6 ms·

Most of the tech companies having layoffs don't "have to" have layoffs. They're doing it to depress worker compensation across the whole sector. It's a shameles

by lph 4y ago

Most of the tech companies having layoffs don't "have to" have layoffs. They're doing it to depress worker compensation across the whole sector. It's a shameless money grab at the expense of their employees.

Godel_unicode 4y ago
That’s an interesting theory, how do you reconcile it with the fact that several companies which have had layoffs have also given out large stock refreshes to some of the employees who weren’t laid off?
- jonathankoren 4y ago
  Easy. You said it yourself. “Some”.
542458 4y ago
This doesn’t really make sense to me from a game theory POV. As a company, laying off productive employees of my own has an insignificant impact on the total sector’s compensation, but reduces my output and therefore profitability. Why would I do it? If I think there’s some big sector-wide conspiracy to unnecessarily cause layoffs to depress wages, my dominant strategy is to not participate - I still gain the full benefits (since my own participation has only a trivial impact on the outcome), but without hurting my own output.
- P_I_Staker 4y ago
  If you're Amazon it would... this wouldn't be the first time companies colluded to suppress wages in SV. It might not even be explicit collusion. These companies do have other motivations for these changes.
- brianwawok 4y ago
  I don’t think dropping the lowest 10% of developers is hurting your output. It might even raise it.
  - pc86 4y ago
    This has baked into it the incredibly naïve (and generally accepted to be incorrect) assumption that layoffs are performance-based. There are plenty of examples of FAANG and other companies laying off folks with 15, 20, 30 years of incredibly specialized and presumably valuable experience but with a compensation price tag to match.
    - red-iron-pine 4y ago
      If anything it's a great time to shed well-paid fat. Hire a noob out of MIT for 1/2 price and hope that the Sr. gave the project enough legs and enough documentation to allow the NUG to figure it out. aka keep wages down
      - pc86 4y ago
        I mean that's certainly part of it. If (and it's a big if) you can run a project for less money, you probably should. However I'm not sure it's as large-scale a thought process as "let's keep industry wages as low as we can" and more "I will look good if I can trim my budget, so I'm going to try to do that." The effect is the same, generally, but not quite as nefarious.
  - chippiewill 4y ago
    Isn't that his point? The companies don't need the conspiracy to instigate layoffs, they already had a legitimate reason to do so.
  - rqtwteye 4y ago
    "I don’t think dropping the lowest 10% of developers is hurting your output. It might even raise it." I have seen a few mass layoffs while I was contractor at different companies. Most of these big layoffs weren't performance based but they axed whole departments. Another group at danger were managers that didn't actually manage anybody. they were either demoted or let go. But in general I didn't get the impression that the layoffs were about performance. It was more about being lucky and being at the right place at the right time.
  - 4y ago
- lph 4y ago
  > Why would I do it? Because the investors want you to [1]. Companies are using this as an excuse to cut unprofitable projects (e.g., Alexa). They over-hired before interest rates went up, when borrowing money was essentially free. > This doesn’t really make sense to me from a game theory POV Assume company leadership only cares about short-term stock price, and recompute your game theory POV. The outcome is exactly what's happening right now. [1] https://www.ndtv.com/world-news/google-layoffs-investor-told-alphabet-more-job-cuts-needed-3717599 https://www.ndtv.com/world-news/google-layoffs-investor-told...
  - User23 4y ago
    > Because the investors want you to [1] Investors don't actually have any market power unless the company in question is doing a stock issue. For example, AMZN doesn't get any extra operating capital no matter how much of their stock any investor buys or sells on the open market. The only way "investors" can control a publicly traded company that isn't dependent on issuing new stock is by depressing the executive comp package's value. From that follows an obvious lesson on corporate governance. The fact that that obvious lesson isn't followed is proof enough that the system doesn't work exactly as advertised.
    - derefr 4y ago
      > The only way "investors" can control a publicly traded company that isn't dependent on issuing new stock is by depressing the executive comp package's value. Or, y'know, if the Board — which is always composed of shareholders, who are, in public companies, expected to hold the stock value as their primary interest over the internal interests of the company, whether or not they're also officers of the company — operates by firing-and-replacing the CEO whenever the CEO does something the market responds sufficiently-negatively to. Or just makes it clear to the CEO that that's what will happen. (This is, in principle, where the infamous hypothetical "duty to shareholders" is supposed to come from. It's not a law; it's the market's ability to transitively fire the CEO through a share-price-incentivized Board.)
      - AlchemistCamp 4y ago
- nonethewiser 4y ago
  Plus if others don't follow suit then you're going to have to rehire for more. Being early would be incredibly risky. The reality is tech had lots of bloat that was sustained by a mix of high profit margins and cheap debt.
- htag 4y ago
  There is no big sector-wide conspiracy. A sector-wide conspiracy would be massively illegal. If, however, several companies individually decided a layoff is in their best interest for legitimate reasons (looming recession instead of suppress wages) then there can be the same practical effect without any criminal act. Groups of people that are coordinating in ways and times others aren't can have a competitive advantage. The game is how to coordinate, and how to establish yourself as a member of the coordinating group, without actually coordinating because that's illegal.
  - vlovich123 4y ago
    Just saying, it has happened before [1]. Except this time they’d have the perfect cover of “no collusion, the economy is doing bad”. The CEOs of these large companies talk all the time. As do board members. Heck, some even share board members. It’s not that hard at this level to generate collusion that’s hard to prove. Now I’m not saying this is what’s happened. I’m a big fan of Occam’s razor. But at the same time I wouldn’t dismiss it. Oh and the “massively illegal coordination”? Why don’t you look at what the outcome was of the DOJ prosecution of that case. [1] https://en.m.wikipedia.org/wiki/High-Tech_Employee_Antitrust_Litigation https://en.m.wikipedia.org/wiki/High-Tech_Employee_Antitrust...
  - somsak2 4y ago
    You don't need a formal conspiracy when interests converge. https://www.youtube.com/watch?v=VAFd4FdbJxs https://www.youtube.com/watch?v=VAFd4FdbJxs
  - mejutoco 4y ago
    > There is no big sector-wide conspiracy. A sector-wide conspiracy would be massively illegal The logic of this sentence is broken. As a thought exercise: - There is no stealing, that would be illegal. - There is no murdering, that would be illegal. Clearly, something being illegal does not prevent it from existing. Otherwise it would not need to be made illegal in the first place. Fact is, this has happened before with collusion, so there is no need to hypothesize. It is definitely possible.
    - 4y ago
- postexitus 4y ago
  you are assuming those workers were productive (in terms of contribution to the bottom-line) to begin with, which a lot of insiders tend to disagree with.
- deleted 4y ago
  [deleted]
- jokethrowaway 4y ago
  Employees in large companies have limited output. You kill a few useless projects and you keep shipping the important stuff. This is done mainly to please the market. Hire when the market is good, fire when the market is bad. + factor in the interest rates
wpietri 4y ago
I suspect it's less about depressing worker compensation than increasing managerial compensation. Average CEO tenure is quite short these days, so the incentive is for execs to maximize short-term gains. Layoffs fit in with what I think of as "market sadism". In economically troubled times, CEOs counter fear of weakness by looking tough. (Tough on other people, of course, never themselves.) That lifts the stock price, putting money in their pockets, and hopefully giving them longer at the trough.
robertlagrant 4y ago
They paid people more and then laid them off to ... pay them less? This seems an unlikely strategy. More like a conspiracy theory.
cscurmudgeon 4y ago
Then why these companies hire massively just a couple of years ago with the highest possible salaries in the world. Nothing everything is a class struggle conspiracy. Insisting highly paid but unproductive employees not be laid off is insisting on a form of rent seeking.
- sokoloff 4y ago
  Seizing the means of un-production.
steveBK123 4y ago
FAANG pays 5-10x what Nintendo pays and every decade theres a 10% layoff? Seems like an OK trade to me. The whinging is reaching stratospheric levels. Planty of stable sub-$90k dev jobs available if you want, but then you can't live in NYC/SanFran, buy 2 Teslas, and take trips to Hawaii/Europe.
thworp 4y ago
How is this idea suddenly so widespread? Big tech are currently at the edge of the abyss to varying degrees. For most it has now been 4 quarters of revenues growing at a lower rate than expenses (and accelerating). At this rate it's obvious they have only a few quarters left before they go into the red. So why exactly should they keep employees around that they hired during the largest bubble in at least 40 years? Should they keep these people on and only start doing something once they are billions of dollars in debt? Besides that, this class warfare rhetoric on HN is a cruel joke. You have the global 0.3% complaining that the 0.03% is stealing their $300,000 salaries. Why don't they accept a 75% pay cut so that the marketing assistant and cleaning personnel can get a salary more in line with theirs? If companies have to make HR decisions based on social factors this will be the result.

by lph 4y ago

Godel_unicode 4y ago

That’s an interesting theory, how do you reconcile it with the fact that several companies which have had layoffs have also given out large stock refreshes to some of the employees who weren’t laid off?

jonathankoren 4y ago
Easy. You said it yourself. “Some”.

542458 4y ago

This doesn’t really make sense to me from a game theory POV. As a company, laying off productive employees of my own has an insignificant impact on the total sector’s compensation, but reduces my output and therefore profitability. Why would I do it? If I think there’s some big sector-wide conspiracy to unnecessarily cause layoffs to depress wages, my dominant strategy is to not participate - I still gain the full benefits (since my own participation has only a trivial impact on the outcome), but without hurting my own output.

P_I_Staker 4y ago
If you're Amazon it would... this wouldn't be the first time companies colluded to suppress wages in SV. It might not even be explicit collusion. These companies do have other motivations for these changes.
brianwawok 4y ago
I don’t think dropping the lowest 10% of developers is hurting your output. It might even raise it.
- pc86 4y ago
  This has baked into it the incredibly naïve (and generally accepted to be incorrect) assumption that layoffs are performance-based. There are plenty of examples of FAANG and other companies laying off folks with 15, 20, 30 years of incredibly specialized and presumably valuable experience but with a compensation price tag to match.
  - red-iron-pine 4y ago
    If anything it's a great time to shed well-paid fat. Hire a noob out of MIT for 1/2 price and hope that the Sr. gave the project enough legs and enough documentation to allow the NUG to figure it out. aka keep wages down
    - pc86 4y ago
      I mean that's certainly part of it. If (and it's a big if) you can run a project for less money, you probably should. However I'm not sure it's as large-scale a thought process as "let's keep industry wages as low as we can" and more "I will look good if I can trim my budget, so I'm going to try to do that." The effect is the same, generally, but not quite as nefarious.
- chippiewill 4y ago
  Isn't that his point? The companies don't need the conspiracy to instigate layoffs, they already had a legitimate reason to do so.
- rqtwteye 4y ago
  "I don’t think dropping the lowest 10% of developers is hurting your output. It might even raise it." I have seen a few mass layoffs while I was contractor at different companies. Most of these big layoffs weren't performance based but they axed whole departments. Another group at danger were managers that didn't actually manage anybody. they were either demoted or let go. But in general I didn't get the impression that the layoffs were about performance. It was more about being lucky and being at the right place at the right time.
- 4y ago
lph 4y ago
> Why would I do it? Because the investors want you to [1]. Companies are using this as an excuse to cut unprofitable projects (e.g., Alexa). They over-hired before interest rates went up, when borrowing money was essentially free. > This doesn’t really make sense to me from a game theory POV Assume company leadership only cares about short-term stock price, and recompute your game theory POV. The outcome is exactly what's happening right now. [1] https://www.ndtv.com/world-news/google-layoffs-investor-told-alphabet-more-job-cuts-needed-3717599 https://www.ndtv.com/world-news/google-layoffs-investor-told...
- User23 4y ago
  > Because the investors want you to [1] Investors don't actually have any market power unless the company in question is doing a stock issue. For example, AMZN doesn't get any extra operating capital no matter how much of their stock any investor buys or sells on the open market. The only way "investors" can control a publicly traded company that isn't dependent on issuing new stock is by depressing the executive comp package's value. From that follows an obvious lesson on corporate governance. The fact that that obvious lesson isn't followed is proof enough that the system doesn't work exactly as advertised.
  - derefr 4y ago
    > The only way "investors" can control a publicly traded company that isn't dependent on issuing new stock is by depressing the executive comp package's value. Or, y'know, if the Board — which is always composed of shareholders, who are, in public companies, expected to hold the stock value as their primary interest over the internal interests of the company, whether or not they're also officers of the company — operates by firing-and-replacing the CEO whenever the CEO does something the market responds sufficiently-negatively to. Or just makes it clear to the CEO that that's what will happen. (This is, in principle, where the infamous hypothetical "duty to shareholders" is supposed to come from. It's not a law; it's the market's ability to transitively fire the CEO through a share-price-incentivized Board.)
    - AlchemistCamp 4y ago
nonethewiser 4y ago
Plus if others don't follow suit then you're going to have to rehire for more. Being early would be incredibly risky. The reality is tech had lots of bloat that was sustained by a mix of high profit margins and cheap debt.
htag 4y ago
There is no big sector-wide conspiracy. A sector-wide conspiracy would be massively illegal. If, however, several companies individually decided a layoff is in their best interest for legitimate reasons (looming recession instead of suppress wages) then there can be the same practical effect without any criminal act. Groups of people that are coordinating in ways and times others aren't can have a competitive advantage. The game is how to coordinate, and how to establish yourself as a member of the coordinating group, without actually coordinating because that's illegal.
- vlovich123 4y ago
  Just saying, it has happened before [1]. Except this time they’d have the perfect cover of “no collusion, the economy is doing bad”. The CEOs of these large companies talk all the time. As do board members. Heck, some even share board members. It’s not that hard at this level to generate collusion that’s hard to prove. Now I’m not saying this is what’s happened. I’m a big fan of Occam’s razor. But at the same time I wouldn’t dismiss it. Oh and the “massively illegal coordination”? Why don’t you look at what the outcome was of the DOJ prosecution of that case. [1] https://en.m.wikipedia.org/wiki/High-Tech_Employee_Antitrust_Litigation https://en.m.wikipedia.org/wiki/High-Tech_Employee_Antitrust...
- somsak2 4y ago
  You don't need a formal conspiracy when interests converge. https://www.youtube.com/watch?v=VAFd4FdbJxs https://www.youtube.com/watch?v=VAFd4FdbJxs
- mejutoco 4y ago
  > There is no big sector-wide conspiracy. A sector-wide conspiracy would be massively illegal The logic of this sentence is broken. As a thought exercise: - There is no stealing, that would be illegal. - There is no murdering, that would be illegal. Clearly, something being illegal does not prevent it from existing. Otherwise it would not need to be made illegal in the first place. Fact is, this has happened before with collusion, so there is no need to hypothesize. It is definitely possible.
  - 4y ago
postexitus 4y ago
you are assuming those workers were productive (in terms of contribution to the bottom-line) to begin with, which a lot of insiders tend to disagree with.
deleted 4y ago
[deleted]
jokethrowaway 4y ago
Employees in large companies have limited output. You kill a few useless projects and you keep shipping the important stuff. This is done mainly to please the market. Hire when the market is good, fire when the market is bad. + factor in the interest rates

wpietri 4y ago

I suspect it's less about depressing worker compensation than increasing managerial compensation. Average CEO tenure is quite short these days, so the incentive is for execs to maximize short-term gains. Layoffs fit in with what I think of as "market sadism". In economically troubled times, CEOs counter fear of weakness by looking tough. (Tough on other people, of course, never themselves.) That lifts the stock price, putting money in their pockets, and hopefully giving them longer at the trough.

robertlagrant 4y ago

They paid people more and then laid them off to ... pay them less? This seems an unlikely strategy. More like a conspiracy theory.

cscurmudgeon 4y ago

Then why these companies hire massively just a couple of years ago with the highest possible salaries in the world. Nothing everything is a class struggle conspiracy. Insisting highly paid but unproductive employees not be laid off is insisting on a form of rent seeking.

sokoloff 4y ago
Seizing the means of un-production.

steveBK123 4y ago

FAANG pays 5-10x what Nintendo pays and every decade theres a 10% layoff? Seems like an OK trade to me. The whinging is reaching stratospheric levels. Planty of stable sub-$90k dev jobs available if you want, but then you can't live in NYC/SanFran, buy 2 Teslas, and take trips to Hawaii/Europe.

thworp 4y ago

How is this idea suddenly so widespread? Big tech are currently at the edge of the abyss to varying degrees. For most it has now been 4 quarters of revenues growing at a lower rate than expenses (and accelerating). At this rate it's obvious they have only a few quarters left before they go into the red. So why exactly should they keep employees around that they hired during the largest bubble in at least 40 years? Should they keep these people on and only start doing something once they are billions of dollars in debt? Besides that, this class warfare rhetoric on HN is a cruel joke. You have the global 0.3% complaining that the 0.03% is stealing their $300,000 salaries. Why don't they accept a 75% pay cut so that the marketing assistant and cleaning personnel can get a salary more in line with theirs? If companies have to make HR decisions based on social factors this will be the result.