884 in 2021. An analysis by S&P Global illustrates that median compensation at Alphabet was 67% higher than at Microsoft and 153% higher than the 20 largest listed technology companies in the US. There is no justification for this enormous disparity.

  We acknowledge that Alphabet employs some of the most talented and brightest computer scientists and engineers, but these represent only a fraction of the employee base. Many employees are performing general sales, marketing and administrative jobs, who should be compensated in-line with other technology companies.

[1] https://www.tcifund.com/files/corporateengageement/alphabet/...

If I'm reading this correctly, it seems they are saying Google has overpaid its employees, particularly those whose market competitiveness does not match their salary.

I find it hard to feel sad about anyone working in Silicon Valley, not after two decades of Silicon Valley decadence.

Of course there is a justification for the disparity. Google has a higher standard for the talent of it's engineers than MS and definitely over the rest of the industry. This gives Google a large competitive advantage as they can respond better to threats and because they can deny some top talent to competitors.

You can make a good argument that Google isn't making good use of this talent, which is a result of management problems with Google we all know about. And as it is, Google is as profitable as it ever was, so there is no urgency in firing people, either. The obvious good long term play is to fix the organizational issues to be able to make better use of existing talent.

Chris Hohn knows this, of course. He just wants Google to buy back more stocks so he can sell his Google position. His interest isn't the long term well-being of the company, his interest is a predictable short term peak in valuation. Chaining short term profits is how these funds get outsized returns and it's how they can make any argument to their investors that they are at all better than a leveraged long position in the general market.

I don't know. The quality and reliability of Google's products have been on a steady decline for years. One of the largest HN threads of all time is about the decline of Google's search product. Stadia failed because of mismanagement. Google doesn't appear to innovate a lot these days.

This is mostly due to incentive and mismanagement issues at the Senior level at Google, instead of engineering deficiencies in the median Googler. Google's search is getting worse for users because it's getting better at making profit, and Stadia is failing because of mismanagement as you say, not engineering quality which was by all accounts excellent.

> His interest isn't the long term well-being of the company, his interest is a predictable short term peak in valuation. Chaining short term profits is how these funds get outsized returns

That's a plausible theory. Except the letter I linked to starts like this:

  TCI has been a significant shareholder of Alphabet since 2017. We currently own shares valued at more than $6 billion, reflecting our strong conviction in Alphabet's future.

Five years does not sound that short-term to me.

For most of the five year period, Alphabet has been giving them magnificent returns, peaking at 200% gross. Only now it has been hit with the economic downturn, so it makes sense that all of a sudden they are trying to sell and get out.

I'm sure that's the way they want to spin it. However, TCI is down around 20%, and it's pretty clear that they intend to juice Google in the short term to make good on their recent losses.

I'm sure they have had a significant share in Google, but this share is a much bigger proportion in recent times of their portfolio. By any common wisdom they should be diversifying anyways.

> Google has a higher standard for the talent of it's engineers than MS and definitely over the rest of the industry

I think this is a completely uncontroversial statement, but I like poking at uncontroversial statements like this. How would you go about validating it?

Is something like acceptance ratio sufficient? I would think not for a few reasons: you could reject 9 out of 10 applicants automatically and voila, low acceptance ratio. Plus, this data probably isn't even available.

So this is a statement that few people would bat an eye at, but is it provable? Or is it just a thing that we believe because we believe it.

You have to love the cold calculating thought process of fund managers. That statement basically translates to "Your engineers are better than everyone else and can keep their salary, but your other employees are grossly overpaid".

Past the shock of the statement though, that's likely true. Recruiters at Google aren't 63% better than recruiters elsewhere, if anything their job is easier because engineers want to work at Google so they always drown in resume.

A company like Google with a strong reputation and generous compensation can attract the best sales/recruiting/marketing professionals. There is no reason to think that these people are not at the top of their fields. Even within a company having your top sales people make 63% above the average is common. There is no reason to think that this trend should not hold across firms.

> There is no reason to think that these people are not at the top of their fields.

I'd flip that statement around though, people are at the top of their fields when they outperform competitors. If Google's sales team is paid 63% more than Microsoft's (and likely 100% more than Amazon's) then their sales numbers should justify that. Yet GCP is behind Azure and AWS.

Your employees aren't great because they have a great salary. They have a great salary because they are great. If the financials don't confirm that idea (i.e. your sales numbers are not higher than your competitors) then your team is not great. Pretending otherwise means you are just drinking the kool-aid of "everyone working here is nice, good and competent" and that just opens the door to a lot of abuse.

To be clear I'm not arguing against high wages, justifying layoffs or anything like that, but I take issue with the idea of that recruiters at Google are making 63% above Microsoft and 150% against other tech companies because they recruit really well.

> Yet GCP is behind Azure and AWS.

This isn't because of the sales team. It's because of the flawed leadership strategy that was App Engine. They squandered precious years attempting to build a walled garden for cloud and GCP has been having to play catch up ever since.

> always drown in resume

Not necessarily disagreeing with you, but I wouldn't say "drowning in resumes" makes a recruiter's job easier... it may actually be harder, since they have to sift through all the applications to figure out who's really qualified.

Either you are the company at the top of the range hiring the best talent possible across the board or you settle for the median and continue on with ~5% growth per year. Mediocrity works well for large corps like UnitedHealthcare, Walmart, and even Microsoft. Hedge Funds seem to want to move Alphabet to that more predictable pattern which makes sense for stability but is disappointing technologically.

Does it make sense if your business is technology? Feels like Google apps are more and more buggy, they'll stagnate if they can't make quality software people want to use.

> Hedge Funds seem to want to move Alphabet to that more predictable pattern

Or the hedge funds feel like this has already happened due to their massive size and bloated management. Maybe they think that Google is beyond the point of meaningful growth in new areas (relative to their ad revenue), so they should start operating like a boring corporation instead of throwing insane salaries at everyone like magic beans that will sprout into new areas of growth.

This isn't necessarily hedge funds pushing for Google to change into something they aren't. Maybe they're just pushing for Google to accept the reality of the situation they put themselves in.

I don't necessarily agree with that perspective, but I don't think it's totally unreasonable.

As detailed in Alphabet's Schedule 14A filing, median compensation totaled $295,884 in 2021. An analysis by S&P Global illustrates that median compensation at Alphabet was 67% higher than at Microsoft and 153% higher than the 20 largest listed technology companies in the US. There is no justification for this enormous disparity.

Is that a super accurate description, though? Out of all the people whose pay could be described as "coming from Alphabet", only a fraction are actually Alphabet employees. Most are third-class citizen contractors who certainly do not get paid 300K a year.

What is the average salary at TCI?

> median compensation totaled $295,884 in 2021

Is this counting stock vesting? Because that's what's expected if you compensate people partly in 4y stock grants and they go up a bunch before vesting.

I think google can pay your stock in cash each year if you ask them.

How much compensation their workers received in 2021 depended heavily on what had recently happened to Google's stock, which was up ~2x. It could easily have not done that, in which case compensation would be lower. This makes 2021 a weird year, and comp was already going to be much lower in 2022 and 2023.

Given that the mean salary at google is probably driven by people making 7 or 8 figures, I’m going to suggest that laying off 10,000 people will not change that one bit

I wonder if laws requiring salary ranges on job listings will inadvertently depress wage growth, since companies will be more able to aim for the middle. I know large companies already have some of this data, but having it out in the open might enable it more.

> There is no justification for this enormous disparity.

I dunno that the Google vs Microsoft comparison _is_ compelling. Isn't the question not "how much do the employees cost" but "are they worth what they cost"? This is not my area, but it seems like measuring _profit_ per employee gets a crude measurement of whether in aggregate those employees are generating more value than their comp.

Grabbing stale numbers from yahoo finance,

MSFT: 221,000 employees, Net Income to common $69.79B => $3,157,918.55 / person

GOOG: 186,779 employees, Net Income to common $66.99B => $3,586,591.64 / person

I.e. even with their higher comp, google employees as a group are generating similar but higher profit per person. And if the median compensation is ~$300k, then on most of them it seems like Alphabet is still doing extremely well? Is this not the right way to look at this?

What this pretty clearly demonstrates to me at least, is that executives and shareholders are stealing 90% of the value each employee creates, as both companies median per employee compensation is around $300k, yet they each produce 10X that amount in profit. Sounds like the employees are actually criminally underpaid. But of course the hedge fund billionaire will say they're getting too much, as heaven forbid some people enjoying comfortable middle class lives prevent a billionaire from getting that third mega-yacht.

Did you just assume Google's infrastructure costs are $0?

That's net income, not revenue. All other costs are substracted.

> shareholders are stealing 90% of the value

I think you are very close to the central point of this debate. Whose value is it to begin with? Current cultural norms point to 100% of the value belonging to shareholders and them deciding how much of that to share with employees and execs in form of salaries, bonuses and stocks. If the employees are not happy with a proposal, then they are happy to go find more generous shareholders.

In that light, I don't think it is stealing.

Yes, if I buy a piece of software for my business for $100, I expect it to save me at least $100, or I shouldn't have bought that software. But I am not a piece of software... While I may employ another person for a set price and expect a reduction in the cost of doing business, or even a return, the fact remains, all that differentiates me from the other person is the luck that I was born in my shoes, not theirs.

A good cultural shift may be to re-align assumptions that personal advantages are due to factors we individually control, and think hard about how we would prefer the other party acted were the tables turned.

An ocean full of yachts is pretty worthless if no one offers them a port.

> all that differentiates me from the other person is the luck that I was born in my shoes, not theirs.

You don't think hard work and personal initiative matters?

maybe the tricky part is that hard work and initiative mean different things to different people

for me, it's a bit hyperbolic, but just in case I wake up in someone else's body tomorrow, my hard work and personal initiative will mean that at least whoever got my body has a decent shot at life. hope I landed in someone who felt likewise

a roundabout way of saying "if we all believed that we would wake up in a different body tomorrow, I bet we would all be a lot nicer to each other", but maybe more realistically, I suppose a mutual feeling like that would at least manifest into people being more pleasant overall, even if it is incredibly unlikely that you'll actually physically switch bodies

lolwut? Was this comment written by ChatGPT?

It isn't stealing. There was an exchange of value, labor for salary, that was agreed upon.

I came across an excellent phrase not but an hour ago (italics mine):

"The political mobilization of envy has led to legal restrictions on productive groups, preferential policies for those unable to compete with them, mass expulsions, confiscations, and mob violence..." [1]

The prevalence of the idea that "shareholders are stealing" seems like an example of "the political mobilization of envy."

[1] Race and Culture: A World View, by Thomas Sowell - (He was talking about the Tamils in Sri Lanka, the Germans in Russia... throughout history, not just current events.)

That seems ahistorical. "Shareholders are stealing" is a modern idiomatic expression of the rightful ownership of surplus value, which is an analysis going back to the 1770s at least.

You can have different perspectives or ideological relationships to this concept, even make an argument for the role envy could play in this expression of it. But there is literally centuries of analysis of this you should catch up on before you try to simplify it so completely.

The value “generated” actually belongs to the consumers who are forced to pay (doesn’t matter whether directly or indirectly) exuberant prices to a monopoly. Which is precisely what Google is.

> consumers who are forced to pay

There were many other search engines at one point. Consumers en masse decided to favor Google. Same for email or map or browser providers. Google just has better products from the lens of an average Joe.

Same with smartphones - plethora of choice and yet people are willing to pay through their noses to get iPhones.

> If the employees are not happy with a proposal, then they are happy to go find more generous shareholders.

If I didn't think you were serious, I'd laugh at your good joke.

I think workers should show up at the owners' homes with a different offer - "Perhaps we will let you live."

> "Perhaps we will let you live."

That's why we need a finely balanced solution. Humanity tried giving workers total control (USSR) and it was a disaster. We also tried giving workers somewhat less control but still more leverage (socialist policies in India until 90's) and that wasn't much success either. For now, various social contracts within a narrow range of what US does and say, what Sweden does, seem to be working well.

In what alternate universe did the USSR gave workers total control? Maybe before Lenin used the German cash to take Russia out of WW1, do you mean during these months?

The gall of calling Stalin a defender of the workers, this is hilarious.

I think there's two lenses here, both of which can yield insights.

I was trying to comment at the level of "even accepting that the goal is to make money for shareholders, what's actually good for shareholders?". Even adopting the value system of investors, if Google can hire more employees of the caliber they have, their track record seems to say they will find valuable opportunities to pursue with those employees. More is probably still more.

If we pick up the lens of "what other kind of good can be pursued given this kind of surplus", yes there's maybe a Marxist view that owners are stealing the value of these workers. But IDK that the fair and just scenario would be these employees making $3M/yr instead. Rather, I think if there's any "theft", it's from the rest of the world. Google could keep the same team, and the same product families, and just charge less / show fewer ads, and the company would still be very successful in absolute measures.

It’s a business, not a co-op. The shareholders are risking capital and can lose it all. The employees get paid so long as they work there regardless of performance (in fact, they get bonuses based on performance and stock options, etc, to get a piece of the pie without risking any capital)

The math is incorrect. It's / 10 on that number, so each employee is bringing in ~$358,659 net income. Meaning Google are getting about $60k per employee. That actually doesn't seem too bad to me

Yes the math is incorrect which jsnell pointed out below. But this is still net income (i.e. all costs, including salaries, have already been subtracted), so google really is getting ~$360k per employee. I was off by 10x, you were off by 6x. Google is getting a pretty good value per head, but not as extraordinary as I thought.

> MSFT: 221,000 employees, Net Income to common $69.79B => $3,157,918.55 / person

> GOOG: 186,779 employees, Net Income to common $66.99B => $3,586,591.64 / person

Your results are off by a factor of 10. The results of those computations should be about 300k, not 3M.

Oops, you're right. I typed `* 10e9` when converting those billions. Unfortunately it is too late to edit my original comment.

I thought that it has been pointed out that TCI has less than a percent of ownership in Google.

Yeah, that's an important point. Anyone who doesn't like this can write to Sundar and he will probably pay no attention, which is a bit less attention than he pays to TCI, but not much.

I think Google might have to pay more due to all additional hoop jumping it instigates in order to hire an employee.

Why would anyone bother to apply to Google if they can earn exactly as much in a company with more relaxed recruitment.

Why indeed!

I'm sure he believes his multi-million-dollar income is perfectly justified.

Google's in California, so it doesn't have non-competes like Microsoft or NY hedge funds. The question for Google isn't "what are they worth to us," it's "what is it worth to keep them from going to Microsoft."

Shouldn't Google response be something like: "If you feel that you know better than the company management how to compensate our employees, we are wrong choice for your investment. You should invest in the other 20 largest listed tech companies instead."

You might think "who is Christopher Hohn, and what is the TCI Fund", but this guy has a history of making money in weird ways. Just before the banking chrisis, in 2007, he managed to force one of the biggest banks of the the Netherlands (ABN Amro) to either be taken over or to be split up. He has a history of suing the boards of companies if he thinks they can be worth more to investors in some way or another.

You can read more about what happened with the ABN Amro bank back in the days in the super thick book "The Pray" (https://www.amazon.com/Perfect-Prey-Wrong-Banking-Industry/d...). I read it last summer and it is surprisingly interesting for a book which follows the board of a big bank...

> He has a history of suing the boards of companies if he thinks they can be worth more to investors in some way or another.

An activist investor. I'm not sure why that is particularly noteworthy.

Activist investors are individuals with significant power who seek to enrich themselves by making life much worse for large numbers of people, without recourse, election or accountability. They are one of the significant negatives of capitalism that would benefit the rest of us if they were greatly reduced or removed.

Activist investors pressure management to improve. Most activists are funds and are accountable to their investors. The investors and ultimate beneficiaries are institions such as the Public School Employees’ Retirement System.

Activist investors pressure management to deliver more profits to investors. That's a narrow definition of "improvement". Doesn't matter who they represent, robbing Peter to pay Paul doesn't make you right.

> Activist investors pressure management to deliver more profits to investors. That's a narrow definition of "improvement".

Except for the fact that there are activist funds that focus on climate change, gun control, animal welfare and corporate governance.

> Doesn't matter who they represet

It does undermine your activist investors significant negative of capitalism thesis.

> robbing Peter to pay Paul doesn't make you right

Nobody is being robbed.

"robbing Peter to pay Paul" is an idiom used to express that causing one person harm to benefit another is not a good thing. When an investor forces a company to lay off staff, merge with another, sell off divisions, etc... (all actions TCI has done) people within those companies get laid off, their jobs change, wages stagnate, etc... and this is purely for a fund's enrichment. For me it doesn't matter if that fund is then donating to charity because I don't think charitable use of a fraction of profits justifies harmful tactics used to raise that money. That'll just have to be a difference of opinion between us.

If you want to move the goalposts from TCI to activist investors that try to improve a company, then that is a different thing as profit is not the primary motive of those changes. There are activist investors who simply do not invest in companies they do not agree with and in other companies try to address issues with how the company runs, pay gaps, tax compliance, workplace conditions, etc... This is actually trying to improve the company and the lives of the employees, at a possible cost to the company and investors, so very different from just trying to improve a company's profits. Ethical capitalism is a bit of an oxymoron but there is definitely an ethical spectrum of actions within capitalism. Not all actions are equal.

Folks, if it wasn't shareholders accelerating this process, it was gonna be the inevitable economic realities of mismanagement and losses. Shareholders are doing not only other shareholders but also these companies a favor by telling them to fix their problems before they get really bad. The cold reality is that the people getting laid off never should've been hired in the first place, the amount of waste at these companies is unfathomable...all the result of the bubble of dysfunctional managerial cultures (ie "Not making money is super awesome, yay!") and way too much money floating around. A dose of reality is much deserved and was gonna happen eventually anyway.

The amount of waste may be unfathomable, but is layoffs really going to correct it?

Instead a culture shift to be more frugal might work better.

The criticism is that most of these companies will go right back to hiring tomorrow.

How do you accomplish that culture shift? It’s easily said that cultures can just be shifted, but layoffs are the way to send the message and get that rolling.

You start by not doubling down on the status quo.

Why not both? Companies are large complex systems that require pruning over time just like any other complex system. Sure you can move a few people around or ask them to spend a little less, but ultimately it would become nearly impossible to respond to market conditions, or even just your own business changes/learnings, without laying people off.

There are plenty of ways to respond to market conditions without kicking people to the curb. Most companies have performance reviews to do exactly this.

Performance reviews are precisely what you would NOT use to respond to market conditions, since they are about individual performance

completely different mechanism.

> Folks, if it wasn't shareholders accelerating this process, it was gonna be the inevitable economic realities of mismanagement and losses.

Do you have any proof?

https://www.youtube.com/watch?v=bK397YwduhQ

This might’ve been true in an era of a normal population pyramid and demographic expansion.

We are in completely unprecedented times where populations are teetering will start shrinking while being dominated by the elderly.

That is to say, we don’t have models to predict how the economy will react.

>>the people getting laid off never should've been hired in the first place

This is a bullshit take. I've seen enough LinkedIn posts from people getting shit-canned after doing excellent work at X company for the past >5 years. They shouldn't have been hired 6 years ago? They shouldn't have been given good performance reviews for the past 6 cycles? Fire Sundar Pichai if you must, but avoid making sweeping generalizations that unfairly disparage a lot of people who did great work.

The OP didn't disparage them, because they're referring not to the skills of those employees but to the economic case for hiring them. He's disparaging the analytical skills of the people who hired them. Given the difficulty of economic prognostication, I take that with some reserve too.

Surely, it would be better for talented people to work at a thriving business that can bring their qualities to the market. Shifting those people from less to more successful services is the Schumpeterian-creative-destruction upside of layoffs.

Doing excellent work doesn't automatically mean you earn the company any money. It's one of the harsh realities of capitalism that you can do an absolutely shitty job and still earn your company a ton of money (and have job security) and vice versa: Working your ass off without adding anything in terms of revenue - not even by proxy.

Well said. From my LinkedIn feed anecdata the Google layoffs seemed especially capricious. People that had been there 5+ to 10+ years. Seems likely tied to high comp though I saw recent hires as well. AFAIK no managers were consulted either.

In one way that's good vs. some of the CEOs that publicly said "these folks are the fat and we're trimming it" which is especially cruel.

If you hire 30k people that you shouldn't have hired, when you let 30k people go it will probably not be the exact group of 30k that you hired, some will be folks that have been there for a while.

And to anyone complaining I just say: "welcome to the tech industry?". Layoffs are a very normal part of our industry and it happens all the time. And as former Google engineers, I'm sure none of those laid off will have trouble finding work again.

it doesn't happen all the time. for Google, this is the first time they've ever done a large set of layoffs in their 25 year history.

Ehh... Kinda. They used to focus more on cutting orgs/teams. Google was pretty notorious for doing the whole "your teams has been shut down, you have X days to find a new role or you can take this package and leave now."

Sounds like a regression.

Shouldn't the shareholders be held responsible for initiating the overhearing in the first place, chasing short-term gains without any regard for the unusually irrational exuberance fueled by the unprecedented pandemic situation? If you're going to excuse them calling for firings now, then you should at least chastise them for hiring earlier.

shareholders always bear responsibility through their exposure to stock price changes.

Yes, but it still seems disproportionate to the losses those going through layoffs must suffer. Especially when it was shareholder agitation that led to the overhiring policies that put those workers in that position.

Strong disagree. Shareholders, especially hedge funds, sole goal is to increase return to shareholders. The long-term outcome of the company is very much secondary.

So instead of hiring all these engineers and paying them higher salaries (raising the bar all around), Google/Msft/Meta should have been giving billions to extremely wealthy investors?

You've bought the company line. I'm sure they'd be proud of you. It's nonsense, but keep shoveling it.

People are being laid off who've worked there for 5-10 years, and the company is still incredibly profitable. There is no need to let go of anybody, and the people they are getting rid of are profitable in the long-term to the company.

The long-term part of that is key, though, since shareholders are focused on this quarter, after which they'll seell the stock and move on, while people's careers have been destroyed.

> Over the last five years, Alphabet more than doubled its headcount

Uh, over the last five year Alphabet also went from $28b ($33b inflation adjusted) in revenue to $69b in revenue. Seems reasonable to me.

> Uh, over the last five year Alphabet also went from $28b ($33b inflation adjusted) in revenue to $69b in revenue. Seems reasonable to me.

Alphabet's revenue is $282 billion as of the last four quarters. $69b was just the September quarter.

For anyone interested in their historical revenue growth, here you go:

2021: $257.64b | 2020: $182.53b | 2019: $161.86b | 2018: $136.8b | 2017: $109.65b | 2016: $89.46b | 2015: $74.54b | 2014: $65.674b | 2013: $55.51b | 2012: $46.04b | 2011: $37.91b | 2010: $29.32b | 2009: $23.65b | 2008: $21.8b | 2007: $16.59b | 2006: $10.6b | 2005: $6.14b | 2004: $3.19b | 2003: $1.47b | 2002: $439m | 2001: $86m | 2000: $19m

2000: $19M

2021: $257B

I just can't over how big this company is. $19M would be considered a successful company by most measures, but a quarter Trillion hits different.

can you post this adjusted for inflation?

Thanks for adding the clarification, I intended to say quarterly revenue but missed it.

Every time the stock markets goes down I know there will be layoffs a while later. I think its psychological, a multi billionaire who has gone down from say, ten billion to seven billion doesn't say to himself “I still have seven”. He feels he has lost three bullion and he wants it back.

> Every time the stock markets goes down I know there will be layoffs a while later.

I mean, isn't that obvious? Our global economy isn't just global in a geographical sense. "Economy" goes down, everybody pays.

The average person is out of a job, the landlord has to increase rents, the billionaire is ejected from the Three Commas Club. It's traumatic to everyone.

Why does the landlord HAVE to increase rents?

Because the average landlord is paying mortgage with interest rates which just went way up.

That's close, but not quite right. Rentals don't exist within a vacuum. They compete against the option of buying outright. If buying outright suddenly got more expensive (because mortgage rates went up), then rentals suddenly has less competition and therefore they can raise prices.

There are other options, like moving in with parents, group housing, van life, or even going homeless. So long as people can afford it they’ll usually avoid those options but once they’re tapped out they are no longer able to. There is a limit for how much rent can be raised even if buying becomes more difficult to finance. I don’t think we’ve ever hit that limit in the US in recent history. Landlords not being able to raise rent to cover mortgage payments would be a new thing they probably haven’t planned on.

Do you rent? If yes, how much does rent have to increase before you decide, "Ah yes, I would much rather be homeless, but at least I am voting with my wallet, that will show the greedy landlords not to raise rents!"

I personally cannot think of a limit at which I would decide to be homeless. I would much rather have a home to live in than buy any food beyond what sustains me, or get new clothes, or go out for any entertainment reasons. I believe I am not the only one in this. Thus, from a purely economic perspective, the landlord in these cases are "leaving money on the table", i.e. they could capture more of my surplus income if rents happened to increase in a coordinated fashion. Unfortunately, there is nothing in Econ 101 which tells you why that would be bad or unsustainable (social unrest etc.) and thus these concepts will be hard to grasp for people who do not have to live this life.

I’m not the marginal renter, and from the sounds of it neither are you, it’s the person who can barely afford rent and doesn’t have good options to chose from. The person deciding between fuel, food, medicine, or rent. The person rationing their insulin. How do you think many homeless people became homeless to begin with. They didn’t all start out as drug addicts.

And as mentioned homelessness isn’t the only option, I know plenty of people who have moved back in with family or still have room mates into their 30s and 40s.

I think I agree with you, and so I will not risk talking past each other.

Let me just take this spot to point out that from a landlord's perspective renting out two units at 100% is economically equivalent to renting out one unit at 200% while letting the other unit sits empty. However, it is strictly worse for society at large because of the artificial scarcity of a basic right.

You had me until this "artificial scarcity of a basic right."

Housing is not a natural right. Rights don't have limits (until they harm someone else), so something like speech can't be artificially scarce.

That is a matter of ideology. The natural rights doctrine you're using to claim rights cannot have limits up to the right of someone else is mostly an artifact of Abrahamic religions and is not founded by much in the way of logic.

There is no hard reason why socially adequate housing cannot be considered a right.

Post your address so we can all visit your pad and exercise our right to housing.

Maybe there is also a right to a job at Google.

That's not a hard argument, it's a soft argument. But generally these rights are backed by a responsibility to society in general as a collective.

I'm not part of your collective nor social contract. I do pay use taxes and fees for public goods such as roads.

When did society get the responsibility to bail out the high-paid bankers who failed in 2008/9? Occupy wall street didn't think we should bail them out.

Soft vs hard means what? More like a slippery slope until too big to fail bankers are rescued by the working class collective.

Rights are endowed by our creator (higher power or whatever your words may be). Rights are not backed by a responsibility.

What about clean drinking water? Or breathing air? Would you like Nestle to buy the rights to and bottle up all the available clean water in your area so that you can only buy it from them?

If your response is "they're not natural rights either", then maybe it's a matter of semantics, because I consider housing rights on the same level as clean drinking water.

I support charities for these activities, not compulsory taxation by government.

(And I wish people would comment rather than just downvote, as a discussion requires comments.)

What would make you think the landlord's interest rates would go up? Its unlikely that any mortgage they have will have a floating interest rate. Borrowing more money will likely be at a higher interest rate, but deals that are closed aren't going to change.

What about variable rate mortgages?

I assume you're used to fixed rate mortgages. A whole bunch of countries don't have those. Actually I only know about the US having real fixed rate mortgages. Other places either have mostly variable rates or some sort of fixed period and a mechanism to bring up the rate in some conditions.

That sucks for folks then. I'd definitely push for that to change. In the US you may not always get the best interest rate but it'll usually be the same for the entire length of the loan.

My own payment going way up. There are no full-term fixed rate mortgages where I live - I can get it fixed for 3-7 years (and 7 gets me much worse interest rate).

That sucks. In the US we typically get fixed rate loans for the length of the loan which could be as long as 30 years.

Why would their rates go up? They should have a fixed mortgage rate. My mortgage rate didn't hasn't gone up at all.

If it's a new purchase, sure.

Before the 1980s it was considered unreasonable risk to rent out a property that was not owned in the clear. Maybe this means we might want to being considering living by some of the older rules, Glass-Steagall being another prominent example among many others.

No, the mortgage rates are fixed for 30 years. So any LL that bought when rates were 3% continues to pay that for 30 years even if rates rise to 7%. That's why being a landlord works out much better than a renter.

And if you do buy when rates are high you can also refi when rates fall.

(Edit: This is in the US; adjustable mortgage rates are more common in other countries)

>the landlord has to increase rents

Is that even a thing? Looking at the data[1], there doesn't seem to be any correlation between recessions (areas shaded gray) and rents rising faster than normal.

[1] https://fred.stlouisfed.org/series/CUSR0000SEHA (you can use "edit graph -> units -> Change from Year Ago, Index 1982-1984=100" to make changes easier to see)

Depends on which country you are in. In germany some popular contracts are bound to inflation index. So rent increases, while employed workers may have to wait with their raises, as companies have to tighten their belts.

That's what's happening in the United Kingdom.

This recession comes with increased interest rates, and we've had a massive Buy to Let scheme for God knows how many years, where people bought houses on mortgage and rented them out. Rising interest rates = rising mortgages = landlords that have to increase rents to keep earning the same amount.

The point is that the average person gets squeezed from multiple sides, and the higher on the foodchain you are, the more chances you have to outsource your losses.

>Rising interest rates = rising mortgages = landlords that have to increase rents to keep earning the same amount.

And what were the landlords doing before? Leaving money on the table by refusing to raise prices to what tenants were willing to pay? I find that unlikely.

I do not understand your question.

Suppose the mortgage is 500, and rent 600. 100 profit for the landlord.

If tomorrow the mortgage increases by 200, the rent will have to increase by the same amount to maintain a profit margin of 100.

If you're asking why was the rent "only" 600 and not 800 in the first place, is that your price is affected by demand and supply. If your prices are ridiculous, nobody'll rent from you. But if everyone around is on a Buy to Let scheme and mortgages (thus rents) rise, your tenants will have to accept your rent increase because all supply has become more expensive. No one is leaving money on the table. It's markets 101.

Copying my comment from another thread because that is relevant.

The stock market is not the economy.

True.

But it always works a bit like this: First the stocks come down, then the earnings and then the whole economy.

It will be interesting to watch what guidance the companies will give for the rest of the year.

I thought it was the other way around. The economy slows which means earnings slip and then that causes people to dump the stock. This is why earnings calls are the trigger- it's when the data is officially reported to the public.

If it affects the economy it is the economy.

Everything's correlated to everything. I won't make any claims that the stock market is particularly correlated to the economy... it's kinda supposed to be, but there's a lot of things that get in the way.

Still, in the end, when things are "generally down", you're going to see the economy go down, the stock market go down, people's fortunes (large and small) go down... they may not be as connected as they "should" be, for some value of "should", but they are certainly neither anti-correlated, nor entirely uncorrelated.

The difference is that the billionaire (better put, the owner class) is the apex predator, so to speak, so there is no one above it demanding higher rents or threatening to put out if business. He falls from ten billion to seven billion. There is so much extra padding he could never spend it.

Caveat, I am not anti capitalist. But I do think much of the dynamic driving the entire financial side of the economy is the mental process of a very few. That is, at tuis level its not impersonal forces.

They pick up the phone (or mail in this case) to the CEO of the companies they own and say: get the stock price back up by cutting 20 percent.

There have only been a few major stock declines since at least 1996 when I started working.

2000 - there was a major correction and the companies that were laying off were mostly in the nascent tech sector. If you worked as a software dev in a profitable “enterprise company” things kept humming along. I personally saw no decrease in demand in Atlanta for instance for software developers at banks, insurance companies etc.

The overall tech market was so small back then it didn’t affect the rest of the market.

2001 - After 9/11 - it didn’t really have any effect on the job market.

2008-2011 - there was a real slow down in spending that was partially offset by the then new mobile market and BigTech really started taking off.

2020 - Covid - of course in some industries people were spending a lot less.

2023 - even now we are just getting back to levels of employment for the profitable tech companies that they were pre-Covid. The overall job market is not seeing layoffs and unemployment is still low.

> lost three bullion putting the STOCK in stock market

> Every time the stock markets goes down I know there will be layoffs

After careful study of money supply and interest rates, I think this more closely matches economic cycles: When "federal reserve" manipulates money supply by raising the price of money (interest rates) or reducing the amount of money (through lender reserve requirements and other tweaks) there will be layoffs.

In other words, don't fight The Fed.

I would have thought that only the big passive funds like black rock would have enough sway to do a sector wide move like this. And perhaps the really big hedge funds like citadel

Some random hedge fund nobody has heard about? Doubtful

But if they're passive, are are they supposed to influence behavior? They can't dump the stock, because they're obligated to hold that stock to track a particular index.

Sorta. They have power by virtue of aggregated votes. The vast majority of people don’t submit their preference for proxy so the passives end up with these huge voting blocks. They either end up rolling with whatever majority they did get on the patchy submissions they got or they make a judgement call

So yeah on paper they are just conduits but they are not as powerless as they would have you believe. Anyone sitting on billions has some power even if they don’t actively move it

Citadels hedge fund has ~50B AUM, TCI has ~35B. They are in the same class of size.

My personal opinion is that the idea that hedge funds started the tech layoffs is bunk, boards get activist letters all the time and they are mostly noise. But TCI has the power to influence board decisions if any hedge fund does.

Unlike Citadel, TCI has a history of forcing the board's hand using litigation. Hardly noise.

Also, TCI's AUM is now only 28B. They've had a harsh last few months.

Another thing is that Citadel is far more leveraged, and it has a discretionary AUM of around 285B, while TCI seems to have little to no leverage. So Citadel controls around 10 times more capital than TCI

It’s like saying that toddler pointing out at the plane and telling it to land caused airplane to land.

Having your costs grow faster than revenue, in uncertain economic situation and responding to it with cutting costs (including layoffs) isn’t brand new invention.

Unless the toddler has a long history of suing the board of the airline company and making their life generally difficult for not doing what they are told, I don't think they are equivalent.

Yes, toddlers can be annoying. But that doesn’t make them masterminds of the operation.

That post sounds very confident in its take, extrapolating from one letter, but I’m curious how much sway this “hedge fund” really has. A Reddit comment said they have minimal investment in Alphabet and so what they ask for doesn’t really matter.

Even if he did hold more than a trivial amount of Alphabet, there's nothing to stop him from taking profits and selling out as soon as the price temporarily moved up (if it even would)

> Folks are treating the recent tech layoffs as something spontaneous.

Letter is dated 20th of January. Not exactly a long time ago. If Alphabets firing were to be because of this letter, I'd call that crazy spontaneous.

if you read the letter, it says the layoff was the right first step and calls for more cuts up to 50k people total

Blaming hedge funds is a misdirection. Google and Facebook have dual classes of shares and all shareholder governance is controlled by the founders.

It surprises me how many people are so sanguine at how synchronized the layoffs were.

"Oh, they all over hired and now they all have to cut back" Why all?

The fact that they are marching in lockstep is suspicious. It points to collusion to lower wages, something that has happened before.

There is one economy, likely heading into recession. There is one war that was supposed to be over quick, but is now looking as though it will spread and go in an unknown direction.

The fact that many companies see this and are preparing for harder times does not require collusion. It simply requires common sense.

If, perhaps:

* The tech layoffs were more spread out over the last year of the war instead of heavily concentrated.

* They were more aligned with the general economy rather than each other

* They were weren't concentrated in very profitable companies that have consolidated their position in the wider economy.

* They hadn't been caught colluding to lower wages before.

I'd be less suspicious. None of these are the case though.

It's likely opportunistic. Sentiment is important for stakeholders. When others in the market are doing it and improving ratios, shareholders are going to ask questions if you aren't doing the same. It's also the ideal time as your employees that stay do not blame the company but rather the market and you can maintain a positive culture, the staff you want to keep are also less likely to jump ship as they presume others are not hiring in this market.

Big organisations scenario plan and it's likely they had an emergency retrenchment plan up their sleeves in case they needed it, which can explain how they were able to execute so fast. It also explains why there are some strange decisions taken.

Ah, like they never[0] colluded before on things?

[0]: https://phys.org/news/2015-09-415m-settlement-apple-google-w....

> There is one war that was supposed to be over quick, but is now looking as though it will spread and go in an unknown direction.

Where will it spread? Have I missed something?

Is there a point at which Russia would consider other countries directly arming, training, assisting Ukraine to be an act of war?

If that point does exist, then either it has to be avoided, which would require knowing where that line between indirect defensive support, and direct action is. Or the point will be crossed and other nations are then involved directly in the war.

Thus far, US/NATO have tried to not cross that line so as to avoid turning it from a proxy engagement to an actual war directly involving US/NATO. As we see countries sending more and better weapons now, there is of course a higher risk that the line is crossed.

So this is speculation and not new information from intelligence sources, right?

We could say with equal confidence that Ukraine is already breaking Russia’s budget and they would not want to escalate.

  > So this is speculation and not new information from intelligence sources, right?

It seems like you're defensive and have set out with an end in mind. That being said, yes intelligences sources have repeatedly warned about escalation and currently there is disagreement on which tanks can/should be sent. Lavrov has also just warned about being on the verge of a much bigger conflict now based on the newest developments[1].

Or maybe it's nothing and Ukraine will crush Russia in a few weeks and we all go back to our over-inflated salaries and all is well in the world. I don't pretend to know the future, you asked a specific question and were given a specific answer. I have no desire to debate the future with you, but maybe we can both agree that in any war there is a risk of it spreading, since we've seen it happen repeatedly throughout history.

And if we can't even agree on that, then we've probably take the discussion as far as we can on here.

[1] https://www.msn.com/en-us/news/world/lavrov-warns-that-the-w...

To further update this, the German Foreign Minister just stated in reference to the recent decision to send tanks to Ukraine: "But the most important and the crucial part is that we do it together and that we do not do the blame game in Europe, because we are fighting a war against Russia and not against each other.”

"because we are fighting a war against Russia" ~Germany's foreign minister. Think about the significance of this statement made yesterday.

https://www.anews.com.tr/economy/2023/01/24/german-foreign-m...

I would say this is an example of the war beginning to spread, yes?

likely heading into recession

People have been saying this for a year at this point and we've seen temporary GDP losses turn around and become GDP growth above expectations. Inflation numbers have been basically at target for the past six months. I'm not so sure that a recession is so inevitable at this point.

All it really implies is that they imitate each other, which is something humans generally do, including the management at large firms.

If so, doesn't that say something about the low quality of the current crop of CEOs?

A smarter CEO might not go on a hiring spree just because everyone else does; or conversely might hire when others are firing as they know they'll get some good quality developers at a lower price.

And if the goal is to drive down wages, they could have experimented with different practices, such as across the board wage cuts, but instead they're all pursuing layoffs.

Do people actually think many or most CEOs are high-quality executives?

If Federal reserve did not explicitly say that its objective was to drive down wages, you could have escaped to that kind of thinking to escape cognitive dissonance. But its not so. The entire financial segment of the economy is collaborating to drive down wages.

https://mronline.org/2022/05/26/u-s-federal-reserve-says-its...

There have been articles here before, imagining that China's state and corporate control is an advantage over the democratic free market in the US.

If FAANG executives wanted the same level of integration as China's CCP companies, it would not be difficult to obtain. The top guys could simply make an encrypted phone call between the tribal leaders of Big Tech and in a couple hours all come to the same conclusion.

Probably don't need to do that cause they all believe the same ideals. The beliefs inspire the same actions, at roughly the same time-frame anyway.

Simultaneous action simply is a fact of life, particularly more-so lately. Information is so readily available, just reactions alone happen in a much shorter time delta than before.

> The fact that they are marching in lockstep is suspicious. It points to collusion.

Or… twitter took all the flak and everyone else is downsizing now because of that.

And it seems that everyone over invested in labor because everyone was over investing in labor.

Was it collusion when everyone over hired?

I don't think it is collusion, but I do think it is an emergent shared strategy. Take advantage of more urgent layoffs at Facebook to flood the market with talent, push down wages for new hires, and set a new baseline for industry-wide compensation that lets you depress ongoing compensation for your existing employees. And do this without irrecoverable damage to your business capabilities by only firing 5-10% of the company.

A strategy which will be all the more effective if you agree it beforehand and synchronize.

I agree, but that fact is not an substitute for actual evidence of the alleged practice occurring. My strategy of daytrading would be more effective if I had insider information, but that doesn't mean I was insider trading just because I was doing well.

If you agree that this isnt cast iron proof and you agree that it is nonetheless suspicious then you are simply agreeing with what I said.

I have to agree with you there. I don’t have evidence, so it’s a bit of a conspiracy theory, but something is off.

>This hedge fund demanded that the big tech companies lay people off because they were being paid too much.

https://finance.yahoo.com/quote/GOOG/holders?p=GOOG

TCI doesn't even register here... why would Alphabet care at all about some random hedge fund? How would their argument impact all the other tech companies doing layoffs?

How about a better explanation?

Did you know >80% of the layoffs are targeting Asian immigrants? Mostly, but not just Chinese nationals.

https://pandaily.com/chinese-tech-community-in-silicon-valle...

Not exactly a huge prediction: https://qz.com/1029860/more-silicon-valley-tech-workers-were...

Why is the US government banning Tiktok? Why is the USA in a war with china? Why are mostly innocent chinese immigrants getting laid off?

Well it's better than internment camps?

>> Did you know >80% of the layoffs are targeting Asian immigrants?

Aren't 80% of Google engineers Asian immigrants?

This is a thoroughly vacuous take.

Relevant thread yesterday: https://news.ycombinator.com/item?id=34476909

indeed they are, but it should also be noted that the same investors were behind the hiring spree in 2021-2022 - FAANG massively expanded hiring (as it most of tech tbf) as we all raced for a bigger slice of that juicy globalised, digitised, remote first future we all thought was gonna be happening. Different world now, as we are in hostile de-globalisation, meaning smaller markets, increased costs, less trade - and therefore less investor return

yeah, like, where was that same guy a year ago? cheering on as they went on a hiring spree?

Hedge funds aren't married to the stocks they own. They'll buy and sell or even short depending on what the next short-term price move will be. As long as the price moves and they predicted it (possibly because they caused it), it's all good for them.

everyone was cheering, it was boom times. The reality is that Putin's war reset the table, and set the entire world down a different path. These lay offs - as tough as they are for the individuals concerned - are a part of that pivot

Serious question. How would acting on this advice be different to collusion between employers to depress salaries? (Given an assumption that TCI also owns shares in other tech companies).

Google isn't a growth stock. So you cannot spend like a growth stock. You need to be efficient. Hardly rocket science...

AI is about to literally rewrite everything...

When you're a growth company, you innovate around issues. When you're a mega corp (like any FAANG) you buy someone who already did that. When AI becomes an issue, Google can just buy it out. The same applies to 1001 other imminent, world changing, breakthroughs (remember last year when we were all about to get quantum computers? Or everything was going onto the blockchain?). When you're small you are nimble, when you're big you just sort of steam-roller along.

As far as I can tell, this is just the corporate lifecycle. Congrats to Google on reaching middle age.

Is TCI Fund even a hedge fund?

> The Children’s Investment Fund Management (UK) LLP (TCI) is a London‐based hedge fund management firm founded by Chris Hohn in 2003 which manages The Children’s Investment Master Fund.... In January 2022, TCI was named by the Guardian as the world's top-performing hedge fund.

https://en.wikipedia.org/wiki/The_Children%27s_Investment_Fu...

It's an old-school hedge fund basically driven by a few people deciding which stocks to buy and how to put pressure to make then more valuable.

These generally tend to fail spectacularly, and aren't particularly good at hedging.

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