Before the pandemic, do you know what employees of major tech companies in Silicon Valley were busy doing at this time?
The answer is: shopping online for formal attire and preparing to attend the company’s Christmas party! Americans pay much more attention to their dress code for formal occasions than we do. Even if it’s only worn once.
The Winners of Life
Just three years ago, in that era, Silicon Valley’s major tech companies were busy throwing money at extravagant parties, renting out impossible venues like yachts, city halls, and art museums. They brought in stunt teams, circuses, and symphony orchestras, and built themed sets that would be torn down the next day, just like Hollywood movie sets.
Facebook once spent an unprecedented $300,000 to rent out the San Francisco Art Palace for two days, transforming the exhibition hall into a ski resort with giant ice sculptures and toy soldiers from a fairy tale world. They even hung a real ski lift in the air. In a place where it never snows, they recreated a snowy vacation town. That night, the envy-inducing luxury was all over social media, making people feel that working for this company was both cool and prestigious.
Who knew that the San Francisco Art Palace could be rented out for parties? Even the San Francisco City Hall, which looks like the US Congress, can be rented out.
Last year at this time, if you talked to tech company employees, the conversation would easily turn to stocks, houses, and cars. By the way, many Silicon Valley companies calculate salaries in part based on stock options, which means that salaries are also affected by stock prices. The highest stock price of a well-known tech company I worked for last year was $301, the year before that was $210, and the year before that was $108. If you plot this growth rate on a curve, everyone in the company of over 10,000 people is a “winner of life,” no wonder everyone is smiling from ear to ear.
During last year’s Thanksgiving holiday, I had drinks and chats with former colleagues from that company. Some of them had been renting all their lives, but took advantage of the soaring stock prices and the ability to work remotely during the pandemic to quietly move to a place two and a half hours away by car and buy their first house. The place was spacious and affordable, twice the size of a Silicon Valley house, but only a third of the price. Living in such a big house, they could enjoy remote work by the pool in the backyard every day, fully embodying the American dream of victory.
What if the company requires us to come back to the office? That’s not a problem. Last year at this time, the job market was booming. No company dared to ask their employees to come back to the office. If they did, employees would immediately quit and find a job that allowed them to work from home permanently, with a 20% salary increase. Every week, we would see familiar faces coming back to the office to hand in their resignation letters. Small companies were aggressively competing for talent, waving the flag of “never having to come back to the office” and saving a lot of money on office expenses. It was a happy time for everyone.
So…holding a bunch of stocks that have multiplied in value, salaries have increased inexplicably. Some people have bought their first house, while others have bought a second vacation home where they can work from anywhere. The housing prices in the outer satellite areas, which are 2-4 hours away from Silicon Valley, have skyrocketed along with the booming economy. Everyone was a winner.
But that was all last year.
The once lively Zhu Men party is now gone.
Life as an Unemployed
Today, Christmas is just around the corner, but no one in Silicon Valley dares to talk about Christmas parties. Even Christmas dinners are rarely mentioned. Google recently canceled its Friday happy hours and team social events – some companies would reward their employees with drinks and high-end snacks on Friday afternoons. Don’t ask how much money can be saved by cutting down on eating and drinking. Please understand the meaning behind it: a company with a market value of 1.3 trillion dollars is starting to count even this small amount of money. Be prepared for what might happen next.
Today, a company whose stock price was $301 last year has fallen to $69 – that’s the price from five years ago. Facebook’s stock price has fallen 75% from its peak last year, returning to the level of six and a half years ago. Today, compared to this time last year, these employees’ salaries have also been greatly reduced. As mentioned earlier, tech companies like to tie part of their salaries to stocks and force their employees to gamble. Part of their salary is paid in stocks. Don’t forget that this money should be used to live on, but they are forced to invest it on the stock market. The IRS taxes based on the value of the stock when it is received. If the stock falls, they still have to pay taxes on the money they didn’t earn last year, and they may even be fined for insufficient withholding. When filing taxes this year, ask the engineers around you. They have paid a lot of taxes on the money they didn’t earn, and they have also been fined.
Today, if they calculated their monthly expenses too tightly, and now their reduced salary cannot pay the mortgage and they want to sell their house – sorry, no one is buying at this time. Today, if the company wants them to come back to work, they have no choice. Tomorrow, a company that claims to allow permanent work from home may change its mind overnight and ask them to come back, just like Twitter did. If they are not used to spending five hours commuting every day, they are welcome to move back to Silicon Valley and forget about remote work. Not only do they have to come back to work, but Twitter has also kindly turned the office into a bedroom, afraid that employees will have nowhere to stay if they work late or get tired. So, let’s treat everything that has happened in the past two years as a dream.
The classic curve of the stock prices of Silicon Valley tech companies over the past five years… Today’s stock prices are even lower than they were five years ago.
Today, the third wave of layoffs in tech companies has begun, with small companies laying off at least 100 people and large companies laying off thousands or even tens of thousands. Amazon previously announced 10,000 layoffs, but has now increased that number to 20,000. The media loves to compare numbers when it comes to tech companies, and these disastrous figures are reported on a daily basis. However, smaller companies that are not publicly traded do not have to disclose their layoffs, and even publicly traded companies can avoid disclosure if the percentage of layoffs is below a certain threshold. Companies can slowly lay off employees in batches without alerting the media, as everyone is tired and afraid of hearing this kind of news. Several of my colleagues have left without any formal announcement of layoffs, so the actual situation is much worse than what the media reports. Layoffs are happening in various ways, both big and small, obvious and hidden, in Silicon Valley. I believe that many companies have already prepared their next list, as everything in Silicon Valley is well-planned.
According to Fortune on November 22, there were 120,000 layoffs. This number did not include Amazon’s additional 10,000 layoffs four weeks ago. Today, according to the latest data from Layoffs.fyi, a total of 150,000 people have been laid off by 986 tech companies in the United States this year. It’s like last year’s tech stock prices, which kept going up every day and were impossible to catch up with, leaving everyone exhausted.
Some companies are kind enough not to lay off employees before Christmas, but there may be a new wave after the New Year.
Those who have been in Silicon Valley for a long time know that this wave of layoffs will continue for several years.
At this moment, if you still have a job, you may secretly feel lucky. Including myself, no one knows if the next wave will hit them, or how many waves there will be. This has little to do with personal abilities and performance. Companies may cut entire product lines to save costs, and even the biggest and most successful companies can remove entire teams in an instant. Winners, losers, good people, bad people, geniuses, fools, heroes, villains… everyone is affected, and it’s up to each individual to figure out where to go from here.
Competing with 150,000 Resumes for a Job
In the US tech industry, there are currently 150,000 resumes circulating, many of which are from top-tier employees at leading companies. If you’ve lost your job, you’ll have to compete with these top-tier employees for a new job.
If you’ve been laid off and are still waiting for your green card, you may have to pack up and leave the country. The US government only gives a 60-day deadline, and if you can’t find a new employer, you’ll have to leave, putting an abrupt end to your American dream. This not only affects your American dream, but also your children’s American dream. Waiting for a green card is a long process, and it depends on where you’re from. If you’re from India, it could take over 10 years, and if you’re from China, it could take 5-6 years. This recent wave of layoffs has affected 62,000 people with work visas from India. Each of these people is fighting to stay. Their children may be in school, they may have just made new friends, they may have just moved into a new home, and they may have already paid for non-refundable plane tickets for this year’s winter ski vacation.
If you’ve lost your job, you’ll now have to compete with these people who have an uncertain future.
Even if you don’t have immigration issues, if your family’s health insurance depends on this job, do you know how much it would cost to buy health insurance out of pocket for a family of four? About $1,500-2,000 per month, and that may still come with a high deductible, only guaranteeing that you won’t go bankrupt from a single illness.
Silicon Valley is generous when it comes to hiring. They’re willing to pay whatever it takes when they need you, they can help with immigration status, add stock options, and offer a large signing bonus. This extra bonus is not limited by salary, it depends on how much budget the department VP has. When the economy is good and they’re fighting for talent, if you have a strong background, thick skin, and good negotiation skills, getting $100,000 is not a problem. When the economy is bad and they’re cutting jobs, Silicon Valley won’t play dumb. They won’t keep anyone they don’t need, even if you’re about to get your green card next month. We’re all just numbers on the accounting books, and the decision to stay or go is up to the top executives who are only responsible for the numbers, and nothing else.
Silicon Valley rewards generously and cuts ruthlessly. Winners and losers are often separated by just one day. One day, they can pat you on the back and say you’re doing great, and the next day, they can find you as the number they can cut, and call you into a small room to hand over your laptop, erasing all the praise and rewards from the past. Generally, when they lay off employees, they give a few months of severance pay, but to get that money, you have to sign a paper giving up your right to sue the company. Faced with immediate financial pressure, I’ve never heard of anyone who didn’t sign that paper. Giving you some money to keep quiet and leave is Silicon Valley’s standard procedure for solving problems, and it works well.
The Era of Packing Up and Leaving
If you have to leave within 60 days and unfortunately have taken out a loan to buy a new car, your only option may be to pack up and leave… This has happened before in history. In 2000, during the dot-com bubble burst, San Francisco International Airport was left with a bunch of luxury cars that their owners couldn’t afford to pay for and were covered in dust. In 2008, during the financial crisis, many people lost their jobs, and the company I worked for laid off 3,000 employees in just two years. The small town of Mountain House, which was built for those seeking the American Dream on the outskirts of Silicon Valley, became the “ground zero” of the New York Times’ report on the nationwide housing market crash due to the large number of people who packed up and left. At that time, 90% of the town’s houses were underwater, meaning that the amount owed on the mortgage was greater than the value of the house.
As people packed up and left, the town became a ghost town, with almost every household being a foreclosed property, and the average house price dropping by 50%. In recent years, with the economic recovery and the rise of remote work, people have returned, and house prices have skyrocketed. However, this year, with the tech stock market crash, house prices have started to fall again. This small town, which is a two-hour drive from Silicon Valley, seems to be the first to reflect the ups and downs of the economy 120 kilometers away. The reason is straightforward: many white-collar workers from Silicon Valley live there, and there is a high proportion of first-time homebuyers and new immigrants. It is closely tied to the economy of Silicon Valley.
Back to the Burst of the Dotcom Bubble
When talking about Silicon Valley today, we cannot ignore the burst of the dotcom bubble in 2000. The burst started with the Nasdaq stock market crash and lasted for three years.
In the first year, only tech stocks plummeted, but the real bankruptcies and layoffs didn’t start until a year later in 2002 and 2003. The layoffs continued for several years. Official data shows that Silicon Valley laid off a total of 86,000 jobs, and the overall economy of the tech industry declined by 17%. Almost all startups went bankrupt, including the company I worked for. Among the engineers I knew personally, about 30% lost their jobs one after another, and many people could never return to the workforce. Some were forced to retire early, some returned to their home countries, and some changed careers. There was no such thing as remote work at that time, but after the burst, commuting for several years felt like driving in a deserted area. During that time, it was common to see luxury cars with “urgently for sale at a low price” signs on the side of the road.
At that time, I also had Indian colleagues who were waiting for their green cards. Some people couldn’t pay their taxes and ran away back to their home countries, while others moved to other states and worked as motel receptionists while also cleaning, unable to turn their lives around for many years and becoming undocumented immigrants. At that time, we were all working for a startup company that had a high chance of going public, and each of us had tens of thousands of shares. At that brief moment of victory in our lives, we would occasionally look at mansions on weekends, basking in the glory of the American Dream and preparing ourselves for that feeling. I once went to a meeting at a well-known tech company that had already gone public and saw several Ferraris in the parking lot. That kind of scene was a great inspiration for us who were about to go public.
However, no one knew at the time that a year later, we would all be unemployed, and the company’s ship would sink, and we would all jump into the sea to escape and compete with tens of thousands of resumes in the job market. When I was lucky enough to receive my next job offer, even though my salary was cut by 20%, I was still grateful and didn’t dare to ask any questions about the significant pay cut. That 20% was implying, “Do you dare to be picky when you still have a job?” At that time, a well-known tech company opened up 53 engineering positions, and the media reported that 3,000 people interviewed, causing traffic jams on nearby roads and requiring police to direct traffic.
I worked hard for five years before returning to my previous salary. If we use salary as a benchmark, the burst of the dotcom bubble cost me five years of my life.
It’s Nothing Compared to Now
Here’s a historical record of the dot-com bubble burst in 2000:
Looking at the sharp drop above, the market value plummeted by 78% after three years of trading halt, and it wasn’t until March 2003 that it slowly started to climb back up. At that time, seeing such a huge wave, I thought it was the biggest storm of my life. Then in 2008, there was another financial crisis. In just eight years, Silicon Valley saw countless layoffs and changes in the fate of many people. But no one could have predicted that looking back at the almost free-fall curve and scale of the Nasdaq in the winter of 2022, this is what a “great recession” really looks like. The previous two were just waves on the shore.
The first red circle in the chart below is the dot-com bubble burst, and the second is the financial crisis. Comparing the two charts, you can see the size of what we are facing now. The 2000 crash lasted for three years before it stopped, and it took another 10 years to return to the starting point. In other words, the cost of that fall was 13 and a half years.
The tech industry layoffs today may have just begun, and the road ahead may still be long.
Silicon Valley’s Resilience
However, every recession prepares for the next leap, and every destruction is an opportunity for the next transformation. In the past, because cloud technology did not exist, too many websites appeared overnight, and the world was not ready. The dot-com bubble burst destroyed small websites that had to do everything themselves, and also ended Web1.0. The next new chapter created cloud technology and Web2.0, bringing the internet into a new era based on user-generated content. In that era, we prospered for 15 years and created super giants like Facebook and Google.
If this great depression is another great destruction, when everything recovers, we may naturally enter a more mature Web3.0, where extremely decentralized processing is ready for the next stable and developed technology platform. History tells us that this fall may not be over yet, but history also tells us that everything that falls will eventually rise again. We can only wait for change and look forward to the next transformation. All of this will happen.