Some companies when they are very prosperous, no one very much care about how many employees they hire and whether the employees are being efficient or not. And then when the bad time comes, the management suddenly finds out they can get way more output with fewer employees and hence, downsizing happens.
(Another classic example; banks)
[Full Videos of Berkshire Hathaway Annual Meeting 1996]
[ABOUT - Collection: Warren Buffett]
Whenever, I search up on fund managers that practice value investing. All of them done 1 common thing that is, they study whatever they can about Warren Buffett from his annual letters, annual meeting or even interviews. Hence, I decided to do the same and share it together with all of you so that we can learn and grow together :)
[My 2 Cents]
"It’s gotten fashionable to assume that downsizing is wrong. Well, it may have been wrong to let the business get so fat that it eventually had to downsize. But if you’ve got way more people than are needed in the business, I see no social benefit in having people sit around half employed or unemployed."
Hence, downsizing is not wrong. What is wrong with that is those businesses that get so fat and over hiring employees and eventually had to downsize.