*"Price's Law"* When Elon bought Twitter, they had 7500 employees. He fired 50% of their workforce. Another 1200 left after he told them he was going to make Twitter "Extremely Hardcore". Less than 2900 remain. How can 2900 do the same job as 7500? Price's Law: Derek Price, a British physicist, historian and scientist discovered something interesting about his peers. There were always a handful of people who dominated the publications within a certain subject. Being a scientist, he investigated. He found out the following: 50% of the work is done by the square root of the total number of people who participate in the work. He tested it across different groups and audiences and it almost universally applied. Especially in business. The square root of the number of people in a company do 50% of the work. In a company of 10 employees, 3 of them do 50% the work. Remaining 50% of the work is done by the other 7 people. These scales too. Competence grows linearly. Incompetence grows exponentially. - 10 employees, 3 of them do 50% of the work - 100 employees, 10 of them do 50% of the work, the other 90 do the other 50% - 10,000 employees 100 of them do 50% of the work, the other 9,900 do the other 50% The survival of any business requires the execs to figure out who the most competent and necessary people are in the organization and keep them happy and keep them around. If they don't, Price's law will kill their business. Elon just has to hope he chose the right people.
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Not sure about the math but this is always true for building new stuff but not necessarily for all the “work” done in a software company. Software is almost always released before it is completely ready this requiring manual support to keep the lights on. This isn’t necessarily in the core product lines but the tail end of features that exist in a software. In that sense, the work done for growth may be done by a smaller set of people but the actual work done is done by a larger set than price’s law. But always there’s some fat that can be cut off..
I mean, Twitter will be ok without a lot of the roles e.g. diversity and inclusion mgr
Informative video... https://youtu.be/BZMBdRfbk6A
“How do 2900 do the job of 7500” They don’t. In the 90s a bunch of companies found this one unique trick to cutting costs: doing away with the R&D and other jobs that did not directly support current products. This worked for years, until these companies realized they had no real innovations for their best products, or ways to actually improve this current products. Judging by my company, we are a bit bloated and very poorly managed. We could probably layoff a certain percentage of workers without any real long and short term effects. With that said losing 50 - 70% of your work force, including full teams, is shooting first and asking questions later.
But, you must agree that those regaining are highly motivated to keep the lights on. I think the layoffs around helped Musk with that.
Any rational person will be highly motivated to look for a new place. It is too much risk to be in a place where the CEO expects you to work 80 hours week…
Wonder if the rest of big tech follows this if Musk succeeds with Twitter.
Maybe Copium but it wouldn’t really make sense If you go full maintenance, sure. Twitter only has one real product and they don’t need to invest in any other product lines FAANG are all competing in so many areas, that’s why they hire so aggressively. Example: neither Microsoft Amazon nor Google were cloud companies but now are aggressively fighting for cloud (with Amazon way in the lead). It’s like this for every hot area Twitters not doing that Lastly, big techs hoard employees just to keep them from the competiton. Don’t think anyone is competing with Twitter as twitters an awful business
I’m not saying to the same degree as Musk did but corporate departments are seriously overstaffed, where coasters hide in plain sight. Cutting unproductive staff by 20% could be a wake up call for coasters.
Yes, both Price's Law and Pareto Principle can be applied infinitely until the number of resources approaches zero. Both are useful to keep the number of resources to a minimum, assuming normal distribution of population. That's what Musk is doing.
So according to that, Twitter keeps only 4 employees. 2 will do 50% of the work and other 2 will do 50%. And 100% of the work of formerly 7500 people get done?
You are misunderstand Pareto principle The principle doesn’t claim that the other 80% are meaningless It claims that you should prioritize the 20% that drives the most impact first. What Elon is doing is saying the other 80% don’t matter. In a highly competitive environment the other 80% that create the incremental difference is actually what drives the dollars I.e. in consulting we live by this principle. People joke that all consultants do is PowerPoints, which would be analogous to the 80% less impactful work. Without it we just have recommendations without a clear to communicate it or drive buy-in
Not really. In my experience thr other 80% are to be given minimal importance if not completely disposed of. In most cases, they're disposable.
Again, consultants literally leave by this principle day to day. You can NOT dispose of the 80%. It destroys long term value and competitive advantage. I.e. If we didn’t make fancy PowerPoints we would 100% lose business
1. It's always tough to do the last 20%. 2. People who do the heavy lifting are paid heavily unlike others.
*"Pareto Principle"* The Pareto principle, also known as the 80/20 rule, is a theory maintaining that 80 percent of the output from a given situation or system is determined by 20 percent of the input. Here are a few examples of the Pareto principle in action: 20 percent of employees produce 80 percent of a company’s results. 20 percent of a given employee’s time yields 80 percent of their output. 20 percent of software bugs cause 80 percent of the software’s failures. 20 percent of a company’s investments produce 80 percent of its investment profits.
+1 to this. Getting 80% of twitters end user functionality likely only requires 20% of the headcount. The last 20% is what the other 80% spend their time on. As it’s a hard problem to solve. I do think twitter’s staffing was bloated, but it’s naive to think the company wasn’t justified in having that headcount. For example Musk’s layoffs lead to a large proportion of ad rev to be lost
@Amazon: But Twitter is still functioning well. There's no new-product dev happening. Correct?