The Paradox of Big Tech Layoffs
Today's second topic talks about Magazine Covers.
Word Count: About 1,000, approximate reading time 4 to 6 minutes. Please share your thoughts in the comments. Please be kind and subscribe to my newsletter.
Over the past few weeks, many articles were written about the layoffs at Meta, Twitter, Stripe, and other tech firms that saw exceptional growth during the pandemic. (Several links are shared below.) Many of the CEOs have acknowledged that their growth plans were too aggressive. They have apologized for the need to lay off large numbers of employees.
In some ways, these leaders are trapped. We can understand this paradox with a thought experiment. Imagine that in June 2020, Big Tech CEO Jethro made the following statement:
"This terrible pandemic will fundamentally change how people work for the next 18 to 24 months. Because of our unique and superior workplace collaboration platforms, we believe our company can grow between twenty and thirty percent per year for the next two years and potentially longer. Eventually, the pandemic will subside, growth will slow, and demand for our platforms will fall as people begin returning to in-person work. We intend to manage our growth to approximately fifteen percent annually to avoid large layoffs in the next two to four years."
What would the response have been? Shareholders would have sold to pursue higher returns. Activist investors would have swooped in to take a large position and then called for the CEO's firing and restructuring of the Board. Many would have pointed out that the choice to grow at half of what the market will support puts the company's long-term survival in jeopardy. The talking heads on 24-hour business news channels would have had a field day.
What is the paradox? The CEOs had no choice but to grow too fast. Leaders who believed the changes would last did not scenario plan for what would happen post-pandemic. Those who planned for change had a chance to moderate the negative impact.
The paradox is that the need to manage Wall Street expectations on a quarterly and annual basis can drive short-term behaviors that can have long-term negative consequences.
The next book on my reading list is The Man Who Broke Capitalism: How Jack Welch Gutted the Heartland and Crushed the Soul of Corporate America—and How to Undo His Legacy. The author's contention appears to be that Mr. Welch's laser focus on stock price growth ushered in an era of "cutthroat" capitalism that continues to this day. Laying the blame solely on Mr. Welch seems unfair; the 1970s and 80s say the rise of corporate raiders whose only goal was to make as much money as possible in as little time as possible without considering the downstream impacts. I will write a review of the book in a future newsletter.
Insider - Tech CEO Thought the Boom Would Last
LinkedIn News - Tech CEOs Sorry
Vox - Layoffs are a reminder that your job won't love you back
Who Should Be On Magazine Covers?
The collapse of FTX and the sentencing of Elizabeth Holmes prompted Francios Arbour to share this post on LinkedIn. We do not know whether Mr. Bankman-Fried was a con artist or just in over his head. Ms. Holmes was convicted of crimes that demonstrated her lack of ethics. Two observations can be drawn from this post.
Both individuals appear to have incredibly strong personal magnetism that caused many intelligent people to not look closely at what was happening. Many signed on without proper due diligence, and when challenged, they doubled down on their judgments rather than listening.
This post also highlights our fascination with "40 Under 40" lists. I am all for celebrating success. If someone under 40 has a great idea, they deserve the credit. But we must not forget they still lack the experience that comes with time. In the early 2000s, Larry Page and Sergey Brin of Google had the self-awareness to agree with investors and bring in Eric Schmidt as CEO to help them learn how to run a business.
Misplaced magazine covers are not limited to people under forty. Ken Lay, Jeff Skilling (Enron), and Bernie Ebbers (WorldCom) were frequently on covers that touted their leadership brilliance and business acumen.
We need to remember Warren Buffett's wisdom: "Investment must be rational; if you can't understand it, don't do it."
What I'm Up To
This week I had the opportunity to help facilitate the M&A Leadership Council's The "Art of M&A for Divestitures & Carve-outs. It is always good to meet with M&A professionals and learn from the conversations.
Our neighborhood has a public arts committee. Last week we installed our seventh and eighth sculptures in our art park. These pieces were on display at the 2022 State Fair of Texas. I am proud to say my wife is on the committee and helps make this happen.
Chips and Salsa: Snack-sized news and posts
Several years ago, a wise colleague once said, "The customer is not always right, but they are always the customer."
Medium - "The customer is always right" is misunderstood
Getting data visualization right is an art. This article by Leon Zucchini is an excellent example of the process of getting from good to great.
Fixing a McKinsey Chart in 3 Steps
Before investing in technology, understand what you want to accomplish.
Fast Company - Starbucks Odyssey
I particularly like "barking management."
Fast Company - Brains need boundaries
I am all for fun.
TED - Why having fun is the secret to a healthier life
We are more creative when we collaborate in person.
MIT Sloan - New study quantifies the impact of face-to-face interactions on innovation
The power of positive thinking; Norman Vincent Peale lives.
CNBC - Fired and re-hired at the same company in 24 hours
Quotes
"One of the tests of leadership is the ability to recognize a problem before it becomes an emergency."
- Arnold Glasow
"The market can stay irrational longer than you can stay solvent."
- John Maynard Keynes
The Leader With A Thousand Faces is available on Amazon.
My goal is to make this newsletter as interesting and valuable as possible. Please share your thoughts and suggestions for improvement. If there are specific topics in leadership you would like me to focus on in future issues, please send them my way.
