Asklemmy

A few things happened pretty quickly.

During the pandemic, tech profits soared which led to massive hiring sprees. For all the press about layoffs at the big guys, I think most still have more workers than they did pre-pandemic.

Interests rates soared. Before the pandemic interest rates were ludicrously low, in other words it cost almost nothing to borrow money. This made it easier to spend on long term or unclear projects where the hope seemed to be "get enough users, then you can monetize." Once interest rates rose, those became incredibly expensive projects, so funding is now much more scarce. Companies are pulling back on bigger projects or, like reddit, trying to monetize them faster. Startups are also finding it harder, so fewer jobs.

And of course, AI. No one is quite sure how much that'll change the game but some folks think most programmers will be replaceable, or at least 1 programmer will be able to do the work of several. So, rather than hire and go through everything severance etc might entail, I think a lot of companies are taking a wait and see approach and thus not hiring.

It's interest rates.

Loans are more expensive, but critically, so are eggs.

Tech workers like eggs, and see no reason to buy fewer, so they're asking for more money, unionizing, or hopping jobs to increase their salaries.

Notice how the big players are releasing press releases each layoff? No attempt at secrecy. No payouts to NDA the laid off employees. It's an intimidation tactic.

It's working at the moment, but tech workers get over their job change discomfort fast when there's a 100% raise on the table. The market rate vs curent pay gap just creates pressure to change jobs until they do, even if they're scared.

And the shareholders are all fucked.

Every tech layoff is a lottery ticket toward a company ending event. And then every employee who leaves because they realize the company is incapable of loyalty. Then every worker who leaves because their suppressed wages aren't keeping up with their expenses or hobbies. Another chance to end the company. Nobody knows which perl script is the lynchpin of their company, or which random person will leave with all knowledge of it.

The CEOs are positively aggressively collecting chances to bankrupt their shareholders.

But the CEO will get a nice payout next quarter. So that's nice.

The Federal Reserve raised interest rates in order to cause layoffs. The capitalist class wanted to enlarge the reserve army of labor so that workers would be too worried about losing their jobs to demand raises.

'You Are Gambling With People's Lives': Warren Rips Powell Over Job-Killing Rate Hikes

I actually think it’s just bandwagoning by a bunch of cowards.

We saw this same phenomenon early last year too: Facebook laid off a bunch of employees, then Apple announced the same, then Microsoft, then Google, then Salesforce, then the infamous Twitter layoffs.

I think big tech is so sensitive to negative press that they all just wait and lay off folks at the same time so no single company takes all the bad press.

It doesn’t even have to be Illuminati-level coordination, either. All it takes is for some exec at Tech Company B to see that Tech Company A is firing people. Then Tech Company B decides to clean house too. The cascade is just a bunch of morons deciding to hop on the “let’s fuck over our employees to help our balance sheet” train.

Employees aren't afraid anymore so companies are trying to reinstate fear.

It's an easy win for the balance sheet. Their products are still sellable, the services should be more or less unaffected (for the next few quarters), so they'll continue to get the same revenue. But their costs just decreased, so they look more profitable.

It looks good on quarterly calls. It's a good way to juice a stock.

Tech is hard, leaders aren’t always technical. AI is great at bullshitting, and it’s swooned many CEOs into thinking it will 10x (make them 10x more efficient than they previously were) existing employees / replace the need for programmers. Lots of leaders just look to what other leaders at companies are doing - some see what elon does at twitter as proof that downsizing drastically won’t kill your company.

Programming is like editing a book with many chapters. New developers need time to learn the story line of the book before they can begin editing anything. If the book has been around and edited continuously for over a decade, it’s going to take some time for those developers to understand the book well enough to start making meaningful contributions. Lots of these tech companies have multiple books each with many chapters, and one thing leadership either doesn’t realize or doesn’t seem to factor into the equation is that maintaining these books and all their story arcs and character development gets harder and harder over time. Truly in the tech industry, it’s more expensive to train a new hire than it is to promote an existing hire.

But again, leaders are listening to folks like elon musk…

Lots of tech companies saw huge growth during covid thanks to everyone having extra money to spend (see crypto and NFTs if you want clear examples that we just had too much laying around).

Many of these companies then saw their revenue and userbase increase month-after-month and thought the growth was going to continue forever (or, more cynically, they knew it was going to crash but acted like it was going to continue). This led to a bunch of hires to "drive growth."

But obviously, pandemic spending habits have mostly stopped, and the money faucet is being turned off. Companies can't afford all the workers they hired, so they're "let go due to market downturns."

TL;DR Companies either thought they were going to have unrealistic growth and made dumb hiring decisions, or knew the growth was going to end and thus made cruel hiring decisions.

Many people got hired during Covid.

Grow isn't as expected, so now they are firing again.

But on the bright side, most of those companies still employ more people than pre-covid.

Overhiring during covid is definitely a major part of it, combined with a slight investment bubble bursting

Late stage capitalism

One factor I haven't seen mentioned is that because of rising interest rates, tech companies have had to shift from being focused on growth to actually turning a profit. Because of this, companies are having to shed employees because they over hired in anticipation of that continued growth. People are expensive so that's an "easy" way to try to get the line closer to positive.

This is kind of a rough overview and I'm by no means an expert on economics. Just someone who works in tech and so has been following things closely.

Overinvestment and strong labor demand led to very high salaries. Investors hate high salaries. Firing people they can replace at a discount now that supply is increasing

Okayokayokay, this isn't the point, I know... but those are some really shitty, ill-fitting suits. They look like crap.

Greed. They are making more profit than ever

Sometimes I like to think of the economy as a small village where people directly goods with each other. The invention of money means you can make a living off of selling to just one person and still have something to offer the farmer, but for this thought experiment this I want to focus on the actual, real, goods and services of the economy.

So imagine a small village. You have the farmer who grows food. You have the blacksmith who builds car parts, and the mechanic that builds cars and tractors. And you also have the village fool who makes people laugh in exchange for tips. The mechanic gives tractors to the farmers in exchange for food, and gives some of that food to the mechanic in exchange for parts. When any of them need a laugh they'll give something to the fool to hear a joke. And you have your other industries, etc. One day a new person comes to town, who will represent the new tech industry. They realize that they can build a machine that tells the farmer the best days to plant and harvest which will help the farmer grow more food. The farmer happily accepts, paying the tech person some food in exchange. Similarly they're able to help optimize the other industries, and with the value they're providing and them being in short demand they're able to get great wages.

With their prosperity, other tech people start coming to the village and helping the other industries get more efficient. Most of the concrete efficiencies are optimized, so they start working on more abstract ones. Someone builds an app to help the villagefolk find someone to trade with ("I have 2 gears but I need 3 loaves" gets matched with "I have 2 wheat bushels and need 2 gears" which gets matched with "I have 3 loaves and need 2 wheat bushels"), in exchange getting a small cut of those resources, and a larger cut if someone pays for preferential matching (advertising). Other tech people find work helping the other tech people at their jobs (IDEs, libraries, issue trackers, etc.) And other tech people build animatronic village fools to entertain the village themselves (video games).

More tech people come as they've heard of how much they can earn at this village. Eventually they start having some trouble finding work to do, everything seems optimized. Some of the wealthy members of the town (let's say the farmer of the biggest field) says to many of these tech people that they'll pay them food in exchange that the farmer gets a portion of whatever the tech person ends up earning with what they build (low interest rates). With all the good ideas used up, the projects these tech people are working on aren't working well (crypto) or are duplicates of already existing tools (how many social media apps do we need, etc.). Still though, the farmer is giving them a lot of food so yet more tech people come to the village, and many of the children of the village (like the farmer's son) are becoming tech workers too.

Eventually, after a bad crop season (maybe because the farmer's son didn't help harvest), the farmer is short on food and stops lending out food to these tech workers. They try to go around to the other villagefolk but most have already been optimized. The tools that optimized life are already built and the required tech people for maintenance is a lot less than those needed to build it, and the number of truly new opportunities to help new industries isn't enough to provide work to all the tech people.

TL;DR

Tech people earned their crazy salaries when they were helping migrate the non-digital world to the digital world. There were so many obvious opportunities for efficiencies and not enough tech people to go around. 'Spreadsheet' calculations literally used to be a day-long affair with a team of people - of course a business would pay anything to a tech person to automate that. Now that times the whole economy.

These obvious efficiencies are finite but we treated them as infinite and kept training new tech workers. Low interest rates helped keep us employed for longer than we should have as we were paid to work on bad products in the hope that maybe there'd be a diamond in the rough and yet we STILL kept training new workers. Meanwhile other careers that provide more concrete value, like mechanics & HVAC professionals, have had a labour shortage as Tech attracted so many young people to itself. This eventually led to persistent inflation which then ended low interest rates. With higher interest rates a lot of speculative tech can't get funding; Tech is only getting paid for the actual new value it can provide today, which is way less than it used to be.

ChatGPT has been quoted as a cause in at least one of the layoffs. The tech industry is specially positioned to be quickly affected by AI, but AI is going to impact 80% of the jobs on the planet within the next 8 years. Our world is about to experience a massive change to the way things are run. We can try to prepare, but it's going to change in ways previously unimaginable.