Perhaps I'm naive, but I think companies are doing massive layoffs these days because of some sort of "domino effect".
There are companies out there who would love to lay off half their staff, but in regular times they couldn't just do it (because it wasn't a common thing, and makes them look "bad"... everyone would protest). But since nowadays every damn company is doing massive layoffs (and not unknown companies, but companies like Twitter, Facebook, Google, etc.) then they take advantage of the situation and proceed to do the same.
> While we are looking forward to what’s to come in 2023, we must also make hard decisions necessary to set us up for long-term success.
This could have been said any damn year in the past, but massive layoffs is the latest trend, so why not.
The FED is currently raising rates to fight inflation. One of the FED's main goals is slowing down demand, as policymakers can't control supply.
So, to fight that elevated inflation they are killing demand, and when demand sharply drops, you can't keep paying your workers as before (because you sell less goods!).
Moreover, companies simply got fat during the pandemic and over hired. I mean, there are probably also a few (lot) companies which do what you write, but I don't think Flexport is one of them. It's more likely they over hired like everyone else. Also, you might want to take a look at the current container fright prices [1]. Pretty parabolic.
Another impact of rising rates and declining demand is decreased credit lines and increased costs.
The world, particularly business in the US, really did get used to cheap borrowing for everything. Using a line of credit for everything or acquiring massive amounts of easy to service debt has been basically a standard business practice for the last 20 years.
I am actually surprised things haven't imploded yet. So many companies have acquired massive debt that's going to become increasingly impossible to service. It feels to me like we are waiting for the first big domino to fall.
I mean, we have seen this before. This is particularly classic in retail, with a lot of overleveraged expansion of new locations by both department and big box stores in the US.
Some dominoes took longer to fall than others (Circuit City was fast, Sears took half a century)
I'm seeing this right now in retail, actually. Particularly retail that got snapped up during the pandemic by private equity which already had high levels of debt. They are opening new stores left and right… and their expansion seems unabated by recent rate hikes. I have to imagine that can not last forever.
This was the case against raising interest rates in the EU. It’d affect the servicing of the debt for countries like Italy.
Companies are screwed. Big companies might get bail out, or not. Governments, especially big ones like Italy, will probably get a bail out and break the stupid system once and for all.
It’s not that the system does not work, but it’s getting abused left and right by people who think they know shit about economics.
If the massive debt is at 1 or 2% interest they could essentially bank a fairly small portion of it to service that interest. When instead debt is at 7+% it's a whole other story. You better be building something that will shake loose enough profit to service the debt.
This is literally what interest rate hikes are meant to do though, and everyone plays along. You hike rates, which switches people to saving instead of spending, since no one is spending companies cut costs and downsize instead of spend for growth and hey presto, demand collapses.
In a cheap money environment you take the money and you gamble for growth, in an expensive money environment you do your best to run lean. The pain is moving between these two. The winners are the guys who did a raise at the peak and can use that cash to accelerate through the downturn, and the losers at the guys who just didn't quite get there, who now are forced into taking capital at a massively diminished valuation.
> In a cheap money environment you take the money and you gamble for growth,
It's a classical Austrian economists nightmare. The argument is that cheap money stimulates malinvestment. That is to say that corporate projects that would not have made adequate returns on capital under normal circumstances seem to look feasible.
It's all fun and games until the tide turns, and then the whole edifice collapses like a house of cards because it was built on shaky premises that no longer hold.
This was my initial take six months ago, but I've come to realize this is about runways. Imagine you just lost your job. First thing you'd want to do is get some idea of how long it'll be until you can get another one, then look at your budget and cash on hand to make sure you can pay the bills. If you don't, you have the options of borrowing money (which is hard and a bad deal in these circumstances) or selling some of your stuff. This is basically what companies are doing.
It's a bad deal for companies to borrow money or take big investments when interest rates are so high. If you want to avoid doing that, you need to predict when interest rates will drop and make sure you have enough cash to ride it out. In spite of being successful, some companies don't have the cash, and they need to reduce their burn rate.
Amazon and Meta are at 0 risk of running out of money. They make billions in profits.
Smaller companies that are still not generating profits? Absolutely they need cuts to survive.
Both of these things are true at the same time. I’m continually surprised at how quickly people have bought the excuse trotted out by extremely profitable companies for mass layoffs. In that situation it is primarily an exercise in juicing up the stock price and keeping investors happy.
More than just make a profit -- they need to be a better investment than e.g. Treasury bonds, for the additional risk. Which means higher Fed rates put the bar higher for acceptable profit levels for companies.
You are naive they just want to rehire positions at lower rates if you see in the article they are cutting 600 but are hiring for 350 to 400 people. It would immediately allow them to replace higher wages workers that have been with the company with entry level positions . Also it seems like an identification of long term trends and they figure they want to invest in automation.
Well, that's what I said. They are doing it not because of "bad times" or "recession" or "post-covid era", they are doing it because that's what they wanted to do from the beginning. They couldn't do a massive layoff in the past because it would get them bad rep, but nowadays, it barely is a thing anymore (just look at this thread: people commenting "well, at least the severance is nice". What the hell? Massive layoffs shouldn't be seen as regular news)
> They couldn't do a massive layoff in the past because it would get them bad rep
Forget about "bad rep", it was a bad economic decision: why let go a slight underperformer (a now-known 0.8x engineer) that you hired in 2015 at pay X, if in exchange you hire a "expected normal 1.0x engineer", but at a price of 1.8*X in 2021 due to crazy escalation of SWE salaries in that period.
(Assuming you have a perfected/more picky hiring process that knows the median hire will be a 1.0x engineer)
Now in 2023, the situation is different: you can hire a "expected normal 1.0x engineer" but at pay 0.8*X (adjusted for inflation - ratios all made up)
The way the article is written is a reorganisation almost, normally you are supposed to let your workers move into other roles, if they are willing. Not the same as reduction in force.
A global recession is coming against a backdrop of the Fed raising rates, that is going to be very painful. A lot of people here don't seem to realise this is the case or are in denial. This is a bubble bursting, this is serious.
Lots of companies are laying off workers or at least freezing hiring because they anticipate earnings cratering, or are already seeing it happen. They haven't reported on it yet, but they will in the coming months. The layoffs will continue to gather pace, as will bankruptcies.
As far as I can tell, layoffs seem concentrated among high-earning folks - I can definitely see how anyone browsing HN would think we're headed straight for a recession. But it seems like overall, and especially in lower-wage jobs, employment is still humming along and people are very much not getting laid off.
That actually really gives me hope for a soft landing - those high-wage folks are much less likely to have serious financial problems like homes getting foreclosed (not to say it's not possible but they're much more likely to have a cushion to keep making payments). If they pull back on their discretionary spending plus stop doing things like driving up housing/car/stock prices by putting money into those things, that feels like it could be the basis for inflation slowing down without a huge uptick in unemployment and everything that comes with it.
This is a good point that I had not previously considered.
Inflation has been pretty stubborn. I assume some of that is coming from supply chain issues, but some of it also could be due to higher-earning households not being as price sensitive as they would have been in previous eras. i.e. a Google engineer is not going to really notice or care that milk is 50% more expensive. They might not even notice or care that their new car now costs $40k instead of $30k. Their annual stock options probably fluctuate by that much on a daily basis. That level of economic comfort used to be the exclusive purview of the professional class, i.e. doctors, lawyers, etc... But the tech boom has expanded that class (upper middle, lower rich?) considerably.
Will be interesting to see if this is the straw that can break the inflation camel. Overall, I am getting the impression that these layoff announcements, while grabbing headlines, are not very indicative of the market at large. But it does seem like they are picking up steam, and of course, these things can also reinforce each other. For example when you let go of 10% of your staff, that means you also reduce your per-seat SAAS software spend, and that money was someone else's revenue.
Anyways, I am rooting for a soft landing but still feel like these things are too hard to control. Would be nice if we could just let some air out of the more bubbly parts of the economy while keeping everything else chugging along. Previous recessions usually result in those who can least afford it getting hit the hardest, so a change of pace on that front would be welcome. Fingers crossed.
I make a good wage and the first thing I'll do if I get the boot is stop buying things from the plebs. No eating out and paying the cook. No day care paying the working class daycare worker. No buying lumber for house projects paying the logger and mill worker. No cars paying the auto worker. etc, etc. Less toys for the kid meaning less trucking and shipping work.
Compound that at scale and it will definitely have an effect.
True but at a minimum income I am not employing anyone and basically only paying rent (straight to the megarich) and taxes (straight to the destitute and the megarich) and food while scrounging and DIY for everything else. The portion people spend on working class worker services probably increases exponentially going from lower working class to upper middle class, which would make the effect naturally even worse than a linear one.
there is also the fact that the skewed income distribution means that there are relatively few high income people cutting back (a lot) on expenses, so while it has an effect, it’s probably a lot less than if the same proportion of low income people were losing their jobs
Yep, this is it exactly. Even tens of thousands of tech workers getting laid off and cutting back discretionary spending isn't actually that impactful in the grand scheme of things, especially since much of their spending is on high-end, luxury goods.
But it seems like overall, and especially in lower-wage jobs, employment is still humming along and people are very much not getting laid off.
There will not be a soft landing.
When has there ever been a soft landing and how would raising rates into a recession ever result in one? Raising rates takes 1 year to come through to the real economy - we haven't even seen the impact yet, only on stock prices which foreshadow the real economy and again are a leading indicator. They will raise till unemployment starts to rise.
Unemployment is the goal of this Fed policy - that is the point - cause unemployment so that inflation goes away.
The reality is we cannot see the future of our incredibly complex, ever-changing economy. Sure, this hasn't happened in the past, but on the other hand the economy today is vastly different than it was even fifty years ago. Not to say we couldn't end in a recession - of course that is a distinct possibility - but the reality is that we don't have a ton of history to draw on when it comes to post-pandemic recessions exacerbated by supply chain issues and large-scale war in major energy-producing countries.
I wonder if you've shorted the equities markets to the greatest degree practically possible given your financial situation? If not, then I think you're phrasing things with too great a degree of absoluteness.
In terms of the Fed's goal, it is reduction of inflation. Unemployment is both a driver and a signal of that, but it's not the ultimate goal. And besides, a rise in unemployment doesn't guarantee a recession - we're at 3.5% and folks from the Fed have said they see 4% as consistent with keeping inflation stable at an appropriate level. It is absolutely possible to have 4% inflation and not be in a recession.
I don't short stocks, but I would not buy the US market at the moment. There will be bear market rallies but I do think this is still a bear market and will take years to play out.
High interest rates causing unemployment and reducing investment is the lever they will use to defeat inflation, it's very very hard to get right and the Fed has a long track record of getting it absolutely wrong (including over the last decade when they stoked a massive asset bubble in the US and all sorts of crazy behaviour like NFTs and crypto speculation). I suspect they will get it wrong this time too.
The Fed created this bubble (and arguably others since 2000) with loose monetary policy, and now they're trying to kill it with tight monetary policy - what could possibly go wrong!
>I wonder if you've shorted the equities markets to the greatest degree practically possible given your financial situation? If not, then I think you're phrasing things with too great a degree of absoluteness.
The equities market doesn't have great correlation with the common pleb's job outlook so it makes no sense to short the equities market based on these kind of predictions.
The prediction was that we are guaranteed to go into a recession. Are you suggesting that we might have a recession in which the stock market doesn't decline? Bear in mind that this is a situation in which we can be sure the Fed will not prop it up, since they're the cause of it going down in the first place.
If we're making predictions about recessions based on history, then it seems pretty clear that the result of one will be a market decline.
I think the issue is that we’re already in a recession, everyone has been talking about this for months, and the stock market has taken a giant turn downward already last year. It could stay at its current level for a year or two before rising again, but the stock market has already been expecting a recession and that’s likely why it’s this low already.
It doesn’t have to drop more in a recession because it already has! People losing their jobs and spending less is already predicted by Wall St.
Apologies for not being clear. I was referring to this quote which you quoted.
>But it seems like overall, and especially in lower-wage jobs, employment is still humming along and people are very much not getting laid off.
There will not be a soft landing.
It seemed like you were responding to this statement that was about employment rather than the stock market, before making your comment about shorting the equities market.
This is a classic, desperate hope that people have going into a recession. "This time could be different". We've been waiting a long time for this one. It's not just about COVID, otherwise why would it happen as things get better.
Many of these businesses being hit were long overdue for a fall and behaving highly irrationally. This borders on the severity of the .com bust, though it does appear to be less severe.
How do we know it won't be worse either? We could be heading into a downturn and turmoil to rival the great depression.
> This borders on the severity of the .com bust, though it does appear to be less severe.
I don't think this is remotely true - the .com bust killed off a huge number of companies (and an enormous amount of market cap) that weren't profitable and had no real path to profitability. This time we're talking about layoffs at companies like Meta and Amazon that are just throwing off money every quarter.
I really wish we had other tools than the Fed at our disposal. Legislation could be passed to create surtaxes on profits that exceed the current rate of inflation to help curb the inflation spiral. Likewise, we could pass legislation restricting the ability of private banks to grant lines of credit (so as to shrink the money supply on the supply-side rather than the demand-side). Either way, it would be nice to see the supply-side take a hit in this circumstance rather than the demand-side. Hit the asset-holding classes harder than the wage-earning classes. Ultimately, it's the asset-holding class that got us into this disaster in the first place.
> I really wish we had other tools than the Fed at our disposal.
The fed is basically a team of scientists when it comes to monetary policy, and meanwhile congress is essentially warring factions of drunk, catty sorority girls when it comes to fiscal policy. It's unfortunate.
If instead of the massive tax cut passed in 2017 we had passed a 2 trillion dollar infrastructure spending bill (and I'm talking 2 trillion in additional infra spending, not the watered-down "1 trillion" that included routine spending) we could've been on a solid footing for supply capacity that could've fought inflation without targeted killing of the working class.
The idea is I think that inflation is caused by too much money supply in circulation, caused by overemployment, and the only cure for that is less employment. It's a lot like how inflation and deflation are two sides of the same coin, but you wouldn't "root for deflation" because that's just the opposite extreme – Fed doesn't want everyone to lose their jobs, "just a healthy amount"
This the reality because there's no political will for Congress to act, so we're left the Fed to implement anti-inflationary measures. A sufficiently empowered legislature might attack this on the supply-side so that nominal increases in wages could become real increases in wages while discouraging the supply-side from increasing prices to rent-seek those nominally increased wages.
It sucks, but it is what it is. The rich keep getting richer and the poor keep getting poorer.
Price controls were tried in the 70’s and it failed spectacularly and often led to shortages. We had almost a decade of stagflation - poor economic performance AND inflation.
It wasn’t until the fed took control of the money supply in the late 70’s did inflation get under control.
Even more it still seems like it’s mainly companies who doubled their headcount since COVID started because someone extrapolated the madness to last forever? I sure hope the first in line for layoffs are the people who thought that was a great idea
>As far as I can tell, layoffs seem concentrated among high-earning folks - I can definitely see how anyone browsing HN would think we're headed straight for a recession. But it seems like overall, and especially in lower-wage jobs, employment is still humming along and people are very much not getting laid off.
Shit rolls downhill. We'll see how well the service economy holds up when their client base has been out of work for 6 months.
Are tech workers really the basis of the service economy? And even if so, will they remain so if lower wage earners, of which there are quite a lot more, start earning relatively more?
One interesting concept is that falling inequality will look exactly like this.
Wealthy people have gotten used to increasing the gap and therefore assume that trouble at the top is much worse below.
But what’s actually panning out is that Internet technology is great at replacing white collar jobs and awful at replacing blue collar jobs (I don’t think electricians are losing sleep over ChatGPT).
I would actually very strongly disagree with that assertion.
Delivery robots are limited to certain college campuses, robotic waitresses are far from the mainstream, and self-checkout appears to still need 1-2 workers manning it for loss-prevention/general help.
Meanwhile, Robotic Process Automation is gutting the "I download a PDF and transcribe it to Excel" worker category at banks.
I don’t think we know that yet. GPT is less capable than StackOverflow, and a service like that using cheap human labour has not yet replaced programmers. In the absence of AI that can write code or change sheets how can we know?
Meanwhile, farm automation has flipped the overall percentage of labour force from >90% farm to <10%
And that doesn't even include the explosion in Buy Now Pay Later services like Afterpay, which are very much debt but likely don't show up in the report.
EDIT: Thank you all for generously sharing your time in writing up such thoughtful answers.
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Would love to hear more on your perspective / insight.
This is all intentional, right? My understanding is that the fed is leaning into this particularly hard in order to dislodge the stubborn housing bubble.
For an individual (someone who isn't a current business owner), does this basically mean we should continue stockpiling savings, and avoid moving (rent) / avoid buying house / buying a car?
Any ideas how long this could last / what the bottom looks like?
> My understanding is that the fed is leaning into this particularly hard in order to dislodge the stubborn housing bubble.
They are trying to reduce inflation. The housing bubble certainly played a part, but inflation was hitting nearly everything. A big concern here, is that many smart people think a fair bit of that inflation was due to COVID related supply chain disruptions (which still persist, see China and COVID). So while raising interest rates will help, it may not be the right tool for the job (but it is the only tool that the Fed has, so here we are).
> For an individual (someone who isn't a current business owner), does this basically mean we should continue stockpiling savings, and avoid moving (rent) / avoid buying house / buying a car?
Definitely build up your savings. The other three are more complicated. Rents appear to be finally going down in some marquee markets. So moving might actually save you money. Buying a house now feels like a bad idea, seems like the market is still carrying on from the fumes of the bubble, but interest rates are definitely having an impact. Based on historical examples, the full impacts will probably take a few years to shake out as housing tends to move pretty slowly. And buying a car, well that is complicated. If you need one, buy one. If not, probably best to avoid it.
If you do have savings, might make sense to start looking at CDs, treasuries, and municipal bonds. Interest rates are up and if you have a chunk of cash sitting around those are good ways to put it to use.
> Any ideas how long this could last / what the bottom looks like?
Watching the Fed is the key here. And the Fed is watching inflation. So as long as inflation stubbornly persists the Fed is likely to keep raising rates, and that is going to impact the economy. I read somewhere that the "market" is expecting inflation to normalize in the summer of 2023. But personally that feels optimistic. I think we still need to shake off the COVID induced supply chain disruptions before things get back to normal, and that still feels like another year or so away.
2022 was the worst performing year ever for bonds and among the worst-10 for stocks -- we've never been this deep in the "negative returns across sectors" quadrant as we are right now, and there's no clear indication or catalyst to suggest we're recovering yet either.
Wow. Take the maximum of both axis, which represent the ceiling of what you can earn with a conservative stock or bond portfolio, and it blows the rest out of the water. Really enjoy the way they distilled this down.
With China dropping its zero-covid policy, I think we're realistically on the way out. However there's no avoiding that we need to pay for 2-3 years of lost global productivity.
I mean picture yourself stopping work for 2-3y with zero planning, living on debt and pretending like nothing happened. At some point the bills come due.
I am not sure what to think about China. Dropping the zero-covid policy feels like just the start. They still might go through a couple of waves of covid before things get back to normal. Or things could snap back fairly quick, hard to predict.
Another factor working its way through the system is the "reshoring" of manufacturing. A lot of companies gave up on China and are moving their manufacturing to other countries or closer to home. This probably creates inflationary pressures as the development of the manufacturing facilities create s a fair bit of demand, but also staffing the facility creates more demand for the local workforce. So if this trend continues I could seeing this being a long term inflationary pressure.
I think at least the China situation or lack of manufacturing capacity will resolve itself by the end of the year. Reshoring will change things but I think over the next 2-3y, making it so that overall the big turbulence we live now goes down slowly until the end of the year and then stabilizes at a higher inflation rate than expected (3-4-5% out of my magic hat), but not as wild as now.
2008 lasted nearly 17 months. The hard part is deciding when the recession actually started. The media and government is in denial, so they'd tell you we aren't even in a recession yet. But the rule of thumb is typically two negative quarters of GDP growth, which we hit this summer.
If you run a VC backed business my suggestion is 24-30 months of runway is a good starting point.
As far as individuals go, it's not a bad idea to mirror this advice. Have essentially 2 to 2.5 years of income saved in the event that you get laid off and can't find a job for a long time. Hopefully it never comes to that, but it never hurts to be prepared.
It’s also hard to figure out when the recession ends.
The q1/q2 numbers were more than made up by the q3 gdp growth. The numbers for q4 aren’t out yet but the consensus thinks they’ll be slightly positive making 2022 a positive year. That’s after 2021 which was a barn burner.
The GDP curve is already nothing like 2008 so it’s hard to use it as a guide.
"The media and government is in denial, so they'd tell you we aren't even in a recession yet."
There are costant headlines about layoffs. Also you said that a recession has a defintion, if that hasn't happened how is the media and government in denial?
Like I said in my comment, it did happen. This summer we hit 2 quarters of negative GDP growth. At the time, and even now, the media is suddenly moving the goal posts and trying to redefine what a recession is.
Falling stock prices are really a reflection of real-world problems - while it obviously feels in the US like everything is fine (judging from the many comments saying this here on this thread), everything is not fine, companies looking at their P/L and laying off staff are not fine, and the Fed is deliberately going to cause a recession and cause unemployment to stop inflation, which is a very brutal and indirect tool to do so.
The Jeremy Grantham interview you cite to for him "correctly" calling a bubble in 2021 was posted on May 28, 2021. S&P was at $420.04. S&P closed today at $395.52. The S&P continued to climb from May 28, 2021 until January 2022.
I would not label this "correctly" calling a bubble when he is off by over 6 months and equities remain within 10% of when he gave his interview.
The peak came after he spoke, in late 2021, and it’s not over yet, bear markets often have rallies. The nasdaq in comparison to s&p has larger losses from peak as it was the epicentre of the bubble this time, hence the layoffs there, but every sector is going to suffer.
This is all about inflation, not housing. Housing is just going to get caught in the crossfire.
If you have a low mortgage, hang onto that! Otherwise standard advice applies, try to keep at least 6 months expenses in cash or cash equivalents. Don’t make big purchases.
>"God I wish we could just do a Land Value Tax and be done with it."
Can you say what this is and how it would address the housing situation?
The housing bubble certainly is a slow moving one at this point. It seems like there's still not a lot of inventory and prices are still at historic highs. Prices haven't come down although price growth has slowed. It's really quite bizarre. We're a mobile a society though, eventually people have to move for various reasons. Maybe people are going to hold on their mortgage and rent the house instead of selling? It's hard to see how all this plays out.
Unemployment is at a record low. US economy added 223k new jobs in December. US Q3 GDP increased annualized 3.2% over Q2.
Some companies are doing layoffs (mainly those that overhired during COVID), others aren't. Look at the data instead of clickbait headlines and everything looks much less bleak.
If you are really certain you can forecast how the economy is going to do with high accuracy, get a job at some hedge fund and get rich.
Unemployment is low due to a lot of early retirement/retirement. It is obvious we're headed for a recession, the question is how bad will it be. Will China's housing market collapse?
Retirement explains the low unemployment % since they're no longer part of the workforce.
The jobs added are great, especially since we need ~140K additional jobs per month due to the growing US Population. (that number probably dropped due to reduced immigration)
Unfortunately I don't work in all sectors of America so even if the GDP goes up to a China-inflated 10% or higher but I'm unemployed, it'll suck.
Sure but that doesn't mean there will be a recession. Sometimes it's just necessary to switch fields (ie horseshoe makers when automobiles were getting popular).
Housing starts (new construction). Home sales (it's harder and harder to get a mortgage). If you know any real estate agents take them out to lunch because most are hurting. Oddly housing prices aren't dropping as much as they should due to the higher interest rates, i.e., people are staying in their homes so not too much inventory.
> A global recession is coming against a backdrop of the Fed raising rates
I believe we're going to double dip. We already dipped before the holidays. We'll see one more very painful quarter, which may not be Q1, but Q2 or Q3. From what I've seen, Series B+ is essentially impossible right now unless you're in the top 0.0001% of companies. Even then, if you're that operationally efficient, you might even hold off on funding until you can pull a higher valuation in 24-36 months.
As far as tech layoffs go. I think this has been coming for nearly a decade. Companies have been hiring at what seemed an insane pace for so long that it just became the norm. My personal opinions on Elon aside, he proved how bloated a lot silicon valley tech companies are/were.
Yes, there will be more layoffs, and when earnings collapse there will be another fall in stocks.
Raising money is going to become very difficult, even for those in a good position who manage to raise, they'll be asked for a lot more of their company in return for less money.
This might be a real bear market in equities (anyone remember those?), where things are bad for years and we may see something like the 70s, where the inflation peaked twice, the second time it was worse.
Many people seem surprised that an organization would simultaneously hire and fire. I think that's normal.
At the end of every season, the Yankees fire some players and hire others.
Old cells in organisms die or are killed, while new ones are born.
Soldiers going on missions may put down the equipment from the prior mission, and pick up new equipment.
The argument "the organization is behaving selfishly, they should just repurposing the existing organization member" is inane since the function of members of an organization depends on the member's specialty, role, purpose, and an organization's purpose can change over time.
It's really strange people act like this is some killer argument when in fact nearly every organization with multiple entities does something analogous (grow in some ways, shrink in others, at the same time)
Remember when everyone cut jobs and canceled orders at the beginning of the pandemic and it really bit them? I'm like 49% sure that's going to happen again. Something funny is in the air.
Amazon's headcount literally doubled from 2019 to 2021. The recent layoffs barely move their headcount back at all.
While Amazon may be the most visible, this pattern was repeated across a lot of smaller companies. Even my employer was setting arbitrary goals to grow headcount by certain numbers last year and hired a lot of people with questionable qualifications in the process. Now they're laying people off and using it as an opportunity to cut their mistakes.
A lot of good people are getting laid off, but I have a feeling that many of these layoffs are an overdue correction from companies that were too afraid to let anyone go in the past few years. Now that the hiring market has changed to give employers the upper hand, it's only natural for them to start wanting to cut underperforming employees and focus on the people doing most of the work.
> Amazon's headcount literally doubled from 2019 to 2021.
What you're leaving out is that Amazon's net sales literally doubled between 2019 and 2021, from $280MM to $470MM. The doubling of headcount over that period was perfectly rational and in-line with its business model.
There was definitely irrational exuberance in hiring during 2021-2022. But Amazon's exuberance was far more rational than most of tech. Ironically, Amazon both hired far more than everyone else and also over-hired less than everyone else. Unlike all of the other FAANG++ companies, Amazon is and always has been a low margin and labor intensive business.
> Now that the hiring market has changed to give employers the upper hand, it's only natural for them to start wanting to cut underperforming employees and focus on the people doing most of the work.
That reeks of "I'm so sorry but with the tough financial times right now, we have to run a skeleton crew, so we won't be able to approve any of your PTO requests and we're expecting you to work long hours for the forseeable future"
Then later at the earnings meeting: "We made record profits this quarter! The CEO is getting a giant ass bonus!"
I wonder if this is what drove a lot of pandemic hiring. A bunch of companies froze their hiring in March-April (some did layoffs), realized they made a mistake, and in the Summer went on a hiring spree.
In this case the maritime shipping industry has a huge oversupply of boats (compared to last year which had a huge undersupply). Consumers are slowing their spending and retailers have a lot of inventory.
It’s slightly different dynamics. At the beginning of the pandemic, people thought the world was going to end (either in literal terms or just economic ones). The massive hiring came after people realized that life would go on.
What’s happening today is a result of the free money spigot being turned off. The layoffs and hiring freezes are going to be a bit more sticky.
I'm skeptical. I think companies are still in denial about just how thorough the upper quintile of the labor force was hollowed out during COVID. This is easy to miss -- especially in industries like tech -- where title inflation for junior workers has cause executives to over-estimate the fungability of veteran labor.
There is also a lower chance of having stimulus to soften the initial blow for those being laid off. It also seemed like layoffs at the start of the pandemic were centered around the service industry, where as now we are seeing them in a broader context.
I'm of the opinion that we're just regressing to the pre-COVID trend line.
Many metrics have a huge pandemic bump that's just approaching the pre-COVID trend line. I suspect we'll see a slight overcorrection. First dipping below trend, then bouncing back up a bit, before finally returning to trend line.
Companies will adjust to supply chain issues. Workers will wisen up and move jobs. Home demand will level out with supply. People will return to "normal" work areas.
High inflation means it's all the more important to find a return. You don't get interest from holding cash, you get interest from lending it out; on a personal scale maybe you can do that by lending to your bank but for those looking for a return on large amounts of capital it's not that simple.
> At Flexport, 2023 is going to bring extraordinary velocity – we are in the process of doubling our software engineering talent and moving to single threaded business organizations to build world class products faster, and we will continue to invest in delivering best-in-class operational execution for our customers.
Looks like they are laying off non-tech workers who they have made (or will make) obsolete through automation
You don't layoff workers that you replace through automation. You simply don't renew their contract. It's much smoother and cheaper, and automation does not happen overnight anyways.
Dave clark brought this from Amazon. At Amazon they call it "STLs" or single threaded leadership. Basically you assign one director/vp/etc. to the business, and they are responsible for PnL/success.
It isn't that you do one thing at a time as an entire company, but your org is focused on one thing. For example, maybe there is a director who runs an org in charge of international freight forwarding.
I'm not really sure how things are organized at other large companies as Amazon was my only experience into mega corp work.
"A single-threaded leader is a leader who is 100% dedicated and accountable to a specific product, such as your mobile application, customer account, or the search capability in your e-commerce store. The single-threaded leader is responsible for turning strategy into real results, and they are empowered to do so."
Reading the letter, it looks like the departing folks are being offered good severance. That makes me happy to see. I've been through rounds of layoffs myself. It never feels good, but how the company treats you if your number is called makes for a lasting impression.
This is one company i've always wanted to work for- my mother is a CTO of a company in the same space/different aspect of the pipeline so I knew this company was going to do well when it entered the YC batch, but I've never even received a screening interview. Hope i can apply once the economy recovers
In my mind, Flexport is part of the "real" economy of moving atoms. They don't fall into the more fluffy "we are a startup that helps other startups start-up". I wonder if this is an early sign for a rough recession that spills outside of the current VC-backed tech slowdown.
I’m not sure it’s that strong a signal, the covid effect on shipping meant that there was a huge backlog of stuff to ship which of course got worked through eventually. But yes one should expect an actual recession outside just shrinking the tech bubble.
When I interviewed with them 2-3 years ago, I recall being told that while the goal was to automate shipping, 95% of their shipping was being done with humans and human processes (due to the complex and irregular nature of shipping).
I would expect that a global reduction in shipping traffic would mean needing fewer of these people internally; so I suspect that's the bulk of the 20% reduction group.
People in this thread seem to be expressing confusion as to why they would be doing this "when the economy is still so strong"
The economy is not "still strong" by most measures. Employment is still strong although there are lot's of arguments to be made that when you dig beneath the surface things are much less rosy. But it get's way worse when you look past employment.
Housing volume has fallen off of a cliff, auto wholesale has fallen off a cliff, Major Metro Commercial real estate volume has fallen off a cliff while REITs are suspending withdraws.
All of this while tax receipts are about to drop off of a cliff while US debt to GDP and deficit to GDP are essentially at historic highs while the rollover rate on that debt is constantly increasing.
And then realize that the US is in a drastically better position than China, Europe and Japan
It seems like some of the HN crowd is very out of touch with the realities of the economic data.
I’d be curious to get Peter Zeihan’s thoughts on this. Flexport’s business is built around globalization and trade. What if Peter is right and we are seeing it all unravel before our eyes right now? Trading paradigms shifting to regional groups of countries. I wonder if this is on the radar for companies like Flexport
> we are in the process of doubling our software engineering talent and moving to single threaded business organizations to build world class products faster, and we will continue to invest in delivering best-in-class operational execution for our customers.
Will be fine.
I wonder what roles they elimated though. Good question for you to ask
I hadn't heard of Flexport before, but they seem to be focused on global shipping. The company I work for ships almost all of its products internationally, and we have seen a massive price hike over the last 2-3 years. Some of it necessary due to rising costs, but we know for a fact that larger-volume customers are still getting lower prices.
Additionally, the well-known carriers still offer incredibly poor service - most notably when it comes to tracking shipments and providing proper updates. This seems to be exactly the market Flexport wants to tackle.
If they can't even compete in the current overheated market, something must be going seriously wrong at their end.
Exactly. I've been told this before: "we have open reqs so there can't be a layoff!" Of course one follows eventually whether there are reqs or not. The reqs are just sitting there and they aren't responding to applications.
You are phrasing this as most of these people were simply lucky to be there, when the reality is that most of these people are the reason why Amazon is the top dog in online retail...
I spent a long time working at Amazon. Pretty clear to me many people were right place right time. True world changing meritocratic talent is rare and the opportunities for it to even matter even rarer
Right place and time (era of cheap money) explains the majority of our so-called genius tech CEOs.
A handful of ideas from info theory coupled with government desire to hype nation state brand does not a genius make.
None of these people have established net new ideas. Just borrowing from Gödel, Shannon, Turing, and the like.
Computer networks put the visibility, routing of logistics within reach of the masses. But we’re obliged to preserve the meme of aristocrats knowing best.
Not just CEOs, a lot of upper management all over. My own employer just hired a bunch of ex-Microsoft & Google people who are hardly the sharpest pencils (other than politically) and it seems all about the name on the resume.
This is one of those companies that were always hiring when I checked HN's jobs page. Honestly I thought they seemed like they have trouble hiring, but good for them that at least they've hired enough to get to the point they need a reduction.
I think what's missing in a lot of these articles are the headcounts of these companies in 2019. Does a 20% layoff hit as hard if the readers find out headcount at a given company is 200% larger than in 2019?
YC-funded freight forwarding company. Basic thesis is by using tech, you can dramatically lower the labor costs of forwarding, and since freight forwarding has huge returns to scale, the benefits compound. They raised 2 G$ from 2019-2022, and their CEO used that warchest to expand counter-cyclically through the pandemic. TBD if either of the two theses pan out.
Freight forwarding itself is the industry of coordinating the logistics of freight shipment, ie subcontracting with physical movers of goods (ocean carriers/railroads/trucking companies) and dealing with customs/legal requirements involved in the movement of goods
(Disclaimer: former FP employee and current shareholder)
> Basic thesis is by using tech, you can dramatically lower the labor costs of forwarding, and since freight forwarding has huge returns to scale, the benefits compound
Is this remotely true though? Aren't the main costs of forwarding simply fuel?
At some point I was importing goods from China (really small volume though) and I did ask them for a quote, and they were twice the price what the Chinese factory could get me from their own forwarder.
Not who you responded to, but I've listened to a number of interviews from the former CEO (highly recommend the Odd Lots podcast for his interviews and many other supply chain related conversations). A couple concepts, some details may be a bit off and I'm very open to correction.
There is a lot of administrative cost. IIRC, you might have something like 1 dispatcher for every 50 drivers. You have other people giving quotes via phone, decently high turnover for truck drivers, slow loading warehouses that cause a cascading effect when the driver can't complete all the stops planned for the day, and a strict limit on hours worked for truckers.
Some of the pandemic port congestion was truckers arriving at a port to pick up a particular load, but that load wasn't ready right then. Flexport has an app which basically let drivers on their platform arrive at a port, grab any container that's part of their platform, and take that to the destination. This prevented countless hours of idle trucks in ports.
There was an article I think on HN a couple of days ago, wondering why Uber and Lyft still couldn't turn a profit after all these years, while cab companies are still around and thriving, and wondering where all the money went.
Isn't it possible that tech simply overpromised, and that a couple of guys here and there smoking, typing numbers in spreadsheets on old computers, yelling over the phone and writing things down on post-it notes are simply cheaper and just as "efficient" as an army of AWS EC2 instances spilling out logs on S3 under the supervision of highly-paid engineers and dev op guys?
If you think about it you still need the same amount of drivers but a lot more administrative staff in the form of a world class engineering team. How could it be cheaper?
My roommate worked at a freight forwarder, but from what he told me, the entire thing is a mess of excel spreadsheets and highly inefficient.
I think the pitch of flexport is what if we modernize the technology and make it more efficient by reducing or removing the need of all of these people managing the forwarding via excel.
I think part of the problem with that pitch is that the cost of an IT integration in this industry could pay for a lot of people in Asia to manage a forwarding operation in Excel. Ocean carriers don't have like, APIs. It's all custom integrations with EDI, SOAP, or CSV-over-FTP and you have to have a lot of tedious meetings with them to figure out how to map out and interpret the data they can send and receive.
Yeah they also don't really have an incentive to integrate with flexport because even though it is a PITA you really only have a few options to ship freight across the ocean.
If you asked me whether I've seen more net inefficiency in my life resulting from underengineering with Excel-like workflows vs. overengineering through the "best" software engineering practices at a given time I really don't know if I could say.
Freight forwarders merely subcontract to the underlying carriers, who, theoretically, are pretty commoditized. In this model, the differentiating costs for a freight forwarder is in the labor required to organize the various subcontracts, which is what Flexport attempts to drive down via tech.
That said, I can't really vouch for the soundness of this argument one way or another. It's been a long time since I worked there, and my primary interest when I did was more in understanding the industry at a conceptual level than in litigating the viability of the business model.
Yes, a freight forwarder is sort of like a travel agent for freight--it's a middleperson role, in contrast to carriers, which are "asset-based" and operate vessels/planes/trucks.
Another significant cost factor for a freight forwarder is IT integrations with customers and carriers--many of which are very old-school and use EDI, SOAP, or even CSV-over-FTP to communicate shipment instructions and statuses.
I'm not sure to what extent Flexport implements these kinds of integrations with their partners, but there is definitely a significant hurdle to breaking even on investment in this kind of automation vs. just hiring clerks to process everything manually with e-mails and phone calls, especially in countries with lower labor costs.
And in many places M stands for thousand, from Latin "mille" (as well as the Roman numeral). That doesn't keep people from counting in kilo-, mega- and gigadollars. Still less confusing than dealing with short vs long scale numbers in translation.
I wouldn't immediately parse that abbreviation in the US--but if I did I'd parse it as G being shorthand for grand. More commonly 2Gs would be used for 2x the normal force of gravity--i.e. you weigh twice as much.
As with many things I never expect others to be respecting arbitrary style guides when they write something. (Same reason I wouldn't use semi-weekly or biweekly.)
Also G (uppercase) doesn't have units that result in G$ being a plausible quantity even if you could combine number-unit quantities and use like a unit like that (which you can't for this exact reason): dollar-cubic metres per kilo per second per second.
Can you imagine the backlash they would get from both inside and outside the company if they started pulling job recs before publicly announcing the downsizing?
Fully agreed, it just shows what people should already know - the only folks who know a layoff is coming in advance are C suite and VPs, maybe a few others. And they will lie through their teeth about it right up until the moment it happens. I'm sure the recruiter who sent that message had no idea this was coming, and is just doing his job.
The rest of us have to read the tea leaves. But for every company that lays people off, you'll find employees swearing up and down that the business is healthy, layoffs aren't happening, and they know this because execs assured them for the third time just yesterday that there's no plans for layoffs.
Don't know the exact origin of the name but maybe an easy way to remember it is "FLEXible transPORT".
To massively oversimplify it for the sake of being short:
- ship a small package within the same country --> UPS/FedEx
- ship a large heavy package (e.g. forklift pallet) within the same country --> freight trucking company
- send a shipping container from one country to another that requires a ton of complicated government paperwork for export & import, pass customs inspection, pay duty fees, and involves coordinating ocean carriers, railroads, air freight, docks, etc --> a freight forwarding logistics service like FlexPort.
E.g. you invented a new electric scooter and had a factory in China manufacture a thousand of them. Now you have to ship those 1000 scooters from the factory to a warehouse in USA. That's the business FlexPort is in. FlexPort itself doesn't own any ships or railroads. It is a coordinator (acts as agent) for various transport companies.
Funny, it's one of these companies that screams "we are hiring!" everywhere but looking at their Linkedin employee growth it's basically flat for more than a year.
This is the guy that got famous during the pandemic for suggesting ports stack containers 3 or 4 levels high vs the standard of 2 [1] [2] Turns out 2 is just fine.
Where did you get the impression that two is fine? I am somewhat familiar with the issue, and looked at both of your links, but still don't understand. Where I live, they stack containers six high.
> Where did you get the impression that two is fine?
That part was a joke because of Flexport's layoffs due to lack of volume. The stacking is probably a separate topic compared to the success of his business, but was just stating why his name and company are familiar on HN.
I personally believe they should stack them vertically vs horizontal stacking to save space so they are always accessible vs 2-3-4 high. (also a joke)
I still don't get the bit where you say 2 high is standard. It's not. Though US port infrastructure is special, it's very outdated/inefficient compared to pretty much the rest of the world.
It's from the article last time this came around [1]
"For instance, Petersen says, local zoning rules prevented the owner of truck yards in Long Beach from storing containers more than two high"
Probably I wouldn't lay off 20% of my staff at all, unless I was really sailing in stormy waters with no way out. And Flexport isn't: there's been a slight dip in global supply chains caused by the uncertainty in China, but nothing so dramatic nor permanent that you should run and fire 1/5 of your staff - you only do that if something happens like China attacking Taiwan, and you know that for years to come trade won't be the same. It sounds to me like another Silicon Valley company laying off large chunks of their staff because everyone else is doing so: https://news.stanford.edu/2022/12/05/explains-recent-tech-la.... Or maybe because VC funds are suddenly draining for everyone?
And,if I really had to lay off so many people, I'd take a more personal approach. Invite the whole company for a virtual or physical meeting where I explain why I have to do that, why I have no alternatives, and communicate the decisions to the managers, so people can be let go after talking to a human. Not after getting an email out of the blue in their box, in the middle of a working day. This has been impersonal and faceless on so many levels.
The "I would never do X" is a classic response of someone who hasn't had to be there and do that. I suspect if you ever make it to that position, you will reach a point where you either have to do a big layoff - or your company will fold. So it's rather likely that you will fold, and no longer be a CEO.
If you think any of the companies that have done big layoffs needed to do so in order to survive I don't think you are paying attention to their fundamentals.
There are companies out there who would love to lay off half their staff, but in regular times they couldn't just do it (because it wasn't a common thing, and makes them look "bad"... everyone would protest). But since nowadays every damn company is doing massive layoffs (and not unknown companies, but companies like Twitter, Facebook, Google, etc.) then they take advantage of the situation and proceed to do the same.
> While we are looking forward to what’s to come in 2023, we must also make hard decisions necessary to set us up for long-term success.
This could have been said any damn year in the past, but massive layoffs is the latest trend, so why not.