Because it is more expensive to borrow money. Think of it like this, if it costs 1% to borrow money and you can use it to generate a 4% return with a less than efficient operation, the equation makes sense. However when that money is now 4% to borrow, you are forced to increase the efficiency of the operation or shut it down completely.
Ask HN: Why are big tech companies having mass layoffs?
11–20 of 94 posts
Re: Ask HN: Why are big tech companies having mass layoffs?
#12Big tech is more focused on becoming software and automating everything than people. As people become numbers and targets and nothing more than dumb robots with opinions, they become more replaceable. Big tech leading the charge for woke mob diversity. Start your own company, run it, eat big tech.
Re: Ask HN: Why are big tech companies having mass layoffs?
#13That some orgs overhired is not in question. What is _insane_ to me is that everyone being let go seems to be an engineer, while the DEI teams remain untouched. That section of the office sure seems to have a lot of free time, between shaming the rest of the company. Shows the power hierarchy I suppose. Wild world.
Engineers are probably a lot more expensive than a DEI employee
Re: Ask HN: Why are big tech companies having mass layoffs?
#14simple, ChatGPT will write all the code now
Re: Ask HN: Why are big tech companies having mass layoffs?
#15That some orgs overhired is not in question. What is _insane_ to me is that everyone being let go seems to be an engineer, while the DEI teams remain untouched. That section of the office sure seems to have a lot of free time, between shaming the rest of the company. Shows the power hierarchy I suppose. Wild world.
If you want to find out who controls you, think about whom you cannot criticize.
Re: Ask HN: Why are big tech companies having mass layoffs?
#16Short answer: they depend on revenue from businesses, ads, etc, and that is going down or likely to.
Long answer: many people naively think that it's all about the money a company has, and these companies have a ton of money, so why are they laying off people when they could weather through the storm.
While this feels like it should be the case, the answer is that it's a bit more complicated than that. Whether it should be more complicated or not is besides the point, sadly. Business health tends to be measured more in terms of cash flow, and in simple terms, more going out than is coming in is bad, even if you could deal with that for many years.
There's also the difficulty for many of these big multinational companies that their cash reserves might not be in the right place, and moving them might incur significant taxes.
Investors are theoretically investing for the prospect of future returns, and while with growth stocks this is in the form of increased share value, in the long term it's also about dividends which come from profit, and so investors want to see a long term profitable company.
Also worth noting is that while, yes, CEOs are largely compensated in stock and therefore interested in seeing it go up, this is also good for the business in a general sense, as it makes it easier for them to raise money for things by selling stock.
I don't necessarily agree with all of this, I have problems with the taxation issues, and I also think it's a bad thing for many employees, but my general point is that this is complicated and there are reasons for it, even if we might not understand or agree with them.
Re: Ask HN: Why are big tech companies having mass layoffs?
#17Amazon, Shopify, Wayfair, Google, Meta: all of these companies make money because e-commerce exists. The higher the proportion of all sales taking place on e-commerce, the more valuable the companies are. For Google and Meta, it's the advertising portion, but it's still impactful. If we track online sales as a proportion of all sales over the last 20 years, there's a pretty stable trend of increase. Then COVID hit, l…
> They all bet that this was a permanent 5-year jump-ahead. They were wrong
This is the part that really needs explanation. How was every CEO of every major tech company wrong?
Why aren't we having a big tech CEO layoff for massive wrongness?
It certainly feels like there's a lot of groupthink here in any case.
The Google severance looks pretty generous? That plus the last couple years of overhiring is going to end up being pretty costly for the company. These were expensive mistakes.
Re: Ask HN: Why are big tech companies having mass layoffs?
#18I mean if you look at the total number of employees by year, all these companies have still added massively to their headcounts in the last 3-4 years. It is not sustainable to continue adding 20-50k employees per year to your payroll.
Indeed. This article has a good graph of growth/hiring:
https://www.cnbc.com/2023/01/18/apple-had-slower-headcount-g...
Most grew 15-30%/year the past few years... probably since money was "cheap".
Re: Ask HN: Why are big tech companies having mass layoffs?
#19That some orgs overhired is not in question. What is _insane_ to me is that everyone being let go seems to be an engineer, while the DEI teams remain untouched. That section of the office sure seems to have a lot of free time, between shaming the rest of the company. Shows the power hierarchy I suppose. Wild world.
To be fair, those teams are usually not very big nor paid on the same level as engineers. And, these companies with layoffs still have massive headcounts and cultures to manage. Whether you like/agree with the DEI initiatives or not… much of the company will keep doing what they are mandated to do.
Re: Ask HN: Why are big tech companies having mass layoffs?
#20I think the simple answer is that "investors demand it."
Investors may indeed be predicting a recession, and it's probably true that many of these firms overhired. But there's no specific fiscal reason for most of these companies to cut staff--5% the cost of their workforce is not standing in the way of billion-dollar deals (e.g. MSFT/Blizzard) or long-term R&D spending (Meta, whatever you want to say about their Metaverse project).
Bluntly: cutting staff is the new stock buyback.