Tech sector lay offs

INTRO: Having failed to post any technical articles for a few years I feel that my blog is at risk of dying from lack of attention. So to avoid that,  I have decided to mix up its content a bit and diversify from long Technical HOWTOs to more casual short posts whose tech content may vary (or not exist at all) ... so to kick off this one is a short rant about tech news!

Fake News about Tech Industry Collapse

A number of bigger tech companies are laying off staff at the moment. The press reports this as a related to them making terrible errors in misreading trends post pandemic and suddenly hiring way more staff than they normally would over the last year, 2022. Now reality has hit and the tech sector is awash with newly redundant workers as big tech desperately tightens its belt to survive. But is there any truth in either the premise of this argument or its conclusions?

A random recent example that repeats these ubiquitous assumptions ... https://fortune.com/2023/01/23/big-tech-layoffs-15-20-percent-next-six-months-top-analyst-says/ ... Citing the not for profit basket case, Twitter, being turned into a uniquely loss making zombie company by Elon Musk as though Google, Amazon and Microsoft had something in common with it as a business!

If you look at the graph of the employee count of these companies year on year. Then only Microsoft hired more than usual last year, 2022, and Amazon to cope with its pandemic boom did so in 2020. Google last had an uncharacteristic hiring spree in 2012. Similarly Facebook and other big tech companies growth curve exactly followed that of the last decade in recent years. There was no extra hiring.

So why the layoffs. Nothing to do with over hiring. Simple - look at the share price curves instead.
The market is valuing most big tech lower and recession looms - they need to chop staff to chop costs and make their finances look better to reduce that drop for their shareholders - the biggest of whom are the CEOs of those companies.

The big companies are still making billions in profit (they are not loss makers) so over the long term it would cost them less to retain talent, and they can afford to. However the CEO's personal short term loss in wealth is something that they can't stomach, and it is a good excuse for a clear out.

Obviously there are large loss makers, the most prominent of which is Twitter, but they are special cases with failing business models - Twitter only ever made a profit in the run up to Trump's election as it became a huge engine churning up ideological conflict with political and conspiracy fictions. Without a politically polarised USA to drive an explosion of lies and social media wars, it was always a loss maker. It has nothing to do with big tech trends. 

Apple is a real exception to the trend, currently, but only because its share price hasn't dropped significantly yet. Hence it hasn't done its layoffs yet.

So the real reason big profitable tech is laying people off is a temporary fix to save a few billions from the bear market's current swipe at the personal wealth of their CEOs. Even though being a slave to short term market driven fire / rehire cycles will cost the company more in the long term. It is purely a personal choice to save personal wealth, there was no over hiring, there is no need for redundancy, there is no down turn in the growth demand for the tech sector, there is just less cheap loans around to fund it.

 
The jump in the cost of borrowing is due to what looks to be a short term hike in interest rates, nothing to do with the tech sector itself. Largely due to Putin starting a war of revenge against his long dead ghosts from 35 years ago, when the Soviet Union fell as he presided over the KGB. A war against ghosts can never be won ... but unfortunately its far more terrible human cost will carry on for years.

This becomes clear on the other side of the market coin, late stage startups are often making no profit at all - because all profits along with loans are ploughed into growth. Because they must never be seen to be shrinking - to keep growing their valuation for IPO.

So a lot of software companies are hiring even though strictly they don't need to, whilst the big boys are firing when they don't need to.

Meanwhile the number of software jobs as a whole keeps growing at 10% year on year. The demand continues to outstrip supply and wage inflation follows. So if you are a talented (if overpaid) software engineer ... I wouldn't worry too much about the layoffs. It is just a chance to take a redundancy bonus and a 20% pay rise to try something new. Unfortunately for those that were used as a disposable foreign human resource by big tech, via job dependent visas, it is a different story. They may well not have time to stop their CEO's thoughtless greed needlessly disrupting their lives.

Many predictions are that interest rates will drop and the bear market end in a year's time. At which point the mass layoffs will be reversed. But the big tech companies will have lost a lot of money, and a great deal more trust, by following the market and each other so closely. The lesson employees will have learnt is that loyalty to such companies will never be rewarded or returned.