I can’t comment on whether this is blind following or not. But it’s a real fact that the market will punish you less for layoffs when others are doing it too. It’s like how the best time to reveal a scandal is after someone else has revealed a bigger scandal.
It's not just that the market will punish you less. Companies are hoping that the market will actually reward them for layoffs. Unfortunately, these moves can and will be damaging to long term prospects at some companies. But long term thinking isn't something markets generally care about.
It's up to companies to push back against market pressure to maintain long term progress, but it's a tough balancing act to do that while avoiding being punished by investors.
Honestly, I don't think these layoffs (broadly speaking) are dangerous long term.
In fact, and this may be unpopular, I think they will be greatly beneficial long term.
Consider:
- These companies grew at greatly-expanded rates over the past few years. Google notoriously added 20% per year for 7 years straight, doubling their staff from 2017-2023. After layoffs, Google will still be right near ALL-TIME-HIGHS in staffing. Same with most of these firms. Small layoffs following the fastest growth period in their history isn't some catastrophe for their business
- Most roles being reduced at most companies are not product-creating but administrative. Lots of HR, hiring, marketing, middle managers, getting axed. If companies predict less hiring or lower ad budgets... then reducing those divisions makes sense. If you doubled your hiring team while you were hiring 20% per year, but now you expect to stay steady and only replace attrition ... what would you do with all that hiring staff?
The real damage to their long term prospects was over-hiring the past 3 years and saddling their businesses with a major problem.
> The real damage to their long term prospects was over-hiring the past 3 years and saddling their businesses with a major problem.
So, the real damage was the people who ordered to over hire (usually top-level executives). If any, they should be lay off to actually mitigate long-term damage.
I think this is all basically true, but what is interesting to me is that these incumbent tech companies were greedy when everyone was greedy and in so doing they created an opening for someone who is greedy when others are fearful to come and eat their cake.
That's wrong. If everyone is doing something irrational that is a big inefficiency in the market and whoever does the opposite eg. hiring will get better outcomes as opposed doing it when all do.
Yeah but in general if you're trying to minimise disaster instead of maximising being the winner, you opt for doing things that avoid revealing you as the being the only wrong one. Being wrong in a crowd is fine. Being the only one wrong is a big deal, "what were they thinking, they knew better than everyone else?!". If everyone does the same mistake, it's just shrugged off as "honest mistake, everyone was doing it."
Plus either way you're cutting expenses and maybe getting rid of some under performers.
