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Goldman Sachs laid off 3,200 employees with as little as half an hour’s notice. It will probably please the petty, pinched, Schadenfreude-prone sort of little people who have never worked for a predatory investment bank to imagine the scenes. I know it did me.
All these huffy guys dressed like Christian Bale in American Psycho, ties wrenched from necks, belongings tumbled into cardboard boxes (lucky gonks, family photos, stress balls, wrinkled twists of cocainey paper and whatnot), stepping out on to Wall Street like goddamn civilians, faces black with fury. Masters of the Universe demoted at a stroke to citizens of the universe.
What’s more unusual is what happened next. Nothing so became them, it seems, as the fact of their going. It turned out that these 3,200 employees, far from no longer just being a drag on the vampire squid’s bottom line, have made the company vastly more money by their departures than the savings on their salaries alone. The weird thing, the alarming thing, the mind-boggling thing, is this: immediately after the layoffs were announced, Wall Street’s enthusiasm increased Goldman’s market cap by $3.3 billion. Ponder that, for a moment: that’s a bit more than a million dollars of value added per employee sacked.
It’s quite the retrospective performance review. I’ve been fired from all sorts of places over the years. And, fair enough: I am pretty useless. I don’t flatter myself that my absence will have much damaged the value of any of the companies that have taken the wise decision to see the back of me. But I have just enough self-respect to doubt that getting rid of me would at a stroke have made the company thousands of dollars more valuable.
These ex-Goldmanites are, reportedly, harbingers of a new community in the workforce described as the “surplus elites.” More and more, big companies are discovering that there’s a giant bounce to be had from getting rid of a whole swathe of well-paid executives. Facebook’s parent company Meta is said to have seen its stock price jump by a third after it laid off 11,000 people.
Turns out there’s quite a bit of fat to cut out there. Like all right-thinking folk I regard Elon Musk as a dangerous lunatic — but fair play to the man: he discovered by bold experiment that it was possible to fire fully three quarters of Twitter’s staff without the microblogging site collapsing altogether. It might be a bit less good than it was, but it’s still there. What were those three-quarters of the staff doing all day? What were those 3,200 people at Goldman doing that not only did they not make the company money, but they were — at least in the estimation of their former Wall Street peers — holding its value down by multiples of their salaries?
The Goldman firings added up to 6.5 percent of the payroll. Now, clearly, there’s going to be some sort of Laffer Curve effect in play here: if Goldman went on to fire 95 percent of its staff it wouldn’t — I hope — be expected to jump in value by $50 billion. But the temptation among many big companies may be to see just what shape that curve turns out to be. Would another 5 percent or so yield similar results? Might be worth a punt, right?
An old friend of mine, during a brief career at a big consultancy during the 1990s, had a prototypical version of this insight. He noticed that when anybody fancied their secretary, they made them a marketing assistant; so he recommended that the company fire all its marketing assistants. I don’t know that they went that far, but they shed a good few and my friend was rapidly promoted in recognition of his keen structural insight and his promisingly heartless disposition.
So it’s a nervous-making time to be a well remunerated upper manager. For most of modern history, the precariat has tended to be composed of those a bit lower down the pay-scale; manual workers whose jobs have been done away with by various industrial advances. The arrival of the spinning-jenny, the closure of coal mines, the discovery that robots are just as good at building cars as people, and so on: these have, generation by generation, left the traditional working class deskilled and demoralized.
Now, apparently, it’s the turn of the white-collar community — and given that “managing” is a little more opaque and more tricky to quantify as an activity than digging coal or pressing rivets, it’s not altogether easy to see where it’s going to end. It seems perfectly possible that over the coming years big companies will outsource their human resources, legal and marketing departments to ChatGPT, while algorithms will buy and sell shares better, quicker and more rationally than their meat-puppet counterparts — and won’t need lunch.
Those speculations about what a “post-work society” looks like could yet need dusting off. A cull of surplus elites may look attractive to those of us who aren’t those surplus elites ourselves, but it has longer term implications. Robots and AI are increasingly good at filling the production side of the economy, but they’re hopeless as consumers. Who’s going to buy all those pelotons, wine aerators and brushed-chrome kitchen surfaces if people in useless but high-earning jobs are all suddenly out of work?
The pitiless operations of the free market are jolly useful and efficient, in other words, but it’s not just the downtrodden proletariat who now need to worry that they might just come round to bite us all in the backside. It’s funny to think, though, that in the vanguard of future converts to the idea of fully automated luxury communism might be former employees of Goldman Sachs.
This article was originally published on The Spectator’s UK website.
