Even though the American labor market is currently stronger than it has been in decades, earlier this year Big Tech companies were laying off workers at an alarming pace. Economists struggled to understand why some 25,000 tech workers were losing their jobs, even as the media panicked about whether those layoffs were a warning sign of an oncoming recession. University of Washington Professor Jeff Shulman joins us to uncover the real reasons behind Big Tech’s layoffs, and to explain their implications for workers.
Jeffrey Shulman is a professor at the Foster School of Business at the University of Washington. He’s also a podcaster and filmmaker with a diverse range of expertise in pricing, entrepreneurial marketing, and product management. As a professor, he is known for his innovative research and teaching methods that delve into the intricacies of economic principles and their practical applications in the business world. Recently, Shulman has gained recognition for his insightful commentary on the highly publicized layoffs in the tech industry.
More from Professor Shulman:
Nearly 25,000 tech workers were laid off in the first weeks of 2024. Why is that?
Why widespread tech layoffs keep happening despite a strong U.S. economy
How To Succeed In Product Management on Apple Podcasts
How To Succeed In Product Management on Spotify
Seattle Growth Podcast on Apple Podcasts
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Nick Hanauer:
The rising inequality and growing political instability that we see today are the direct result of decades of bad economic theory.
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It’s time to build our economy from the bottom up and from the middle out, not the top down.
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Middle out economics is the answer.
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The more the middle class thrives, the better the economy is for everyone, even rich people like me.
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Goldie:
I don’t know if you’ve heard this before, Nick, but apparently Seattle is dying. Have you ever …
Nick Hanauer:
I have heard that.
Goldie:
… read The Seattle Times Op-ed page. And one of the reasons why, of course, is we’re a big tech city, big high-tech city, a lot of high-tech companies here, either their main offices or satellite offices. And, of course, there’s been a lot of layoffs in tech. It’s weird. It’s not like these tech companies are suffering. Their stock prices are doing great, their profits are through the roof, but they’ve laid off hundreds of thousands of workers over the last year and a half or so. I assume that Seattle’s dying because of that. You’ve been involved in the tech industry peripherally, Nick. Are you aware of that?
Nick Hanauer:
Well, A, I don’t think Seattle’s dying. I believe it continues to be the case that King County is one of the fastest-growing counties in the country. But what I find really interesting is that the broader economy is booming. We’ve added more jobs in the last few years than, I think, any administration has added in history. And yet the tech industry looks like it’s in many ways downsizing and that disjunction is really interesting, right? How can the broader economy be doing well while the tech industry, at least based on their hiring practices or firing practices, it looks like it’s going in a different direction.
For my own part, I don’t think the tech business is shrinking. But today we’re talking with a guy named Jeff Schulman, who’s a professor at the University of Washington Business School who studies these sorts of things. He’s a professor at the Foster School of Business at the University of Washington, and he’s also a podcaster and filmmaker. In any case, he’s written about this a bit and I think it’ll be really interesting to talk to him about what he thinks is really going on.
Jeff Schulman:
My name is Jeff Schulman and I’m a professor of marketing at the University of Washington’s Foster School of Business. And part of the reason why I’m here is probably because I’ve studied Seattle’s growth and the amount of change, why it happened and how it happened and what it means for all the people around Seattle. And through that really seeing how tech can transform a city and the challenges and opportunities it creates.
Goldie:
Nick, you have some history with tech transforming the city, right?
Nick Hanauer:
A tiny bit.
Goldie:
Some involvement with some small company.
Nick Hanauer:
A little bit. One of the reasons we wanted to talk to you, Jeff, is that the American economy, largely, is booming. The job creation record over the last few years has been nothing short of astonishing. I think, what was it? 300,000 jobs last month. All the talk of recessions has receded not to alliterate, and yet we’re seeing some of these pretty big layoffs in tech, which you have been thinking about and covering. Can you talk to us about why these things are not lining up?
Jeff Schulman:
It’s really quite fascinating and it helps to look back and just get a sense of the timing of when these layoffs started and what the original reason was, and then what’s happened since. And so we saw tech has been booming for the better part of at least the decade, the 2010 to 2020 decade. And then even through the pandemic, the stock prices and the growth continued. And then in November 2022, all of a sudden it switched from this dream job for so many into what could be a nightmare for those who were laid off and then increasingly getting more difficulty finding their next job. And so November 22, we saw huge by thousands and thousands of layoffs within tech. What happened is it peeled off the bandaid, so to speak, and whereas that seemed like a weakness, it now became a strength. And so we’ve seen these layoffs continue throughout and they’ve become smaller in scale, but more continuous than I could recall from the previous decade. So I’ll pause there and then I could dive into any part of that that you wanted to be [inaudible 00:05:08].
Nick Hanauer:
I’m not presently running a tech company, but I have run a bunch of them. And in particular, one of the things that is fairly intrinsic to these sorts of businesses is super rapid growth and lots of companies grow, but when you’re doubling or tripling in size every year, that puts a very particular kind of stress on management. And just to use a perfect example, when my company aQuantive, which ended up being effectively the world’s largest internet advertising agency and when we finally sold it to Microsoft. When we were in hyper growth mode, it was so hard to fill seats for the jobs that we had available, that we organized teams of people to go out on Friday and Saturday nights and go from bar to bar, interviewing people at tables trying to find good people who had decent jobs, and that we would just try to get them to come interview for us. It was that crazy. It was nuts how hard it was to fill seats.
Even last decade, they were giving away a Tesla, right? So you had companies giving away a Tesla saying, please join us. So the war for talent was intense. And then it shifted.
Jeff Schulman:
Well, but here’s the thing, is that when you were trying that hard to fill seats, you make a lot of mistakes, right? You are not going through a rigorous long period of analysis person by person. You’re so desperate to get stuff done that you definitely tend to err on the high side. I say that because it’s my intuition that that happened a lot in most of the big tech companies in the country.
But for a while, at least from the outside, it seemed as if there was a fear to show that weakness, to reset. And so you might cut a few low performers here and there, but to reset by laying off thousands or cutting entire divisions seemed like that was antithetical to the message they were giving of invincibility. And this war for talent we’re so strong and growing and we need you. And so I think what happened in November 2022 is the Band-Aid was pulled off, and it actually proved to not be that problematic because as I said in a previous interview, there was this hurting effect. One company did a big layoff, another company did a big layoff, and then almost all of the major tech companies did big layoffs. So there was really no place for people to go if they didn’t want to work for a company that would lay off thousands of people.
Goldie:
So wait, are the two of you telling me that some of the largest, most powerful, most profitable, highest tech companies in the world are riddled with inefficiencies?
Nick Hanauer:
Yes they are. Yes they are.
Goldie:
How’s that possible? They’re competing in a market.
Nick Hanauer:
No, that is very, very possible. And I suspect the bigger the company, the more riddled with inefficiencies it is. And so I guess, Jeff, what I hear you saying is this is much less an indication of where tech is going generally, where the underlying technology is going. Generally. It’s not like technology is slowing down or there are fewer opportunities these emerging technologies are creating, but really this was the cascading effect of a collective right sizing for the industry.
Jeff Schulman:
Well, so that’s tricky, too. So there’s a couple of things that switched that I think really contributed to this November 2022. On the one hand is the interest rates were raised. And so, that with higher interest rates, the companies put a greater emphasis on what they’re doing today. Whereas when the interest rates were practically zero, it was take the money today, invest in people and hope that it pays off tomorrow. And it kept happening. So there became a bit of more myopia, we got to worry about a profit and what’s happening today.
The second thing that happened, I think, is the work from home. And that works really well with some employees. And I think everybody might have some experience with a work from home employee who it was harder to get them to be motivated and stay moving forward. So there was a loss of power that happened that I think the tech companies wanted to regain of having these consequences and bringing people back to the office.
And then the third thing is the investment community was really favoring growth, like grow at all costs, get your head count, and we want to see more head count, we want to see more users, we want to see more revenue. And I think there became, we saw since November 2022 that the stock market actually appreciates profitability and rewarded the year of efficiency that Zuckerberg declared for Meta, the stock market rewarded efficiency, whereas previously it was rewarding growth at all costs.
Nick Hanauer:
So can we come back to this issue of power and tech companies wanting to reassert more control over their employees? So are you saying that you think some of these layoffs were part of a signal that if you’re not willing to do it, how we want to do it, you’re out?
Jeff Schulman:
So I can’t conjecture the reasons behind it in terms of did they, I don’t have firsthand knowledge of somebody expressing that they wanted power, but from the outside you could see that the power does shift. When you’re at a company that you know is hiring by the thousands and is desperate for talent, you inherently know that there’s going to be some leeway for you because it’s really costly to get talent and they can’t get it. And then you know that when companies are laying people off, you know that could be you. And so you have to work that much harder, and you know that if that is you, it’s becoming harder and harder to get back, or it takes longer and longer to get back into the workforce there.
Nick Hanauer:
Interesting. And Jeff, not to put you on the spot, but in the world of tech, do you have a quantitative sense or even a qualitative sense of what proportion of tech workers are still remote?
Jeff Schulman:
I do not have a specific number on that. You’re seeing that there’s some companies that have really found processes that have made it work. I believe Dropbox, but I hope somebody could fact check me and delete that if I’m wrong. But I believe Dropbox is still entirely remote. And then I think you see more companies becoming at least three days a week. And so, I can’t give you specifics on that, but my sense is we’re seeing more and more coming back to the office at least part-time.
Nick Hanauer:
Some kind of hybrid model.
Goldie:
I’m curious, what is it that these hundreds of thousands of laid off workers were doing? I mean, if these companies are still up and functioning and they’re extremely profitable, it’s not like their revenues are down, they weren’t in the business of generating revenue. Are these companies just cutting back on R&D future investment, future growth? What are they losing here? Because it can’t all be just inefficiency that’s being…
Nick Hanauer:
Great question.
Goldie:
… scraped off the top.
Nick Hanauer:
I’d push back on that, Goldie. You build a tech team of 10,000 people or 1,000 people quickly, I guarantee you there are 10% of those people you do not need.
Goldie:
But you don’t know which 10%. I mean …
Nick Hanauer:
No, but you kind of do.
Goldie:
… the thing is this seems just as dramatic, it seems almost faddish, like during the pandemic, we’re going to have this surge of growth and surge of hiring. And then, as you point out, Jeff, there’s this herd effect where one company does a bunch of layoffs and then everybody does. It goes, “Hey, Wall Street likes that.”
Jeff Schulman:
And I think there’s a couple of things going on. I would push back. I don’t think it’s all that the workers themselves who are laid off did not fit with the vision and couldn’t be productive workers in that environment. But I do think we’re seeing some redundancies that happen that as you scale up, you see two teams doing the same thing and decide let’s just have one. And then I also think with AI, people are becoming more efficient.
Nick Hanauer:
Were there projects that you took on that just turn out to be dumb? Or you build a feature or you thought that there was a feature that you thought you absolutely had to build and then it turns out that it just wasn’t true? I mean, there’s so many ways, again, when you’re growing fast, you have to make decisions so quickly about what people are doing and why they’re doing it and how it is all organized. It is just so hard to get that right the first time, right? Quickly.
Goldie:
But the point is, Nick, this is happening industry-wide and it doesn’t speak to any particular downturn in the tech industry. It’s not like the business is suffering.
Jeff Schulman:
That’s right. But it started when everybody was afraid. And so when everybody was afraid, they were all scaling back their expenditure. So we saw them spend less on people. We saw them spend less on learning and development. We saw them cut back some of their sponsorships in the community. So we just saw them in general cut back. And when they each cut back, that rippled across each other. So all these companies are spending money, their competitors and collaborators at the same time, they’re so big at this point. And so there was this general fear back in November 2022, and I think that fear is not really, it hasn’t materialized, but as you said, they have discovered that it can be rewarded and it can work.
Goldie:
You had briefly were about to talk about AI and its role in this. I assume you’re talking about the shift to investment in AI as opposed to proposing that the AI became self-aware and decided it didn’t need all these workers.
Jeff Schulman:
Well, it’s actually a little bit of both. I wouldn’t say that AI became self-aware and terminated the workers, but I would say that the workers that they have have figured out that we could automate some of the things that we used to have a bunch of people do, and we could automate it with AI. So customer service teams, research, we’re seeing marketing messages being sent with AI. So a lot, I wouldn’t say it’s completely eliminated all these jobs that we’re seeing being laid off, but the efficiencies that AI is creating is creating the need for fewer people in a lot of different subsets of the business.
Goldie:
Oh no. So some of those Nigerian, Prince scam emails I get, they might be coming from AI now instead from …
Nick Hanauer:
An actual Nigerian Prince, correct.
Goldie:
Scammers. And do we know what’s happened to these workers? Obviously there’s been a lot of these layoffs in Seattle. Are they finding other jobs in tech? Are they leaving?
Jeff Schulman:
So I can’t speak to specific numbers, but I have worked with quite a few of our alumni and other people who I know firsthand have been laid off and we’re seeing it’s just taking a little bit longer than it used to to get another job. But whereas there was this conglomeration, everybody, most people were pursuing the big five, so to speak, the FANG companies. And now we’re seeing these smaller companies who are crowded out in that war for talent are getting more talented people than they were able to get before.
Goldie:
Oh, okay. So there could be a bright side to this in that it actually spurs innovation and competition by opening up opportunities for smaller companies.
Jeff Schulman:
What’s really bizarre to me, and you see this cycle, this boom bust cycle in tech and throughout the economy, but what’s really bizarre is just how quickly things turned from giving Teslas, fighting for every single employee as what Nick was saying, the basic equivalent of going to bars and taking whoever would work for you to laying off thousands and thousands of people. And then it wasn’t just a one-time correction that the CEOs said at the time. It’s been a continual thing that’s extended now a year and a half, and it looks like it’s the new normal is that you hire and you lay off. And that wasn’t possible when there was just such a hunger for talent that was impossible to satisfy.
Nick Hanauer:
By the way, this will be true on a case-by-case basis. There will be lots of tech companies out there who are growing 300% a year for whom they will continue to be in this hyper growth, hire people as fast as we can and not worry about the layoffs mode. It’s just that the biggest companies have normalized around, I mean, let’s face it, this is much more of a normal business practice framework, correct?
Jeff Schulman:
I mean, it does make sense. What didn’t make sense is just how hungry these companies were for talent and how many people they were hiring by the thousands and thousands.
Nick Hanauer:
That can’t last forever, right? At some point, things normalize, and you’re much more circumspect about, there may be parts of Facebook that are growing, but I mean, I think the mothership is shrinking, isn’t it?
Jeff Schulman:
Full employee headcount or revenue?
Nick Hanauer:
Well, I mean the platform itself.
Jeff Schulman:
Well, that’s why they start the metaverse and now they move into AI. They’re trying to stay nimble.
Nick Hanauer:
And all the other things. Right. But the thing that made Facebook, Facebook? Is not growing at hyper, in the way that it once did.
Jeff Schulman:
And that’s why you see these companies grow. You start with books, like if you’re Amazon, and then you discover the cloud and you take what you learn from growing at hyper speed, and then you apply it to new industries, and that’s the only way to continue to grow.
Nick Hanauer:
But Amazon, unless I’m missing something, is now selling everything.
Jeff Schulman:
Well, yeah.
Nick Hanauer:
So it’s very difficult to expand into adjacent areas.
Jeff Schulman:
Well, it’s interesting. ‘Cos while they’re selling everything, I think from what I understand, a lot of their revenue and profit is coming from their foray into digital advertising and into the cloud. So whereas we think, well, we buy everything from Amazon, that must be why they’re such a big company. That’s actually a pretty small reason why they’re a big company. I mean, sorry, it created everything else, but it’s not what’s driving their profit now.
Goldie:
So what we think of as Amazon as this giant lost leader.
Nick Hanauer:
Well kind of is. So let’s talk about the future for a minute. What’s your sense for the future?
Goldie:
So learn to code. Is that still a thing or do the coders have to worry about the AI coming for their jobs?
Jeff Schulman:
The coders don’t have to worry for the future. They’re worried now. We’re seeing people with these copilots and AI helping them be coding faster. So I mean, any knowledge worker, it’s a pretty scary time. I’m maybe a little doom and gloom, but we saw throughout history when we automate jobs, it’s really trouble for swaths of the economy, and we’re seeing a lot of automation happening in fairly high paying jobs that may not be high paying jobs in the long run.
Nick Hanauer:
Interesting, interesting. Do you feel like tech hiring is going to radically slow down?
Jeff Schulman:
I think … This is all conjecture at this point, so I get to a free pass when I’m completely wrong. But if you look at … Go ahead and be Larry, go ahead and be Larry Summers.
Goldie:
Just pretend you’re an economist for a moment, and you could just …
Nick Hanauer:
Say both things and be right. You could say on the one hand it may grow and, no go ahead.
Jeff Schulman:
I really do have both a love and fear relationship with artificial intelligence. I think it is a little bit of hype at some level. You see a lot of weakness in it, but you also see that this is a gold mine that people are racing to be the leader, and I think we’re going to see fairly close to a winner-take-all type environment, and it’s going to leave a lot of people behind. So I’m fairly fearful on what AI could do to a lot of knowledge workers and people who are highly paid. You now have to adjust to embedding AI into your processes to be more efficient. I mean, you look at what it took to write even a blog post and it would take days and days or maybe a day, and then you edit it, and now you could get a blog post in five minutes, and then you could edit it a couple times or yourself or with AI. And so you just see a lot of different jobs that now could be automated a lot differently than before.
Goldie:
Not the type of blog posts I used to write. AI couldn’t do that because it doesn’t have the foul language vocabulary.
Nick Hanauer:
Exactly. AI has been trained to not be that mean.
Goldie:
I’ll always have …
Jeff Schulman:
There’s always a place for you curse words. We need you.
Goldie:
That’s what you have to do is learn how to make yourself unique.
Nick Hanauer:
There you go.
Jeff Schulman:
So I think these tech companies are going to continue to grow, and I think we’re going to see a profit grow, and I think we’re going to see life-changing technology come from this. And I think part of that life-changing technology is going to be replacing and making a lot of employees find a new way of making their lives.
Nick Hanauer:
So Goldie, we usually ask the benevolent dictator question, but I’m not sure if that’s appropriate in this case. Right?
Goldie:
Well, I don’t know. It sounds like our AI is going to be the dictator. I don’t know whether it’ll be benevolent or not. So I guess if you were Skynet, what would your main policy objectives be in order to improve the lives of your human subjects?
Jeff Schulman:
Gosh, this is just such an interesting question. The economist in me says, ringing out inefficiencies is a positive, and we want to encourage reducing these redundancies. And then the human in me knows that every time there’s this major technology shift, there’s a lot of lives that are disrupted, and we continue to say, retrain and retrain. And that becomes harder the older you are. And that’s easier said than done for a lot of people. That’s my semi doom and gloom. I think we’re in a good shape in the short run, but I do think we’re getting to the point where we might have too much efficiency to the point we have to figure out does the people who created that efficiency get all the wealth that comes with that? Or are the people who are affected by the efficiency, do they have a way to survive and live going forward?
Nick Hanauer:
And I think the smart way to think about this is that we cannot have a society where we fear technological advancement. Technological advancement is how we improve human welfare.
What we have to fear is a set of economic policies that concentrate the benefits of those technological advancements in the hands of a very few people at the tippy top and socialize the disadvantages among the little people, which is what we tend to do, right? There is no reason why these transformations need to benefit the few and harm the many. You can do it another way. So our enemy is not technology. Our enemy is neoliberalism. And of course, this is what we talk about on the pod every day, but in the way that all big technological transformations take place, there will be disruption.
Goldie:
I don’t know, Nick, if Zuck or Elon end up owning the IP for the AI that puts everybody out of work. There’s absolutely nothing we can do to prevent him from monopolizing all the benefits because anything else would be communist.
Nick Hanauer:
That’s true.
Goldie:
So property rights are in violence. If one company just own owns the AI, ‘cos it’s winner take all. I don’t know, fair is fair. They created all the value.
Nick Hanauer:
And Jeff, one final question. Why do you do this work?
Jeff Schulman:
Okay, so there’s a bit of work that I do, but most importantly, so the stuff with the tech and Seattle, I moved here in 2006, and then in 2010 I lived in South Lake Union. 2010, I moved away from South Lake Union. Two years later I came back and it was completely unrecognizable. And so I was just super curious about, wow, people who’ve been here a lot longer than me, how are they feeling about all the dramatic changes that are happening around them and what can we learn from what’s happening in Seattle, which is at a stronger and a more intense scale, but that is experienced in cities around the country, which is an influx of wealth, influx of innovation and change, and then an impact that’s far-reaching. And I’m trying to understand why is it happening and what are the implications of that?
Nick Hanauer:
Fantastic. Well, thank you for being with us. It’s fun to talk.
Jeff Schulman:
Thanks for having me join you. I appreciate the conversation.
Goldie:
The word that jumped out at me from our conversation with Jeff, Nick, it was the word efficiency. We, of course, hear that word a lot in economics. It’s apparently the purpose of the economy, like this is what markets do. They’re efficient. They create efficiencies, they efficiently allocate resources. And so what you look at when you see all these layoffs is that, oh, well, that’s efficient. It’s obviously efficient for these companies to downsize. And so Wall Street is rewarding them for their efficiency, which really means for their cost-cutting. The reason why this word jumps out at me, ‘cos we also talked about it in terms of AI, how efficient AI can be, if AI can write a blog post more efficiently than a blogger can, and by some metrics, of course, what couldn’t be more efficient than the way I write? That’s a good thing. The economy’s better for everybody, ‘cos we have more efficiencies.
And honestly, I hate that word. I think it’s bullshit. It’s not what really matters in an economy. We talked about this before, it’s a feature not a benefit, because Nick, and I know you agree with me on this, even if you don’t agree with my broader analysis, the best things in life are inefficient.
That’s why we have an economy. That’s why we have all these technologies. That’s why we want all this productivity growth to allow us to be inefficient so that we can enjoy life. Because otherwise we’re just efficiently scrapping for our survival.
Nick Hanauer:
No. So I mean, Goldie, I think you raise, of course, a really good point. And for sure the word efficiency is used in economics as this cudgel to beat down all sorts of competing interests. And what efficiency has come to mean in the broader economy and certainly through the neoliberal era, is really capital efficiency. How little money do we have to deploy to get a big return is largely the question that economists want to answer. But you can think of efficiency, of course, in a thousand different ways. One of the ways in which you can think of efficiency is the rate at which we progress or so on and so forth. And I’m in total agreement with your broader point. And yet at the same time, having sat in the seat and made both the mistakes and the hard choices that come from growing really fast and then having the right size.
One of the reasons that markets are the indispensable social technology for generating prosperity in human societies is that they are effective. They’re actually not fundamentally efficient, but they can only be effective if they’re adaptive, which means the thing about the world is that it’s a complex adaptive system, and it’s changing every minute of every day. And if you don’t have enterprises that are pretty good at adapting to new circumstances, they will 100% die.
So this growing and then retrenching and growing and retrenching cycle that companies go through, at least good companies go through is, I think, an indispensable part of how high-functioning markets function. And particularly in cases where you’re talking mostly about people who earn extremely good livings and where you’re talking about just redeploying assets to another thing, or the fact that you’ve overstepped what you need and need to right-size with respect to something, I find that much less objectionable than grinding low wage workers down to $7.25 an hour in the interest of “efficiency” and letting taxpayers pick up the difference.
‘Cos that’s not efficient. That’s parasitism. And when you’re laying off a bunch of folks who make a couple of $300,000 a year because you want to pivot to something else, or look, I’m telling you, out of a team of 10,000 people, a thousand of them are going to be shitty, right? Just not good at their jobs.
Goldie:
And I’m telling you, the same people who made bad decisions, hiring what you’re describing to be shitty workers are the same people making the decisions now as to who is shitty.
Nick Hanauer:
That’s true. That’s true. And you can’t do that perfectly. You always make mistakes.
Goldie:
I question the efficiency of these managers and the effectiveness of these managers.
Nick Hanauer:
Okay. But what’s your counterproposal?
Goldie:
Look, I think that obviously if you’re a small company who’s running out of cash, because interest rates are 5.5% and it’s hard to raise additional capital, some startup, and you need to conserve your cash on hand, it makes sense to cut costs wherever you can so you can get through this difficult period of Fed tyranny. But if you are a company like Facebook or Apple or Google or Amazon, and maybe you did hire too many people during the pandemic and you don’t need all these people, I can tell you they’re making a shit ton of money right now, and these companies aren’t suffering. There was a time in some economies, in some parts of the world where employers felt a little more responsibility to their and employees, and they didn’t just like, “We don’t need you now. A hundred thousand of you, you’re gone. Sorry. Thanks for the help.” I think there are more humane ways to do it and maybe try to not put all of the risk and hurt on employees and maybe try to grow into the situation.
Nick Hanauer:
But now we’re talking about policy. So if you said, as you know here at Civic Ventures, we’re always tossing around …
Goldie:
I’m talking about norms.
Nick Hanauer:
Okay. But norms follow policy. And so, one of the things that we’re kicking around here are new kinds of labor standards, and one of the things that we’ve surfaced is the idea of mandatory severance for all employees, including places like McDonald’s and low wage workers, so that if you hire somebody and they’ve been with you for N number of months or a year or something like that, if you fire them, if you lay them off, you have to give them 60 or 90 days worth of severance so they can find a transition. I’m definitely in favor of using policy to make these transitions easier on the employee and riskier for the business. But you can go too far, right? You talk to a French executive and they will tell you that the number one problem they have, the reason they never hire people is because they can’t get rid of them, right?
That is not a high functioning way to run a market economy. You want to be able to change what you’re doing. You want be able to transition from one set of skills to another set of skills. You want to acknowledge the fact that you may have hired 10 or 20% more people than you needed for a particular product or service or whatever it is, and be able to adjust to that. But at the same time, I think laws that make those transitions much less risky for the people who are being transitioned and give companies more pause before they do it. A hundred percent in agreement, a hundred percent in agreement. And then you don’t just hire and get rid of people willy-nilly, like, okay, well, we’re going to hire these people. It’s going to cost us a shitload of money if we get rid of them.
And so we’re going to take the decision seriously, and before we get rid of a whole bunch of them, we’re going to take that much more seriously too, because maybe at the end of the day, if I have to pay these people three months of severance, it’s just worth it to just hang onto them for a while and hopefully redeploy them. So fixing that balance of power super, super in favor of, and sympathetic to rejecting the idea that companies have that it’s not necessary to right size or adjust. I think that’s dangerous. I think you can’t have a high functioning market economy if you can’t do that.
Goldie:
Well, it’s not where I thought this conversation was going at the start, Nick, but well, here we are. You know what the journey is, the reward. That’s right. That’s right.
Nick Hanauer:
And who’s always right? The boss is always right.
Goldie:
Well, no, no, no. If you were always right, Nick, you wouldn’t have hired me to …
Nick Hanauer:
That’s right. To tell me I’m wrong all the time.
Goldie:
That you’re not always right. So it’s a paradox. All right. Okay. Well, if you want to hear more from Jeff, we have provided a link to his podcast in the show notes.
Voiceover 2:
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