The Silicon Reset

This is the new Silicon Valley, where layoffs are the talk of the town!

That’s not always a good thing if you’re an employee, but at least health service jobs are still available for the newly unemployed tech workers.   

Better get a move on before they run out.

The recent data backs up my biggest fears that many tech firms are getting out the machete and slicing and dicing the fat off the bone.

Staff cuts are on the menu and it’s the main dish, unfortunately.

This will be a roller-coaster ride for the ages where employees suddenly face a predicament in which they must finally prove their value to their bosses, and do it fast.

Gone are the times when Twitter workers could waltz into the front entrance 2 hours late and sit in the cafeteria all day with a cup of joe and an ice cream sandwich.

Not going to happen anymore!

Gone are the cheerleading warriors who were whole “marketing” departments acting like they market products but really doing no work at all.

Three-hour bathroom breaks are now caput.

You know who you are!

It’s finally time to get fingers out of noses.

If companies haven’t announced heart-palpitating layoffs, then they have instituted hiring, promotion, and wage hike freezes.

One company I know well from the inside is Amazon, which announced it will no longer fill certain corporate positions, while Apple said it would stop hiring in most departments.

Meanwhile, younger tech companies including payment provider Stripe and ride-hailing business Lyft (LYFT) are also slashing workforce.

They both said the decelerating economy was becoming increasingly unfavorable for tech.

Last week, Amazon released dismal third-quarter earnings showing revenue growth of 15% which was down from 37% growth a year ago.

AMZN’s stock plummeted 20% overnight, sending the company’s market value below $1 trillion for the first time since 2020.

With aggregate demand for its services falling, Amazon is looking to shrink its risk exposure.

Last week, after the poor earnings report, the company laid off around 150 people from its live radio division, and on Thursday shared with employees that it was implementing a hiring freeze for corporate retail jobs.

All eyes are on Twitter’s Musk now, who is really dishing out the new playbook for how to cut down while being most efficient and productive.

He’s even looking at cutting Twitter cloud costs by $1 billion per year at Twitter.  

Musk’s management style is distinguishing him from the charlatans, and I see that as a highly positive development in corporate America long term.

Rumors of workers required to work 84 hours in a sink-or-swim scenario could be true; Musk is testing workers to see who he wants to keep.

I’ve also seen photos of workers who have resorted to taking naps on the ground in sleeping bags in Twitter’s San Francisco headquarters.

The leverage of in-person work is now over for 2023, and we most likely will see another paradigm shift in terms of work environment.

Even more important, the massive .75% rate hike and waving away any possible pauses in interbank interest hikes means that the dollar will get stronger and tech stocks will continue to be a sell-the-rally or buy-the-bear-market-rally type of deal.

Ultimately, this industry needs a reset as the supercharged growth coincided with too much bloat, which is really starting to reveal itself.

In the last few years, effectiveness definitely suffered from diminishing returns, and now that cost of capital is not free; management cannot just sling things at walls to see what sticks.

Responsible management will be the x-factor in choosing who thrives in the next tech bull market.