The technology industry's pandemic-era expansion gave way to a steep contraction after the Federal Reserve raised interest rates from near zero to roughly 5.5 percent through 10 consecutive hikes in 15 months. Tech companies responded with mass layoffs and budget cuts, and their executives and investors blamed workers for the industry's troubles rather than the expansion decisions made during the boom.
The sector had grown rapidly while rates stayed near zero for most of the 2010s, an era economists call zero interest rate policy. Between 2019 and 2022, Amazon and Facebook more than doubled their head counts, growing 92 percent and 93 percent respectively, while Microsoft added nearly 80,000 employees and Google brought on over 60,000. Many of those workers were placed on teams with no immediate tasks, held for projects that had not been planned.
When inflation rose and the Fed tightened, the S&P 500 fell 19.4 percent, its largest drop since 2008. Almost $4 trillion in combined market value disappeared from Amazon, Facebook, Apple, Google and Microsoft. Facebook lost two-thirds of its value, Amazon lost half, and nearly $1 trillion was shaved from Microsoft. The industry fell 30 percent for the year, its third-worst year ever after 2008 and the dot-com crash.
Rather than accept responsibility for the expansion, tech leaders pointed at their employees. Silicon Valley investor Keith Rabois said thousands of workers at Facebook and Google were doing fake work and simply sat at their desks doing nothing. David Ulevitch, a general partner at Andreessen Horowitz, suggested as much as half of Google's white-collar workforce was not contributing meaningful labor and blamed the rise of bullshit jobs.
Google CEO Sundar Pichai told an all-hands meeting in 2022 that productivity was not where it needed to be and that workers should minimize distractions and raise the bar. Wayfair CEO Niraj Shah warned employees in an internal email that laziness is not rewarded with success. Mark Zuckerberg, responding to claims of fake work, declared 2023 the company's year of efficiency.
Labor is the largest cost at asset-light tech firms and the easiest to cut. During the zero-rate years, extra engineers were a small price against a possible breakthrough. In the higher-rate environment of 2022, each employee became a financial trade-off against the guaranteed return of holding cash, and tech workers had to earn their place through short-term returns.
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