Handelsblatt International correspondent Torsten Riecke analyzes interesting data and trends from all over the world in his weekly column. You can reach him at [email protected]
(Photo: Klawe Rzeczy)
London Marc Benioff likes to be a pioneer of technological progress. A few years ago, the co-founder and boss of the American software giant Salesforce installed an artificial intelligence-equipped virtual manager at his board table, which he christened “Einstein”. The CEO hoped that the artificial colleague would be more efficient in managing the $27 billion group.
Meanwhile, at Benioff’s table are four very real “Gordon Gekkos”, activist investors from Elliott, Starboard, Value Act and Inclusive Capital who, like the legendary financial shark in the film “Wall Street”, are less interested in gadgets than in returns. Salesforce laid off about 10 percent of its 80,000 global employees in early January after the company’s market value had fallen by almost half in the previous 12 months.
What Benioff is currently experiencing is similar to others in the tech industry. According to a study by investment bank Lazard last year, about a quarter of all the targets of activist financial investors came from the tech sector. In the previous three years it was only 14 percent.
Falling stock prices, poor quarterly results and a lack of cost discipline make technology companies a popular target for profit seekers. Even the fact that techies still earn more than all other sectors in economic history despite the slump in business cannot prevent “barbarians” from now standing at the gates of the tech temples in Silicon Valley who do not want to make the world a better place, but above all pay homage to the despicable mammon.
The unwelcome visit is not without consequences. Meta founder Mark Zuckerberg has just proclaimed 2023 the “Year of Efficiency”. Alphabet boss Sundar Pichai only wants to invest “responsibly and with great discipline”.
Even Apple boss Tim Cook promised his investors that he wanted to proceed “well thought out and considered”. The fact that the tech icons are now emphasizing virtues that have been taken for granted in other industries for years shows how far some pioneers of progress had strayed from economic reality.
Mass layoffs do not harm all companies
The fact that many of them are now reacting with mass layoffs also shows that their abilities, which have long seemed magical, are reaching their limits. Some tech corporations have grown so large that they suffer from inertia and oversize like other mammoth organizations. In addition, many governments are now putting regulatory shackles on future makers, forcing them to change their business model.
As is to be expected, technology is still the answer to all problems for some of the inventors who are in love with their products: Zuckerberg, for example, is betting that he can use artificial intelligence to limit losses in advertising revenue, which due to the higher level of protection of the threaten privacy. Others such as Microsoft and Google also see AI as the new savior – both technologically and economically.
However, the example of Marc Benioff and “Einstein” shows that clever machines cannot guarantee economic reason and certainly cannot replace it. It would therefore be good for the high-flyers that a few financial investors sit at the table with a sharp pencil when the future is being designed.
It may not be a coincidence that Apple is the only tech company to have refrained from mass layoffs. The company has been in the sights of financial investors for more than a year. Apparently it didn’t do him any harm.
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