What a dumb article. Corporations exist for the purpose of returning money to shareholders, not for the purpose of permanently employing unneeded workers.
Corporations are supposed to what's best for the shareholders. Milton Friedman equated it to maximizing profit, but it's not necessarily so.
Even if you assume that the profit is the sole reason for the corporation, it's not clear laying off 20% worker would necessarily lead to maximizing shareholder profit in the following years (e.g., it could lead to stifled innovation, lower employee morale, etc).
If as a board you unduly punish executives when bets they make don't pan out, you risk causing a culture of fear that prevents innovation and big bets.
Obviously there's a limit, and the reasoning is important behind the bets.
That being said it's not like all of the tech ceos were perfectly competent - that's not what I'm saying. But the knee-jerk "well, fire them too" reaction from the internet is mostly an emotional response.
People are paid based on opportunity cost. Executives are paid very highly because the cost of them making a poor decision, or not making a good decision, is very high. Meanwhile, the cost of hiring me and me not performing to expectations is low. It's not because they're God's or anything. The supply of people with leadership experience is also definitionally low.
Of course there's a lot of old boys club in executive roles in reality but that's the boards and shareholders problem when they do a bad job.
And under-hiring today because your crystal ball says market conditions will deteriorate in the future is also not always the best course of action.
The myriad causes which lead Intel to this point exist at many levels from individual, corporate, competitive, and macroeconomic.
It’s overly reductive to assume a layoff is due to some mistake, that a layoff is due to over-hiring, or that a layoff’s root cause is the executives who mapped out a past hiring plan.
For starters, the hiring plan will be based on revenue projections which will be based on technical market analysis overlaid with a technical roadmap. This is a distributed effort and major analysis at the level of a corporation like Intel spread across potentially dozens of business units. The hiring plan could easily have been “perfect” based on faulty product roadmaps / product performance projections or any number of other factors.
> Intel's earnings report for the first quarter of 2023 was one of the worst in the company's history. Its revenue dropped by 36% annually and the firm also posted a loss per share of four cents. These losses came as the firm ensured that its investors were happy and paid $1.5 billion in dividends out of pocket during Q1, keeping the payments nearly similar to the year ago quarter's figures.
What is beneficial to management may or may not actually be in the best interest of shareholders (and neither incentive necessarily aligns with the interests of either customers or employees).
If you believe Intel will be profitable again in the near future then paying the dividend really does make sense. Unfortunately there have been lots of companies that thought that was true when it wasn't and the dividend is how they ran out of runway quick.
If you believe your company will be profitable you should reinvest all avaliable capital into the business to grow it.
What you are advocating is contrary to every shred of logic and common sence.
No, because being profitable doesn’t mean marginal profits from expansion are available. Your plan would have all profitable firms expanding until they collapse from overextension.
This should not be true for microchip manufacturer during global computerisation. We now have microchips in sofas and handbags.
No? Then they are under investing in R&D. It's been a while since M1 came out and intel CPUs still havent caught up.
They GPUs are lacking too. Apply has AI inference functionality in their chips and great ML software support.
You don't get to tell me that they have nowhwre to invest when they are losing on multiple fronts.
I am not even mentioning the fact that they should be finding foundamentally new opportunities ahead of their competitors.
A month ago, would you would have believed that management team is right hire these people?
Did they make a mistake when they were hiring or did they make a mistake now when they are firing?
You cant believe both simultaneously.
Alternatively, maybe management team is just out for themselves, doesn't care. , and is just riding the wave. Pumo the share price.
Or maybe they are incompetent, don't know how to apply a large team, are out of ideas on how to invest 1.6 billion dollars profitably.
Now I dont have proof for my hypothesis b, but at least I am mot contradicting myslelf.
No it's entirely plausible that hiring then was the right decision and firing now is the right decision. There's no universal law that says you must hire people for eternity.
Why do you feel the urge to make excuses for managerial incompetence.
Like when you are a worker, they must be scruitinised to make sure they arent lazy or incompetent, but the day you get promoted to executive you gain godlike immunity from criticism
In the past 40 years several FTSE 250 companies have collapsed, gone bancrupt or suffered some other disaster.
I can't name any example where shareholders replaced upper management before it was too late. Can you?
They could show up with a RISC-V for a new socket AM6, called Zen7, with x86 acceleration: An actual x86 mode to support legacy applications during the transition to the best and industry standard ISA.
Or they could, alternatively, fall into irrelevance on the CPU side. Which would be a waste.
Every societal consensus believes itself to be the fountain of net progress.
And every societal consensus looks on its predecessors and peers as hairy barbarians.
Plenty of ancient civilisations celebrated their cruelty and capacity to deal violence as a competitive advantage (e.g. the Spartans, Vikings, Nazis, Mongols and Aztecs, et cetera). Even contemporary American society celebrates its military power. (No civilization celebrates its chaos, almost by definition, as that’s the antithesis of statehood.)
Invade Iraq? "Justified" revenge for a guy from Saudi Arabia attacking a building.
Torture a random dude grabbed from the middle east? He must have been doing something wrong.
Drone bomb a wedding? Don't make the mistake of living in a country the US thinks might have a terrorist.
Kill a black guy? "He looked suspicious" or "he had a criminal record".
But most of them are very cruel, within and without.
Spartans, Nazis and Aztecs were proudly cruel to their own. Hyper-masculine societies have historically celebrated this as a way of culling the weak from their ranks, a necessary evil. If anything, not being an honour-bound and sacrificial culture is something of a modern phenomenon.
We're comparing dividends to child sacrifice. If that doesn't encapsulate progress, I don't know what does.
This is hyperbole. We have hungry kids in America, and that's a tragedy. But they're not dying en masse, and we're certainly not celebrating that as a necessary sacrifice.
We absolutely celebrate the slow death of the poor as a necessary sacrifice in the face of economic growth and dividends. Just not always in the same breath. The fittest grow and the weakest adapt, or don't. Believing that when they don't is a tragedy, is not an effective way of mitigating tragedy, and indeed can serve as an affirming and normalizing act in and of itself.
"That's a tragedy, but that's the way it is"
This is a single metric. Number goes up. What other numbers went up? What numbers went down? What do these directions mean?
It does seem like fewer child deaths is a good thing. It does seem like modern medicine in general is probably a really good thing. There are a lot of other things in this world that are good things.
I'm not trying to deny goodness here. Just asking for more perspective, to better mitigate hubris.
I would guess that maybe less than a third of the total workforce is doing things we actually want and need as a society, and 90% of that third are jobs that are close to being automated.
As one example, the US alone has nearly $300 billion a year in revenue for the advertising industry and employees a quarter million people. When looking at the list of things humanity needs, ads aren't very high. There is a lot that exists to facilitate the other shit that doesn't need to exist.
point of clarification: people have value regardless of their profession and regardless of whether it becomes automated
At scale, is "less destructive" a synonym for "more productive"..?
Capitalism has a cost, and it's extremely high. Higher than any war in history.
2. Nearly the entire reduction in poverty the last few decades has taken place in China
and the united states has caused a ton of chaos and violence throughout the world. arguably they're one of the main causes of instability in a lot of countries.
Most (by ownership) direct owners of Intel aren't even natural persons.
As if that is some kind of fact of nature?
That is a debatable topic. As in- SHOULD that be the case? The older I've gotten the more I realize we are taught all of these constructs and never to question their actual intentions.
What is the intention behind the construct of a corporation that the primary responsibility is to give back to the shareholders? Green & rewarding people that already have money.
Why can't the main intention be a company to given stable employment to workers and adequate rights? To pay reasonable taxes on your profits to give back to the welfare of society?
But no.. we have a system in place here where a company is basically not required to give paid sick leave, no maternity leave, limited healthcare, zero paid time off, no sort of retirement/safety nets, no guarantee that you won't be fired the next day and have zero severance.. etc etc etc
Everything that's wrong with not helping people in our society is all intermingled right now. We need to increase taxes significantly on corporations and the wealthy. We need to guarantee healthcare, early childcare, significant maternity leave, paid sick days, vacation, way more higher education assistance.
Then even if corporations get to continue to be more greedy, at least they are paying their share and have to provide way more benefits to people.
Now since we are on HN- someone is going to say "Intel and X tech corporation do that!" And hey, fair enough they do a lot of that. But you know what? They are giving benefits to the people WHO HAVE MONEY! We are literally in a society where the people with the best benefits are the ones who make enough money where they could manage without them.
Yet most of the workforce that does more random jobs are the ones who get screwed with basically no benefits while making shit money.
Long story short? It's all connected and so much needs to change. But I have little hope any of this will in the US.
Just withing Capitalist countries. we have tried like 4 or 5 different forms of capitalism.
When eneconomic growth was highest in US history, college was free and share buybacks were illegal. 40% oftax reciepts were corporation tax. (now <10%)
A couple salient points:
The "best interests of the company" need not, and often are not, simply maximizing quarterly profits, share price, etc. Indeed, sometimes these things are odds with one another.
Moreover, shareholder value includes but is not limited to return on investment. It is simply most convenient _from a managerial perspective_ to simplify diverse shareholder notions of value down to the most legible lowest common denominator.
This is utterly and completely false.
If you don't believe me, here's what Justice Alito (known for his conservative/libertarian bent on the court) had to say in the Hobby Lobby opinion: "Modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not.
> What purpose an organization turns it's work to is up to the people who make the decisions, and varied.
Just because they can do certain things does not mean it's ethical. Employees themselves are agents, not principals - employees making decisions to enrich themselves at the expense of actual owners is highly problematic from an ethical standpoint.
A lot of people in this thread seem to be confusing the fact that employees acting for the benefit of shareholders is not strictly enforceable and the benefit itself does not have to be monetary in nature with the idea that employees can do whatever they want with the power that they have. This is simply not the case - sure, employees don't have to maximize for the short-term profits or stock price, or even in some cases, companies can be mission-driven, with a long-term mission that's prioritized ahead of profit-maximizing.
None of this means it's reasonable to make a decision to hold on to employees for the employees' benefits, rather than the corporation's benefit, except to the extent that it helps the long-term mission of the company.
The article is about Intel, so what do you believe the purpose of Intel is if not for profit? What do you think shareholders expect to gain?
A stronger onshore chipmaking industry could be one thing. There are plenty of other reasons individual shareholders might have to park their money in one place as opposed to another which don't simply have to do with maximizing returns. People have ethical considerations, ideological considerations, patriotic considerations...
The purpose of Intel is to manufacture chips. Selling them to make money allows them to reinvest to make more chips. Offering shares on public exchanges raises funds to... you guessed it, make more chips.
If the only true end goal of every corporation is to make money, then eventually we would eventually end up in a financial shell game where money is shuttled around ledgers while nothing of value is created. (Yes, I know.)
> The purpose of Intel is to manufacture chips.
No, the purpose of Intel is to make money.
> If the only true end goal of every corporation is to make money, then eventually we would eventually end up in a financial shell game where money is shuttled around ledgers while nothing of value is created
No, we end up with Intel manufacturing chips (in order to make money). If Intel becomes unable to make money manufacturing chips, I guarantee they will stop doing it.
“I do not expect to join any company which is simply a manufacturer of semiconductors. I would rather try to find some small company which is trying to develop some product or technology which no one has yet done. To stay independent (and small) I might form a new company, after a vacation.”
Noyce and Moore incorporated their new venture on July 18th and made a commitment to continued innovation a fundamental component of their company’s culture.'
https://www.intel.com/content/www/us/en/history/virtual-vaul...
By the way, Gordon Moore was worth an estimated 7 billion when he died earlier this year.
It makes exactly the opposite clear to me. Money is a means, not the end.
Kodak should have laid off every single person working in film development and pivoted hard to digital sensors, but for a variety of reasons, decided that they were done in that market, so they kept paying people to make better disposables.
Not saying they would get there, but Sony makes c.$2bn a year in profit there, so realistically Kodak could still be a multi-tens of billions of dollars company if they had done that.
Regardless of corruption, the market for film tanked.
The cameras were a loss leader to sell the film.
Seriously, here's the 1999 10-k self description (cameras is second to last only ahead of projectors!):
Kodak manufactures and markets various components of consumer imaging systems. For traditional consumer amateur photography, Kodak supplies films, photographic papers, processing services, photofinishing equipment, photographic chemicals, cameras (including single-use) and projectors.
My point is that if Kodak saw the writing on the wall that film was out and sensors (notice I didn't say cameras anywhere in any of my posts) were in, they could be in a position like Sony is right now.
It's honestly amazing that all those participants didn't know that very simple fact when Kodak management constantly talked about it at the time. Maybe that's why they blame 'corruption.'
EDIT: Maybe to put it another way, Kodak didn't see themselves as rivals to Nikon or Canon (you could put Kodak film in those), they saw themselves as rivals to Fujifilm.
So maybe it's not a much better system.
If your nation makes more money, but the median worker does not receive any of it, is it really better?
I gave my own metric, biggest parasites.
Looking at the top 10 tax avoiding, etm, sorry, minimising organisations, the top ones are also from the US.
Why should I support the biggest and fattest freeloaders?
I pay for roads and police, Starbucks just uses them and pays zero tax. And the coffee is shit.
They don't even have excuse of 'innovation' like google does. If Starbucks HQ gets nuked from orbit tomorrow, the world would just lose a parasite. They would be replaced by mom&pop coffee shops overnight, and they would pay tax and make better coffee
The fuel tax is especially relevant insofar as it’s explicitly meant to be a direct fee on the users of the roads to pay for the roads. Their drivers and those who contract for them in logistics will also pay for licensing, registration, and tolls.
There’s a variety of meaningful discourse to have on the proper tax structure for Starbucks… but representing them as freeloaders on the roads and the police does not belong as part of it.
Pretty sure that if there were no businesses, there'd be a lot less tax revenue as well.
And given that Germany spends way, way, way less on defense than the US, and has been protected by the US from the Soviet Union & Russia for many decades, I think "freeloaders" is an interesting term to choose.
To make my point clearer, lets replace Germany with Kazahstan.
Lets say we are examining if Starbucks management is more or less skilled than some random coffee company in Kazahstan.
Revenue per customer in USA will be higher. Sometimes workers in Kazahstan could be sick because there is outbreak of the literal plague and that will hit revenues.
Could you replace management in Kazah coffee company with American management and achieve the same results as in US?
Does the great skill of American management prevent outbreaks of the plague, or stops mafia from raiding your corporate office? No, in Us management doesn't even have to think about these kind of issues.
If not, then lets not assign the entire success of American society to corporate upper management?
It is for everyone except shareholders.
This is the same nonsense Pat's predecessors did, laid off long term experts in manufacturing & design and replaced them with fresh grads. And see how where we are.
The market cap of a company is an estimate of its value. The value includes things like current assets, expected present value of future profits, and so on. If it pays out $X, to first order effects, investors have $X more money, the company has $X less in assets, and so is worth $X less than it was. This is literally a redistribution of current market value back to investors.
At the level of a stock, the result is that a dividend of $Y will normally DROP the price of the stock by $Y. This is the exact opposite of "inflating" it.
Now I said to first order. What would be a second order factor? Well a large part of the value of a company comes from an estimate of the present value of future returns. Paying a dividend is literally an admission on the part of management that they do not think that they can spend the money and get returns matching other investments (ie the stock market). And therefore it is in the interests of investors that the money be returned. If this admission comes as a surprise to investors, this may change expectations of the future and drop the stock price even further. But unless the money being returned is from an unexpected windfall, the second order effects are unlikely to be positive either.
As an investor you should rightly see the fact of the money being returned as a bad sign for the future. However if you understood the chip industry deeply, it shouldn't come as a surprise. Your theory and preference appears to be that Intel should roll the dice on a Hail Mary to have a chance of a revival that keeps your losses from being permanent. But given the headwinds that they face, returning money and winding down operations in an orderly fashion may well give the best possible returns for investors. Which is what management appears to have concluded.
Hence return money that they can return, cut overhead with a layoff, and expect more of the same going forward. Anyone who invests in Intel expecting them to do anything else is probably throwing good money after bad.
Management should give money back when they do not think that they can generate future returns with it that are worth more to investors than the money. If management is right, then attempting to keep the money is taking value away from shareholders.
Given my knowledge of Intel's situation, I believe that management is making the right call here. We've known for decades that CISC based architectures don't scale as well. For a long time Intel compensated by investing enough to be able to iterate faster despite their advantages. But now ARM has taken over mobile, and is moving into data centers. Intel lost, they can't invest enough to overcome their innate disadvantages.
This isn't news, but there is a huge chunk of x86 out there. Unfortunately they've lost their moat on that to AMD. AMD now has better designs and more money to put into research. AMD also has outsourced manufacturing to TSMC, which (because they also build lots of ARM devices) has better economies of scale and manufacturing than Intel can hope match. And even if Intel tried to copy AMD here, there is a long learning curve to working with outsourced manufacturing that Intel would have to go through.
The result looks pretty grim. There is not one area in which Intel has an institutional advantage. And there is every reason to believe that Intel is not long for the world. Therefore extracting maximum value from current assets is probably their best management strategy. Rather than engaging in wishful thinking about a return to their former glory.
It was only in the past few decades that a political ideology decided that corporations were about maximizing shareholder investments to the detriment of everything else.
The problem with many of your "unneeded workers" is that when they become needed you can't flip the switch and they'll appear grateful for the bread you throw at them.
See service industry after the Pandemic, now extrapolate for highly technical jobs ( even the sales ones ). And also it's not like these people have gold fish memory, they remember, and adjust accordingly.
On the other side, Intel can't/shouldn't simply cancel the dividends because those 1.5B "saved" would cost them multiples of that since investors wouldn't buy their stock and many would sell - cutting their already big losses - So for Intel, capital would come only from the banks and the rates aren't exactly 0% now..
This is yet another example how Intel "star" execs ( and the board ) should have been competent 10 years ago instead of riding the wave. Now Intel is in a very tough position and it's really "no ones fault" of those who are there now.
Wow, no wonder our lives are worse than our parents’.
'Let them eat cake'.
There is a pov that societal interdependence is a fact, and that means that societal actions must ultimately be benefitial to the society at large.
This point of view can then hold that liberal market economy is a good thing because it promotes and engenders productive social activity (induced by economic self-interest) that then results in greater societal well being. So here the "economic self-interest" is the frosting on the cake: the cake is "productive social activity". So we in the liberal West go and congratulate ourselves in that our 'greater good system' is also 'better for the individual' as well. It's great!
But, some in our system do not hold to the view that societal interdependence is factual, or even if it is, it is desirable. To them, the cake of our system is "economic self-interest" and the societal well-being thing is, frankly, a nuissance, a "cost of doing business".
This is the germ of the issue, imo.
Nobody in any productive and creative activity has dollar signs in their eyes. It's about building, creating, optimizing, allocating and yes, also removing. At least some part is long-term (certainly longer than the reporting interval of a "quarter"), and positive contributions compound. Alternatively you can just withdraw, and eat the seeds now - stock market and executive bonus agreements would reward that, and that's the mentality that cannot create.
The sense is that those formerly exciting companies are a little lame right now, and maybe lack the right visionary leadership? Why does the new AI boom not create excitement for Intel, to make chips for AI or to use AI to make chips or w/e. The sentiment is a disappointment in the tech sector that had been good for so long.
German companies of a certain size have to have worker representation on their boards. Since Germany is perhaps one of the world's leading economies and hasn't been destroyed by not only returning money to shareholders, there is, at least, a viable alternative.
But please continue to embody why we can't have nice things.
Also it's wrong to assume companies are rational. If you are constantly in a cycle of hiring and firing employees, then it indicates you have a no long term vision and no skills to navigate the market.
If layoffs are the result of bad management, does it mean that there's no good management in tech, since everyone is doing them?
I am far from convinced this is even a goal of capitalism, much less the goal. There is a reason it trends towards monopoly.
While I violently disagree with the moral position of the GP's post, I think their mentality is much more closely aligned with a working definition of the thing, which is to optimize for output of material wealth, while allowing individual people to benefit from private ownership of the means by which that wealth is created.
At no point does the concept of "helping people" enter that definition; it only "allows" people to help themselves, if they can, within the limitations of a framework that compounds generational and socioeconomic success (and thus, already have some degree of "help" to stand on).
> The original goal of any economy is to enable specialization and still provide for the basics. People aren’t just workers.
I'd add some nuance here. The goal of any economy is to enable specialization towards the goals of the drivers of that economy and provide the basics for people who enable those goals. Not for people in some holistic, humanistic sense.
And under capitalism, since that goal is production of capital, those people are absolutely just workers, except for the owners of capital, and the ones who fall out of the machine and become so many loose parts rotting on the floor.
Also “people aren’t just workers” might be true in general sense, but for the company they are exactly that: workers. Their private lives are not the company’s concern. They shouldn’t be. The thing I hate the most is when my employer tries to take care of my wellbeing outside work. I consider that invasive of my privacy.
Maybe read it if you want to understand the current zeitgeist in the world of managers, but I wouldn't look for wisdom in them.
If management is beholden to a bunch of competing groups, then in any given situation they can do whatever they want and justify it by saying “well yeah the shareholders (or whoever) don’t like it, but this is what we need to do for the sake of the employees (or whoever).”
I’d rather have the shareholders in charge than unaccountable management doing whatever they feel like.