Consider all the reasons you might have to reduce headcount in an economic downturn:
- You rely on venture capital to survive which is no longer as easy to get, so you simply can't afford to pay your staff.
- You've started making a loss, so you need to fire people to get back to profitability.
- You have low cash reserves, so need to reduce operating costs to give you more of a runway if things go wrong.
- There's reduced demand for your services so no need for as much staff.
- Business propositions which were marginally worthwhile in the past are no longer positive expected value.
So consider Meta:
- It's a super profitable company (made 4 billion dollars last quarter).
- It's got 40 billion dollars in cash reserves - enough to keep the lights on for 6 months even if income dropped to zero.
- It's usage hasn't significantly changed, and demand for advertising certainly hasn't dropped enough to lay off more than 10% of it's workforce.
- The employees who were layed off don't seem to be exclusively layed off from sectors which only make sense to invest in in an upturn. E.g. Eric Lippert was laid off, and his team worked on internal tooling to improve software development at Meta. Whether that's a good idea or not seems independent of the economic headwinds.
Also laying off staff has enourmous costs. Meta is paying extremely generous packages to laid off employees (16 weeks of pay, plus 2 for every year working at meta, and 6 months health insurance). It also strongly demotivates people who weren't fired and makes it harder to recruit in the future. Finally, since fired employees aren't usually given a chance to handover, it leaves their colleagues scrambling to take over their roles.
My best guess is that actually the layoffs have nothing directly to do with the economic downturn. Among any big company's investors there's those who want it to stay lean, and those who want it to expand. When Meta posts poor financial results (even if they have more to do with the state of the economy than whether Meta's business decisions were any good), that shifts more firepower towards those who want to slim things down, and so Meta is forced to make cuts.
Echoing some sentiments said in other answers:
"Successful" tech companies are designed, structurally, for growth at every size. Startups grow to fill a market, large companies grow to expand into new markets. The currency of power internally is headcount — so everyone's pushing for bigger teams, more scope, etc.
For larger companies, hiring is a huge machine that takes time to change course. So, executives are trying to predict the future — what might the economy look like? what businesses will be successful?
When times are good and capital is cheap, incentives aside, this sort of culture might make sense. Google and Amazon have demonstrated that you can keep compounding far longer than anyone imagined, even people who believed in power law outcomes.
High-leveled employees and investors share an incentive: they want the stock price to go up. Sometimes the price goes up because of company growth (alluded to above). But in hard times, lean/efficient companies are valued. There's no reason to run the company break even if you can run it profitably; and no reason to run it merely profitably when you can run it massively profitably.
Meta is an interesting example because they are in an unusual position: they historically had a cash cow (Facebook, Instagram), but it's clear to everyone that it won't last forever. So they're desperately trying to manifest the Metaverse into being their next act. Investors agree: at the recent low, the $META stock was trading around 9x earnings, which is incredibly low for the type of company they are ($GOOG was over twice that).
Lastly, it's fairly safe to say that ~20% of a large tech company is dead weight. Not that they aren't talented or doing useful jobs, but that from the outside, the company could do basically the same without them. This is fractal: companies may be supporting products that were a bad idea, but no one's taken the political hit to cancel it; middle and end-line managers may have a few low performers that are borderline, and they never got around to doing the performance improvement plan → firing HR process.
So there's a few dynamics at play: