Continuing Tech Layoffs Based on a Bet
2023 was great year for layoffs in the tech sector. More than 250,000 hard-working non-unionized workers from companies like Google, Microsoft, Amazon, eBay, Etsy, and many other technology-based companies were tossed out without further considerations of the impact to long-term product strategies, financial viability of the company without workers to create long-term value, or even the risk of overburdening the remaining workers with all that added work previously done by those that were sent away. Now in early 2024, the layoff trend has continued, with even more layoffs announced affecting 25,000 workers. While layoffs are a strong indicator of poor company leadership, bad management of company resources, and incompetence in developing viable products and services, the stock market generally rewards companies announcing layoffs with a higher stock price. Those companies, in the short-term at least, are believed to be making changes that will help their long-term value. Unfortunately, this layoff trend is likely to continue. Insiders point to a recent charity poker game for Gamblers Anonymous in which several tech leaders made a “friendly wager” on who could lay off more people and still maintain a high stock price and price-to-earnings ratio. To win, the companies have to fire more people and maintain or grow their stock price and P/E ratios at January 2024 levels. The leaders of the Magnificent Seven (Amazon.com, Meta, Apple, Alphabet, Nvidia, Tesla, and Microsoft) are all believed to be in on the bet. Once the wager was made, Elon Musk immediately called his Chief Operating Officer (COO) at Tesla, told her to layoff 70% of the managers at the company, and then fired the COO on the call. Tesla stock rose 3.1% in after-hours trading on the news.