Why You Should Not Be Surprised by the Big-Tech Layoffs
Tech Layoffs: A Forgotten Deja Vu
Remembering the Dot-Com Bust in the Times of Big-Tech Layoffs
Winter is Coming
The big-tech layoffs, coming one after another, have caught the media by storm. Some of the biggest names, like Alphabet, Meta, and Amazon have joined the “layoff” bandwagon on the heels of Twitter with its erratic firing of a large section of its workforce. In the second half of 2022, as an Engineering Manager, I recruited at a pace not seen in years preceding it (especially in our niche domain). But some of those new recruits are now weary. Having left their previous organizations, where they had accumulated credibility and respect, they are worried that in the new organization, if there are cuts, they will be much more vulnerable than before (although, on the flip side, some of their previous organizations have closed entire teams, since).
The fear is palpable in the corridors of the tech industry — and I say this from India, which is rather less affected. When there is industry-wide cost-cutting, lower-cost locations like India and China with their large pool of tech talent, become lucrative for the multinationals, which already have teams there. Contrast this with the US. Over the last five years, I have seen Indian teams grow while the North American teams have either shrunk or stagnated in head counts, or barely grown if lucky. When tough times arrive, those team members are more vulnerable. Add to it the H1B equation — which covers large swaths of the tech workers in the US — which means anyone on such Visas has to find another job in a short time to avoid having to return to their home countries, and the situation can be quite daunting for many.
The End of An Era?
Last two decades, the Tech industry has gone from strength to strength, with easy availability of capital thanks to various factors (US treasury mainly?). Top tech workers were used to multiple job opportunities/offers, cross-company-bargaining that lead to inflated packages, and an escalating war of perks. So these sudden headwinds have surprised many in the media, and indeed the workforce itself. Remember, in countries like India/China, the median workforce is very young, and would have no memories of earlier times. Contrast this with the nineties and early noughties, when many companies in India — especially service-based (but not exclusively) — would resort to “bonds” (legally dubious “service contracts”) and sometimes even holding on to candidates’ original certificates as a guarantee against them, to keep people from switching jobs. Times have indeed changed. But if anyone thinks it's thanks to the benevolence of the industry, they are sorely mistaken.
In a recent New York Times article about the changing of the times, Nadia Rawlinson starts thus:
Silicon Valley as we know it — with its radically transparent company cultures, empowered employees, flat hierarchies and rarefied perks like nap pods and free food — is quickly disappearing. And it’s unlikely to return.
For nearly two decades, tech companies heralded an approach that centered on making workers happy with benefits that were intended to seamlessly integrate work and life. They made well-being programs and unlimited vacation, initiatives that prioritized the whole person, standard employee benefits. This, along with high salaries and equity packages, was a way not just to win but also to dominate the war for talent.
For someone who entered this industry right in the middle of its earlier turbulent times (the dot-com burst), it's hard not to be cynical when I hear terms like “radically transparent company cultures” and “empowered employees”. Or worse: “seamless integration of work and life”.
The Forgotten History of Tech Layoffs
For all the glitter of the tech industry, anyone who has lived through its twists and turns, the reality is much more nuanced. When I completed my masters from one of India’s premier tech institutes, the world had just survived the millennium bug, aka the Y2K problem. The tech industry was just taking off in India, especially considering the scale it was to reach in just over two decades since. I joined a startup that soon got acquired by a US multinational, a competitor of Cisco. Our stock options were suddenly lucrative, and our offices expanding. People had started to buy property, and shiny new bikes and cars. All seemed well.
But the dot-com burst was starting to become a tsunami. The networking sector was especially affected (our stock, which was trading at $210, was soon down to single digits in about a year), and our parent company soon developed cold feet. I remember the day I was laid off, barely a year into my career, married just a few months back, having just put a deposit on a new rental agreement, and with no substantial savings to speak of. I was a little unwell that day and had decided to take the day off. A colleague called me in the morning and told me I should better come to the office. When I climbed the stairs of our makeshift office in a residential building, I saw a meeting happening on the lower of the two floors that constituted our office. I was stopped at the door and told to wait in my cubicle. It’s how I knew I had not met the cut (or rather the cut had me covered).
In less than a year I spent there, I had worked on a cutting-edge product, filed a patent, but I had not survived the first downsizing (the company let go rest of the talent that came from that acquisition a year down the line). All in all eight Indian employees were laid off — about 20% of the team. Five of those had gotten married recently (in the six months preceding the layoffs). One was an admin who barely made 20% of our starting Engineering salary. It seemed like a cruel joke. But there was a cold logic to the decision to let go of people who had had a significant event in their lives leading to a bit of productivity challenges thanks to it.
The Shallow Benevolence of the Tech Industry
For people not working in the tech industry (or the knowledge industry in general) there is almost a sense of disbelief about the kind of perks that the big tech has not just made aspirational but almost normalized, especially in Silicon Valley. But even in cities like Bangalore and Pune, the tech workers' compensation packages and perks/benefits are not comparable to the more traditional industries, with their highly regimented work cultures and much lower salary ranges. But few understand many of those perks are/were the new opioids.
From laundry on the premise, to swimming pools, and gyms, many of the perks took care of all sorts of activities that could make people step out of their offices, and were meant to keep people on the premises in the days when remote work wasn’t the norm. In India, there were creative perks like office staff running errands for employees — depositing checks in banks, paying electricity bills, and so on. An employee stepping out for such an activity meant half an hour to an hour's worth of lost productivity, which costs way more than the same time for a staff paid at the minimum wage. As the war of perks got escalated, it did seem like the tech sector was pampering its workforce. But it was about attracting and retaining talent. It was never going to last indefinitely, just like the perks given by Ola/Uber to their drivers in the early days.
The extravaganza of manufactured desires
Then there is the thing with lifestyle: once you take it up even a notch, you can’t bring it down without getting a sense of serious loss. As people started getting bigger and bigger paychecks, they raised their living standards drastically. Once you have done that, you are dependent on that n-figure salary. So, whereas, the bigger paychecks should have covered for lean years, many with their extravagant lifestyles are nowhere near financial stability.
Mortgaging the future: the new indentured labor?
The dot-com bust (1998–2002) was preceded by a dot-com bubble that saw real estate prices go up, and many tech workers had bought their homes on long-term loans. Many of these homes lost value post the bust, and property markets saw a correction that lasted a few years (till the tech sector bounced back again). But even in a steady state, many tech industry workers buy properties assuming future earnings. When a bad phase comes — something that many tech workers of today have no memory of — many will find that they are in waters deeper than they have learned to tread. And while the big tech employees are probably in much better shape financially, that’s just a minority of the larger tech sector. Many who aren’t so lucky, have skills that are fungible, and easy to learn. The stories of horrible bosses and terrible work conditions are not exactly alien to the industry, and people have to put up with it because they have mortgaged their futures, and it’s not always easy to find new opportunities, especially without significant disruption to your life.
Ms. Rawlinson gives a warning:
We are entering an era of external investor pressure, higher financing hurdles and overall market volatility. This environment calls for management to make structural changes in the way workplace culture is experienced for both labor and capital.
And that :
The current tech work force is used to every voice getting a vote, and it will now have to yield to a new world — one with heightened expectations and disciplined investment.
I agree with the first paragraph. The headwinds may not be as temporary as many who have not experienced long winters before may be ready to believe. But the tech industry was never a utopia with everybody getting a vote. Anyone who has seen the industry from the inside (like the author of that article has) cannot, in good faith, make it look like it was. That thin layer of veneer was never going to last forever. It’s time everyone realized that.
