When I left Microsoft, they dropped from 181,000 employees to 180,999. In the five years since, they’ve hired & acquired another 40,000 employees, peaking at 228,000 just last year.
Guess it took a lot of people to replace me.
That’s nearly a quarter of a million people. Santa Rosa is the biggest city in Sonoma County at 170K people. Every single person here plus the next biggest city (Petaluma, 60K) would clock-in at Microsoft if they were local.
The software business runs on people. Clever people who code. At least it used to.
In the past year or so Microsoft has been trying their hardest to get rid of people. It started with layoffs or RIFs (reduction in force) and now they’re getting creative.
RIFs make headlines; they’re bad PR.
Earlier this year, Microsoft offered early retirement to about 10K people; around 3K took the offer. Now they’ve dramatically expanded this approach and it’s no longer age or geography based. Their latest early exit offer extends to 60K people.
Oh my God, they killed Petaluma!1 You bastards!
The offer targets just engineering and ops. The people who write the software; the people who run the datacenters.
The software business has changed.
Meta (the company I love to hate) gave a clue in their last earnings report. A year after laying off 8,000 people — 10% of their workforce (they’re around 1/3 the size of Microsoft) — revenue went UP: a monster 25%.
You know what else increased? Yep, capital expenditures — which is a fancy way of saying now they’re spending money on machines, not people.
Software was an easy target industry for AI to upend. I’ve explained how this happened, with the wealth of public or open source code available to teach machines how to be great programmers.
Enter the Ants. Claude Code is Anthropic’s breakout product and it has transformed how we write software.
If you’re an Anthropic employee, you call yourself an Ant, and Anthropic will list on the NASDAQ as ANT.
Anthropic employs 5,300 people, err Ants. That’s like my local tiny town of Guerneville, on the Russian River, hitting the market and asking for a couple Trillion dollars. It’s how many people hit the Santa Rosa Costco on a busy Saturday.
Anthropic is 40 times smaller than Microsoft if you count people. What if you count by the almighty dollar? Well, today — 40 years since going public — Microsoft is worth 4 Trillion dollars.
Anthropic is shooting for a valuation half that: 2 Trillion dollars.2 That makes each Ant worth $375 million versus $18 million per Microsoft employee. That’s nuts. It took Microsoft 35 years to get to 2 Trillion.
It’s only this decade that we’ve started counting with the unfathomable number Trillion. Microsoft crossed over into $1T valuation in 2019, doubling a couple years later and then doubling again after a couple more.
The companies worth trillions? All Tech3. It comes back to the fundamentals of software: huge profits, because you make software once and sell it over and over again (versus say, what goes into building cars) and cloud, because now customers pay by subscription so they pay you every month, forever.
The closest historical parallel to Anthropic’s upcoming IPO is when Google went public some twenty-ish years ago. At the close of their first day of trading, they were worth over 20 Billion. After that they hired people, and built up search like mad to fuel their growth. I wrote about this as the Golden Age of computing.
Google built a new thing: search.
Anthropic has also built a new thing: AI. Claude Code changed how software is built in companies and here’s where Anthropic is taking Microsoft’s playbook: laser focus on the business software market.
The Enterprise market is where the money is, which is why Microsoft is worth so much more than, for example, Meta/Facebook. Winning the business market is also how Anthropic is beating their arch-rival OpenAI to IPO.
In Google’s IPO they talked up their motto: Don’t Be Evil. Anthropic is similarly virtuous at this stage of the game and their IPO features a convoluted governance structure to ensure they retain control of the company.
But outside of these commonalities, Anthropic’s AI business is very different than traditional software. They can’t get enough compute to build and run their products. They’re more of a research company than a product company, spending way more on R&D than shipping the products that make the money. Sure they had a break-out hit in Claude Code but can they repeat this in other industries? Open source AI and Chinese Models are coming on strong; can Anthropic sustain a unique differentiation?
And of course the existential question that their founders are entirely too happy to bring up — will their products kill us all?
I can see Microsoft’s future — they’ll continue to shed more people as the machines write more of the code, and they’ll keep building datacenters to support their core business of selling plumbing to enterprise customers (AI included).
I can’t see Anthropic’s. Maybe they’ll be like Google and find their way, but in many ways their IPO is unprecedented, and I have no idea how it’s going to turn out.
Fewer people will take this exit offer than the prior early retirement one. The first (called VRP) was at least targeted at people that were already thinking about getting out. It’s not a great time to be looking for work in tech so if I was early in my career I for sure would be looking, but I might sit tight collecting a paycheck until they fire me. Shitty for morale that’s for sure.
Interestingly, the offer extends overseas to big work centers like India where the uptake is expected to be higher and tech hiring is still strong.
Everyone is wondering, what’s next? You gotta assume if Microsoft doesn’t hit their headcount goal, more RIFs are ahead.
After yesterday’s AI dip they’ll be lucky to get 1.5 or even a measly … $1T?
Of the US companies worth more than $1T today, all are tech: Nvidia, Apple, MSFT, Alphabet, Amazon, SpaceX, Meta, Broadcom & Tesla. The bottom two on the list are the exceptions: Eli Lilly (GLP1!) and Berkshire Hathaway - both only recently topped the $1T mark.
The suddenness and scale of these personnel changes boggle my mind.