They're going to sacrifice quality. In the short run, that will work. The smart move would be to moderate with a small, expensive lead and cheaper offshore, arund-the-world talent. (The brilliant move would be to negotiate, but Huffman has made this personal.)

Keep in mind the power law nature of content. What makes Reddit charming is the long tail. What makes it profitable, in the short term, is the short end. They don't need to hire mods for every subreddit, just the large ones, and among those, only those rebelling and unwilling to relent.