>In traditional industries like manufacturing you don’t hire 500 factory workers unless you have a production line that needs them. You don’t over-hire based on a guess.

Traditional factories do make wrong guesses about the future and overhire all the time. Example: https://www.google.com/search?q=Ford+f150+lightning+laid+off...

Anecdotally, I didn't see more safety for engineers working on cash cows. Quite the contrary, if a product is already bringing revenue, it is an easy decision for the business to squeeze a bit more margin by letting people go. Stable, cash-generating projects are often first to be put into efficiency/maintenance mode.

Interesting framing. The article makes a compelling case that we're seeing the hangover from 14 years of ZIRP-fueled hiring rather than an AI apocalypse.

But I'm curious what people think the equilibrium looks like. If the "two-tier system" (core revenue teams + disposable experimental teams) becomes the norm, what does that mean for the future of SWE as a career?

A few scenarios I keep turning over:

  1. Bifurcation - A small elite of "10x engineers" command premium comp while the majority compete for increasingly commoditized roles                                                       
  2. Craftsmanship revival - Companies learn that the "disposable workforce" model ships garbage, and there's renewed appreciation for experienced engineers who stick around                 
  3. Consulting/contractor becomes default - Full-time employment becomes rare; most devs work project-to-project like other creative industries                                              
                                                                                                                                                                                              

For those of you 10+ years into your careers: are you optimistic about staying in IC roles long-term, or does management/entrepreneurship feel like the only sustainable path?

From around 2010-2020 the stock market was rewarding growth more than profit. That means large tech employers hired like crazy to indicate growth.

Then came COVID and the economy contracted. As a result the stock market changed to reward profitability. So, excess developers had to go. We are still feeling this.

I do agree that AI is not to blame for this. In fact I will go further and claim that AI is a net negative that make this worse for the employer by ultimately requiring more people who average lower confidence and lower capabilities than without, but I say that with a huge caveat.

The deeper problem is not market effect or panaceas like AI. The deeper problem is poorly qualified workers and hard to identify talent. It’s easy to over hire, and then fire, when everyone generally sucks and doesn’t matter. If the average employed developer is excellent at what they deliver these people would be easy to identify and tough to fire like engineers, doctors, and lawyers. If the typical developer is excellent at what they do AI would be a complete net negative.

AI and these market shifts thus hide a lower level problem nobody wants to solve: qualification.

A thought I had about this topic, this is a simplification of reality to illustrate a point:

Software developers are doing R&D, you create new stuff that continues to exist forever. This is unlike most jobs, in which you produce goods and services that are consumed and then you have to produce them again.

What if we are getting to the point where all of the low-hanging stuff is invented? For example, every bank has an app which works and rarely needs to be changed. Or take a social network like Facebook, going from zero to a product with 1B users took a lot of development but since then, it's been mostly static, why employ thousands of developers dedicated to Facebook? Etc.

The author describes hiring strategy relative to Fed policy as one assumption that presumably motivates the current context in the market, but completely fails to make a point about AI, or to generally back their claims. In fact, even the main claim seems to be pulled out of the hat wrt to Europe where there’s no Fed. No hiring/layoff numbers, etc. I get it that it’s just a guy with a blog, but it’s on top of HN now, and IMO vacuous, describing one motivation that’s been floating around for quite some time. Perhaps as long as they wanted to write about it until this “last straw”

>In traditional industries like manufacturing you don’t hire 500 factory workers unless you have a production line that needs them. You don’t over-hire based on a guess.

This is interesting, in my experience its seemed to be the opposite.

In manufacturing, its must easier to come up with a specific number of employees you need for a given project or contract.

If the contract is expected to sign you may hire early to get ahead of it.

If the contract falls through, or an existing contract is cancelled, you know exactly how many people you need to cut to balance labor with your current commitments.

I'm not arguing against the core arguments of the article (I agree with most of the points), but on the other hand, software development is (at least currently) an essentially iterative process - one that differs greatly from other production processes (e.g. buildings, cars). We all know how difficult it is to estimate how much development time something takes. Planning is hard and outcomes have therefore greater variability.

Mind you that the IT over investment sucked money out of other industries. My friends who chose different career paths do not seem to be particularly content either.

IMO, this is a not-wrong but less insightful perspective on what Ed Zitron talks about in The Rot Economy. Cycles of overhiring and layoffs happen, but they're not the core mechanism. AI isn't the cause, but it's also not a scapegoat. It's just the current placeholder, like blockchain and the metaverse, that allow companies to have their valuation based on growth rather than profit.

https://www.wheresyoured.at/the-rot-economy/

The main issue IMHO is the monopolization of the industry, especially in the US. Once the giants do layoffs, the rest of the market can't absorb the people effectively, which leads to oversaturated job market.

We can of course discuss how many people got into industry during COVID heyday and whether they should have, but mostly I think it's about those behemoths having disproportionately high impact on the entire labour market.

Having stable core revenue teams and disposable experimental teams seems like an excellent way to ensure the experienced developers will leave as soon as they can, and that any new knowledge leaves the company as soon as possible.

So in the end you lose both your ability to acquire new knowledge and to keep existing knowledge.

There has to be a better way surely?

Could this not be simply summarized as ZIRP fueled a bubble in tech long before AI? Mass layoffs have been cycling on and off since ZIRP stopped. I doubt we will see that change anytime soon.

This tracks, reminds me of Cory Doctorow's talk on reverse centaur situation where he gave a nice rundown of the tech market of the past 15+ years.

Do anything and everything to remain in "growth stock" category. Spend money on useless features, on engineers working on those useless features - as long as it will make your company look like it has bright future and space to grow.

This is just scarcity based economics failing us in the ways that it has been for decades now. The only thing that stands out about tech is that from 2010 to 2020 it seemed to be withstanding the rot.

I don't really understand what the author is arguing for here. Yes, tech companies (and everyone else) hired a ton of people when money was cheap, and now they are doing lay offs. I suppose the alternative would be employing people for life? Or that it should be costlier to fire people (ie like in Europe)?

Also, if you are using AI to even write such a simple blog post, then perhaps corporations are indeed using it for all kinds of purposes too, and that undoubtedly reflects on their hiring.

Ofcourse, AI does have an impact. We can't close our eyes to that. Atleast, it created a belief that massive layoffs are affordable now without affecting productivity.

Proven businesses can always borrow at fairly low rates. When capital gets really cheap it starts to incentivize greater amounts of risk taking because investors actually want risk.

If you are starting a dry cleaning business, you have a cost of the equipment, rent and other well known factors. Starting a tech company in a new and unproven area has different expenses and a different risk/reward profile.

Malinvestment can come in a lot of flavors. Cheap capital will result in too many dry cleaners and also too many startups that probably shouldn't have gotten funding.

The downside comes in various forms. 1) existing dry cleaning businesses are less profitable because of increased competition, and 2) startups hire scarce engineers and drive up wages, which drive up costs for everyone.

Cheap capital is justified bc the goal is growth, but it is a blunt instrument that creates hot spots and neglected areas simultaneously. Compare the approach used in the US with the approach taken by China. Chinese firms face significantly more competition than firms in the capitalist US, but overall China's policies are crafted with a more deliberate eye toward their distributional consequences and notions of the greater good are much more subject to sharp critique and pressure across social and industrial strata.

What we are seeing in the US is that policymakers have come to believe that the growth-focused approach is an escape hatch that can be used to reduce the effects of other bad decisions, but at some point the size of the inflated economy gets big enough that it takes on a political life of its own -- post-911 defense contractors have dramatically more lobbying and policy-influencing power than they had prior. Today, systemically risky financial industry participants have significantly more political clout than they had before the 2008 correction.

In other words, the fabric of (political) reality shifts and it becomes hard to identify what normal would look like or feel like. In my view, AI adds fuel to the existing fire -- it rapidly shifts demand away from software engineers and onto strategists -- give the team a strategy and now with AI the team will have it done in a few weeks. If not, a competitor will do it without poaching anyone from your team.

And market forces include both creative and destructive forces. Firm failure is a feature, not a bug.

If you make a prediction that the stock market is about to collapse every year, then one year you will eventually get it right.

> Most engineers (including me) spent months grinding LeetCode at least twice in their career, studying system design, and passing grueling 6-round interviews to prove they are the “top 1%.”

Really grateful that the opportunities I've been given weren't predicated on knowing things completely irrelevant to my job. I have spent exactly zero time solving LeetCode problems in my career (beyond algorithm stuff in college).

Gravity is coming back to Silicon Valley: workers are realizing that the Bell Labs image they were sold was mostly innovation theater and hoarding talent for websites overstuffed with ads designed to manipulate users into buying junk

Unfortunately, I think the next head of the fed is going to be appointed specifically to reduce interest rates, so we’re probably just going to go back to the 0-rate trough.

Don’t think it needs to be either or.

ZIRP, AI, over hiring, and a wave of boot camp labour supply I suspect all contribute.

Plus we’re also likely approaching saturation on a lot of fronts with attention and ad density saturation. Things like YouTube seem to be on the edge of how much ads they can force feed without people just not using yt because it’s unusable. Enshitification isn’t a cycle, it’s a one way trip. Combine that with over hiring and it’s bound to hit a wall

> The result is the worst of both worlds. European engineers now face US-level job insecurity with European-level compensation and limited mobility.

Firing people in most of Europe is still not as easy as it is in the US.

The opposite is also true, it's not that easy to leave your employer and you have to give 1/3/6 months notice before leaving, depending on your role/seniority/contract.

Sometimes companies even make you sign 12 months notice contracts clause where they pay you a fixed monthly bonus but you can't leave without giving a 12 months notice, my SO has signed one.

> The liquidity that flooded the tech sector didn’t just inflate valuations; it inflated teams, egos, and expectations.

Yes it's kind of obvious to anyone who's looking at the actual work being done: the constant churn of OS updates, the JS-framework-du-jour, apps being updated constantly...

It seems to me like a lot of this is just busy work, as if engineers need to justify having a job by being releasing inconsequential updates all the time. Bullshit jobs anyone?

I for one would really like things to slow down, we all deserve it!

There is some fat in the system that likely needs to cut off.

Here is Google complaint about not serving lobster biscue:

https://x.com/Andercot/status/1768346257486184566?s=20

Zero interest rate phenomenon.

I will add some commentary from my subjective POV in IT:

“Efficiency” is a damned lie. Enterprise IT is one of the most inefficient spaces out there, full of decades of band-aids layered atop one another in the form of fad products, fancy buzzwords, and “defining leadership” projects. The reason you cannot get shit done at work quickly isn’t because of bureaucracy or management layers standing in the way so much as it’s the vested interest in weakening IT and Ops teams so that those higher-ups can retain more of the profit pie for themselves.

My entire job is to make technology become so efficient that it fades into the background as a force amplifier for your actual work, and I’ve only spent ~1/3rd of my 15+ year career actually doing that in some form. I should be the one making sure documentation is maintained so that new hires onboard in days, not months. I should be the owner of the network and/or compute infrastructure the business needs to operate, not some MSP in another country whose contract you’ll replace with a lower bidder next year. I should be the one driving improvements to the enterprise technology stack in areas we could benefit from, not some overpriced consultant justifying whatever the CIO has a hard-on for from his recent country club outing.

Consultants, outsourcing, and fad-chasing aren’t efficient. They do not better the business, overwhelmingly. AI won’t magically fix broken pipelines, bad datasets, or undocumented processes, because it is only ever aware of what it is told to be aware of, and none of those groups have any interest or incentive in actually fixing broken things.

The tech industry is woefully and powerfully inefficient. It hoards engineers and then blocks them from solving actual problems in favor of prestige projects. It squanders entire datacenters on prompt ingestion and token prediction instead of paying a handful of basically competent engineers a livable salary to buy a home near the office and fucking fix shit. Its leaders demand awards and recognition for existing, not for actually contributing positively back to society - which leads to stupid and short-sighted decision-making processes and outcomes.

And all of this, as OP points out, is built on a history of government bailouts for failures and cheap debt for rampant speculation. There’s no incentive to actually be efficient or run efficient businesses, and this is the resultant mess.

Let's look at reality. In reality, warfare, k-shaped economic growth, and influential social media tantrums from Elon, POTUS, and other big billionaires are the más problemas stifling our job market. Go ahead and sit AI in last place as 'reasons' why the tech market isn't improving, but do not call it a scapegoat. We have many distinct problems here. A lot of them are not financial. It's a dumpster fire getting free heat, free fuel, and the oxygen supply has never been more pure. AI is simply the dumpster vessel putting it all together.

https://en.wikipedia.org/wiki/Fire_triangle

Personally I think all these posts miss 50% of the issue... I agree it's not AI, but I suspect it's only partially an interest rate story.

Tech changed a lot from 2010 to 2020. Prior to 2010 almost everything built required a huge amount of development effort, and in 2010 there was still a huge amount of useful stuff to be built.

Remember – prior to 2010 a lot of major companies didn't even have basic e-commerce stores because the internet was still a desktop thing, and because of this it really only appealed to a subsection of the population who were computer literate.

Post 2010 and post iPhone the internet broadened massively. Suddenly everyone was online and companies now had to have an e-commerce store just to survive. Only problem was that there wasn't a Shopify or even npm to build from... So these companies had to hire armies of engineers.

Similarly there was no Uber, online banking was barely a thing, there was no real online streaming services, etc, etc, etc...

During this time almost everything had to built by hand, and almost everything being built was a good investment because it was so obviously useful.

Around 2015 I realised that e-commerce was close to being a solved problem. Both in how most major companies had built out fairly good e-commerce stores, and also in how it was becoming relatively easy for someone to create an e-commerce store with almost no tech skills with solutions like Shopify.

I'd argue somewhere between 2010 and 2020 the tech industry fundamentally changed. It become less about building useful stuff like search engines, social media sites, booking systems, e-commerce stores, etc – these were the obvious use cases for tech. Instead the tech industry started to transition to building what can only be described as "hype products" in which CEOs would promise similar profits and societal disruption as the stuff built before, except this time the market demand was much less clear.

Around this time I noticed both I and people I knew in tech stopped building useful stuff and were building increasingly more abstract stuff which was difficult to communicate to non-technical folks. If you asked someone what they did in tech around this time they might tell you that their company are disrupting some industry with the blockchain or that they're using machine learning pick birthday cards using data sourced from Twitter.

I used to bring this up to people in tech but so many people in tech at this time had convinced themselves that the money was rolling in because they were just so intelligent and solving really hard problems.

In reality the money was rolling in because of two back to back revolutions – the internet and the smart phone. These demanded almost all industries made a significant investment in technology, and for a decade or so those investments were extremely profitable. Anyone working in tech profited from those no-brainer technical investments.

Post-2015 the huge amount of capital in tech and the cheap money allowed people to spend recklessly on the "next big thing" for many years. 2015 to 2020 was such an amazing time to be in tech because people were basically throwing money at you to build literally anything.

But time's up now. Companies are realising that a lot of the money they invested in tech in recent years isn't profitable and isn't even that useful. So now they're focusing in on delivering value and building up profit margins.

The tech market isn't broken, it's coming back down to reality. Like railway workers post the boom we must face that most of the core infrastructure has now been built. A few of us will stick around making the odd improvement and maintaining what's already there, but that boom isn't coming back. Many of us will need to seek new professions.

I don't really understand this writer's objection: Big tech is big money and big risks. If some giant FAANG company is going to take a gamble on paying you $350,000 TC you should be squirreling most of that away for yourself in case the bet goes south.

If you want stability, go write Java for an insurance company for $85,000/year in Hartford, CT.

OP is horrified to discover risky gambling happening in Las Vegas.

When the unwind came, companies cut the layers that existed because hiring was easy, not because the work was essential. In a tighter market, the advantage shifts back to people with real systems experience and operational depth

> But in Tech, the playbook is different. Companies over-hire software engineers intentionally. To play the lottery.

The actual reason tech companies overhire is because people get promoted based on the number of people that are "under" them. All leaders are incentivized to fight for headcount.

solid analysis but i think you're missing the logical endpoint here: this doesn't end with companies "relearning scarcity"... it ends with the permanent contractor-ification of various types of work at these tech companies (not just tech roles, but other types of roles at these companies). already, contractor-to-employee ratio has gotten higher and higher at these companies in recent years and I expect this to continue.

ZIRP (especially the "double tap" ZIRP in 2021/2022) created this monster (bootcamp devs getting hired, big tech devs making "day in the life of" tiktok vids).

contractors give:

instant scale up/down without layoff optics

no benefits overhead

no severance obligations

easy performance management (just don't renew)

this mirrors what other industries typically do after large restructuring waves ... manufacturing got temp agencies and staffing firms as permanent fixtures post-rust belt collapse. tech is just catching up to the same playbook.

> Yesterday, the news of 16k Amazon layoffs plus two LinkedIn posts on the same topic back-to-back encouraged me to finally write about it.

Amazon is fundamentally a logistics + robotics company and is one of the worst companies to join for 'stability' as they have razor-thin margins.

With almost 1.6M workers, the layoffs there are at least in the 5 figures and they will not stop to do the easiest thing possible in order to increase profit margins and that is to take jobs away from warehouse workers (using robots) and corporate jobs (using AI agents).

> Most engineers (including me) spent months grinding LeetCode at least twice in their career, studying system design, and passing grueling 6-round interviews to prove they are the “top 1%.”

Leetcode can be easily gamed and cheated and is a waste of time.

Now you need to make money for yourself instead of dancing around performative interviews since an AI Agent + Human out performs over 90% of workers doing the mundane work at Amazon anyway.

You are being scammed without knowing it.

> Europe just became a lower-cost extension of Silicon Valley.

Pretty much spot on. The UK included in the above definition of Europe as well.

Is this just for the big guys like FANG, AI companies?

There is huge part of tech market that is just humdrum blue color software. Keep the ERP system running, build a new efficiency report, trouble shoot why the payroll missed bob last week because of a un-validated text entry field.

Or because of the years of zero interest, tons more people went into software, so now it is over-populated, and thus puts pressure on regular hum-drum software jobs.

  > Till ~2010, a layoff was a sign of failure. It meant the CEO messed up.
  > 
  > In 2024, a layoff is a signal of “discipline.” Companies lay off thousands, and their stock price jumps.

Mostly true, but AI accelerated that process:

- Senior Engineers now often is sufficient for most tasks, Junior Engineers seems like a burden rather than a boost during development process

- Companies feel comfortable with hiring fast and firing fast

- Tech Market is now flooded with not-so-good engineers having good experience with good AI coding assistants - which already are capable of solving 80% of the problems - they are ready to work for much less than really experienced engineers

In general, yes, companies overhired many software developers, hoping they will continue hyper growing, but then reality has kicked in - this was not sustainable for most businesses.

Should information technology be a stable employment sector?

As far as I'm concerned, the main purpose of IT is to automate work. Tech companies make these systems of automation and provide them to other industries, so they can automate.

Making a program or an IT system is something you only do once. So once it is completed, it is expected that a lot of people who helped make it have to go. It's like building a skyscraper. Massive amounts of work to build it, and when it's finished, most workers have to move on.

Of course an IT company can continue to expand into perpetuity, but what if they don't have the leadership talent or resources to create a new giant project after one has been finished? Then the sensible thing is to down-size.

"Well don't hire too many people in the first place to rush your project into completion" - Then you get left behind.

I am about to give my take on software development:

Most [sane] software out there, but not all, has a main development time which is ridiculous compared to its life cycle (you could code in binary machine code, for several ISAs, it would not even matter).

Then, it is extremely hard to justify _HONESTLY_ a permanent income in software development. Really, really hard.

The industry was always a disaster, but if you take a disaster and put AI in the mix you get a disaster at light speed. It was always getting worse and worse but now it’s speedrunning it.

I remember after the Brexit vote (i.e. years before anything actually changed) there was a rash of British companies who clearly would have gone bankrupt anyway blaming their ailing fortunes on Brexit.

There is remarkably little pushback on company narratives about layoffs or ailing economic fortunes from journalists which is weird because it's more normal that they are not truthful.

The Brexit vote is nothing like this though. AI is probably the biggest corporate gaslighting exercise I've ever seen in my entire life.

Westinghouse Electric Corporation built early electrical grid turbines, and worked extensively with consumer product markets to close the circle of demand. Accordingly, more retail products required more energy, and more energy required more turbines.

The LLM proponents are trying the same naive move with intangible assets, but dismissed finite limits of externalized costs on surrounding community infrastructure. "AI" puts it in direct competition with the foundational economic resources for modern civilization. The technical side just added a facade of legitimacy to an economic fiction.

https://en.wikipedia.org/wiki/Competitive_exclusion_principl...

Thus, as energy costs must go up, the living standards of Americans is bid down. Individuals can't fix irrational movements, but one may profit from its predictable outcome. We look forwards to stripping data centers for discounted GPUs. =3

"Memoirs of extraordinary popular delusions and the madness of crowds" (Charles Mackay, 1852)

https://www.gutenberg.org/files/24518/24518-h/24518-h.htm

The speculative nature of tech has always been present.

The point is mass media communication and frictionless money movements across the world and market access which is so freely availible to the small retail investor.

It's a recipe for disaster because an extraordinary claim can attract billions of dollars with nothing but hope and dreams to back it up.

Imagine if the Wright Brothers had today markets and mass media at their disposal, they'd be showered in billions or even trillions but the actual model didn't make any money because it was R&D

>Europe just became a lower-cost extension of Silicon Valley.

Stay away from europe while you can.

IMO the issue is even more fundamental than the article presents. The software product market is approaching a saturation point. All the low hanging fruit has been commoditized, so buying something off the shelf is now generally preferable to having engineers on your staff. After the pandemic hiring spree, even the big tech companies realized they didn't have enough productive work for all these engineers. The effect is compounded by the return to normal interest rates, so investors are no longer desperate to dump their cash into every random startup idea. Ultimately, software engineers aren't going away, but the era of desperate need is over for good.