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Amazon, Shopify, Wayfair, Google, Meta: all of these companies make money because e-commerce exists. The higher the proportion of all sales taking place on e-co

by mabbo 4y ago

Amazon, Shopify, Wayfair, Google, Meta: all of these companies make money because e-commerce exists. The higher the proportion of all sales taking place on e-commerce, the more valuable the companies are. For Google and Meta, it's the advertising portion, but it's still impactful. If we track online sales as a proportion of all sales over the last 20 years, there's a pretty stable trend of increase. Then COVID hit, lockdowns, and we saw a 5-6 year jump ahead. Big question: How much of this is temporary, and how much is permanent? Maybe people discover that grocery delivery is way better than going to the store and never stop. Imagine if you bet against it being permanent, and you were wrong? Your company just lost out on a massive opportunity- a CEO that does that would be worried for their job. And if you bet for it being all permanent and are wrong, well, you just have to lay off a few people. They all bet that this was a permanent 5-year jump-ahead. They were wrong, there was no jump-ahead. Now there's a looming recession. Everyone has too much headcount. And for publicly traded companies, there are shareholders who will demand that something be done to prove you're not going to bankrupt the company. To minimize the PR hit, everyone quietly announces their layoffs just after someone bigger than them does, so that they aren't the headline in the news tomorrow.

lapcat 4y ago
> They all bet that this was a permanent 5-year jump-ahead. They were wrong This is the part that really needs explanation. How was every CEO of every major tech company wrong? Why aren't we having a big tech CEO layoff for massive wrongness? It certainly feels like there's a lot of groupthink here in any case. The Google severance looks pretty generous? That plus the last couple years of overhiring is going to end up being pretty costly for the company. These were expensive mistakes.
- prottog 4y ago
  Groupthink, yes, definitely. The shareholders, through the board, are responsible for hiring and firing management; so I guess shareholders haven't lost confidence in the CEOs yet, or perhaps it's too early still.
- dec0dedab0de 4y ago
  The most favorable explanation is that they didn't really think it would be permanent. They just needed the headcount at the time, and they don't need it anymore. The rest is just marketing spin to not make it seem so bad. Now if they all balloon back up to the same headcount in the next year, but with lower salaries, then we will see if the real motive was to lower salaries. Someone had posted on another thread that the federal reserve stated that the goal of recent policy changes was to lower salaries. It's much easier to layoff and rehire, than it is to give out paycuts.
  - Silverback_VII 4y ago
    I think the main reason for the layoffs is AI accelerating jobs. As Sam Altman stated, programmers in the future will be much more productive than programmers today.
    - Daishiman 4y ago
      This is Altman selling snake oil. As of yet there is no evidence of this on anything beyond toy examples. And these gigantic codebases are anything but toys.
- captainkrtek 4y ago
  I agree, think it was also a ripe time for empire building further within these companies. I’ve been at one of these companies for many years and the shift in hiring dramatically changed in the years leading up to covid. Covid just put things into overdrive until reality hit that this kind of growth isn't sustainable or permanent.
- nickthegreek 4y ago
  The cost of being wrong in the other direction was a worse bet for them to make. Missing out on the growth was unthinkable to them. They would rather just fire thousands of workers than miss those possible profits.
  - s1artibartfast 4y ago
    I think this is the critical point. It's about if they thought it was likely to happen but if it could happen. Maybe they thought it was only 5% likely, but still worth the risk and expenditure
- jgwil2 4y ago
  I think the answer is in OP: > Imagine if you bet against it being permanent, and you were wrong? Your company just lost out on a massive opportunity- a CEO that does that would be worried for their job. And if you bet for it being all permanent and are wrong, well, you just have to lay off a few people. CEOs answer to shareholders, not employees. From the shareholders' perspective, the risk of losing out on market share was much greater than the risk of having to pay a few months' severance for the 5-10% of the workforce you trimmed.
- gsatic 4y ago
  The larger companies get, the fewer moves they can actually pull off. There aren't that many options on the buffet table, so it can look like everyone is eating the same thing.
- basch 4y ago
  Two words. Record profits. https://fortune.com/2022/03/31/us-companies-record-profits-2021-price-hikes-inflation/#:~:text=Corporate%20pretax%20profits%20surged%2025,even%20more%20of%20an%20outlier https://fortune.com/2022/03/31/us-companies-record-profits-2.... Everyone saw an opportunity to make MORE money during the pandemic, and instead of focusing on long term health, focused on quarterly profits. This lead to massive expansion. The second answer is that these companies have mass layoffs every year. Are these really that abnormal, given the context of their mass hiring's the year before? Facebooks headcount went absolutely bonkers, they are still up over a two year period. I think saying they were wrong is a mistake. It was more of a hedge on a bet, a bet they could afford to lose, but not afford to miss taking. It was akin to a game of chicken or mutually assured destruction, where if somebody else was expanding, you had to as well, defensively.
  - cratermoon 4y ago
    Disaster Capitalism
- danenania 4y ago
  The truth is that everyone takes the money when it's available. Even if you "knew" a recession was coming and that you were overhiring/overspending, you get far less flak overall for riding the gravy train to the end, then making cuts along with everyone else, than for appearing to be overly conservative and not growing as fast as you could during the boom. Taking the money and spending it while you can is the equivalent of buying IBM. No one else in your circle will fault you for it when things go south, because they all did the same.
- jinyoo 4y ago
  I think the comment OP explained it pretty well. It's less of groupthink, and more of betting on this side is the optimal choice. Bet on permanent growth - growth is permanent: You're a hero - growth is temporary: Sucks, but you just do some layoffs Bet on temporary growth - growth is permanent: You're fired - growth is temporary: You're righ! But so what?
- jhallenworld 4y ago
  >Why aren't we having a big tech CEO layoff for massive wrongness? The only job of the board of directors is to decide when to fire the CEO. (Waiting for Tesla's board to do their job..., but I digress) Sure, capital is represented on the board, but what about labor? No representation, so a round of layoffs is not going to be a reason for this to happen.
- rowanajmarshall 4y ago
  Something I'd like to see is if large, profitable, private tech companies are also doing layoffs. Like, it's reasonable for unprofitable companies to do layoffs. I can see investor pressure causing something similar in large public companies like Google and Amazon, even if they're profitable. But profitable private companies should be snapping up all the best talent now.
  - s1artibartfast 4y ago
    But it's not about capturing Talent. It is about the marginal benefit of the next worker that you hire. If they cost more than they raise your bottom line, there's no reason to hire them
- danaris 4y ago
  CEOs don't get laid off (or fired) for being wrong—not once, not a dozen times. At worst, they get sent off with golden parachutes when the company is doing flagrantly terribly, or they resign if they're hit by a scandal they can't just spin away. There just aren't systems in place to evaluate CEO performance with anything remotely resembling objectivity. The job has become a way for rich people (on boards) to give their rich friends and colleagues another way to get richer and exercise unwarranted power.
- fuzzythinker 4y ago
  Apple still haven't has one yet. If they aren't having one later this year or if it's much smaller percentage than the other bigs, it really speaks how well Time Cook and the leadership is in forecasting and running the biggest company in the world.
jaxn 4y ago
It’s not just that they staffed up, but also that it was really hard to hire since everyone was hiring. So salaries went up, and internal recruiting teams expanded to meet the hiring need. When the hiring slowed, there was not as must work to do hiring and onboarding new employees. This is why so many companies are including “HR” in their layoffs. The other piece is even if they didn’t over-hire, they over-paid. I believe these mass layoffs are a natural way for salaries to go back down to pre-pandemic-ish levels.

by mabbo 4y ago

lapcat 4y ago

> They all bet that this was a permanent 5-year jump-ahead. They were wrong This is the part that really needs explanation. How was every CEO of every major tech company wrong? Why aren't we having a big tech CEO layoff for massive wrongness? It certainly feels like there's a lot of groupthink here in any case. The Google severance looks pretty generous? That plus the last couple years of overhiring is going to end up being pretty costly for the company. These were expensive mistakes.

prottog 4y ago
Groupthink, yes, definitely. The shareholders, through the board, are responsible for hiring and firing management; so I guess shareholders haven't lost confidence in the CEOs yet, or perhaps it's too early still.
dec0dedab0de 4y ago
The most favorable explanation is that they didn't really think it would be permanent. They just needed the headcount at the time, and they don't need it anymore. The rest is just marketing spin to not make it seem so bad. Now if they all balloon back up to the same headcount in the next year, but with lower salaries, then we will see if the real motive was to lower salaries. Someone had posted on another thread that the federal reserve stated that the goal of recent policy changes was to lower salaries. It's much easier to layoff and rehire, than it is to give out paycuts.
- Silverback_VII 4y ago
  I think the main reason for the layoffs is AI accelerating jobs. As Sam Altman stated, programmers in the future will be much more productive than programmers today.
  - Daishiman 4y ago
    This is Altman selling snake oil. As of yet there is no evidence of this on anything beyond toy examples. And these gigantic codebases are anything but toys.
captainkrtek 4y ago
I agree, think it was also a ripe time for empire building further within these companies. I’ve been at one of these companies for many years and the shift in hiring dramatically changed in the years leading up to covid. Covid just put things into overdrive until reality hit that this kind of growth isn't sustainable or permanent.
nickthegreek 4y ago
The cost of being wrong in the other direction was a worse bet for them to make. Missing out on the growth was unthinkable to them. They would rather just fire thousands of workers than miss those possible profits.
- s1artibartfast 4y ago
  I think this is the critical point. It's about if they thought it was likely to happen but if it could happen. Maybe they thought it was only 5% likely, but still worth the risk and expenditure
jgwil2 4y ago
I think the answer is in OP: > Imagine if you bet against it being permanent, and you were wrong? Your company just lost out on a massive opportunity- a CEO that does that would be worried for their job. And if you bet for it being all permanent and are wrong, well, you just have to lay off a few people. CEOs answer to shareholders, not employees. From the shareholders' perspective, the risk of losing out on market share was much greater than the risk of having to pay a few months' severance for the 5-10% of the workforce you trimmed.
gsatic 4y ago
The larger companies get, the fewer moves they can actually pull off. There aren't that many options on the buffet table, so it can look like everyone is eating the same thing.
basch 4y ago
Two words. Record profits. https://fortune.com/2022/03/31/us-companies-record-profits-2021-price-hikes-inflation/#:~:text=Corporate%20pretax%20profits%20surged%2025,even%20more%20of%20an%20outlier https://fortune.com/2022/03/31/us-companies-record-profits-2.... Everyone saw an opportunity to make MORE money during the pandemic, and instead of focusing on long term health, focused on quarterly profits. This lead to massive expansion. The second answer is that these companies have mass layoffs every year. Are these really that abnormal, given the context of their mass hiring's the year before? Facebooks headcount went absolutely bonkers, they are still up over a two year period. I think saying they were wrong is a mistake. It was more of a hedge on a bet, a bet they could afford to lose, but not afford to miss taking. It was akin to a game of chicken or mutually assured destruction, where if somebody else was expanding, you had to as well, defensively.
- cratermoon 4y ago
  Disaster Capitalism
danenania 4y ago
The truth is that everyone takes the money when it's available. Even if you "knew" a recession was coming and that you were overhiring/overspending, you get far less flak overall for riding the gravy train to the end, then making cuts along with everyone else, than for appearing to be overly conservative and not growing as fast as you could during the boom. Taking the money and spending it while you can is the equivalent of buying IBM. No one else in your circle will fault you for it when things go south, because they all did the same.
jinyoo 4y ago
I think the comment OP explained it pretty well. It's less of groupthink, and more of betting on this side is the optimal choice. Bet on permanent growth - growth is permanent: You're a hero - growth is temporary: Sucks, but you just do some layoffs Bet on temporary growth - growth is permanent: You're fired - growth is temporary: You're righ! But so what?
jhallenworld 4y ago
>Why aren't we having a big tech CEO layoff for massive wrongness? The only job of the board of directors is to decide when to fire the CEO. (Waiting for Tesla's board to do their job..., but I digress) Sure, capital is represented on the board, but what about labor? No representation, so a round of layoffs is not going to be a reason for this to happen.
rowanajmarshall 4y ago
Something I'd like to see is if large, profitable, private tech companies are also doing layoffs. Like, it's reasonable for unprofitable companies to do layoffs. I can see investor pressure causing something similar in large public companies like Google and Amazon, even if they're profitable. But profitable private companies should be snapping up all the best talent now.
- s1artibartfast 4y ago
  But it's not about capturing Talent. It is about the marginal benefit of the next worker that you hire. If they cost more than they raise your bottom line, there's no reason to hire them
danaris 4y ago
CEOs don't get laid off (or fired) for being wrong—not once, not a dozen times. At worst, they get sent off with golden parachutes when the company is doing flagrantly terribly, or they resign if they're hit by a scandal they can't just spin away. There just aren't systems in place to evaluate CEO performance with anything remotely resembling objectivity. The job has become a way for rich people (on boards) to give their rich friends and colleagues another way to get richer and exercise unwarranted power.
fuzzythinker 4y ago
Apple still haven't has one yet. If they aren't having one later this year or if it's much smaller percentage than the other bigs, it really speaks how well Time Cook and the leadership is in forecasting and running the biggest company in the world.

jaxn 4y ago

It’s not just that they staffed up, but also that it was really hard to hire since everyone was hiring. So salaries went up, and internal recruiting teams expanded to meet the hiring need. When the hiring slowed, there was not as must work to do hiring and onboarding new employees. This is why so many companies are including “HR” in their layoffs. The other piece is even if they didn’t over-hire, they over-paid. I believe these mass layoffs are a natural way for salaries to go back down to pre-pandemic-ish levels.