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This article misses the mark. Shopify etc. are not stupid companies. During the good times, it made sense to take cheap money and expand headcount. Growing fast

by ttul 4y ago

This article misses the mark. Shopify etc. are not stupid companies. During the good times, it made sense to take cheap money and expand headcount. Growing fast when the growth is available is a good idea. During a downturn, you make layoffs. Big deal. That’s how it works.

zeroonetwothree 4y ago
I kind of agree but on the other hand it’s not so simple. Layoffs aren’t instant and their negative effects on morale and employee work can last a long time. It can also be hard to identify the right people to lay off so companies are likely to make the wrong choice in many cases. So on one hand yes it makes sense to splurge when money is cheap and then cut back when it isn’t, on the other you may cause long term damage to your business doing this too much. I think tech companies probably overdid it the past few years.
- Waterluvian 4y ago
  I agree. There is a qualitative cost to this grow/contract strategy. And I’m not sure companies are able to recognize or react to it because it can’t be measured easily.
taveras 4y ago
This is “how it works” because founders are better rewarded when quick growth happens over a short time window. Perhaps that incentive is the problem?
- crazygringo 4y ago
  Well, in markets where there's only space for 1, 2, or 3 companies to succeed, then it makes sense to be rewarded for quick growth, so that you can end up in one of the 1-3 "winning" slots instead of going out of business. The incentive isn't something artificial, it's just how certain markets work. E.g. a city might be able to support hundreds of pizzerias, but only 2-3 ride hailing companies.
  - Apocryphon 4y ago
    What if the winning strategy isn’t simply seeking growth of your talent pool? Did we all forget the lessons of The Mythical Man-Month?
    - crazygringo 4y ago
      Well, nine women can't deliver a baby in one month, but nine women can definitely drive nine riders where they need to go at the same time. The mythical man-month is about how adding individual new members to an existing software team doesn't necessarily make the team deliver faster (and can even slow them down). Nowhere does it claim that adding more parallel projects or growth initiatives to a company slows the company down.
BaseballPhysics 4y ago
They're stupid because the pivot to profitability has failed for many of these companies. We were assured for years they could turn a tap and start the spigot of cash flow. Unfortunately that seems to be rare indeed as the very things needed to drive revenues (increasing prices, advertising) drive away those users who were attracted to cheap venture-subsidized products.

by ttul 4y ago

zeroonetwothree 4y ago

I kind of agree but on the other hand it’s not so simple. Layoffs aren’t instant and their negative effects on morale and employee work can last a long time. It can also be hard to identify the right people to lay off so companies are likely to make the wrong choice in many cases. So on one hand yes it makes sense to splurge when money is cheap and then cut back when it isn’t, on the other you may cause long term damage to your business doing this too much. I think tech companies probably overdid it the past few years.

Waterluvian 4y ago
I agree. There is a qualitative cost to this grow/contract strategy. And I’m not sure companies are able to recognize or react to it because it can’t be measured easily.

taveras 4y ago

This is “how it works” because founders are better rewarded when quick growth happens over a short time window. Perhaps that incentive is the problem?

crazygringo 4y ago
Well, in markets where there's only space for 1, 2, or 3 companies to succeed, then it makes sense to be rewarded for quick growth, so that you can end up in one of the 1-3 "winning" slots instead of going out of business. The incentive isn't something artificial, it's just how certain markets work. E.g. a city might be able to support hundreds of pizzerias, but only 2-3 ride hailing companies.
- Apocryphon 4y ago
  What if the winning strategy isn’t simply seeking growth of your talent pool? Did we all forget the lessons of The Mythical Man-Month?
  - crazygringo 4y ago
    Well, nine women can't deliver a baby in one month, but nine women can definitely drive nine riders where they need to go at the same time. The mythical man-month is about how adding individual new members to an existing software team doesn't necessarily make the team deliver faster (and can even slow them down). Nowhere does it claim that adding more parallel projects or growth initiatives to a company slows the company down.

BaseballPhysics 4y ago

They're stupid because the pivot to profitability has failed for many of these companies. We were assured for years they could turn a tap and start the spigot of cash flow. Unfortunately that seems to be rare indeed as the very things needed to drive revenues (increasing prices, advertising) drive away those users who were attracted to cheap venture-subsidized products.