Separated employees will receive 14 weeks of pay, and one more week for each year served at the company (rounding partial years up). The firm is also dropping its one-year equity cliff so that employees who are laid off with under 12 months of tenure can buy their vested options; Airbnb will also provide 12 months of health insurance through COBRA in the United States, and health care coverage through 2020 in the rest of the world.
That strikes me as a pretty generous severance package.
I get paid monthly and have a yearly salary so three and a half months or slightly over a quarter of a year are durations I can more easily convert to an idea of money (or time), which I think is the point. If I hear 14 weeks or 98 days I can’t easily (ie naturally) convert it into terms I can think about.
I was at a company in the UK where a department closed. They offered 3 months, plus a month per year served. And for first round they offered a 6 month bonus for volunteers vs stay and try to get an internal transfer.
I was surprised how few volunteers there were. I don't think I've had a job I wouldn't walk from for a years pay. Those that were chopped second round were pissed.
The US workers, at least in IT make much more money than their European counterparts, while paying less taxes. A wise person could in theory save 20% or more every month to create own safety net, while still enjoying a high standard of living. Alas this is not the American way of life, where it is not uncommon to spend even over 100K per year on a lavish lifestyle and living in debt.
But if you save up for your own safety net, you might get very high bills if you get one of the sicknesses that are not covered by the insurance. Either you depend on society or the market. Both have their problems.
Join a company based in the US (like many tech companies), and do a really good job. They will then start trying to get you to move to the US, under an L1/L2 (if you can handle management, L2 tends to be better as your partner/spouse can work).
Immediately apply for a green card.
Preferably be born in a small European country, so the green card comes in your lifetime.
Meh, it's not impossible. You probably need to move to Ireland or the UK though, as that's where most of the larger tech companies have most of their roles.
What are you referring to here? How much money buys you? Aka: costs of living?
How much you make, converting EUR to USD?
What industry? IT?
I worked in a leadership position at a multi-national in Berlin for almost five years. I know the salaries the engineers had in CA & Chicago vs Germany.
US was maybe 20% more max. In terms of what it buys you ... not so much. See below.
Cost of living in Munich (one of Germany's most expensive cities) vs. SF.[1]
And then Berlin (one of Germany's cheapest cities) vs. SF.[2]
They're referring to specifically the tech industry. Which is, most assuredly, higher paid in California than anywhere else around the globe (in the mean, there are obvious exceptions).
This comes from a person with EU citizenship who has shopped jobs/interviewed in multiple major cities in Europe; including Munich, Berlin, Amsterdam, London, Dublin and Prague.
It's not insignificant. We're talking 150-220k USD/yr in LA vs 75-95k EUR/yr in Amsterdam (as an example, since it paid the greatest during my search) for a similar seniority role. That's before accounting for nominal tax differences (~37% LA vs ~38-42% AMS; which is significant at that delta).
When I reviewed housing, Amsterdam wasn't significantly cheaper than LA, but it varied wildly based on where you wanted to live in both cities. LA apartments: 1200-4000USD, AMS Apartments: 930-3500EUR. The major plus in AMS being that you could live further from City Center and still reliably account for public transit. There's medical: free in AMS, $38/mo where I opted to work in LA. There's vacation time: 20-24days in AMS, flextime at my company. Etc.
I mean, there are more comparisons to be made; but those were the prime metrics I was interested in.
> Wait what?! What kind of apartments are we talking about here?
All of them, that was the range from the cheapest to the priciest. Idk why that seems unbelievable, I literally just looked at apartments in AMS now and the range appears the same.
> What does the medical insurance cover?
It’s full medical coverage via a PPO plan. $40 copay, $250 deductible, $1500 max out-of-pocket per year.
> How much did your car & car insurance cost in LA and did you need one in Amsterdam (probably not)?
I already owned a car, and would have sold it if I moved. Insurance is paid semi-annually but isn’t a major expense. Additionally, I included public transit as a benefit for Amsterdam in my original post, so I’m not sure what your point is.
It really seems like you’re grasping at straws to justify the difference. The reasoning is obvious: the tech industry is massive, highly competitive and California is currently the global leader in that industry.
Sorry to break the news for you, but German salaries are 50% of US salaries (US salaries may vary by location). My first offer on the cost as my first job was 160k USD. In Germany they were backing out in Munich if I asked for 60k EUR.
"Cost of living in Munich (one of Germany's most expensive cities) vs. SF.[1] And then Berlin (one of Germany's cheapest cities) vs. SF.[2]"
I think these numbers are outdated. Especially Berlins rental and real estate costs are catching up quickly.
The point still stands. Rental caps mean it is very difficult to find a place to live in desired neighborhoods. Of course, you can find places outside the ring, but those would have been cheaper anyway!
That’s not to say it isn’t sensible social policy. It is less disruptive to people who have lived there for a long time. But if you move for work, you will have to either pay a lot more than you would have in 2011, or get lucky.
I would hold that the better social policy is capping the cost of rent by allowing the construction of competitive housing stock. Either alternative is quite harmful: new housing is unattainable, either by defect of price or availability.
Depends on whether you mean, "there exists someone who pays this", or whether you mean, "as someone looking for housing, you can expect to get the housing, and pay this much." (The part where you can actually obtain this rental falls apart entirely.)
It’s worth making 4x in the states and paying less taxes to boot. Forget cost of living, only rent is more expensive so tack on an extra $2k a month if you don’t want to live with roommates.
You don't have to keep working. Workers compensation, life insurance, long-term care policies all exist.
There's really not much different in what's available, only who's responsible for it. In America, you earn and keep more and it's up to you to allocate properly (or not). In other countries, the government does it all for you to ensure there's a base level of support for everyone.
It's not a question of availability it's a question of price.
If you need to pay for a very expensive medical insurance then you can only afford it while employed which you won't be if you have health issues that prevent you from doing so or get fired.
That is not how it works at all. America has both public funded (federal Medicare, state-level benefits, etc) and private insurance (either personal or group policies through your employer).
There are plenty of choices for continued care and coverage, as long as you plan for it. That's the major difference. It requires you to actively plan for your retirement and old age. Other countries just do that for you in exchange for a heavy tax.
This US healthcare meme is tiring and uninformed. A small minority have financial hardships due to medical emergencies here, and they for the most part aren’t poor, who get healthcare for free.
I assumed what was meant was how generous it was compared to a normal severance package in the country. Ie, if a normal package would be 2 months in the US and this is 3.5, then saying it's like a 12 month package in Germany implies that a normal German package would be just under 7 months.
Which basically the average Silicon valley wage is the wage I am making now. However that is with quite a bit of seniority, I've noticed offers from Germany are generally lower than what I make but Germany costs less. If I were starting out right now I would probably make 60% of what I make now.
My guesstimate of the difference has always been that a years pay in Denmark was equivalent to 8 months pay in the better paid parts of the U.S.
Those wages are severely off. Glassdoor is no longer used in the United States to research wages for tech. An average engineer at a top tech company makes well over 250k USD per annum.
What does that even mean? Are you talking about buying power? How much you lose on taxes? You make it sound like Germany is a low wage country. Their minimum wage is around 9 euros, versus 7 dollars in the US, no?
The Federal minimum wage is a useless metric. California's minimum wage is $12 (and higher, in some counties) and is set to increase to $15/hr by 2022 (assuming COVID doesn't have some major echoing effects).
Also, they're referring to white collar tech employees. All salaried, all well above minimum wage and most definitively the highest paid (in that industry) in the world, including outside of SF/the Bay.
there are also regulatory requirements at play in different countries that can make it much harder to fire people (and causes unemployment in the end because companies will think twice before hiring, too).
really? i've always counted weeks, since every week is the same lenght (and paid fortnights, since every fortnight has the same lenght). i get paid by the month now and it's super weird to me, as if i'm worth more in february than in march.
Weekly or fortnightly pay is common in Australia, so talking about it as weeks of pay made sense to me. I don't think they really even use the term "fortnight" in the US. Every tech company I've worked at here seems to do the 15th and 30th which is still strange to me.
It's true, I have colleagues point out how odd my usage of fortnight is in presentations, meetings, etc. Had no idea that was a difference until I moved stateside.
Larger companies tend to prefer weekly/biweekly as you don't get that month-length variance. On the other hand, many employees don't like it as much because their biggest bills tend to be paid monthly so they'd prefer their paychecks to be aligned.
I've seen both and as an employee the semi-monthly is the best - it's about biweekly but you don't have to wonder why some months you only see 2 paycheck vs. 3. Predictable is really good.
From a company standpoint, not having to accrue the liability on the ledger simplifies the accounting auditability & ability to close your books monthly.
I've had it both ways, and prefer it biweekly. That way, I can build my budget based on 2 pay periods, and have the occasional 3rd paycheck in a month go immediately toward savings.
I've had it biweekly including in my first "tech" job. I made enough that paying bills wasn't really an issue and having the "extra" paycheck for savings seemed almost like free money towards savings/paying off loans.
On the other hand, I understand people who are on tighter budgets who would rather have their revenue better aligned with their expenses rather than having to balance them on their own.
Labor day is celebrated on May 1st around the world in honor of the events of the Haymarket Affair, where the Chicago police attacked striking workers. But in the US it is celebrated at the end of summer. This is not an accident, and is directly connected to your question.
I didn't downvote the OP but I am picking up a tone of indignation that I don't quite understand. I find this pretty interesting.
Here is my take on the situation:
Let's say I own a widget factory and you are highly skilled at turning paper clips into widgets. We agree on a price for your time and I hire you to start making widgets. Things are going gangbusters, you produce a ton of widgets and I pay you for the time you spend working for me. All of a sudden people stop buying widgets. I no longer need your services so I have you stop coming in and stop paying you for your time.
I don't understand why I should be obligated to pay you for services you didn't provide. It's not like I can go to my customers and ask them to pay me for widgets I didn't sell them.
You own a factory. Your employees don't. There's a power imbalance in the employment relationship.
Most people (who don't own things like factories) need a regular, predictable, stable income to survive, and finding new employment is not always easy.
Therefore, people in most developed countries have agreed that by taking on an employee, it is contingent on the employer to provide some guarantee of stability. This is borne out by laws restricting firing in many cases, and requiring severance pay in the event.
The USA is an aberration in this regard - even the workers seem to value the rights of the employers far above the rights of the employees. I'm not sure why this is.
In return for these employee benefits, the employees make less money, and are less likely to be hired, since every mis-hire is a potentially fatal error for the business. The laws of economics are not magic and the costs have to go somewhere.
Cost and availability of capital, rather than anything else.
Like, if you are a PM at FAANG you can probably get a seed round for any kind of nonsense in SF, but in Germany you would need far more proof and preferably revenue (I don't know Germany that well, but it's similar across much of Western Europe).
Because the dollar is the world reserve currency, and lots and lots of large pension funds, university endowments and family offices spend tiny proportions of their assets on VC (as it's expected to be uncorrelated with market returns).
VC's tend to be look a person in the eye and judge his (almost always) character. They don't like travelling, so most of their investments are made in the Bay Area.
Coupled to this, there's much more availability of angel funding because of the previous unicorns (paypal, eBay, Google, Facebook et al) so it's easier to get started.
There are definitely some cultural issues at play also, but fundamentally the reason that the US has such a high proportion of tech giants (which seems to be what you're focusing on) is the low cost of capital caused by the dollar's exorbitant privilege.
You realize other countries have VCs too right? Yet hundreds of foreign billions still go to America because it's a better environment for innovation and produces bigger and more impactful companies. Your 3rd point even relies on it.
Note that it's per capita, and Israel has a population of 8mn, versus the US's 330mn.
I think it's pretty clear that most VC funding is given in the USA.
And note that the terms are often much better, and funding is accessible earlier. This article explicity states that you want to get seed funding in the US if you want to maximise your valuation. See: https://medium.com/sosv-accelerator-vc/what-does-seed-fundin...
Yes but these companies also largely exist because you have a deregulated market whereas the European Union is a much more regulated market.
These regulations provide for worker rights, productions and consumption safety, product quality and much more. Something America is lacking in completely.
You also have a government and department of defense that helps a lot of your big multinationals grow and kill it's foreign competitors.
You can look at the acquisition of Alstom by General Eletric as a good example.
Well that's the point. US has lower regulations and more fluid employment which leads to bigger and more innovative companies. America isn't as nationally protectionist as China though, although that will now change with this pandemic.
I think that just speaks volumes of your cultural bias.
For me, it is quit natural to assume that a base level of employee protection causes innovation. And Germany would be a good example, as there are quit some innovative small to medium sized companies. The only thing lacking is tech unicorns and there are all sorts of reasons for this.
The proof are the many valuable American companies making world-changing products used globally and constantly copied by many other nations with their own domestic clones.
What is missing is a causal link between lesser employee rights and those values.
I could claim that the historic position of the USA after WW2 caused all of these. My claim would be as baseless as yours. A good starting point for research, but nothing more.
That quote by Ronald Wright is actually paraphrasing part of a John Steinbeck book, where he's using it to describe people who wanted socialist governments, but were dissapointed that everyone ended up poor instead of a utopia where everyone has everything they need.
It's funny how it started out as a criticism of people who think that the government should have more control of how businesses operate, but has been paraphrased so many times that it's now used as a way to criticise people who want to minimize government involvement in business.
>To paraphrase a famous quote, in the USA the workers don't see themselves as workers, but as temporarily down-on-their-luck owners.
It's hilarious applying it here, given the situation described was reversed. Your position is that the worker who doesn't own the factory should dictate what the factory owner should pay because of a power imbalance.
Weird.
Perhaps the issue is having difficulty telling the difference between workers and factory owners in general.
> You own a factory. Your employees don't. There's a power imbalance in the employment relationship.
You make it sound like employers are all fat rich people smoking cigars while everyone else is in a sweatshop. The reality is that 99% of businesses are very small in size (as in, one owner and very few employees) and it's often much more a partnership than the power imbalance you are talking about. Yet the same laws apply whether you deal with a 10 persons company of a 100000 persons one.
There's often (though not always) some size cutoffs in various benefit requirements for small businesses to relax the rules a bit. Such as 50 employees for the ACA I believe.
But I agree, people act like the economy is nothing but fortune 500 megacorps and push for laws that make it harder for everyone to survive except for such businesses and their employees.
And people always miss the hidden cost, even when talking about the fatcats. If you require companies to provide a year of severance, then everyone just gets paid (n-1)/n as much on average, where n is the average number of years an employee is expected to stay.
I've heard the difference between European safety nets/regulations and US systems described as "freedom to" vs "freedom from". If we accept your premise, that the hidden cost of regulating severance is a decline in salary, this fits the above difference. In the US, you have the "freedom to" be as irresponsible as you want, living at or beyond your means, but if you're laid off, you bear the responsibility of dealing with the consequences. In Europe, you have the "freedom from" having to worry about that situation, since the safety net will provide some time for you to get back on your feet, and the price was a lower salary (in effect, forced savings).
Is this stat still up to date? It changes drastically between booms and recessions. In some years small businesses have had far more employees. A fact which should affect policymaking as much as the ratio at any given point.
Either way I'd expect fewer americans still work at large businesses than at small and mid-sized businesses combined.
The issue of course is that more regulation makes it that much harder for small business to hire and over time forces more and more of the economy and the labor force into the arms of big business.
That's 10s of millions of small companies hiring half the people. The point being there's plenty of people in America becoming "owners of the factory".
Why don't you look at the actual data: Firms with fewer than 100 workers accounted for 98.2 percent, and firms with fewer than 20 workers made up 89.0 percent. [1] The vast majority are small companies with single-digit employee counts. Add in independent contractors and it's even more skewed.
Being an entrepreneur means getting things done with what you have. You don't need to be wealth and instantly go from 0 to 1000 employees. Most people start with modest means and build up from there.
Wrong. 80,5% of all SMEs don't employ anyone (nonemployer firms).
So not only do most Americans do work for multinational companies (53%) but on top of that, 80,5% of the ones working in SMEs are themselves the owners and don't have any employees to speak of.
Which leaves a whopping 19.5% of American SMEs which actually employ workers.
Nobody is stopping you from owning a factory. The workers are also free to leave anytime without any notice or responsibility to the employer. This is a flexible arrangement for both parties that focuses on individual freedom and responsibility.
It also helps make it easy for entrepreneurs to start companies and create jobs in the US and is a direct reason why we don't see the same innovation in regulation-heavy regions.
Sweden and Germany, for example, are heavily regulated but have more innovation in terms of GDP% than the USA.
If you're talking about why we don't see more visible commercial innovation from European countries then it's more about access to the enormous amounts of capital to build a big name startup like Uber etc.
Nobody notices the legions of small bootstrapped or seed to profitable software businesses across the EU.
How do you measure "innovation in terms of GDP"? I certainly don't see trillion-dollar world-changing companies like Google, Microsoft, Apple and Amazon coming from those regions. What small business could replicate the impact of Windows, or Gmail or the iPhone?
It's worth noting that those companies have trillion dollar stock valuation, but by far less actual revenue. Average revenue per year of these companies is "just" 159 billions. Amazon has had a revenue of 88 billion.
German companies with more revenue than Amazon: Volkswagen, Daimler, BMW, Allianz, Siemens, Deutsche Telekom, Uniper, Bosch.
On the smaller end, Germany also has a comparable number of employer firms per capita as the U.S.
Empirically it largely is a myth that worker protection and consumer protection stiffles enterprises or innovation.
Amazon 2019 revenue is $280B, which is greater than every company you listed and tied with Volkswagen.
Valuation reflects market sentiment and potential but perhaps I should have left it out. The real focus is the "world-changing" aspect of the products produced.
What have been the recent global innovations produced by those German companies? Anything turned into a household name?
You're correct regarding Amazon's revenue, I somehow got the 2014 data, sorry.
I'm actually not quite sure what you mean with the "global innovations" part, though, could you expand on that? What is it that makes e.g. Microsoft innovative?
What I see is the your big four all sell consumer product/ services and thus are more visible. E.G. Bosch is developing electric powertrain components, produces radar/lidar and video sensors for autonomous driving. Bosch also produces the robots used in those mostly-automated factories.
Every Apple iPhone and Watch uses Bosch's gyroscope and accelerometer tech. They're also the market leader in smaller EV tech used in electric motorcycles, bikes and scooters. It all goes out to consumers without them knowing. Even Tesla use Bosch parts.
I would think that since innovation and growth (caused by innovative use of resources or increase in efficiency or novel products and services) in general should be relative to the population and its state to begin with, nominal GDP growth per annum would be a reasonable metric as a proxy for the wildly non-measurable "innovation in terms of GDP"; for reference, here's the data for 2018:
Spending on research and development is an awful proxy for results delivered by said R&D, which is what we would actually want to measure if we're looking for innovation relative to GDP.
The car was invented in the 1800s, and has seen mature competitors in many other countries like Japan. In the current century, Tesla is the auto giant leaving behind all the legacy manufacturers while also branching into energy products.
Pivotal products are a better milestone than vague estimates of R&D spending.
There's no doubt about Tesla's ability to bring an innovative product to market but they're not a giant by any measure except valuation.
Little known German company ZF has almost double the revenue of Tesla. They also make the transmission for the Porsche Taycan EV that's outselling the 911.
How are Tesla more innovative than other companies ? They kicked off a big conceptual change but I don't see that they have a significant technological advantage over other companies like Volvo.
>How are Tesla more innovative than other companies ?
People always seem to compare Tesla technology of tomorrow with what its competitors are doing right now. That's why Volvo "only" has level 3 self-driving, while Tesla has a fleet of robotaxis that are earning you money on its ride-sharing app while you sleep.
I joke, but a large portion of the Tesla fan base has no clue what is going on in the autonomous driving or auto manufacturer world outside of Tesla. Tesla has been a big innovator, but they aren't leaders in everything....not even close.
The thread is about innovation, so that's what counts. And what other manufacturer matches what Tesla has driving on the roads today? The closest realistic challenger is the expensive Porsche Taycan which is still missing all the functionality and usability features.
>Tesla is the auto giant leaving behind all the legacy manufacturers while also branching into energy products
Tesla has sub-1% market share in the global auto market and rapidly declining energy product deployment (they deployed 4x more MW 4 years ago than the did last year). Let's not pretend Tesla has taken over anything yet.
Seriously, who's stopping you? It's ironic to say that on HN when YC has helped launch thousands of companies and several self-made billionaires.
The ability to hire and fire fast is undeniably helpful for companies, and being able to quit and move to new jobs is just as useful for personal career development. It might not be for everyone, but it's not any less valid.
The typical member of the precariat doesn't have the financial means of taking an unpaid sick day. How on earth do you imagine that they have the means of starting their own company?
The discussion was about at-will employment in America. There are pros/cons to both employee and employer, and it is an absolute truth that this arrangement helps companies grow and helps employees eventually start their own companies - as opposed to different regulatory environments.
Adding more regulations will bring equivalent trade-offs because that's the reality of economics. Do you disagree?
If you want to get bogged down in technicalities and anecdotes though, then sure life isn't fair. I worked manual labor before and now own multiple properties. I guess it's just magic.
No one suggested it was magic. What it often is - statistically - is socioeconomics. It’s more or less the single best predictor of outcomes for you and yours.
There are outliers, but we’re talking about broad systemic patterns.
You evidently went to an okay UC - you probably had supportive parents. Be it emotional or financial support. Perhaps both! Perhaps your family life was reasonably stable. Perhaps you had three square meals most of your youth.
The point is that you are in a position to access capital that is markedly different from a lot of individuals born into lower socioeconomics striations in society and the statistics are weighed :heavily: against them.
This is often through no fault of their own.
Thank your lucky stars the world aligned for you as it did. Where and with whom you started that life made a far bigger difference than any perceived grit you might think you exercised.
That's called venture capital, or a loan, or a mortgage; things that millions of others have used to start their own businesses. Happy to make some intro's for you. Let me know.
But that's not always possible when you don't have a good enough job to save which is the reality for a majority of Americans since they live pacheck to paycheck.
Sure, because nobody has ever taken a loan to start a business before. And VC funding doesn't exist. And mortgages are a falsehood. And companies are never bootstrapped either.
I guess eventually owning a factory is just impossible right?
Yeah and I could become a rock star if I started playing the guitar.
Getting loans is hard, especially if you're one of the working poor. Starting a company that doesn't die after a few years is harder. When you're one of the 40% of Americans who can't cover an unexpected $400 expense, if you company fails you're fucked. The social safety net in the US is a joke.
Yes, it's a trade-off. Less regulation and more freedom and flexibility at the cost of more social risk and personal responsibility. That's the American way.
I was simply stating that truth, not defending it nor saying other realities can't exist. But there is always a trade-off. What part of that is so controversial?
Perhaps things have changed and the balance needs to be shifted now. That's a great discussion to have, but let's actually have a discussion then.
It is easier to start and grow a business when there are less regulations around employees. Every employee in America is also free to walk away from their job without any notice. These are both facts and have allowed for vast commercial growth and innovation in America (and in countries with similar setups).
Whether you (can) take advantage is completely orthogonal to the original question of why the USA is "an aberration in this regard", and I would rather not devolve into yet another rehash about fairness and opportunity.
maybe the reason why so many want to start they own business is because u can get fired for no reason. being it's own boss gives you at least the freedom to not always live in fear of being fired if you do something that the company does not want, like getting pregnant, i have read enough stores of companies firing pregnant women and i cannot believe it's legal to happen.
in europe at least that part is gone, you start your own company not out of necessity but out of motivation.
Do you think it's easier to start a company and that is has less risk than just finding another job? Also have you seen the world-leading benefits at places like Google?
America just chooses more freedom than government mandated security. There's some slight trade-off but it is nowhere near as problematic as media makes it seem.
"Just buy your own factory" as a response to the power imbalance between the workers and the owners of the means of production is the controversial statement.
The actual quote is "nobody is stopping you" - because that imbalance means it's easier for you to also own the means of production. It's unequivocally true, and enjoyed by 10s of millions of small business owners and entrepreneurs which form the heart of the American middle class. It answers the why posed by the GP.
But yes, different places are different and life isn't fair. No need to cutoff any discussion of various economic systems and environments for the same basic retorts.
No, the imbalance doesn't make it easier for you to own the means of production at all. On the contrary, it allows for systemic exploitation that makes social mobility harder and increases the wealth imbalance over time.
Depending on your target industry, "a factory" can be as simple as some old yet reliable drill presses and lathes, and then hiring a machinist or two. How is the flexibility to do this "controversial"?
https://youtu.be/xXze8_SzW28?t=431 <---Granted he's got Youtuber money and other gun-sales related money to help, but the concept is the same....he's bootstrapping a factory after purchasing the relevant capital infrastructure using his own money.
> Granted he's got Youtuber money and other gun-sales related money to help
This is the difference. Most Americans don't have access to this capital, or access to means of borrowing this capital, and if they do have the means then they might not necessarily be able to shoulder the risk.
It's not like the capital just fell into his lap from a friendly Wall Street banker. Those businesses are ALSO self-started (to the best of my knowledge), especially his Youtube success. He's a prime example of someone working hard, spending less than they earn, accumulating resources, and then expanding that into ownership of the means of production as well as employing others.
It's not for everyone. Sure, most people have no appetite for the level of risk involved even if they can scrape together the money to buy some revenue-generating asset (I know a guy who left the Marine Corps as a truck driver...moved back to Japan, bought a truck, and then opened a moving company). Most people don't have access to capital....nor will most people ever have the intellect to write tight software code, no matter how many government-backed Code Bootcamp Initiatives there are.
To bring this back to the original point though, telling someone to bootstrap a factory, which is demonstrably doable in the American economy even today (for flexible definitions of "factory"), shouldn't ever be a "controversial" piece of advice. Especially on an pro-entrepreneurship site like YC/HN.
You don't. You start small and work you way up while offering whatever collateral you can until you get that big loan. Save up earnings and use a downpayment or buy insurance. That's how business growth works.
There are 10s of millions of business owners in America. Ask any of them how they did it.
The total amount of land is relatively fixed on human time scales. Given that, everyone who owns a factory (or any land) does make it more difficult for you to own a factory.
That’s quite a stretch since 95% of the world population lives on 10% of the land. [1] We can also build vertically, and space is a whole new frontier that is seeing lots of interest lately. I don't see this as a serious limitation. Opportunity is endless.
Start by making things where you live right now. In fact that's how many HN users are producing value as we speak.
Finding and controlling land to expand your business is not a serious limiting issue. You have effectively infinite headroom before you need to worry that you can't own a factory on Earth because too many other factories already exist.
I understand the policy and I don't think it is an entirely unreasonable way to combat wealth inequality. The only point I was trying to make is that it feels disingenuous to be surprised a company has a say in the severance they pay.
I do think there are a few places where this policy breaks down. For example, the additional transaction cost makes hiring decisions "stickier." I think this hurts the employee as well as the employer.
I don't quite understand the power imbalance here. My employer requires my labor and I am willing to trade my labor for money. If I'm not happy with the arrangement I'm free to find someone else to trade with.
> I don't quite understand the power imbalance here
There's only a power imbalance if workers are prevented from organizing, or if they (for whatever reason) refuse to organize. Or if they workers are very easily replaceable.
Obviously, if you're one of 200 workers, you can't negotiate evenly with the ownership as 1/200th of the company's workforce. Same goes if you're an unskilled worker who is easy to replace. However, even then, if you organize with all 200 of your co-workers, you are closer to a balance in negotiating power since it would be hard for said company to replace all 200 workers at once.
Here in Sweden we don't see it as making things harder for employers, but making them act in fairness.
Swedish worker unions sees the success of the business as success of the employees and will help get there for example by fair to both sides collective agreements.
This means for example that unreasonable demands from employees will be blocked, and if the employer needs to cut down employees cannot refuse.
But there is no inherent reason the business itself is the locus of responsibility to the worker (other than obvious things like worker safety on the job.)
Why not, for instance, make the loss of a job be covered by saved union funds that are generated by the union as a whole? The only reason the business is tagged as the responsible party in Europe is historical cruft.
If it's specified in their employment contract, they absolutely do. A severance package is really at the root of it just something laid out in an employment contract that says that absent cause, an employer needs to compensate the employee for terminating the contract. Clauses like that are super common in all kinds of contracts.
The main difference, of course, is that in countries that require this sort of thing, it's required - but requiring certain implicit terms in employment contracts is a regular thing in the U.S. as well - there's all kinds of regulations and case law on what sorts of employment contracts are valid. Saying that something like severance is a necessary requirement is a difference of degree, not of kind.
if you need to get the other party to sign a contract granting you a contractual right, doesn't that rather make the above poster's larger point though? Especially since that contract is the place where the salary and work are agreed upon. If I don't have a right to force you to work for me as a servant, then I need to get you to agree to do it willingly via some kind of contract.
Are notice periods, minimum wages, and restricting discrimination on protected grounds unjust as well? All of those are forced onto employment contracts in the U.S. (if not explicitly, then implicitly) regardless of whether employees or employers want them to be.
I live in the UK. Here the obligation is symmetric. All my recent work has been on 90 day terms. That is, if either I or the employer wish the contract to end normally that requires 90 days of notice unless both parties agree otherwise.
My most recent employer decided their costs were too high compared to projected income, so they gave me 90 days notice back in 2019.
At that point I knew that in 90 days I won't have a job. I could start looking for a new job, able to tell any prospective employer that I can start on day D+90. I would still get paid, as usual, and my employer was entitled to insist that I continue to work as usual.
In fact of course they gave me garden leave, I guess that's probably an alien term in the US too? Garden leave means that the 90 day term still applies, you still work for them not anybody else, and they still pay you fully - but your employer thinks it would be best (for example because they're scared you will sabotage things, poach customers, or steal trade secrets) that you do not come to the office or use their computers and thus you cannot do your job.
I'm very awkward so I pointed out that they're short of cash, rather than having too many engineers, and so since I wasn't doing anything else I kept working, although I will admit I wasn't exactly the most motivated team member since I knew I was terminated. They had to go re-enable my git access, AWS access and so on, which had been severed when I went in to be told I was fired. Very amusing.
Now, let's roll back to my previous job. I'd been essentially head-hunted, I informed that employer that I'd be leaving, triggering the 90 day notice. I was actually at their offices at the time, (I usually work from home) and I informed them that I'd be available until close-of-play to negotiate the exact details. They got right down to the wire but eventually sent someone to work it out, and we agreed I would spend the notice period spinning up people who'd been brought in to learn what I do, and that I wouldn't take my vacation days, but I would actually leave on D+85 not D+90.
Gardening leave is quite common in the US. No sure whether the term itself is known, though?
Paying out a notice period is very different from severance pay. I can assure you that AirBnB does not have a 14 weeks notice period.
(American companies also pay you out the notice period, and some send you on gardening leave, if they want you out of the office. But notice periods in America seem to be generally shorter, like 14 days, for most more junior jobs. In the UK one month seems to be more standard?)
Moreover, as a condition of employment, many (most?) US workers must sign an “employment agreement” which is essentially a legal document written by the company, for the company. It’s like an employment contract except with terms that only benefit the company.
Legally speaking, you always have a contract when working for someone. Even if it's implicit and oral only.
You even have a contract when you are buying a piece of candy at the newsstand.
(At least in the common law world. In eg German law technically you have one contract for the piece of candy, and one contract for each individual coin you are handing over. See https://en.wikipedia.org/wiki/Abstraction_principle_(law) Germans are a bit crazy.)
Huh? Literally the first sentence in that article starts with
> At-will employment is a term used in U.S. labor law for contractual relationships [...]
Emphasis on contractual.
Or am I missing something?
A contract that can be dissolved at will is still a contract. Just like you can cancel your Netflix subscription at will, and it's still a valid legal contract.
Employees stay longer because the safety net grows.
Less likely to speak poorly about you after leaving
More secure in their job. More emotional invested.
What are your reasons for not? Even if google stops selling at home they will keep the server alive for a grace period.
I had a friend who ran a bitcoin market. When the market shutdown he was responsible for customer records for 7 years and had to pay a company to secure access in case of requests.
You own a widget factory and I buy widgets from you. All of a sudden I don't need widgets, and I no longer need your products and stop paying for them.
You may have bought raw materials, hired people, set up a warehouse and stocked it with products anticipating my orders, but I don't understand why I should be obligated to pay for your products if I no longer need them.
All contracts generally include terms for termination of the contract. The tone of indignation is in the US, employers determine them unilaterally and employees don't have the bargaining power to do anything about it.
In many countries, there is no concept of 'at will employment'. It is not surprising that HNers from such countries would be incredulous.
Employment law in Europe, for example, frequently requires the severance terms to be determined at the time the employee is signed up. The employment agreement is a contract, and will be signed by all positions in the firm. In many cases, the severance terms are based on law.
Among other differences, for example, a German President is personally liable for the financial obligations of their company. If the company goes bankrupt, so does he.
Can you provide some references for your claims? Don't know much about Germany but that sounds totally made up as limitation of liability is the key concept behind the invention of companies.
https://en.wikipedia.org/wiki/Gesellschaft_mit_beschr%C3%A4n...
I would imagine if a director breaks the law, only then he could be personally liable. And in that case I would imagine Germany does have higher standards than US.
"If the company is in crisis special obligations arise for a managing director the breach of which may lead to a personal liability of the managing director."
So this is quite a bit different and more limited than "If the company goes bankrupt, so does he." and closer to "I would imagine if a director breaks the law, only then he could be personally liable.", for example Adam Neumann might have had problems if WeWork was a German GmbH.
"Among other differences, for example, a German President is personally liable for the financial obligations of their company. If the company goes bankrupt, so does he."
Not really. Directors are not generally held liable for debts incurred by their companies in Germany. However, they can be held liable if they are found to be in breach of their duties as directors. Also, the onus of proof is reversed in some cases (e.g. the director needs to prove he wasn't in breach of his duty).
>Among other differences, for example, a German President is personally liable for the financial obligations of their company. If the company goes bankrupt, so does he.
In US new enterprise have a very high failure rate, how do entrepreneurs survive in such environment?
They are protected by US corporate law. The debts of a corporation are the responsibility of the corporation. A corporation (Inc.) is treated like a person from that perspective. If a corporation runs out of money and cannot pay its debts and declares bankruptcy, the management is under no obligation to cover the debt, and the debt holders are out of luck.
A CEO (and other company execs) can be held personally liable only if there is fraud or other illegal acts. Mismanaging a company, or even simply working hard and not succeeding, are not illegal.
American firms can take on much more risk, so we tend to see both many more failures and many more successes.
I think you answered your own question. In the US, entrepreneurs are not personally liable. Now, that's not the same thing as saying that failure won't reflect badly on their reputation. But it is definitely a lot easier to have a comeback career if you don't have to declare personal bankruptcy.
worth noting that this severance is vastly more generous than you'd get from statutory redundancy in most (all?) countries.
the UK is one week's pay for every year, but with a maximum of £538/week and a maximum of 20 years for length service.
given that a software engineer who's been at AirBnB for two years is going to get 16 weeks of pay and probably makes _at least_ 180k/year, they're probably getting around $55k.
This is in practice just a deferred salary scheme. Since the mandate attaches an unavoidable additional liability to every year of employment, that will get rolled into the total cost of employment by accountants.
So yes, when you collect the deferred salary it feels generous. But you were getting less salary up until that point in order to make the system solvent.
One may well prefer this arrangement, but one can't evaluate the generosity of the payment without also accounting for the cost that made it possible.
I think they mean unavoidable from the company's point of view - they can't make you quit, so when they hire you, they have to assume if they ever need to lay you off, they'll need to afford your severance.
Yes — I was slightly incomplete in my description, but you are exactly correct about what I meant. Company liabilities include things you are obligated to pay under uncertain future circumstances, so accountants have to make sure that such liabilities can be handled if they ever arise.
I think European dev market is a lot more complex than that; if you work in Zurich or London, do contracting, work for a major bank etc then the market is way different for you than if you do (say) PHP as an employee of a non-software company in Berlin.
The baseline is decently middle class with a solid safety net but there's a lot more room at the top than you're making out IMHO.
As always, to make cash as a "working" dev you have to get as close as you can to a gigantic money funnel of some sort. The main difference from the U.S. is that there are fewer and different money fountains, especially missing unicorn and VC money. Finance, FAANG outposts and doing specialised things for huge real-economy companies still pay well.
Zurich and London top out at $100k, any more and we're talking managerial responsibilities. Compared to SF or SEA they are only paying ~25% market rate.
The safety net argument has no legs. Australia and Canada both have social benefits that far exceed the majority of EU nations, yet pre-pandemic there was no shortage of $150k+ dev roles.
Zurich does definitely not top out at 100k. Depending on your negotiation skills, you'll start at about 120-140k in the big tech companies, around 120k in data science consulting, 120k for data science in banks, 80-100k at the smaller software companies.
The number of European devs making >$100k is a fraction of a percent. Your numbers tell the story — the pinnacle of the entire European continent is still only paying 25% comparable US market rate, and 60% comparable AU/CA rate. In a city more expensive than SF.
Just as there are American devs pocketing 7 figures annually. Again, the number of European devs making >$100k is a fraction of a percent. You can be making $100k in the US after a 6 month bootcamp or in AU/CA with a couple of years experience.
If you've read salary threads, you’d know that everyone on Hacker News makes $1.5 million per year as an entry level software engineer, owns three houses and a Ferrari, and has a supermodel significant other.
I had an offer in London as a dev in finance at ~300k GBP total comp and a Series B startup offer over 100k GBP and that was more than 4 years ago. Ended up going with a much smaller seed-stage company in Berlin because I couldn't stomach the finance people and liked Berlin.
This one is more generous, true, but the real question is, because the employer decides, how likely it is to be better than European countries that have the same standard for every employee.
Most employees in the US are hired at will. This means that the companies are not obligated to continue to offer their employees work. Severance is usually paid by the employer so that the employee agrees to leave amicably and does not sue for wrongful termination.
Which country do you live in? Is it common practice for all employees to have severance negotiated as part of an employment contract? What happens if the employee decides to leave the employer before the contract expires?
In Belgium, they used the "Claeys formula" for many cases: https://en.wikipedia.org/wiki/Claeys_Formula. (I believe they use something different now, but it's hard to imagine that unions would have allowed a significant relaxation of the earlier rules, so it's still a good first order approximation.)
Some examples:
- somebody who makes 5000 euro gross per month who's 20 years with the same company would get ~15 months severance.
- somebody who makes 3000 euro gross who's 5 years at a company would get 7 months of severance.
Interestingly enough, the age of the employee is a factor of the equation!
When it's the employee who decides to leave the company, the company can require them to stay on for many months, again depending on how long the employee was with the company. Or the company can agree to release earlier, but it will still be on the hook for a significant amount of months of salary.
Let's just say that the decision to hire an engineer isn't done lightly.
In Australia it's not negotiable. Our employment laws dictate what severance payment is required if a company is letting people go to reduce costs. Those laws don't apply if the employee leaves of their own accord, or if they are fired for other reasons.
Then the situation is maybe not so different? It's an amount you're entitled to when laid off, set by the government, which your employer has to fund proactively (payroll taxes).
Because it's set by the government, it caps out at well below a typical tech worker's burn rate, so it's little more than a brake on the depletion of our savings. When a tech company offers severance it's typically much, much more than what the government guarantees.
You also get the full amount regardless of how long you're unemployed, so e.g. if you get laid off with 7 weeks severance and find another job in 3 weeks, that's a free month of salary.
In our case, the payout is defined as 4-12 weeks of salary (plus 1-4 weeks notice), based on length of tenure. Since this scales with what people earn, there's little need for tech companies (or other well-paid fields) to offer anything extra.
On a related note, Australians are also entitled to 4 weeks paid leave per yer, which accrues if not taken. Employers are also required to pay out any leave balance (even if the employee leave voluntarily), which means most workers will have at least a couple of additional weeks paid out on top of the severance.
It's the same here, in that you get the full amount regardless of how long you're unemployed after they let you go.
For a variety of reasons, unemployment is a split federal/state responsibility funded by insurance. The framework was established back in the Social Security Act of 1935. Unemployment is administered and has rules developed by states that need to meet Federal standards, and the feds fund parts of the system and keep the state funds solvent.
Benefits vary greatly. It has been awhile since I worked with this stuff, but IIRC Massachusetts is the highest payout ($750+) and places like Alabama, Florida, Mississippi and Arizona are <$300.
Severance is usually part of an employee contract (if one exists) or commonly part of an agreement at separation where the employer gets some benefit (waiving the right to sue, etc).
Same in Israel, but it's mandatory to pay a months' wages for every year you worked at the company. The employer has to pay into a fund that the employee can cash out when they're let go.
Aren't they though? My understanding is that they pay the payroll taxes on behalf of the employees but I think they aren't required to, it's just customary. If you're an independent contractor you pay it yourself.
Because there's no legal requirement to pay any sort of severance in the US.
Just like, for example, there's no legal requirement to pay employees bonuses, so bonus pay is at the employer's sole discretion. In fact, salary itself is at the employer's sole discretion other than complying with minimum wage and overtime laws.
It's been my experience that severance for rank-and-file employees is rarely offered and is very miniscule if it is paid.
I mean, as an American... I'm not even sure why companies give severance pay in the first place. It doesn't feel like something they should be obligated to do.
I'd guess it's mostly to maintain morale among the remaining employees. People who are on the fence between staying or leaving are a bit more likely to stick around if they know they'll get a severance package if they're laid off but nothing if they quit.
In the US every company pays unemployment insurance. When employees are laid off, they receive unemployment benefits from this fund until they find a new job (for up to 39 months). Severance is the company "willing" to paying the laid-off employee more money than unemployment insurance.
I'm not a fan of Airbnb's business but this is highly commendable.
The severance package is the core metric to judge a company that is doing layoffs. In this case, it sounds like Airbnb did the right thing. Airbnb fired people well in advance of when they were actually forced to. This enabled them to provide an ethical severance.
Some companies wait until the last minute and then provide two weeks or similar. These companies should be publicly shamed for all time.
I wouldn't judge them too softly, they did after all promote having an internal services food team for years and virtue signaled all over the place that they wanted them to be team members and not contractors like every other tech company (they got stock, sick days, vacation, benefits etc), then fired them all over Christmas break one year and replaced them with contractors.
4x12 = 48 weeks of compensation disbursed by the entity. Restated compared to some nightmare no severance scenario meant they effectively terminated 4 FTEs to achieve slightly less than 3 FTEs of cost savings (adjusted for healthcare costs).
I'm not arguing against AirBNBs approach btw. Their CEO had a wonderful podcast on the Masters of Scale pod roughly two weeks ago.
However the Rawlsian philosophy on that marginal employee that got terminated effectively to fund the severance for herself and her colleagues is a tricky ethical consideration.
It doesn't seem all that tricky to me. While losing any job is rough, losing a job with enough severance and benefits to cover the ensuing period of uncertainty and a job search likely isn't going to be that bad for people who were able to get hired by Airbnb to begin with. But losing a job without a safety net could be a disaster. Imo it's far better to put more people in the 'bad, but not that bad' situation than to put anyone in the 'disaster' situation.
It's confusing. Some read it as "COBRA is available at full price" and others as "healthcare paid by AirBNB". My understanding is COBRA is just the default. The company can't really block it, for 18 months. No action required.
So if AirBNB went out of their way to mention COBRA, it likely means they're covering it.
You actually have to pay the full premium for healthcare. But still, assuming a months pay covers at least 3 months of Cobra coverage, that is 3 months PTO to get your head straight.
for someone that just lost their job having to pay basically double what you were paying for health insurance it certainly is expensive from their pov. health care in america is not something any other country would ask to have save some esoteric elective surgery out of pocket if you are rich.
I think I've only had one job where the employer funded $ amount of my health plan was actually spelled out. My expected contribution was always made known at enrollment time but the employer contribution was left to blind speculation.
They wanted like $1400/month for family coverage when I left my last job. I rolled the dice and went without it. It's available retroactively so if you need it later you can sign up for it.
Unfortunately not to some here in Switzerland. The average adult here pays around $350 USD/month for just their coverage, according to official statistics. The total cost for a family might end up less than $1400, but not by much.
A COBRA plan can be about ~$500-1000 for an individual in the US. A family can reach $2000-5000/month. Then, you are still sometimes left holding the bag for deductibles, co-pays, co-insurance and annual out-of-pocket maximums. Old but not way off: [1]. Some folks are better off on the private markets, especially exchanges.
> A COBRA plan can be about ~$500-1000 for an individual in the US. A
A COBRA plan is just continuation of the same plan, at the same cost (except that the ex-employee now covers whatever part was paid by the employer), as you had when employed.
> Some folks are better off on the private markets, especially exchanges.
Rarely for an equivalent quality plan if they were in a large group plan, which are usually better than individual plans, even exchange plans, on a cost/benefit basis. Excluding, of course, consideration of exchange subsidies if the ex-employee would qualify based on their reduced income.
Anecdotally, my employer's group health plan costs ~$650/month for just me. A roughly equivalent plan on the NY exchange is ~$750~900/month (my insurer doesn't participate in the NY exchange and also my employer customized my health plan so there's no direct comparison either way). So there's definitely some savings present.
In the future, you should just look into temporary insurance. Almost every insurer offers temporary plans that you can buy for 1-6 months of coverage to handle a gap between jobs. Unless you have some reason to keep your COBRA coverage (e.g. regular appointments for a chronic condition), the temp insurance acts as good emergency coverage and for very small amounts (last time I did it, ~$250 total for 3 months coverage)
Yeah, most people don't realize that you have 90 days to elect COBRA retroactively after you leave a job. They'll reimburse all your expenses incurred during that time period under the program as if you'd had it the whole time. Once you pay the premiums, of course.
So you basically get 90 days "free" COBRA, but your deductible is 1, 2 or 3 months premiums.
I have a feeling engineers who managed to find employment at AirBnB in the first place will turn out just fine. It's not exactly your local no-name web dev company.
A lot of big tech companies continue to hire, AirBnB was at the rough intersection of discretionary leisure travel, the gig economy, COVID and tech. aka "the big oof"
They will "cover" 12 months of COBRA, which I take to mean they'll pay the premiums:
> In the midst of a global health crisis of unknown duration, we want to limit the burden of healthcare costs. In the US, we will cover 12 months of health insurance through COBRA. In all other countries, we will cover health insurance costs through the end of 2020. This is because we’re either legally unable to continue coverage, or our current plans will not allow for an extension. We will also provide four months of mental health support through KonTerra.
Anyone who loses health insurance due to losing their employment (even if they voluntarily resign) is legally allowed to buy COBRA for 18 months. I think they are paying for it, otherwise this would be a fairly meaningless statement since the employer isn't involved with COBRA at all and that's less eligibility than any employee would have.
Something like that happened to me. I was a grad student until the project I was working on ran out of funding. Their website said if you left the program you could pay for health insurance out of pocket under the same plan you had while a student.
What they left out was that the company could reject you as a customer if you had a pre-existing condition. (This was before the ACA took effect.) They can legally do this because COBRA does not apply to grad students.
Fortunately, Oregon at the time had a state-subsidized health insurance plan called OMIP for people that were rejected by private health plans. The premiums weren't cheap, but they weren't worse than equivalent plans. Eventually OMIP was superceded by the ACA marketplace.
I worked for a company that was sold for scraps and they laid off all but there people. It didn’t affect me, I got a contract the next week with one of our clients that I worked with and paid for Cobra.
However, my Cobra eligibility died when the acquiring company cancelled their health care and moved everything to India.
Do you realise you have to find a new job within those four months?! It's not 'time off', it's time desperately searching for a new job until you start eating into your savings and your children end up starving.
What is the median salary of people who were laid off?
It is some how hard to believe that they will start starving within a year after a layoff (perhaps if they plan to maintain their expense levels unchanged, but still sounds very improbable)
What are the calculation that lead you to this conclusion ?
Not everyone manages to negotiate the same high tech salaries even if it looks like they're working for a prestigious company It may take a very long to find new work. People have mortgages that they may struggle to afford long term - or at all if they can't find a job with the same salary, meaning they could have to sell their homes. Some people have debts for whatever reason out of their control. Some people have many family members depending on them. Not everyone's got a simple life.
My wife was part of this layoff, worked in their HR org and we just bought a house beginning of the year borrowing heavily from our 401(k)s. So we immediately now have to payoff this huge loan back to her 401(k) which we were paying per paycheck. 90%+ of her team were let go, so she's competing with all of them for the few roles available in other companies. Most of those 1900 people were not developers, so the next few months will have a lot of uncertainty for us. "Not everyone's got a simple life."
Even people who are employed can go broke, declare bankruptcy, and not being able to pay for their previously-enjoyed lifestyle anymore.
The financial security ladder has many steps.
Hard to imagine that programmers, product managers, SREs that had successfully passed AirBnB interviews would be so close to the bottom of that ladder, that their children will go hungry within months of stopping to receive the severance.
Something that scares me is that tech interviews are so fickle. You could pass the Google interview one day but be rejected by everywhere else the next.
There are many caveats to your first statement. For example food aid (SNAP) may be time limited. The federal govt is concerned that you may be deterred for getting a job.
I’m surprised they were still handing out options - don’t most later stage startups switch to RSUs? I’d hate to have to decide whether to exercise today, cliff or no cliff.
Does anyone recall if Airbnb were one of the firms to institute more employee-friendly exercise windows? If so that takes some of the pressure off the decision.
You mean if you're still an employee? I've read their RSUs have 7y expiration, which is part of the whole Airbnb IPO problem because the ones from 2014 will start expiring next year.
But what's the window to exercise once you leave the company? I doubt it's until expiration.
RSUs normally expire only if there’s no liquidity event (ipo or sale) and once vested remain yours even after end of employement. Ofx that depends on specific contract
If these are double trigger RSUs they don’t fully vest until two conditions are met:
1) the usual employed by the company for a certain period of time
2) some qualifying liquidity event (ipo / sale)
This is to avoid employees needing to pay taxes after #1 even though the stock can’t be sold. However for tax reasons there has to be time limit when they either vest or expire worthless. Depends on which lawyer you ask how long that can be, but generally most are less than ten years.
Late stage startups have to offer RSUs, as the equivalent option package becomes extremely unattractive if you depart before the company is public.
Imagine, for example, an initial option grant of 180K shares at $2.00, which expire 90 days after you leave. Then fast forward two years: The valuations have doubled every year, and half are vested, so you have 90k options priced at $2, but that last valuation puts at $8 each. Sounds like you have a lot of potential money right? Maybe, but not if you leave. If the company isn't public, you either have to rely on some secondary market that might be really shady, or have to hold your shares until IPO. To do so, you need to spend $180K, and prepare for an AMT tax hit of, roughly, 28% of the gains. 90k shares, with $6 a a share paper gains, means $135k in taxes that year.
So barring that secondary market for the shares, we are talking about spending $300k exercising the options. Few people can, or are willing, to put that much money in, even if on paper they are up hundreds of thousands of dollars.
RSUs will demand action at IPO, as you can't delay the exercise forever, but it's far better than, in practice, letting a majority of options lapse, even when you are pretty sure they'll be deep in the money at IPO.
RSUs are common in late stage startups. The share price at the time of grant is calculated based on an estimated valuation. If I remember correctly, in the year or two leading up to IPO, Uber issued RSUs to employees at a valuation of $49/share so the IPO price of $45 was already below grant price for many that joined late.
If they don't have the money they can take a loan (maybe hard without a job) or try to raise it (lots of people will be happy to invest). Let's not forget that many of these individuals have been making top dollar. Airbnb is known to be very competitive, even with FANNG level salaries.
I don't see it as a tough choice. Airbnb will IPO, it's just a question of when. It's a safe investment to make. This is a company operating all over the world that had $4.3B in revenue last year. If not COVID-19 they would've probably IPO'd very soon. They will get through it.
It would be nice if you could just hand over a percentage of the options to the government as a tax, instead of having to pay in dollars at a guess of the value.
I'd expect the options might be under water based on recent funding announcements. Probably still expensive to exercise, but I can't see how there would be a tax liability if they are under water.
It's pretty much impossible for us to say in this case since the terms weren't disclosed that I know of. They've been described as debt and equity. It's reasonable to assume the equity component would imply a certain valuation, and that valuation could be down from previous valuations.
If you received options at a strike price at the peak valuation, then the current valuation may be below that level.
Yeah it's going to be a hard decision to make for a lot of these people, especially given some of the bad press that these kind of gig factories have been enduring.
1 RSU is worth 1x the stock price. 1 option is worth the delta between the stock price and the strike price, meaning 1 RSU is always worth more than one option.
Usually you get more options than you would RSU’s to compensate for this, but there’s still a risk/reward tradeoff. I have had stock options that ended up worth $0 because they were underwater. RSU’s would have been worth $non-zero.
The fact that RSU’s retain some value when the stock price goes down is highly relevant to a company like AirBNB which is undoubtedly struggling with the current situation. Also relevant may be that AirBNB isn’t a public company yet, making their shares relatively non-liquidifiable. This can pose problems both ways: if you get RSU’s in that situation you’ve received “taxable income” in the form of a non-liquidifiable asset and if you get options, you have to choose whether to buy stock in a travel accommodations company in the middle of a pandemic that just laid off 1/4 of their workforce, hence potentially incurring a very strong risk of loss.
You don't necessarily get taxable income from RSUs [edit: when they're granted] if they're structured in a 'Facebook Style' RSU which has an expiration if the company does not IPO within a certain time frame.
As long as there's a real risk of loss you can avoid the taxable income and private companies with high valuations will do this to help employees avoid the bad tax situation on an illiquid asset (without need to have huge amounts of cash to exercise options).
Options similarly must expire after 10 years for similar risk of loss tax reasons (as I understand it).
I was told the RSUs are 'Facebook Style' because they were the first to pioneer this.
Even options with a low strike price can be problematic because tax law is dumb and charges tax on the spread before sale when you exercise (so you can end up with a huge tax bill on exercise without the ability to sell the shares to cover it). ISOs were supposed to prevent this, but AMT has not increased to match inflation over time and was never updated to accommodate for this case specifically so you still have to pay tax if you hit it (which you will because it's low). This wasn't considered originally because companies intending to IPO were not private >10yrs so expiration risk was not a serious problem and you could just wait for the IPO before exercise.
So with options even if you save the exercise cash you have to save a large amount for taxes depending on the spread, or deal with a bunch of loan shark like companies that will take a cut to front you the capital.
For most people RSUs are probably preferable unless you get in really early and can exercise all the options when the spread is zero (preferably with an 83b election for early exercise on non-vested shares).
RSUs (even facebook-style) are definitely taxable. With options, you're in control of when to take the tax hit. With facebook-style RSUs, the tax hit comes when the stock gets distributed (taxed as ordinary income) -- usually in the form of withholding some amount of shares.
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Important to remember with RSUs in pre-IPO companies: even though you might get shares distributed at IPO, you're usually subject to a lock up. This is unfortunate because if you receive stock at IPO, you have to pay taxes at them -- so if your company IPOs at $50, then drops to $20 when the lockup expires, you have to pay taxes on the shares you received at $50 value even though you couldn't sell shares at that value.
My understanding is they're taxable, but only after they're liquid which makes it easier for the employee. I think most companies doing FB style do something fancy to avoid the distribution tax lockout issue (witholding some to cover tax or direct listing to avoid lockout).
The situation where you have a huge tax bill and no cash to pay it (or worse a huge tax bill and your illiquid stocks have crashed to $0) shouldn't happen, though I guess there's still a chance in the pathological case you describe? Not sure if that's avoidable.
The other thing I forgot to mention is that if you do risk all this cash on option exercise/taxes and your company does go to $0 you do get to take a $3000 AMT tax credit each year until you die (but maybe only if you don’t have kids or something, can’t remember) - it’s not great.
Actually, underwithholding can still happen. Employers may withhold at a flat 22% federal rate, which can be significantly lower than a highly paid employee's actual marginal tax rate. So the employee may still need to increase the withholdings on their regular pay, or make an estimated tax payment for each quarter of RSU income.
This is my current possibly incorrect understanding:
Scenario A there’s no tax, but the company is failing to hold up their end of the bargain and this would probably lead to everyone quitting or some sort of RSU regrant.
Scenario B I think you’re taxed when they vest. If there’s no IPO then you don’t get any money.
The other relevant point, in favor of RSUs is they usually have a double trigger for settling. One is service time, and the second is an equity event. Which is nice because you basically earn the RSU based on service time, but it doesn't truly settle until there's a liquid market available to dispose enough shares to cover tax liabilities.
This is why you'll see recently IPO'd companies reporting large one-time equity compensation numbers.
edit: s/vesting/settling. I believe "settling" is the term actually used.
If you started working at Boeing exactly a year ago and were leaving today, would you rather have been granted RSUs at a notional initial value of $371.60/sh or been granted options at a strike price of $371.60/sh?
Not really. RSU’s don’t have a “notional initial value” for public companies; if you get them, you pay tax on the number of RSU’s you got times the stock price at the time you get them. Your vesting schedule will just say, “X units of ABC on 5/1/20” with no dollar figure.
Brokerages will typically set things up so you can automatically sell enough shares to cover your tax liability as soon as they vest.
Typically you have to amend your cost basis on your tax return for this to actually work, for some stupid bureaucratic reason. Probably a conspiracy to make people who get equity compensation buy the more expensive version of TurboTax.
(Under US law,) You pay income tax on RSUs only when they are both vested and released. (These typically happen on the same day, but in the future, not on the grant date.)
At my employer they withhold taxes from the RSUs themselves as they vest (taxes are withheld at the bonus tax rate using integer multiplication, I believe).
E.g.: you'll get Math.floor(x * (1-bonus_tax_rate)) shares and will owe no income tax (unless your marginal tax rate is over the bonus tax rate). After that point, you'll only owe taxes on possible capital gains from price at the time of vest to the time you sell.
Well, yeah, that's Boeing, but if I'm going to work at a startup I want options, I want lots of them, and I want a good strike price. After all, if it's not going to do damned well next year why am I even going there?
RSUs, as structured at companies I've been at, always have upside: you can sell them for the stock price, which is a least $0. At the worst, you make nothing. Tax is paid upon acquiring them by selling a number of the acquired RSUs to pay for the tax.
Options, however, can have downside: tax can't be paid with the excerised option itself, because you can't sell the exercised option. So you have to pay the tax out of pocket. Meanwhile, the company can go under, and render the options worthless: you've lost the tax amount. If the company's valuation increases significantly, the taxes can be fairly significant. But you also can't just wait to see if the company succeeds, either: every company I've been at forces you to exercise within a certain amount of time if you leave the company.
Dumb question here, I don't really understand what an option is in this context - can you just think of it as a call with a expiration of the vesting date and strike price at whatever they set? So they're giving you calls, with a $0 premium?
It's a call option, with no premium paid, a strike price specified [typically the last 409A valuation or other better proxy of current value], subject to vesting [cannot exercise before this date], but with an expiration some number of years into the future (typically 10 years from the date of the grant).
So you had it basically correct, except they don't expire at the vesting date.
Options are awful. Exercising them can trigger AMT, where you get to pay taxes on money you don't have yet (and cannot get) at a time when you probably just spent a lot of your savings to purchase the options.
Bc you lose your optionality after leaving the company - terminated employees would need to decide whether or not to exercise their vested options within some post-termination window (typically 30-90 days)
That's why when a yet another aspiring startup wants to hire me, I ask for a high sign on bonus as an insurance, monthly vesting cycle, at least 200k in base pay and high severance upon termination. Never been given that, but I don't regret: looking back, all those "just 1 year till IPO" companies are underwater.
Monthly vesting without a year one cliff is not really done, AFAIK. I also don't think that there is a lot of wiggle room for negotiated severance terms. But sign on bonuses and 200k base pay could certainly be on the table.
It was just acceptable before to have a 1 year cliff? Also it was done to placate Nooglers not getting a refresher for the first year (although that didn't make any sense and some Nooglers in 2017 got neither end of the stick).
Yep. That's what I had at Google. Was selling shares as soon as I acquired them (no issue with GOOG but I preferred more diversification). I recall there being some admin time needed (~2-3 months?) before I had access to said shares but as soon as I did all 2-3 months worth were "vested" and I started cashing out.
Looks like finally a comment thread where there are no pitch forks against G. Still waiting for someone to concoct a reason as to why this maybe bad for employees :D Also it's quarterly at FB.
very astutely stated. I think many of us make fundamental attribution mistake - what can be attributed to ignorance/stupidity should not be attributed to malice.
For some high-level positions, it gets negotiated up-front. You're leaving some other company, taking a risk, and there's a good chance you might not be right for the new company.
But if you're less high-level but rare and desirable, well, some situations, like moving cross-country, might make it a bit appropriate.
Everything is negotiable. You can negotiate a private office with a ocean view if you're valuable enough. This won't work for rank and file employees obviously.
Same, those clowns are Sky Rocket Ventures wouldn't stop calling me. I told them to match 65% of my then-salary, they realized they weren't talking with a broke 20 year old kid and stopped calling me.
Lots of people are afraid when negotiating, and the original comment shows that even making big demands up front is not catastrophic. You can still cave in later.
Unless you are receiving executive level compensation and/or you have a serious public reputation on the line, no reasonable company would consider giving you that. It would give you the perverse incentive to try to get fired and someone negotiating for that would be a strong negative signal - an economic moral hazard. https://en.wikipedia.org/wiki/Moral_hazard
Nope, no one. And I could negotiate terms with directors, VPs and CEOs (of small firms) over lunches: meaning that they deemed it valuable enough to spend a few hours of their time on me, make a sales pitch and listen. Some admitted that while my terms were reasonable, it would just too expensive for their company to hire me.
But your healthcare would be very cheap, if not free, wouldn't be tied to your employment; education cost would be minuscule compared to US; kids would benefit from the first two factors too; minimum annual vacation would be 4 weeks, mandated by law.
Sticker price doesn't tell the whole story. I'm not saying that the total benefit is lower, but the cost of earning that $175k is definitely much higher than the cost of that $50k.
Sending your kids to school all the way up including university costs about ~€10K per kid in Europe. How much would it cost in the US? ~$150K? I think that would make up another large chunk of price difference.
And: it’s available for every parent. Not just those in nice tech jobs.
For California residents, the top state schools are ~$57k in tuition for all 4 years (total). Yes, American private universities would cost more, but that's a choice to pay more if you think it's worth it.
As the pandemic demonstrated, quality of education is hardly relevant. It is all about the credentialism. 16 yo kids in Palo Alto didn’t threw themselves in front of the caltrain because they so desired a quality education. It is because there is so much competition in labor market that even their multi-millionaire parents could do so much. Why do you think we had an Operation Varsity Blues? If hyper-affluent is under this much pressure to cheat, what chance does the $175k/year software laborer’s kid have?
Depends where you live. There's no reason the 175k employee can't live somewhere "bad" or suffer a long commute. Most major western european cities and their suburbs are by no means cheap to find housing in.
>car & car insurance
Most white collar Europeans with families own cars. Owning and operating a vehicle is astronomically cheaper in the US, even in California which has insanely high costs compared to the median or mean state.
>kindergarten
Part of the free (at the point of use, obviously it's paid for by taxes) public school system in the US.
>And you medical coverage might still cover less than the European one.
I don't want to have a healthcare debate but the cost was addressed higher up the thread and the difference in coverage between what American BigCo employees get and what Europeans get (and both those classes of insurance are diverse enough to make comparison impractical without sweeping generalizations) is not going to be meaningful except in the edge cases.
> Depends where you live. There's no reason the 175k employee can't live somewhere "bad" or suffer a long commute. Most major western european cities and their suburbs are by no means cheap to find housing in.
I don't think there are many "bad" places that are cheap around Silicon Valley.
Most western European cities have neighbourhoods that are drastically cheaper than the well-off ones.
> Most white collar Europeans with families own cars. Owning and operating a vehicle is astronomically cheaper in the US, even in California which has insanely high costs compared to the median or mean state.
New cars in America are twice as expensive as the average in the EU.
Average car insurance in America is five times as expensive as the average in the EU.
> Part of the free (at the point of use, obviously it's paid for by taxes) public school system in the US.
Sorry, I meant nursery.* Kindergarten is free in the EU as well.
> I don't want to have a healthcare debate but the cost was addressed higher up the thread and the difference in coverage between what American BigCo employees get and what Europeans get (and both those classes of insurance are diverse enough to make comparison impractical without sweeping generalizations) is not going to be meaningful except in the edge cases.
Well that's convenient. Based on the American medical debt lets go with a lesser coverage for the American workforce.
Also it's not taking into account the cost of opportunity of having medical insurance event when you won't be employed anymore in case of an accident or other reason.
>I don't think there are many "bad" places that are cheap around Silicon Valley.
They're not cheap relative to other parts of the country buy they're cheap relative to where most white collar employees are living. The janitor and the plumber have to live somewhere and you can pay what they pay if you don't mind living among them.
>Most western European cities have neighbourhoods that are drastically cheaper than the well-off ones.
And in American cities those neighborhoods are particular suburbs (often cities themselves). Cheap housing that is literally in the city is much less numerous.
>New cars in America are twice as expensive as the average in the EU.
You can't compare car prices without comparing the cars and the associated costs. Americans buy much larger more expensive vehicles because they can because the taxes are lower, the fees are lower and the insurance is cheaper. This topic has been beaten to death. Americans buy $30k crossovers because those $30k crossovers cost $30k out the door. Contrast that to the typical taxes on new cars in Europe and you'll see why Europeans gravitate toward lower purchase prices.
>Average car insurance in America is five times as expensive as the average in the EU.
Citation please. This flies in the face of all my anecdotal experience.
>Sorry, I meant nursery.* Kindergarten is free in the EU as well.
We call that daycare. In the US you have an entire range of options from a high priced daycare with a low child:staff ratio, located in a high end part of town, quadruple extra special background checks on all the employees, etc, etc all the way down to single person cash only operations that people run out of their homes. It's as expensive or cheap as you're willing to make it. Remember, the poor families have to send their kids somewhere too so it's not like options don't exist at every price point. It's rare in tech because the employee demographics result in low demand but many employers offer free/cheap on-site daycare or a voucher to a particular daycare as a job perk. That said, work from home perks that are common in tech can alleviate some of the demand for daycare.
>Well that's convenient. Based on the American medical debt lets go with a lesser coverage for the American workforce. Also it's not taking into account the cost of opportunity of having medical insurance event when you won't be employed anymore in case of an accident or other reason.
I'm done debating with you. I'm not going to get tricked into trying to defend the American system as overall better which is where you seem to be nudging the goalposts toward. All I am saying is that even with it's failings someone making 175k (a pay grade certainly not representative of the workforce in general) is likely better off with it than taking a 100k pay cut for the European system.
It is possible to spend the same amount in medical, car and daycare expenses if you keep a job while being ill, ride a beat-up car and leave your kid to a shady cash-only operating in someone's home.
So explain to me how earning $100K more is so interesting again?
You can get a new Toyota/Honda car for 2 months pay after taxes in the US scenario. And it’s trivial to go to Nevada from the Bay Area to make the purchase and pocket the cost difference if you have a spare weekend.
You spend more on medical out of pocket, but it’s a drop in the bucket compared to the pittance folks make in Europe. Set aside $200k over 16 years of school/daycare and you’ve still cleared in excess of a million dollars more than your European counterparts.
There is a reason the top SWEs in the world flock to the tech companies in the US. The income is drastically better and if you don’t succumb to lifestyle inflation, you can live like a typical European middle class citizen (one car, tiny apartment, little eating out) and retire after a 15 year career.
> There is a reason the top SWEs in the world flock to the tech companies in the US.
I can tell you from experience that no developer I have ever met in my career want to move to the US. Sorry to burst your bubble. And it's not even a question of money for most of them.
> The income is drastically better and if you don’t succumb to lifestyle inflation, you can live like a typical European middle class citizen (one car, tiny apartment, little eating out)
That's not a typical European middle class citizen. Typical European middle class citizen already bought a house within that timeframe.
> retire after a 15 year career
Not sure where you're retiring but it's not going to be Europe because you would be way, way off money wise since you don't own anything.
To give one idea, nursing home room cost is 100k/year. Considering the possibility of chronic conditions, specialized treatments and overall increase in healthcare usage, in the span between 70-90 it is very easy go over >2M.
My parents put up grandma with Dementia in PA for about $50k a year in nice place. Are you drawing figures from movie star nursing homes in LA or something? Do you think the average American just puts a bullet in their head after 70? The household income in this country is about $60k a year. Your math is ludicrous.
Health care is >$800/month in Germany. I don't get why we get away with the notation that health care is free. It's not free, health insurance is simply compulsory here.
800$ is the nominal price. Real price is the fact that it is not tied to your employer, particularly your employers’ negotiation power with the insurance company. Which in turn increases your negotiation power as an employee. Not only for pay, but also other non-priced issues like quality coworkers, meaningful job etc.
I feel like this is a bit of a sweeping generalisation. Certainly many countries in Europe would not give this. And others would have maximums which are lower than typical Airbnb pay.
The USA's unemployment rate in March 2020 (4.4%) was lower than the EU's unemployment rate in January 2020 (6.2%) according to a very casual Google search. I'm curious how you're drawing this. Are you saying the EU has lower unemployment today than it did in January?
It's amusing you post pre-COVID numbers for both regions. Best comparison would be April numbers for both EU and US. The US is around 20% now [1].
The US short-term unemployment numbers are way up, because the US didn't do enough to help small businesses weather the storm, so they laid off their workforce. In contrast the EU supported their businesses and workers and consequently people are taking leave instead of unemployment.
This is an accounting gimmick. The US has clearer unemployment conditions and also has given relief. In countries in the EU (and it varies a lot) you would see they are still employed, but not working and taking a paycut. That's really the same as unemployed.
In any case my comment was about the meaning of having severance in contrast to having a job, not about crisis handling.
If you meant "these days" as specifically in response to the COVID-19 crisis, we don't have basis for a useful comparison. As another commenter pointed out, the US is delivering economic relief primarily in the form of expanded unemployment coverage whereas Europe is taking a myriad of business support measures. Whether one is better than the other is not obvious yet it's effectively what unemployment numbers would reflect.
As a European I wouldn't be too fast to gloat - the EU is trying to keep jobs on hold but it's not clear to me what will come out of this - it seems like the restrictions are going to be here for a long time and keeping businesses afloat artificially could end up blocking restructuring. My biggest concern right now is that migration restrictions are going to kill seasonal manual labor migration and government unemployment subsidies will prevent local population from taking up that work - we could end up with major issues in things like crop harvesting.
They're gradually pushing the time period back, as of a couple days ago I believe it was end of May. As of right now it's for "stays and Airbnb Experiences made on or before March 14, 2020, with a check-in date between March 14, 2020 and June 15, 2020"
Of course, events as far out as late July are cancelled due to COVID-19
If they won’t let you cancel, and you don’t want to go, I’m sure there are plenty of ER nurses that you could donate your booking to. I also keep hearing of hospital bed shortages.
Yes, strict cancellation policy. For those following the drama, they keep extending their extenuating circumstances policy out but it doesn't cover most of the summer yet. Apparently the circumstances are only extenuating for the immediate future.
That's unlikely at this point. Enough people ignored social distancing and still are not wearing masks that the powder keg is about to explode. There also will be a second wave.
The social distancing thing is subtle, it only takes a few outside of the bubble interactions to break the whole thing. Given the 2+ week lag we are still seeing the initial wave propagate and has not yet peaked.
If it is the case it seems out of context to refer to this severance benefit as COBRA as it is my understanding this program has been specifically designed by Congress to force employers to offer the "opportunity" for the separated employees to get health insurance at full cost (without the employer subsidy).
Since the Affordable Care Act, it seems to be cheaper to forego COBRA benefit and enroll in one of the offered options. Lost of job let you do so outside of the official enrolment period.
My read of that is that AirBnB is paying the premiums for the next 12 months, as regardless of what the company does all employees are eligible to stay on their employee plan and pay their own premiums for 18 months.
First X (12?) month are paid by Airbnb (ex-employer). After that layed off ex-employee can keep health insurance through CORBA but will have to pay from own pocket.
"Beneficiaries then have 60 days to inform the administrator whether or not they want to continue insurance coverage through COBRA."
If you are paying for COBRA you are doing it wrong. You take those 60 days to find private insurance. You basically get 2 free months of health insurance since you cancel on that 60 day mark and never pay. If on day 58 you need health insurance you pay COBRA. Otherwise - your new private insurance kicks in on day 60.
[Yes! You could have history of heart attacks and not find cheaper private insurance but I am hoping that isn't you!]
> Yes! You could have history of heart attacks and not find cheaper private insurance but I am hoping that isn't you!
Major medical health insurance in the United States for the individual and small business markets has had community rating since 2008. That means health insurers are not able to take health history into account when setting rates. They can only set rates based on age and tobacco usage.
When I left my last job, I "lived" in Arizona. There was only plan on the Obamacare exchange there, and it was the same price as my employer's plan with much shittier coverage.
Back in the day, severance packages for white collar workers were close to one month per year served. My father received that from Kodak (Not once, but twice... He had the rare privilege of being laid off (From the same team, no less) in 2009, and then again in 2016. The severance package did not change much between each of his stints of employment.)
With that schedule, anyone who worked at AirBnB for four years or less looks to be in a similar position.
When Texas Instruments closed their offices in Nice (somewhere around 2016?), the package was one month per year worked. Most people had worked there for between 10 and 20 years. From what I heard, Hewlett Packard was even more generous when they shut down
"In many countries, the severance pay is a lump sum that increases with the employee’s tenure in the company and their wage level.
In the Czech Republic, Denmark, Hungary, Italy, Lithuania, Poland, Portugal, Slovakia and Spain, employees with service of up to one year are entitled to severance pay (in most cases one month’s pay), while in Luxembourg employees have to have a minimum of five years within the organisation before receiving severance pay.
In France and Slovenia, employees with up to five years’ tenure are entitled to severance pay amounting to a maximum of one month’s pay; in Spain, the entitlement is 100 days’ pay for the same tenure."
AirBnB is giving laid off workers around 3 months of severance pay. How is that less competitive than what's given in Europe?
Less competitive no, rather similar to what most white collar companies give. Some go way beyond, ie my own when fired due to similar reasons (and not say criminal behavior) will add 1 salary per year worked. It can lead to some serious package for long timers. This ain't for some C-level managers only, but regular desk IT folks for example.
Now if they would be firing say 30-50% the rules might be different, this ain't part of any written contract, but they did so for all folks fired for last 10 years. But that's probably the best package I've ever heard of, regardless of location.
In France "cadres" (managers, most devs etc) will still be payed for three months (while you can work another job at the same time and get double income then), plus of course all accrued vacation days, and some amount based on your seniority at the company and its activity sector.
After the three months most people will qualified for regular unemployment.
And until you start working at another company you still get healthcare from your former employer's provider.
edit: as it's weeks and not days for Airbnb I guess it's pretty similar then.
Germany, health care isn't even a question, three months notice is the norm. Plus some additional severance payments. Don't take the number for granted, but I think IIRC it is something like one month per year. Not sure anymore, so.
EDIT: Read days instead of weeks regarding AirBnB severance pay. That changes a lot, and it makes it a more than generous package by anyone's standards.
How does this mean? As in, it's provided by the state and therefore not a part of a severance package or as in German employers don't provide any? I'm not sure how to take this. If it's that the state provides it, then arguably AirBnb is being even more generous or possibly it shouldn't be included in the comparison. It's about what AirBnb is providing when discussing their generosity or lack thereof.
> IIRC it is something like one month per year.
So possibly way more generous or possibly way less generous depending. Under AirBnb's scheme, it's more generous so long as you've been employed less than 5yrs.
Not sure I'm seeing how German standards are so much more generous. Possibly that's fair under the healthcare standpoint but even then AirBnb is providing for a whole year so not really clear at all that that wouldn't cover an individual until their next role.
Health care is public, so worst case it is covered by the state. Also, just realized that AirBnB offer 14 weeks of pay. Initially read it as days... My fault. Being weeks, it really is a great package, health care or not. And even more so for the US with health care. All I can say is Kudos AirBnB.
"In many countries, the severance pay is a lump sum that
increases with the employee’s tenure in the company
and their wage level.
In the Czech Republic, Denmark,
Hungary, Italy, Lithuania, Poland, Portugal, Slovakia and
Spain, employees with service of up to one year are
entitled to severance pay (in most cases one month’s
pay), while in Luxembourg employees have to have a
minimum of five years within the organisation before
receiving severance pay.
In France and Slovenia, employees with up to five years’ tenure are entitled to severance pay amounting to a maximum of one month’s pay; in Spain, the entitlement is 100 days’ pay for the same tenure."
AirBnB is giving laid off workers around 3 months of severance pay. How is that less competitive than what's given in Europe?
It's not, people just love shitting on America. 14 weeks + 1 additional for each year served at US salaries + unemployment + paid health insurance for 12 months is extremely generous compared to the peanuts that Europe pays engineers.
What you describe here as generous is pretty standard in my part of Europe, things like health insurance or unemployment benefits aren't even a concern to worry about. In fact, when fired, my company normally gives 3 months PLUS 1 month per year worked. Now that's what I call generous.
What part is that? And what's the average salary there? It's easy to give 6 months of severance when you're severely underpaying compared to global labor markets.
> does US have an unemployment plan. how long and how much do you get ?
Each state has unemployment insurance. In most cases, the benefit amount per week/month puts you around the federal poverty line for an individual. No state has a severance requirement (although some do require your PTO balance be paid out as wages).
Yes. It depends on your salary, but given the current covid crisis, most airbnb technical employees are eligible for around $4200 per month for 26 weeks.
Yeah so severance is what you get from the company directly.
That counts as your usual pay. So during that time you don't get 'unemployment'. After the severance runs out then you collect unemployment, how much that is varies state to state.
then it's a little different in europe (afaik), you get your severance, it's one time payment but it's usually not that big. and you can right away get your unemployment payment. the length and the amount depends on how much have you worked and the pay you had. the one does not depend on the other.
My brother (in Australia, where I grew up, before moving to the US) recently got laid off from his firm (actually, I believe they were going out of business due to retirement or such). Their policy was 1 month severance per year. He'd been there 14 years, 14 months severance.
Their last day is May 11th, so no they're not working. Otherwise it wouldn't be considered severance pay, that's basically just giving 3 months notice.
afaik in some countries its not required (switzerland?) and in others it depends on the number of years the person worked in company. i think it depends on the country.
No severance pay required in Switzerland but there will be a mandatory one month to three months notice period. A company can decide to send their workers home earlier but they would still be required to pay salary for that period. Though when laying of 25% there will be some additional government requirements as it would be classified as a mass-layoff and will need a social plan.
This makes me think, they value their reputation a lot more than the greedy 'minimize losses' option. This way, they still save money over 2020, while hopefully hitting the ground running when the whole thing clears up.
Isn't there much better way? Many big cities are projected to start opening up in June. I would expect life coming back to normal around August end. So that's basically 4 months. Why not just keep paying instead of doing severance and lose all these well-trained talent? If you are doubtful if 4 months will be enough, you can still offer option of continued employment at 50% or 75% pay? I feel move like this tarnishes stability aspect of companies. Does anyone now want to sell their houses and move to where AirBnB is so they have their job in future?
Dropping the cliff period for new employees is pretty much useless. The equity/ESOPs new employees will be exercising will be of the last valuation price which would be already high, and after Covid-19, with the struggles of tourism industry as such the notional value would have fallen a lot. So if you exercise those significantly expensive options now, you would probably need to hold it for a long time and really believe that AirBnB can be where it was.
What incentive does an employer have to give a generous severence?
Sure, there is a slight PR benefit, and you have slightly more chance of rehiring those employees later maybe, but as a shareholder it really seems to be throwing money away unless the severance package was agreed upfront when the employee was first hired (ie. as an incentive to join the company).
14 weeks pay, don't they just mean that you are on garden leave while given notice? That's quite common in Europe, have to admit the one year health insurance is a nice extra which is the first time I hear about it.
In parts of countries like Canada, the last part isn't particularly important, but it's not nothing. Typically, white collar employers cover, in part, or in full, medical insurance premiums that every resident is expected to pay. In BC, prior to the recent phase-out, it was ~$900/year. (That money now comes out of income taxes.)
Employers paying for that kind of benefit is either tax-advantaged, or just consistency of policy between their US, and Canadian offices. Not sure which.
Damn, deleted the comment to soon it seems... Agree, for the US it isn't to bad a package, especially considering the circumstances and the health care system. All the best for the affected people!
However it is hardly comparable as unemployment benefits would kick in (on average 72% of your previous salary after taxes, maximum duration 24 months with decreasing amount).
For instance if you worked 3 years and your annual salary was 80k, you could get a benefit of 57k over 12 months.
it's generous by startup standards, but laid off kickstarter employees are getting an even better deal because they unionized: four months full pay for everyone, up to six months of paid (not COBRA healthcare), recall rights if the jobs open back up, release from non competes
How is this an even better deal? About the same amount of pay, half the healthcare paid (COBRA healthcare is same plan). As for recall rights and release from non-competes, these are slightly better than nothing I suppose.
If Airbnb is willing to pay 14 weeks (3.25 months) of severance, they must believe this is going to go on significantly longer than that. Or they're using this as an opportunity to cut underperformers at the same time.
Because if they believed things would start to recover by fall, wouldn't you just pay the people as normal and make a judgement call around then? You're spending the payroll money either way -- 14 weeks of severance and people stop working immediately, or 14 weeks of payroll and people are still working.
I personally suspect that travel related industries will be one of the last to recover, both due to consumer reticence and due to lower levels of disposable income during the recovery.
> lower levels of disposable income during the recovery.
There's also going to be a lot of pent-up demand from people who didn't lose jobs and had no outlet for leisure spending during the quarantine. I'm not sure which will win out.
The pandemic doesn't end simply because quarantine is lifted. People will seriously question flying or passing through airports, especially as case counts are getting worse while the restrictions are being lifted.
Looking at what is happening in the US as of right now, I'm fairly sure the second wave will be more like in July 2020. Unless you count it as still the first wave moving in from the coasts to the heartland and then as it moves back out is that the second wave?
Their analysis has new case rates falling off the peak as quickly as we arrived at it. And new case rates almost zero by end of June? This is wildly optimistic. Italy’s chart looks nothing like their forecast for the US.
"Through the success of the global eradication campaign, smallpox was finally pushed back to the horn of Africa and then to a single last natural case, which occurred in Somalia in 1977. A fatal laboratory-acquired case occurred in the United Kingdom in 1978. The global eradication of smallpox was certified, based on intense verification activities in countries, by a commission of eminent scientists in December 1979 and subsequently endorsed by the World Health Assembly in 1980." (from https://web.archive.org/web/20070921235036/http://www.who.in... )
The Wikipedia page starts with "Smallpox was an infectious disease". I believe this is one of the most powerful sentences I've ever read on the Internet, and it gives me so much hope for what we can achieve.
> The debate centers on whether or not the last two remnants of the virus known to cause smallpox, which are kept in tightly controlled government laboratories in the United States and Russia, should finally and irreversibly be destroyed.
But most people are capped to how much they'll spend on leisure by their vacation time. So there probably isn't much headroom to be gained for people who are regular travellers post this pandemic.
Sure, but like vacation money, vacation time has also been curtailed. I'm currently not on a vacation I had previously planned and working instead, saving both time and money I would have otherwise spent.
I'm in the same boat. Dearly wish I could take a vacation but the state has banned short term rentals for some reason (hotels still open though). So when they let us out of house arrest I plan to get out of town asap.
With the United States heading for unemployment numbers estimated to be as high as 15%-20%, I find it hard to believe that people who are still employed are going to be ramping up their discretionary spending.
Just because you still have a job in May doesn't mean you'll still have one in August.
On the other hand we're almost certainly heading for a recession so (you would hope) there would be some reticence to over spend on luxuries like holidays.
Many folks are booking family vacations like crazy using current low prices and hoping to leverage rebooking flexibility. So there will definitely be at least some pent-up demand. This demand could evaporate though if folks who consider their jobs safe start feeling insecure.
But I think that if the leisure travel collapses it would be because of the economic declines, not medical risks. My 2c.
Even people with jobs tighten their belts in a recession. Your job could be gone tomorrow. Who was taking vacations in 2008, or 2009 for that matter? Maybe if you have scratch, but 4 in 10 American's can't come up with $400 let alone a vacation.
Also, companies are realizing that maybe they don't need to spend thousands of dollars for last minute business trips if they can just do a zoom meeting instead.
Personally I don’t think this is true. The entire sales team where I work is itching to be able to travel to potential customers again. They’re not at all satisfied with Zoom as a replacement.
Administrators above them though are beginning to see their desire to travel isn’t actual justified in greater business value, so their mere preference or their assertion is less likely to be believed.
Travel for current or prospective customers has some of the best ROI of nearly any expense at the company, and this is well understood. To the contrary, everyone up the chain including the CEO is even more eager to resume sales travel.
I have a friend desperate to get out to his overseas clients before they start thinking about not renewing his contract in favour of a local option. (He is a specialised architect working with a luxury auto brand.)
We cancelled a trip to the US from Australia that would've been in full swing right about now and would normally be very keen to reschedule. However, even once restrictions lift, travel insurance is not likely to cover health issues in the US (especially a declared pandemic) and the risk of incurring huge costs is too great. That sort of thing may be a factor for many people.
I'm not so sure. Airlines have sent huge numbers of their aircraft to the desert for storage, so quickly spinning up flight supply and then spinning that back down will be expensive.
I find it unlikely this will be the limiting factor in flight demand. Flights are typically booked a few weeks in advance, which is adequate time to go retrieve the planes from the desert and inspect them to insure they are airworthy.
It's not like people are going to be showing up at airports overnight buying flights for the same day.
Oh yeah. I feel like there are going to be totally crazy parties popping up everywhere like there is no tomorrow. And then we will have a spike in births around Feb/Mar 2021
All indications are that we are going to experience a not-so-great depression. Not a recession, an honest-to-goodness depression. 2020 will be down YoY in terms economic output probably across the world, and it wouldn't surprise me if that's not only true for Q2-Q4, but if it also lingers into Q1. My guess is that we will feel like things are growing again this time next year.
Some economists are hoping for a better outcome than this of course, but you can connect the dots and see what people are planning for, as you've done here. Airbnb is not alone in planning for depression, and the travel industry will be worse than most.
Australia's gov't owned ABC news company has started spreading articles filled with either optimism or "why a depression wont be so bad". The people who know these kind of things can see the way the wind is blowing.
Are we looking at the same markets? We are still below where we were, and a pullback after an initial legdown is expected. Look at the chart from 2008. Leg down, pull back, some time at the top of the roller coaster to look around, then the real big second leg down that just pummels the market.
Nasdaq is nearly flat for the year. 2008 was systemic failure of financial system. Unless you’re suggesting something much worse will be unearthed by this shock, this is looking like 1987.
Which markets? If you are referring to the S&P 500, hope is outweighing fear right now, I'll give you that. If you mean crude oil markets, well, they reflect the narrative. If you mean bond markets, yields are declining.
Also, it would be remiss of me not to point out that the markets != the real economy. They are correlated, but that correlation is not perfect. 20M newly unemployed Americans would disagree with you that things are largely unchanged from 3 months ago.
You need to operate the company under the assumption that this will happen for a very long time, and that even afterwards people will think about travel differently
Depends. I'm a finance noob but I think there's a big difference from an accounting perspective to say "we have a big expense to pay for the next ~14 weeks" versus "we have a big yearly expense that will continue in perpetuity". I think this bookkeeping is especially important when looking for funding. Perhaps someone with more savvy and better articulation of the nuances can chime in here. (I'm interested myself on if I'm way off the mark here.)
The economic consensus is that COVID growth and an underwater economy will mutually reinforce each other for the next two years.
If you accept that scenario your decisions in the present about finances, investments, and employment all radically shift. My decisions have radically shifted to accommodate even though I have two essential industry employers with virtually no risk of being laid off.
What I personally use as a thermostat on how to proceed during adjusted life is the military. How they conduct business is bound by finances not beholden to a profit stream and they do not conduct business out of political ideals/favors. When they lift travel restrictions I will feel more confident about traveling. Once they reopen schools I will more confident about going back to work in an office building. When they drop the need for face masks or mandatory forced quarantine I will feel more confident stepping away from social distancing. Until those things happen I will continue to play it highly conservative in accordance with the suggested medical guidance to avoid exposure.
Underperformance is always relative to some degree. They most likely decided that much of the stuff that 25% is working on - the article mentions "experimental and costly endeavours" - won't be feasible even after the crisis is over and people book short-term rentals again.
I mean, personally I think a year is a better time estimate for connectivity returning (and maybe 3+ for economic recovery) but you are also looking at some specifics to airbnb here - much of their growth was people converting long-term rentals to short-term rentals - many of those will either get locked back up in the long-term rental pool or go into foreclosure
You also have the case that like stock prices employee hiring is often based on projections for anticipated need in a high-growth business - it's such a friction point, you are trying to stay ahead of the curve to build the capacity to grow now and handle that growth 12 months from now
Airbnb employee here (opinions are my own)-- Brian Chesky referenced making decisions so that Airbnb would be able to weather a 1.5-2 year storm. It likely will take that long before travel begins to recover.
The optimist in me wants to think that the executive team realized they had about 4 or 5 months before they had to lay off these folks, so they decided to give them a few months of time to look for work and be with their families since there wasn't that much work to do anyways. Maybe if they do this, then in a few years when the economy recovered those ex employees would want to return to Airbnb.
Either way, it's a good package, since most people are getting zilch at other places.
I think it's quite obvious that tourism isn't going to recover back to 100% where they were in 3 months, no...
Note that '100%' includes the growth prospects that Airbnb still had in January 2020. 'startups' like airbnb hire for growth. 25% workforce cut is roughly the growth prospects (20-30% per year) that airbnb had last year.
So no, that recovery won't come in just a few short months. For one because there's still a global pandemic related global lockdown. Second, because an effectively rolled-out vaccine is not expected until at least next year. Third because tourism is hardest hit in a normal economic crisis, in a recession and 20% unemployment figures like now, the first thing you stop doing is taking international trips for fun. Fourth because in a virus pandemic, tourism (concentrated populations gathering in hotspots like a museum, bus, airplane etc, and transporting the virus across borders) is a high-risk activity that gets restricted way more than other economic sectors like farming, manufacturing, or work from home office jobs. Fifth because most of airbnb's stock is caught up in one of two categories: people renting out their home when they're away on vacation, these people are staying home and aren't making their real estate available. Or professional airbnb companies which purchased real estate that's only economic with large revenues, financed with leveraged mortgages, many of these companies are set to collapse in a 3-month shutdown, let alone a 6-month low-activity industry. A lot of these will be folding and selling their properties. Both the demand side and supply side is going to take a hit, airbnb will run much less business for the next year at least and will need to bounce back. It won't be easy. Especially in an industry where you'll see dirt-cheap hotel prices competing for a few years.
> Or professional airbnb companies which purchased real estate that's only economic with large revenues, financed with leveraged mortgages, many of these companies are set to collapse in a 3-month shutdown, let alone a 6-month low-activity industry. A lot of these will be folding and selling their properties.
I wonder how this is or will impact the real-estate market? Are enough people going to foreclose without interested buyers that the market takes a plunge?
This conversation has come up a lot in real estate circles. I think it depends on the debt load that people have, which means that more expensive places that have lots of Airbnb's will be hit the hardest. Anecdotally, my friend outright bought a house outside of Detroit to use as an Airbnb. With no mortgage to pay and property taxes low, he's deciding whether to wait it out until people start travelling again, or put it up for rent.
I think it's highly unlikely...but I'd be very happy to be wrong, too.
These highly-leveraged "new" companies and individuals make up only a portion of AirBnB-rented homes, which themselves are only a small portion of the entire housing market. There was a very recent interview or article with AirBnB's CEO where he (I'm sure he was fudging the numbers a bit) said only 1/3 of AirBNB homes are actually owned by these kinds of speculative home-buyers. The remaining 2/3 are split evenly between traditional real estate leasing companies and homeowners with only 1 house.
Also, worth considering that short-term rentals can easily be transformed back into long-term rentals. In any case, I think a national housing market plunge is highly unlikely.
> These highly-leveraged "new" companies and individuals make up only a portion of AirBnB-rented homes
That's what AirBnb very much likes you to believe. In my opinion they lie a lot.
> which themselves are only a small portion of the entire housing market.
That really depends on the city. Barcelona, Amsterdam, Prague and other cities were literally killed by AirBnb and by extension by AirBnb slumlords.
> Also, worth considering that short-term rentals can easily be transformed back into long-term rentals.
That maybe true. Then again, if you max out your credit card to speculate on highly leveraged financial products the time window for clean-up may be very short and you may be forced to sell at a very bad price.
I, for one, are really not sorry for this bunch of city killing assholes. For short term financial gains they make life miserable for everybody else.
Yes that's of course what the CEO wants to say, because professional airbnb = hotel company not playing by the hotel regulations/license rules, plus it's pushing out locals. So he downplays that and wants to make it seem as if airbnb is majority-driven by mom n pop folk, who make available a free room or their home some of the time to supplement income a bit, harmless.
In reality, a typical person (like me) would rent out their space about 10 days a year, while an airbnb company aims for 365. Could very well be that 2/3rd of listings are average-joes and 1/3rd are professional.
But in terms of nightly stays, it could still be about 20 professional to 1 average-joe. And those nightly stays ultimately reflect the revenue that drives the economics of these properties, airbnb's business and the impact on the local market.
When Warren Buffett completely divests Berkshire Hathaway of all airline stocks, as he recently did, I think it's a reasonable bet that travel is going to be down for a while.
Airlines are very capital-intensive, and those are exactly the type of industries that do not weather recessions very well. One does not simply lay off a 50 million dollar jet. It needs to be maintained -- regardless of whether or not it is in the air, making you money, or it's grounded in a hanger.
I have heard of people taking a luxury Airbnb near where they live for a month since kids can be remote from school along with parents, and I just don't trust hosts or previous guest enough to ensure that the place is clean.
All indications at this point are that the virus spreads a lot more through the air than via surfaces. And it only stays active up to 3 days on plastic and metal surfaces, and that's in ideal conditions.
If you bring cleaning supplies and just wipe down high-contact areas like counters, doorknobs, refrigerator handle, etc. when you arrive, it doesn't really seem any more risky than something like bringing in groceries from the grocery store, which may have been touched by other people, the cashier, etc. Or to be extremely cautious, you could pay for an extra 3 days prior to arriving to make sure nobody has touched anything in that time. If you're gonna be there a full month anyway, what's another 3 days added on to the cost.
Take any sane model of the virus and you'll see that we're headed for a rebound due to early re-opening of states. I'm starting to bet against this entire year at this point.
Tourism won't even come close to recover until at least half a year after a corona vaccine gets available, countries will do everything they can to avoid the need for a second lockdown, and that includes drastic border controls. And it is not sure yet how many airlines will survive the crisis, combined with planes being perfect spreading ground for corona... and without airlines there will be no tourists.
The whole industry is fucked and it will probably kill some countries too, a lot have a massive, unhealthy dependency on tourism.
Even if we "open up" the virus won't be gone and society will have to function in a cautious state to mitigate the spread of the virus still. Lockdown was simply the most extreme portion, but the rest of the mitigation efforts will still have to continue at least until a vaccine is available. This means the economy is not going to return to normal for a long time.
It's going to go on far, far longer than 14 weeks.
Airbnb are going to have issues, as the longer this drags on, the more landlords are going to be forced to sell or commit to long-term rentals, limiting the number of eligible places, even if there is some later snap-back (due to say a very effective vaccine).
I'm shocked that 2020 revenues will come in only 50% below 2019. I don't think anyone will be travelling for the bulk of this year, especially with the looming threat of potentially getting sick in a foreign country or away from your home.
It will take 5+ years for them to get back the same level of inventory/hosts/customers as they had in 2019. Many hosts will foreclose on their rented properties during 2020 or convert to long-term rentals. Airbnb may lost inventory for multiple years, not just months.
The second wave will be the nail in the coffin for a lot of companies, I think Airbnb is one of them unfortunately.
> I'm shocked that 2020 revenues will come in only 50% below 2019
This is a fair point, but it also suggests strongly that a significant minority of their business is month to month rentals, possibly in place of leasing.
And hey, being frank, I wouldn't mind considering going somewhere else for a few months now that I can work remotely for a while.
I have no real data, but anecdotally a large number of my peer group (tech folks in NYC) fled the NY Metro Area in March. Those who had (not at-risk) family nearby stayed with family, while others (like myself and my partner) are quarantined in Airbnbs in more remote areas (although still close to a functioning medical system).
It's costing us an arm and a leg, but we've been very fortunate in that we can afford it. We normally live in a high-traffic apartment building with multiple dogs that require walks, so exposure seemed likely (and indeed a doorman later tested positive).
As someone who's spent a significant amount of time staying in AirBnBs and other transient living, renting month-to-month on AirBnB is a terrible idea unless you're fine paying 2-3x more while AirBnB takes the difference. Also if you show up to the property and aren't satisfied with something (eg. WiFi doesn't work), or need to modify your booked dates, it is extremely difficult to get a refund because AirBnB's customer service is awful (to be fair I last had to deal with them in 2017, so maybe things have improved since then).
The smarter move is to book a 2-3 days and work out a deal with the host.
The current property I'm staying in I originally found on AirBnB for twice the price at which I'm currently paying. And I have the peace of mind of not being locked in to a place for weeks/months in advance since I don't know how long I'll stay here.
I would too, but the thing holding me back is if the shit hits the fan, and I need to do something like buy a freezer to store extra food, I can't conveniently do that in an Airbnb. And if I somehow get sick, I'm at the mercy of the doctors and hospitals in this foreign land. I'd rather be in my own home with the doctors and hospital system that I'm familiar with. I think more than 50% of people feel this way, which is why I think a 50% cut in revenue is too little, I would say its more like an 80-85% cut in revenue. This is catastrophic for Airbnb.
They have a functional system. If they can maintain it going on the cheap, they can pull themselves back up. Still, this gives times for alternatives to come and drink their milkshake.
They do have functional infrastructure but their business is suffering a catstrophic shift. As I mention, a lot of the hosts are either going to go into foreclosure or they will convert to long term rentals. A lot of people were buying condos and converting them to Airbnb because the revenues were so predictable. That won't happen in 2020 and 2021. It will take many years for inventory to come back up to 2019 levels and less inventory means less revenues, even if people started to travel again, which also is unlikely in the next couple of years.
I think it’s highly unlikely that an upstart is going to steal a noticeable amount of market share from AirBnb during this pandemic. It would be hard enough during normal times when travel volume is much higher.
If shit hits the fan, there won't be freezers to be bought... they'll get panic purchased instantaneously and, if you did manage to find one for sale, expect it to cost multiple times what you otherwise might have paid.
Jeebus how is this possible - is our supply chain that fragile that things like hand sanitizer (that you can make with alcohol + aloe gel) and freezers run out?
Why is there no increased demand-driven supply on these things?
There are plenty of places where you can buy hand sanitizer currently. Any sort of manufacturing takes time to ramp up. There’s a usual demand for freezers and that’s how much is typically made. If everyone decides they want a freezer there’s not enough. Why is this surprising? Sure they may start manufacturing more freezers now, but it’s going to take time and it’s not clear if demand will stay high, so who knows how much will be made. These things continue to be made, so our supply chain is not breaking, it just can’t massively scale up production instantly. I don’t know why this would be surprising.
It's basic microeconomics. Firms produce widgets until the marginal profit they get from the widgets goes down to 0. The marginal profit is based on the marginal cost of producing a widget and the current price of the widget. If the price goes up, the firm can now afford to produce more widgets. If the state introduces price controls to keep the price fixed during increased demand, the company cannot afford to produce more to meet this demand and shortages will result.
Normally shortages lead to increased price in the short term and in the long term lead to increased production and movement to the price equilibrium.
To my mind, a freezer is a pretty low priority item if you are trying to mitigate “shit hits the fan” tail risk. You can easily survive without a freezer, and a dependency on a freezer isn’t a good thing in that scenario. Then you just have a bunch of food that’s doing to go bad if the power goes out.
That would mean that a lot of people would avoid going to the US or other countries where health care is complicated and/or expensive. And I would harbor a guess that travel insurance companies will put in anti-pandemic clauses going forward. That has already started by the way, so who knows what insurers will cover in late 2020.
> a significant minority of their business is month to month rentals
I was wondering about that too. My next-door neighbors vacated their place when the lockdown started, but someone else has been living there. Since they often rent their place on Airbnb for weekends, my assumption has been that this is another Airbnb renter. She's been there for over a month now.
I have a potential theory of future revenue for them - as "work from home" becomes more accepted and popular, working vacations or nomadding even within the united states will become a lot more popular for couples looking to get away, singles looking for new locations to try out and even families on trips.
There's been this sweet spot with AirBNB where you can rent a place for 1-2 months for a relatively small monthly premium over a 12-month lease that I've been planning to take full advantage of this year, already having been remote. A lot of AirBNB hosts have started preferring these sorts of arrangements because people are less likely to cause trouble. I can't help but think the AirBNB that replaces hotels might drop by a lot, but the mid-term monthly rentals might bounce back a lot quicker as people become less location dependent on work. I know I absolutely am planning to go somewhere warmer in the winter months.
There's still a huge opportunity in a hassle free monthly rental experience. Month to month through almost any legacy property management company is an absolutely dreadful experience with huge up front deposits and being treated basically like a criminal. I have no idea how big this market is admittedly but its been a very interesting value prop for me.
You might be surprized how many people are "stuck" around the world right now, and are staying in Air B N B's waiting for all the closures to end.
For example Argentina has cancelled ALL plane flights (in/out and domestic) until September.. and unless you have signed authority you can't even drive town to town. So anyone that was travelling there is now stuck, and are essentially forced to rent a place and stay put.
A few friends are caught there, and many others in similar situations around the world.
So Germany basically collected all its citizens that could be found (and that wanted to) around the world back home last month, including chartered airplanes and special permission organized for them to travel to the airport (~200.000 people).
Lots of countries had repatriation flights like that, but many thousands of people chose not to go, or couldn't make it work for various logistical reasons (they're travelling with a vehicle or a pet or who knows why)
You vastly underestimate how little of a shit is given by Millennial and Gen Z travelers.
Outside of the bubble of Bay Area and North East tech industries, a lot of younger people couldn’t care less, especially when seeing how insanely low the mortality/hospitalization rate is for their age group. Before I get the lecture, I know that them spreading it is also a risk, spare me.
People who think no one is going to travel this summer are deeply deeply entrenched in their preachy sanctimonious echo chamber of friends. Go look at how many young people were having picnics in groups at NYC parks this past weekend and then tell me no ones going to travel this summer. Get real.
Hosts definitely are pulling properties already - based off stories I've heard/read, many AirBNB hosts were/are overleveraged on their properties and have had to sell or convert to long-term now that their income has dried up, to avoid defaulting.
Further anecdotally, I've been closely following the rental market in my city because I'm looking for a long-term place for August. There's been a noticeable drop in prices, and _huge_ quantities of listings in buildings that were notorious for being "AirBNB hotels". Furthermore, lots of listings are obviously ex-AirBNB units - tells include being only available furnished, only available for ~4 month rentals, descriptions that include "Perfect for your next stay!" or words to that effect, and my favourite: hotel-style "No smoking" cards caught in the listing photos.
> I don't think anyone will be travelling for the bulk of this year, especially with the looming threat of potentially getting sick in a foreign country or away from your home.
I became an Airbnb customer in early April because of the disease. I was consulting for a client away from home, but my hotel room's mini-fridge was not cutting it, so I rented an Airbnb suite which contained a washer, dryer, oven, microwave, freezer and full refrigerator. I go to the supermarket, stock up on food, and don't have to leave for a week.
Airbnb is dead, long live Airbnb. Somebody else will take their place but I'm wondering how publicly traded companies like Booking and Expedia are going to handle this crisis.
I was too, but I have a few friends who own multiple AirBnBs. They are all fully booked with long term renters. Some of them were forced to stay because they have nowhere to go.
So I guess it isn't quite as bad as you'd imagine. I'd guess the purely vacation rentals are suffering, but the ones that were typically business renters could be converted to long term.
I think they're going to poach a ton of business away from hotels once things start opening back up. It's way easier to maintain social distance in an AirBnb (hotels have check-in processes, hallways where you have to pass other guests, etc), and I think more people will be travelling to rural areas where Airbnbs have an advantage.
Yeah but do you trust someone to sanitize their home properly after the previous guest or would you trust a hotel to do that correctly? Thats the question my friend circle has been thinking about...
I trust that I will sanitize it properly vs. a minimum wage housekeeper who prob needs to clean 50 rooms a day. Thats my plan is all airbnb and when I get there will do all the cleaning myself.
Ah got it, thanks for the clarification. Might be a good way to backfill a portion of lost revenue, but I still don't think travel is going to pick up in Q3/Q4 as much as AirBnB is forecasting.
Travel to cities is certainly done for a while. Travelling to rural areas might still have a chance. I have heard of families getting away to cabins in the woods where no human contact was needed. (Of course whether or not that should be allowed is a different conversation.)
I have no idea how big this market is, but I know some people who have fled COVID cities like NYC to spend 2 months in an Airbnb house with a backyard.
My initial reaction is "wow, nice severance package!" My secondary reaction is they must think things are going to be very bad for a very long time for this kind of payout to make sense financially.
Good point. If they're wanting to part ways with 25% of the workforce now, covering 3 months of full salary and 12 months of expensive healthcare, they must be expecting fundamental market shifts.
Also, the debt they took on may have been partly to cover these lavish severance packages while also extending the runway.
And yes, this is extremely lavish. Paying severance that appears roughly equal to the median annual income in the USA.
"Good point. If they're wanting to part ways with 25% of the workforce now, covering 3 months of full salary and 12 months of expensive healthcare, they must be expecting fundamental market shifts."
Why? Can't they rehire the people they laid off during this period?
Just because they've cut these projects or they're not generating revenue today doesn't mean they don't "need" them. What if the economy tanked in 2007 and Amazon decided to dissolve AWS?
It is generous by US standards, but it's just nice for many other western countries, where the standard is a few months of salary, or e.g. one month salary for each year worked (that is, if you had worked for the company for 5 years, you get at least 5 months salary on termination -- Israel mandates that one by law, for example, and NOT paying it is considered a criminal violation performed by the employer)
Don't get the idea that those are free lunches. They are factored as an expected value in your total compensation for sure. It's part of the reason that median incomes in the US are much higher than Europe and everywhere else: less benefits requires higher cash compensation for the same marginal product.
There are no free lunches. But do note that this is also factored in into AirBNB's/Google/FB/IBMs/Microsoft's compensation as well; They could have paid everyone more and let them save for themselves, but -- like healthcare -- factor it into the "employer's cost" of which "visible" salary+RSU+ISO+bonus is only a part (70-90% depending on many factors).
The main difference is that in the US it is optional, so only the well-to-do employers and only at good-enough-time do it -- so the expected costs are weighted by the probability they will do them (say, 30% - I'm sure they have a good idea) -- and they can bail out at the last second if conditions are unfavorable for them to do that.
In Europe the systems mostly mandate it. The difference is more striking with respect to pensions paid on retirement - they are "optional" for the employer in the sense that they could (and are) discharged in bankruptcy, meaning that after 40 years of employment, one bankruptcy event (we'll see many after the lockdown) is all it takes to deny those payments.
There are no free lunches, indeed - the cost of higher US salaries are unpredictable (and often unfavorable) future cash flows for employees -- and only in some industries are the salaries high enough to actually allow the employees to prepare for that.
edit: I've heard someone describe these forcefully-ensured severance and retirement funds as "denying one the ability to steal from their future selves". I think that's an apt description of what it is.
To put some numbers on that, AirBNB compensation is no joke. They're paying senior engineers 200k+ base and nearly 200k stock. https://www.levels.fyi/SE/Airbnb
I have (regrettably) not found many companies in other countries which pay that well, except maybe Google Zurich, which is hard to get in I hear.
I don't know specific numbers at AirBNB or their layoff details but you would hit the equivalent L5 at other large bay area companies in about 5 or 6 years.
Wow. This is my comment most downvoted in history, and I would really appreciate an explanation why from someone who understands why (no hard feelings, I don't care about internet/brownie points, but the reason I'm here on HN is to learn and downvotes only help me figure out that someone thinks I'm wrong, not why).
If you think this is factually wrong, please point out why. If you think it's stupid (even though it is not factually wrong), I would also appreciate an explanation why.
In Germany, if an employee gets laid off after 2 years, they would get 50% monthly salary times number of years worked, so 1 months pay.
That means the Airbnb severance package is equivalent to a 6+ year employee, for every employee getting laid off.
That's generous by German standards, isn't it?
Then when you consider the median income for a software engineer in Germany is $54k, whereas in the USA it's $92k, and at Airbnb it's $200k+, that means that an engineer being laid off from Airbnb could be receiving the median annual income of a software engineer in Germany as severance, not including stock.
In Denmark according to GlassDoor [0], Avg developer salary is 530K DKK/yr =~ $76K ; The policy for severance months[1] is sliding, but is front loaded and starts at with 1m severance for 5m worked, sliding down to 6m severance of >9years with a few more stops.
In Israel, according to GlassDoor [2], the avg pay for a software developer is 253K ILS =~ $72K USD; severance policy is 1m severance for every 1y worked.
When I was employing people in the UK, salaries were significantly higher than those paid in Israel or Denmark, though they are lower (~$68k/year) now that the GBP lost so much of its value (and ... I haven't employed anyone in the UK for more than a decade; not sure how different it is now)
I'm not familiar with the german market, but - $75K vs. $92K is 20% difference, which from my experience is very consistent, including at the high end (Amazon in Israel is offering top engineers $300K-$350K/yr for example, and I would guess FB, Goog, MSFT are doing that as well, "regular" senior engineers at the $150K level).
And it's important that this severance pay is not, in any way, dependent on benevolence, generosity, or even proper management in most cases -- employers are forced fund governmenta-approved-and-regulated severance funds on a monthly basis, so bankruptcy doesn't rob the employee.
McDonald's employees get the same arrangement, although some companies (mostly finance and high tech) are much more generous than that.
p.s. Israel is not actually in Europe - it's in Asia (very close to North Africa and relatively close to Southern Europe). But from a legal and cultural perspective, Israel is closest to being European -- specifically, Irsaeli Laws were forked from British Laws in 1948.
That depends on your definition of “a lot”. About 20-25% more than Dennark and Israel and the UK (see https://news.ycombinator.com/item?id=23089392; the parent of that post says it’s 70% more than Germany).
20% difference is not little, but it is within the differences of PPP and average cost of living, so it’s not clear whether or not it’s more - e.g. food is cheaper in the us but medical services are much more expensive, so comparing how far money goes depends on your conditions.
I'm not so sure. Recent news has been that lots of startups are laying people off and Google has slashed budgets and frozen (or at least scaled back) hiring across the company.[1]
Companies like Google and Facebook that rely on ads for most of their revenue aren't going to be doing so well when a lot of the businesses that buy their ads are closed down.
Companies like Apple that sell premium-priced goods are also not likely to do well in a recession - people who have lost their jobs or are afraid of losing their jobs won't be running out to buy a new iPhone.
AirBnb was doing about $4 billion in revenue per year before the crash with 7,500 employees. That's about $500k revenue per employee, which is on the high end of tech industry standards. How is that bloated?
Is that $4 billion in bookings or only their take? If it's the latter, then their "real" revenue per employee is much lower. For marketplaces it seems disingenuous when they use the top-line number for revenue given that they can only increase their rake so much.
It is now. It started when Facebook would make a really big deal about their productivity per employee as a way of showing the incredible efficiency of their technology.
I worked at reddit at the time, and we laughed because ours was double Facebook's, despite the fact that we weren't even doing very well. But we also had very few people.
So the calculation doesn't really work at very small numbers, and also doesn't account for expenses.
There's been some talk about how reddit is seriously undervalued, and I'm leaning more towards believing it, now.
I know when I'm looking for an authoritative answer to something I often append 'site:reddit.com' to my search - and I think younger generations are, if anything, moving more in that direction.
If a business has enough money to hire more people (revenues per employee is proxy). It should do so as long as it can recoup the investment.
If a business already has thousands of people sitting around doing nothing, should it continue to hire more?
There are a near infinite amount of small optimizations and extensions in global businesses that can pay for themselves,
so technically it should always hire... but should it really?
Ugh, to be honest I get tired whenever I see the "Why did company XYZ need so many people, they're just a website!"-type comments. While it is definitely possible AirBnB was bloated, it's not hard for me to imagine at all what all these people did.
AirBnB is a relatively high-touch business, so I imagine a huge number of those people were in customer support/customer relations, both for travelers and for property owners. AirBnB also operates in a huge number of countries, and each of those countries need (a) marketers, (b) people with regulatory knowledge (often at a level much more granular than the country level - and to head off any 'but AirBnB ignores the regulations!' comments, while that may be true, I guarantee they still have people that know what they are), (c) again, customer service people knowledgeable with the local language and customs.
Yeah typically happens with each layoff. It's nice that when times are good companies are able to spread the workload more. It helps increase code quality and quality of life for everyone working there. Also part of current employee numbers is hiring to keep up with projected growth etc.
If everything was so easy to build we should all quit our jobs and do our own single developer startup.
I would imagine that most AirBnB scams are in the other direction -- travellers defrauding property managers. If you are just a customer and you don't like the experience, you simply tell your credit card company that you aren't going to pay for it and the problem is solved on your end. Meanwhile, if you manage the property people can consume nights of service and end up not paying, and you're never getting that back.
I am sure there are horror stories where people didn't like their AirBnB, but I am also sure they didn't pay for that AirBnB.
While your points are valid, we can still consider the bloatedness hypothesis but just looking at the engineering team size.
Uber was similarly accused of being bloated and it definitely was on just the engineering team - several thousands of engineers for what is definitely a complex app but not that complex really.
Not at all what I said. I was absolutely surprised and asked a legitimate question. Ignorance is one's default state, hence why we're encouraged to ask questions when we're young.
Tell us why you think 7,500 employees is too high, in order to implement, maintain, and grow an online lodging and experiences marketplace in 191 countries.
Provide a source for that 500 headcount... Hotels.com lists 1100-1500 employees depending on where you look, and LinkedIn shows ~1600 employed by Hotels.com today.
With that said, Hotels.com is owned by a multi-billion dollar conglomerate called Expedia, which employees ~24K people across multiple brands. AirBnB is operating on their own.
Worked there a few years ago. Should be double now since they've extended to and filled a new building.
The whole group with Expedia was something around 15k if I recall well. It includes more than a hundred independent brands and products, plus a few massive white labels, covering an order of magnitude more languages and currencies than AirBnb. So better not compare the whole conglomerate to AirBnb (except as an evidence it's bloated).
The last media reports put AirBnb at 12000 or 15000 employees, but the article is mentioning a total workforce of 7500, so either the media were very off or a whole bunch of employees are not factored in. Either way it's a lot, no doubt the business can run with half of that.
Wikipedia lists ~12K employees at AirBnB, so I agree that some additional clarity would be needed to understand the discrepancy.
If you compare the ratios of operating income vs headcount between the two, the companies are nearly identical based on the metrics available in Wikipedia today.
I don't see how you could do a comparison since neither of the company publish any metrics? They're not public and not required to publish any financial or operational information. Turns out it's not even possible to figure out how many employees they currently have. ^^
Just one tip. Don't do the mistake of taking Expedia in place of hotels.com. Expedia is a large conglomerate of many companies that is not representative of just that one. It's like confusing the mobile related business of Samsung versus Samsung as a whole.
Apples and oranges. Hotels.com is a middle-man. When you have a problem with your stay, you talk to the actual hotel, which has its own front desk, customer service, legal, engineering, business, marketing, blah blah blah, teams.
The hotel contact number you got on the website and the receipt goes to a central support run by hotels.com, it doesn't go to the actual hotel.
The support can often sort our issues better than what you could do yourself. They're in a better position to pressure the hotel or rebook you somewhere else nearby.
My family vacation house which we let got a visitor through hotels.com through expedia and we don't have anything you mentioned. My guess would be whatever something is called be it Hotels or AirBnB they are working with everyone in the business in some capacity
Same with AirBnB. I’ve never contacted AirBnB support, but typically have 2-3 interactions with the host every time I stay at an AirBnB property. AirBnB are just a middleman.
Thanks for offering a legitimate response to a legitimate question. After finishing up work and looking for answers, I found (provided it is accurately sourced) this article [1] outlining targeted departments of the company I hadn't even heard of before, even though I've used the service extensively for recreation.
Obviously diversification occurs with these large companies, I just hadn't realized how much they had branched out.
While I don't want to seem like I'm wishing unemployment or hardship on anyone, the implosion of Airbnb is already causing a rent price correction that was sorely needed in many cities that have become severely unaffordable.
Wired published an article about this effect in London [1] and I've seen price drops as much as $500 for condos in the downtown core of Toronto on Zillow already.
It's pretty bold to claim any and all price drops are directly attributable to Airbnb when in the middle of a recession causing pandemic that is heavily impacting normal housing/rental market activity.
I admit that both my observations, and the ones in the Wired article I cited, are anecdotal. And it's certainly not the only factor driving those rent decreases. But it's oddly coincidental that the biggest and most immediate price drops seem to be concentrated in the areas that had the most Airbnb listings, at least based on what i've looked at in Toronto.
It's possible that while AirBnB increased demand for housing, the market could have responded by building and allocating more real estate to housing, resulting in an equilibrium. So it is at least plausible to me that an implosion of AirBnB might be good for renters in the short term as there is an over-allocation of housing, but that without AirBnB, market rates will increase to about where they were before as supply drops over time in response. The whole thing is complicated enough that there's no way I'm going to trust any single, non-academic article on the subject.
If the short-term rental market suddenly evaporates, and you have a chunk of the housing stock full-time serving that much more lucrative market (and not catering to locals), this is the first thing that is going to put downward pressure on rents. Support mechanisms are in place for most "normal" classes of renters and owners.
I can only imagine how much it sucks to be laid off and what a difficult decision it must be for Airbnb executives.
To me, the severance and exit benefits do seem to strike an employee friendly tone. Kudos to the leadership to striking a good balance on keeping the business alive and doing right by their people.
These are abnormal circumstances. I wonder if it is possible to delay the layoffs by cutting salaries - maybe instead of firing 5 out of 10 equally paid people, they can cut the salaries of all 10 people by half (or something like that).
Cutting salaries in half guarantees they lose all the top performers, and probably more than half, instead of the 5 they pick. I don't believe that is the goal.
Yes, during normal times. But these are not normal times - like, who is hiring now? If I were a top performer, I'd take a salary cut if it means saving my colleague's job.
I get what you are saying though. They are a business and I guess they're doing what is best for their business. The severance package is generous (relatively speaking), so there's at least that.
Edit : I guess I didn't word this properly. I was saying they'd lose top performers if their salaries are cut, during normal times.
> But these are not normal times - like, who is hiring now?
Facebook and Amazon, just to mention a couple of giants that would probably love if every company doing layoffs right now would instead halve their top performers' compensation.
This is not as relevant in the Airbnb case since the expected value of RSUs went down so much that this is effectively the case even with no salary cuts.
Never a good time, but especially in this environment!
I recall that airbnb workforce has become very marketing lopsided (vs. tech). Whereas tech folks generally have an easier time landing, I imagine the environment for the next 9-12mos being very bad for marketing/MBA folks.
I'll agree with that, even given how much I hate AirBnB as a company for what they've done to local housing in cities. They're at least doing the right thing here.
It feels bad that this happened to one of the companies with a very good engineering culture. The stuff they have put out in the open either on GitHub or through their blogs is a testament to that. I think any company will be lucky to have these folks.
If you think they don't have a good engineering culture, you should check out their open-sourced tools[0].
I had an opportunity to work with some of their open-sourced tools (Airflow was one of them) about 5 years ago at my old workplace, and the quality of their product and documentation is nothing but superb.
At my current workplace, I use Enzyme all the time when dealing with unit tests, and it seems to be pretty much the industry standard for React UI unit-testing.
AirBnB was really a leader in these types of consumer-to-consumer payments. While AirBnB has also changed their strategy WRT their mobile apps, I think it's certainly commendable how they were leading with the technical approaches they took.
For a Linux user, you can already build such a system yourself quite trivially by getting an FTP account, mounting it locally with curlftpfs, and then using SVN or CVS on the mounted filesystem. From Windows or Mac, this FTP account could be accessed through built-in software.
There are going to be a lot of tough decisions for people who have to decide whether to buy their Airbnb options or lose them. I bet a lot of people at Airbnb are wishing they went public before all this.
While Airbnb is clearly going through a rough patch right now, there is a clear bull-case argument for why Airbnb will emerge stronger than it's ever been after this:
- Airbnb has sufficient cash in the bank to survive the crisis.
- A significant % of hotels and budget chains will not survive the crisis --> decreased competitor supply
- People will be looking for budget options when traveling --> increased demand for Airbnb
- People will seek to make extra income to make ends meet --> increased supply for Airbnb
I honestly don't know what fraction of AirBnb's business still consists of indies renting out rooms to vacationers for short-term stays. But that market is simply hosed for the foreseeable future, if not forever. Complete lack of enthusiasm from guests and hosts alike. Driving strangers around in your car or having them stay in your home is never again going to seem like the great idea that it once did.
I think this is spot on. Every time I've been to Europe to stay in an Airbnb in the last 4 or 5 years, it's been a professional operation. Same with most of the properties in the states. These weren't people leaving their house for a weekend and trying to get some extra income. These were people who invested in real estate to get into the side-channel of psuedo-hotel business. They obviously have mortgages, likely not under the same rules of own-occupied that might potentially give them protections....
As far as AirBnb trying to get the customer base back, once the economy starts to open, even their new policies for having hosts have 24 hours between guests and rules for how to clean. How is AirBnb going to enforce that? Not to mention, their refund policy basically sucks right now, so I don't see me or my friends jumping back into using AirBnbs once travel does pick up, no way I'm committing to a vacation when we my have more surges coming, etc... I'll choose a hotel who I can cancel and not have to pay.
There may very well be a clear bull-case argument for Airbnb being successful long term, but at the moment that's not really the point.
Any long term employees who have been around long enough to even have the decision to make regarding exercising options (from other comments it appears that Airbnb switched to RSUs at some point), would be facing a massive tax liability this year.
It is clear that there will be some debate and uncertainty around a fair-market-value for Airbnb shares in light of COVID, but AFAIK any capital gains, and therefore tax liability, will be based on their most recent funding rounds (which were obviously based in the pre-COVID world)
It would be interesting to know the fair market value of their next 409A valuation compared to the previous one. The reduced FMV could shift the equation and help those laid off employees exercise at least a portion of their shares when otherwise they would be unable to responsibly do so. Oh, and it would reduce taxes on vesting RSUs for remaining employees too. The worst hit may be those that receive RSUs or exercise options before the write-down, huh? Airbnb should hurry then...
Would be interesting to know what % of AirBnb Hosts do it on a semi-professional basis. I get your arguments for the mom-and-pop opening your house and all that. But everytime I've been to Europe, or to big cities, the AirBnbs were almost always part of a bigger operation. And then there's all the people who bought rental properties to operate their own AirBnb rentals.
Anyway, my hunch is that the percent % of AirBnbs that are actually people utilizing their excess space (initial AirBnb model) is small vs more hosts entered via owning and operating their own hotels through buying leveraged rental properties and the AirBnb platform....
> A significant % of hotels and budget chains will not survive the crisis --> decreased competitor supply
The actual hotel properties are not going to be abandoned, demolished, or converted into something else. Hotels will continue to run as hotels, tho possibly with a change of ownership/management.
And, hopefully, just hopefully, governments will actually step in and stop the supply from going back to AirBnB, helping alleviate some of the housing crisis in their country (I know AirBnB is a huge issue in Ireland, and several of my Irish friends are praying it fails to force all those apartments and houses back on the market; I am myself, as I'm possibly moving there this fall for a masters.)
The funniest case will be if governments don't even have to step in - I've read cases of AirBNB hosts being extremely overleveraged in their "investment" properties. With some luck, they'll be forced to sell or convert to long-term rentals (which are _very_ strongly protected where I live) to avoid defaulting on the cheap debt they gorged on.
There is, unfortunately, the risk of others doing the exactly the same thing subsequently, because they'll see this as a black swan event that will clear out the market of smaller overleveraged AirBnB "hosts", leaving them to purchase the properties in question. There are some big players, such as "The Key Collection", who are heavy users of AirBnB, with a large number of properties, as well as more legitimate properties like hotels, guesthouses, &c.
There are a few important things to keep in mind.
The Irish government has not been very good at enforcing the law around this kind of thing, and I see no reason why that should change, especially as the biggest party on the government side of the Dáil was the main party in the last government, and their records on housing (they're basically Tories) is notoriously bad. The other party in the proposed government is an ideologically similar party, and the one the caused our economy to implode due to property speculation in the 2000s.
Yeah, that is an unfortunate situation that Ireland has found itself in. I know several of the people I've talked to (most of them native Irish speakers), are really upset about it, having voted for Sinn Féin, and them getting the majority of the votes but not ending up controlling parliament.
Still, at least the outlook will hopefully be decent for me if I do move there this year (depends on how I think economy is going...and if uni's actually do open in September).
One hilarious part of all this is that I'm not strongly contemplating getting a mortgage and buying a place _purely_ on the basis that between taxes and repayments, it would cost me 2/3 the amount I currently pay in rent.
going public at any point after nov '19 probably would have been a disaster for most employees due to lockup period. Let's say I have $1M of RSUs at IPO – fed+state gov wants 450-500k for taxes total. When I went through Uber IPO they only withheld ~30%, which leads to a $200k tax bill at the end of the year in this scenario. If stock declines 75% due to COVID before I can sell at expiration of lockup period, I'm left with $175k ($700k post-withholding * 25%) and $200k tax bill. Not sure about you but I'd prefer the non-IPO scenario.
Separated employees will receive 14 weeks of pay, and one more week for each year served at the company (rounding partial years up). The firm is also dropping its one-year equity cliff so that employees who are laid off with under 12 months of tenure can buy their vested options; Airbnb will also provide 12 months of health insurance through COBRA in the United States, and health care coverage through 2020 in the rest of the world.
Layoffs always suck, no matter what, but this is laudable behavior on their part.
Once places open up in a few months, I expect a massive short-term surge in demand for AirBnB lodging.
I know for a fact that by the end of summer (assuming places open up like planned), I will start traveling again. And I will be doing no less traveling this year than I would any other year. Of course, that won't be the case for everyone, but keeping that in mind, the 50% revenue drop seems like a pretty reasonable expectation.
There's no vaccine yet. Given how many people are asymptomatic, I expect the virus to create a new wave in a business as usual scenario. I think people will be quite cautious, particularly in international travel. Local bookings should probably be higher than usual, foreign visits much lower than normal, but it's mostly foreign visits which drives airbnb worldwide as far as I know.
Second I really wonder if things will open up as per usual. There's a lot of talk that we'll see things stay restrictive for the rest of the year. Many countries for example mandate face masks in public transport. Some countries mandate offices to fill to at most 50% capacity, mandating 6 feet of distance. There's many countries which expect that to be the norm once things like restaurants open again as well. Basically the current supermarket model: you can shop, but only 50% of the normal occupancy. We'll likely see this for busses, for stores, offices, museums, parks etc. I don't expect a massive short-term surge myself.
Good for you. For us, it was announced as an optional WFH, entirely at the employee discretion (unless they are in a role that has hard requirements of being in the office, like hardware engineering), until October.
To me, that sounds like a perfect opportunity to work remote on a nice beach during the day, and enjoy my time during the evening in a new place, without having to take days off for that. I get concerns of some people like you, and I am not trying to diminish your choice to stay at home. But your take on this is not representative of what everyone else will be doing (and neither is mine, hence why I expect AirBnB to still have that 50% revenue drop), so I wouldn't discount my original point based on that.
I'm kind of surprised it took this long, honestly. It does suck if you're one of those affected so you have my sympathy if you're one of those. On the bright side, at least by US standards, this does seem to be pretty generous.
That aside, if this whole pandemic manages to kill or mortally wound AirBnB, I won't be upset. What AirBnB does to cities, neighbourhoods and the long-term rental market is atrocious and it needs to be reined in.
I can only hope this leads to a backlash against high growth companies staying private for so long. Along with their jobs, I imagine many AirBnb employees have lost a majority of their (paper) net worth because they were not given the opportunity to sell and diversify.
The only way this is related to IPO timing is that more people are affected. If this happened to a $200M company planning to IPO, the paper losses are still pretty bad.
The main criticism of delaying IPOs is that by the time they hit the public market, all the growth is gone. Markets learned this after Lyft and Uber, and Wework got punished for it. While there can be more corporate shenanigans in a private company, I also buy the justification for staying private that private companies can focus on longer-term thinking without quarter-to-quarter market expectations.
We're talking about a decade-old company with billions in revenue. If your job at AirBnb was your first chance to build any wealth, you never had the option to diversify. I don't think it's fair in that case to blame the employee.
I don't necessarily blame the management either. I do hope this reminds employees of private companies that their equity is only on paper until they are able to sell, and they should pressure management to give them the option.
Or, don’t get lured in by a company offering you huge compensation that you can’t actually touch (without realizing it’s a gamble).
To be fair, even the cash compensation at Airbnb was supposedly pretty high. But I’m not sure whether that’s much consolation now, after they’ve been dangling a golden carrot in front of employees for years.
Was a mystery to me why they waited so long to do an IPO.
They must be kicking themselves now, will be a long long time, before they can match the kind of cash they could have raised anytime in 2019.
I wonder what the previous CFO is thinking right now. I believe he tried to take it to an IPO earlier but Chesky disagreed with him. This is rumor of course.
Does anyone know what percentage of the call centers are not actual employees but contractors?
The contractors are usually demand based, therefore "invisible" in these stats.
A lot of tech companies have relied on BPO (business process outsourcing) like TaskUs for call center workers.
They try to take on fresh college graduates as employees in the Philippines for about $400/salary + benefits and try to resell them to companies as outsourced talent for about $1800/month.
I know a few people who work over at airbnb, they are very generous with who they call an employee. Unless things have changed in the past year or so security guards and food staff(people who make meals onsite) are all full fledged employees who I assume get stock, I think this is awesome as a lot of these folks come from low income backgrounds and having full insurance and a extra bit of cash via salary and stock options goes a long way towards improving their lives.
Things have changed (unless they changed back). Food hasn’t been in house for nearly two years. Only a small portion of customer support are direct employees. Most physical security was outsourced too.
I'm wondering what's the ratio of IT folks to "others" in Airbnb, I suppose most of the workforce is customer service, human resources, legal and so forth? So maybe this cut won't touch engineering teams at all? After all dev teams can still do something during times like these (eg. trying to make other unicorns) but keeping big headcount in customer service is simply burning money...
The generous severance makes a lot of sense. Besides being the right thing to do, if the economy somehow does have a V shaped recovery, they may want to rehire a lot of these people.
It's a lot easier to rehire someone who still likes you than to try and find new people.
Don't be fooled by the Q1 results that only cover a few weeks of the shutdown - FANGs are hurting too.
30 M unemployed and growing means no disposable income for consumer businesses, which in turn are shutting down and shrinking their spending on B2B services. The latter is delayed and won't be fully visible until Q3.
>which in turn are shutting down and shrinking their spending on B2B services
You are assuming the scenario where consumer division was making a lot of money. For a lot of very successful B2B businesses, their consumer division exists mostly to make small gains, while acting primarily as a getaway or advertisement for their B2B offerings.
You would be surprised to find out how much more revenue (and profits) a company like Microsoft makes on their B2B offerings compared to the consumer ones.
Microsoft isn't FANG, and even then, who do you think Microsoft's B2B customers serve and get their revenue from?
Even those that are still B2B eventually need cash flows from consumer businesses. Hence the statement that we won't fully realize the losses until Q3. Less spending by consumers depresses all businesses, some sooner than others, but FANGs are definitely hurting.
>who do you think Microsoft's B2B customers serve and get their revenue from
The cool thing about B2B, as opposed to consumer offerings, is that the contracts on those are usually multi-year. Just because the client enterprise suddenly receives less revenue from customers, it doesn't mean that they would be able to stop paying MSFT until the contract term is over. Unless this current lockdown situation lasts multiple years, it shouldn't affect things significantly.
That's not how B2B contracts work. They have clauses for breaking them. They are not paid out in bankruptcy. They tend to scale per variables like users or calls.
AirBnB is now paying for 7000 less exchange accounts and office licenses, and you have yet to explain how FANGs are doing well.
Bankruptcies, Bankruptcies, Bankruptcies. All these contracts go underwater once the companies file chapter-11. Gold Gym has already started, most retailers are following the suit. That said, Microsoft (my previous employer) is well diversified to come out net positive or neutral.
Yes, but instead of buying several AirBnBs, they could instead buy dozens of smaller startups that are not operating in the hospitality industry - which is going to recover much slower than most forms of B2B or B2C.
> Meanwhile, long-term prospects for AirBnb have not changed. Disease existed before COVID and will exist after COVID.
Not sure I 100% agree with this. AirBnB's bread-and-butter was urban rentals. Even before Covid, there was huge backlash against AirBnB in a lot of those locales. Now, especially after you saw huge numbers of AirBnB's convert to long term rentals (really laying bare the nonsense of the "AirBnB doesn't take from long term rental stock" argument), I think you'll see tons of cities accelerate their plans to ban lots of short-term rentals in their current form, and these cities and society at large will become a lot more hostile to AirBnBs in residential neighborhoods.
I agree that there is a general backlash against AirBnb in certain locales but this was a risk before COVID too. I don't see how COVID would compel cities to move FASTER to ban short-term rentals. During a time like this, aggressively cutting down a good business (for property owners) seems like a bad move in general.
The conversion of short-term -> long-term is a side effect of reduce demand. Once demand picks back up, supply will return.
Q1 results only cover a few weeks of the lock down. FAANGs require consumers to continue spending, and with 30+ million unemployed, that's a lot less disposable income and piling debt.
We won't be able to fully see the results of the pandemic in the FAANGs until early Q3.
Why do people consider AirBnB tech? They are a services company with a website connecting external parties. This isn't hard tech, this is marketing.
Edit: It seems people are under the impression that because you have lots of technology that is required to run your company you are a technology company. I don't believe that to be true in this day and age, tire distributors probably have more technology requirements then AirBnB does but we don't consider them tech companies. By the same token I wouldn't consider Expedia/Travelocity etc to be tech companies either the use tech to provide a service.
My personal take on what defines a "tech company" is a company that understands and respects that tech drives its business and thus treats its tech employees with respect.
Almost every large company is tech driven these days. But in a lot of them, tech is considered more of a necessary evil "cost center". The tech employees are treated as second class citizens compared to the marketers, salespeople, traders, etc. who are the "profit center".
A big investment bank (disclosure: I work at one) arguably has more tech running through its veins these days than say, Airbnb. But I would firmly classify Airbnb as a "tech company" per the above definition, and the bank as "not a tech company".
Their core business is a marketplace connecting travelers to hosts and their homes/rooms. That marketplace is software. If you're a company selling a service that is completely software based, are you not a tech company?
By the definition you seem to be using, the only companies that can be considered tech are enterprise SaaS.
The defining feature of tech is marginal cost of production close to zero at scale . Meaning, as you grow your business you increasingly automate away human labour. That's why Instagram was worth billions with 13 employees.
You're not a technology company just because you rely on software. Walmart makes software too, much more of it than airbnb actually. You're a technology company if you automate away human labour. This doesn't really seem to be the case for most of these 'marketplace' companies which is reflected in their margins. They just have to keep adding more labour as they expand.
In an effort to keep both the demand and supply sides of its marketplace healthy enough to survive hibernation, Airbnb has allowed users to cancel some reservations without penalty, and provided financial succor to its hosts.
Unsure if this will ring true to most hosts. They were heavily penalized with full cancellations, while Airbnb issued vouchers.
Airbnb will have to make a lot of effort to win hosts' trust back.
I'm glad the employees got a generous severance package, hopefully ISO's was misreported and the employees received RSU's instead, as it would be a burden on the employee to have to come up with cash to exercise during such a time. Its important to remember that Lyft and Airbnb also Uber are all heavily tied to travel which isn't happening now due to covid. With states reopening and warmer weather, plus a drug that reduces the duration of covid-19(remdesivir) things will hopefully be getting better. If and when a second wave comes more drugs could surface that show efficacy against the virus so it won't be all doom and gloom.
At least they aren't doing it the wrong way, like when some big companies need to clean house a bit, they move the office to a new location quite distant from the current one. In the process they reduce the office size from 50,000 seats to 30,000 because they've estimated that amount of people will resign rather than endure a 4 hours commute... But officially :
> totally you still have your job if you want, we are not laying you off, but I need you in the office everyday... Or you could resign if you don't like the new location...
Why not furloughs or temporary part-time? I thought this was a rocket ship. Why would they have even consider an IPO raise if they weren’t looking to massively expand? Are they going to rehire all these people when business picks up? Not that I disagree, but it smells like vanilla-variety cuts for efficiency/performance.
Not privy of their figures but what are they gonna do with the 75% of workforce? Maybe I'm biased related to where I'm sitting, but looks like everything has stopped, travel especially. And looks like 2020 at least will stay that way.
Of course they can't just shut down....they have to hope and be ready.
I wonder how will the revenue drop be distributed globally. which countries, places will see the worst revenue drops. In such places there will be highest probability than some Airbnb landlords start selling off their properties - can be a good time for people who want to buy a place for themselves!
Maybe, but just the last August bootcamp of new hires was north of 100 people. If Airbnb wanted to do this for a while, I'd imagine they would have hired less even around then.
I had a guest that destroyed thousands of dollars of property at my house weeks ago and it's still going through their claim process. They've been stalling for a while now and it's been extremely frustrating since no one in support seems to have any idea what's going on.
These 1900 people were well paid SV employees, being well paid by working for a company operating in a zoning grey area that profits off of the removal of housing stock from the market. Only 45% of my city holds a job right now, and only 25% can afford the median house. I weep for these people struggling in my city, not the comparative handful of people who chose to work for a fundamentally degenerate company whose existence contributes to the housing crisis.
Many of these people are on work visas and will potentially need to leave the country. Some are new grads who have no savings and might not be able to afford rent. And the cut was across all roles, not just the ones that were well-paid.
Devastated housing costs which were on a decade long uptrend before AirBNB existed you mean? Or because its capitalized rentals to a higher extent than the normal purchase/rental market could do?
AirBnB is a great business. I actually met the founders when they were just starting, handling out Obama 'O's as marketing gifts. Maybe should have asked them to join their company.
This being said. Their business and bypassing of local laws has made many housing markets in touristic city insanely expensive. I know, some win, some lose but still, it is a major concern.
In the face of a housing crisis, the last thing you want to do is turn perfectly good housing stock into a de facto hotel. There are whole apartment buildings that have been turned into Airbnbs. The only work done in converting them was installing the cheapest flat screen TV possible, some futons and coffee tables from walmart, and a microwave. This maneuver can net a landlord twice as much money a month, and removes housing supply from the market in the process.
I think as long as a landlord can make twice the amount of money, its gonna be really hard to keep that down.
It also creates a lot of incentives to increase housing stock though no? If suddenly I can make $4k/mo on an apartment I'm building instead of $2k, wouldn't I want to build more apartments?
We've tried just about everything other than being permissive with new housing. We refuse to scale our most popular areas to live, with the idea that what makes it nice will go away if there's more people. That just makes it exclusive and expensive.
Airbnb and Twitter use Ruby for the same reason; Rails was the fastest way to bootstrap a working product in 2006-2008, when they both started out. When the issue comes up here these days, plenty of people argue it still is.
Doesn't look like more to me. Roughly same salary duration (would bet a pretty penny that Kickstarter doesn't pay nearly as much as Airbnb to begin with), significantly less health insurance, nothing about equity. That's what a union came up with for such a microscopic layoff compared to Airbnb? Sounds like the free market is better off deciding these things.
Will agree on the point regarding non-engineers. I would bet all else being equal they do, but will not fight over it as it's just an educated guess.
With regards to COBRA, the premiums are certainly covered by AirBnb as COBRA is available to employees for 18 months by default and 36 months in California where AirBnb is headquartered.
RSUs will always be worth something unless the company goes completely bankrupt. Judging by the stock prices of major hotel chains like Marriott and Hilton which serve as a rough guide, the equity is likely worth ~50% less now -- certainly not irrelevant considering the offers were always considered generous to begin with.
That too is a generous severance. But the AirBnB severance is considerably more generous:
Longer Severance (14 weeks + n vs 16 weeks)
1 year of Cobra vs 4 months
Equity vs None
that is a pretty good severance. I was laid off from an ad-tech company based in SF in April and received 4 weeks of pay (I had worked there for almost 2 years)
It's possible that the contract with these employees requires 3 month notice period both ways. So, an immediate dismissal would require them to pay it in compensation (guess this would also depend on the legislation). Regarding the insurance, usually its already bought for a year or so, so they possibly let it run as there's no point in revoking it without getting a refund.
If the 3-month notice is true and the compensation comes with that, then its still cheaper to let go now than in 3 months as there will be other costs like bonuses, expense claims for phone bills etc, other mandatory govt insurance schemes in some countries, more leave accrued. I'm not too convinced that it was all a nice gesture.
I called this 3 weeks [1] ago and no one believed me. Were are going to see A LOT of this the next 3-4 months as large companies experience bad quarters. These are the companies that were setup and run well (i.e. not day to day, burning stacks of money with no revenue).
MANY people called this, especially after they announced salary reductions at the top over a month ago. [0] This is not at all a surprise or unexpected.
I guess I was bitter because of the argument I got when originally discussing it on HN. I do feel validated. It sucks for these employees but everyone working for a VC fueled startup lives in this same boat. They had to know at any moment they might get tossed overboard, they were going to have layoffs prior to IPO as is.
And AirBNB has caused plenty of strife in the communities they operate in over the years, impact is always relative to ones perspective.
That strikes me as a pretty generous severance package.