Sunday, November 27, 2022

Layoff Guru

Layoff Guru


As the Holiday Season fast approaches, the number of tech layoffs in Silicon Valley has spiked, disproportionately affecting smaller startups without monopolistic business silos to shelter all of their employees. To be fair, though, there have been large cuts at the likes of Amazon, Twitter, Facebook, and (loomingly) Google too. Many employees with H-1B visas have both employment and continued residency concerns. This situation looks dire. Now what?

Tech has followed a classic boom/bust cycle for multiple generations now, ever since the introduction of the seminal Silicon Valley invention; the microprocessor. If one thing has been constant, it is that during every boom there is hedonistic excess, and after every bust (like wildfire) new startups (sprouts) emerge from the charred landscape.

Being let go from a job is one of life's most stressful experiences and something you should not have to deal with alone. Below are the "Big 3" questions I typically get asked by clients recently laid off:

California Severance Pay

There is no legal requirement under California Law that employers provide severance pay to an employee upon termination of employment. Employees should refer to their employer's policy with respect to severance pay. As such, most employees DO NOT have a legal right to receive severance pay. Many companies, however, DO offer severance pay to help reduce the their legal lability. Make sure you have a copy of your employee policy and consider requesting time to review any severance agreement prior to signing it.

Healthcare

If you have been laid off you have a lot on your mind right now, and health care is surely near the top of the list. You have options for continuing health coverage. You may have heard about the Consolidated Omnibus Budget Reconciliation Act (COBRA), it is intended to give families an insurance safety net after a job loss. It is available if you have already enrolled in an employer-sponsored medical, dental, or vision plan, and your company has 20 or more employees. You can learn more about COBRA here.

Legacy Benefits

Many of your legacy employment benefits can continue or be rolled over or kept in place. Make sure you have received a copy of your employee policy and benefits package. It will detail what your options are for life insurance, 401K, and restricted stock or options vesting.

For many employees in Silicon Valley, the proverbial "elephant in the room" is their H-1B status after a layoff. Typically there is a 60-day grace period, meaning you will have a maximum of 60 days to arrange for another employer to submit an H-1B petition for you, change to another status, or depart the United States. A more detailed explanation can be found here

For a complimentary consultation and review of your specific situation please fill in the appointment form linked and I can contact you within one business day. I have been working with laid off employees for decades now, through multiple boom/bust cycles, and understand the stress it brings, but having a game plan in place can make the transition to a new, better path forward a a lot easier.
 
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Monday, November 21, 2022

Tech Layoffs

Tech Layoffs


Barring the recent "layoffs" of pranksters Rahul Ligma and Daniel Johnson, the Silicon Valley tidal wave of tech carnage is very real. Assuming 10% of the Valley is laid off, the economic impact of this bust cycle will be painful. It will hit workers hard first, with service business like restaurants, retail and ultimately real estate next. As the old adage goes, if your neighbor loses her job it is a recession; if you lose your job it is a depression. Time to head for higher ground.

Ten percent might be a significant understatement of what is about to occur in Silicon Valley. Typically these boom/bust cycles wipe out 30% or more of the carrying tech employment scene. To the upside, it also typically spawns new companies, ideas, and industries...but that is far, far down the road at this point. Amazon, Meta, Twitter, and Google are all cycling up MASSIVE layoffs, to the tune of well over 25,000 employees in the "Bay Area," while non-monopolies with less defensive business models are shedding employees like snake skin. The worst is yet to come.

It has been a solid decade since the last wipeout, so data suggests this one will be nasty. For every 1% of the local employment scene laid-off, the resulting real estate, medical, and social services (read as tax base) will be exponentially impacted. Cinderella may have lost her shoe, but when it finally drops that shoe is going to be called "real estate." With the highest prices in the nation, Silicon Valley real estate is uniquely positioned for a collapse with massive tech layoffs on the horizon.

As any small business owner knows, cash flow is king. And each one of these laid off tech workers is becoming her own business now. And cash flow will dip first into severance, then into savings, and finally into retirement savings to either stay/survive in the Valley or flight to a lower cost of living/higher quality of living area (in the United States or abroad.) Given that the "uptake" (rehiring) rate will be tepid at best, but nonexistent as likely, many laid-off employees will return to their pre-Silicon Valley roots with a bag of cash (in the form of severance, vested options, and real estate sales gains.) Quitting while you're ahead isn't the same as quitting.

Is that Santa Claus flying over? No, that is a laid-off tech worker decamping from Silicon Valley. The first to know are typically the first to act. As with Covid, those who knew first acted first. In this case, those laid off first have the ability to cash out of their company stock and over-priced Mountain View home first. Oddly enough, the first to go are probably the best off because they can still walk away with a Santa-bag. With the USD at an all-time high against most major world currencies, this decision is a no-brainer. And as everyone in the world has been told, Silicon Valley people are the smartest on Earth.

What does this mean for the typical Financial Farmer eagerly reading this blog? Big picture: Expect tech stocks to continue to be weak and most likely continue their selloff until that last sliding door pinches the last butt out because when the cutting finally stops, then those cost savings will hit the proverbial "bottom line" on corporate balance sheets. Until then, employees that were canned will make the easy choice of bolting to a lower cost of living area with a king's ransom in their savings accounts earning 5% risk-free from US Treasury T-Bills. As usual, Main Street will pay for the hubris and excess of Silicon Valley companies no longer run by founders, but by woke technocrats.

In the next 18-months to 24-months (that's right, 2 years), expect non-founder tech companies with bloated workforces to lose about 25% of their workforces, dramatically reign-in costs (like R&D), focus on their core monopolies, and regain obscene profitability numbers if they can stabilize revenues. The next cycle after that, or perhaps in parallel, we should see the rise again of Silicon Valley. Until then, consider looking elsewhere for reasonable returns on capital.
 
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Thursday, November 17, 2022

Too Big To Innovate

Too Big To Innovate


With tens of thousands of layoffs pending, Silicon Valley has proven it is "Too Big To Innovate." The bloated employment roles of many major tech companies for years have been a symptom of a dearth of innovation; many hires were made simply to prevent those people from actually creating competition. The "I-Word," innovation, is the worst word in the lexicon amongst the "Big Five" in Silicon Valley.

Google owns search. Apple owns iPhone. Facebook owns social. Amazon owns e-commerce. Microsoft owns bad software. Sprinkled in those distinct monopolies are a mix of other "bets" which help assuage regulators. But make no mistake dear readers, when times get tough (and your stock is down say 50%+ year-to-date), it is time to cull those losing hands and focus on what works: monopolistic control of niche segments and layoffs.  And nothing hits the bottom line faster than fewer employees.

Sadly the new aphorism for non-founder CEOs seems to be the same: "When in doubt, Grinch it out."

The net beneficiaries? Oddly enough, culling large numbers of employees ramp up production of digital nicotine. Layoffs will have wondrous effects on the bottom lines of these companies. After the one-time costs associated with severance, a couple months salary and limited healthcare, those employees are now off the books and largely become subsidized by taxpayers for healthcare. And the companies themselves? Oh baby, get out the napkins because it is gravy train time!

Each percentage of layoffs translates to an exponential increase in bottom line profitability for these tech companies. Workloads are typically transferred to surviving employees, or if the worker was not a revenue producer, that functionality may cease to exist. It is not a 1:1 benefit ratio to the company.

Obviously the damage is most acute in regards to future products development, but when you own a tech monopoly R&D becomes an increasingly negligible cost. The only real danger to the "Big Five" is that maybe some of these employees become founders.

 

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