In my opinion, there are multiple causes of the current tech job market situation:
1) Rapid rise in interest rates .. affects funding available to startups as well as makes corporate R&D more expensive relative to the payoff
2) Overhiring during covid likely led to a degradation in standards and a pile up of warm bodies at the largest firms (I say likely because I don't think my org was able to hire on net. We kept getting outbid for candidates and lost people to attrition). Even if this is a perception in the leadership and not a reality, it will lead to a cull.
3) Consumer demand for consumer electronics, computer gear and generally Internet services has fallen compared to the covid bubble. A lot of weird things were going on with respect to both increase demand and constrain supply back in those days. Whiplash effect in supply chains is being studied by academics today.
4) Changes in the US tax code for how software dev costs are attributed. I don't fully understand this but seems pretty plausible.
5) I think the leaders don't see how AI can make them money yet ... the obvious thing is it can reduce costs by trying out AI in their processes. This is all very expensive so perhaps the layoffs creates room for investments in the that direction.
All of these are significant headwinds. Am I missing any?
I'll posit an unpopular one. Elon's mass-firing at Twitter showed CEOs that many tech companies really are overstaffed and can get away with far fewer employees (Twitter's troubles now are due to dumb policy decisions, not their tech stack falling off a cliff).
Counterpoint : projects/products usually take years to die from neglect.
Every large company that handles IT as a cost-center has a host of zombie projects they believe are still well, but actually are understaffed/funded, and will eventually fail unexpectedly. When the failure is perceived, the usual decision is to start a rewrite, and have both an old, unmaintainable product and a recent product that isn't fully-featured yet.
I can't tell whether Twitter was really overstaffed or not, but I don't agree with people who use "see, twitter.com is still stable now" as a proof that the company was overstaffed before layoff. For instance, the stability could have been earlier investment in reliability engineering paying off. Cutting features and reducing changes also improves stability, but that may not be a good thing in the long run.
Order's from who? Certainly Musk re-platforming hate speech (and lies) in the form of Alex Jones and re-tweeting antisemitic posts had NOTHING to do with corporations wanting to flee right?
This is pretty intellectually dishonest. Doubt the ad boycott wouldn't have been nearly as large - or maybe even happened at all - if it weren't for Musk letting Nazis have a field day on Twitter again.
I think 5 is pretty spurious at this point. I don't think any serious businesses are trying to replace most of their devs with ai yet. Otherwise you got a lot of the reasons. I think there's a few more. There's probably pressure being placed on leadership at a lot of companies by VCs, investors, and shareholders to trim the fat. That's why I think a lot of these layoffs seem pretty random, with situations like people's manager having no idea their direct reports were getting let go. The layoffs are coming from a fairly high level in these organizations. You mentioned this but this has a lot to do with the perception of the money people more than it has to do with reality, imo. That's why you can have extremely profitable companies like Google firing 10% of their workforce. Hugely destructive imo.
Additionally, January is the end of the fiscal year. Companies want to make cuts to their budget before February.
I've been seeing a lot of action in terms of recruiting outreach however. There seem to be a lot of very small startups getting created with a different financial attitude, eg trying to focus more on balancing profitability with growth. Rough time to be a late stage start up that just spent the last 8-10 years collecting debt and losing money on every new user. Supposedly the fed is going to cut rates at some point this year, so maybe that changes the calculus here eventually.
When my company did layoffs last year, neither my manager, or my manager's manager, or my manager's manager's manager knew before the moment we all knew if we were staying or not. You had to go up to the VP level to find anyone who was involved in planning the layoffs.
When the VP has about a thousand engineers recursively reporting up to them, how are they supposed to be able to decide who stays and who goes. We were told that the layoffs weren't performance related, but at that level of distance what useful signals are there outside of the performance rating?
Nail on head, and if I had to stack rank the highest to lowest contribution I would say:
1, 2, 4, 3, 5
Rates rule everything around you. Macro.
Hiring standards absolutely went out the door. I remember being on interview panels in 2020-2021 and it was - more open roles, less candidates per role, higher fill rate per role, fewer interview rounds per role.
Tax code seems to be a big factor and being called out by journalists in the know. It's also telling that FAANGs are winding down / shrinking their more "moonshot" and "researchy" areas that have no real products or high staff to actual product ratios.
I think 3&5 are much lesser impact but certainly there.
>Hiring standards absolutely went out the door. I remember being on interview panels in 2020-2021 and it was - more open roles, less candidates per role, higher fill rate per role, fewer interview rounds per role.
I sure wish I had that experience. I went some 6 rounds at my pre-COVID job and when layoffs hits I was 4 rounds in with 3 other companies before I accepted my next job (which was 3 rounds, but I had a referral from a very early employee)
now I'm laid off again and it's still 4-5 rounds, but less vibes on if that even leads to an offer. I went 5 rounds with one studio and then they ghosted me for 3 months. Unthinkable in 2022.
One additional reason according to me, pressure from investors to show growth post COVID. COVID time period saw rapid market expansion for a lot of tech companies, which was not sustainable. Now that things are getting back to pre-covid times, market is also shrinking. But investors want to see growth and what better way than to reduce cost and show growth than by laying off employees.
DEI and diversity hiring incentives are much less popular due to Harvard's statements on free speech and also the supreme Court decision regarding the legality of not hiring white/Asian people due to their race.
In short, you used to be able to deduct the entirety of an SWE R&D costs in the year it was paid, but now you must amortize it, like you would with machinery. That means that some companies are incurring "gains" that must be taxed, whereas before they wouldn't for that year.
One thing nobody's talking about is the loss of the R&D tax credit - engineer salaries must now be amortized over 5 years (15 for overseas) driving $billions in taxes being sucked out of the tech industry.
The article should break out 2022 by quarter. It shows a tiny number for January 2022 but a fairly large number for 2022 overall. What actually happened was the first 3 quarters of 2022 were good but then the layoff wave took off early in Q4.
> The video game industry (and the larger tech industry) say they over-hired in 2020 and 2021 to ride the increase in digital activity after social-distancing rules went into effect around the world.
Firstly, citation?
Secondly, what does this actually mean? More people using existing online services means infrastructure scalability, surely, not generally "we need to hire more people across the board"?
Companies operate under a set of constraints. If your hiring is currently constrained by revenue (meaning “we have plans for what we could use more employees for, but can’t support hiring them”), an influx of sales could release that constraint and spur you to hire.
Later, as constraints change, you might find that you have picked up a conflict between the constraints and your current business approach and need to make an adjustment (or delay a while and hope things improve).
I think it’s not that different from people upgrading their house, car, and travel as they make more income (“lifestyle creep”). What you used to drive and where you used to live obviously sufficed, but was constrained by your income. When that constraint relaxed, you adjusted your consumption to reflect that.
> More people using existing online services means infrastructure scalability, surely, not generally "we need to hire more people across the board"?
From what I saw, the hiring was driven more by an influx of cash than an actual need to respond to business needs. Companies began hiring much too early during the pandemic response to have down it based on seeing an increase in use and analyzing where their resource bottlenecks were.
The government dumped new money into the financial systems and investors moved funds to more heavily invest in tech assuming that the industry would be less effected by lockdowns and would see more benefit from work from home, distancing, etc.
tl;dr; They did over hire, but for all the wrong reasons. Balance sheets and new money.
Instead of freaking out about AI, we should start building companies to replace the old guard using AI tools to untangle the mess.
The problem is funding but I'm sure reasonable business plans will find seed money from more traditional investors instead of VC gamblers. Maybe even self-finance with clients.
1) Rapid rise in interest rates .. affects funding available to startups as well as makes corporate R&D more expensive relative to the payoff
2) Overhiring during covid likely led to a degradation in standards and a pile up of warm bodies at the largest firms (I say likely because I don't think my org was able to hire on net. We kept getting outbid for candidates and lost people to attrition). Even if this is a perception in the leadership and not a reality, it will lead to a cull.
3) Consumer demand for consumer electronics, computer gear and generally Internet services has fallen compared to the covid bubble. A lot of weird things were going on with respect to both increase demand and constrain supply back in those days. Whiplash effect in supply chains is being studied by academics today.
4) Changes in the US tax code for how software dev costs are attributed. I don't fully understand this but seems pretty plausible.
5) I think the leaders don't see how AI can make them money yet ... the obvious thing is it can reduce costs by trying out AI in their processes. This is all very expensive so perhaps the layoffs creates room for investments in the that direction.
All of these are significant headwinds. Am I missing any?