The widespread layoffs are more because of copycat behavior than cost-cutting
businessinsider.com
businessinsider.com
And I've actually been inside an organization or two. It's cost-cutting. Companies are ludicrously bloated because caring about it is too much effort for the value; during a downturn, they care a bit more, so they trim a bit of the fat. Musk was the one that pointed out that the emperor has no clothes, but that doesn't change how long it's been that way for. There's always this blind spot with academic types observing the software industry, where they assume that the dysfunction is rumors and the real issue is something thinky and academic (see e.g. the declining value of a CS degree - couldn't've been always worthless, must be a supply-and-demand issue), because it's just about impossible to fathom how something as dysfunctional as the software industry really is could possibly stand on two feet without falling over, until you've seen it firsthand.
are / were we in the downturn? when in a downturn should a company start downsizing?
i dont think all these HR departments saw some objective point pass and base the layoffs on that. theyre watching what everyone else is doing.
You need punishment in capitalism. You need incentives, and you need punishment. Because where you have incentives with no punishment, somebody just has a free option—-in this case paid for by damaging employees’ careers and health, as well as investors’ capital.
This insanity must end. And it will only end when you start doling out punishment to the guilty parties: The CEOs. No more CEOs “taking responsibility.” They need to be fired.
Then the market psychology changes and some CEO is the first to think that maybe this time the market would reward the opposite action, aka a layoff. It works… so the next one over goes and the rest of the dominos fall in the name of competing for institutional dollars within a zero-ish sum game
Company B isn’t just looking at company A’s “success”. Company B’s levels of attrition are increasing because its employees are going to company A. So company B has no other option than to open the hiring floodgates or else they can’t meet bare bones maintance tasks let alone growth.
Not your comment but most of the comments on this thread are whacky. It’s like people completely forgot how hot the software market was during the pandemic. Anecdotal but I had 2 friends trying to break into the software game at the same time. That didn't happen during the pre 2019 boom so who knows what that means lol
There is a significant training period where programmers learn the local culture and quirks and tools. It takes a while before they can become effective.
Once programmers are effective, it can take months or years or longer before a project they work on gets any significant revenue.
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Consider all the money Facebook sank into the Metaverse, with nothing to show for it yet.
Or consider the typical video game, that takes maybe 3+ years to go from programming into revenue.
The 1 to 2 year hiring period from 2020 to 2022? I bet that most of these programmers did not create any revenue by the firing times of Q4 2022. It's just not how this industry works.
That's why we fire them! /s
False. They saw positive returns because the market was rocketing up o matter what, which is why they over hired. That, and to signal to investors that "they're healthy and growing".
We go through all these weird gyrations to explain layoffs, but do nothing to explain the insane hiring that happened. And, even with these layoffs, the companies are still way above their employee count from as little as 12-24 months ago.
The interesting part is why are they all in sync, and fairly similar in size. Did they really all make the same mistake in the past? Was the groupthink/copycat happening during the over-hire phase?
Having said that, the layoffs are not happening in a vacuum, there's been significant economic issues over the past year and cash isn't basically free anymore. Some companies may have made moonshot efforts hoping to be at the front of <now essential industry> with the pandemic but things largely went back to normal.
But it's likely not just one factor. I'd believe that:
1. Some companies are bloated and can (maybe should) downsize, or over-invested in projects that didn't pan out.
2. Some companies care more about costs now than they did a year ago (for reasons good or bad)
3. Some companies are more willing to conduct large layoffs since other large ones are doing it and it looks better
4. Some companies are facing pressure from investors to cut costs and do layoffs because "other bigs ones did it"
All can be true for some sets of companies - there isn't going to be "just one reason" why all a company decides to do layoffs.
So many potential reasons, including:
- "If we're to do it, let's do it now, while we're still in the wake of Twitter and other big companies, and thus shielded from bad press".
- Some company's management was considering a layoff for quite a while, but worried it might be too damaging or too difficult. Seeing other similar companies doing their own layoffs without much effort or negative impact would relieve the management's fears, and lead them to staging their own layoff. Now imagine there were a lot of companies that independently overhired, then started thinking about "cutting the fat", and all got - again, independently - blocked by the same set of worries. This threshold is a sync point. Everyone may arrive at it on their own, but they cross it simultaneously.
I loathe Zuckerberg but his insistence that managers contribute or leave is exactly what my org needs. Unfortunately this is the sort of change that’s basically impossible when so many people’s power is vested in it not happening.
The the point upstream about Musk is real. Companies like Google established that you need to hire 10x rockstars or whatever, and pay ludicrous salaries. The growth curve is going to slow, and the money people aren’t gonna want to pay the wacky salaries for people.
As to the in sync part, the most plausible explanation is the economy. Inflation from the Russian-Ukranian war plus Covid stimulus drove the Fed to boost the interest rate.
The similar size bit is more difficult, but if a lot of that is support staff like recruiting, then that may make more sense, if those staffing levels were based on the number of engineering headcount in the first place.
R&D, marketing, even good customer service all allow you to grow next year but firing them allows you to return more money now.
As I read the title, that is what it says. It does not say, e.g., "The widespread layoffs are because of copycat behaviour not cost cutting". It says
"The widespread layoffs are more because of copycat behaviour than cost-cutting".
To me the interesting part is that with all the coordinated layoffs, so far the public1 generally sees no "decline in service", assuming these companies claim to be providing services to the public.2 That implies these were, as Graeber would put it, bullshit jobs.
"Tech" companies are not known for original thinking. Knee-jerk, copycat behaviour can be seen in everything they do.
1. By "public" I mean the ad targets, aka "users", not the advertisers.
2. Twitter being a notable exception.
...on the scale of a few months, maybe. There are a lot of activities that are essential to the long term health of the organization that can be abandoned for a little while: developing future innovative product lines, keeping infrastructure well maintained, having a full QA process compared to cutting corners, customer service tools and roles, etc.
Here you have a Harvard professor on another tangent:
“Doesn’t it seem silly that, in a moment of crisis during the pandemic, we all figured out how to keep working productively without all these conversations and debates, seemingly because we were just rolling up our sleeves collectively and getting work done?” Ethan Bernstein, an organizational behavior professor at Harvard Business School, asked in the Harvard Gazette last fall. “And now that we have the choice, it’s the choice that makes this hard.”
https://news.harvard.edu/gazette/story/2022/08/back-to-offic...
Companies have been bloated for...ever, and even more than usual in recent years. That they're all choosing now-ish to cut some costs is copycatting.
Unless you're inside the mind of the CEO, it's not clear how this is relevant. And if the CEOs are acting irrationally, it's not clear that even being inside their minds would help, because the irrational tend to lack the self-awareness to see their own irrationality.
The professor doesn't claim to be inside their minds either. The point is that, empirically, layoffs very often fail to bring about any economic improvements to the company, and may indeed hurt the company in the long run.
It's a matter of penny-wise but pound-foolish.
Companies are ludicrously bloated because caring about it is too much effort for the value; during a downturn, they care a bit more
The last bull run fueled by negative rates lasted far longer than it should, which lead to growth for the sake of growth without efficiency in mind, which lead bloat and inefficiencies to accumulate far more than normal, which nobody dared to address because "line goes up".
Now that the line went down, CEOs feel pressured to remove all the ballast they accumulated, which causes the line to go back up.
Also, "the economy" is merely an aggregate, an abstraction. In every economy there are both winners and losers. People tend to forget that one of the most successful products in history, the iPhone, was introduced shortly before the so-called "Great Recession". Of course a lot of workers and consumers were hurting during that time, but apparently there were still plenty of people able to afford new iPhones too. Imagine if Apple had decided to cut back severely rather than investing; that would have been a huge mistake. If you believe in your product, then you need to stick with it.
Technical debt.
When you're growing fast, you accrue technical debt because you prioritize milestones over quality. The same goes for the hiring process. You might need a big push for some deliverable so you hire more people. After that, you're stuck with the people and whatever structural growth your company went through.
Then on the software side, the project gets bloated and grids to a halt so some asshole proposes a refactor in rust. This is largely useless and will further complicate things. Same can happen for layoffs in bloated company. You wanted to streamline but you ended up disrupting the processes you had and losing talent, which leads you to bad performance and rehiring.
If everyone’s doing it in crunch times, the internal pushback is much less.
"We're experiencing larger call volumes than normal".
The fact that this is pervasive and constant makes it a lie. It means that many organizations have seen that everyone else is doing it (cutting support staff, or not increasing head count).
I would say that is both copy cat and cost cutting behaviour.
Very few non-FAANG organizations have a lot of fat to trim post-2009. In fact, reduced head counting and overloading already over-stretched employees has been going on since the mid-90's in most industries.
Insane how people locked up in institutions that resemble absolutely nothing like a workplace feel they can even comment on a workplace.
Hubris of academics is insane, living in a dreamworld.
I wonder if this professor also thinks there's no bloat at the institutional level.. despite some schools having almost* single digit ratios of admin to students.
The evidence from recorded history disagrees.
No public company wants to be the first (or the last) to make a move, so even at public companies that don’t NEED layoffs - especially indiscriminate ones that decimate a talent pipeline - will initiate downsizing.
It’s all to appease the street - they expect blood, mgmt gives them blood, share prices goes up, mgmt hits bonus targets.
Long term impacts don’t matter because they won’t be there to endure the pain - pass that off to another poor sucker and hope you have a chair when the music stops. Pubco 101.
Now you create a wave of fear and uncertainty, new hires can't negotiate a remote position, they'll take anything because they need the job. Slowly we go back to where we were and maybe even lower compensation in the process.
tin foil hat on
Sorry, that contains a healthy dose of "trust me, all managers are complete idiots who would rather spend a million on hiring new people than spend 10k on retaining their employees".
Empirically this view is valid.
The managers themselves don't even need to be stupid. A bad incentive structure (or even interaction of locally-reasonable ones) might reward bad behavior.
Most people think their own contributions are invaluable, and when they or someone in a similar position get laid off, that challenges that self-image and the obvious explanation is: their perception is completely accurate, but the others are idiots and cannot see it, or they see it, but are ruled by perverse incentives that make them kill the company instead of doing The Right Thing (i.e. keeping and promoting the employee).
It's understandable, but I don't see much value in that line of thinking.
It may not work out well for the employees, though: once everyone stops pretending to care, the companies will be less worried about someone else giving you a better offer, so your negotiating leverage may just go down the drain.
Company being just a big bag of people - at different levels, there are all sorts of different incentives going on.
They don't need to be stupid to make decisions that do not benefit companies they work for. They might just read incentives they operate under right.
Managment greatly enjoys the feeling of power they have over people and I don't think it is absurd to say that they are fed up with the current dynamic that takes part of this away from them and are firing people just to create an atmosphere of fear.
But it's been that way forever in tech companies: SWE make enormous amounts of money and can control their work + environment a lot. In the world where corporations function like torture dungeons and managers are running around looking for opportunities to satisfy their sadist urges, how would the boom cycles ever happen where employees get whatever they ask for and 5 years of work straight out of university can get you enough money to retire to a modest life without ever lifting another finger. Managers are all bipolar? Do they have meetings where they coordinate when to lure the people in and then all release their hate at once for maximum effect?
That just doesn't make a lot of sense to me whereas the cyclic nature of the economy and the external stimulus through a) everyone being in their homes a lot more because of the pandemic, and b) money pouring in like crazy because of the central banks explains both the aggressive hiring (during hard upswings and cheap money) as well as the trimming (during downturns and less cheap money).
If it's one company, sure, it may be because of some manager hating people. But pretty much all companies with the exception of Apple (so far, and who also only indirectly employs a lot of their people, so they don't fire them, they just terminate the contracts with their employers, who then fire them)? That would need coordination beyond "monkey see, monkey do".
Founders aren't your typical managers. The boom cycle you talk about started with Google paying ridiculous amounts and giving everyone huge nice benefits, and then others had to start matching that to not get all their best programmers stolen by Google.
But today there is no longer a founder led giant who is applying pressure here, so likely things will normalize over time back to 90's early 00's, where programmers were paid more like engineers instead of being a class above.
Unless that changes rapidly, I don't think we'll go to "developers make slightly more than the national average".
You missunderstood, I was talking about founders not following the normal management culture, so they do things like "pay our people twice the market rate so we can get the best people!", no regular manager or CEO would do that, and that is how for example programmers could start earning so much more than engineers.
> I don't think we'll go to "developers make slightly more than the national average
That isn't a quote. I said similar pay to other engineers, not everyone. Engineers makes more than typical people.
> there's a lot of stuff to do where you need developers and only so many developers to do them. If you want yours done, you offer more money so developers do them for you.
This was true in the 90's as well, Microsoft was the richest company on earth yet they didn't pay all their programmers significantly more than the typical market rate for engineers. The fast rise in salaries started when lots of companies started to copy Google in the late 00's.
But that's literally what Wallstreet Banks and Hedge Funds do and have done for decades, and they're the definition of all things not cool by being a cross between MBAs and lawyers. Even when they needed to be bailed out, they maintained their high bonuses because "otherwise you can't keep the best people".
It's also what you'd expect to happen whenever a resource is limited and there's more demand than supply.
> The fast rise in salaries started when lots of companies started to copy Google in the late 00's.
That's because suddenly the demand for developers exploded, not because Google did some magic trick though. In the 90ies, and especially at Microsoft, having developers do stuff for you was nice and all, but it didn't convert into cash quickly and at scale. When the first dotcom boom came, that changed, and suddenly startups paid large sums. Google continued doing so because they needed to grow to capture more of the market / capture more markets.
This has certainly not been true since for ever and is only partially now. Only a small minority of developers make enormous amounts of money and there are plenty of shitty companies that do not give you any control whatsoever.
That being said, I do not disagree that part of it is due to the boom-bust cycle of markets, but yeah, managers "coordinate" in a sense that there is a zeitgeist and a common understanding of what the atmosphere is.
They hired people when it was beneficial (note that I am not using the word "profitable" here) for them to do so and now they are firing because that is the new beneficial thing. Keep in mind that managers do not pay you out of their pocket.
A pure market-driven downsizing wave usually touches the C-level too.
My company and other SMALL businesses I know retain productive people through good times and bad. There's some shared pain in those bad times, and shared upside in the good. Why? Because we're human beings, in a small tribe, and we care about each other.
This falls on deaf ears when I'm interviewing and candidates want the prestigious name on their resume, or a game room in their office, or mega-benefits small businesses cannot provide.
I've had two productive employees leave my small business for big corporations. Two came back. One started their own small business.
What does your business do? And are you hiring?
This is the week in which the lab leak theory was finally confirmed in public- something that was obviously likely to be true from the start of the pandemic
You should apologise for trying to paint it in a different way, even more for calling it "confirmed", it's either deceptive or blatantly ignorant.
People seem to forget that when the fed talks about inflation, they are also talking about wage inflation. Raising rates slows hiring, and should slow wage growth. That is the whole point.
2. Workers increased salaries were passed to consumers. No problem until consumers stop purchasing. https://fred.stlouisfed.org/series/UMCSENT
3. In a recession cash flow is everything. For most companies labor is the largest variable element of cash flow.
4. Wages don't go down. Not that they cannot, they just don't. https://fred.stlouisfed.org/series/ECIWAG
Tin foil hats are a crutch for a lack of understanding, or a tool for total understanding. Which case applies to you?
So certain product lines or businesses can't afford the same number of engineers maybe. But the demand for good software engineers seems to far outstrip the supply so suppression of wages doesn't seem like an appropriate resolution to the problem.
One thing to consider is how companies lower wages by reclassifying the work. Converting staff jobs into “independent” contractors saves the company a lot of money in benefits even if the hourly rates appear to be stable or even increase slightly.
Similarly, consumer spending has remained incredibly high, and non-tech firms are ramping up still from the covid downturn.
It’s just as likely that tech companies just did a bad job forecasting future growth than they are preparing for a broad based downturn.
You must read different news than I do.
Leading indicators are always narrow, and they require some economic knowledge (and some risk) in interpreting them. Rises in interest rates. Yield curve inversion. Drops in advertising spending. Companies cancel major new investments. Mortgage applications fall off. Housing starts fall.
Nearly all of these are happening now. Things like the Fed Funds rate going up usually lead the recession by ~2 years, yield curve inversions by ~1 year, ad spending and capital investments by 6-12 months. Broad-based layoffs and drops in consumer spending usually don't happen until the recession is well underway.
IOW, check back in a year. I'm predicting carnage, and trading on it. You might be right, in which case I've missed out on the growth of a year, but you might also be ruined.
Other indicators that are positive, unemployment, jobs added, new home sales, service growth sentiment (and while manufacturing sentiment is negative it’s trending better than last year).
I’ve been waiting for a blood bath in real estate since last year, I’m still betting on one this spring. I can see that contagion spreading to the broader economy, but I don’t know that it will for sure.
My broader thesis is that the tech companies don’t know what the broader economy is going to do any better than other market participants and these layoffs are not preemptive, they are reactive to bad forecasting.
Does that preclude a recession? No. But the economic indicators do not “all say” a recession is imminent. The picture is extremely muddy, with most recent indicators (sans the yield curve) trending up.
I saw GP's arguments less as guesses and more as statistical probabilities. We are discussing layoffs, which is a socio-economic topic after all. So unlike Physics, you should expect probabilistic reasoning here.
Regarding conviction / sincerity, do you see any problem with any of the 4 arguments GP presents? If so, let's discuss that instead of just ad-hominems.
Really? Let's go one by one.
1. "Cuts are companies preparing for recession. We are long overdue for a down cycle and every indicator says its here or on its way." - we are indeed overdue for a down cycle. COVID could have been that but it was short lived due to massive stimuli. And all the traditional indicators (like yield curve, fed's statements) are pointing towards a recession (empirical evidence, as you ask).
2. "Workers increased salaries were passed to consumers. No problem until consumers stop purchasing. https://fred.stlouisfed.org/series/UMCSENT" - there is empirical evidence right there in that line.
3. "In a recession cash flow is everything. For most companies labor is the largest variable element of cash flow." - first part is objectively true. No cash flow, no viable business. And for second part, just go read the 10-Q's. It has labor costs spelled out.
4. "Wages don't go down. Not that they cannot, they just don't. https://fred.stlouisfed.org/series/ECIWAG" - again, GP is cognizant of possibilities and says so. And also provides evidence.
What are you really objecting to?
I read the tin foil hat comment as "I suspect something nefarious, but I don't have any evidence".
Your question, on the other hand, strikes me as being in the class of "are you still beating your wife" types of questions, that are designed as an indictment rather than knowledge seeking.
Sorry marx and Marxists, but boom bust cycles are not your saving grace to get you the revolution.
I have to wonder if this is entirely incidental. Sudden layoffs can also help maintain labor discipline, which a lot of business leaders felt was getting away from them.
It's probably more about that than about cutting costs.
Once sufficient fear has been instilled, the next stage will probably be across-the-board pay cuts.
Not saying you are wrong but it's common knowledge now that the best way to secure a pay rise is to find a new job.
So I expect that a fair number of employees faced with an actual wage reduction in a time of pretty significant inflation will feel motivated or even forced to find new employment. Which in turn will mean that when the firms go to replace those workers, which for the most part they eventually will want to do, they will wind up having to pay a higher wage to attract the same level of talent and competence.
Will they?
'glanzwulf here[0] is making a not so tinfoil-hat point that widespread layoffs create an atmosphere of fear. At this scale, the people who were laid off may no longer feel so sure about their prospects of finding a new job quickly - so they might just be willing to compromise for a lower salary, just to secure some job. For the first time since... ever? software developers might experience the job market the way everyone else does - that is, one where employers hold all the power, and employees are happy to take whatever they're being offered.
--
Unionized professions may be fairer than non-unionized, but compared to software dev pay, unions only turn a shitty salary into merely meh salary.
This doesn’t happen [1] because wages are sticky [2].
* Intel pay cut earlier this month.[1]
* Amazon pay cut earlier this month.[2]
* 50% pay cut for new tech hires in India.[3]
[1] https://www.oregonlive.com/silicon-forest/2023/02/intel-slas...
[2] https://fortune.com/2023/02/21/amazon-staff-pay-50-less-expe...
talk is cheap.
Action reveals true intentions.
And tbh, anyone who believes that they will not ever be laid off (and only ever voluntarily quit) is delusional. Whatever a company claims - "you're like family", "important asset", "valuable talent", etc - nothing compares to cash and profit. The shareholders do not suffer losses to prop up a business or employees.
You want labor discipline in a boom so you don't get taken to the cleaners.
> a lot of business leaders felt was getting away from them
How did you source this?
Does labor discipline even have a robust definition?
We saw this theatre at my employer. A mandatory all-company meeting called with a few hours notice, lots of stern faces and vague ominous talk, followed by "you will be notified in the next moments if you are being made redundant".
They are a huge company whose name you would almost certainly recognize. We found out later that the total number of people let go was....5. That's how many people we hired in our group alone the previous month. It was just a show.
And layoffs will also slow wage growth. So I wonder, did they all agreed to this at Davos?
The booms and busts occur due to speculation, over-investment, and contraction when the bottom falls out. That occurs just fine with distributed banking and loans.
Did 0 percent interest contribute to our current cycle? Absolutely. But these cycles exist in any economic system with capital markets
This is in practice impossible because value hand-off is not instantaneous. Someone is always at risk in a transaction, to a varying degree over time. (To say nothing of the productivity gained from the friction reduction of transaction credit.)
In Malthusian terms, every child is born with future claims on unproduced food. Mandating that be settled up front requires dark decisions, ones starving cities and families have had to make.
There was, AFAIK, no time in history in which a monometallic gold standard with no fractional reserve banking was the international norm, certainly no time overlapping with the capitalist econonic system and industrialization. The US before 1870 was primarily on a silver standard—and that’s true of most ofnthe West for quite some time before the US existed, and fractional reserve (or no-required-reserve) banking was the norm in the US before the gold standard, too. The gold standard was only 1870-1932, and none of that time was there no fractional reserve banking.
I do think in general popular economics (aka LinkedIn blogs) tend to overstate the benefits of gold.
No, that’s not what the phrase normally means when taling about finance.
> But this is not the only way to do it, see IMF austerity rules.
Lots of things have been said, by lots of people, about IMF austerity rules, but calling them an implementation of the gold standard is…a new one.
> In that case you’re just treating foreign reserves as if they were metallic treasure.
There is certainly a sense in which an externally controlled currency is similar to any other commodity bases for money that isn’t a domestically controlled currency from the perspective of the local government, and particularly in terms of the limits on its fiscal policy, but to the extent that central managers manipulating supply artificially creates business cycles that do not exist with a natural resource-based commodity currency like gold (a contention which, again, is false anyhow, but is the argument that was being made upthread about the gold standard) you’d expect that to be as true in foreign countries dependent on the currency as in the country that is managing it.
This is trivially, empirically, untrue, most notoriously in the free banking era [1]. These cycles are even the norm in ecologies, where they’re theorised to underpin diversity [2]. Republican Rome had endogenous boom-bust variations [3]; Malthus famously wrote about this generally [4].
[1] https://www.richmondfed.org/publications/research/econ_focus...
[2] https://www.nature.com/articles/s42003-021-02021-4
[3] https://d1wqtxts1xzle7.cloudfront.net/40444914/In_Search_of_...
My sides.
The gold standard in the US ran from 1870 to 1932; the Long Depression of 1873-1879, the Depression of 1882-1885, and the and the Great Depression of 1929-1933 all happened during it (overlapping its end, in the last case), as did some smaller recessions.
(Prior to 1870, most of the time the US was on a silver standard, which also had plenty of downturns and some depressions, in case you wished to retreat to “metallic” from “gold”.)
Have you heard of the 'great depression'? That happen while on the gold standard. So unless your going to no true scotsman that fact...
This word typically has a connotation of deception, and is usually applied to interactions between people. Looking for a reason for a cycle change is a totally natural and reasonable thing for someone to do.
This isn't correct - you can produce very sound analysis of past events, but to make money trading you need predictive power into future (as well as a lot of other things).
However, per GP, such useless analysis can still make the reader feel smarter, meaning you can monetize it - through paid or ad-funded publishing. In this sense, journalists are selling "analysis porn".
Actors with no perfect knowledge will result in bummans bust kind of cycles.
Other factors you can't simply ignore: the massive rise of interest rates, the drop in productivity per worker, the money going to the war in Ukraine.
Another way to look at this, instead of copycat, is voting with your wallet the direction you think the economy is going. A form of wisdom of the crowd. https://en.wikipedia.org/wiki/Wisdom_of_the_crowd
Wow. The next time I look for a job, this is a huge factor for me.
I avoided <certain big tech co.> and even adviced someone to turned down an offer there before they started this bullshit and I am so glad I did that.
I mean I get the whole "it's a business, not a charity" thing but seeing people lose their jobs because some c-suite asshole hears about a trend and acts on a whim is scary stuff. Job loss affects people wose than divorce and even as much as death of a family member!
What I really want is a list of companies that didn't participate in this. I would want those companies to turn me down first!
But the people will, for sure. And the company leadership should be held accountable for that in some way other than to get bigger bonuses.
Did this all start before Musk bought Twitter and in his inimitable way went about reforming its workforce? If not, I'd guess a lot of other managers finally felt they had the excuse to do what they'd been wanting to, but for some reason were holding back on.
No man rules alone.
Do you think before Musk every CEO wanted to lay everyone off, but couldn’t? Are investors punishing companies who grew responsibly and aren’t going Jack Nicholson from the Shining on their teams? Of course not.
Leaders want to grow and hire and Dorsey around giving TED talks. But when creditors get uneasy and Board members what-have-you-done-for-me-lately, survivors survive, they have no choice. They must deliver.
And it’s not like those creditors and Board members reign sovereign. They have their own LPs, pensions and billionaires, asking why they’re there if Treasuries yield five percent. You’re probably looking at your portfolio or grocery bill and wondering why your fund manager or manager manager can’t get you a better return, or deliver you that raise. That’s what’s causing this.
When even the world’s richest man is constrained by margin loans and interest payments on debt trading at dimes on the dollar, with banks who were once friends now threatening to take it all away; by stock multiples punishing losses and leverage with existential consequences; when it all looks like it’s falling down it’s tempting to coronate someone, anyone, as sovereign. But that’s not how it works, it’s never how it worked, kings always had lenders and warlords and pretenders to the throne. Systems have momentum, and when inflation spiked and rates rose, nobody had a choice other than persisting or perishing.
No man rules alone.
And people should not be mistaken, CEOs are on the hot seat now. Either cut more, show they are effectively using the resources they control, or be replaced.
If leadership is punished for layoffs, are they also rewarded for hiring people?
It might make for an interesting model for society, but I imagine it would end up with similar inefficiencies as the USSR's policy of full employment. For each employee it's nice to have three people man a single cash register, but for an economy's productivity it seems better if each company has no more workers than it needs, because those workers become available to other companies.
The USA's problem is more in how temporary unemployment is seen as a shameful personal failing, rather than a normal occurance in an economy that people have to be supported through (for a reasonable timespan).
The market doesn't care. And it makes sure to reward executives that don't care. As long as they can keep making money in short-term speculation transferring wealth from some naive Ohio teachers and fireman retirement fund to their pockets this is what will happen.
The line between capital and financial markets has been completely blurred a long time ago. Big finance calls all the cards, and big finance, like the House, always wins.
They are not naively copying each other behavior, they are doing what wall street expects of them if they want to keep their big fat bonuses.
The non-speculative shareholder is being robbed in daylight and labor is just collateral damage (not to mention that usually they are both the same person)
maybe companies had increased demand during pandemic? and companies selling cloud service saw more demand because zero interest rate policy mean more businesses want to take loan and spend freely on cloud infrastructure? Or maybe businesses spend freely online advertising? now rate continue to climb. world is different. cheap money regime no longer reality.
this opinion piece not even close to reality. written by someone who appear not to understand how businesses work. maybe private company should function like government apparatus and keep unnecessary head count, as long as it mean profit not negative? maybe next year we just increase taxes and continue pumping money because business is just a massive charitable jobs program for ceo to get re-elected? yes rhetorical statement.
with rising rate and no end in sight, proper thing to cut excess fat from businesses. focus on value and trim out moon shot idea or area in business that not give revenue. good to prepare and do EARLY and not wait to when company already bleeding.
the truth in situation is many tech company especially big tech have massive grift executing at scale. workers who paid hundreds of thousands of USD in salary plus stock compensation to not do meaningful work. fake economic class of worker.
musk pulled mask off this grift and everyone else followed. good on them. does this author realize 70% or more of Twitter employee fired. Twitter still work for me decent. See more new features now than last 6 year. so exactly what “critical” job all these people have?
[1] I was an partner in a company that nearly died, but was able to pull through and eventually do well/get acquired. Ultra conservative around hiring is a bias I know I still carry with me from the experience.
Old joke retold: Tim Cook is talking to his exec team about saving money. He turns to Deirdre O Brien who he has invited to the meeting to share her ideas. "We will fire 900 contractors and the one guy who works on Apple's graphical sudo product". Hands go up on all the Facetime screens, and it's clear everyone has the same question. "Why that guy?", Jeff Williams asks. Deirdre turns to Tim with a knowing look on her face.
"See, I told you. No one gives a fuck about the contractors"
Apple has shit tons of cash lying around - 55 billion dollars at the end of Q4/22 [1] and likely three times more in investments/assets [2].
If anything, Apple can afford keeping their staff on payroll... additionally, it keeps their knowledge in-house which is valuable on its own - NDAs and non-competes (with questionable legal standing) aside, they likely don't want laid-off staff starting up companies with knowledge gained by working on now-shelved projects at Apple.
[1] https://www.macrotrends.net/stocks/charts/AAPL/apple/cash-on...
[2] https://www.investors.com/etfs-and-funds/sectors/sp500-compa...
VCs and investors are perceiving they would want to copy and layoff during this season and try to bring people back to the office.
They are considering a company as healthier if they can layoff extra fat from COVID season.
If you can make predictions about real interest rates, you can see the future and you don't need to hire any staff at all - because you're God.
Lemmings[2] is a very educational game on many levels.
[1] https://www.bbc.co.uk/cbeebies [2] https://en.wikipedia.org/wiki/Lemmings_(video_game)
On a side note, I can't figure out all the responses to this comment. Everyone seems to be piling on and talking about stuff totally unrelated to your point.
CEO class is motivated by KPIs. Focus solely on KPI creates volatility in all the other variables that are not this year's KPIs. Hiring and then firing feels like work, hence needs to be compensated.
Nobody in the corporate america is compensated to explicitly do nothing, even though it might be the most appropriate move in a given quarter.
A variety of factors, including higher interest rates, create an environment where the tolerance for a lack of profit or productivity from certain operations becomes much more limited. In some cases that impacts entire companies, where stuff like “we’re pre-revenue” is now coming under far more scrutiny. In other cases company are taking a harder look at unprofitable divisions or teams without a hard link to the bottom line and trimming some previous excesses.
Nobody is building a business from first principles, get real. Of course it's copycat. That's fine. That's life. That's how you get through life without sitting in bed for ten hours planning how to put on a shirt.
This title sounds profound until you think about it for ten seconds.
The problem here is not how companies react to a downturn, but why they think there’s one. And they are copying the whys too.
It's not about the number of seconds that matter, but it's the direction of where your thoughts go.
I hear this expression often and I don't think it's fair; it's quite condescending. The fact that you think something is obvious and if only somebody bothered really thinking about it for a moment it would be obvious to them too, is missing the reason different people come to different conclusions about things. What you think next is determined by many factors, including your goals, your biases, your prior knowledge, what you had for breakfast.
And you should know that, if you think about it for ten seconds.
You have no idea how many potential new product lines, etc you cut off with layoffs. You don’t realize how much your remaining employees don’t give a shit anymore. It takes a decade or so to recover from this, and it never really is the same.
Recently they instituted a hard 3/2 RTO, a bonehead move in my opinion -- we could've stayed remote and attracted proper talent, especially with all the recent tech layoffs. The execs tout "innovation" as one of the "core values" but their actions reek of fear of change and a desire to "go back to normal".