In 2004, Google co-founders Larry Page and Sergey Brin took part in a comically passive-aggressive IPO road show. They ditched business suits for casual clothes, refused to answer many questions from financial leaders and warned investors that instead of focusing on profits, the newly public company could use its resources “to alleviate a number of global problems.” Both founders feared the limitations of a public company and vowed that Google would never sing to the tune of Wall Street. To make sure they could do this, the founders structured the company so that they controlled a majority of the voting stock. Instead of returning money to shareholders, Google will nurture the talent that drove its innovations by providing perks like in-home massages, free meals and generous compensation. For example, in late 2010, Page and Breen wowed their workers by announcing an across-the-board 10 percent raise, a doubling of their generous annual bonus, and a $1,000 Christmas gift, just like that. The beneficiaries already had the highest salaries in the market, supplemented by profitable shares. But the founders’ generosity made it clear that they meant it when they said that employees are the heart of the company.
Brin and Page haven’t been deeply involved in the business over the years, but the company’s 25-year history has carried much of that convention-defying legacy. At least until this month, when Google’s parent company Alphabet laid off 12,000 employees, about 6 percent of its workforce, including many senior executives and some people who have worked there since the early days. For a company that is famous for pampering its workers, the layoffs came as a mental shock. Especially since some victims were sent out cold, their email access cut off before they could even say goodbye to longtime colleagues.
Alphabet isn’t the only company laying off workers. Top executives at Meta, Microsoft, Salesforce, Amazon, and others are doing the same thing — dealing with what they suddenly see as redundancies by cutting off heads. The memo from current CEO Sundar Pichai was so similar to other corporate messages that they all seemed to be sending the same prompts to ChatGPT: Hi, sorry I was too optimistic in hiring when we raked in the dough during the pandemic, so some of you will have to leave. But this is only a point on our trajectory. I’m so excited for the future that not all of you will be a part of!
However, the bloodletting at Alphabet is different. Aside from laying off several hundred sales staff in 2009, the company has never experienced any major layoffs. And with it, there are signals that the age of unlimited bonuses is over. (Among those who suffered the cuts were 27 of the company’s own massage therapists.) And it’s not that the company is in financial danger. Even though growth has slowed and the stock has fallen like every other tech company lately, Alphabet is still making a lot of money. In the last quarter, the company managed to earn 14 billion dollars in profit. It also has $116 billion in vaults. And it has spent more than $100 billion buying back its own stock over the past few years, which Wall Street likes but does nothing for the business itself.
Pichai does have a case for layoffs and reduced benefits. Of the 187,000 employees, there were undeniably thousands whose work was not an integral part of the company – probably not just massage therapists, but also hundreds of middle managers doing non-essential projects. (Breen and Page have always believed that middle managers slow down innovation.) As you might expect, those working in AI, including Google’s Brain research team, have been spared the layoffs. In fact, Pichai claimed that the cut was made so that Google could spend more AI resources.
But in some ways, the layoffs represent what appears to be a gradual shift in philosophy. Over the years, Alphabet has funded projects and created entire departments dedicated to producing new forms of technology. One was an in-house incubator called Area 120, which was virtually shut down due to layoffs this month. Alphabet’s X division, which works on “moonshots,” also had some scraps. Wall Street has argued for years about the unprofitability of the company’s coveted “other bets,” and now the company appears to be more focused on its more specific businesses.