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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