In the first few months of the pandemic, Facebook only got bigger and more central in our lives. As the blocks spread, countless people started shopping, socializing and working on Facebook and other online platforms. As CEO Mark Zuckerberg said in March 2020, utilization was so high that the company was “just trying to keep the lights on.”
Against this backdrop, the Zuckerberg-based firm has embarked on a substantial wave of hires. Facebook, which was later renamed Meta, went from 48,268 employees in March 2020 to over 87,000 in September this year. In other words, he hired the staff of another Facebook. And it looked like the company would continue hiring just to support its ambitious plans to build a future version of the internet called the metaverse.
On Wednesday, however, Zuckerberg reversed course and fired more than 11,000 employees, marking the most significant cuts in the company’s history. In a memo to staff, Zuckerberg came up with some of the hardest words in the English language. “I was wrong”, he wrote, “and I take responsibility”.
“In the early days of Covid, the world moved quickly online and the surge in e-commerce led to massive revenue growth,” Zuckerberg wrote. “Many people predicted that this would be a permanent acceleration that would continue after the pandemic ended. I did too, so I decided to significantly increase our investments. Unfortunately, this didn’t go as I expected. ”
Silicon Valley is based on many myths, but one of them is the founder’s idea as a visionary who can see key trends to come for years if not decades. But Zuckerberg is one of a growing list of prominent tech leaders who are cutting costs and issuing mea culpa after failing to anticipate a whiplash in the market between 2020 and 2022.
The tech industry, already seemingly invincible in early 2020, became increasingly dominant during the pandemic as other parts of the economy were disrupted. Consumers have shifted their shopping online. The Federal Reserve at the time kept interest rates close to zero, giving tech companies easier access to capital. And private and public market valuations for tech companies only seemed to rise.
With the reopening of the world, however, many consumers have returned to their offline lives. Meanwhile, high inflation and fears of a looming recession have reduced consumer and advertiser spending, disrupting the core businesses of many of the biggest names in technology after years of rapid growth.
Now the industry is cutting thousands of jobs.
Last month, home-based fitness company Peleton, which had been welcomed by investors during the pandemic, suffered its fourth round of layoffs in 2022. Last week, payment processing giant Stripe said it was phasing out 14% of its staff. And Twitter recently announced widespread job cuts after its new owner Elon Musk bought the company for $ 44 billion, funded in part by debt financing.
While Musk has remained largely silent about the mass layoffs, Twitter co-founder Jack Dorsey, who led the company through late 2021, said in a contrite thread that he takes responsibility for the situation. “I have grown the size of the company too quickly. I apologize for this, ”wrote Dorsey.
Likewise, Patrick Collison, CEO of Stripe, one of the most valuable startups in the world, told employees that the leadership takes responsibility for the pandemic-era miscalculations that have led to people losing their means of communication. subsistence.
“For those of you who leave: We are very sorry to take this step and John and I are fully responsible for the decisions that will bring it,” Collison wrote. “We were too optimistic about the short-term growth of the Internet economy in 2022 and 2023 and underestimated both the likelihood and impact of a broader slowdown.”
Other big tech companies, including Amazon, Apple, and Google, are now suspending or slowing hiring amid fears of recession following a wave of expansion. Amazon, in particular, saw skyrocketing growth during the pandemic, doubling its distribution centers over a two-year period, before moving on to focus on “cost efficiency” earlier this year.
The e-commerce giant is now freezing corporate hiring “for the next few months” and is reportedly looking to cut costs in some of its unprofitable units. Amazon spokesperson Brad Glasser said senior management regularly reviews investment prospects and financial performance, adding, “As part of this year’s review, we are obviously taking into account the current macro environment and considering opportunities. to optimize costs “.
Although there have been layoffs in Silicon Valley over the years, the latest wave of cost cuts seems to hit every corner of the industry, including engineers and programmers who were often considered untouchable. The tech bubble may not have burst, but the bubble at the top of the bubble certainly is.
Zuckerberg said Meta’s layoffs would be spread across the company, including the impact on both its family of apps and the Reality Labs division that is tasked with helping build the metaverse. He noted that some teams, such as recruiting, will be more interested than others.
With Musk at the helm, Twitter has reduced half of its staff, including AI, marketing and communications, research and public policy teams.
Roger Lee, founder of a San Francisco-based startup, has closely followed the layoffs in the tech sector since the start of the pandemic via his website Layoffs.fyi. Initially, his goal was to informally track downsizing to seek out potential candidates to recruit for his own company, a 401 (k) digital service provider for small businesses. Eventually, the fired workers started submitting their data and filling out spreadsheets for its website to grab the attention of recruiters.
“Unfortunately, I didn’t anticipate how far the layoffs would increase,” Lee told CNN Business. Nearly two months to go, she said the number of tech employees laid off in 2022 has already surpassed 100,000 according to his data.
Lee said some of the biggest trends he has seen recently are severe job losses in recruiting, HR, and sales teams. While “the engineers are still in better shape than the other roles,” Lee said her data indicates that these positions have also been cut in recent months.
“Nobody knows how long this current period will last,” he said.
There has already been a clear shift in the mood of the industry. Blind, a popular online forum that allows employees of major companies to communicate anonymously to share interview tips and brag about compensation packages, has emerged as a sobering forum where people post about layoffs rather than their own. work.
Some laid-off workers are also joining together on social media and crowdsourcing spreadsheets for recruiters. These workers created documents with hundreds of names and LinkedIn profiles (as well as visa status) of former Twitter and Meta employees.
While some companies may be better equipped to weather the storm than others, it is becoming apparent that no company is completely unscathed, said Nikolai Roussanov, a professor of finance at the University of Pennsylvania’s Wharton School.
“The technology has been beaten so badly precisely because it has been seen as very immune to the fluctuations of the real economy, but ultimately no one is immune,” Roussanov said. “And that realization, I think, is important and perhaps what has helped these ratings skyrocket quite quickly.”
Meta’s market cap has dropped from a peak of over $ 1 trillion last year to less than $ 300 billion. Amazon, meanwhile, has seen its market cap drop by $ 1 trillion from last summer’s peak.
Roussanov said current fears of a recession are not unjustified, but in many ways “there is a bit of a self-fulfilling nature to this.” He added: “As these fears become more and more widespread, people’s consumption slows down, business investments slow down and this kind of snowballs on itself.”
What’s happening in technology right now is “perhaps a taste of what’s yet to come” elsewhere, Roussanov said.