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Comment by cortesoft | Hacker News Reader

> where bankers and consultants can come in and say yes deprive these 5000 people of their income and livelihoods because we need to give the founders and early investors an exit

So if those 5000 people are doing work that is not valuable, we should keep paying them to do worthless work? There are a million worthwhile things we need people for, let's not pay them for busy work.

This is why we need a good social safety net... those people should be let go, and find new productive work... but as you pointed out, that will be extremely disruptive to their lives while they find new work. If we could support them with a safety during that time, to prevent this business decision from depriving them of their livelihood while they found a new place where their labor was productive, we could be both economically and morally efficient.

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I’ve found this to be one of the strongest arguments for a strong social safety net, at least one centered around helping people to find new jobs or be retrained for new careers. Taxpayers and the economy in general do not benefit from preserving unnecessary jobs (whether in the govt or the private sector). It would be much better if society accepted that job & career turnover are necessary to a healthy functioning economy and embraced that reality by countering the disruptive downsides.

Even free market economists like Milton Friedman have argued for such programs. And at least for the time being, there is still plenty of work for people to do even if it’s different than what they were doing previously.

The hard part of this is designing the system in a way that avoids inevitable abuse, and then convincing people that it does so effectively.

I sometimes think the fears of abuse are overblown... people would choose to spend $100 to prevent $10 of abuse. It should obviously be taken into consideration, but eliminating abuse should not be the #1 goal.

Yes, I believe that as well (though I also don't think it means we should fully ignore actual abuse).

You'll often see the perception/possibility of abuse touted as a reason to replace many/all of these situation-dependent welfare programs with a Universal Basic Income, where there is much less to abuse and thus less need to police it.

Growing up in the inner city, I knew many people who took pride in their ability to manipulate the system, work as little as possible, and collect as much as possible. I don't think the fears of abuse are overblown at all.

I think this is why the working class tends to vote against social programs while the wealthy support social programs - working class people actually know "non-working" class people who live off the system.

Its not hard. Require people to pay back the money they received once they have a job. That’s how Switzerland does it. I‘ve seen so much abuse in Germany of the social security system that would be prevented by this simple measure.

> if those 5000 people are doing work that is not valuable

That’s a big “if.” When under pressure, managers and consultants will always claim they are cutting unproductive people, but time after time it turns out that they also cut things that were vital to the company’s long-term future.

This is especially true when the spotlight glare of a possible sale or IPO is on them, they will do anything to make its seem as if the company is more profitable/less unprofitable NOW, at the expense of the future.

I have no visibility into WeWork and these people, but I don’t automatically grant that the company will be better off without the work of these people.

(Ok, maybe the wave pool folks can go. And everyone in finance, WeWork’s finance and corporate governance people sound like “they’re so crooked they could hide behind a spiral staircase.”)

> That’s a big “if.” When under pressure, managers and consultants will always claim they are cutting unproductive people, but time after time it turns out that they also cut things that were vital to the company’s long-term future.

Source?

Anecdata from following business and public sector news since the 1980s. Consider all the companies that would lay people off, claiming a headcount reduction, and give them a one-time package. So there is an immediate hit, to be made up for in the long run by lower ongoing operating costs, right?

Only nope, the eliminated functions were still necessary, so many of the laid-off employees come back as consultants, and charge more than their fully loaded costs as former employees.

Companies doing that gained a certain amount of flexibility, it’s always easier to get rid of a consultant than an employee, but all-too-often the company would trumpet the reduction in headcount and savings in salaries, while saying nothing about the need to increase operating costs on consultants, &c.

Again, I have no visibility into WeWork. Anything could be going on there. I simply don’t automatically grant that companies can perform big layoffs and magically only get rid of people who were producing less than they cost. And I don’t automatically grant that companies will perform the layoffs, and then actually realize the gains they promised.

> So if those 5000 people are doing work that is not valuable

Hold on there, let's pump the brakes. Who said their work wasn't valuable?

I think this highlights a bigger problem with the current economic system. Our economy is focused on growth when it should be focused on sustainability. Growth for the sake of growth is not valuable for the long term.

Without growth, capitalism devolves to "rich get richer, poor get poorer." Growth is chaotic and stirs wealth around.

It's not about growth in the aggregate, but rather that sustainability in the individual startup is sacrificed for growth.

In some cases, this ends up working out. (See: Amazon) How many companies have failed because they were a 10 million company that was trying to be a billion dollar company and flamed out?

I mean... The best way of making a company sustainable is to reduce headcount.

Keeping extra headcount is the unsustainable "growth" play, usually

> I mean... The best way of making a company sustainable is to reduce headcount.

I disagree, reducing headcount for sustainability could be disastrous. It could leave to decreased productivity, decreased customer satisfaction, and a multitude of other things that could lead to a reduction or destruction of the business.

Headcount isn't just a number.

> "This is why we need a good social safety net...that will be extremely disruptive to their lives while they find new work. If we could support them with a safety during that time..."

I want to refrain from getting too political here, but what you are stating here seems to be one of the core reasons for why Andrew Yang is proposing the Freedom Dividend [1].

[1] https://www.yang2020.com/policies/the-freedom-dividend/

I don't see how even the most optimistic can see $1,000/month as any sort of reasonable safety net.

Depends where you are in the country. One of the reasons why setting one number nationwide doesn't feel workable (but the alternative - giving "coastal elites" more money - is even less politically possible than the original proposal)

> So if those 5000 people are doing work that is not valuable, we should keep paying them to do worthless work?

And

> This is why we need a good social safety net...

If we raise corporate taxes to create that social net, companies will fire more employees.

If we raise taxes on wealthy individuals, people will complain that we're stifling innovation -- which creates jobs.

If we raise taxes on everyone else to make up the safety social net, the taxes will most likely hurt consumer spending power -- which drives the economy.

So is it really so terrible to keep those people employed?

5000 people at 100,000k a piece is what? 500 million a year at their once prospective evaluation at $47 billion?

It's not a drop in the bucket, but it would be better if the company shared some of the profits to make up for the personal shortfall. It seems to me they could give a years worth of salary and still be okay at a $47 billion dollar valuation.

> If we raise taxes on everyone else to make up the safety social net, the taxes will most likely hurt consumer spending power -- which drives the economy.

Except that the money is going back to people who are going to spend it, driving the economy. We aren't taking the money out of circulation.

> Except that the money is going back to people who are going to spend it

1. People have disposable income. With higher taxes needed for the safety net, they will have a lot less of that. Less dinners,

2. One way to measure the success of the economy is to look at GDP. Another way to look at it is how much are people making from employment. GDP may still be the same, but actual employment may be lower. So yes, it can still drive the economy, but through the lack of jobs.

I would think both average quality of life and the quality of life of the worst off would be a better measure than "employment"

Employment is not an intrinsic good, it is a means to an end.

Who deems what is "productive"? I've seen plenty of apps that were really great get turned into shit because they were monetized or put under new leadership.

See Snapchat, Instagram, WhatsApp, and Reddit.

Profits for the preferred or majority shareholders has become synonymous with productivity

Who deems what is "productive"?

The people paying for it. If nobody is willing to pay for your product/service, you have a hobby, not a business. Hobbies that cost billions of dollars a year don't usually last, unless the hobbyist is a Gates or Bezos.

Facebook. The infamous news feed used to be an actual feed that showed you everything your friends posted, not an algorithmic hellscape of fake news and ads. Sharyl Sandberg pushed to turn it into an advertising vehicle in 2012 because a social network that puts users first isn't profitable.

The market is pretty good at determining where resources should be allocated, as long as we mitigate the known shortcomings of a market economy - externalities, tragedy of the commons, etc.

I agree that I wish that not every app was designed to be VC style - grow to be huge, with large revenue and expenses. I do think there are plenty of examples of smaller, not VC growth type companies... they just, by definition, aren't as big and popular as the high growth, large audience, ones.

> as long as we mitigate the known shortcomings of a market economy - externalities, tragedy of the commons, etc.

Pretty loaded caveat there. I can't think of a market economy that's actually existed where we've adequately internalized externalities and protected the commons.

Not going to argue, but what are you suggesting we do instead? I think we work on adding those safe guards as best we can, rather than throw out the entirety of a market economy.

A fair point, and I don't have a silver bullet. But wherever we talk about markets optimizing utility we need to acknowledge that to-date that's purely theoretical, and hand-waving away externalities and the commons has brought the entire planet to the brink of ecological collapse.

In some ways, the tyranny and 'sub-optimal' allocation of central planning seems preferable.

I'm more on the mandatory cooperative enterprise boat. But like I said, I don't have a good solution.

I think if you are going to point out that every market economy has failed to properly handle externalities, you also should acknowledge that every centrally planned forced cooperative has ended up run by abusive leaders who do not take care of their citizens.

All systems are going to have powerful people who work the system for their own gain... mitigating that is the primary problem of government design.

> you also should acknowledge that every centrally planned forced cooperative has ended up run by abusive leaders who do not take care of their citizens.

I mean, that's my point. That abusive leaders who do not take care of their citizens in an economy centrally planned to not destroy the Earth is preferable to a "free" one that does.

It's a false dichotomy. The capitalist world has included horrible authoritarian governments that have perpetuated the same atrocities against humans as your "abusive leaders", just like these centrally planned economies haven't exactly been environmental stewards.

All else equal, I'm saying that I'd prefer a sub-optimal centrally planned economy that guaranteed strong environmental protections.

Why would someone invest in a company that hired 5000 people more than it needed? Doesn't that suggest incompetence at the highest levels?

Even if you accept that it's the right decision, the lack of consequences for people that previously made such an apparently idiotic one seems astounding.

I don't understand your point here.

WeWork makes a mistake of overhiring, now it is laying off people to offset the effects. Are we blaming it to create those false jobs in the first place or canceling them out afterwards? They can't be both right at the same time.

Less valuable != worthless. This conversation was probably about valuation, so recurring net revenue and cost cutting to justify the valuation enters the equation.

Agree that making it easier for people to transition between jobs/careers could be beneficial to society as a whole.

While I agree with you, I think the point is: how was this so close to going public, being seen as a Unicorn. How is there such a disparity between the reality and the hype?

It was not close to going public. That was just PR and marketing, which is part of the game.

They filed an S-1. People who should have very good insight into the business filed a registration form to go public.

This is what unemployment insurance is supposed to do. Should it pay out more and for longer?

Yes.

Oh a safety net for sure, but that should be regulated by an international government, of which we have none.

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