It’s hard to estimate the marginal value of an employee. In boom times, it’s easy to see that surpluses justify experiments and expansion to find more avenues for future profits. In lean times (and especially just after the shift from boom to lean), those surpluses are less certain in the future, and the avenues for future profits are both less likely and likely to pay less in the near-future.
There is a true shift in the expected value of many projects, and therefore many employees. I think that explains a lot of layoffs or hiring freezes during a downturn.
I think it’s ALSO worth acknowledging your thesis—it shifts the balance of power among decision-makers, away from “growth at any cost will eventually pay off” to “stay lean to survive the coming winter”.
And also also, it’s the “normal” thing to do, and you don’t want to look weird to investors. Along with this, it’s easily justified to those who will be laid off—it’s very hard to fire people without pretty strong cause, so it’s perhaps worth it to trim a bunch of workers every decade or two—you’ll lose some good people, but you’ll lose more low-marginal-productivity employees.
It’s hard to estimate the marginal value of an employee. In boom times, it’s easy to see that surpluses justify experiments and expansion to find more avenues for future profits. In lean times (and especially just after the shift from boom to lean), those surpluses are less certain in the future, and the avenues for future profits are both less likely and likely to pay less in the near-future.
There is a true shift in the expected value of many projects, and therefore many employees. I think that explains a lot of layoffs or hiring freezes during a downturn.
I think it’s ALSO worth acknowledging your thesis—it shifts the balance of power among decision-makers, away from “growth at any cost will eventually pay off” to “stay lean to survive the coming winter”.
And also also, it’s the “normal” thing to do, and you don’t want to look weird to investors. Along with this, it’s easily justified to those who will be laid off—it’s very hard to fire people without pretty strong cause, so it’s perhaps worth it to trim a bunch of workers every decade or two—you’ll lose some good people, but you’ll lose more low-marginal-productivity employees.