Key Points: – Former Meta AR head Caitlin Kalinowski joins OpenAI to lead its robotics and hardware division. – OpenAI invests in Physical Intelligence, a $2.4 billion robotics startup, as part of its hardware push. – Kalinowski’s hire underscores OpenAI’s move to embed AI into consumer-facing, physical devices.
OpenAI has taken a major step in its robotics and hardware ambitions by hiring Caitlin “CK” Kalinowski, former head of Meta’s Orion augmented reality glasses project, to lead the company’s robotics and consumer hardware initiatives. Kalinowski, an experienced hardware engineer and executive, announced her new role on LinkedIn and X on Monday, stating that her initial focus at OpenAI will be “bringing AI into the physical world” through robotics work and strategic partnerships.
The move comes as OpenAI, best known for its chatbot ChatGPT, increasingly signals its intention to expand beyond software into physical technology. Kalinowski’s background includes nearly two and a half years at Meta leading the development of Orion, a pioneering AR glasses project initially known as Project Nazare, as well as nine years working on VR headsets for Meta’s Oculus division. Before her time at Meta, Kalinowski spent nearly six years at Apple, contributing to the design of MacBook Pro and MacBook Air models.
The timing of Kalinowski’s hiring aligns with OpenAI’s recent investment in Physical Intelligence, a robotics startup based in San Francisco that raised $400 million in funding. The investment round also saw contributions from high-profile investors including Amazon founder Jeff Bezos, Thrive Capital, Lux Capital, and Bond Capital, and the startup’s post-money valuation now stands at $2.4 billion. Physical Intelligence aims to bring general-purpose AI into real-world applications, using large-scale AI models and algorithms to power autonomous robots.
This latest move reflects OpenAI’s strategic push to establish itself as a leading force in consumer hardware, with a focus on embedding its AI capabilities into physical devices. This aligns with its recent partnership with Jony Ive, former Apple design chief, to conceptualize and develop an AI-driven consumer device. These developments indicate that OpenAI is not only aiming to develop software but is also working toward integrating its advanced AI capabilities into everyday, tangible products.
With the addition of Kalinowski, OpenAI gains expertise from a seasoned professional with a strong background in both augmented reality and consumer hardware, positioning the company to bring its AI advancements to life in ways that go beyond the digital realm. As OpenAI enters this new territory, Kalinowski’s experience in AR, VR, and consumer technology will likely be instrumental in helping the company transition its AI models from conceptual applications to real-world, user-friendly products.
Kalinowski’s start date at OpenAI is Tuesday, Nov. 5, marking the beginning of a new chapter for OpenAI as it takes significant strides toward expanding its footprint in robotics and consumer hardware.
Key Points: – Meta and Microsoft’s AI spending plans trigger a broad tech stock decline. – U.S. 10-year Treasury yield climbs to 4.33%, pressuring equities. – Core PCE inflation and jobless claims data keep Fed policy under scrutiny.
Wall Street’s main indexes dropped sharply on Thursday, driven by renewed concerns over Big Tech’s escalating artificial intelligence (AI) expenses. While both Meta and Microsoft posted better-than-expected quarterly earnings, their plans to increase already significant spending on AI infrastructure raised red flags among investors. This push toward higher AI investment triggered a sell-off in the technology sector as fears surfaced that such costs could eat into future profitability.
The Nasdaq Composite, heavily influenced by tech giants, fell approximately 2%, while the S&P 500 dropped about 1.6%, reflecting the widespread impact of these concerns. Meta and Microsoft’s focus on AI investments caused their shares to slide, signaling that, despite their strong earnings, heightened spending in this area could offset potential gains. This trend extended to other major technology companies, such as Amazon and Apple, which are also slated to report earnings soon. Investors will closely monitor their results as the “Magnificent Seven” tech giants—the group of leading high-value companies that have largely driven market gains—determine much of the market sentiment around AI and technology spending.
Bond markets added another layer of volatility to the day’s trading activity. U.S. Treasury yields rose, with the 10-year yield hitting 4.33%, its highest level in months. A stronger dollar also accompanied this climb in yields, placing additional pressure on stocks, particularly in sectors sensitive to rate fluctuations. Meanwhile, across the Atlantic, the UK faced a bond market sell-off, fueled by inflation fears related to recent fiscal stimulus, adding further tension to global markets.
Compounding the market’s cautious mood was new economic data reflecting inflationary pressures and resilient employment. The Personal Consumption Expenditures (PCE) index, the Federal Reserve’s favored inflation gauge, showed core inflation rising 2.7% in September, maintaining August’s rate and slightly exceeding economists’ expectations. The data hints that inflationary forces might still be persistent, adding pressure on the Federal Reserve as it prepares for its next policy meeting. Investors are now left questioning whether the Fed might adjust its rate policy to control inflation, particularly as a series of rate cuts had been anticipated.
Additionally, weekly jobless claims fell to 216,000, a five-month low that was below market expectations of 230,000. This lower-than-expected figure further indicates a strong job market, a factor that could complicate the Fed’s decision on interest rates. Combined with last month’s spike in private payrolls, this data builds a case for economic resilience, though the Fed must balance this with inflation management. With the critical monthly jobs report due Friday, investors anticipate further insights into employment trends and inflation risks as they navigate these mixed signals.
This blend of rising bond yields, mixed tech earnings, and economic data reflecting both inflation and robust employment presents a complex landscape for investors. The challenges of AI’s impact on Big Tech’s financials, alongside uncertain Fed policy in the face of economic data, have amplified market volatility. The coming weeks, including additional earnings from major tech players, Middle Eastern tensions, the Nov. 5 U.S. election, and the Fed’s upcoming policy meeting, suggest that market fluctuations will likely continue.
As concerns over excessive screen time’s effects on kids escalate, the debate around regulating underage social media usage is intensifying – with major investing implications. The recent Florida law restricting online activity for those under 14 is just the beginning of a broader regulatory reckoning that could fundamentally disrupt platforms’ business models.
At the heart of the issue is big tech’s reliance on attention-grabbing, addictive algorithms to maximize engagement and ad revenue. Social media giants like Meta (NASDAQ: META) that own Facebook, Instagram, and WhatsApp have been criticized for tactics some argue exploit youths’ developmental vulnerabilities for profit.
Multiple studies link excessive social media use to disrupted sleep, lower self-esteem, cyberbullying, depression and more in young users. The long-term impacts remain largely unknown. But public pressures are mounting for these companies to better safeguard kids’ wellbeing over relentless growth.
From an investing standpoint, implementing robust parental controls and age verification mechanisms won’t come cheap. Significant compliance costs from stricter age-based targeting rules could compress Meta and peers’ profit margins, at least temporarily. Their scale across billions of users also makes effective content moderation extremely challenging.
As the regulatory tide shifts with bipartisan support for reining in big tech, new rules seem inevitable. Major changes to restrict underage social media engagement could be highly disruptive for growth trajectories if companies are forced to sacrifice lucrative younger audiences.
Instituting stronger guardrails proactively may let incumbents get ahead of even harsher regulatory crackdowns down the road. But their interim earnings could certainly take a hit from product reinventions reprioritizing child safety over engagement-driven profits.
Analysts expect this youth social media regulation debate will be a hot topic at upcoming consumer and tech investor conferences. With both policymakers and the public increasingly scrutinizing potential harms to kids, social platforms face intensifying pressures.
Some investors view any guardrails on big tech’s ability to monetize younger demographics as an existential risk to business models predicated on constant user growth. For companies like Meta that have operated with minimal oversight, preparing for a future of tighter digital reins on underage users is now prudent risk management.
Conversely, those with a longer-term outlook see upcoming regulatory requirements as valuations repressing near-term earnings overshoots. Any share price dips from compliance costs could actually present compelling entry points. Responsible corporate reforms demonstrating a willingness to evolve with the times could bolster brand equity and customer loyalty over the long haul.
Ultimately, the rapidly evolving online landscape demands new frameworks beyond the antiquated Children’s Online Privacy Protection Act established in the Web 1.0 era. Whether through new federal legislation, FTC action, or a combination, transformative change is coming to minors’ social media experiences. Well-prepared companies insulating ethical practices into their models now could emerge as winners, while those digging in their heels may face an existential reckoning down the road.
Investors should make plans to attend events like Noble Capital Markets Consumer, Communications, Media & Technology Conference scheduled for June, to dive deeper into these critical issues shaping the future of the social media industry and the AI revolution. With potential regulatory bombshells looming, having an informed perspective will be key for constructing a winning investment thesis in this pivotal sector.
The artificial intelligence (AI) revolution has arrived, and big tech titans are betting their futures on it. Companies like Alphabet (Google), Microsoft, Amazon, Meta (Facebook), and Nvidia are pouring billions into developing advanced AI models, products, and services. For investors, this AI arms race presents both risks and immense opportunities.
AI is no longer just a buzzword – it is being infused into every corner of the tech world. Google has unveiled its AI chatbot Bard and AI search capabilities. Microsoft has integrated AI into its Office suite, email, browsing, and cloud services through an investment in OpenAI. Amazon’s Alexa and cloud AI services continue advancing. Meta is staking its virtual reality metaverse on generative AI after stumbles in social media. And Nvidia’s semiconductors have become the powerhouse engines driving most major AI systems.
The potential scope of AI to disrupt industries and create new products is staggering. Tech executives speak of AI as representing a tectonic shift on par with the internet itself. Beyond consumer services, AI applications could revolutionize fields like healthcare, scientific research, logistics, cybersecurity, and automation of routine tasks. The market for AI software, hardware, and services is projected to explode from around $92 billion in 2021 to over $1.5 trillion by 2030, according to GrandViewResearch estimates.
However, realizing this AI future isn’t cheap. Tech giants are locked in an AI spending spree, diverting resources from other business lines. Capital expenditures on computing power, AI researchers, and data are soaring into the tens of billions. Between 2022 and 2024, Alphabet’s AI-focused capex spending is projected to increase over 50% to around $48 billion per year. Meta recently warned investors it will “invest significantly more” into AI models and services over the coming years, even before generating revenue from them.
With such massive upfront investments required, the billion-dollar question is whether big tech’s AI gambles will actually pay off. Critics argue the current AI models remain limited and over-hyped, with core issues like data privacy, ethics, regulation, and potential disruptions still unresolved. The path to realizing the visionary applications touted by big tech may be longer and more arduous than anticipated.
For investors, therein lies both the risk and the opportunity with AI in the coming years. The downside is that profitless spending on AI R&D could weigh on earnings for years before any breakthroughs commercialize. This could pressure stock multiples for companies like Meta that lack other growth drivers. Major AI misses or public blunders could crush stock prices.
However, the upside is that companies driving transformative AI applications could see their growth prospects supercharged in lucrative new markets and business lines. Those becoming AI leaders in key fields and consumer services may seize first-mover advantages that enhance their competitive moats for decades. For long-term investors able to stomach volatility, getting in early on the next Amazon, Google, or Nvidia of the AI era could yield generational returns.
With hundreds of billions in capital flowing into big tech’s AI ambitions, investors would be wise to get educated on this disruptive trend shaping the future. While current AI models like ChatGPT capture imaginations, the real money will accrue to those companies pushing the boundaries of what AI can achieve into its next frontiers. Monitoring which tech companies demonstrate viable, revenue-generating AI use cases versus those with just empty hype will be critical for investment success. The AI revolution represents big risks – but also potentially huge rewards for those invested in its pioneers.
Two of the biggest tech giants, Meta and Microsoft, recently hit major market cap milestones as part of the ongoing record rally in tech stocks.
Meta’s market cap surpassed the $1 trillion during intraday trading on January 24th, marking the first time the company reclaimed this valuation since 2021. Meta previously hit the $1 trillion mark in September 2021 at the height of its stock’s popularity.
Driving Meta’s soaring stock price is a nearly 200% surge over the past year, as CEO Mark Zuckerberg enacted cost-cutting that included laying off over 20,000 employees. After its stock plummeted to a six-year low in 2022, Zuckerberg has described 2023 as a “year of efficiency.”
Shareholders are bullish on Meta’s focus on expanding its position in artificial intelligence. Last week, Zuckerberg revealed the company is ramping up AI investments, procuring hundreds of thousands of high-powered AI chips from Nvidia. This signals Meta is spending billions to compete in the red-hot AI space.
On the same day Meta topped $1 trillion, Microsoft also briefly surpassed the $3 trillion mark during trading on January 24th. This comes around two weeks after Microsoft temporarily overtook Apple as the world’s most valuable company in mid-January. While Apple has since regained the top valuation spot, Microsoft remains hot on its heels.
Fueling Microsoft’s continued share price gains is optimism around the company’s AI initiatives. Microsoft stock is up over 7% year-to-date amid strong demand for AI capabilities, especially in generative AI.
Analysts predict Microsoft will post a solid earnings beat for its upcoming quarterly report, citing its leadership in enterprise-level AI as a key advantage. Microsoft seems poised to capitalize on the explosion of interest in AI technologies like ChatGPT.
AI Arms Race
The back-to-back market cap milestones from Meta and Microsoft highlight the massive investments pouring into artificial intelligence right now.
With breakout successes like ChatGPT demonstrating new possibilities for generative AI, tech giants are racing to stake their claims. The companies leading development of advanced AI stand to reap substantial rewards.
Both Meta and Microsoft are positioning themselves at the forefront of this AI arms race. In addition to its major chip purchases, Meta recently unveiled its own chatbot project, BlenderBot. Microsoft is integrating generative AI into Bing search and other offerings.
The tech world’s strike into AI looks poised to pay off based on the positive investor sentiment boosting Meta and Microsoft’s valuations. However, the AI hype cycle could eventually lead to a correction for these high-flying stocks.
For now, shareholders seem willing to bet on the transformative potential of artificial intelligence. And the tech giants pouring money into AI research appear ready to capitalize on this enthusiasm.
Big Tech Boosts Markets
Meta and Microsoft reaching new market cap heights also highlights the outsized impact of Big Tech on the broader stock market. The performance of tech stocks is a key factor driving indexes like the S&P 500 to record levels.
Despite some pockets of weakness, optimism around AI and other emerging technologies continues fueling upward momentum. The Nasdaq index, heavily weighted toward tech, rose over 12% in 2023 even as the overall market declined.
This dynamic shows no signs of changing in 2024. Tech stocks led markets higher to begin the year, with the Nasdaq up close to 10% in January as of this writing. Stocks like Meta and Microsoft hitting new milestones reflects their leadership in this rally.
However, extended runs by Big Tech raise risks of overheating and heighten their influence on market swings. With Apple, Microsoft, Amazon, Alphabet and other tech giants comprising over 20% of the S&P 500, their performance significantly impacts overall returns.
Nonetheless, bullish sentiment toward AI and other disruptive tech breakthroughs appears likely to keep lifting valuations. As giants like Meta and Microsoft position themselves to capitalize on these trends, their gravity on markets looks set to rise.
After a nightmarish 2022 saw Meta’s stock plunge over 60%, the company orchestrated a jaw-dropping turnaround in 2023 – with shares skyrocketing 178% year-to-date. This staggering rally cements 2023 as the best year ever for Meta’s stock, capping a remarkable validation of CEO Mark Zuckerberg’s intense push around “efficiency” and coast cuts.
The share price resurgence was fueled by Meta leanly rebuilding itself as an advertising titan laser-focused on what drives revenue today. Zuckerberg notably changed his tone in early 2023 – listening to shareholders, communicating more transparently, and realigning his priorities around the core ad business over capital intensive metaverse bets.
It represented a dramatic pivot from the seeming indifference to shareholder concerns that defined much of 2022 as Meta’s stock spiraled. After three straight quarters of declining sales, Zuckerberg admitted economic troubles and stiff competition had severely impacted projections.
2023 became Meta’s “year of efficiency” with sweeping layoffs and disciplined spending helping right the ship. Growth returned as digital advertising rebounded and Meta seized market share back from rivals Snap and Alphabet.
Crucially, Meta rapidly adapted its ad targeting to Apple’s 2021 privacy policy changes which had previously hammered revenue. Investments in artificial intelligence and machine learning helped Meta overcome the loss of certain user data – finding new ways to optimize ads despite disruptive forces.
The company also benefited enormously from booming advertising spend out of China looking to target Meta’s billions of users globally. This diversified another previous over-reliance on western advertisers.
Wall Street firmly rewarded Zuckerberg’s renewed focus and urgency regarding costs and care for the core business. But work remains heading into 2024 amidst lingering industry skepticism.
Meta still predicts an uncertain advertising landscape tied to geopolitical instability and the possibility of global recession. Its family of social apps also face intensifying governmental scrutiny and lawsuits related to mental health and data privacy concerns.
Plus the multi-billion dollar metaverse division continues bleeding substantial losses quarter after quarter – leading some analysts to demand bolder restructuring of that arm. Zuckerberg has trodden delicately here so far though, reluctant to fully abandon his vision.
And peril lies ahead in 2024 as digital behemoth Google plans to join Apple in phasing out certain ad tracking cookies from its dominant mobile ecosystems. This threatens a repeat of the mammoth revenue hit Meta only just recovered from and adapted to regarding Apple’s changes.
The regulatory ground also keeps shifting under the entire social media sector with legislative action repeatedly proposed on issues ranging from antitrust regulation to outright platform bans tied to national security concerns.
Upstart rival TikTok particularly remains an imposing threat having pioneered the culture-dominating short video format now ubiquitous across all social apps. Its popularity with younger demographics continues outpacing Meta’s offerings, forcing more ad dollars out of Meta’s reach as marketing follows shifting generational engagement.
Despite still monumental scale, Meta therefore heads towards 2024 with nervous investors recalling how quickly its business model faltered against the collision of multiple storm fronts in 2022. Its salvation came by sweating assets through job cuts and engineering revenue growth however possible in a battered online ad market.
But Meta likely needs more innovative long-term vision to guarantee sustained dominance as new technological and economic realities reshape its competitive landscape in dynamic ways year after year.
For now, as 2023 wraps historically, Mark Zuckerberg has earned a victory lap after boldly steering his tech empire back from the brink. Though clouds remain on the horizon, Meta proved it still has sharp reflexes and can reinvent itself when forced. The coming decade may demand that agility over and over as digital ways of life advance apace.
Tech stocks have taken it on the chin over the past two days, with the Nasdaq tumbling nearly 3.5%, despite stellar earnings reports from two giants in the space. Alphabet and Meta both exceeded expectations with their latest quarterly results, yet saw their shares plunge amid broader concerns about economic conditions weighing on future growth.
Alphabet posted robust advertising revenues, with Google Search and YouTube continuing to hum along as profit drivers. However, its Google Cloud division came up shy of estimates, expanding at a slower pace as clients apparently pulled back on spending. This reignited worries about Alphabet’s ability to gain ground on the cloud leaders Amazon and Microsoft.
Meanwhile, Meta also topped analyst forecasts, led by better ad revenues at Facebook and Instagram. But in the earnings call, Meta CFO Susan Li warned that the conflict in the Middle East could impact advertising demand in the fourth quarter. This injected uncertainty into Meta’s outlook, leading the stock lower.
The sell-off in these tech titans reflects overall investor angst regarding the challenging macroeconomic environment. While both companies beat expectations for the just-completed quarter, lingering headwinds such as high inflation, rising interest rates, and global conflicts have markets on edge.
Details
This skittishness has erased the gains tech stocks had made earlier in the year after a dismal 2022. Meta and Alphabet remain in positive territory year-to-date, but have given back chunks of their rallies from earlier this year. Other tech firms like Amazon and Apple are also dealing with the fallout ahead of their upcoming earnings reports.
The market is taking a “sell first, ask questions later” approach with these stocks right now. Even as fundamentals remain relatively sound, any whiff of weakness or caution from management is being seized upon as a reason to sell. The slightest negative data point is exaggerated amid the unsettled backdrop.
Both Alphabet and Meta have been aggressively cutting costs after overindulging during the pandemic boom years. But investors are now laser-focused on the revenue outlook, rather than celebrating the expense discipline. If top-line growth decelerates materially, the bottom-line gains from cost reductions will be moot.
For now, the Nasdaq remains in a confirmed uptrend, so this could prove to be just a brief pullback before tech stocks regain their footing. Many firms in the sector remain highly profitable with solid balance sheets. But the risk is that slowing economic activity and consumer jitters will weigh on future earnings potential.
Tech investors may need to buckle up for more volatility ahead. The days of easy gains propelled by boundless growth and ultra-low interest rates appear to be over. Now tech companies face much more skeptical scrutiny of their business fundamentals. In an environment where growth is harder to come by, even stellar quarterly results may not be enough to pacify traders worried about what lies ahead.
Why Meta’s Embrace of a ‘Flat’ Management Structure May Not Lead to the Innovation and Efficiency Mark Zuckerberg Seeks
Big Tech, under pressure from dwindling profits and falling stock prices, is seeking some of that old startup magic.
Meta, the parent of Facebook, recently became the latest of the industry’s dominant players to lay off thousands of employees, particularly middle managers, in an effort to return to a flatter, more nimble organization – a structure more typical when a company is very young or very small.
Meta CEO Mark Zuckerberg joins Elon Musk and other business leaders in betting that eliminating layers of management will boost profits. But is flatter better? Will getting rid of managers improve organizational efficiency and the bottom line?
This article was republished with permission from The Conversation, a news site dedicated to sharing ideas from academic experts. It represents the research-based findings and thoughts ofAmber Stephenson, Associate Professor of Management and Director of Healthcare Management Programs, Clarkson University.
As someone who has studied and taught organization theory as well as leadership and organizational behavior for nearly a decade, I think it’s not that simple.
Resilient Bureaucracies
Since the 1800s, management scholars have sought to understand how organizational structure influences productivity. Most early scholars focused on bureaucratic models that promised managerial authority, rational decision-making and efficiency, impartiality and fairness toward employees.
These centralized bureaucratic structures still reign supreme today. Most of us have likely worked in such organizations, with a boss at the top and clearly defined layers of management below. Rigid, written rules and policies dictate how work is done.
Research shows that some hierarchy correlates with commercial success – even in startups – because adding just one level of management helps prevent directionless exploration of ideas and damaging conflicts among staff. Bureaucracies, in their pure form, are viewed as the most efficient way to organize complex companies; they are reliable and predictable.
While adept at solving routine problems, such as coordinating work and executing plans, hierarchies do less well adapting to rapid changes, such as increased competition, shifting consumer tastes or new government regulations.
Bureaucratic hierarchies can stifle the development of employees and limit entrepreneurial initiative. They are slow and inept at tackling complex problems beyond the routine.
Moreover, they are thought to be very costly. Management scholars Gary Hamel and Michele Zanini estimated in 2016 that waste, rigidity and resistance to change in bureaucratic structures cost the U.S. economy US$3 trillion in lost output a year. That is the equivalent of about 17% of all goods and services produced by the U.S. economy at the time of the study.
Even with the mounting criticisms, bureaucratic structures have shown resilience over time. “The formal managerial hierarchy in modern organizations is as persistent as are calls for its replacement,” Harvard scholars Michael Lee and Amy Edmondson wrote in 2017.
Fascinatingly Flat
Flat structures, on the other hand, aim to decentralize authority by reducing or eliminating hierarchy. The structure is harnessed to flexibility and agility rather than efficiency, which is why flat organizations adapt better to dynamic and changing environments.
Flat structures vary. Online retailer Zappos, for example, adopted one of the most extreme versions of the flat structure – known as holacracy – when it eliminated all managers in 2014. Computer game company Valve has a president but no formal managerial structure, leaving employees free to work on projects they choose.
Other companies, such as Gore Tex maker W. L. Gore & Associates and film-streaming service Netflix, have instituted structures that empower employees with wide-reaching autonomy but still allow for some degree of management.
In general, flat structures rely on constant communication, decentralized decision-making and the self-motivation of employees. As a result, flat structures are associated with innovation, creativity, speed, resilience and improved employee morale.
The promises of going flat are understandably enticing, but flat organizations are tricky to get right.
The list of companies succeeding with flat structures is noticeably short. Besides the companies mentioned above, the list typically includes social media marketing organization Buffer, online publisher Medium and tomato processing and packing company Morning Star Tomatoes.
Other organizations that attempted flatter structures have encountered conflicts between staff, ambiguity around job roles and the emergence of unofficial hierarchies – which undermines the whole point of going flat. They eventually reverted back to hierarchical structures.
“While people may lament the proliferation of red tape,” management scholars Pedro Monteiro and Paul Adler explain, “in the next breath, many complain that ‘there ought to be a rule.’”
Even Zappos, often cited as the case study for flat organizations, has slowly added back managers in recent years.
Right Tool
In many ways, flat organizations require even stronger management than hierarchical ones.
When managers are removed, the span of control for those remaining increases. Corporate leaders must delegate – and track – tasks across greater numbers of employees and constantly communicate with workers.
Careful planning is needed to determine how work is organized, information shared, conflicts resolved and employees compensated, hired and reviewed. It is not surprising that as companies grow, the complexity of bigger organizations poses barriers to flat models.
In the end, organizational structure is a tool. History shows that business and economic conditions determine which type of structure works for an organization at any given time.
All organizations navigate the trade-off between stability and flexibility. While a hospital system facing extensive regulations and patient safety protocols may require a stable and consistent hierarchy, an online game developer in a competitive environment may need an organizational structure that’s more nimble so it can adapt to changes quickly.
Business and economic conditions are changing for Big Tech, as digital advertising declines, new competitors surface and emerging technologies demand risky investments. Meta’s corporate flattening is one response.
As Zuckerberg noted when explaining recent changes, “Our management theme for 2023 is the ‘Year of Efficiency,’ and we’re focused on becoming a stronger and more nimble organization.”
But context matters. So does planning. All the evidence I’ve seen indicates that embracing flatness by cutting middle management will not, by itself, do much to make a company more efficient.
