David Friedberg said companies could quickly realize: "Wow, you don't actually need 50% of the workforce in order to keep the product running."
Neilson Barnard/Getty Images for the New York Times and ROBYN BECK/AFP via Getty Images
Some of Elon Musk's closest associates are celebrating his decision to lay off about 50% of Twitter's staff.
Tech investor David Friedberg said Musk's cost-cutting measures at Twitter could quickly become a new Silicon Valley standard as companies struggle to address the economic downturn in the months to come.
The investor made the comments in the "All-In Podcast" on Saturday. Twitter staff were told to listen to the podcast episode to learn why layoffs were necessary, according to tech newsletter Platformer. Friedberg is one of four major investors that co-host the show.
"He shows the entirety of Silicon Valley that you can cut deep and you can turn a profit and you can do it fast," Friedberg said in the podcast. "It really kind of sets a new standard that a lot of folks might then end up saying, maybe we should go deeper," he added, referencing recent cuts at companies like Snap and Stripe that have slashed about 20% and 14% of staff, respectively.
Friedberg, who is currently the CEO of San Francisco-based investment firm The Production Board, said companies could quickly realize: "Wow, you don't actually need 50% of the workforce in order to keep the product running and to drive profitability."
David Sacks, a longtime friend of Musk and a member of the PayPal Mafia, said companies could easily cut their headcount in half if they returned to their plans before the pandemic "distorted" the economy.
"The point is you didn't have to do this when the rates were zero," billionaire investor Chamath Palihapitiya added. "There was just an abundance of free money and risk seeking that is now out of the market."
Ultimately, Friedberg argued that Musk's $44 billion Twitter purchase could catalyze a "flurry of violent activity" as more people "try to mimic the Elon playbook," including through initiating private buyouts.
The large layoff round also seems to follow advice recently given by Silicon Valley venture capitalist Bill Gurley. In September, Gurley said it makes more sense to launch large-scale layoffs versus smaller ones, noting small-scale layoffs bring more pain and "very little gain."
However, some experts have pointed to Musk's layoffs — which were conducted via blunt emails signed by "Twitter" — as an example of what not to do.
"Why would anyone want to go work at a place where they've just treated people poorly?" Robin Erickson, who studies how companies behave in crisis as vice president of human capital at Conference Board, told Vox. "Those organizations that laid off employees will have a harder time rebounding as they try to hire employees."
There are also signs that Musk might have cut too deeply.
On Monday, Insider's Kali Hays reported that Twitter had already begun to reverse some termination decisions and was asking employees to reach out to old coworkers to ask if they'd be interesting in returning.
