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.
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Super isn’t your only option. These smart strategies can help you self-fund a comfortable retirement.
Super isn’t your only option. These smart strategies can help you self-fund a comfortable retirement.
Superannuation is the first thought when it comes to self-funding retirement. Yet it is hardly the only option for doing so.
Just as we have a choice in how and where we work to earn a living, many people also have a choice in how to fund their retirement.
It is possible and sometimes preferable to leave your superannuation untouched, allowing it to continue growing. Some or all of your income can come from alternative sources instead.
Here are some alternatives you can consider.
For many who own their own homes, the equity accrued over decades can eclipse the funds in superannuation. However, it’s theoretical money only until it is unlocked.
Selling up the family home and downsizing – or rightsizing – for retirement allows you to pocket those gains tax-free and simultaneously relocate to a more suitable home with lower upkeep costs.
Up to $300,000 from the proceeds can be contributed by a downsizer to boost your super, and the remainder can be used to fund living expenses or actively invested.
Remember that while the sale proceeds of your home are tax-free, any future profits or interest earned from that money will be taxable.
Semi-retirement allows you to gradually step into retirement. You continue earning income and super while working part-time, keeping a foot in the workforce while testing the waters of your new found free time.
Doing so also offers scope to move into different roles, such as passing on your skills to future generations by teaching/training others in your field of expertise, or taking employment in a new area that interests you and is closer to home.
Retirement from a full-time position presents a good opportunity to pursue self-employment. With more time and fewer commitments on your hands, you have greater scope to turn your hobby into a business or leverage your professional skills and reputation as an external consultant.
Also, for the self-employed and those with a family business, director’s loan repayments from the company are typically tax-free, offering a potentially lucrative source of
income and a means of extracting previous investments into the business without selling your ownership stake.
Rental property income (from residential or commercial properties) can supplement or even provide a generous source of income. The same applies to dividends from shares.
These are likely to be more profitable if you own them well before retirement.
Income that is surplus to your everyday needs can be reinvested using tax-effective strategies to grow your future returns.
A family trust could be used to house investments for yourself and other relatives, building intergenerational wealth.
Trusts allow funds to be allocated to beneficiaries to manage marginal tax rates and stretch the money further, you have control over how income is split between different family members and have flexibility for changing circumstances.
You may not realise the value of items you have collected over the years, such as wine, artwork, jewellery, vintage cars, and antiques.
Rather than have them collect dust or pay to store them, they could be sold to fund your living costs or new investments.
Where possible, avoid selling growth assets in a depressed market – wait until you can extract maximum value.
Part-pensions are not only possible but valuable in making your superannuation stretch further. They still entitle you to a concession card with benefits in healthcare, transport, and more.
Take these savings even further by requesting pensioner discounts with other companies, on everything from utilities to travel and insurance to eating out.
Also, don’t overestimate the value of your assets as part of the means test. It’s a common mistake that can wrongly deny you a full or part-pension.
However, you ultimately fund your retirement, planning is crucial. Advice would hopefully pay for itself.
Understand your spending and how those habits will change before and during retirement, then look to investments that offer the best fit.
Consider a mixture of strategies to diversify your risk, manage your tax liabilities and ensure ongoing income.
Above all, timing is key. The further ahead you plan, the more time you have to embrace additional opportunities and do things at the right time to maximise their value. You’ve worked hard and now is your chance to enjoy the fruits of your labour!
Helen Baker is a licensed Australian financial adviser and author of the new book, Money For Life: How to build financial security from firm foundations (Major Street Publishing $32.99). Find out more at www.onyourowntwofeet.com.au
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