Last year the tech sector cut nearly 100,000 jobs. The pace has accelerated this year — but investor attention has turned to the Next Big Tech.
The phenomenon has inspired an expression that says a lot about its importance: the
Behind the label hide waves of job cuts in tech, which is rediscovering austerity after two years of crazy spending and massive recruitment.
It’s a bit like the tale of ‘The Grasshopper and the Ant’ by the French fabulist Jean de La Fontaine.
The ant spent the summer harvesting the foods it needed to survive and then storing them. The grasshopper spent its summer having a great time. It didn’t prepare for a cold winter. Eventually the grasshopper is freezing and without food as the winter closes in while the ant is cozy.
Tech is the grasshopper. The tech sector last year cut more than 150,000 jobs, with demand fading as the pandemic eased, layoffs.fyi reported.
The pace has picked up sharply this year: The sector in 40 days has slashed some two-thirds of the number from last year. Almost 98,000 jobs have already been eliminated in 2023, according to data firm layoffs.fyi.
And no question, we’ll see plenty more before the year is out. We in fact may reach or break job-cut records set when the dot-com bubble burst.
Investors Love Job Cuts
Not long ago tech-sector job cuts were urgently being announced, amid questions about the broader economy’s health and the prospect of a recession. IBM, Microsoft, Intel, Amazon, Alphabet, Salesforce, Cisco and many more top tech providers announced workforce reductions in the name of financial caution and efficiency.
Now, investors tend to applaud almost every announcement of cost cuts coming from the sector. Case in point: the stock-market revival of Meta Platforms (META) – Get Free Report.
The social-media giant’s stock is up 89% since Chief Executive Mark Zuckerberg announced in November that the company was cutting 11,000 jobs.
“We’re working on flattening our org structure and removing some layers of middle management to make decisions faster, as well as deploying AI tools to help our engineers be more productive,” Zuckerberg told analysts on Feb. 1.
“As part of this, we’re going to be more proactive about cutting projects that aren’t performing or may no longer be as crucial, but my main focus is on increasing the efficiency of how we execute our top priorities.”
The stock price has gained 29% since these remarks promised further cost reductions. All this apparently was enough to make people forget Zuck’s many mistakes related to the metaverse. The Reality Labs unit, home to the metaverse projects, lost $4.28 billion in the fourth quarter, bringing its total operating loss for 2022 to $13.72 billion.
True, tech employees generally have substantial salaries, and not many average workers sympathize too much with their situations. But at the same time, they are the ones who build the technologies that make the tech sector go. And to ignore them is to not hold the tech-sector CEOs accountable for not preparing for the winter.
But Who Cares? The New Big Thing Is In.
Yet in the blink of an eye, we’re not talking about job cuts anymore.
Now, everyone is busy talking about the new El Dorado: artificial intelligence. It’s the new kid on the block. It’s shiny, It’s buzzing. It’s hype. It might even be useful.
Some CEOs don’t have an AI strategy — but meantime they can’t help hyping the new big thing because they don’t want to look as if they might miss the AI train.
But as with all buzzy new technologies, the AI madness will die down. With it, billions of investment dollars will be lost due to strategies that are rushed and insufficiently thought-out.
And again the employees are the ones who will pay the price. That’s how tech hiring goes. It’s fashionable and news-release-worthy — and then it gradually fades, until the Next Big Tech emerges.
Welcome to the tech-hype world!
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This story was originally published February 8, 2023, 5:17 PM.
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