The whole article rests on this false economic claim, that traditional industries don’t overhire based on expectations. They absolutely do, ALL THE TIME. Manufacturing, automotive, airlines, energy etc. all of them make demand bets and lay people off when those bets fail.

Cheap money amplified this cycle, but this isn’t a tech specific "failure", it’s just how forecasting under uncertainty work.

It’s incredible how some engineers assume they understand economics, then proceed to fail on some of its most basic premises. This tends to happen when engineering-style certainty is applied to systems that are driven by incentives and uncertainty.

I will avoid getting into a “who understands economics better” debate.

But factory workers usually require specialized machinery, tooling, and physical capacity, which makes overhiring slower, harder and more constrained. Those investments force more deliberate planning.

By contrast, engineers mostly require a laptop and company hoodie... That low marginal cost makes it far easier to hire aggressively on expectations and unwind just as aggressively when those expectations change.

> It’s incredible how some engineers assume they understand economics, then proceed to fail on some of its most basic premises. This tends to happen when engineering-style certainty is applied to systems that are driven by incentives and uncertainty.

Software engineers are stupid, often because they think they are very smart (which breeds arrogance). And on top of that, they often have many biases that they often fail to account for (e.g. a preference for neat-and tidy-systems, leading them to get seduced by oversimple neat-and-tidy explanations, e.g. Econ 101).

My take is that the traditional industries you mentioned (manufacturing, automotive, etc.) are making expectations on the market for what it is they're selling. With tech though, it makes expectations on markets that are brand new, or don't exist, and/or have no proven track record whatsoever.

And with that, VR would like to take the microphone and have a few words…

There's also this tech exceptionalism/grass-is-greener bias where software engineers especially tend to romanticize other industries and professions.

Tech companies also benefit from over hiring. It gives them slack to absorb crises, and Fast Fuel to move quickly on new growth. Eliminating the fear of layoffs allows employees to take more risks and explore.

The current crop of tech companies cutting staff is going to lead to a large number of dead giants. The staff who services the layoffs will be risk averse, and defensible in a job cut situation. You see this in legacy firms where it takes 10 people to make a change because each person has a small slice of permissions required to effect the change. This pattern is by design as laying of any of the ten people on different teams would kill dozens of critical business processes.

This is not how you make high growth firms.

> It’s incredible how some engineers assume they understand economics

I would say most engineers. The reason is simple - basic economics is not taught in the public schools, and economics/business is not a required course for an engineering degree.

One of the best classes I ever took was a summer class in accounting.

They typically have an elastic workforce padded with several contractors or temp workers that can expand or contract based on market conditions.

It's incredible how engineers of all stripes assume they know all sorts of things they don't actually understand

> It’s incredible how some engineers assume they understand economics, then proceed to fail on some of its most basic premises. This tends to happen when engineering-style certainty is applied to systems that are driven by incentives and uncertainty.

Dunning Kruger effect, am I right?

We consider we are smart because we can make computers go beep boop so we know about the economy too. I mean, I am part of this too even though I (or we all) know the effect but I guess my point is that there should be an humility if we are wrong.

I can be wrong, I usually am. If someone corrects me, I would try to hopefully learn from that. But let's see how the author of this post responds to the GP's (valid, from what I can tell) critique.

Edit: Looks like they have already responded (before I wrote it but I forgot to see their comment where they said that its not at the scale or frequency we see in tech)

> Cheap money amplified this cycle,

This is more-or-less the rub.

Fortunately we had a kinda-sorta sane monetary policy under the Biden administration once the pandemic started to ebb, but now we've got Mr. Appearances trying to push Jerry Powell to make stupid mistakes.