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By Hannah Connolly
n late October 2022, titans of the tech industry, at their lowest point, saw stocks crash by a combined $950bn amid mass layoffs, wavering investor faith and market fears, prompting the question: has big tech crashed?
The big five of tech is made up of the key industry leaders, Alphabet (formerly Google), Meta (formerly Facebook), Amazon, Apple and Microsoft, some of whom, in their own ways, have entered one of the toughest periods in their respective histories.
Harvard Business Review (HBR) first introduced the concept of the Icarus Paradox back in 2009, using the ill-fated titular character of the Greek fable as the poster boy for the self-destructive egos or fatal naivety of big businesses.
Identifying that often, the very thing that makes a company successful, could become the same thing that leads to its downfall. An Achilles heel of sorts that blinds execs from spotting oncoming dangers, or remaining agile enough to see out rising competitor threats.
To illustrate their point, HBR took a closer look at the Fortune 100 class of 1966, and discovered that 60 years later, in 2006, 66 of those listed companies no longer even existed at all.
Reason for big tech’s often obscene success has been rooted in the industry’s knack for agility, reinventing products and services to meet growing, or changing demands, of consumers, leaving them seemingly exempt from the effects of the Paradox.
A look back over the “good years,” largely during the 2010s, tech introduced a new way of working, a new age of success. Flexible hours, jeans in the office, open plan, standing desks and seemingly in nite levels success, emerging as the clear darlings of Wall Street and as a whole new beast of business. But with the good times came a great deal of bloat; hiring binges and vast wealth was poured into far-o concepts and ideas that for a while seemed like a sure to be lucrative bet for investors.
Yet, even big tech cannot escape the effects of spiking interest rates, global recessions and the roving gaze of investors looking, as result, to more traditional, quick return investments as consumer spending faltered.
Meta, helmed by Mark Zuckerberg, found itself at loggerheads with Wall Street in late 2022, after doubling down on its metaverse spending despite warning from analysts, timing with its second consecutive quarter of declining revenue.
"Big tech cannot escape the effects of spiking interest rates, global recessions, and the roving gaze of investors"
In late October, hedge fund Altimeter Capital penned an open letter to Zuckerberg, calling on Meta to slash its spending on employees and limit the cash flow to metaverse projects. CEO Brad Gerstner said in the letter to the company: “Like many other companies in a zero rate world — Meta has drifted into the land of excess — too many people, too many ideas, too little urgency. This lack of focus and fitness is obscured when growth is easy but deadly when growth slows and technology changes.”
What followed was the laying o of more than 10,000 workers, reducing Meta’s workforce by a shocking 13 per cent. In fact mass layoffs have beset the tech industry as other members of the big player group slash their employee pools during the last quarter of 2022.
According to global layoff tracker Layoffs.fyi, 120,000 employees in the sector have lost their jobs last year alone. Twitter’s new tsar Elon Musk has caused controversy for many reasons, including the paused and subsequently un-paused ability to purchase Blue tick verification and the potential return of previously banned accounts.
Yet, mass rings have captured the world’s attention as around 3,700 members of the previously 7,000 strong employee pool took place throughout October according to CNBC. Musk says layoffs come amid the social platform sustaining $4m per day losses. Many former employees discovered the fate of their positions through the remote logging out of their company emails and some even via tweets from the new boss himself.
At Microsoft, the numbers are far fewer, at just one per cent of the workforce being laid o , but is as a direct result of the announcement of slowest levels of revenue growth in five years had been recorded.
Over at Amazon, the story is similar. In October 2022, hiring came to a standstill as 10,000 open roles in the company’s core retail businesses were abruptly frozen according to the New York Times. This came ahead of weaker than expected festive season projections and the slowest rate of growth recorded for two decades. At the time of writing, Amazon announced its plans “to eliminate just over 18,000” roles in a company news update released to their website in January 2023. Adding: “Amazon has weathered uncertain and di cult economies in the past, and we will continue to do so. These changes will help us pursue our long-term opportunities with a stronger cost structure; however, I’m also optimistic that we’ll be inventive, resourceful, and scrappy in this time when we’re not hiring expansively and eliminating some roles.”
In October 2022, Alphabet also announced its weakest quarter of growth since 2013 (with the exception of one other period early in the pandemic), and that revenue was at 6 per cent down from 41 per cent the year before.
In what could be described as a told you so moment, if HBR’s Icarus fable is to be believed, the hiring of talent that saw profits swell in the pandemic, has become big techs biggest problem.
The hubris of the seemingly never ending good times, has meant the aggressive expansions and hoarding of employee talent is at odds with the economy the companies now find themselves in and are answerable in the staggering losses the industry has accumulated in the past 12 months.
Record-level layoffs and market fears spark a new troubling chapter for some of the biggest names in the tech industry. This story comes from the Second Edition of The Stack World Newspaper.
By Hannah Connolly
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