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> Eg. need to trim $x million of cost. Let's start with that: the "need" to reduce costs. In another comment I used Google as an example so I'll do so here too

by jmyeet 4y ago

> Eg. need to trim $x million of cost. Let's start with that: the "need" to reduce costs. In another comment I used Google as an example so I'll do so here too. Google is specatacularly profitable on an overall basis and a per-employee basis. Layoffs as a cost-cutting measure are largely virtue signaling than true cuts in costs, for several reasons: 1. Once you factor in severeance costs, it takes a long time to realize any of those savings; 2. Those layoffs assume those laid off were providing no value. It's hard to believe that 10K+ employees were providing no value. Whatever value they were providing is also lost, further defraying any supposed cost savings; 3. Mass layoffs tend to be hugely destructive to culture and have a long-lasting impact on those who remain; and 4. By the time any benefits are realized you're probably hiring again anyway. The point of layoffs is to virtue signal to the market that they're "serious" about cutting costs and to depress compensation. These companies won't be getting inflation pay raises. They'll probably be getting minimal bonuses and 0-2% pay raises, if that. Refresh grants will be less. But the real kicker comes from doing more work for the same pay. Whatever the laid off people were doing will become the additional responsibility of those who remain. Sundar Pichai has come out and said he's aiming for 20% increase in "productivity" (ie 20% more labor for no increase in compensation). Zuckerberg has said similar about Meta. You see with inflation that there is fairly rampant profiteering: raising prices because prices are rising while reaping record profits. These mass layoffs are largely the other side of that coin. Wages are being suppressed due to some largely invented (to this point at least) "recession". Now there are some other commpanies who truly do have to cut costs. They don't have a profitable business model and because of rising interest rates, the cheap VC money well is drying up. But all the FAANG companies are doing just fine but have seen (or arguably created) an opportunity to attack labor costs.

conductr 4y ago
Time will tell. But it’s possible that this is being treated as a complete transformation/releveling of the business and how work is done. Was the rampant hiring even rational to begin with? Did the projects have any path to value? Profit? Google has had a hard time profiting off most of their portfolio of products over the years, so probably not. That’s not a reflection of the individuals working on those products. It’s also well known that inefficiencies are rampant in these companies. Maybe the intend to reevaluate how decisions are made and work is done so that the 20% productivity gain is from people actually being more productive with the hours they already are working. You are right that “need” isn’t always a financial need. It’s doesn’t make it less of a need though. If the board told Sundar to trim $x million, and X is significantly large, he can’t do it without trimming headcount. If you were working on some small product, your job was never guaranteed and likely highly reliant on the success of that product. If they decided to shut down the product, you’re likely laid off. Likewise, if their core/go forward products has reached a “maintenance mode” it makes sense to reduce headcount - Profitability isn’t even part of the equation, sure it’s a secondary effect. Furthermore, the trend to remote/WFH was always going to accelerate the shift of labor to lower cost. It often makes no sense to pay someone 2-20x more to do the same job as another person in another region. The main reason was because the norm was meetings/collaboration that occurred in person. Just pointing out how much armchair quarterbacking is being done. We know nothing about these things and their future strategies. But there are a lot of scenarios where these cuts make good and obvious business sense and the management team gets judged on that just like anything else. I hear a lot of what sounds like rent seeking behavior on this topic. Like because they can afford it they should perpetually employ all these people forever. It’s hard for me to support. I’m aware capitalism isn’t perfect but nobody was complaining when they were making the Google compensation, which were/are inflated like a roughneck’s usually are (to use the oil industry analogy again).

by jmyeet 4y ago

conductr 4y ago

Time will tell. But it’s possible that this is being treated as a complete transformation/releveling of the business and how work is done. Was the rampant hiring even rational to begin with? Did the projects have any path to value? Profit? Google has had a hard time profiting off most of their portfolio of products over the years, so probably not. That’s not a reflection of the individuals working on those products. It’s also well known that inefficiencies are rampant in these companies. Maybe the intend to reevaluate how decisions are made and work is done so that the 20% productivity gain is from people actually being more productive with the hours they already are working. You are right that “need” isn’t always a financial need. It’s doesn’t make it less of a need though. If the board told Sundar to trim $x million, and X is significantly large, he can’t do it without trimming headcount. If you were working on some small product, your job was never guaranteed and likely highly reliant on the success of that product. If they decided to shut down the product, you’re likely laid off. Likewise, if their core/go forward products has reached a “maintenance mode” it makes sense to reduce headcount - Profitability isn’t even part of the equation, sure it’s a secondary effect. Furthermore, the trend to remote/WFH was always going to accelerate the shift of labor to lower cost. It often makes no sense to pay someone 2-20x more to do the same job as another person in another region. The main reason was because the norm was meetings/collaboration that occurred in person. Just pointing out how much armchair quarterbacking is being done. We know nothing about these things and their future strategies. But there are a lot of scenarios where these cuts make good and obvious business sense and the management team gets judged on that just like anything else. I hear a lot of what sounds like rent seeking behavior on this topic. Like because they can afford it they should perpetually employ all these people forever. It’s hard for me to support. I’m aware capitalism isn’t perfect but nobody was complaining when they were making the Google compensation, which were/are inflated like a roughneck’s usually are (to use the oil industry analogy again).