Tell HN: DigitalOcean is doing layoffs | Hacker News Reader

Tell HN: DigitalOcean is doing layoffs

302 pointsbobbybc253 comments

I was let go this morning along with at least 4 others from team. Looks like a big company wide layoff is underway

I don't really get the motivation for this beyond personal greed on behalf of executives that are only seeking to prop up the share price in the short term.

The market forces at work will force all technology companies down in valuation pretty much regardless, what is the difference of a few extra million market cap to handicap your ability to grow during the next expansion phase?

I can understand it if you have brought on a lot of fat and you want to lean out your team and need an excuse but outside of that rather narrow situation I really don't understand cutting stuff like technical writers etc during these periods.

Why handicap yourself in the future just to make one quarter look better? Surely if you have faith your stock options will be worth more if you play the longer game?

Seems like sociopathic tendencies are a requirement for C-Suite Execs

Mr. Zorg from 5th element is basically the archetype for a MegaCorp CEO.

These CEO traits were very, very clear long before The 5th Element was a thing.

> what is the difference of a few extra million market cap to handicap your ability to grow during the next expansion phase?

For an executive, it's a big difference in stock based bonus.

The executive level at corporate america tends to filter for status and financial obsessed sociopaths, so they make sociopathic decisions where they are content with making decisions that harm many (layoffs) but benefit themselves. That's how we got the enron, the great financial crisis of 2008, and many others.

That would make sense if a significant amount of their compensation stood to be made during the contraction.

However if your tenure is expected to outlast the contraction then you would make more money in the long run by planning for how to be in the best position to exploit the market conditions during the next upswing.

It's hard to do that if you layoff crucial staff that are part of your growth engine.

Average CEO tenure is 5 years and it's going down. Personal anecdote: I worked at a large EU tech company, then acquired by even larger US tech company. For the five years there, I've seen five different CEOs with almost fully different teams of other C-levels. After the second CEO you clearly start to see how long the next one expects to reign - just take the roadmap and look where reasonable and achievable goals convert into pipe dreams.

In contrast, FAANGM’s have had an average of <2 CEO’s in the past 20+ years.

Yes, on the scale of FAANG, the "I won't be in this position after a year" attitude shifts from C-level down to upper and middle management. I think it's because when you're a CEO of any of top-10 S&P500 companies, there is no next position for you to take, you're already at the very top of your personal career pyramid.

And I honestly think that in any of them, neither mass hirings nor layoffs are initiated by CEOs. I'd bet it's rather "one person pushes through the idea of hiring a lot of people, a year after another person pushes the idea of laying them off".

At least at Apple, Amazon, and Google, most execs have been there 10+ years.

One of the challenges is people often think “where’s my growth going to be if my Senior Director/VP isn’t going anywhere for 5 years?”

> I can understand it if you have brought on a lot of fat and you want to lean out your team and need an excuse but outside of that rather narrow situation

This doesn't really seem to be a rather narrow situation. The tech companies were hiring like crazy for the past two years. Quick googling shows that DigitalOcean increased headcount by 31% last year.

And contrary to the popular opinion here, for me this does sound like the right move for the time. The logic, on the growing market, was "let's hire people now for 200k TC and give 50k raise after a year, because year later they'll be asking for 500k TC upfront". Now it's clear the salaries won't be going to the moon in the nearest future, so it makes sense to cut the fat.

One other factor in all of this is how companies used debt to sail through the pandemic. They took out loans, and now the bills are coming due. If you can't grow revenues to match interest payments, you often have to cut OpEx, and that seems to be what some companies are doing.

Still sucks if you're on the receiving end, though.

I don’t think old loans are the problem. Corporate paper was dirt cheap during the pandemic, and the interest will still be dirt cheap now.

The fact that new loans are not cheap thanks to high interest rates is the more threatening factor.

This is a commonly overlooked point. Most of these companies doing layoffs will still have much larger employee counts than they did two years ago.

Hiring in 2021 and 2022 was really out of control at many companies. There was a feeling that companies had to keep even the underperforming engineers earning $200K TC because it was so hard to hire replacements. That has changed, so it makes sense to start cutting the employees who were hired into roles they couldn’t handle.

My company had layoffs late last year. It has only made things more efficient. We lost some good people, but there were too many people assigned to every project. Half of our time was spent dividing up work and coordinating across teams for things that should have been handled by a single team. There was just too much hiring in 2021 when money was cheap.

Stating that these companies hired a lot last year as an explanation for doing layoffs this year sounds like a total non-sequitur to me. Nobody gets hired to just sit around and do nothing. They were hired because there was work to do. Have tech companies now decided that they're just... not going to do that work anymore?

In every good company there is always more work to do than workers, sometimes significantly so. Technical debt, features that may or may not be useful, features that are useful but deprioritized in favor of even more useful stuff.

So yes, they're just going to put some things in the backlog again, it's totally normal.

It's not to make one quarter look better, it's to align the company with new market expectations. Investors now are expecting responsible cash burn, since capital has become significantly more expensive than before. Companies exchanging cash for market share are no longer as attractive. Profitability and sustainable growth are the new objectives (personally I wish this was always the goal and think the last 3-5 years were a bit of a shame, but that's not the point - the market did not agree with me).

Maybe this apply at startups but not to established and cash-rich companies like Google.

Just because you have money, doesn’t mean you should burn more money than you need to. It’d be one thing if Google had a clear expansion goal that justified the extra headcount and cash burn, but they don’t.

In the end, hiring is a transaction. Google does not have obligations beyond that, and neither do employees toward Google when there is a better transaction or when the terms no longer suit their needs.

It absolutely applies at cash-rich companies as well. Losing money is losing money, no matter how much you have in the bank. I don't know why folks seem to keep thinking that having money means you can lose it forever, or that out of the kindness of the company's heart they can continue taking investor money it and funneling it back out to non-productive activities. For-profit companies exist to make money. Investors were willing to put that on hold for 5 years because interest rates were low enough to make borrowing cash effectively free, allowing you to trade cash in the short term for growth. That is no longer true, and they're no longer willing to do that.

Put more clearly: investors __do not want to invest__ in companies that are burning money right now, no matter their cash balance. Responsible, profitable growth is the goal. Your cash backstop is not relevant.

My point is that market expectations are fickle, over-hiring, layoffs etc are all symptoms of paying too much attention to the market in the short term rather than focusing on long term ROE.

I really struggle with this perspective for a pretty simple reason:

"Market expectations" are predictions of the future. Early pandemic, predictions for tech companies were favorable. They were hiring not because of quarterly targets or short-term objectives, but because companies believed they would be able to pull future goals forward. They are now laying off because future predictions are more bleak. With new data, we form new ideas. There are few companies out there saying "we're 100% confident we can grow 100% YoY for the next two years" but not hiring according to that. Their projections of where they will get have changed, and the hiring plan follows suit.

It's really easy to say this with hindsight, and we often forget/don't realize when we're acting based on it. The reality is that unless you (the general you) were shorting Google/DO/Salesforce/whoever in 2021 at their peaks, then it's clear none of us really know what the future hold and are all guessing. If it was so obvious then, there are ways for us to individually profit off of that.

So, being 100% genuine here: if you really believe you have a better opinion about long term value, play in the stock market. Short companies that are underinvesting in growth compared to their competition. Buy the dips. Sell the highs. But my guess is you don't have that level of confidence (I certainly don't!) and that should help explain why, as the person responsible for a >$1B annual budget, you might have to change some decisions you made when new data comes in.

> because companies believed they would be able to pull future goals forward.

And what justified these beliefs, to them?

I'm curious what level of blending there is between the two states.

"We need to lay people off now to focus on profitability"

Are they also doing any hiring whatsoever?

If in 6 months Jerome Powell comes out and says "no more rate hikes, expect to taper down from 5% to 3% in the next 12 months", does DigitalOcean (and companies like them) turn around and "go for growth" again and restart the (expensive) hiring process (after having just laid people off not too long ago)?

> I don't really get the motivation for this beyond personal greed

That's all you had to say

> Why handicap yourself in the future just to make one quarter look better? Surely if you have faith your stock options will be worth more if you play the longer game? Is this specifically in reference to "I really don't understand cutting stuff like technical writers etc during these periods." ? If so, do you think technical writers are important business value wise?

do you think technical writers are important business value wise?

If they aren't, why were they hired in the first place?

Offset writing duties to enable x higher output. (x = duty that is not writing). Probably could have worded the question instead as: "do you think technical writers are important business value wise to enable a full time position?"

I've hired out technical writers full time and part time. And I've found it's far better to hire a technical writer part time or on contract vs. full time. The value to cost ratio is not comparable to technical roles.

late stage capitalism in a lot of the time. they fire ppl and hire them back for less.

That's exactly what happened 3 years ago too. Look at the sequence of events.

When interest rates are 0%, any amount of growth compounded over years is attractive.

When you can get a 5% risk-free return from treasuries, even 7% rate of return is unattractive when compared to the safest asset on earth returning 5%.

My point is, layoffs will continue until companies are much more efficient, or interest rates go down.

> My point is, layoffs will continue until companies are much more efficient, or interest rates go down.

Exactly what the FED wanted.

how does interest rate affects company layoffs and why is being more efficient affects that? and why would FED want this? - serious question

The FED wants unemployment to go up which will drive demand, and therefore prices, down. That will reduce inflation.

> FED wants unemployment to go up

This is wrong. The Fed doesn’t want higher unemployment. It isn’t even willing to tolerate it. That’s the whole “soft landing” conversation, and why hikes are so hesitant.

The ideal path would be labor market loosening with no more unemployment. Absent structural adjustments, that’s possible. But we need structural adjustments, so layoffs are necessary, which makes the closest to ideal layoffs and immediate reuptake, i.e. constant employment with less wage growth.

A single-mandate Fed would respond to last year’s inflation like Russia did: a sharp, steep rate hike.

You're technically correct, but this seems like a bit of a distinction without a difference. The Fed may not want unemployment, but they do want people to lose their jobs, and an obvious risk of people losing their jobs is that they'll be unemployed. There's no guarantee the Fed will stick the "soft landing."

> they do want people to lose their jobs, and an obvious risk of people losing their jobs is that they'll be unemployed

No, they want less nominal wage growth. The less people lose their jobs, the better. But economies don’t adjust without creaking, which means yes, an expected effect is layoffs and bankruptcies. But the Fed doesn’t want that, and goes to significant lengths, often with negative impact on its price-level mandate, to manage this downside.

"soft landing" is a hope but if bringing the labor market under control ( higher unemployment ) requires a hard landing or recession the FED is prepared and willing to do that. The whole concept of a soft landing is "well that would be nice but it's not the priority".

Maybe the reason why people keep repeating it is because that's more or less what Powell keeps saying: "Reducing inflation will likely require a sustained period of below-trend growth, and it will very likely require a softening of labor conditions," (source: https://www.cbsnews.com/news/federal-reserve-interest-rate-h...)

Softening of labor conditions is pretty directly saying "Increase unemployment".

> and why cuts are so cautious.

They're so cautious because they want to hit the right amount of increased unemployment, not that they don't want unemployment to go up at all.

> Softening of labor conditions is pretty directly saying "Increase unemployment"

Not at all. It means less nominal wage growth. That can and does happen without an increase in even job losses, let alone unemployment. (You can have job losses with constant or even increasing employment.)

That seems extremely hypothetical. Sure, in specific anecdotal places/times wages got frozen and employment stayed fixed, but I don't think _anyone_ expects that to happen at a national level if the policy goal of the day is to "soften labor conditions". The expectation is higher unemployment. I think most people understand this.

> seems extremely hypothetical

It’s literally what we’re seeing right now. It’s not the norm, but it’s precedented[1], most recently in America in the 90s.

[1] http://pombo.free.fr/phillips1958.pdf Figure 1

There is a major difference between "this thing we have to do in order to hit our target 2% inflation rate may unfortunately increase unemployment" and "the fed wants layoffs"

Also job numbers have been incredibly good so it's not even generally true unemployment is increasing outside of sectors that are incredibly susceptible to fears of recession.

> There is a major difference between "this thing we have to do in order to hit our target 2% inflation rate may unfortunately increase unemployment" and "the fed wants layoffs"

I don't think that is a major difference to someone who is laid off because of intentional decisions that the fed makes to effect an outcome, knowing that layoffs will be a consequence.

> don't think that is a major difference to someone who is laid off because of intentional decisions that the fed makes to effect an outcome

The difference between being laid off and having job offers versus going onto a growing roll of the unemployed is major. We're not seeing a meaningful increase in unemployment [1][2].

[1] https://fred.stlouisfed.org/series/ICSA

[2] https://fred.stlouisfed.org/series/CCSA

Won't unemployment lead to deflation, which is also bad?

Prices never come down. Except maybe gasoline, after it jumps high in a panic now and again. Everything else just ratchets up, always.

The best I can understand it, the low interest rates encourage lending / borrowing, which expands the money supply. As the supply of real goods and services is not keeping up, theres more money than goods, so prices of everything go up.

Layoffs are a way of keeping wages down, but that's just corporate greed. If wages went up, it would effectively negate inflation - we'd just get extra zeros on everything, but individual purchasing power would stay on par (you could still pay your rent with half a paycheck, etc).

Of course in a global economy that would cause the country to be at a disadvantage in the import/export game.

Some categories do deflate over time. Consumer electronics, cell phone services, toys are examples that are cheaper now than 10, 20, or 30 years ago.

You can get a 43" 1080p TV for $150: https://www.bestbuy.com/site/insignia-43-class-n10-series-le...

I never quite understood this. For things that are new and novel it makes sense for price to decrease over time, like TV tech (do note that OLEDs today aren't any cheaper so the category is not TVs it’s LCD TVs). But games/toys it does not. It implies quality is lower or efficiency of production is higher and with something like video games I really doubt efficiency is higher. This is why I welcome the $10 price hike for video games. I want good games again.

I paid $3500 for a high quality 480p TV in 1997. A 4K OLED TV that will stomp all over that TV can be had now for under $1500. In nominal dollars, the TV fell by over 50%. In real dollars, it fell by over 75%.

I spent $3500 on a nice OLED a few years ago. You’re not wrong, but there’s a lot of variance in what you compare.

Now do car prices.

Cars have both increased in reliability, features, safety, and longevity and deflated significantly in real terms. They have not deflated in nominal terms as consumer electronics have.

https://www.in2013dollars.com/New-cars/price-inflation

Commodity prices fluctuate wildly. That means food.

To combat inflation in the housing market. A subset of White collar professionals (such as those in Tech, Real Estate, Finance) ended up earning so much that housing became unaffordable as a small but significant minority began buying multiple investment properties

https://www.politico.com/news/2021/11/10/rent-inflation-bide...

https://www.politico.com/news/2022/12/31/labor-market-high-i...

“Tech and finance are taking the impact of rate hikes the hardest because they gorged the most on low rates,” said David Kotok, chief investment officer at Cumberland Advisors. “But if you are a carpenter or a retail worker right now you can still quit your job whenever you want and instantly go somewhere else and get paid more. This won’t continue to be true if we go into a real recession.”

Tech workers are a small portion of workers overall

But a significant portion of the top 10% of Americans economically.

The top 10% of Americans by combined household income is any household (not income, household) earning ~170k or above. [0]

Layoffs at this point have mostly been within the tech industry only, hence why rates continue to be hiked. Who cares about techies who most live and vote in already dark blue districts. To win elections you gotta decrease inflation in purple districts and red districts with much more diverse economies. (Big reason Big tech started nearshoring in Atlanta, Austin, Nashville, Columbus, and RTP btw - to get some political capital from legislators in Red states)

This is why you see Dems who get most of their support from white collar professionals like Warren and Ro Khanna slamming rate hikes as they negatively affect their core constituents. [1][2]

This is a white collar recession [3] and most Americans aren't white collar. Hence why you are seeing strong job growth in blue collar jobs still [4] leading to even higher rate hikes, because they clearly aren't negatively impacting most Americans

[0] - https://finance.yahoo.com/news/much-money-top-1-5-100000529....

[1] - https://www.politico.com/news/2022/08/28/warren-elizabeth-re...

[2] - https://www.politico.com/news/2022/10/11/jerome-powell-riski...

[3] - https://www.bloomberg.com/news/articles/2022-09-13/tech-layo...

[4] - https://www.politico.com/news/2023/02/03/employment-report-b...

HN has a lot of main character syndrome. Anyone posting here is closer to 1/330,000,000th of Jay Powell's concern.

Not really. The richest American, aka 1/330,000,000 is is the top 0.0000003030303%, and is non other than Elon Musk, according to Forbes, assume you're referring to rich Americans (which excludes Bernard Arnault and Carlos Slim Helu), followed by Jeff Bezos, Larry Ellison, Warren Buffett, and Bill Gates. All $100-billionaires. An amount so staggeringly higher than mere mortals that it does everybody a disservice to lump them in with mere millionaires. You may have heard of tech millionaire Linus Torvalds (net worth $50 million) or Urs Hölzle (Google; $10 million). The top 0.000003% have five orders of magnitude more money.

Everyone is closer to being a millionaire than any of the billionaires mentioned.

I found this visualization by MKorostoff very educational on just how staggeringly much money a billion dollars is. https://mkorostoff.github.io/1-pixel-wealth/

Indeed. Dude is concerned about inflation for the US dollar. Last thing he’ll care about is 20-something making 200K a year sending emojis over the Internet.

You are correct. The FED is not targeting tech workers as implied above; they do not have a granular "toolkit" at their disposal. Although workers in growth industries will be harder hit due to valuations being based on future cash flows.

I never implied the Fed is targeting tech. I said rates hikes are used to minimize asset inflation caused by speculation driven by the top 10% of Americans. Tech is just overrepresented in that top 10%.

More than you'd think. BLS says 4.4 million software engineers in the US. Compare that to:

5.5m Nurses

4m Teachers

9.8m Retail workers

Sounds more like a personal frustration.

Rates are hiked to combat a high CPI. Housing costs, with the exception of home-related taxes, are not even included in the CPI.

Home prices rose a blistering 18.8 percent in 2021, and rent has climbed 17.6 percent nationwide over the last year, industry data shows. But those prices, the result of a severe supply shortage fueled by municipal government restrictions across the country, haven’t fully shown up in inflation figures because leases are typically annual.

“The housing shortage is going to push up the overall [consumer price index] to uncomfortable positions for the Federal Reserve,” National Association of Realtors chief economist Lawrence Yun said. “Consequently, this high inflation that we have is certainly not transitory, and it’s going to remain stubbornly high through the end of the year.”

https://www.politico.com/news/2022/03/18/housing-costs-infla...

Also, the CPI DOES include cost of housing - https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...

because if people don't have extra money to buy things, then merchandisers are forced to lower price to a point where people are willing to buy it.

it's supply and demand, Feds can't really impact supply - but they can impact the demand of it

The best I've been able to determine is: we went through a period of very low unemployment, and as a result employee class people were able to do things like "ask for reasonable pay" and "switch jobs for more money".

> the scariest thing that can happen to a capitalist system

This is nonsense. Nobody benefits from high nominal and low or negative real wage growth. Everyone does from real wage growth, including investors.

The feds “dual mandate” is "maximum employment, stable prices, and moderate long-term interest rates." There’s too much employment at the moment, imperiling price stability and forcing their hand on interest rates.

Inflation expectations, particularly”wage spiral”, are tied to unemployment. The historically low unemployment would/should drive further increases in wages due to scarcity/bargaining position of labor. More layoffs and job suppression will reduce that inflation pressure.

Wild to think a country can have both too much employment and millions living below the poverty line.

Yah which is exactly why this response is not going to work.

The issue right now with "full employment" is incentive based -- after covid large numbers of people opted out of the jobs available to them because they finally recognized how much they have been being screwed over by the employer classes. The social contract is bad -- people are unhappy with raw deals.

I think the only thing that could actually work right now will require actually addressing the structural social wealth imbalances.

Too much employment --> introduce mandatory hour caps and increase mandatory vacation allowances and decrease retirement ages.

Too much overhead per employee -- get healthcare the hell out of the employment contract ...

It's insane to me that when we saw relative cross class wage growth for the first time in decades -- the immediate conclusion of all the decision makers had been that the labour market is over-exuberant and needs to be tamped down...

It’s important to understand that the Fed has limited tools at its disposal. Congress does have the power to enact the required structural changes. However, the Fed Chair has not been very vocal about this so it always seems like the Fed is the only agency that can do anything about the situation.

Honestly Powell should stop pretending he has any control over the situation and say it explicitly that rate hikes aren’t really having the intended effect. He is a bad Fed chair.

Too much employment is a weird problem description to begin with. The more I think about it the weirder it gets.

Yes, it is extremely weird, especially alongside the overt contempt for employees being so prominent. Really makes you wonder who the economy is meant to actually work for.

My friend mentioned something similar on the topic of wages being 'too high': "it's pretty screwed up that the economy essentially needs a significant portion of workers to be two paychecks away from financial disaster to be sustainable."

Just imagine an absurdly overheated economy where a few million workers are doing something of really marginal or negative value, like cold calling seniors to sell them dogecoin. That’s not our economy today, but that’s ultimately what the Fed is looking out for, and it’s what you’d get if you have too loose money for too long.

If negative social value work is lucrative, people will do it. If it's not lucrative, people won't do it.

This has no relation at all with the employment rate.

It’s not the social value it’s the economic value, and as interest rates rise riskier and less productive use of capital becomes less attractive.

Not everyone has the same skills and capabilities.

Also the poverty line is a moving target. People with streaming TV and video game consoles are technically in poverty in the US. In the 1960-70s, access to those items would be only for ultra wealthy.

You mean non-existent. The Atari 2600 came out in 1977 and it's very difficult to have streaming TV without the internet, which came about in the 80s and 90s.

>Also the poverty line is a moving target. People with streaming TV and video game consoles are technically in poverty in the US

Yea, this is a tricky one. Is there something below poverty? Googling it says the poverty line is $35,801 for a family. I have relatives in a foreign country that would die for $35k (even all things relative). They have a TV but that's about it. No streaming, no reliable cell phones, etc. All through college and even a bit before, I would have lived in what was considered poverty... but to say "I lived in poverty" just sounds silly.

Depending on where one lives 35k may not even cover rent and food after taxes so that basically leaves you with debt or constantly accruing more and more poverty which in turn it becomes harder and harder to get out of.

Yay they can stream while their kids don't have decent winter coats, shoes, or access to dental care. What progress.

It is also a joke on the very well (empirically) established characteristic of employment to self-regulate over the same range.

Pretending that the government can push that number low or high for any long period is a joke. It can smooth some noise, or make some extra noise, and that's all.

A lot of answers for why the fed would want this but regarding your first question:

The interest rate can be thought of as the “cost of money”. The higher it is, the more expensive it is to get more money in the short term. This is why 0% was labeled “free”

When companies have access to cheap money it is less risky to invest short term in long term growth. Generally “growth” is expensive up front and pays out over time.

Also, hiring takes time so starting to grow happens on a lag.

Now, we had a long span of cheap money so, companies not only planned to grow but they planned to keep growing. This meant they were hiring today for tomorrows growth.

Money is no longer cheap.

All of the future growth is a lot riskier so any hires made for that purpose are cut. Also any in-progress growth became risky, so some of those hires are cut too. Lastly, there is no growth after the current crop of projects so, as they complete, some or all of those hires are let go.

Cheap money is risk free growth opportunities. Growth needed people. Expensive money is very risky belt-tightening opportunities. That leads to layoffs.

Increasing interest rates can discourage investment by making it more expensive to borrow money, and by increasing the yield of savings relative to available investment targets.

Corporations seeking investment in this climate might try to attract it by increasing the expected return on investment, which would involve committing fewer resources or achieving greater returns - being "more efficient".

Labour costs are typically one of the main outgoings for a corporation, and so they might try to increase their rate of return by eliminating positions which are considered to be producing too few returns.

The Federal Reserve might want this because they believe (erroneously, in my view) that high employment is the main contributing factor for inflationary pressure.

You are absolutely correct and I wish more people understood this: poverty is a feature of the system. People who tell poor people to just "get a job" don't understand how this system works. Also, there's no point in trying to figure out how to "fix" the system, i.e. eliminate poverty, because we've found no alternative that works save for one: social safety nets to ensure the poor are at least housed, clothed, and fed.

I don't think poverty is necessary, that problem could be solved by redistributing these returns, e.g. through a higher corporate tax and UBI. The alternative to monetary policy is a cycle of boom and bust that is much larger and more disruptive. Fundamentally though, we do not want people to be employeed in jobs that produce little value, and when interest rates are too low a lot of that starts to happen.

> that problem could be solved by redistributing these returns,

TBF, we already have redistribution via progressive taxation which funds "social safety nets to ensure the poor are at least housed, clothed, and fed." (to use GP's words). Trick is to ensure that we do not do too much of it, else people will not have any incentives to work harder.

We have progressive taxation in theory, however the reality is we have a virtual aristocracy able to pay to have tax law written in their favor, to the point where as a percentage of income the extremely wealthy aren't paying nearly as much of a portion of their income in taxes as the middle class who are only a couple of missed paychecks away from life-altering changes in lifestyle.

Also, the Laffer Curve has been thoroughly debunked time and time again. You may want to pay attention to what happened to wealth distribution since the start of the Reagan Administration and its adherence to "voodoo economics" - the very same economic theory plaguing us to this day.

Why do you think the Feds view is erroneous? High employment led to a buyers market for labor, and total comp in tech (and every other field) higher.

What do you see as primarily driving inflation? Supply chain, China, Ukraine?

Regarding the interest rate, the interest rate is the price of both money and debt (as modern economies are debt based and not capitalist, socialist, communist, or anything else). As the cost of debt increases, pressure exists within any budget to cut costs wherever possible. This is exacerbated by a general tightening in investment markets due to returns needing to be higher than both the interest rate and the rate of inflation.

The Federal Reserve wants to raise rates for multiple reasons. One is to try to slow inflation. Another is to try and salvage the dollar as the global currency. Yet another reason is to try and save the banking system. The overnight market has seen a lot of activity and change over the years as banks operate on slimmer margins with low required reserves. Raising interest rates will get people to park money in banks and help to ameliorate the heat.

The Fed doesn't want layoffs – at least not directly. I'll give you the accepted economist explanation rather than my own, but I would note there is a serious lack of independent thinking in economic circles. It's like these people are all educated in the same elite universities reading the same textbooks – as an outsider the level of group think in economics is utterly bizarre.

Now that disclaimer is out of the way...

So the Fed has three mandates (in theory), minimize unemployment, keep inflation low and stable, ensure moderate interest rates.

Inflation in an economy is always caused by supply and demand dynamics. If there's a lot of demand for something but not enough supply then prices will rise until an equilibrium is reached. Rapid changes in prices is something the Fed is mandated to tackle.

The Fed as a central bank can't really do anything to change how many goods / services businesses are supplying so all they can really do to control prices (inflation) is influence demand.

I won't get into the details of all the ways they can do this here, but to summerise they basically have a few really crap tools, with the primary one being to increase interest rates – not 100% true, but close enough. This has the impact of making it more attractive for consumers to save, rather than spend (basically).

More saving and less spending means lower demand for goods, and therefore inflation should fall back to target. The opposite is true when the Fed wants inflation to be higher. The Fed wanting more inflation was why interest rates have been so low in recent years. One of the consequences of lower demand is that businesses may need to slow hiring, or cut jobs.

Their mandate on employment and moderate interest rates largely stems from low and stable interest rates. This is because employment and interest rates are mostly a product of growth dynamics and the only way the Fed can encourage long-term growth is by ensuring prices in the economy are stable and accommodative to long-term decision making.

When people say the Fed wants unemployment what they mean is that the Fed wants people to stop spending money so they stop bidding up the price of goods and services in the economny. Historically tight labour markets (as we have now) correlate well with robust economic demand, and therefore higher inflation. This is partly because consumers have jobs and can spend, but also because in a tight labour market businesses have to compete for labour so consumers tend to get pay rises easier too.

I'm skipping over a ton here, so feel free to ask if there's anything you're unclear on. But basically the Fed wants you to lose your job so you'll stop spending money and so businesses don't have to compete as aggressively for labour. In theory, this is good for long-term growth dynamics.

The Fed wants lower inflation, period, that is part of its fundamental charter. It is taking pains to not cause extra damage to the economy in the process. The damage from Fed tightening is nothing compared to uncontrolled inflation.

But we aren't seeing major layoffs in other industries, unemployment is low and job growth is relatively high.

It seems like the low interest rates were helping sustain a bubble in tech and that bubble is now deflating.

Which other industries relied so heavily on outside funding to stay afloat?

I don't think you have been reading the same news I have. Maybe you are only reading tech-news like HN

Disney https://www.cnbc.com/2023/02/08/disney-reorganization.html

3M https://www.cbsnews.com/minnesota/news/3m-to-lay-off-about-2...

GE https://www.cnbc.com/2022/10/06/ge-layoff-20percent-of-onsho...

Dow Chemical https://cen.acs.org/business/finance/Dow-rolls-layoffs-profi...

Ford https://wraltechwire.com/2023/02/14/layoff-watch-ford-cuttin...

I can keep going, but this is much broader than tech

This math ignores inflation. When interest rates are 0% and inflation is 1% you have -1% interest rates, which makes investing in FI bad. When interest rates are 5% and inflation is 7%, real rates are -2% (maybe -3 or -4% after tax) which is worse than before.

> rates are 5% and inflation is 7%, real rates are -2% (maybe -3 or -4% after tax) which is worse than before

Spot real rates versus long-term inflation expectations. If you think we’ll be at 3 or 4% inflation long term, the short term bite is fine. As such, yes, higher nominal rates, even if lower in real terms in the short run, can still have this effect.

> When you can get a 5% risk-free return from treasuries, even 7% rate of return is unattractive when compared to the safest asset on earth returning 5%.

I got news for you. The riskiest place to park your money right now is government bonds. Long-dated US treasuries are risky. You will end up losing everything.

But if you insist on US treasuries, be my guest. I need someone to trade against.

Treasuries return exactly what is printed on the coupon, no more, no less. Short of government default, they are as risk free as you can get.

and if the government every truly defaults, you are pretty much screwed no matter what you own.

Gold and private assets in general are a hedge against government collapse

Can you name a time in history where government has not defaulted?

I’ve seen some fascinating stuff on this site, but someone claiming to trade against T-Bills is hilarious.

Well of course you don't do long-dated. You open a Vanguard account and put your cash in something like VMFXX; average maturity is 11 days. 4.5%

layoffs will continue until companies are much more efficient

DO made a profit of a little over $250m in 2022, on revenue of $428.6m. That's a 60% margin. How much efficiency does a company need?

EDIT: Correction.. those are the 2021 numbers. The latest numbers on the DO website for Q3 2022 state;

"Gross profit of $97.6 million or 64% of revenue, an increase of 300 basis points year-over-year, and adjusted gross profit of $121.5 million or 80% of revenue."

https://investors.digitalocean.com/news/news-details/2022/Di...

divided across 1,000 employees, that's pretty low per employee. Nowhere near Google's $1,486,779 per employee, pre-layoff.

That doesn't address the point in the comment you replied to. He is talking about returns. The question is what return they made on invested capital. It might still be very good, I have no idea, but it's not the same as margin.

Wait, doesn't the invested capital equal the revenue minus the profits? That is, the expenses.

No, those have nothing to do with each other (except on the very long term..)

As an extreme example, a SPAC that hasn't acquired anything yet has near-zero revenue, profit and expenses, but a lot of capital

At 60% margin your argument becomes pretty disingenuous.

Sure, they're not the same but the quoted number is freely available and correlates with the returns.

Thanks for posting this. I see so many comments that fundamentally misunderstand the relationship between rising interest rates and layoffs, e.g. "Many of these companies have very low debt and don't need to borrow right now, so why do they need to do layoffs?"

Interest rates are the key parameter for calculating the present value of future cash flows, which is (theoretically) how companies are valued. When interest rates go up, those present values go way down, to the point where they're no longer competitive with risk-free investment options.

But why does that matter? Why does a wildly profitable company need to compete with “risk-free investment options”? Why do they need to be an investment option at all?

Obviously I’m not understanding something very basic about finance here, but I don’t see how “profitable company is not more profitable than a loan would be” implies layoffs.

The only reason DigitalOcean exists is because people have invested money in it. But those people have every right to invest their money elsewhere if they see a more profitable option, such as U.S. treasury bonds. As a result, DigitalOcean needs to compete with loans, not just other cloud computing companies.

That's how the current economy works.

> Why does a wildly profitable company need to compete with “risk-free investment options”?

The shareholders are the owners of the company. Their ownership stake is referred to as shareholder's equity, and the company's net income divided by this equity is called return on equity.

Now, if you're a shareholder, and you've determined that your return on equity in this company is lower than, or not all that much better than, the risk-free rate of return, what is the rational thing to do (economics-wise)? Shut down the company and put all your money into Treasuries. Why would you leave your money in a company, that has all the risks associated with the ups and downs of business, when you can just park it in a risk-free option (though, of course, Congress in their grand stupidity is trying to change that "risk-free" designation at the moment, but I digress...)?

I think often times when you wonder "why does the economy work like this?", it's really helpful to put yourself in the shoes of a company owner. What are their incentives and competing options?

Really appreciate the hand-holding here.

One thing I don’t fully get yet, is that you say that if the DO return on equity is lower than that of a government loan, the shareholders should just dissolve the company. How is dissolving the company going to get them their money out? They’ll get only a tiny sliver of their original investment back, right?

They're not quite right. They won't dissolve the company.

What happens is that market participants sell their holdings of the company's stock (since they want to free it up to buy bonds with higher returns), causing the stock price to fall. Eventually the price theoretically reaches an equilibrium level where it's worth what it should be relative to the risk-free interest rate (with a risk premium factored in).

Whichever participants were still holding company stock will have seen the value of their holdings shrink as a result of this price fall.

So what do company executives do? They cut costs (staff and investments for the future) to improve their operating profit, which directly equates to justifying a higher stock price - thus lessening the fall in the stock's price. They're being compared to peers/competitors, too.

What if they don't do this? Shareholders (often big funds) won't be happy (because their own portfolio value will fall and they might lose bonuses or get fired), and some will call for the CEO to be replaced by someone who will do the job.

That's the magic circle of life on Wall Street.

The value of future earnings vs current earnings is all that matters.

Nobody wants income. They want capital gains.

Corporate profits are a necessary evil in the way to extracting out lower-taxed capital gains.

When interest rates go up, the value of future profits goes down, and the value of current profits goes up.

This means, if you're the CEO of DigitalOcean, and all you care about is the stock price... You fire people so you have more current earnings so your stock price goes down less, so 1) your pay goes down less, and 2) your shareholders are happier.

That's pretty much it.

Margin is sort of the wrong metric to the above argument. You need to consider revenue vs capital.

DO has a negative roe

Any company can report a profit as long as they exclude actual expenses.

> We define adjusted gross profit as gross profit exclusive of stock-based compensation, amortization of capitalized internal-use software development costs and depreciation of our data center equipment included within Cost of revenue

Gross profit is before a lot of people related expenses are taken out (R&D, sales and marketing, and other admin). Their net income was only $10m for the time frame you're quoting.

Its so crazy to put into perspective. After a whole year, what was their net productivity, with all that tech, all those people, all those degrees?

about 25 single family homes.

That idea of productivity is odd to me. If I build a house for you and you build a house for me and we both compensate each other with the same $ amount for the work, is that a net productivity of 0? Two new houses got build.

you're right in that regard. But I'm looking at it as net of the whole system inputs.

You put in one house, I put in one house. There are no resultant houses for others to consume remaining.

Another way to think about it might be manual farm labor. If an acre of food grows enough potatoes to feed 1.2 people (idk if that's true), and it takes 1 person to labor over. The acre is only producing enough food to have .2 people as non-farmers.

If there are only non-farmers, the farmland doesn't produce any food (discounting wild berries or whatever grows when farmland is wasted). The farm can simply produce for 1.2 people...

That's 25 single family homes for company owners only. Don't forget they also gave jobs and salaries for a thousand of people, and a product for the market to use.

Wow. If a company has to layoff with those numbers, that is insane. I guess the Venture Market demands that or it is just a ploy to get rid of low performers in general. I wonder.

Gross Profit isn't a helpful number as it doesn't account for any fixed costs like offices, wages, sales and marketing, etc. Operating profits is a better indicator (EBIT or EBITDA) and also much closer to the holy grail of Free Cash Flow that companies need to keep an eye on to make sure they make payroll and fulfill their interest payments obligation, among other things

Exactly. Parent's comment is only meaningful if you completely ignore paying workers which seems pretty relevant if you're going to be talking about layoffs.

I've found a lot of tech workers (including myself) really need to learn how to read an earnings statement. Coursera has an excellent Intro to Financial account course [0] that I've found very helpful in understanding what's really happening at these places.

0. https://www.coursera.org/learn/wharton-accounting

Also, Aswath Damodaran has (among loads of other teaching material) a crash course into accounting just enough to get by when reading financial statements:

https://www.youtube.com/watch?v=Jbp3-AU9v_g&list=PLUkh9m2Bor...

Yeah, I'm pretty thankful for my 4 year technical program for having us do a couple of business course. One which was accounting and the majority of the work was the teacher walking us through reading financial statements of public companies.

Last 12 months on Yahoo Finance is showing Digital Ocean's operating income at -$21M. Also, negative in 2019, 2020, 2021.

It's either financially illiterate or completely disengenuous for commenters to cherry pick financials such as gross profit, which doesn't include salary expense, when we are talking about layoffs.

Other commenters calling execs sociopaths when company is losing money, as if they can lose money forever.

Can anyone enlighten me on this because cloudflare seems to report similar high margins with no profits.

What are these high margin numbers both DO and CF report? They both report high margins but then do not make any money. Are these margins excluding most expenses - because that makes no sense. Companies have expenses and that affects the bottom line. If digital ocean had real margins of 60% they would show a profit.

It's because they are growing massively, meaning they invest a lot of those margins in capital expenses. At least that's true for CF, not sure about DO

Ok I get it, still seems a bit dumb. DO for example still needs to replace failed components (ssd drives which have the highest failure rate can expect 1 - 3% failure rate per year on the low end), pay datacenter fees, likely power increases in the dc fees built in, replace servers on a 5 - 7 year scale (3 - 5 is better), and networking equipment generally on a 7 - 10 year level. Even if the growth is zero, these don't go away they just are not spending as much because they don't need to add so many new systems for their growth.

You can check their latest numbers at Yahoo Finance: https://finance.yahoo.com/quote/DOCN/financials?p=DOCN

A 60% margin, wow, can't do much better than that! What's their P/E ratio? Oh ...

More than that. 60% margin on a growth business is dangerously low.

> That's a 60% margin.

If you don't count salaries and operations. From the linked statement

> Income from operations was $9.4 million and operating margin was 6%.

Last quarter was DO first profitable quarter. If sales go down it's going to be hard to maintain that.

Same here. Rolled over in bed to an email from Yancey to my personal email. Went to my laptop, can't log in, Slack is also dead.

Early Spring Break!

Very sorry to hear that, though you seem to have a fairly good outlook about it.

Excuse me if it's callous to ask this at this time, but as I've been observing layoffs and been hearing that people are immediately shut down from their systems, I'm wondering: how do they communicate it to you if you can't access your email? Do they reach out to your personal email, call you, send you a letter?

I might understand revoking access but if the only immediate means of communication of termination are not being to access your systems, and thus having to deduce that you've been laid off, that would be fucking abhorrent.

> Do they reach out to your personal email, call you, send you a letter?

Personal email, phone and letter.

It was an email from the CEO to my personal email. By the time I received that email, all my IT access was already cut off: no Slack, no laptop login, no VPN, etc.

At the place where I was laid off from we got an email to our company account right at 9 am and then 15 minute meeting with an HR contractor was setup for ~30 minutes later, after which we were locked out of our company laptops. After that, everything else was communicated through your personal email or whatever means you arranged in the meeting with HR

I don't understand why it's necessary to treat employees with such sudden distrust. It is necessary to immediately cut off all access? These employees aren't being fired because they are suspected of perpetrating a crime, right? I I understand the need for layoffs, but I can't respect an organization/leadership that treats people so coldly. This behavior also affects non-fired employees that may have a need to ask knowledge transfer questions.

Since I'm fortunate enough to be an experienced SWE living in the US, I can afford to add D.O. to my list of "will never work for" employers and discourage peers from ever joining.

i think policies like this are related to insurance. Like the business insurance agreement dictates all access will be removed asap once a person is no longer an employee of the company. Something like that. It's not a "i don't trust this person so immediately lock their account" kind of situation.

From the administrative/IT point of view, I understand it entirely. It's a simple risk/value proposition. If an employee gets mad they were laid off (and that does happen) and decides in a fit of rage to start deleting Slack channels, damaging or even just accessing production environments, deleting shared logins in the team password manager, downloading company/employee/customer/client data, stealing company IP, etc., they could seriously hurt the company. Even if what they do is illegal or you can sue them afterward, it's a very significant short term loss and in some cases, they may be able to do damage that cannot be reversed like deleting Slack channels.

Obviously, every company should have good access controls in place that would prevent this from a regular employee. But that's not always possible and at the end of the day, some employees have to have those privileges. It's easier to just immediately lock them out of anything and avoid any potential damage. It seems cold to you (and it probably is), but even one ex-employee going rogue before lock-out could be disastrous. And that's without going into the "ex-employee drags down team morale by ranting about company/job" aspect and in many cases insurance companies will require it. It's just not worth it, even at a much smaller company than DO like where I work.

> Even if what they do is illegal or you can sue them afterward, it's a very significant short term loss and in some cases, they may be able to do damage that cannot be reversed like deleting Slack channels.

I was recently tasked with revoking access to systems during my companies recent round of layoffs. We had it timed so that when the departing employee found out they were leaving they'd already have no access.

Unfortunately for us, they were a brand ambassador and took to their personal social media to tell their followers that we were embezzling client funds (not true).

I don't know what happened from a legal stand point (if they were sued or there was any other consequences) but sometimes new customers find out they said that and are distrustful of us.

Exactly. We've had some similar issues. We also time it so they get locked out as they are being told (we do it in-person/over-call rather than via email as DO did). We've never had an issue preventing them damaging systems, but we have received a few laptops from remote employees that were clearly damaged in rage and in a few cases, had employees start calling up their clients and trying to persuade them to leave us for literally anyone else. It can be rough as a smaller company trying to convince clients they're jilted ex-employees that aren't telling the truth about anything.

On paper I agree with all of that but in practice folks who are getting laid off already had access to all of those things every day.

Why do you trust them every day but not on the day of being laid off? Unless you're extremely close friends with them at a personal level you don't know what their state of mind is while employed without being laid off. They could do all sorts of destructive things at any point in time (both subtle and obvious).

I guess where I'm going with this one is you're always at risk for short term loss by hiring anyone. If you trust the people you hired then the short term loss outcome won't happen if you fire them. If you don't trust the people you hired then why did you hire them and give them access to do those things? All this does is optimize for bad actors and make the experience horrible for someone being fired who doesn't have intent to take the company down with them, they just want to say goodbye to their co-workers.

Plus, like you said, there could be legal actions taken against them. Who's going to risk getting sued by a corporation in the US by destroying as much as they could before they lose access? This action could potentially ruin the rest of their life from debt.

You don't. But you're also not purposefully doing something that is going induce undue stress and potentially upset or anger the employee. You don't know how anyone is going to react to being told they've been let go. That's not an easy thing to be told and I have seen people get violent afterward.

As an example, about a decade ago, we let go an underperforming employee. His reaction was to walk out of the room before the conversation had finished, take a trash can and dump it onto his desk and computer, then go outside and into his car, pull a gun out of his trunk and start walking around the building rambling like a mad man. We had to go on lockdown and wait for a police response. Prior to that moment, he had never shown a single indication he would react like that and was trustworthy, he just wasn't performing well. If he had been someone with elevated privileges anywhere, he could have instead reacted by going back home or even into his car, accessed systems, and done damage that way.

I get what you're saying, but you're discounting how big a deal it is to lose your job and the things it can do to you mentally. Some people come out the other side of that a completely different person for a while.

> Why do you trust them every day but not on the day of being laid off?

Because they had a job to care about before being laid off. It's entirely possible that being laid off triggers them to take malicious actions that they never would have when they were employed.

People under intense stress are prone to act in unpredictable ways. A sudden job loss produces intense stress, therefore increases unpredictable behavior, some of which the company needs to protect itself from, others it tries to help the employee protect themself from.

> I don't understand why it's necessary to treat employees with such sudden distrust

To be honest, every employee should treat their employers with the same level of distrust.

It's important to have mutual mistrust as baseline for a healthy professional relationship.

Thank you for this, I had a good laugh. XD

If you fire 1000 people and just 0.5% go crazy over the firing you got 5 people abusing their remaining permissions. Being strict makes it easy for the company. Especially those where employees are just a number for the executives.

It sucks but I'm sure its the most "logical" move.

Just curious, how would you handle it? I would love to say I would trust everyone to be adults about it.. but you never know, sad to say.

Cmon man literally every well known late stage startup, faang, and even small startups are doing layoffs like this. Your only employment options at this point if you stood to your morales are Apple, Verkada, and Levis’ Jeans

Not to mention when the money was flowing in half the talk and advice around the industry was take more money over the relationships you’ve built with your current org. Can’t have your cake and eat it too

I guess this happens when you're treated as a replaceable cog in a machine. I had so far a very different experience with small companies I worked for/with.

I guess something to plan for, if I ever apply for a 'cog' like position. Things like saving non-company contact information for people I might be interested in communicating with in the future, keeping copies of important information/documents on personal computer, etc.

A disgruntled SRE with prod access can bring down an entire company. Drop the prod databases, delete the backups, done.

When my company did layoffs recently I got to peek behind the curtain a bit. It started with an all-hands video call from the CEO announcing the layoff. HR had loaded emails to send immediately following the call directly to your company email that either said "you are not fired" or "you are".

For those who were fired, infosec ran a script during the CEO call to pull their access packages for production systems, crank the data-loss protection systems on their laptops up to high, boot them from Slack, and prevent them from sending & receiving emails to non-HR folks. After their "fired" email they received an invite to talk with HR to provide updated contact information. Then infosec pushed a new password to their account & force shutdown their workstation.

If it sounds brutal, it was. But the layoffs I was involved at a previous company were handled much differently, more traditionally: CEO announcement at 9am, and then you spent the rest of the day agonizing and waiting if you're going to get a :15 private calendar invite from your manager titled "Employment", or if you'd make it to the end of the day with no news (good news!). I'd almost argue that moving fast was more merciful than this, but that's easy for me because I wasn't fired either time.

what happens to your equipment? especially if you're remote?

The Helpdesk didn't know until after the RIF happened as some of them lost their jobs too. But every fired employee will get some return-labeled boxes shipped over to them, and are asked to pack up their equipment & send them back. Most companies who do these layoffs still count you as an employee for the duration of your severance, and your only real job requirement is to pack up your equipment and drive it to the UPS store.

Towards the end of their severance time, Infosec will run a remote wipe so if their endpoint ever connects to Wifi it'll get nuked. They tend to wait a bit to ensure there's not something on the laptop that needs to be recovered for the company – or the employee says they had some critical personal things on it. Either way the only way they get it back is by sending it back and letting the Helpdesk pull the data.

Worst case, an employee doesn't send stuff back and we write it off. It's really not a big deal. Mandatory FDE + device wipes when a laptop comes online means any data is protected, which is 100% of what we're concerned about. No one cares if an employee gets a "free" MacBook that's a few years old.

Last company I was laid off from (a few months ago) said they would deduct from your severance (I forget the amount, but was more than the Macbook was worth) if you didn't return it.

I did not test them on that and just returned it.

In the US I think there are varied state laws on what's legal and illegal in that area. This is obviously complicated by any employee agreement that you might've signed up for when you joined the company.

I think the basic decision was "a 2021 MacBook is now worth less due to deprecation than the time it'd take HR/legal to figure this all out, so screw it and let's mark it disposed for $0"

Some companies let you keep it, some companies want you to mail it back so they can pay for it to be recycled properly or stored in a closet.

They send you a box and you send it back basically. Though, the last company I left they made me pay for box and shipping (fine) but are refusing to reimburse me for the ~$200 shipping (no so fine)

if your severance package is "good enough" in your opinion, you mail it back in the box they send you

if your severance package isn't "good enough" in your opinion, you keep it and reformat it...eventually they tell you that your severance will go away unless you return the equipment

most returned equipment will just become e-waste, no one is going to breathe life into my four year old laptop

I see a lot of companies just telling people to keep it and use it as they see fit

some security types freak out about former employees being able to access "confidential" information on their own laptops after being terminated...newsflash: if we wanted to mail this stuff to North Korea we could have been doing it five times a day

When I worked construction and a job was ending, you'd find out Friday if they needed you back.

They'd put your name on a list Monday and other jobs could pick you up if no one did, you'd have someone from HR come by and walk you through cobra insurance and hand you the forms for your unemployment, and then you had 30 minutes to pack your shit and go.

Weeks on end of wondering every Friday if you had a job next week. This was during 2008/10 and all our jobs that we had won got sent for rebid and the company declined to bid on them again. Lost all the work we had lined up and no one was hiring.

I was a real grind, guys expecting kids and hoping to get the baby delivered before the lost their health insurance.

> Rolled over in bed to an email from Yancey to my personal email

Personal email. I've heard of people getting linkedin messages too.

Hearing that a lot of Community teams were let go, including the teams responsible for tutorials. Seems obvious DigitalOcean doesn't care about developers anymore. But this has been obvious for a while now. I guess their value "Our Community is bigger than just us" only matters when profits are up.

Pour one out for DigitalOcean. It's the end of an era.

That's a shame given the quality of their content. I wonder what this means for CSS Tricks.

I wouldn't mind knowing haha.

Add me to that watchlist!

Content should be thought of as an investment, because the value it returns extends over many years: some of the most valuable and popular DigitalOcean tutorials were written over a decade ago. For that reason, losing people responsible for writing new tutorials is not going to have a negative impact on developers relying on their tutorials in the short term, rather, DigitalOcean will suffer years from now when they have competitors using the content vacuum to steal marketshare. Teams that are an investment in the future are the first to go in a difficult financial climate, it's natural, it doesn't really speak to DigitalOcean's attitude towards developers.

That's the marketing department and I would be shocked if they don't continue down that route unless they decide to pivot to a different target market.

I knew it was only a matter of time once they went public.

> I knew it was only a matter of time once they went public.

Very common. "This was a great place for an engineer to work. Then the MBAs came..."

Yes, I was a technical writer on the content team. I am hearing that our entire team was laid off. It just isn't a big money-maker in these trying times. More of a cost center, I suspect.

It's too bad, as DO tutorials and content have been respected for so many years by developers and sysadmins. The end of an era.

fwiw their decision is foolish and shortsighted imo; the only reason i ever used do was because they hooked me in with their tutorials and guides

Kind of you to say. I know many devs have loved our content for a long time. I was one of them, which is the whole reason I joined as a tech writer. I can't claim to have helped create that solid library of tutorials, as I was only at the company for a little while. It's a real shame.

Just want to call out that I owe a lot of my career in webdev to DO tutorials. My first stack, LAMP, was heavily covered by DO.

Kudos to you and your teammates.

Which is crazy because a lot of the stuff I built out initially on DigitalOcean was due to reading the excellent tutorials. I appreciate your efforts.

Just want to add my 2c that DO tutorials are pretty damn amazing and I've got a number of them bookmarked for several common tasks. Even for such mundane tasks as wiping one's machine of stale docker containers/images.

This is really sad to see it go. I wonder if this could have been handed over to a better home. e.g. I love how Mozilla hosts a lot of pretty good content explaining basic web concepts.

I always felt like DO had one of the very, very best set of documentation available on a lot of very technical topics (even things that didn't related only to D.O.) - sorry to see there were cuts in that area.

Agreed!

This is a mistake. I'm a designer by trade but do a lot of development in my free time. I use DO for serving all my projects. The reason I initially selected them is because their tutorials are so good. Besides price, it was a huge factor in my decision to host with them.

Eliminating teams that create technical content is going to backfire.

Good content was always a marketing strategy. For a while DO's content ranked high for a lot of tech searches. Rightfully so too, it is high quality.

Then another Google algo change pushed high quality content, like DO's tutorials, down in ranking. No need to spend money on something that isn't having the intended effect.

I worded this a bit tongue in cheek but seriously, search results have gotten really terrible in the past few years. At least DO's stuff was helpful. Now the first page is full of spun garbage just because it follows the new outline format that Google loves.

At least we can thank DO for training ChatGPT on high quality content

The funny thing is, a few of us who have been following the ChatGPT frenzy were supposed to have a meeting TODAY to discuss "So, what we gonna do about AI?"

Too little too late! :laughcry:

I really like DO. I was thinking though, awhile back the seemed like they suddenly got tons of money and starting pouring it into all these "initiatives" around the world as if they were a charity org. I found it odd at the time. Not that its related but seems a bit hypocritical to "splurge" on all of that stuff and then have to layoff lots of people a few months later.

That is such a bummer to hear. The DigitalOcean tutorials are such an amazing resource.

There is a newer portal within the DO Docs site (not the Community site) for similar tutorials:

https://docs.digitalocean.com/developer-center/

The content is created by Developer Advocates rather than Technical Writers and Editors. I am not sure if this team was impacted in the layoffs, but I suspect not, as this portal is a very new effort. It's only been around for a matter of weeks.

Time will tell whether developers and sysadmins will value this content as highly as they have always valued the Community tutorials.

I just set up a Slack for those of us who were laid off: https://join.slack.com/t/slack-e4g5716/shared_invite/zt-1pcb...

The link isn't working

Wont touch DO with a 50ft pole ever since they deleted all my data while I was on vacation because my credit card got flagged

This has happened to me too. They are strangely aggressive about it.

I think they already improved on that area. There is now a 1 month grace period if the automatic monthly billing charge failed due to insufficient card balance / expired card. I know because I intentionally kept minimum amount in my debit card for online subscriptions and sometimes digital ocean can't charge it due to insufficient balance.

Have been a mostly happy DO customer for some time. Would be interested to know if the layoffs were carried off skillfully/compassionately or messily/carelessly.

Never lose your 2FA backup codes or you're locked out of your account forever if you lose your 2FA device - despite support having a verification process to remove 2FA in the event you lost your codes - the support tickets are ignored or unmonitored.

I was also a happy DO customer for the last 5 years or so. But now I'm locked out of my account.

My fault for losing my codes (DO are the only backup codes I can't seem to find where I kept them... oddly they are not in my password manager) but they have a process in place for this and don't follow it. I'd be less annoyed if I was told it was my fault and there wasn't an avenue to receive support than being told I can go to support and then get ignored...

> Never lose your 2FA backup codes or you're locked out of your account forever if you lose your 2FA device

In the case of digital infrastructure, I'm actually kinda ok with this. Would be better if it was a policy or if you could prove ownership of the payment account, but at the very least it's much harder to social engineer someone out of an account.

Of course, the lack of support isn't good.

I'm OK with it when it is official policy or you were warned beforehand that "No really. If you lose this and you're fucked - we will not provide support for account recovery." Precisely for the same security reason of preventing social engineering attacks for otherwise well-secured assets. But, and it is common with most places, you can jump through some hoops and get it removed my support. I still blame myself for losing my backup codes - but being told Support can help and then being ignored is well... annoying to say the least.

I use cock.li [0] for my emails. This is the official password recovery process:

> I forgot my password!

> Passwords are not reset for any reason. Good luck.

Many years ago - I forgot my password to my email! It was the kick in the ass I needed to begin using a password manager - and since the email was mostly for memes and not really used it was mostly a positive experience with a positive outcome. I occasionally try to login to the email but so far no luck in remembering my password. :)

[0] https://cock.li/help

It seems like a good case for putting an exorbitant charge on it with huge warnings about that upfront. Charge a $1000 recovery fee or something like that and make people check a box agreeing to it. I would imagine thoroughly vetting the request is pretty onerous on DO support (and it should be), but they should make the customer pay for it since it is ultimately the customer's responsibility.

This is my greatest fear with my 2FA stuff and why I try to make sure and always have an available backup.

I had this happen in 2018 and had no trouble getting my account back. The support agent requested pictures of me with documents -- front of credit card used as payment method + passport -- and then disabled 2FA on my account.

The support ticket email requested I reply back with that information: Details about the payment method on the account, the date and amount of the last transaction by DO, a photo of a government-issued ID, and a photo of you holding the ID next to your face.

I provided the payment details, the date and amount of the last transaction as text, a screenshot of my bank statement of the transaction, 2 forms of ID (passport & driver's license), and a photo of my face next to both ID's on January 23rd. I replied again on February 7th with the most recent date of my transaction and the amount paid.

No response.

I’ve been burned by companies like this before, but there is no way for anyone to know if you are providing them with correct info, as this is also the easiest way to takeover someone else’s account.

The tough lesson to learn is always to deploy from a source code repository.

It sucks to lose your stuff, but if you follow best practices it will make you a better developer/architect and things like this will only become minor inconveniences.

I had to lose months of hard work for similar reasons to learn this lesson.

My CTF [0] that has been running for years will break and that's honestly my biggest concern. I have no clue how to even get it up and running again because I've mostly forgotten everything I learned to get it setup to begin with... I kept it out of my repo to prevent accidental spoilers if I ever made the repo public - though thinking back I really should have set up a CTF branch and just never published that branch. So lesson learned if I ever make another CTF: extensively document every single step for how to recreate and setup the game again.

Redeploying the site and even saving all the files uploaded to the site are both relatively trivial. The deploy is almost entirely automated and I can still login to my root user panel, download any uploaded files, and transfer them over to the newly deployed site - so I'm only experiencing minor data loss. (eg. the DateUploaded for files will be lost and I don't care enough to try and back that up to restore it)

Hopefully I do everything right and prevent link rot. Thankfully I'm the sole user of my file host so nobody else is losing any data.

[0] If anyone wants to become the 4th and probably final person to ever solve my CTF - you have just shy of 2 weeks before it breaks: https://nadyanay.me/ctf

I'm literally in thee process of trying to do this right now and have gotteen responses from their support within an hour or two, including late at night.

Maybe stuff got better, but 2FA Recovery seems to not be as bad as you're saying.

I'm glad to hear the process is working for you but I'm also in the process right now.

This is my "Sent" folder: https://imgur.com/a/3D1FSYz

Initial ticket was sent to Support on Jan 23rd, I bumped and asked if there was any issue with the information I provided on Jan 29th or if they needed more information, I then provided February's payment on Feb 7th. I wanted the answer to "The date and amount (in USD) of the last billing transaction by DigitalOcean." to be up-to-date since January's was no longer a valid answer for the information that was being requested.

Providing an update: I'm 99% sure my personal email address is being flagged as spam by DO's ticketing system and it isn't that I'm being ignored but that they're not receiving my correspondence. :)

I reached out to @DigitalOcean on Twitter about my tickets and the older one was closed out as a dupe and we moved forward with the most recent one. They weren't able to verify my ID - no reason give but I think I know why - and they asked if we can move forward with an alternate means of verification: a random temp charge between $0.01 and $4.99 to the account and I provide the amount of the charge.

I agreed to this - and 12 hours later I forgot if I had replied so I agreed to it again. This morning I received an automated response asking for me to respond. I responded. 2 hours later still no response - I hit up Twitter again. I'm thinking the reason they weren't able to verify my ID is because they never got my email providing it in the first place.

Now - despite not verifying any charge amount - literally as I was typing this post I received an email stating 2FA was disabled. Either they lied about not being able to verify my ID or they decided to unlock my account anyway without verification which may be of concern to others.

2FA re-enabled and this time I made damn sure to backup my backup codes properly... also responded to the support ticket one final time requesting they verify if they've received it. If I don't hear back I'm going to assume I should change the email associated with my account. :)

Final update as it has been nearly a day now: no response from support. :)

Changing the email address associated with my account to one that hopefully isn't blocked in the future.

Question in case anyone actually sees this: What downsides would there be to whitelisting email addresses associated to active/paying customer accounts? Seems like a no-brainer move to have your customers whitelisted to send you email if support is primarily done through email. I understand blacklisting domains known for abuse/spam but whitelisting individual accounts from that domain that are paying you seems like a good compromise having only put 5 seconds of thought into it.

Seeing my ticket in their Help Center - and I don't see any of my responses. So they weren't getting my emails. I don't blame the Support team at all - they can't help someone they can't speak with - but it's still shitty that my email is blocked from contacting Support due to what is likely a domain blocklist. :(

I guess a word to anyone who uses non-standard email (and by non-standard I sadly mean "not Gmail, Outlook, or Yahoo"...) to test if you can actually contact support with your email address. Best to confirm you can when you don't need it than not be able to when you do!

The layoffs will continue until productivity improves /s

For the uninitiated, this is a reference to the infamous "The beatings will continue until morale improves."

Explaining the joke is not helpful at all.

Explaining a riff that most haven't heard of a joke that isn't all that common actually seems extremely helpful.

Or all workers return to the office so management can surveille them

I was laid off too from DigitalOcean this morning. Just an email that I was terminated effectively immediately. Don't companies give a month's notice in advance though?

My experience has been that companies will either terminate effective immediately with some sort of severance, or they'll give a notice, where you're on the "books" with them as far as employment goes, but you'd surrender all work hardware and your account would be locked out. You're effectively laid off while you find another job. Your severance in that situation is the fact you're still on payroll for however long your severance period would be.

afaik the cold turkey hard stop in large layoffs stems from wanting to avoid retaliation from disgruntled employees. access is terminated immediately to avoid a "going postal" situation. https://en.wikipedia.org/wiki/Going_postal

Unfortuantely this is the reality for most companies in the US. Only in most european countries do they have this courtesy.

While this holds for individual employment[1], there is the WARN act[2] for mass layoffs, which requires advance notice if certain conditions are met. However, my experience is that companies will do whatever they can to avoid triggering it and you will not necessarily hear about it if a team you don't communicate with is impacted.

-- 1: https://en.wikipedia.org/wiki/At-will_employment 2: https://www.dol.gov/agencies/eta/layoffs/warn

In Europe yes. Depending on the country, you get between 1 and 3 months of notice by law.

Hearing more. Appears some C-Suite and VPs have resigned in protest. Earnings call tomorrow. Maybe Gabe finally brokered the Microsoft acquisition that everyone has been joking about since he joined. Seemed like a joke then, but now.....

From what we've heard internally, any VP/C-suite changes aren't in protest but are happening like the rest of the RIFs.

People actually think that? I don’t see anything in that sort of deal for Microsoft. Lose-lose situation basically.

Word is that it's roughly ~10-11% of the company - am seeing a lot of (deactivated) in slack.

I'm still not sure if it's better to do it that way (one big cut) rather than multiple waves of smaller layoffs spread over time.

And call it stack ranking. Every six months you lose one person on your team.

Sounds like a good way to create a cutthroat working environment :O.

It appears that this was heavily orchestrated; right before their earnings call for tomorrow on the 16th.

I am expecting an announcement of this layoff from them shortly but their stock is going to be very volatile in the next 24 hours.

Didn't know they were public company

They listed in 2021

you could not imagine how little responsibility, care, and general competence was displayed by leaders on the all-company call today.

We were told that reliability issues will be fixed by going slower. Feature delivery targets are not changed though. The amount of engineering time planned for reliability work is 0%.

That’s insane. Iirc my employer budgets 25% time for reliability work as a baseline for every team. And I got a number of projects approved making my reliability and scaling work this year around double resourcing my feature work.

I wonder if they will start trying to monetize stuff like Netbox. It's a really solid free product and some of the paid closed-source alternatives are terrible and cost a lot of money. The potential revenue is likely a droplet in the bucket though.

The original creator of NetBox now works at NS1. NS1 has a NetBox cloud offering.

the entire SRE and reliability platform teams are laid off with no plan on what to do about it

Wait, how is that possible? A hosting platform with no SRE?

Sorry to hear that! Curious what you think of DO now? I've always loved DO but I've found it REALLY hard to recommend we us it at work

I mean, I don't want this to be the "kicking them while they're down thread", but I always wondered how a little guy is supposed to compete with AWS. I say that as someone who was there firsthand to watch Rackspace get crushed by them.

IMO what DO had going for them was simplicity. If I was in the market for a no-nonsense VPS I could see myself going with them over AWS.

AWS actually offers their own version of that with Lightsail and can build on their own primitives to deliver it. It's one of many reasons why they seem so formidable to me.

I have now, twice, with a distance of a decade between the experiences, seen a VPS provider's simplicity and ability to easily scale stop mattering at high-ish but not extremely high levels of traffic—in both cases, because their network couldn't keep up with traffic, such that we were finding ourselves network-bound even on pretty weak VMs, everywhere. Apparently poor inter-connects or peering agreements or something (not sure) leading to consistently terrible performance for people in some regions, heavier public traffic hitting a wall long before a smallish VM was starting to sweat, that kind of thing.

First time it was Rackspace, second time it was DO. First time we fixed it by leasing bare metal somewhere (I forget where) and running our own libvirt/KVM VMs, second time we fixed it by switching to AWS. In both cases, that fixed all the network issues.

AWS has a separate problem that they have these vague classifications for network quality and it's hard (at least, it was for us) to feel certain the network was the problem, but at least it's not that hard to spin up a VM with a better-rated network to trial-and-error one's way to the right setting.

DigitalOcean hasn't been price-competitive in the VPS and baremetal server market in which there are quite literally hundreds if not thousands of players, most of whom offer better value than DO.

DO is in a weird place - not as popular or feature-rich as the big clouds, but also not price-efficient enough to compete in the extremely price-sensitive VPS and baremetal market. I wonder what kind of startup decides on DO as their infra provider of choice.

I use DO and AWS and I use DO when I want to guarantee my shit is gonna cost $5 a month.

While I'm not an enterprise customer, I can tell you why I choose Digital Ocean (and have been using them for the last 10 years).

They allow me to put a fixed amount of money in a fund that they charge me from. I will never get any "surprise fees" this way. They don't have my credit card so it will just drain my funds until they delete my services, which is extremely ok by me.

My major fear of paying for things like AWS or Google business/cloud tools is the fear of getting my account locked up/banned because I want to dispute a charge that isn't fair. I've slowly been decoupling my accounts away from Google (banking, healthcare, etc) but it's very hard. Their moat is extremely deep.

I wonder if it's just a preventative measure or if they are actually experience decline in revenue and growth. I guess we'll know tomorrow. Solid product though.

good luck with your next endeavour

Solid CEO, always did right by us.

Another one… thanks for reporting and I feel sorry for you.

Ouch. So let's all move workloads to Hetzner

Any word on compensation offered?

Reply on news.ycombinator.com