Focus
- 1 At present, major Silicon Valley tech giants are slowing and freezing hiring, and according to a recent Fortune survey, "90% of US CEOs believe a recession is coming." ”
- 2 Silicon Valley investors estimate that there will be 25,000 to 50,000 unemployed engineers in the Bay Area's job market in the coming months. Their wages will drop and they will even accept jobs they may not have considered before.
- 3 This round of layoffs in Silicon Valley will also have an increasing impact, and some people are worried about this: Will the United States enter the "Internet bubble 2.0 period"? The entire economy may usher in a period of shock and recession.
The "Silicon Valley Cover" series focuses on the dynamics of Silicon Valley technology companies, interviews with technology leaders, blockbuster research reports, etc., aiming to provide technology information enthusiasts with the world's most cutting-edge in-depth articles. This issue focuses on the current situation of layoffs in Silicon Valley and its impact on the technology industry.
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Twitter, Facebook parent Meta, payment platform Stripe, software services company Salesforce, ride-hailing company Lyft and a growing number of smaller companies have laid off double-digit employees. This means that tens of thousands of engineers, salespeople and support workers in one of the country's most important and highest-paying industries are unemployed. Meanwhile, other companies, including Google and Amazon, have recently begun to slow and freeze hiring.
For more than two decades, America's tech industry has been a reliable source of thriving elites in exchange for well-paying jobs. But over the past few months, the luster has faded and the axe has fallen.
According to public information collected by Layoff.fyi, a Silicon Valley layoff tracking website, 1,396 technology companies have lost about 234,000 people in the past three years since the epidemic. The numbers will continue to climb. Andy Jassy, president of e-commerce giant Amazon, wrote in an employee memo that the company's 10,000-person layoff plan is expected to continue until 2023.
Since May, more and more tech companies have announced layoffs in Silicon Valley, and employees are surrounded by bad news. Under pressure, they seek help in a variety of places. In addition to traditional talk therapy, demand for psychiatric exposure therapy, equine therapy (talking to horses to reduce anxiety), laughter therapy, and hugging therapy has all risen significantly. Recently, the hugs of "professional hugging teacher" David Mahabali have suddenly exceeded the supply. He is a professional hugger for Cuddlist.com, a US-based healing services company that provides hugs and emotional talk, clarification services for people who are depressed and in need of comfort, to raise people's mood through oxytocin produced through physical contact. He describes and estimates that he now works an average of about four times a week, twice as many as last year.
Mahabali believes that the surge in business is due to increasing pressure from tech companies and startup CEOs. "During the treatment, clients often have mood swings, with some going back and forth between crying and laughing. They talk about feelings of isolation, the difficulty of balancing work and family, and the worry of having to lay off workers or be laid off themselves. ”
Along with the surge in layoffs is the anxiety of practitioners. This sentiment continues to spread across the tech industry and even in the broader economic environment. According to a recent Fortune survey, "90% of U.S. CEOs believe a recession is coming." ”
U.S. tech giants face sluggish growth
After laying off two-thirds of Twitter's employees in nearly three weeks, Musk finally said at a Twitter all-hands meeting on November 21 that the company has completed layoffs, is actively recruiting engineers and sales employees, and encourages internal referrals. However, the next day, the Wall Street Journal quoted people familiar with the matter as saying that Musk expanded the scope of his layoffs at Twitter - some sales employees said that they were still fired after agreeing with Twitter 2.0.
The hardcore "Twitter 2.0" is a new corporate culture advocated by Musk, which means long-term high-intensity work, and in the large-scale layoffs, it also triggered Twitter's collective departure. On his first day at Twitter, he dismissed the company's board of directors and laid off several key executives, including the president, CFO, chief compliance officer and legal counsel. Then, in the November 5 wave of Twitter layoffs, more than 3,700 of the more than 7,500 employees were laid off, and some departments were even completely abolished. There was no coordination beforehand, no communication afterwards, and just a cold email of layoff notice.
Unlike Twitter, most tech CEOs are in order when they announce layoffs. They usually write a memo or email to employees explaining what difficulties the company is facing and why they had to make the difficult decision to lay off employees.
"This is a sad moment that nothing can be avoided." Mark Zuckerberg, president of the former social network Facebook (now Meta), wrote in an employee memo. He also said he mistakenly assumed that online activity would continue to grow during the pandemic. "I made a mistake and I'm responsible for it."
Andy Jassy, Amazon's president, is also personally leading a cost-cutting program, including cutting businesses that are not yet profitable and is expected to lay off 10,000 jobs. The company currently employs 1.5 million people worldwide. Snapchat, a social platform that laid off 20 percent of its employees, is in its sluggish sales growth since its launch. Evan Spiegel, the company's president, said, "We have to reduce the cost structure to avoid significant losses that continue to be significant. ”
Almost every tech company has experienced its own slowing growth. In addition, Patrick Collison, president of Stripe, an internet payment platform, mentioned that "in our world, we overhire people. He also mentioned that inflation, energy crisis, rising interest rates, reduced investment budgets and tight funding for startups can all cause problems.
Last year, big tech companies were telling Wall Street a growth story: After the pandemic changed people's work and lifestyle habits, a surge in online activity brought traffic and revenue. Unusually high demand has prompted the industry to hire and expand more people than it should. At one point, Fed Chairman Jerome Powell said the job market was still "overheated" because there were now more jobs than workers and employees were demanding higher wages, which in turn pushed up inflation.
However, the situation soon reversed. Inflation has soared, consumer demand for goods has fallen, the dollar has strengthened, supply chains have been disrupted, and tech companies that have shown resilience in the midst of market turmoil are not delivering good results. Tech giants have not done well this year compared to last year, especially as Amazon lost nearly $4 billion in its fiscal first quarter. Over the past few months, tech giants have indeed posted less-than-impressive earnings.
In the second quarter of this year, the quarterly results of technology conglomerates Alphabet and Microsoft were disappointing, and the revenue growth of both companies' core businesses slowed - Google's parent company Alphabet's search advertising business slowed sharply, while Microsoft's cloud computing revenue growth declined. The general decline in earnings in the tech sector has coincided with an imminent recession, causing consumers to cut back on spending and show little sign of rebounding.
J. J. Bu, vice president and principal analyst at Forrester, a well-known market research firm. P · J.P. Gownder argues that "the third quarter [of this year] was much more difficult than the second quarter, so the headwinds became more pronounced, and tech startups realized that they couldn't grow with their current workforce, so they actually had to lay off employees." "So, regardless of size, tech companies are starting to tighten their belts, starting with layoffs.
"When companies cut costs, the first priority is usually labor costs, followed by advertising and marketing," said Dan Wang, an associate professor at Columbia Business School. When things don't look good, companies have to adjust labor costs to accommodate those expectations. ”
At this time, some technology companies happen to be planning for the next fiscal year. For example, the fiscal year 2022 for Amazon, Meta, and Google will end at the end of 2022 or early 2023. They may be looking to remove costs from their balance sheets by the end of the fiscal year. Specifically, if an employee is now laid off and given six weeks of severance pay, or even three months' severance pay, their salary will not appear on the books until the end of the first quarter, reducing costs in the first quarter of the following year.
While not applicable to all tech companies, the fiscal year plan did spawn a new round of layoffs. J.P. Gownder explains, "It's unfortunate. This means that on the occasion of the holidays and the New Year, a certain number of people lose their jobs. "Even if there is no cost assessment plan for the fiscal year, there may be layoffs." Looking at other peer companies, not necessarily competitors, but companies similar to yours in tech, might make you say, 'Ah, now is the time.'" ’”
If tech companies don't want to hurt team morale during the holidays and affect future talent acquisition plans, they'll have to hurry, preferably before Thanksgiving. As a result, since May this year, employees have been brushing the news media and social networks for the bad news of layoffs. Silicon Valley serial entrepreneur Roger Lee directly developed a layoff tracking website, Layoff.fy, which provides redundancy compensation appeal services and helps unemployed people connect with new job opportunities.
The wave of layoffs removes the aura of Silicon Valley elites
The new generation of Silicon Valley technologists remains hopeful after the layoffs. Marc Weil taught himself programming at age 9. Since 2010, he has worked in technology at various companies and even started his own business at one point. In November, the 35-year-old Stripe engineering manager was one of thousands of unemployed.
"Over the past few decades, the tech industry has grown stronger every year, as if there is no end in sight," Will describes, "and everyone is constantly on the lookout that this will end." That's it, it's over now. Three weeks before he was laid off, he had just bought a house. But he's not worried about his new job, thanks to the rich connections he has built in Silicon Valley for a decade. Will is more concerned about the prospects of his younger colleagues.
Sarah Cho, 23, graduated from UCLA this year and received a job just a few months after joining Lyft as a product manager. "The market is very saturated and there are only a handful of jobs available," Zhao said. Because she is Korean, she also faces visa difficulties. "As a last resort, you can only seize any opportunity to open up."
Semil Shah, a partner at venture capital firm Haystack, estimates that there could be as many as 25,000 to 50,000 unemployed engineers in the Bay Area's job market in the coming months. Wages will fall, and they will even accept jobs they may not have considered before.
Layoffs will only be a problem if the unemployed cannot find work again. Now, as Silicon Valley's most valuable talent, the engineers who were laid off have been snatched away by startups. Kathy Zhu, co-founder of startup Streamline AI, told the Wall Street Journal, "There's a lot of talent right now because of these layoffs. A few years ago, we could not have attracted such candidates. ”
Bill McHar, founder of talent acquisition startup Talent House, also revealed that the recruitment market is doing very well. The company mainly serves startups. In his opinion, big tech companies no longer hire large numbers of people, the interview process is lengthy, there are comprehensive background checks, and the pay is lower than ever. Still, "startups can pay high or over budget." Plus, they hire four or five people for a sales position, when they actually only need two. ”
Startups have struggled to compete with tech giants for engineers, and probably still do so. McHarg said that when well-qualified candidates are hired, they often end up at the company. The deeper reason is that the stories of Silicon Valley who work around the clock at startups with low salaries in hopes of becoming big and changing the world are becoming rarer. More of them will think and convince themselves, "I can't just go." I can't just leave Facebook or Google and go to the cryptocurrency industry or Web3 startups to make more money. Actually, I might have to do my job now and be happy with it. ”
Big tech companies have dominated the U.S. economy for the past 10 years. Apple, Amazon, Google, and Microsoft all crossed the trillion-dollar valuation mark to become the most valuable business organizations in modern history. They compete with venture-backed startups like Uber, WeWork, Airbnb and Stripe for tech and business talent, driving up wages and the cost of living in other tech hub cities like the Bay Area and Seattle.
Over the years, engineers have moved between companies to earn higher salaries. It's not uncommon for junior engineers to receive $200,000 a year plus signing bonuses from big tech companies. Tech companies offer perks like free dining, massages, dog walking, and on-site laundry, as well as long vacations.
Tech companies have grown even faster during the pandemic, as people spend more time online, buy more computers and video game consoles, and shift most shopping from in-store retailers to e-commerce. Tech companies have taken advantage of this shift, investing billions of dollars to hire new employees and build new data centers to take advantage of what is seen as a once-in-a-lifetime shift.
But as restrictions ease overseas and most people return to pre-pandemic habits, the bet that this consumption behavior will be permanently changed is dashed. "Most large companies still have more employees than in 2019, but there is a huge gap between high expectations and reality," explains analyst Beyer. "This round of layoffs in Silicon Valley will also have a growing impact. People either see a knock-on effect on the economy or see an industry "avalanche."
Today, some engineers have to work at smaller tech companies. It was a painful personal life shift. But in the long run, the impact of current layoffs may be a good thing for the tech industry in the future. "There's a very famous phenomenon in Silicon Valley," Barnafa said. "After every major event, like the dot-com bubble in 2000 or the financial crisis in 2008, new companies are born. They were reborn from the ashes. ”
Is the US dot-com bubble 2.0 coming?
"It feels a bit like the millennium," says Lisa Beyer, senior tech analyst, "hiring engineers, hiring engineers, hiring engineers, and then all of a sudden, the company is sluggish, it's like being poured cold water." ”
When Internet users were less than 2% of the US population, in 1993, the US government proposed the "Information Highway Plan", which opened a vigorous Internet stock market. In the past decade, with the superposition of monetary easing and the large-scale transfer of household savings to the equity market, it gradually formed a bubble.
In the sense of doom at the turn of the millennium, with Microsoft's antitrust sanctions as a landmark event, the Internet industry suddenly collapsed. The tech-heavy Nasdaq just hit an all-time high of 5,048.62 in March 2000. Within a month, it plummeted by 35 percent. Not only are employees unemployed, but when the dot-com bubble burst in 2000, Silicon Valley instantly became a graveyard for tech companies.
Ahmed Banafa, an engineering professor at San Jose State University, lost his job as a technologist at a tech company that year. He still remembers how unstable the economy was back then. Banafa recalls that whenever you add the internet industry to a company, it drives up its valuation, both in terms of products and balance sheets. "It was a (real) bubble. So when it breaks, it cracks completely. It was only 15 years later that the Nasdaq was back at 5,000 points.
"The current downturn in the tech sector is nowhere near as it was in 2000-2001, nowhere near what happened during the Great Recession of 2008-2010 or the months leading up to the pandemic in 2019, at least not yet." According to tech author Joe Kukura.
From January 2019 to November 2021, the tech-heavy Nasdaq rose 144% to a peak of 16,057 points before plummeting 30% the following year, with tech company shares plummeting and layoffs. Between January 1995 and March 2000, the NASDAQ soared 500 percent and then plummeted 76 percent over the next two years, a rise that completely offset gains from early Internet economic players and upended the entire San Francisco economy.
While today's tech stocks are strikingly similar to the boom-and-bust cycles that the Bay Area experienced 20 years ago during the dot-com bubble, experts predict that today's Silicon Valley is no longer the Silicon Valley of 20 years ago, nor will there be the so-called dot-com bubble 2.0 era. There are two main reasons:
First, the solidity and maturity of today's tech sector may have the power to prevent a severe crash when the first dot-com bubble burst. Margaret O'Mara, a high-tech economic historian at the University of Washington, explains, "What we're seeing in the internet [.com era] is some very similar patterns, but the real difference is that everything is now a lot bigger." "For example, venture capital invested in tech companies has grown fivefold over the past two decades, from about $60 billion during the dot-com bubble to about $330 billion today. The Nasdaq has also more than doubled its market capitalization. Even if rapid growth during the pandemic has led to overspending, experts say big company losses won't make them disappear entirely.
Second, the impact of the layoffs on the city's economy is limited. "It's too early to assess the impact of layoffs on the city's economy." San Francisco Chief Economist Ted "But I can't predict how long the layoffs will last," Egan said. If tech companies continue to shrink hiring, or even lay off workers, it will certainly not be good for the local economy. "And when the dot-com bubble burst in the millennium, there were far more job losses than we see now. According to the Silicon Valley Business Journal, about 2 million people were laid off in 2001.
"The difference between 2022 and 2000 is that technology is now ubiquitous across all industries and is influenced by macroeconomic cycles," Anne Glover, CEO of Amadeus Capital Partners, told Sifted. Robin Klein, a partner at LocalGlobe, said there are too many tech companies solving real problems in society. "In 2000, only 360 million people were online, but today, 64 percent of the world's 8 billion people are online," Klein said. Today, the enduring influence of technology is ubiquitous across all industries, and even a brief depression will not eliminate it.
Resources:
【1】A comprehensive guide to how Elon Musk is changing Twitter，Shirin Ghaffary，VOX
【2】Why tech layoffs are happening all at once，Avery Hartmans，Business Insider
【3】Recent tech layoffs: The great reset after a pandemic boom，Chuqin Jiang，missionlocal
【4】Layoff spree in Silicon Valley spells end of an era for Big Tech，Gerrit De Vynck，The Washington Post
【First Issue Review】Burning up $3 billion in 8 years, Jia Yueting and his Faraday future is still a chicken feather