I've noticed many recent posts about layoffs in the US. Are these continuing due to recent changes in the way software expenses are accounted for?
This is going to be a controversial opinion.<p>The quality of your average tech worker has completely nosedived in the last 10-15 years.<p>All these huge companies wanted more products, more marketshare, more money, etc. They needed more people to pull this off. They started lowering hiring standards across the board because there just weren't enough people in tech.<p>Simultaneously, a huge portion of the world saw tech salaries and wanted in on it so they started taking every quick certification, bootcamp, degree, etc to get into tech.<p>It turns out that compared to the dedicated nerds of the previous generation, most new people just don't care that much about tech and don't want to go deeper than the bare minimum required by their job.<p>So I think tech overhired by a LOT, then they realized all these new people are actually net negatives on the company, and we are slowly correcting.<p>I think a solid 50% of people in tech are still on the chopping block. You can do much more with tools + really smart people in the year 2024 than you could before.
The same thing that always drives layoffs.<p>You are a company. The system we have demands growth. Even very stable and reliable profits are seen as failure. There must be growth.<p>The people who run a company can not press a magic button to increase revenues. They can't just pull a successful new project out of nowhere. Anything like that is going to be a risk, and will probably fail. It will also take time.<p>The one thing they can always do is cut costs. Projects can be cancelled. Divisions can be sold off. The biggest cost at most companies is labor, and labor can be let go.<p>When someone controls a company, they own a lot of shares in that company. Their bosses are all shareholders who only care that the stock price goes up. Nothing the company is doing is generating huge new revenue streams. Time for layoffs.<p>And when some people do layoffs, everyone does them. They're all subject to the same market pressures in the same industry. One company doing them gives all the other companies in the sector permission to do likewise. If a company doesn't follow suit the market might even start to question why.<p>You may have seen some news that Microsoft passed Apple briefly in terms of most valuable company on Earth. You may have also noticed that Apple is much more restrained in its layoffs than the others. Not doing as many layoffs, not doing as well in the market. These things are not unrelated.
One reason I think not given enough weight is that it is now acceptable to do layoffs. These huge companies accrue a ton of dead weight and dead-end projects that they would love to flush routinely, but 5 years ago their stock prices would halve if they suddenly laid off 10% of their work force because of bad optics. Now it has become acceptable for all the various reasons so any company that wants to clean house is going to clean house.
A lawyer commenting on the game industry (which is largely copying the Silicon Valley business model) has an excellent explanation of these cycles, and why it is that the industry is simultaneously reporting record profits and mass layoffs: <a href="https://www.youtube.com/watch?v=-653Z1val8s" rel="nofollow">https://www.youtube.com/watch?v=-653Z1val8s</a><p>tl;dw (in my own words): investors like it when you have extreme hiring during the good times, and they like it when you have extreme cutbacks during the bad times. Investors don’t like slow and steady growth.<p>Interestingly, Nintendo quite firmly rejects the Silicon Valley approach, sticking firmly with the slow & steady - and while the rest of the games industry was doing layoffs, Nintendo gave all their employees 10% raises.
Gergely Orosz's theory[1]:<p>> An IRS tax code change in Section 174. This change eliminates the ability for businesses to deduct R&D as an expense.<p>> Hear of lots of layoffs directly because of this, as a start.<p>[1] <a href="https://twitter.com/GergelyOrosz/status/1735030983173230944?lang=en" rel="nofollow">https://twitter.com/GergelyOrosz/status/1735030983173230944?...</a>
I think it's a combination of things and will vary by company.<p>For the largest companies, it's likely to some extent to put downward pressure on salaries in the market.<p>For others it can be like the Twitter case were they hired way too many devs for what was needed and that simply makes a bigger communications mess not more productivity.<p>For others still it's outside pressure to become financially stable or income positive with a reduction in investment capital over time.<p>The larger economy, the potential for a more widespread military conflict and a number of other factors taking their toll in different ways.<p>When belts need to tighten, late and expensive projects get cut.<p>There are still jobs out there, but with remote roles in particular, which I'm personally experiencing. Pay scales are all over the map and there are hundreds of applicants to many jobs out there.<p>It sucks to be looking and I imagine it sucks to be hiring as well. The latter because of the shear volumes of applicants to sift through.<p>I will say, I'd rather receive no contact at this point than the boilerplate rejection emails. If there's no substance or advice, it's just a net negative IMO. Used to hate getting dropped. But having to fill out a few dozen applications a day competing against hundreds and seeing the ones where you're less than ideal sucks.<p>I took 4 months off because I needed to get past the burnout. Now it's just hard getting back in.
I've seen these answers:<p><pre><code> - excess hiring during the pandemic;
- interest rates raised;
- salaries too high;
- cut in remote work (to ease return to office later);
- some weird thing coming;
- AI;
</code></pre>
(I could replace all those semi-colons with question marks.)<p>(Edit: formatting)
I don’t know about in general, but I can describe why I was laid off last year.<p>I was hired by a small consultancy on a software team supporting a dedicated software product for a small but powerful industry. Software was/is an emerging side business for that employer. This team completely lacked discipline and vision from a software execution perspective. The software was horribly organized, 80% of the logic was in SQL stored procedures, there was no test automation, and everything was copy/paste between environments. So, this was extremely high risk. The product side of the team, on the other hand, had extremely good discipline with a solid vision and extremely good documentation.<p>I was the only senior developer on the team with any advanced experience outside of SQL. It became super clear this employer was a mistake when they didn’t want me to fix anything and my junior peers back-stabbed me during 360s as salvation for their inability to communicate in writing. I just rode out the last several months until they eventually fired me when billable hours evaporated.<p>After a few months of looking for a new job I made a promise to myself to never EVER return to employment that feels immature. I would never take a job too reliant on frameworks and tools, such that the job/industry are compensating for talent with gimmicks. I abandoned my career writing JavaScript and eventually gained work in data science.
This is the bust side of the hiring frenzy of the past few years. Borrowing money isn't as cheap as it was, and investors get a better bang for their buck by letting it sit and earn interest.<p>Many companies over-hired and now are trying to lean up to balance their books. With some betting if they over-fire they can hire new talent at a lower rate.
Outside of the obvious mentions, including section 174 changes, I think that layoffs have caught on like a contagion and a bunch of mediocre managers and executives are borrowing from an outdated 80s layoff playbook.<p>The reality is that layoffs disconnected from a larger strategy (like discontinuation of a product line) are typically disastrous and highly predictive of underperformance relative to companies that didn’t perform layoffs. What typically happens is companies hire back the folks they let go very quickly with a huge dent in morale long term.<p>The concerning thing at this point is that general layoffs are so in vogue that they’re depressing tech wages. Few executives actually take any real responsibility for their overhiring either, the best you usually get is some generic I’m sorry followed by fat bonuses.
A reason that I can think of is it's a result of the hiring that happened during COVID. First you had Amazon saying they were going on a massive hiring spree. The other tech companies (except for Apple it seems) said to themselves, "Oh no! They're going to snap up all the talent!" so they ramped up their hiring too.<p>Interest rates were at record lows so there was a lot of available money and nobody (except for the scientists) knew how long this COVID thing would last. These companies are used to short-term thinking because they're public companies and the public markets won't think further than six months from now.<p>Now that interest rates are back up to where they were 20 years ago, and Amazon has gone through a few rounds of layoffs, the rest of the industry is doing some belt tightening as well.<p>I predict several of these companies will be a shell of themselves in 10-15 years for this and many other reasons.
obviously a steve-jobs-like backroom deal like the one from 2005 having most companies agreeing on doing it at the same time "with no quick hires backsies".
I'm convinced that it's because the recession that has been predicted for the past 3 years has not happened, and now we're in the election year and it must happen. The layoffs will continue until we get the macro outcome we're looking for<p>It's the only explanation for companies that are at all time highs in revenue, profit, and stock value to be laying off double digit percentages of their employees
Programmer productivity is really hard to measure, so managers will act in their own interest and push for larger teams. The shift to digital due to COVID provided the excuse. Low interest rates provided the means. Eventually external factors force a reevaluation/correction.
SVB bankruptcy is part of it. A lot of free money dried up.<p>But also, it's an "everyone else is doing it" thing. Saturate the market with unemployed devs and you can reasonably tell your employees "Sorry, no budget for raises".
I suspect there is something political going on, concentrating power, and disdaining the value of individuals, compassion, and responsibility to build a better world (obviously, not any company's only considerations, but a balance -and now those considerations seem at an all-time low IMHO). In other contexts, the same movement disdains the rights, freedom, and lives of other people generally.<p>Or that could be a bunch of BS; it's hard to establish objectively. It seems so important, that cultural change, that I think it's worth talking about (and maybe someone else has a more objective, factual way to talk abou it).
I think it all comes down to the fears of investors. At larger companies they have to answer to share holders who are moody, pessimistic, and very bipolar. They will look at a companies revenue, see that its doing well, but still lose sleep over every negative piece of financial news they hear. Then they'll demand costs to be cut. 'd-dont you see the economy...' Next thing you know executives have to do the same thing as every other company to be perceived as competent. Investors love their group think so if you're doing something different during a time like this they're going to lose their shit (even more.)<p>For smaller companies the explanation is probably much simpler: there's less spending on new companies and therefore maximizing 'runaway' is critical. So if its not absolutely essential it needs to be cut. People who don't do that might not survive until things turn around, unfortunately. It's not a great situation to be in.
I think it happens every year by this time, more or less severe, to show "savings", good financials, by the end of the financial year in April. And then start hiring again to show it is booming. Also maybe to rotate the lower rated workforce
Venture capitalism, late stage capitalism, and just gross incompetence <i>and</i> lack of empathy.<p>The U.S. is all about me, myself, and I, and these layoffs are just one result of those at the top keeping it the way they like it.<p>Another driver is that workers' rights suck in the U.S. So now employees are just back to the first industrial revolution: they are just bodies and line items on spreadsheets. They are not people or assets.
Over hiring aka poor planning in the last few years.<p>Riding interest rates causing investors to demand more stock returns or they will seek returns in treasuries.<p>In free money era, companies created too many processes and incentive structures that are wasteful. These processes are too expensive when money is expensive. E.g. too many managers whose time is filled with calibration, stack ranking, agile processes instead of true engineering and product leadership.<p>Ultimately, growth cannot be endless and current crop of companies are not set up for difficult times.
A multitude of factors.<p>One thing to keep in mind though is that even if AI can't do your job, if it can translate conversations with humans who can buy have a different primary language, and companies have moved to work from home, that's a recipe for jobs going to qualified people elsewhere.<p>So on top of a pendulum swing backwards from overhiring we're seeing accessibility and virtual commuting open the door for many more candidates for a smaller pool of jobs which compounds the effects.
[Pulling from another thread, but this is my best guesstimate. With additional context]
The rules of the game have changed.<p>> We were allowed to expense all employee compensation tied to software or R&D in the year in which we paid it. Now we can only expense a small fraction of that because we have to capitalize the expense. That means if you paid and developer $100 to develop a piece of software then sold subscriptions totaling $100 you now have a profit. The old model you have zero dollars in profit the new model says you have something like $80 in profit that you know have to pay taxes on… with what cash?<p>Additional "finger in the wind context": this change was brought about through the Trump Tax Cuts. My best guess is that Trump wanted the 174 change as a negotiation token to prod tech to make a deal. Mind you and me, this was all pre-pandemic. The financial world was pretty stable and this was going to be a 'great way' to make people work together, if desired. After the pandemic financial response, all bets were off.<p>Soloprenuers are the only one's somewhat immune. I'm thankful my companies needed to downsize before this.<p>Final context, there will be a whole new industry to define the useful life for a piece of software given the advancements in AI. This is going to be great fun.<p>[edit] One more thing, this change was thought to be “repeal-able” with new legislation. Since it no longer looks to be the case, to avoid “everything is securities fraud” (Matt Levine term), everyone has to adjust their public statements and accounting for this new change. Sure many of the big players will still make profit, but analysts only care about “beats and misses.” And since the legislation hasn’t passed to put the old rules back in place, accounting has to make these forecasts more permanent with less wiggle room - aka misses and forecasts down. Now, there is a huge op to trade the rules changing back - which would be a huge tailwind (made headcount cuts and get favorable tax treatment)
Little impact on the revenue side while cost can be cut significantly.
Many companies have proved it to be useful and their stock prices soar. Why don't we try it
If interest rates are 5%; entrepeneurs must shoot for 20% annual returns to compensate for risk and get funding. If interest rates are 0% the bar is far lower.
I think that tech companies know they can get away with this now and are not scared to do it again (see Google, Amazon, etc).<p>Previously employees at tech companies were put on a pedestal with unbelievable perks and treatment. Now companies like Google can start to become more like conventional companies when all the other companies around them are becoming like that too.
The "free money" is going away, now that the Boomers are all retiring and taking their money out of the stock market. Interest rates are about to rise to 8-10% and stay there for a few decades, <i>if all goes well</i>.<p>This will mark the beginning of an immense era of innovation as all of that talent floods the market and is put to far more productive use.
The federal reserve raised interest rates to put people out of work and it was successful. Rising wages were a threat to corporate profitablity in the form of "inflation." The quality of workers has not dropped, but the quality of work products has, mainly due to cost cutting and short sightedness.
I think a lot of the revenue generating products for these companies are at a very stable, low-growth point.<p>There's just not a ton of innovation happening outside of AI and LLMs at the moment, IMO.<p>If a company foresees all of the future revenue being aligned in one direction -- whether it will work out that way or not -- then why not re-align and focus on that direction (AI, LLMs)?
The US Fed monetary policy has everything to do with it. Money is especially valuable right now. As well as the proliferation of new "AI" tools that increase worker productivity by 10x-1000x.<p>Between the Fed tightening demand and the AI tools simultaneously heating up supply (productive output), it's no surprise these layoffs are happening.
Lack of vc investment at the bottom means lack of seed through series c companies suddenly flush with money willing to buy B2b software so they can grow and sell their software to B2b businesses who sell software to B2b businesses who sell their software to end users.<p>Cut the bottom out, it trickles.
Massive overhiring in the sector, especially for non-tech positions or soft tech-adjacent roles.<p>Unfortunately when it comes to layoffs, many of the factors that lead to this overexpansion will also ensure that the parts that ballooned are not axed more than the actual tech positions.
My speculative pure non-analytic layman take is, these behemoths have reached such a scale and domination by hoarding all talents long enough to build the perpetual revenue machine in the era of free money. All low hanging fruits were picked, regulation shut all doors slowly as majority of market dominators were built on fringe of the law, so any new player will have to fight in impossible odds of both regulation and lack of funding, so chance of competition is very low. Anything that is barely threatening will be acquired and extinguished.<p>So, now that the money printing machines will continue to print, competition landscape is muddied by regulation hammer, so layoffs left and right. Besides, any bad decision now will bear consequences far ahead in future that by the time most people making the decisions will be retired or moved on to something else. The saying goes, death by a thousand cuts, but for behemoths, bleeding takes a long time before severe disability takes place.<p>— end of rant/opinion —
Even though the annual government deficit is almost 7% of GDP, essentially injecting stimulus into the economy, wall st analysts are convinced high interest rates will cause a recession. CEOs have responded by slashing forecasts and employees to appease wall st.
My 2c: companies lay people off to please shareholders in the short run, and the laid off employees continue to work in the industry, developing the ecosystem and provide opportunities for more profit in the long run
Unproductive workforce and employees being too much in the comfort zone.
People just got lazier as more stuff were thrown at them - from chia puddings to remote work and most of us humans have lazy self-control features built-in.
All big companies are rusty and covered with cruft. Twitter showed that you may lay off 75% of the workforce and still run your business at scale relatively smoothly. It is a great temptation to follow the suite.
Interest rates went up and now profitability matters. Tech companies' biggest expense is employees, so it's the lowest hanging fruit to generate higher profits. It's really that simple.
why? this is why (kinda). <a href="https://www.axios.com/2024/01/10/wealthy-own-record-share-stock-market" rel="nofollow">https://www.axios.com/2024/01/10/wealthy-own-record-share-st...</a><p>The financial beast demanding growth feeds on increasing gains in the value of stocks and other financial instruments. One of the easier ways to fake growth is layoffs.<p>Your 401(k) is part of that beast, and your investments in stocks, etc., contribute to the system that drives layoffs.
these workers met your hiring bar.<p>why lay them off when there is hiring in other teams ?<p>why not move workers from unproductive projects to more promising ones ?
Overhiring in good times and getting fat. Diet in hard times and losing weight.<p>It’s that simple.<p>Why do people want to find more sophisticated explanation?<p>There is no great conspiracy. Except maybe conspiracy of corrupted governments and terrorists profiting from the war.<p>But even that is a less likely explanation than people stupidity
The past ten years of tech have been subsidized with low interest rates, i.e. free money.<p>That is now gone and companies must tighten belts. There really is no greater mystery here.