Why are Tech Jobs Declining in a Recovery?

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This question, posed and somewhat answered by Kevin Kelleher of GigaOm. In the article, Kevin suggests that with M&A (Mergers and Acquisition) activity up, among other things, some 17,000 jobs in the past month have been lost.

From an investment standpoint, founders and venture capitalists have good reasons to cash out now. Market caps of public tech giants are rising “” the Nasdaq gained 15 percent last quarter alone ““ and so are their cash stockpiles: Microsoft is sitting on $49 billion in cash; Google, $24 billion. The IPO market is coming back to life, but not enough to meet the pent-up demand. And high-profile deals like the ones we’ve seen recently have a way of spurring on other acquisitions.

The risk is that, just as the quality of IPOs tends to deteriorate the longer a market boom lasts, a wave of M&A deals will bring on marriages that make less and less sense.

Kevin would be correct. Major acquisitions have been announced in the past few months including Adobe’s purchase of Omniture at an estimated $1.8B valuation, eBay’s sale of Skype for $1.9B in cash as well as the mammoth acquisition of EDS by HP.

337/365: The Big Money

I think it’s more than M&A though. I don’t claim to be anything more than an armchair economist, but I think there’s some sense that this recession isn’t over yet, even if the key indicators (sans unemployment) are heading north. For one, I think there’s a sense that as long as key Fed interest rates are maintained at a 0% or near-0% level, companies can continue to cut staff and pocket more money. Less money going to interest means more revenue in a trickle-down sense. More revenue means more cash on hand. Slashing jobs provides cover for higher profits. Wall Street likes higher profits. Stock prices increase. Especially since Wall Street sees no end in sight for 0% lending rates.

Additionally, there continues to be a risk of a whiplash recession resulting from hyperinflation. With an influx of newly minted cash into the market thanks to bailouts and the Troubled Asset Relief Program (TARP) bill, the economy runs the risk of quickly reaching a point where over-inflation becomes a very real risk. In an over-inflated market, the cost of goods, services and products increases while the value of money inversely decreases creating a vicious cycle that feeds upon itself. A company with $10B in costs suddenly needs $15B or $20B for those same costs. Meanwhile, the value of a single dollar declines in a proportional way feeding the frenzy.

In my non-expert opinion, the companies laying more people off are both reading the writing as well as feeding the lion.

These companies see the potential danger ahead and as any good, economically conservative, risk-averse company is, they are choosing to mitigate their risks in a completely legitimate and sensical way – cut costs via layoffs and other cost saving measures.

The danger this approach takes is that by doing so, they are feeding the Wall Street monster that looks for the increasing profit margins with little end to 0% rates. These investors buy the stocks, increasing the net worth of the company while simultaneously encouraging a pattern of layoffs and non-hiring.

Though companies will need to hire again (because you can’t just take artificial profits forever), there is little incentive to do so now, especially with the risk of a whiplash recession.

It’s a difficult-to-end cycle.

Photo taken by David Muir

Will the Real Tech Community Please Stand Up

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Our world today is diluted. The lines have blurred. Everyone has bought into this concept of community – that everyone has something for everyone and we’re one big happy family. Specifically, the concept of the “technology community” which is a term that has come to mean anyone who has a blog, uses social media or Twitter and engages online in some way or another.

Though this has been a trend that is akin to the frog happily boiling in an ever increasing pot of hot water, the reality struck me today as I saw this Wall Street Journal article about how Facebook and Zappos approach hiring. Facebook, of course, is the social networking platform that has become the largest social network on the planet and Zappos, the sexy company that was just acquired by Amazon and has made its name, not on selling shoes – its core business – but in its company culture and parties.

In the WSJ article, the writer begins with the statement, “For fast-growing technology start-ups, there are many approaches to employee hiring and retention.”

While Zappos is a great company, and their acquisition by Amazon (which is a technology company) certainly places them in the ranks of great Internet success stories, they are a glorified shoe store, using eCommerce, web marketing and buzz to execute on their core business. They are not a technology company.

This is not a pissing match over labels. If calling a company a technology company when they are not was harmless, I wouldn’t care. The reality is that it is a harmful trend that is hurting the real tech community. This is not about Zappos. This is about the hundreds of people who hang out on the social networks, using the technologies built by real technology companies and technologists, and who call themselves technologists because they use the tools.

Photo by rutty on Flickr

These are the people who go for job interviews that they are not qualified for hanging their hats on social media experience.

Being in social media does not make you part of the technology community.

The real technology community is made up of developers, I.T. architects, and even highly trained engineers with C.S. degrees. For the record, I have neither a C.S. degree or any degree at all. However, I have been slinging code for 10 years now and it continues to be my primary business, despite public speaking, book writing and social media engagements. I am a technologist. A marketer or a salesperson may be highly trained marketers or sales people, but they are not technologists in most cases.

Here are some thoughts. These are common. I’m not simply being a little over the top.

  • The most you know about memory leaks is when Firefox crashes. Do you know why? Can you debug it? Do you understand the concept of a memory leak and why it happens?
  • You don’t know how or why an API is important. If you have to ask what an API is, you’re not a technologist. You don’t have to know how to use it, but know what it is. If you don’t know why an API might be important, you’re also not a technologist.
  • Your evaluation of a good website is based on the UI and layout. Great design is important and great designers are hard to find. That doesn’t make them technologists. Though there are some who straddle both worlds extremely well. A website is not just a website because of the appearance. It’s about how data is used. Remember this video?

  • It doesn’t matter if a site is built in a compiled language (Compiled PHP, .NET, etc) or not. Yes it does. Why?
  • Your approach to business does not include principles of Object Orientation as understood by developers. OOP is huge with developers. Ask any Java, Ruby or Python developer. Can you apply these principles to business too? They do apply…
  • The most exposure you’ve had to XML is RSS. And at that, the most you’ve had is adding a feed to Google Reader.
  • Your idea of working for a web startup is as ‘community manager’. Yeah, there are some great community managers. They are people people, not technology people. Additionally, community managers are meant to be liaisons between users and developers. Stop calling yourself a tech person if you’re a glorified PR person.

Again, if this was simply a matter of labels, it would be no big deal. Social media expert? Go for it… Everyone is a social media expert. Entrepreneur? Unless you’re building the product yourself, you’re probably not a technologist. Businessperson? Sure. CEO material? Quite possibly. Don’t call yourself a technologist.

You’re HURTING us. This market is filled with people looking for work right now. And recruiters are out in force looking for the one person who can fill the role of two people and save their client money. So by you walking in the door and taking jobs you’re not qualified for simply because you can do some marketing, strategy and you know how to hack on a website, you’re hurting this industry of highly qualified, professional people.

Stop carpet-bagging on our industry and call yourself what you are. You are highly qualified marketers. You are highly qualified journalists. You are highly qualified business development people. You are not technologists.

Tech Community Worthless to Economic Recovery

One of the most notable things about the dot com bubble burst is that the innovations and technologies established in the late 90s and early 2000s spurned the comeback of the economy and the establishment of a new economy of business and internet value. We called it, for better or for worse, Web 2.0 and it was marked by stark innovations in human interaction driven largely by the glut of bandwidth provided by undersea cables laid in the 90s. The technology that, arguably, caused the downturn that resulted in so many dot-com bombs, became the impetus for a new generation of business and spending.

Unfortunately, this new generation of internet technology, technologists and startups is so far not demonstrating any ability to lay the groundwork for the economic recovery and innovation. Instead, we continue to focus on “teh Twitter”, and marketing gimmicks played out by celebrities like Ashtun Kutcher and Oprah. We talk about the new look and feel of Friendfeed, seen Friendfeed focusing on making what we know better, but ignoring the very impetus for economic recovery proven time again – innovation. Something new. Something radical. Something that challenges the basis of the cultural and societal problems in existence that generate the economic problems affecting everyone, not just a subset of the population existing in a subset of the worlds geography.

In the 1930s, the United States (and by proxy, the world) faced the worst economic crisis in modern history (one could make the argument that the Dark Ages were actually centuries old and worse than anything generated by modern economic recessions). It wasn’t until society was forced to innovate, via programs instituted by President Franklin Roosevelt, that the economy began to recover.

Silicon Valley, as bubble-like as it is, has been the center of innovation in the technology world, for several economic cycles now. In every case in the past 20 years, the impetus for technology growth and recovery, can be categorized by new ideas, new companies doing new things. They don’t rehash the same cycles. They haven’t focused on the same ideas. They start over building from the plateau left from the cycle before – utilizing prior technologies and developing completely new things.

This is innovation and this is not what is happening in this cycle. Instead, the technology world talks about celebrity races to 1 Million Twitter followers. They talk about the mainstream adoption of these technologies. We live in years of yore, still conversing about how Obama won the White House using social media – as if that fact will somehow change our world.

We still talk about advertising on blogs, as if advertising sales are somehow going to spur economic recovery, despite a regression in advertising spending across the board. We still build companies based on an idea that free is a valuable asset.

BREAKING NEWS: The economy spins out of control while people keep spinning stupid ideas worthy of 2001.

It’s time to get smart about business. It’s time to start applying the entrepreneurial spirit that we claim as important to our culture. It’s time for the technology community to actually be important to the economy. It’s time to stop expecting that the President will call upon us as a community of change and innovation, when all we can do is talk about publicity stunts by celebrities.

Grow up, people. Get real about making a difference. Maybe we can actually get this country and this world moving again if we stop being stupid. Maybe. We are not necessarily the chosen ones. That right must be earned.