How Did Apple Avoid Layoffs? | The Acquirer's Multiple®

In their latest episode of the VALUE: After Hours Podcast, Brewster, Taylor, and Carlisle discuss How Did Apple Avoid Layoffs?. Here’s an excerpt from the episode:

Tobias: I couldn’t tell you. I didn’t dig that deeply into it. I just saw it very quickly in a tweet and had a look at it. I thought it was interesting, but the hours topped out in late 2020, 2021, like 35 hours a week. And now, they’ve rolled off the tiniest bit. I don’t know, because there was only two or three years of data there, what is significant. But when you look at that, there’s an indexed version of it, which doesn’t have the actual hours. It just has it relative to 100 on an index. The amount that it’s come down is infinitesimal. You can hardly see it. So, it’s hardly budged at all. You would expect the E to go last. There’s a lot of reports about tech companies laying like tens of thousands of workers off. But at the same time, they hired that many last year.

Jake: Based on those Day in the Life videos, you’re only losing maybe one hour of work there per employee, it seemed like. [laughs]

Tobias: What were they thinking when they hired all those people?

Jake: That’s a really good question that I think is underdiscussed. If you’re going to be laying people off a year later– If you go back and look at the employee counts from 2016 to 2022, huge additions in workforce. That was probably the error. Now, it is just the correction of the error.

Tobias: It’s not even a full correction. They’re not cutting deeper than what they hired in 2022. They may end up doing that, but it’s not like the layoffs that are coming at now aren’t reducing total employment. They’re just reducing those– [crosstalk]

Jake: We’re rolling all the way back to 2021 levels.

Tobias: Yeah.

Jake: Yeah.

Bill: Yeah. I don’t know. The sales per employee on something like Google is up from– what is this, in millions? 1.2 million million to 1.67 million million?

Tobias: Over what period of time?

Bill: From 2015 to the TTM. [crosstalk] Yeah, the revenues have supported some of the employee growth. I know on a percentage basis, the hiring didn’t really move all that much. I just don’t know how you incorporate that many people into a culture and even know what the hell they’re doing. When I joined a team, it took probably a year before I knew what the hell was going on and they knew what was going on, what they could depend on me, and you got thousands and thousands of people.

Jake: Is that because you were down in the basement with your red stapler? [laughs]

Bill: Yes, more or less.

Jake: Okay.

Bill: That’s where I should have been. Yeah, I don’t know.

Jake: Like second order thinking on this too, boy, does this set you up for a lot more antitrust potential? As long as you’re hiring, as long as you’re being a decent steward of society in some ways–

Tobias: A good citizen.

Jake: Yeah, a good corporate citizen and now, you’re laying people off for the perception of more profits for Wall Street, is this opening the door for some regulator who wants to now use that against you and come after you for antitrust stuff? Maybe.

Bill: I don’t know how much to– Ben Thompson has written about this. I could buy it. I don’t know how much they were depending on natural attrition and now people just aren’t leaving.

Tobias: It’s pretty good in there.

Bill: Well, fuck– [crosstalk]

Tobias: This [crosstalk] videos didn’t– [crosstalk] [chuckles]

Jake: Why would you quit that kind of-?

Tobias: Someone just plays to your life, and you make TikTok videos, that sounds pretty good.

Bill: Yeah. I think a less, I don’t know, maybe rude way to say it is you’re making well into the six figures for, I think, a lot less stress than you would have at a startup or if you’re running your own thing.

Tobias: Christopher Hohn, he’s an activist who runs children’s TCI. I think it’s mostly philanthropic at this point. I don’t know, but then I saw a tweet today that said that he made $1.9 million a day. I don’t know if you guys saw that. He sent a note. I think it was to Google, but it could have been to Microsoft. Do you know–? [crosstalk]

Bill: Yeah, it was Google. Yeah.

Tobias: Google? Where he said, “The cuts are good. You’re going to have to cut a whole lot more.” And then, somebody put above that this guy’s made $1.9 million a day in 2022.

Jake: Running a charity. I’m joking.

Tobias: I don’t know. I don’t know if he personally made $1.9 million a day or if the whole organization. That’s what they’ve taken the top line and then– I just don’t know how it works. So, I’m not sure what– I don’t want to give him too much credit, if it’s not all being given to charity.

Bill: Sounds like a guy that knows how to cut and generate profit.

Tobias: It wasn’t well received in the Twitter sphere, but then you have the Twitter sphere- [crosstalk]

Bill: Yeah, bunch of– [crosstalk]

Tobias: -extent to [crosstalk] FinTwit.

Bill: Bunch of employees that don’t run anything and rely on rainmakers for their salaries, criticizing a guy, okay.

Tobias: Rainmakers still need the people who do the grunt work. You still need the operations.

Bill: No doubt. It is symbiotic, but I respect those that have made the rain, especially those that have run their own organizations quite a bit more than I respect those that collect the rain.

Tobias: That’s a tough letter to send. That’s not a good look to be sending a letter like that. I don’t think Buffett would be dumb enough to send a letter like that.

Bill: Well, maybe not a letter, but he would totally do stuff like that.

Tobias: In the backend– [crosstalk]

Bill: You’re talking about a guy that drew a line in a warehouse and said, “Get the inventory under here.” This guy used to buy companies and suck them dry in reality.

Tobias: I think he learned his lesson though. I think he learned his lesson.

Bill: Yeah, after he made millions and millions and millions of dollars.

Tobias: [laughs]

Bill: This guy is not some saint, his whole life. I love the Buff Dawg.

Tobias: No, that’s true.

Bill: But let’s not rewrite history.

Jake: Do you think that he’s been talking to Tim Cook, which– I think Apple conspicuously now hasn’t been doing layoffs. Is that true?

Tobias: Well, Tim Cook took 40%.

Jake: So, [crosstalk] Tim Cook takes some pay cut. They’re not doing layoffs. I wouldn’t be surprised to see them zig when everyone else is zagging. And maybe they lean into this, and they hire people. I could see Buffett going to Tim Cook and saying, “Hey, I don’t mind if we look a little less profitable for a few years, that’s fine. By the way, if the stock happens to tank because of that, back that buyback machine up, baby, and let’s just load up on this and concentrate my ownership. And five years from now, it’ll be all good.”

Tobias: Does that also help you avoid antitrust action or any kind of adverse regulatory actions?

Jake: This is your invincibility, Toby.

Tobias: I don’t think Buffett necessarily does it out of the goodness of his heart. I think that he’s just sensible to the public perception of very successful, wealthy men calling for layoffs in these kinds of companies.

Bill: Look, the other side of all this, okay, is pensions do need returns to generate what they need to pay the people that will benefit from the pension? And those pensions do own these big companies.

Tobias: That’s true.

Bill: These companies also give stock to employees which happen to be a key resource. You don’t want your stock to go down so far that your employees are disgruntled. There are more reasons to do this than just some hedge fund guy writing a letter.

Jake: The inversion at this– [crosstalk]

Bill: I know that this gets lost.

Jake: The inversion of this of not laying off looks like Japan over the last 30 years. You end up with ossified structures, you end up with low returns on equity, you end up with markets that are sideways for a really long time, and stasis, and just clogged toilet bowl of capitalism.

Tobias: Do you think that’s overvaluation as much as it is just the failure to renew underneath? I guess Japan has been very, very cheap. It was overvaluation initially that drove the decline, but now, it needs a reason to get up, right?

Jake: Well, if you’re earning anemic returns on equity, you should trade at a low price to book That is logical.

Tobias: Yeah, that’s right.

Bill: Facts. True facts.

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