Ask HN: Why is everybody copying layoffs?
Google: 12000
Microsoft: 10000
Amazon: 18000
Meta: 11000
Twitter: 4000
Salesforce: 8000
200,000+ laid off in tech since the beginning of 2022.
Microsoft: 10000
Amazon: 18000
Meta: 11000
Twitter: 4000
Salesforce: 8000
200,000+ laid off in tech since the beginning of 2022.
133 comments
[ 3.3 ms ] story [ 180 ms ] threadThe financials aren't actually telling these companies to lay people off; the shareholders are. The macroeconomic climate is very different than the microeconomic climate; the microeconomic climate for most of these companies is "slow expansion", not "contract". In fact, many of them are still hiring even as they're laying people off because of that. But the shareholders are very much concerned, and so this is much more of a response to that.
The theory behind the moves of the FED is that they want inflation down. How? By firing people (people will only pay prices they can afford). The FED can't fire much people. So if shareholders want the FED to back down ... they need enough people fired.
And that doesn't really work because we are fundamentally tight on the labor market for 4+ years now. Nobody fired is going to have trouble finding a new job. Maybe not the same, but they won't exactly be unemployed (although given the wages offered unemployment might be the preferable option).
It's not shareholders, it's Jerome Powell.
It's also just not going to last. The Federal government is looking at two options, in ~1.5 years. Cutting spending by 4% (and one year after that, >10%) with LESS income. Or convincing "independent" Jerome Powell to lower interest rates back to 0%.
So we'll have, let's call it 2 years of this. The FED will be as effective as an inflatable dart board, but they only have ONE tool and goddammit, they will make it work!
So they terminated 40% of their staff despite the growth basically because investors are very pessimistic.
Our economy has become completely over-financialized, and in this situation the fed have decided that inflation needs to be contained, and are inducing a recession to do it. They can do this quite reliably because of the level of financialization, companies are in debt to the hilt even if they don't need to be (it's because shareholder value), etc.
I'm guessing the decision makers here are sometimes aware of the irrationality of the snowball effect, but bet on it being irrational not to copy it before the market reality hits them and they have to make even deeper cuts in future.
And to expound on the main topic, I think what we're seeing is a confluence of the above: using downturn, etc. as an excuse to shed perhaps individuals or groups that are in opposition to the culture the board thinks is useful, drowned out by a total also comprised of some amount of acceptible loss in employees the company wouldn't mind keeping.
Watch as some individuals from all of the above are individually asked to rejoin with a pay bump.
My two cents.
I also don't think he properly sorted engineers between slackers and non-slackers due to reasons like the speed at which cutting occurred and the rehiring into firing to fix whatever random issues.
Industry wide layoffs are a nice cover to cut inefficient workers, although I don't know how well they can be sussed out in large companies. My own company with only a few hundred employees cut some people and I can say that, of the ones I was familiar with, they were mostly slackers or low performers.
Is that true across the board?
I would also like to amend my current qualifiers to include underutilized employees, too; eg a company over-hires and ends up not having enough work for everyone, which seems to be another common narrative for these layoffs. These people can appear as low performers even though it is the fault of the company for hiring them.
I’ve never in my career worked for an extended period on something that was just maintenance. Software systems are extremely stable so long as no one is adding features or increasing usage. I have made (as part of a very small engineering team) a company close to a billion dollar profit on one project, but in the whole 5 years we built that thing, no one in the world would have noticed if we got fired. Because it was R&D.
Engineers are R&D investments. If you decide “no more R&D”, then that’s fine, that’s a strategic business decision. But it doesn’t mean the people previously doing R&D were doing nothing.
Where do people get these ideas?
It's been a failure.
The shareholders always want growth and profits.
[1]: https://memory-alpha.fandom.com/wiki/Rules_of_Acquisition
How much of this is course correction vs sheer cluelessness?
That might be a case of them cutting the costs to prop up the stock price so they can make acquisitions? Time will tell
a. With cheap money, placing and chasing risky bets was risk almost-free. Although, this has been the case for past 4years, 2021/2022 was where it eclipsed new highs. b. Wag-wars: In 2020, 2021, 2022, in SV, I have seen people getting insane offers. Sometimes accompanied by multiple expansion of stock (TSLA, NVDA). This eventually meant that if you don't pay top-dollar, someone else will and you will have to keep hiring belt burning. [presume that prospective employer finds you worthy enough]
I also find hard to believe that decision makers believed that pace of growth/expansion in 2020, 2021 was sustainable. There were signs that it isn't and cheap money kept flowing. Some would also criticize the stimulus checks but in my view, it helped folks who needed it the most but it also went on to chase risky or unproductive things like NFT etc.
/end-of-rant
Why do companies that are known for being overly bloated mean anything for the rest of the economy?
For large US software companies, it's basically everyone.
You don't grow with fewer people who can put out fewer products.
There's no stigma for them doing it if everyone else is.
If they lay people off in good times, then that is a serious indication of trouble at the company.
If they lay people off in bad times then that is an indication of wisdom and prudence.
I've seen it in multiple recessions.
What's interesting here is that, in the face of all the fears about a recession, no recession actually seems to be happening
The Fed has already signaled it will keep hiking rates until the economy slows down and inflation is controlled. As an entrepreneur/CFO, would you bet against the Fed?
Inflation was negative last month. Core CPI was above zero, though (0.3%).
https://www.bls.gov/cpi/latest-numbers.htm
Wait until Q4 results come out. If companies like google have seen a drop in Q4 advertising revenue (unsurprising since it’s often an expense that gets cut first), they may be trimming headcount before the downturn in revenue is even made public.
Just to point out that there are often personal implications for the powers that be, if the stockholders feel that mistakes were made.
How often do execs actually get punished for _not_ doing something terrible? I never seem to hear about cases where they are held responsible for not following fiduciary duty. I only seem to hear it brought up as a justification for shitty behavior.
I'm not trying to say it doesn't happen. I'm genuinely curious.
But anyway in my case I didn't say it was their duty, I was talking basically about the psychology.
From this angle, it's about whether they think that shareholders will/might think they made a mistake, not about whether they actually made the best judgement for the company.
I have no doubt that at least some CEOs will absolutely choose to do something that they privately believe is not optimal for the company, when they think shareholders will see things differently.
The converse of this is seen when a politician does something out of principle that they know will get them in trouble with voters. We have plenty of evidence that that happens -- and that it's on the rare side.
Sure it's not ideal but it does happen.
I don't get why people react emotionally to it as though the company is question is evil.
For healthy employees without pre-existing health conditions, the odds of developing a new health condition rise by 83% in the first 15 to 18 months after a layoff, with the most common conditions being stress-related illnesses, including hypertension, heart disease, and arthritis. The psychological and financial pressure of being laid off can increase the risk of suicide by 1.3 to 3 times. Displaced workers have twice the risk of developing depression, four times the risk of substance abuse, and six times the risk of committing violent acts including partner and child abuse. The stress induced by a layoff can even impair fetal development.
- Terrible for those who lose their jobs and lifelihood - Terrible for those who in the process lose their visa/life they know - Terrible for those remaining as they are anxious to be next - Terrible for the company as the best people will now look for a job elsewhere (before the axe hits them) - Terrible for the company as anxiety leads to less effective employees
Thanks to the dominance of mega index funds and pension funds, there is no way to rein in on boards of directors. Activist investors can control a bit. Remember the fight between Carly Florina and her hand-picked board on one hand and Walter Hewlett on the other hand about HP and Compaq merger.
Shareholders really want them as a copycat maneuver.
Again, I have no reason to believe this is happening, but it IS a potential motive.
The firings aren't performanced based. So really all you're doing is reducing so you can waste billions on hiring again in 2025.
These companies are sitting on cash, they are expected to hire and use that cash to grow revenue. The last decade of free money made many companies irresponsible and bloated.
I used to work at Amazon from 2001-2006 and every single year there was a round of layoffs of several percent after the annual 360 degree review nonsense was completed. That was part of the whole "topgrading" nonsense to keep negging all the rest of the remaining employees.
Did they actually have to stop doing that, or is this whole "nobody ever did layoffs in tech up until this year" narrative something invented in the past few months?
The people that want to come over and accept the job offer are aiding in their own kidnapping?
I don't get it, you don't support work visas or you think Twitter is abusing them, or...?
I have so many questions about your statement.
you know that when applying, accepting, and relocating.
so all of my questions to the GP still stand.
what is the suggested change or even the specific complaint?
are all companies with visa workers holding their employees hostage?
or did they give them an opportunity they otherwise would not have?
If the rumors are to be believed, revenue has cratered. At the very least, the quality of ads has steeply declined - from A tier brands to B and C tier ones.
Perhaps eviscerating the sales and content moderation teams was not a genius 11-d chess move?
I suspect that with some time the people who are left there will burn out from the maintenance load due to the 70% cuts. Elon should have been more empathetic when cutting people, to not burn the good will of everyone who was left imo.
If you are a good CFO, you say:
"Hey remember how we want 5 years of cash, well i just looked at selling bonds and getting cash now is expensive." For tech companies the biggest expense is salaries, so saving cash means firing people.
For the smaller companies they aren't getting investments as easily or at all. They will also need to save cash.
The next few years are going to be different.
Interest rates: https://fred.stlouisfed.org/graph/?g=Z12V.
It really is interest rates.
Google has $28B in debt.
Debt has major tax benefits to it. That’s why companies who don’t really need to issue debt, do.
And this also gives these companies (and others) a reason to skip promotions and pay hikes for everyone else. This is just an excuse to exploit labor to increase profits when demand is falling.
Then imagine the Federal Reserve comes along and says, "How would you like a bunch of almost free money?"
The logical thing to do would be to get a bunch of that almost free money and then hire people to crank the heck out of that money printing machine. So that's what they did.
And then the Federal Reserve says, "Party's Over!" and stops giving out the almost-free money. You lay off the bottom performing x% of your entire workforce.
Almost Free Money Party Starts
https://www.cnbc.com/2020/06/29/the-fed-is-buying-some-of-th...
Almost Free Money Party Ends
https://www.bloomberg.com/news/articles/2022-03-09/fed-s-big...
B) To liberate the workers from wage slavery.
C) It feels good to do this in your soul.
D) There’s no such thing as bad publicity.
I’m leaning towards A?
E) We f*cked up and hired too many so we'll blame it on the economy.
As a company, if you believe there will be less economic activity in the future, you must cut costs to ensure survival.
Of course one could bet central banks will fail, but historically this sort of bet has held nothing but pain and suffering.
The theory by a certain Jack Welch being that the bottom 10% are "non-producers". Since they don't produce, they can simply be fired without affecting the output of the company.
And since some startups had legit trouble and laid off people because they really couldn't survive otherwise (but then typically laid off >10% or had multiple rounds of layoffs), the others can now do it without taking a reputation hit (again, in theory).
VCs seem to be pushing this heavily.
Personally, not a fan. Yes, it's legally not as easy to fire someone for low performance like it is to fire 10% because "the economy!!1", but it's also not impossible. No need to use scorched earth tactics...
this a massive GRIFT..saw armies of new hires. Now people on HN and LinkedIn say, "So hard to recruit this level talent. Will need to re-hire them." Oh really? Let me tell you.
i saw:
- original founders, execs, and they proteges leave, to be replaced by "Professional Managers"
- professional managers have no vision or direction.
- professional manager cares nothing for customer, product, or value.
- professional manager driven by prestige of being at big tech and ego
- only goal is to increase HC, fight territory battles, and grow empire.
- main incentive was PROMOTION.
- how to achieve promotion? Managers: empire building. IC: invent complexity, build solution to problem that not real. launch it, get promoted, go to next team. great, now we need to spend even more $$ to support some piece of shit services because critical stuff taking dependency on it. manager, Sr. Mmnager collude across organization to show big impact and get unnecessary thing entranced deep in tech stack. But hey, now we write document in promotion portfolio so sr. manager can become director.. sr. engineer become staff level..
- 20% of company provide value that pays the other 80% salary.
- Many people work on stupid thing that have no meaning for customer.
let me pick a random big tech co:
you tell me what huge improvement in amazon shopping, how alexa better, how kindle better, how fire (junk) any better? What big innovation even from aws in past 7 year? oh let me tell you – lets steal some open source project, give no credit or contribution back to main project, and sell as managed service and eat our customer in data transport cost alone.
this grift went on long time enable by cheap borrow policy. and in silicon valley, it at level of Ponzi scheme. I invest in company x,y,z, and c. i force c to use shitty SaaS products from x,y,z or some other company my friend invest in. it literally same dollar moving from x to y to z to c.
entitled grifters.
Why don't you know this?
Most employees will be hired back into the industry, probably swapped between these companies... at a lower salary.
That... and culling, getting ready for the economic shitstorm.
Chance to reset salaries within the company without losing out much on the market (doing layoffs in a similar time frame with others will pretty much leave you with options when you all start hiring again)
Showing the whip to their remaining work force, as the power dynamic becoming even slightly more equal is unthinkable.
Google (through September 2022): 68k
Microsoft (through June 2022): 77k
Amazon (through December 2021): 310k
Meta (through September 2022): 52k
Salesforce (through January 2022): 39k
Most of the layoffs in these places is coming in HR and sales.