21 ms·

Why are there so many tech layoffs, and why should we be worried?

233 points by tim_sw 4y ago

libdjml 4y ago
This entire piece and author lost me within the first paragraph. “and soon Google” links to a complete unsupported fluff piece from November, drawing a loose connection to an activist investors letter.
frgtpsswrdlame 4y ago
I mean certainly some of it is social contagion but what kicked off the contagion? I feel like in an article talking about why tech is laying people off surely interest rates should at least appear as a possible reason.
- notadev 4y ago
  Just speculating here, but I think Musk gutting Twitter staff was the catalyst. Layoffs were already happening, but Musk went to the extreme and it worked, at least from the outside looking in. A day after his initial layoffs is when Meta and Amazon both made the news for upcoming layoffs.
  - 1234letshaveatw 4y ago
    By what measure did it work? I am curious if you are going by share price, or ROI or Revenue per employee? or uptime?
    - BigRedDog1669 4y ago
      The website stayed up and there wasn't any big short term existential political problems. (Not speculating on whether it's wise, just that it's feasible in the short term.)
  - fragmede 4y ago
    that's a difficult pill to swallow, but I think you're right.
  - mrandish 4y ago
    It may have been a catalyst for the timing of accelerating the announcements slightly but I doubt it was a catalyst for the layoffs directly. Large public companies consider the perceptual impact of negative announcements on the stock and brand and there's some benefit to being perceived in a trend vs an outlier.
UncleMeat 4y ago
[flagged]
- malfist 4y ago
  What misinformation?
- jrochkind1 4y ago
  Would you like to be specific, or link to something with more context, for those who don't know what you are referring to?
  - mikeyouse 4y ago
    Yeah that's a really weird critique -- the linked article from November says they have sources telling them that Google was going to adjust their PIP so that 6% instead of 2% of people fall into the lowest category. Then in December, Google gave details of their new ranking system --- and 6% of employees will fall into the lowest ranking category (https://www.cnbc.com/2022/12/22/google-tells-employees-higher-risk-of-low-performance-ratings-in-2023.html https://www.cnbc.com/2022/12/22/google-tells-employees-highe...). I guess you could argue they didn't "announce layoffs" like the others, but when you start shuffling tens of thousands of employees into a PIP, is the result not the same?
    - UncleMeat 4y ago
      That't not correct at all. 2% are expected to be in the lowest bucket. 4% are expected to be in another "below normal" ratings bucket. Neither of these ratings are tied to PIPs. Even in the old system, most people who received "Needs Improvement" ratings were not given PIPs. Google also gave details of the rating system and expected distributions in March, not December.
  - UncleMeat 4y ago
    A few months ago there was a Forbes contributor article (e.g., blog post) that claimed that Google was going to lay off 10,000 people (6% of the company). Their argument for this was that Google introduced a new performance review system in 2022 that changed the expected ratings distributions such that roughly 6% of the company was expected to receive either of the two ratings below the baseline "significant impact" rating. From this, oodles of news outlets reported the headline: "Google plans on laying off 10,000 people." The new performance review system was created in 2021 and announced in like March 2022. It is independent of the current context of tech layoffs. Maybe Google will lay people off, I don't know. But the original post is just baseless nonsense and it is frustrating to see it repeated all over the place.
jt2190 4y ago
From the article: > [Melissa de Witt] Do you think layoffs in tech are some indication of a tech bubble bursting or the company preparing for a recession? > [Professor Jeffrey Pfeffer] Could there be a tech recession? Yes. Was there a bubble in valuations? Absolutely. Did Meta overhire? Probably. But is that why they are laying people off? Of course not. Meta has plenty of money. These companies are all making money. They are doing it because other companies are doing it. This may be true, but I’m not sure how we escape this: The market has different expectations now, leadership has to be sensitive to the expectations of the market, etc. “Making money” has a direct correlation with “risk taking”: When you have money pouring in it’s easy to allocate some to “moon shot” projects. Less money coming in and you can still make “improvements”. When money starts drying up you can only do “maintenance”.
- Our_Benefactors 4y ago
  I just don’t buy the argument of companies are doing it because other companies are doing it. Overhiring issues + popped bubble valuations + tech recession = you’re doing layoffs because you’re greedy? Really? It doesn’t add up.
  - clint 4y ago
    To my mind its the only thing that adds up.
  - Apocryphon 4y ago
    It definitely makes them seem hiring and short-sighted in retrospect for overhiring during the bubble. Shouldn’t corporate leadership be as aware that the Fed injected an insane amount of money as the layman, that it was unsustainable? What happened to following Buffet’s dictum about being fearful when others are greedy?
- kypro 4y ago
  Not completely relevant to your comment, but I personally I think the word "bubble" is a really bad label for what happened during 2020-2021 and redirects blame away from those responsible. It assumes there was some irresponsible multi-asset speculative boom in various markets including, government bonds, housing (gloally), crypto and stock valuations all conveniently around the same time in late 2020/ early 2021 when central bankers were doing trillions of QE and governments were injecting similar amounts of fiscal stimulus into the economy, fuelling a general demand boom and pushing the risk-free rate to near-zero. And top on of this central bankers were completely wrong / lying about the path of inflation and rate hikes in the coming years miss leading investors and businesses about the environment they would be operating in going forward. I guess my point is that if tech companies "over hired" they only did so because the risk-free rate being near-zero devalues profits and incentivise growth. And meanwhile they had a massive demand boom to service caused by the insane fiscal stimulus. They were arguably just doing what they had to given the macro environment governments and central bankers created. The "bubble" might as well have been government policy. Investors / businesses were just responding as you would expect given the economic conditions. Were we to drop the risk-free rate to zero and pump $2T in the economy again this year exactly the same thing would happen again.
rcme 4y ago
I couldn't disagree with this article more. The main point is that tech, despite being generally over hiring and having a valuation bubble burst, is going through layoffs just because "everyone is doing it." There are two, more obvious, reasons for layoffs. 1) The valuation bubble bursting is a big factor. Both high valuations and hiring decisions were made with a certain amount of growth in mind. Now that it's clear that the old level of growth is unrealistic going forward, valuations are coming down to reflect that, as is employee head count. Additionally, employees hired at the sky-high valuations are going to be disgruntled unless they're "made whole". Easier to just let most of them go and top-off the ones you want to keep. 2) There are two types of tech companies. The first is a company like Google, where their tech enables a step-function increase in human productivity. Google Search gave people a super power they never had before. This type of company is extremely valuable as they can capture the value of the productivity they unlock. The second type of tech company is something like WeWork. This type of tech company is essentially a digital version of something that existed previously. These companies can gain traction due to the convenience factor unlocked by the digital transformation, but there isn't much extra value to capture. When interest rates were 0, VCs and the market as a whole were valuing these companies the same as true tech companies. Now that investors are more discerning with their money, the valuations of such companies are popping. The valuations are lower because the true value of the company is low. If you have a low value company, you don't need thousands of employees all earning 6+ figures to run it.
- deleted 4y ago
  [deleted]
- Blackstone4 4y ago
  Yes but if you are management and you have been wanting to make changes and cut the fat, it was previously difficult to do layoffs without extensive negative coverage. Now you can do it and fly under the radar so it may be opportunistic in nature.
  - jcadam 4y ago
    A lot of this occurred in 2008 as well. Many of those jobs simply never came back, even after the economy recovered.
gibsonf1 4y ago
Hmm, economy not a factor at all as with the dot com crash in layoffs...??? Sounds a bit too academic and disconnected from the actual cause of the layoffs.
- TrueGeek 4y ago
  I might be really naive and I don’t know a lot about finance. But the fed has said unemployment is too high and their goal it to raise it by 1 percent. Does it just work like that scene in Fifth Element where some important person in the government calls some CEO and says “hey, please do a round of lay offs?”
  - umeshunni 4y ago
    > But the fed has said unemployment is too high and their goal it to raise it by 1 percent. I think you mean that employment is too high.
    - TrueGeek 4y ago
      Yes, thank you. I had the first half of that sentence all backwards.
badcppdev 4y ago
If "Layoffs literally kill people, he said." then why are they just talking about the Tech Layoffs. Interesting links to a report that has US Job cuts back to 1989: https://omscgcinc.wpenginepowered.com/wp-content/uploads/2023/01/The-Challenger-Report-December-2022.pdf https://omscgcinc.wpenginepowered.com/wp-content/uploads/202... https://www.challengergray.com/blog/the-challenger-report-job-cuts-in-2022-up-13-over-2021/ https://www.challengergray.com/blog/the-challenger-report-jo...
irrational 4y ago
These things go in cycles. Remember all the layoffs during the tech bubble burst in the early 2000s? Then another round of layoffs around 2008. The another round around 2015. Now, here we are again in 2022. Boom and bust. Over and over and over again.
- matwood 4y ago
  A bust would be dropping below the start of the boom, which is not happening at all here. Nothing goes straight up, and these layoffs so far have been what I could consider normal growth.
manicennui 4y ago
This is just what large public companies do. The pattern at the last company I worked at (100k+ employees) was to perform layoffs and a hiring freeze every fall and winter after assuring everyone that there wouldn't be a layoff early in the year. Then they'd hire a bunch of people in the first couple of quarters. It is so obviously done to make financial numbers better for the end of the year.
- stevehawk 4y ago
  but the end of the year for all of these companies was October, the end of the fiscal year. Yet companies are still doing it as we head into Q2 of 2023.
  - manicennui 4y ago
    I think some of the big tech companies in particular are starting to hit the end of the easy endless growth.
kubb 4y ago
I wish they fired me.
avgDev 4y ago
This is coming from a "Stanford scholar", yikes. What explains why so many companies are laying large numbers of their workforce off? The answer is simple: copycat behavior, according to Jeffrey Pfeffer, a professor at the Stanford Graduate School of Business Since the answer is so simple I stopped reading the article. Obviously companies should not care about the their stock dropping massively in the last year, rates going up and consumer spending reducing. The layoffs is just copycat behavior. /s Man, this guy must have predicted 50 of the last 2 recessions. Edit: This is such a bad take I would expect to read it on r/investing in a most downvoted comment. A "scholar" should know rarely things are black and white. There isn't a simple to answer to literally anything in macroeconomics, or just in life in general really.
- kodyo 4y ago
  [flagged]
  - lib-dev 4y ago
    Is "retarded" back?
    - anp 4y ago
      No, still crappy to use.
- sam0x17 4y ago
  Regarding the copy-cat behavior, the types of personalities that tend to be OK with working for FANG (external locus of control individuals who are likely to conform) aren't going to put themselves out there and do what they think is best for the company when they can just copy what [other FANG] is doing. They view these situations as "omg, amazon is doing X, how can I justify to my boss not also doing X"
  - ghaff 4y ago
    On the one hand, it's easy to be critical of herd behavior. On the other hand, when all (or most of) the other presumably smart people are heading in a different direction than you are, you should probably seriously consider the possibility that you're the one that may be wrong.
RumPumpkin 4y ago
"social contagion" is not the cause of tech layoffs. The cause is depressed valuations, and investors focusing investments away from tech (impacting private and public companies alike). When more cash is readily available, companies spend more freely. When it's less available, companies tighten spending. The "social contagion" here is a basic understanding of finance.
lowbloodsugar 4y ago
Companies were having a hard time hiring and keeping talent. Many got retention bonuses. Something had to be done. One year later, the situation is the opposite: employees are “lucky” to have a job. The economy is working well. For the people who run it.
Barrin92 4y ago
Not sure I buy this thesis of layoffs just as imitation behavior. There's been a pretty incredible increase in headcount at many tech companies over the last three years. Facebook in 2019 had 44k employees, 71k in 2022. Google went from 118k to 160k over the same timespan, and I don't really see for what reason. If anything I'd say the agressive hiring was the herd behavior, the layoffs seem more like a justified course correction. Tech companies are always crazy paranoid about slurping up talent, I don't think they're too keen on paying severance for people they just hired.
- rightbyte 4y ago
  > Facebook in 2019 had 44k employees, 71k in 2022. Google went from 118k to 160k over the same timespan Those are insane numbers. Imagine the chaos internally with so many newcomers.
fiat_fandango 4y ago
IMO the folks at the All In podcast nailed this - at work so I don't have time to find the exact clip but basically their synopsis went like this: When money was cheap to borrow, borrowing against stock and increasing headcount was seen as a metric that could pump stock price. Hence, hire as much as possible (especially engineers since they drive the most value at many of these huge tech orgs). Problem is, money is no longer cheap to borrow and real revenue is king now - having excess headcount that isn't resulting in clear value (something these companies are exceedingly good at measuring) means layoffs to reach the prior equilibrium of "real revenue" generated per engineer.
- MuffinFlavored 4y ago
  > Problem is, money is no longer cheap to borrow and real revenue is king now Real revenue and no profit or real revenue that leads to profit? The narrative seems to be that the day of awakening for "dump money with no expected ROI" style projects/companies is here when https://www.investing.com/economic-calendar/interest-rate-decision-168 https://www.investing.com/economic-calendar/interest-rate-de... is 4.5-5%
- onlyrealcuzzo 4y ago
  This notion that money isn't cheap doesn't make sense to me. If interest rates are 2% and inflation is 2% - borrowing money is free. If interest rates are 10% and inflation is 80% - you get paid to borrow money - which seems cheaper than free. We're obviously not in that situation - but we had interest rates at 2% with inflation at 10% - this was the cheapest money was in a long, long time. Now we have (short term) interest rates at 4% - and inflation is >4%. I get that it's not as cheap as 2021 - which would be necessary to maintain the asset bubble. But we still have negative real interest rates (at least short term). So money is still cheap, right?
  - KptMarchewa 4y ago
    >If interest rates are 10% and inflation is 80% - you get paid to borrow money - which seems cheaper than free. You still have to generate that 10% return.
caporaltito 4y ago
When did this guy actually worked in the tech industry again?
- zwieback 4y ago
  Just looked at his bio: never.
marktangotango 4y ago
I have been interested to see some factual discussion about the current environment around layoffs compared to previous down turns in tech, but this isn't it. In fact this reads a little wierd. Example: > Could there be a tech recession? Yes. Was there a bubble in valuations? Absolutely. Did Meta overhire? Probably. But is that why they are laying people off? Of course not. Meta has plenty of money. These companies are all making money. They are doing it because other companies are doing it. When stock prices and earnings are down one of the surest ways to boost earnings is reducing head count. This has been true forever. It doesn't matter how much money Meta (or whoever) has, it's the quarterly numbers that matter to investors, and companies act accordingly.
ojbyrne 4y ago
He’s an Organizational Behavior prof. I think one of these gets trotted out by journalists every time there are mass layoffs. You would likely get a different perspective from a Finance or Accounting prof.
theGnuMe 4y ago
Man nobody reads the articles anymore. I think the Prof is correct. This is a social contagion all the way from Wall Street. Arguably the contagion trigger was the Fed raising interest rates. But that doesn't mean layoffs are eminent especially in cash rich businesses. I remember being in high school and some girl freaked out about not getting the grades to get into Stanford etc... Guess what, that anxiety spread through the class and it was never the same again. As smart as we are, we do not think for ourselves and let social cues manipulate us. From the article: "What are some myths or misunderstandings about layoffs? Layoffs often do not cut costs, as there are many instances of laid-off employees being hired back as contractors, with companies paying the contracting firm. Layoffs often do not increase stock prices, in part because layoffs can signal that a company is having difficulty. Layoffs do not increase productivity. Layoffs do not solve what is often the underlying problem, which is often an ineffective strategy, a loss of market share, or too little revenue. Layoffs are basically a bad decision. Companies sometimes lay off people that they have just recruited – oftentimes with paid recruitment bonuses. When the economy turns back in the next 12, 14, or 18 months, they will go back to the market and compete with the same companies to hire talent. They are basically buying labor at a high price and selling low. Not the best decision. People don’t pay attention to the evidence against layoffs. The evidence is pretty extensive, some of it is reviewed in the book I wrote on human resource management, The Human Equation: Building Profits by Putting People First. If companies paid attention to the evidence, they could get some competitive leverage because they would actually be basing their decisions on science. "
- pm90 4y ago
  Yes, looking at all the comments it’s pretty clear nobody reads the article or stops reading as soon as they read something that goes against what they already know. He even suggests methods to avoid layoffs: broader cuts in staff compensation in lieu of letting people go. The most trotted reason for layoffs (“market conditions have changed”) isn’t really being justified with any kind of numbers so I find this argument unconvincing. While I understand layoffs may be required for companies that aren’t profitable and low on financing it makes little sense for highly profitable ones like Meta.
logicalmonster 4y ago
Anything approaching an explanation resembling the Austrian Theory of the Business Cycle would probably be persona non grata to a good percentage of people on HN, but I'd strongly suggest looking at monetary policy in the last few years for clues. Due to the (IMO extreme over-) reaction to Covid, governments spent money and made it available like drunken sailors. Businesses overhired, were able to get insane valuations, and a lot of excess cash made its way into the markets and overinflated everybody's valuations. The problem is, there ain't no such thing as a free lunch. Now we're reaping the predictable contraction.
zxcvbn4038 4y ago
Some of it is overdue, but most of it is spending slowdown, driving by the rapidly increasing inflation, which is causing interest rates to go up. But should you be worried? Not at the moment, US unemployment is still very low, a lot of tech people being laid off are being snatched up fairly quickly at the moment.
chaostheory 4y ago
I really disagree with the article’s conclusion. This is not simply about being a copycat We have tech layoffs because even the tech giants are reliant on new startups. Startups in general are suffering because leverage is no longer cheap, and startups are extremely cash hungry. Demand destruction affects everything and not just consumers
mensetmanusman 4y ago
“If layoffs don’t work, what is a better solution for companies that want to mitigate the problems they believe layoffs will address? One thing that Lincoln Electric, which is a famous manufacturer of arc welding equipment, did well is instead of laying off 10% of their workforce, they had everybody take a 10% wage cut except for senior management, which took a larger cut. So instead of giving 100% of the pain to 10% of the people, they give 100% of the people 10% of the pain. Companies could use economic stringency as an opportunity, as Goodnight at the SAS Institute did in the 2008 recession and in the 2000 tech recession. He used the downturn to upgrade workforce skills as competitors eliminated jobs, thereby putting talent on the street. He actually hired during the 2000 recession and saw it as an opportunity to gain ground on the competition and gain market share when everybody was cutting jobs and stopped innovating. And it is [an opportunity]. Social media is not going away. Artificial intelligence, statistical software, and web services industries – none of these things are going to disappear. “ If this was true, all that is missing is true leadership. Would people here take a 10% pay cut if it meant their colleagues weren’t fired?
- cj 4y ago
  I'll take the unpopular opinion and say I don't think the occasional team/company shakeup is always bad. Often times, the resulting team can be stronger than it was before. Particularly if the organization just went through an extremely ultra-fast hiring spree where it's likely low quality candidates were hired. The "cut 10% of my pay to save my coworkers" works well if you have a high performing team/company. If you don't, the high performers may become resentful if they start to feel like they're subsidizing the salary of low performers.
  - iso1631 4y ago
    > Particularly if the organization just went through an extremely ultra-fast hiring spree where it's likely low quality candidates were hired. The trick is identifying those low quality candidates. You can try to measure them, but once you measure them they become a target, and you get to the equivalent of the person who takes all the easy jobs from a queue because they then think they'll be higher in the value queue.
zwieback 4y ago
... says the guy who has spent his entire career in academia.
- fallingknife 4y ago
  Speaking of industries that need to do layoffs...
  - zwieback 4y ago
    No kidding, not happy about how my kids' tuition is used for bloated university operations.
twawaaay 4y ago
IMO there are two simple reasons: 1) Companies really, really don't want to be doing layoffs. It signals they are in a weak position. But when bunch of other companies do this it becomes a much more available option as there is something to blame ("Recession!") 2) Companies compete fiercely and up until recently they tried to hire as much people as they could. But now they are finding they onboarded a lot of people and possibly a lot of people they do not want to have and became less efficient in the process. Normally, it is pretty difficult to fire people and it takes a long time and resources to get them on PIP and then push them out. But, hey, there is a faster solution -- just blame recession! I am looking closely at this recession as I am trying to navigate it financially and professionally and I came to conclusion that it is to a large extent fiction. It is mostly just a bunch of companies jumping on a bandwagon because it is convenient for them for one reason or another. There is no real underlying reason for all this. And if you are not convinced, other than couple tech companies that were just mismanaged and other than valuations, companies seem to be in a better shape overall than ever.
- deleted 4y ago
  [deleted]
- shartshooter 4y ago
  This is my perspective as well. Using Salesforce as an example(having cut 10% of their workforce just a week ago). Their Q3 2022 results - “We had a solid quarter with revenue of $7.84 billion, up 14% year-over-year or 19% growth in constant currency, and record operating margin,” said Marc Benioff, Chair & Co-CEO, Salesforce. - “We delivered another quarter of double-digit top and bottom line growth,” said Amy Weaver, President and CFO, Salesforce. In my opinion, they're laying folks off because they can conveniently get away with it without too much blowback. And best of all, their stock is up 6% in the past five days so the folks they're really catering to are happy as a clam.
- explorer83 4y ago
  I can confirm number 2 is extremely real.
- r00fus 4y ago
netfortius 4y ago
Another US biased "research", exposing unemployment as cause of morbidity and mortality. Of course you will have people getting sick, undergoing degrading health and even dying, with worse health insurance than when employed, tech or not, you, geniuses!
yrgulation 4y ago
[dead]
stevev 4y ago
This was an opinion piece with no backing or supported evidence for it’s claims. Excluding the consequences of being laid off, the author’s opinion is that the tech layoffs are strictly a copycat move. Since others are doing it, we might as well. One would expect an establishment as such to provide better evidence or support for its claim. Historically layoffs occur due to unforeseeable labor market situations, reduced spending and economic constraints. No one rolls the dice when it comes to potentially saving money and going under. Some economists are saying that we’re only at the beginning of a recession here in the US.
whispersnow 4y ago
Take away from the article's airplane example: FANG are laying off. Who is hiring? I am gonna buy their stocks!
leesec 4y ago
Isn't there still an abundance of tech positions open? From this article (1), "according to the U.S. Bureau of Labor Statistics, there’s plenty to go around. The Bureau finds that openings for software engineers and similar jobs are projected to grow 22 percent from 2020 to 2030 – much faster than the average for all occupations – estimating about 189,200 new openings every year on average. The Bureau also estimates that in 2020, there were 1.4 million more software development jobs than applicants who could fill them." So I guess who cares if the industry shrinks by 10-20%? Isn't there still a vast shortage? 1. https://www.hackreactor.com/blog/open-coding-jobs https://www.hackreactor.com/blog/open-coding-jobs
- moneywoes 4y ago
  Heavily low paying jobs, yes
- confidantlake 4y ago
  Thank you for providing a source. I went to the website. They themselves don't give any sources and they are a coding bootcamp with an incentive to talk up a shortage of developers for obvious reasons. I went on the US Bureau of Labor statistics (BLS) and found this page(1). There is no mention of 1.4 million unfilled software jobs. To me this doesn't pass the smell test. There are currently 1.6 million developers according to the BLS. Can someone really say with a straight face there should be 2x that? If that were true there wouldn't be 4 rounds of leetcode and system design for every generic developer job. 1. https://www.bls.gov/ooh/computer-and-information-technology/software-developers.htm https://www.bls.gov/ooh/computer-and-information-technology/...
- trashface 4y ago
  I think the number of openings is quite inflated especially at small companies. They often have multiple listings on their web page or job sites that they never interview for, the purpose is to just make the company look healthy.
unity1001 4y ago
These articles miss a big elephant in the room: All of these tech companies are releasing legions of capable, experienced people into the market who will end up becoming their competitors. The layoffs are so large that entire networks of interconnected professionals are being released in one go. Many potential new start ups. In a few years, many of these companies may wish that they had had cut back on other stuff (including the shareholder expectations) rather than releasing all of these people to become their competitors.
- Apocryphon 4y ago
  The problem is, in this environment, where, with these new startups get their funding? At the same time it is certainly said that in bad times, the best new companies will flourish. Survival of the fittest.
  - unity1001 4y ago
    > The problem is, in this environment, where, with these new startups get their funding? As the other commenter in this thread said - there would be many among them who have enough runway to try something for a few years. Couple this by the many already well-off employees who resigned since the great resignation started, you have a lot of potential small startups. Moreover, remote work is well established now. People don't have to cram into expensive urban locations like SF and have to shoulder outrageous real estate and living costs. Also the cloud provides easy way to build scalable apps now, they are also well covered in respect to startup infra. What's left is ideas, reaching to the right audience and iterating. With many tens of thousands of people being laid off, there will eventually be startups that hit big on various things and take market share from their earlier employers.
- neilv 4y ago
  And a lot of those people have war chests from years of high TC, and can afford to self-fund "garage" startups for awhile. OTOH, it might be that these big companies select for people who'll jump through the hoops for interview rituals and KPIs/OKRs/promotions while leaning on company inertia, and so be unfamiliar with startup-like thinking and skillsets. (I mean the kind of startup that has to ship and sell and operate viable product, until the VC party resumes -- not the kind of startup that can just play along with a VC investment scheme by manufacturing signals of "growth"/potential.)
mywacaday 4y ago
Tech still hasn't had its own version of the "Industrial Revolution", I don't think its a factor this time but it will come. As tech becomes a more and more off the shelf commodity the amount of engineers required to build will reduce and the skills required to be a maintain and integrate will reduce, become lower paid and will require less people to maintain. There is a difficult road ahead and its not as far away as we'd like to believe.
2devnull 4y ago
It’s like this person has never heard of macroeconomics. “Yes. Was there a bubble in valuations? Absolutely. Did Meta overhire? Probably.” Could that have been the result of overly loose monetary and fiscal policy? Only an ostrich would think otherwise.
gbajson 4y ago
Lay-offs? Companies are hiring people as fast as they can! I am writing from Poland.
- deleted 4y ago
  [deleted]
dadjoker 4y ago
"Research – by him, and others – has shown that the stress layoffs create takes a devastating toll on behavioral and physical health and increases mortality and morbidity substantially. Layoffs literally kill people, he said." Which is why the forced layoffs because of overwrought COVID fears were so destructive, and the "cure" was worse than the disease.
spaceman_2020 4y ago
There are so many tech layoffs because there were way too many tech hires during the pandemic. And despite the layoffs, most of these companies are still far above the pre-pandemic employee count
leetharris 4y ago
There's something at play here that I haven't seen anyone talk about: we have a LOT of new talent entering the tech industry in the last 5 years. On average, the quality of devs, PMs, designers, etc has gone down in my experience. Companies expanded massively and when we ran out of seasoned employees, we started to hire people with very low qualifications. I think a lot of these layoffs are driven by correcting not only for increased headcount, but for decreased quality. A lot of tech companies are looking to up their average employee by culling the bottom performers.
friend_and_foe 4y ago
They're really making the argument that these big companies full of engineers that engineered much of modern life over the last 20 years are just blindy laying people off like some kind of social contagion? That's not how it works. Companies that big and that reliant on data don't make big decisions without some team of eggheads showing them the numbers and telling them they have to. And layoffs are a bad idea? Always? Even when sunsetting multiple large projects and downsizing your speculative endeavors? There are whole teams at these companies who's jobs just simply aren't needed anymore. It sucks for them, but to say it's a bad idea for a company to lay off people is just nonsense, there are times when you have to unfortunately.
- Apocryphon 4y ago
  These corporations all blindly overhired in the years prior because they just went along with Fed policies even though every financial news outlet in the world was saying more money has been printed than decades back put together. Surely that is a sign of groupthink and not thinking ahead. > Even when sunsetting multiple large projects and downsizing your speculative endeavors? Those same data-reliant companies initiated those projects!
jedberg 4y ago
> Layoffs literally kill people, he said. In the USA. It stresses people because they suddenly lose their health care and income with no safety net. In most civilized countries, it's far less stressful because the employee knows they can still get health care, they can still get food, they probably won't lose their home, etc.
DannyBee 4y ago
At a base level, the cause of letting people go is volatility and unpredictability. Not just because of valuations popping or whatever. Good things or bad things happening is not, itself, the direct cause. If you can say "18 months from now, the world will look like this", you can plan for this, good or bad. Maybe you get to "we will run out of money" (or whatever) and have to let people go. Maybe you get to "everything will be great" (or whatever) and you decide to hire despite things sucking now. It is only partially relevant what the world looks like right this second. It depends what you can float, the risk of floating, etc. But with things relatively volatile, you have to plan for unpredictably bad scenarios, or repeatedly lay people off if reality gets worse. Even if you have some idea "the economy will get bad", that isn't enough when the error bars are so high. In these situations it is usually better to overshoot than undershoot - overshooting is painful but "understandable" . Undershooting causing repeated layoffs is usually not.
tmnstr85 4y ago
I graduated in May of 2008 and only managed my way into the bowels of a large bank due to the fact I had interned there over the summer and spring. This big bank was allowed under state law to pay us "premium pay", it was 50% of what we usually made after 40 hours, we were grinding 70 hours in 12 hour shift due to how badly the recon was after the crisis. By October of 2009, I had watched 4 or 5 colleagues with 25 year careers get carried off the floor due to the shock of losing their jobs. This stuck with me as I prepared for secondary school and decided to go with a master in applied technology, I was the only white kid in the program. Since then I've slowly accepted that I have a skill set that will keep me employed for years to come. Will it fill my pockets with the riches, not really, but it will keep me from getting the type of eviction notices I found on my dad's rental as a teen. Everything is relative - for those who do get laid off, I feel for you and want you to know that this too, shall pass.
- DimitriPetrova 4y ago
  I don't understand why you point out that you "were the only white kid in the program." Why is this significant and what was the race of the other students?
steve76 4y ago
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0xbadcafebee 4y ago
We should be worried because it's evidence of a tech bubble. I mean, this is obvious, as almost every major tech company has been operating at a loss since their inception, and are propped up by investors anyway, because it inflates their stock price, and if you sell at the right point, you can get rich. It might destroy the world economy, but hey, shit happens.
deleted 4y ago
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jmyeet 4y ago
I somewhat agree that layoffs are copycat behaviour but this misses the mark a little. It's virtue signalling to the market. It's telling the market "we are going to cut costs". That is the prime reason so yeah, there's some copycat element in that message. It's worth noting that advertising spend tracks GDP pretty well. In a recession, GDP shrinks and so does ad spend. Companies like Google and Meta are highly dependant on ad revenue so a recession quite literally signals a reduction in revenue is coming. But here's why this is all so much posturing. Meta laid off what? 17,000 people? Assuming an average of $300k pa each (they're not all engineers) that's around $5 billion a year in savings or $1.25B a quarter on revenue of $17B+ and net income of $4B+. So the cost here isn't zero but it's certainly a cost the company could bear if they wanted to. It's a choice to get rid of these people. Also remember that while these people were costing $5B/year, they were still obviously producing something too. It's not like this was 17,000 people sitting around doing nothing. That value is also gone. Lastly, for Meta in particular, they're spending a literal fortune on the Metaverse, something that's unproven in any kind of product-market fit and doesn't seem to be a thing anyone actually wants. That's costing way more than the laid off workers. If Meta really was batoning down the hatches, they'd kill the metaverse and cut down their expenses to support their core businesses: IG, FB, WA and ads for all of these. So copycat? Kinda. Posturing and virtue signalling? Absolutely.
taylodl 4y ago
Layoffs have always been a part of tech. I've been laid-off three times during my nearly 40 year career: in 2 instances the company folded and in the other the project was cancelled and everybody working on it was let go. That's the nature of this beast. Companies get bullish on the future and over hire, then they have to layoff. Completely new bet-the-company projects get launched and then turns out to be a bigger bite than the company could chew. It happens. The rule-of-thumb I was always taught growing up in tech (and I started in the mid'80's) was expect to be laid-off at some point in your career and always make sure you have six months of expenses on hand to weather a layoff. It was good advice then, and it's good advice now.
ttul 4y ago
Inflation, tightened consumer spending, and geopolitical uncertainty have led to a decline in the value of high-growth companies that have remained unprofitable. To combat this, some companies have cut back on side projects and laid off employees. Factors such as geography, sector, and size will likely determine which companies are better able to weather the downturn. Consumer-facing tech companies have seen a decline in sales, while business software companies like Adobe and Salesforce are expected to fare better. Additionally, larger firms, with more cash on hand, are expected to be more resilient during the downturn. The shake-up of the tech industry may help larger firms grow even bigger in 2023. Source: https://www.economist.com/graphic-detail/2022/12/14/after-a-dreadful-year-for-tech-firms-who-will-thrive-in-2023 https://www.economist.com/graphic-detail/2022/12/14/after-a-...
UltraViolence 4y ago
Obviously layoffs are bad for people's health (both mental and physical), but they're an integral and important part of our capitalistic society. Companies need to respond to market and financial pressures and layoffs and hiring (the latter is almost always not being reported) are the tools for this. I personally believe that Big Tech put on lots of flab during the pandemic. Now they need to get rid of it to weather the downturn.
black_13 4y ago
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captainbland 4y ago
It seems odd that these layoffs come around the time that some of these companies are struggling to enforce return to office policies. It seems like part of the motivation for these layoffs is likely is to undermine the confidence of tech workers who are resistant to the whims of management types who'd like to smash the WFH status quo where it still exists.
anonreeeeplor 4y ago
I believe that Jerome Powell wants to gaslight United States employers into shaking off excess and over hired workers. The strange thing is I believe the economy is better than it is being portrayed as. The unemployment rate indicates that the economy is strong. And going into 2023, most of the headwinds like ukraine war and energy inflation don’t look so bad. And China is turning a bit less crazy and opening borders. These are all good. I think perhaps having all these big tech companies over hire and over spend on talent is prematurely screwing smaller businesses and startups. Powell and his big business friends are highly aligned to scare employers and give them air cover for agressive lay offs. I believe 2023 will be far better economically than people think, and that the situation is not as bad as it is being portrayed. They want to scare you into laying off to increase economic dynamism which is better for everyone. A lot of people are getting paid way too much and afraid to ever quit because they can’t get a better job. That prevents innovation and growth. The solution to scare everyone into firing helps everyone.
sacnoradhq 4y ago
Spot-on, in most regards. I work at a MAANG company that, for the past 5-10 years, has been hiring like OpEx was free and spending money without organizational budgets. This is an unsustainable cultural attitude using capital inefficiently by promoting lavish expenses and unbounded CapEx projects, neither of which necessarily translate into business value (or investor returns). Hiring or spending on assets with hockey stick trajectory doesn't necessarily translate into "build it, and they (customers) will come (and spend money)". There is a reasonable balance between a budget process that is overly strict which hamstrings productivity and spending money without any cost controls. The knee-jerk tendency to cut staff and budgets in perceptions of macro downturns in business may be harmful to current and future operations, especially if done without proper priorities such as sabotaging current and future cash cows. TL;DR: Don't cut staff or budgets because everyone else is out of fear. Look at the numbers, and explain to equity owners the decision analysis of to cut or not to cut, and where and why. PS: Obliquely, Stanford University enacted blanket budget cuts in the past to "virtue signal" an image of fiscal responsibility to peers and donors, but their finances and endowment were such that they were unnecessary.
additall 4y ago
I have a rule for reading materials: I read them till the first BS sentence. This one made me stop at: "Most problematic, it’s a behavior that kills people".
incomingpain 4y ago
The 2022, presumably it will continue into 2023, layoffs are because of the Ukraine/USA/EU war with Russia and China. The people being laid off are >80% green cards. https://www.wncw.org/2022-12-07/sweeping-tech-layoffs-are-hitting-immigrant-workers-hard https://www.wncw.org/2022-12-07/sweeping-tech-layoffs-are-hi... The majority of the people I'm sure aren't even a threat; but I guess nobody really wants to talk about the xenophobic reality of national security.

233 points by tim_sw 4y ago

This entire piece and author lost me within the first paragraph. “and soon Google” links to a complete unsupported fluff piece from November, drawing a loose connection to an activist investors letter.

frgtpsswrdlame 4y ago

I mean certainly some of it is social contagion but what kicked off the contagion? I feel like in an article talking about why tech is laying people off surely interest rates should at least appear as a possible reason.

notadev 4y ago
Just speculating here, but I think Musk gutting Twitter staff was the catalyst. Layoffs were already happening, but Musk went to the extreme and it worked, at least from the outside looking in. A day after his initial layoffs is when Meta and Amazon both made the news for upcoming layoffs.
- 1234letshaveatw 4y ago
  By what measure did it work? I am curious if you are going by share price, or ROI or Revenue per employee? or uptime?
  - BigRedDog1669 4y ago
    The website stayed up and there wasn't any big short term existential political problems. (Not speculating on whether it's wise, just that it's feasible in the short term.)
- fragmede 4y ago
  that's a difficult pill to swallow, but I think you're right.
- mrandish 4y ago
  It may have been a catalyst for the timing of accelerating the announcements slightly but I doubt it was a catalyst for the layoffs directly. Large public companies consider the perceptual impact of negative announcements on the stock and brand and there's some benefit to being perceived in a trend vs an outlier.

UncleMeat 4y ago

[flagged]

malfist 4y ago
What misinformation?
jrochkind1 4y ago
Would you like to be specific, or link to something with more context, for those who don't know what you are referring to?
- mikeyouse 4y ago
  Yeah that's a really weird critique -- the linked article from November says they have sources telling them that Google was going to adjust their PIP so that 6% instead of 2% of people fall into the lowest category. Then in December, Google gave details of their new ranking system --- and 6% of employees will fall into the lowest ranking category (https://www.cnbc.com/2022/12/22/google-tells-employees-higher-risk-of-low-performance-ratings-in-2023.html https://www.cnbc.com/2022/12/22/google-tells-employees-highe...). I guess you could argue they didn't "announce layoffs" like the others, but when you start shuffling tens of thousands of employees into a PIP, is the result not the same?
  - UncleMeat 4y ago
    That't not correct at all. 2% are expected to be in the lowest bucket. 4% are expected to be in another "below normal" ratings bucket. Neither of these ratings are tied to PIPs. Even in the old system, most people who received "Needs Improvement" ratings were not given PIPs. Google also gave details of the rating system and expected distributions in March, not December.
- UncleMeat 4y ago
  A few months ago there was a Forbes contributor article (e.g., blog post) that claimed that Google was going to lay off 10,000 people (6% of the company). Their argument for this was that Google introduced a new performance review system in 2022 that changed the expected ratings distributions such that roughly 6% of the company was expected to receive either of the two ratings below the baseline "significant impact" rating. From this, oodles of news outlets reported the headline: "Google plans on laying off 10,000 people." The new performance review system was created in 2021 and announced in like March 2022. It is independent of the current context of tech layoffs. Maybe Google will lay people off, I don't know. But the original post is just baseless nonsense and it is frustrating to see it repeated all over the place.

jt2190 4y ago

From the article: > [Melissa de Witt] Do you think layoffs in tech are some indication of a tech bubble bursting or the company preparing for a recession? > [Professor Jeffrey Pfeffer] Could there be a tech recession? Yes. Was there a bubble in valuations? Absolutely. Did Meta overhire? Probably. But is that why they are laying people off? Of course not. Meta has plenty of money. These companies are all making money. They are doing it because other companies are doing it. This may be true, but I’m not sure how we escape this: The market has different expectations now, leadership has to be sensitive to the expectations of the market, etc. “Making money” has a direct correlation with “risk taking”: When you have money pouring in it’s easy to allocate some to “moon shot” projects. Less money coming in and you can still make “improvements”. When money starts drying up you can only do “maintenance”.

Our_Benefactors 4y ago
I just don’t buy the argument of companies are doing it because other companies are doing it. Overhiring issues + popped bubble valuations + tech recession = you’re doing layoffs because you’re greedy? Really? It doesn’t add up.
- clint 4y ago
  To my mind its the only thing that adds up.
- Apocryphon 4y ago
  It definitely makes them seem hiring and short-sighted in retrospect for overhiring during the bubble. Shouldn’t corporate leadership be as aware that the Fed injected an insane amount of money as the layman, that it was unsustainable? What happened to following Buffet’s dictum about being fearful when others are greedy?
kypro 4y ago
Not completely relevant to your comment, but I personally I think the word "bubble" is a really bad label for what happened during 2020-2021 and redirects blame away from those responsible. It assumes there was some irresponsible multi-asset speculative boom in various markets including, government bonds, housing (gloally), crypto and stock valuations all conveniently around the same time in late 2020/ early 2021 when central bankers were doing trillions of QE and governments were injecting similar amounts of fiscal stimulus into the economy, fuelling a general demand boom and pushing the risk-free rate to near-zero. And top on of this central bankers were completely wrong / lying about the path of inflation and rate hikes in the coming years miss leading investors and businesses about the environment they would be operating in going forward. I guess my point is that if tech companies "over hired" they only did so because the risk-free rate being near-zero devalues profits and incentivise growth. And meanwhile they had a massive demand boom to service caused by the insane fiscal stimulus. They were arguably just doing what they had to given the macro environment governments and central bankers created. The "bubble" might as well have been government policy. Investors / businesses were just responding as you would expect given the economic conditions. Were we to drop the risk-free rate to zero and pump $2T in the economy again this year exactly the same thing would happen again.

rcme 4y ago

I couldn't disagree with this article more. The main point is that tech, despite being generally over hiring and having a valuation bubble burst, is going through layoffs just because "everyone is doing it." There are two, more obvious, reasons for layoffs. 1) The valuation bubble bursting is a big factor. Both high valuations and hiring decisions were made with a certain amount of growth in mind. Now that it's clear that the old level of growth is unrealistic going forward, valuations are coming down to reflect that, as is employee head count. Additionally, employees hired at the sky-high valuations are going to be disgruntled unless they're "made whole". Easier to just let most of them go and top-off the ones you want to keep. 2) There are two types of tech companies. The first is a company like Google, where their tech enables a step-function increase in human productivity. Google Search gave people a super power they never had before. This type of company is extremely valuable as they can capture the value of the productivity they unlock. The second type of tech company is something like WeWork. This type of tech company is essentially a digital version of something that existed previously. These companies can gain traction due to the convenience factor unlocked by the digital transformation, but there isn't much extra value to capture. When interest rates were 0, VCs and the market as a whole were valuing these companies the same as true tech companies. Now that investors are more discerning with their money, the valuations of such companies are popping. The valuations are lower because the true value of the company is low. If you have a low value company, you don't need thousands of employees all earning 6+ figures to run it.

deleted 4y ago
[deleted]
Blackstone4 4y ago
Yes but if you are management and you have been wanting to make changes and cut the fat, it was previously difficult to do layoffs without extensive negative coverage. Now you can do it and fly under the radar so it may be opportunistic in nature.
- jcadam 4y ago
  A lot of this occurred in 2008 as well. Many of those jobs simply never came back, even after the economy recovered.

gibsonf1 4y ago

Hmm, economy not a factor at all as with the dot com crash in layoffs...??? Sounds a bit too academic and disconnected from the actual cause of the layoffs.

TrueGeek 4y ago
I might be really naive and I don’t know a lot about finance. But the fed has said unemployment is too high and their goal it to raise it by 1 percent. Does it just work like that scene in Fifth Element where some important person in the government calls some CEO and says “hey, please do a round of lay offs?”
- umeshunni 4y ago
  > But the fed has said unemployment is too high and their goal it to raise it by 1 percent. I think you mean that employment is too high.
  - TrueGeek 4y ago
    Yes, thank you. I had the first half of that sentence all backwards.

badcppdev 4y ago

If "Layoffs literally kill people, he said." then why are they just talking about the Tech Layoffs. Interesting links to a report that has US Job cuts back to 1989: https://omscgcinc.wpenginepowered.com/wp-content/uploads/2023/01/The-Challenger-Report-December-2022.pdf https://omscgcinc.wpenginepowered.com/wp-content/uploads/202... https://www.challengergray.com/blog/the-challenger-report-job-cuts-in-2022-up-13-over-2021/ https://www.challengergray.com/blog/the-challenger-report-jo...

irrational 4y ago

These things go in cycles. Remember all the layoffs during the tech bubble burst in the early 2000s? Then another round of layoffs around 2008. The another round around 2015. Now, here we are again in 2022. Boom and bust. Over and over and over again.

matwood 4y ago
A bust would be dropping below the start of the boom, which is not happening at all here. Nothing goes straight up, and these layoffs so far have been what I could consider normal growth.

manicennui 4y ago

This is just what large public companies do. The pattern at the last company I worked at (100k+ employees) was to perform layoffs and a hiring freeze every fall and winter after assuring everyone that there wouldn't be a layoff early in the year. Then they'd hire a bunch of people in the first couple of quarters. It is so obviously done to make financial numbers better for the end of the year.

stevehawk 4y ago
but the end of the year for all of these companies was October, the end of the fiscal year. Yet companies are still doing it as we head into Q2 of 2023.
- manicennui 4y ago
  I think some of the big tech companies in particular are starting to hit the end of the easy endless growth.

kubb 4y ago

I wish they fired me.

avgDev 4y ago

This is coming from a "Stanford scholar", yikes. What explains why so many companies are laying large numbers of their workforce off? The answer is simple: copycat behavior, according to Jeffrey Pfeffer, a professor at the Stanford Graduate School of Business Since the answer is so simple I stopped reading the article. Obviously companies should not care about the their stock dropping massively in the last year, rates going up and consumer spending reducing. The layoffs is just copycat behavior. /s Man, this guy must have predicted 50 of the last 2 recessions. Edit: This is such a bad take I would expect to read it on r/investing in a most downvoted comment. A "scholar" should know rarely things are black and white. There isn't a simple to answer to literally anything in macroeconomics, or just in life in general really.

kodyo 4y ago
[flagged]
- lib-dev 4y ago
  Is "retarded" back?
  - anp 4y ago
    No, still crappy to use.
sam0x17 4y ago
Regarding the copy-cat behavior, the types of personalities that tend to be OK with working for FANG (external locus of control individuals who are likely to conform) aren't going to put themselves out there and do what they think is best for the company when they can just copy what [other FANG] is doing. They view these situations as "omg, amazon is doing X, how can I justify to my boss not also doing X"
- ghaff 4y ago
  On the one hand, it's easy to be critical of herd behavior. On the other hand, when all (or most of) the other presumably smart people are heading in a different direction than you are, you should probably seriously consider the possibility that you're the one that may be wrong.

RumPumpkin 4y ago

"social contagion" is not the cause of tech layoffs. The cause is depressed valuations, and investors focusing investments away from tech (impacting private and public companies alike). When more cash is readily available, companies spend more freely. When it's less available, companies tighten spending. The "social contagion" here is a basic understanding of finance.

lowbloodsugar 4y ago

Companies were having a hard time hiring and keeping talent. Many got retention bonuses. Something had to be done. One year later, the situation is the opposite: employees are “lucky” to have a job. The economy is working well. For the people who run it.

Barrin92 4y ago

Not sure I buy this thesis of layoffs just as imitation behavior. There's been a pretty incredible increase in headcount at many tech companies over the last three years. Facebook in 2019 had 44k employees, 71k in 2022. Google went from 118k to 160k over the same timespan, and I don't really see for what reason. If anything I'd say the agressive hiring was the herd behavior, the layoffs seem more like a justified course correction. Tech companies are always crazy paranoid about slurping up talent, I don't think they're too keen on paying severance for people they just hired.

rightbyte 4y ago
> Facebook in 2019 had 44k employees, 71k in 2022. Google went from 118k to 160k over the same timespan Those are insane numbers. Imagine the chaos internally with so many newcomers.

fiat_fandango 4y ago

IMO the folks at the All In podcast nailed this - at work so I don't have time to find the exact clip but basically their synopsis went like this: When money was cheap to borrow, borrowing against stock and increasing headcount was seen as a metric that could pump stock price. Hence, hire as much as possible (especially engineers since they drive the most value at many of these huge tech orgs). Problem is, money is no longer cheap to borrow and real revenue is king now - having excess headcount that isn't resulting in clear value (something these companies are exceedingly good at measuring) means layoffs to reach the prior equilibrium of "real revenue" generated per engineer.

MuffinFlavored 4y ago
> Problem is, money is no longer cheap to borrow and real revenue is king now Real revenue and no profit or real revenue that leads to profit? The narrative seems to be that the day of awakening for "dump money with no expected ROI" style projects/companies is here when https://www.investing.com/economic-calendar/interest-rate-decision-168 https://www.investing.com/economic-calendar/interest-rate-de... is 4.5-5%
onlyrealcuzzo 4y ago
This notion that money isn't cheap doesn't make sense to me. If interest rates are 2% and inflation is 2% - borrowing money is free. If interest rates are 10% and inflation is 80% - you get paid to borrow money - which seems cheaper than free. We're obviously not in that situation - but we had interest rates at 2% with inflation at 10% - this was the cheapest money was in a long, long time. Now we have (short term) interest rates at 4% - and inflation is >4%. I get that it's not as cheap as 2021 - which would be necessary to maintain the asset bubble. But we still have negative real interest rates (at least short term). So money is still cheap, right?
- KptMarchewa 4y ago
  >If interest rates are 10% and inflation is 80% - you get paid to borrow money - which seems cheaper than free. You still have to generate that 10% return.

caporaltito 4y ago

When did this guy actually worked in the tech industry again?

zwieback 4y ago
Just looked at his bio: never.

marktangotango 4y ago

I have been interested to see some factual discussion about the current environment around layoffs compared to previous down turns in tech, but this isn't it. In fact this reads a little wierd. Example: > Could there be a tech recession? Yes. Was there a bubble in valuations? Absolutely. Did Meta overhire? Probably. But is that why they are laying people off? Of course not. Meta has plenty of money. These companies are all making money. They are doing it because other companies are doing it. When stock prices and earnings are down one of the surest ways to boost earnings is reducing head count. This has been true forever. It doesn't matter how much money Meta (or whoever) has, it's the quarterly numbers that matter to investors, and companies act accordingly.

ojbyrne 4y ago

He’s an Organizational Behavior prof. I think one of these gets trotted out by journalists every time there are mass layoffs. You would likely get a different perspective from a Finance or Accounting prof.

theGnuMe 4y ago

Man nobody reads the articles anymore. I think the Prof is correct. This is a social contagion all the way from Wall Street. Arguably the contagion trigger was the Fed raising interest rates. But that doesn't mean layoffs are eminent especially in cash rich businesses. I remember being in high school and some girl freaked out about not getting the grades to get into Stanford etc... Guess what, that anxiety spread through the class and it was never the same again. As smart as we are, we do not think for ourselves and let social cues manipulate us. From the article: "What are some myths or misunderstandings about layoffs? Layoffs often do not cut costs, as there are many instances of laid-off employees being hired back as contractors, with companies paying the contracting firm. Layoffs often do not increase stock prices, in part because layoffs can signal that a company is having difficulty. Layoffs do not increase productivity. Layoffs do not solve what is often the underlying problem, which is often an ineffective strategy, a loss of market share, or too little revenue. Layoffs are basically a bad decision. Companies sometimes lay off people that they have just recruited – oftentimes with paid recruitment bonuses. When the economy turns back in the next 12, 14, or 18 months, they will go back to the market and compete with the same companies to hire talent. They are basically buying labor at a high price and selling low. Not the best decision. People don’t pay attention to the evidence against layoffs. The evidence is pretty extensive, some of it is reviewed in the book I wrote on human resource management, The Human Equation: Building Profits by Putting People First. If companies paid attention to the evidence, they could get some competitive leverage because they would actually be basing their decisions on science. "

pm90 4y ago
Yes, looking at all the comments it’s pretty clear nobody reads the article or stops reading as soon as they read something that goes against what they already know. He even suggests methods to avoid layoffs: broader cuts in staff compensation in lieu of letting people go. The most trotted reason for layoffs (“market conditions have changed”) isn’t really being justified with any kind of numbers so I find this argument unconvincing. While I understand layoffs may be required for companies that aren’t profitable and low on financing it makes little sense for highly profitable ones like Meta.

logicalmonster 4y ago

Anything approaching an explanation resembling the Austrian Theory of the Business Cycle would probably be persona non grata to a good percentage of people on HN, but I'd strongly suggest looking at monetary policy in the last few years for clues. Due to the (IMO extreme over-) reaction to Covid, governments spent money and made it available like drunken sailors. Businesses overhired, were able to get insane valuations, and a lot of excess cash made its way into the markets and overinflated everybody's valuations. The problem is, there ain't no such thing as a free lunch. Now we're reaping the predictable contraction.

zxcvbn4038 4y ago

Some of it is overdue, but most of it is spending slowdown, driving by the rapidly increasing inflation, which is causing interest rates to go up. But should you be worried? Not at the moment, US unemployment is still very low, a lot of tech people being laid off are being snatched up fairly quickly at the moment.

chaostheory 4y ago

I really disagree with the article’s conclusion. This is not simply about being a copycat We have tech layoffs because even the tech giants are reliant on new startups. Startups in general are suffering because leverage is no longer cheap, and startups are extremely cash hungry. Demand destruction affects everything and not just consumers

mensetmanusman 4y ago

“If layoffs don’t work, what is a better solution for companies that want to mitigate the problems they believe layoffs will address? One thing that Lincoln Electric, which is a famous manufacturer of arc welding equipment, did well is instead of laying off 10% of their workforce, they had everybody take a 10% wage cut except for senior management, which took a larger cut. So instead of giving 100% of the pain to 10% of the people, they give 100% of the people 10% of the pain. Companies could use economic stringency as an opportunity, as Goodnight at the SAS Institute did in the 2008 recession and in the 2000 tech recession. He used the downturn to upgrade workforce skills as competitors eliminated jobs, thereby putting talent on the street. He actually hired during the 2000 recession and saw it as an opportunity to gain ground on the competition and gain market share when everybody was cutting jobs and stopped innovating. And it is [an opportunity]. Social media is not going away. Artificial intelligence, statistical software, and web services industries – none of these things are going to disappear. “ If this was true, all that is missing is true leadership. Would people here take a 10% pay cut if it meant their colleagues weren’t fired?

cj 4y ago
I'll take the unpopular opinion and say I don't think the occasional team/company shakeup is always bad. Often times, the resulting team can be stronger than it was before. Particularly if the organization just went through an extremely ultra-fast hiring spree where it's likely low quality candidates were hired. The "cut 10% of my pay to save my coworkers" works well if you have a high performing team/company. If you don't, the high performers may become resentful if they start to feel like they're subsidizing the salary of low performers.
- iso1631 4y ago
  > Particularly if the organization just went through an extremely ultra-fast hiring spree where it's likely low quality candidates were hired. The trick is identifying those low quality candidates. You can try to measure them, but once you measure them they become a target, and you get to the equivalent of the person who takes all the easy jobs from a queue because they then think they'll be higher in the value queue.

zwieback 4y ago

... says the guy who has spent his entire career in academia.

fallingknife 4y ago
Speaking of industries that need to do layoffs...
- zwieback 4y ago
  No kidding, not happy about how my kids' tuition is used for bloated university operations.

twawaaay 4y ago

IMO there are two simple reasons: 1) Companies really, really don't want to be doing layoffs. It signals they are in a weak position. But when bunch of other companies do this it becomes a much more available option as there is something to blame ("Recession!") 2) Companies compete fiercely and up until recently they tried to hire as much people as they could. But now they are finding they onboarded a lot of people and possibly a lot of people they do not want to have and became less efficient in the process. Normally, it is pretty difficult to fire people and it takes a long time and resources to get them on PIP and then push them out. But, hey, there is a faster solution -- just blame recession! I am looking closely at this recession as I am trying to navigate it financially and professionally and I came to conclusion that it is to a large extent fiction. It is mostly just a bunch of companies jumping on a bandwagon because it is convenient for them for one reason or another. There is no real underlying reason for all this. And if you are not convinced, other than couple tech companies that were just mismanaged and other than valuations, companies seem to be in a better shape overall than ever.

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shartshooter 4y ago
This is my perspective as well. Using Salesforce as an example(having cut 10% of their workforce just a week ago). Their Q3 2022 results - “We had a solid quarter with revenue of $7.84 billion, up 14% year-over-year or 19% growth in constant currency, and record operating margin,” said Marc Benioff, Chair & Co-CEO, Salesforce. - “We delivered another quarter of double-digit top and bottom line growth,” said Amy Weaver, President and CFO, Salesforce. In my opinion, they're laying folks off because they can conveniently get away with it without too much blowback. And best of all, their stock is up 6% in the past five days so the folks they're really catering to are happy as a clam.
explorer83 4y ago
I can confirm number 2 is extremely real.
r00fus 4y ago

netfortius 4y ago

Another US biased "research", exposing unemployment as cause of morbidity and mortality. Of course you will have people getting sick, undergoing degrading health and even dying, with worse health insurance than when employed, tech or not, you, geniuses!

yrgulation 4y ago

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stevev 4y ago

This was an opinion piece with no backing or supported evidence for it’s claims. Excluding the consequences of being laid off, the author’s opinion is that the tech layoffs are strictly a copycat move. Since others are doing it, we might as well. One would expect an establishment as such to provide better evidence or support for its claim. Historically layoffs occur due to unforeseeable labor market situations, reduced spending and economic constraints. No one rolls the dice when it comes to potentially saving money and going under. Some economists are saying that we’re only at the beginning of a recession here in the US.

whispersnow 4y ago

Take away from the article's airplane example: FANG are laying off. Who is hiring? I am gonna buy their stocks!

leesec 4y ago

Isn't there still an abundance of tech positions open? From this article (1), "according to the U.S. Bureau of Labor Statistics, there’s plenty to go around. The Bureau finds that openings for software engineers and similar jobs are projected to grow 22 percent from 2020 to 2030 – much faster than the average for all occupations – estimating about 189,200 new openings every year on average. The Bureau also estimates that in 2020, there were 1.4 million more software development jobs than applicants who could fill them." So I guess who cares if the industry shrinks by 10-20%? Isn't there still a vast shortage? 1. https://www.hackreactor.com/blog/open-coding-jobs https://www.hackreactor.com/blog/open-coding-jobs

moneywoes 4y ago
Heavily low paying jobs, yes
confidantlake 4y ago
Thank you for providing a source. I went to the website. They themselves don't give any sources and they are a coding bootcamp with an incentive to talk up a shortage of developers for obvious reasons. I went on the US Bureau of Labor statistics (BLS) and found this page(1). There is no mention of 1.4 million unfilled software jobs. To me this doesn't pass the smell test. There are currently 1.6 million developers according to the BLS. Can someone really say with a straight face there should be 2x that? If that were true there wouldn't be 4 rounds of leetcode and system design for every generic developer job. 1. https://www.bls.gov/ooh/computer-and-information-technology/software-developers.htm https://www.bls.gov/ooh/computer-and-information-technology/...
trashface 4y ago
I think the number of openings is quite inflated especially at small companies. They often have multiple listings on their web page or job sites that they never interview for, the purpose is to just make the company look healthy.

unity1001 4y ago

These articles miss a big elephant in the room: All of these tech companies are releasing legions of capable, experienced people into the market who will end up becoming their competitors. The layoffs are so large that entire networks of interconnected professionals are being released in one go. Many potential new start ups. In a few years, many of these companies may wish that they had had cut back on other stuff (including the shareholder expectations) rather than releasing all of these people to become their competitors.

Apocryphon 4y ago
The problem is, in this environment, where, with these new startups get their funding? At the same time it is certainly said that in bad times, the best new companies will flourish. Survival of the fittest.
- unity1001 4y ago
  > The problem is, in this environment, where, with these new startups get their funding? As the other commenter in this thread said - there would be many among them who have enough runway to try something for a few years. Couple this by the many already well-off employees who resigned since the great resignation started, you have a lot of potential small startups. Moreover, remote work is well established now. People don't have to cram into expensive urban locations like SF and have to shoulder outrageous real estate and living costs. Also the cloud provides easy way to build scalable apps now, they are also well covered in respect to startup infra. What's left is ideas, reaching to the right audience and iterating. With many tens of thousands of people being laid off, there will eventually be startups that hit big on various things and take market share from their earlier employers.
neilv 4y ago
And a lot of those people have war chests from years of high TC, and can afford to self-fund "garage" startups for awhile. OTOH, it might be that these big companies select for people who'll jump through the hoops for interview rituals and KPIs/OKRs/promotions while leaning on company inertia, and so be unfamiliar with startup-like thinking and skillsets. (I mean the kind of startup that has to ship and sell and operate viable product, until the VC party resumes -- not the kind of startup that can just play along with a VC investment scheme by manufacturing signals of "growth"/potential.)

mywacaday 4y ago

Tech still hasn't had its own version of the "Industrial Revolution", I don't think its a factor this time but it will come. As tech becomes a more and more off the shelf commodity the amount of engineers required to build will reduce and the skills required to be a maintain and integrate will reduce, become lower paid and will require less people to maintain. There is a difficult road ahead and its not as far away as we'd like to believe.

2devnull 4y ago

It’s like this person has never heard of macroeconomics. “Yes. Was there a bubble in valuations? Absolutely. Did Meta overhire? Probably.” Could that have been the result of overly loose monetary and fiscal policy? Only an ostrich would think otherwise.

gbajson 4y ago

Lay-offs? Companies are hiring people as fast as they can! I am writing from Poland.

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dadjoker 4y ago

"Research – by him, and others – has shown that the stress layoffs create takes a devastating toll on behavioral and physical health and increases mortality and morbidity substantially. Layoffs literally kill people, he said." Which is why the forced layoffs because of overwrought COVID fears were so destructive, and the "cure" was worse than the disease.

spaceman_2020 4y ago

There are so many tech layoffs because there were way too many tech hires during the pandemic. And despite the layoffs, most of these companies are still far above the pre-pandemic employee count

leetharris 4y ago

There's something at play here that I haven't seen anyone talk about: we have a LOT of new talent entering the tech industry in the last 5 years. On average, the quality of devs, PMs, designers, etc has gone down in my experience. Companies expanded massively and when we ran out of seasoned employees, we started to hire people with very low qualifications. I think a lot of these layoffs are driven by correcting not only for increased headcount, but for decreased quality. A lot of tech companies are looking to up their average employee by culling the bottom performers.

friend_and_foe 4y ago

They're really making the argument that these big companies full of engineers that engineered much of modern life over the last 20 years are just blindy laying people off like some kind of social contagion? That's not how it works. Companies that big and that reliant on data don't make big decisions without some team of eggheads showing them the numbers and telling them they have to. And layoffs are a bad idea? Always? Even when sunsetting multiple large projects and downsizing your speculative endeavors? There are whole teams at these companies who's jobs just simply aren't needed anymore. It sucks for them, but to say it's a bad idea for a company to lay off people is just nonsense, there are times when you have to unfortunately.

Apocryphon 4y ago
These corporations all blindly overhired in the years prior because they just went along with Fed policies even though every financial news outlet in the world was saying more money has been printed than decades back put together. Surely that is a sign of groupthink and not thinking ahead. > Even when sunsetting multiple large projects and downsizing your speculative endeavors? Those same data-reliant companies initiated those projects!

jedberg 4y ago

> Layoffs literally kill people, he said. In the USA. It stresses people because they suddenly lose their health care and income with no safety net. In most civilized countries, it's far less stressful because the employee knows they can still get health care, they can still get food, they probably won't lose their home, etc.

DannyBee 4y ago

At a base level, the cause of letting people go is volatility and unpredictability. Not just because of valuations popping or whatever. Good things or bad things happening is not, itself, the direct cause. If you can say "18 months from now, the world will look like this", you can plan for this, good or bad. Maybe you get to "we will run out of money" (or whatever) and have to let people go. Maybe you get to "everything will be great" (or whatever) and you decide to hire despite things sucking now. It is only partially relevant what the world looks like right this second. It depends what you can float, the risk of floating, etc. But with things relatively volatile, you have to plan for unpredictably bad scenarios, or repeatedly lay people off if reality gets worse. Even if you have some idea "the economy will get bad", that isn't enough when the error bars are so high. In these situations it is usually better to overshoot than undershoot - overshooting is painful but "understandable" . Undershooting causing repeated layoffs is usually not.

tmnstr85 4y ago

I graduated in May of 2008 and only managed my way into the bowels of a large bank due to the fact I had interned there over the summer and spring. This big bank was allowed under state law to pay us "premium pay", it was 50% of what we usually made after 40 hours, we were grinding 70 hours in 12 hour shift due to how badly the recon was after the crisis. By October of 2009, I had watched 4 or 5 colleagues with 25 year careers get carried off the floor due to the shock of losing their jobs. This stuck with me as I prepared for secondary school and decided to go with a master in applied technology, I was the only white kid in the program. Since then I've slowly accepted that I have a skill set that will keep me employed for years to come. Will it fill my pockets with the riches, not really, but it will keep me from getting the type of eviction notices I found on my dad's rental as a teen. Everything is relative - for those who do get laid off, I feel for you and want you to know that this too, shall pass.

DimitriPetrova 4y ago
I don't understand why you point out that you "were the only white kid in the program." Why is this significant and what was the race of the other students?

steve76 4y ago

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0xbadcafebee 4y ago

We should be worried because it's evidence of a tech bubble. I mean, this is obvious, as almost every major tech company has been operating at a loss since their inception, and are propped up by investors anyway, because it inflates their stock price, and if you sell at the right point, you can get rich. It might destroy the world economy, but hey, shit happens.

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jmyeet 4y ago

I somewhat agree that layoffs are copycat behaviour but this misses the mark a little. It's virtue signalling to the market. It's telling the market "we are going to cut costs". That is the prime reason so yeah, there's some copycat element in that message. It's worth noting that advertising spend tracks GDP pretty well. In a recession, GDP shrinks and so does ad spend. Companies like Google and Meta are highly dependant on ad revenue so a recession quite literally signals a reduction in revenue is coming. But here's why this is all so much posturing. Meta laid off what? 17,000 people? Assuming an average of $300k pa each (they're not all engineers) that's around $5 billion a year in savings or $1.25B a quarter on revenue of $17B+ and net income of $4B+. So the cost here isn't zero but it's certainly a cost the company could bear if they wanted to. It's a choice to get rid of these people. Also remember that while these people were costing $5B/year, they were still obviously producing something too. It's not like this was 17,000 people sitting around doing nothing. That value is also gone. Lastly, for Meta in particular, they're spending a literal fortune on the Metaverse, something that's unproven in any kind of product-market fit and doesn't seem to be a thing anyone actually wants. That's costing way more than the laid off workers. If Meta really was batoning down the hatches, they'd kill the metaverse and cut down their expenses to support their core businesses: IG, FB, WA and ads for all of these. So copycat? Kinda. Posturing and virtue signalling? Absolutely.

taylodl 4y ago

Layoffs have always been a part of tech. I've been laid-off three times during my nearly 40 year career: in 2 instances the company folded and in the other the project was cancelled and everybody working on it was let go. That's the nature of this beast. Companies get bullish on the future and over hire, then they have to layoff. Completely new bet-the-company projects get launched and then turns out to be a bigger bite than the company could chew. It happens. The rule-of-thumb I was always taught growing up in tech (and I started in the mid'80's) was expect to be laid-off at some point in your career and always make sure you have six months of expenses on hand to weather a layoff. It was good advice then, and it's good advice now.

ttul 4y ago

Inflation, tightened consumer spending, and geopolitical uncertainty have led to a decline in the value of high-growth companies that have remained unprofitable. To combat this, some companies have cut back on side projects and laid off employees. Factors such as geography, sector, and size will likely determine which companies are better able to weather the downturn. Consumer-facing tech companies have seen a decline in sales, while business software companies like Adobe and Salesforce are expected to fare better. Additionally, larger firms, with more cash on hand, are expected to be more resilient during the downturn. The shake-up of the tech industry may help larger firms grow even bigger in 2023. Source: https://www.economist.com/graphic-detail/2022/12/14/after-a-dreadful-year-for-tech-firms-who-will-thrive-in-2023 https://www.economist.com/graphic-detail/2022/12/14/after-a-...

UltraViolence 4y ago

Obviously layoffs are bad for people's health (both mental and physical), but they're an integral and important part of our capitalistic society. Companies need to respond to market and financial pressures and layoffs and hiring (the latter is almost always not being reported) are the tools for this. I personally believe that Big Tech put on lots of flab during the pandemic. Now they need to get rid of it to weather the downturn.

black_13 4y ago

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captainbland 4y ago

It seems odd that these layoffs come around the time that some of these companies are struggling to enforce return to office policies. It seems like part of the motivation for these layoffs is likely is to undermine the confidence of tech workers who are resistant to the whims of management types who'd like to smash the WFH status quo where it still exists.

anonreeeeplor 4y ago

I believe that Jerome Powell wants to gaslight United States employers into shaking off excess and over hired workers. The strange thing is I believe the economy is better than it is being portrayed as. The unemployment rate indicates that the economy is strong. And going into 2023, most of the headwinds like ukraine war and energy inflation don’t look so bad. And China is turning a bit less crazy and opening borders. These are all good. I think perhaps having all these big tech companies over hire and over spend on talent is prematurely screwing smaller businesses and startups. Powell and his big business friends are highly aligned to scare employers and give them air cover for agressive lay offs. I believe 2023 will be far better economically than people think, and that the situation is not as bad as it is being portrayed. They want to scare you into laying off to increase economic dynamism which is better for everyone. A lot of people are getting paid way too much and afraid to ever quit because they can’t get a better job. That prevents innovation and growth. The solution to scare everyone into firing helps everyone.

sacnoradhq 4y ago

Spot-on, in most regards. I work at a MAANG company that, for the past 5-10 years, has been hiring like OpEx was free and spending money without organizational budgets. This is an unsustainable cultural attitude using capital inefficiently by promoting lavish expenses and unbounded CapEx projects, neither of which necessarily translate into business value (or investor returns). Hiring or spending on assets with hockey stick trajectory doesn't necessarily translate into "build it, and they (customers) will come (and spend money)". There is a reasonable balance between a budget process that is overly strict which hamstrings productivity and spending money without any cost controls. The knee-jerk tendency to cut staff and budgets in perceptions of macro downturns in business may be harmful to current and future operations, especially if done without proper priorities such as sabotaging current and future cash cows. TL;DR: Don't cut staff or budgets because everyone else is out of fear. Look at the numbers, and explain to equity owners the decision analysis of to cut or not to cut, and where and why. PS: Obliquely, Stanford University enacted blanket budget cuts in the past to "virtue signal" an image of fiscal responsibility to peers and donors, but their finances and endowment were such that they were unnecessary.

additall 4y ago

I have a rule for reading materials: I read them till the first BS sentence. This one made me stop at: "Most problematic, it’s a behavior that kills people".

incomingpain 4y ago

The 2022, presumably it will continue into 2023, layoffs are because of the Ukraine/USA/EU war with Russia and China. The people being laid off are >80% green cards. https://www.wncw.org/2022-12-07/sweeping-tech-layoffs-are-hitting-immigrant-workers-hard https://www.wncw.org/2022-12-07/sweeping-tech-layoffs-are-hi... The majority of the people I'm sure aren't even a threat; but I guess nobody really wants to talk about the xenophobic reality of national security.