He mentioned that Musk once noticed a group of interns at SpaceX lining up to buycoffeeGoing around idly.
This perfectly normal thing seems to Musk to be an insult to productivity. According to Labuis, Musk responded by firing all the interns and having the company install cameras to regulate the order if it happened again.
Of course, in addition to threatening to fire everyone, Musk could also cancel the coffee break or buy another coffee maker for the company. Musk has been known to sleep right in the office when confronted with production problems, and mercilessly threaten to fire people who disagree. But those two options aren’t Musk’s style, or Silicon Valley’s style today.
After a boom that lasted nearly 15 years, the tech industry is now in contraction mode. Shares in newly public tech companies have fallen about 60% since October. Tech investors are beginning to worry that some unicorns and high-valued startups may not be able to raise additional capital and will have to slash costs.
Earlier this month, Facebook parent Meta announced a slowdown in hiring in an effort to cut costs. Late Thursday, Twitter announced a hiring freeze. Even Uber, the ride-hailing company that has been burning through cash for business growth, has issued serious memos to employees about “unit economics.”
Investors who until recently were only concerned with “building” businesses are suddenly turning their attention to layoffs. Marc Andreesen, the venture capitalist who funded Musk’s $400 million acquisition of Twitter, tweeted: “The overstaffing of the great big companies is twice as large.” “The overstaffing of the bad big companies is 4 times or more than the original.”
The slowdown in hiring at some companies shows that executives are becoming more risk-averse and “less willing to do anything for growth,” said Julia Pollak, chief economist at job site ZipRecruiter. “Many of these companies have grown very fast; maybe they overdid it.”
Hiring changes in the tech industry are worrying some workers, who have expressed fears of being laid off or finding jobs on job sites such as LinkedIn. Many tech companies say they want to do more to reduce spending. Facebook parent Meta said last week that the company, which has more than doubled the size of its workforce since 2018, will significantly slow hiring.
Twitter CEO Parag Agrawal told employees in a memo on Thursday that the company will suspend hiring and re-evaluate offers that have already been made. Agrawal said Twitter plans to reduce spending on outsourced work, consultants, employee travel, marketing and more.
Uber Chief Executive Dara Khosrowshahi also told employees this month that the company would “see hiring as a privilege” and be more careful about when and where it hires. Khosrowshahi said the market and investor sentiment has shifted, and companies need to focus on improving profitability.
Some companies that grew in the early days of the pandemic also ran into trouble. Online car dealer Carvana announced it would cut 12% of its workforce; fitness equipment maker Peloton said in February it would cut 2,800 jobs, including about 20% of the company’s jobs.
Venture capitalist Vinod Khosla said smaller companies and startups may be more cautious, as it may now be less easy to raise large sums of money quickly. That could lead some executives to think differently about whether to add new roles or expand their teams, he said.
“Smart entrepreneurs must be cautious,” Khosla said. “When capital is cheap, they burn money,” he said. “They spend a little more to gain an advantage over their competitors or to expand the market.”
In contrast, now “less funding will be used more efficiently,” Khosla said.
A lot of the conversation among entrepreneurs has recently turned to saving money, said Maria Colacurcio, chief executive of Syndio, a compensation data analytics platform. “Everyone is turning to cash preservation,” Cracursio said. “‘I don’t want to raise money in this environment,’ and that’s something a lot of my peers are talking about.”
At a time when many are anxious about the direction of the economy, Pollack said moves by prominent tech companies could be cause for concern and have a huge impact on job market sentiment. “People are nervous,” she said. “They’re looking for signs and signals of what’s going to happen in the future.”
In any case, the shift appears dramatic. Over the years, the tech world has been seen as a source of pride by paying well-paid and coddling talented engineers. Former Google CEO Eric Schmidt has boasted about his efforts to retain “genius.” He believes that bosses should listen to the “smart creatives” who are difficult to get along with. Facebook has touted the company’s “recharge” program, which encourages employees to take 30 days of vacation every five years. Twitter’s vacation policy is already generous, and during the epidemic, it has added “rest days” to improve mental health throughout the company.
This perk is now the object of ridicule. Days after Musk announced his Twitter acquisition, tech investor and longtime Musk friend David Sacks said Twitter’s operational failure was not caused by its former CEO Jack Dorsey , but by Dorsey’s overly doting company employees.
“It really feels like Twitter employees are running the company,” Sachs said, warning that executives were “shoved and bullied by employees.” The answer, he said, is firing: “Twitter has about 8,000 employees, and no one knows what they’re doing.” Musk, he said, could fire as many as 6,000 people.
Fortunately, Musk’s actual plan appears to be much more modest. A leaked report to investors suggested he would lay off less than 1,000 employees and then eventually hire thousands more, a far cry from the idea of a 75% layoff proposed by Sacks and Anderson.
Also, while the valuations of tech companies have been falling, it’s unclear whether employees have lost their clout. The labor market is still very tight, and big companies have been forced to compromise on returning to the office, allowing employees to work from home indefinitely, along with big pay rises. Just three months ago, Amazon doubled its base salary cap as its share price fell. Perhaps it was these developments, along with complaints about employees, that put Silicon Valley investors into crunch mode.
With growth prospects limited and employee compensation showing no signs of slowing, the investor shift makes more financial sense. No matter what VCs say, it usually comes down to money. (Chen Chen)