The toilet paper school of business

Hello! It’s Drake here in New York. Tech companies could learn something from toilet paper makers. But first...Today’s must-reads:• An $8 bi [View in browser]( [Bloomberg]( Hello! It’s Drake here in New York. Tech companies could learn something from toilet paper makers. But first... Today’s must-reads: • [An $8 billion US phone subsidy for the poor is under threat]( • [Tencent is back among the world’s 10 most valuable companies]( • [Laid-off Twitter workers are still waiting for severance]( Wipeout This week, two of the world’s biggest and most widely emulated technology companies, Amazon.com Inc. and Salesforce Inc., announced layoffs. In Amazon’s case, the cuts, which will eliminate 18,000 jobs, were [the largest in the industry](. Big tech is shrinking. In November, Meta Platforms Inc., the parent of Facebook and Instagram, said it was [cutting 13% of its workforce](. Snap Inc. is [laying off 20%](. This year is already bringing more of the same. Employees at Alphabet Inc., Google’s parent, are [bracing for possible cuts](. So are workers throughout the sector. Part of the problem, as the companies are quick to point out, is a slowing economy. But so far, tech has been particularly hard hit. It’s the inverse of what happened at the height of the Covid-19 pandemic, when those same companies raked in money and grew while much of the rest of the economy struggled. To be fair, the pandemic has tested everyone’s sense of the future. But some got it right. Remember the toilet paper shortages? Early in the pandemic, when people began hoarding it, toilet paper manufacturers such as Kimberly-Clark Corp. and Georgia-Pacific LLC declined to radically ramp up production to meet the new demand. They looked at the world and did not see a future where people would need steadily increasing amounts of toilet paper. Instead, they figured that everyone had simply gone a little nuts and would soon realize they didn’t want a six-month supply of Charmin sitting in their closets. The companies instituted measures that could later be reversed, like increasing shifts at their plants, but they didn’t go out and hire tens of thousands of new workers or build new plants. Compare that to the pandemic’s biggest tech Icarus. Peloton Interactive Inc., maker of connected exercise machines and the content that goes on them, went from being a niche product to a phenomenon, and its stock price briefly octupled. Its co-founder, a tech veteran and fitness buff named John Foley, predicted that Peloton would soon be a trillion-dollar company. The [hydration obsessed]( Foley spent money like, well, water — on new hires and stores and expensive ads and content partnerships. He made the argument that the pandemic was, rather than an anomalous global event forcing people into patterns of behavior they found unpleasant and unnatural, an accelerant to a future of high-margin virtual activity, in this case physical activity. That argument has not aged well. Peloton has been scrambling to reinvent itself — and to survive — for over a year. Zoom Video Communications Inc., whose leadership was always a bit more ambivalent about its pandemic stardom, has seen its stock price return to exactly where it was in early 2020. But tech companies whose success long predated the pandemic got caught out in similar ways. Salesforce, which saw demand for its software boom during the pandemic’s enforced remote work, went on a hiring spree that grew it to 80,000 employees, from 48,000, and expanded into [the world of business media content](. There are, of course, very real differences between toilet paper and software. One is that toilet paper is cheap and bulky; software is pretty much the opposite. But that, according to Willy Shih, a supply chain expert at Harvard Business School, imposes a [certain kind of discipline]( on people who make TP. Among other things, they are reluctant to do things like break ground on [factories they may not really need](. And they do not decide to spend billions of dollars [trying to architect a virtual universe]( that will interpenetrate in magical and lucrative but as-yet-undefined ways with our own. Toilet paper companies have to live in the world as it is. Sometimes the people purporting to build the future have to do that, too. —[Drake Bennett](mailto:dbennett25@bloomberg.net) The big story The Chinese government is moving away from lavish spending on chip subsidies. [Beijing is more concerned with its Covid response](. Get fully charged A Hong Kong crypto mogul is trying to [raise $1 billion for a web3 fund](. Stitch Fix will cut 20% of salaried workers, and [the CEO will step down](. A major US union told regulators they should approve [Microsoft’s mega-acquisition of Activision Blizzard](. Deere is making an [electric excavator](. Follow Us More from Bloomberg Get Bloomberg Tech weeklies in your inbox: - [Power On]( for Apple scoops, consumer tech news and more, every Sunday - [Game On]( for reporting on the video game business, delivered on Friday - [Cyber Bulletin]( for exclusive coverage on the shadow world of hackers and cyber-espionage, sent every Wednesday Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. You received this message because you are subscribed to Bloomberg's Tech Daily newsletter. If a friend forwarded you this message, [sign up here]( to get it in your inbox. 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