[username_my1]

wrong view / comparios ... in a 5% interest rate environment, companies fight for investors money .. if you don't do the cuts and find a way to be efficient investors will put their money somewhere else that's more profitable.

this reasoning is pure and simple and correct, you start from the top, not from the fact "they can afford it" because their job is not to spend the money they have their job is to increase value for investors.

[SturgeonsLaw]

Let's do a little root cause analysis. Why do companies like Google, Microsoft and Amazon, with massive income streams combined with substantial cash holdings, need investor money? Maybe Toyota's "Five Why's" can shed some light on it.

We need to fire thousands of people.

Why?

Because it will make us more attractive for investors.

Why?

So they put their money in our company.

Why?

Because that will buoy our stock price, which is important.

Why?

Because it makes shareholders richer.

Oh.

[Yoric]

True but oversimplified a little.

Because that will buoy our stock price, which is important.

Why?

Because our stock price is also our operational funds.

How comes?

Because our actual funds are invested somewhere else.

Why?

Because it makes shareholder richer.

Oh.

[benj111]

But the b2b sourdough app is a potential driver of future growth. Yes it may help the bottom line today, but getting rid of employees today lowers future growth potential.

Investors know this. Investors would also question why there are layoffs in an apparently healthy company. All this means that CEOs don't want to do mass layoffs which even more strongly raises the question of why they did it to start with.

[chmod600]

"need investor money?"

There exist large private companies; how do they behave differently? I could imagine it going either way, depending on the owners, employees, and all kinds of other factors.

[mook]

I think the last answer is a bit off.

… Why?

Because that will buoy our stock price, which is important.

Why?

Because a significant portion of executive compensation is in stocks.

[overrun11]

The median shareholder in Microsoft, Google and Amazon is likely a lower economic class than the median employee at these corporations if I had to guess.

The framing of ordinary workers getting the boot so fat cats can buy bigger yachts is seductive but I can just as easily frame it as:

Fixed income, middle America boomers entrusted these companies to be good stewards of their capital but it was instead spent on paying high six figure salaries to coastal city professionals from elite schools to do work of dubious value.

[xapata]

Who are the shareholders?

Pension funds, which ensure a decent retirement for a large portion of US residents. Index funds, in which many people have invested their retirement funds.

[bootsmann]

And they didn't think about making shareholders richer the years before when they hired all these people or how do you explain that process?

[noisy_boy]

Thats four whys.

[pjc50]

It's necessary to divide the companies making layoffs into "profitable" and "unprofitable". It is much easier to make the case for layoffs at an unprofitable company: eventually it will either have to appeal to investors or run out of money, at which point everyone will be laid off anyway.

But the big tech companies are actually profitable. Even Amazon. https://www.wsj.com/market-data/quotes/AMZN/financials/annua...

They put $470 billion through the till and ended up with $33 billion net income, for a margin of 7%. That's a normal profitable company, albeit a huge one that continues to eat the remaining retail world. You can look at the quarterly results too, but there's nothing in the rear view mirror that justifies layoffs.

[Aeolun]

> their job is to increase value for investors

Is their job to increase it in the short or the long term? These “I know we’ve been doing great for 3 years, but the past 3 months haven’t been so hot, so we’re going to cut jobs.” Messages seem incredibly shortsighted.

[christophilus]

Public companies have an incentive to focus on the short term (quarterly reports). This really makes a difference in management behavior. Bill Clinton and Warren Buffett have both talked about this, and presented regulatory approaches to fixing it, but here we are.

[pbhjpbhj]

Do investors sell if they company income falls for a quarter? I'm guessing yes, and that answers the question of whether the company looks to the short term when seeking only to satisfy investors.

The whole system is wrong.

[notahacker]

This might be true of a lot of companies, but then you look at others like Waymo where the revenue is pure projection, the relationship between staff numbers and having a workable product unknown and the pile of cash available to fund it not requiring any borrowing, and it looks suspiciously like trend following (with maybe a bit of actually self driving cars are further off than we thought but, hey, not our mistake because everyone else is doing layoffs too thrown in)...

[grey-area]

It’s not trend following, it is genuine existential fear, particularly someone like waymo -

With 0% rates money is free and you can take forever to make a profit, nobody cares, just borrow more money if you run out.

With 5% rates money is expensive and you have say 2 years to make a profit or everyone loses their job and investors lose their funds.

This doesn’t really apply to massive companies like google or MS of course but it does to anyone smaller without a cash cushion (the majority). Now job cuts may or may not be the right decision but they are triggered by very real and urgent fears about plummeting earnings.

[loudmax]

A lot of middle and upper management pays lip service to increasing value for the investors, but they don't really care for the investors any more than they care for their employees or their customers. It's better for them to be paid in cash and be ready to jump ship at the first sign of trouble than the much riskier course of counting on long term growth of their present company.

[s1artibartfast]

To be fair, stock price for large profitable big companies has almost nothing to do with investment money. When someone buys a stock, the company doesn't see any of that money.

The real driver is shareholder returns. The shareholders would rather make more money than provide more jobs / run a charity.

Maybe you were saying the same thing, but the companies don't see the new investor money, other investors /owners do

[anothernewdude]

> if you don't do the cuts and find a way to be efficient investors will put their money somewhere else that's more profitable.

A company that is cutting staff is creatively bankrupt and has clearly no idea where to spend effort in anything new.

I wouldn't invest in a company that is reducing headcount in this manner.

[sokoloff]

You’ll be holding a lot of your investments outside of stocks for a while, then.

[Temporary_31337]

I agree- someone with money can simply put it in bonds or a savings account. To invest in a company it has to promise to return more than the 5% per annum