The collapse of Silicon Valley Bank has sent ripples that travel far beyond its eponymous geographic home.
But well before the shock failure of the biggest financial institution supporting the tech and venture worlds, a sea change was already underway in how this industry thinks about how to build teams and the opportunity ahead for today’s tech giants.
A message that Meta Platforms (META) CEO Mark Zuckerberg once again hammered home on Tuesday.
For the second time in five months, Meta announced it would lay off at least 10,000 employees while taking down another 5,000 open job listings. What Zuckerberg called a “Year of Efficiency” for the company back in February has clearly marked an inflection point in the company’s staffing philosophy.
“As I’ve talked about efficiency this year, I’ve said that part of our work will involve removing jobs — and that will be in service of both building a leaner, more technical company and improving our business performance to enable our long term vision,” Zuckerberg wrote Tuesday.
Taken together with last November’s announcement the company would cut 11,000 jobs, Meta’s total headcount is headed back towards levels that prevailed nearly three years ago.
In a filing with the SEC posted Tuesday alongside Zuckerberg’s memo, Meta cut its expense guidance for 2023 to $86-92 billion, down from the $89-95 billion forecasted last month. Following this announcement, Mark Mahaney at Evercore ISI raised his price target on Meta Platforms to $305 from $275. Shares of Meta Platforms gained more than 6% on the news.
On Tuesday, Zuckerberg played some of the hits coming from the tech industry in 2023 — AI gets a few shoutouts in his memo, and so too does a “new economic reality.”
Before the events of this past week, these were the totems of an industry searching for meaning after a bruising 2022. And while the wreckage Silicon Valley Bank’s collapse will leave in its wake is yet to be fully accounted for, financial stability concerns go well beyond the tech industry’s next move.
So as regulators and lawmakers sort through what really went wrong at SVB — and Silvergate (SI) and Signature Bank (SBNY) — Zuckerberg’s latest call for a new paradigm in tech refocuses the industry’s attention on what was supposed to be 2023’s biggest story.
A story centered on thinning out staff and beefing up bottom lines.
Otherwise known as a “Year of Efficiency.”
“In addition to helping us build a better technology company, our other goal for the Year of Efficiency is to improve our business performance given the new economic reality,” Zuckerberg wrote. “Profitability enables innovation.”
Move fast. Break things. Report positive operating cash flow.
“At this point, I think we should prepare ourselves for the possibility that this new economic reality will continue for many years,” Zuckerberg wrote. “Higher interest rates lead to the economy running leaner, more geopolitical instability leads to more volatility, and increased regulation leads to slower growth and increased costs of innovation.”
Bloomberg Opinion columnist Conor Sen said Tuesday Zuckerberg’s note has “the potential to be more deflationary than SVB failing.”
Because if there’s one lesson Silicon Valley Bank’s failure has reiterated for investors it is that the tech and venture worlds travel in a pack. Where one goes, many follow. Whether that means companies use the same bank or they build the same short-form video player for their app.
Or, in the case of how to run your business, that means leaning out staff aggressively.
Earlier this month, we noted Tesla (TSLA) and Salesforce (CRM) had joined Meta in celebrating the many forms efficiency can take in a business.
These were not the first copycats to a now months-long push from the tech world to cut costs.
And these will not be last examples of businesses using industry-level cover to make the large-scale changes most executives don’t usually let leave a white board or slide deck.