Grotesque lifestyle: “A day in the life of a 23-year-old product manager at Meta,” was the title of a 30-second video that a staffer named Riley Rojas posted last fall — significantly, on TikTok, not Instagram. Rojas seemed to be living life as it should be: “I keep a journal in the morning. Then I go to a quick workout. I get dressed. I try to look pretty every day.” This is followed by explanations about coffee in the morning and work on the terrace, a shuttle home, the great view and dinner with friends.
The video went viral – just not how Rojas thought it would. When a few weeks later Meta became the first Big Tech company to announce mass layoffs, the 23-year-old became the symbol of the supposedly spoiled Generation Z, who wanted everything but not work hard. Rojas was not fired, but 11,000 other employees were after Meta boss Mark Zuckerberg announced the first major layoffs in the company’s 18-year history last November. When addressing the workforce, Zuckerberg looked like he had never really been seen before: contrite, embarrassed, self-critical – the 38-year-old was everything but a bot, as he is so often accused of.
The historic moment in meta-history marked a remarkable trend reversal in the history of a success-spoiled industry that had not felt any headwind since the great financial crisis of 2008/09, but – on the contrary – found itself in the wake of the enormous stock market boom of the 10s seemed to be in the midst of a lavish party. Stock market prices rose almost indefinitely, and as the value of the company increased, so did the opportunities to attract more and more workers and to reward them with stock options again. “Big tech exploded during the 14-year economic boom,” says marketing professor Scott Galloway, summing up the best of times and worlds for the IT industry.
“Big Tech spent like rock stars did in the 80’s”
Dan Ives was even clearer in the Economic Times: “The (Big Tech) companies have been spending money like rock stars in the 80s,” the investment analyst commented on the hiring excesses of recent years. Since the beginning of the corona pandemic, the big five US tech companies have created almost a million jobs, as the financial portal Marketwatch has documented.
Amazon alone has hired around 750,000 new employees since the beginning of 2020 and had 1.54 million employees at the end of the third quarter of 2022. Meta also almost doubled its workforce from 45,000 employees at the end of 2019 to 87,000 employees as of September 2022. At Microsoft and Alphabet, the hiring frenzy was somewhat more muted, with increases of 50 percent in the comparable period of the pandemic: At Microsoft, the workforce grew from 144,000 to 221,000 employees, at Google from 119,000 to 187,000 employees. Only the most valuable company in the world hired more reluctantly: Apple hired around 27,000 new colleagues between the beginning of 2020 and the end of the fourth quarter of 2022 – an increase of around 20 percent.
Inflation causes a wave of layoffs
Then the party ended abruptly a year ago. Because inflation accelerated at a dizzying pace, the American Federal Reserve was forced to make the most rigid interest rate hikes in the past four decades, the consequences of which are well documented: in 2022, tech and internet stocks experienced the worst crash of the financial crisis or, in some cases, since the internet bubble burst in 2000.
At the top, five trillion dollars in company value were wiped out by big tech companies on Wall Street last year. The reflexes after the fall from the sky are the same this time as in the last crisis: To make the company balance sheets look better again, employees are laid off.
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“Layoffs are bad for corporate morale and even worse for those who are fired, but they’re often good for business,” says Scott Galloway, explaining the mechanism behind mass layoffs in the American tech industry. “The average tech worker cost their employer at least $100,000 in salary plus benefits and dilution effects in 2022. Let’s say $150,000.” Fewer people meant significantly more earnings per share. With a gross margin of 30 percent, Google and Meta could either lay off 25,000 employees or increase their sales by $12.5 billion and post the same operating profit, the marketing professor calculates. “They and hundreds of other tech companies will opt for a first version.”
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