(upbeat music)
- As you know,
there have been lots of layoffs
even from the biggest tech companies.
Meta laid off more than 11,000 employees,
Amazon cut about 18,000 jobs,
and Google just cut 6%
which is 12,000 employees.
And that includes the 31 massage therapists
that got let go.
The Google employees who managed
to avoid mass layoffs
may have to continue doing their jobs without
on-site massages.
My condolences.
Not only is it shocking
to see Google lay off 12,000 employees,
but the way they did it was also shocking.
Let's watch this clip from a Google employee.
- [Nicole] A day in my life getting laid off at Google.
So I woke up to this really ominous text from my boss
and I honestly had no idea what it was gonna be about,
so I called her the minute I woke up
and saw this,
and she told me to check the news and my email.
So I rushed downstairs to find out
that I had lost access to basically everything.
I couldn't log into my email or even check my calendar.
I called my boss back
and we just sobbed over the phone
because she was also finding out about my layoff
for the first time today too.
I started getting calls from a bunch of my coworkers,
and started finding out who else was let go on my team
and some neighboring teams as well.
But I think the worst part is
that it seems like no one was consulted on this decision
and everyone was just finding out
about the layoffs at the same time.
It just felt like a really bad game of Russian Roulette
and there was no consistency around
who was let go.
It was also not performance based,
so it just felt really random.
- It seemed like there was no heads-up at all,
no conversation with your manager,
and the layoffs felt pretty random
as it wasn't even based on performance.
And then one day,
your access to everything gets cut off
immediately without communication,
just like the way my ex broke up with me.
I think a lot of these companies
simply overhired and overspent
during the pandemic,
and are now finally addressing it.
Generally, you want to avoid doing layoffs
because it looks so bad for your company.
But since everyone else is doing it now,
it became, kind of like,
socially acceptable to do so.
So every company jumps
at the chance to fire people
without the blame for handling things poorly.
Here's an analogy.
If you're in a classy restaurant
and you're holding the biggest fart of your life,
you're going to want to keep that fart in
even if it kills you,
because you don't want to be known
as the guy who farts at fancy restaurants.
But if suddenly, everyone around you
is ripping out massive farts,
then you don't feel so bad letting one
out yourself anymore.
Basically, if you fart alone, you're a villain.
But if you fart in solidarity with the people,
now you're suddenly a victim
and farting is an act of protest.
And together, you can turn the blame on the food,
or the restaurant or on macroeconomic conditions.
Was there anything that these tech giants
could have done differently
to prevent these massive layoffs?
Was there another solution?
To even start answering these questions,
I think the first thing we have to ask
is why these layoffs even happen.
I think it all comes down to leverage.
And tech companies were over-leveraged.
Leverage is a tool,
it helps you get more out of what you have.
Leverage comes in many forms.
The simplest form of leverage
would be to take out a loan to invest in stocks.
Tech startups also take on a form of leverage.
Startups will raise money,
spend money to hire more people,
subsidize their services,
operate at a loss.
They're willing to lose money
in the beginning for the sake of growing quickly
and capturing the market,
even before they figure out their unit economics.
If the startup gets to a stable state and is profitable,
then it's all good.
So in this case,
taking on leverage was totally worth it.
Investors are happy since
they made their money back faster.
But what happens when you never get
to profitability and your business model
simply doesn't work?
Then you get a startup like Bird,
the electric scooter sharing company
that spawned dozens of copycats.
At the peak in 2019,
the streets were littered with scooters.
For a couple dollars, you could ride them
for 15 minutes.
It was an awesome way to get around the city,
if you don't mind looking like a suburban mall cop.
But was it sustainable?
Was Bird profitable per ride?
No!
In fact, it was also extremely dangerous,
which caused issues for the company.
Let's look at a clip.
(light classical music)
So you can see
why electric scooter companies get a bad rep.
This guy clearly didn't
park his scooter back in its designated area.
He just left it there in the middle of the street!
Without the cooperation of the customers,
it simply won't work.
Also I've never seen anyone walk away
so casually after getting hit by a car before.
Anyway, buying scooters and renting them out
was not a sustainable business.
But VC money was flowing in
and scooter companies expanded across the country,
and even internationally.
At the peak, Bird was worth $2.3 billion
when it went public through a SPAC.
And now, it's only worth $70 million,
which means if you invested $100 when it IPOed,
your shares would be now worth $3 today.
How did a non-profitable company get so overvalued?
Why did people even buy into that?
It's because in 2020,
the market was filled with greed.
And SPACs were a vessel to carry through that greed.
SPACs were hot shit,
everyone wanted to invest in them.
Normally, when a company goes public through an IPO,
it must go through a highly regulated process
that often takes over a year.
Armies of investment bankers and lawyers
comb through the details of your company
to make sure they meet the SEC's requirements.
It's an expensive process in terms of money, time
and just pure hassle internally.
All that just so that you can penetrate
through that SEC tunnel and IPO.
But a SPAC can facilitate that process.
A SPAC is a company with the bare minimum.
A board, a management team, a bank account.
That company zips through the IPO process,
and since there's literally nothing,
it's a shell company.
It's fast and cheap.
Afterward, it raises money from people
looking to get rich quick,
to acquire a private company,
like Bird, so they can go public.
SPACs allowed companies to go public
without the scrutiny of a real IPO.
It was the perfect instrument for Wall Street insiders
to get rich by selling off their shares to us
at an inflated price because of the hype.
And then the rest was history.
2020 was the year of the SPAC.
$250 billion were poured into them.
The story might sound familiar because
the same thing happened with crypto.
In retrospect, everybody was scrambling
for get-rich-quick schemes.
Venture capital funds had so much money
to throw around,
the moment your startup pitch had the word
Web3, Creator Economy or Blockchain,
they jizz in their pants
and beg you to take their money.
It was the "zero interest rate" phenomenon
meaning interest rates were so low
that borrowing money was basically free,
which flooded the market with all this extra cash,
and everything went up.
But the music was going to stop at some point.
At that time, Ray Dalio,
a billionaire hedge fund manager said,
"Cash is trash,"
because, during a bull market,
almost anything you invest in will go up
because everyone else is also investing in it.
So holding cash is literally the worst thing
you can do for your financial health.
Well, actually the worst thing
would be to spend it on a banana
duct-taped to a wall for $120,000.
Like it's gonna turn into compost,
what are you thinking?
Anyway, the overall sentiment then was,
"If you're holding cash, you're a fucking loser."
I don't want to be a loser,
I don't want to fall behind.
I see my friends getting rich
on meme stocks, crypto, NFTs.
It doesn't matter.
As long as it'll make me money,
I'll drain my savings account if I need to.
Even the most conservative investors.
Once we're in a bull market,
you can convince them to invest
in a cartoon picture of a rock.
That JPEG sold for $1.3 million.
That's more than this photograph of a potato
which only sold for $1 million.
At least this is was a real tangible photo.
And this potato looks pretty fucking sick.
Basically, people rather be poor together
than feel left behind by everyone else getting rich.
That's the zero-interest rate epidemic.
Now, big tech companies are not immune to this epidemic.
They develop FOMO too,
the fear of missing out.
Every tech company and their moms
are spending money to expand
and scale their businesses,
you have no choice but to keep up
and also spend that cash.
You don't want to be left behind.
Remember, cash is trash.
So what did Google do?
They spent and hired aggressively,
even if they didn't have a solid plan
on how to deploy that capital effectively
or how to make use of the talent they hired.
That's why you see overqualification,
low-impact work, bloated teams,
and a bunch of employees making day in the life TikToks.
- [Narrator] Day in the life as a 23-year old
product manager at Meta.
I always journal in the morning
and then do a quick workout routine.
I get dressed,
I try to look cute every day.
Got some food at the office.
I make a coffee every single morning.
I need that.
I did some work on the roof.
Worked until lunch
and then ate up there.
Here's me being cute.
I got a snack, always.
I then shuttled home,
the view is so pretty.
Met up with some friends for dinner
and then my boyfriend came over,
and was acting like a DJ for my dog.
That used to be me, man.
Now I have to actually make YouTube videos.
Now, things are starting to unwind.
Ray Dalio no longer thinks cash is trash.
Interest rates are actually coming back
to a reasonable level.
So these tech companies
have to undo what they did,
since their revenue couldn't keep up
with the pace of their spending.
Though it was their mismanagement of their leverage,
the employees are the ones who had to pay the price.
All right, that's it for today.
If you like these videos, let me know.
If you don't, say that you like them anyway
because it makes me feel good about myself.
Okay, I'll see you in the next video.