The massive layoffs that have rocked the tech sector in recent days have become the subject of widespread speculation in the mainstream media, with some industry and media sources attributing the firings and announced staff cuts to adverse economic factors, such as inflation and interest rate hikes. But the real reasons go much deeper than a momentary economic downturn or “hiccup,” industry experts have told The Epoch Times.
Besides facing a growing threat of censorship of loosely defined “hate speech,” the industry may have reached a turning point where consumers have grown disillusioned with the online experience, and what were once deemed to be perennially popular services and products have lost their luster, the experts say.
Big Tech’s About-Face
It is important to keep these numbers in perspective and not jump to conclusions about the tech sector or the economy in which in operates, believes Lee Vinsel, a professor in the Department of Science, Technology and Society at Virginia Tech University in Blacksburg, Virginia.“Microsoft laid off 10,000 people, but they had hired 40,000 in the previous year, so we are not seeing a major pullback into the pre-pandemic base numbers,” Vinsel told The Epoch Times.
“Now, that might come. We’ll have to see. A lot of what’s driving this at Facebook, Google, and other firms is that there’s been some economic downturn at the end of 2022, and that has led to a decline in spending on advertising,” he said.
Vinsel described the leading tech platforms as heavily dependent on ads for their primary income, and noted that in a recession, spending on ads is one of the very first things that companies tend to scale back on. The hiring sprees at some of the tech firms last year may have been undertaken in moments of extreme overoptimism, he observed.
Getting Old Fast
Having acknowledged the adverse macro-conditions affecting the tech sector, and making it retreat a bit from the overconfidence that led to hiring sprees, Vinsel invoked broader, cultural factors that the tech firms may not be eager to contemplate. Enthusiasm for social media may simply have passed its peak.“We see a lot of skepticism about social media these days, and this is more anecdotal, but when I sign into Facebook, and Twitter as well, it seems that people are disenchanted. Facebook has become a very boring place. I think that some people are just kind of over it, in a sense that we’re at the end of a technology bubble that has lasted a little over a decade. Part of what kills such bubbles is the end of exuberance about the technology that’s at the heart of them,” Vinsel continued.
In agreement with Vinsel about the need to look beyond short-term economic factors as an explanation for the shedding of employees is Jeffrey McCall, a professor in the communications department at DePauw University in Greencastle, Indiana.
“My sense is that this is more than simply a short-term ‘hiccup.’ It would seem an obvious reason for the layoffs is the feared general slowdown in the economy, and executives want to get out ahead of necessary belt-tightening that is likely to come. Beyond that, however, there seem to be other factors at work,” McCall told The Epoch Times.
“I believe there is a sense now that the tech sector grew too fast in recent years and, in a sense, ‘outkicked its coverage.’ There was once the belief that tech would be a never-ending place for growth, and that notion is now being challenged. Thus the tech industry must look for efficiencies, and managers have realized that operations can be streamlined,” he added.
Even those who are not enthused at Elon Musk’s $44 billion purchase of Twitter last year must acknowledge that Musk has revealed how the platform can operate with fewer employees, McCall said. Others in the industry cannot have failed to take note of Musk’s emphasis on efficiency and the role for automation in the tech space, he observed.
Another factor, and one that may have a far more decisive effect on the industry’s fortunes than fluctuations in interest rates, is cultural in nature. The fanfare with which Zuckerberg has promoted the coming Metaverse may have failed to take into account a growing disillusionment with this type of experience, McCall believes.
“It could well be that a cultural shift is coming with regard to big tech. The public could be starting to sense that living on social media and other tech platforms maybe just isn’t that fulfilling. Tech takes up a lot of people’s time, and consumers are recognizing the false promise of living in a tech world,” McCall said.
The concerns that some people have expressed in the past about Instagram and its role in fostering narcissism and anxiety on the part of young users do not take into account the full extent of social media’s destructiveness and distortion of social relations in the contemporary age, he suggested.
Life in Cyberspace
What may be happening in society at large is, simply, a case of tech burnout, he speculated. Many users have had bad experiences on online platforms, and they cannot escape the consequences indefinitely.“The limitations inherent in these outlets weren’t obvious for many years, but the cultural costs—anxiety, time wasted, lost privacy, misinformation, harassment, etc.—of people immersing themselves in social media are now becoming apparent. Further, at a certain point it becomes exhausting for people, even young adults, to constantly be feeding their social media. It is less exciting, and becoming more of a grind,” he continued.
Vinsel cautioned against jumping to conclusions, but did not discount the possibility of major tech companies facing insolvency in coming months.
“I’m very interested to see what happens over the next six months or so. There are signs that there might be a soft landing with the economy, and if that happens, you can imagine ad spending coming back, and maybe these firms will be okay, but we also see signs that money is pretty tight around venture capital in Silicon Valley,” he said.
“There is a pretty good chance that we’ll see a wave of bankruptcies. I think a lot of startups out there are hanging by a thread right now, and if this continues for the next six months or gets worse, we’ll see an extinction of some sort,” Vinsel added.
The Epoch Times has reached out to Meta, Microsoft, Google, and PayPal for comment.
