How Big Tech Deluded Itself and Got Into This Mess
Reading Time: 5 minutesIndustry giants ballooned during the pandemic. Their workers are now paying for their hubris., Google, Microsoft, Meta, Amazon layoffs: Tech is still hiring, but the industry giants are paying for their pandemic bet.
When an industry lays off more than 100,000 people, you’d normally think there’s a sizable problem. It’s probably not the most advisable profession to pursue. If you’re in it already, maybe you’d even want to consider switching careers.
At the very least, you would be reckoning with the harsh realities of your field and measuring the depths of your passion for the work. A lot of tech workers certainly have time for that now. Ten percent of the workforce here, Thirteen percent there. Eighteen thousand gone at Amazon. Twelve thousand at Google. Eleven thousand at Meta. Ten thousand at Microsoft. Is this really worth it? Do I love what I do enough to face unemployment repeatedly, if necessary? (I can say, as a journalist, these can be very good questions to ask!)
But while more than 150,000 people have been laid off in tech in the last six months, prompting headlines about ‘a new economic reality‘ and claims that ‘tech workers had their pick of jobs for years. That era is over,’ very few of these workers should be having a dark night of the soul right now.
Despite what you might imagine from the pink slip–colored bloodbath at tech giants over the last couple of months, tech jobs are actually still abundant, high-paying, and generally some of the best work you can get. Technology and computer science still remains the single best thing a college student can choose to study if they’re looking for earning potential and an abundance of choices.
What’s popped isn’t a tech bubble but the biggest firms’ hubris. Companies that quietly reveled when the pandemic necessitated global dependency on their products have now been forced to reckon with the fact that there’s a price to pay for aggressively expanding amid a global tragedy. Logically, when the tragedy starts to ebb—or people decide it’s over, or however you’d define this strange point in the pandemic—business will ebb with it.
With hindsight, ‘pandemic darling,’ the term affixed to companies that thrived as America retreated indoors, is clearly a cursed moniker. It implies an inherent weakness in the business model. It means that consumers didn’t choose you—they had to use you.
The leaders of these companies plainly admit their mistake. They assumed that the pandemic reshaped the world in a way that would stick. The note from Alphabet CEO Sundar Pichai announcing 12,000 layoffs states it most plainly: ‘Over the past two years we’ve seen periods of dramatic growth. To match and fuel that growth, we hired for a different economic reality than the one we face today.’
What Pichai doesn’t do is address what that mistake actually means, or explain why it happened. Doing so would involve admitting a much deeper failing.
What none of these leaders will say is that in ‘those past two years,’ tech companies realized they could make unbelievable amounts of money because everyone was forced to rely on them whether they wanted to or not. When everyone’s afraid to leave their house, it makes sense that the largest consumer retail delivery business would suddenly make $100 billion more (nearly a 40 percent increase) than it did the year before. When everyone’s lives are literally trapped online, it makes sense that Google and Meta, both online advertising–dependent, would see 40 percent revenue growth in 2021.
But as the much-revered leader of Google or Amazon, shouldn’t you understand that the circumstances of the pandemic are quite literally unprecedented? Shouldn’t that give you pause as you add 50,000 employees in less than one year?
If you’re wondering why these companies weren’t asking these questions a year ago, you don’t understand the ethos behind their thinking. A black swan event for global health is to them a seizable opportunity. Amazon’s retail head Doug Herrington basically admitted as much in a January memo to employees: ‘Although other companies might have balked at the short-term economics, we prioritized investing for customers and employees,’ he wrote. In Silicon Valley c-suites, this was perfectly logical: If you really believe in your business, and then everyone turns to you with gratitude in a moment of global fear, it’s simply validating your company’s premise. The future finally caught up with your genius.
In October 2021, Microsoft CEO Satya Nadella was really feeling the moment. ‘For all the disruption and suffering that the pandemic has wrought on our lives and our communities, it has also been the catalyst for an unprecedented digital transformation that is driving massive technological and societal shifts that are creating important new opportunities for our customers and for Microsoft,’ he wrote in his annual shareholder letter. ‘This moment was built for Microsoft.’
What Nadella and his peers weren’t asking in that moment was whether the increased advertising spend and massive uptick in cloud adoption might have been a concerning omen. The pandemic extended the era of rock-bottom interest rates—following a decade of low rates and free-flowing capital—which made for cheap debt that was easy to swallow in the name of growth. (Now that interest rates are high, there’s no more cheap cash to be found.)
And if you’re making all these assumptions, you’re also going to hire for them, because increased hiring means you’re capitalizing on the moment. It’s a way of telling the world—and more importantly, your investors, who keep pushing your stock to never-before-seen heights—that you have faith that this is more than temporary.
If leaders had really cared to pay attention, one company’s arc foreshadowed the current trouble: Netflix. Like the other brand-name tech companies, Netflix experienced a massive surge in subscribers in the early days of the pandemic, breaking past records for growth. Unlike the others, its leaders immediately warned investors that this growth was likely to be mirrored by a fall. And they were right. The company still didn’t realize just how bad that fall was going to be—so bad that Netflix finally launched an ad-supported tier and cracked down on password sharing, in addition to layoffs—but at least it knew enough to acknowledge that its subscriber growth wouldn’t continue into perpetuity. People were stuck in their houses, so of course they were going to sign up for Netflix if they hadn’t already. The whole thing was a hostage situation.
It’s not that technology itself isn’t completely pervasive, structural, and important. We live in an era that will be defined as the internet age. It’s that a global tragedy held everyone hostage to these specific companies, and their particular history of braggadocio led them to make false assumptions about the future. And their laid off workers are the ones paying the price, at least for now.
Compare Nadella’s earlier confidence to his note from last week, announcing the layoffs of 10,000 people. ‘Every one of us and every team across the company must raise the bar and perform better than the competition,’ he wrote. ‘It’s as simple as that.’ (Was it also simple, just over a year ago, when Nadella was touting Microsoft’s invincibility?)
Yet in one way, these companies have achieved what they set out to do. They’ve made us dependent on tech, broadly, in the way we structure our world. Today, more than half of all tech jobs are actually outside of the major tech companies. Every other industry is dependent on the same kind of work that’s done inside these companies, only those industries didn’t benefit as much when their entire customer base was trapped inside living rooms. Finance isn’t going anywhere—and most finance jobs are tech jobs. Logistics is one of the world’s thorniest problems. The solutions are tech solutions.
Though the labor market has finally started to cool from its record-breaking highs in 2021, the market still added about 223,000 jobs in December, which is almost double the 145,000 jobs added in December 2019, before the pandemic began. For anyone still worried about the tech workers laid off from the world’s most prestigious companies, here’s a brief listing of jobs I found in a 30-second perusal: 2,400 software-related openings at JPMorgan. Eighty hundred and fifty roles at Deloitte. Four hundred and forty five at Ford.
The people who made these tech companies run will all find jobs if they want them, and they’ll be paid well for the work. What will change is that they may never return to a tech giant with a glowing halo of fame and prestige—and when or if they decide to try, they’ll likely find that halo to be diminished. With these layoffs, even the people inside those once-hallowed halls are starting to understand that the companies themselves are, after all, just companies.
Ref: slate
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