David Heinemeier Hansson

January 12, 2024

The tech layoffs continue

A quarter of a million tech workers were laid off last year from the likes of Google, Amazon, Meta, Microsoft, and thousands of other big and small companies in the industry. And it looks like this year is not going to bring any relief. Google just announced more layoffs, Twitch cut 35% of staff, Discord is axing 17%, and Unity is cutting a whopping 25%. And we’re just two weeks into the new year!

The last time I remember seeing such brutal cuts, so broadly was after the dot-com bubble in the early 2000s. It took years to recover from that, and brought some rough years for anyone trying to break into or stay in the industry.

The bust reached all the way to Copenhagen. I was working for a venture-backed software company in 2001, and with the writing of the dot-com implosion on the wall, I applied to Copenhagen Business School for refuge. But I stayed on as a consultant for a bit longer with the company, so I got to watch the layoffs roll through. It really wasn’t pretty. Eventually the company folded.

Getting fired sucks. Whether it’s a mass layoff or individually. I was fired a couple of times before becoming a business owner, and I still remember vivid details from each incident. But I’ve also had to fire several people working for me in the past twenty years, and that’s no picnic either. There are no good firings, just degrees of awful ones.

That doesn’t mean it isn’t warranted. Either because the business realizes that it has hired too many people, and gotten ahead of the sales needed to support it. Or because it’s hired the wrong people, and that if it doesn’t let them go, it’s going to hurt the rest of the organization. This is a natural cycle of commerce, and as painful as it seems in the moment, the alternative is usually far worse.

I remember talking to an owner of a series of car dealerships in Spain in 2011-2012. The business had seen some massive boom years prior to the Great Recession, but following that, sales had collapsed. So now he had hundreds of employees on the payroll milling around doing very little at all. He could see the demise of the business ahead, but he just couldn’t correct the size of the business fast enough under Spanish law to make the numbers work. And sure enough, a year or two later, the company went belly up, and everyone lost their jobs.

Contrast that to Denmark, which has a very flexible labor market. It’s relatively easy to lay off people, which makes companies less afraid of hiring when the going is good. There’s also a decent safety net for people to collect unemployment for a while, which takes some of the sting out of it (even if Danish authorities are extremely pushy to get those on benefits to take a job, any job, to get off it!).

I think the Danes have correctly realized that however much it sucks when companies lay off workers, you can’t magically fix that without consequences that are even worse. Whether it’s to make companies really reticent to hire full-time workers or it is to doom companies that could have survived if adjustments were possible. It’s the difference between what we wish was true (nobody ever has to get fired!) and what reality demands (sometimes firings are necessary).

Either way, if history is any guide, this forest fire of layoffs that seems to continue this year in tech may just seed the ground for the next big leap forward. Let's hope so!

About David Heinemeier Hansson

Made Basecamp and HEY for the underdogs as co-owner and CTO of 37signals. Created Ruby on Rails. Wrote REWORK, It Doesn't Have to Be Crazy at Work, and REMOTE. Won at Le Mans as a racing driver. Fought the big tech monopolies as an antitrust advocate. Invested in Danish startups.