The Washington Post writes The U.S. economy is booming. So why are tech companies laying off workers? This article has some good data, but I think misses the point with sub-heads like “Shine has come off the tech industry.” Really? How is that reflected in their stock prices?

I think a few things are happening.

First, tech companies are typically best at adopting new technology, which leads to productivity gains.

AI may be an obvious example of this, though for all its hype it hasn’t had a huge impact on most companies yet. I agree with Sam Altman when he says there may someday be a billion-dollar company run by one person who is able to highly leverage future AI agents to automate most traditional roles at a company. That said, I think there are advantages to teams including allowing people to go on vacation or take time off, and provide business continuity and succession, so literally one-person is probably an exaggeration. We don’t need AI to see very small teams being valued highly: Instagram had only 13 employees when it sold for a billion dollars to Facebook, in 2012!

Some of this productivity gains just come from adoption of existing tools like Google Workspace or Office 365, issue trackers and version control with tools like Gitlab, Github, or Jira. At Automattic we don’t use email to work or communicate internally, it’s all Slack and P2. We also leverage our distributed nature to effectively have teams around the world coordinating several shifts of product work per day, and 24/7 coverage for things like systems and customer support without the need for “graveyard shifts.”

The way tech companies operate, the pace and culture, would be unrecognizable to people at many more traditional companies.

At tech companies some roles are highly leveraged, like systems, engineering, and design, and everything else in the company really exists to support these. These leveraged roles can create enormous amounts of value, and that’s why it’s not unusual to hear of machine learning engineers working on ads at Google with salaries in the seven figures. (There’s been a weird accounting thing where companies put a lot of their compensation into equity, but I think that’s going away as investors are learning to better account for dilution and employees appreciate the fungibility of cash.)

Creators are also highly leveraged, which is why Joe Rogan can sign a new $250M deal with Spotify (which smartly puts him back on Youtube) after laying off 1,500 people in December. Some people like Hagen Terschüren try to tie this together and say you should avoid Spotify for it, but there’s nothing wrong with a business becoming more efficient to serve its customers, it’s the whole point of capitalism. Capitalism is, as Nicholas Stern says (via Marc), the best way to take care of people we don’t know. There’s no honor in keeping people employed inefficiently, it’s better for them to find someplace in the market where their talents will be better leveraged for society and themselves.

There was a bubble in hiring because tech had so much money it tried to throw people at problems. But the unlock in technology can come from a single person, a single insight. It’s the mythical man-month. Tech-first companies are going to become leaner and more leveraged. Fewer people are going to create more value for society, in ways that will follow power laws and I think we should investigate things like Universal Basic Income to provide for all living beings. Technological progress creates abundance, where we have more than what we need.

At Automattic last year we did not do layoffs, but allowed performance management and natural attrition (voluntary regrettable was 2.9%, non-regrettable 6.8% for us in 2023) to allow our size to shrink down more naturally, on average two people left for every person we hired last year, from a peak of about 2,064 to 1,936 today.

Today is the day! The first day of my sabbatical. What an experience it has been. On Thursday I delivered my very first Ignite talk on the subject! Here it is.

The Ignite format is a tricky one as a speaker! I will do better next time. My friend Connie has delivered seven Ignite talks now and I thought hers and Adam Savage’s were the highlights of the ones I saw. (I didn’t see everything because I was popping in and out.)

Preparing for this sabbatical has been the most fun I’ve had working at Automattic, ever. It brought so much clarity to things, we’ve been able to resolve in hours things that have lingered for months, including two acquisitions, several hires, big strategies, and more.

After this talk I caught a redeye to NYC to meet with the WordPress.com leadership team and hand off my leadership there to Daniel Bachhuber.

It is a beautiful symmetry that the first-ever sabbatical taken at Automattic was by its CEO at the time, Toni Schneider, which gave me the opportunity to step in and try on being a CEO, and it’s an incredible gift that Toni is returning to be CEO of Automattic while I’m out for the months of February, March, and April.

What am I going to do with all this free time? Blog a ton. So follow along if you want to see this journey. I’m going to try to open source all the things. 😇

Update: I ended up extending this to May 15 since it got a late start.

Considering I am going on sabbatical in 83 hours and passing the CEO torch to Toni Schneider until I return in May, it seemed like a perfect time to do a giant re-org! Just kidding. But we did introduce a concept into Automattic that I think will provide a lot of clarity for the teams within Automattic, and hopefully for the broader WordPress ecosystem that works and partners with us.

The frame is there’s a game, each person gets a card: Be the Host, Help the Host, or Neutral.

You cannot change cards during the course of your day or week. If you do not feel aligned with your card, you need to change divisions within Automattic.

If you’re Be the Host, you are hyper-competitive. You are trying to make the case to a customer for why they should host with you and not consider anyone else. This is what everyone assumes all of Automattic is, but it’s actually just one sub-division, which is a minority of our revenue.

For Help the Hosts, your word is ecosystem. You plant the seeds of open source software that grow everywhere. Every WordPress is precious to you, wherever it grew up. You want every host to be as successful as possible, because the real threat is from the Big Proprietary folks outside, who steal all your good ideas and don’t let you touch them again. You want to get to know every WordPress in the world, however it grew up, and help it out by selling it attachments.

Neutral treats everyone equally, either because they don’t care (Day One, Pocket Casts, et cetera don’t have a horse in this race) or because they are a support function like finance or HR.

Whenever you meet or talk to an Automattician you can ask what their card is.

Also, WordPress.com is going to orient itself more towards developers, and have an experience that feels similar to WordPress hosted other places, less Calypso more wp-admin.

The big tension this surfaced was Woo Express, going forward that team is switching under WP.com, and Woo.com will recommend a variety of hosts (like W.org) to get started with Woo. Now people can meet with Paul Maiorana, who leads Woo, or James Grierson, who leads Jetpack, and know they have Help the Hosts cards as their teleological goal.