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My issue with analyses like this is they argue that layoffs are a bad idea and it's just companies shooting themselves in a foot. That's what people want to hea

by msm_ 4y ago

My issue with analyses like this is they argue that layoffs are a bad idea and it's just companies shooting themselves in a foot. That's what people want to hear, so it gets a lot of clicks and citations. But, this also means that all the big companies (and that's a lot of them) that just announced layoffs made a obviously bad move. Are they all stupid? I find it hard to believe. It's more plausible, that yeah, layoffs are trust destroying and life ruining, but they make shareholders rich, so they are a rational choice expected from CEOs.

aaomidi 4y ago
Honestly yes. If you’ve been in any high exec meeting you’ll know they’re all stupid. Like, arguably more so than the average engineer.
- jeltz 4y ago
  I 100% agree. The average engineer is stupid and so is the average executive.
- redleggedfrog 4y ago
  Ouch with those down votes. Prolly don't say "all" cause absolutes are almost always wrong. But the sentiment is correct. They're not in those positions because they're technically smart, but because they're good at social climbing and empire building. And in my experience exceptionally bereft of integrity. Layoffs are a tool in their C level signaling system. Maybe they're good for the company and maybe they're not, but they're doing what the other C levels are going so they're mostly safe from repercussions and scrutiny.
Quarrelsome 4y ago
> Are they all stupid? I find it hard to believe. I find it very easy to believe. A lot of executives appear to have a prime motivation that is "number goes up" which IMHO makes them extremely susceptible to the same levels of groupthink and other cognitive fallacies as one would see on /r/wallstreetbets. I appreciate that isn't necessarily the case for all executives but given that executive's fallacies are mostly disproved by a slow to react and sometimes illogical economy as opposed to a nearby cold logic machine, it makes cliff-marching much easier for them.
- hirako2000 4y ago
  And stupidity isn't the only possible reason for a party to engage in what seems like a counter productive move. Certain motivations are often hidden. Mike has been married for 12 years, happy couple, no children. He suddenly changes in attitude and make his wife life a nightmare every single day, turning his brother in law against him, losing the one job his wife's brother gave him out of pity. Never crosses a line, but jobless and a constant jerk, he ultimately get the divorce document handed over by his wife. Is he stupid? He might have won the lottery and had his own agenda for what he would do with the money. And that's a personal affair. Let's not underestimate to which extent business and the capital at wide can go making up stories, getting books to look a certain way for a zero sum profit far below the cost inflicted to the other parties.
- jdgoesmarching 4y ago
  Agreed. Most of the time using a substantial layoff to boost your balance sheets would raise eyebrows with shareholders. This layoff spree is gives shortsighted leadership the cover they need to bump numbers during a not-a-recession-for-PR-purposes recession.
teeray 4y ago
> they make shareholders rich In that regard, I wonder if it becomes a Wall Street meme--layoffs for the sake of doing layoffs. Companies that performed layoffs made shareholders rich, so therefore if your company isn't doing layoffs in a layoff climate it's assumed that shareholders are better off putting their dollars somewhere else.
- cyanydeez 4y ago
  This currently _is_ a meme. Heck, even the fed was complaining about inflation and the unemployment numbers. It's definitely one of those "if we're not growing, we're dying, lets cut all the employees off"
- jackcviers3 4y ago
  It's also what the fed wants to slow inflation.
  - katbyte 4y ago
    And keep wages down during a period of historical low unemployment.
  - teeray 4y ago
    So it's also a cargo cult. Appease the fed gods and they'll turn the money faucet back on again.
- piva00 4y ago
  That's the gist I get from currently working in a company that did layoffs, the affected number of employees will not impact OPEX in any meaningful way if the issue is cash got more expensive, even less compared to pre-2020/21 levels. But if they didn't do layoffs when earnings showed an increase in OPEX the shareholders would see it as a bad sign, so to signal to those that this is a serious-business™ the layoffs happen. Crisis of confidence are pretty well known/studied, this seems to be a flavour of trying to avoid a crisis of confidence if the herd mentality isn't followed. It all just sounds stupid, and like higher management aren't too far away from behaving like children and not responsible adults.
cyanydeez 4y ago
It depends entirely on what's driving the layoffs, is it: 1. Actual market costs requiring a diminished future projection of cash flow 2. A Market expectation of investors who'll rate your company as less valuable if you dont. I'd posit right now #2 is more likely than #1 given all the record profits being reported everywhere. When #2 happens, it's definitely going to affect people. When there's no actual problem, just some future expectation of problems, that's going to cost you.
todd3834 4y ago
Most of them over hired like crazy during the pandemic bubble. I wouldn’t say they were stupid but collectively most of them made a massive mistake. So yeah it isn’t hard to believe for me. I don’t think the layoffs are a stupid decision but I do think the extreme over hiring as if the bubble was a new normal was. Between 2020-2022 I literally conducted over 200 interviews for my previous employer. It was like we couldn’t hire fast enough and I would always hear that we were way behind from what we wanted to hire.
- hbn 4y ago
  > Most of them over hired like crazy during the pandemic bubble. I wouldn’t say they were stupid but collectively most of them made a massive mistake. It wasn't a massive mistake if the rapid growth grew their stock enough that paying a few hundred/thousand extra employees for a year or 2 was worth the cost.
  - todd3834 4y ago
    I’d agree with you if any of them that did this had a stable or positive stock price. Looking at tech stocks and it’s hard to find an example where I feel the hiring was a good thing.
- andsoitis 4y ago
  > Between 2020-2022 I literally conducted over 200 interviews for my previous employer. it sounds like you knew at the time that it was a mistake to hire this much and you were part of the interview processes. did you ever speak up, tried to make a case that it is the wrong move?
  - IshKebab 4y ago
    This sounds like a typical HN accusatory comment. "It sounds like you should have dropped everything to solve whatever issues you have. Did you? No? Well it's your fault then." Pretty similar to the stupid "did you submit a PR?" response to literally any issue with open source software. Maybe you didn't mean it like that but that's what it sounds like.
greenthrow 4y ago
The companies are doing it for a short term stock price bump. They are always incentivized to think short term because of the way our distorted markets work.
fsociety 4y ago
Most executives and shareholders I meet are truly clueless in their business and how to be effective. I think this shows more in larger organizations because lower level employees are far removed from important decisions. It’s fair to disagree, but in my mind it is why you pay top $$$ for great executives. But also unfortunate that an average executive can cause harm to a business due to a large sphere of influence.
lmarcos 4y ago
These companies laying off people are doing so because they made a mistake to begin with (over hiring). So, yeah, if you make one mistake, you can make another. And no: not all tech companies have over hired during the pandemic and they are not firing people these days. No one talks about them because that doesn't sell.
- Apocryphon 4y ago
  That would sell because those companies would be desirable places for the newly unemployed to apply for.
cgearhart 4y ago
Part of the problem is that it’s very difficult to quantify the higher order effects of layoffs. It’s easy for an exec to understand “if we fire a bunch of people then our labor costs will go down”. It’s much harder to anticipate the effects of “if we fire a bunch of people then those who remain will be demoralized, will lose trust in us, may leave on their own, may be too distracted to work effectively for awhile, etc.” That means the risk assessment is a comparison between a sure thing and a bunch of possibilities—and there’s a long history of companies surviving after layoffs. It seems perfectly rational. I have a couple observations from going through layoffs at a growth stage startup. If you have to do layoffs then you shouldn’t worry too much about protecting top performers—a noticeable percentage of them (10-20% maybe) will leave on their own _after_ the layoffs. You have broken trust with these folks, and they almost surely have other options. The people who stay either deeply and firmly believe in the company (good!) or for some reason feel like they don’t have other options (less good). Secondly, layoffs don’t end with the pink slips—your company is choosing to go down a long, slow path of rebuilding until almost anyone who remembers the layoffs is gone anyway. It will be harder to recruit top talent at standard market rates for awhile because folks will want to price in a risk premium to hedge against continued future instability, so replacing the fired folks may actually be more expensive in the long run.
andsoitis 4y ago
> they make shareholders rich do you realize that for most software engineers at the hi-tech companies, the majority of their compensation is in the form of equity? and at startups, reduced headcount cost gives more runway for the company and hence employment.
- IshKebab 4y ago
  That's nonsense. Maybe for a small number of companies in SV or for successful startups (which are rare). But the vast majority of software developers get no or very little equity.
  - andsoitis 4y ago
    If my interpretation of the overarching sentiment here on HN is accurate, it is that the big tech companies make tons of profit and hence the layoffs are unnecessary. It is within that context that I said that.
saurik 4y ago
I don't think the comment is claiming the layoffs are a bad idea per se, it is merely claiming the cited reason is disingenuous.
simplyluke 4y ago
Interesting takeaway. One of the big lessons I took away from the prior three years is that there’s an absolute ton of groupthink and trend chasing among tech leadership. Going all in on remote, over hiring 21-22, now layoffs all come to mind. There are notable exceptions. Apple rejected (thus far) all three of those trends and is weathering this period much better than most of the industry.
- urthor 4y ago
  Being counter cyclical pays. Immensely.
WaitWaitWha 4y ago
Just a quick reminder regarding those "they", "shareholders" - it is a pet peeve of mind how we tend to forget who are the vast majority of these sharholders "getting rich" by the count of people, not necessarily by the value. In the USA 401(k)[0] & 403(b)[1] plans are used by vast majority of people as their retirement funds. It is very rare for a small organizations to be able to offer full pension plans. What they do offer are investment plans like 401 & 403. All those little 401k/403b plans, through the plans and the mutual funds are the "they" "shareholders", "getting rich". In 2019 21% of US workers participated in pension plans, while 43% in 401K/403b [2] [0]: https://en.wikipedia.org/wiki/401(k) https://en.wikipedia.org/wiki/401(k) [1]: https://en.wikipedia.org/wiki/403(b) https://en.wikipedia.org/wiki/403(b) [2]: https://www.pensionrights.org/resources/information-center/ https://www.pensionrights.org/resources/information-center/
- Salgat 4y ago
  The median 401k balance is downright scary. For ages 55-64, it's only $84k. Percentage participating in these plans doesn't mean much if they don't have much in it. https://www.personalcapital.com/blog/retirement-planning/average-401k-balance-age/ https://www.personalcapital.com/blog/retirement-planning/ave...

by msm_ 4y ago

aaomidi 4y ago

Honestly yes. If you’ve been in any high exec meeting you’ll know they’re all stupid. Like, arguably more so than the average engineer.

jeltz 4y ago
I 100% agree. The average engineer is stupid and so is the average executive.
redleggedfrog 4y ago
Ouch with those down votes. Prolly don't say "all" cause absolutes are almost always wrong. But the sentiment is correct. They're not in those positions because they're technically smart, but because they're good at social climbing and empire building. And in my experience exceptionally bereft of integrity. Layoffs are a tool in their C level signaling system. Maybe they're good for the company and maybe they're not, but they're doing what the other C levels are going so they're mostly safe from repercussions and scrutiny.

Quarrelsome 4y ago

> Are they all stupid? I find it hard to believe. I find it very easy to believe. A lot of executives appear to have a prime motivation that is "number goes up" which IMHO makes them extremely susceptible to the same levels of groupthink and other cognitive fallacies as one would see on /r/wallstreetbets. I appreciate that isn't necessarily the case for all executives but given that executive's fallacies are mostly disproved by a slow to react and sometimes illogical economy as opposed to a nearby cold logic machine, it makes cliff-marching much easier for them.

hirako2000 4y ago
And stupidity isn't the only possible reason for a party to engage in what seems like a counter productive move. Certain motivations are often hidden. Mike has been married for 12 years, happy couple, no children. He suddenly changes in attitude and make his wife life a nightmare every single day, turning his brother in law against him, losing the one job his wife's brother gave him out of pity. Never crosses a line, but jobless and a constant jerk, he ultimately get the divorce document handed over by his wife. Is he stupid? He might have won the lottery and had his own agenda for what he would do with the money. And that's a personal affair. Let's not underestimate to which extent business and the capital at wide can go making up stories, getting books to look a certain way for a zero sum profit far below the cost inflicted to the other parties.
jdgoesmarching 4y ago
Agreed. Most of the time using a substantial layoff to boost your balance sheets would raise eyebrows with shareholders. This layoff spree is gives shortsighted leadership the cover they need to bump numbers during a not-a-recession-for-PR-purposes recession.

teeray 4y ago

> they make shareholders rich In that regard, I wonder if it becomes a Wall Street meme--layoffs for the sake of doing layoffs. Companies that performed layoffs made shareholders rich, so therefore if your company isn't doing layoffs in a layoff climate it's assumed that shareholders are better off putting their dollars somewhere else.

cyanydeez 4y ago
This currently _is_ a meme. Heck, even the fed was complaining about inflation and the unemployment numbers. It's definitely one of those "if we're not growing, we're dying, lets cut all the employees off"
jackcviers3 4y ago
It's also what the fed wants to slow inflation.
- katbyte 4y ago
  And keep wages down during a period of historical low unemployment.
- teeray 4y ago
  So it's also a cargo cult. Appease the fed gods and they'll turn the money faucet back on again.
piva00 4y ago
That's the gist I get from currently working in a company that did layoffs, the affected number of employees will not impact OPEX in any meaningful way if the issue is cash got more expensive, even less compared to pre-2020/21 levels. But if they didn't do layoffs when earnings showed an increase in OPEX the shareholders would see it as a bad sign, so to signal to those that this is a serious-business™ the layoffs happen. Crisis of confidence are pretty well known/studied, this seems to be a flavour of trying to avoid a crisis of confidence if the herd mentality isn't followed. It all just sounds stupid, and like higher management aren't too far away from behaving like children and not responsible adults.

cyanydeez 4y ago

It depends entirely on what's driving the layoffs, is it: 1. Actual market costs requiring a diminished future projection of cash flow 2. A Market expectation of investors who'll rate your company as less valuable if you dont. I'd posit right now #2 is more likely than #1 given all the record profits being reported everywhere. When #2 happens, it's definitely going to affect people. When there's no actual problem, just some future expectation of problems, that's going to cost you.

todd3834 4y ago

Most of them over hired like crazy during the pandemic bubble. I wouldn’t say they were stupid but collectively most of them made a massive mistake. So yeah it isn’t hard to believe for me. I don’t think the layoffs are a stupid decision but I do think the extreme over hiring as if the bubble was a new normal was. Between 2020-2022 I literally conducted over 200 interviews for my previous employer. It was like we couldn’t hire fast enough and I would always hear that we were way behind from what we wanted to hire.

hbn 4y ago
> Most of them over hired like crazy during the pandemic bubble. I wouldn’t say they were stupid but collectively most of them made a massive mistake. It wasn't a massive mistake if the rapid growth grew their stock enough that paying a few hundred/thousand extra employees for a year or 2 was worth the cost.
- todd3834 4y ago
  I’d agree with you if any of them that did this had a stable or positive stock price. Looking at tech stocks and it’s hard to find an example where I feel the hiring was a good thing.
andsoitis 4y ago
> Between 2020-2022 I literally conducted over 200 interviews for my previous employer. it sounds like you knew at the time that it was a mistake to hire this much and you were part of the interview processes. did you ever speak up, tried to make a case that it is the wrong move?
- IshKebab 4y ago
  This sounds like a typical HN accusatory comment. "It sounds like you should have dropped everything to solve whatever issues you have. Did you? No? Well it's your fault then." Pretty similar to the stupid "did you submit a PR?" response to literally any issue with open source software. Maybe you didn't mean it like that but that's what it sounds like.

greenthrow 4y ago

The companies are doing it for a short term stock price bump. They are always incentivized to think short term because of the way our distorted markets work.

fsociety 4y ago

Most executives and shareholders I meet are truly clueless in their business and how to be effective. I think this shows more in larger organizations because lower level employees are far removed from important decisions. It’s fair to disagree, but in my mind it is why you pay top $$$ for great executives. But also unfortunate that an average executive can cause harm to a business due to a large sphere of influence.

lmarcos 4y ago

These companies laying off people are doing so because they made a mistake to begin with (over hiring). So, yeah, if you make one mistake, you can make another. And no: not all tech companies have over hired during the pandemic and they are not firing people these days. No one talks about them because that doesn't sell.

Apocryphon 4y ago
That would sell because those companies would be desirable places for the newly unemployed to apply for.

cgearhart 4y ago

Part of the problem is that it’s very difficult to quantify the higher order effects of layoffs. It’s easy for an exec to understand “if we fire a bunch of people then our labor costs will go down”. It’s much harder to anticipate the effects of “if we fire a bunch of people then those who remain will be demoralized, will lose trust in us, may leave on their own, may be too distracted to work effectively for awhile, etc.” That means the risk assessment is a comparison between a sure thing and a bunch of possibilities—and there’s a long history of companies surviving after layoffs. It seems perfectly rational. I have a couple observations from going through layoffs at a growth stage startup. If you have to do layoffs then you shouldn’t worry too much about protecting top performers—a noticeable percentage of them (10-20% maybe) will leave on their own _after_ the layoffs. You have broken trust with these folks, and they almost surely have other options. The people who stay either deeply and firmly believe in the company (good!) or for some reason feel like they don’t have other options (less good). Secondly, layoffs don’t end with the pink slips—your company is choosing to go down a long, slow path of rebuilding until almost anyone who remembers the layoffs is gone anyway. It will be harder to recruit top talent at standard market rates for awhile because folks will want to price in a risk premium to hedge against continued future instability, so replacing the fired folks may actually be more expensive in the long run.

andsoitis 4y ago

> they make shareholders rich do you realize that for most software engineers at the hi-tech companies, the majority of their compensation is in the form of equity? and at startups, reduced headcount cost gives more runway for the company and hence employment.

IshKebab 4y ago
That's nonsense. Maybe for a small number of companies in SV or for successful startups (which are rare). But the vast majority of software developers get no or very little equity.
- andsoitis 4y ago
  If my interpretation of the overarching sentiment here on HN is accurate, it is that the big tech companies make tons of profit and hence the layoffs are unnecessary. It is within that context that I said that.

saurik 4y ago

I don't think the comment is claiming the layoffs are a bad idea per se, it is merely claiming the cited reason is disingenuous.

simplyluke 4y ago

Interesting takeaway. One of the big lessons I took away from the prior three years is that there’s an absolute ton of groupthink and trend chasing among tech leadership. Going all in on remote, over hiring 21-22, now layoffs all come to mind. There are notable exceptions. Apple rejected (thus far) all three of those trends and is weathering this period much better than most of the industry.

urthor 4y ago
Being counter cyclical pays. Immensely.

WaitWaitWha 4y ago

Just a quick reminder regarding those "they", "shareholders" - it is a pet peeve of mind how we tend to forget who are the vast majority of these sharholders "getting rich" by the count of people, not necessarily by the value. In the USA 401(k)[0] & 403(b)[1] plans are used by vast majority of people as their retirement funds. It is very rare for a small organizations to be able to offer full pension plans. What they do offer are investment plans like 401 & 403. All those little 401k/403b plans, through the plans and the mutual funds are the "they" "shareholders", "getting rich". In 2019 21% of US workers participated in pension plans, while 43% in 401K/403b [2] [0]: https://en.wikipedia.org/wiki/401(k) https://en.wikipedia.org/wiki/401(k) [1]: https://en.wikipedia.org/wiki/403(b) https://en.wikipedia.org/wiki/403(b) [2]: https://www.pensionrights.org/resources/information-center/ https://www.pensionrights.org/resources/information-center/

Salgat 4y ago
The median 401k balance is downright scary. For ages 55-64, it's only $84k. Percentage participating in these plans doesn't mean much if they don't have much in it. https://www.personalcapital.com/blog/retirement-planning/average-401k-balance-age/ https://www.personalcapital.com/blog/retirement-planning/ave...