The Six Five team discusses tech layoffs.
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Transcript:
Patrick Moorhead: Tech layoffs and a little sprinkling of Twitter. This has been a lot of fun. It’s been depressing for some, listen, I’ve been laid off so many times, Daniel, I can’t even tell you. Every time I bounce back baby to something better.
Daniel Newman: Have you really?
Patrick Moorhead: Oh yeah.
Daniel Newman: All right.
Patrick Moorhead: It’s been people getting out of businesses and AMD was down to six months cash. They pretty much got rid of anybody who wasn’t in engineering or in sales and I was in neither.
Daniel Newman: This one’s yours buddy. You can start.
Patrick Moorhead: Oh my gosh, you got to be kidding me. It’s me. I was totally punting this over to you. So, first of all, we’ve seen layoffs from Meta, Twitter, Amazon, Lyft, Stripe, Salesforce, Microsoft, Robinhood, Coinbase, Cisco. A lot of different companies. And instead of focusing in on the numbers and the companies, I want to talk holistically about economies and how this works. So, Dan, I know you like to play virtual economist and I think you’re really good at it. I’m a student of history and essentially, we have different cycles that have happened over the last hundred years and they are boom and bust cycles.
Rarely is there a stasis of GDP and inflation and interest rates. We have an incredibly high interest rates compared to where they were when there was literally the Fed was loaning at 0%. That’s free money. Banks might put two or three points on it, but essentially it was free money. And what happens is you are able to go and get a lot of debt and that included a lot of tech companies who were making some very good but some very bad investments out there.
And here we are in the state of economy. So don’t be surprised. I think what’s surprising people is this is some of the first time that any of these companies is doing layoffs. Companies like Amazon who’s been on this rocket ship. You made a very good point about automation, Daniel, which was people just when it came to things like production and warehouses, just hire bodies and get them in there. Very little investment in automation like robotics or software automation like we talked about earlier with the Build product from SAP. But I think that people will look at this, companies will look at this time to get lean. Quite frankly, get rid of some of the C and the D players that were hired. Some companies hired 100,000 workers over the last decade and hard to keep people. And I guarantee you that there were some very bad hires along the way. So, this is a good time to get focused on what matters. Cut out what doesn’t. That’s my thoughts on the tech layoffs.
Daniel Newman: All right, so how much time do we have? We have one more topic. Probably a quick one though.
Patrick Moorhead: 11 minutes.
Daniel Newman: I’m going to use the majority of our time on this because the last topic I think is more of a bit of an update. The layoffs themselves are almost entirely a byproduct of what I said in that last segment. And that’s that companies relentlessly through bodies of things. And by the way, paid extraordinary prices to hire people during the labor tightening cycle that we just went through. But because growth was felt to be or seemingly endless with zero interest rates made, liquidity very easy for companies, they could kind of go all in and of course all time record high stock prices gave the market a lot of confidence to continue forward and companies continue forward. We’ve seen that completely get slashed now. A miss on earnings, you may as well set your business on fire right now. The labor market is still tight and pricing hasn’t necessarily come down, but you still have to grow and you have to grow earnings too.
And there’s no patience in the marketplace right now. CEOs are under fire. Mark Zuckerberg basically said we’re going to stay flat. And then the market was like, “No you’re not.” And they sold the stock. They were going to sell them down to $50 a share. He would’ve gone down 90% from the highs had he not basically made those layoffs. Investors, the market wants to see companies doing what it’s going to take to put themselves in a position to survive this period of time. Period, period, period, period. So that’s where we’re at with layoffs. Can I use a segment? I’m just going to pivot. I want to talk about Twitter though really quickly.
Patrick Moorhead: Yeah baby. Roll it up dude. Let, let’s hear it. Preach. Preach.
Daniel Newman: Okay, this isn’t a bitch fest. This is just going to be an observation. It may or may not be popular, but I’m extraordinarily tired of people that have never built a company of 1, 10, 100, 1000 people thinking that Elon Musk should somehow put on a Superman cape and be able to reverse over a decade of really poor management, poor product management, poor monetization, poor customer service and treatment, poor innovation, and just turn it around and everybody’s just absolutely bombing the guy. Now look, did he make some mistakes? Should he have weighed in on the Pelosi thing? Probably not. But you know what? He’s complex. He has built a right through creating from scratch trillion-dollar companies from putting everything on the line in his career to be able to have an opinion and sometimes his opinions are going to be wrong. I also want to know when we got to a zero inaccurate, zero wrong, zero world where people can’t ever say anything wrong, I just want to know when that happened.
Somewhere along the lines we lost the ability to have real discourse in public or even throw out a possibility of something being wrong and things like Covid and things like policy and politics. We have learned now that people had said things correctly, been filtered out, blocked and deplatformed for things that later turned out to be true. So, there’s a lot of problems right now with this. He basically bought a company that is not only in transition but a company that was in an absolute disaster. I love Twitter, so this is not like me putting on Twitter. “Hey.” And he was asked, like I said, within what, 48 hours to make it hum. Privatization of this company is going to be the best chance of it to have a chance to reboot, recreate its culture. People that don’t want to double down right now while this company is underwater.
His whole memo thing, look, you could say hardcore, you could say hard work, but the culture of that company was like no work, nobody worked. There was too many people and nothing worked. Whether it’s the software bloat in microservices and just all the poor architecture and design that he’s trying to unravel right now or it was the complete lack of a strategy to monetize the platform successfully for over a decade. Now all needs to be reflected upon, and look, I’m not an apologist for Musk, I’m just saying nobody can turn around a $44 billion company inside of what? 10 days and expect it to be really successful. And if it was anyone but him, I think people would have a more reasonable outlook and expectation for how quickly this should happen.
But I would say give it three maximum six months and come back with an opinion then. If you have an opinion at that point and it’s still as bad of a disaster as it was the day he got it, then you know what? Shame on him. But I think for all of those kind of armchair quarterbacks out there that have never built anything, it might be a moment to reflect a little bit upon why you’re so angry about this and maybe give the guy, a CEO that has built a trillion dollar market cap company from scratch before and say, “Let’s give him a little bit of time to see if maybe he can pull this together and make Twitter better than it was.” Because it couldn’t have been much worse.
Patrick Moorhead: Yeah, I think people don’t like Musk primarily because of his political affinities and the kind of moves, he’s kind of like a centra. Sometimes he’s conservative and sometimes he’s liberal. So, I don’t think people like that. I think all the liberals want him to be liberal all the time and I think many of the conservatives want him to be a Republican all the time. I think that’s what it is. With regards to the memo, I tweeted it out today. I received two of those memos from senior management. One of them was from a huge company and one of them was from a startup. And I pressed the yes button and I got promoted and I got super experience and ended up turning at least one of the companies around that I said yes to. So, I kind of like the sign up or get out and every company I’ve worked for I guess except my own, I’ve seen that memo. Anyways, I like it. And the great thing is this is a free country and you don’t have to like it if you don’t want to.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
