SOFTWARE ENGINEER COUNT: At the end of 2021, Twitter had a total of
7,500 employees.
After acquiring Twitter, Elon Musk would viciously lay off the workforce shrinking it to just
1,300 employees, out of which only 550 were full-time engineers.
With such a purge, you would think that outages become commonplace, bugs and glitches become
a normality, and the infrastructure of the company collapses from within.
But, as far as we can tell, Twitter is still completely operational.
I mean as an average user, you wouldn’t even know that such a massive change unfolded
on the backend.
Not only has Twitter remained operational, but they’ve even been able to roll out some
new features like Twitter Blue.
But, this doesn't make any sense.
If 1300 employees are able to keep Twitter functional and even launch new features, why
in the world did Twitter have 7,500 employees just 6 months ago?
This might seem like a Twitter specific question at first glance, but when you zoom out you’ll
realize that the same question applies to virtually every tech company.
Facebook had a total of 86,000 employees.
Google had a total of 190,000 employees.
And Apple had a total of 164,000 employees.
Now of course, not all of these employees are software engineers but a substantial portion
of them are as in 30-50%.
And even more of them are tech workers involved in program management, IT, and solutions architecting.
It’s not just these big FAANG companies either.
The same question applies to well known startups as well.
Robinhod 3,800 employees.
AirBnB, 6,800 employees.
Uber, 33,000 employees.
I mean, why in the world does Uber need 33,000 employees.
This becomes even more confusing when you consider that most of the core services for
all of these companies are already built out and functional for years if not decades.
I mean, modern software engineers at Google aren’t going to be writing search algorithms
from scratch, and software engineers at Instagram aren’t going to be creating messaging infrastructure
from scratch.
Now of course, many of these software engineers have been getting laid off in recent times.
Google laid of 12,000 people.
Facebook has laid of 21,000 people.
And you know all those startups that we were talking about?
Well, most of them have laid off 40-50% of their workforce, but this simply furthers
the narrative that these companies are able to get away with far smaller workforces . So,
why exactly did they have so many software engineers in the first place and what exactly
were all of them even doing?
THE OVERHIRING CRISIS: Common sense would lead you to believe that
running these companies simply requires such a large workforce, but that’s not exactly
true.
While coding may seem intimidating and difficult from an outside perspective, the truth is
that most coding projects are actually pretty straight forward.
Creating an app like Instagram or AirBnB isn’t actually that hard.
AirBnB for example could be created by a single developer and a single UX designer within
16 weeks.
And, you don’t even have to outsource the labor to cheap developers overseas.
You can pay the developer $5,000 every week and the UX designer $50 per hour, and it would
only cost you $82,000.
But, you don’t even have to look that far.
Instead, you can look back.
Many of the tech apps and services that we use on a daily basis were initially completely
developed by less than 5 people.
The initial WhatsApp was created by a Russian developer from RentACoder.com.
The initial AirBnB website was created by three roommates.
The initial Uber App was created by 3 friends.
And the initial version of Twitter was created by just Dorsey and a contractor.
Now of course, as you grow, you wouldn’t want to rely on less than 5 developers.
You would want developers checking each others work, developers who are focused on user retention,
developers who are focused on onboarding, developers who are focused on A/B testing,
developers who are focused on backend engineering, and so on.
You would also want program managers who are leading each of these efforts and a CTO who
can set company wide goals and timelines.
But, none of this takes tens of thousands of employees.
More realistically, it would take hundreds of employees and if you wanna be generous,
you can call it a 1000 employees similar to what Twitter has right now.
Most companies did indeed start off this way, but somewhere along the line, they started
hiring far past their needs.
Take Facebook for example.
At the end of 2014, they had a total of 9,200 employees.
By this point, Facebook had already been around for over 10 years and they owned all three
of their main platforms, Facebook, WhatsApp, and Instagram.
The core functionality of these services were complete, and the only tasks ahead were optimization
and scaling.
This isn’t to say that these tasks are easy, but it’s also questionable if it warranted
a 9X increase in head count over the next several years.
A similar story can be seen at Google as well.
Back in 2014, Google had a total of 54,000 employees.
By this point, Google already had all of their money making services setup and performing
well and they had a market cap as high as $400 billion.
You would think that Google could cut back on the hiring and simply let time do it’s
magic, but instead Google would go ahead and increase their head count to nearly 200,000.
So, if it’s not an intrinsic need that’s pushing these companies to hire more, what
is?
FILTHY RICH: One of the main reasons that these companies
hire so many people is simply because they can.
This might sound a bit anticlimactic, but it’s true.
Virtually all of the companies that we’ve discussed so far are extraordinarily profitable
on their own or they have infinite venture capital money.
At first these companies do the sensible thing with all this money.
They build up cash reserves, they diversify into new businesses, and they solidify their
user base and brand image.
But, eventually they run out of things to do.
They simply reach market saturation.
Traditionally, this is when a company would chill out and pay dividends, but these are
tech companies that we’re talking about.
Traditional oil, consumer, and industrial giants take 50, 70, 100 years to get to this
point.
So, the transition to dividends feels more natural.
These tech companies, however, often get to this point within 5, 10, 20 years, and they’re
used to ludicrous amounts of growth which has warped their perspective quite a bit.
Pretty soon, this leads to some pretty weird hiring habits like hiring with no intention.
This might sound confusing, but this is literally what happens.
At a normal company, if your team needs a new person, your manager would probably put
in a request with HR.
HR would then turn around and put up a job posting and leave it up for a months or so
to attract a sufficient number of candidates.
From there, HR would pass on the most promising candidates to your manager who would then
interview these people and choose the best one.
This is how a normal sensible company hires.
But, at most tech companies, it’s the exact opposite.
In fact, the needs of specific teams is mostly irrelevant.
Instead, these companies have generic job listings like software engineer and program
manager that are up forever.
And it’s not until candidates pass the arduous hiring bar that Google even thinks about where
to place them.
This often results in candidates passing the hiring bar, but then getting infinitely stuck
in the team matching phase.
Why does Google do this you ask?
Well, their philosophy is basically, we have a crap ton a money, so let’s just hire the
best people and we can worry about giving them something to do later.
For obvious reasons, this leads to a pretty bloated workforce and team switching policies
just make this even worse.
In traditional companies, it’s relatively hard to switch teams.
The reason for this is that you were hired to do a specific job, so if you switch to
another team, they now have to find someone to do your old job.
At many tech companies though, you weren’t hired to do a job, you were simply hired based
on your skills and general knowledge.
So, they have some pretty lenient team switching policies which candidates naturally tend to
leverage.
You see, over time, candidates have come to realize that if they waste too much time in
team matching, they might not get a job at the company despite passing the hiring bar.
So, it’s in their best interest to join the first team they can and just switch to
the team they really want 6 or 12 months down the line.
While this is clever, this leads to a two fold issue.
First of all, it’s not clear how useful they will be during the first 6-12 months
in the first team.
And secondly, it’s likely that most Google and Facebook hopefuls have the same dream
teams in mind leading to certain teams becoming even more bloated.
But, despite all this, these companies will still continue hiring because they’re chasing
infinite growth.
CHASING INFINITE GROWTH: Why do tech companies have so many employees?
Well, the answer is that they not only overhire but most of these employees end up working
on things that will never see the light of day.
Things like weather balloons that are supposed to increase internet connectivity.
Underwater cameras for ocean farmers.
AI that’s supposed to increase agriculture.
Light that can enable wireless connections.
These are all projects that Google is working on right now and those are just a few of the
public ones.
Who knows how many more projects Google has behind the scenes.
And as for Facebook, do I even have to say anything about the Metaverse?
The Metaverse is just one example though.
Several years ago, Facebook was pouring substantial resources into building drone internet.
And who could forget Google glass?
The reality is that most of these moonshot projects don’t end up going anywhere, but
end up requiring a lot of employees and resources.
This doesn’t just apply to moonshot ideas either.
Most projects relating to even successful projects like Chrome and YouTube don’t generate
any ROI.
For example, if you use chrome, you may have noticed that Google has recently been experimenting
the UI of downloads.
Instead of having a download shelf on the bottom, they are experimenting with a download
icon on the top right.
This may indeed be better, but it’s hard to say if it will actually increase Google’s
revenue or profit in any meaningful way.
It probably did, however, keep several engineers busy for several weeks.
But, if the ROI isn’t there, why do these companies continue pursuing these projects?
Well, the answer is that they’re chasing endless growth.
They’ve exhausted most of the obvious avenues, so all they can do now is experiment with
out there ideas and optimize the UI to the absolute max.
Most users will never spot these changes or use these new products or make the company
any extra money, but that doesn’t mean that these companies will stop trying.
After all, the end of the quarter is always around the corner, and they want to please
shareholders.
THE STATE OF TECH: In the end, the harsh reality is that most
tech companies don’t need anywhere near as many employees as they have.
If they were just trying to maintain their platforms, they could get away with 20-30%
of their workforce if not les.
But, they’re not just trying to maintain their platforms, they’re trying to add another
ten billion or another trillion onto their marketcap.
And they’re willing to over hire tens of thousands of employees, burn billions of dollars,
and waste tens of millions of man hours in the hopes that maybe they’ll find the next
Chrome or the next iPhone or the next Instagram.
So far, this hasn’t exactly worked out.
Some parts of the Metaverse have 38 users.
We have yet to see the Apple car or the Apple VR headset or the Apple AR glasses or whatever.
And Google’s most successful moonshot idea, Waymo, is still somehow eons behind Tesla.
None of this mattered though.
They had money and they were gonna try to brute force creativity, innovation, and a
market need.
But, for the first time, these companies are starting to see their money go down and these
projects take a toll on the core business.
And it’s only now that these companies are starting to realize that they’re inside
an overhiring nightmare.
Doesn’t really matter for the companies though as it’s the employees that have to
deal with a 20, 30, 40, 50% reductions in the workforce and that’s the harsh reality
of the tech industry right now.
Do you think overhiring is reasonable?
Comment that down below.
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