Technology Layoffs: Preparing For A Major Reset?
That all is not well with the technology sector globally is an understatement. Marquee names from Google, Amazon and Meta to Twitter, Microsoft, Salesforce and Netflix have been undertaking significant layoffs in November. This has created the inevitable uproar in media and a sense of anguish all around.
But should we be surprised? Firstly, the signs of an all-round disruption across industries has been evident for a few years now. For example, robotics are set to disrupt the manufacturing industry with significantly lower cost of operations, including doing away with managing the inherent complexity of laws, social issues, etc. when compared to humans; 3D printing on scale would be technically feasible in the next 20 years; a healthcare revolution is on hand through genome sequencing, the congruence of cloud and sensors, and the emergence of healthcare platforms enabling predictive healthcare and AI- based physicians; solar energy will be cheaper than the grid soon and radically transform the fossil fuel industry; open networks and the all-pervasive public WiFi will prompt a communications disruption. Many more examples abound.
Secondly, on the other hand, funded by cheap money, PE players have taken massive bets on such transformational technologies with valuations of Big Tech companies ballooning into trillions of dollars; salaries of tech workers are at an all-time high and exotic tech-driven asset classes like cryptocurrencies have redistributed new wealth to investors and ordinary people alike. Now with the collapse of the second largest crypto exchange, FTX, many asset classes run the risk of a domino effect, though it may be better contained than in 2008, as cryptos were still a relatively insulated asset class with low single digit allocations globally.
Thirdly, on the macro economic front, the confluence of factors has been simply overwhelming since the beginning of the year, and which I had publicly warned against in January 2022. With the withdrawal of the Fed led liquidity bubble, a higher interest rate regime to curb expected rampant inflation led by a stronger dollar, reduced investment budgets, and significant reduction in startup funding was a given. The Ukraine war further led to energy shocks, supply chain disruptions, and coupled with the over estimation of the effects of a permanent shift of consumer behaviour post Covid, have only added to the inflated expectations that now require taming. The profound effects of this are only now becoming evident, as are the serious implications of geo- political realignments and trends of economic deglobalisation.
Multiple broad trends of this magnitude have not come together for generations. A reversal of the excesses had also become necessary and is perhaps a good thing. A short term recession will be positive by freeing up resources and redirecting them to more financially sustainable projects and companies. That negative cash flow models, without a credible path to profitability, are not sustainable is now becoming evident. I had pointed this out repeatedly in various columns before the Zomato IPO last year. It had few takers at that time, and was drowned in the cacophony of TV channels, investors and “experts”.
Given the above, I am not surprised at all at the layoffs all across the technology sector. In my view this is a great technology reset – those employed by it need to recognise it and, more importantly, prepare to deal with it. How we manage it will be key for both companies and employees.
Mark Zuckerberg’s approach for Meta and Elon Musk’s modus operandi for Twitter are exercises in sharp contrast. Whilst Meta has adopted a humane approach with the founder, refreshingly, accepting responsibility for an erroneous strategic move (in terms of planning, timing and execution, if not the overall direction), Elon Musk has been ruthless by applying a guillotine approach and blaming all and sundry for a situation precipitated by his impulsive decision to buy Twitter at an exorbitant cost on borrowed money, for a quasi-political need and amidst significant controversy.
While Mark Zuckerberg was thoughtful enough to explain how the layoffs are a part of the overall sustainable roadmap to nurture Meta back to profitability, Elon Musk has displayed no such strategic thinking of Twitter’s path to profitability except in the short term through a wide scale reduction of costs due to the indiscriminate layoffs, and coupled with the wild expectation that the resources lucky to have retained their jobs will now become remarkably productive by working 90 hours a week! This exercise in contrast is telling of leadership styles which impact the lives of many – unhinged, erratic and disoriented vs. calm, measured and thoughtful. The path other leaders follow in the upcoming turbulence will be instructive.
As far as employees are concerned, they would be best served by acknowledging the new reality that the era of stable jobs and careers is over, and it is in their best interests not to be held hostage to the whims and fancies of corporate leaders and businBW Businessworld ess cycles. Being independent by developing skills that makes one valuable must now be a priority. In the coming age with unprecedented uncertainty, economic independence at the individual level can only be achieved by combining passion with one’s strengths in the work one does.
As I had written in in 2020 in an invitation feature sharing my perspectives of life on turning 60, we must strive for a state where instead of being known only by the company you work for (eg.: Chairman, Unilever) we must migrate to a position in which the company is also known for your association with it (Warren Buffet invests in Unilever). In other words, being recognised beyond merely your professional calling card. This can happen only by building a reputation based on skills in the chosen area.
The key challenge is to continually stay relevant and, to that extent, an entrepreneurial mindset is what needs careful inculcation in the formative years. A job should be viewed only as a learning opportunity in the early years but without the expectation of retiring at 60. In fact, the reorientation which our generation undertook at 60 will now be necessary by about 40. This approach is perhaps, the best way to confidently navigate the volatile and uncertain world we are moving towards.
The world is not in a good place – but human capabilities are immense. The current technology layoffs are just a symptom of a major reset globally in the tech world which should be viewed as the new normal. Darwin’s theory of survival by the species that can adapt best, is at the core of this transformative mindset necessary to survive in the future.
The author is a Sloan Fellow of the London Business School, non-executive director, and an advisor to chairmen, of corporate boards.
