I think the unfortunate reality is that lots of companies in our industry have suspiciously inflated employee counts in the first place. Even when removing AI and the pandemic over-hiring, I wouldn't have been surprised to see corrections sooner or later.

Employee count seems to correlate to stock market incentives - which is how GitLab is like 5x larger than Valve.

I’d say it differently though. The company who hired all these people are finding they don’t have enough value added projects to keep them employed. Most of the FAANG and larger VC backed companies have something in common. They typically have 1-2 huge cash cows and they have a bunch of moonshots, R&D type stuff, etc. They are at a point where most of the moonshots have been disincentivized financially and just overall don’t see high enough ROI to continue pouring money into; exception is AI, which is a different skillset and this personnel can’t just pivot to it.

The fact is, a lot of tech products have matured and kind of entered maintenance mode. Feature additions are smaller incremental improvements than ever. If you cut out AI, I don’t know if any of the products we all use daily look much different than they did 5 years ago.

So my argument is this simply represents a natural business cycle where these companies are shifting from growth to mature. This shift always comes with a recalibration of expenses.

> I think the unfortunate reality is that lots of companies in our industry have suspiciously inflated employee counts in the first place. Even when removing AI and the pandemic over-hiring, I wouldn't have been surprised to see corrections sooner or later.

It's funny to me that everyone talks about pandemic over-hiring, as if this hadn't been a thing for a decade before that. Like, when I started at FB in 2013, they probably had about 75% of the engineers they needed (and about 10% of the sales people). But they grew engineering much faster than sales for some reason (engineering in the broad sense including data and product).

That being said, it's easy for people to look at other parts of a company and think they are over-staffed, because we don't see all the work necessary to keep the balls in the air.

It's largely also down to management hierachy. Valve and Jane street for example both have semi-anarchist managment structures. In normal companies like GitLab, your worth as a manager and compensation is usually tied directly to the hierarchiecal structure. This incentivises you to create a project to hire a team and so on.

I think it’s simplest to view these companies 2020s layoffs cycles through the lens of a political battle between executives and middle managers. Middle managers always want to grow ICs because it’s their main stake to higher title and more pay. Executives are the intermitten contra to this, with their incentive being tied to the stock (high growth at high margins). AI gave executives more leverage, productivity had gone up so they could fire more with compromising operations.

Its also notable that over the last few decades the business community has normalized layoffs and layoffs while highly profitable as net positive for the company (stock). While all the engineering driven companies, GE, Boeing, etc that go down this route end up in strategic decline.

I keep seeing this over hiring argument everywhere. What's the evidence for that?

And weren't the layoffs of 2023-24 supposed to correct that?

In my experience, in every big tech company for the past two decades, almost everyone always complained that they were understaffed to meet their goals/okrs.

IMO, the real explanation is:

- Some unprofitable companies don't want to raise money in a high interest rate world, and are using AI as a partial excuse, partial ambition to do layoffs to cut costs. Eg: NET - Other companies are investing heavily into data centers (eg: META) and need to cut costs elsewhere to offset that.

And in both cases, there's some real productivity gains that they have already seen due to AI that will offset, plus they expect to see more gains as the remaining people will work harder and be more motivated to increase their productivity for job security.

> which is how GitLab is like 5x larger than Valve.

Doesn't Valve hire tons of contractors? I don't think anyone except them knows how many people/agencies they're paying to work on stuff like proton, linux, mesa, vulkan, etc., not to mention internal projects.

Valve could not actually do all that they do with just the leaked headcount numbers.

There are companies of a certain size that hold on to thousands of people they don't really need just so they can but them at a moment's notice to appease the stock market if bad news hits. It keeps talent out of their competitors, and gives them a cheat code if earnings dip or bad news hits.

That’s the true answer. AI is just used as an excuse for “oh shit, we over-hired, and it would be nice if we had an excuse to shed these people”. Then suddenly AI popped up, and well, that’s a nice excuse.

Returning to office was the previous excuse, so now they have the next one ready to go.

I agree with both the gist of the article and your comment.

In the case of the well known FAANG and other similarly structured large software companies, everyone working there or having approached them know how bloated and inefficient they are.

What is happening is likely a long-term plan to completely restructure themselves, progressively shedding headcount while using it as a disciplinary tactic.

I am sure they understand the cost and the effect on morale.

But they are foreseeing radical changes and they want to be ready and slim before the storm.

And moreover,

The headline is backwards, the companies cutting headcount for AI have already lost, that's why they're cutting. Most of these companies are losing market share or are in dying markets and need to cut headcount. They're just blaming AI because it's convenient and forward-looking.

>which is how GitLab is like 5x larger than Valve.

Seems questionable to compare the valuation of a public company vs a private one, with the latter being marked to market rarely, if ever.

A lot of places did over-hire, but I'm suspicious that those places will successfully cut the fat rather than the muscle.