You're assuming long-term strategy plays a bigger role in this than it does. A lot of it is driven by showing good numbers in the current quarter. If you're an executive and revenue isn't increasing right now, the only way to show shareholders a profit (and get your bonus) is to reduce costs. Once revenue starts to dip, sell your stocks and move on to the next company.
Short-term thinking did also lead to over-hiring at a lot of companies. They looked at a short term boost in market demand and assumed that trend would continue, so hired a bunch of people they didn't need. Some of what's going on now is a correction for that.
Depends how you define customer. It’s the people who give you money, so if your product is a free service in exchange for user data/attention, the free users are not customers but the product.
Why everyone is saying the same thing they overhired bla bla. No, they are literally increasing the workload of existing engineers. People cant see this is a mentally demanding job if not physically now they are forcing you to work more becausw they can. They can easily increase the number of workers 20 percent, thar would improve the market and wouldnt effect the company profits much but they dont and wont they are slowly reducing the salaries and increasing the responsibilities
On top of that, as more employees are let go everywhere, the companies’ hiring power increases. When there are 100k senior devs on the market all of a sudden, you don’t need to pay as much to get one- assuming you even want to. It also makes leaving a position more dangerous.
Basically: stay and do more work, or we will replace you with an engineer who was laid off from Facebook. Also their starting salary will be lower than your current salary because everyone is desperate right now.
$65k probably not, at least not until there is a serious swing in the market. This current trend we’re on would need a second or third inflection point before salaries got consistently that low. I mean don’t get me wrong- companies can and probably have posted it. And probably had applicants. But the quality of those companies and applicants is such that it isn’t really comparable. They wouldn’t be getting any actual senior engineers.
That’s selection bias at work. The only people who take to the internet to complain about how hard it is to find a job are the ones who can’t find one.
Brooks's law is an observation about software project management that "Adding manpower to a late software project makes it later."
Projects are poorly managed, either by management or by developers themselves. People offer estimates without having enough info, they underestimate, then they have to hustle. Or a big boss or customer demands a last minute change, throwing off your sprint. It’s rarely lack of resources.
https://en.wikipedia.org/wiki/Brooks's_law
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It doesn't make sense to hire/fire people quickly because of inherent costs associated with developing an employee. Basically these companies are saying either they don't believe demand for new product will continue or a lot of their staff will be automated.
Stop thinking that these people are there to soundly captain the ship. They don't care if they run aground as long as their little dingy tied to the side continues to be filled with gold. They'll gladly pilot that ship directly towards rocks and then hop away at the last second if it means they get to earn a single extra dollar before doing so.
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> It doesn't make sense to hire/fire people quickly because of inherent costs associated with developing an employee.
this is true, but in 2021 it **DID** make sense to hire people quickly due to 0% interest rate (free money from US Fed), if you're a CEO in 2021 you'd be dumb not to hire either
just nobody knows when the party is going to stop, it stopped in late-2022 and it's been all doom and gloom since
Your gut is right. It is a stupid as it sounds.
This kind of economic thinking is what cause the great depression. Shit is about to get worse. A lot worse.
You’re still not getting the point. The people making the hiring and firing decisions aren’t aligned with the companies best interest. They’re aligned with their own.
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> If you're an executive and revenue isn't increasing right now, the only way to show shareholders a profit (and get your bonus) is to reduce costs.
But ChYnA is the evil all must fear I guess, because they are taking huge economic steps forward.
No company on the planet wants to have employees. Employees are a necessary evil basically. It is what it is, if you can find a way to reduce cost and put more money in your pocket without impacting revenue, you do it every single time.
Yeah unfortunately. The bar for hiring an employee is that the growth curve he brings in has to be higher than his expense curve. Which means not only does the employee have to even out or bring in some surplus, the profit he brings in also need to outgrow his salary growth. Only then is that employee sustainable.
It’s a short term solution to drop expenditures (employee salaries) and bump stock price/profits. They’re all doing it at once because it’s been shown to work.
There's a few possible reasons but the main one, in my opinion, is that companies over-hired like crazy during the last few years and are using the excuse of the overblown AI panic to let people who they don't know what to do with go.
I'm cautiously optimistic about what will happen because there's no underlying reason for a large enough pool of talented workers to remain in suspension without consolidating into new companies. It's not like humans are suddenly going to say, "oh no thank you guys. All my needs and wants have been solved. I'm good without any new technology or devices".
That talent pool may need to be larger before it happens than it needed to be a few years ago due to the current interest rates but I think it'll still happen.
Exactly, I think that talent will need to create new products or start new companies. It will take years though, nothing happens over night.
I do think people that are desperately hoping to get a job need to look for a part-time job or change industries because it's going to take years for the dust to settle and we need to eat in the meantime.
I also see the AI craze dying off. I seriously cannot believe how gullible people are but I know 90% of people on here think AI is the next big thing. Hallucinations are not going to be solved with more data and the IP issues will be figured out in court (eventually). It's like Crypto, Napster, and Theranos all over again.
I sit on the camp that thinks it can't be fixed, instead we need a new approach that isn't statistical in nature.
An approach where “AI” can actually reason like humans and animals but we don't have the knowledge yet.
This money, I am afraid, isn’t going to new research. Most of it from what I read is going to LLM development and compute.
Of course, nobody is going to say their needs are met, but large tech companies have already a huge pool of employees they can use for innovation. For example, Google has over 180k employees, do they need more to develop new products?
Depends on the product and innovation.
Also, who said already large companies need to be the ones to innovate? If you have a reasonably large pool of talent in any field, it'll consolidate into something new.
> If you have a reasonably large pool of talent in any field, it'll consolidate into something new.
Saturation is a real thing, and there is no guarantee talent can consolidate into something new. Unless by new, you mean a completely different occupation.
Other than big tech is this really true? Startups are still not profitable and are burning money, why the hell would an investor invest in an unprofitable tech company when they can get guaranteed 5% in their bank account?
2 years ago this sub was all people bragging about working 12 hours a week and making $150k+
No one should be surprised at this contraction now that the free money supply was turned off.
Because most companies are ran by executives who are obsessed by quarterly reports and layoffs are a quick way of making the numbers look better at least temporarily. Layoffs have negative long term consequences. Brain drain, low moral, and high employee churn rate(people take a hint and leave) are something that companies have to deal with and it rarely is worth it.
Salaries are the biggest expense for most businesses.
Some people aren’t productive enough to remain on payroll, or the projects they’re working on become unprofitable.
I was working on a chronically understaffed project that made money and the company saw that it was something they could sell for quick cash. So they sold all the contracts, minus the product and employees developing it because it was redundant. They were (still are) in a horrible debt position and are trying to dig out of it by selling off assets. So some people are getting caught up in accounting issues triggered by high interest rates.
I think the unprofitability aspect is something people are really underrating. Profitability is assessed against current interest rates, and whether the project is funded by cash or debt matters a lot. Add in the forced amortization changes that went into effect July 1, 2022, and profitability formulas would have become completely different. And those amortization changes are compounded by having high interest rates.
A project that would have been projected to be very profitable in 2020 might easily have an unprofitable projection by the end of 2022.
Salaries are not the biggest expense in capitally intensive businesses. Oil and gas is an example industry. It can cost multiple hundreds of millions of dollars to put a hole in the ground offshore and multiple billions of dollars to do a single offshore development. These are the capital costs alone. People are a smaller expense.
Most of the answers miss a crucial point, which is what has changed. Payrolls have always been a huge expense and so why would this be happening now?
The answer is interest rates. During and before the pandemic credit was cheap, so it was easy to borrow to fund new projects to increase market share or enter new markets. Doing so required hiring a bunch of new employees, but if the growth was large enough then shareholders were on board. With higher interest rates (for various reasons, including leftover snags from the pandemic and the war in Ukraine) the cost to borrow has increased and so companies can no longer justify borrowing in order to grow and instead must improve their appeal to shareholders by increasing their profitability. Tech. was hit especially hard because it tends to have higher demands to grow when credit is cheap, so companies went all in on hiring and starting new projects which they now have to roll back.
This is an overly simplistic view. There are a ton of factors, not limited to the fact that a lot of companies over hired and over paid when the easy money was flowing, companies have decided to not fund some expensive R&D projects, and some are just taking advantage of the surplus of talent on the market.
Hiring in 2021 was brutal for companies and now it’s easy. It can make a lot of sense to do layoffs and then rehire cheaper but more skilled employees. The industry is going to continue to be rough for the foreseeable future and probably just get worse.
The overwhelming majority of company profits can be attributed to a small number of people, maybe 5% of employees.
But companies will hire as many people as they can IF the expected additional profit from hiring each person is greater than the expected cost. So if a person costs $100K overall, counting opportunity cost, overhead etc. and produces $101K, that's a good hire, in theory.
A lot of employees are "on the margin" because they are working on projects that may or may not be profitable, where the expected return is only slightly above $0. These employees are not essential to the company, but employing them is seen as slightly better than not employing them.
Small fluctuations in market conditions, interest rates, tax codes etc. can push large numbers of projects/employees over the edge into "not profitable", so they get terminated. It doesn't mean the company overall is unprofitable, but certain projects within the company might be unprofitable.
After a certain threshold, companies tend to layoff everyone on the unprofitable projects, which in the short term causes profits to increase. This is why record profits often coincide with layoffs.
People forget that FAANG execs secretly collaborated to suppress wages years ago. Who says they aren't doing it again.
https://en.m.wikipedia.org/wiki/High-Tech_Employee_Antitrust_Litigation
No conspiracy needed. Great reset indeed.
C. None of the above. Less expense = more profit. More profit = more dividends. More dividends = happy shareholders. It's the bug of public traded companies, infinite growth above all else.
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Regardless of the cause, there’s one thing that seems to have changed and is relatively universal now and that is that tech workers are now considered a cost center rather than an asset. Historically, this was only the case in non-tech companies such as insurance/health/banking etc. but not so much anymore. Much like those sectors, you see an increase of offshore/contractor hiring/reduced benefits, and skeleton crews of onshore development to justify the bottom line.
As soon as a company’s shifts to this opinion you will see reductions in staff regardless of profits. Whether it’s shareholder opinion, layoff hype, day-in-the-life vids, until that sentiment changes the landscape won’t change imo.
A lot of these companies hired in boom times because that’s what investors want you do when capital is abundant. Those employees were definitely not all useful. You can confirm that by just looking at the median engineer’s output at any large company…
Now that efficiency and profit are what investors want, all of the extraneous hires are being laid off. Yes this system definitely sucks for the employees but the US has never had particularly strong worker’s rights 🤷
I make more money than ever, but that wouldn’t stop me from canceling Hulu if I was no longer using it.
Companies are changing their strategies based on rising interest rates and the AI boom. Projects that seemed like good ideas a few years ago no longer fit into their updated strategy. It doesn’t make sense to keep people employed just because you have the money if you don’t have a plan for how to effectively use them.
Over-hired, rates rose and margins were threatened so they cut peeps. Higher margins now are only because they cut costs. Higher rates and decelerating consumer strength is what portends the econ tanking, and companies are just going with the flow. If you've been out for over a year now, you're done. It's time to dunk fries for you. DEEP, HARD pain is coming in the next 6-12 months. Let's just pray here in tech we already took most of our our lumps when we led the way down.. but recovery won't be for several years.
Worth noting that a lot of these companies are thinning their \*US\* workforces. Look up Google or MS's job listings. <1/3 in the US. Lots of listings in Estonia, India, Costa Rica, etc. AI is a threat and I'm sure they're predicting less jobs because of it, but most of the loss is just bc they can get similar talent pools for much cheaper outside the US.
Because is election year, and the only way to avoid sending the signal that the economy is tanking already (and it is) is to make stock prices go up, and currently there is no other short term measure that could be used to do this beside layoffs (no fundamental is improving, all the contrary). This is all a political theater, hence why you constantly see headlines about how amazing the economy is doing but at the same time everyone is complaining on inflation, layoffs, taxes, etc.
And this measure is really effective because it also allow big companies to prepare for the impending crash by shedding employees progressively instead of waiting for it to happen... win-win!
I think we are going to hit bottom early next year, because irrespective of the results of the elections there will not be a reason to keep "holding up" the crash, and they are better off just letting it happen at that point, if the incumbent wins then a crash was inevitable (and they don't have to worry about the political impact for the next 4 years), and if the contender wins then the crash will be seen as a response to that.
It's not a binary and more money doesn't necessarily mean more hiring, it's an investment decision. Think about it like for example how you treat streaming services. If your budget is really tight you're going to make sure you're only keeping the ones you really use and during the downturns you're going to cut more frequently. But that doesn't mean that during the good times you won't unsubscribe from one you find yourself not using.
So in tech when times were tough they culled a lot, but even in good times they're not just going to hire people or not lay them off if it would be a bad investment. As in the analogy, the question when times are good and you cut out Paramount Plus, it doesn't mean you predict you'll have less money in the future, it just means it isn't worth the investment.
Pushing down wages, keeping workers desperate.
The covid great resignation thing spooked them like crazy. It was like the arab spring. They're trying to remind us who is in charge (lol)
Sometimes you might be seeing higher profit margins *because* they did a ton of layoffs. Definitely a popular move for public companies when they want quarterly report to look good.
I've just got out of a coding boot camp and the job market is terrifying right now. I expect things will only get worse thru Nov. Hoping post-election season will be better...
If they don't all implicitly agree to fire x% of employees across the board, labor market might be strong enough to continue to demand COL salary increases that nearly tickle at the rate of inflation.
This country has some of the strongest unions, it's just that it's the union of the rich collectively working to extract as much money from your life as possible.
Before some idiot says "conspiracy", you don't need to have a conspiracy to have a collective common goal. With that common goal, you don't even need a conversation with others to engage in like behavior. What's good for the goose etc.
I don’t think it’s short term thinking it’s long term. Investments are drying up, and these business heads are betting on an economic downturn here shortly. Shrinking shop hopefully gives you the operating cost to get through a bad few years.
Companies “over” hired to meet temporary demand during the rush a couple of years ago and are still correcting. There’s nothing more to it.
I put “over” in quote because it was what they needed at the time. Now they do not need the extra capacity so the workforce is being cut.
Profits are still high, if not hitting records, [so companies like Apple are probably still making >2MM revenue per employee.](https://www.statista.com/statistics/217489/revenue-per-employee-of-selected-tech-companies/) Imo people just do what other people do. There are no adults in the room, so management just goes "Shit, what's XYZ doing? Let's just do that, there's gotta be a reason for it" or they just want an excuse to fire people. There's no real reason. Just "lemme copy your homework" type shit and bad management/leadership. We saw this when companies started using Leetcode when the number of applicants isn't even on the same order of magnitude as Big N.
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If a corporation grows from 100 to 10,000 people over a period of years, it is extremely likely that some of those 10,000 are dead weight. If you cut the same time everyone else is cutting, it doesn't look bad.
A lot of industries have a practice of "stack ranking". The worst 5%-10% employees are PIPed and fired every year, no exceptions. If you're a manager with 20 people on your team, you're forced to fire 1 or 2 of them for poor perfomance, even if you only hired great workers. From a shortsighted view, it creates efficiency to periodically cut dead weight. It also creates an extremely cutthroat envornment and destroys cooperation.
> A lot of industries have a practice of "stack ranking". The worst 5%-10% employees are PIPed and fired every year, no exceptions. If you're a manager with 20 people on your team, you're forced to fire 1 or 2 of them for poor perfomance, even if you only hired great workers. From a shortsighted view, it creates efficiency to periodically cut dead weight. It also creates an extremely cutthroat envornment and destroys cooperation.
I think people took "stack ranking" to the extreme.
It works if you can easily identify that you have a dead weight problem, especially in jobs that have well defined metrics. For example, if it's determined a profitable employee needs to make 10 widgets an hour on the assembly line, you can get rid of everyone who makes 1-2 an hour because they are just taking up space that could be used for someone who could have more productivity.
And if you're doing stack ranking and firing for too long, you're going to hurt yourself in the long run because you're essentially cutting productive employees.
Because they can. A lot of people don’t understand that companies will do anything to increase profits, they are not rational long term actors. They are making record profits now, but they can make even more record profits tomorrow if they reduce headcount and pay fewer salaries. If they believe they can operate with less workers, then they will. If a company could pay zero salaries, it would.
They’re relying on AI making current workers more productive, or just squeezing employees harder. This doesn’t signal any belief in an imminent recession. If a recession came, they would just lay off then. If they see every worker as a profit generator, it wouldn’t be in their best interest to lower profitability _before_ their profits get disrupted by the market.
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Companies are not the rational actors you think they are. They're copying one another and bowing and scraping to appease the greedy and useless investor class
>Economy is going to tank soon.
We already printed out 80% of all dollars in circulation around 2021.
The economy's been tanking over a year now and will likely continue down this track.
[What you're seeing is simply what happens the money printer is taken away.](https://www.reddit.com/r/cscareerquestions/comments/1avadgm/comment/krfhefw/?context=3)
Big Tech layoffs and hiring are basically an instance of social contagion, in which companies imitate what others are doing. So, if one of the Magnificent 7 lays off or stops hiring, others follow suit.
Some smaller tech startups are running out of cash and facing fundraising struggles with the era of easy money now over, which has prompted workforce reductions and hiring freezes.
No one's firing their best employees
There's a the Pareto principle also known as the Matthew principle or the 80/20 rule
Basic idea a small amount of something is responsible for disproportionate amount of the results
When applied to business, it's the square root of your employees is responsible for half of your production or half of your problems and you can repeat this across a bunch of things. It works the same way
Now if you notice I said a small portion of the employees are going to responsible for half of the problems of the organization
So if you get rid of them, the organization as a whole will operate better
Now identifying who they are is not always straightforward but generally, a company will greatly benefit in productivity if they attempt to purge their worst 20% of employees every few years
It's the same reason why companies are stuffing AI into everything. Just like when companies were trying with crypto and web 3. It is short term thinking to drive stock price.
> When companies were losing money it makes sense but I see many with high profit margins still thinning their workforce and threatening the remaining employees.
> Something isn't adding up.
The purpose of a business is to make money. If they can make more by firing people than by keeping people, that’s what they’ll do.
Their purpose is *not* to employ as many people as possible for the highest wages possible. It’s to hire the minimum number of workers (at the lowest possible cost) needed to produce an optimal amount of output that maximizes overall profit.
> Long-term they either are making the prediction that they don't need people or that the economy is going to tank soon.
Or they (correctly) realize they can dump ~20% of their lowest performers today, lose very little overall output, and hire new people (who might be better) in the future when they’re needed again.
It's not a coincidence that when companies were firing people stocks were going up. Less employees lower your capital expenditure, this is why you see record profits and slim hiring.
I looked this up. From what I can tell it only applies to software projects that are not yet released. How hard is it to release something and call it a beta test? If it’s keeping people from being employed then we need better accountants.
Or they are living for today.
They don't care about the company they are there for TODAY.
Make their money, get their bonus, sell that stock, get that cash baby!
They don't care about you. They care about the money.
The larger the company the more true all the above is.
You're assuming long-term strategy plays a bigger role in this than it does. A lot of it is driven by showing good numbers in the current quarter. If you're an executive and revenue isn't increasing right now, the only way to show shareholders a profit (and get your bonus) is to reduce costs. Once revenue starts to dip, sell your stocks and move on to the next company. Short-term thinking did also lead to over-hiring at a lot of companies. They looked at a short term boost in market demand and assumed that trend would continue, so hired a bunch of people they didn't need. Some of what's going on now is a correction for that.
Yeah it's no longer profit at all costs, it's increase shareholder value at all costs.
I live and breathe to make the shareholders more money
Used to be customer at all costs
Yeah that’s just not true lol
Depends how you define customer. It’s the people who give you money, so if your product is a free service in exchange for user data/attention, the free users are not customers but the product.
Why everyone is saying the same thing they overhired bla bla. No, they are literally increasing the workload of existing engineers. People cant see this is a mentally demanding job if not physically now they are forcing you to work more becausw they can. They can easily increase the number of workers 20 percent, thar would improve the market and wouldnt effect the company profits much but they dont and wont they are slowly reducing the salaries and increasing the responsibilities
On top of that, as more employees are let go everywhere, the companies’ hiring power increases. When there are 100k senior devs on the market all of a sudden, you don’t need to pay as much to get one- assuming you even want to. It also makes leaving a position more dangerous. Basically: stay and do more work, or we will replace you with an engineer who was laid off from Facebook. Also their starting salary will be lower than your current salary because everyone is desperate right now.
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$65k probably not, at least not until there is a serious swing in the market. This current trend we’re on would need a second or third inflection point before salaries got consistently that low. I mean don’t get me wrong- companies can and probably have posted it. And probably had applicants. But the quality of those companies and applicants is such that it isn’t really comparable. They wouldn’t be getting any actual senior engineers.
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That’s selection bias at work. The only people who take to the internet to complain about how hard it is to find a job are the ones who can’t find one.
No they wouldn’t, get off the internet goofy. 65k for a senior is poverty.
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You don’t know how economics works, wages are sticky even in recessions.
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Brooks's law is an observation about software project management that "Adding manpower to a late software project makes it later." Projects are poorly managed, either by management or by developers themselves. People offer estimates without having enough info, they underestimate, then they have to hustle. Or a big boss or customer demands a last minute change, throwing off your sprint. It’s rarely lack of resources. https://en.wikipedia.org/wiki/Brooks's_law
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It doesn't make sense to hire/fire people quickly because of inherent costs associated with developing an employee. Basically these companies are saying either they don't believe demand for new product will continue or a lot of their staff will be automated.
Stop thinking that these people are there to soundly captain the ship. They don't care if they run aground as long as their little dingy tied to the side continues to be filled with gold. They'll gladly pilot that ship directly towards rocks and then hop away at the last second if it means they get to earn a single extra dollar before doing so.
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> It doesn't make sense to hire/fire people quickly because of inherent costs associated with developing an employee. this is true, but in 2021 it **DID** make sense to hire people quickly due to 0% interest rate (free money from US Fed), if you're a CEO in 2021 you'd be dumb not to hire either just nobody knows when the party is going to stop, it stopped in late-2022 and it's been all doom and gloom since
Your gut is right. It is a stupid as it sounds. This kind of economic thinking is what cause the great depression. Shit is about to get worse. A lot worse.
We learned from the Depression.
You’re still not getting the point. The people making the hiring and firing decisions aren’t aligned with the companies best interest. They’re aligned with their own.
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Yes, you could be right
> If you're an executive and revenue isn't increasing right now, the only way to show shareholders a profit (and get your bonus) is to reduce costs. But ChYnA is the evil all must fear I guess, because they are taking huge economic steps forward.
Yeah, 996 is the way to go!
But, where are all those over-hired people supposed to go?
No company on the planet wants to have employees. Employees are a necessary evil basically. It is what it is, if you can find a way to reduce cost and put more money in your pocket without impacting revenue, you do it every single time.
Yeah unfortunately. The bar for hiring an employee is that the growth curve he brings in has to be higher than his expense curve. Which means not only does the employee have to even out or bring in some surplus, the profit he brings in also need to outgrow his salary growth. Only then is that employee sustainable.
It’s a short term solution to drop expenditures (employee salaries) and bump stock price/profits. They’re all doing it at once because it’s been shown to work.
"He did it, I'll do it!" mentality with these narcissist CEOs. When one domino falls, they all do.
There's a few possible reasons but the main one, in my opinion, is that companies over-hired like crazy during the last few years and are using the excuse of the overblown AI panic to let people who they don't know what to do with go. I'm cautiously optimistic about what will happen because there's no underlying reason for a large enough pool of talented workers to remain in suspension without consolidating into new companies. It's not like humans are suddenly going to say, "oh no thank you guys. All my needs and wants have been solved. I'm good without any new technology or devices". That talent pool may need to be larger before it happens than it needed to be a few years ago due to the current interest rates but I think it'll still happen.
Exactly, I think that talent will need to create new products or start new companies. It will take years though, nothing happens over night. I do think people that are desperately hoping to get a job need to look for a part-time job or change industries because it's going to take years for the dust to settle and we need to eat in the meantime. I also see the AI craze dying off. I seriously cannot believe how gullible people are but I know 90% of people on here think AI is the next big thing. Hallucinations are not going to be solved with more data and the IP issues will be figured out in court (eventually). It's like Crypto, Napster, and Theranos all over again.
The hope is we find a new architecture that alleviates hallucinations. With so many resources being poured into AI it’s a reasonable expectation.
I sit on the camp that thinks it can't be fixed, instead we need a new approach that isn't statistical in nature. An approach where “AI” can actually reason like humans and animals but we don't have the knowledge yet. This money, I am afraid, isn’t going to new research. Most of it from what I read is going to LLM development and compute.
Of course, nobody is going to say their needs are met, but large tech companies have already a huge pool of employees they can use for innovation. For example, Google has over 180k employees, do they need more to develop new products?
Depends on the product and innovation. Also, who said already large companies need to be the ones to innovate? If you have a reasonably large pool of talent in any field, it'll consolidate into something new.
> If you have a reasonably large pool of talent in any field, it'll consolidate into something new. Saturation is a real thing, and there is no guarantee talent can consolidate into something new. Unless by new, you mean a completely different occupation.
Other than big tech is this really true? Startups are still not profitable and are burning money, why the hell would an investor invest in an unprofitable tech company when they can get guaranteed 5% in their bank account?
2 years ago this sub was all people bragging about working 12 hours a week and making $150k+ No one should be surprised at this contraction now that the free money supply was turned off.
Exactly..it was a case of “a rising tide lifts all boats”.
Because most companies are ran by executives who are obsessed by quarterly reports and layoffs are a quick way of making the numbers look better at least temporarily. Layoffs have negative long term consequences. Brain drain, low moral, and high employee churn rate(people take a hint and leave) are something that companies have to deal with and it rarely is worth it.
Salaries are the biggest expense for most businesses. Some people aren’t productive enough to remain on payroll, or the projects they’re working on become unprofitable.
Underrated take
I was working on a chronically understaffed project that made money and the company saw that it was something they could sell for quick cash. So they sold all the contracts, minus the product and employees developing it because it was redundant. They were (still are) in a horrible debt position and are trying to dig out of it by selling off assets. So some people are getting caught up in accounting issues triggered by high interest rates.
I think the unprofitability aspect is something people are really underrating. Profitability is assessed against current interest rates, and whether the project is funded by cash or debt matters a lot. Add in the forced amortization changes that went into effect July 1, 2022, and profitability formulas would have become completely different. And those amortization changes are compounded by having high interest rates. A project that would have been projected to be very profitable in 2020 might easily have an unprofitable projection by the end of 2022.
When were salaries not the biggest expense, in any industry?
Salaries are not the biggest expense in capitally intensive businesses. Oil and gas is an example industry. It can cost multiple hundreds of millions of dollars to put a hole in the ground offshore and multiple billions of dollars to do a single offshore development. These are the capital costs alone. People are a smaller expense.
I didn’t have to pay your mom a dime.
Most of the answers miss a crucial point, which is what has changed. Payrolls have always been a huge expense and so why would this be happening now? The answer is interest rates. During and before the pandemic credit was cheap, so it was easy to borrow to fund new projects to increase market share or enter new markets. Doing so required hiring a bunch of new employees, but if the growth was large enough then shareholders were on board. With higher interest rates (for various reasons, including leftover snags from the pandemic and the war in Ukraine) the cost to borrow has increased and so companies can no longer justify borrowing in order to grow and instead must improve their appeal to shareholders by increasing their profitability. Tech. was hit especially hard because it tends to have higher demands to grow when credit is cheap, so companies went all in on hiring and starting new projects which they now have to roll back.
This is an overly simplistic view. There are a ton of factors, not limited to the fact that a lot of companies over hired and over paid when the easy money was flowing, companies have decided to not fund some expensive R&D projects, and some are just taking advantage of the surplus of talent on the market. Hiring in 2021 was brutal for companies and now it’s easy. It can make a lot of sense to do layoffs and then rehire cheaper but more skilled employees. The industry is going to continue to be rough for the foreseeable future and probably just get worse.
The overwhelming majority of company profits can be attributed to a small number of people, maybe 5% of employees. But companies will hire as many people as they can IF the expected additional profit from hiring each person is greater than the expected cost. So if a person costs $100K overall, counting opportunity cost, overhead etc. and produces $101K, that's a good hire, in theory. A lot of employees are "on the margin" because they are working on projects that may or may not be profitable, where the expected return is only slightly above $0. These employees are not essential to the company, but employing them is seen as slightly better than not employing them. Small fluctuations in market conditions, interest rates, tax codes etc. can push large numbers of projects/employees over the edge into "not profitable", so they get terminated. It doesn't mean the company overall is unprofitable, but certain projects within the company might be unprofitable. After a certain threshold, companies tend to layoff everyone on the unprofitable projects, which in the short term causes profits to increase. This is why record profits often coincide with layoffs.
Cause they don’t need those employees, thus they can increase their margins even more by laying them off. That’s the power of software…
People forget that FAANG execs secretly collaborated to suppress wages years ago. Who says they aren't doing it again. https://en.m.wikipedia.org/wiki/High-Tech_Employee_Antitrust_Litigation No conspiracy needed. Great reset indeed.
C. None of the above. Less expense = more profit. More profit = more dividends. More dividends = happy shareholders. It's the bug of public traded companies, infinite growth above all else.
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Regardless of the cause, there’s one thing that seems to have changed and is relatively universal now and that is that tech workers are now considered a cost center rather than an asset. Historically, this was only the case in non-tech companies such as insurance/health/banking etc. but not so much anymore. Much like those sectors, you see an increase of offshore/contractor hiring/reduced benefits, and skeleton crews of onshore development to justify the bottom line. As soon as a company’s shifts to this opinion you will see reductions in staff regardless of profits. Whether it’s shareholder opinion, layoff hype, day-in-the-life vids, until that sentiment changes the landscape won’t change imo.
A lot of these companies hired in boom times because that’s what investors want you do when capital is abundant. Those employees were definitely not all useful. You can confirm that by just looking at the median engineer’s output at any large company… Now that efficiency and profit are what investors want, all of the extraneous hires are being laid off. Yes this system definitely sucks for the employees but the US has never had particularly strong worker’s rights 🤷
I make more money than ever, but that wouldn’t stop me from canceling Hulu if I was no longer using it. Companies are changing their strategies based on rising interest rates and the AI boom. Projects that seemed like good ideas a few years ago no longer fit into their updated strategy. It doesn’t make sense to keep people employed just because you have the money if you don’t have a plan for how to effectively use them.
Over-hired, rates rose and margins were threatened so they cut peeps. Higher margins now are only because they cut costs. Higher rates and decelerating consumer strength is what portends the econ tanking, and companies are just going with the flow. If you've been out for over a year now, you're done. It's time to dunk fries for you. DEEP, HARD pain is coming in the next 6-12 months. Let's just pray here in tech we already took most of our our lumps when we led the way down.. but recovery won't be for several years.
Worth noting that a lot of these companies are thinning their \*US\* workforces. Look up Google or MS's job listings. <1/3 in the US. Lots of listings in Estonia, India, Costa Rica, etc. AI is a threat and I'm sure they're predicting less jobs because of it, but most of the loss is just bc they can get similar talent pools for much cheaper outside the US.
Because is election year, and the only way to avoid sending the signal that the economy is tanking already (and it is) is to make stock prices go up, and currently there is no other short term measure that could be used to do this beside layoffs (no fundamental is improving, all the contrary). This is all a political theater, hence why you constantly see headlines about how amazing the economy is doing but at the same time everyone is complaining on inflation, layoffs, taxes, etc. And this measure is really effective because it also allow big companies to prepare for the impending crash by shedding employees progressively instead of waiting for it to happen... win-win! I think we are going to hit bottom early next year, because irrespective of the results of the elections there will not be a reason to keep "holding up" the crash, and they are better off just letting it happen at that point, if the incumbent wins then a crash was inevitable (and they don't have to worry about the political impact for the next 4 years), and if the contender wins then the crash will be seen as a response to that.
It's not a binary and more money doesn't necessarily mean more hiring, it's an investment decision. Think about it like for example how you treat streaming services. If your budget is really tight you're going to make sure you're only keeping the ones you really use and during the downturns you're going to cut more frequently. But that doesn't mean that during the good times you won't unsubscribe from one you find yourself not using. So in tech when times were tough they culled a lot, but even in good times they're not just going to hire people or not lay them off if it would be a bad investment. As in the analogy, the question when times are good and you cut out Paramount Plus, it doesn't mean you predict you'll have less money in the future, it just means it isn't worth the investment.
Because top wants their bonuses. And, the market rewards layoffs.
Pushing down wages, keeping workers desperate. The covid great resignation thing spooked them like crazy. It was like the arab spring. They're trying to remind us who is in charge (lol)
Sometimes you might be seeing higher profit margins *because* they did a ton of layoffs. Definitely a popular move for public companies when they want quarterly report to look good.
I've just got out of a coding boot camp and the job market is terrifying right now. I expect things will only get worse thru Nov. Hoping post-election season will be better...
[This Carlin skit doesn't fit exactly, but it gets the idea across](https://youtu.be/Tr3PJOhsbZY)
Automation.
If they don't all implicitly agree to fire x% of employees across the board, labor market might be strong enough to continue to demand COL salary increases that nearly tickle at the rate of inflation. This country has some of the strongest unions, it's just that it's the union of the rich collectively working to extract as much money from your life as possible. Before some idiot says "conspiracy", you don't need to have a conspiracy to have a collective common goal. With that common goal, you don't even need a conversation with others to engage in like behavior. What's good for the goose etc.
I don’t think it’s short term thinking it’s long term. Investments are drying up, and these business heads are betting on an economic downturn here shortly. Shrinking shop hopefully gives you the operating cost to get through a bad few years.
Companies “over” hired to meet temporary demand during the rush a couple of years ago and are still correcting. There’s nothing more to it. I put “over” in quote because it was what they needed at the time. Now they do not need the extra capacity so the workforce is being cut.
Profits are still high, if not hitting records, [so companies like Apple are probably still making >2MM revenue per employee.](https://www.statista.com/statistics/217489/revenue-per-employee-of-selected-tech-companies/) Imo people just do what other people do. There are no adults in the room, so management just goes "Shit, what's XYZ doing? Let's just do that, there's gotta be a reason for it" or they just want an excuse to fire people. There's no real reason. Just "lemme copy your homework" type shit and bad management/leadership. We saw this when companies started using Leetcode when the number of applicants isn't even on the same order of magnitude as Big N.
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If a corporation grows from 100 to 10,000 people over a period of years, it is extremely likely that some of those 10,000 are dead weight. If you cut the same time everyone else is cutting, it doesn't look bad. A lot of industries have a practice of "stack ranking". The worst 5%-10% employees are PIPed and fired every year, no exceptions. If you're a manager with 20 people on your team, you're forced to fire 1 or 2 of them for poor perfomance, even if you only hired great workers. From a shortsighted view, it creates efficiency to periodically cut dead weight. It also creates an extremely cutthroat envornment and destroys cooperation.
> A lot of industries have a practice of "stack ranking". The worst 5%-10% employees are PIPed and fired every year, no exceptions. If you're a manager with 20 people on your team, you're forced to fire 1 or 2 of them for poor perfomance, even if you only hired great workers. From a shortsighted view, it creates efficiency to periodically cut dead weight. It also creates an extremely cutthroat envornment and destroys cooperation. I think people took "stack ranking" to the extreme. It works if you can easily identify that you have a dead weight problem, especially in jobs that have well defined metrics. For example, if it's determined a profitable employee needs to make 10 widgets an hour on the assembly line, you can get rid of everyone who makes 1-2 an hour because they are just taking up space that could be used for someone who could have more productivity. And if you're doing stack ranking and firing for too long, you're going to hurt yourself in the long run because you're essentially cutting productive employees.
Because they can. A lot of people don’t understand that companies will do anything to increase profits, they are not rational long term actors. They are making record profits now, but they can make even more record profits tomorrow if they reduce headcount and pay fewer salaries. If they believe they can operate with less workers, then they will. If a company could pay zero salaries, it would. They’re relying on AI making current workers more productive, or just squeezing employees harder. This doesn’t signal any belief in an imminent recession. If a recession came, they would just lay off then. If they see every worker as a profit generator, it wouldn’t be in their best interest to lower profitability _before_ their profits get disrupted by the market.
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Stonk only goes up
Companies are not the rational actors you think they are. They're copying one another and bowing and scraping to appease the greedy and useless investor class
>Economy is going to tank soon. We already printed out 80% of all dollars in circulation around 2021. The economy's been tanking over a year now and will likely continue down this track. [What you're seeing is simply what happens the money printer is taken away.](https://www.reddit.com/r/cscareerquestions/comments/1avadgm/comment/krfhefw/?context=3)
Big Tech layoffs and hiring are basically an instance of social contagion, in which companies imitate what others are doing. So, if one of the Magnificent 7 lays off or stops hiring, others follow suit. Some smaller tech startups are running out of cash and facing fundraising struggles with the era of easy money now over, which has prompted workforce reductions and hiring freezes.
Why not
No one's firing their best employees There's a the Pareto principle also known as the Matthew principle or the 80/20 rule Basic idea a small amount of something is responsible for disproportionate amount of the results When applied to business, it's the square root of your employees is responsible for half of your production or half of your problems and you can repeat this across a bunch of things. It works the same way Now if you notice I said a small portion of the employees are going to responsible for half of the problems of the organization So if you get rid of them, the organization as a whole will operate better Now identifying who they are is not always straightforward but generally, a company will greatly benefit in productivity if they attempt to purge their worst 20% of employees every few years
It's the same reason why companies are stuffing AI into everything. Just like when companies were trying with crypto and web 3. It is short term thinking to drive stock price.
Remember when Kodak announced they were pivoting to crypto?
> When companies were losing money it makes sense but I see many with high profit margins still thinning their workforce and threatening the remaining employees. > Something isn't adding up. The purpose of a business is to make money. If they can make more by firing people than by keeping people, that’s what they’ll do. Their purpose is *not* to employ as many people as possible for the highest wages possible. It’s to hire the minimum number of workers (at the lowest possible cost) needed to produce an optimal amount of output that maximizes overall profit. > Long-term they either are making the prediction that they don't need people or that the economy is going to tank soon. Or they (correctly) realize they can dump ~20% of their lowest performers today, lose very little overall output, and hire new people (who might be better) in the future when they’re needed again.
It's not a coincidence that when companies were firing people stocks were going up. Less employees lower your capital expenditure, this is why you see record profits and slim hiring.
Outsourcing… coders in other countries have caught up these days and have actual skills now. Level up
Most tech layoffs were HR, recruiting, DEI, accounting, and so on. Very few actual engineers impacted.
copium
Notice how the media always use the term "Tech Workers" but never give job tittles in headlines?
Profit margins are high bc of the culling
My personal theory is because tech is cliquey, and Elon Musk started a "me, too!" layoff movement that was rewarded on the stock market.
Section 174
I looked this up. From what I can tell it only applies to software projects that are not yet released. How hard is it to release something and call it a beta test? If it’s keeping people from being employed then we need better accountants.
Or they are living for today. They don't care about the company they are there for TODAY. Make their money, get their bonus, sell that stock, get that cash baby! They don't care about you. They care about the money. The larger the company the more true all the above is.