You can understand the 2020/2021 hiring at certain companies with a very clear pandemic-related angle like Zoom. But I've lost track of the number of non-answer answers, both public and private, to why companies apparently overhired. We hired more than we meant to. How does that happen?
Especially at a company losing large piles of money.
1. In the Internet era, we live with much bigger markets and hence much more of a "winner-take-all" (or at least winner-take-most) economy for companies that exist primarily on the Internet. You see this over and over in different areas - there is usually one giant leader that takes the lion's share of the money, then maybe 1 or 2 frequently discussed competitors, then everyone else.
2. With this "way fewer points for second best" dynamic, most investors and business leaders are biased much more towards FOMO than fear-of-losing-money.
3. Thus, when the pandemic came along, many folks did see it as the start of a new dynamic with how people used online services. And they weren't entirely wrong, e.g. remote work is obviously much more prevalent now than pre-pandemic. But again, from a business leader's perspective, I'm sure most of them thought it would be much worse to miss out on a paradigm shift in online services than to over-invest.
Of course, any discussion about this topic should lead with the huge sloshing of money due to low interest rates that abruptly reversed. Whenever that happens you see investors pour money into risky assets as they chase yield.
Excellent reply and I think you can add a number 4 - Remote work makes the barrier to hiring so much lower.
You no longer need to source people from specific Geos. You no longer need to provide office space, desks, parking, etc for new employees. Even the interviewing process itself is so much faster. No arranging flights, hotels, ubers, interviewing is 100% remote now for most tech companies.
Fair enough. I would say that looking around in general, the "new normal" looks a lot more like the "old normal" than a lot of people expected in 2020 or 2021. Business travel is essentially back to pre-pandemic levels. There's more workplace flexibility but--especially outside tech--there's relatively little full remote. A lot of food and meal delivery seems to have really tapered off.
And arguably it didn't cost companies that much to hedge for an upside. It's not even clear if employees now being laid off were in general worse off for having a job. (Modulo some things like being in the US on a visa.)
Do you have a source on business travel being back to 2019 levels? Everything I’ve seen about this shows it’s at only half to two thirds, but numbers seem to vary a lot.
That's not just business travelers of course but I can't believe there's been a huge spike in tourist air travel in the US in non-holiday season winter.
In-person tech events still seem to be down but that's probably sector specific.
I'm willing to bet every other company that can will be hybrid work, come in at least x days over y time.
You won't retain talent if your competitors are more flexible. Unless you pay an "absurd" amount to have me come in every day, and at that point you're just wasting money on me and your oversized office.
Well I am probably not your normal worker, but for me WFH is soooooooo far down on the list of "must haves" for an employer that it may as well not be on the list
my Top 10 for a new employer
1. Pay
2. Hours / On Call
3. Vacation / PTO
4. Health Insurance quality / cost
5. Team Fit / Corporate Culture
6. Total Work Load / Back Log
7. Tech Debt of the Organization
8. Financial Debt of the Organization
9. How many Layoffs have you had in the last 12 months t0 2 years
10. How many open positions do you currently have organization wide
I would put WFH at the top of my list but only because it is the only reasonable way to have 1,2 and 3 above. If I have to live in SFO or ATX, the pay would have to be so absurdly better than remoting in from small-town Michigan, that likely no one will pay it. Same for hours -- I'm not commuting 1.5 hours each way to the affordable housing in these areas. Same for PTO: I effectively have tons more living near family since I don't have to hoard it to use for family reunions, Thanksgiving, etc. I can do all these things without using PTO, and therefore am able to go on real vacations instead.
Sure, I'll come into your office every day if you
1) let me work 5 hours a day instead of 8 (to account for the commute)
2) give me double the vacation so I can spend Thanksgiving/Christmas/4th of July/Super Bowl Sunday/Labor Day/etc with family, never miss a wedding, and also have enough left for a week on Lake Huron in the summer and a winter-time jaunt somewhere warm
3) increase my pay to account for the housing cost difference in whatever post-industrial NIMBY hellscape your office is in and my current home.
There's also corporate culture. I find that I don't want to work with a team that has difficulty connecting via email/chat/videocon and feel they require constant meatspace contact. Usually this means a lot of "alpha" type personalities that need to press the flesh to get their half-baked agendas pushed through on others' backs. On the other hand, if you are disciplined enough to be able to collaborate via email and the occasional quick call, then you probably aren't a ripoff artist.
You'd be surprised how far people push commutes in the Midwest. I know at least one person that lives near Saginaw and works in Detroit. I have a relative that commutes nearly two hours each way in northern Wisconsin -- and they bought this house /because/ of the location of the job, so this wasn't an accident of history.
I can maybe see this, but I have had several kinds of long commutes in my life: long distances by country road, by interstate, by train, by bus. Rush hour driving in Austin is hellish compared to the same length of commute by country road in Michigan (at least when there isn't a blizzard) but they are still driving. It's not downtime. Commuting by coach-style (think Greyhound) bus in central Europe is probably the easiest hour+ commute I've had, but you are still trapped in a metal box: you might be able to answer some email or listen to an audiobook but it's not downtime.
When I had a job in Boston, I could commute mostly by train with about a five minute drive on one end and a 10 minute walk on the other. Much better than driving unless I was doing something in the evening. But it was still three hours out of my day. Fortunately didn't need to do it every day but it was still not sustainable.
I envy a good grid. Here on the east coast, in many cities only the very center core is gridded, with the rest being most of a hub-and-sprawly-spoke model. The only corridor through my 40-mile wide, 2M+ person metro area is a single Interstate that's basically a parking lot at rush hour, and also carries our bus-only transit system.
Yeah, as a native who recently returned because of remote work - it's insane that people think austin is worth what it costs to live here now. Even if austin was 50% cheaper than NYC its by no means 50% as interesting / provides 50% as much opportunity as NYC.
I think WFH is important as it shows deference to families bringing up children where WFH may be a vital part of being able to dedicate enough time to their children.
As someone without children myself, I judge an organisation by how they treat employees with divergent goals (such as wanting to spend time with their children) because it shows me how the organisation will treat me if/when I fall outside complete alignment with corporate goals (perhaps due to politics, age or health).
hmm I wonder if that is why I have a somewhat negative view of WFH, I dont have kids, and often times I seem people with children for go their work responsibilities or worse say something like "well phpisthebest does not have kids so they can be on call or work holidays"
to me your personal situation should have ZERO bearing on your job, I should not even know if you have kids or not.
>>I judge an organisation by how they treat employees with divergent goals
I judge organizations on their equality, and by that I mean they treat all employees the same regardless of their marital or child status.
You could say the same about being in the office, or not. If the work can get done remotely who cares about coming into the office.
Companies that are capable of succeeding with remote workers are going to have an advantage as they will have less real estate costs, and they can get value out of paying for both a wider geographic worker pool, and they won't necessarily have to pay them big-city rates if those workers will accept slightly less nominal (which translates to more real if they have lower cost of living). Not possible in all circumstances but those that do it will benefit.
>>Companies that are capable of succeeding with remote workers are going to have an advantage as they will have less real estate costs,
COVID did not change the economic metrics on that, so I am not sure why this is a continual talking about for justification of WFH in these "new times"
There have always been full time WFH organizations, and there have always been non-WFH organizations.
I dont see this having a huge impact on if an organization stays WFH post covid or not.
>>and they can get value out of paying for both a wider geographic worker pool
Yea... no. Companies tried that and found out real fast the problems with legal liability, and tax jurisdictions this is why you are seeing even companies that stayed Full time WFH post-covid have started to limit where they can hire from to only states / nations where they have business in already, already have Tax ID's already know and comply with the local employment laws.
>COVID did not change the economic metrics on that
I disagree with this assertion completely.
You are commenting on an article that illustrates the fallout from COVID having economic consequences that companies are working through. Inflation, higher rates, over-hiring, and I would add over-investment in expensive prime real estate. There have been plenty of reports about companies having to deal with new problems with higher rates necessitating cost cutting. One of which is re-assessing the need for huge amounts of expensive real estate. Facebook and Amazon come to mind in this regard. Others may follow.
The change here is we may be enterning a new economic cycle unlike the last 10 or so years of extremely low interest rates and huge VC money as well as companies running stock buyback and stock compensation schemes to paper over low or no profitability. You can claim the next few years will be like the last few years, I simply disagree with this. So in this light, WFH may be a variable in equation of lowering costs.
>started to limit where they can hire from to only states / nations where they have business in already
Ok, but the dynamic I describe can still be achieved by limiting workforce to US. You can still have a wider pool of workers who want to stay located in lower costs states near their hometowns and families and not need large footprints of expensive real estate.
I think you are taking the missteps of perpetually online companies like Amazon and Facebook and conflating that too much with the wider economy.
Did the tech sector screw up, yes... That is nothing new for them... the local psychic has a better track record at predicting the future than the Tech Sector
Do I believe the problems in the tech sector are indicative to the wider economy. No. NYC, Silicon Valley, and other Extremely "Hot" cities may have an outsized downturn, and a commercial collapse but I know people that live in those places do not like to admit it we here in "Fly Over Country" do exist, and have huge amounts of economic output. increasingly so based on the Investments in Ohio, Michigan, Texas, and other states.
The economic shift may be less WFH and more Shifting to other regions of the US as CA, and NY collapse
I'm not talking necessarily about the wider economy, rather only "Companies that are capable of succeeding with remote workers" as I stated, regardless of the label you want to apply to them. But certainly tech/software companies primarily.
So let's constrain our point of contention simply to these companies. The larger players have an outsized position in hiring, and a few cities have an outsized position in being the location where these companies and employees operate and live, so the trends in these companies and these locations is meaningful.
Even if there's a hybrid strategy where more companies locate in midwest/lower costs areas and they have some remote workers, my claim is there will be less real estate footprint than before covid and more WFH employees. And that this combination, even if just marginal, will be a net benefit for these companies vs themselves before pandemic if they didn't have this strategy before and going forward vs those that don't do it/are intransigent on remote work.
Fly over country does not have the same economic output as the big cities. It’s why most people flock to the big cities. Cities are economic powerhouses at the forefront of innovation and culture.
I worry that we're sliding towards employer divide and conquer tropes here, being at odds with fellow employees over this makes no sense. Rather the onus should be on the employer to ensure they create an environment that is accommodating for all sorts of lifestyles. Why shouldn't you be able to take time off in a similar fashion to pursue your own child-free but otherwise time-consuming activities?
That parents are able to WFH and work flexibly also confers YOU the rights to do the same. That is why I am personally extremely supportive of those rights despite not having children because it gives me the rationale to demand the same flexibility when I need/want it.
I have kids and I agree with this. Giving someone work on a holiday or weekend because of their parental status is pretty bad. I think I would quickly leave a place like that.
>to me your personal situation should have ZERO bearing on your job
I can't see for humans ever being the case. People have life events that change their productivity: depression, marriage, death, children, personal interests.
I completely agree that you having/not having kids should not dictate workload.
Working without any context of peoples life wouldn't be a place I'd want to work at, basically your personal situation has a fuck tonne of bearing on your job.
> "well phpisthebest does not have kids so they can be on call or work holidays"
I’ve worked in the industry for over 10 years, on teams with several parents and have never heard this sort of sentiment. Just throwing my anecdata out there. The most I’ve seen it brought up is for maternity/paternity leave and for someone adjusting their commute schedule to take care of picking up kids/avoiding bad traffic.
It depends on the company and the organization. I have seen it personally (all the parents have a soccer game to go to, the non-parents pick up on call).
> A senior lawyer working in the Bay Area told me how, prior to the pandemic, the parents of small children would file out at between 5 and 5:15 p.m. each day to collect their children from childcare and head home, while child-free colleagues stayed at their desks until the work was, well, done. “I know many parents also log on later in the evening, but if they’ve missed an important call or haven’t had time to read the latest documents we’ve received, it falls to me and my child-free colleagues to pick up the slack,” they told me. “There’s a disparity in expectation as to when the working day ends and what gets done during it. I’m given the message that my nonwork life is less important—sometimes explicitly.”
> A friend in Salt Lake City is a former competitive skier, and the topic of being child-free came up during a recent conversation. “Honestly, I’m starting to resent the fact that my colleagues who are parents are free to take slabs of time off to look after sick kids or log off early to attend recitals. The thing is, I fully support the fact that they can—being a present parent is so important. But sometimes I wonder why I’m not allowed to take a couple of extra days each year to ski, or spend time with my 97-year-old grandfather? Whenever I suggest this to HR they literally laugh.”
That just sounds like unrealistic work expectations from the org being redirected into anger at parent employees. The issue is surely with the org as opposed to the employees that happen to be repopulating the earth. i.e. the non parent-employees should have access to the same level of freedom and if the org doesn't permit that or punishes the remainder somehow then that's the issue at play here.
> to me your personal situation should have ZERO bearing on your job, I should not even know if you have kids or not.
This is just impossible. Trust me, if your baby is sick it will impact your job. If (s)he had a fight in the school and the teacher calls you in the middle of work, that working day is gone. etc. etc.
I'm the opposite. For me, WFH is table-stakes. There isn't a realistic amount of pay, PTO, benefits, or anything else that would make me work on-site right now. We're still in a pandemic, and the risk of contracting long-covid and no longer being able to do knowledge work due to impaired cognition are far too high for me to consider working in an office these days.
There are too many unknowns to say for sure. If we put aside technical definitions of pandemic vs endemic and focus on the practical matters of daily life, I don’t think I’ll ever go back to life as it was in 2019. Covid is here to stay and that means adapting to that. The types of adaption will probably change over time.
I have two goals: avoid any long term effects from getting Covid myself, and avoiding giving Covid to my immune compromised spouse. At the moment, the only way to achieve either of those things is to avoid getting Covid at all. With better treatments to either prevent contracting Covid after an exposure, or better treatments to reduce the risk of long Covid, I’d start to consider my risk budget. For now it’s “as close to no risk of contracting Covid as possible”. With better prevention and treatment strategies I’ll probably consider some things that I won’t do now, but I don’t see a realistic scenario where I ever return to conferences, and I imagine I’ll probably continue masking in public essentially forever.
In a lot of ways, the situation today is harder than it was a couple of years ago. Vaccines help prevent infection but not to a degree where you can really rely on that as a first line of defense, and they barely reduce the risk of long Covid, if at all. On top of that, masking is rare, people no longer test, and if they do they no longer avoid going out into public with an active infection. In any reasonably sized office there’s basically no chance you won’t be exposed to Covid at least several times per year now.
> Covid is here to stay and that means adapting to that.
Thanks for the response.
Respectfully, it sounds like you'll never return to public life with this perspective. (Big assumption: assuming you don't have any major commodities), the reason most people aren't taking Covid as seriously anymore is that they are comfortable with their current risk assessment. It seems this is paying off for many, at least in my anecdotal experience.
Again, I'm kind of just musing here, absolutely not telling you how to live your life. I'm just interested because I don't know anyone in my personal network who takes this perspective of yours.
I get that perspective. There aren't a lot of people who agree with my risk assessment. I'm _mostly_ not going to tell other people what they should or shouldn't do (I do wish we'd go back to universal masking in a few locations, like doctors offices and government buildings. Higher risk and more cautious people can avoid restaurants and bars, but you can't just not show up if you get summoned for jury duty, or need to get treated for cancer).
Ultimately, either I'm wrong and the opportunity cost is the extra years of quality I'm losing to continued caution, or other people are wrong and the cumulative effects of infections are going to greatly impact their quality and quantity of life. If everyone chose to take some extra precautions, like masking, better ventilation, and staying home when they were sick then I'd have to give up less, and other people might not be risking so much, but I know that's just not going to happen, and I'm going to deal with the world as it is rather than as I think it ought to be.
My guess is that, although covid isn't going away, in a few years I think things will improve. Long covid is real, and it's having a real economic impact already. It's going to have a bigger impact in the coming years, and there's going to be real incentive to do something about it when it becomes clear that it's a huge drag on productivity. Prophylactic nasal sprays, better post-exposure protocols, next generation vaccines, faster and more reliable testing (preferably something that detects covid in the air rather than relying on individual testing), improved ventilation- all of that is being worked on, and I think eventually a lot of things will be low enough risk that I'll resume some activities.
In the mean time, I'm lucky to be far enough in my career that the impact of a harder line stance on this isn't too bad. Technical collaboration has always been largely remote for me, and there are ways I'm able to maintain connections with friends and family even though we rarely see each other in person.
I think it very much depends on where you live. I live in a suburb of a medium sized city that is not a tech hub so WFH is a top priority for me. I don't want to have to uproot my family and move for a job. If I already lived in a NYC or SF I could completely understand. With WFH though I am able to pay mid city suburb housing prices while working for a company in Manhattan and getting NYC pay.
Most of the tech jobs are in an area of town that is an hour commute each way so no way I am going to do that. End up leaving for work at 8 and not getting home until 6 or 6:30. With WFH I can actually dedicate exactly 40 hours a week to work and no more. Plus get away with it.
So for my WFH is the number 1 item. Pay is top as well but if I cant WFH or have to move then the pay doesn't really matter.
Although I would absolutely love to have a local office I could go into once or twice a week.
The "work from home" part of WFH isn't the most important thing. Its actually a downside - I would love to have a nice office to go into a few times a week where I could chat to coworkers.
The real benefit is that your market for possible jobs expands nationally or even globally. For my current job, there simply isn't a job like it in my home town, and if it wasn't for WFH, I would have to move to California. I think there is something to be said for including folks from other locations into the cutting edge of tech.
Does it matter if your commute is 2 miles, 30 miles, 50 miles? 10 minutes, 30 minutes, 75 minutes? For many people, that is what makes WFH a big part of the decision. When they have kids, or for any other reason want a nicer home, in a nice area, that can be bought for half the price near offices that are typically metropolitan with high demand and low supply, then a commute becomes part of the equation. Do you want to spend 2 hours a day on top of your 8 hours of working, sitting in traffic? Or would you rather have 2 hours more at home, with family -- or even working for your employer because you feel like it?
Funny story: woman kept complaining that she comes to work everyday and she doesn't understand the big deal for those who don't want to and want WFH. Months later, the company moved offices from SF to the South Bay. She was very vocal about how her 10 min commute was now going to be 45 minutes or more. Don't you love it when people suddenly realize why other people had been fighting for something-not-that-unreasonable?
I could not even get paid half of what I am paid if I were limited to my local small-town market. I don't want to move. So WFH is a requirement for me to hit your #1.
Work from home is an extremely idiosyncratic benefit though. How you feel about it will be dominated by 1) your commute time, cost and unpleasantness, 2) your home office situation (ranging from empty mansion to tiny noisy apartment crammed with family), and further down the list your age, marital status and whether you like your coworkers etc. However you feel about it, clearly many people do like it.
That seems far and away the most common outcome for a lot of knowledge workers. More flexibility than the "bad old days" but not fully remote in the mountains somewhere either.
There will be fully remote jobs but it's not going to be the norm at most companies. And I suspect that people who are fully remote at companies that mostly aren't may feel at a disadvantage.
> at that point you're just wasting money on me and your oversized office.
Some industries and companies have so much margins that they are willing to spend that much more...
It may be only those industries which have really tight margins and/or large numbers of employees that benefit from having them remote or in different geos.
Right now as in this very moment? Maybe people are more careful what they wish for, but how many of these fired people will go unemployed? I bet most land a position pretty much anywhere they point, I'm still getting LinkedIn recruiter spam daily.
>> I'm still getting LinkedIn recruiter spam daily.
yea and they have not filled those positions for a reason....
>>Right now as in this very moment?
Ironically it is very regional. Some areas in the US are seeing very high unemployment numbers. Largely because most remote work has dried up, and the few companies still doing remote limit to states where they have an office so you can not just "live anywhere" like the promise of FT WFH was
No not really. I know people who were at multiples of FAANG who struggle to find jobs for months now (SWEs & SREs). Certainly noone's going to snub an offer for lack of remote.
Also, there is (a non-unsurmountable) hurdle of coming from FAANG in that hiring managers suspect that someone coming from a FAANG to a much less cushy position simply wants to sit out a downturn or a burndown before jumping back.
> Certainly noone's going to snub an offer for lack of remote.
I wouldn't take a non-remote job until it's that or homelessnes. I need to optimize for the long term viability of my career, and that means avoiding long-covid, which in turn means avoiding working in an office.
Certainly for most people there’s a point where there’s no choice left and if your only option is to work on-site then that’s what you’ll have to do. My point was simply that there are a lot of people, myself included, who would snub an on-sight offer as long as there are other options.
I see a lot of people assuming that remote work is merely a preference, but for a lot of people it’s a lot more than that. Avoiding contracting Covid in the office is a difference between life and death for some people- and the difference between a productive long term career or a struggle to eek out a living in the face of long term disabilities due to long covid for others.
Well, at this point, for a lot of roles, the choice between never going into an office, or attending a meeting, or taking a business trip does involve pretty severe career tradeoffs. I'm on a distributed team and travel is pretty locked down because of budgets but I still don't really have the flexibility to say I'm not leaving my house (though I want to get out in general).
It’s a trade-off for sure. There are companies where you can be successful without in-person events, but that’s not going to be every company or remote team. I’m comfortable with the trade-off. I’m an extrovert, and I miss meeting people I work with regularly (even though I’ve always disliked travel). Unfortunately, putting my feelings aside, a sober analysis of the state of Covid right now has me convinced that it’s still really really worth avoiding as much as possible.
What was their previous comp and what companies are they applying for? If you're looking for half a mil comp at top tech companies, yeah it's going to slim pickings.
> I'm still getting LinkedIn recruiter spam daily.
As long as it hasn't intensified, I guess. If you start getting a lot more recruiter spam then you'll know that the jobs are few and far between. The easier it is for employers to hire the picker they'll be, which makes things much, much harder for recruiters to find a good fit and more pressure to be the person responsible for filling the position to keep their own job.
There are lots of companies that sell stuff that is profitable - where the barrier for entry isn't putting up a web page and having a developer work on it but rather have something that you hold in your hands that you can sell to someone (and that is profitable to make).
Look for product based companies rather than service based ones.
And yes, that means that as a software developer you're not likely in the "engineering" part of the company or a profit center... and that will have a corresponding impact if you are looking for a salary based on being in a profit center.
The thing is, the companies didn't overhire given the expected growth rates they were forecasting. Companies doing layoffs now are doing so with the same reasoning they used when they did hiring during the pandemic - they are forecasting their growth based on current economic realities.
The pandemic years saw companies accelerate their growth, even those who didn't have a clear 'pandemic angle' like Twilio. 2020 Q4 saw Twilio revenue growth 65% which encouraged them to hire more. Again, this is just the flip side of the current growth they are seeing (20-30%) which is causing them to re-balance their cost structure for lower growth.
There is risk in hiring during high growth periods - the risk being potentially these employees either won't deliver the value you expect, your strategy is wrong, or your growth rates won't continue. If these things happen, you might have to do a layoff. There is risk is NOT hiring during high growth periods too - if the company doesn't structure itself to capitalize on the current growth it is seeing, competitors could come in and sweep up market share.
At the end of the day, no one has a crystal ball for when high growth rates will stop, or when low(er) growth rates will pick back up again. In these cases, companies will hire during high growth periods and might have to lay off during low growth periods.
Many people seem to want to frame "layoffs" as a de facto failure, but it really isn't a failure as much as it is a company responding to dynamic market conditions (again, the flip side of hiring when growth is high). It's hard to say if the pandemic era hiring was really a bad idea - that hiring did fuel many of these companies to rapidly expand their revenue base and capitalize on many growth opportunities. Now that their future growth is expected lower, they are re-balancing their cost structure to respond.
> even those who didn't have a clear 'pandemic angle' like Twilio.
Twilio absolutely had a pandemic angle -- they help provide telephony to people outside of the office. As people suddenly moved home, they needed a way to get their phone calls forwarded to all their employees and other related telephony.
Yes, and not to mention all the notifications for all these different communication apps that people were using more and more and all the new remote work tool startups that use telephone, texting, and other notification services that Twilio offers.
Parkinson's law, first written about in the 1950s, explains that work expands to fill the available time.
In his essay he noted that what that means is that managers work to expand the people they manage as that gives them more budget more prestige and more power.
He has an amusing anecdote about the British Navy in the early 1900s to illustrate his point.
They essay is very well written and I highly recommend it.
> companies apparently overhired. We hired more than we meant to. How does that happen?
Everyone here is replying with various explanations of why these companies made the "mistake" of over-hiring but no-one is stopping to ask if it was a mistake. Sure the announcements are full of apologies and stories of taking responsibility for mistakes made, they need to be: they're marketing. But cui bono, or more pertinently, the inverse: who is negatively affected by layoffs? It isn't shareholders. Meta just did massive buybacks after layoffs.
Over-hiring isn't a mistake because the only real downside is the subsequent layoffs, and layoffs don't negatively effect anyone that "matters".
Sure there's institutional knowledge loss but that only matters for product quality which, let's be honest, isn't any indicator of revenue.
IMO BigTech had the notion that for the most part you wouldn’t be laid off unless you “underperformed”. The fact that people with long tenures and good perf were still let go definitely has an impact on how these companies will be perceived by future employees.
> IMO BigTech had the notion that for the most part
I'm not sure this is "for the most part"
Sure, FAANG may have had this notion (or at least FNG; not sure if the As ever had), along with the sort of religious/dogmatic "drinking the koolaid" type culture they were trying to instill within their employee-base (helped to no end by outsourcing large portions of their sales operations so they'd have a smaller core to "spoil").
Thinking of BigTech more broadly though, & especially big old enterprise-y tech like the IBMs, Oracles, SAPs & telcos, layoffs being arbitrary & indiscriminate seems like nothing new.
That sounds reasonable but will it change anything? Pretty much every major tech company did layoffs, and they're all going to keep paying same relative to each other. I'm a guy who wants a big paycheck, so I'll still be working for FAANGs.
Sure, now I know my job isn't 100% secure and maybe I'm less inclined to go above and beyond, but I'm sure they'll address that by having bigger "differentiation" in pay between top and average performers.
We hired more than we meant to. How does that happen?
Every explanation here thus far misses one simple fact: interest rates.
Imagine the more people you hire, the more money you make and/or the more dominant of a market position you assume.
Now imagine the Federal Reserve has lowered the Federal Funds Target rate to 0 and is performing FOMC operations to buy $9 trillion of bonds to lower interest rates across the board. This is what they did:
So imagine firms can go on a hiring spree with almost-free money. Consider that WACC (weight average cost of capital) is one of the key factors in calculating the NPV of a project. Now consider that a positive NPV means you should do the project. This means a lot of projects (and hence hiring) get greenlit.
Now imagine the Federal Reserve says, “Party’s Over, guys!” and raises the FFT rate and stops buying bonds. Almost free money goes away, the WACC increases and now the NPV of all those juicy projects goes negative.
Add in an expected recession, the ability to cull the bottom x% performers and you get a recipe for widespread layoffs.
Companies hired because other companies were hiring.
If you're big, you would have to explain to shareholders and the board why Google and Facebook are doubling/tripling in size, but you're not - is it because the company is moribund? SELL SELL SELL!
If you're small, you would have to explain to investors and the board why other startups/unicorn wannabes are doubling/tripling in size, but you're not - is it because the company is moribund? SELL SELL SELL!
Here is my company leadership heuristic: what option requires the least discussion/interaction/explanation with the board? That's the one that will be chosen.
One way to think about 10% downsizing at a company that doubles in size roughly annually is its being off schedule about a month.
IF they go back to doubling in size every year, THEN its a short term one month layoff. Looking at the numbers, this specific company example is not going back to doubling every year.
I think it gets engrained into the DNA of the company that they double every X months or X years and its hard to shift the culture when the company flatlines or even slightly declines. "Why, we always onboard 10% of our workforce per month, its just what we do" and when you grow that fast there are literally people who's entire day job is onboarding, like typing in new W-2 and insurance forms all day long or whatever.
In my opinion, it's ok if it happens to rookies. Like, small mom and pop business owners who got excited during a "gold rush" (surge in sales during CoVID) or whatever.
But like... executives with net worths $20m who are like, elected (and kept quarter after quarter) by a board of massive publicly traded companies? I thought they needed to be next to perfect / the gold standard. "Eh, we messed up, sorry, we're human". I thought the bar was higher.
Maybe I'm over-exaggerating the whole thing anyway. If Microsoft is done doing 1 time layoffs past 3 years at 10k, people after CO=oVID, not a big deal. If it's just the beginning and every quarter or so they shed more and more, it'll be interesting.
Having a shortage of people is as debilitating as having too many people. Not only is a company not able to fulfill their goals for business development, but they also can't sustain their existing responsibilities and existing customer base. People were switching jobs left and right, and inspired a desire to retain people instead of adding people on demand, in the same way as the supply chain caused people to stock up on chips resulting in today's oversupply of chips.
In 2020, companies were envisioning that the way we worked was so drastically different from how it really turned out, surprisingly similar to before. That meant a lot more investment in new markets that would need a lot more services and goods (ex. remote work meant a lot of work for people to develop homes more, allow more to be done fully virtually, move many services originally in cities to suburbs). When things didn't turn out that way, and people started to get back to normal, projects that would have had a huge return if realized and need more people working suddenly different. Then it was a game of chicken of how to admit that they invested in the wrong efforts because things didn't turn out how they had expected.
> But I’ve lost track of the number of non-answer answers, both public and private, to why companies apparently overhired. We hired more than we meant to. How does that happen?
Overhiring isn’t “hiring more than we meant to”, its “hiring more at time X than is appropriate for the market conditions at X+Y”.
It’s what normal, capital-controlled firms do in times of easy money, the hire more when throwing more stuff at the wall to see what sticks is cheap, and then when a contraction occurs, they cut and milk the stuff that is already working. Its normal business-cycle things. When there is talk of cooling inflation by tightening monetary policy, one of the core mechanisms that that works by is causing firms to cut employees in roles that don’t contribute to short-term returns as much, reducing consumer demand and constraining price increases.
(“Overhiring” is something of a misnomer from any perspective other than the perspective of the time after the hiring when market situations have tightened.)
Companies generally only make detailed plans a year ahead based on data from the prior year or two. Which works out most of the time and the times it doesn't you can't really do anything about like financial crisis and covid boost then normalization.
If you were buying in the stock market early and didn't sell (or held on to vested stock), you probably felt the same and wouldn't have predicted such a precipitous crash. It looks obvious now but if you said mid-2022 that 2023 growth is gonna be lower than even pre-covid you get funny looks. Then the unplanned growth strains support, customers are complaining, your competitors are doing well too and are going to keep R&D expense ratios, so you do the same to stop your product falling behind. Investors are high on the bubble, you can spend money with much less scrutiny
My guess from what I've heard, or at least a factor.
A lot of cheap money (low interest govt loans, etc) as part of the market propping up in April 2020, and beyond lead to a lot of incoming capital for a lot of these companies. I think just over half or at least close to half of the money printed to assist people went straight to Wall Street. That flooded the market with money which while propping up the market, probably got used to hire a lot of people who weren't necessary for "growth" or not strictly necessary and wasn't sustainable.
One thing that seems to go unmentioned, unless I missed it, is that many of these companies bought other companies and brought over those teams. Initially, they probably needed more members of those acquired teams than they do now that those products are integrated. So layoffs are almost guaranteed in that sense.
Add in higher interest rates mentioned elsewhere, and instead of buying more and more companies (which means you can move staff around to new teams), there isn’t any buying so layoffs are the result.
Because technology is still in the "land grab" era of business. Say you don't hire during the COVID boom, well, ok, now you don't have to do layoffs but now you have to battle 2-3 new entrants into the market who snarfed up customers you were unable to serve because you were understaffed.
There only "downside" to not hiring is the chance you have to layoff 5-20% of your workforce in a year or so. The upside is tremendous.
And it's still relatively cheap. The dot-com era (1995-2001) had higher rates than we do now. When we get back to 8 or 9%, like we had in the 80's, start worrying.
Also, I would guess major grows are due to a massive influx of tech-sales people.
This is just an extrapolation, but I would bet when the pandemic hit their email boxes and phones blowup with people throwing money at them and begging to "fix" their telephony system in a scenario where most of their employees are at home.
Now the market is bigger but also mostly adjusted and the 2021 tsunami of free money is over.
I'm sure many technical people are affected by this but they are a minority because they were never the majority of hires ( my guess )
Twilio isn't a turnkey platform, quite a bit of this business went to platforms like Telnyx that make Teams Phone System and similar setups super easy.
Yes. When people talk about “turnkey” they are talking about higher level aggregate products though. For example, ZenDesk is a “turnkey” customer support product that is built on top of Twilio APIs. Dropbox is a “turnkey” file management product built on top of AWS S3 APIs.
These days, Twilio does have a lot more integrated solutions, but people still think of them as just the message transport layer that they started as.
As I've mentioned frequently before, it amazes me how many people looking at tech company financials will only look at Revenue and completely ignore profits.
What the revenue/profit plot you showed for TWLO clearly demonstrates is that there is no magic point there suddenly you increase revenue and profitably starts to increase as well. I think an assumption many people have is "if revenue keeps rising you have to be profitable soon", clearly that is not always the case.
Another pattern I've noticed is that many companies are not like Amazon, which is the model of a growth company. While AMZN does often reinvest its profits (historically to the dismay of investors) it has repeatedly demonstrated that it can be profitable. For companies like TWLO and UBER it's not obvious that they even can be profitable.
When I see this TWLO chart the message I get is that the only way to increase revenue is to increase net losses. It's not even remotely clear that TWLO can generate a profit at any level of revenue.
The Uber model can be profitable - we know this because of Bolt’s cash flow generation capabilities.
Unfortunately for Uber and Lyft, they massively over-hire and over-compensate (except for drivers) relative to the more financially healthy rideshare firms globally.
Unemployment spiked early in the pandemic, aggressively lowered back to pre-pandemic levels, and then stabilized slightly lower, at least until mid-2022.
Putting it in context: the US has about 160 million people in the labor force. It's shocking when we see companies laying off 10,000 people, but in the grand scheme of things this is really quite a small drop in the bucket. In all of 2022, tech saw ~150k layoffs, or about 0.1% of the labor force.
That's insane! I think a good future indicator before joining any company is their hypergrowth ... avoid at all cost. Smoke and mirrors. When you hear CEOs blathering on doubling, tripling etc .. headcount ... run ...
Absolutely! I’ve avoided hyper growth companies for many years and I’m very glad I made that decision. There are sometimes attractive salaries and roles at these places, but ultimately you are most likely to become irrelevant and disposable. Even if you’re a particularly talented and capable person, very few companies are run well enough to ever expose and utilize that. Your career is at risk of stagnating, I think.
There are exceptions of course. The risk to reward ratio seems pretty bad to me, though.
> sometimes attractive salaries and roles at these places
yeah, it is a lottery. Though more often than not is paper money that never realized into actual $$$. I did my fair share of it, but eventually went for steady long term income, slower growth but sustainable.
I see it as investing in single stocks or boring mutual funds.
SG&A, which includes sales & marketing, grew 3.06x since 2019 -- so linearly with revenue growth, as is typical for enterprise B2B.
And on the engineering front: If they're not investing substantially in R&D, then they're likely going to flame out in the coming decade. R&D expense grew 2.62x in the same timeframe.
How much of their revenue came in because of acquisitions like Segment?
That said, sustainable growth is ok, Twilio's head count growth was "wild" to put it mild.
Holy shit !
They make $3.5B/y of Revenu qnd they can't afford 9k employees ?
How much are they paying them ?
and what are they doing with the rest of that huge pile of money ?
I wonder if a company should hire as many people even though the Covid drove unexpected traffic. I mean, shouldn't we build systems that scale by adding machines instead of adding people? Even if a company wants to hire for growth, shouldn't they hire a team of 2 or 3 to test water first, namely hiring for results instead of for investment?
I think a lot of the time the bulk added is in sales and marketing, to capture the most of a 'wave' when it shows up. The penalty for over hiring remains less than for under hiring in these cases.
This cut now sounds very deep indeed. It seems not at all the same as trimming against "overhiring" nor about mispredictions of growth, but instead perhaps a more fundamental concern about the health of the company.
This is not true, except for first-time builders and those who do not send a lot of SMS. Twilio is a great on-ramp to the world of SMS via API, but at scale considerations beyond developer UX can become more important.
Speaking as someone whose company uses Telnyx... Telnyx has too many incidents/problems to be worth replacing Twilio with. Would go with Bandwidth if you're looking for cheaper-than-Twilio-but-worse-tech.
Two severe layoffs so close together followed by "significant structural changes" resulting in "forming two business units." I'm imaging morale and worker productivity are both in the toilet.
Not surprising, given the -$500m net income result on last quarter amid slowing growth, Twilio has been burning money since a long time, despite being a public company.
Sometimes I wonder what those CEOs are doing to let a situation roll like this for so long. How boards accept this kind of thing?
Twilio has terrible numbers, you don't even need to be a VC or professional analyst to see that. They need a big cut not only in personel, but in expenses.
Checking their leadership team, there is a "Chief People Officer", "Chief Diversity Officer", "Chief Social Impact Officer", "Chief Digital Officer" and a bunch of pompous and inflated C-level titles. In fact their C-suite has 12 people!
Maybe the shareholders should be asking if their C-suite is going to be downsized appropriately.
I don’t know their compensation packages but I doubt firing a few executives will fill a minimum $500M hole. They must have additional systemic issues with their business model
Chief Diversity Officer - ... responsible for guiding and scaling inclusion strategy and diversity initiatives across Twilio's global workforce
Chief People Officer - .. responsible for driving the talent development and acquisition strategy, and building infrastructure to support a thriving culture of belonging, diversity and inclusion across the company
There was a period of time after the last lay off and before the current one, I had noticed a huge number of exec level folks jumping ship, moving companies etc. I wonder if that was just in anticipation of all this? The execs do seem to be taking care of each other regardless of companies while employees argue about which companies are supreme!
Stock market. A lot of these companies are not only kept afloat but celebrated because of some future pie in the sky possibility. Everyone makes money in this game from brokers, engineers, managers, media. A perfect merry go round.
Nope, nobody can make money consistently out of a company that has the same CEO since 2008 and is still burning money(!!!).
Maybe their business model isn't even viable, and/or needs a big revamp.
Unlike other companies that fired people with 100bi in cash(looking at you, Google), Twilio is literally paying for people to use their services for over a decade.
Are boards and VCs so rich that they can keep such thing going on for so long, without ever the expectation of making a profit?
They seems to be pulling in 100 directions from Automated Communications, to Authentication, Serverless Cloud, To Transactional Email, to Video Services to what ever else.
Pension funds and many other xyz funds have these companies in their portfolio. Crypto markets with their scammy tokens are a good simulation of US stock market of today. Unprofitable companies posting 1 less cent loss as compared to forecast and seeing their stock jump 20%.
This is the correct take, but it is funny, because everyone is always lamenting the "quarterly focus" of the stock market but the reality is bloated companies are given huge runways in public markets.
I don't think anyone really ever thought they were. I've posted a similar sentiment a bunch of times, but both of the following can easily be true:
1. There are companies that are run inefficiently, especially ones that grew spectacularly quickly during the pandemic due largely to FOMO concerns from execs.
2. Large companies have a huge number of responsibilities and needs for staff that are rarely grasped by the "It's just a website! I could build this in a weekend!" crowd.
The question that I have is: why are all these big corporations doing synchronized layoffs? Is it about having more people than needed or is it pure greed and expectations that they can easily get away with it because "everyone is doing it"?
I don't think it's really a mystery as to why most tech companies are doing layoffs (also import to note that other industries still have tight labor markets, like oil and gas which happens to be rapidly growing during this downturn).
Tech company growth rates were high during the pandemic so they hired to fuel that growth. Now that growth rates are lower, they have to re-balance their cost structure to match their new forecasted growth. This is happening at every company currently doing layoffs. In Twilio's case, they went from almost 70% year over year growth during the pandemic to currently about 20-30% year over year growth. The same evaporating growth rates is true across the tech industry - Meta is actually seeing revenue decline year over year, Google has seen growth shrink to just 1%. Even more telling are operating margins which are evaporating very quickly as growth stalls - Google's operating margins are down 17% year over year.
No one has a crystal ball, so companies hire during high growth periods to capitalize on growth, and lay off during low growth periods to re-balance their cost structure towards profit. This is true of many industries - you see the same effects play out in the boom and bust cycle of industries like O&G - which are currently hiring and not too long ago were laying off as well. People want to frame lay offs as de facto failure, but really it is just companies responding to market conditions - no different then companies hiring when growth is high.
It's a good time to do it; copycat layoffs (The Board: "everyone is doing layoffs, why aren't we?") and it's a way to give a short term boost to the stock price - at least for publicly traded companies - when technology earnings are mixed or poor.
It's because the fundamental economics of nearly the entire sector don't make sense.
I predicted there would be mass layoffs in tech right like this last year, and more specifically predicted 6 months ago that we'd be seeing basically what we're seeing as far as layoffs.
With rising rates investors are asking companies to show a clear path towards profitability. Most of these companies are losing more money each quarter and industry wide this has to stop.
For the larger profitable companies it's likely because they realize a huge amount of their revenue is coming from these companies that don't make money.
While I'll be the first to criticize companies for working to remove power from workers, what we're seeing is simply investors waking up to the economic reality that growth without profits is not sustainable.
The most frustrating part of all of these layoffs is that it seems more or less understood that if the fed lowers rates, we'll be back to irresponsible hiring. This belief that there is a sing "right strategy" for the given economic conditions completely ignores switching costs, both for individuals (whose lives are upended) but also for companies (imo the coordination overheard of hypergrowth likely means that companies are less productive in the short term).
Cover - layoffs make the company look bad. Laying off when you are the only company doing so makes you look even worse both to the public and investors.
"the United States Federal Reserve raised the Federal Funds Rate from 0.25% to 4.75% in the past 6-18 months, therefore, these companies are reacting to that and having to cut back on costs"
where it falls apart in my mind is (and I might be missing something)
why is that having such a massive impact so quickly on these companies to the point where, the cost to service NEW debt (not existing) rises?
i thought a lot of these companies had so much cash due to high tech margins that, they didn't really finance growth through cheap debt?
The stimulus in 2020 and 2021 was historic and caused rapid economic growth, therefore companies hired in response to that growth.
The rise in interest rates from 0.25% to 4.75% is meant to slow economic growth, therefore companies need to adjust to a period of slower growth. The higher interest rates work primarily through the real estate market, slowing construction, but this means less consumers, and therefore less income for companies.
Keep in mind, the banks raised rates rapidly as soon as they knew the Fed was going to raise rates. The Fed took many months to get to 4.75% but the banks jumped ahead and raised rates almost instantly.
In 2020 many CEOs needed to plan for hypergrowth, in 2023 many CEOs need to plan for a possible recession.
The money I spend becomes income for a company, and when that company pays you a salary, and you buy something from my company, then they money you spend becomes my salary. Everything goes around in a circle. Therefore, it doesn't matter how much debt a company has, but it does matter how much debt other people have. If other people suddenly need to pay more interest on their debts, then they have less money to spend whatever it is that your company is selling (unless you work at a bank).
I think it's more direct than that. Rich people weren't getting any return on their money from fixed income instruments so instead they gave it to funds that invested in tech startups that then used it to hire people. Now interest rates are higher, rich people don't need to do that any more.
Did VC investments actually increase a lot in 20-21? Did Twilio issue more stocks?
I get that Rich people were buying new assets, but I don't see how that is new funding for hiring. I thought it was more of an increase in asset prices for more risky assets. So the previous owner of the stock gets paid, but that doesn't result in hiring.
Yes, that’s ultimately the theory behind rate hikes in the first place. On a big enough scale, wages get driven downward and then that has a knock-on effect on prices. It just turns out tech was especially vulnerable.
> It just turns out tech was especially vulnerable.
This should not be surprising at all! The entire tech rally was fueled by a huge amount of leverage. That leverage was very cheap in the last 10 years, because there was a lot of money sloshing around and the interest rates were zero (sometimes even negative), which meant that the bar on portfolio returns was very low.
I'm going to simplify a lot: let's say you have a portfolio that returns 10% p.a., if the risk free rate (ie bond returns) are 0, then you can say that your portfolio gives people 10% in excess of what they could get by holding safe assets. But now rates are 5% (for the sake of simplicity), that same portfolio only gives you 5% excess returns. On any single given year that's not a huge difference, but if you compound this over 10 years, that's the difference of having earned 60% vs. 160%. Huge difference!
So as you can see this relatively small (in absolute terms) change really compounds itself into a massive re-evaluation of investments. When rates are negative, you'd be happy to hold assets that merely do nothing - ie neither gain nor lose value - but once rates start to rise appreciably, the future value of those investments needs to be discounted and because we are dealing with compounding, the discounting itself can be pretty brutal. This is then further compounded by the expectation that money supply itself is shrinking, which makes the pool of available money smaller as well.
It's really a double whammy which will mostly affect highly leveraged and risky bets, as they become much much less palatable.
It was really perverse how many tech companies had no discernible avenue of ever becoming profitable, and yet had billion dollar valuations. People were looking desperate for parking capital anywhere they could.
> Keep in mind, the banks raised rates rapidly as soon as they knew the Fed was going to raise rates. The Fed took many months to get to 4.75% but the banks jumped ahead and raised rates almost instantly.
"Banks are intermediaries between the central bank (such as the Federal Reserve) and consumers and businesses. Banks borrow funds from the central bank at a certain rate and then lend those funds to their customers at a higher rate, earning a profit on the spread between the two rates."
> therefore companies need to adjust to a period of slower growth.
I think this is the missing piece for me. I didn't realize that since consumers will purchase less houses, the real estate sector will lag, and those who earn their living in it will have less discretionary spending to pump into the economy. From there (at scale), companies like Microsoft will grow less due to weakened consumer demand.
That and people who need to finance car purchases right now (new or used) would also be affected. If it costs them more to finance a car than it did 12 months ago, Microsoft/Amazon/Google/Facebook can expect to have weakened consumer demand.
So it isn't that Microsoft itself is directly impacted at a "we finance debt to pay our employees with the Federal Funds rate", but more that the Federal Reserve is trying to weaken consumer demand. Once that weakened demand reaches Microsoft, they need to adjust (lay off unprofitable teams/projects) to stay on their previously baked in growth projections that Wall Street expects to see/demands. Without this, Microsoft stock will go backwards because Wall Street wants to see perpetual continuous growth.
"Banks borrow funds from the central bank at a certain rate"
Right, but banks don't have to borrow money from the Fed. Banks also have the deposits from their customers, and so banks can make new loans based on those deposits. Last time I checked, this was roughly a 5 to 1 ratio (a bank with $1 million in deposits could make loans of $5 million) but that changes all the time, based on limits set by the Fed.
But in general, right, when the Fed raises rates, consumer demand will weaken, and then that spreads to the retail sector, and then that works backwards to the manufacturing sector and all the service sector activities that support businesses in general (accounting, legal, janitors, etc), eventually slowing all economic activity.
So because Microsoft's board assumes that consumer demand is due to weaken (as a result to the raised Fed rates), they laid off 10,000 people. So we can most likely assume those people were not bringing a lot of value to the company.
So it's not that the Fed rate affects Microsoft directly, because they don't really have any loans/processes where they need to get loans/debt at the Fed rate.
It's that they will be affected by lower consumer demand.
It's a valuation problem with how much FUTURE profits are valued vs CURRENT profits.
Losing money now to make money in the future isn't sexy anymore. So you have to fire people until you make money now.
For companies like FAANG - which are ridiculously profitable - it's still the same.
Future profits aren't worth as much. Current profits are worth more. Now it's sexy to fire people to make more money now, because that's valued higher than before.
> Losing money now to make money in the future isn't sexy anymore. So you have to fire people until you make money now.
I am familiar with this concept but I'm curious if you could teach me more on the specifics. I think what you are referring to is basically "cost of capital analysis".
If the companies weren't hiring/paying payroll with debt at 0.5%, why does the fact matter that debt would now hypothetically cost them 5% come into play? Are they up against the fact that their projects (after payroll and all expenses) need to return more than the risk free rate (4-5%)? Why would that matter? Are tech projects really that unprofitable? I figured most projects at tech companies are easily 20%+ in terms of margin.
> For companies like FAANG - which are ridiculously profitable - it's still the same.
Would you go as far as to say Microsoft laying off 10,000 and Amazing laying off 18,000 people had next to nothing to do with the federal funds rate then?
I am just learning about too, but I think the explanation goes something like this: Because the risk-free rate of return is now much higher, the net present value of the estimated future cash returns from that investment has gone down. Another way to look at it, earning a dollar today is now worth much more than earning a dollar in five years.
Just how much has it increased? If we use the 3-month Treasury bill rate as the risk-free return, it has gone from 0.05% to 4.64%. A dollar in five years used to be worth (1 / 1.0005^5) and now it is only worth (1 / 1.0464^5). That's a drop of 25%, definitely significant enough to make some speculative and longer-term investments no longer pencil out.
Another way you can think about this: imagine you have a portfolio that makes 10% every year and risk free rate is zero. If you reinvest your returns (ie compound returns), in 10 years time you'll have made 160% of your original investment vs. 0% if you kept your money in a risk free portfolio.
But now let's say that risk free rates are 5%, which means that your portfolio has to compete with a net positive value asset that is essentially free of risk and in the same 10 year horizon will make you 60%, so your excess profits are now "only" 100%, which is a significant reduction from the original value proposition.
Thus, for the same risk profile, investment firms have to become much more restrictive in what they put in their portfolio. An entire class of investments (e.g. companies who are not expected to ever make money but have hype) has become basically a negative value proposition.
The Fed's dot plot shows they plan on lowering interest rates within the next 24 months.
How can Microsoft (big tech company) not have faith that their highly paid engineers + managers can't build amazing products efficiently (aka not costing too much) to the point where they can outcompete the risk free rate which is temporarily ~5% and headed back down to 2-3% within the next 2-3 years most likely?
Sure, but 24 months is six quarters of potentially lower returns and share price. Execs are bonused on share price appreciation so the layoffs make sense to them.
> Because the risk-free rate of return is now much higher, the net present value of the estimated future cash returns from that investment has gone down.
When the risk free rate was 0.25%, the net present value of estimated future cash returns was X
Now, the risk free rate (2 year) is 4.50%. A different of 4.25%, therefore the net present value of estimate future cash returns is whatever X was, but 4.25% worse
For a company like Microsoft, how does that translate to layoffs? If their project was profitable to the tune of 10% margins and the risk free rate makes it only 5%, why are they getting rid of the entire project?
Or, did they have projects that had 5% net margin, and now the projects are breakeven, so they get rid of them? That would mean the people who got laid off at Microsoft were almost unanimously working on projects that were only netting Microsoft 5% net margin? I thought tech had better margins than that?
> If their project was profitable to the tune of 10% margins and the risk free rate makes it only 5%
The 5% needs to be weighed against the cost of capital, not just the absolute return from the company's perspective. A 5% return sounds fine but if the market is now pricing equities for a 7% return then a company is lighting money on fire by making that 5% investment (because they can return the cash to shareholders who can invest in other businesses at 7%).
Cost of capital: 0.25% (should be irrelevant because they had billions in cash on hand but let's assume they refuse to use it for whatever reason and instead went to banks to get loans to pay for employees working on projects)
They work on a project, it returns 20% gross. 20% - cost of capital = ROI of 19.75%
2022
Cost of capital: 4.50%
Project returns 20% gross still, but now the net ROI is 15.5%
Why would you lay off employees who could bring you 15.5% (average project profitability assumption?) in favor of instead parking your cash for the risk free rate of 4.5%?
Ostensibly, company valuation should be reflective of the sum of its future cash flows discounted back to today, with the discount rate being the risk free rate + risk premium (simplifying). If the risk free rate increases, the discount rate increases, if the discount rate increases, future cash flows become meaningfully less valuable than current cash flows. Which means that at the margin, management teams are incentivized to produce higher near term cash flows at the expensive of future ones, one way of doing that is reducing costs…
Existing debt coming due as well as a change in market. These are more than likely not 30+ year loans. Probably anything from overnight to 2-10 year. It is also possible to be 'cash poor' but have lots of invested value. That trap puts you in a spot where you borrow money to make payroll, even though you have enough. That gotcha put a lot of companies out of businesses in 2008. When it became very difficult to even borrow money. Higher rates also make it harder to borrow especially if you are carrying an existing debt load.
This is just speculation on my part but also perhaps instead of investing the money in the company it is better to just buy bonds for a better rate of return? Basically instead of buying workers time to get a rate of return. That worker has to 'beat' the interest rate which factors into MR=MC to make it worth the while of the company to keep them around. Wonder if there are any economic studies on that.
> This is just speculation on my part but also perhaps instead of investing the money in the company it is better to just buy bonds for a better rate of return?
That is what I was trying to get an answer on. That is rooted on the premise that it needs to be a truthood/assumption that Microsoft's projects net them less than the risk free rate (which is 4.5%).
Tech stocks are long duration assets (e.g.they have high interest rate sensitivity (if investment one pays me $10 a year for the next 20 years versus investment two which pays me $200 in year 20, in a 0% interest world they’re worth the same, in a 5% discount rate world, option one is dramatically more attractive and the NPV change in investment two, is far more severe than in investment one))
This is part of why valuations in tech land have been cut so much. If you are the management of a public company, and you are trying to increase your stock price, the answer is to make the your cash flow profile look more like option 1 vs option 2 above. One (perhaps shortsighted) way of doing that is to cut cost via layoffs…
It's more about that there's a cascading effect going on right now where your customers are scaling back because their customers are scaling back because their customers are scaling back, etc. So because of that, everyone is expecting a decline in growth that was planned for and hired for.
Companies still do have lots of cash but they need to manage that cash with the expectation that they won't be able to raise cash as easily in the near/mid future. Valuations are cut because there's better places to put money now to get yield so when you do raise, you'll need to sell an even bigger piece of the company to get the funds you need.
Because unprofitable investments that theoretically MIGHT be profitable in the future, something tech was full of, are much less attractive in this environment and investors are no longer throwing money at them.
> why is that having such a massive impact so quickly on these companies to the point where, the cost to service NEW debt (not existing) rises?
It's because a lot of tech companies have built their financial management on regularly refinancing and getting new cash through the debt market to keep things going, rather than minimizing the usage of debt markets for cash generation.
I don't think we have any proof that a company as profitable and large as Microsoft, based on their financial reports, is using cheap short term debt to finance projects (payroll expenses included)/accelerate growth? Or are they?
My free PR advice to companies announcing layoffs is to cut short on the cute company employee nicknames, keep the 'Twilions', 'stripes' and 'Zoomies' to the good times.
I love PR observations like this -- another one is to reconsider using the company blog template for such postings. This one isn't bad (though it does have prominent share buttons included), but I think it was Zoom that had a giant, cheerful "Don't forget to share!" at the bottom of theirs last week.
Take responsibility for what? Certainly possible that hiring all these people was the correct choice, and that laying them off now is also the correct choice.
Layoff are not necessarily a mistake or a consequence of a mistake. Of course they might be, but not always.
That's not what taking responsibility means. You should acknowledge when your actions hurt people, even if you think it was the right thing to do. In this case, if the CEO thinks they made no mistakes, taking responsibility might involve:
1. Explicitly stating this was your decision, not just the inevitable consequences of the invisible hand of the market. Explaining that "we" in this post refers to the CEO and board of directors.
2. Explaining that you hired thousands in the last couple years with the knowledge that the company was not in a strong long-term position, and knew at the time that you might have to lay them off soon, but didn't tell them because you thought it would hurt your ability to hire and retain them.
3. Acknowledging out loud that layoffs hurt people, not being honest with your employees about their future hurts them, but you do not regret it and believe the size of Twilio's market cap is more important.
I’ve seen the threads, but asking again, anyone tried finding a dev job right now? How hard is it? There must be 50k software engineers looking for work. Gotta wonder how long it will take for the job market to recover
Haven't tried, but I've been doing this for several decades and it has always been hard to find good people and 10 years on you can't even remember which years were the downturns and which were the booms.
Agreed... it was more segmented at the time, as employment was more regional... so seemed to affect the West coast more/earlier... didn't hit Phoenix until nearly a year after it was already bad in NorCal. Was out for about a year, and it was rough, to say the least. Was denied unemployment because I had done side work the year prior, and all that had dried up too.
Took almost 8 months to be working again (at half where I was prior) and a few years to get back to that level again. Given the number of remote workers, can see the effects being broader and more impactful much more quickly if it keeps going this way.
This time I have a house and other people relying on me... so it's a bit scarier. I'm on C2H right now, after getting let go in October, and just hoping to convert to FTE in the next couple months. Fortunately, in an industry unlikely to be affected by the tech downturn.
I don't know if it was so much regional--except as a side effect of different regions having different types of companies. It was probably mostly startups, especially web-related startups, that took the brunt of the initial impact and the contagion probably spread at a rate more or less related to the degree of exposure to the startup ecosystem. There were some other areas like optical networking too.
The company I was laid off from had a lot of exposure to startup spending whereas the one I was hired by mostly had big blue chip computer company clients which were (at the time) still only modest affected by dot-bomb.
Could be... the Phoenix area is generally more business and banking industry in terms of most software development jobs... even the startups that are here don't tend to operate in the same way as most of the rapid growth startups do, more about getting positive revenue and conservative growth earlier on. Though the couple I'm familiar with, still got bought/swallowed by larger companies as an exit.
Yep. live thru that myself - never got laid of in either the 2008 or 2000 busts, but I know a lot of folks in tech and finance (especially) that it took them years to find anything close to comparable once they were let go.
I am not yet convinced we are not heading there again.
I got laid off right after 9/11 and I was lucky enough to get an offer from the CEO at a very small company who I knew from prior work--and didn't get so much as a nibble anywhere else. Never earned as much as my relatively modest comp of the prior decade. Then 2008 rolled around and that didn't seem the best time to be beating the bushes for something else. But finally landed something new with someone else I knew in 2010 and that set me up pretty reasonably.
I even remember the 1998 'crash'. I am convinced we are heading there again, but in much slower motion. It may never hit rock bottom, but we are definitely not in a bullish market at this point.
I got laid off in 2009. It took me roughly six months to find something new, and this was with three years of experience and transition from driver development in C to full-stack web development. I got a token raise in the process. In hindsight, 2008 wasn't fun, but it wasn't that bad.
That said, I could see this being worse than 2008 for tech. Parts of tech really did binge on hiring in 2020 and 2021. In 2007, companies were just getting over the scars of 2000.
It’s not as easy as getting a job in 2021, but then again that was an outlier.
When we post job listings we get a lot of great applicants now. It’s hard to choose between all of the great candidates. Some of our best candidates are getting multiple job offers from different companies so it’s not impossible to get offers right now.
We have access to salary statistics data for the market. The comp ranges have dropped a little, as is expected in a mass layoff situation.
A disproportionate number of laid off candidates were working remote when laid off, from what I’ve seen. Among my friends, the only people laid off were remote. I also sense that remote positions are slightly harder to get now, though not impossible.
> A disproportionate number of laid off candidates were working remote when laid off
I did not want to go remote. I had to because my SO's job required us to move from New York to basically rural America. I hated moving here, and now I feel like my career opportunities are fucked because of the move.
The situation is honestly probably better today than it once was. 20 years ago if someone got a position at a rural/small town college, most of the national labs, etc. a partner would have basically no options other than whatever the local jobs were.
Today in technology, remote may mean you don't get to be as picky as if you live in NYC etc., but there are probably options.
I wouldn't lose hope. I'm still seeing plenty of remote jobs. Out of the six interviews I did recently, the single one that doesn't offer it is tip-toeing around the subject and even promised "two days a week at home" off the cuff during negotiations.
I can see more bureaucratic companies or some FAANGs not allowing for it, but then again it's not really a surprise.
More people shared their experience there, and a lot shared super nice comments which were nice to read.
Since then, 32 recruiters sent me message request at LinkedIn whom I have not yet accepted, 21 more sent me in-mails or I accepted them and have a conversation, and maybe 3 cold-contacted me via email.
Wellfound (angel.co) seems to be a good place to be, too.
I suspect difficulty in finding a job is related to how much quality and money you're looking for. If you're willing to accept anything you'll probably still find a job quickly.
Context: I live in Argentina, and we do get contacted a LOT because we're generally cheaper than first-world-country developers, specially USA. That makes getting offers really easy, but getting an equal-work-equal-pay job that pays good salaries regardless of where I live is super challenging.
Based on my experience most people employed at larger companies are not software developers. They don't say what roles they terminated. It might be support, project managers, HR, recruiters etc. that gets removed first.
It's surprising to me to continue seeing this myth that engineers are spared in most of these layoffs. That may be true in some cases, but most of the large tech layoffs have included plenty of software developers.
Laid off in November. It's been basically impossible to get an interview with a good paying large company.
I have one offer from a start up that is okay, but I'm interviewing with a fairly big tech company that would pay me very close to my old salary. They paused hiring for a bit and I luckily have some experience on my resume that aligns with one of the few positions they want to fill.
I’m not laid off but was putting my feelers out and I’m getting lots of denials/ghosts at the first stage. In the last few years I had a very high return rate on the initial contact. I have a phone screen tomorrow but unless that goes amazing I’ll just chill for 6 months and hope my company doesn’t do more layoffs
Most people laid off in all those companies are not in engineering. It seems they are mostly cutting support, HR, administrative, etc.
If anything I've noticed that salary ranges are starting to catch up to inflation and salary ranges becoming more common in initial communication, at least when people reach out to me.
This is mirroring what I’m seeing. I’m actually noticing a lot of senior dev jobs with base salaries extending to 200k+. This is new to me as before Covid this base salaries were very hard to come by even for higher level staff and principal roles, even in Faang
IIUC, Google's attrition rate is ~1/3 and they have ~250k people so each year there are ~80k people just from Google looking for a new job. Then take into consideration there are a lot more companies with their own attrition rate.
Those are insane number, do you have a source for them...? 30% yearly attrition rate is the stuff of call-centres, I find it hard to believe 1 out of 3 googlers quits the free-everything "googleserf" lifestyle (@ Douglas Coupland) every year.
FWIW, this article puts the tech sector at a bit over 20% in 2020. One would think Google was on the lower side given that at least on the engineering side is probably going to find it hard to walk into a higher paying role from Google. (Though obviously people leave for other reasons.)
currently on the market for a job since November, its a bit rough. I was interviewing with some companies last Nov/Dec that didn't go anywhere as these companies are also having layoffs. Most large companies are either still laying people off or has frozen hiring. Only startups and financial companies are still hiring, but TC for these are a bit lower.
It was definitely lighter than it used to be in 2015 - 2019 but for an experienced dev, roles definitely existed.
I applied to ~60 companies over three weeks in the first weeks of January and had 5 or so interview processes running at once. The response rate definitely seemed lower but again, I was applying in the first weeks of January.
If you have less than 2 or so years, it's definitely going to be harder. For senior+ though, there are still startups that need engineers.
My analogy on this is that tech is a very, very large iceberg and FAANG is the little bit that sticks out of the water.
The summarized experience of my social network (in USA!) is that for relatively junior labor (1-5yoe), across many job types dev and not dev, startups are hiring and big firms aren't, and in between there is some mixture .
Essentially, don't expect an offer from a firm that just did layoffs, and do expect tougher competition at smaller firms during interview loops, but there are jobs available. Just my two cents.
It's funny how spoiled people have been the last few years. For a long time the rule of thumb was to plan 1 month job hunting for every 10k of salary. Salaries have definitely gone up since then so the rule can likely be revised to something like 1 month/20k-30k of salary. The point is that the higher salary required, the longer it typically takes to find a position. The last few years were the outlier times, and it seems we're settling back to normal.
They could. That rule of thumb has helped me plan for how much of an emergency fund I need to have. The more you make, the longer it will likely take to fully replace that salary.
Another thing people should realize is that salaries do not always go up. Making 200k today does not mean someone will make 200k+ forever more. Plan accordingly.
Post dot-bomb I didn't really recover salary for a decade. (Which still is probably not especially spectacular by tech standards--although I did very luckily get a new job pretty quickly.)
Last year I applied to and then interviewed with roughly 15 companies between about March and August. It wasn't terrible but toward the end some of them stopped the process during freezes, which was a bit frustrating.
I'm not an amazing engineer or interviewer so I took the one offer I got.
If not for that I'm not sure if I'd have a job by now with everything going on.
> Overall employment of software developers, quality assurance analysts, and testers is projected to grow 25 percent from 2021 to 2031, much faster than the average for all occupations.
> About 162,900 openings for software developers, quality assurance analysts, and testers are projected each year, on average, over the decade. Many of those openings are expected to result from the need to replace workers who transfer to different occupations or exit the labor force, such as to retire.
I don't know how bad it is in the US. The EU market has plenty of L5+ positions and their recruiters are cold messaging as usual. I would argue it's even easier than before the layoffs, since it's really easy to justify short gigs and gaps right now.
Maybe focus a bit more? I never came close to that even shotgunning out of school ages ago. And everything since then was very tightly focused on people I knew.
From the article
"I'm sure you're wondering why we're making additional cuts to the team after the September layoffs. At that time, we sought to streamline the company as it was then structured."
Translates as "We did a terrible job with the first round of layoffs and didn't really explore all of our options and because we messed up then we have to lay off more of you now."
Wasn't this the company that announced they were laying people off based on race in the last round of layoffs? Looks like that turned out great for them, shocked they are laying more people off now. No mention of race in this announcement though.
Note [before I get torched here]: I am saying hiring and firing based on race is insane and should be based on talent and what skills you need for the job. I am in no way saying any race is better than any other race at anything.
> Wasn't this the company that announced they were laying people off based on race in the last round of layoffs?
Oh yeah, they were. I forgot about that.
> As you all know, we are committed to becoming an Anti-Racist/Anti-Oppression company. Layoffs like this can have a more pronounced impact on marginalized communities, so we were particularly focused on ensuring our layoffs – while a business necessity today – were carried out through an Anti-Racist/Anti-Oppression lens.
They finally listened to their lawyers. Anyone not of a so called “marginalized community”fired in the last round very likely sued for civil rights violations.
One of the silver linings of this recession is DEI has been gutted and thrown on the trash heap where it belongs. Any competent CEO is using this moment to gut the commissars and rabble rousers from their payrolls. Time to check the Slack logs and cleanse the company of activists.
I wonder why people just can't be completely honest and say something along the lines of: "look, rising interest rates makes leaving money in the bank way more attractive than spending it by having x% more employees doing things that we were not sure if contributed directly to our financial KPIs. It was cool while it lasted but right now we're just keeping the cash cows and what they need. Thanks"
Revenue growth rate was > 50% per year when most of these people were hired. Now they project 20% growth. That has more impact that wanting to earn interest on a savings account.
It also seems worse than that based on other replies in this post.
Twilio has only had one profitable quarter in its entire existence. Both the business model and strategy are clearly broken.
I do wonder (read: hope) if this means the next wave of tech companies will be more private/lifestyle focused. 37Signals had a great article about this:
Not every company needs to be a market leader, what's wrong with having a drastically smaller size (say <200 people, a number plucked from thin air) and decent revenue?
I mean shouldn't there something a little wrong about not running a profitable business for nearly a decade and that the only people who seems to be "winning" are those that took advantage of a relaxed monetary environment and cashed out during the IPO?
Why does money trump this?
I absolutely disagree that most workers want to work for "winners." Most workers want to have a stable job and a life of meaning outside the company. These companies are not stable at all.
There's none, quite the opposite. Apologies if my previous post is a lame snarky comment, the real criticism is that texts about thousands getting their jobs cut due to "environment changes" often show very little effort to define and quantify what's the environment and which were the changes.
In my humble opinion, having used Twilio extensively for over a year, it is an awful service.
They will happily take your money and report that SMS are being delivered when they're not. They implement the most bureaucratic nightmarish processes for vetting brands which are impossible to do via the UI, and must only be done through broken/bizarre API calls that were clearly cobbled together without any design considerations. Maybe you get it all to work, but then after deliverability customer complaints a month later, you hear from Twilio that something broke on their end and you need to re-submit the vetting.
Having a major production issue? Well, you too can get a response in 3 hours by forking over 4% of your spend or $250 minimum, whichever is greater (how does that even make sense? Why should I pay more than a minimum?). And the response right at the end of the 3 hour window will consist of "We have received your issue and are passing it to the relevant team" which resets the 3 hour window. Whoops it looks like you're outside of business hours now, we'll get to it tomorrow. Unless you want to upgrade to the 8% monthly spend or $5000 minimum plan?
All that said, Twilio can burn. Burn or get their act together. I hope they get eaten by a better service though, truly.
> In my humble opinion, having used Twilio extensively for over a year, it is an awful service.
> They will happily take your money and report that SMS are being delivered when they're not.
This is an industry issue. You can request SMS delivery indications, and the carrier can send you delivery indications while dropping the messages. Or an intermediary might do the same thing. There's no way to ensure you only get delivery confirmations from the phone, so the delivery confirmation doesn't mean much. (Often, requesting confirmation results in better deliverability though)
If you can track delivery yourself, because a user is expected to use the message right away (verification), you should really be running multiple providers and picking the provider to use based on success and costs.
All the sms providers will tell you that they have global coverage, only use direct routes, and that they're the best. But they're all lieing. I ran a global SMS (and voice) verification service with 5 SMS providers, and when a major provider had a big outage, their success graph went to zero, but every other provider's graph dropped significantly too --- they all had some routes through that provider.
Yeah the underlying issue is that telecoms networks naturally trend towards monopoly. So often times there will be only one route that is cost effective / reliable to deliver traffic.
I'm with you on the support being sub-par, but the whole vetting brands (A2P) thing has nothing to do with Twilio at all. It's entirely forced by an industry group called The Campaign Registry. I don't know the last time you tried to create a brand in Twilio but they support the entire process in their UI these days, but the nightmarish API you're talking about is entirely an invention of TCR, not Twilio.
> They will happily take your money and report that SMS are being delivered when they're not. They implement the most bureaucratic nightmarish processes for vetting brands which are impossible to do via the UI, and must only be done through broken/bizarre API calls that were clearly cobbled together without any design considerations. Maybe you get it all to work, but then after deliverability customer complaints a month later, you hear from Twilio that something broke on their end and you need to re-submit the vetting.
We have had the same experience. Takes 15-20 api calls at least. And you have to wait unknown amounts of times before you can continue at several points in the process. Their paid support has been worse than useless, they just cost us more time.
Competitors to Twilio only require 3 calls per customer. In comparison, Twilio's process is utter insanity.
The truth is that many of these companies can be run with fewer and fewer people as abstractions in technology become higher-level. Software takes a lot of effort to write, and much less to maintain.
We just went through an era of effectively no software, to one with a large saturation of software that fills many niches. In the 2010's there was no competition for the majority of these businesses as VC capital tended to move towards new ideas, rather than directly competing with existing ventures.
All of that is changing. The world will continue to need new and improving software, but the value provided by a single engineer continues to trend higher, and fewer and fewer developers will be needed to create these systems.
Some SaaS has high costs of switching and a defensible moat, but many do not and are easily replicated. Existing players may even be at a disadvantage to competitors due to existing architectures using old patterns that require more manual labor/cost to maintain. e.g. Something like DocuSign is a good example of a low moat SaaS. Database systems are a good example of large moat (high cost of switching, even if better tech comes out)
It's worth competing in any industry if the numbers work out. My main point was that the extremely high margin and lack of competition in SaaS is not likely to persist over time (without a defensible moat/high cost of switching).
It's a better time than ever to create a SaaS with low cost overhead. If you leverage serverless and strong design, you can build extremely useful and far-reaching products with a handful of people. No longer do you need hundreds or thousands of people to do this.
Then operational cost is low, and revenue required for breakeven/profit is low too.
My favorite part of these posts are learning all the dumb names people call employees.
For anyone who has been at a place with an employee pet name that stuck, did you buy into it? Did you have to use it with a straight face or was it more of an outwards facing, recruiting tool?
This guy Jeff Lawson was virtue signalling big time about how much he loves paying San Francisco's taxes. I wonder if he's taking a pay cut while he leaves 17% of his workforce without jobs.
Twilio hit its all time high around Jan 2021, $435/share. In the 12 months following that he sold roughly $160M in stock, riding the price down to about $250/share. And he even got a 75,000 share grant last March after that performance.
From afar it seems like the company is being plundered by the C suite, would love to hear first hand accounts from employees after the last 24 months.
Over the last few years Twilio’s CEO wrote a navel gazing book and hosted some conferences about social justice, but didn’t improve the core product. I bet this made him popular with employees, though I suspect it would have made him less popular if they saw these layoffs coming.
That's fair and good to know. Not like we are going to jump ship as it would be very expensive but we should probably come up with at least a migration plan in case the worst happens some day.
I chose not to use sendgrid (twilio) because they force their own 2nd factor auth app, instead of allowing to use literally any of the ones already out there.
2 - You need to add a phone number and receive a SMS challenge, before setting up any other 2FA method
3 - With the Authy app installed on your phone, the token is instead instantly added to your account upon reception of the SMS. This cannot be disabled. Use a very particular combination of steps in the account settings to convince it to let you use a simple offline TOTP app instead.
4 - Use your recovery code every month and repeat the whole thing because somehow all other 2FA methods break simultaneously for all Twilio accounts set up with that phone number.
The experience was so awful I had to delete the App and the account.
Their process is ridiculous and is matched only by the insane password requirements that they recently implemented (I think they required a 18 character password ? Or 24 ?)
However, I am entwined in their ecosystem for all of my texting and calling and message management, etc., so I am forced to deal with it.
In fact, their clownish requirements were the impetus behind the 2FA Mule[1] experiment which I now use across almost all services.
There are standards for 2FA (OTP) codes... "Google Auth" being one, but the same generators are available inside both LastPass and BitWarden, for contrast. The Microsoft authenticator is another annoying variation imo.
While other techniques and applications might be (somewhat) more secure, the loss of ability to use the same application you already have/use for 2FA is a pretty big annoyance for a lot of people.
I have my 2FA in bitwarden myself... with a pretty long passphrase that I don't use for anything else. It's the master key to the kingdom. There are many sites that I keep with the sms/email codes simply because they either don't offer typical OTP as an option.
Every company that relied on low interest rate loans because the Fed held the rate at near 0% is sensitive to inflation when the Fed is about to raise that same rate.
Twilio doesn't have a high debt burden. They're affected like all other growth tech because future cash flows are discounted against the risk free rate.
Last year "Twilio had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through $254m of cash and made a loss of US$1.1b."
They will burn through that cash much faster with higher interest rates on their 1.012B in debt.
Interest expense is 64m in the trailing twelve months so it's not a meaningful difference in their cash burn. Most corporate debt is fixed rate and with a net cash position they don't need to roll it over. Interest rates affect Twilio by affecting the economy.
The fact that revenues are not rising as fast as management expected means the only way left to reduce losses is to cut expenses.
Twilio's debt to equity ratio is small enough to be irrelevant.
Revenue is falling while the economy is still growing because pandemic trends are reverting to normal. Same as e-commerce, which caught Shopify and Amazon with too many employees. Same as media, which caught Netflix flatfooted.
People are shifting their spend from goods to services and from online to offline. Coincidentally, that's what people use to explain inflation. There's always micro trends underlying a macro trend.
This is the impact of moving from the "growth company" to "profitable company" investment model.
Twilio and other "high growth" saas companies for the last few years have competed solely on how much they could grow the top line every quarter. Now they have to rebuild themselves.
Ukraine war outlook in 3 months China will face a severe shortage of fertilizer(they get that from Russia at over 80%) along with India and since those are two big supply chains it might be that all these companies see a rise in one of their inputs via the supply chain disruption in the future towards April-May as decreasing their profits while at the same time increasing other costs.
So my question is why is everyone assuming that it is some other economic force than this if this is the actual looming economic near term disaster?
Think back a full year when we had the last supply chain disruption, did not Governments step in a fund grants to prevent the rise in input costs?
I can understand a single layoff to "right size" the company, but a second layoff always points to an underlying problem that they didn't either believe or recognize only a few months previous. Which kind of makes me nervous. This as the Meta layoffs means that they didn't have a handle on the problem only a few months back.
Agreed; the first can be blamed on following the crowd and over-hiring. The second shows weakness in leadership, especially considering economic conditions are similar to ~6 months ago. Part of the leadership team need to be "affected," "impacted," or whatever euphemism you want to use, and the stock should go down.
First layoff shakes the tree, those who would run will run, then the second layoff retains the intersection between those they want to keep and those who did not run. The outcome of trying to do it all in one go is far more unpredictable.
>Or maybe they thought two ~small~ big numbers in layoff headlines (or remaining employee morale) would be better than one ~big~ massive one.
No one in their right mind would think that. One layoff can be understood as necessary. Two says to employees "you will never feel safe here again", and is a huge signal for top performers to run for the exit.
This is a well-known thing, people aren't guessing here and there's nothing to dispute. Having multiple layoffs destroys morale and the best practice is to cut deeply once to avoid a second layoff. Anyone who doesn't believe this is simply and foolishly repeating the mistakes of the past. Which suggests to me that it was a surprise to even themselves that they had to do this because of a revenue shortfall.
Super simplified: Firing is when the reason for the employee leaving is their fault. Layoff is when it's "the employers fault" (e.g. overstaffing etc).
That said, this article gives zero indication this is a firing, so I expect that your parent's comment is someone who is salty at Twilio and wants to make this sound "more vicious" -- 'firing' someone is a harsher sound than 'laying them off'. Plus, there's VERY few examples ever of significant staff cuts happened with _firings_. That would imply that 17% of Twilio did something so egregious at work that they got fired all simultaneously, which, like...how?
> Firing is when the reason for the employee leaving is their fault. Layoff is when it's "the employers fault".
That's not how I'd use those words. "Fired" just means your employment was involuntarily terminated. Layoffs are a type of firing, at least to my ears.
I suspect in some states, it might have implications for collecting unemployment. But given how almost all long term employment is "at will", there isn't really any meaningful distinction, except colloquially, I suspect.
Laying off usually means the person's role is declared redundant, or in a department maybe a number of jobs are declared redundant rather than individual ones (i.e. a call centre finds it needs 20% fewer people manning the phones). There is no fault seen in the individual¹, it is seen as a matter of the state of the company, the market, or the economy as a whole.
When you are fired there is a direct implication of fault or failing to perform.
These things can vary a lot depending on local/state/country laws, but if you are laid off you may be entitled to a redundancy payment, you may be entitled to apply for other roles in the company², you will have a notice period which you will either work or go on gardening leave for, and so forth. If you are fired, none of this applies³. If you are in an work-at-will state things are a bit different. Gig economy jobs are a grey area in many places⁴.
--
[1] other than the implication that the people who kept the same/similar role are better or otherwise more useful to the company
[2] if the lay-offs are due to restructuring rather than downsizing
[3] except you have access to some sort of appeals process (for unfair dismissal for instance) which goes your way
[4] there are court cases and other investigations ongoing to determine/clarify what rights such workers do[n't] and should[n't] have
A layoff tends to mean that the job position that the person had is gone.
Firing a person tends to mean that the position will be hired for again once the person is gone.
Another way of looking at it:
Firing a person is terminating an individual working with a company - but the company still has that role to be filled.
Laying a person off is the elimination of the role, which also has the person leaving the company, but its the role that is being removed, not the person (they are free to apply for other positions in the company or get rehired later).
In some states this is legally enforced and if the company opens the position back up within 6 months of the layoff, the former employee needs to be offered the position back.
I always understood that "layoff" has the implication that it's potentially temporary, and that the employees let go would be preferentially hired back if the company's fortunes improve.
Yeah they are. Sugarcoat it all you want but when a company exits you then you have been fired/terminated/etc. It doesn't really matter. Sure they might treat you differently if you terminated for cause or not but when you lose your job you are fired. Laid off is a form of being fired, I guess.
Sure, insofar as you're defining the term as "you're no longer employed here." But that definition is not really all that helpful, and is equivalent to saying that you're fired because you quit, also.
There's absolutely a difference in widespread RIFs/layoffs and firing an employee, both in terms of how that individual is treated by future potential employers as well as the eyes of the law.
There’s voluntary termination and involuntary termination. Within involuntary there’s terminated for cause and terminated without cause. Laid off people are terminated without cause but are fired none the less because they are involuntarily dismissed (terminated) from a job. It’s not an official or legal term. It’s informal. But we’ve come up with other terms to make people feel better or not wound their pride or something. But the result is the same - you’ve been fired.
On an individual basis, sure. But this is not what we're talking about. This is a mass layoff, which absolutely does have special legal treatment. Sure, you can call it a mass firing if you'd prefer, and I suppose you'd be equally "correct," but then it's not clear what the goal of that clarification is besides making these people feel worse about the situation. Everyone knows what a layoff is. Nobody is confused, thinking that it was the employee's choice. We call it a layoff because it absolves the employee from fault in fewer words than "involuntary termination without cause."
If, however, you're suggesting that there is in fact no difference between individual involuntary termination without cause and a mass involuntary termination without cause, then the WARN act in CA is just one such counterexample, and very clearly treats "plant closing or mass layoff" as a specific event, separate from other types of involuntary termination without cause.
Leo Laporte mentioned on security now last week that he was happy to move away from authy because it was run by twillio(a previous sponsor of the podcast). Have things been rough for the company?
They are burning over $1B per quarter (before stock based comp) and it's accelerating. If they want to turn that around by reducing staff this won't be the last round.
If you double the size of the team one year then lay off 20+% the following year it means you have a management problem, IMHO, which is also a red flag.
But you're twilio, you acquired 2 other companies (sendgrid, segment) with the Fed 0%< and 20% of employees are the hr, finance, and canned feature growth.
I should probably start thinking about how to move all my 2FA codes out of Authy, at this rate I wouldn't be surprised if they suddenly stick me with a monthly fee to keep logging in to my stuff.
Does anyone know how to do this? Authy seems to make it intentionally as difficult as possible to export TOTP keys and I'd rather not repeat the 2FA setup process for dozens of accounts.
On paper, they solve a lot of problems. They've got apis for everything. The problem in my interactions with them is that they have a ton of people working in different directions on those problems. One team tells us to do X, support asks us why we're doing it, another team tells us we can't do that. Then they do madness like make the process for registering a phone number you already own take 15 api calls... and that's if you don't count checking on registration progress.
A lot of that is protectionism/regulatory capture being wielded as a weapon by the dinosaur carriers. Your frustration and problems are by design, unfortunately.
>"We’re winding down some of the perks we’ve historically offered, including our book and wellness allowances. We’ve also decided to sunset Twilio Recharge, which I believe in, but which (in retrospect) was ill-timed given our profitability goals."
I make a living sending SMS in Europe (transactional, mostly for banks and insurance companies) and Twilio SMS pricing is extremely expensive for this geo. Even so, they keep losing money.
Just made a quick comparison with two competitors in terms in gross margin:
A 15% price increase in ~12 years on a finite, depleting resource seems pretty reasonable (if not excellent), especially when considering inflation in that time period is over 30%.
I love the Twilio product line, but always saw it as classic Product Lead Growth, self-service, self-scale. Surprised to hear of their troubles.
Are they selling below cost? Are they creating product lines or features that dont drive revenue? Is it high-touch corporate sales?
IMHO all these companies are flooded with account managers, sales, customer success, BDR, when they could just let customers choose their own plans, upgrade freely, etc, instead of "schedule a call with our team"
Companies do that because it works. Early in Twilio’s life (pre-ipo) the company was very adamant that outreach and negotiation are not needed for SaaS. Jeff Lawson (the CEO) would regularly mock and lambast companies for having a pricing page that said any variation of “contact us for pricing”. There were some pretty dramatic reorgs and management departures because of that attitude. Lawson eventually relented and adopted a more hands-on growth model and growth went up.
Before the change, the company was really struggling to attract blockbuster customers. The growth strategy was (and still partly is) to have startups get hooked early by the quality and just never leave as they grow. For the longest time their biggest customer by faaaaar was Uber, and that happened because both companies were created and grew together. Once the hands-on outreach started, they started getting meaningful revenue from giant multinational banks and manufacturers that have a ton of money but, frankly, don’t empower their developers to choose the best tools for the job.
Looking at Twilio employees posting their Linkedin Open-for-hire ad post-layoff, I see lots of POC, women and H1B's. Seems this layoff was not done through the same anti-racist/anti-oppression lens as last time.
always thought twilio would be acquired by AWS eventually - twilio is more of a product than a company, or even just a set of product features. Never made sense to me as a stand-alone company.
https://www.wolframalpha.com/input?i=TWLO+revenue+and+profit... isn't quite as readable for financial data, but shows the context with employees (as this is about a layoff).