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Editorial: It's right that big tech leans up with layoffs, focusing on profitable activities

Elderly man and screen with information that his services are no longer needed

With more than a decade of cheap money coming to an end thanks to higher interest rates, we’ve seen many big tech companies lay off employees, with some continuing to make more cuts. It’s awful to be one of the affected employees who may have made big life decisions based on having the job and now having to give all those plans up.

Nevertheless, I think that companies are right to lean up and focus on their profit-making operations. At the end of the day, profits are made when you offer services that society needs and is willing to pay for and by keeping the costs to provide those services low - one of the biggest costs to companies is employees.

Perhaps one of the most notable instances of a company spending money on an experimental project is Meta with its metaverse ambitions, it even renamed itself. To develop this project, Meta would have had to take on people to help develop its VR headsets and the software to run on them, before even knowing that the technology would be successful.

Not only does the company need to sink huge amounts of money into this project, it also takes up countless hours of labour (that could be spent doing something more beneficial) and it has to hope that it can sell the metaverse to the public and to businesses. Meta has not given up on its metaverse ambitions as a result of the cuts but it will have to think more carefully as it proceeds with fewer engineers.

In a recent statement on the so-called ‘Year of Efficiency’, Zuckerberg said that Meta was cancelling projects that were “duplicative or lower priority”. While it may be good for the person being paid, you do have to ask yourself what is the point of a company hiring several people to do duplicate work.

It suggests that companies have been a bit sloppy in recent years and have not really been paying much attention to what’s happening internally and to what products and services would actually provide a benefit to shareholders and society.

Several weeks ago, after Google I/O, CNBC reported that Google employees had been mocking staff for constantly spouting buzzwords such as “AI” throughout the event. One of the memes that were shared internally showed Google’s stock price in the red with the text “Execs cutting cost and buying back stock” and the stock price in green with text reading “[Engineers] getting stuff done”.

Google employees mocking execs through the medium of memes
Employees at Google made a meme mocking execs, via CNBC

While it’s true that Google does benefit from unveiling new products, it’s a bit fallacious to suggest cost cutting isn’t important either. If you look at both the Meta and Alphabet stock prices, you can see that they reached lows in November 2022 just as the cuts were beginning and the share prices have been climbing ever since.

A common criticism of businesses is that they only do what the shareholders want them to do. This is true because shareholders are a very good barometer of a company’s future.

Meta 5-year stock price chart
A five year price chart for Meta stock. It shows a sharp reversal in November 2022 when job cuts were announced.

An investor who puts money into a company expects the share price to increase in the future; investors are the epitome of the common saying “Put your money where your mouth is”. If your share price is falling, it’s because investors wouldn’t gamble their money on your company based on all the public information.

It’s pretty clear that the economizing going on at the companies, and the continued unveiling of revolutionary products like generative AI, are giving investors confidence because the share prices of these companies are increasing; investors feel that these companies will be doing well in the future and will be able to sell the shares in the future for a higher price because they’re more sought after and the company’s operations justify the price.

A five year chart showing Alphabet stock price
Just like Meta experienced, Alphabet's stock price reversed after job cuts revealed in January.

I said at the start of the article that it's awful to be one of the people affected by these cuts, it can be a very stressful experience to lose your job and it means putting plans on hold until you can find another one.

What’s interesting, though, is that at the end of 2022, tech workers who had recently been laid off were able to find new jobs relatively quickly. A survey by ZipRecruiter found that 79% of those laid off found new jobs within just three months of starting their job hunt - the main reason for this quick turnaround was that they already have experience in the field.

Assuming these people are moving into jobs where the business has properly thought out the job opening, they will probably be moving into a job that will help the company attain profits. If this is the case, you have people moving from jobs where they were doing duplicate, low-priority, unprofitable work that’s not as much benefit to society, to roles that generate profit and provide a real service.

This is my thinking on the whole matter of efficiency pursuits by big tech. It’s certainly detrimental for those who are in an affected role, but in terms of wider societal benefits and the long-term health of these companies, it’s certainly a positive move rather than a negative one.

Let me know in the comments if you have any comprehensive thoughts about what big tech is doing. If you believe contrary to this editorial, let us know what you think companies should be doing instead.

The views, opinions, positions or strategies expressed by the author and those providing comments are theirs alone, and do not necessarily reflect the views, opinions, positions, or strategies of Neowin

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