Layoffs are killing innovation in companies (and eventually the companies themselves) posted on 15 February 2024

Last year I had the chance to attend a fireside chat with Andy Rachleff, founder at Wealthfront. He described a company product as an inverted U if you look at its net profits over time. From there, companies have to create multiple products to stack these inverted Us to keep thriving.

There are still so many tech companies doing layoffs (Google, Meta, DocuSign etc.) – my heart goes out to those affected, especially those in difficult situations (immigrants with visas, new parents etc.). With that being said, performing layoffs is a cost cutting strategy that may make companies achieve more profitability by reducing expenses, which makes the inverted Us taller.

My uneducated opinion (as a software engineer/employee without having been a CEO/investor) is that these layoffs will create an environment where innovation becomes more difficult. For example, employees will focus on staying employed, aiming to constantly deliver wins in the given performance review timeline (e.g. every 6 months). In practice it means the company culture will shift toward prioritizing short term wins which will result in narrower inverted Us (because the best way to maintain a product long term is not with a short term/greedy strategy).

Similarly, creating impactful products is risky and by creating a risk-averse culture, you won’t be able to create such products. I personally could deliver the impact I had at Google because I could work on multi-year long projects (with some short term benefits but whose main benefits come after +one year later). The same goes for my work at Databricks, while many have/had short term benefits, most of them are aimed to yield results in a significantly longer time period.

Thoughts? Opinions? I’m personally not sure how I would feel working at a company that did layoffs (and worse, that has more planned layoffs). Though maybe employees just forget layoffs over time and the culture recovers?

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