Forces of nature, designs of man

Coming to grips with boom and bust cycles in the tech industry.

This is my third cycle of industry-wide layoffs in tech.

I landed my first computer job in the late 1990s. Soon after, I moved to the US and waltzed right into the middle of the dot-com crash. We cracked jokes about our worthless stock options and watched the mayhem from the sidelines. Then, at the tail end of the recession, my employer showed me the door. This put me in a post-9/11 immigration limbo and ultimately forced me to leave the country with the last $100 in my pocket and no real plan.

Soon after, the industry came back roaring. Dot-com survivors such as Google, Amazon, and Apple emerged as some of the most valuable and influential companies in the world. IPOs and skyrocketing valuations turned countless engineers into millionaires. It finally felt like we had a real thing going — built on merit, not on dreams.

Then, around 2007, the housing market broke. I joined Google only to watch the company’s stock lose 60% of its value. Layoffs followed, although the company never called them that. Instead, they closed a bunch of engineering offices and offered staff an ultimatum: find another job within the company and relocate, or leave.

The downturn lasted a couple of years, then ended as abruptly as it started. A decade of hiring sprees and skyrocketing valuations followed. The quintessential SF Bay Area career question was once again whether you had the guts to make millions at a pre-IPO company, or whether you’re content with paltry mid-six digits at Big Tech.

We braced for a reckoning in 2020, when COVID-19 hit; instead, a flood of stimulus money buoyed equities and other asset classes to new highs and fueled another hiring spree. Two years later, the government finally pushed its monetary theories to their limits, and had to clean up the mess. Steep rate hikes to counter inflation made it harder to borrow money to speculate, develop products, or buy goods. Ad tech revenues plunged. Precipitous stock market declines and a wave of layoffs came next.

I want to be angry, but I’m struggling to pin the blame. I feel that tech companies are stuck in a cycle they can’t escape. In the good years, the newcomers know they need to grow at any cost: when you’re small, Google or Facebook can throw a thousand engineers at your problem space and eat your lunch. For a Silicon Valley startup, the #1 priority is to get big enough not to be easy prey.

As for the big players, they’re acting rationally too. They remember the titans of yesteryear - Xerox, Sun Microsystems… heck, Google’s original 1600 Amphitheatre Pkwy buildings used to belong to SGI. The companies realize they can’t keep growing their existing revenue streams for much longer. They see regulators breathing down their necks and disruptive products coming out of left field. So they keep throwing money at whatever they can, in hopes of coming up with the next big idea — a desperate bid for corporate immortality.

As tech workers, we’re complicit too. We don’t want to miss out: at internal Q&As, we pepper executives with demands for fast-growing stock rewards, rapid promotion opportunities, and relentless growth. I’ve been asked countless times for career advice. My opening line — “don’t live paycheck to paycheck” — is usually greeted with an eyeroll.

As to the necessity of cuts: I don’t think there’s a simple answer. Payroll matters to the bottom line. I’ve been told several years ago that it costed FAANG about $500,000 end-to-end to employ an average engineer; it might be higher now. It follows that Google laying off 12,000 people makes a difference — to the tune of $6B a year.

It’s true that the company has massive cash reserves, so they don’t have to do it now. But in the long view, cash on hand doesn’t matter if your revenue and expense forecasts don’t line up — and waiting too long leaves you worse off. This is the first time these companies are facing a high-rates environment. Looks like they don’t think it’s gonna be over soon.

There’s also another factor at play: in the fat years, project prioritization and performance management tend to take the back seat. If you can solve problems by hiring more people, there is little incentive to have unpleasant conversations and confront waste. Every now and then, execs look at this ballooning headcount and are overcome with dread. Google nearly doubled in size since I left the company in 2018 — but they aren’t doing twice as much. In a way, recessions and layoffs have come to function as a “reset” button: a terrible last-resort antidote to the inevitable, emergent culture of unprincipled growth.

I can’t offer black-and-white moral judgments; I’ve come to think of these cycles as forces of nature, more so than designs of man. To the folks affected by this one, I offer sympathies. To all other techies: take notes, for all this will happen again.