There are companies out there who would love to lay off half their staff, but in regular times they couldn't just do it (because it wasn't a common thing, and makes them look "bad"... everyone would protest). But since nowadays every damn company is doing massive layoffs (and not unknown companies, but companies like Twitter, Facebook, Google, etc.) then they take advantage of the situation and proceed to do the same.
> While we are looking forward to what’s to come in 2023, we must also make hard decisions necessary to set us up for long-term success.
This could have been said any damn year in the past, but massive layoffs is the latest trend, so why not.
So, to fight that elevated inflation they are killing demand, and when demand sharply drops, you can't keep paying your workers as before (because you sell less goods!).
Moreover, companies simply got fat during the pandemic and over hired. I mean, there are probably also a few (lot) companies which do what you write, but I don't think Flexport is one of them. It's more likely they over hired like everyone else. Also, you might want to take a look at the current container fright prices [1]. Pretty parabolic.
The world, particularly business in the US, really did get used to cheap borrowing for everything. Using a line of credit for everything or acquiring massive amounts of easy to service debt has been basically a standard business practice for the last 20 years.
I am actually surprised things haven't imploded yet. So many companies have acquired massive debt that's going to become increasingly impossible to service. It feels to me like we are waiting for the first big domino to fall.
I tend to think they will stick to their guns: they will raise to 5+% and stay there as long as unemployment is below 4.5%
In a cheap money environment you take the money and you gamble for growth, in an expensive money environment you do your best to run lean. The pain is moving between these two. The winners are the guys who did a raise at the peak and can use that cash to accelerate through the downturn, and the losers at the guys who just didn't quite get there, who now are forced into taking capital at a massively diminished valuation.
It's a classical Austrian economists nightmare. The argument is that cheap money stimulates malinvestment. That is to say that corporate projects that would not have made adequate returns on capital under normal circumstances seem to look feasible.
It's all fun and games until the tide turns, and then the whole edifice collapses like a house of cards because it was built on shaky premises that no longer hold.
It's a bad deal for companies to borrow money or take big investments when interest rates are so high. If you want to avoid doing that, you need to predict when interest rates will drop and make sure you have enough cash to ride it out. In spite of being successful, some companies don't have the cash, and they need to reduce their burn rate.
Smaller companies that are still not generating profits? Absolutely they need cuts to survive.
Both of these things are true at the same time. I’m continually surprised at how quickly people have bought the excuse trotted out by extremely profitable companies for mass layoffs. In that situation it is primarily an exercise in juicing up the stock price and keeping investors happy.
Lots of companies are laying off workers or at least freezing hiring because they anticipate earnings cratering, or are already seeing it happen. They haven't reported on it yet, but they will in the coming months. The layoffs will continue to gather pace, as will bankruptcies.
That actually really gives me hope for a soft landing - those high-wage folks are much less likely to have serious financial problems like homes getting foreclosed (not to say it's not possible but they're much more likely to have a cushion to keep making payments). If they pull back on their discretionary spending plus stop doing things like driving up housing/car/stock prices by putting money into those things, that feels like it could be the basis for inflation slowing down without a huge uptick in unemployment and everything that comes with it.
Inflation has been pretty stubborn. I assume some of that is coming from supply chain issues, but some of it also could be due to higher-earning households not being as price sensitive as they would have been in previous eras. i.e. a Google engineer is not going to really notice or care that milk is 50% more expensive. They might not even notice or care that their new car now costs $40k instead of $30k. Their annual stock options probably fluctuate by that much on a daily basis. That level of economic comfort used to be the exclusive purview of the professional class, i.e. doctors, lawyers, etc... But the tech boom has expanded that class (upper middle, lower rich?) considerably.
Will be interesting to see if this is the straw that can break the inflation camel. Overall, I am getting the impression that these layoff announcements, while grabbing headlines, are not very indicative of the market at large. But it does seem like they are picking up steam, and of course, these things can also reinforce each other. For example when you let go of 10% of your staff, that means you also reduce your per-seat SAAS software spend, and that money was someone else's revenue.
Anyways, I am rooting for a soft landing but still feel like these things are too hard to control. Would be nice if we could just let some air out of the more bubbly parts of the economy while keeping everything else chugging along. Previous recessions usually result in those who can least afford it getting hit the hardest, so a change of pace on that front would be welcome. Fingers crossed.
Compound that at scale and it will definitely have an effect.
There will not be a soft landing.
When has there ever been a soft landing and how would raising rates into a recession ever result in one? Raising rates takes 1 year to come through to the real economy - we haven't even seen the impact yet, only on stock prices which foreshadow the real economy and again are a leading indicator. They will raise till unemployment starts to rise.
Unemployment is the goal of this Fed policy - that is the point - cause unemployment so that inflation goes away.
Shit rolls downhill. We'll see how well the service economy holds up when their client base has been out of work for 6 months.
Wealthy people have gotten used to increasing the gap and therefore assume that trouble at the top is much worse below.
But what’s actually panning out is that Internet technology is great at replacing white collar jobs and awful at replacing blue collar jobs (I don’t think electricians are losing sleep over ChatGPT).
going to hit $1 trillion soon for the first time. seems not great in face of high interest rates.
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Would love to hear more on your perspective / insight.
This is all intentional, right? My understanding is that the fed is leaning into this particularly hard in order to dislodge the stubborn housing bubble.
For an individual (someone who isn't a current business owner), does this basically mean we should continue stockpiling savings, and avoid moving (rent) / avoid buying house / buying a car?
Any ideas how long this could last / what the bottom looks like?
They are trying to reduce inflation. The housing bubble certainly played a part, but inflation was hitting nearly everything. A big concern here, is that many smart people think a fair bit of that inflation was due to COVID related supply chain disruptions (which still persist, see China and COVID). So while raising interest rates will help, it may not be the right tool for the job (but it is the only tool that the Fed has, so here we are).
> For an individual (someone who isn't a current business owner), does this basically mean we should continue stockpiling savings, and avoid moving (rent) / avoid buying house / buying a car?
Definitely build up your savings. The other three are more complicated. Rents appear to be finally going down in some marquee markets. So moving might actually save you money. Buying a house now feels like a bad idea, seems like the market is still carrying on from the fumes of the bubble, but interest rates are definitely having an impact. Based on historical examples, the full impacts will probably take a few years to shake out as housing tends to move pretty slowly. And buying a car, well that is complicated. If you need one, buy one. If not, probably best to avoid it.
If you do have savings, might make sense to start looking at CDs, treasuries, and municipal bonds. Interest rates are up and if you have a chunk of cash sitting around those are good ways to put it to use.
> Any ideas how long this could last / what the bottom looks like?
Watching the Fed is the key here. And the Fed is watching inflation. So as long as inflation stubbornly persists the Fed is likely to keep raising rates, and that is going to impact the economy. I read somewhere that the "market" is expecting inflation to normalize in the summer of 2023. But personally that feels optimistic. I think we still need to shake off the COVID induced supply chain disruptions before things get back to normal, and that still feels like another year or so away.
If you run a VC backed business my suggestion is 24-30 months of runway is a good starting point.
As far as individuals go, it's not a bad idea to mirror this advice. Have essentially 2 to 2.5 years of income saved in the event that you get laid off and can't find a job for a long time. Hopefully it never comes to that, but it never hurts to be prepared.
He called this correctly in 2021, before it burst: https://www.livewiremarkets.com/wires/grantham-this-is-a-bub...
He feels there is still farther to fall (and I agree with him there): https://www.msn.com/en-us/money/markets/prepare-for-an-epic-...
Falling stock prices are really a reflection of real-world problems - while it obviously feels in the US like everything is fine (judging from the many comments saying this here on this thread), everything is not fine, companies looking at their P/L and laying off staff are not fine, and the Fed is deliberately going to cause a recession and cause unemployment to stop inflation, which is a very brutal and indirect tool to do so.
This will not be a soft landing.
If you have a low mortgage, hang onto that! Otherwise standard advice applies, try to keep at least 6 months expenses in cash or cash equivalents. Don’t make big purchases.
God I wish we could just do a Land Value Tax and be done with it. It wouldn't hurt the economy and might even create more work.
Some companies are doing layoffs (mainly those that overhired during COVID), others aren't. Look at the data instead of clickbait headlines and everything looks much less bleak.
If you are really certain you can forecast how the economy is going to do with high accuracy, get a job at some hedge fund and get rich.
Unemployment is low due to a lot of early retirement/retirement. It is obvious we're headed for a recession, the question is how bad will it be. Will China's housing market collapse?
I believe we're going to double dip. We already dipped before the holidays. We'll see one more very painful quarter, which may not be Q1, but Q2 or Q3. From what I've seen, Series B+ is essentially impossible right now unless you're in the top 0.0001% of companies. Even then, if you're that operationally efficient, you might even hold off on funding until you can pull a higher valuation in 24-36 months.
As far as tech layoffs go. I think this has been coming for nearly a decade. Companies have been hiring at what seemed an insane pace for so long that it just became the norm. My personal opinions on Elon aside, he proved how bloated a lot silicon valley tech companies are/were.
Raising money is going to become very difficult, even for those in a good position who manage to raise, they'll be asked for a lot more of their company in return for less money.
This might be a real bear market in equities (anyone remember those?), where things are bad for years and we may see something like the 70s, where the inflation peaked twice, the second time it was worse.
At the end of every season, the Yankees fire some players and hire others.
Old cells in organisms die or are killed, while new ones are born.
Soldiers going on missions may put down the equipment from the prior mission, and pick up new equipment.
The argument "the organization is behaving selfishly, they should just repurposing the existing organization member" is inane since the function of members of an organization depends on the member's specialty, role, purpose, and an organization's purpose can change over time.
It's really strange people act like this is some killer argument when in fact nearly every organization with multiple entities does something analogous (grow in some ways, shrink in others, at the same time)
Flexport always seemed to be hiring.
Source: I’m a hiring manager for software engineers at Flexport.
Taking Amazon for example, look at this chart: https://www.statista.com/chart/7581/amazons-global-workforce...
Amazon's headcount literally doubled from 2019 to 2021. The recent layoffs barely move their headcount back at all.
While Amazon may be the most visible, this pattern was repeated across a lot of smaller companies. Even my employer was setting arbitrary goals to grow headcount by certain numbers last year and hired a lot of people with questionable qualifications in the process. Now they're laying people off and using it as an opportunity to cut their mistakes.
A lot of good people are getting laid off, but I have a feeling that many of these layoffs are an overdue correction from companies that were too afraid to let anyone go in the past few years. Now that the hiring market has changed to give employers the upper hand, it's only natural for them to start wanting to cut underperforming employees and focus on the people doing most of the work.
What you're leaving out is that Amazon's net sales literally doubled between 2019 and 2021, from $280MM to $470MM. The doubling of headcount over that period was perfectly rational and in-line with its business model.
There was definitely irrational exuberance in hiring during 2021-2022. But Amazon's exuberance was far more rational than most of tech. Ironically, Amazon both hired far more than everyone else and also over-hired less than everyone else. Unlike all of the other FAANG++ companies, Amazon is and always has been a low margin and labor intensive business.
That reeks of "I'm so sorry but with the tough financial times right now, we have to run a skeleton crew, so we won't be able to approve any of your PTO requests and we're expecting you to work long hours for the forseeable future"
Then later at the earnings meeting: "We made record profits this quarter! The CEO is getting a giant ass bonus!"
A bull-whip effect, but for employment.
What’s happening today is a result of the free money spigot being turned off. The layoffs and hiring freezes are going to be a bit more sticky.
No. Did they have layoffs previously? I also don't remember anyone cancelling orders and cutting jobs at the beginning of the pandemic.
[0]https://www.bls.gov/opub/ted/2021/temporary-layoffs-remain-h...
Many metrics have a huge pandemic bump that's just approaching the pre-COVID trend line. I suspect we'll see a slight overcorrection. First dipping below trend, then bouncing back up a bit, before finally returning to trend line.
Companies will adjust to supply chain issues. Workers will wisen up and move jobs. Home demand will level out with supply. People will return to "normal" work areas.
I can imagine a lot of companies struggling to hire in a few months. But I can't imagine they being the same ones that are just firing.
There are a lot of companies not unsustainabled, at least in the 10 year frame, that are laying off.
> At Flexport, 2023 is going to bring extraordinary velocity – we are in the process of doubling our software engineering talent and moving to single threaded business organizations to build world class products faster, and we will continue to invest in delivering best-in-class operational execution for our customers.
Looks like they are laying off non-tech workers who they have made (or will make) obsolete through automation
What does that even mean? They are only able to do one thing at a time? Doesn't sound like a recipe for business success to me...
They could start by laying off 50% of their CEOs
https://www.flexport.com/blog/flexport-co-ceos-note-to-emplo...
Well that's YCombinator in a nutshell.
I would expect that a global reduction in shipping traffic would mean needing fewer of these people internally; so I suspect that's the bulk of the 20% reduction group.
Is it safe to say the Global Trade is down but there is still demand (for now) for tech efficiencies.
We've had 5 such approaches in the past 6 weeks of which 2 we have taken over.
It is going to get very very bad inside the next 6 months. We're still in the pre-swell phase before the tidal wave hits.
1. Start making money 2. Sell the company
Many of them will tell themselves that they can somehow see massive growth and start making a profit, and will fail while trying to do so.
The economy is not "still strong" by most measures. Employment is still strong although there are lot's of arguments to be made that when you dig beneath the surface things are much less rosy. But it get's way worse when you look past employment.
Both volume and rates on maritime container shipping are down roughly 80% YOY. https://www.drewry.co.uk/supply-chain-advisors/supply-chain-...
PMIs are falling off of a cliff https://tradingeconomics.com/united-states/manufacturing-pmi
S&p Earnings are in steep decline off the peak https://www.macrotrends.net/1324/s-p-500-earnings-history
Consumer revolving credit is extremely high while the savings rate has fallen off of a cliff since the pandemic peak https://fred.stlouisfed.org/series/REVOLSL
https://fred.stlouisfed.org/series/PSAVERT
Housing volume has fallen off of a cliff, auto wholesale has fallen off a cliff, Major Metro Commercial real estate volume has fallen off a cliff while REITs are suspending withdraws.
All of this while tax receipts are about to drop off of a cliff while US debt to GDP and deficit to GDP are essentially at historic highs while the rollover rate on that debt is constantly increasing.
And then realize that the US is in a drastically better position than China, Europe and Japan
It seems like some of the HN crowd is very out of touch with the realities of the economic data.
https://en.m.wikipedia.org/wiki/The_End_of_the_World_Is_Just...
Will be fine.
I wonder what roles they elimated though. Good question for you to ask
I hadn't heard of Flexport before, but they seem to be focused on global shipping. The company I work for ships almost all of its products internationally, and we have seen a massive price hike over the last 2-3 years. Some of it necessary due to rising costs, but we know for a fact that larger-volume customers are still getting lower prices. Additionally, the well-known carriers still offer incredibly poor service - most notably when it comes to tracking shipments and providing proper updates. This seems to be exactly the market Flexport wants to tackle.
If they can't even compete in the current overheated market, something must be going seriously wrong at their end.
https://www.drewry.co.uk/supply-chain-advisors/supply-chain-...
Both volume and rates are down roughly 80% YOY.
Amazing incompetence.
A handful of ideas from info theory coupled with government desire to hype nation state brand does not a genius make.
None of these people have established net new ideas. Just borrowing from Gödel, Shannon, Turing, and the like.
Computer networks put the visibility, routing of logistics within reach of the masses. But we’re obliged to preserve the meme of aristocrats knowing best.
Freight forwarding itself is the industry of coordinating the logistics of freight shipment, ie subcontracting with physical movers of goods (ocean carriers/railroads/trucking companies) and dealing with customs/legal requirements involved in the movement of goods
(Disclaimer: former FP employee and current shareholder)
Is this remotely true though? Aren't the main costs of forwarding simply fuel?
At some point I was importing goods from China (really small volume though) and I did ask them for a quote, and they were twice the price what the Chinese factory could get me from their own forwarder.
> You’d be joining at an exciting time, Flexport is in a hyper-growth stage
See also: insider trading
Don't know the exact origin of the name but maybe an easy way to remember it is "FLEXible transPORT".
To massively oversimplify it for the sake of being short:
- ship a small package within the same country --> UPS/FedEx
- ship a large heavy package (e.g. forklift pallet) within the same country --> freight trucking company
- send a shipping container from one country to another that requires a ton of complicated government paperwork for export & import, pass customs inspection, pay duty fees, and involves coordinating ocean carriers, railroads, air freight, docks, etc --> a freight forwarding logistics service like FlexPort.
E.g. you invented a new electric scooter and had a factory in China manufacture a thousand of them. Now you have to ship those 1000 scooters from the factory to a warehouse in USA. That's the business FlexPort is in. FlexPort itself doesn't own any ships or railroads. It is a coordinator (acts as agent) for various transport companies.
Quick! Don't think! Get in on the ground floor so you won't be left behind when we go to the moon and you can become a bazillionaire!
[G] https://www.npr.org/2021/11/03/1051773672/a-look-at-whats-ca...
If you were CEO how would you lay off 20% of your company?
And,if I really had to lay off so many people, I'd take a more personal approach. Invite the whole company for a virtual or physical meeting where I explain why I have to do that, why I have no alternatives, and communicate the decisions to the managers, so people can be let go after talking to a human. Not after getting an email out of the blue in their box, in the middle of a working day. This has been impersonal and faceless on so many levels.
