Layoffs at Amazon, Meta, and Twitter show that there’s a big shift in Silicon Valley.


A wave of massive layoffs is sweeping across Silicon Valley.

Meta CEO Mark Zuckerberg cut 11,000 employees, or 13% of Facebook. Amazon has confirmed plans to cut as many as 10,000 corporate and tech jobs. lift. Robin Hood. stripes. netflix. coin base. They are all shrinking. And not only are they abolishing jobs, they’re abolishing some of the perks that have become synonymous with working in the tech industry.

Each company has its own unique challenges, driving cost-cutting measures. But there are also some great reasons for shrinkage. First, technology companies were the winners of the pandemic. Tech stocks rose as consumers were stuck at home with Zoom meetings, Peloton rides and Netflix viewing. They injected huge amounts of cash and used it to expand their business. But as the economy worsens and inflation rises, investors are looking for safer bets and tech companies are back on the planet, while pandemic restrictions are easing. increase.

Another big reason for cost savings, as argued by Recode’s Peter Kafka, is today, explain, that the largest technology companies are now mature. In other words, it won’t be able to offer investors the same massive growth it did during the boom years of the late 2000s and his 2010s. And it will have all sorts of implications for industry players.

Below is an excerpt of the conversation, edited for length and clarity.There’s a lot more in the full podcast, so listen up today, explain Apple Podcasts, Google Podcasts, Spotify, Stitcher, and wherever you can get podcasts.


Noel King

What are your current cost-saving strategies?

peter kafka

These are cost-saving measures, but they’re also kind of an emotional, cultural reset when you talk to techies. We are going to hire all the best talent. We pay them a lot to keep them here, but we also keep them through these exorbitant perks. As well as free meals, we have multiple cafeterias per office to keep you hungry all day. A really elaborate gym and shuttle bus to take you from your home to our campus. ”

Then, last spring, companies like Facebook and Google started saying, “We’re going to put the brakes on this stuff.” Facebook said last spring, “If you’re here and work late, you can eat food for free, but we’re not going to give it to you so soon.” should stick to. And “we’ll provide smaller take-out boxes so you can’t go eat your family with the steaks we serve.” I’m saying. At the very least, it will bring us closer to the normal working conditions that many people across the United States are accustomed to.

Noel King

How would you describe the extent of existential change in technology during this period?

peter kafka

I think it’s a pretty big change. I think most people working in the tech industry are only there during boom times. The last real deflation in technology dates from 2000 to his 2001. So if you’ve worked in technology, you’ve only seen things go up and down. You got a lot of salary. There was always a company wanting to hire you away from the one you were in, so you got paid even more. I knew I could leave Facebook and Google and go to startups. If the startup doesn’t do well, it may be bought by Facebook or Google.

And all of them will have a record scratch stop this year. People say You can’t leave Facebook or Google and go to a cryptocurrency or Web3 startup to make more money. I may have to actually do my job and be happy with it. ’ And it’s a big cultural reset.

Noel King

Peter, you argue that the fundamental problem underlying these cuts is the one we want to talk about. today, explain: The problem is growth, or lack of growth.

peter kafka

yes. There is a bigger story that goes back decades. All these tech companies, Google, Facebook, Amazon, Apple, have grown like crazy. They were selling tons of ads. They were selling tons of iPhones. They reflect a major shift in how the world uses technology. they were at the forefront. They got paid for it.

But those companies are no longer growing at the same rate. Many of them are pretty old now — or their flagship product is pretty old: the iPhone is 15 years old. Google’s main search advertising business has his 20-year history. YouTube is more or less 15 years old. Many of these companies and products are still very large and very profitable, but no longer grow like gangbusters. It is difficult to derive an increase in So if you’re looking for growth on Wall Street, it’s harder to find in Big Tech these days. Also, Big Tech is no longer as dynamic as it used to be. These big tech companies used to be disruptors, but now they’re big established giants. From a Wall Street perspective, it’s not very attractive.

Noel King

Do these companies need to grow?

peter kafka

you can definitely do that. It helps if you own your own company, don’t owe anyone, and have no shareholders looking for profits, but you can definitely do that. Also, if you’re a company that says to investors, “We’re growing a few percentage points every year, but we’re not going to grow too much,” then it doesn’t have to grow that much. It’s a pretty reasonable way to live life and run a business. But Wall Street often says: We want to grow at scale because we want to make more money and we want you to commit to grow at scale. ’ That’s what many of these tech companies have been doing for decades. And now it’s getting harder for them to do that.

Noel King

And are tech companies honest with their investors? Did they go to them and say, It will never grow as big as it used to. ”

peter kafka

yes and no. They must publicly report their numbers. But if they say, “Look, we’re basically trying to stop growing,” or, “We’re only going to grow a little bit in the long run,” it’s game over. Wall Street doesn’t want to hear that. Or Wall Street would say: But we want that growth somewhere else, so it’s 70% less valuable than it was before. ’ I see a lot of companies saying this. Create a new metaverse. We will grow in markets that do not yet exist. Trust us, we’ll get there. Netflix says in this same version: Sounds good.

Noel King

What does all this mean for founders? They’re old now too. what will happen to them?

peter kafka

One thing I think is pretty telling is pretty much all the men who started and ran these big tech companies (and they’re all men). they are not there anymore. There are different stories in every case, like Steve Jobs passing away, but many people said, ‘I don’t want to run these companies anymore.’ Amazon, Google, and Microsoft all said this. we are going to do other things. ‘ We’re going to buy the Washington Post. For Bill Gates, try to vaccinate the world. Because, frankly, it’s more fun doing other things than running these big companies. Mark Zuckerberg is the only big exception.

Noel King

Does all this volatility mean that Big Tech companies are less powerful than they used to be?

peter kafka

Frankly, I don’t know they have less power. It’s worth a lot less, but it’s still the most valuable company in the world. Comparatively, they are still big dogs. I think it will become more and more difficult to secure the best and most ambitious talent. It’s fun for us personally. Interesting. It also has many economic advantages for us. So maybe you don’t want to work for Facebook, Google, Amazon, or Apple. Do something else instead. ”

Noel King

I hear you say there are potential benefits here, like the broader benefits.

peter kafka

yes. I don’t want to be Pollyanna about this because people are losing their jobs. But that there is this creative destruction where the old is torn down is part reality and part fiction in Silicon Valley. New cool stuff will be built in its place. It’s part of the fables and myths of Silicon Valley, and there’s a lot of truth to it, too. By the way, we’ve made a ton of money over the last few years, over the last decade. It’s okay if you don’t work for a big tech company for a while. Look for new ideas. ”



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