Big Tech Stops Doing Stupid Stuff
This year it might be smart to invest in companies that think a little smaller
This year it might be smart to invest in companies that think a little smaller
The era of moonshots is (mostly) over. This year tech companies are taking a more earthly approach.
Stock charts both explain the change in boardroom sentiment and tell the story following an epic Covid-fuelled rise and fall. The tech-heavy Nasdaq fell 33% last year—its worst performance since 2008. Big tech, which spent the past several years spending on big dreams, is starting to think smaller. Last year more than 1,000 tech companies laid off employees, resulting in over 150,000 lost jobs, a tally by layoffs.fyi shows. It is an eye- popping number that could actually get worse: More than 23,000 tech workers have already been let go this year as of Jan. 13, the same tracker shows.
Many of these workers were newly hired under the mistaken assumption that booming pandemic demand would become the new normal. But a good percentage were legacy employees working on projects that, given today’s market environment, range from fiscally irresponsible to projects that fall well outside their parent company’s wheelhouse.
Meta Platforms and Amazon.com are the most high-profile examples, having cut a combined 29,000 workers so far. Meta is still reeling from an online advertising slump and the many billions of dollars that Chief Executive Officer Mark Zuckerberg is throwing at a new virtual world dubbed the metaverse. Amazon is coping with a retail slowdown in part by scaling back spending in unprofitable business areas such as its Alexa-controlled electronics products.
Meta Chief Technology Officer Andrew Bosworth said in an internal memo late last year that his company had “solved too many problems by adding headcount,” according to a recent newsletter published by the Verge. He reportedly added that headcount comes with overhead, which “makes everything slower.”
Despite its much-touted virtual ambitions, Meta said in a blog post last month that it is still devoting 80% of its total investment dollars to improving its own legacy business. In the Verge’s recent interview, Mr. Bosworth acknowledged that Meta is “changing our investment strategy” to the extent that some projects have to demonstrate value sooner to justify their high burn.
The ax also seems to be falling at the original moonshot factory: The Wall Street Journal reported that Google-parent Alphabet is laying off more than 200 employees at its Verily Life Sciences unit, plus another 40 at its robotics software company, Intrinsic. Both are part of Alphabet’s Other Bets segment, which racked up $5.9 billion in operating losses over the past four quarters while generating barely $1 billion in revenue.
Those cuts are unlikely to be the last at the Google parent, which added more than 30,000 new employees in the first nine months of 2022, even as its own advertising business started slowing.
Smaller tech companies are feeling the burn too. Redfin CEO Glenn Kelman told the Journal recently that if he could jump back in time 18 months, he would advise companies looking for profits to just “stop doing stupid stuff.”
He speaks from experience: The real-estate brokerage laid off 13% of its staff and shut down its automated home-flipping business late last year after deeming the operation too risky and expensive to continue. That followed a second quarter in which its so-called iBuying business had swelled to account for over 40% of its overall revenue. Channeling an old playbook for the new year, Mr. Kelman said in his company’s third-quarter report that Redfin “will have more cash and sell more properties” by focusing on its online audience and on better brokerage services.
Competitor Zillow gave up on its own iBuying business a year earlier than Redfin for similar reasons. It has since refocused on finding better ways to help its customers buy and sell other people’s homes. It is now using artificial intelligence to do such things as helping apartment hunters view available listings on New York City buildings they pass by and helping sellers generate floor plans for online listings based on photos. Zillow is also bundling its technology into an updated product to bolster traditional agents’ businesses.
A sector that has long worked to disrupt is now focusing on enhancing what already exists. In ride-share, Uber Technologies has now added taxi bookings to its platform in many cities, essentially feeding business to a competitor (but not without taking a small cut, of course). In Britain, Uber users can also book trains, buses and rental cars through its app. With Uber Explore, users across several cities can even book restaurant reservations and experiences.
Reinventing the wheel is so last year. The best tech investments of 2023 might be companies content to spend their coin greasing it.
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
While most U.S. workers are putting in fewer hours, men in the top 10% of earners cut back their time on the job the most, according to a new study
American workers have cut the number of hours they spend in their jobs since 2019, but no group has dialled back its time on the clock more than young, high-earning men whose jobs typically demand long hours.
The top-earning 10% of men in the U.S. labor market logged 77 fewer work hours in 2022, on average, than those in the same earnings group in 2019, according to a new study of federal data by the economics department at Washington University in St. Louis. That translates to 1.5 hours less time on the job each workweek, or a 3% reduction in hours. Over the same three-year period, the top-earning 10% of women cut back time at work by 29 hours, which translates to about half an hour less work each week, or a 1% reduction.
High-earning men in the 25-to-39 age range who could be described as “workaholics” were pulling back, often by choice, says Yongseok Shin, a professor of economics, who co-wrote the paper. Since this group already put in longer hours than the typical U.S. worker—and women at the highest income levels—these high earners had longer work days to trim, Dr. Shin says, and still worked more hours than the average.
The drop in working hours among high-earning men and women helps explain why the U.S. job market is even tighter than what would be expected given the current levels of unemployment and labour force participation, Dr. Shin says.
“These are the people who have that bargaining power,” Dr. Shin says of the leverage many workers have had over their employers in a tight job market. “They have the privilege to decide how many hours they want to work without worrying too much about their economic livelihood.”
The paper published by the National Bureau of Economic Research, which isn’t yet peer reviewed, suggests high earners were more likely to benefit from flexible working arrangements, which could be a factor in reduced work hours.
Before the pandemic, Eli Albrecht, a lawyer in the Washington, D.C., area, says he worked between 80 to 90 hours a week. Now, he says he puts in 60 to 70 hours each week. That’s still more than most men in America, who averaged 40.5 hours a week in 2021, according to federal data.
Mr. Albrecht’s schedule changed when he shared Zoom school duties for two of his young children with his wife. He’s maintained the reduced hours because it’s making his relationship more equitable, he says, and gives him family time.
“I used to feel—and a lot of dads used to feel—that just by providing for the family financially, that was sufficient. And it’s just not,” Mr. Albrecht says.
The downshift documented by Dr. Shin and his colleagues occurred as many professionals have been reassessing their ambitions and the value of working long hours. Emboldened by a strong job market, millions of Americans quit their jobs in search of better hours and more flexibility.
Overall, U.S. employees worked 18 fewer hours a year, on average, in 2022 compared with 2019, with employed men putting in 28 fewer hours last year and employed women cutting their time by nine hours, data from the U.S. Census Bureau’s Current Population Survey show. The average male worker put in 2,006 hours last year, while the average female worker logged 1,758 hours.
Separate data from the Census Bureau suggests that men with families, in particular, are working less. Between 2019 and 2021, married men devoted roughly 13 fewer minutes, on average, to work each day, according to the American Time Use Survey, which hasn’t yet published 2022 figures. They spent more time on socialising and relaxing, as well as household activities, according to men surveyed by the Census Bureau. The amount of time unmarried men spent on work changed little during that same period.
As high-earning workers in the U.S. cut back, low-wage workers increased their hours, according to Dr. Shin’s research. The bottom-earning 10% of working men logged 41 hours more in 2022, on average, than in 2019. Women in the lowest earning group boosted their hours worked by 52 last year compared with 2019.
While women work fewer hours than men, the unpaid labor they perform outside of their jobs has been well documented. Many working mothers take what’s termed a “second shift,” devoting more time outside work hours to child care and housework.
Maryann B. Zaki, a mother of three who has worked at several firms, including in big law, recently launched her own practice in Houston, giving her more control over her hours. She says she’s noticed more men in her field opting for reduced schedules, sometimes working 80% of the hours normally expected—which can range from 40 to more than 80 a week—in exchange for a 20% pay cut. For the average lawyer, that would amount to a salary reduction of tens of thousands of dollars each year; such arrangements were initially offered to aid working mothers.
Responding to new expectations of work-life balance may be particularly vexing for industries already facing staffing shortages, such as those in medicine. Dr. Lotte Dyrbye, the chief well-being officer for the University of Colorado School of Medicine, said she often hears from early-career physicians and other medical professionals who want to work fewer hours to avoid burnout.
These medical workers are deciding that to be in it for the long haul requires a day every week or two to decompress, Dr. Dyrbye says. But as staff cut back their hours, it costs medical organisations money and may compromise access to care.
The market is forced to confront the impact of COVID lockdowns.