Why There Are So Many Layoffs, How (Not) to Think About the Future, Plus Why Leaders Are Getting it So Wrong

I’m Umair Haque, and this is The Issue: an independent, nonpartisan, subscriber-supported publication. Our job is to give you the freshest, deepest, no-holds-barred insight about the issues that matter most.

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Quick Links and Fresh Thinking

1. A Global Recession Wave Is Building Steam (Barrons)
2. Addressing Challenges of a New Era: Against Rule of Thumb Economics (IMF)
3. 5 Rules for Better Thinking (Psychology Today)
4. Toward a Revolution of Love (Lions Roar) 
5. How scared is China of Donald Trump’s return? (The Economist) 
6. Nike is cutting about 1,700 jobs (CNN) 
7. How loneliness is killing us (Big Think)
8. The Cult-Like Language That's Coursing Through Business (Inc)

Today's Issue at a Glance:

• Wave after wave of layoffs is hitting the economy. So is the economy really “good?
• America’s just the beginning. They’ll spread around the globe.
• Why is there a wave of layoffs? Leaders are failing to grasp the reality of global macro trends, and how painful this age really is for people. Over-exuberant, expecting the good times to last forever, they failed to plan for an age of stagflation. Now, they’re beginning to pay the price.
• Many companies and institutions—and even countries—will need to be restructured for a global economy with stagnant long-run growth. This is what democratic breakdown is about, in many ways.
• The more and longer leaders keep getting the macro picture this badly wrong, the worse it’ll keep getting for the organizations they lead, from companies to countries.

Google. The Washington Post. Time. Vice. Buzzfeed. Amazon, Cisco, Meta, Microsoft, Google, IBM, Salesforce, eBay. Thought I was done? Nike, Mattel, the Gap, PayPal, Cisco, Levi’s, UPS. That’s just a very abridged list of layoffs sweeping the economy. It’s a wave—a key micro trend to watch. But to that list of organizations going wrong, we could also add countries—would you say things are going especially well in most countries? Layoffs—lost potential. Leadership. See the theme? If not, don’t worry—we’ll come back to all that.

First, though…

Why Are There So Many Layoffs if the Economy’s “Booming”?

It’s a curious thing to behold. Because on the one hand, we’re told, time and again, that the economy’s “booming,” doing well, bustling, etcetera. And yet here we have a spectacular, growing tsunami of layoffs. It’s not an historic one just yet, but it is striking that all this comes in the middle of what’s nominally a “good” economy. Those two things are very much at odds. If the economy were really doing as well as its purported bo be, of course, we wouldn’t be seeing the axe falling over and over again, this hard and this frequently.

So what gives here? Why this wildfire of layoffs in the midst of a “good” economy”? It’s more than little bit weird, and like I said, while it’s not at all time highs, this juxtaposition shouldn’t be happening, either. It tells us something’s…off.

Rivian, the electric car company, is another to join the crowd—laying off, ouch, 10% of its workforce. It’s CEO said something like: “we acknowledge the current challenging macro conditions.” Finally. And too late. I highlight Riven for a reason—because their CEO’s comments spell out the painful truth in stark detail.

What’s been happening here is that leaders—and not just CEOs, but politicians and investors, too, call them “decision-makers,” if you like—have been severely overestimating….things. Everything. The world, the economy, reality, their potential. A reality disconnect has emerged. Looking at numbers like GDP and its growth, they’ve concluded that all is well.

But all is emphatically not well, nor has it been. I’ve wanted to shake them out of their torpor, if I’m honest, watching all this head to the inescapable conclusion it was reaching—layoffs, restructuring, pain, the axe falling. Haven’t you guys noticed that the world’s been in the middle of the greatest cost-of-living crisis in decades? Hello, and you’ve been raising prices…betting that people would just somehow pony up and take it. Doesn’t make much sense when I put it that way, does it.

Leaders haven’t been paying enough attention. To macro trends in particular. They’ve been ignoring a bitter reality unfolding around them—overexuberant, expecting the good times to roll on forever. But for whom…and for how long?

The luxury industry crashed because it ignored the macro trend of slowing growth worldwide—and worldwide includes China, of course, the very country it was betting on heavily to continue boosting its fortunes. But we’ve known for half-a-decade or longer that China’s young people, for example, are so bereft and hopeless that they call themselves the “lying flat generation”—as in, giving up on the future. How is it, I wonder, that the luxury industry’s been ignoring this? If young people are “lying flat,” who exactly is going to buy $900 jeans and $8000 handbags? Just their grandparents? That’s hardly a wise game to play. And so here the luxury industry is, baffled, bruised, wondering how its fortunes went into decline.

All this is is a trend in itself: leaders are ignoring the reality of this age. This isn’t an age of good times. It’s an age of tough times. Bleak and bitter ones, for the vast majority of people in the world. The average person across the globe is getting poorer—and has been. In this context, betting that the good times would last forever—and by that, I mean a temporary, fleeting post-pandemic boom, as people’s pent up demand exploded for a moment, until they realized that in fact, they weren’t doing all that well—in that context, ignoring reality is a fatally poor bet. This is an of Everything Crisis, of polycrisis, and we’ll talk about that more in just a moment—but the takeaway is that betting that business as usual is going to go on is like betting the farm when a category 6 hurricane’s approaching. Take cover, my friend, run.

The Trouble at Nike (and What it Illustrates)

I often used Nike as a bellwether. It’s an incredibly well run company. You might not know it, or maybe you do, but many of the techniques and tricks we associate with modern management itself were pioneered at Nike, in part. Things like for example modern branding, replete with celebrity endorsements, or the idea of “matrix management,” or financial discipline—in all these respects, for decades, Nike’s set the standard of what a well run organization is.

And yet it just announced a 2% workforce reduction, which for it, is tremendous. It’s a sign of how powerful the trend above is. Even a company as well-run as Nike fell into the trap of overexuberance, betting the good times would roll on forever—and failed to recognize the pain that people are in. The result is that even it’s on the growing list of organizations who are getting the future wrong, and in this case, that means that Nike won’t just have to lay off thousands of people, but spend close to half a billion dollars on restructuring itself. Ouch. These are the kinds of stakes we’re talking about when it comes to getting the future wrong.

So what did Nike get wrong, exactly? Many, many things. Like much of the list above, it bet heavily on China. But it also bet heavily on young people—like luxury did, for example. Only to discover that young people have changed. For Gen Z, a pair of Nikes isn’t what it used to be—they like different brands entirely, like New Balance, and that’s not a coincidence: it’s that Nike’s values, the hard charging individualism, the earning a trophy with your sweat thing…it just doesn’t appeal to a generation who’s lived through mega-crisis, is collective, far less materialistic and individualistic, and takes a pretty cynical view of things like “winning” games it believes are rigged to begin with (and that doesn’t mean the Olympics, it means life in general.) Nike failed to understand the economy—and, lethally, it failed to understand young people. Instead, it bet on (go ahead and stifle a laugh) things like “phygital,” which means “sneakers in the Metaverse.” Young people don’t want a metaverse, though, as Zuck found out the hard way—they just want a functioning world, country, lives.

When even a company like Nike—an innovator, with huge resources, talent, the capacities to get all that right—gets all that wrong instead, what hope is there for lesser companies on the list? Those who are slower, less flexible, less adaptable? You see why I use Nike as a little case study.

Nike’s failure boils down to not understanding macro trends, which is what this larger problem is really about. When organizations don’t grasp the reality of the world around them, then suddenly, eventually, it crashes into them, often, square in the face—and at that moment, the bill comes due. In the form of layoffs, of course, which come with huge personal and organizational cost—and in the form of half a billion dollars in “restructuring” expenses, which just means “getting this organization ready for the future again.” It shouldn’t be this way, and organizations shouldn’t be getting reality and the future this badly wrong.

So why are they?

How to—and How Not to—Think About the Future

Let’s go back to the weird, off-kilter mismatch of a growing tsunami of layoffs in a “good” economy. If times were really that “good,” there’d be a massive, massive hiring boom, from new industries, not wave after wave of layoffs, of course. So what’s really happening here? 

GDP’s “growing,” sure, but in many respects, it’s low-quality, lowest-common-denominator growth. Not all “growth” is created equal. The kind of growth we’re seeing now is largely phantom growth—it accrues to the richest, which is how the rich went from super to mega to “ultra high net worth.” But the average person sees little of it, and in many places, less than none—like I said, across the world, the average person is actually getting poorer.

Let’s go back to macro trends for a moment—and remember, that’s one in itself. America’s economy is nominally “growing”—but the rest of the world is in deepening trouble. Parts of Europe are formally going into recession, China’s been hit by a shattering, paralyzing slowdown, and the IMF says the global economy’s “limping along.” For the rest of the decade, the world economy’s expected to be stagnant—growing at maybe 2-3% or so, which is the bare minimum.

Hey! I want to shake decision-makers and say. Pay attention to this stuff! You can’t go on making such foolish mistakes. What’s happening here is that they’re simply not paying attention to these forecasts—they’re tuning them out. And that’s a colossal mistake. It’s like a doctor just ignoring your blood pressure, because you “look” fine. Not good enough. Leaders have to consider all this data carefully and seriously—it’s the heartbeat of our civilization, after all. 

Instead, they seem to be seduced or blinded by myths that fuel overexuberance, which lead them to merrily conclude, “why, we can raise prices into oblivion and everything will be just fine!”—instead of saying to themselves, “hey, the world Is in crisis, people are hurting, the world economy is stagnant, and political breakdown is leading to chaos—we’d better try to get it right, not just pretend business as usual’s going to go on forever.” But they say the former, think it, really believe it, and then wham, reality suddenly slams them in the face. It turns out that you can’t keep raising prices forever, and offering people a worse and worse deal, and expecting that to be the “good times” that last forever.

There’s a quote from a recent piece about Rivian that expresses that really well—I can’t find it just now, but it doesn’t matter, paraphrasing will do just as well: “who thought that a $100,000 electric truck would be a hard sell?” The quote’s meant to be sarcastic—but up until a couple of months, the problem is that nobody much, at least on the inside, thought so. The idea of a $100,000 truck? Just fine. But is it? Now we’re learning, painfully, or at least Rivian is, that it might not be. But so are many industries. Luxury’s learning that raising prices into the stratosphere just makes generations roll their eyes at them. Big Tech’s and media are learning that it’s earned little but distrust and hostility from people—and because of that, as ad dollars are cut, because, yes, the economy really isn’t that great, they find themselves suddenly at the mercy of the ill winds of misfortune.

Pay attention to macro trends. I wish I could say it three times to every leader under the sun, because the truth is, and as I’ve tried to explain, not enough are. It’s not just economics, though—it’s politics, too. Biden’s hit a wall precisely because he refuses to acknowledge macro-trends, and his refusal, too, tells us why, perhaps, a little bit: it makes the story more complex.

It’s easy to say: “the economy’s great!” Or what have you—insert relentlessly positive message here. Reality’s never that simple though, and especially not in times like these. Instead, we have a much more nuanced, subtle, and complicated picture. Yes, “growth” is happening, in America, but not in most of the rest of the world, and even in America, the average person’s fortunes aren’t "growing,” but receding, hence, the pessimism and distrust and despair. Meanwhile, globally, living standards, progress, and well-being are all falling, fueling an historic, sudden, startling implosion in democracy itself. 

So when we just focus on one dimensional aggregate statistics, like GDP, or what have you, we ignore this larger set of macro trends—and what we present to people, to ourselves, and to the future, is a kind of stick figure. Not a robust portrait, shaded in, nuanced, carefully drawn. And of course a stick figure blows over easily in the wind. There’s nothing much in it or to it. Presenting the larger portrait, even understanding it, is much more complex, more difficult to do. It challenges our “priors”—our pre-existing beliefs, what we want to believe, what we hope for, even. We have to sit with all this, and really take it in, and let our minds absorb it and hold it. 

Leaders in this day and age are going to have to do better. They are going to have to understand macro trends deeply, seriously, and well—they can’t just go on ignoring them, and hoping, nervously, for the best, even as the earth begins to quake.

Political leaders, if they want to save democracy. Business leaders, if they don’t want to go on having mega layoffs, and paying billions of dollars in needless costs. Leaders of all kinds, those guiding the former, especially, advisors and so forth. The price of getting the future wrong is too steep. Financially, economically, politically. Sure, there are plenty of cynical CEOs, but by and large? Nobody likes to lay off their employees, much less spend a billion dollars or two on restructuring the whole shebang. Even CEOS would much rather just…do business and earn fat bonuses. Political leaders, when they ignore macro trends, for the sake of simplistic, cartoonish one-dimensional narratives, cede ground to demagogues, who blossom in the obvious distrust that ensues.

This issue goes deep, in other words. Way deeper than “why are there so many layoffs” suggests. It’s about the future, how to approach it, orient one’s self towards it, create it, think about it, and how…not to.

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