What Happens Now to All the Laid Off Tech Workers?

having asked oh, yes, yes. So this often happens on the podcast because we often touch on kind of wide varying topics and we're not experts in a lot of the things that we talked about, and often the first episode is sort of you get to know your subject matter, and then you leave it with even more questions. Yeah. So I often kicked myself, like, oh, I should have

I should have obviously asked that obviously. And then the other thing that happens is you post then the episode comes out, and then like people on Twitter and elsewhere, they'll talk about it. They talked about it, they're like, what I'm curious about is actually like, oh, that's really

good question too. I should have thought of that. So, like I thought, like a thing that we should do maybe one day is schedule, like, have all episodes be two parters where we do an interview with a guest, take a week, sort of magrinate on it, think about it, what are some questions we wish we would ask, and then have the second episode schedule. I really like that idea.

It's sort of like it's almost the octopus model of podcast episodes, where like one one episode just springs forth a dozen you arms and legs that you can talk about forever. So today we're kind of gonna we're kind of gonna be doing that. We're this is I think we might be This might be close. I'm not sure what the record is, but this might be close to the soonest we've ever had a guest on so soon after they appeared the show. This is a pilot for

podcast two parters. The only other time I can think of is we talked to Claudia Sam twice before the pandemic and was because it was sort of like her general views on how to like forecast recessions, and then like two weeks later, like the pandemic was in view, and it's like, oh, I shoot, this might be really bad, so he had her on really fast. But this is going to be close to that record. I think, yeah, sounds good. All right, let's do it. So we recently

talked to Patrick McKenzie. He is a technology infrastructure financial infrastructure specialist. He worked for Stripe for six years. He's currently an advisor. He's the author of the Bits about Money newsletter, and we talked to him about like corporate I why it is the way it is? Why does it seem to be like years and years behind what we think of the cutting edge of software wise it off and clunky wise it off and have these big technical issues that can take a while to fix. That

was a great conversation. The public loved it. But there's a lot going on in software these days. And the other sort of big trend that we haven't really talked about is that for the first time and I don't know, maybe like fifteen years, we've been seeing all these tech layoffs, right, And I think there was a little bit of tension in that episode in that we were talking about why

corporate software is so bad. So it's almost like, well, obviously there's a need for better software, and yet all these big tech companies that ostensibly provide these services are laying people off, but also in the broader macro picture. Since we recorded that episode, we had a payrolls report that came out much, much stronger than anyone expected. And

yet we've seen these big tech companies layoff people. And so the question obviously becomes, is this something specifically about tech or are these layoffs sort of the first sign

of something broader to come in the economy. And the other thing that everyone points out to when when you see these announcements from Meta and Alphabet, at various startups and Microsoft and Amazon they all done it is like they edited so many jobs over the last two years that actually these layoffs are like fairly small in uh, the grand scheme of things, even for these companies, based

on the amount of hiring that they've done. Yeah, but I saw I saw a figure from Goldman Sex I think it was Yannatsis, and he was talking about in the tech sector, most of the companies that have been laying people off grew their head count by over since the pandemic basically because they thought all the pandemic trends were going to keep going. Maybe there's a little bit

of labor hoarding. But it's a big figure. Absolutely. You know, people in our industry, journalism, when journalists lose their jobs, there's always trolls on Twitter saying, oh, learn to code. You know, that's like a thing. I think at one point even like Twitter start banning people for saying that. But I guess the question is, right now, when you see these layoffs, like should we learn to code or is that not you know, is that not the career

safety that that it used to be? So all kinds of questions about what is going on in the market for tech talent. I'm sure someone's going to tell us to learn to code. For the record, I can code just in like very non useful languages. I have no well, I coded in basic like yeah, yeah exactly, like C plus plus and like some really basic HTML. But all right, let's talk to someone who knows more about this question than we do. We're bringing back Patrick. Thank you so

much for coming back on the podcast. Thanks very much for having me. Absolutely so. I guess the question is, before we even start talking about the recently off announcements, why don't we start with like the hiring boom that we really saw over the last two years, just massive amount of headcount added and all these companies, we know

who they are, what drove that. So how about we rule back history to two thousand nineteen and if you're looking at recent history, as of two thousand nineteen, tech has been on sort of an uninterrupted series of a bunch of very good years, broad based expansion across the entire industry, basically writing continuing to ride the wave that had happened since the late pots. Is that how we was it in English with the consolidation of mobile gains, etcetera, etcetera.

Then the pandemic happened and there was a brief pause of okay, is this going to be an absolutely catastrophic event for the entire world economy. Many bad things happened during the pandemic, the way it played out for tech

was probably not how anyone would have expected one. There was sort of a one two punch of a combined fiscal response from governments built in the United States and worldwide to stave off a huge economic disaster, which had the effect of both putting money into consumers pockets and also using the markets for assets, for example tech stocks, which will come back to the importance so that in a moment to a lot of the customers were, due

to various non pharmaceutical inventions, sitting at home with very little to do other than use the internet. And so a lot of commerce that had been possible on the internet before the share of it that was soaked up by the Internet in uh both sort of like semi discretionary places like food delivery, but also much less discretionary places like you know, core supermarkets suddenly shifted online in

a very very fast way. And so this combination of there's more money slashing around and more of it is falling into the online bucket led to absolutely blockbuster years for tech companies, and it was a real like trying to keep your fingers onto the rocket internally at the companies, like the amount of new users that was on boarding, at the rate of growth of the business, the raw volumes of stuff that was going through the pipes made

it like difficult to keep everything up and running. And a good news front, the business is largely successfully did keep up and running during a time where society very much needed them to. They also started to like readjust their projections of what the future would look like, and

for a while it was looking like. Yeah. The phrase that was going around was decades of growth were happening every couple of weeks in terms of, you know, our anticipated long term shift of the offline economy into the online economy. And there was a big question of how long does that continue for and is that pulling forth growth growth that is happening in the future, is it a one time spike, etcetera, etcetera. To to various structural

and competitive dynamics, a lot of firms spit simultaneously. This is a pretty durable change. We find ourselves crushed by the amount of demand we're seeing right now. We're going to need to hire and hire aggressively to deal with this and to position ourselves for what we see as the you know, eventual coming out of the pandemic future. And as a result of this, companies were mature companies

the Google's Amazons Facebooks of the world. We're hiring on the order of like year over year growth across large

portions of their business. Somewhat earlier stage companies, companies that might look like a stripe even though stripe as uh somewhat larger these days, or early stage startups were on boarding multiples of their pre pandemic had count as we used over the course of the pandemic, so huge expansion during the during the interval, and then as we came out of the pandemic, companies assessed a number of things.

One the growth rates tended to go back to his historical norms rather than this shot in the arm that the pandemic was offering. Importantly, and you know, tech is a wide sector. It touches every part of the economy these days, so it's difficult to say with huge generalizations, but as top line level things did not decline back to two thousand nineteen. And again, two thousand nineteen was not a bad year for tech. It was a, you know, a pretty good year after a number of pretty good years.

So we haven't gone back to the pre pandemic baseline. We haven't even stopped growing. In a number of cases, the growth curve has just spent downwards, and so the sustained like plus plus headcount growth over time didn't look like it could be that could be sustained. And then companies started to look at things that they had allowed to happen for the course of the pandemic to characterize

these broadly. One of the things that happened during the pandemic was due to the lockdowns and advisability of having large numbers of people congregate in small pockets of air, a bunch of companies went to both remote work and remote hiring where they might not have had a huge amount of institutional experience with that model of working before, and after two to three years of working with these newer cohorts of people, they've found that there are some

practices that they want to continue from this room at work world into the future, and that there's some amount of internal impetus to return to office and have sort of a cultural reset around the office or headquarters, etcetera as the sort of beating center of these firms. I've worked remote for most of my career, myself of a

broad fan of the model. Let's say that there was some cultural tension and companies on where the locus of activity is going to be, whether it's going to be in this online in zoom meetings and slack all the time, or in the office high band with communication directly with trusted peers, and a lot of companies wanted to have a bit of a pullback towards the office, and then they're looking more granularly at the classes of people to the heart over the last couple of years, and found

that in comparison to prior classes, there was a bit of cultural drift relative to where the companies want their baselines to be, and also in some cases a bit of a measured productivity difference versus where they wanted their baselines to be. That's sort of expected because when you're pulling out all the steps to hire, you like necessarily you have to be a little less choosy than you

normally are. You have, you know, to the extent that you describe any value at all to the in person interview loop, which I describe relatively little value too, but hopefully like slightly greater than zero. You you lose that amount of signal and they're sort of hiring in a

slightly more challenge fashion than usual. And so I think that companies will be pretty quiet about saying, but we'll we'll say to themselves is we probably have a few more regrets in like hiring classes than we did in the hiring classes as a percentage, Patrick, this actually leads to something that I want to ask you, but what does blow actually look like in the tech sector, and you know, is it something that only emerges as business activity actually slows down, or even in one would you

have characterized tech as bloated. So it's difficult. This tech sort of subsumes more and more of the economy into its every increasing embrace to make like huge paint with raw brush assertions across all of it. But let's see where to start here. So one, the number of things that are done in these large companies are extremely varied. People might have a image that like most people who

could google our engineers, that's actually not the case. Depending on the company we're talking about between twenty and the people who work at the company are technologists broadly written, they are software engineers, their system administrators, their designers at some companies reporting to the same division. And then the rest are every sort of worker that you would have in any company in the economy. Lawyers, regulatory people, customer

sport agents, etcetera, etcetera, etcetera. Management layers upon layers of management. So what does what does company growth look like? In one case, it is staffing up more teams to work on products that already exist. Sometimes staffing teams that sort of like grow with the the rate of usage of your products. So like customer service teams typically grow relatively linearly with the usage of your service. Sometimes it's teams that grow relatively nearly with the size of your organizations.

So as companies were having these sort of like unprecedented amounts of employees getting on boarded every year, they needed larger recruiting divisions to staff up there are other employees, and it's just based on like the productivity math of a recruiter. And you can, like finger to the wind that if you hire a recruiter, that recruiter will be

able to hire twenty five people in the year. And so if you need to hire four thousand people, then you know, work math backwards, you require a hundred sixty recruiters that you didn't have previously. That will tend to cause your recruiting division to get larger as you are doing a rapid expansion, and then it will contract faster than the rest of your company will when you decide to take your foot off the gas bottle. So those are the the things that are sort of less inside

of your control. You you just need to keep doing them to run the business, and then you're making some more speculative investments on like what are what is our new product line up going to look? Like? What features are we going to add? And so the basic unit of organization within an engineering organization these days is a single engineering team will typically be like five to eight people, and that team has a mental bandwidth to deal with

three relatively narrowly scoped problems. And so the more that

you want your software services suite, etcetera. To do, the more like narrowly scoped problems that come into its domain, more like five to eight people engineering teams you need, and so you might find yourself in a position where you've hired like five to eight people to work on three relatively narrowly scoped problems somewhat opportunistically, and then when you you know, come to three and are thinking very rigorously around like, Okay, we think we're a little bigger

than we were when we were efficient back a couple of years ago. We think the economic environment not be might not be as strong and as we were model link, Which of all the problems in our company are the ones that we definitely need to keep focusing on, and which can we refer into later or just our corridor business right now, then perhaps like some of these nearroly scoped problems are not at the top of our list.

And then if you consider, you know, like this product that we thought we would bring to market in three maybe it will not be brought to mark till then there might be like ten teams implicated by that that you do not have propletied for I have a lot of questions. You know, when Ellen bought Twitter, and he, like what you know, much more aggressive with the layoffs than anything else that we've seen. There were all these

like vcs and stuff. A common to the Dirty Secret and Silicon Valley is that all these companies could do that they have fifty of their employees not really working on anything and not really contributing anything. And like, thank you Ellen for showing that this could be done. And

Twitter still is operating. Although I don't know how the businesses or whether he cut too deep to the bone or whatever, but like, would you hear that, like is that the case that just like over the years, setting aside the unrealistic expectations of one and maybe two, was there just a wide scale over hiring relative to the needs of the business. So tech has been in sort of a land grab mode for essentially all of my

adult life. We certainly haven't hit the asom to oute of how many things in the economy can be orchestrated by software. We certainly haven't hit the assom tote of how many human and human interactions will be intermediated by

a technical system happening over a smartphone, etcetera, etcetera. In that sort of land grab mode, you aren't simply like trying to answer what is the minimal set of things we can do with the minimal number of people, but are sort of opportunistically looking at what are the next ten things that we can try such that one of

them becomes a company defining product feature, etcetera, etcetera. I have a little bit of risk reflective contrarianism when people say all tech companies are overstaffed by Could you cut eighty percent of people who work at tech companies and still have something functional at the end of the day. Probably true, that would be extremely painful. But if you went into a very different mode of operation and just wanted them to continue the products and services they had

three years ago, possibly that could be done. Probably wouldn't be optimal for any of them. That's one major reason why nobody does it. There's also some not gone like cultural, etcetera. Effects that make it virtually unthinkable. If you were an executive at at a tech company and you were sufficiently in your cups and had a had a heart to heart with someone and said, what's the true number of Like if I could wave a magic wand and no consequences,

where would our staffing be? Would probably be like eighty five to ninetent of what it is currently. I think I think most people would say, like, oh, there's a bit of there's a bit of like I hate the word fat in this context about you know, a little bit of fluff around the edges, but we're not in systemically a terrible place. And I think you know you you would get different numbers from different people in different parts of the organization, but that feels like plus or

minus right to me. Should be noted that I was a beer worker b rather than the sort of executive that would be tesked with making that kind of decision. Patrick, you mentioned the sort of impetus towards creating company defining features, and this is also something I've always wondered, is there a bias in tech towards creating new products and our employees and engineers you know, rewarded for doing new things

rather than maybe maintaining the old ones and perfecting those. Oh, this is an extremely important thing to understand and the behavior of the large tech companies from outside of them that they all have what's called a PERF process in the industry, it's called PURF outside is a performance review, and the performance reviews are largely how a company takes creative work that is done over this time scale of like quarters and years, and it is often sort of

indevigable and very area and reduces it to a number such that the company can dole out things of value like promotions and bonuses and career paths, etcetera, etcetera. And PERF happens on a semi annual or annual basis, and the way it PERF works that most large tech companies is heavily biases in the direction of getting your name attached to new things that shipped in the world versus you know, I was assigned to this legacy product, the product did not go down for six months, you should

definitely give me a bonus on that basis. Oddly enough, this is not straightforwardly the things that is in the company's interests because all of the money is made by existing, well, not all the money. The supermajority of money in the tech companies is made by satisfying customers you already have rather than getting new customers, and the supermajority of money is made on your oldest and tourist products rather than

the new stuff. But institutionally, tech companies biased towards we want our best people to be on the new things all of the time. And if your individual best people want to be, you know, doing the hard yards that keeps the old stuff running, they will quickly be dissuaded by their mentors and managers, etcetera, and say don't, no, no, that is not the way to exceed expectations. You will like, if you only do great maintenance work for the for the next couple of years, you will be, you know,

severely career limited here. So figure out something new to do and make sure your name is attached to it in a way that is legible to your manager and your manager's manager and this performance roview process. So let's talk about the layoffs that we've seen. Because you said something interesting in your first answer, which is that's sort

of like hiring discipline, hiring quality. During those crazy years of one part of may have been loose, maybe not as the standards were a little lower, or maybe people just didn't fit or something like that. When companies these days are now or recently making the decisions about who they're going to let go, how skewed is it towards

that sort of recent cohort. Because the other thing I could see is that look at many companies, you probably have people who have been there forever who are getting paid extremely high salaries or very good salaries just based on the fact that they got some bump every single year. Maybe they're not pulling their weight to some perceived degree as much as they used to be. So how much of the you know, when when are they when the

executive look and say, okay, we're gonna make cuts. How much was it skewed towards the new cohort versus seeing as like this is an opportunity to get rid of some highly paid employees maybe don't add as much value as they want. So a disclaimer off the top, layoffs are like understandably traumatic for the people who go through them.

I don't want to minimize that. At the same time, I think we often, particularly as as workers in this industry, sort of like advocate responsibility for understanding the like structures that cause these things to happen in ways that are not in our interests. So broadly it's it's good to have like open conversations about how these sort of decisions

are made. I think it is different on a firm differing basis, but broadly speaking, you would not want your simply to like roll back for the last six months of your hiring. There's a couple of different reasons for that.

One is that when you're dealing with these complex ecosystems that sufficiently large companies ecosystem to itself, there's all sorts of levers that you are like managing a parallel and one of those levers is that you are attempting to balance the seniority ranges in various parts of your organization such that you always have a mixed within some error bars of how many people that you have they're acclimating to the company versus how many who have acclimated and

could do productive work, versus how many are in that senior mode where they can lately parachuting to consult on things and do the architecture stuff that you're more intermediate

employees might not be able to do. Yet, if you sort of create a bubble in the pipeline by concentrating your cuts in the people that were only hired in the last six months to two years, then you are setting yourself up for a bubble a couple of years from now where you have far too few people at a portion of the experience curve to do work that you urgently need to do work on a week by week,

quarter by quarter basis. And so if you come to the conclusion that we've hired a few too many people over the last couple of the last couple of months, what are we going to do about that? You have to distribute your cuts over a larger number of cohorts than the most recent cohorts, or you will set yourself fun for some pain. There's also some compliance and legal issues that come up with is employees and you already a protected class in particular jurisdictions, which also plays into

it into a little bit. But the biggest reason is to avoid causing the operational issues for your company layoffs. Is performance management that is a thing that exists in the world. And so you know, if you were hearing skeptical FECs on Twitter, that they would say about large software companies is not merely that they were a little bit flabby, but that they were a little bit uh self assured of their position in the world, and it

had too many good years in a row. And if you got attached to them, you could you get a job in a corner office and not do all that

much and still be fine. I think that is a little exaggerated, but let's say there's certainly cases of it, and there's certainly some people like mature into a career where they continue being impactful over years and decades, and some people end up in sort of a tenured professor mode where they've become critical to the organization because they know a couple of things that the organization needs to know, but they don't bring the same intensity that they used

to in their career. And then there are some people who have like successfully created a niche for themselves inside the company, but the company might not desire to exist, and nobody wakes up in the morning and says today,

I want to do layoffs. But given a circumstance where everyone in the industry is doing layoffs, some executives might say, okay, it is a good time to reevaluate and like turn up the heat a little bit on our performance management and say, okay, is there anyone who has been coasting a little too long? Is there anyone who has uh, you know, created a secure little nest for themselves in a way that that nest does not add a lot

of value to the company. Given that we we need to usher some people on two new positions, let's start with that first and then move to the cuts that are going to take more mental energy to do. You know, we're talking broadly about hiring discipline and the idea of bloat.

And this is a slightly loaded question, but to what degree, if any, do you think the sort of maybe monopolistic mode that some big tech companies have built around their businesses has contributed to some complacency on the hiring front. And a little adverse to the word monopolistic, but I think I get what you're getting at, and that there is certainly a lot of rent created in the technology industry where these are some of the most effective businesses

ever created in any industry. Google AdWords will print a ginormous amount of money next year, and almost no amount of action taken by any set of first actors internal or external ad to Google will cause Google AdWords to not be worth many, many, many billions of dollars, and so the margins on it are very high as well in comparison to you know, we we're talking last time about the airline industry, where the airline industry has struggled

mightily to maintain like single digit percentage positive margins over a multi decade timeframe. Tech doesn't have that problem. The nature of these very sticky products that shearsket size of them, and the margins do tend to create a little more room for that flabbiness than in exists in many industries that have more of a cutthroat reputation. This is sort of the polar opposite question. But nowadays we hear a lot about the possibility of companies hoarding labor when it

comes to tech. How much of that do you think has actually gone on in the sense that do you see tech companies opportunistically hiring people just so their competitors can't get their hands on them. I've heard this theory advanced many times, and honestly, I don't think it is very explanatory, and sometimes it's phrased Google would rather hire a particular talented engineers so that they don't create a startup and then eventually become competition to one of Google's products.

If hypothetically that were something that actually motivated executives at tech companies, there would be a number of things that would be easier to do than quote unquote labor hoarding that we don't do institutionally. So in finance, there's this institution of gardening leave. Tech doesn't institutionalize gardening leave at

any level almost anywhere in the industry. And if you were thinking about let's prevent highly talented people from doing interesting things for our competitors or for new startups that

they could create. The people in the industry that you have the like tightest speed on their productivity level are your existing employees, and so you would be you would think, oh, well, like the natural place to start is like start with people who are already work here and say, if you leave, we would like to buy twelve months of your time

sight unseen, and no one does that. And there's other things that you can do Broadly tech is there's always a bit of push and pull between the needs of a company and the needs of employees, but broadly tech who is strikingly pro worker relative to many industries in the United States. These things that are done that would be consistent with the labor hoarding hypothesis just are not done.

You know, you can talk to the people that are involved in the decisions that that are read on the outside as labor hoarding, and they never advanced that as a reason to you know, buy up. A new company that has four engineers attached to it is typically phrased something more similar to, well, this is a team that

seems already jelled. They're clearly highly highly productive individual contributors, and we could have a bunch of engineering recruiters work for months to find for similarly talented individuals or the m and a team can like tick one box off in Q one and get them all in the door for the price of one low check. Let's do it. The notion of like and let's take this team off the table, so they don't, you know, have a market success in three years and create something competitive with us

never comes up. Okay, we started talking about why the hiring boom happened. In the first place, we've talked about maybe some of the decisions on who is getting cut. Let's talk about the sort of prospects for the people that have lost their jobs and or the people that are thinking about going into a career in tech. So how quickly do you perceive that the people losing their jobs over the last several months are finding new offers? Like,

let's start really simple. Can I tack something onto that, which is how how fungible are these types of jobs in reality? Yeah, A long time ago, in a place far far away, during the dot com crash, I was graduating from university and the Wall Street Journal was which read the Wall Street Journal every day with my father growing up. It was how I learned to read the

Wall Street Journal. Could do no no wrong in my as as a an undergraded engineer, and the Wall Street Journal was pretty decided that yep, engineering as a field is done in the United States of America. Henceforth, all engineering will happen in Asia. And I said, oh, chucks, I really wanted to get an engineering job. I guess I have to move to Asia, and so I did. Oh back, now we know the origin story. This is the backstory of how I ended up spending my entire

adult life in Japan. Now that ended up being a good read like a good life decision for me for entirely unrelated reasons. But it turns out there were, in fact engineers hired between two thousand and four and two thousand and twenty three in the United States, and so reports of the field's demise were heavily exaggerated. If you are considering a career in engineering, every reason you had to consider a career in engineering in is like still a reason to do it. So this like minor wobble

that will be forgotten in a matter of months. Please don't allow it to like cause you to make major drastic life decisions. Although life is what happens when when you're busy dealing with these little wabbles. Okay, so that out of the way. How fungible are people? Broadly speaking? In the early levels of career, tech tends to cast a very wide net and hire people for what's often called horsepower, with the expectation that they will be able

to specialize over time. There is some degree of worry that if you spend ten years or fifteen years in a particular industry doing. The quote often used is have the same year ten years in a row, then you will end up over specialized and only be available for doing that sort of thing in the future. Depending on the thing you are doing, there might be a sharply

limited set firms for which that is relevant. But broadly speaking, the engineers that were hired to do anything in the first five seven is years of their career are broadly expected to be able to do not quite anything, but like a large subset of all the things that a

tech employer could want an engineer to do. And so the liquidity in the tech market within like a broad class like recruiters or engineers, etcetera liquidity between job titles, exact roles, exact companies business model of the company is very high. And I'm forgetting what Joe's original question was, Well, so are they finding just a short term like you must hear from people, you must talk to people like, uh, people just got cut off? Are they recruiters already reaching

out to them from different companies? Structurally tech company this would be a bad pool quote. Structurally tech companies are like sharks. Okay, we're gonna we're gonna pull their quote. Just just like sharks, like the way that their gills work. They have to keep swimming or they stop getting oxygen.

And that's an unfortunate thing for most creatures. The tech companies because of their staffing models, they and that thing we talked about earlier, where they are constantly mixing the number of people at each level of seniority within the company. They have to keep hiring. And so even if an individual company decides like, Okay, we're going to like push pause for six weeks and do quote unquote hiring freeze one the amount of time and they can actually do

that and not severely damage the business is limited. So it pauses always temporary unless the company is going down the tubes. And like the large tech companies certainly are not going down the tubes. Some startups might get shaken out at the march and tow to UH funding constraints, et cetera, But the like the overall business of the Internet, continues to grow apace. So pauses are temporary nature. And there exists, you know, like many different companies inside that

the broader ambit of tech. Some of them might be positive any given moment, Some of them are you know, still attempting to make new investments for three and some of them while they're not in uh sort of rapid growth mode, growth mode for doing things like you know, we have to back fill for people who are leaving the company, and in a typical year at a typical tech company, that may be like ten percent of our

engineering staff. So if we've got two thousand engineers, we have two hundred engineers that we are slate to hire in Interestingly, one of the things that cost a bit of the over hiring was companies have this model for what percentage of people will leave in a year and therefore how many you need to hire just to stay

at the current level of employment that you have. And when the economy started wobbling in, what happened was the rates of voluntary attrition that companies, meaning that people who resigned out of their own volution, went lower than the

model predicted. And because you need to like set in place a process that takes months to hire people, but the process of deciding not to quit is not visible for those months, that resulted in sort of like a hiring overhang, and so companies overshot their targets for how many people would be in the company, which doesn't sound like an easy thing to do, but it is a very easy thing to do if there is a sort of like sharp change and employee behavior with regards to

things that they have total control over and don't have to announce to you, like deciding to leave or not leave in a statistical fashion. Are there signs that tech workers should look out for that they're about to be laid off? Like do you stop being a signed new projects? Do your access codes get cut off? Does someone come take your stapler off your desk? Like? What exactly are

the warning signs that you might be in the danger zone? Many, many tech people have a large degree of stress with regards to whether I'm doing well, am I on the list, etcetera, etcetera, And I don't want to add to that stress. Broadly.

You should. You should have an understanding of how performance is calculated at your company, and consider that official view of your performance to be perhaps more important than you would naively believe it too, because the official view where you're the entirety of your performance is reduced down to like one number, I'm a full or for this six months.

That is the only view that is going to be available to someone who might be two, three, four steps above you on the ladder when they're going to make hard decisions in a hypothetical future where they're making hard decisions. So the things that cause formal visibility to accompany are anomalously important, and the career oriented people around you, who are very good at work in those systems their advantages

will find advantages based on that. But I wouldn't, you know, over rotate on perfect The only thing we're thinking about seems simple, But just do great work and then make sure people are aware of the fact that you did the great work, and then things will tend to work out in a career fashion over only a long period of time, not gun. So I have a question that bridges this conversation with the conversation we had last week about I T. And I realized I should have asked

it last time. This whole episode has been because it's actually I actually only just had one question from last time. I had to come up with a whole excuse for why we needed to have you back out just so I could ask this. But occurred to me, you know, like in the in the business press, we're always reporting on c E O s getting fired or let go and hired. Sometimes CFOs I don't see much coverage of, like c t O S or c I O is like the people who run the internal tech systems being

let go for poor performance. I actually think the only time I can ever remember hearing any sort of CTO or something losing their job for poor performance is probably like fifteen years ago when Twitter was always having the fail wills and like they weren't scaling very well during the boom years. And other than that, I can't actually recall a time in which I like read a story about it, you know, a CTO being laid off for

bad performance. How often does that happen? And you know, in the context of whether we're talking about tech companies or all. You know, I think we were talking about Southwest and others last time, Like how often do the head of do those positions lose their job because they say, like, our I is not good. So it's a complicated subject for a number of reasons. One is that the degree of saliency of CTO most companies to the media is

relatively low. The degree of saliency of many things that are very important in the tech industry to the media is lower than many people in the tech industry, but like and that is one cause of the frequent conflict between the media and tech. But be that doesn't two

people get laid off for for performance. Yes, one relatively frequent thing that happens relative to the incidents of senior senior executives departing is the uh sort of like fall on your sword motion if there is a significant outage.

Is a thing that frequently happens, are frequently relative to all causes for a departure and hesitant to give you the example because Tokyo is a small town, but there are a number of banks, both in Japan and outside of Japan that have had disabling computer outages for like days to weeks at a time, where that is an extremely extremely thing to be avoided for a bank and rules up fairly directly to the head of I T

or the CEO. And there are cases where either the head of I T or the CEO of have left us a result of doing that. There is one thing that I do like about the culture that is Japanese management, where in the sort of like ritualized speech that an executive gives it that they will often say police don't blame the people that had their hands on the keyboards during this. The fact that this was allowed to happen was a result of managements miss decisions or taken over

the course of years. I presided over them, and as a result this uh, this allage. Even if you know it was one person individually fat fingering something that took us down for a week, this belongs at my door, and I'm resigning to take responsibility for it. There are many things I don't love about Japanese management culture, but that bit I do like. Another thing is there are reasons for companies to be other than other than maximally public about the fact that we are removing a senior

executive for cost. If you remember the over the course of the last couple of years, the I T sector has been in sort of like massive boom mode. Companies are extremely protective of their brand with respect to engineering candidates. Nobody wants to join a organization that exists under a cloud who's CTO just got fired for being an idiot. So the thing that might happen is like, oh, well, the previous VP of engineering wasn't quite up to enough.

Maybe they can be shuffled onto a different project, and we're going to hire a CTO above them. If you've already hired a CTO, that's a bit of a bit of a more difficult thing. But like shuffles with regards to who are the most important people in the engineering organization and is there a separate product organization? Do they report to the same people, etcetera, etcetera, are sometimes caused

by like X isn't getting it done. We want to like shuffle in why, But we don't want that to be seen as a repudiation of X. Not because we care about X's opinions so much, but we care about how this will be read by internal engineers who we want to keep attaptioned to the company and external candidas. Alright, one last small question they'll probably eject, a question that we can talk about for a long time, but just

real quickly. So the one one area within tech that seems like almost certainly going to be hiring like crazy for years at this point is anything to do with AI. And you know we all know what's going on there. How much are the skills that some of these like

sort of cutting edge AI companies in need of. How much are these skills that sort of legacy or existing tech workers might have, or how much are the skills that they need something that like you really need years of like focus training in the specific area to satisfy what these companies need. Can I can I add another thing onto the back of that place? How many coding jobs will something like chat GPT destroy? Ye? Should people

stop learning to code? Yeah? Yeah, talk about talk about So I have a glib but true answer with respect to our advanced AI techniques going to destroy programming jobs.

The first program or class of programs that we had where an advanced computer was obviating the need for human programmers was called the compiler, where instead of doing you know, complex low level and instructions directly and assembly and speaking sort of natively the language of the computer, you use what we're called high level programming language is like C

back in the day. And then the compiler would you know, use its magic AI powers to turn that C into assembly language so that you didn't have to laboriously do the assembly language itself. So every technology that gives programmers more power, more capability to do things that are valuable for human society probably increases the aggregate demand for programmers is sort of like my high level view on the world and if yet to see a contrary example to that.

So an interesting question with regards to AI is what are the like, what series of steps is going to be necessary to take it to market in a way that it actually creates the value for individual people land for society, and that it seems to have Latin within it.

And if you look at like chat GPT, if you like I view it as an iceberg, there's the above the waterline part and below the waterline part, and below the waterline part has some let's say deep deep magic there bracketting out that magic for the moment, it seems like the above the waterline part was very important in why everyone has heard chat GPT and probably used it if you're listening to this podcast, but it hasn't heard

of like similar efforts at Google, etcetera. The reason is that there was a you know, a product focused team that made a relatively pedestrian piece of software like a chat interface, but made it really, really good and like work on that to the point where people's interactions with the underlying large language model would be like sufficiently effervescent that it would screenshot that interaction has shared it over to Twitter, and so everything that above the water line

part is amenable to the to the technologies and tactics that existing engineers have with no modification whatsoever. There you're talking to the back end. The back end is implemented in a different kind of magic than your back ends usually are. But the back end has always been magic too. That is like part of the answer. There's an interesting question, like how much of the work is going to be

that above the waterline part. The productization of these you know, creating like new forms of user interfaces, new models for interactions with users, new metaphors that we have to teach to people, like new you know there there might be an entire field and like education and how to do I don't know, prompt engineering, well, prompt engineering being how do you type in the right series of incantations to the machine so that the the spirited some and stuff

out of the ether does the right thing for you? So, like, what percentage of the work will happen there? First? What percentage of the work will happen on these like core under the hood model things. A sub sub question to that too is like okay, so for the work happening at that model layer. Is that work going to happen at every company that consumes models, or is it going to happen primarily at open AI and Google and Microsoft. And we can count the number of firms that like

need this these engineers on a single hand. In a world where we count the number of firms that need like dedicated hard AI researchers on a single hand, that probably implies like lower total employment of them than in the world where every firm that touches AI has its own AI practice on staff. But it's at least as of like the current state play deeply uncertain where that

will shake out. And so these are some of the questions that get debated upon people at both the AI firms and also like you know, if if you are a VC that's adventure that's investing in the space, you are probably having like a number of interesting dinner conversations on okay, where does the value accrue in this chain? Where does most of the work get done? What do these products like expose themselves to in the life of the user. Is it's something deeply under the hood or

is it integrated into their daily operations? Do they know they're using an AI do they know they're using software? Is it something that they're like directly typing in or is it something that they're interfacing with someone who's doing the typing on their path, etcetera, etcetera. Well, Patrick, this was absolutely great talking to you. We could talk for a long time, but instead we'll just talk to you in a few weeks again when we have a million

more questions. Now, I'm big patigias, but I learned a lot and really appreciate you coming back on the show. Thanks very much for having me, and I always happy to be come back. Thanks Patrick. That was fun, so Tracy, there were so many interesting elements of that conversation. I'm

really glad we had Patrick back. I'm not even sure where to begin, but to start, you know, his point about the hiring boom during the pandemic, I thought was interesting, not just that maybe these companies had a sort of unrealistic expectations about how long does growth boo would last, but that when you're hiring that fast and under sort of extremely unusual situations, like you have that drift where maybe you're like there's a little bit of a we're

not that happy with the class. And then also that point, but you also can't just hire everyone who came in recently for reasons of like seasoning and like skill level growth. Well, to me, it kind of I guess hammers home the point that three years on from the start of the COVID pandemic, we are still experiencing these normal developments. And it kind of gets to the macro versus micro point about some of the recent payrolls figures. You know, all

the tech layoffs that have been announced. Are they saying something about the wider economy or is this really a tech specific problem? And I think, I mean, I can kind of argue it either way. I think I come away from that conversation thinking, well, you know, one were really unusual periods in terms of hiring for the big tech companies, and to some extent it seems reasonable that

that starts to get rolled back a little bit. But uh, you know, it's also I take his point, is he and I suspect it's probably true, which is that if a year ago you were thinking you wanted to go into engineering or coding or something like that, very little about what we've seen so far in three should make

you change your mind. I thought that was really interesting too about like sort of the questions about AI and how so it's like, as he pointed out, like there are other you know, places working on very similar, if not equal technology. What sort of made things breakthrough recently was the consumerization of some of the chat interface or some of these AI images imaging things. So like how much of like to go to market for this stuff?

Ultimately isn't sort of like familiar experiences that people already have. It reminds me a lot and I don't mean this necessarily in a negative way, but it reminds me a lot of crypto in the sense that, like, yes, there is a lot of hype around AI, but also in the sense that this is a new technology that people

can actually participate in. And so the use of the AI image generators, chat GPT, it kind of brings it to people in the same way that they are able to experiment with, you know, blockchain and different types of money using crypto, and so it suddenly becomes a lot

more salient for people in that way. Yeah, you know, like there's a good example because like with crypto, like if you're like interacting with like core protocols are like developing on ethereum like that's going to be a limited a limited number of people know how to do that. But if you're building like an exchange, there are a lot of I mean, everyone can have a wallet, right you're marketing or stuff like that. There are still all of these roles within crypto that have like sort of

like consumer facing analogs to any other industry. Yeah, I need to look up the compile tiler. That sounds interesting. Yeah, I'm gonna go off in Google um deep learning compiler. I guess for so far a job security, we still need to learn to code. Huh. I think we need to learn AI. I don't know. Probably I don't know, but you know C plus plus, which is what I learned in a little bit of no because it's obsolete.

Like no, I don't think anyone uses c post plus and they certainly don't use it for for AI and machine learning stuff. I should have asked Patrick what language? What coding language Python? When we have them back in the Yeah, okay, yeah, our next episode with Patrick will be about which coding language we should all be learning in the future. Shall we leave it there? Let's leave it there. This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me on

Twitter at Tracy Alloway. And I'm Joe wisn't Thal. You can follow me on Twitter at the Stalwart. Follow our guest Patrick McKenzie. He's at Patio eleven and check out his Bits about Money newsletter. Follow our producers Carmen Rodriguez at Carmen Armand and Dash Bennett at Dashbot. And check out all of our podcasts Bloomberg under the handle at podcasts, and for more odd Lots content, go to Bloomberg dot com slash odd Lots when we push the transcripts Tracy

and I blog. If we have a weekly newsletter that comes out every Friday, go there and sign up. Thanks for listening