The takeaway is that layoffs are extremely trust destroying for employees NOT laid off, and in the end not clear they're a financial net positive. Both with direct and indirect costs (lack of engagement from employees, etc).
It takes long time for the layoff effects to hit the company.
The main effect is that you lose the trust of the top performers. These will be the in the lookout for new opportunities the day after the layoffs are done. If you cut 10%, expect 10% from the top to flee within a couple of years.
The second effect is related to the fact that companies usually target older people with expensive jobs. In an a big org these are the wizards who have the unwritten cookbooks in their brains. When they leave en masse, a lot of the organizational memory is gone, and expensive operational mistakes of the past are forgotten. These have longer effects that will haunt the company for many years.
The only way you can safely pull off layoffs is if you ensure that anything you do in the company requires the experience of a boot camp. That means that everyone is fungible and you can easily swap them.
And this is what tech did better than any other industry. The average required know-how depth of a tech white collar worker is easily two three levels below when compared to other industries. Pharma and chemicals come to mind from personal experience.
I worked at a bigco that followed this approach. I think the alleged fungibility of programmers is surface-level.
Sure - ~any decent programmer can jump into ~any codebase and do your JIRA tickets. But there's a more holistic ownership you miss out on that's going to be the difference between a system aging gracefully and a system becoming a giant hunk of butchered junk that's been one-small-jira-ticket-ed to death over a decade and now needs a very costly and distracting replacement/rewrite.
I worked at a different company that did the opposite of this. Programmers were expected to stay either 1 year or 10 years, and you'd be compensated according to which bucket you were falling into. They had excellent retention rates, and the dev team was small, <30 engineers. We never rewrote systems. They had owners who had either written them, or been handed off apprenticeship-style over the course of a year or two from the former master to the new master.
Place 1 was a fucking mess of tech debt and had constant incidents that made high value customers mad, execs mad, and oncall engineers mad. One of my coworkers literally went into his first oncall shift, got paged at night three times in two days, and resigned the next morning when he found out that yeah this is just kind of normal and good luck convincing leadership to let us fix it.
Place 2 literally never had tech incidents. The worst oopsies were generally related to (it was a trading shop) other people in the market fucking up and resulting in trade breaks that we had to clean up after hours, or exchanges having problems and sending us garbage data that we had to resolve by calling someone from the exchange to confirm order statuses and so on.
I only left place 2 because I was moving across the country and they didn't do remote (and still don't, even post covid). I was laid off from place 1.
> One of my coworkers literally went into his first oncall shift, [...], and resigned the next morning
I've seen people nope right out of there, and (anecdotally) it's always been an experienced person seeing something that was worse than they should've expected, and having an idea how unusually bad it is.
When you know for an absolute fact that you hold ownership and are held accountable for a codebase, assuming you're competent, things like tech debt and bugs suddenly become much more important and consequential to you.
Ah no nothing like that. And 10 is just a pithy way to say that they want people to stay a long time if they're good. And they did that by, each year, if they wanted you out, you got a very small bonus. If they wanted you to stay, you got a very large bonus. That's all I meant - they retain you by giving you many dollars via payroll.
It's how it works in the trading world. The base is decently competitive (for devs anyway) but the bonus is based on trading results and functions similarly (from an incentives/alignment and retention perspective) for how stock works for other companies.
I think the point is that salary + bonus = your real salary, but they give much if it in the form of a bonus so they can more easily choose to give your overall "salary" a cut.
> The main effect is that you lose the trust of the top performers. These will be the in the lookout for new opportunities the day after the layoffs are done. If you cut 10%, expect 10% from the top to flee within a couple of years.
I don't know, but I imagine that there's a pretty substantial difference between an isolated layoff and an industry wide layoff. Maybe it hits differently when you get to see the sausage made.
Where is a top performer at Google going to go? I'm sure there's some companies out there that aren't doing layoffs right now, but most of those probably can't offer FAANG/MANGA salaries.
Startups. Top performers at Google, if they've been smart about their finances, are sitting on a few million in the bank and have runways between ~10 years to infinity. They can afford to work for equity for a few years to take a slice of the pie when the company takes over another industry.
My own pet theory about this round of layoffs is as follows. The tech companies spent 2021 massively over-estimating the value of boot camp folks and new grads. They spent 2022 learning a tough lesson. I saw this first hand. So much lost time mentoring low-quality hires.
Now they will spend 2023 massively underestimating the value of their senior folks (10+ yoe engineers, scientists with deep domain expertise, experienced people managers, etc.). The problem in 2024-2026 will be that experienced engineers/managers and PhDs who know how to operate well in industry do not grow on trees. Fixing that mistake is going to be a LOT harder than firing a bunch of junior engineers. It may take a decade or longer, and I think the burnt bridges could even be existential for at least one of the FAANGs. (I also bet you'll guess a different one than me, so maybe more than one ;-))
Also: the alternative is not just startups. Smaller companies, sole props, and of course also skiing.
I am getting very close to that "~10 years to infinity" number in my accounts. I might do a startup, probably self-funded, likely keep it small. I know who my first 5 customers will be, the work will be fun, I know I can execute well. Doing this at a FAANG would require pulling in 20+ full timers for a year before shipping our first line of code. Totally not worth the ridiculous pageantry when I can do it on my own or with 1-2 helping hands.
I'll be making a tiny fraction of what I make today, but the work will be enjoyable and I'll be building what I've wanted to build for the last ten years. Also, I will own the damn thing, which is much more tax-efficient than taking a few years of massive paychecks, and that's something I am more sensitive to now that my money is making so much money. If I were laid off today, I'd need at least double my current comp to return to a FAANG. And even then probably wouldn't.
>I also bet you'll guess a different one than me, so maybe more than one ;-)
Only thing I'll say is it won't be Apple, since they did none of the above/didn't get into the "hiring Spree" in the same way all the rest of the tech giants did, which includes what I'd call FAANG-adjacent spots like Uber, etc.
> Doing this at a FAANG would require pulling in 20+ full timers for a year before shipping our first line of code.
Why are these large companies so slow? Are the 10+ yoe engineers, scientists with deep domain expertise, experienced people managers, etc. helping or hurting this?
A combination of risk aversion, regulatory burden, and process. The corporate machine can't afford to trust the judgement of individual contributors or even their managers or even their directors or sometimes even their VPs.
Credit where it's due: some of that is because of real risks that large corps do need to worry about but scrappy startups don't need to worry about.
A lot of it though -- especially the burdens that come from standardized processes and distributed responsibility -- boils down to a combination of (1) the cost of treating employees like cogs and (2) some amount of empire building.
> Are the 10+ yoe engineers, scientists with deep domain expertise, experienced people managers, etc. helping or hurting this?
It can go either way, but the question is kind of ill-formed. The decisions that slow stuff down happen at the VP+ level. If you're being slowed down by an IC, it's usually not the IC's fault (you'd rather not even have to interact with them in the first place, but someone VP+ demanded that you must).
That said, generally the valuable people with tons of experience are the ones building/fixing stuff. The "process implementation cogs" are typically more commodity-like labor.
Because for FAANG to invest resources in a program, they need to make sure that it will return hundreds of millions of dollars. Don’t forget that every year they need to show to the shareholders that they grow with double digits, and for FAANG this means billions of dollars in extra revenue.
So a lot of time is spent evaluating a program in stead of just doing the program.
This as well. Things that make for fantastic lifestyle businesses -- a few people doing mid-seven revenue with minimal compute expenses -- just isn't worth it for a FAANG spending an order of magnitude more than that per hour just on one guy's compensation package.
The highest performing, most expensive employees are going to be pretty senior and pretty experienced, ie older - the demographic least inclined to bet the farm on equity in a startup.
They’re likely to be at the stage of their life where their “runway” is their kids’ college tuition, or their (possibly early) retirement plan. Most will be far more inclined to take a (stable) pay cut rather than make a risky bet.
Plus, this whole downturn is rooted in drying up credit. Startups are more likely to fold than ever, and will largely have to either slow hiring or reduce non-equity compensation.
I think there is another point of view to this. Once you hit the 5-10M NW range as employee, you're basically free to take risky bets on start ups. You're looking for something that will be game changing (10M+) rather than another 500K in the bank.
You've got college, housing etc. covered, so it's fine to go take risks in order to get large lottery tickets.
The problem is that "industry wide" doesn't mean much if you know your company is doing well. It's jarring seeing "record profits" and "layoffs" mentioned within a few weeks/months of each other. If you get laid off even when things are going great, what hope do you have for knowing when the next layoff occurs?
I think this is the logic that can make a company like Citadel, which fires 10% of their staff per year, work out well. If you have no expectation of job safety, it attracts a certain kind of person, but there's also no love lost if a layoff round is a little bigger than normal.
Exactly. I worked at a Citadel like fund and that's the vibe. The calculus was like this - I'd rather risk being fired than work in a place where low performers are cozy.
The reality is that working at a place like that or a FAANG for just a few years sets you up for a great career no matter what happens. So even if you get fired after a few years you are still better off.
It's good to have coworkers who can think rationally and make decisions this way, too. It's a virtuous cycle.
Being ambitious and having an environment that lets you run (and rewards you for it) is what prevents burnout at a place like that.
A lot of people at hedge funds like having a baseline level of good stress in their lives. It's only when the stress starts to make you feel insecure that it creates problems.
I worked at one of these firms for a while, and my "burnout" point came when I realized I wasn't actually getting rewarded for my extra contributions to the company (my bonuses were going up by a small amount each quarter, no matter what).
Great anecdote, but burnout generally isn't caused by that for most people. At its core, it's because of stress. Incompetent coworkers and organizations may certainly cause stress, but rarely is it so bad that it causes burnout.
The ambitious people who take 500k/year jobs at HFT firms are to top .25% of "workers" in some abstract measure, and have different expectations and causes of burnout relative to the median burnout experiencer who is for example a school teacher or administrative assistant in an office job. Some people have an addiction to the fast pace, feeling of being need, and stress.
Loss of efficiency/productivity might not be the product of burnout. It might be the cause.
People get addicted to the dopamine hits of getting things done and when they hit a wall, enter a vicious cycle of depressive withdrawal. Recovering from burnout by taking a break is simply resetting that dopamine addiction. Just a personal theory.
If you work in a high paced environment with competent colleagues, management and tooling, you can just keep rolling with the punches and never hit the wall.
> When someone makes $500k+, what does "unpaid overtime" even mean?
It means shit work/life balance, thus missing on a lot of people that would want to have it and results in worse productivity (people need time off or they break).
I’d rather do actual work than generate signals for wealth managers to personally capitalize on in a government protected and policed fiat currency scam. It’s no different than a church deeming priests the most pious.
Fingers crossed white collar jobs are on the verge of being AI’d away.
Real logistics information should be made public and democratically planned online across the globe in an organized way, not micro managed by elites who spend a lot getting us to memorize and recite that they own imaginary things.
> The only way you can safely pull off layoffs is if you ensure that anything you do in the company requires the experience of a boot camp. That means that everyone is fungible and you can easily swap them.
Yes, and that's the number one thing successful small business owners learn. The ones who don't learn this aren't successful.
You want as many of your staff as possible to be easily replaced. If you're running a restaurant, do you really want the success of your restaurant to hinge on a single talented chef?
Nope. You make sure that there's a process so that another few chefs can drop in quickly without changing the menu or the quality of the food. All the other kitchen staff don't do "complicated", they follow instructions.
If the business depends on having developers that are in the top 5% (say, one of the criteria to working on the code is understanding Haskell with Monads), the business is at constant risk because the developers are not easily replaceable.
While they certainly have some people who are cogs, all of the small businesses I know are heavily reliant on their owner constantly being around being that person and putting in soul-crushing hours, though, as they can't rely on anyone else and yet simply aren't large enough to have the entire business be built out of cogs. A result of this is that they are businesses that are fundamentally trapped at their current size because of this reliance on their size, and I will claim the only way they grow is by figuring out how to bring on other dedicated strong people to help them get some horizontal scale. I honestly don't think you can try to do the "everyone is a cog" thing until you are at least a medium-sized business.
You are talking about a Franchise model. At a good nice restaurant the individuals recognize me as an individual. You can't just drop someone in and have them know what I like or the service I am used to. You can make yourself a McDonalds, but you better not have any large customer contracts because they are not compatible with the 'franchise' everyone can do everything model (because they expect individualized attention, and often individualized features).
> The second effect is related to the fact that companies usually target older people with expensive jobs. In an a big org these are the wizards who have the unwritten cookbooks in their brains. When they leave en masse, a lot of the organizational memory is gone, and expensive operational mistakes of the past are forgotten. These have longer effects that will haunt the company for many years.
Is this true this round? I have noticed a few things:
* On the hiring front, much more demand for senior, staff, principal devs, less demand on the junior / intern front.
* (Anecdotally) A LOT of junior / new people laid off. It seems in this round companies want a small but elite force, rather than opting for junior people.
Companies have always preferred to hire experienced ICs. They hired juniors because they couldn't find or afford more senior people. It does seem that a lot of juniors are being impacted. But the hiring front likely reflects the fact that there are now more senior folks in the market, and likely that they can offer lower salaries since job seekers have less leverage.
Things might be a little different regarding losing trust of top-performers when layoffs happen broadly across a sector.
If every semiconductor manufacturer reduces headcount by N%, there may not be much incentive for an engineer to jump ship. If only one of those companies doesn't lay anyone off, though, the dynamics are completely different.
Top performers are pets. You use layoffs to generate excess opex savings in order to retain them.
You guys are acting like companies are too dumb to think of these very basic concepts. I have personally witnessed discussions that can roughly be described as “ok we need to add an extra three people in order to fund retention for X.”
> The main effect is that you lose the trust of the top performers. These will be the in the lookout for new opportunities the day after the layoffs are done. If you cut 10%, expect 10% from the top to flee within a couple of years.
I've been through one of the tech layoffs that happened during the pandemic, so N=1 and all, but this was exactly what happened.
On the day of the layoffs, few top performers were affected. It was a classic layoff with an HR email and immediate lockout. Managers of affected people learned later. Some people learned they were being laid off after hearing it in mainstream media first.
After 6 months, many best performers (more than 10% in my opinion) have left after struggling with low morale. A lot of company knowledge was lost, portions of the codebase became unmaintainable, projects went from being certainly doable to being in perpetual uncertainty about cancellation. The responsibilities of the the top performers fell on less experienced people, some received promotions but buckled under the pressure in disruptive ways.
Two years later, the company is still rebuilding but has obvious competency gaps. There was also difficulty in filling them because HR was disproportionally affected by layoffs. The distrust in management persists and more than a few people are openly talking about leaving. Though the hiring in tech has cooled down which had a chilling effect on people leaving, too.
I am not sure about this (not disagreeing, just not sure). First, 10% of top performers out in 2 years is a normal attrition rate for a 20 year tenure. And I suspect mean time at the company is much lower.
But even more important, I think most top performers understand and accept the risk that their employment may end. For example, the company can fold. It is easier for top engineers to accept that because they likely have better connections and can pretty easily find a good job elsewhere. My 2c.
> The only way you can safely pull off layoffs is if you ensure that anything you do in the company requires the experience of a boot camp. That means that everyone is fungible and you can easily swap them.
This is an interesting way to think of the Leetcode style interview. If you don't require any particular experience and you have built your company's systems in a way that any "competent" developer can join and be effective, layoffs may not be such a big problem.
This is why React is so popular; not because it is inherently good or performance or has great DX but because of how easy it is to swap one so-so React dev for another so-so React dev.
Cynically, aren’t corporate blub languages like Java and Go kind of built on the same notion? That is, they intentionally limit the amount of complexity possible so that there is a low ceiling for mastery and workers are interchangeable.
Have you ever seen a company (from the inside) where everything was easy and clean and documented, and you needed no institutional knowledge / context be effective?
If it's really possible, I think it's the very rare exception.
> The main effect is that you lose the trust of the top performers.
Why? top-performers are most positioned to be aware of incompetence around them and may in fact welcome a housing cleaning. With that said, it's not always easy to identify who's who-- it's possible top-performs are affected or incompetence isn't, which can erode trust.
> top-performers are most positioned to be aware of incompetence around them and may in fact welcome a housing cleaning
That's thinking from a notch or two below top-performance. Top performers know what's "in the wheel house" for others around them and how to use it optimally. Don't be fooled by local maximums!
There are many factors involved in employee assessment of employer suitability. Steve Blank has observed [0] that when top employees recognize that when an employer moves to assessing them from a purely financial perspective, it's time to go.
> If you cut 10%, expect 10% from the top to flee within a couple of years.
If the company was laying off the deadwood and the quiet quitters, the top performers know who they are, and are not concerned about being laid off themselves.
Top performers don't particularly care to work with deadwood and quiet quitters, either.
> If the company was laying off the deadwood and the quiet quitters
That's a big if, though.
Executives doing layoffs also tend to do them quickly and plan them in secret in order to reduce the chance leaks. That means they are deciding who to cut with very limited time and information. They make lots of mistakes.
Both times I've been through large layoffs, I saw skilled respected peers get the axe while deadwood didn't. It causes the loss of valuable employees and completely destroys respect for executives who are apparently so clueless that they don't even know which of their employees are worth keeping around.
As someone sometimes in that position, if I can get 85-90% accuracy (in both directions), I think that’s about the best I can possibly do in a 500-ish person organization.
I hate the false positive (including a good performer incorrectly beyond that required by the depth of layoff) more than anything else for its deep unfairness to the individual, the team, and the company.
It's rare that "deadwood" and "quiet quitters" do literally zero work. Even if you feel that your job is secure, you might not appreciate having their work dumped into your lap, especially since there's a good chance that it's not critical-path work. And you might not want to be in an environment where morale is low and trust in leadership just took a major hit.
They're deadwood if they cost more than the value they produce. Nobody missed them. And the livewood didn't have to go redo all the stuff they messed up.
Another terrible effect is that the people who aren't laid off have to onboard the next wave of new hires. I've seen a lot of poisonous behavior as a result of someone having a chip on their shoulder because a friend was laid off, and that can have disastrous consequences for someone who has less experience and needs support.
> The second effect is related to the fact that companies usually target older people with expensive jobs. In an a big org these are the wizards who have the unwritten cookbooks in their brains. When they leave en masse, a lot of the organizational memory is gone, and expensive operational mistakes of the past are forgotten. These have longer effects that will haunt the company for many years.
This can be a good thing. In my experience these people are generally unambitious people who's claim to fame is that they held a job for a long period of time rather than any innate talent.
And when you have a majority of seniors who's only value is in being a well of knowledge, they're resistant to any change that reduces the value of that knowledge. This can quash innovation and perpetuates the anti-pattern of information hording.
Depends on the environment. In a startup, the top performers often say basically “what took you so long? Glad we can move faster now. And try to hire some more top performers for me to work with.”
You typically are asked to work longer hours to make up for missing staff, deal with a lot of nonsense and get "at least you didn't get laid off" as a reward at the end of it. When the money people turn out their pockets (become low performers in their role) no point in sticking around or at very least, no reason to coutinue to be a high performer when the business is signaling its going to be a low performer in regards to the value its going to be able to deliver to you.
- The people let go might have been good friends or at least people they enjoyed working with.
- While they’re not targeted, their coworkers are, they’ll sympathize with the tension. Also that workforce is now doing the same work amount with fewer people.
- They are expected to do a lot of education and bringing people up to speed. More churn means more work, and it’s also harder emotionally if you’re not sure how long the person will stay in the company.
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.
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.
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.
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.
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.
> 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.
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.
Lmfao. Do you know how hiring works at a large company? When your management chain has won a few headcount marbles during this quarter’s game of Hungry Hungry Hippos, it’s not in your interest to blithely challenge them on it.
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.
That would likely be a career limiting move.
I remember the dot-com bubble days. We'd hire like mad... literally anyone who could spell HTML or PHP. There was no reason to speak up. We didn't know the gravy train was going to be over in a couple of years.
I might think this way if this was my first rodeo. When executives allocate money for hiring I assume they've put some thought into it with data outside my immediate view. You think I should be questioning executives? Most of us are out here just trying to survive and making C titles look bad in public is how you get fired immediately.
There’s a middle ground between saying nothing and making them look bad in public. Talk privately to your director/VP. Ask questions. You don’t even have to come right and say you think they’re wrong, but showing interest in the direction and financial health of t the company is unlikely to hurt you in any way.
Nope, I expect the people making these decisions who are responsible (and paid extremely well) for the financial health of the company to be doing an exhaustive due diligence when it comes to budget. The only real question is do any of these executives take responsibility for their actions. That question has ultimately been answered over the past couple of weeks so why bother asking...
We are doing due diligence, but it can never be exhaustive; the single best source of qualitative information is from talking to people who are closest to the work and then trying to synthesize a view of reality from the multiple points of view expressed.
You’re not under any obligation and can keep your head down if you like. I can see the spreadsheets with perfect clarity. I need to marry that data with the more complex and hard-to-get view of the elephant that can only from the people who are working with/on it every day.
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.
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]
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
> The takeaway is that layoffs are extremely trust destroying for employees NOT laid off, and in the end not clear they're a financial net positive.
Well... for whom though? When megacorp CEOs laid people off the stocks soared - massively enriching the C-suites executing the layoffs and the investors demanding the layoffs.
The error in your thinking is that the financials of the company and its continued success matters - when the people in charge are optimizing for THEIR OWN financials.
I've got already a message of a former colleague working on Gitlab. He wants to leave. He thinks thats better to negotiate a salary while in a job, than when you are desperate running against the clock. We are going to take him back.
If your plane is gonna crash without dumping some excess weight, killing everyone on board, what do you do? You throw a ton of stuff out of the plane in an effort to continue on. This is what layoffs are. It’s a survival mode tactic. The cost of lower morale is smaller than the cost of complete failure.
When all of these companies act together to influence the labor market, they can subsequently cut long-term costs due to the natural suppression it effects on wages. I'm seeing very significant reductions.
typically a company also refocuses where they spend effort or make changes how they operate and that leaves a lot of people without meaningful work that matters. not only will those people be demoralized, but those around them too, together with continue collaboration and communication complexity. waiting for that to organically resolve it self would be terrible leadership.
Many/most of these companies have a huge portfolio of projects underway and have lots of open headcount that they’re hiring for. What sense does it make to say cut an engineer from one org only to hire another one a month later for another org?
Literally no thought is given to redeploying the labor force against the new set of projects. Just cut and rehire. It’s the ultimate short-termism, lack of vision and lack of leadership. Ironically all of these companies blather on about leadership but fail to even demonstrate a scintilla of it. Leadership just means “plays political game competently” at these companies.
google’s profit not only dropped 34% in the last quarter, it is also the fourth consecutive quarter that their profit as dropped. if they didn’t change anything and just continued on, what do you predict the next 4 quarters would look like? what do you think the comp of those at google will look like taking into account that more than 50-60% of one’s compensation is equity?
So the plane has been flying over valleys at record altitude and we see a couple of mountains ahead that we will easily clear. Despite being absolutely no where near crashing, let's throw a couple of crew overboard so that we can continue to climb to new heights and keep the hype engines of our overvaluation going?
These pat responses still elide whether future results are contingent upon drastic action. You simply cannot justify all actions by claiming past success is irrelevant.
Maybe you missed the memo, but corporations are supposed to grow exponentially, for all eternity -- never mind the Laws of Thermodynamics (or any other sanity check, for that matter).
I would imagine there are two occurrences at play, some employees affected by both some by one, but 1. You're wondering when you'll be next 2. People you have been working with are just gone now.
> and in the end not clear they're a financial net positive
This feels like another instance of Deming's (paraphrased) "People will destroy the enterprise to align to their incentives."
The people who make these decisions may be incented on the _short term_ cost savings. It's a fractally smaller version of the entire org aligning to shareholder expectations at the expense of company growth.
Productivity takes a hit for a week. And then starts up anew with new direction and new energy.
Sometimes layoffs are erratic and cause employees to question management's logic.
Most times, every employee is put on alert to not get complacent in their job and always be on the lookout for a better position. (this might be a net positive, POV)
What are the different kinds of layoffs? 7% sounds like one person from every-other-pizza-team but in practice isn’t it more like “we laid off the self driving garbage truck team (70 of 1000 employees) in order to focus on our core infrastructure and future as a builder of large language models”?
I think it's a brinksmanship game. The company that does the least amount of layoffs and survives will be in the better condition coming out of the recession.
At this point it's beginning to look like tech companies are doing this because it's the trendy thing to do, along with inserting a few words about AI in their websites and pitch decks.
"What explains why so many companies are laying large numbers of their workforce off? The answer is simple: copycat behavior, according to Jeffrey Pfeffer, a professor at the Stanford Graduate School of Business."
A few weeks ago I was opining that companies were laying off staff because "that's what everybody else was doing." I'm glad to see to few folks concur.
Copycat behaviour is not uncommon, I think, and is swayed by market sentiment. If the (equities) market ( mean in a general sense) feels bullish, then Microsoft, Google, etc. start piling on employees. Because hey, we're tech companies, we have to justify our market ratings by pursuing (or at least looking like we are pursuing) growth, so that's what they do.
Then, when things sour, the mood becomes one of conservatism. Then it looks good to shed employees. This is all despite the fact that it may have little to do with the actual state of the companies.
Microsoft in particular is hardly a heavily cyclical company, so there is little need to behave like one. Not really. They could adopt a more even approach to hiring. If they tried.
Companies bleat on about how difficult and expensive it is to hire staff. And yet, here we are.
We are a SaaS tool and we've has to justify our value to customers as everyone is looking to cut expenses. We also did cut our own spending on SaaS tools. So I think that this is sort of percolating through the industry. There is a real contraction in SaaS spending.
I would be very willing to believe this if it wasn't for the fact that so many tech companies have fundamentals that just don't make sense.
We've just gotten so used to the idea that "tech companies don't need to make profit" that we don't even question it any more. I still hear people shocked when a companies revenue goes up but their stock price drops while completely ignoring the reality that costs also went up.
The truth is all companies need to have profit and many of these tech companies have never showed that they're even capable of turning a profit.
What's happening is that investors are going to boards and telling them you need to make serious progress towards profitability. If sales are growing slowly or even declining there is no other option but to do layoffs.
IMHO this is still just the beginning, there's a lot of feedback in the tech ecosystem that are going to start playing out as more and more companies start scrambling to show profitability.
It's less that it's the trendy thing to do, but more that the bar has been lowered.
If this is an option you're considering, then it's a much easier message to sell if everyone is doing it. Otherwise you look like the bad performer and it'll hurt morale and stock price even more.
I don't know how this has gone over everyone's heads here, because what's happening is extremely obvious.
If you're a big FAANG-like company, you've seen workers make big gains in wages over the past year, and turnover rates have been increasing significantly during the great resignation. This isn't enough to sink you, but you don't like it, because it does eat into your margins a little. Of course you're still making massive profits, but workers getting any measure of power scares you. Imagine if this trend continues? Workers are only getting harder to find!
So what do you do? You can't walk up to all your CEO friends and say "Hey how can we go about paying everyone less? What if we all agree to lay off our expensive people at the same time? That way, we'll have a massive pool of workers to hire from that are all looking for jobs, and since they'll all be scared from having been laid off they'll happily take pay cuts. Additionally, it'll scare the hell out of the rest of the employees to see all their friends get blown up with no warning right in front of them. They'll want desperately to keep the jobs they have and won't leave!"
You can't say that because coordinated wage suppression is highly illegal (remember Apple and Google?). But wink/nod based wage suppression? Totally fine! If everyone just happens to fire their expensive workers at the same time but leaves no record of getting anyone to agree to it, it's perfectly allowed. This is not "copycat" behavior. This is all the CEOs recognizing what the game is and cashing in on it.
And better yet, there's nothing the tech workers can do about it! There are no real tech worker unions to speak of, and these companies know their workers have a highly libertarian bent who believe in the meritocracy myth, so there's no real risk of unionization no matter how bad things get. It's a pure win for them, with no real downsides, and the general consensus is that if they're smart they'll do this every so often to bring workers to heel. And given the pervasive attitudes about labor that I see among tech workers I don't see any reason to think that's wrong.
Indeed. I remain shocked at how many people who work in this industry are still making excuses for the companies that are performing these completely unnecessary layoffs. (They'll never be laid off of course, of course – only the other people who are old and bad at their jobs.)
These companies overhired and now they are realizing that the positive cash flow to justify all of these new employees isn't existing. None of these layoffs are focused on laying off their most expensive people. The severance packages have been very good meaning that the laid off employees have a long time to find another well paying job.
> These companies overhired and now they are realizing that the positive cash flow to justify all of these new employees isn't existing.
This is false in a broad sense - the majority of CEOs plan to increase headcount this year in spite of layoffs. You can find examples here and there where it is true, but in general it is not. There's tons of literature of this readily available, but here is an example from as recently as yesterday: https://finance.yahoo.com/news/ceo-outlook-report-optimism-r...
> None of these layoffs are focused on laying off their most expensive people.
The people you see laid off tend to be newly hired at higher recent market rates or people who have been there a very long time, both of whom are either expensive in a relative sense or an absolute one.
But even that is besides the point. Even if you fire randomly you still see this benefit if you're a CEO.
>the majority of CEOs plan to increase headcount this year in spite of layoffs.
This just means that companies are continuing to hirer. It doesn't mean that they plan on increasing headcount to above where it was before the layoff.
It's so weird to post the first thing that feels like a thought, just to carry water for CEOs who are never going to see you write this, and will never like you, without getting paid for it. 1300s feudal serfdom mindset. And it's everywhere.
If you're continuing to hire past these layoffs, and expanding plans to do so, it's to take advantage of the environment created by the layoffs. If there really was a fiscal crisis you'd also see mass hiring freezes, but we're not seeing that.
> “We expect to end 2023 as either roughly the same size or even a slightly smaller organization than we are today,” said Meta CEO Mark Zuckerberg.
I don't really see it. Gitlab isn't a Google-style megacorporation; its CEO is co-founder, and it still has a reputation for having fairly horizontal management.
The idea that its execs just decided to lay off a bunch of people for no reason just to wage some plausibly deniable class warfare doesn't really make sense to me.
I dunno, maybe look at more than one company doing layoffs and think about whether the group as a whole is in dire fiscal straits, whether they're continuing to hire through the layoffs, and who the winners and losers will be through the whole ordeal. Those details are elsewhere on the thread and are easily googleable if you have a real interest.
If you have a hard time believing capitalists wouldn't literally do capitalism when they see a chance for it, I don't know what I can tell you really.
"I don't really see it" is a pretty... well it's something, that's for sure.
In my view they see a few benefits. If the "market climate" is layoffs, then they can be much less competitive with offers to any candidates they do want to hire. It's an opportunity to let go a contingent of lower-performing workers, and lastly, it's a way for the CFO to send a message to all the managers that they aren't getting the incremental headcount they are always asking for to inflate their team sizes.
I don't necessarily think this is a good thing, but I think dismissing it as copy-cat behavior is not digging deeper than the surface layer.
Instead of the group of managers making the case they are doing a good job because their team has grown over time, there is a shift in power to the managers saying they have saved the company x number of doll-hairs because they cut xyz budget and team.
It's a coordinated attack on the companies, and anybody that is going to hold shares long term. Focused specifically on the ones that will buy shares after one or two announcements of larger than usual profits but will hold for more than a couple of months.
The people doing this do not lose time thinking about workers.
(About Gitlab specifically, they are not profitable, so a layoff is a normal survival strategy if their cash is running low.)
It's not purely about the recession. If it was, they would halt hiring, keep talent, trim executive bonuses, and be precise about where dead weight exists. Not 5%+ layoffs of major teams and roles.
You see other industries, they're laying people off sure, but we're not talking 5%+. They're doing the above, being more precise about their spending. Like Blackrock, huge losses, and still "only" let go of 500/16000, ~3%.
You will not see tech companies balloon to the same number of employees ever again, if anything they will continue to shrink astronomically. No matter what happens to the economy, as these decisions are not because of the recession or the pandemic, both of those reasons are amplifiers not sources.
Well, I am glad top see so many people deluded and thinking we are not in a recession. The only reason it doe snot look like a recession yet is because inflation is still higher then the Fed Rate. This is why the Industrials are not layoff as many people yet.
> You will not see tech companies balloon to the same number of employees ever again
I feel that people do not understand Macro economics and the complexities of this market with inflated asset prices from years of near zero interest rates. You cannot compare numbers
Economic indicators may look solid, but why? I assert it is because the Fed rate is STILL below the inflation rate. This is why the housing market has not totally seized up yet. The next inflation numbers will be high and then you will see people scrambling again.
Nowhere was that stated. Hopefully you understand that both we are in a recession, and you are being misled as to why these layoffs are happening are both true. As stated, if it was purely because of the recession, the likes of Blackrock would also be hitting 5%+ layoff numbers.
What corporations, consider recession, and what the Fed considers a recession or two different things.
Now, Yahoo is letting off all these people. That does not happen during recession. If you follow what the Fed says about recessions, you’ll be left behind.
Good on them for offering proper severance. At my company, we got 2wks and nothing else. Not even a thoughtful letter from the CEO. Nothing. (And this was a sizable tech company in the middle of an IPO).
Burning bridges who might have been references for subsequent employment is almost never a good idea.
There is always a time and place, of course. But generally speaking, you don't speak ill of your (former) employer or even talk about it publically lest there be ramifications beyond your imaginations.
It might hurt the feelings of HR at the new place where he wants to apply though.
No one disagrees with you in principle, but there are realcitrant social practices punishing this kind of feedback. It is always taken as a grudge rather than an observation, and this makes you less attractive as a hire.
This goes the other way too: Generally speaking, companies are expected to refrain from negative commentary when contacted as a reference by subsequent employers. The only exception, and seldom done, is if the employee was terminated due to egregiously bad circumstances.
That is to say, (former) employee doesn't speak ill of (former) employer and (former) employer doesn't speak ill of (former) employee. It's how society keeps itself oiled.
As a former GitLab employee from an expensive region, I’m a little concerned Sid didn’t layout the layoff process more transparently. Were high earners more likely to be laid off while lower CoL areas were kept? This was always a distant fear in working for a very global team where I knew teammates from other countries did the same job as me for much less.
The answer is yes, in all cases, he doesn't need to state in explicitly. So what? Layoffs are being done to save costs or to signal doing so to shareholders. It is not a "let's be meritocratic and only cut the lowest performers" exercise. The overarching question is, with our insistence on remote working etc, how will we ever justify hiring from high CoL areas again?
If that value justifies the cost, there should not be a problem. Some of that value may move to low CoL areas and offer comparable value for much lower cost - then things will start to become complicated - this is totally based on the assumption that that value is only available in high CoL areas.
The problem is when you hire those high CoL areas, extract value by training others, and then discard them. This will make high CoL workers more hesitant to join a globalized employer.
Because low-performers are nearly impossible to identify, at least from a CEO level. There are two things one can be doing in a job:
1) Their job
2) Signalling to everyone around how much they're doing, and how hard it is
Universally, as you shift from camp 1 to camp 2, your job security goes up. There is no such thing as perfect transparency, and especially in careers like programming, it's hard to estimate how hard something is (or is going to be).
You can also do things like 360 reviews, which reward people who are good at making friends.
You can look at lines of code, which rewards 1000 lines doing the job of 10.
Every IC has their direct manager: team lead or something like that. Every decent manager knows who is underperforming in their team and secretly dreams about firing the slacker and hiring someone better instead, but rarely has such freedom. Now, the layoff is suddenly breaking. It's a no-brainer to jump the train and finally make it for the sake of the entire team.
Layoffs are coming. You're a manager. You have ten employees:
- Grumpy. Grumpy doesn't like you, and you don't like Grumpy. He doesn't keep you updated, and seems to sit in an office with a closed door. He complains a bit.
- Happy. Happy is your best friend, and tells everyone what a great manager you are. If all your employees were like Happy, you'd have perfect job security!
- Cheery. Cheery goes out and showcases all the great work he's doing to everyone. Everyone believes Cheery is the heart of the team.
- Praisy. Praisy is a good friend, you have kids in the same school, and you go to the same church. Firing Praisy would ruin a lot of relationships.
- Toss in six more caricature personas.
You cycle positions every 2-3 years in the company, and so no one can really tell how good a job you're doing from output except by signalling.
Your boss tells you that you need to fire 20% of your team. Whom do you fire? Whom do you keep?
If, as a CEO, you could count on every line manager and tech lead representing you, this might work. In practice, line managers and tech leads want to keep their jobs, signal the work they're doing, and keep their friends. They might also not be following their reports' work directly, and might not know whether Grumpy is the heart of the project (where this post started), or is in fact just playing video games.
I am a manager indeed. I more or less familiar with whereabouts of my reports, I know a lot about their performance and performance of their teams (some of them are team leads). I also know who is looking at the market for opportunities, who recently became parent, who is interested in relocation from their current country. I know who is safe to lay off from their teams, who is underperforming and who is currently vulnerable and it would be ethical to let them stay.
I really doubt this. Unless I'm working pretty directly with someone (that is, on the same specific project), it's hard for me to know how much they're really contributing. On my team of 8, I really only know how hard 2 or 3 of my teammates work.
I have doubts that a manager would be able to do this that much better.
Manager should deliver on time and budget in order to keep their job. It is easier to do having performing team. Performing team consists of performing ICs. Easy as that.
On the whole, though, it's easiest to do that with low expectation setting. If I can convince management that what my team is doing is Very Hard and Very Important, my team will be perceived as high-performing. Unless the CEO is sitting in on sprints, except for extreme cases, they won't know better.
If you're in a large corporation, and your team does more with less, but your director constantly sees the output of another team, who gets laid off at the next layoffs? As a manager, how are the incentives split between managing your reports, and managing your director, the CEO, and the rest of the org?
This problem isn't specific to management. It's any time you've set up incentive structures, from teaching-to-the-test at schools, to how we select the CEO themselves.
I don’t get this - did every single company hire hundreds of people for no good reason? A global event forcing folks to temporarily use more online services is, well, temporary. I just don’t get the mindset that triggered all these companies to mismanage their teams so badly.
It's quite simple: If you don't follow the herd, you risk being blamed if you fail. But if you follow the herd and do what everyone else is doing, even if the herd runs off of a cliff, nobody points any fingers.
You'd think somewhere, in at least one of these larger tech companies, there would be a leader boldly proclaiming "this is our time to increase our investments and beat our competitors!" But it turns out there is even less diversity of thought in tech leadership than there is racial and gender diversity.
That said, Gitlab may be making a very prudent decision given their circumstance. I don’t know enough to conclude one way or the other. But considering what they are doing so closely mirrors what nearly everyone else is doing, skepticism is warranted.
It makes me sad. These are actual human beings losing their jobs. I guess they don't include “human cost” or “how much pain we inflicted” as a column in financial reports.
In many cases, these were people they shouldn’t have hired in the first place. When the herd said “hire 10% more employees!” the same lemmings did as the herd commanded.
It certainly isn’t the fault of those being hired, but it might have given them a chance to find employment somewhere that truly needed their skills and didn’t see them as “headcount”.
No, because the rising tide of automation should, at least ostensibly, lift all boats. If the extra utility created by automation is captured by technocrats, that’s a political and social problem, not a technical one. Pointing out the ways that technology can be abused isn’t an argument against technology - it’s an argument against abuse, and for governance that optimizes the wellbeing of constituents.
20-22 there was basically infinite cash sloshing around the system. If your competitors takes advantage of that, hire like crazy to build out and innovate, what do you do?
Not saying it’s good management of a company, but that’s the mechanism driving this.
Companies hire in a frenzy based off future growth, esp. in tech, not exactly always current needs. How many times have you heard a recruiter or someone say in a company all-hands that we're going to grow our engineering team 300% by EOY, or TRIPLE our headcount.
Laid off GitLabber here, the funny thing about this is the promotion season just ended. A LOT of people got promoted, so their employee cost is probably a wash after these promotions. Make of that what you will.
My company is doing the same thing. Layoffs haven't happened yet (but anyone who isn't in denial knows they're coming), but we probably had a record number of promotions.
The reason for this is that you want to butter up the employees you're going to keep before layoffs. Getting promoted after you saw coworkers you respect get laid off makes you feel gross, and companies do need to do something to increase morale.
The funny part is many people at my co. believe promotions are evidence that we couldn't possibly get layoffs.
Same at my company. I see that many people got a BS promotion because their bosses are good at politics. Meanwhile about 7% were laid off and our bonuses were taken away
What’s annoying is these companies maintain a “Careers” page with a bunch of job openings. “Oh look we’re the ones who are still hiring. Psych! We’ve been working on firing thousands!” At least GitHub shut down their careers page weeks before they announced their cut.
They removed about 60% of listings back in January (without notifying candidates, mind you), and seem to have removed another chunk today.
An optimist might assume that the remaining listings are legitimate, although it's possible that some recruiters are yet to come online and remove further listings today.
You're missing the point - the point is to send a message, to employees and to the investors. That they're SERIOUS COMPANY that does the right thing. Follows the market. Listens to economy. That won't hear complaints from the entitled lazy overpampered engineering workers. That they need to get back to the factory and be like all other quiet labor. That HARD DECISIONS can be made without regret when bankers ask for them.
Exactly- Facebook laid off 7% of their staff and then followed it up with a $40 billion stock buy back. That's over $3,600,000 per laid off employee. The economy isn't the issue here, the companies know that since layoffs in mass are happening they can get away with it without taking the same reputational hit as if they did this on their own.
The stock buy-back really exposes the game though... for $20bn they could retained their employees for another <5 years and just waited for the economic climate to change a bit... it's unlikely to take more than 18mo.
Whilst there's good arguments to be made about workforce planning during recessions, and how you need to not have "slack employees" doing nothing... there are similar arguments to be made about stock buy-backs (ie., that having 40bn in reserves is a massive economic cushion).
That they choose to weaken their cash position for the sake of a temporary boost to stock prices shows that their incentives arent well-aligned to most stakeholders in this.
Sort of yes, but also no. He pays his employees with that stock, and it being higher makes that a better deal. Additionally, being valued as a growth company is much better than being a value stock.
Mind you, Im not interested in buybacks but if they paid a dividend I'd hold them till they lose their advertising business.
>"Additionally, being valued as a growth company is much better than being a value stock"
Could you elaborate, how does the buyback help them to be valued as a growth company? Also doesn't the fact that he paid for the buyback with employee layoffs really damage FB as a prospective employer when FB at some point in the future again needs to hire? What was the logic here?
> how does the buyback help them to be valued as a growth company
Buybacks are what growth companies do, dividends are what value companys do (for whatever reason). But more generally, FB needed to show profit growth to go back up in value, and the easiest way to do that is lay off a bunch of people.
> Also doesn't the fact that he paid for the buyback with employee layoffs really damage FB as a prospective employer when FB at some point in the future again needs to hire? What was the logic here?
Maybe it does. But if they offer shedloads of money, I can't see people worrying about. For context, FB performance reviews are hardcore, so it's not like people were resting and vesting there. I dunno what his real logic was (I left in 2018), but the above seems reasonable, to me, at least.
Attrition tends to happen with the most qualified individuals leaving for other companies.
Attrition is not targeted or evenly distributed (depending on the goals). This can result in what would later be perceived as being lopsided compared to the layoff cut. For example (and purely made up), if part of the layoff was to cut back on marketing of the self hosted instances, then you would be looking to lay off marketing, and developer evangelists. However, if attrition doesn't hit those roles (because who's going to be leaving in this economy), you can have it take much longer to scale back that headcount. Saying to the developer evangelist "ok, we don't have something for you to do, we're going to switch you back to an entry level developer position with this other set of roles and responsibilities with a corresponding pay cut" isn't something that can be done easily.
If you target specific people, even if they do garbage work, somebody somewhere will find something to sue you over. If you do a less targeted layoff, you'll hit some of that target group anyway, and some will leave over their own volition after. Yeah you'll lose some good people but the whole point of this charade is that in management's eyes the engineers and knowledge workers are cogs in a machine, so collateral damage is okay and it'll all come out in the wash over the next few years with new hires.
I think there are several reasons to do it this way:
- Effective number will be higher because some employees will be disgruntled because of the layoff event and will leave on their own. It's usually estimated that the effective number is twice as high
- By doing a layoff you can quickly get rid of people who are overpaid. The attrition would take much longer. And with the regular performance review process you can only get rid of under-performers
- With a layoff you can get rid of entire teams, wouldn't happen normally
- Finally, and probably most importantly, shareholders expect a layoff, especially if other companies had already done it. Cargo cult CEO thinking. You could see the stock price rising for some of the previous companies announcing layoffs
Can attest to this. I worked at an open source consultancy for a while. During a tough period, and having made some bad bets (trying to get into the enterprise Java world), they did some downsizing - or actually, it was more like warning that there would be downsizing. A lot of people quit, not even waiting to get a severance package. Including many people they definitively weren't happy to lose.
- Why is this beneficial? The disgruntled will be the high performers. In no shape or form is this beneficial for culture.
- Assuming you mean average performers who are paid well, ie. well tenured? Considering these types harness significant domain knowledge it would be a strategic mistake to let them go in any meaningful number. The focus on smaller cuts tends to be low performers or recent hires.
- The only time this is beneficial is when there is indeed 1) a financial dire straights situation or 2) a significant change of course (ala Google) and blood letting has to be rapid, otherwise you're letting go of top performers in the process. It would be much cheaper to reassign to other teams given the cost to source/acquire and onboard top talent.
- Bingo. This is the primary reason almost always.
1. I actually also think it's not beneficial. However, company leaders must realise of this side-effect yet it doesn't stop them from lay-offs. I just wanted to point out a difference vs regular attrition, since this was the question asked by OP.
2. I could also be people hired recently, it is often the case that they're paid more than their peers on the same level.
3. Maybe re-assigning people from a dismantled team doesn't make sense because these people will be upset about their former team being dissolved and thus spread the negative energy to other teams?
As someone who was recently laid off at one of these % cuts at another company, these cuts target specific groups, for instance people who have higher salaries. Well paid people won't just quit.
I’ve seen this happen over the years and I’m always curious why there isn’t a discussion beforehand that offers the “overearners” a chance to stay at a reduced salary. I’ve asked people who were in those positions, and they’ve often indicated that they would have stayed at a lower salary, at least for a while.
You lay off hard to instill fear and legally-depress everyone's wages, but you give good severance so that when you inevitably want to hire people in the next two months (as GitLab is likely to do), they're aren't too terrified to accept your offer because of all the layoffs you just did. 7% of staff as "layoffs" comes out to about 150-ish? people, but they are also currently hiring for over 100 open job position at GitLab on job boards right now. GitLab is also up 74% year-over-year in quarterly revenue, and had their highest sales quarter ever just four months ago, according to their own PR department (https://ir.gitlab.com/news-releases/news-release-details/git...)
It's a pretty transparent process, frankly. Lots of companies are doing 'fake layoffs' (layoffs they don't need, done solely to appease the executive class, who strongly desire a recession), but unfortunately for them, the truth is that the economy isn't anywhere close to a recession, so they simultaneously have to keep hiring open, to keep labor incoming, to keep up with all the new business growth or increased sales they're experiencing right now.
None of what you have said is evidence that the intention is to "instill fear".
Also, I am not sure how confidently you can assess the health of Gitlab. Those open positions my not actually be "open". While their revenue was up four months ago, much has changed since then. Their next quarter might be down and they are adjusting now.
> isn't anywhere close to a recession
No one knows where the economy is headed.
> It's a pretty transparent process, frankly.
Except that it is not. Perhaps you are correct, but you really have no evidence their decisions were to maliciously "instill fear". It is equally plausible that they are doing what they think is best for the company and the remaining employees.
Scare probably in the sense that performance goes up and some people will quit additionally. So the 7% becomes 10-15% by itself, without them having to pay a severance package.
For the 7% you have to look like you care, since you will be hiring in the future and probably with lower salaries. Mass layoffs are a good way to lower wages throughout the industry.
Don't drive class division. Even the highest paid engineer is closer to being homeless than being any of the people deciding these layoffs. If the primary economic force you have is the sale of your labor, you are labor, and need to act like it.
Our "high" salaries could quickly evaporate if we're not paying attention while the owners of capital are taking advantage of excuses to wage class warfare.
Engineers are still not proles lol. And they will never be, so it's always funny to hear a bunch of highly paid SWE talk like they are class conscious workers. In reality, most are thoroughly professional managerial class, with 0 connection to anything close to labor.
It's even funnier when that discourse seem to mostly happen when firings happen, as if losing your highly-paid cushy job makes you a proletaire.
I mean, it does instill some fear though. Knowing that a lot of companies are going around laying off 5-10% of their folks means I'm a lot less confident I can get a new job if I'm laid off or quit my job. Which means I'm going to keep my head down and do my work and not rock the boat at my current job as much.
Yes, I'm paid well, and yes I have more of a cushion to land on if I got laid off, but I know folks who got laid off last year who haven't been able to get a new job for months. I don't have 6 months of all of my living expenses just laying around in a bank account, and even if I did, that pretty much wipes out my savings.
"Other people are doing worse than you" doesn't mean there aren't rational fears. Making an engineer's salary doesn't set you up for life within a few years.
Workers are workers. Even the most highly paid workers have more in common with the homeless than they do with capitalist class. Get laid off, maybe have a large medical bill, and then any worker could find themself desparate for just a roof over their head. So yeah, it sucks when these huge layoffs are happening, it sucks lot. The best thing that could come from this is for tech workers to realize how precarious their lives are and start standing in solidarity with other tech workers and workers generally. Don't try to drive a wedge between tech workers and other workers.
The working class and employing class have nothing in common.
Franky I'd say this sort of attitude is much more corrosive – the idea that people who feel they are being treated unfairly or poorly should roll over and accept it merely because other people are being treated more unfairly or poorly.
I don’t really agree with the idea that there is an underlying wish to “instil fear” or whatever. I agree even less with the attitude that we should all shut up and be happy so long as someone else is worse off.
The difference is the people on r/antiwork by and large have menial jobs, and/or are students in that very predictable/boring pseudo-socialist phase of their life. People on HN are making like $200k/yr typing JavaScript into a computer.
That's not necessarily true. I've never made remotely close to that as I've always worked on open source projects. Right now I could really use one of those 200k/year jobs but it looks like they're disappearing. So what's next?
It's just the first cut (for all companies). You can't do 50% right away as you don't know what will happen, so you need to do in steps. If they were just 7% over hired then they could just do attrition + a bit tougher perf reviews, or close a few teams over the course of a year but there is high chance for all companies they are not 10% or 7% or 15% over hired but 50%
The fun thing is that their R&D cost is dwarfed by expenses on Sales&Marketing and General&Administrative. So, if I understand their financial statements for 2022FY correctly, a 7% cut on R&D could lower their total expenses by 2% at best https://ir.gitlab.com/news-releases/news-release-details/git...
Even cutting their R&D 100% would not make GitLab profitable, if other expenses are kept the same, so economics is clearly not the reason for layoffs.
Yeah, I can't be sure. However, the "tech" part of the layoff most likely falls under the R&D expenses, which are relatively small compared to their overall costs. So I don't see, how cutting any number of core development workforce would make a significant difference. At least in the financial sense.
From a cost basis, this could possibly be true. But, with that type of attrition, you would probably see a greater percentage of high-performers go because they have good options. Then, you not only have lower producing staff, but it also becomes more difficult to hire top level talent back, because they want to work with other folks like themselves.
Isn't that attrition going to happen anyway? And with mass layoffs, wouldn't top talent, with plenty of options, be wary of a company who is likely to layoff 7% of its staff to please stockholder share pricing? I don't know the answer to top talent retention, but it seems easier and less expensive to turn your existing staff into "top talent" under the tutelage of the existing top talent and implement a hiring freeze with no huge news cycle.
Our banking corporation did that some... 7? years ago. Instead of random firing rounds happening locally and globally few times per year, where even locally best people were sometimes let go ie due to current under-allocation, and everybody would be nervous for months afterwards... just nothing.
Helped morale tremendously. Don't treat your employees like numbers, it will bite you back eventually, in all aspects including finances. Even most cold-hearted sociopaths on the top should grok that.
No, it isn't, and it's embarrassing at this point to continue insisting this. The macroeconomic environment is good, particularly in the United States. Business investment is growing at 3% a quarter (annualized), which is better than the average over the past decade. Employment is growing rapidly. Inflation has been tame over the past six months. And wages are growing steadily, but not rapidly in a wage-inflation spiral. In the US, the stock market is down about 10% over the past 12 months, but it's up over the past six months, and corporate earnings have been high.
Everywhere you look, the economic indicators are solid.
I do not have insight into Gitlab's customers, or the current state of Gitlab's business. But it is simply not true that the macroeconomic environment is tough. It is not. If there are problems, they are Gitlab problems, not macroeconomic problems.
But to be fair if a company can continue to operate or even grow while laying off employees, were these employees necessary in the first place ? I mean, should profit be given to employees, or owners ? Should company sacrifice their profit buffer to give it to employees they dont need ? Do they have a social responsibility to employees ?
I m european so we see work in a way more controlled, mutualized way were companies are expected by the state to provide for the citizens, but the success of the american model is that they disagree with us and are way more liberal with all of it. Should they change to copy us ?
> But to be fair if a company can continue to operate or even grow while laying off employees, were these employees necessary in the first place ?
You can drive a car a long way even if you never change the oil, but eventually it catches up with you. You can't conclude that an employee wasn't necessary if the company doesn't crash and burn soon after he was laid off. The negative consequences may not be manifested until years later.
You can almost picture the Executive team at Disney on one of their private yachts on an island somewhere being fed food and drinks cackling at each other about how they'll be able to convince people they "Had to" layoff workers.
Disney is laying off people because their movies keep bombing in the theaters. All they do is remakes and spinoffs of the famous old IPs they devoured, but that gravy train is coming to a stop. After a while people get tired of watching more half-baked Star Wars and Marvel sequels of bootleg quality.
They're running out of franchises to milk, and making something new and original is not in their corporate culture.
I’m guessing you didn’t read the article because Avatar made in over 2 billion dollars, exceeding even their expectations, becoming the 6th highest grossing film of all time. Or maybe it bombed, beats me.
None of these figures matter a damn. Gross figures aren't profit. And you need to adjust for inflation. Avatar 2 doesn't even show up in the top 25 all time when you adjust for inflation.
If the prod cost for Ava2 is $250 as reported, and marketing is roughly the same, then you're down to $1.5B before all the theaters take their cut. It doesn't mean that Disney netted $1.5B.
FWIW, Encanto (Disney Animation, 2021) and Turning Red (Pixar, 2022) were the most streamed movies on any platform for all of 2022 according to Nielsen. Moana (Disney Animation, 2016) was #4.
It's debatable whether these films feel like "sequel direct to DVD" or not, but I don't think it's debatable that audiences are watching them.
Encanto was quite good, Turning Red was Disney quality, not Pixar (I feel).
The problem with streaming is that you can stream repeatedly (believe me I know that) without incurring anything additional to Disney but costs. In the "old days" going to see Encanto in theaters would have cost our family easily $80+ - now that's just the cost for Disney+. And we would have gone, but why bother when it's available to stream?
They also cannot milk for MORE than the streaming cost/yr. I've noticed a lot of Encanto merchandizing on the clearance aisle, but I don't really have a way to track that.
I would argue “ability to stream a 1+ year old movie repeatedly, on demand” is part of what makes keeping your subscription worthwhile.
I think Disney intentionally took a lot of family-oriented films and kept them out of theatres during covid (reminder Encanto released in 2021) to avoid the optics of creating super spreader events where children are at the forefront. In their conference call they mention going back to theatrical releases.
Once the accounts get to it, it will be shown to have lost money. (I'm referring how movie studios will get financially creative to portray popular movies "losing" money in order not to pay royalties to actors/writers"
They brought some of the accountants from Hollywood to the bay area and now all equity not owned by the founders or investors mysteriously becomes worthless right before a liquidation event.
Disney has produced a bunch of duds this year, Avatar and a marvel movie or two were the only two shining stars in a otherwise drab sky. Lets look at Lightyear, a real bomb considering every other Toy Story movie has been a smashing success($220M made against a $200M budget). Or Strange World which did even worse($73M made against a $135-170M budget). Black Panther Wakanda looks like it had a good box office, but when compared against the first movie it did half the returns of its predecessor.
That's a funny one cause Lightyear was a really good movie. In some ways it was a much more mature sci-fi story than most of the big "sci fi" movie franchises.
strange world was really excellent. I never heard about it until it hit the streaming service, and then my kids watching nothing but that for like two weeks straight
Disney's film division made a huge profit last year. One of their films made over a billion in around 10 days, has passed the $2 billion in just over a month, and is still on track to earn another hundred million before it leaves theaters. (Disney demands, and gets, 100% of opening weekend revenues, and a declining share each week thereafter; the exact breakdown varies from chain to chain. For small/independent chains, Disney retains at least 50% of box office revenues for the first 8 weeks.)
Their parks and live experiences made a huge profit last year: $29 billion in revenue, and approximately $8 billion in operating profits.
Their tech-heavy streaming division was the part that lost money: over $4 billion for the year, almost entirely offsetting the gross revenue made by the the film division from theatrical releases.
Yep, that's right: the only part of Disney that lost money was the tech-focused part.
the comment you're replying to shows revenue up 8% for them. Is there any evidence of this claim? It seems like everyone is watching Andor, and they're fresh off the new Avatar movie, one of the highest grossing films ever? like i don't watch any of these movies, hate marvel and the new star wars, but you're just wrong?
It's a similar example of a company justifying layoffs with "difficult macroeconomic conditions" which actually doing very well. (Well I don't know if Gitlab are doing well but there are plenty of more examples like Disney.)
This feels like another semantic argument, this time over what "macroeconomic environment is tough" means.
You are correct in everything you say in your first paragraph. That said, it's fair to say that "sharply rising interest rates" are also part of the macroeconomic environment. You can say that it was silly for all these tech companies and investors to think the free money spigot would go on for so long, but the key driver for all of the fall in tech company valuations and employment levels is rising interest rates.
> If there are problems, they are Gitlab problems, not macroeconomic problems.
Yet literally every big tech company I can think of has had similar levels of layoffs. If these were Gitlab-specific problems you wouldn't expect the slowdowns and layoffs to hit everyone.
It isn't every big company. Apple hasn't, and they're the biggest of all.
I think that is the point: it does not feel accurate to say that "macroeconomic conditions are tough" or that you expect slowdowns while recording record levels of revenue, and yet company after company after company is using these imaginary tough headwinds to justify laying off 6-8% of staff, often while paying dividends or issuing stock buy-backs.
If it really is rising interest rates, then be honest. Say "due to rising interest rates, we are going to lay off 7% of staff... while buying back stock using our record profits."
Or maybe all these layoffs wouldn't be a problem if we in the US had a government that supported people more reliably with wages and affordable health insurance for a decent duration after a layoff.
Over hiring then laying some off shouldn't be a catastrophe in tech.
I also think people would have less issue with these layoffs if CEOs didn't make it sound like a short term critical business decision while being worth hundreds of millions of dollars.
I agree with you, but all else being equal, layoffs are stressful and... while I would prefer that companies have the flexibility to do so paired with a social safety net to lessen the impact, there's also an argument for employers who don't just plug in and then discard people like "resources".
While Apple did have a much smaller increase in headcount over the last few years, I wouldn't use Apple as an example while we're still in the midst of everything. In December, people were touting Google as an example of one of the layoff-proof companies. I didn't trust that logic, and I don't trust the logic that Apple is somehow immune when they're so closely tied into the tech industry. For example, I'm theorizing that a non-trivial part of their profits comes from supporting the developer ecosystem (who else buys max-spec Macs at scale?). Regardless of the underlying reason, mass layoffs and tightened budgets are going to dry up B2B profit streams.
To me, complaining about the reasoning used by companies while not currently at the head of such a company feels pretty darn foolish. You just don't have the numbers at hands to qualify what they are saying.
And I don't understand why you would care about layoffs from the tech industry (of all people) anyway, it's one of the best industry today and will probably for a while still (forever?). Maybe one of those engineers can help his local tech shop instead.
I'm not an accounting nor a forecasting expert, but I'm comfortable theorizing that the current quarter's financials of a company doesn't necessarily dictate its next moves.
I find people's tendency to generate outrage from nothing other than headlines to be very annoying.
This would make more sense if any quarter stood completely in isolation, but some of these companies have been making sounds about "economic headwinds" since before the last quarter started, setting expectations low, and then still managed to "somehow" deliver outstanding or even record results.
Hearing how bad things are going to be for more than three months as they continue to not, in fact, be that bad, I started to wonder if they even believe what they're saying.
And if they do, that's fine, but then why use the money for buybacks/dividends rather than saving it for the downturn they're sure is coming?
The sharply rising interest rates are a problem if you have a short runway that makes you reliant on debt or investor money, in which case yes you very well may need to cut costs just to keep the lights on.
But if you're Microsoft or Google? You're profitable. You're bringing in money hand over fist. Technically the high interest rates might benefit you because now you have more options of what to do with that giant pile of cash: you can lend it out and get a decent return!
So high interest rates maybe do justify layoffs in some cases. And even perhaps for GitHub specifically, though I'm not sure I understand the complex dynamics of how it generates value for Microsoft anyway...
:facepalm: Ah yes, thank you for the correction, I definitely misread that. I also don't know Gitlab's specific financial situation, so perhaps the general point still stands haha.
> Yet literally every big tech company I can think of has had similar levels of layoffs. If these were Gitlab-specific problems you wouldn't expect the slowdowns and layoffs to hit everyone.
Many might just take the opportunity because "everyone else" is doing it.
>Yet literally every big tech company I can think of has had similar levels of layoffs. If these were Gitlab-specific problems you wouldn't expect the slowdowns and layoffs to hit everyone.
That doesn't really mean anything other than they are all riding the same wave.
People say “free money spigot” but I don’t understand it. Google has 120b in the bank. How was it able to leverage nearly zero interest loans before? Why isn’t new risk free (nominal) growth on cash a benefit considering they have so much cash?
All of Google advertisers were able to make use of easy/cheap money to fuel their own business, in which they bought Google and YouTube ads with part of that money.
How much are interest rates relevant for Tech companies particularly growth oriented firms? They raise equity via stock not debt and VC firms aren't primarily raising money for their funds via debt either.
> Everywhere you look, the economic indicators are solid.
Sure, if you cherry pick the indicators. There's a pretty big one you're tiptoeing around: the Fed Funds Rate has gone from 0.25 in 2022 to 4.75.
> I do not have insight into Gitlab's customers, or the current state of Gitlab's business.
Well, that is to your detriment, both as a persuader and decision maker. Gitlab is publicly traded, and their fiscal year ended Jan 31, so you have a wealth of data you could be consulting to make the case. Yahoo Finance shows[1] they have zero debt, and margins at negative fifty percent -- for every dollar take in they lose a dollar fifty.
It's not too hard to imagine the company has been losing money while money was cheap to grow marketshare versus GitHub, but now that rates are up it will be much harder to issue debt and pay it back. It's not to hard to paint Gitlab as a company in transition from loss leader to profitability by cutting costs and reducing long term investments as they become more expensive. And I think describing that as a response to macroenvironment conditions is appropriate.
>Sure, if you cherry pick the indicators. There's a pretty big one you're tiptoeing around: the Fed Funds Rate has gone from 0.25 in 2022 to 4.75
Talk about cherry picking indicators—the federal funds rate isn't even an indicator. If you sincerely want to look at the data without cherry picking, please look at the top 10 US macro indicators [0].
Why would I want to look at the SOFR? That's the epitome of cherry-picked data. I just sent you a list of common economic indicators, and you're willfully avoiding them, which doesn't bode well for your argument. If anything, you should be referencing the yield curve, which is an actual economic indicator and has recently inverted. That would illustrate your point much better.
I'm asking what your preferred metric for interest rates is. Apparently you want to look at the yield curve slope? Which is fine, and commonly used as a leading indicator of recessions. But in a way its about the market predicting a change in the future value of money, rather than economic conditions right now. Sort of a second order effect, and IDK any timeseries that captures it that I can compare now versus last year with.
> I just sent you a list of common economic indicators, and you're willfully avoiding them, which doesn't bode well for your argument
You sent one random top ten listicle from investopedia. How do housing starts matter as a macroeconomic signal for a tech startup selling services to other tech companies? It won't, these are proxies for the larger economy. And it wont ever matter to them. Interest rate is the macro indicator that most directly affects such companies, so thats the one I'm discussing.
Other conditions exist, like every tech company undergoing layoffs and cost cuts is a factor but not usually treated as "macro." It's definitely a factor, and one worth reflecting on. But we're not trying to forecast global GDP here, so when an exec says 'macroeconomic conditions' think capital markets not rental vacancy rate.
That isn't a "random listicle", it's a list of major macroeconomic indicators that are very well known. You're free to discover for yourself that housing starts is among the major indicators used by the government and businesses in their determination of the health of the economy.
You're dismissing other indicators, like GDP and unemployment, in favor of the one you personally feel is important; that's called cherry picking. When determining the health of the economy, you need to look at all major indicators.
>But we're not trying to forecast global GDP
This has exactly nothing to do with trying to forecast global GDP; that's not what these indicators are for.
Investopedia? I don't have any advice here, but The Personal MBA[1] is a reading list, and their pick "How to Read a Financial Report: Wringing Vital Signs Out of the Numbers"[2] doesn't sound like the worst. But I haven't read it, so don't mistake this for a personal endorsement.
Record high credit card balances, record low personal savings, 40 year high inflation, rising interest rates and no sign of the fed stopping. Housing affordability at its lowest point since the real estate bubble and crash of 07/08. You are on some very good copium if you believe the economy is in good shape.
This economy is baffling to basically every professional who looks at it.
Just this week we saw a jobs number that absolutely rofl stomped the consensus expectations. At the same time the credit card number came in ism services business purchasing came in 35% over expectations and new orders were way over expectations as well. Businesses are out there doing something!
You could watch in real-time as the markets all did a collective about face on what the narratives should be.
I frankly don’t know if we are in a good economy or not, but there are lots and lots of indicators we are, so saying someone is on “copium” because they espouse that view says a lot more about your biases than theirs.
I listen to conservative AM radio a fair bit (because I'm not right in the head) and a local guy was really struggling with this the other day. "The jobs numbers, yeah, those are really good, but... um... economy bad? Can't possibly say it's good while a Democrat is President, but um, yeah, I was surprised at how good the job numbers were. But... it's still bad, somehow, because reasons. Inflation? Oh and we're definitely on the cusp of a recession, if not a depression, I'm just sure of it."
The situation's super-weird and it's evidently hard for people used to being able to easily spin the narrative one way or another to adjust to whatever the hell this is. It's definitely not the case that all indicators look great, but damned if the economy's not still trucking along.
It makes sense to me that the economy overall is doing well but that the tech sector specifically over invested during the pandemic and is now contracting.
That’s my thinking. Tech companies over-expanded based on predictions juiced by the pandemic accelerating things online, that actually didn’t happen so they are over extended.
But I can see being critical of a ceo saying it’s the macro environment when other industries are doing really well. They clearly mispredicted the future, that’s different than a broad economic decline.
That sounds like proper risk management then? If you don't know what's happening then it makes sense to play safe. The only problem is that those collective layoffs might actually slow economies down and exacerbate the issue at hand...
That's interesting. Thanks for sharing. (Eyeballing it) That seems to be a continuation of a trend since 2015. I wonder if that relates to the prevalence of rideshare, which also caught-on about that time? https://trends.google.com/trends/explore?date=all&geo=US&q=u...
There are always some measurements by which the economy is currently a disaster, and you are definitely going to hear those from companies that need to or want to lay off employees or from opposition politicians. A lot of other measures are solid now, the main thing is rising rates will hurt companies that aren't very solid financially and give everyone else a nice excuse to let go of employees.
The only economic conditions that matter to any company is whether they will be able to continue earning money the way they have been.
Since most of the companies doing 6-8% layoffs are concurrently reporting revenue growth, it isn't clear why they feel their future revenue is going to suddenly decline. It also isn't clear why, if they truly expect a decline, they'd continue to buy back shares or issue dividends. Seems like they'd want to keep that cash on hand, if they actually had concerns about the future, and weren't just using the social contagion as an excuse.
> The only economic conditions that matter to any company is whether they will be able to continue earning money the way they have been.
This is clearly not true, although it is probably the most important thing.
Interest rates matter if a company financed expansion using debt. Cost of capital matters if your plan is to grow through VC and you're not yet profitable. Changes in these areas can change a company whose books add up to one that doesn't.
> Interest rates matter if a company financed expansion using debt.
I haven't personally seen companies taking out operating loans using adjustable rates. Have you? If rates are fixed, then a company's expansion plans may need to slow or stop, but that's not the same as the company contracting.
> Cost of capital matters if your plan is to grow through VC and you're not yet profitable.
Which does apply in Gitlab's case, I think, but does not apply in most of the cases we have been seeing of 6-8% layoffs made at profitable companies, many of which are concurrently doing expensive stock buybacks or issuing dividends.
If your business model depends entirely on 0% interest rates, then a 7% layoff is probably not enough, you have a dead company walking. But 6-8% is what's popular, so that's what we get.
which says a lot if the economy is disconnected from the prosperity and economic outlook of the majority of people. In such a case, a "good economy" is just a synonym for "elite are still doing well."
The bottom 50% have collectively more than doubled their net worth in the last 3 years[1], and their wages have outpaced inflation even at its currently high level[2].
Inflation began to spike in the U.S. in April of 2021, when it hit 4.2%. Inflation continued to climb, hitting 7% year-over-year by December 2021. Sadly, 2022 didn’t see any slowdown in inflation as the rate peaked at 9.1% in June. Starting in July, inflation began to fall slightly, though it still sat at 7.7% in November.
Your atlantafed link shows unweighted wage increase peaking at 6.7% in August 2022. In what way did wages outpace inflation?
Click on the button to separate by wage level. Wage growth for the bottom 50% has significantly outpaced wage growth for the top 50%. Their wages grew at around 7.3% over the last 12 months, which outpaces inflation. It may have been a bit under when inflation was at its peak, so it's possible they just came out even with inflation overall, which is still pretty good when you're doubling your net worth at the same time.
This, I think, seems to be the important thing that seems glossed over in news articles. At certain income, the economy is doing great. But that is within the group that, historically, has always done well. When you have enough money, a lot of pain can be made largely removed.
Now, it is only anecdata. I am in IL. My household is above average in terms of income for US and my state. We are struggling ( not as much as so many other Americans, but I can't say I am comfortable say.. buying a new car or remodeling kitchen or even taking a vacation ) and it is not like we are throwing money at random indulgences and we did not even start school for our kid yet. By all metrics I should be in a comfortable enough position ( and I guess I am by comparison ), but to me outlook is choppy. And it is not just the boom/bust cycle. I am talking real systemic issues that will take both massive tax hikes and services reductions, but that would not be a popular message to take so no one talks about it.
I remember working sub $20k job. I remember being bumped to $30k ( ~US median? ) and I can't even begin to imagine anyone having to live on that today.
To your point about services reduction, I don't agree. I think more of a re-allocation of where capitol is going is the cure. We should increase or create new social programs that incentivize native births, home ownership, making it possible for most households to have just one person in the workforce, etc - and reduce the money that goes towards foreign wars, foreign agitation, welfare for nations across the world, etc. And I agree, tax hikes but targeted at the financial system which makes money in parasitic ways. In short, the economy needs to be optimized to the benefit of the lower and middle classes, the working class, and no longer to the 1%. This all probably requires heavy nationalization of banking and major industry. I dont see this as an evil and mistrust those that tell me to fear putting the power back in the hands of the people and away from the elite.
<< And I agree, tax hikes but targeted at the financial system which makes money in parasitic ways. In short, the economy needs to be optimized to the benefit of the lower and middle classes, the working class, and no longer to the 1%. This all probably requires heavy nationalization of banking and major industry. I dont see this as an evil and mistrust those that tell me to fear putting the power back in the hands of the people and away from the elite.
I disagree. The only way to even begin thinking about selling it to the public, which happens to include moneyed interests is 'shared sacrifice' ( similar to how a war effort would be sold ). In pure mathematical terms, we really should be doing both already. We don't because things did not get bad enough yet, but once it starts, it will be a little hard to stop. Shock therapy is necessary to get things under control. And the longer we wait pretending it can be 'managed', the worse it will be later on.
<< I think more of a re-allocation of where capitol is going is the cure.
From where to where? I don't automatically disagree, but 'entitlements'(depending on how you define them ) are somewhat protected from touching and 'defense' is even harder. Re-allocation is not going to happen, because even current allocation was a result of heavy compromises.
I disagree based on the information provided so far. If you have math to back up either point, please share. Right now, we are still running US on continuing resolutions suggesting that balanced budget now is just not possible. Something is wrong and it needs to be corrected before it gets much worse.
> … is shared sacrifice similar to how a war effort is sold.
You actually posed a solution here not a disproof. Yes all this requires selling changes to the public and under a social message. One doesn’t need math to know this, it is intuitively true.
> from where to where
I already answered this.
> re-allocation is not going to happen because even the current allocation was a result of heavy compromise.
So anything that requires compromise cannot be undone? I’m not tracking your logic here.
I think you are looking for more evidence to backup my suggestion. See 1930s Germany as example where this model was followed and resulted in one of the greatest economic turnarounds of all time.
> inb4 muh nazis and Holocaust
Doesn’t disprove the economic turnaround that transpired.
<< So anything that requires compromise cannot be undone? I’m not tracking your logic here.
I am convinced, just about anything can be done given enough effort, time and money. That said, how much of those would have to be expended to undo current compromise status quo? I personally would venture a lot more than most people would be willing to give in exchange.
<< See 1930s Germany as example[..]
Um.. yes, because US just happened to fund that recovery ( and of entire western Europe ) via Marshall Plan. Who, exactly will fund US recovery? I am not sure if you noticed, but central banks have been looking around for an alternative to USD[1] so further debt binge may not be an actual option soon.
This brings me to the original point. Drastic measures will eventually need to be taken. If those are taken now, they will be much less painful.
<< inb4 muh nazis and Holocaust Doesn’t disprove the economic turnaround that transpired.
I am not sure this adds much to the conversation. I will ignore it for unless you think it is relevant. If so, please elaborate.
Eh, the US didn’t fund the German recovery. I think you seem to be confusing pre WW2 Germany (30s) and post war Germany (50s). The German state before national socialism was having hyper inflation, spiraling unemployment and a failing economy. The national socialists created one of the greatest economic recoveries of all time. It took the entire western world plus Russia to conquer it.
Post war Germany was hallowed out and the nation is a husk of what it once was, basically a US vassal state.
Then, sadly, you are even more wrong than before when I gave you the benefit of the doubt. 30s Germany got their stuff under control for reasons that are kinda frowned upon these days ( actual fascism - as in convergence of state control and private sector, waging war and annexing parts of Europe for lebensraum, removing from society perceived outsiders, dissidents and other undesirables and so on ). I would like to think you are not suggesting those solutions implemented.
If you would like to rebut, please give me the 'good policies', 30s Germany implemented. I worry that may you have the 'national socialism' part confused at best.
<< Post war Germany was hallowed out and the nation is a husk of what it once was, basically a US vassal state.
Somewhat accurate. How would explain the Nordstream debacle then?
edit: I decided to pre-empt it a little. I am not interested in discussing whether fascism was left or right wing ideology. I had this argument before it gets ridiculous fast. I am going to bow out should it happen here.
<< Then the system propaganda has worked fully. You police your own speech.
I will expand a little on the why so as not to look like I am being difficult. I am actively avoiding the conversation I mentioned not because of propaganda, fear thereof, its impact or even because I police my own speech. I avoid it because it is largely pointless. For better or worse, both major parties in US noted that you can make anything work well if you compare the other team to nazis. For that reason and that reason alone, you will see constant bickering whether fascism is a left or right wing ideology, which manages to completely miss the point, because it does not rely on two poles of US politics ( that likes to keep things simple for people ) for its origin. It is like trying to put a square in a round box. It can be done, but nuance will be lost.
<< Why not? Cause the current ruling class frowns up it?
No. Because it is a bad idea. It is difficult to put in words how bad an idea it is, but I will say this. For all my beef with current system, at least it has a degree of predictability and stability to it, which is more than most periods that came before it. It is pretty selfish, but I would like that state to continue for as long as possible. Proposed solutions will not make for a stable society.
> For better or worse, both major parties in US noted that you can make anything work well if you compare the other team to nazis.
Agreed, I think this serves a common purpose as other generalized propaganda on the subject. The idea is to poison the well concerning any good-faith discussion of national socialism such that people self-moderate and dismiss the idea prima facie. In this very thread, I pointed to the economic recovery in pre-WW2 Germany which was undeniably facilitated by a shift to nationalist, socialist policies. When I did, you dismissed the idea immediately due to "facism" - announcing you'd withdraw from the conversation if indeed national socialism was the topic.
> No. Because it is a bad idea. It is difficult to put in words how bad an idea it is.
Precisely, I've seen this pattern time and time again. It is prima facie a bad idea, but proof cannot be articulated. In such cases, the fallback is often (not accusing you of this) to attack the person suggesting the idea rather than the idea itself (ad hominem). I agree predictability and stability are ideal characteristics, but only in scenarios where there are other positive characteristics. Predictable and stable misery is a pretty bad state to be in. I think we can agree that the current system has many faults. One of these faults, I think, is that the system has optimized the wealth and opportunity for a very few in number. I believe the nation requires a shift in philosophy away from globalist, hyper individualism, and towards an inward looking (nationalist) stance that optimizes the wellbeing of the people (socialism). Such a shift in national philosophy, as was seen in pre-WW2 Germany, has shown an ability to correct for the excesses and decay of a globalist and individual culture, improving the outlook dramatically for the citizens. By many measures (num of children, unemployment, inflation, wealth, life expectancy) national socialism improved Germany dramatically.
It's the "we're in a downturn" crowd that is relying on vibes and feelings. GDP is growing. Unemployment is the lowest it's been in over 50 years. Real wages are growing for the bottom 50% of earners despite high inflation.
You should actually look at the concrete numbers. GDP and the unemployment rate are the two biggest economic indicators used in determining a recession, and these concrete numbers tell you that you're wrong.
Many people feel fine right up until the point they get diagnosed with a terminal illness. The point being, this would be like going to the doctor and having high blood pressure, high cholesterol, high blood sugar, etc. etc. The patient can be up, walking around, feeling OK, but in reality they are headed for a nightmare.
A bad one. What's the insight here? If a body were a nation-state, it'd be a totalitarian hellscape where life is cheap, individuals exist only to support the collective and some populations are invaders to be exterminated.
I'd call it a complex system. It's entirely possible to have a component in a system that may disrupt the whole system in a whole new, unpredictable way.
Just like some sort of asymptomatic tumor which breaks the whole body once it metastasizes.
Yes, and as I don’t want metaphorical chemotherapy for the country I’d prefer we chose a different metaphor. An analogy shouldn’t just be some strained parallels, it should lead us in useful and not destructive directions.
What is the relation between people's inability to notice having a brewing disease and business predicting turmoil in the future hence going for the diet?
Right, this is the problem. The stock-market / macro-growth figures look good, but /personal/ finances and true cost-of-living look to be in trouble.
If the "solution" is a bunch of layoffs, it's just going to compound the problem. The solution is all these companies that aren't actually dying need to raise wages to match all the recent inflation.
I think that's the part that many naysayers don't appreciate. When the average family is already under incredible pressure it does not take much to trigger a deep recession. Even if one or two percent of people lose their job right now that is going to translate into a lot of missed debt service, foreclosures, etc.
> Record high credit card balances, record low personal savings, 40 year high inflation, rising interest rates and no sign of the fed stopping.
Actually, those are all traditional signs that the economy is overheated. They're not signs that the economy is doing poorly, they're signs that the economy is doing too well.
Well perhaps. If you take a hyper-zoomed-in-view of this chart [1] then I can see how you'd have this takeaway. But contextually this is in the period right after a 1-2 year period where rates were consistently 3-5x above the average. Consumers drawing down on personal savings right now is a natural release from all the savings during covid, and in fact is a positive economic indicator because it injects a lot of cash into markets and that goes straight to corporate balance sheets. Probably a good time to be hiring, not laying off.
> 40 year high inflation
1. This is often good for companies and businesses, because it means that they get a free pass to essentially lower pay across the board for every single employee. While on the revenue side, since "everyone is raising prices" they get a free pass to adjust pricing UP to account for inflation, and then some! So in the end businesses are probably pretty happy with how inflation has played out this last year, particularly because...
2. The actual pain experienced from inflation is more connected to the area under the curve. If we had sustained 40-yr high inflation for several years, then yes that is truly disruptive to an economy. But an inverted "V" like peak (which is clearly what we have the last year [2]) means a single shock, but after that everything resettles. We're clearly in the resettling period, as current inflation as of December is only 6.5% and dropping quickly. That may feel painfully high for millenials accustomed to decades of near zero inflation, but merely newsworthy for another time and place.
> rising interest rates and no sign of the fed stopping
As I said in another comment, perhaps this is a reason for a small startup with a short runway and highly dependent on investor cash and bank credit to layoff employees, but Microsoft and Google? They're flush with cash and are not dependent on credit markets to survive. These layoffs are clearly about "showing fiscal responsibility" and "trimming fat", and not at all about a mathematical response to economic conditions.
As it is, there are plenty of signs that the fed will be stopping soon. Already rate hikes have dropped from 50p to 25p, and markets are indicating a complete end to rate hikes some time later this year.
> Housing affordability at its lowest point
One would think that raising interest rates would mean the housing market would totally seize up, right? In fact nearly the opposite has happened. Construction, housing starts, and housing completions are an a contradictorily high point right now, particularly in one of the most affordable segments: multi-unit housing! These giant real estate companies are not worried at all about interest rates and are instead plowing ahead adding tons of supply to the market.
Lenders are getting creative about how to get around high interest rates. Sellers often buy-down the buyer's interest rates. Adjustable rate mortgages actually make sense for once and are getting more popular. California is finally solving the NIMBY housing crisis and zoning high-density. Outlook in housing in general is pretty good right now.
And it is no wonder they have issues when their customer support is hostile. I used to pay for Gitlab but switched to the community edition after having to deal with their support over billing issues. Easier to use the free version than the paid version. Making money does not seem to be a priority.
Same here situation here (went from paid to free for a similar reason). We are a small team, so we don't represent a lot of $, but it's changed how I perceive Gitlab as a company, and it also means I won't recommend them anymore to clients.
> No, it isn't, and it's embarrassing at this point to continue insisting this.
Yeah, it feels the most charitable interpretation for the companies that say that is their CEO read doom-and-gloom predictions last fall, and hasn't opened a newspaper since.
My employer just put out good numbers for 2022 and what look like positive growth predictions 2023 -- they're not laying anyone off, but they're cutting budgets and letting go of contractors (mostly very good ones), which will really hurt our ability to deliver and maybe even negatively impact stability. I've heard that meeting the budget is the priority, even if the actions needed to do that are illogical. It makes no sense.
There is a great deal of uncertainty in the current economic environment. There was a pandemic, permanent shifts in the ways people live/work/travel, massive geopolitical events involving multiple, full spectrum global superpower conflicts, huge Ponzi schemes rising up and then collapsing in spectacular fashion (crypto), stagnating productivity (exacerbated by work from home), government bailouts followed by inflation hitting multi-decade highs and central banks mistaking raging inflation for something "transitory" and acting too late, and now skyrocketing interest rates, ongoing labor and supply chain issues, a looming recession and open questions about the ability of central banks to engineer a "soft landing" for the economy.
Investment, M&A and corporate spending activity has come to a near standstill in the past 6 months across multiple industries, as a result of the current economic uncertainty. Business loan default rates are expected to rise, there have already been increasing numbers of bankruptcies (e.g. Serta Mattresses, near default Bed Bath and Beyond, health care providers, etc). Not to mention the cascading bankruptcies of crypto schemes. The ramifications of permanent WFH have yet to cascade through the Commercial Real Estate sector - there are huge amounts of vacant office capacity that have yet to be written down, but we can expect to see sales of obsolete and aging office buildings at deep discounts. High interest rates also have an impact on the Residential Real Estate sector, with housing pricing declining, mortgage rates increasing, etc.
So 5-7% layoff is prudent for any large corporation in this economic environment, and layoffs / cost cuts have happened and will happen in many different industries, not just tech.
The macroeconomic problems facing all of these corporations are that labor is feeling empowered, that's it. Between union actions, NLRB actions, wages rising, low unemployment, and the whole return to work debate; power has subtly, slightly shifted towards workers. And it scares the shit out of the capital class. In response, they're culling the herd and raising interest rates to discipline workers.
The cost of money went up dramatically last year, and businesses which relied on very cheap (almost free) money for the last decade now need to make a profit or die.
They are therefore panicking about the near future (and rightly so), this is what they mean by 'The current macroeconomic environment is tough'.
> Interest rates are high and I am worried about getting my next round of funding or meeting minimum payments on corporate debt.
Because an overwhelming number of corporations take advantage of tax laws that make interest debt deductible, every interest rate hike leads to firing people and decreasing business investment, just to stay profit margin neutral.
IT industry has benefited the most from COVID along with drug companies, due to that, many if not all of them over hired by like 20% or much more, that's the main reason they're cutting ~10% across the board now when COVID goes away, it's a normal business boom and bust cycle decision to me.
Even though the macro economy are not bad or just fine, that still can't justify the crazy hiring those companies did in the last 3 years, thus the lay-offs.
On top of that, we have been in booming cycle since 2008, which is a long stretch, some adjustment is due.
For a company like GitLab, the widespread perception that macro conditions are bad is equivalent to their actually being bad.
The email says that clients are holding off on big software purchases, and that's GitLab's bread and butter. I see no reason to disbelieve Sid on this.
In general this is one of those weird things about the economy, that perception/expectations dictate a lot of terms. It gives me the heebie jeebies sometimes. If enough people suddenly stopped believing that stocks represented real value, we'd be in a lot of trouble.
All of that looks good but the current rate is at 4.5% with expectation to continue to rise.
That is the true underpinning of the economy right there. If everything else remained the same but rate is at 2% steady there is probably going to be a hiring crunch like we had in 2021.
> Inflation has been tame over the past six months.
No, I don’t think so. 6.5% [0] is still an absurdly high rate compared to the past 30 years. It is nowhere near tame and may still fluctuate quite a bit.
I also wonder where the widespread sentiment is coming from. Everybody had been expecting a recession on the basis of prediction markers like inverted yield curves and because it's historically due. That being said, no actual economic markers are actually pointing at one.
Lots of companies are using this and layoffs at other companies as an excuse to cut down their work force, which they (uncommonly) hadn't done for years (which might mean never for young companies). My guess is also that this is more acceptable to share holders because it allows companies to put some money in the bank in case a recession actually arrives. Being transparent about this would be more honest than blaming it on "tough macroeconomic environment". At least severance packages look pretty neat and there's lots of jobs out there still for software people. Hiring is getting a little easier for smaller companies too.
> No, it isn't, and it's embarrassing at this point to continue insisting this.
Your macro is not the macro that Gitlab is referring to. It's disingenuous to interpret it otherwise.
All of these tech companies "overhired" (in hindsight) because they achieved unprecedented growth 2021~2022. If you're Gitlab - who sells to software development organizations - and the whole market has thrown hand over fist into the software development organizations, you have no choice but to chase that market. If that market (this is GitLab's macro) cools then you simply cut back.
Y'all think there is something nefarious going on and I don't get it.
Let's be clear about what the macroeconomic environment is, because it has a specific meaning. I'll quote from another definition here, so I'm not merely offering my own interpretation:
> A macro environment refers to the set of conditions that exist in the economy as a whole, rather than in a particular sector or region. In general, the macro environment includes trends in the gross domestic product (GDP), inflation, employment, spending, and monetary and fiscal policy. The macro-environment is closely linked to the general business cycle as opposed to the performance of an individual business sector. [1]
If Gitlab had simply said what you said, then I wouldn't have commented at all.
Instead, Gitlab explicitly blamed economy-wide conditions for these layoffs, and that is what I take issue with. The economy is doing well. It's not all rosy, but in general, most indicators are fair-to-good, and trending better. (Manufacturing is one area that continues to trend worse).
And frankly, my comment was not directed merely at Gitlab, but rather the slew of layoff notices we've seen that appear to be copied and pasted from each other. It's comical at this point, and the idea that the broad economy is in bad shape is simply not true, and not supported by the evidence.
> Instead, Gitlab explicitly blamed economy-wide conditions for these layoffs, and that is what I take issue with. The economy is doing well.
And a macro-environment doesn't refer to just the economy. Per wikipedia: "The macro-environment refers to all forces that are part of the larger society and affect the micro-environment. It includes concepts such as demography, economy, natural forces, technology, politics, and culture."[0]
Btw, if you really want to get pedantic, you specifically used macroeconomic and macro-environment interchangeably, which also have two specific but interrelated meanings. Gitlab used the word macroeconomic. Which sort of tells me all I need to know about how you and other people really understand Gitlab's message, which is exactly what I was referring to - the macro "view" is that people aren't spending like they used to on technology. Look at every publicly traded tech companies and you'll see that. Combine this with political factors (inflation at recent historic highs) and the macro "view" or whatever term you want to use seems dim compared to what it was in 2021/2022.
> And frankly, my comment was not directed merely at Gitlab, but rather the slew of layoff notices we've seen that appear
> the macro "view" is that people aren't spending like they used to on technology.
Okay, so if I understand your point correctly, it's that Gitlab may have blamed the macroeconomic environment, but it should be fairly obvious to the casual reader that what is meant is that after the orgy of spending in 2021, tech spending is now broadly declining, and they can't ignore that. If sales are down, costs need to come down. So let's examine if that's true for Gitlab specifically, through their most recent quarterly data [1]:
> Quarterly revenue of $113.0 million, up 69% year-over-year
Gitlab's Q3 results showed higher revenue than any other quarter, and it wasn't close. It's many multiples higher than changes in wage indexes. Gitlab's 2022 revenue was nearly double their 2021 revenue, when technology spending was meant to be freely-flowing, and their second half revenue was higher than their first half. Gitlab is singing an entirely different tune to investors, and touting their rapid revenue growth.
There is no sign of any slowdown in Gitlab's revenue. It's higher than it has ever been, by a lot. Admittedly, Gitlab has not released Q4 2022 results, so there's been a few months since this release, but things have been improving over the course of the past several months, not deteriorating.
My complaint is not that Gitlab is conducting a layoff. If Gitlab over-hired, then fine. Course correct. If Gitlab wants to exit low-performers as part of a single broader cut, rather than manage them out, fine, do that. But don't blame the macroeconomic environment, especially when you're telling investors that the company is experiencing extremely high growth and improving margins, because it's disingenuous.
if, as you say, the economy is super strong and employment opportunities are robust, then nobody should worry about the layoffs because hey, you’ll find a new gig easily!
Many people have been at a place for a while, some over a decade. Massive layoffs means quick and picking individuals who rarely demonstrated poor performance.
What it means to someone being laid off is far more than the challenges in finding another place.
Plenty of fish and a rich dating scene out there. If you are dumped for dubious reason, would the argument that it isn't a problem at all to find someone else stand to not touch on the reasons?
Plus given the power dynamic at play, don't you think the debate should go on with the reasons for what almost look like a centralised decision making power deciding when millions people should be let go despite no correlation with poor individual performance and even business performance in many cases?
The world has just moved from a decade plus zero interest rate environment, combined with massive multitrillion dollar pandemic QE and accompanying hyperinflation, into a rising interest rate environment.
The macroeconomic environment is more volatile now than any year in recent memory. It is objectively tough, and cherry picking random indicators which aren't core drivers of the economy doesn't prove terribly much.
I think you would have to go back to the 70s and 80s to find similar precedent. If you look into the origin of the Volcker rule, you'll see exactly the kind of messiness the world might be in for.
Wow, things really are so rosy on planet jlmorton. But meanwhile on planet earth, and especially the Western hemisphere, real inflation has been going through the roof -- to name only one of the myriad economic problems.
Indeed. In fact 10 days ago the IMF upgraded their outlook for the global economy in 2023.[1]
These layoffs and their accompanying statements from the CEO talking about "challenging macroeconomic environments" are really starting to feel like CEOs just parroting each other.
Current layoffs are not due to macroeconomics, but more a normalization
of what happened in the last couple of yers. Most of the companies laying-off
they all over hired.
Tech went bananas hiring during the pandemic, and are only suddenly discovering that this may have been a bad idea.
You know who didn't? Apple. You know hasn't announced a hand-wringing, gosh-golly, tough times, BS announcement about layoffs? Apple. Got to hand it to Tim Cook, he seems to have stayed level-headed through the nonsense.
I imagine the saying 'be the change you want to see in the world' pervades the c-suite pretty thoroughly. Thus, if 'the current macroeconomic environment is tough' is not true now, with all these layoffs it'll likely be true soon enough with all of these layoffs and the resulting cascading copycatting.
I saw that in one place I was working - macroeconomic environment was always tough for them. Like 2014-2016 was not global depression and it was long past 2008 but somehow they were still in depression.
We had such situation in socialist Yugoslavia in the 80s, just before it collapsed. Most people just "went to work" without doing anything useful or producing anything valuable while still getting fairly good money. Government kept printing money while increasing foreign debt to keep people content as opposed to let unprofitable companies close so that people get laid off but hopefully regroup into more profitable ones. It lasted for some time, but when it finally came to an end it was really ugly.
I feel sorry for everyone that gets laid off, but perhaps that is better than the alternative.
The “good jobs report” is just smoke and mirrors to have something positive to say at the state of the union. Changing how you measure the number of jobs so it looks better is just par for the course for politicians. Using the old measure that 400k over the 100k expected is 20k less than expected.
Maybe they didn’t. Still smoke and mirrors though, we “gained” 500k jobs, even though payrolls would show a decrease in 2.5m. But it was expected we would lose 3m seasonal jobs. So voila!
It’s like when the government says we saved 50 billion in spending this year because we were planning on increasing spending by 150 billion, but only increased it by 100 billion instead.
I’m not saying Biden is only one that does this, but the economy sucks, and those think the spin put out at the state union means otherwise, are like those who admire the naked emperors clothes.
> But it was expected we would lose 3m seasonal jobs. So voila!
This is not smoke and mirrors, it's a seasonal adjustment. Without these seasonal adjustments, the jobs report would be completely and utterly useless. We always lose a massive number of jobs in January after the holidays, each and every year. Removing that seasonal variation from the jobs report is the only thing that produces a useful signal, and it's something we've been doing for your entire life, so there's no difference in the trend.
The economy is quite good. Record low unemployment, near-record high job openings, very low long-term unemployed, low part-time for economic reasons, rising wages, modest inflation over the past six months, record-high corporate earnings. There are some areas that are weak, particularly manufacturing, but it's just not even remotely true that the economy sucks.
> Everywhere you look, the economic indicators are solid
Everywhere? Have you been down a grocery aisle? The Ukraine war is likely to continue disrupting global food, fertilizer, energy, and raw material supply for years.
Boomer retirement is crunching capital. Finding investment will likely only get harder for the next several years.
China may be on the verge of a demographic, manufacturing, and political collapse.
I would've guessed GitLab would be unlikely to join the layoffs party right now, just on culture and internal/hiring image reasons.
Then again, I also thought Google might've been a holdout among the FAANG companies. Before, I figured someone working at Google could assume that, if they focus on the company and do great work (or focus on the perf/promo metrics/criteria that Google seems to want), that Google will take care of them.
Now, for both companies, I wonder whether, rather than lighting a fire under anyone who needs it, layoffs erode the unusual trust and intangible appeal they might've enjoyed.
(Obviously, Google will still have the selling point of paying very well (or pay OK, if RSUs and bonuses don't recover). And I suppose Leetcode interviews make more sense, if you imagine it coming from a musty old complacent Fortune 100 bureaucracy. And GitLab, though not known in the US for pay, will still hire people around the world, with transparency on at least non-layoffs things.)
Google doesn't need good will; they'll always be able to get commodity labor. As long as they take care of a large enough number of senior folks they will be okay. (Unclear they're doing this, ofc.)
Companies like GitLab are different; these layoffs seem extremely risky long-term. But they're unprofitable and capital has gotten a lot more expensive, so they might not have much of a choice.
Do the founders still believe in Google culture? It seemed to be styled as a place that other Stanford new college grads would want to go (money, status, lifestyle, ambition).
Without goodwill, even senior people pulling down $500K-$1M and performing very well are going to be thinking about when it makes sense to leave (for a competitor, startup, or windsurfing/woodworking).
Is there a single company anywhere that doesn't intermittently layoff employees? Like, I think its good, of course, to analyze and criticize, but why particularize it so case by case in all these threads? It just feels like a lot of missing the forest for the trees.
If you were studying an animal that has been shown in all prior research to intermittently eat its offspring, you wouldn't then stop at each animal and ask "why is this animal doing this?" You would start to generalize as a good scientist and understand that this is just how these animals sustain themselves. You wouldn't moralize the animals, you would understand they are apart of a deterministic system which requires this.
If you have a problem with layoffs and workers being chronically undermined for the sake of the bosses, then you have problem with our current economic order, not this or that company.
But as amusing as it is to riff off of your analogy, your point is still wrong. When studying the behavior of human beings, and corporations are people, friend, it is important to try to fathom the motivations of their decisions. You can’t simply look at the behavior of companies, even in aggregate, and pretend it’s scientific to say, “ah, that is simply how they sustain themselves.”
And in this case perhaps what people are upset about isn’t simply moralism, but the potential irrationality that drives the behavior we are all witnessing.
If it is irrationality, it seems like a huge case of mass-hysteria is happening!
When would it be time for you to consider adjusting your framework here? Is there really enough variation in the obervables here to justify seeing each company as its own fully-personed snowflake?
It does seem like a case of manic activity not unlike the overhiring that brought us to this point in the first place. As far as the economic validity of anything happening, who knows. I know better than to bet against the irrationality of the market.
Behavioral economists have ascribed economic bubbles to the same root causes as mass hysteria. Humans may become more sophisticated, but the tendency to believe in collective delusions are rooted deep in our psychology.
General question about this wave of tech layoffs: Has anyone done a breakdown of what roles have been cut? Is it management or product or engineering? Senior or junior?
My general sense is that every company is rushing to trim some fat while it's socially acceptable to do so. But where are they making cuts?
Here's the number that I keep tossing around: in June of 2019, Microsoft had about 144k employees. In 2022, they had about 221k employees. They're laying off 10k, which still makes a net gain of almost 70k. It's pure optics for wall street.
I'm not particularly worried but this is why you should always be applying and looking for another gig to have in your back pocket. Or, even better, be overemployed and work multiple gigs at once.
These companies will toss you out like an old shoe, so f*ck 'em.
Our company is hiring more sales. Trying to squeeze more out of the market before facing reality I guess.
Our investors also forced us to do layoffs and other savings because it’s good optics and their other portfolio companies are losing money fast. Even though we’re a net profitable company
No one has done this analysis -- I keep wondering the same thing. I'm sure it's insanely difficult to get accurate data. If (e.g.) the majority of cuts are in HR/recruiting, that's more of a signal of tightening up hiring for the foreseeable future.
I am waiting to see the C-suite get some accountability - not holding my breath. if you over-hired by 7-12% over a an 18-24 month period that's a pretty significant management mistake - you clearly did not have a pulse on the business and its operations. I fail to see why these CEOs still have their jobs and worse, are continuing to get their performance bonuses.
I'll have to find a new job in spring this year in IT after a one year break. I'm kind of worried considering all those lay offs I must say. I'm not a high profile candidate by any means.
I've always wondered if programming skill would be useful and transformative of traditional businesses internally (instead of a salesman pushing a B2B solution). But it's clear that traditional business have neither the know how or the money to hire software engineers in numbers that could actually affect such change.
I wonder if downturns like this offers them a chance.
I have thought about this too, it would probably be very innovative if smallish 100 person companies brought on software people to do menial work with eventual automation in mind. The problem is no competent software engineer is going to work for 60k a year and no company is going to pay 200k.
Anecdotallly I’m not hearing back a lot. I think positions are flooded with applications right now. Last year I would hear back for most applications at least to talk to the recruiter
From an investor POV are layoffs an indicator that companies management feel they dont have growth prospects? Companies, especially tech companies would rarely admit this openly, e.g. how they typically hold ever growing cash rather than pay dividends.
Logically you would think now would be a great time to hire if you genuinely saw significant grow/product rollouts coming. Especially if a company is making profit and not trying to extend runway, reduce debt, in world where money costs more.
In this context it is a sign they bend their knees and kiss the ring.
Shareholders have been feeling that the tech workers held too much power, and companies were openly / not-so-openly having a fight with their shareholders, so to speak (especially in cases like Meta).
With the new blood sacrifices, shareholders can rest assured that their profit > everything else.
There is no excuse. One way or the other it's really bad management. You may not realize it but 7% is a massive piece of the pie. Why did you hire those people Gitlab in the first place?
The macroeconomic environment isn't tough, my equity stock and shares could have been better but are doing just fine. And if it were tough, it would justify layoffs of 1%, not 7%. Covid, the Russian war and energy crisis have been going on for years now but they didn't stop you from hiring Gitlab. Your irresponsible hiring patterns show mediocrity, corporate chaos.
Exploiting the situation to rollback hiring mistakes is not justified. Nor experimenting with peoples' lives.
I mean Sid Sijbrandij has been a horrible CEO for Gitlab. Has squandered every meaningful lead the company had. If he was sharp and a good leader, they wouldn't be in this boat.
Generous severance, half the layoff size of other firms by percentage, particular attention paid to health care. I have always admired GitLab, and I remain impressed.
This is the correct answer. The Fed rate is the main driver for these layoffs. The fed is trying to cause a slowdown in the economy (including layoffs) in order to temper inflation.
Specifically the Fed is trying to wrestle away the monetary power that Labor has, quoting a "wage-price spiral". In other words, the Fed is trying to cause a recession in order to fend off inflation, at the cost of Labors current economic power.
Yes, it's a brutal calculus, but inflation is also really corrosive for labour, since wage rises tend to take a while to respond to inflation and... cause more inflation.
They are stuck on the horns of a dilemma they created 10 years ago with 10 years of sustained QE and ZIRP, which led to the asset bubble we now see deflating.
I agree that they are stuck in a bind, for sure, and they are definitely causing a recession in order to stave off the larger dragon/danger of inflation.
Also agree it's largely due to QE! I think the only thing I find weird enough to pause and think "huh, that's weird" is the timing. Labor gets market power and oh wow, we better fight inflation.
Maybe it just all happened at the same time and COVID caused it to bubble over. Just seems weird timing to me.
This isn't an explanation. The job market has been red hot over the past year, and the total of tech layoffs comprise a small fraction of overall job growth in the US. HN users think there is a recession because they are only focused on their particular industry, and refuse to look at what the actual economy is doing.
Employment usually peaks just before a recession, along with denial of course.
The real economy is not doing well globally, inflation is a serious problem, and the impact of the rate hikes will take about 10 months to show up (so should hit this year).
I've been reading these predictions on HN for almost a year now, and so far they've been false. If people keep repeating them, eventually we'll witness a recession and they'll be right, but that doesn't make their analyses correct, it just makes them a broken clock.
They're giving a broad time frame for recession to hit, and they keep moving it back, so eventually they will necessarily be right. In other words, they make predictions that are so vague, they necessarily can't be wrong. This is why their predictions are useless.
Fed reps are on record as saying interest rate hikes are to get a pullback in labor market, and that’s expected to affect lower paid industries, but with the relationship with investments, it can make sense to see it in tech
The tech sector didn't start layoffs early last year because they forsaw a possible recession more than a year ahead. Moreover, layoffs are still contained within tech. It's time for a new theory.
Besides the economic realities of companies selling shovels to out of work miners, companies always have people they want to layoff but generally want to avoid both the confrontation and publicity.
Once the flood gates open up by your competitors or the sector as a whole starting layoffs, it makes sense to get your own house in order.
Occams razor suggests that if the trend were kicked off by wildly profitable companies that have previously been fined for wage fixing then the cost of capital might not be the whole story.
Because you always need to find some reason why you lay of which is satisfying for various parties (through not really the people fired, but investors both current and future, people with shares, companies you sell to, the public, etc.).
And "currently everyone does so and the economy is bad" is a good excuse.
And there are many reasons why a company might lay of people even if it's currently not strictly necessary:
- you don't really need that many people (anymore), common for small companies which grew to fast
- you want to restructure your company majorly and doing it will less people is easier
- you prefer to go a bit slower, so that e.g. current investment money lasts longer
- you want to be more robust to a potential economic dive, so you reduce money cost at the cost of going a bit slower and in turn can compensate hits in actual revenue better (at least for some time)
- you have accumulated a bunch of people which are not bad enough to fire them because of performance but also you know you can get better people, so you use it as an excuse to let people go, go slower for a "not short but not too long" while and then rehire. Alternatively companies like Amazone do that every year fire bottom x% then rehire roughly the same amount.
- you expect salaries to fall in the industry as a whole by quite a bit
Lastly group dynamics to affect Investors, CEOs, Board Members, HR people etc. too, so it might be a "everyone does so so we better do so, too" situation (potentially forced onto the company by the board of shareholders).
7% is the amount of layoff larger companies can "in general" layoff without hurting operation too much. Hence why some huge companies lay of the bottom 7% of performers every year (and normally hire that amount too).
So if the layoffs come not because of hard "we have x to much cost" reasons but of "we need to be more robust for potential dives in profit and increased cost" reasons and an arbitrary number must be chosen which isn't affecting operation too much but also makes a difference 7% is a common choice "because that worked well for some other large companies". Especially when the push comes from shareholders without much company insight 7% is likely.
If your company is smaller you make decisions on a one by one basis (after having some target for rough performance where you cut). But the moment your company has 100+ or even 1000+ people that gets impractical so a % line is set for how many people need to be cut.
There are only so many numbers between 1 and 10 where the cut from the layoff is deep enough to have an effect and not too much. Going above 10 says very different things.
It's cargo cult corporate leadership. My company has less than 200 employees, so our layoffs weren't newsworthy, but the c-suite decide to cut 5% last week citing "trends in the industry." I can't speak for other departments but our engineering team definitely _is not_ bloated yet they still axed two positions from teams working on the highest priority projects in the company. Absurd.
- They are on venture capital, not profitable, and the process around IPO, being purchased, or getting more rounds of funding has been complicated by the downturn. So, they need to change their rate of burn to last longer.
- Companies are profitable and their leaders want to keep the profit margin for their owners (share holders). If income is down or doesn't grow to the level it had then they can lay off to reduce expenses which pushes up profit levels. This has become trendy in the past 40 years.
- Income has been reduced and companies are breaking in less money. They may no longer be making a profit. To return to break even (or profit) they need to lay off.
There are other reasons. These are some that come to mind.
Ultimately the only thing really regulating these labor markets are competitive forces. If all the competitors are cutting their labor costs, you have reduced risk of your labor jumping ship, less mobility, etc. and have opportunity to cut costs as well. You have an opportunity to reduce costs and increase profit and revenue at the same time.
It may also be the case that this is an actual correction trend in the market to overhiring. Whether or not that's the case or the target is more of the former is ambiguous to any outsiders so this will be the explanation given because it puts things in a more positive light than the strategic "we have a golden opportunity to cut labor costs so let's do it."
The economy and stock market impacts similarly positioned companies all at the same time. And in this corner of the Internet, that seems like "everyone."
There are other companies doing great -- Stryker (NYSE: SYK) is near their all-time high and has not done layoffs as far as I know.
Partly. Another factor is that VC money is starting to dry up. Yet another is that many companies piled on employees during the PANDEMIC! They found that they didn't need that much staff.
I don't know if Gitlab hired a bunch during the PANDEMIC! They might be back to pre PANDEMIC! numbers.
They found out they didn't need EXACTLY the same percent of staff than all the other herd didn't need? :P Even if they're massively different megacorps with different financials? :D
Some of it is that other companies doing it provides PR cover, where it's sort of implied that "It's not just us, look...we're posting similar reasoning".
Everyone is subject to the same macro-economic trends. Massive growth and free money the past few years, now turned into rising interest rates and a bearish market.
It requires exceptional executives and an exceptional executive data scientist today, no doubt. Though, based on my experience it is possible given mutual due respect. Executives are domain experts, and I’m a business economist-statistician / econometrician. We work together to pool our understanding given our vantage points and differing abilities, skills and knowledge. By working together, and applying the right skills to important situations, it’s possible to avoid a lot of conformation bias it would be difficult to avoid otherwise (and the result is growth and smooth operation). ie- through analysis, it’s possible gain alignment & prevent all kinds of erroneous assumptions (resulting in increased growth).
I’ve been performing it informally for many years and more formally for the last year and a half as Zapier’s Principal Data Scientist. I really enjoy combining my advanced technology, business, economic and statistical skills with large scale business opportunities to produce innovation for people and earnings for the company.
My goal is ensuring executives are making decisions using the best information possible. It’s highly collaborative to maximize the amount of pooled information (because executives are deep experts, too). Based on how it’s gone so far, I think it’s innovative and has a strong beneficial affect on the quality of decisions (and output as you’d expect). ie- applying more technology & skills improves output volume and quality.
Are you serious? Maybe you all should take a basic economics course. We are in a recession. Businesses know this. It doe snot matter if the Fed says if we are in one or not. Layoffs do not happen if the future business outlook is positive.
Every time a tech company announces a layoff, I'd like a corresponding announcement of where in their history this puts them. Back at late 2022 levels? 2021? 2020? All of these layoffs feel like a little purge after a big binge, not a serious signal of problems.
Companies generally give as little evidence as possible of layoffs before they happen. Morale and productivity take a huge hit as soon as employees start to realize what's coming.
If you keep an eye open on who's hiring on linkedin you'll see a surprising number of companies posting new positions will have layoffs the next week.
pay through unspecified transition period, but also 4 months salary PLUS 6 months health insurance?
that is such a nice severance package that I almost wish I worked there and was getting laid off!
But I have been thinking "the job market is still ok", but am starting to doubt that, it seems like it really is going to be a lot harder to get a job.
I am in a position to hire and fire people in this market, albeit at a much smaller scale. We only hire those that we can afford to keep, even based on our most conservative financial models, because it's the right thing to do.
When companies like GitLab hire you, they lie about their principles and values. It's a polite lie that obfuscates their true goal, which is to generate profits for only a small fraction of the people to whom they are accountable, at the expense of the remainder.
This is cowardly, and morally wrong. I hope that those who were affected by this lie will find greener pastures at companies which live up to their stated goals and principles, who work in the service of what's right over what's profitable.
It’s an easy opportunity for common to cut costs while making the same excuse as everyone else whether it’s applicable or not. If you do it when everyone is doing it, it’s not news and doesn’t scare shareholders the way it would if you did it at another time.
If they would lower their prices to be competitive they’d get a lot more cash. We tried to switch to Gitlab and at every turn they acted like We just weren’t worth the $$. Seems they want nothing but big enterprise accounts and they push everyone else to free
This rings so true. A best friend ran her business through GitLab for years. She was a subscriber for a team of 3-5 people, but recent pricing and plan changes [1] caused her to switch back to GitHub.
She's got a small team on GitHub and has all of the critical features for less than a single seat at GitLab now.
If these layoffs were just done to go with the flow and because everyone else in tech is doing it, holy moly will it go down as one of the worst actions a CEO can take in history. Gitlab lives, breathes and dies on customer trust. If I send them money I am betting on them being a good steward of my source code (_the_ most important asset for many companies) and host for my artifacts, CI, etc. Nothing gives me more concern about the near and long term future of the company than a massive layoff out of the blue. How can customers trust Gitlab will even be functioning or exist in a year? If I depended seriously on them today I would be rapidly finding and moving to an alternative.
You could start by going through some Accounting or Finance videos from edu sites like Khan Academy, and also spend some time looking at the financials for public companies on a site like Yahoo Finance. Annual statements are also available on EDGAR (https://www.sec.gov/edgar/searchedgar/companysearch) rather than, e.g., Yahoo Finance, but maybe a bit harder to parse even though its closer to source data.
I think you only need some basics to learn how to look at a financial statement and understand information like whether or not the company is profitable, or roughly how long the company can survive if things continue the way they are, or get better, or get worse. If you want to be able to really understand and assess a business and its financial health based on these statements, I'm not sure you can just learn that. I certainly don't have the confidence that I can do that yet. My feeling is that I'd probably have to work in the industry in some capacity where I am looking at this information daily, across dozens or hundreds of companies.
At best, I can pick up on anomalies that can later be explained (e.g., I saw there was a large amount of cash added to GitLab in the past year, and later it was clear that this was largely because of their IPO, which seems obvious but nobody told me there was an IPO before reading the statements (granted, the existence of the statements tend to imply this is a publicly-traded company)). That gives me some confidence that I know what I am reading, but I haven't done much outside of Khan Academy videos and taking a university-level accounting 101 course where I learned about the accounting equation, the accounting cycle, and how to write financial statements based on the financial events for a business.
In the US at least, there is a baseline standard based on Generally Accepted Accounting Practices and SEC reporting requirements. Generally it is reported quarterly (every three months) with a big year end summary.
They’re a bunch of terms and abbreviations you’ll also need to understand eg FY means Fiscal Year, what the various GAAP measures are, and often many companies and industries have their own non-GAAP measures.
To really understand it all takes a lot of work, corporate accounting is nothing at all like managing person cash flow, there are a lot of accounting practices you need to understand like depreciation, how revenue is recognized, etc - all of which can be games to a degree.
Note that a private company doesn’t have to release this kind of info.
Interesting. Looks like the bulk of their spend is on sales and marketing, which I suppose makes sense in that these companies require using this kind of money to acquire new customers. But obviously that spells out the questions, how sustainable is this business model, and also, how much of this are they decreasing in addition to or as part of the layoffs?
This is on the Condensed Consolidated Statements of Operations. Total OpEx: 351,625; Sales and Marketing as part of that is 190,754 or about 54% of their operating expenses. I don't read finance statements that often so I don't know how normal this is for the industry.
Layoffs make sense if you need to extend runway past the current economic climate (valuations are down and it could be very painful to raise now). Basically if it's make or break.
That doesn't describe the big tech companies who will certainly suffer greater than 10% lost productivity and opportunity cost and could easily weather a long down trend.
Weathering the trend only really makes sense when you know there is growth on the other side. Maybe a lot of these companies grew to accommodate the explosive growth caused by working from home and they are no longer certain they really need the extra workforce in the coming few years?
It's interesting the number of company layoffs recently that have listed "you can keep your laptop" as part of the severance package. Is it possible that shipping charges for layoffs of this size plus the overhead and personnel to deal with such numbers of returns is more expensive than just having employees keep them?
Most companies, especially remote first ones like Gitlab, don’t have sizable IT departments that could deal with receiving, cleaning, reformatting, and deploying hundreds of laptops anyway. Can you imagine the poor technician who gets 150 laptops FedEx'ed to his house? The company is paying tens of thousands in severance costs per employee, way easier to just add the mostly-depreciated laptop onto that figure than deal with the logistics.
Considering the huge "organic" turnover Gitlab had already, they lay off 7% every month already.
They always grew thanks to the sweat of remote workers they already fired on the spot without any remorse. The excuse of "our commitment to responsible growth" is really cynical.
I really looks like swinging the word 'macroeconomic' is a wildcard to justify just anything.
I'm tempted to see if I can get away with horrible shit by just appealing to it. "Agent, I got in the drugs business fue to the current macroeconomic situation..."
These small percentage layoffs seem a bit pointless.
A lot of these companies were hiring right up till their layoff (including gitlab if their careers page was accurate last time I looked). Just appropriately pausing hiring would deliver similar savings.
I'm a huge supporter of GitLab, I love their product. Facilitated the use of it for my work and really admire how open their product development and company morals are. So when I say that this is probably one of the worst decisions they can make I hope you can understand I don't say that casually.
The problem with running an open company (check out their handbook[0] if you don't understand what I'm referencing) is that you can be held accountable to your values when you break them. All these blog posts regarding the "current macroeconomic climate" make it sound as though they've been blindsided by the downturn in the economy. To me, that's just a straw man. If you listened to any economist or financial adverser, even while the economy was doing okay in 2022, most knew there was a recession coming[0].
Even if they didn't know that, and they were completely ignorant (of which I would expect multiple executive level firings), they bragged in the Q3 Earnings Call on 12/05/2022 that "We added over 200 new team members in 3Q and we continue to experience lower attrition than the industry"[2], undoubtedly as they were planning layoffs. According to Wikipedia, Gitlab had 1,630 employees in January of 2022, so assuming they added 500 new employees in 2022, 7% layoffs would be about 150 positions. Given that, I love this quote from that same call[2].
> As Sid and I have said over the last several quarters, our number one priority is growth but we
will do this responsibly.
The "I" that quote is Sharlene Seemungal, acting CISO[3]. I don't even have to research the layoffs to know that neither Sid nor Sharlene have suffered from the layoffs.
All that said, it's laudable the level of investment you took in ensuring the employees you laid off have a good transition--but it would be better if you didn't play the corporate bullshit shocked pikachu face game when the downturn everyone knew was coming came and actually hired responsibly.
Severance: A single payout equal to four months' base salary, and payments will be made according to local processes and timing requirements.
Equity: We’re accelerating vesting through 2023-03-15 and removing the vesting cliff for team members who have been granted equity and have been with us for under six months.
Healthcare: Based on location and current benefit options previously selected by team members, healthcare premiums will be covered for up to six months, where possible. Modern Health for mental health support will continue for all team members for six months.
Hardware: Team members can keep their hardware and home office equipment subject to our security protocols.
Career support: We will provide outplacement services with a third-party vendor, including coaching, resume building and guidance, and job-seeking support.
Where’s your entrepreneurial spirit? Companies will pay at least $1,000 to offload the negative PR of copying others’ layoff emails verbatim. No brainer.
The takeaway is that layoffs are extremely trust destroying for employees NOT laid off, and in the end not clear they're a financial net positive. Both with direct and indirect costs (lack of engagement from employees, etc).