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There is often this line "apology for the leadership decisions that led to these peoples’ unemployment?" and the options are as such: - In an env with cheap mo

by lbotos 4y ago

There is often this line "apology for the leadership decisions that led to these peoples’ unemployment?" and the options are as such: - In an env with cheap money, business chooses not to take advantage, growing slower, and in turn, possibly losing to competitors who did choose to take advantage - In an env with cheap money, business choose to take advantage, growing on pace with competitors and either keeping or building a competitive advantage When the environment shifts: - Businesses that chose not to take advantage of money are less likely to have layoffs, but are they on par, behind or ahead of those that did? Some will be ahead for sure, but it's not guaranteed. - Businesses that choose the money strategically cut and double down on winning bets The ultimate key take away for readers reading this: Understand what kind of business you work for, and decide for yourself if you are happy with leaderships risk profile. If you aren't, adjust accordingly... EDIT: To be clear, I'm not pro-EA and I think they have milked their products for a long while, I'm talking about the meta here.

bombolo 4y ago
Companies might have used the cheap money to do something worthwhile rather than hire people to look growing and then fire them and cancel their projects?
- colinmorelli 4y ago
  …the “something worthwhile” WAS the projects that the spun up and hired people for, which they are now shutting down since it’s no longer economically viable to continue. Every single time a layoff is done, there’s a conversation about what initiatives are on the chopping block as a result. Investments that are now lower priority are cut. It’s really quite disappointing that the prevailing sentiment on HN seems to be that all corporate leadership are a bunch of bumbling fools. Just like technology is more complex than it looks on the surface, so too are large enterprises.
- bitwize 4y ago
  Companies do strange things for accounting reasons. For example, going all in on cloud, especially if you're a huge company who can afford the upfront costs of on-prem infrastructure and can reap the savings. It turns out that buying equipment for on-prem is capex and only tax-deductible once, whereas a cloud subscription is opex and tax-deductible year over year. So it makes financial sense to go with cloud, even if it seems counterintuitive at first because on-prem is cheaper before you apply these accounting concerns. I think something similar applies with hiring when interest rates are low.
sokoloff 4y ago
Exactly. Q: “How can a company avoid ever having to layoff 100 people?” A: “Don’t hire 250 of those 100 in the first place.”
Retric 4y ago
That’s hardly the only option, you can rapidly shrink your workforce through attrition. Large scale layoffs require companies to be caught completely by surprise which is a huge management failure. The point of upper management is to steer the boat not run into an iceberg.
- deleted 4y ago
  [deleted]
- lbotos 4y ago
  6% is not large scale. Many would say that if the company only had to lay off 6% they were taking "reasonable" risk. Compare to say Luno who had to cut 35% of staff: https://techcabal.com/2023/01/26/luno-layoffs/ https://techcabal.com/2023/01/26/luno-layoffs/ Counter: What's better for morale, your project to get stopped now and cut and you re-prioritized or let go, or a slow bleed through the year where no new headcount get put on the project as people leave for you to eventually find out in a year that management knew and kept you on that project aimlessly to "avoid a layoff"? Personally, I'd prefer the former, as the latter would give me a lot more doubt for future projects
  - Retric 4y ago
    You can cut 20% of a workforce through attrition, but it requires long term planning and shifting people to new roles. You don’t bleed projects over time but move people around after milestones. Not every job is fungible so you may end doing some small scale hiring and let a few people go. But that’s normal and occurs outside of large scale layoffs. Layoffs aren’t companies tossing risks, they’re companies offloading risk to their workforce.
- somedude895 4y ago
  > you can rapidly shrink your workforce through attrition. That would be a terrible move. The people who change jobs are generally the ones with better options. If you just do attrition you'll end up losing only the good people and you have no control over which projects / departments you starve of resources.
JKCalhoun 4y ago
I understand what you are saying but I'm old fashioned (or naive) enough to think that entertainment companies are supposed to be about art (and I'm using the word in an admittedly hand-wavy sort of way) and not about finding cheap money and/or growing headcount. It already reads wrong if throwing money at my "competitors" somehow gives them some kind of advantage over me. That sounds factory-like (but then I am also coming to believe that what others call "AAA" games may not be the same kind of thing that drew me into gaming).
- jackseviltwin 4y ago
  For EA and other entertainment companies, it's probably not about finding cheap money or growing headcount for its own sake. Cheap money funds more "art." They can try to create new games or movies or tv series and gamble that one or more becomes a hit or even a franchise that makes a return on that cheap investment. Maybe a return that covers the cost of multiple failed attempts. Similar to VCs.
- bordercases 4y ago
  As we are now decades into the history of both film and gaming industries, at the top level of the pyramid, yes, this is naive. Your experiences as a gamer will have little to do with the kind of decision making that yields billions of dollars at the margin. There are exceptions in the game space of overnight hits becoming cottage industries (Stardew Valley, Braid) but the way those liabilities are formed are much different. The developer is the tastemaker. They are almost industries of two types you shouldn't confuse if you want your claim to hold.
kevviiinn 4y ago
Just like you're blindly copying what you read others say about "cheap money", EA is just blindly copying what others are doing and laying off employees
- colinmorelli 4y ago
  …there are pretty limited options here. Nobody is blindly copying what others are doing. For most technology companies, salaries and compensation are one of if not the top line item in the budget. And during a time of cheap money (which is objectively true - this is not someone regurgitating other comments), companies invest in new initiatives. So when headcount is the top line item, and new initiatives are less desirable as capital becomes more expensive…it’s pretty clear that there’s a small set of viable options to make the math work again.
  - kevviiinn 4y ago
    It could still be related to rising salaries but not interest rates. Mass layoffs increases competition and lowers salaries overall irrespective of interest rates, having a lot of layoffs from multiple companies at the same time is a way for the company to save money. I don't know why people think companies that generally have millions or billions in the bank need to borrow money to pay salaries, I've never seen anyone provide evidence that these huge companies are doing that. I only see people parroting the interest rate line and blaming the Fed
    - colinmorelli 4y ago
      Because you are fundamentally misunderstanding how interest rates impact companies. No, these companies are not borrowing money to fund salaries. When interest rates drop, safe investments (such as bonds), become less attractive. The yield on those investments is not high. This means that excess capital gets reallocated towards riskier bets (such as stocks, or venture investing) to try to yield a return that way. More speculative bets happen as a result of free flowing cash to high growth organizations. Companies are willing to lose money in exchange for market share because investors are willing to bet on companies that are losing money on the off-chance that one of them yields a 100x return. This game becomes more attractive when other means of growing investments are harder to come by. Now, interest rates are higher. I can throw money into a savings account at 4.5% APY. A potential 7% return by throwing it all into high growth stocks (which also carry significant downside risk) is comparatively less attractive. I'm now much more incentivized to invest in companies that are stable and carry less downside risk. Those companies are the ones that are spending more responsibly and generating positive cash flow.
lesuorac 4y ago
IIUC, EA's gross margin is higher than it was pre-covid [1]. But more to the point, they're paying employees say $1 and that employee is producing $4. Seems silly to lay them off. [1]: https://fullratio.com/stocks/nasdaq-ea/electronic-arts https://fullratio.com/stocks/nasdaq-ea/electronic-arts

by lbotos 4y ago

bombolo 4y ago

Companies might have used the cheap money to do something worthwhile rather than hire people to look growing and then fire them and cancel their projects?

colinmorelli 4y ago
…the “something worthwhile” WAS the projects that the spun up and hired people for, which they are now shutting down since it’s no longer economically viable to continue. Every single time a layoff is done, there’s a conversation about what initiatives are on the chopping block as a result. Investments that are now lower priority are cut. It’s really quite disappointing that the prevailing sentiment on HN seems to be that all corporate leadership are a bunch of bumbling fools. Just like technology is more complex than it looks on the surface, so too are large enterprises.
bitwize 4y ago
Companies do strange things for accounting reasons. For example, going all in on cloud, especially if you're a huge company who can afford the upfront costs of on-prem infrastructure and can reap the savings. It turns out that buying equipment for on-prem is capex and only tax-deductible once, whereas a cloud subscription is opex and tax-deductible year over year. So it makes financial sense to go with cloud, even if it seems counterintuitive at first because on-prem is cheaper before you apply these accounting concerns. I think something similar applies with hiring when interest rates are low.

sokoloff 4y ago

Exactly. Q: “How can a company avoid ever having to layoff 100 people?” A: “Don’t hire 250 of those 100 in the first place.”

Retric 4y ago

That’s hardly the only option, you can rapidly shrink your workforce through attrition. Large scale layoffs require companies to be caught completely by surprise which is a huge management failure. The point of upper management is to steer the boat not run into an iceberg.

deleted 4y ago
[deleted]
lbotos 4y ago
6% is not large scale. Many would say that if the company only had to lay off 6% they were taking "reasonable" risk. Compare to say Luno who had to cut 35% of staff: https://techcabal.com/2023/01/26/luno-layoffs/ https://techcabal.com/2023/01/26/luno-layoffs/ Counter: What's better for morale, your project to get stopped now and cut and you re-prioritized or let go, or a slow bleed through the year where no new headcount get put on the project as people leave for you to eventually find out in a year that management knew and kept you on that project aimlessly to "avoid a layoff"? Personally, I'd prefer the former, as the latter would give me a lot more doubt for future projects
- Retric 4y ago
  You can cut 20% of a workforce through attrition, but it requires long term planning and shifting people to new roles. You don’t bleed projects over time but move people around after milestones. Not every job is fungible so you may end doing some small scale hiring and let a few people go. But that’s normal and occurs outside of large scale layoffs. Layoffs aren’t companies tossing risks, they’re companies offloading risk to their workforce.
somedude895 4y ago
> you can rapidly shrink your workforce through attrition. That would be a terrible move. The people who change jobs are generally the ones with better options. If you just do attrition you'll end up losing only the good people and you have no control over which projects / departments you starve of resources.

JKCalhoun 4y ago

I understand what you are saying but I'm old fashioned (or naive) enough to think that entertainment companies are supposed to be about art (and I'm using the word in an admittedly hand-wavy sort of way) and not about finding cheap money and/or growing headcount. It already reads wrong if throwing money at my "competitors" somehow gives them some kind of advantage over me. That sounds factory-like (but then I am also coming to believe that what others call "AAA" games may not be the same kind of thing that drew me into gaming).

jackseviltwin 4y ago
For EA and other entertainment companies, it's probably not about finding cheap money or growing headcount for its own sake. Cheap money funds more "art." They can try to create new games or movies or tv series and gamble that one or more becomes a hit or even a franchise that makes a return on that cheap investment. Maybe a return that covers the cost of multiple failed attempts. Similar to VCs.
bordercases 4y ago
As we are now decades into the history of both film and gaming industries, at the top level of the pyramid, yes, this is naive. Your experiences as a gamer will have little to do with the kind of decision making that yields billions of dollars at the margin. There are exceptions in the game space of overnight hits becoming cottage industries (Stardew Valley, Braid) but the way those liabilities are formed are much different. The developer is the tastemaker. They are almost industries of two types you shouldn't confuse if you want your claim to hold.

kevviiinn 4y ago

Just like you're blindly copying what you read others say about "cheap money", EA is just blindly copying what others are doing and laying off employees

colinmorelli 4y ago
…there are pretty limited options here. Nobody is blindly copying what others are doing. For most technology companies, salaries and compensation are one of if not the top line item in the budget. And during a time of cheap money (which is objectively true - this is not someone regurgitating other comments), companies invest in new initiatives. So when headcount is the top line item, and new initiatives are less desirable as capital becomes more expensive…it’s pretty clear that there’s a small set of viable options to make the math work again.
- kevviiinn 4y ago
  It could still be related to rising salaries but not interest rates. Mass layoffs increases competition and lowers salaries overall irrespective of interest rates, having a lot of layoffs from multiple companies at the same time is a way for the company to save money. I don't know why people think companies that generally have millions or billions in the bank need to borrow money to pay salaries, I've never seen anyone provide evidence that these huge companies are doing that. I only see people parroting the interest rate line and blaming the Fed
  - colinmorelli 4y ago
    Because you are fundamentally misunderstanding how interest rates impact companies. No, these companies are not borrowing money to fund salaries. When interest rates drop, safe investments (such as bonds), become less attractive. The yield on those investments is not high. This means that excess capital gets reallocated towards riskier bets (such as stocks, or venture investing) to try to yield a return that way. More speculative bets happen as a result of free flowing cash to high growth organizations. Companies are willing to lose money in exchange for market share because investors are willing to bet on companies that are losing money on the off-chance that one of them yields a 100x return. This game becomes more attractive when other means of growing investments are harder to come by. Now, interest rates are higher. I can throw money into a savings account at 4.5% APY. A potential 7% return by throwing it all into high growth stocks (which also carry significant downside risk) is comparatively less attractive. I'm now much more incentivized to invest in companies that are stable and carry less downside risk. Those companies are the ones that are spending more responsibly and generating positive cash flow.

lesuorac 4y ago

IIUC, EA's gross margin is higher than it was pre-covid [1]. But more to the point, they're paying employees say $1 and that employee is producing $4. Seems silly to lay them off. [1]: https://fullratio.com/stocks/nasdaq-ea/electronic-arts https://fullratio.com/stocks/nasdaq-ea/electronic-arts