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Tuesday, May 21, 2024

Big Tech’s Layoffs Will Fuel the Industry's Future

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The Plain View

This was the month when Big Tech got smaller. The leader in the shrinkage was a troubled Twitter, led by a new owner who, after trying to weasel out of his $44 billion commitment to buy the firm, has thrown himself into the task of fixing its problems. Job One was getting rid of half the workers behind the money-losing platform. But Twitter was far from alone in stripping employees of their salaries, health plans, and email addresses. Stripe, only recently seen as the gold standard of rising deca-unicorns, cut 14 percent of its staff. Intel chipped off 20 percent. Robinhood booted almost a fourth of its workers. Lyft lifted 13 percent of its staff off the rolls. Shopify discounted a tenth of its 1,000 headcount. Snap disappeared a fifth of its people. The unkindest cut of all, at least in volume, came from Meta. Mark Zuckerberg gave 11,000 workers an opportunity to share the “badge posts” that outgoing workers write upon leaving the Frank Gehry-designed building. Apple and Amazon simply announced hiring freezes.

The number of newly out-of-work techies from this recent purge is probably well into six figures. But numbers don’t tell the full story. The most valuable asset at a tech company is talent. I have sat through endless diatribes at events for prospective founders, like Y Combinator’s Startup School, where peach-fuzzed moguls drill into people a quarter-generation behind them that the biggest screwup you can make is hiring the wrong person, and that glory comes to those who resist filling posts with anything less than superstars. That mantra extends not only to the tiniest garage-based startup but industry goliaths as well. Anyone who has ever applied for a job at a hot tech firm, or even a lukewarm one, knows that a brutal obstacle course lies between application and orientation. Candidates often must endure weeks of interviews, coding tests, and CIA-level scrutiny of their past. At one point Google, whose hiring was personally overseen by cofounder Larry Page, would go over applicant’s college transcripts with a comb so fine-toothed that it could pick off lice. Why did you get a C in that course? Unless you had a good excuse—“Uh, my mother died that semester?”—forget about getting those free meals at the Googleplex cafeteria.

Given that ordeal, you would think that actually landing a Big Tech job would earn you the status of a made man in the Cosa Nostra. But this week’s message is that when the bottom line finds a new bottom, or dark clouds gather on the economic horizon, companies are willing to write off that investment in talent and kick their most valuable assets into the street. In tech, the only untouchables are those at the very top. Mark Zuckerberg may say he’s accountable for the bloated staffing that led to the massive layoff he ordered—but pulling the paychecks from 11,000 people boosted Meta’s stock price 7 percent in a day, bloating Zuck's bank account by several additional billion.

At least Zuckerberg signed his letter explaining the layoffs. The email that told Tweeps half of them would lose their jobs was signed, simply, Twitter. Without a blue check mark!

But here’s the irony. While the economy reliably fluctuates between boom and bust, and valuations rise and fall on Wall Street’s whims, the technology itself goes in only one direction. Connection speeds get faster, chips get more capacity, and rocket ships get more reliably reusable. Generative AI models don’t degenerate because advertisers are skittish or creepy equity people force themselves onto some company’s board of directors. They just get smarter and scarier.

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When the great business cycle mandala turns and Wall Street puts away its yellow flag, the companies that let go of their talent will find themselves playing catchup. They will spend millions of dollars to restaff their ranks of recruiters, and those new scouts will spend many millions more to attract new employees.

But those companies may find they have fearsome new competition. Where do you think the people who lost jobs in 2022 are going to find work? Every Big Tech company seems to be either laying people off or refraining from hiring new ones. The obvious opportunity is joining a startup. If you have a great idea about how to take advantage of the ever-upward arrow of tech progress, there’s never been a better opportunity to snag talented people to help you build your dream. And I imagine hundreds of newly laid-off engineers, product managers, and designers are discussing how to launch new companies based on ideas they’ve been secretly hatching for months, while they toiled for companies now feeling insecure about their ad-based business models. Funding might get tougher, since investors are no longer throwing millions of dollars at any hoodie-shrouded Stanford grad with a laptop and a Github account, but the discipline required when seed rounds are more modest will help toughen those businesses for the long run.

Silicon Valley history shows that many iconic companies got their start in down-market times—Google, being a prime example, launched in 1998, just before the dotcom bust. Expect these current layoffs to add a new volume to that legacy. By the end of this decade, some of those new ventures will be among the most valuable in the economy. Their founders will grace the covers of magazines (or the post-print equivalents), draw big crowds at tech conferences, and be handling giant workforces of their own. And undoubtedly dreading layoffs when the next downturn hits.

Time Travel

Yes, we have seen this movie before. In March 2002, I wrote in Newsweek about how Silicon Valley was on the rise after the dotcom bust. Plenty of critics had dismissed the early tech boom as a fad, but of course the technology kept getting better even as valuations of companies like Amazon and Apple were in the dumps. Sorry you didn’t invest then?

After the dotcom bubble was reduced to soap scum, cynics took to calling its epicenter “Death Valley.” Venture capitalists switched from free-spending Medicis to Scrooge McDucks (2000: $21 billion invested. 2001: $6 billion). Acres of office space, once harder to find than elbow room on a microchip, are going begging, and unemployment has reached Dust Bowl proportions. No. 3 in the Bay Area best-seller list? A book called “Dot.Con.”

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But before you bust out in a schadenfreude grin—or weep over your festering Yahoo stocks—check out the Web-connected WozCam. Chances are good that you’ll catch a glimpse of the Valley’s prodigal son Steve Wozniak. Yes, he’s baaack, sitting on furniture grabbed at cheaper-than-IKEA prices from failed dotcoms, banging on a G4 titanium laptop bulging with emailed resumes to his new company Wheels of Zeus (check the acronym). Twenty-five years ago Woz cofounded Apple Computer in a garage. Now, of all times, he’s back on the startup trail, ready for a new revolution.

Woz’s return symbolizes what insiders already know: Silicon Valley is not only not dead, it’s already on the way back. In the aftermath of history’s biggest and giddiest boom-and-bust, the tech industry is entering the early stages of yet another cycle of innovation. “It’s a great time to start a new company,” says Heidi Roizen of Mobius Venture Capital. Jim Breyer, a partner at VC firm Accel, concurs. “This is exactly what was happening in the early 1990s [before the Internet took off].”

Ask Me One Thing

Rik asks, “When was the first credit card transaction over the internet? I ask because as a researcher at Liverpool University, UK, around 1994, we had to explain the internet to an American Express engineer.”

Thanks, Rik. It’s probably impossible to know for sure. Maybe somewhere in the 1980s someone gave their credit card info over the old ARPANET to buy a SCSI cable or something. But it seems that the same year of your encounter with an American Express engineer, Phil Brandenberger, sitting at his desk in Philadelphia, used his Visa card to buy a Sting CD from Noteworthy Music in Nashua, New Hampshire. Since the number was sent via an encrypted protocol, that purchase was celebrated as the first secure credit card transaction on the internet.

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It took a while to catch on, though. I remember chatting to one CEO of one of America’s largest banks at a conference in 1997. He told me he was not confident enough in internet security to use his card to buy anything online. Two years later Amazon launched!

You can submit questions to mail@wired.com. Write ASK LEVY in the subject line.

End Times Chronicle

According to the UN secretary general, “We are on a highway to climate hell with our foot on the accelerator.” I guess there are worse things than the Twitter hellscape.

Last but Not Least

Two years after starting its independent Oversight Board, Meta is cheering its progress, even while some inside the company try to slow it down. Meanwhile, the board is planning to improve online social discourse in general.

As he prepares to leave government, Dr. Anthony Fauci formally denies conspiring with Mark Zuckerberg to hide Covid’s incubation in a Chinese lab. Godspeed, doc!

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As if losing whole species of animals isn’t enough, we’re now fighting over how to classify all that fauna. Meet the hymenopterist in the middle of this crisis.

Well, there goes my plan to write a hagiography of Sam Bankman-Fried.

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