Nintendo has been historically notorious for making more money per employee than most companies [0]. 10% is a step in the right direction, but it should definitely be more.
Most of the tech companies having layoffs don't "have to" have layoffs. They're doing it to depress worker compensation across the whole sector. It's a shameless money grab at the expense of their employees.
This doesn’t really make sense to me from a game theory POV. As a company, laying off productive employees of my own has an insignificant impact on the total sector’s compensation, but reduces my output and therefore profitability. Why would I do it? If I think there’s some big sector-wide conspiracy to unnecessarily cause layoffs to depress wages, my dominant strategy is to not participate - I still gain the full benefits (since my own participation has only a trivial impact on the outcome), but without hurting my own output.
Because the investors want you to [1]. Companies are using this as an excuse to cut unprofitable projects (e.g., Alexa). They over-hired before interest rates went up, when borrowing money was essentially free.
> This doesn’t really make sense to me from a game theory POV
Assume company leadership only cares about short-term stock price, and recompute your game theory POV. The outcome is exactly what's happening right now.
First, the article you linked is talking about an investors who called for layoffs but the company didn't respond with layoffs. So it completely undermines your point.
Most importantly, the investors have minority stakes in many of these cases. Facebook, Google, etc. And how do you explain non publicly traded companies like Stripe?
Cheap debt and high margins fueled waste. It's as simple as that.
They over-hired before interest rates went up, when borrowing money was essentially free.
I'm confused. As I understand, the wealthiest tech companys do not borrow money. Yes, they all have highly advanced treasuries to manage cashflows (different currencies, etc.), but they do not need to create liabilities (new debt) to run their businesses. They are cashflow positive and highly profitable.
Are you trying to say that as interest rates rise, the consumption part of the economy has slowed, thus profit growth has slowed at Big Tech? If yes, hmm, I half agree to attribute to layoffs. Mostly, I think they are cleaning house. A lot of people are working on projects that have little or no revenue potential. During economic weak periods, it is normal to close those projects.
There is also another aspect in addition to sister comment:
When interest rates are low, institutions with contractually agreed returns (pension funds and such) have to invest in riskier assets (stock, private equity, corporate bonds, riskier state bonds) to reach those targets.
When interest rates are where they should be they can just buy G8 government bonds. This leads to pretty big outflows from the stock and corporate bond markets.
Incidentally I think there is a huge blindspot (intentional or not) for the amount of economic pain this interest rate normalization will cause. After 10 years of negative real interest rates (central bank rate minus inflation) the economy and all its participants have become junkies. The withdrawal from the free money drug will be painful but neccesary.
Investors don't actually have any market power unless the company in question is doing a stock issue. For example, AMZN doesn't get any extra operating capital no matter how much of their stock any investor buys or sells on the open market. The only way "investors" can control a publicly traded company that isn't dependent on issuing new stock is by depressing the executive comp package's value. From that follows an obvious lesson on corporate governance. The fact that that obvious lesson isn't followed is proof enough that the system doesn't work exactly as advertised.
> The only way "investors" can control a publicly traded company that isn't dependent on issuing new stock is by depressing the executive comp package's value.
Or, y'know, if the Board — which is always composed of shareholders, who are, in public companies, expected to hold the stock value as their primary interest over the internal interests of the company, whether or not they're also officers of the company — operates by firing-and-replacing the CEO whenever the CEO does something the market responds sufficiently-negatively to. Or just makes it clear to the CEO that that's what will happen. (This is, in principle, where the infamous hypothetical "duty to shareholders" is supposed to come from. It's not a law; it's the market's ability to transitively fire the CEO through a share-price-incentivized Board.)
At least in the case of Google and Facebook, the owners have a different class of stock that has enough voting power that they cannot be fired by outside shareholders.
In public companies, majority (rather than plurality) shareholders who are also the officers of the company (i.e. where the CEO doesn't have to listen to the Board, because the CEO "is" the Board for all intents and purposes) are the exception, not the norm. Most companies have sold off an internal controlling interest by the time they go public. And, if they survive in the market, most other companies that kept an internal controlling interest initially, end up selling it off once all the founders leave or retire. (In fact, insofar as you can think of a retired founder as now having the interests of an external shareholder, the process is almost a tautology.)
For the relevant example, Nintendo's shareholdership — https://www.nintendo.co.jp/ir/en/stock/information/index.htm... — is composed of "47.43% Foreign Institutions and Individuals" (this category usually meaning "foreign investors"), and "31.07% Japanese Financial Institutions" (i.e. domestic investors.) So, (more than) 78.5% of Nintendo is externally owned. These are not voting shares, but that doesn't matter; they're a majority of shares, so they're controlling shares in practice: even if you can't vote, you can still do a coordinated dump of the company's stock to signal your displeasure. Thus, the institutional shareholders with these shares drive board allocation in a game-theoretic sense, rather than a legal sense.
That's why you see some very mysterious people (https://www.nintendo.co.jp/corporate/en/officer/index.html) on Nintendo's Board, specifically on an "Audit and Supervisory Committee" (a.k.a. "the actual Board; composed of people we didn't pick and don't really want here, but were strong-armed into taking by threats to do things to our share price; who can veto any decision made by the rest of the Board.") These are either large individual shareholders, or are "ambassadors" for the interests of institutional shareholders, or both.
Takuya Yoshimura is "Vice President at Mizuho Securities" — pretty clear why he's there. Asa Shinkawa works for an M&A company. Masao Yamazaki, retired Japanese railway tycoon, is likely there as a representative of his friends' institutional interests (and maybe the interests of some, er, "groups" in Japan); while Katsuhiro Umeyama, accounting-firm CEO, is there in a more formal (but not formalized) capacity to put a literal external auditor / comptroller lens on Nintendo's spending on behalf of whichever companies think that's needed.
Make no mistake — these people on this "Audit and Supervisory Committee" can get a Nintendo CEO or "President" fired, if they don't like their last-quarter decisions and resulting stock performance. That's pretty much all they can do; but in theory it's enough to steer the company, as they can just keep rolling the dice until they get a President whose policies happen to already align with theirs.
For companies with high levels of share-based compensation, share price is the denominator for converting grant values to shares, meaning the share price does affect the share pool consumption from any given grant.
There is no big sector-wide conspiracy. A sector-wide conspiracy would be massively illegal. If, however, several companies individually decided a layoff is in their best interest for legitimate reasons (looming recession instead of suppress wages) then there can be the same practical effect without any criminal act.
Groups of people that are coordinating in ways and times others aren't can have a competitive advantage. The game is how to coordinate, and how to establish yourself as a member of the coordinating group, without actually coordinating because that's illegal.
Just saying, it has happened before [1]. Except this time they’d have the perfect cover of “no collusion, the economy is doing bad”. The CEOs of these large companies talk all the time. As do board members. Heck, some even share board members. It’s not that hard at this level to generate collusion that’s hard to prove.
Now I’m not saying this is what’s happened. I’m a big fan of Occam’s razor. But at the same time I wouldn’t dismiss it. Oh and the “massively illegal coordination”? Why don’t you look at what the outcome was of the DOJ prosecution of that case.
It is possible to kill without legally murder. It is possible to have your property taken without someone legally stealing. This is the point I was attempting to make with my rhetoric.
Put in game theory language, the optimal solution for the game includes a group of people cooperating when defecting amongst a population of defectors would be the optimal strategy.
From a communications point of view, players have limited communication channels, and must both explain the game and encourage cooperation without directly doing so. The players have similar cultural backgrounds, having read the same books and having overlapping social circles. When a player announces their agreement to cooperate they used clearly false reasons, implying there is much left unsaid. Maybe the stock bump that happens when a player cooperates is a positive reinforcement signal by people concerned about rising labor costs.
Your logic is somewhat fallacious: specifically, you create a false dichotomy between "there is an illegal sector-wide conspiracy" and "these things could happen across the sector if there were fully legitimate reasons for them to".
You are missing the middle, which is that there is no conspiracy, but that many companies in the sector saw, at around the same time (though possibly influenced by some bellwether I'm unaware of), the opportunity to juice their stock prices with layoffs even though they're making record profits and don't actually expect to be hit by a looming recession.
you are assuming those workers were productive (in terms of contribution to the bottom-line) to begin with, which a lot of insiders tend to disagree with.
This has baked into it the incredibly naïve (and generally accepted to be incorrect) assumption that layoffs are performance-based. There are plenty of examples of FAANG and other companies laying off folks with 15, 20, 30 years of incredibly specialized and presumably valuable experience but with a compensation price tag to match.
If anything it's a great time to shed well-paid fat. Hire a noob out of MIT for 1/2 price and hope that the Sr. gave the project enough legs and enough documentation to allow the NUG to figure it out.
I mean that's certainly part of it. If (and it's a big if) you can run a project for less money, you probably should.
However I'm not sure it's as large-scale a thought process as "let's keep industry wages as low as we can" and more "I will look good if I can trim my budget, so I'm going to try to do that." The effect is the same, generally, but not quite as nefarious.
"I don’t think dropping the lowest 10% of developers is hurting your output. It might even raise it."
I have seen a few mass layoffs while I was contractor at different companies. Most of these big layoffs weren't performance based but they axed whole departments. Another group at danger were managers that didn't actually manage anybody. they were either demoted or let go. But in general I didn't get the impression that the layoffs were about performance. It was more about being lucky and being at the right place at the right time.
This does not work in practice. You don’t have a perfect metric to evaluate performance, and managers at all levels have some margin of decision and they can interpret different people’s productivity differently. The effects on morale are also usually terrible and can reduce the productivity of the remaining employees while the best ones polish their CV and look elsewhere.
This idea is rooted in a philosophy where people are interchangeable cogs that can be evaluated purely on a one-dimensional axis, don’t have emotions, and where you don’t have competitors taking advantage of this by getting good engineers for cheap you fired for ideological reasons.
This generally isn't how layoffs work because if there is any correlation between performance and protected indicators (age / gender / race / etc.), then a mass layoff may appear to be biased and open up a legal liability.
Instead, layoffs are shaped by specific reductions in funding for product areas, and a degree of randomization and rebalancing is mixed in to eliminate bias.
If you're Amazon it would... this wouldn't be the first time companies colluded to suppress wages in SV. It might not even be explicit collusion. These companies do have other motivations for these changes.
How is this idea suddenly so widespread? Big tech are currently at the edge of the abyss to varying degrees. For most it has now been 4 quarters of revenues growing at a lower rate than expenses (and accelerating). At this rate it's obvious they have only a few quarters left before they go into the red. So why exactly should they keep employees around that they hired during the largest bubble in at least 40 years? Should they keep these people on and only start doing something once they are billions of dollars in debt?
Besides that, this class warfare rhetoric on HN is a cruel joke. You have the global 0.3% complaining that the 0.03% is stealing their $300,000 salaries. Why don't they accept a 75% pay cut so that the marketing assistant and cleaning personnel can get a salary more in line with theirs? If companies have to make HR decisions based on social factors this will be the result.
That’s an interesting theory, how do you reconcile it with the fact that several companies which have had layoffs have also given out large stock refreshes to some of the employees who weren’t laid off?
I suspect it's less about depressing worker compensation than increasing managerial compensation. Average CEO tenure is quite short these days, so the incentive is for execs to maximize short-term gains. Layoffs fit in with what I think of as "market sadism". In economically troubled times, CEOs counter fear of weakness by looking tough. (Tough on other people, of course, never themselves.) That lifts the stock price, putting money in their pockets, and hopefully giving them longer at the trough.
>In Japan, people value job security over maximizing expected value of compensation.
I don’t think that is it. In Japan, the way of maximizing compensation is by staying in your job as long as possible, because the pay is strongly tied to seniority.
On the whole, this is a rather more "equal" process. The top managers don't get paid the huge amounts they do in the US. However this also leads to all the unproductive situations you can imagine, with seniors running the company into the ground and the juniors not being able to do anything about it.
It always fascinates me how Japan is full of anachronistic, counter-productive traditions and is also one of the most advanced countries in the world at the same time.
The whole place is full of contradictions. If everyone works absolutely insane hours and has no life, one would imagine the life expectancy would be shot as well, just due to the stress.
Japan was one of the most advanced countries in the world.
The country has been stagnating for quite a while. South Korea and Taiwan have since eclipsed it by PPP-adjusted metrics per person. (Japanese make higher paper incomes than South Koreans and Taiwanese, but they also generally pay more for imports due to tariffs.)
My off the cuff theory is perhaps their diet is very good, so offsets some of the shortened life expectancy from stress? On the graph of stress vs diet, where being in the top right is the worst for life expectancy, being high on only one might help.
Having said that, I don't know if the average Japanese diet is good. Just postulating a possibility.
On the whole it is probably better than US, but it's not like they don't have unhealthy habits either. Smoking is far more common than in most Western countries. Drinking I'm not so sure, but they do have the custom of forced work drinking parties, and most Asians have the gene that produce extra toxins from alcohol, so the harm from drinking must not be negligible.
I would posit that the life expectancy is in part due to lack of documentation of dying. There are many cases in Tokyo where old people living alone are found dead only weeks later when neighbors complained about the smell.
It seems Nintendo profits were 4B+ last year. It has ~7000 employees, working out to 500k+ per head in profit (not revenue). I can't readily find compensation data but given the low pay in Japan I'd be surprised if the average annual compensation is substantially higher than 100k. They definitely have a lot of room to increase pay despite whatever risk you mean. And it's not like past profits are necessarily going to help "weather the storm".
I expect Nintendo to have a different workforce composition than your typical SaaS.
They will proportionally have more artists and translators, who have less leverage/alternatives in the labor market than engineers. That would explain a lower expense line in the profit formula.
Obviously, this is not a value judgement. Diamonds cost more than water, at the margin, but that doesn't mean one is more important than the other.
> They will proportionally have more artists and translators, who have less leverage/alternatives in the labor market than engineers. That would explain a lower expense line in the profit formula.
And not just artists, but artists at a name-brand company that shape games. People from all over the world would line up around the block for days, buddhist monk style, to get an artist job there. They can pay at or below market rate just because folks would kill to design the next Metroid game.
If OpenWork snippets [0] are to be believed, sounds like people after a couple of years (5)? are making 7M. People citing entry-level pay as 5M. Managers at 10M JPY. General "salary based on years of service" stuff.
Now... I think in Kyoto that's a pretty decent number! Tech company salaries in Kansai are _so much worse_ than in Kanto when I looked (5 years ago but). But if you're in Tokyo and making that... honestly you are gonna be better off elsewhere.
I have seen worse numbers at other game companies, but hearing 500k+ per head in profit, it's kind of disgusting they don't pay a bit more.
To add insult to injury, I'm guessing the lawyers that help them enforce their IPs are paid better than their top engineers and artists, also because of a disparity in typical outside options.
My experience with Japanese people and some anectodes from a friend who worked at Nintendo is that bureaucracy, culture expectations that you shouldn't change jobs at all, and English ability are some of the strong limiting factors for Japanese rank and file employees to achieve high pay. It's a shame as Japan has so many smart people who are both down to earth and innovative.
The storm of wanting to keep their obscenely large profits at the same scale? I mean, that's what the other big tech companies who are laying off employees are doing
Couldn’t get archive.org to get the content for your article, unfortunately.
Anyways, I’m not sure that this is the right metric to criticize a company, at least not without corroborating metrics. Two main questions I’d be interested before casting judgement are:
What did they do with the excess monies they had from their large profit:compensation ratio?
Were they paying above market rate for their industry?
I do see how my response betrays my assumption that profits do not always need to be shared with the labor pool that generated/oversaw the period of profits. That’s something I’m chewing on, personally.
Isn't that their normal cycle though? Produce a console that prints money, produce a console that bleeds money, repeat. Seems like their cash reserves keep them nimble enough to experiment and remain independent.
I don't think bleeding money is accurate for Nintendo. They are in the habitat of iterating on their previous consoles instead of just throwing everything out the window each time like some other companies, so even with their consoles that flopped it's not like the R&D money is just down the drain, and I'm sure labor-and-materials-wise they're making some kind of margin on the hardware itself.
i don’t think they’ve had a console that bleeds money in the sense that playstations/xboxes have, though they’ve had quite a few flops over the past 20 years
Given the cycles for Nintendo consoles this sounds pretty reasonable particularly now that they have a single line of consoles with the Switch instead of console + handheld.
It's not like the Wii U sold a lot. Who knows if the Switch replacement won't be a Wii U. Who knows if there won't be two Wii Us in a row.
Businesses are not people who get old, can't keep working, and retire. Businesses can borrow significant sums of money, issue stock, come up with a new product that can transform their revenues overnight, etc.
I know what you're trying to say but this isn't a great comparison.
The Marxist* notion that workers should get salaries commensurate to net profit of the company is weird and purely subjective.
Why should they?
There is an argument that wages should be tied to productivity, but that would lead to internal inequalities and would be very subjective as many worker outputs are hard to measure.
The current employer-employee "bargain" is for the worker to get a steady fixed income, independent of output or consistency, in exchange for the security that provides.
Self-employment is a good way to take on more risk for (potentially) higher pay.
Before anyone counters with "but what about unskilled workers who can't self-employ", I would return the question - yes, what about them?
I see no particular reason why profit of a company must be shared with its workers, most of whom did not outlay the initial capital (or subsequent funding rounds) that built the company.
*Maybe there's a better word for this or an earlier progenitor of this idea but I think this captures it well enough for this comment.
> The Marxist* notion that workers should get salaries commensurate to net profit of the company is weird and purely subjective.
Is that actually a thing? I read the Capital quite a long time ago but I don’t think Marx advocated for any of that. He wrote about workers’ ownership of the means of production and how they should be the ones deciding what to do with the results of their labour.
In a market economy, that would lead to workers-owned companies, so the people deciding salaries and compensations would be the employees. How revenue is split is still a strategic decision: you still need war chests for difficult times, investments, etc. You’d hope that the pay would be more fair, but it’s a consequence of the employees taking decisions, rather something postulated a priori.
> Self-employment is a good way to take on more risk for (potentially) higher pay.
Indeed. And some people really like it, which is great. But you obviously cannot do the same thing as a one-man shop than as a large company. A working economy needs both, otherwise the plucky independents quickly get out of things like manufactured goods and food. Also, for some people stability is more important, and sometimes both sets of people are the same at different points in their lives. It is not really a good argument against fair wages.
> Before anyone counters with "but what about unskilled workers who can't self-employ", I would return the question - yes, what about them?
This sounds fine and dandy until they take a rifle and get off you what they need to survive. The simple truth is that people are not going to just starve because you think they don’t deserve a living.
> I see no particular reason why profit of a company must be shared with its workers, most of whom did not outlay the initial capital (or subsequent funding rounds) that built the company.
OTOH, capital itself does not build anything or produce anything. You need people to actually do the work at some point, and they are at least as necessary and important as the rich dude who signed a check at the beginning. Never mind the fact that “investors” who get rich off the secondary market do not bring anything to the company of which they trade the shares. I do it as well at my (very modest) level, but I don’t pretend I am doing anything useful by buying and selling stock.
> In a market economy, that would lead to workers-owned companies, so the people deciding salaries and compensations would be the employees.
This seems to make no sense - managers and C suite are employees already, and they decide salaries.
But more generally: what is the actual way they should reward work?
I.e. if you just pay everyone the same, what happens to your company if another company that pays based on value decides to hire all your top employees at 20% more?
They are mandated by the board, and ultimately by the shareholders (who, yes, can be employees in principle but most of the time are not).
> What is the actual way you should reward work?
Pretty much the same way it works usually, in that respect. This structure actually exists already, employees-owned companies are a thing that is common in some countries, and it is not particularly problematic. These companies do not pay everyone the same salary, but they tend to be less unequal.
Also, I am not really advocating for or against this, just that this would be how you steer towards de-alienating the workers in a market economy based on the theory in the Capital. Though yes, that is short of a communist utopia but still a step in the right direction from that point of view.
> This structure actually exists already, employees-owned companies are a thing that is common in some countries
I'm not sure about common, but yes it does happen. I'm asking how does the commenter expect this to work in practice? What's the difference between my manager telling me my new wage and my comrade telling me my new wage?
You usually democratically determine the process by which you arrive to individual compensation. I've seen an organization to use mix of measuring actual billable output and blending it with time spent on internal company workings, tooling, management and so on. There is usually a way to redistribute couple % ad-hoc, e.g. when someone has financial difficulties or a baby or something.
There is always a financials dashboard for everyone to see and complete openness and even discussion about compensation.
But yeah, I have only see a handful of companies like that. Some were not even worker-owned, but had owners who said "OK, here is a fixed share of revenue that goes to us before you distribute the rest among yourselves" and then let the workers do the rest.
But what did the workers doing the rest actually look like? To me, almost all companies are like that: owners own a chunk of the company and authorise salary budgets, the board decides top executive pay and employees such as executives and managers decide how to distribute the pay budget.
> The Marxist* notion that workers should get salaries commensurate to net profit of the company is weird and purely subjective.
The opposite is rampant inequality, where workers get paid pennies and owners keep most of the profits.
> I see no particular reason why profit of a company must be shared with its workers, most of whom did not outlay the initial capital (or subsequent funding rounds) that built the company.
You are OK with the people who create the actual thing a company sells, not getting their share. Only people who provide capital should.
> I see no particular reason why profit of a company must be shared with its workers
I am a devout capitalist and I largely agree with your argument, but the Marxist argument isn't rooted in the desire for every man's labour to be as valuable as its demand. It's rooted in the belief that every man's labour should be treated as equally valuable. This is a moral argument, not an argument about real value or evidence thereof.
In 2022 Google at 282 billion / 190,234 employees = 1.48 million per employee.
In 2022 Nintendo was 13.923 billion / 7,136 employees = 1.85 million per employee.
In theory Google might be more consistent, but the article was written in 2008 when Nintendo was 1.6m per employee in 2008 beating Goldman Sacks at 1.2m and Google at 600k.
[0] https://www.ft.com/content/9d9624a4-8341-11dd-907e-000077b07...