Tech has always had a firing problem. Hiring problem – no way! But burning through cash till infinity, you bet. The thing is, why tech has been such a glamorous bet over the past two decades was all down to one thing: interest rates.
The Fed brought them down. All the way down. This gave investors the massive incentive they needed to pump money into these companies. It didn’t really matter whether their profits would come in 20 or 30 years’ time. The point was that they didn’t mind paying for it. Chunky valuations priced in perfection. But now, the game is changing.
Hint hint: interest rate rises are casting a massive shadow on this spending-spree.Â
They thought that low interest rates (and their steamy valuations) would continue till infinity. And the 2020 liquidity injection that came from the back of covid meant that the moon didn’t look too far away. Not where valuations were concerned!
As a result of all this exuberance and greed tech companies have, for the most part, bloated their workforce. They hired people left right and centre. They got carried away. Thinking that they’d have investors no matter what. Pouring more and more money into their loss-making experiments.
Tech companies are only now realising that they can’t quite afford their expensive workforce. After enticing them with chunky joiner packages (Meta offered $45k!!!) they’re letting them go. Interest rates are making these guys a whole lot less profitable. That’s if they were profitable to begin with!
From Twitter to Lyft to Meta they’re all shedding workers (and costs)
Now that Musk finally completed his Twitter deal after what was probably the most dragged out deal, ever, he spared no time in firing 50% of its workforce. 3,700 workers from the bird app biz that’s somehow managed to become the centre of attention have been let go. Though awkward for the little bird’s new owner who has now realised, oops, we kinda need some workers here. So he’s trying to get them back.
Meta’s joined Musk in laying off workers and say goodbye to 13% of them. That’s 11,000 people who have been made jobless. (Read here for Mark’s goodbye message to his once-metamates.) Lyft, like Meta ,is laying off 13% of its staff while Stripe is laying off 14%. These are massive numbers. Just imagine the scale of this and the ripples that it’ll send through the entire labour market. Meanwhile, juggernauts Apple and Amazon have put a freeze on hiring for the time being.
My Twitter and LinkedIn feeds are full of accounts of people who have been laid off. And some found out they were fired by not being able to log onto their Slack channel! What a way to find out, huh. Layoffs.fyi estimates that more than 90,000 workers have been laid off from about 700 tech companies this year. Not a pretty figure at all.
No! You mustn’t call them layoffs!
Tech companies hate using the word layoff. It makes them sound like they’re actual businesses with actual profits to make and with some hard-but-very-much-needed cost-cutting measures to turn things around. But instead, tech bros say things like “no longer in a go-forward role” (like what on earth does that mean?) or “right-sizing” or “reduction in force” – now we’re talking. Getting to the beast itself.
And so the story-telling continues. Why give the impression that you’re in trouble? So much trouble that you have to sack your profit-drivers. Nah. That’s way too easy. Instead, give (or at least try) a story of being more efficient. Something tells me Mr Market won’t be buying it. And nor will investors.
The only company Wall St was pleased to see their “reduction in force’ was Meta. It means that Zuck finally decided to get it together and that he doesn’t plan on letting his biz bleed any more money. Curious to see that one unfold!
Though what gets me laughing is that while the tech bros seem to get with A LOT, it’s their investors who are funding all this. Maybe the tech guys really are having the last laugh.
But for the rest, layoffs (as they should so rightfully be called) are a bad sign. It means the firms’ profits (if they exist) aren’t big enough to carry the weight of their workers. So by cutting your expenses (and wages are literally the biggest one) you free up some income. Yay. Obviously there are other ways to boost profitability but shedding workers always seems to be the one they choose.
Nothing is secure. Not even your flashy tech title
I think the lesson here is that no job is secure. No, not even your swanky (and overpaid) tech job in San Fran. And it’s usually workers who end up suffering from corporate greed.
And this is why it’s so dangerous to tie your identity to any one single thing, especially not a tech company. They’re ever so flimsy and unreliable. Sure, these guys got real good goodbye packages that it takes some of the sting out but it doesn’t leave you feeling any less empty.
And that often comes when you = your job. When you work all hours of the day (and night) that you no longer know who you are. You don’t even have the time to! Or it could be you’ve wanted that job forever. It was your dream biz. And you finally landed the spot. You feel like you’re on cloud 9. And to have it taken from you. Horrible.
That’s precisely why you need to have your own identity. Figure out who you are outside of work. Get a hobby. And no, I don’t mean a side hustle! A real hobby. Something you can fully immerse yourself in and take your mind off everything.
For me it’s writing. I love it despite me not making a dime outa it. After a long day at work (or home!) I open my laptop and start writing. Nothing feels better.
So work on figuring who you are outside of work. You’ll find yourself with a better, and much healthier sense of self.
Go on, and explore! What are you waiting for?
Happy Friday!
Disclaimer: This blog is not investment or financial advice. It is my opinion only. This blog is not a personal recommendation to buy/sell any security, or to adopt any such investment strategy. Always do your own research before you commit to any investment.
Knead Your Dough 
Leave a Reply