Poisonous Greed and it's Antidote

'Tech bloodbath intensifies: Amazon slashes more than 18,000 jobs - while software provider Salesforce will cut 8,000', reads a headline from Dailymail news article yesterday. Layoffs are an everyday occurrence now, so much so that there is a dedicated website to track the prominent ones. In the Corporate Balance sheet, suddenly Human ‘Capital’ is being seen as a ‘Liability’ and is being speedily gotten rid of. Accompanying messages and statements from CEOs vary between ‘deeply saddened’ but ‘necessary’ (Mark Zuckerberg's letter to the employees), gimmicky (Musk’s “Let that sink in”), nearly inhuman (mass firing at Better.com over Zoom) and even ridiculous virtue signaling with crying selfies. The CEO voices, amplified by news and social media, quickly drowned out the quieter sobs of the people who are losing their entire household incomes, immigrant workers losing visas and even pregnant women losing insurance covers.

Underlying reasons have been claimed to be over hiring, demand reduction etc. but the most obvious, known-to-everyone-but-never-said-out-loud reason, I believe, is this: Companies need to generate news to create a positive financial outlook to prevent the continuous erosion of their stock price (a hangover after trillions of dollars printed inflated the valuations). A sample of last 1 year drops being Snap -78%, Meta -66%, Amzn -49%, Salesforce -41%, Goog -36%. Stock markets love the layoff news and reward these stocks handsomely. Within just one week of layoffs, Meta’s market cap increased by MORE than the Annual salaries of all the 11,000 layed off employees put together. Don’t believe me? Here’s the rough math $250,000 (estimated salary) * 11,000 = $2.75 Bn compared to stock going up from $101 to $115, increasing the market cap by about $3.9 Bn!

But it’s not just a listed companies' phenomenon. Startups and private companies have also been going though an identical phase, with the VC and PE funds (instead of the stock markets), from their board seats, dictating the court martials of employees. These private investors (good for them) are able to escape bad press on at least this front, while they are battling them about gross negligence on due diligence and resulting debacles like Theranos/Elizabeth Holmes and FTX/San Bankman-Fried. In just a few months, VCs seem to have ‘pivoted’ in their mandates to the portfilio startups - from ‘Growth at all costs’ to ‘Profitable Growth’. Natural outcome being thoughtless hiring earlier and ruthless firing now. Refer to this letter from YCombinator – the world’s most renowned accelerator program – to the Founders in their cohorts, clearly asking them to 'prepare for the worst'.

Disregarding the sizes of the companies, there’s an underlying pattern. Profits are taking precedence over People. And there's only one explanation – Human greed knows no bounds. It is rampant, unchecked and as a result, out-of-control.

Easier to point fingers than to suggest solutions, you may say. I am no expert on the world problems, but I’d like to share two true-stories.  

The first one, from a college batchmate Ayush Ghai and how he, Aloke Bajpai and the Ixigo team overcame the tough times of 2008, bonded by a strong sense of collective empathy, with everyone sharing salary cuts instead of letting some people go. Full story here. A 10% reduction in everyone's salary, or a fairer process with tiered salary cuts in which higher paid employees take steeper cuts than lower paid ones, is far more humane, than laying off 10% employees. But seems almost no one wants to do that, since shared-cuts doesn't create the positive-for-stock-news of similar magnitude, or appease the VC lords, as much as layoffs do.

The second one, is of my company, Datahash .

About a year ago, our First Party Data product was getting a lot of interest and traction and I needed to hire people in Leadership positions to continue researching, developing and growing the product. The salaries of Tech people in India had gone up massively by then, no thanks to the free flow of VC money into startups. Candidates, serving their notice periods with in hand offers of more than 2X of their current salaries, were still shopping around to see if they could get even more.

The selling price of our product was quite low, and despite the sizeable number of customers, Datahash could not afford to hire senior people, without a cash infusion. I contemplated bringing VC money in, but having started Datahash only a few months before Covid and living through it with only one resolution of not having to let go of people due to financial constraints, I was afraid that the VCs would push me into the ‘Growth at all costs’ paradigm, and the resulting hire-and-fire game.

I reached out to two of my batchmates, Akshat Jhanwar and Nitigya Kuchhal , offering them just enough cash to run their homes and to pay off their EMIs, and asking them to take rest of their compensation in equity, with a premium for the risk they are willing to take. They accepted! I have followed this pattern for several new hires, as well as increments for existing team members, replacing cash with equity, and in this process they become partners in this growth story, with a skin-in-the-game, instead of employees.

When I started Datahash, I set a personal KPI for myself, to ensure that every team member, no matter how junior, will have Stock Options. We are 40 people strong team now, 100% bootstrapped, and managing to grow, despite our modest Revenues.

If we have more money, we can do better, of course. But if that money brings along the all-consuming greed, we’d rather stick to our frugal innovations (story for another day!) and survive by sharing and distributing our sustainable growth between us.

It’s time for cockroaches and not unicorns. They don’t look pretty, but at least they're real!