Cloak and Dagger lay-offs and the stabbing of the PM role

The louder you scream the less people see you moving the furniture in the background

Let’s spell out why layoffs are still happening in tech at a big rate. Why some of them are not what they seem and why you are paying too much attention to PMs becoming obsolete. It’s connected.

If you look too much into the flame you might miss that it’s all a theater piece

“Can these people just not plan?”

Could we have anticipated that the current situation with plummeting valuations and drying up VC money have lasted this long?

Yes, and we also did or at least most people I deal with did. So why is it that tech companies are then still laying off people seemingly left and right? Sometimes 2nd round layoffs are even less than a year in. How can this happen? Are they just idiots and can’t plan?

We have a couple of interesting effects happening right now that throw everything around in tech and some leadership teams in tech covering up the fact that they - indeed - suck at planning and are covering this up right now under the smoke of other bigger fires going on.

An (AI) reality imagined is a reality happening

Firstly, there are still a lot of zombie corporations running around that will never reach their previous valuations before things turned sour. They were evaluated way too high by the collective FOMO going around back then.

Just because this fear of missing out is gone and valuations are back to more realistic levels doesn’t mean those companies are reflecting this state of affairs yet. Even years after, it takes time to adapt to new realities.

And understandably some cannot let go of their dreams turning sour. It’s not that they don’t want to see it but the other option is just to close shop sometimes: Invested money into a start or scale-up cannot just be (easily) taken out and invested into something new. You have to pretend that whatever you are doing with that money is still towards the original purpose… whether that makes sense or not.

What we often forget is that even if you just look at the tech sector isolated, money not coming for funding doesn’t just stall growth and expansion. It threatens the very business because if you don’t have money your customer also doesn’t have money. Tech companies are very often selling to each other turning this into a nice snake that is eating itself.

Companies, much like stocks are valued and operating on the belief of how the market is going to be in a couple of years not how it is today.

There are 3 core beliefs going around that we can assume to happen:

• Efficiency: Efficiency per person is dramatically going up due to AI-assisted tooling.

• Commoditization: Markets are flooded with new tooling competing for the same verticals because they are so much easier to build. More and more choice

• Company size shrinking: Overall company size is decreasing for the same output. This is connected to the first point but is worth pointing out. Companies are becoming smaller but also their aspirational goals on where to go. From unicorn in 2 years to… how to survive with something.

These 3 dynamics are playing into each other, due to commoditization consumers pay less because of increased competition but most importantly it also decreases a company’s totally addressable market.

The more you niche down (and not be able to expand after) the more efficient you become with your solution per user you attract from that market but the overall size of that market becomes smaller. And at some point, there is just no more possible reality of your company existing with 2000 people. You don’t need them. The market you compete with is just getting smaller. In terms of money and absolute potential customers.

A good example of this is Photoshop. While it’s trending on social media now for its superior use of AI the tool is actually becoming less of a generalist through time. I see fewer and fewer designers use it but it becomes extremely relevant for photographers and digital artists.

Adobe simply could not find an answer despite its huge machine so they felt the need to buy Figma to not lose out on the other side of the market completely.

Layoffs are not sexy. So let’s hide them

Yes, we had many layoffs that happened due to overspending and the market contracting. Yes, that’s never easy. But some of them are now happening because people are starting to get numb at them and not because they are necessary: