Massive Twitter layoffs by Elon Musk inspired similar cuts across Silicon Valley: Report

In a bold and controversial move, billionaire Elon Musk, after acquiring Twitter for $44 billion in 2022, initiated a massive overhaul of the company's workforce. According to a report by The Telegraph, Musk dispatched loyal associates, including former Boring Company executive Steve Davis and his cousin James Musk, to assess the value of existing employees. 

This led to the termination of 6,000 workers, approximately 80% of the workforce at the time, a decision that reverberated through the tech industry.

The report detailed how employees were required to justify their roles and recommend colleagues who should be retained. The diversity and inclusion departments, along with the product and design teams, were hit hardest by the layoffs. Even Twitter's content moderation team faced significant reductions.

"It was clearly pretty bloated. You had to right-size the organisation. However, Musk went further than anyone predicted. When he cuts a team, he cuts the whole team, and that creates significant chaos," a source told The Telegraph.

Musk aimed to rebuild Twitter, now rebranded as X, with a fresh perspective and a challenger mindset. However, the aggressive approach left many gaps, as entire divisions were eliminated without a clear strategy to fill the voids. 

Talented employees had ample opportunities at rapidly growing startups like OpenAI, making it challenging for Twitter to retain and attract top talent.

Despite initial predictions of doom for Musk-led X, the app has managed to endure. This resilience has, in part, been due to new "free speech" policies that reinstated previously suspended accounts, including that of former President Donald Trump, and a mandate for "hardcore, high-intensity" work hours for the remaining staff. While these changes led to user complaints about increased hate speech and functionality issues, the platform has continued to operate.

Musk's radical downsizing did not go unnoticed. Within weeks, other major Silicon Valley companies began implementing similar large-scale layoffs. Companies like Meta, Google, Microsoft, and Amazon collectively slashed 165,269 jobs in 2022, 263,180 in 2023, and 96,551 in 2024 so far, according to data on layoffs.fyi. 

The majority of these cuts targeted middle management layers, or as Meta CEO Mark Zuckerberg described, “managers managing managers, managing managers, managing managers, managing people who are doing the work.”

The drastic reduction in workforce was initially met with scepticism and concern about the future of Twitter under Musk's leadership. However, the broader tech industry soon followed suit, adopting similar practices in an effort to streamline operations and cut costs amidst rising economic pressures.

David Friedberg, a technology investor, noted that Musk’s actions “set a new standard” for the scale of job cuts in the industry. This new standard appears to prioritise leaner operations and a focus on core functions, often at the expense of broader employee welfare and job security.

Despite surviving the layoffs and operational shifts, Twitter's financial valuation has suffered significantly. The company's worth has plummeted to $14 billion, a stark contrast to the $44 billion Musk paid for it. This steep decline has had a substantial impact on investors.

A source mentioned in The Telegraph report suggested that many investors have come to terms with the loss. "Most people involved have accepted that a large part of that money is gone. The hope is for most investors who lit their money on fire that hopefully when he has another very successful project, like SpaceX, they will get a ride on that Musk rocketship," the source said.

Musk's approach to restructuring Twitter may have set a precedent for the tech industry, but it also highlighted significant risks. The aggressive cuts, while achieving short-term cost savings, created operational challenges and a loss of valuable institutional knowledge. Moreover, the drastic reduction in workforce has raised concerns about the long-term sustainability and innovation capacity of affected companies.

The pattern of large-scale layoffs seen in Silicon Valley is reflective of a broader trend towards cost efficiency in an uncertain economic environment. However, this trend also underscores the delicate balance companies must strike between maintaining lean operations and fostering a supportive, innovative workplace culture.

As the tech industry continues to navigate economic challenges and rapid innovation cycles, the influence of Musk’s radical approach at Twitter will likely be a topic of debate. While some argue that such measures are necessary for survival and competitiveness, others caution against the potential downsides of extensive workforce reductions.

For Musk, the focus now shifts to proving that the drastic changes at Twitter can lead to a sustainable, profitable business model. For other Silicon Valley giants, the challenge lies in learning from Twitter's experience, balancing cost-cutting measures with strategic growth and innovation.

In the meantime, the impact on the broader workforce remains a critical issue. As companies follow Musk's blueprint, the tech industry must grapple with the consequences for employee morale, job security, and the overall health of the labor market.

The unfolding story of Twitter under Musk’s leadership and the subsequent ripple effects in Silicon Valley will continue to shape the discourse on corporate restructuring and employee management in the tech industry for years to come.