Ted Audio Collective Hello everyone.
You're listening to After Hours.
I'm Felix. I'm Mihear.
And I'm Charlotte Howard.
Welcome back, Charlotte.
It's great to have you.
Thank you. Thanks for having me.
You know, one thing I always wondered, in your business as a journalist, should I think elections are the worst thing that can happen?
The endless conversation about the same topics, or are you excited about elections?
Well, it kind of varies depending on whether it's early in the morning or late at night.
But I'll say that at The Economist, where I'm the New York bureau chief, we have lots of people who are working on our digital team, so they're constantly updating new stories, and responding to the latest news.
So it's been a very busy week for us.
Well, the good news for you and The Economist, Charlotte, is all the stuff in the UK is so calm.
It's not like both countries could fall apart at the same time.
Well, at least they're taking turns.
There's no small amount of schadenfreude among the Americans who are used to people in Europe pointing to us as an example of what not to do.
We're feeling quite patriotic this week, pointing at the comparison.
There you go. Excellent.
Good. Wonderful. And we brought topics, of course.
What did you bring me here?
So it's a little bit of a serious topic, but I think it's an important one, which is we have now started to see very significant layoffs in the economy, and in particular in the tech sector, in a way that we haven't really seen before.
I guess I wanted to talk to you about how these layoffs are different and how we should think about them.
Okay. Interesting. And what did you bring, Charlotte?
Well, I have politics on the brain, so I'm interested in speaking with you both about what this election does and doesn't mean for American business over the next two years.
Excellent. All right.
So me here, tech layoffs.
Yeah. So this is just something that we haven't really seen in a long time, which is significant announcements about layoffs, and in particular in the tech sector.
Most notably, of course, Twitter and Meta, but also leading firms like Stripe have announced very significant layoffs.
And by very significant, that can mean somewhere north of 10 % of the workforce, all the way up to 50 % of the workforce.
And it is happening at a scale and at a speed that I think is really interesting.
So estimates are that about 100 ,000 folks in Silicon Valley broadly have been laid off.
Now, of course, every recession brings layoffs, and they're very painful for all the people involved.
But I'm curious what you make of these layoffs.
Well, it's just so fascinating, the reversal for so long, these companies were all about scale and ambition.
And you see this sort of great chastening happening in tech, where it turns out that not all big bets are good ones, and not all growth and investment make sense, particularly at a place like Facebook.
Investors aren't so sure about the big investment that that company has made on the Metaverse.
It doesn't have the obvious logic, for instance, of Amazon's historic investment in AWS.
And so it is really remarkable to see someone like Mark Zuckerberg at Meta talking about growing too quickly.
You cannot imagine those words coming out of his mouth just a few years ago.
I always remind myself how dynamic the economy is overall.
If you look at last year, we had around 300 ,000 layoffs.
And so, yes, of course, 100 ,000 in one sector in a short period of time seems really significant.
And as you pointed out me here, it's terribly painful for everyone who's affected.
But the churn is actually not completely unprecedented.
And then if you're thinking about Meta today after the layoffs, and you're thinking about Meta a year ago, actually, there's still significant increase in the level of employment.
They added roughly 28 % to their workforce these past 12 months.
Over the last three years, they basically doubled the size of their staff.
And now we're going back 13%, which is a big number.
But it still means the company maintains its growth.
And Snap, they increase staffing levels by 35%.
They have now laid off 20%.
But that still means it's a bigger company.
It's even true for smaller startups, say Astra, the rocket company, they tripled headcount in the last 12 months, and they now laid off 15%.
So the conversation is exactly as you say, Charlotte, a particularly interesting conversation against the growth trend.
But it two pieces of what you said, Felix and Charlotte, strike me.
The first is the economy churns jobs and these numbers aren't small.
And by the way, Felix, the labor market is incredibly tight.
We're still in a very robust labor market.
I think what strikes me though, that might make this different is this chastening that Charlotte referenced, which is, it is not just layoffs, it is layoffs for a set of people and for a set of firms, where I think people thought it couldn't happen to them.
In part, there's a macroeconomic aspect to layoffs.
But I wonder if the dimension that makes this one really different and special is just Charlotte's sense that the expectations of growth were so pronounced and there was a sense of invincibility.
And to have that reversed seems particularly difficult.
My big question is I wonder whether this talent will get more spread out.
I was speaking with companies in January of this year.
And if you have to think back, it was such a different time.
Companies were competing ferociously for talent.
The recession was not on the horizon.
And even before the great resignation companies that were traditional, very large American blue chip companies just had a really, really hard time getting tech talent through the door because everyone wanted to be at a Google, at a Twitter, at Snap.
They wanted to be someplace young and hot.
They didn't want to be with Procter & Gamble in Ohio.
And I just wonder now if you're going to have a bit more success at some of those other companies saying we have a digital marketing team and we want you to come work for us or we have a new customer journey that we're building online for people at Hilton.
Can you come to us?
So I am very curious whether this results in just a bit more broad distribution of where young graduates go going forward.
And I think in a way that's a silver lining.
That kind of talent permeating more broadly in the economy has aggregate effects for everybody, which can be fantastic.
I think that is a really good piece of what may be happening here.
The other part that strikes me is evidence in these very large tech firms is that productivity is highly concentrated amongst relatively few people.
And so we're running a little experiment where we ask ourselves, how many employees does Google really need?
They've swelled to such a large size.
And I think they themselves know that in fact, productivity is highly, highly concentrated.
And in exchange, what did we get?
How much better is your Facebook experience today than five years ago?
How much better is your Google Maps experience today compared to five years ago?
Even just thinking about the most promising avenues for tech talent to work in, maybe it's not in what we classically have come to think of as technology.
One other aspect of this that I'm quite curious about is that there was a point in the past five years when employees were just making all kinds of demands of their employers beyond what we would have traditionally thought of as employee benefits.
Employees wanted their companies to take a clear stand on social issues and really holding firms feet to the fire on that.
And I just wonder as the balance of power shifts a bit, as you have employers regain some power in that dynamic.
And this has been born out of my conversations with different executives saying, we just don't want to be out there on social issues in the way that we used to be.
And the demand for employees remains, but I think companies are going to start being more reluctant to meet those demands both because of the shifting dynamics in the labor market and the shifting dynamics within politics.
That's interesting, Charlotte.
I mean, I could see cutting one of two ways.
You're absolutely right.
If the balance of power shifts, and in particular, if there's a broader recession, then you could imagine employers maybe not catering to employees in the same way.
But the other way that this could spin out is actually this great reallocation of talent away from these tech companies.
It's not just technology expertise that will go to the broader economy, but those demands and those mores will spread more widely.
If you have spent five or 10 years in Silicon Valley, and you are now going to get a job at JP Morgan, or you're going to get a job at PNG, or wherever it is, you're going to have a set of expectations about the way the world works.
And so I guess the other alternative is just as possible.
That kind of nourishment of demands on employers to be more than what we might have expected them might actually infect more and more companies as all this talent gets reallocated.
And maybe the cultural transformation of traditional businesses with this reallocation of talent is going to be as important as the migration of pure technological talent.
Yeah, that's a really interesting point.
I can imagine that it will vary across two different kinds of benefits that you might have expected in Silicon Valley.
One is just the perks.
Yeah. Free laundry is maybe a thing of the past.
But at the same time, this idea that you deeply care about the purpose of the company you work for, that it really matters to you that you have a sense I'm making a difference and I'm making a positive difference by spending a 10, 12, 14 hours a day in some particular organization.
I have to say I have a very hard time imagining that this goes away.
I actually had another question.
Every CEO who announced layoffs had some sort of public statement that included, I'm so sorry, I have to do this, and I take full responsibility.
And it struck me as really interesting in the sense that it was so uniform.
Mark Zuckerberg, I take responsibility, Jack Dorsey, Trilio's Jeff Lawson, whoever you think of, it's the same ritualistic behavior.
And I was thinking, what does that even mean?
When Zuckerberg says, I take full response, yes, of course, he is the only owner that matters and he's the CEO.
But that sounded not right to me.
What was your response?
I want to distinguish the layoffs that have happened that you outlined and the layoffs at Twitter.
I don't think that those were handled with any degree of contrition or grace.
Yeah, honestly, your question has made me think about it again, because when I heard it, I actually thought to myself, at least they're taking responsibility.
So I was quite positively predisposed to that, in the sense that the alternative, which is blaming it on the world, seems problematic.
You're right, though, now that you've pointed it out, it all felt so canned.
It was also ritualistic.
I get that. I'm not sure what the alternative is, though.
At least they've gotten the message that contrition is the right appearance.
Now, whether they really feel contrition, who knows?
But at least they're manifesting contrition for PR purposes.
That struck me as pretty good.
But I guess my question back to you is, what kind of a message do you think they should be sending?
Well, maybe there's two things.
One is, generally speaking, when someone says, I take responsibility, I expect some consequences.
The person is responsible for something really horrible, and I step down, or I distribute 10 % of my shares to everyone who gets laid off to come out and say, I'm responsible, but then there's nothing.
That seemed a little odd.
And to your earlier point, me here, maybe I'm also skeptical because I'm not really buying the story that they're telling us.
So the story is, look, there was this pandemic, it was unprecedented, we grew very quickly, and we and the rest of the world assumed that this would just continue this way.
And actually, when you look at the numbers, so say, take the online advertising numbers.
You see, growth in a typical year is anywhere from 10 % to 20 % if things go really, really well.
And then last year, 2021, really stands out in the sense that the ad market grows by almost a third or so.
But even if you believe the pandemic story, and even if you believe that the kinds of behaviors that consumers learned during the pandemic are here to stay, that's a one -time shift.
That's not, we continue to grow at 30%.
The explanation that sounds much more reasonable is what you said, Charlotte.
Coming out of the pandemic, there was this unprecedented shortage of talent and everybody chasing everybody else's talent with ever higher compensation.
And I think they got really caught up in that fever.
I don't really think you can tell a story from business fundamentals that would then lead you to increase the size of your workforce by 100 % in three years.
Now that you say it, Felix, I think you're absolutely right on both points.
One is, where are the consequences?
And the second is they're casting it as a genuine mistake that was a misreading of the economic scenario.
And I think what you're characterizing it at is more fully true, which is the hubris of what they thought they could do with their businesses and what they thought the world would look like.
And that's a much deeper, more personal error that I think is harder to admit to.
But that I think is the bigger thing they should be taking responsibility for.
May I ask you just on the culpability question, since we're framing it in these terms, what you think of investors being complicit is probably too strong word, but for decades, the market rewarded a certain type of expansion.
Totally. This was the model that seemed to be greeted with more and more accolades and an ever higher share price.
So do you think the investment community has permanently shifted now where reality has set in and there's more inherent skepticism that will be sustained?
Or do you think that we might go back to an environment where investors reward the kind of bold planning and investment that we had seen previously?
That's such a great point, Charlotte.
I think it's absolutely true that the response of the market to even small changes in business fortunes and growth has changed dramatically.
And there are two reasons.
I think one is just we no longer live in a zero interest world where growth is really all that matters, but also a little bit that mindset.
All I want to know is like, can you grow at 10, 20, 40, 50 % and there I'm a little less optimistic, frankly, that things have really changed.
I have a group of students who are in conversations with VCs and they have a business model that has amazing unit economics, but scaling is a little more shaky, I think.
And they have all kinds of difficulties convincing investors that this is a great opportunity.
Even though they said, we're going to make money from day one.
And we have these really enviable margins in an industry that is not known for these kinds of margins.
And it just does not seem to matter that much, which is really fascinating to see.
I think this speaks, Felix, to this broader issue that you're raising, Charlotte, which is that kind of investor mindset, that kind of soft bank view of the world, this kind of really crazy magical thinking, it doesn't die easily.
Just look at the markets in the last week, the slightest notion that maybe things are going to be different.
People want so badly to believe that we're going back to where we came from.
And that desire to believe that thing is so deep, it will not die easily.
Felix, what would you tell somebody who has just gone through something like this?
The very natural reaction is to somehow think that you're partially to blame and that it says something about either your skills or your success or your ability to connect with others inside the organization.
And it puts you in a mindset where you have diminished expectations about the next job, the likelihood that you can find something really great.
If you can get away from that, I think that's a really important thing to do.
This is not mostly about the people who have been laid off.
This has a lot to do with how these companies thought about their future, and then how the market turned in a particular direction.
So getting away from a sense that I almost have to be glad if I find something else to going back into a position.
No, actually, you have skills, you have experience, you have seen maybe a part of Silicon Valley that not every company has seen.
That is really valuable.
We are in a remarkably robust job market situation still.
Yeah, that's great advice.
Charlotte, what do you think?
I guess I'm someone who has spent much of my life on the coast, but also has lived in and covered the middle of the country.
And I would encourage someone who has spent recent years in California to look to the many really big, interesting, well -known companies that aren't in San Francisco or New York.
Yeah. And even if you don't want to live there forever, by the way, maybe you might, that there are some really interesting places where you can build something and have a lot of responsibility and have a fascinating experience.
Though I should add the caveat that I've worked at the Economist for almost 19 years, so I'm not someone who should be giving advice on transitions to anybody else.
Fair enough. Amongst this group, you might, because I think that tenure is shorter than Felix and my tenure at Harvard.
But anyway, let's put that aside.
So what about you, Mihir?
Do you have pieces of advice?
I think two things.
First is it's just worth remembering that your networks are going to be the most profitable sources of future opportunities.
Networks matter, and at this time in your life, getting out there with your networks is just first order important.
And then the second thing is, I think there is going to be a temptation, especially in this population, to kind of take 12 months off.
And I would counsel against that.
I would counsel towards getting back in the labor force.
I think there's going to be a lot of people who are like, oh, it'll be great.
I'll take a year and go to Guatemala and whatever.
And I get that impetus, but my instincts are those breaks can change you.
And it's such a valuable time in your career, that investing in that next thing wholeheartedly and not spending a lot of time outside the workforce, I think is really good.
And I know that runs counter to a lot of people's intuition, but I really believe that.
I think staying in the workforce is really, really valuable.
Well, for everyone's sake, let's hope we don't have another episode on this in 12 months.
It is a really important phenomenon.
It's a really painful one.
And hopefully we won't have to revisit this in the future.
I don't know. I'm thinking about 12 months in Guatemala.
That sounds good. There you go.
So, Charlotte, elections are a great time to rethink politics and business.
What are you thinking about?
There are a few things that are pretty sure to be big issues for American companies over the next few years.
So I'll start by highlighting two of them.
One is climate legislation.
So you may recall we had the inflation reduction act over the summer, which was a big piece of climate legislation.
That climate bill was all carrots and no sticks.
So historically climate legislation has included something like a carbon tax or cap and trade that people in fossil fuel states didn't like.
The inflation reduction act didn't have any of that.
It just had subsidies.
It's just about building stuff.
And guess what, a lot of that stuff is going to go to red states.
And so I think that you're going to see money flowing from Washington across the country and different businesses lobbying for their piece of that.
And it won't be a particularly bipartisan issue.
It's my expectation.
I think this is something that's going to move forward.
What sounds exactly right to me is that in an era where we have divided government, we have a lot of gridlock, we have more extreme positions in government.
We get the kind of rhetoric that makes it look like nothing can ever happen.
But we actually know from the last two years that very often the very senators and members of the House who publicly opposed particular spending programs were then not shy to ask for their share once these programs had been enacted.
Gridlock makes a particular set of things more difficult, but the spending of government funds on projects that are of interest to business, that that's not going to be affected.
I think that intuition sounds exactly right to me.
It's interesting in the context that many people actually think that the markets will do better if we have a divided government.
There's sort of a short run expectation that stock price performance will do better.
And that expectation is particularly interesting because it's not what the long run data would suggest.
The long run data on gridlock actually say on average in the 20th century when we had divided government, we grew the economy by 4%.
If we didn't have divided government, we grew the economy by 8%.
And so an interesting question is, did something change?
Is there a novel aspect to the business government relationship that now makes divided government particularly attractive from a growth perspective or maybe particularly terrible?
Yeah, it's a super interesting question you guys are raising.
So on this first one and that legislation, Charlotte, I think you're absolutely right, which is there's nothing that can unify the world like spreading around a bunch of money.
People who can see unity in that, if they get a little piece of that action.
And I think the IRA legislation is really brilliant in that way.
As you said, it didn't ask anybody to really make any hard decisions.
It just is going to spread around a lot of money in potentially really, really powerful and productive ways.
And maybe we can get a little more of that.
That's possible under divided government.
To your broader question, Felix, of divided government, is it bad or good?
It is striking to me that there is this mantra now that, oh, business likes divided government, market likes divided government, blah, blah, blah, blah, blah.
It's everywhere. Right.
I find it all vaguely confusing and not probably right.
So first off, it's based on these stock market tests, which have no meaning because the sample sizes are really small, but let's put that aside.
I think it's predicated on the idea that first, government is bad.
And as long as you get them out of the way, then things are good.
My instinct is most business people don't really think like that.
They think like most people think, which is if government can do something good for me, then I like it and I want more of it.
This idea that business people and markets like governments not to do stuff is I think totally wrong.
Actually, they want them to do the things they want them to do.
And so I actually think business folks are going to find gridlock if that's what emerges to be problematic.
Some moderation I think is what lots of people like, including business.
So extreme solutions are I think things that lots of people don't like.
So anything on the edges is problematic.
But the notion that gridlock is good seems really weird to me.
You see this in lobbying data.
If you look at the third quarter, there was just this absolute splurge in spending by people who are interested in the housing market.
And why is that? Because interest rates are rising and the housing market is suffering accordingly.
So people who are involved in housing, whether it's realtors or people in home building or mortgage lenders, they are knocking on doors right and left around Washington saying, do something for me.
They're not asking for government to get out of the way.
They're hoping that the Biden administration will do more to stimulate the housing market.
They don't want the government to stay out of it.
They want the federal government to step in.
What's really interesting about the frame that you suggest me here is that maybe we should be asking, what are the circumstances under which government is then willing to do the kinds of things that we wanted to do?
If the general consensus is government can do many meaningful things.
And as long as they do things that are meaningful for me, I'm totally okay with it.
What does that look like on the politics side?
And there's a really interesting break in the relationship between not only divided government, but also just how competitive is politics and how does the level of competition spill over into growth and increases in expenditures.
If you look at a very long time period, 1880 to 1980, basically what you find is if the races are more competitive, if it's less clear that either the Democrats or the Republicans will dominate the political process, we get more growth, we get more spending, because it's exactly what you outlined.
Oh, it's very competitive out there.
I need to do what people want and people want government to spend reasonable amounts of money on reasonable projects.
And then that turns in 1980.
So if you look at 1982, 2020, you find that the most intense periods of political competition actually don't spill over into that kind of spending.
And one of the big unexplained questions is what's changed?
And one idea that, I don't know if it's true, but it sounds plausible to me is that in the 1980 to 2020 period, politics has gotten more extreme.
We have many more politicians that take extreme positions, show extreme behavior.
And so elections are less about the bread and butter kinds of issues, but are more about how does my identity relate to the identity of the people who run for office.
Right. After the January 6th insurrection, can I ever imagine to vote for Republicans again?
And those kinds of things then, of course, make the bread and butter and the expenditure issues a little less relevant.
And so the argument would be, yes, we want sensible projects from the government, but now the government doesn't really have to do that much because they know our allegiance, our political decisions depend less on these kinds of things.
They depend less on these big questions.
Do you think democracy is in trouble?
Do you think Republicans have an interest in doing away with voting rights and so on?
One thing I would think is worth keeping in mind as we have this discussion is that the influence that companies have through political giving has been on the decline.
So there has been a rise in donations from smaller donors and from individuals, and that corporate donations have fallen as a share of the total.
I'm kind of struck by the really big trends of small donors and very wealthy donors gets conflated with business donations.
And in fact, business donations are very different.
And there's kind of a sense of like all these big fat cats, companies and plutocrats and whatever is what's going on.
It's really quite different.
It's quite distinctive.
You have small donors who are rising in importance.
You have big donors, individuals rising in importance.
And then you have corporations kind of doing what they do.
And I don't think it's as quite as an important piece of the picture as we might think.
I'm really struck, though, Felix, by your comment about what has happened in the last 40 years.
And I think one way to understand it all is that all this political polarization feels costly because it's nasty.
People are being mean to each other and so on and so forth.
But the real cost of that political polarization is this displacement of central economic issues and your language was bread and butter issues that have gotten displaced and then no longer get catered to in the political process, because it's all been eclipsed by some cultural identity issues that are thought
to cater to these extreme populations.
So it is interesting to think that maybe that polarization is costly to all of us, not simply because it's nasty to experience, but it's really displacing so much of what genuine policymaking could be.
And then we end up in this world where we start to say, oh, well, maybe I like gridlock because nothing gets done.
But that's probably not right in any meaningful sense of the word.
And we kind of just demonize the functioning of government, even though we all know that everybody wants what they want out of the government.
So that feels like a very costly part of what's happening that I hadn't thought about.
And we know this from smaller groups who always support either one of the two big parties.
So if I already know that a particular group is always going to vote Democrat, or is always going to vote Republican, the party loses all interest in furthering the issues of that group because you know you have them for certain.
The flip, of course, is that you see many businesses that continue to support both parties, where it's not so clear that they're in someone's pocket.
And if I never really know, are you all in support of me, or maybe not so much, then that tethers you to my interests in a way that is really beneficial to me.
And on the one hand, you can have these very romantic notions about, oh my God, now we have all of these small donors who give small amounts of money.
And that sort of money is evil, but this is the democratization of the money part of politics.
And my worry is that many of these small donations actually come exactly in response to issues having to do with identity, having to do with ideology.
I read the small donor movement more as a reflection of the polarization and the importance of ideology.
So that's born out in the data.
Your instinct on it is right, which is that small donors and even really large individual donors, so the Sheldon Adelson's of the world as an example, that they are more ideological than a company.
Yeah. It's funny, this conversation is also just making me reflect Felix on a little bit of what you said, which is businesses typically give to both parties.
And there's a characterization of that, which is, oh, that's super gross and super opportunistic, because they're just giving to both sides.
You can characterize it in that way.
On the other hand, you can characterize it as, thank God there's somebody in the center.
Thank God there's somebody who is not catering to one party.
And I think that's a nice way to think about that.
It's not the way I would have thought about it.
Usually you think it's just, oh, they don't have any beliefs.
They're just super opportunistic.
Well, but maybe that's okay in this context.
Maybe they're the center.
And maybe this election is a little bit of a resurgence of the center in some readings of what is happening here, with both parties taking a knock in some different ways.
There's a lot to be said in some sense for that resurgence of the center.
So maybe we can summarize this segment by saying we are mildly optimistic.
Yes, always. I'm glad that being optimistic is a familiar feeling for you, Felix.
For me, it's entirely foreign.
All right. Welcome to the club.
Yeah. And we have recommendations.
What do you have for us, Charlotte?
My recommendations are always slightly self -serving in that I think that the economist coverage of Ukraine continues to be your source if you want to understand what's going on.
And it was a pretty remarkable week in America.
We've been focused on the midterms and craziness with crypto collapses, but there's been huge development in the war in Ukraine with Russia withdrawing from a key region.
So I recommend reading about that in The Economist.
Excellent. And Felix, what do you have?
So my recommendation is actually related to the topic Richard spoke about.
If you're interested in what is happening in campaign finance, how money flows, who gives, who spends, how much a fabulous set of data is on this website called opensecrets .org.
Everything you want to know about the flow of money and the role of money in politics broken down in really interesting ways and with lots of explanations, how it's changed over time, what the history is.
If you're curious about, I hear so much about dark money.
What is dark money in the first place?
This is really an incredible source carefully put together and carefully updated also after each election.
That's great. You can check on your favorite corporation and see what they're doing.
Yeah, exactly. What did you bring me here?
So you know how sometimes a book just has you at the title and you're like, I'm buying that book.
Oh, I know that feeling all too well.
I'm here to recommend Life is Hard.
That's a title that drew you in.
I confess all this happiness stuff that everyone wants to talk about and how to be happy and all this stuff.
I'm kind of a Life is Hard kind of guy and this book is just wonderful.
This book is by a serious philosopher, Kiran Satya at MIT.
It is about the difficult times in your life and how philosophy can help you and how those difficult moments make you stronger and how the struggle matters.
It's totally bite -sized, small pages with big print.
You can digest it in a day or two, but it's really deep and it's really readable.
So my recommendation is Life is Hard.
Stop reading Happiness Studies and sign up for Life is Hard.
So can I ask, is it deep and relatable?
Because I often find these philosophical accounts of life.
They're maybe intellectually super interesting, but not really easy to relate to.
So he uses his life in a really nice way.
That's a hard thing to do.
He describes current events and he does it in this really wonderful way.
And then he throws in the Wittgenstein.
It's really that nice combination of kind of the mundane and the deep philosophical stuff.
So I really liked it.
Wonderful. And this is it for today.
Thank you for listening.
This was After Hours from the TED Audio Collective.
