Power and Employment

The last 15 years have given rise to a sense of entitlement and self-worth that is not really in alignment with the world as it exists. Some painful lessons are being learnt.

One of the trends that I have noticed — at least in the popular press — is that there is a perception that the incoming class of employees are able to dictate corporate strategy and ultimately to have “veto” power over things they do not like.

Companies like Google, Apple, and others have grappled with internal employees’ positions on hot-button cultural, and socio-political stances. Like divesting from Israel in the aftermath of the assaults on Gaza, or on whether to do work or sign in-depth contracts with government agencies they disapprove of (there was a wave of this during the Trump administration around the DHS and building of IT solutions to support the shit-show that was the Trump response to immigration).

And for about a decade, they seemed to have the upper hand, using this power to speak out about these externalities that they were truly passionate about. They mostly got away with this.

But why did they get away with it?

In the 2010’s there was a confluence of events that came together to deliver outsized power to big tech. First, Social Media became ubiquitous. It was the rise of platforms, and a lot of the smaller players were gobbled up until it became Google¹, Facebook, Twitter (to a lesser degree), and most recently TikTok.

These all started on the premise of “connecting” people, but quickly it became a goal to get more eyeballs (with oodles of data for targeting) predictably, and then using this to get advertisements sold for top dollar to fund their phenomenal growth.

And this worked, primarily because there was a tidal wave of money sloshing around. If you lived in a cave during this era, you might not be aware that in the aftermath of the GFC (Global Financial Crisis) the Fed set interest rates at effectively 0%.

That made it ridiculously cheap and easy to borrow money, and that fueled truly titanic investments. Hell, without that deluge of cash, Uber would have died on the vine.

The one thing that this era did was lead to a lot of pampering of the employee population. The perks were legendary. Exquisite cafeterias with honest to god great chefs turning out amazing food. Free of course. Laundry service, on premise car washes and oil changes, and much much more. These perks were first to attract talent, and then to keep them on campus longer. If you can eat breakfast, lunch and dinner, and have your mundane chores taken care of on the company dime, well, you might not quibble about working from 7AM until 8PM or even later.

And when your leaders did something you didn’t like, you could vent in all hands meetings, on large internal message boards, and on inhouse collaboration tools. While I can’t remember any of these outrage cycles actually changing the course of the company’s direction or investments, at least the leaders “heard” the grumbles, and even at times paid lip service to the positions of the rank and file.

But, the ZIRP² gravy train ended post pandemic, as inflation began slipping the grips of control that the Federal Reserve likes to maintain, and now money is not free³. Thus, the financial pressures on companies is a bit higher. They can’t just swipe that no-interest credit card and expand, start a new project or hire another batch of talent to keep the hopper full.

In fact, the big tech companies (with the notable exception of Apple) doubled down and hired a fuckton of staff during Covid, with the expectation that the shutdown shifts in consumer sentiment was a permanent realignment of the economy, and that to “win” you needed more staff⁴. So whether there was work for them or not, all the majors went on a staffing tear, and as we learn from Physics, what goes up must come down. Starting in late 2022, when the Fed began putting the screws to the economy with interest rate increases to control the bolus of inflation working its way through the system, big tech began firing people in earnest.

And by firing people, I mean ruthlessly and brutally. 14K at a whack at Microsoft. BOOM. Facebook who had pivoted bigly into the metaverse — so much so that they changed the name of the company to Meta — just slaughtered the staff. This led to lots of grumbles and spleen venting on the socials.

Furthermore, big projects were cancelled. Apple reportedly spent about $10B on their “car” effort before completely unwinding that earlier this year. It was a heady time, and like the fallout from a nuclear bomb, it fell back to earth leaving a lot of devastation in its wake.

Oops.

Amidst all that, the current generation of Gen Z and later staff seem to have not gotten the memo that their power has been cut off at the knees. It is time to get to what triggered this newsletter this morning. I was reading — as is my wont — the latest blurbs on Slashdot, and there was an article about “Google Employees Question Execs Over Decline in Morale’ After Blowout Earnings”. The summary is what you would expect. Google reported a boatload of profit and tons of good news, but they are still laying tons of people off, and they are removing or paring back the perks for employees, as well as not granting much wage and other increases (mostly stock) to the population.

Employees read the earnings report, and they expected that because the numbers go up (a lot) that they should get a fat raise and a huge bucket of stock and other cash equivalent compensation goodies.

Want to support me? Do me a favor, go to Susan Speaks and subscribe. If you have a few bucks, toss them her way. She’s a great writer and deserves some love!

I feel for them, but the rank and file are in for a tough lesson. First, there are two demographics in a corporate hierarchy, labor and management. When labor is tight, and employees are in demand, they can negotiate and get very good pay packets. But when there are plenty of candidates, and companies have the pick of the litter, they can be choosy. Remember that a few hundred thousand tech employees have been made redundant, increasing the supply in the face of reduced demand.

Most of this generation have never experienced a softening in the economy, and the terror that instills. They are used to either being given retention bonuses or jumping to a new company ever 18 months or so to snack up on a much larger pay packet.

But we are in a weird place, and Tech is way out of alignment with the general economy. Unemployment, while it ticked up ever so slightly in the last readout, is still pretty fucking awesome at 3.9%. This means that there are plenty of jobs out there, and if you want to work, you likely can easily find a job.

But what it doesn’t mean is that there is a surfeit of tech roles with abundant perks and really fucking good salaries. In fact the waves of repeated layoffs from the MANGA⁵ companies means that there is a huge pool of former tech employees to sift through when hiring, so you can get great talent, instead of trying to just fill roles⁶.

The other demography is management or the executives. I usually lump them together, as their incentives are different. It is to deliver value to the shareholders, and to be ruthless in getting there. Whether you agree with their pronouncements or not, as the labor side of that equation, you are beholden to their whims. And if that says that the company will pivot to AI so that one day your work (labor) can be done by a box of chips and algorithms, so be it.

Back to the article/item in Slashdot. There were a couple of comments below it that I felt were worth reading. First, one poster entered this:

The employees are only part of "the team" as long as they are hard to replace. At any other time, they're just serfs. Now that replacing large numbers of employees with "AI" is perceived to be on the horizon by the company's masters, they're making sure those employees are aware of their serfdom. They can be 'properly' respectful and deferential to their 'betters', or they can be cast out.

Royalty rules by decree and not by consensus, and Alphabet's leadership and large shareholders fancy themselves as royalty. In a de facto day-to-day functional sense, they may actually be correct in that assessment - their dominance in mobile phones and in advertising makes them very powerful. Power corrupts - it encourages arrogance, callousness, and social irresponsibility. Fundamentally, it both breeds and feeds psychopathy. This is why society needs to exercise better, stronger, more ruthless control over corporate entities.

This gets it largely right. A corporation is not a collective, it is a top down, hierarchical organization, structured to allow the leadership to set the direction, and to provide guidance and/or coercion to get to a goal.

And if you, as a worker are unhappy with that goal, or how they intend to get there, you have really two choices. You can get on the train and help move it in the stated direction. Or, you can leave and take your talent elsewhere.

Yet, somehow the rank and file, led largely by the latest cohort of workers who has seen nothing but good times in tech, seems to believe that they can stand up and shout down the leaders of the organization.

And they can’t. They had some power for a while when the labor market was tight, money was easy to come by, and leaders often catered to these dilettantes. Now, we are going back to the shit-show that was the late 1990’s and the collapse of the first Dot-Com bubble. A lot of people learned that they had far less power than they envisioned, and it took a long time. We are now tsk-tsking the current crop. They will learn some painful lessons, have their FIRE⁷ strategy derailed and then cycle back into jobs that pay less (but still pay phenomenally well) and not make waves. One more comment from the same thread lays out how the workers might be able to gain the upper hand:

I mostly agree with you.

On the one hand, employer's attitude to compensation is "pay what the market requires, and no more." How well they have lined their pockets has nothing to do with what their people are paid, they pay market rates and maybe a bit above to retain the VIPs, and that's it. And they feel their employees are being uppity with this totally inappropriate demand that the company owners should share their wealth with the workers.

On the other hand, employees MUST push for higher compensation, consistently, or they will receive nothing more than table scraps. The only force that pushes their salaries up is their refusal to stay loyal to companies when others are willing to pay more to poach them. So, a conversation like this is a good starting point, but that's all it is. Either they union up or they shop around for a higher salary and walk as soon as they get it. That's how employees take what they deserve.

It might not be cause for joy that everyone must constantly fight for what they deserve. But seeking one's own best interest is simply human nature. That's never going to change. If you removed every leader at Google and replaced them with anyone else (assuming they had sufficient education to competently lead a business of this size, and hence not run it straight into the ground) you will see the new leaders behave exactly like the old ones, because they have exactly the same incentives. That's just the way it is. All anyone can do is figure out how to make the best of it.

I do agree that we need to keep businesses regulated. Regulation is necessary to protect the freedom of the market. Without regulation, monopolies and cartels dominate and ruin absolutely everything. But (and this is the only point where I disagree with the OP), that doesn't mean that all businesses should be so thoroughly regulated that they are effectively state-owned. We cannot completely destroy the profit incentive, because that incentive is the means by which we get the services and technological advances we want. A balance must be struck, and that means giving as well as taking.

I couldn’t have said that any better.

Look, Tech is a lightly regulated industry (seriously, it is almost unregulated) and this ultimately leads to chaos in the workers, fighting for favorable roles, and hard scrabbling for every raise, bonus or share of stock.

I have long thought that Tech should unionize. The leaders are uber aggressive to prevent this, and there are enough luminaries who rail against it, assuming that their mad skillz are enough to ensure that unionizing is a loser, and this has traction throughout the industry.

But with the great outsourcing to BPO⁸ companies’ trend in full swing, it is becoming ever more likely that the rank and file will ultimately begin to toy with forming unions to secure benefits and equitable wages, especially as AI is poised to decimate whole disciplines central to many companies.

But will this happen now? Who the fuck knows. I am just glad that I am at the tail end of my career, and that I am not facing this in front of me. Otherwise, I would go into something that is less lucrative, but more secure. I always liked working on cars, and I spent a summer repairing appliances with my stepfather, so I have skills.

Kids today are in for some bleak times. They are not as special as they have been led to believe, and the current economic environment is not going to be good for them!

1. You might quibble with me about the inclusion of Google, but Google did have Google+ and their search and ad-tech stack are instrumental in the rise of the social media behemoths.

2. Zero Interest Rate Policies

3. I should add that the current Fed funds rate is between 5.25% and 5.50%, that is smack dab what it has been between the mid 80’s and the mid aughts. This is really a “normal” interest rate…

4. I learned that from the start of Covid, until about 3 months ago, my company, a fairly conservative place, had almost 60% of our full time employees leave and the positions being refilled. That is in the last 3.5 years, 6 in 10 of our FTE employees left and were replaced, our total headcount remained fairly constant, but the great resignation really hit us hard.

Plus the strategy of this over-hiring was purposeful, it was a way to “Bogart” or hoard talent to prevent your competitors from hiring them. This to me is the most egregious offense.

5. Meta, Amazon, Netflix, Google, Apple - a basket of ginormous tech companies. Actually, we should add Microsoft into that mix, but it fucks up the acronym…

6. It has been a long time since I was in a position to hire anyone, but when I did, at a large company, the reqs would open and close all the time, so managers had to just get a body before the corporate HR team froze (or worse, close) requisitions. That led to a lot of suboptimal hires. No bueno!

7. Financially Independent, Retire Early - a strategy to make enough money to be able to retire in your mid 30s (or earlier) and live on your savings. Of course, this is really tough to do when interest rates are at or near 0%…

8. Business Process Outsourcing - moving support role to contractors who rely on overseas companies like Tata to do IT support…

---