Twitter watchers were stunned on Feb. 26 when Elon Musk canned another 10 percent of the Twitter workforce. He has now fired 3 out of every 4 employees that worked there before he took over. Imagine a thriving business tossing out 75 percent of a staff of 7,500! That alone should indicate that something had gone very wrong in the hiring process.
Is the site and service suffering? Not so far as users can tell. It seems like it works better than ever. The manipulative throttles are largely gone, although some still exist by deference to European rules. As a service overall, it has never been better. And there are new features being continually rolled out.
One feature that fascinates me is “Twitter Spaces.” Truly, you can spend most any evening of the week listening and engaging with people based on topics in what’s a very agile radio call-in show that works in real time. It’s startling to encounter simply because it’s self-policing: complete free speech but with a culture of civility and intelligence.
It’s truly addictive. To be sure, ad revenue is still behind and the idea of paid check marks and benefits for upgrades didn’t plug all the holes in the boat. But one can sense that the platform is inching its way toward profitability. There has been more in the way of development since Musk took over than in the three years prior.
Crucial to getting there finally is to cut ridiculous labor costs. That’s what this is about.
Among the terminations was the high-profile executive Esther Crawford, who famously slept on the floor as she worked after the first round of cuts.
How do we know she slept on the floor? Because she posted a picture of her doing so on Twitter.
“Hey, get a picture of me sleeping on the floor and I’ll tweet it,” that’s a pretty weird way to go about gaining job security.
A much better way would be to prove your value to the firm. Along with 200 others, she apparently hasn’t done this, at least not in a way that justifies what are surely very high salaries. I don’t know for sure, but one suspects that she isn’t unlike many people in her position, better at performing work than actually doing it.
Everyone knows the type. It might be typical of most workers in these sectors. They specialize in appearances rather than value creation. They rely mainly on their resumes and educational credentials and extract huge salaries with an implicit blackmail to their bosses that unless they earn top dollar, they'll go to the competition.
It worked for many years. But the game seems to be up. A whole generation of the haut bourgeois professional class is being introduced to the cold waters of the capitalistic work ethic. They never learned about this in school, and the workplace heretofore hasn’t taught them.
Elon isn’t a ruthless man. Nor is he cruel. He’s a person who’s dealing with economic realities. Twitter was blown up wildly out of proportion with labor costs. So too with many of these tech companies that thrived so much in lockdowns. Even before the lockdowns, thanks to zero-interest-rate policies by the Fed, it seemed to many in these sectors that there was truly no limit to the boom. They made the decision to hire their friends and friends of friends, seemingly without limit.
It was this period in which we saw the invention of a slew of management theories that we had never seen in the history of capitalism. We were told that the point of a company isn’t to sell stuff, do excellent work, and serve its stockholders. The point was to bolster highly politicized ideals that went under fancy-sounding acronyms, such as ESG and DEI.
It was also in this period that every job came with an endless slew of benefits, such as unlimited time off for mental health. The idea of a human resources department with vast powers and budget was also invented, as a kind of courtroom of the workplace to which everyone could carry their grievances.
Workers in these low-show jobs began to tout their devotion to “work/life balance.” In case you don’t know, that means that the person doesn’t like work. Then, there was the claim that young people aren’t seeking high salaries as such but rather experiences, so employers had better comply and give plenty of both.
When the lockdowns came, for them it was just more of the same. Instead of goofing off at work—always preserving that balance!—they could goof off at home. That went on for two years.
To be sure, the life of Riley didn’t actually lead to happiness. We saw a slew of books appearing about the misery of corporate life and bad bosses, and the lawsuits against anyone and everyone began to pile up. The corporate workplace became a cesspool of discontent and anger.
Why might this be? Because there’s something about knowing that you’re useless that eats away at the human spirit. Laziness and subterfuge actually aren’t good for us, mentally or morally. Idle hands do the devil’s work, as they say. Indeed, it’s true for vast numbers of the overpaid millions who lost self-respect, skills, and even basic regard for others during this period.
Now, these companies inhabit a new economic environment. The Fed started working to cool inflation. But there was and is a problem. It isn’t as if they could take rates from 5 percent to 10 percent and thereby soak up some of the trillions in excess money floating around. They had to start at near-0 percent and get rates ahead of the pace at which the dollar was depreciating.
This has required engaging in the fastest rate of change in the history of modern interest rate policy. And we still aren’t where we need to be with the terminal rate. But consider what this change did to the trajectory of capital in a macroeconomic sense. It drained it from the bloated capital goods industries promising profits in the very long term and rekindled interest in actual profits on the left side of the yield curve.
Everyone in the tech sector is today looking for a way forward on cost-cutting. The labor sector is nowhere near purged enough. Elon’s strategy of firing 3 in 4 overpaid and spoiled people on the payroll has the attention of the world.
The costs of the lockdown period are truly astronomical in terms of lost productivity and talent. They set us far back as a civilization. But something similar can be said of zero-interest rate policies that began in 2008. They massively distorted production structures and turned an entire generation of otherwise intelligent workers into lazy drones for whom kvetching became their only skill.
This isn’t easily fixed. It will be many years before the work ethic comes back as a norm, if it ever does.
Final advice for workers in these sectors: Don’t expect that posting performative pictures of dedication on social media platforms is going to give you job security. The best job security now and in the future might be via the old-fashioned way: actual hard work that creates value for the firm and its owners and customers.
