Boom-Bust Cycles Are Typical in the US Economy  

Kollengode S Venkataraman

For all the gloss the IT industry uses to describe itself, the response of its American CEOs during the system-wide layoffs were trite and very unoriginal. Unlike their muscular CEO brethren in the steel and auto industry, whose decline several decades ago wiped out hundreds thousands of muscular blue-collar jobs, these IT CEOs were contrite and apologetic. Using copycat vapid phrases for not assessing the situation correctly, they took personal responsibility for the layoffs.

It was ironic that these IT industry giants, as they themselves claimed, had all the software tools for gathering the needed data to predict the future under different scenarios to advise their clients for making business decisions and improving productivity, of course, using their expensive consulting services. This reminded me of a colloquial Tamil proverb,

meaning, “The teacher’s son is an idiot and the doctor’s son is sick.” Or more to the present context,

meaning, “The teacher himself is dumb and the doctor himself is sick.”

Many companies offered expanded severance packages to their laid off employees to lessen the pain. Often, these companies also employ large number of TVCs [temps, vendors, and contractors] working on their campuses. But these TVCs are not covered for the severance package since they are not in the companies’ payroll.

Here are contrite, unoriginal e-mails from the CEOs of IT giants, as if they copied from each other explaining the layoffs to those who they fired:

Sundar Pitchai CEO of Alphabet, which owns Google:


I have some difficult news to share. We’ve decided to reduce our workforce by approximately 12,000 roles. We’ve already sent a separate email to employees in the US who are affected… …

This will mean saying goodbye to some incredibly talented people we worked hard to hire and have loved working with. I’m deeply sorry for that. The fact that these changes will impact the lives of Googlers weighs heavily on me, and I take full responsibility for the decisions that led us here.

Over the past two years we’ve seen periods of dramatic growth. To match and fuel that growth, we hired for a different economic reality than the one we face today.

… … To fully capture it, we’ll need to make tough choices… … While this transition won’t be easy, we’re going to support employees as they look for their next opportunity.

Satya Nadella, Microsoft:

… … We’re living through times of significant change, and as I meet with customers and partners, a few things are clear. First, as we saw customers accelerate their digital spend during the pandemic…  [now they want] digital spend to do more with less. We’re also seeing … parts of the world are in a recession and other parts are anticipating one…  [and] the next major wave of computing is being born with advances in AI…

This is the context in which we as a company must strive to deliver results…[requiring] us to take actions grounded in three priorities.

First, we will align our cost structure with our revenue … result[ing] in the reduction of our overall workforce by 10,000 jobs through the end of 2023. This represents less than 5 percent of our total employee base… … We know this is a challenging time for each person impacted. The senior leadership team and I are committed  that we go through this process in the most thoughtful and transparent way possible.

… [W]e will treat our people with dignity and respect, and act transparently. These decisions are difficult, but necessary. They are especially difficult because they impact people and people’s lives – our colleagues and friends… U.S.-benefit-eligible employees, will receive a variety of benefits, including above-market severance pay, continuing healthcare coverage for six months, continued vesting of stock awards for six months, career transition services…

Zuckerberg, FaceBook:

Today I’m sharing some of the most difficult changes we’ve made in Meta’s history. I’ve decided to reduce the size of our team by about 13% and let more than 11,000 of our talented employees go. We are also taking a number of additional steps to become a leaner and more efficient company by cutting discretionary spending and extending our hiring freeze through Q1.

I want to take accountability for these decisions and for how we got here. I know this is tough for everyone, and I’m especially sorry to those impacted… the start of Covid, the world rapidly moved online and the surge of e-commerce led to outsized revenue growth. Many people predicted this would be a permanent acceleration that would continue even after the pandemic ended. I did too, so I made the decision to significantly increase our investments. Unfortunately, this did not play out the way I expected. … [and] our revenue [was] much lower than I’d expected. I got this wrong, and I take responsibility for that.

Elon Musk, Twitter:

Elon Musk’s Twitter cut 50% of the company’s workforce, including its contractors. He tweeted his sympathies: “Folks at Twitter past and present are strong and resilient. They will always find a way no matter how difficult the moment. I realize many are angry with me. I own the responsibility for why everyone is in this situation: I grew the company size too quickly. I apologize for that.”

Niraj Shah, Wayfair:

Last August, furniture retailer Wayfair said it would let go of 900 people, or about 5% of its workforce. In a published letter, CEO Niraj Shah wrote: “Over the past few years, we’ve grown Wayfair significantly to keep pace with the e-commerce growth in the home category. We were seeing the tailwinds of the pandemic accelerate the adoption of e-commerce shopping, and I personally pushed hard to hire a strong team to support that growth. This year, that growth has not materialized as we had anticipated. Our team is too large for the environment we are now in, and unfortunately we need to adjust… I take responsibility for the impact this decision will have on the nearly 900 Wayfairians who will be told today they are no longer a part of building our company’s future.”

Are these systemic layoffs anything new for American businesses? No. These are familiar for those who lived through earlier gut-wrenching transitions in our own times caused by self-inflicted wounds. During the 1970s when the steel industry died in the US, tens of thousands lost their jobs, causing a deep decline of many towns and cities (like Pittsburgh) in the Rust Belt.

Later, the American auto industry declined seriously only to reinvent itself copying the Japanese, after ridiculing the same Japanese compact fuel-efficient cars. The closing down of the full-fledged automobile plants in rural American towns turned them into graveyards.

The S&L bailout followed, and when the real estate bubble burst, many ended up owning huge mortgages on homes that lost their market values. In the wake of the Y2K, tens of thousands of Indian IT temp workers all across the US were dumped on the streets. The bubble burst was the next with huge job losses. Then in the Wall Street melt down in 2008 job losses were in the millions across the board in the US.

Even NASA was not spared in the boom-bust cycle. Hundreds of thousands of people were employed in the 1960s directly by NASA and indirectly by subcontractors making components needed for the moon mission. After the Moon landing when an American Stars & Stripes was planted on the Moon, NASA had to shrink and tens of thousands of employees were let go. Again, when the US Congress stopped the space shuttle program in 2011, NASA laid off thousands of skilled engineers and technicians.

The latest IT layoffs are only following this pattern of what American businesses go through: incubation and euphoria on new businesses and technologies with speculators jumping into the fray ushering in explosive growths of a whole new industry. Innovators become icons, only to see their innovative and avant garde businesses becoming one more “mature” and “regular” corporation needing run-of-the-mill managers, bean counters, and lawyers, HR & PR folks to manage the layoffs.

This boom-bust cycle has been common in the US since the early days of its industrialization in railroad, banking, gold and copper mining in the Western States, and drilling for oil and natural gas. In this template, the American Dream is fulfilled for those who succeed, and the American Nightmare unfolds for those who struggle to barely survive, with many succumbing along the way. History is replete with these stories in many books for those who care to know.

Every society has its own culture, irrespective of the constitutional and legal framework in which it operates. If the society is large enough in land mass (as the US is), or complex enough (as India is), it also has subcultures within the big umbrella.

How many Indian IT companies spend their time and resources educating their employees on their business, and the cultural backdrops of their clients in different countries to which they depute their employees?

And how many Indian IT companies manage their risks by diversifying their market segments in Central & South America, Africa, the Persian Gulf countries, Southeast & East Asia? And in the huge Indian domestic market in the small and medium industries and retailers in second and third tier cities? These market segments will NOT give them 20 to 30 percent annual growths. But they will certainly help them to spread the risk to mange the economic downturns and wean them away from over-dependence on the industrialized West, as seems to be the case now.

And how many university-educated Indian IT professionals care to study the industrial and cultural history of different countries in their career expeditions all across the globe? After all, these tech-savvy youngsters have access to all kinds of information literally on their fingertips when they sit in front of their PCs with internet connections.


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