Episode Transcript
Speaker 1 00:00:05 Okay, this week was a week of chaos. Utter chaos. So I'm gonna talk about a whole bunch of things. I'm gonna talk about Twitter and meta. I'm gonna talk about the election. I'm gonna talk about SPF and crypto. I'm gonna talk a little bit about inflation, and then I wanna talk about the job market. So I don't know if this many things happen in one week very often, but a lot of things happened. So let's talk about Twitter and meta and the layoffs first. As most of you have heard from me before, the tech market has been in a bubble for a number of years. I love technology and love technology companies, but when companies are trading at 20 to 30 times sales and 50 times earnings, you know there's going to be a correction. And for those of you that have into business school, if you ever took accounting and I had a very good accounting professor at uc, Berkeley, a company that's losing money has negative market value because you have to put money into it to keep it afloat.
Speaker 1 00:01:01 So every one of these pre profit companies, in the case of Twitter and others, that were trading at billions of dollars, were basically a gambling bet on behalf of investors. And because we've had such low interest rates, investors were very willing to bet on these, which I'm gonna talk about relative to crypto in a minute. So Twitter, which is a very interesting service, is really a terrible business. I'm not sure it's ever made a profit. It never really had a path to make a profit. I'm not sure if the product plan existed. I tried buying some of the services from Twitter and they didn't even work correctly, and there was no way to get hold of anybody to talk about them. So they never really thought about customers. I think they only thought about tweeters and they attracted this weird combination of press, political people and self-proclaimed puns and just built this very strange social network.
Speaker 1 00:01:53 Yes, it's important. Yes, it's interesting. Yes, it's actually fascinating. But as a business, it never really was that great. And Elon overpaid by probably five times. So he's gotta pay off this 40 to 50 billion investment by making a profit. And so he did what basically any equity investor does. You cut costs and he cut about half the people. And he did it in a typical private equity fashion, not thinking about the culture, not thinking about the brand, just getting rid of as many people as fast as possible. And there is an argument that that's a good idea, but I'm very much against it because what it does is damage the culture, damage the brand, damage the skill set, and creates all sorts of problems. It's not that they didn't have enough problems already. Now they're gonna have more. I have high hopes for Twitter because I think he's a relentless guy and he will stick with it.
Speaker 1 00:02:41 But this was a very dysfunctional way to do it. Ditto. The same thing happened at Facebook. Now, Facebook is a different company. Meta not quite as chaotic as Twitter, but chaotic in its own way. I've been there, I've met some of the execs. They laid off 11,000 people. That's a lot of people, a lot of salespeople, a lot of product people, a lot of HR people, a lot of engineers, other roles. And that was long overdue too. The reason of course that layoff took place is that the ceo, Mark Zuckerberg, is betting the farm on the Metaverse personally, in my opinion, it's years and years into the future. And the ultimate winner of the Metaverse will be Apple and Microsoft or maybe Accenture or somebody else. And we're not gonna be walking around wearing 3D glasses anytime near in the future, if ever. So the fact that he was willing to spend billions of dollars of r and d on this and not have that much effect is the reason they're laying off 11,000 people.
Speaker 1 00:03:37 And I've been to Facebook and met Lori goer and talked to people there. It's really a pretty cool company. But they, as many tech companies do, suffered from the get big fast problem. They hired and hired and hired and overpaid and overpaid and overpaid. I know HR people that worked at Facebook, they were making $500,000 a year. Believe me, the average HR director doesn't make that much money at very many other companies. And that was probably the same thing that was happening in engineering and sales in other places. So all of a sudden he realizes he actually has to run a business here and he needs to get it back on track. And it appears that that layoff was a little more rational. And there's other layoffs coming. So there's no question that the Fed has finally started to slow down the economy. And companies that aren't well positioned in their markets are going to have to ratchet back.
Speaker 1 00:04:27 Even Disney's talking about having a layoff. And there's discussions about Amazon and other companies too. I do not believe we're going into a massive global recession. I see no evidence of that at all. In fact, our customers are very much the opposite. They're telling us it's harder and harder and harder to hire people and retain people. And I think there's good reasons for that that I'll talk about in a minute. Okay, so that's a little bit about the tech scenario. Don't take it as an example of what goes on in every company. Many, many companies manage their workforce and their profits and their revenues much, much better than tech companies. But tech companies have been sucked into this whirlwind of high valuations and just grew way, way too fast. Okay, the election, I don't wanna talk a lot about politics, but I think what we can learn from the election is that at the end of it, all values and trust really do matter.
Speaker 1 00:05:19 Now, I've done a lot of research on employee experience, and we've done many studies on this topic, the Simply Resistible model, my book, on and on and on. And what you find from all the research that's ever been done on employees perceptions of their jobs, of their managers, of their companies, is the number one thing that drives their satisfaction is a sense of trust. And what was going on in the political arena is that starting with Donald Trump throughout the Republican party, there was a pretty unanimous focus on the lack of trust and we didn't trust them. So what happened, for the most part, despite the variations in political strategies between the two parties, is the non-trust actors didn't win. And I think this is a really good thing. You know, it's the first time I've felt positive about politics in a long time. I'm sort of a conservative Democrat or a liberal Republican.
Speaker 1 00:06:12 And so I've been looking for a party in the middle and I haven't been able to find it. And I think most people are much more like me than they are at the either ends. And maybe we're reaching a stage where that will be the position of most political leaders in the future. Generally speaking, I don't find politicians particularly attractive, but we have to live through this process because that's how the country works. So I think it's good. I think we're gonna have a positive outcome from this. I think some of the legislation that's being passed will be more rational. And generally speaking, thumbs up. Number three, this guy named Sam Banks Friedman, most of you probably never heard of him. He was the king of crypto, a young guy wearing sneakers, unkempt hair, ka out shape, futzing around in his slippers, built this big crypto exchange called ftx, and he was featured on the front cover of most business magazines, interviewed by Bloomberg all over the press as the savior of crypto.
Speaker 1 00:07:12 Well, not so much. Turns out he's just as greedy and crooked is everybody else that seems to get into these roles and his entire company has collapsed. It may be that he illegally misappropriated funds from his hedge fund into his exchange. He's getting into all sorts of troubles with other players. And it's really the story of the week or maybe the story of the year about crypto. And it does beg the question of whether cryptocurrencies really are a currency. And I've been skeptical from the beginning as a technologist because what tokens are is really just digital objects. And the fact that a digital object can suddenly be made into currency is like saying teacups or currency or sneakers or currency or anything else that can be manufactured any other place. And this belief system that a distributed finance system is better than a centralized filing system is a flaw.
Speaker 1 00:08:10 The problem with distributed finance is bad actors are all over the place and you can't predict them. And a centralized finance system, I can go to Bank of America or Citibank and I can have an argument with them and the government has regulated them and they will give me my money back. If you lose your Bitcoin because somebody scammed it from you, there's no way to get it back. And that's basically what happened to sbf. So I think you should read the articles about him if you're interested. The real story to me in HR is this is a story of culture and greed and ego, exactly the same as Enron and WorldCom and all sorts of business failures we've seen before. So I'm not a big fan of crypto at all. I think the blockchain technology has yet to be proven for anything particularly valuable.
Speaker 1 00:08:53 But I think we've just just punctured that bubble too. The fourth thing is inflation. So if you go through the inflation data, it actually did go down a little bit. Not a lot, but a little bit. And so the stock market rallied because people see perhaps a trend. One data point of course does not make a trend. And it may be that the supply chains in the economy are getting worked out. I don't believe the inflation is entirely caused by the federal government. I have to believe based on the economics that the federal spending has had something to do with it. But most of the countries in the world are experiencing inflation just like the United States. And many of them didn't put so much money into the economy as we did. So I look at the government spending that we did in the United States as a positive because our economy is very, very robust and most consumers are better off now than they were for many years.
Speaker 1 00:09:44 That inflation remains a continuous problem. And for those of you in hr, the challenge is hiring. If you're being asked to raise wages, and we have to make wages transparent because of the new laws in California and Colorado and New York and other states, what do we do with the people we already have? Do we raise them too? And if so, where are we gonna cover that cost? And as I talked about in last week's article, those are very significant issues. We now see research that comes back that says that pay has become, most recently the number one driver of employee job switching. And the reason for that is studies have shown, particularly from ADP, that if you change jobs, you can get twice the raise then if you stay in the same job, which was incumbent upon us as employers to take really good care of our people.
Speaker 1 00:10:33 And that's why we built the four R model. Recruit, retain, re-skill redesign. You need to be thinking about all four R's at the same time relative to every talent strategy and every individual in your company. People won't leave your company just because they can make more money somewhere else unless they're unhappy or unless there's a wide disparity or you have a pay equity problem. And Cathy is about to launch a really fascinating study of pay equity, we'll probably launch in next year. And you'll see that pay equity is actually one of the biggest drivers of employee experience of all. And so looking at pay equity and taking steps to improve pay equity will turn out to be a pretty big strategy for 2023. Second thing, or last thing on the economy is the job market. Now, amongst the many meetings I'm going to in Europe next week, by the way, next week I'm going to Europe.
Speaker 1 00:11:24 I'm gonna be meeting with a whole bunch of customers in Sweden, in the UK, and all over the Netherlands. And I'm gonna be meeting some dignitaries in the Netherlands. And I'm really excited about, and I'll tell you more about that later, the general consensus everywhere I go is there are not enough people to fill the jobs we have. And as you'll be reading about in my predictions report, there's a really big reason why that's happening. First, the fertility rate is low. Most countries are not creating citizens as fast as they are retiring citizens. So in many cases, we are reducing the size or the population of countries over the next 20 years. And so there simply are fewer people working now, people are working longer careers and they're living longer. But the but the general supply of talent is flat to shrinking in many, many countries.
Speaker 1 00:12:12 And we don't need to talk about immigration and how politically difficult that is. So that means that even though the unemployment rate might tick up a little bit, and it has gone up a little bit, but not much. The real problem is recruiting, retention, retaining and redesigning the jobs for the people you already have. Last week or the week before, Bill and I were at the Gloat Users Conference and we are building a series of case studies and research on internal talent mobility, internal talent. Mobility is one of the most important innovations to hit business. And of course HR is in the middle of it. And it has a lot to do with creating a much more dynamic workforce, solving your problems of hiring. And there's many pieces to this. If you read about it in my book, Irresistible, you can learn all about it.
Speaker 1 00:13:00 There's reskilling within a role. There's reskilling across a role. There's horizontal mobility like what Microsoft does. There's career pathways to move people who don't have college degrees and to higher value jobs. There's all sorts of new things you can do that we weren't even thinking about five years ago cuz we were just hiring, hiring, hiring. So this is a very significant change in the way we deal with the job market. And the reason the job market is so competitive is not just because the economy's been growing, but the amount of mobility between companies has skyrocketed. And the reason for that is twofold. First of all, as you read about in our global workforce intelligence research, every company is transforming itself into an adjacent industry. And I've talked about this before, you can read about it in the gwi studies, which means that you need skills you don't have and you don't necessarily even know what they are.
Speaker 1 00:13:54 And the second is we have become pretty good at skills-based hiring. All this baloney about building a skills-based organization has mostly fell, fell on recruiting. And so upwards of 45% of the people that changed jobs during the pandemic changed industries. That is just an exceptionally different dynamic in the job market than we've ever had before. And what it does is it makes it easier and easier and easy for people, for workers, for employees to find new roles or work part-time or work in a gig experience of some relationship or some arrangement, which of course makes it even more difficult for you to find the person you want. If you are an old fashioned bank and you're competing with a high growth startup for software engineers, it's hard. You've gotta decide very clearly what are you offering that's different, better, and improved over all the money that's being thrown at people from this alternative that may not even be in in your industry.
Speaker 1 00:14:51 So lots of interesting things going on there. And we will be launching our global workforce intelligence research on banking later this year in December or early January. So stay tuned for that. Let me just say one thing about the gwi. The Gwi project, which we've been doing for over a year, was a big risk on our part. We knew that we needed to dig into the skills adjacencies, the trending skills, the new career pathways, and the new employment models in all these industries. Cuz you guys were asking us about it constantly. And so we set about to do it and I think we've gotten really good at it. Our first research study on the healthcare industry has been magnificently successful. And if you're a corporate member, please join. You can get access to all of the content and all of the data. The next one on banking is similarly fascinating.
Speaker 1 00:15:40 It will be launching that in the next month or so. And the next one we're gonna be doing is consumer goods, which is one of the most interesting, fascinating, dynamic industries on the planet. So stay tuned for that. Okay, so that's kind of a little overview of the chaos that's been going on this week. Underneath all of that, the big theme is that culture and leadership really, really matter. My book is all about that. And these companies like Twitter and Meta and all of the companies that have been struggling Disney with various issues over the last couple of months, it all comes down to culture. And we are firm believers and we can prove this, that when you invest in your people, the company will outperform. And if you don't understand that or your CEO doesn't understand that, we will certainly help you figure that out. Have a fantastic week. I will come back to you in a week or so with an update on Europe and what we've discovered over there. And as always, if you have any questions, please call us and check out our corporate membership program. We have some huge announcements coming in early next year that will make you even more excited about joining. Thank you.
