My hunch is that these companies are cargo-culting their strategies. The hiring freeze is as essentially a gut reaction. If one starts with layoffs, others will follow. The real problem is that companies of the Google scale will always need new engineers for particular projects and have a surplus for others. A global freeze or even layoffs simply don't fit.
The other side to this is that businesses tend to follow the leaders of the industry. So if engineer salaries were getting too high, they start a "freeze" which then cascades down to medium then small companies. However, the goal wasn't actually a freeze, it was to lower salaries, increase the pool of candidates and they can then find talent better. In a sense it is manipulation of the labor market and businesses that just follow the trends.
On the labor side, if talent is looking for work right now, they might accept less or even stay around longer during change in fear.
For VCs, this allows some time again for lowering investments, letting others play out and decreasing valuations.
While there is a slowdown and some macro market conditions, those are always exploited for companies looking to contain labor costs and increase availability.
There are some geopolitical elements going into it as well currently but in that case really it would make sense to hire more as the pools have shrunk due to division.
It is just another game really, there is no slow down or "freeze" there is a tightening, and the goal is constraining costs and increasing the pool of talent.
If I was in charge of hiring right now, I'd look at this current market as a huge time to increase hiring if you are set for multiple years. If a round is up soon, you might have to pull back. The "freeze" is a buy low moment of the market.
The best businesses I've seen work counter-cyclically.
When there are hiring freezes and layoffs, it's easy to find good cheap engineers and you hire. When job markets are hot, you put a pause on hiring.
The same goes for many other things. A recession is an ideal time for deep R&D. There's little competition, and it's possible to do long-term thinking. When the recession ends, and the bubble begins, you hit jackpot.
All of this requires deep enough pockets to weather a few years, though, and patient investors. That's rare.
Cargo culting for Google and Facebook make little sense organization-wide, since they do have deep pockets. They make complete sense employee-wise. No one got fired for following industry best practices, conventions, or cycles.
I couldn't agree with you more.
A FAANG-tier company with which I'm closely familiar pretty much did the worst thing every time during the past 2 years - they tried to tighten the belt when COVID first hit (missing a ton of great talent when the initial uncertainly killed off some of the smaller companies), then they tried growing and chasing talent really hard, right when the bubble was at its peak, and now that the economic outlook is negative, they've halted / significantly slowed down hiring.
My personal opinion is that Warren Buffett's old quote to be "fearful when others are greedy, and greedy when others are fearful" rings really true.
The problem is when things are going well you have the sales and thus money to hire and pay more staff, when things are bad you don't have the sales and thus don't have the income.
You are absolutely correct. This is one of the best measures of how good/bad management is: how many people they keep around in bad times, and ideally hire. Any idiot can manage a company when there is a ton of money coming in, it takes real talent to manage well in hard times.
You need a counter-cyclical business to really make that work however. And given how interconnected things are these days, what out there is counter-cyclical?
Having a counter-cyclical business is helpful but not strictly necessary and actually not sufficient.
What is actually most important are a long-term outlook, backing from shareholders to pursue anti-fragility at the cost of short-term growth, and well-managed and well-protected cash reserves.
Few well-known, public or VC-funded companies operate this way, because collective greed is a far more powerful force than the desire to build an anti-fragile, long-lasting company.
And in a world where it's fairly easy to close a company's book and move on to start the next thing, and where the economy hasn't experienced real stagnation in over a generation, this arrangement of incentives makes sense.
Berkshire Hathaway has historically worked this way, as an example. One of Buffet's basic playbooks was to combine the books of cyclical and counter-cyclical businesses, and harvest temporarily high prices of the former to plow into the latter, and vice versa.
You don't need a counter cyclical business, what you need is somewhat counter cyclical funding.
You develop during recession when it is easy to hire people, and when the economy is on the up side of the business cycle you have a product that's ready to sell.
> My hunch is that these companies are cargo-culting their strategies
Yes most of these tech companies are the same. Their strategy is based off what other successful companies are doing. Also they want shareholders / investors to be on board. @paulg himself started this run with an email telling investors and companies to turtle up and stop hiring.
The whole thing has become a self perpetuating loop.
Companies also use this type of thing as an excuse. You'll be seeing companies blaming their poor performance on this downturn for the next few years long after it's all over.
Or they both over-hired and are taking similar steps to lean into natural attrition.
As for new engineers and surplus of others, I'm sure they'll be moving people around. A backend dev on one project can move to another backend project. Same for frontend, mobile, etc. So little of the work being done at these companies is massively specialised as they all have mature systems you're weaving together to deliver solutions.
> The real problem is that companies of the Google scale will always need new engineers for particular projects and have a surplus for others. A global freeze or even layoffs simply don't fit.
Markets are trying to communicate the exact opposite: tighten the belt and focus on core profitability.
Just because Google can continue to throw money at idea after idea doesn’t mean that investors want them to.
Is it just doing what markets expect? They currently expect the companies to signal hiring freezes, thinking it will lower costs and increase profitability... Probably started by some that needed to do something and now rest just follow.
