November 15, 2022
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Today's newsletter is 1,241 words, a 5-minute read.
1 big thing: Web3 in FTX's blast radius
Fallout from the cratering of Sam Bankman-Fried's FTX is casting a giant pall over the decentralizing project known as Web3.
Catch up quick: Over the past two years, some cryptocurrency enthusiasts and their venture-capitalist backers expanded the scope of their dreams.
- They weren't just revamping the global financial system — they were inventing entirely new ways of organizing human relationships, online and off.
- They dubbed their vision "Web3" and raised piles of money — to the tune of tens of billions of dollars — to build it.
Now, FTX's disintegration means they're going to have a much harder time winning public confidence for their plans.
The big picture: While financial sleuths work overtime to figure out where all the money went in FTX's wreckage, and nervous investors worry about how the collapse will affect contiguous markets and services, the tech world is coming to terms with a different kind of contagion of mistrust.
Web3, at its heart, is all about using blockchains and crypto tokens as tools for organizing decision-making, governance and financial incentives in every realm of human endeavor — from virtual world-building to social networking and from accounting to art-making.
Between the lines: FTX was just a financial exchange — its operations barely touched the surface of the kinds of crypto-backed enterprises Web3 architects have imagined.
- Web3 true believers will point out that the failure of a trading platform that played fast and loose with its customers' money shouldn't discredit still largely untested blockchain-based ideas.
But to outsiders, FTX's failure suggests that the crypto world hasn't even arrived at square one of its vision.
- If crypto can't even get the foundational stuff right, like managing trading and handling customer assets, there's little reason to trust it with any other dimension of our lives.
Yes, but: When the dotcom bubble burst two decades ago, a ton of people wrote off the entire internet as a lost cause.
- That was a big mistake. Web3 builders will be hoping for a similar turnaround.
My thought bubble: In 2000-2002, people kept using the internet through a financial disaster because the network provided plenty of opportunities to do useful, cheap and fun things.
- If Web3 has any future, it will need to give users more to do than buying cheesy-looking NFTs and losing money on tokens.
The bottom line: Axios' Felix Salmon wrote yesterday that crypto entrepreneurs' dream of supplanting the world's existing financial infrastructure is now dead. It's also likely that their wider Web3 dreams will never come to life.
2. Tech layoffs are soaring this month
November is shaping up to be a brutal month for tech layoffs — and we’re only halfway through, Axios Markets' Emily Peck reports.
The latest: Amazon is gearing up to lay off about 10,000 employees, the largest reduction to its headcount in the company's history (though a teeny fraction of its 1 million employees), the New York Times reports.
Why it matters: Unemployment overall is low, but you wouldn't feel that way if you worked in tech — or the mortgage industry. These are the sectors feeling the most pain from the Fed's rate hikes.
- A hyped up "war for talent" led some companies to hire too fast and spend too much. Some of that hiring was "sloppy," one recruiter told Axios.
Details: The Amazon layoffs will concentrate on those in corporate roles, including people working on Amazon devices, its retail division and human resources, per the Times.
- Growth has slowed in Amazon's core retail and cloud-computing businesses. Last week, the WSJ reported that the company was launching a "cost-cutting review," and that its device division was hemorrhaging money.
The big picture: Layoffs will likely mean huge changes culturally in a tech sector known for well-paying roles with lush perks at companies pitching endless growth.
By the numbers: "November has been the worst month so far in 2022," said Roger Lee, who runs the site Layoffs.fyi and has been tracking tech firings since the start of the pandemic.
- Meta's layoffs make up nearly half of the 23,000 firings thus far tallied in November.
- If Amazon's cuts happen as expected, November will see more than 32,000 tech workers let go, easily surpassing the prior peak in Lee's data — 27,000 in April 2020, a time of historically high unemployment as the pandemic arrived.
- More than 120,000 tech workers have been laid off so far in 2022, eclipsing the total from all of 2020.
- Other companies cutting staff this month: Twitter (3,700 laid off, per Lee's tracker), Salesforce (1,000), Stripe (1,000), Lyft (700), Redfin (850), Opendoor (550) and Zendesk (350).
3. Qualcomm sees upside to glut of chips
Qualcomm will unveil its latest high-end smartphone chip Tuesday, as it — along with the rest of the industry — grapples with a rapid about-face in the semiconductor market, from unprecedented shortage to incipient glut of both devices and key components, Axios' Ina Fried reports.
Why it matters: Every player in the chip industry has to deliver the latest and greatest to avoid losing market share to rivals. At the same time, the makers of phones and PCs now have weeks’ worth of inventory of existing products, as the economic slowdown pinches consumers.
Driving the news: Qualcomm is holding an event in Hawaii this week aiming to convince journalists and analysts that its latest Snapdragon 8 chip has the power to take on the latest offerings from Apple and Google.
- Meanwhile, most of the PC and phone industry — Qualcomm included — has warned Wall Street that the traditionally strong last quarter of the year will be far weaker than originally thought, with a glut of inventory putting a further damper on what is already a dramatically weaker outlook for consumer spending.
- Chipmakers AMD and Intel have offered similarly gloomy forecasts, as has Microsoft.
What they're saying: "Everything that has consumer exposure is suffering," Qualcomm CEO Cristiano Amon told Axios ahead of the company event.
Between the lines: After experiencing chip shortages over the past two years, many companies decided it was better to break from past tradition and keep more inventory.
- But as demand slows, that inventory moves more slowly too. What was once a week's worth of products might now be more like two weeks' worth.
- That leaves many makers of PCs and smartphones with more unsold devices and raw components than they want — and many will want to work through both before placing new orders.
Yes, but: Even as Qualcomm faces a substantially weaker outlook for its core business of supplying chips for smartphones, it sees some advantages.
- The company is benefitting from its efforts to diversify beyond phones, as demand for chips that go in cars and industrial devices remains strong, Amon said.
Qualcomm also announced during its recent earnings that it expects to supply the lion's share of modem chips for next year's iPhone models, after earlier predicting it might only be in 20% of devices.
- Amon said that will probably go to zero during the following year, as Apple shifts to its own modem chips. But it will keep supplying the communications component if the iPhone maker wants it. "If they need it, they know where to find us," he said.
4. Take note
- Transcription service Otter.ai added Zack Cable as chief revenue officer and Treena Diebolt as VP of people.
- Google agreed to pay $392 million to a coalition of 40 state attorneys general to settle an investigation of its privacy practices. (Axios)
5. After you Login
It's a translucent 1998-era iMac! No, wait, it's a ... George Foreman grill?
Thanks to Peter Allen Clark for editing and Nick Aspinwall for copy-editing this newsletter.