TECHNOLOGY

Amazon and Salesforce cut 26,000 jobs in a day, and the year's story is set

The layoffs that began at the startups in the summer reached the largest employers in software in the first week of January.

On the morning of January 4, Marc Benioff told Salesforce's roughly 80,000 employees that the company would cut about 10 percent of them and close some offices. "As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we're now facing," he wrote, "and I take responsibility for that." The company said the plan would cost between $1.4 billion and $2.1 billion in charges. It was the largest cut in Salesforce's history and the first since 2020.

That evening Amazon confirmed it would eliminate more than 18,000 roles, up from the 10,000 it had signalled in November, most of them in its stores and human resources groups. Andy Jassy, the chief executive, used almost the same words as Benioff: the company had hired rapidly for several years and the economy had turned. Together the two announcements made it the largest single day of technology job cuts anyone in the industry could remember.

They followed Meta's 11,000 in November and Twitter's dismissal of roughly half its staff after Elon Musk's takeover. Coinbase, the cryptocurrency exchange, said on January 10 it would cut a further 950 people, about a fifth of its staff. Goldman Sachs began removing about 3,200 employees on January 11, its deepest cut since the financial crisis. Layoffs.fyi, a site that tracks the sector, counted more than 25,000 technology workers let go in the first two weeks of the year, against roughly 160,000 in all of 2022.

The framing from every chief executive was the same: this is a correction of pandemic-era over-hiring, not a collapse. Salesforce's revenue is still growing. Amazon's total headcount, at about 1.5 million, is roughly what it was a year ago. What has changed is the cost of money. With interest rates at their highest in fifteen years, investors have stopped paying for growth and started asking for margin, and the fastest lever on margin is people.

For Salesforce the cuts arrived alongside pressure from an activist investor, Starboard Value, which disclosed a stake in October, and the departure of co-chief executive Bret Taylor, announced at the end of November. Benioff said the company would keep investing in its core products. Partners and consultancies that live in the company's ecosystem, a large share of them in India, spent the week reading the memo for what it meant for them.

Microsoft is in talks to put $10 billion into OpenAI

A deal that would value the maker of ChatGPT at $29 billion, six weeks after it released a research preview.

Microsoft is negotiating an investment of about $10 billion in OpenAI, Semafor reported on January 10, in a structure that would give Microsoft three quarters of OpenAI's profits until it recovers its money and a 49 percent stake thereafter. Neither company would confirm the talks. The Information had reported a week earlier that Microsoft plans to build ChatGPT-style answers into its Bing search engine, and its Azure cloud already sells access to OpenAI's models to corporate customers.

The talks follow Microsoft's $1 billion investment in 2019 and its position as OpenAI's exclusive cloud provider. Bing has held a low single-digit share of the search market for more than a decade; a chatbot that answers rather than lists is the first thing in years that might move it. Google's response, after its internal "code red" in December, has not yet appeared in a product.

AVIATION

The FAA grounds every departure in the country; Southwest puts its December bill at $800 million

Every commercial flight in the United States was held on the ground for about 90 minutes on the morning of January 11 after the Federal Aviation Administration's system for distributing safety notices to pilots, known as NOTAM, failed overnight. It was the first nationwide ground stop since September 11, 2001. The agency said a damaged database file was to blame and that its investigation was continuing. More than 10,000 flights were delayed. Separately, Southwest Airlines told investors on January 6 that its December cancellations would cost between $725 million and $825 million before tax, enough to turn its fourth quarter into a loss.

CONGRESS

McCarthy wins the Speaker's gavel on the fifteenth ballot

Kevin McCarthy was elected Speaker of the House early on January 7 after four days and fifteen rounds of voting, the first time since 1923 that the chamber had needed more than one ballot. To win over about twenty holdouts on the right of his party he agreed to rules that let a single member force a vote to remove him and gave the group more seats on the committee that decides which bills reach the floor. The House then adopted those rules and began its work with a majority of a handful of seats and a Speaker whose job any of them can put to a vote.

BRAZIL

Bolsonaro supporters storm Congress, the Supreme Court and the presidential palace

A week after Lula's inauguration, several thousand supporters of the former president Jair Bolsonaro broke into and ransacked the three branches of Brazil's government in Brasília on January 8. Police made about 1,500 arrests. The Supreme Court removed the governor of the Federal District from office for 90 days for failing to prevent it. Bolsonaro, who has been in Florida since December 30, condemned the violence in a post that also compared it to protests by the left. Governments across the region and in Washington condemned the attack; the parallel with January 6, 2021, was drawn by nearly everyone.

WASHINGTON

Classified documents found at Biden's former office and home; a special counsel is appointed

The White House confirmed on January 9 that classified documents from Biden's time as vice president had been found in November at the Washington think-tank office he used after leaving office, and on January 12 that a second batch had been found in the garage of his home in Wilmington, Delaware. Attorney General Merrick Garland appointed Robert Hur, a former US attorney, as special counsel the same day. The president said he was "surprised" and was cooperating fully. The discovery complicates the Justice Department's separate investigation into documents kept by Donald Trump at Mar-a-Lago.

ECONOMY

US inflation slows to 6.5 percent, the sixth monthly decline

Consumer prices in the United States rose 6.5 percent in the year to December, down from 7.1 percent in November and a peak of 9.1 percent in June, the Labor Department said on January 12. Prices fell slightly month on month, the first outright decline since 2020, led by gasoline. Core inflation, which strips out food and energy, was 5.7 percent. Markets took it as licence for the Federal Reserve to slow to a quarter-point increase at its meeting at the start of February.

INDIA

Joshimath is sinking

Cracks have opened in more than 700 buildings in Joshimath, a town of about 20,000 in the Himalayan state of Uttarakhand that serves as a gateway to the Badrinath shrine and to Auli's ski slopes. Families were moved to relief camps from the first week of January; the state declared parts of the town unsafe and began demolishing two hotels that were leaning into each other. Residents blame a hydroelectric tunnel being bored beneath the town, along with decades of unplanned construction on what geologists have known since 1976 to be an old landslide. The company building the tunnel denies its work is the cause.

IN BRIEF

China reopens; California floods; Meta fined; Nepal crash

China lifted quarantine for arrivals on January 8, ending three years of closed borders, as its own outbreak continued to swell. A series of atmospheric-river storms has killed at least 19 people in California since late December and flooded towns from Santa Cruz to Sacramento; the president declared a major disaster on January 14. Ireland's data regulator fined Meta 390 million euros on January 4 for forcing users to accept personalised advertising in its terms of service. A Yeti Airlines turboprop crashed on approach to Pokhara, Nepal, on January 15 with 72 people aboard; there were no survivors. Lisa Marie Presley died on January 12 at 54. A Russian missile struck an apartment block in Dnipro on January 14, killing dozens; the toll was still rising as this issue went to press.

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The Ledger

Microsoft's $10 billion talks with OpenAI would be the largest AI investment on record. Bing is the first product expected to show it. Salesforce, Google, Meta: nothing shipped.

Rates

US CPI 6.5 percent in December, sixth consecutive monthly decline; markets expect the Fed to slow to a quarter point on February 1.

Real estate

US 30-year mortgage rate 6.33 percent (Freddie Mac, January 12), down from 7.08 percent at the November peak. Purchase applications remain near their lowest since the mid-1990s.

Healthcare

China's reopening on January 8 ended the last national lockdown regime in the world. The WHO continues to ask Beijing for hospital and death data it is not getting.

India tech

Amazon's cuts reach India, with about a thousand roles reported affected. Startup layoffs continue: Ola, ShareChat and Dunzo all announced reductions in the first fortnight of the year.

What we called wrong

Last issue we noted that Microsoft had "said nothing publicly" about OpenAI. It still has not, formally; it let Semafor say it instead. We will take that as confirmed.

The Back Page

Did we win?

Damar Hamlin, a 24-year-old safety for the Buffalo Bills, collapsed on the field in Cincinnati on the night of January 2 after making a tackle, his heart stopped, and medical staff restarted it in front of a stadium and a national television audience. The game was abandoned, the first NFL game not to be finished for reasons other than weather in living memory. Hamlin was released from hospital in Buffalo on January 11. His doctors said that when he first woke and could not speak, he wrote a question on a pad: had they won. One of them told him he had won the game of life. A charity drive he had started in 2020 to buy toys for children in his hometown, with a target of $2,500, passed $8 million.

The Fortnight's Fable

The Farmer Who Ate His Seed

Through a hard winter a farmer ate the grain he had set aside for planting, reasoning that spring was far off and hunger was now, and he was warm and full while his neighbours went lean over their untouched sacks and called him a fool. When spring came the neighbours sowed, and the farmer stood over empty ground with nothing to put into it, and he was hungry for a whole year to buy himself one comfortable month.

Moral: there is a difference between the harvest and the seed, and the man who forgets it feasts through one good winter and starves through the year that comes after.