4 ms·

To be honest, most successful startups are indeed quite cancerous. Twitter doesn't need 3,500 employees, Facebook doesn't need 17,000 and Google doesn't need 7

To be honest, most successful startups are indeed quite cancerous. Twitter doesn't need 3,500 employees, Facebook doesn't need 17,000 and Google doesn't need 72,000. They could all fire 50%-90% of their workforce and the product wouldn't be materially affected for the vast majority of users. The reason they have this many is because they can have this many. Their success has given food to the cancerous growth. You get this situation whenever a company isn't operated by a shareholder who get's dividends. When the person who runs the company knows that every dollar they don't spend is money in their pocket, people start to actually care about expenses and only focusing on what is important.

ec109685 9y ago
There isn't any basis to your statement that Facebook could make as much short term and long term profit if they fired half their staff. Instagram, for instance, is much bigger than they were a couple years ago, and those employees have built things that have drove growth for the product.
eropple 9y ago
You don't even have to go as far as the big tech companies. You see it even in smaller ones. Something that's stuck with me is when, in the span of about a week or so, I had multiple people at different startups answer a question "hey, how's it going?" with "oh, really great, we [note: not founders] just closed a round and we're hiring X more people [note: at companies where the product is stable and well-understood]". It's fief-building, to a large extent.
ashark 9y ago
I agree that a lot of tech companies have a much larger staff than they need (especially the mid sized ones) and I agree that Google in particular seems to suffer from severe mismanagement, but this is kind of the best case when you see a company with high enough barriers to entry that they collect rents: they spend on R&D and other "wasteful" stuff. Part of the problem with the thought experiment of the perfect free market (infinite producers/consumers) is that margins are so razor thin that no one can do this kind of stuff, which can be enormously beneficial when well coordinated (see: postwar Japan) so you do want some of it to happen.
probe 9y ago
I strongly disagree with this on two points 1) one of the biggest moats for tech companies is talent, and it's necessary to have GOOD employees available to test new fields and grow quickly (when Android came along, Google suddenly needed a lot more engineers that it had available and saved the time/challenge/cost of hiring good quality engineers). Also the numbers you posted are overall employment numbers, not engineering ones (you need to have bigger HR, sales, support etc as you grow). I totally agree that there is a point of diminishing marginal return and they could be bloated, I just don't know what that is and I don't think you do either, so don't discount the number just because it's large. 2) Dividends are given if the company doesn't think that it can reinvest those in a more profitable way. Berkshire Hathaway notoriously doesn't give dividends - it doesn't mean Buffett & Munger are personally pocketing all the wealth. Also, dividend returns are taxed so that's why many times shareholders are okay with having the company reinvest it/bring it down as retained earnings because it's smarter that way.
- Negitivefrags 9y ago
  With regard to dividends the tax situation is what is causing the bloated and shitty behavior in the first place. In countries with Dividend Imputation (https://en.wikipedia.org/wiki/Dividend_imputation https://en.wikipedia.org/wiki/Dividend_imputation) such as the one I live in, companies actually distribute the money they earn. In the USA, wasting money on bloat is effectively incentivised by the tax structure because you can spend money that is already inside the company with an effective discount vs distributing it so that it can be invested elsewhere. Owners should be withdrawing the profits of their companies. The current situation leads to bloat and stagnation.
  - probe 9y ago
    Never heard of dividend imputation - thanks for sharing! Though I still don't agree with withdrawing profits - I think it's smart to reinvest profits into the business (just look at Amazon).
usrusr 9y ago
I agree with your assessment of Google, Facebook et al not needing almost all of their manpower. They hire because they can and because they (and, by proxy, their shareholders) sincerely believe that this manpower can create nonnegative marginal improvements to an already very successful "machine" and because they fear that going lean will make it impossible to adapt to changing markets. The key difference is this: they earned the money and they can do with it whatever their shareholders allow them to. Wikimedia, on the other hand, get the money from the annual beg-fest aka "give is money or bad things may happen to humanity's last remaining encyclopedia" racket and they are only bound by whatever liberal interpretation they apply to their statutes. The problem I see with this is that with each increase in avoidable expenses they increase the risk of donations one day not keeping up with rising expenses, threatening the very existence of Wikipedia as we know it. By growing expenses, they are essentially endangering what they are supposed to protect.

ec109685 9y ago

There isn't any basis to your statement that Facebook could make as much short term and long term profit if they fired half their staff. Instagram, for instance, is much bigger than they were a couple years ago, and those employees have built things that have drove growth for the product.

eropple 9y ago

You don't even have to go as far as the big tech companies. You see it even in smaller ones. Something that's stuck with me is when, in the span of about a week or so, I had multiple people at different startups answer a question "hey, how's it going?" with "oh, really great, we [note: not founders] just closed a round and we're hiring X more people [note: at companies where the product is stable and well-understood]". It's fief-building, to a large extent.

ashark 9y ago

I agree that a lot of tech companies have a much larger staff than they need (especially the mid sized ones) and I agree that Google in particular seems to suffer from severe mismanagement, but this is kind of the best case when you see a company with high enough barriers to entry that they collect rents: they spend on R&D and other "wasteful" stuff. Part of the problem with the thought experiment of the perfect free market (infinite producers/consumers) is that margins are so razor thin that no one can do this kind of stuff, which can be enormously beneficial when well coordinated (see: postwar Japan) so you do want some of it to happen.

probe 9y ago

I strongly disagree with this on two points 1) one of the biggest moats for tech companies is talent, and it's necessary to have GOOD employees available to test new fields and grow quickly (when Android came along, Google suddenly needed a lot more engineers that it had available and saved the time/challenge/cost of hiring good quality engineers). Also the numbers you posted are overall employment numbers, not engineering ones (you need to have bigger HR, sales, support etc as you grow). I totally agree that there is a point of diminishing marginal return and they could be bloated, I just don't know what that is and I don't think you do either, so don't discount the number just because it's large. 2) Dividends are given if the company doesn't think that it can reinvest those in a more profitable way. Berkshire Hathaway notoriously doesn't give dividends - it doesn't mean Buffett & Munger are personally pocketing all the wealth. Also, dividend returns are taxed so that's why many times shareholders are okay with having the company reinvest it/bring it down as retained earnings because it's smarter that way.

Negitivefrags 9y ago
With regard to dividends the tax situation is what is causing the bloated and shitty behavior in the first place. In countries with Dividend Imputation (https://en.wikipedia.org/wiki/Dividend_imputation https://en.wikipedia.org/wiki/Dividend_imputation) such as the one I live in, companies actually distribute the money they earn. In the USA, wasting money on bloat is effectively incentivised by the tax structure because you can spend money that is already inside the company with an effective discount vs distributing it so that it can be invested elsewhere. Owners should be withdrawing the profits of their companies. The current situation leads to bloat and stagnation.
- probe 9y ago
  Never heard of dividend imputation - thanks for sharing! Though I still don't agree with withdrawing profits - I think it's smart to reinvest profits into the business (just look at Amazon).

usrusr 9y ago

I agree with your assessment of Google, Facebook et al not needing almost all of their manpower. They hire because they can and because they (and, by proxy, their shareholders) sincerely believe that this manpower can create nonnegative marginal improvements to an already very successful "machine" and because they fear that going lean will make it impossible to adapt to changing markets. The key difference is this: they earned the money and they can do with it whatever their shareholders allow them to. Wikimedia, on the other hand, get the money from the annual beg-fest aka "give is money or bad things may happen to humanity's last remaining encyclopedia" racket and they are only bound by whatever liberal interpretation they apply to their statutes. The problem I see with this is that with each increase in avoidable expenses they increase the risk of donations one day not keeping up with rising expenses, threatening the very existence of Wikipedia as we know it. By growing expenses, they are essentially endangering what they are supposed to protect.