Looming recession? Some Silicon Valley executives say bring it on

By Clint Rainey

Tech industry layoffs over the past year have catapulted to dizzying heights. The 60,000 jobs shed so far in 2022 reportedly almost equals the number lost annually in 2008 or 2009 during the Great Recession. But from that last recession, a bonanza of growth emerged in the tech sector, one that Silicon Valley has continued to enjoy up until recently.

Now a new survey from Ernst & Young (EY) suggests that previous boom isn’t far from the minds of today’s tech leaders: 61% of them said they believe that “a potential recession will have a positive impact on their organization.”

For its survey, Ernst & Young polled 250 leaders at tech companies with 5,000 or more employees. Beyond the respondents seeming to welcome an economic downturn, 74% added that, in fact, the signs of a recession were already visible in their businesses. But these business leaders, the report notes, “remain bullish on their business outlook” anyway.

The reasons why include their newfound belief that remote and flexible work can provide “cost-saving opportunities,” and that emerging technologies such as data analytics and AI can “help insulate and even leverage elements of a recession into potential growth opportunities.”

Numerous tech executives now acknowledge that the hiring sprees they undertook at the start of the pandemic have saddled their companies with costly, bloated workforces. Consider these recent examples:

    When payments startup Stripe laid off over 1,000 employees at the start of November, the cofounders wrote: “We overhired for the world we’re in. We were much too optimistic.”

    Days later, when Meta showed 11,000 workers the door, CEO Mark Zuckerberg also singled out their overeager expansion. “I made the decision to significantly increase our investments,” he told employees. “Unfortunately, this did not play out the way I expected.”

    Twitter cofounder Jack Dorsey echoed the same sentiments once Elon Musk began cutting jobs at Twitter, which now employs about one-third the number of October’s 7,500 workers. “I own the responsibility for why everyone is in this situation: I grew the company size too quickly,” Dorsey tweeted. “I apologize for that.”

Flashback to 2020, and most of these companies were expanding aggressively because their profits were soaring in an otherwise-weakening economy. Now, apologetic confessions granting that they did, indeed, bulk up too fast are sweeping through Silicon Valley as a recession looms.

This year’s 60,000 total layoffs bear a striking resemblance to another recent number, according to data crunching by Joint Venture Silicon Valley. The group’s research arm, the Silicon Valley Institute for Regional Studies, says that, incidentally, Silicon Valley’s biggest tech companies added about 68,000 new jobs between 2020 and 2021.

Nor are those job cuts necessarily over yet: Google has reportedly instructed managers to identify their “lowest performers”—a category it wants to be applied to 6% of the workforce, or about 10,000 employees. Meanwhile, DoorDash announced on Wednesday that it is laying off about 1,250 of its corporate employees. “We were not as rigorous as we should have been in managing our team growth. That’s on me,” CEO Tony Xu wrote in a memo. He added that “I’m optimistic about our future” nevertheless, because “our business remains strong and continues to grow.”

Xu’s words match the general optimism voiced by his contemporaries, who seem to have taken a sort of circle-of-life view toward a possible recession. Half of the tech leaders told Ernst & Young they already have plans to activate new growth plans “within the next two years or sooner.”

Correction: An earlier version of this story misspelled Tony Xu’s last name.

Fast Company