Perhaps I'm naive, but I think companies are doing massive layoffs these days because of some sort of "domino effect".
There are companies out there who would love to lay off half their staff, but in regular times they couldn't just do it (because it wasn't a common thing, and makes them look "bad"... everyone would protest). But since nowadays every damn company is doing massive layoffs (and not unknown companies, but companies like Twitter, Facebook, Google, etc.) then they take advantage of the situation and proceed to do the same.
> While we are looking forward to what’s to come in 2023, we must also make hard decisions necessary to set us up for long-term success.
This could have been said any damn year in the past, but massive layoffs is the latest trend, so why not.
The FED is currently raising rates to fight inflation. One of the FED's main goals is slowing down demand, as policymakers can't control supply.
So, to fight that elevated inflation they are killing demand, and when demand sharply drops, you can't keep paying your workers as before (because you sell less goods!).
Moreover, companies simply got fat during the pandemic and over hired. I mean, there are probably also a few (lot) companies which do what you write, but I don't think Flexport is one of them. It's more likely they over hired like everyone else. Also, you might want to take a look at the current container fright prices [1]. Pretty parabolic.
This is literally what interest rate hikes are meant to do though, and everyone plays along. You hike rates, which switches people to saving instead of spending, since no one is spending companies cut costs and downsize instead of spend for growth and hey presto, demand collapses.
In a cheap money environment you take the money and you gamble for growth, in an expensive money environment you do your best to run lean. The pain is moving between these two. The winners are the guys who did a raise at the peak and can use that cash to accelerate through the downturn, and the losers at the guys who just didn't quite get there, who now are forced into taking capital at a massively diminished valuation.
This was my initial take six months ago, but I've come to realize this is about runways. Imagine you just lost your job. First thing you'd want to do is get some idea of how long it'll be until you can get another one, then look at your budget and cash on hand to make sure you can pay the bills. If you don't, you have the options of borrowing money (which is hard and a bad deal in these circumstances) or selling some of your stuff. This is basically what companies are doing.
It's a bad deal for companies to borrow money or take big investments when interest rates are so high. If you want to avoid doing that, you need to predict when interest rates will drop and make sure you have enough cash to ride it out. In spite of being successful, some companies don't have the cash, and they need to reduce their burn rate.
You are naive they just want to rehire positions at lower rates if you see in the article they are cutting 600 but are hiring for 350 to 400 people. It would immediately allow them to replace higher wages workers that have been with the company with entry level positions . Also it seems like an identification of long term trends and they figure they want to invest in automation.
A global recession is coming against a backdrop of the Fed raising rates, that is going to be very painful. A lot of people here don't seem to realise this is the case or are in denial. This is a bubble bursting, this is serious.
Lots of companies are laying off workers or at least freezing hiring because they anticipate earnings cratering, or are already seeing it happen. They haven't reported on it yet, but they will in the coming months. The layoffs will continue to gather pace, as will bankruptcies.
As far as I can tell, layoffs seem concentrated among high-earning folks - I can definitely see how anyone browsing HN would think we're headed straight for a recession. But it seems like overall, and especially in lower-wage jobs, employment is still humming along and people are very much not getting laid off.
That actually really gives me hope for a soft landing - those high-wage folks are much less likely to have serious financial problems like homes getting foreclosed (not to say it's not possible but they're much more likely to have a cushion to keep making payments). If they pull back on their discretionary spending plus stop doing things like driving up housing/car/stock prices by putting money into those things, that feels like it could be the basis for inflation slowing down without a huge uptick in unemployment and everything that comes with it.
EDIT: Thank you all for generously sharing your time in writing up such thoughtful answers.
--
Would love to hear more on your perspective / insight.
This is all intentional, right? My understanding is that the fed is leaning into this particularly hard in order to dislodge the stubborn housing bubble.
For an individual (someone who isn't a current business owner), does this basically mean we should continue stockpiling savings, and avoid moving (rent) / avoid buying house / buying a car?
Any ideas how long this could last / what the bottom looks like?
Unemployment is at a record low. US economy added 223k new jobs in December. US Q3 GDP increased annualized 3.2% over Q2.
Some companies are doing layoffs (mainly those that overhired during COVID), others aren't. Look at the data instead of clickbait headlines and everything looks much less bleak.
If you are really certain you can forecast how the economy is going to do with high accuracy, get a job at some hedge fund and get rich.
> A global recession is coming against a backdrop of the Fed raising rates
I believe we're going to double dip. We already dipped before the holidays. We'll see one more very painful quarter, which may not be Q1, but Q2 or Q3. From what I've seen, Series B+ is essentially impossible right now unless you're in the top 0.0001% of companies. Even then, if you're that operationally efficient, you might even hold off on funding until you can pull a higher valuation in 24-36 months.
As far as tech layoffs go. I think this has been coming for nearly a decade. Companies have been hiring at what seemed an insane pace for so long that it just became the norm. My personal opinions on Elon aside, he proved how bloated a lot silicon valley tech companies are/were.
Many people seem surprised that an organization would simultaneously hire and fire. I think that's normal.
At the end of every season, the Yankees fire some players and hire others.
Old cells in organisms die or are killed, while new ones are born.
Soldiers going on missions may put down the equipment from the prior mission, and pick up new equipment.
The argument "the organization is behaving selfishly, they should just repurposing the existing organization member" is inane since the function of members of an organization depends on the member's specialty, role, purpose, and an organization's purpose can change over time.
It's really strange people act like this is some killer argument when in fact nearly every organization with multiple entities does something analogous (grow in some ways, shrink in others, at the same time)
Remember when everyone cut jobs and canceled orders at the beginning of the pandemic and it really bit them? I'm like 49% sure that's going to happen again. Something funny is in the air.
Amazon's headcount literally doubled from 2019 to 2021. The recent layoffs barely move their headcount back at all.
While Amazon may be the most visible, this pattern was repeated across a lot of smaller companies. Even my employer was setting arbitrary goals to grow headcount by certain numbers last year and hired a lot of people with questionable qualifications in the process. Now they're laying people off and using it as an opportunity to cut their mistakes.
A lot of good people are getting laid off, but I have a feeling that many of these layoffs are an overdue correction from companies that were too afraid to let anyone go in the past few years. Now that the hiring market has changed to give employers the upper hand, it's only natural for them to start wanting to cut underperforming employees and focus on the people doing most of the work.
I wonder if this is what drove a lot of pandemic hiring. A bunch of companies froze their hiring in March-April (some did layoffs), realized they made a mistake, and in the Summer went on a hiring spree.
In this case the maritime shipping industry has a huge oversupply of boats (compared to last year which had a huge undersupply). Consumers are slowing their spending and retailers have a lot of inventory.
It’s slightly different dynamics. At the beginning of the pandemic, people thought the world was going to end (either in literal terms or just economic ones). The massive hiring came after people realized that life would go on.
What’s happening today is a result of the free money spigot being turned off. The layoffs and hiring freezes are going to be a bit more sticky.
I'm of the opinion that we're just regressing to the pre-COVID trend line.
Many metrics have a huge pandemic bump that's just approaching the pre-COVID trend line. I suspect we'll see a slight overcorrection. First dipping below trend, then bouncing back up a bit, before finally returning to trend line.
Companies will adjust to supply chain issues. Workers will wisen up and move jobs. Home demand will level out with supply. People will return to "normal" work areas.
> At Flexport, 2023 is going to bring extraordinary velocity – we are in the process of doubling our software engineering talent and moving to single threaded business organizations to build world class products faster, and we will continue to invest in delivering best-in-class operational execution for our customers.
Looks like they are laying off non-tech workers who they have made (or will make) obsolete through automation
Reading the letter, it looks like the departing folks are being offered good severance. That makes me happy to see. I've been through rounds of layoffs myself. It never feels good, but how the company treats you if your number is called makes for a lasting impression.
This is one company i've always wanted to work for- my mother is a CTO of a company in the same space/different aspect of the pipeline so I knew this company was going to do well when it entered the YC batch, but I've never even received a screening interview. Hope i can apply once the economy recovers
In my mind, Flexport is part of the "real" economy of moving atoms. They don't fall into the more fluffy "we are a startup that helps other startups start-up". I wonder if this is an early sign for a rough recession that spills outside of the current VC-backed tech slowdown.
I’m not sure it’s that strong a signal, the covid effect on shipping meant that there was a huge backlog of stuff to ship which of course got worked through eventually. But yes one should expect an actual recession outside just shrinking the tech bubble.
When I interviewed with them 2-3 years ago, I recall being told that while the goal was to automate shipping, 95% of their shipping was being done with humans and human processes (due to the complex and irregular nature of shipping).
I would expect that a global reduction in shipping traffic would mean needing fewer of these people internally; so I suspect that's the bulk of the 20% reduction group.
People in this thread seem to be expressing confusion as to why they would be doing this "when the economy is still so strong"
The economy is not "still strong" by most measures. Employment is still strong although there are lot's of arguments to be made that when you dig beneath the surface things are much less rosy. But it get's way worse when you look past employment.
Housing volume has fallen off of a cliff, auto wholesale has fallen off a cliff, Major Metro Commercial real estate volume has fallen off a cliff while REITs are suspending withdraws.
All of this while tax receipts are about to drop off of a cliff while US debt to GDP and deficit to GDP are essentially at historic highs while the rollover rate on that debt is constantly increasing.
And then realize that the US is in a drastically better position than China, Europe and Japan
It seems like some of the HN crowd is very out of touch with the realities of the economic data.
I’d be curious to get Peter Zeihan’s thoughts on this. Flexport’s business is built around globalization and trade. What if Peter is right and we are seeing it all unravel before our eyes right now? Trading paradigms shifting to regional groups of countries. I wonder if this is on the radar for companies like Flexport
I hadn't heard of Flexport before, but they seem to be focused on global shipping. The company I work for ships almost all of its products internationally, and we have seen a massive price hike over the last 2-3 years. Some of it necessary due to rising costs, but we know for a fact that larger-volume customers are still getting lower prices.
Additionally, the well-known carriers still offer incredibly poor service - most notably when it comes to tracking shipments and providing proper updates. This seems to be exactly the market Flexport wants to tackle.
If they can't even compete in the current overheated market, something must be going seriously wrong at their end.
This is one of those companies that were always hiring when I checked HN's jobs page. Honestly I thought they seemed like they have trouble hiring, but good for them that at least they've hired enough to get to the point they need a reduction.
[+] [-] dakiol|3 years ago|reply
There are companies out there who would love to lay off half their staff, but in regular times they couldn't just do it (because it wasn't a common thing, and makes them look "bad"... everyone would protest). But since nowadays every damn company is doing massive layoffs (and not unknown companies, but companies like Twitter, Facebook, Google, etc.) then they take advantage of the situation and proceed to do the same.
> While we are looking forward to what’s to come in 2023, we must also make hard decisions necessary to set us up for long-term success.
This could have been said any damn year in the past, but massive layoffs is the latest trend, so why not.
[+] [-] super256|3 years ago|reply
So, to fight that elevated inflation they are killing demand, and when demand sharply drops, you can't keep paying your workers as before (because you sell less goods!).
Moreover, companies simply got fat during the pandemic and over hired. I mean, there are probably also a few (lot) companies which do what you write, but I don't think Flexport is one of them. It's more likely they over hired like everyone else. Also, you might want to take a look at the current container fright prices [1]. Pretty parabolic.
[1] https://fbx.freightos.com/
[+] [-] SilverBirch|3 years ago|reply
In a cheap money environment you take the money and you gamble for growth, in an expensive money environment you do your best to run lean. The pain is moving between these two. The winners are the guys who did a raise at the peak and can use that cash to accelerate through the downturn, and the losers at the guys who just didn't quite get there, who now are forced into taking capital at a massively diminished valuation.
[+] [-] madrox|3 years ago|reply
It's a bad deal for companies to borrow money or take big investments when interest rates are so high. If you want to avoid doing that, you need to predict when interest rates will drop and make sure you have enough cash to ride it out. In spite of being successful, some companies don't have the cash, and they need to reduce their burn rate.
[+] [-] dpflan|3 years ago|reply
[+] [-] alsfjslkdfgj|3 years ago|reply
[deleted]
[+] [-] zitterbewegung|3 years ago|reply
[+] [-] grey-area|3 years ago|reply
Lots of companies are laying off workers or at least freezing hiring because they anticipate earnings cratering, or are already seeing it happen. They haven't reported on it yet, but they will in the coming months. The layoffs will continue to gather pace, as will bankruptcies.
[+] [-] idopmstuff|3 years ago|reply
That actually really gives me hope for a soft landing - those high-wage folks are much less likely to have serious financial problems like homes getting foreclosed (not to say it's not possible but they're much more likely to have a cushion to keep making payments). If they pull back on their discretionary spending plus stop doing things like driving up housing/car/stock prices by putting money into those things, that feels like it could be the basis for inflation slowing down without a huge uptick in unemployment and everything that comes with it.
[+] [-] warent|3 years ago|reply
--
Would love to hear more on your perspective / insight.
This is all intentional, right? My understanding is that the fed is leaning into this particularly hard in order to dislodge the stubborn housing bubble.
For an individual (someone who isn't a current business owner), does this basically mean we should continue stockpiling savings, and avoid moving (rent) / avoid buying house / buying a car?
Any ideas how long this could last / what the bottom looks like?
[+] [-] jupp0r|3 years ago|reply
Some companies are doing layoffs (mainly those that overhired during COVID), others aren't. Look at the data instead of clickbait headlines and everything looks much less bleak.
If you are really certain you can forecast how the economy is going to do with high accuracy, get a job at some hedge fund and get rich.
[+] [-] ryanSrich|3 years ago|reply
I believe we're going to double dip. We already dipped before the holidays. We'll see one more very painful quarter, which may not be Q1, but Q2 or Q3. From what I've seen, Series B+ is essentially impossible right now unless you're in the top 0.0001% of companies. Even then, if you're that operationally efficient, you might even hold off on funding until you can pull a higher valuation in 24-36 months.
As far as tech layoffs go. I think this has been coming for nearly a decade. Companies have been hiring at what seemed an insane pace for so long that it just became the norm. My personal opinions on Elon aside, he proved how bloated a lot silicon valley tech companies are/were.
[+] [-] epivosism|3 years ago|reply
At the end of every season, the Yankees fire some players and hire others.
Old cells in organisms die or are killed, while new ones are born.
Soldiers going on missions may put down the equipment from the prior mission, and pick up new equipment.
The argument "the organization is behaving selfishly, they should just repurposing the existing organization member" is inane since the function of members of an organization depends on the member's specialty, role, purpose, and an organization's purpose can change over time.
It's really strange people act like this is some killer argument when in fact nearly every organization with multiple entities does something analogous (grow in some ways, shrink in others, at the same time)
[+] [-] maldeh|3 years ago|reply
[+] [-] ec109685|3 years ago|reply
Flexport always seemed to be hiring.
[+] [-] unknown|3 years ago|reply
[deleted]
[+] [-] JamesAdir|3 years ago|reply
[+] [-] willcipriano|3 years ago|reply
[+] [-] PragmaticPulp|3 years ago|reply
Taking Amazon for example, look at this chart: https://www.statista.com/chart/7581/amazons-global-workforce...
Amazon's headcount literally doubled from 2019 to 2021. The recent layoffs barely move their headcount back at all.
While Amazon may be the most visible, this pattern was repeated across a lot of smaller companies. Even my employer was setting arbitrary goals to grow headcount by certain numbers last year and hired a lot of people with questionable qualifications in the process. Now they're laying people off and using it as an opportunity to cut their mistakes.
A lot of good people are getting laid off, but I have a feeling that many of these layoffs are an overdue correction from companies that were too afraid to let anyone go in the past few years. Now that the hiring market has changed to give employers the upper hand, it's only natural for them to start wanting to cut underperforming employees and focus on the people doing most of the work.
[+] [-] spamizbad|3 years ago|reply
A bull-whip effect, but for employment.
[+] [-] epa|3 years ago|reply
[+] [-] xienze|3 years ago|reply
What’s happening today is a result of the free money spigot being turned off. The layoffs and hiring freezes are going to be a bit more sticky.
[+] [-] ctvo|3 years ago|reply
No. Did they have layoffs previously? I also don't remember anyone cancelling orders and cutting jobs at the beginning of the pandemic.
[+] [-] SkyPuncher|3 years ago|reply
Many metrics have a huge pandemic bump that's just approaching the pre-COVID trend line. I suspect we'll see a slight overcorrection. First dipping below trend, then bouncing back up a bit, before finally returning to trend line.
Companies will adjust to supply chain issues. Workers will wisen up and move jobs. Home demand will level out with supply. People will return to "normal" work areas.
[+] [-] marcosdumay|3 years ago|reply
I can imagine a lot of companies struggling to hire in a few months. But I can't imagine they being the same ones that are just firing.
[+] [-] 72f988bf|3 years ago|reply
[+] [-] CityOfThrowaway|3 years ago|reply
> At Flexport, 2023 is going to bring extraordinary velocity – we are in the process of doubling our software engineering talent and moving to single threaded business organizations to build world class products faster, and we will continue to invest in delivering best-in-class operational execution for our customers.
Looks like they are laying off non-tech workers who they have made (or will make) obsolete through automation
[+] [-] umeshunni|3 years ago|reply
They could start by laying off 50% of their CEOs
[+] [-] Baeocystin|3 years ago|reply
[+] [-] abadger9|3 years ago|reply
[+] [-] warent|3 years ago|reply
[+] [-] pchristensen|3 years ago|reply
[+] [-] cj|3 years ago|reply
https://www.flexport.com/blog/flexport-co-ceos-note-to-emplo...
[+] [-] calr|3 years ago|reply
[+] [-] colechristensen|3 years ago|reply
[+] [-] moffkalast|3 years ago|reply
Well that's YCombinator in a nutshell.
[+] [-] michaelteter|3 years ago|reply
I would expect that a global reduction in shipping traffic would mean needing fewer of these people internally; so I suspect that's the bulk of the 20% reduction group.
[+] [-] sremani|3 years ago|reply
Is it safe to say the Global Trade is down but there is still demand (for now) for tech efficiencies.
[+] [-] game_the0ry|3 years ago|reply
[+] [-] sanguy|3 years ago|reply
We've had 5 such approaches in the past 6 weeks of which 2 we have taken over.
It is going to get very very bad inside the next 6 months. We're still in the pre-swell phase before the tidal wave hits.
[+] [-] grey-area|3 years ago|reply
1. Start making money 2. Sell the company
Many of them will tell themselves that they can somehow see massive growth and start making a profit, and will fail while trying to do so.
[+] [-] wferrell|3 years ago|reply
[+] [-] anm89|3 years ago|reply
The economy is not "still strong" by most measures. Employment is still strong although there are lot's of arguments to be made that when you dig beneath the surface things are much less rosy. But it get's way worse when you look past employment.
Both volume and rates on maritime container shipping are down roughly 80% YOY. https://www.drewry.co.uk/supply-chain-advisors/supply-chain-...
PMIs are falling off of a cliff https://tradingeconomics.com/united-states/manufacturing-pmi
S&p Earnings are in steep decline off the peak https://www.macrotrends.net/1324/s-p-500-earnings-history
Consumer revolving credit is extremely high while the savings rate has fallen off of a cliff since the pandemic peak https://fred.stlouisfed.org/series/REVOLSL
https://fred.stlouisfed.org/series/PSAVERT
Housing volume has fallen off of a cliff, auto wholesale has fallen off a cliff, Major Metro Commercial real estate volume has fallen off a cliff while REITs are suspending withdraws.
All of this while tax receipts are about to drop off of a cliff while US debt to GDP and deficit to GDP are essentially at historic highs while the rollover rate on that debt is constantly increasing.
And then realize that the US is in a drastically better position than China, Europe and Japan
It seems like some of the HN crowd is very out of touch with the realities of the economic data.
[+] [-] zwilliamson|3 years ago|reply
https://en.m.wikipedia.org/wiki/The_End_of_the_World_Is_Just...
[+] [-] coolbreezetft22|3 years ago|reply
[+] [-] crote|3 years ago|reply
I hadn't heard of Flexport before, but they seem to be focused on global shipping. The company I work for ships almost all of its products internationally, and we have seen a massive price hike over the last 2-3 years. Some of it necessary due to rising costs, but we know for a fact that larger-volume customers are still getting lower prices. Additionally, the well-known carriers still offer incredibly poor service - most notably when it comes to tracking shipments and providing proper updates. This seems to be exactly the market Flexport wants to tackle.
If they can't even compete in the current overheated market, something must be going seriously wrong at their end.
[+] [-] pm90|3 years ago|reply
[+] [-] whatever1|3 years ago|reply
Amazing incompetence.
[+] [-] greatpostman|3 years ago|reply
[+] [-] nsonha|3 years ago|reply