Comment by alexasmyths | Hacker News Reader

Comment by alexasmyths | Hacker News Reader

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Sadly, there is another economic reality: most good businesses are actually very inefficient and could cut 10% without missing a heartbeat.

Here's the key: when businesses develop dominance in a market, they get fat margins - and they often just 'hire'. It becomes instinctive to think that 'people create value' and so they hire. Moreover - VP's, Directors, Managers are all trying to build their status, and they 'push to hire'.

I worked at a post-startup-stage high-growth company, and my VP was given directive to 'hire 100 people'. Completely not driven by business needs, or project needs, or ROI. 'Just hire'.

There is sometimes good strategic reasoning for 'just staffing' up i.e. scrape all of the talent in an area way from competitors, be a 'real company' to validate the upcoming IPO etc.. but it's really perverse.

Google, FB, MS - all guilty of this. Regular companies just the same.

I'll bet 1/2 of finance today could be replaced by computers - or frankly nothing. 1/2 of Hedge Funds could just put their money in indexes, drop their staff and get the same results.

Large successful companies often spend billions on 'new projects' that are doomed to fail - one could argue that 'failure' is part of the innovative process, yes, but it might be more efficient to invest/partner with startups.

When big, lumbering companies start to wane, well, they can't afford all the graft and have to start letting go.

It's an odd cycle, and it's surprisingly not as directly related to productivity as we might want to imagine.

I once worked with a large internal marketing team of maybe 25 people, they did almost nothing. Nobody was really sure what they were there for. They 'did stuff'. They were smart, nice. But they were very irrelevant - and I took pains not to discount their effort, i.e. not realize that they were 'important but unrecognized' cogs in the wheel. No. They were hired 'for hiring sake' and 'worked' for the sake of 'work'. This is common. A lot of big, entrenched industries are like this.

> most good businesses are actually very inefficient and could cut 10% without missing a heartbeat.

Maybe so, but, being inefficient, chances that they'll identify the RIGHT 10% to cut are pretty low.

Especially when a large portion of those tasked with identifying the 10% is likely part of it...

> VP's, Directors, Managers are all trying to build their status, and they 'push to hire'. > When big, lumbering companies start to wane, well, they can't afford all the graft and have to start letting go.

The thing is, they start by cutting front-line employees instead of the root cause of inefficiency: management and bureaucracy. It's best to immediately fire the managers that were hiring for the sake of status.

By the time a company needs to do 'layoffs' it's usually way too late.

HP is a dinosaur. They are just a machine that was setup, doing whatever they did before, and won't really be able to change.

Because they are in tech, it's unlikely they will be able to 'turn around' - it's too competitive.

Maybe KMart or Sears maybe under the right management could have turned around. Maybe. A cracker company. An insurer. But not HP. What are they going to do, AI?

And I don't mean 'strategic layoffs' - like MS has done - that's just somewhat ruthless restructuring.

I don't see how IBM or HP truly recover.

One interesting addition may be Cisco, someday. Not yet though.

They could go back to making test and measurement instruments, they were pretty good at that.

They spun that off in 1999 to create Agilent. Which, unlike the rest of the rotting carcass of Hewlett-Packard, seems to be healthy and profitable.

> most good businesses are actually very inefficient and could cut 10% without missing a heartbeat

No, they can't. Organizations don't work that way. People don't show up to work literally doing nothing, they have some kind of workload that will go belly-up if they just don't show up the next day.

Yes, many organizations could be made much more efficient, through restructuring, automation, flatter management structures, etc. But it doesn't happen overnight, and if you try to make it happen overnight, then a lot of the workload just ends up being forgotten about until the customer steps in the door and reminds you in such a way that it becomes critical. Trying to reduce the size of a company needs to be carefully planned and executed over time to do so without affecting operations.

Large sudden layoffs, which is to say large layoffs which need to be executed quickly, mean that the company doesn't care about the hit to operations, which means that there are cash flow problems or worse.

" People don't show up to work literally doing nothing, "

50% of what people do in large organizations is a waste of time. It doesn't matter how hard they work.

"Large sudden layoffs, which is to say large layoffs which need to be executed quickly, mean that the company doesn't care about the hit to operations, which means that there are cash flow problems or worse."

No. Not at all. Corporate raiders since the 1980's have shown this. Hedge Funds see slack, they come in and buy the company, cut the slack and make it profitable. It's not uncommon.

> 50% of what people do in large organizations is a waste of time

This is not the same thing as literally doing nothing. A waste of time is spending hours changing values around in Excel week after week for a report an executive will spend 30 seconds looking at (if that) instead of automating your job away. Literally doing nothing is taking long lunches, frequent water cooler breaks, and playing around on your phone for so long that your workstation auto-locks from lack of activity.

> Corporate raiders since the 1980's have shown this. Hedge Funds see slack, they come in and buy the company, cut the slack and make it profitable.

No corporate raider cuts slack and achieves profitability overnight. A few weeks, maybe, but overnight? No. Especially not in an era where automation infrastructure can't be built overnight.

We don't actually disagree here.

Certainly there's inefficiency in any human endeavor, but just cutting staff is unlikely to solve it. At least, not if you're doing it proactively to save money. Sometimes you need redundant roles just to make sure someone is paying attention to details that might get lost.

Don't you mean 100% of all hedge funds could drop their money in index funds and get better results? That's the way I interpreted the outcome of the Buffet bet.

There are black swan funds like Renaissance Technologies that routinely beat the averages by 30 or more percent, year after year. You can count the number of hedge funds that do that on one hand, however.

That'd be true if all hedge funds were actually trying to just beat the S&P. The vast majority, however, aren't trying to do that all; they're trying to create different risk/return profiles than you get by just indexing large-cap US companies.

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