Tech CEOs all made the same dumb mistake, thinking the pandemic boom would last forever. Now employees are paying the price with massive layoffs.
- Mark Zuckerberg took accountability for the mistake that led to this week's 11,000 job cuts at Meta.
- That mistake: Thinking the pandemic-era good times for tech would last forever.
Nothing is forever. I know it, you know it, André 3000 knows it.
And yet, we're in the middle of what can only be described as a bloodbath, as the tech giants shed jobs by the thousands. This week, Meta (formerly Facebook) and Salesforce made major cuts, joining firms like Stripe, Snap, Netflix, and Oracle, which have all held their own layoffs recently.
Those are all very different companies, but they have one thing in common: They grew fast as the pandemic drove demand for digital products and services — and were caught flat-footed when the combination of a return to (relative) normalcy, rising interest rates, and inflation brought the good times to a halt.
"At the start of COVID-19 in early 2020, the world rapidly moved online and a surge of e-commerce led to outsized revenue growth. Many people predicted this would be a permanent acceleration that would continue even after the pandemic ended," Zuckerberg wrote in a memo to employees on why he's cutting 11,000 jobs at Meta.
"I did too, so I made the decision to significantly increase our investments. Unfortunately, this did not play out the way I expected," he wrote.
He wasn't the only one, either, with many other tech luminaries expressing similar thoughts lately: "We over-hired for the world we're in," Stripe's founders wrote in a memo to employees announcing that it would cut 1,000 workers, or 14% of its staff.
All of which raises a natural next question. How did these top tech executives — generally assumed to be proven, intelligent, capable business leaders with access to mountains of valuable data — misread the situation so badly?
In the spirit of fairness, it wasn't entirely illogical. In the earliest days of the pandemic, several companies paused hiring or held layoffs as a cost-saving measure, under the assumption that the crisis would dampen the economy.
"It will take considerable time — perhaps several quarters — before we can be confident that the virus has been contained," venerable venture capital firm Sequoia wrote in a March 2020 memo warning startups of tough times ahead. "It will take even longer for the global economy to recover its footing. Some of you may experience softening demand; some of you may face supply challenges."
Instead, the opposite happened, as people spent more time shopping online, watching videos on YouTube or TikTok, playing games like Roblox or "Among Us," and generally pouring dollars into the tech sector. Startups raised money in eye-watering amounts, even as the major tech companies saw their share prices soar. Even the long-suffering PC industry saw something of a renaissance as people bought new gear for their work-from-home setups.
It's easy to envision how that sudden turnaround felt like a second chance, an opportunity to strike while the iron was hot and chase big ambitions. With interest rates low, valuations high, and remote work offering an unprecedented level of access to talent, it felt like a pivotal moment in the history of tech. Leaders like Oracle's Larry Ellison went so far as to praise videoconferencing tool Zoom, a pandemic-era darling, as an "essential service" that had permanently upended the working world.
Still, there have long been signs that the good times wouldn't last forever. Almost a year ago, Zoom reported growth that was well below Wall Street expectations, in a sign that the availability of vaccines and a general reopening of the global economy was going to see the reliance on tech wane. Over the summer, Roblox said it expected to operate at a loss for the foreseeable future as its more youthful userbase spent more time outdoors. Tech still plays a critical role in daily life, but it's no longer the center of the universe.
So it's understandable, to some degree, that founders like Zuckerberg invested like the world had changed forever. But again, nothing lasts forever. And these gambles have ended up costing many thousands of people their livelihoods, if not put them at risk for deportation from the US in the case of immigrant tech workers.
It's positive that Zuckerberg and other chief execs are taking accountability for their mistakes here. But these leaders also showed a startling display of naivety at best and a straight-up failure of imagination at worst when they say that they didn't see it coming.
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