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It's not to make one quarter look better, it's to align the company with new market expectations. Investors now are expecting responsible cash burn, since capit

It's not to make one quarter look better, it's to align the company with new market expectations. Investors now are expecting responsible cash burn, since capital has become significantly more expensive than before. Companies exchanging cash for market share are no longer as attractive. Profitability and sustainable growth are the new objectives (personally I wish this was always the goal and think the last 3-5 years were a bit of a shame, but that's not the point - the market did not agree with me).

gtirloni 4y ago
Maybe this apply at startups but not to established and cash-rich companies like Google.
- stu2b50 4y ago
  Just because you have money, doesn’t mean you should burn more money than you need to. It’d be one thing if Google had a clear expansion goal that justified the extra headcount and cash burn, but they don’t. In the end, hiring is a transaction. Google does not have obligations beyond that, and neither do employees toward Google when there is a better transaction or when the terms no longer suit their needs.
- colinmorelli 4y ago
  It absolutely applies at cash-rich companies as well. Losing money is losing money, no matter how much you have in the bank. I don't know why folks seem to keep thinking that having money means you can lose it forever, or that out of the kindness of the company's heart they can continue taking investor money it and funneling it back out to non-productive activities. For-profit companies exist to make money. Investors were willing to put that on hold for 5 years because interest rates were low enough to make borrowing cash effectively free, allowing you to trade cash in the short term for growth. That is no longer true, and they're no longer willing to do that. Put more clearly: investors __do not want to invest__ in companies that are burning money right now, no matter their cash balance. Responsible, profitable growth is the goal. Your cash backstop is not relevant.
jpgvm 4y ago
My point is that market expectations are fickle, over-hiring, layoffs etc are all symptoms of paying too much attention to the market in the short term rather than focusing on long term ROE.
- colinmorelli 4y ago
  I really struggle with this perspective for a pretty simple reason: "Market expectations" are predictions of the future. Early pandemic, predictions for tech companies were favorable. They were hiring not because of quarterly targets or short-term objectives, but because companies believed they would be able to pull future goals forward. They are now laying off because future predictions are more bleak. With new data, we form new ideas. There are few companies out there saying "we're 100% confident we can grow 100% YoY for the next two years" but not hiring according to that. Their projections of where they will get have changed, and the hiring plan follows suit. It's really easy to say this with hindsight, and we often forget/don't realize when we're acting based on it. The reality is that unless you (the general you) were shorting Google/DO/Salesforce/whoever in 2021 at their peaks, then it's clear none of us really know what the future hold and are all guessing. If it was so obvious then, there are ways for us to individually profit off of that. So, being 100% genuine here: if you really believe you have a better opinion about long term value, play in the stock market. Short companies that are underinvesting in growth compared to their competition. Buy the dips. Sell the highs. But my guess is you don't have that level of confidence (I certainly don't!) and that should help explain why, as the person responsible for a >$1B annual budget, you might have to change some decisions you made when new data comes in.
  - gatlin 4y ago
    > because companies believed they would be able to pull future goals forward. And what justified these beliefs, to them?
  - MuffinFlavored 4y ago
    I'm curious what level of blending there is between the two states. "We need to lay people off now to focus on profitability" Are they also doing any hiring whatsoever? If in 6 months Jerome Powell comes out and says "no more rate hikes, expect to taper down from 5% to 3% in the next 12 months", does DigitalOcean (and companies like them) turn around and "go for growth" again and restart the (expensive) hiring process (after having just laid people off not too long ago)?

gtirloni 4y ago

Maybe this apply at startups but not to established and cash-rich companies like Google.

stu2b50 4y ago
Just because you have money, doesn’t mean you should burn more money than you need to. It’d be one thing if Google had a clear expansion goal that justified the extra headcount and cash burn, but they don’t. In the end, hiring is a transaction. Google does not have obligations beyond that, and neither do employees toward Google when there is a better transaction or when the terms no longer suit their needs.
colinmorelli 4y ago
It absolutely applies at cash-rich companies as well. Losing money is losing money, no matter how much you have in the bank. I don't know why folks seem to keep thinking that having money means you can lose it forever, or that out of the kindness of the company's heart they can continue taking investor money it and funneling it back out to non-productive activities. For-profit companies exist to make money. Investors were willing to put that on hold for 5 years because interest rates were low enough to make borrowing cash effectively free, allowing you to trade cash in the short term for growth. That is no longer true, and they're no longer willing to do that. Put more clearly: investors __do not want to invest__ in companies that are burning money right now, no matter their cash balance. Responsible, profitable growth is the goal. Your cash backstop is not relevant.

jpgvm 4y ago

My point is that market expectations are fickle, over-hiring, layoffs etc are all symptoms of paying too much attention to the market in the short term rather than focusing on long term ROE.

colinmorelli 4y ago
I really struggle with this perspective for a pretty simple reason: "Market expectations" are predictions of the future. Early pandemic, predictions for tech companies were favorable. They were hiring not because of quarterly targets or short-term objectives, but because companies believed they would be able to pull future goals forward. They are now laying off because future predictions are more bleak. With new data, we form new ideas. There are few companies out there saying "we're 100% confident we can grow 100% YoY for the next two years" but not hiring according to that. Their projections of where they will get have changed, and the hiring plan follows suit. It's really easy to say this with hindsight, and we often forget/don't realize when we're acting based on it. The reality is that unless you (the general you) were shorting Google/DO/Salesforce/whoever in 2021 at their peaks, then it's clear none of us really know what the future hold and are all guessing. If it was so obvious then, there are ways for us to individually profit off of that. So, being 100% genuine here: if you really believe you have a better opinion about long term value, play in the stock market. Short companies that are underinvesting in growth compared to their competition. Buy the dips. Sell the highs. But my guess is you don't have that level of confidence (I certainly don't!) and that should help explain why, as the person responsible for a >$1B annual budget, you might have to change some decisions you made when new data comes in.
- gatlin 4y ago
  > because companies believed they would be able to pull future goals forward. And what justified these beliefs, to them?
- MuffinFlavored 4y ago
  I'm curious what level of blending there is between the two states. "We need to lay people off now to focus on profitability" Are they also doing any hiring whatsoever? If in 6 months Jerome Powell comes out and says "no more rate hikes, expect to taper down from 5% to 3% in the next 12 months", does DigitalOcean (and companies like them) turn around and "go for growth" again and restart the (expensive) hiring process (after having just laid people off not too long ago)?