How Mark Zuckerberg Broke Meta

The Washington Post / Naomi Nix

11:42 JST, May 1, 2023

Mark Zuckerberg sounded nervous.

The Meta CEO had just announced that his company would slash thousands of jobs last month, on top of 11,000 layoffs in November.

During an hour-long town hall meeting from the company’s Menlo Park headquarters in California, the decimated workforce peppered Zuckerberg with questions – including why they should have confidence in his leadership.

“That’s a completely fair question,” Zuckerberg responded without his usual bluster, according to a recording of the meeting obtained by The Washington Post.

It was a sobering admission for the CEO, who popularized the phrase “move fast and break things” to describe how he made a scrappy start-up into a towering $116 billion symbol of Silicon Valley success. Zuckerberg has shepherded Meta through years of public turbulence, offering employees confident defiance and the security that, despite some missteps, their CEO always bet on the correct future.

But now, roiled by economic tumult, waves of layoffs that will slash some 21,000 workers and a costly investment in the virtual reality “metaverse” that shows no immediate signs of paying off, many inside Meta say Zuckerberg has lost his vision – and the trust of his workforce. Instead, he is steering the company into an unprecedented morale crisis, according to interviews with more than two dozen current and former employees who spoke on the condition of anonymity for fear of retribution.

“It’s like they went from ‘move fast and break things’ to ‘slow down, break things,’ then ‘maybe fix it later on a case-by-case'” basis, one of the employees said.

Meta’s core product, Facebook, is battling TikTok for users and marketers. Economic forces have cut into its advertising business. The company lags on generative artificial intelligence, which is quickly revolutionizing the tech industry.

Last week, Meta’s stock rose 13 percent on news that quarterly revenue had ticked up for the first time in nearly a year. But insiders say the layoffs – along with pledges from Zuckerberg for further cost-cutting – have shattered internal resolve.

Even in the highest ranks of Meta’s leadership, some blame Zuckerberg for the company’s malaise. For example, Meta hired 41,000 people during the pandemic, in a frenzy to invest in labor while money was pouring in. During a company meeting this month, Chief Technology Officer Andrew Bosworth said Zuckerberg made some hires over the “objections” of senior executives – and sometimes rebuffed their advice in order to fire people, according to two people who spoke on the condition of anonymity to discuss private company matters.

Zuckerberg has characterized the cost-cutting as painful but necessary, part of a “year of efficiency” aimed at preparing the company for slower revenue growth triggered by rising interest rates and geopolitical instability. He’s part of a cohort of tech executives who have responded to the shifting market by cutting staff.

Zuckerberg was personally involved in the cuts, despite keeping a reduced work schedule because of the birth of his third child. He has deputized a cadre of top executives along with people in human resources, legal and finance departments to help redraw the organizational charts and find ways to make the company more efficient.

In a statement, Meta spokesman Dave Arnold said the conditions that led to the layoffs are “well known and reverberating throughout the industry.”

“Mark has been transparent about how we’re becoming more efficient to make us a better technology company and improve our financial performance,” Arnold said.

Still, morale is low. It was already harder for the company to attract and retain the best talent thanks to an array of scandals, including Facebook’s role in spreading misinformation in the 2016 election. In an internal employee survey in October, before layoffs, just 31 percent of respondents said they were confident leaders were taking the company in the right direction – an 11-point drop from May 2022, according to one of the people.

Zuckerberg promised last week that the company will return to stability once the restructuring is over. But as employees persevere through seven months of continuous job cuts, it’s unclear if the CEO will be able to regain their confidence.

“What was special about Meta was the trust. We drank the Kool-Aid and really felt like it was our company [and] even willingly defended it when everyone said we were evil incarnate,” one current employee said. “But that’s been shattered, so it feels like a betrayal.”

Kingdom builders

For years, Meta hired plentifully, luring workers with generous benefits and some of the highest salaries in tech. Company culture encouraged recruiting. Every year, Zuckerberg consults with executives to set up hiring goals based on business priorities – a process that was sometimes called “Napkin,” according to one of the people.

Ambitious managers could move up the ladder by proposing projects requiring them to spin up a new team or claim a departing manager’s direct reports. These climbers were privately called “empire builders” or “kingdom builders” by their colleagues, according to three of the people.

And Meta could afford to build up legions of “kingdoms.” Throughout 2020 and 2021, Meta benefited from an influx of brands using Facebook and Instagram to reach customers, as the coronavirus pandemic forced shoppers online. By early 2021, the company said e-commerce had become its largest advertising sector. “Commerce has been growing on our services for a while,” Zuckerberg told investors in April 2021. But the pandemic made it “a lot more important.”

Meta quickly retooled to take advantage of the demand. For years, the company grew its employee ranks by double-digit percentage points; the trend accelerated during the pandemic. Head count nearly doubled between 2019 and 2022, according to regulatory filings. It launched Facebook and Instagram Shops, digital storefronts for selling products on Meta’s social networks and produced Live Shopping, a social media version of the home shopping network.

But this reliance on e-commerce was risky. It’s easy for companies buying digital ads to pivot quickly when those ads no longer lead to sales.

The company was following a similarly optimistic prediction as it plunged into virtual reality. For years, Zuckerberg has pitched a lofty vision of the metaverse, an immersive world that he argued would become the next great computing platform after mobile phones – a revolution that Meta failed to take advantage of.

But when Zuckerberg renamed the company Meta in October 2021, reflecting a new emphasis on virtual reality, employees greeted the move with trepidation. Some inside Reality Labs, Meta’s virtual reality division, were happy to be the new center of gravity but worried about the increased scrutiny on a division that hadn’t yet achieved commercial success. “We are no longer a footnote. We are a line item,” one former employee said.

Since Meta’s 2014 acquisition of the virtual reality company Oculus, its investment in hardware development and research has exploded. Meta has tried to build everything including augmented reality glasses, smartwatches and VR headsets, sometimes deploying different teams to work on different generations of the same device at the same time.

“It was built like a software company that was trying to experiment instead of a mature hardware company that was trying to build hardware,” one former employee said.

The company has stuck with products long after it was clear they weren’t appealing to users. Since 2018, Meta has been pitching its video calling devices, Portal, as a next-generation communication device.

But behind the scenes, employees would regularly bring up data showing that the devices were missing their sales targets. Users who did buy them didn’t use them frequently.

“They missed their goals regularly,” one former employee said. “But everyone knew that didn’t matter.”

Instead of quashing the product, Meta rebranded: During the pandemic, Portal was pitched as a business product for remote work. It wasn’t until 2022 that the company finally scrapped the devices, which had then grown to include four different versions.

Similar issues plague the company’s Quest headsets, which were intended to provide an on-ramp to Meta’s virtual reality app, Horizon Worlds, and other third-party apps. Instead, Meta executives found that buyers often use them for only a few weeks. And users who do use the headsets often flock to competing apps, such as Rec Room and VRChat.

Meta has been losing billions trying to turn its metaverse vision into a reality. Reality Labs lost more than $13.7 billion last year – up from the $10.2 billion it lost in 2021 and the $6.6 billion in 2020, according to regulatory filings.

John Carmack, the former chief technology officer of Oculus and a high-ranking consultant for the company’s virtual reality division, quit in December, frustrated he couldn’t fix the inefficiencies plaguing the division, despite his high rank and relative power.

“We have a ridiculous amount of people and resources, but we constantly self-sabotage and squander effort,” Carmack wrote in his goodbye message. “There is no way to sugar coat this; I think our organization is operating at half the effectiveness that would make me happy.”

By early 2022, Meta’s optimism started to fade. The company reported that its flagship app, Facebook, lost daily users for the first time in its decade as a public company – falling by about half a million users in the last three months of 2021. The company’s stock plunged by more than a quarter.

That summer, Zuckerberg and other executives began signaling internally that managers needed to identify their lowest-performing employees. Newly implemented hiring freezes threw the entire human resources and recruiting division into a tailspin. Over the coming months, the company rescinded job offers or didn’t bother hiring recruiters’ recommended applicants.

The blunt messaging from Zuckerberg and other leaders created a wave of anxiety and resentment among Facebook’s workforce. Employees worried they could lose their jobs, receive lower annual bonuses or that an already rigorous corporate environment would grow even more competitive, the people said.

Zuckerberg stands out in Silicon Valley as one of the few founders who still leads a big tech giant long after its initial public offering, and he controls 61 percent of voting shares – leaving his power virtually unchecked.

Critics say Zuckerberg often surrounds himself with longtime deputies who have spent much of their careers working within Meta’s systems and culture, limiting the range of perspectives he is likely to receive.

Former COO Sheryl Sandberg, often thought of as a “co-CEO,” left last year. Zuckerberg tapped Javier Olivan, who had been working at the company since 2007, to take a more limited COO role – splitting up her role among several different executives, the majority of whom had worked at the company about a decade or more. (In recent years, Meta has appointed new members to its board and elevated Global Affairs President Nick Clegg.)

“These are all talented and experienced leaders who I’ve worked closely with over the years, and I’m confident they’ll continue to do great work in this new structure,” Zuckerberg said at the time.

When the layoffs came in November, deciding who to cut was left to top executives – not individual managers, according to a person familiar with the matter. When media reports surfaced that thousands of employees would be laid off a few days before the company’s own announcement, Bosworth, along with other top Meta executives, decided not to address the matter. The article was “vague” and staffers were still being productive, so they didn’t adjust their long-standing layoff plans, Bosworth said, according to a recording obtained by The Post.

“I got this wrong. It was a big mistake,” Zuckerberg said at the same meeting, referring to his overestimating revenue. “Going forward – what this means – is we have to be a leaner and more capital-efficient company.”

The company is now in the midst of its second round of layoffs, eliminating 4,000 jobs this month.

At a town hall this month, Zuckerberg provided a forceful defense of why workers should stay at the company: No other tech firm is delivering social experiences to billions of people in the way that Meta is.

“At the end of the day, I hope that you are here because you believe in the work that we are doing,” Zuckerberg said. “This is very special place.”