Big Tech Doesn't Want You Anymore

Big Tech Doesn't Want You Anymore

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Big Tech is slashing hundreds of thousands of  jobs and blaming artificial intelligence, but   there may be more to the story than that. Intel  just announced fifteen thousand layoffs yesterday,   causing their stock price to plunge. Big Tech, who  for over a decade provided all sorts of employee   perks may no longer be the dream place to work. In 2009, a friend of mine who had quit his job  

in investment banking joked that in  the wake of the financial crisis,   being an investment banker was like being  an airline stewardess. The job used to be   glamorous and well paid and now it was neither. After the financial crisis, central banks around   the world slashed interest rates to near zero –  which was bad for banks, but good for startups and   the tech industry. According to the St Louis Fed,  over the five years after the financial crisis,   jobs in the tech sector expanded by more than  twenty percent – compared to 11 percent job   growth in the overall US economy. Tech  sector wages, which were already high,  

grew at roughly 5 percent per year over the  same period. It became the place to be.   While other businesses offered employees  benefits like pensions and healthcare,   tech firms attracted staff by offering perks like  free food, offices that looked like playgrounds,   nap pods, the ability to bring your pets to  work, on-site massages, meditation rooms,   office jam sessions- at Spotify and something  called disco yoga. Google and Facebook offered   employees a free laundry service – which is only  so much of a perk – when their employees mostly   wear shorts and t shirts. I dunno, maybe  the laundry service went to their homes   and picked their dirty laundry up from their  bedroom floors… That’s probably what it was.   To seem relatable, tech workers began  posting “day in the life” videos on   social media mostly showing themselves playing  ping pong and eating berries at work. [Clip]  

In 2020, the global pandemic transformed how  people lived, worked, educated their children   and spent their free time. The world rapidly  moved online, and the surge of e-commerce and   consumer tech spending led to massive revenue  growth at big tech. Central banks around the   world slashed interest rates even further and  tech firms took that cheap money, significantly   stepping up their investments in moonshot projects  like self-driving cars, metaverses and crypto.   Facebook – who went so far as to change the  company name to Meta – to demonstrate their   commitment to – whatever the metaverse is  - hired a ton of people during this period,   with headcount up 60% by the end of 2021. During this boom period the megacap tech   firms’ combined increase in headcount was 35%,  or almost 130 thousand new jobs, and the lavish   deals they had given their employees redefined  employment expectations in the entire economy.  

The big tech firms were already rated as the  best firms to work for with Google – or Alphabet   having been ranked number one, eight  times between 2006 and 2018 on the   Fortune list of best companies to work for list. Justin Fox at Bloomberg points out that there had   been an acceleration in hiring even before the  pandemic, which explains why tech CEOs might   have thought that the growth they were seeing  during the pandemic represented a new normal,   rather than a temporary effect. By the end of the  pandemic, they had hired almost 200 thousand more   people in the US than they would have if  they had stuck to their prior hiring trend.   The tech stock sell off that started in 2022 put  big tech companies under pressure to improve their   bottom lines and they laid off some of the excess  staff that had been hired to meet the pandemic   boom. Twitter led the way with layoffs when  its new owner reportedly laid off half of the   employees within a month of taking over the  company, breaking the taboo of tech layoffs   making it easier for other big firms to lay  off staff without standing out from the crowd.   Big tech has been making significant cuts, and  the layoffs don’t seem to be ending. According  

to Layoffs.fyi a website monitoring job cuts  in the tech sector there were 165 thousand tech   sector layoffs in 2022, 260 thousand in 2023 and  there have been 125 thousand so far this year.   The tech firms are still reporting good  earnings, and the AI boom is still in full swing,   overall jobs growth in the United States has  been strong if slowing slightly and workers   pay has been outpacing inflation, so why are tech  workers losing their jobs, where are they going,   and which roles are disappearing the fastest?  Is working for Big Tech no longer a dream job?   Learning a little every day is one of the  most important things you can do, both for   personal and professional growth. Today’s sponsor  Brilliant dot org helps you build real knowledge   in minutes a day with fun lessons you can do  whenever you have time. Brilliant is a learning   platform designed to be uniquely effective as  each lesson involves hands-on problem solving   that lets you play around with concepts so that  you learn by doing rather than by memorization   Brilliant’s growing number of programming  courses are a great way to build foundations   and learn real-world applications. Using the app  you can learn essential coding elements, from  

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To try everything Brilliant has to offer for free  for a full 30 days, visit brilliant.org/Patrick   or click on the link in the description. You’ll  also get 20% off an annual premium subscription.   In 2024 the YouTube and LinkedIn trend of  posting day in the life of a tech worker   videos reversed course. The new videos were  called “A day in the life of an out of work   tech worker” and they seemed a lot less fun. For  some reason these young tech workers hold their  

microphones in their hands in their videos,  which I worry makes them less employable,   as if you don’t understand the technology of  a mic stand – which is a stick – you don’t   seem that up to date with technology. I mentioned this issue to a friend who   told me that young people do this to seem more  personable – so I thought I would give it a go.   Hopefully I seem more relatable now. The audio  quality should still be good – because - this   isn’t actually plugged in – I’m trying to  seem relatable, not to have bad audio.  

According to the FT a lot of the tech lay-offs  are happening as companies are reshuffling   their resources in order to invest in new areas  such as generative AI while showing shareholders   there is a continued focus on cost discipline. They highlight Meta, which cut more than   20,000 jobs since late 2022 who said in  February that net headcount additions for   the year will be “minimal” even as they made  “significant investments” in generative AI,   which would involve securing talent. The result has been a wipe-out in tech   jobs and for the first time since the dot-com  bubble burst, IT unemployment is actually   higher than U.S. unemployment overall. I have to stop with this microphone thing   – it’s ridiculous. I’ll put a link to  a mic stand in the video description to   help out any of my younger viewers who  are not familiar with that technology.   The tech stock sell-off of 2022 led tech  companies to evaluate their workforces   and realize that they had a lot of dead  wood. And if they had leaner organizations,  

they could be more profitable. And as they  cut staff their stock prices started to rise.   According to the Washington Post, as  stocks have risen spirits in the San   Francisco Bay area (the heart of the US  tech industry) have only fallen further.   The layoff announcements from big tech companies  all contained variations on the theme of “we   hired too many people during the boom years.” While things are tough in the tech sector –   BLS data shows that the ratio of job openings to  job seekers is quite good. There are 8.2 million   job openings and only 7.1 million job seekers.  Unfortunately, a lot of the job openings are in   areas like education, healthcare, hospitality  transportation and utilities – not tech.  

According to the press, a lot of the tech layoffs  have been in ESG areas where the big tech firms   have started abandoning their woke policies as  part of their cost cutting. The New York Post   reported that Microsoft laid off a team devoted  to diversity, equity and inclusion after spending   millions of dollars on the initiative. One of the signs of their over-hiring   may have been the woman they hired away  from the land registry who would read the   property title before every meeting. [Clip] Maybe I should look up who owned this office  

before me – say something  nice about them… I dunno…   Last year, Alphabet and Meta – or Google and  Facebook… reduced the scope of their DEI programs   and cut staff. Zoom, Snap, Tesla, DoorDash, Lyft  and Wayfair have also downsized their DEI teams.   The Post reports that DEI-related job postings  had declined by 44% by mid-2023 compared to   the same period in 2022. Despite these layoffs,   Microsoft told the Post that their Diversity  and Inclusion commitments remain unchanged.   Merryn Somerset Webb wrote in Bloomberg earlier  this year that ESG and DEI policies had turned   out to be low interest rate environment Luxury  Goods. She highlights the pullback from these   policies across both the public and corporate  sectors. In the UK, the Financial Reporting   Council just opted against including ESG  requirements in the UK Corporate Governance   Code and BlackRock’s CEO Larry Fink – once a  champion of ESG rarely mentions it anymore.  

Mentions of DEI and ESG in company  earnings calls have plummeted too,   since interest rates started to rise as has  their prominence in corporate presentations.   A recent paper from the University of Copenhagen  suggests that even amongst retail investors,   ESG investing is a luxury good where  demand for it increases disproportionally   with the scale of inherited wealth. Tech, just like finance can be a boom-and-bust   industry where workers are paid well but there is  a lot of career volatility. People who have been   in either industry for a full market cycle are  usually aware of this and know to save their money   when the times are good. I’m reminded of a story  a friend told me of hiring at an investment bank   in the late 1990’s. He said that it was so hard  to hire at the time that he found himself making   offers to the type of candidate that he would  never have considered in prior years as he just   needed to fill seats. During the slowdown of the  early 2000’s he let all of those people go.  

During the US tech sector’s last high-growth  phase from 1990 to 2000, national employment in   the tech industry shot up by 36 percent over the  period according to Federal Reserve data. Average   weekly wages for tech workers doubled, rising by  102 percent over the decade. At its peak in 2000,   tech employment accounted for just over  4 percent of total private employment.   When the dot com bubble burst, technology  sector employment declined rapidly, with   significant net job losses for four straight  years. By the time it bottomed out in 2004,   the sector’s workforce had shrunk by almost  18 percent and tech employment declined to   3.4 percent of total private employment. From 2010 through to 2022 job growth in the  

tech sector once again hugely outpaced  job growth in the rest of the economy   and most tech workers under the age of  thirty-five have never seen a slowdown.   The FT reported earlier this year that the tech  layoffs in 2024 appear to be more strategic,   as job cuts in 2024 have come  alongside “active hiring.”   Meta, which cut more than 20,000 jobs since late  2022 said in February that net headcount additions   for the year would be “minimal” even as it made  “significant investments” in generative AI,   which would include securing talent. SAP announced a “company-wide transformation”   in January that involves 8,000 layoffs as  they increase their focus on AI. They said   that their staff numbers would stay about  the same but that they would be reskilling.  

This reskilling process is extremely painful for  tech workers, as it usually involves being laid   off and requalifying. I saw a LinkedIn post  earlier this week on how there are both - too   few and too many software engineers right  now because of a huge skills mismatch in the   software development industry. The author wrote  that there had been a huge boom of people coming   into software development and training as web  developers, but companies now want to hire people   with skills in AI, Machine Learning, Data Analysis  and things like that. The writer argued that Big  

Tech needs to hire the best people and then train  them as necessary. It might be too disruptive   turning over your workforce constantly. While layoffs are happening at these   high-profile tech firms, they aren’t happening  in every department. According to Robert Half – a   recruiting firm - a sizable portion of the  layoffs at Big Tech have not been technology   professionals but those in other departments. 365 Data Science looked into which roles were  

most affected by the Tech Layoffs and  found that HR specialists and recruiters   made up almost 28% of the layoffs. They also  found that this group were finding replacement   jobs most quickly. This makes a lot of sense  as these people are not really tied to the   tech industry – they can work at any big firm. The researchers found that 19% of the laid off   tech workers who found new jobs had moved  to smaller software development firms and   13% had moved to internet companies. They  found that the majority of rehired workers   continued their careers outside of tech. Among  them, 10% moved to financial services, 8% moved   to the services industry, 7% to consulting, 6%  to manufacturing and 34% to other industries.  

Because the majority of tech jobs are outside  of the tech industry and tech skills are still   in high demand in other industries, many  of these people are doing just fine – but   possibly struggling a bit with the culture  clash of no longer getting to play ping pong   and eat free berries in the office. Unfortunately, the researchers found   that the majority of laid off tech workers  are still on the job market, competing for   the type of roles they had recently been laid  off from during hiring freezes and continuing   layoffs. These people are mostly highly  qualified with a lot of work experience.   We will have to see how long they remain on  the job market, or if they switch careers.   A study from The Brookings Institute found that  tech sector jobs have started spreading out around   the country since the pandemic. San Francisco and  San Jose disappeared from the list of metro areas   gaining the highest shares of digital employment.  Replacing them have been metro areas like Dallas,   Denver, Miami, and Salt Lake City. A report on pay trends from ZipRecruiter found  

that 48% of 2,000 US companies surveyed lowered  pay for certain roles last year and 41% of   employers said that a position has gone unfilled  in the past 6 months because candidates wanted   more pay than the company was able to offer. According to the report, companies are not   just taking advantage during a difficult  job market to cut costs. In some cases,   stagnant and even lowered salaries are the  result of a reset for a pandemic era surge   in compensation when companies were scrambling  to fill roles during the Great Resignation.  

This phenomenon of falling wages is being  seen mostly in the United States because of   how its economy rebounded from the Pandemic.  During the rebound wage growth in the United   States outpaced that of the UK and Europe,  and now that its resetting, the pinch is   being felt most in the United States. One of the perks of working at a hot tech   firm during the boom period was getting a chunk  of your compensation in the form of stock options,   which a lot of high growth tech companies liked to  think of as being free, rather than as a deferred   expense, that is eventually paid for when the  options vest. We see this cost today in the   massive stock buybacks which have to happen at  firms like Salesforce to keep their share count   from rising and earnings per share from falling. Bloomberg reported in May that insiders at   magnificent seven tech companies have  been selling their shares after going   nine years without any significant sales.  Senior management may be less bullish than  

the general public are. The Magnificent seven  tech stocks had risen nearly 150% since the   start of 2023, partly because of investors  excitement over artificial intelligence.   Jeff Bezos netted about $8.5 billion dollars  selling Amazon stock over a two-week period   in February. This was his first sale of Amazon  stock since 2021. Mark Zuckerberg sold a billion  

dollars’ worth of Meta stock last November. Sundar Pichai of Alphabet sold more stock in   the first few months of this year than in all of  2023. Nvidia director Mark Perry sold more stock   at the start of this year than in the previous  two years combined and Apple chairman Arthur   Levinson filed in February to sell his biggest  block of stock in more than twenty years.   This isn’t just happening at the companies that  are doing well. Tesla’s Chair Robyn Denholm filed  

to sell about $52 million dollars’ worth of  stock this year, her first sale since 2022.   Some of the luster has come off big tech in recent  weeks, with the Nasdaq more than 11% off its high   from a few weeks ago. The downturn followed  underwhelming outlooks from the biggest tech   companies, along with a bad jobs number. Intel  lost more than a quarter of its value this Friday   after announcing plans to slash headcount and  capital spending, as it suffered further setbacks   in its slow-moving turnaround plans. Its price is  below where it traded in 1997. Other semiconductor   stocks like ASML and Tokyo Electron fell too. Microsoft’s AI-fueled cloud growth fell short  

of investor expectations earlier this week and  the stock is down about 11% over the last month,   but it is still up about 10% year to date. The scale of capex by the big US tech companies   based on a belief that AI will transform the world  amounts to the biggest and fastest, infrastructure   rollout in history according to the Financial  Times. Big Tech is expected to spend a half a   trillion dollars over the next two years – much  of it on data centers powered by Nvidia GPU’s.  

From a financial perspective we have to ask  who will benefit from this spending and when   will the returns on investment start rolling in?  Researchers from MIT argued in a recent report   that the technology isn’t designed to solve the  complex problems that would justify the costs,   which may not decline as many expect. The economist wrote last year about how   the big tech firms were no longer showing up at on  campus recruiting events at top US colleges like   Berkeley. Students who were hoping for internships  at FAANG companies were now talking to firms like   Juniper Networks – an ancient company that had  been founded all the way back in 1996. They report   that some computer-science majors have had  their internships cancelled and those with   job offers have had their start dates pushed  back. Apparently, students are now seeking   stable employment rather than big brand names on  their CV’s since the waves of layoffs started.   One student told the Economist that she had  realized that she hadn’t actually wanted to   work in Big Tech before the lay-offs and is  relieved she didn’t get sucked into it. She  

hopes to work as a product designer at a small  company, where she can get “solid experience   rather than just chasing a bigger name”. Stanford professor Jeffrey Pfeffer wrote in   the Stanford Report that he is concerned that the  tech layoffs could spread across other industries,   he wrote that “Layoffs are contagious  across industries and within industries.   So why did the big tech firms move  so aggressively to cut staff? Well,   a big part of it was just because they had  simply over hired. Are layoffs the best move  

in a challenging business environment, or is  there something else they could have done?   Well, they could have announced goals to  increase margins (for example) to shore   up the stock price. But then they would be  held accountable to achieving those goals.   When they announce layoffs and the clearing out  of dead wood, they get to do that and move on,   having shown that they’re serious about  margins and costs. It’s an easy fix.   So, if, as the Economist says,  Big Tech no longer wants you,   where can you go? Well as I mentioned earlier  the majority of tech jobs in the United States   are not at the big tech firms. The other  sectors who hire tech workers may now be  

able to hire some top talent that previously  they couldn’t. Some of the recently laid   off tech workers might opt to start their own  companies too and bring new products and ideas   to the market. Most of today’s tech giants  grew out of the ashes of the dot com bust.   If you found this video interesting, you  should watch my video on what’s happening   with electric vehicle sales next. Don’t forget  to check out our sponsor Brilliant dot org using   the link in the description. Have a great  day and see you in the next video. Bye.

2024-08-08 17:20

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