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    Big Tech Is Getting Clobbered on Wall Street. It’s a Good Time for Them.

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    Flush with cash, Facebook, Apple, Amazon, Microsoft and Google are positioned to emerge from a downturn stronger and more powerful. As usual.SAN FRANCISCO — Apple, Amazon, Microsoft and the parent companies of Facebook and Google have lost $2.7 trillion in value so far this year, about the annual gross domestic product of Britain.So what have the companies done about this thrashing on Wall Street? Microsoft has doubled its employees’ bonus pool, Google has committed to hiring more engineers, and Apple has showered its top hardware talent with $200,000 bonuses.The dissonance between the stock market’s relative panic and the business-as-usual calm among tech giants foreshadows a period when analysts, investors and economists predict that the world’s largest companies will widen their lead in their respective markets.The bullishness about their prospects reflects an understanding that the companies have tight control of some of the world’s most lucrative businesses: social media, premium smartphones, e-commerce, cloud computing and search. Their dominance in those arenas and toeholds in other businesses should blunt the pains of inflation, even as those challenges hammer big companies such as Walmart and Target and the stock market nears bear market territory.The S&P 500 spent much of Friday below the threshold for what is considered a bear market — commonly defined as 20 percent below its last peak — before rallying late in the afternoon. The index ended the week with a loss of 3 percent, its seventh straight weekly decline. That’s its longest stretch of losses since 2001.In the months ahead, Microsoft, Google, Apple and Amazon are expected to boost hiring, buy more businesses and emerge on the other side of a bearish economy stronger and more powerful — even if they shed some of their total valuation and their relentless growth of the last few years.“Big tech can say, ‘Forget the economy,’” said Richard Kramer, founder of the London-based advisory firm Arete Research. Flush with cash, he said, “they can invest through the cycle.”Read More About Apple‘After Steve’: Jony Ive, who helped define Apple’s iconic look, left as the Tim Cook era took hold. A new book details how they and the company changed following Steve Jobs’s death.A $3 Trillion Company: Four decades after going public, Apple reached a $1 trillion market value in 2018. Now, the company is worth triple that.Trademarks: The tech behemoth has opposed singer-songwriters, school districts and food blogs for trying to trademark names or logos featuring an apple — and even other fruits.AirTags: Privacy groups said that Apple’s new coin-size devices could be used to track people. Those warnings appear to have been prescient.The large companies’ plans contrast sharply with a wave of spending cuts crashing through the rest of the tech sector. Steep declines in share prices at unprofitable companies such as Uber, down 45 percent, and Peloton, down 58 percent, have led their chief executives to cut jobs or consider layoffs. Start-ups are pruning their workforces as venture capital funding slows.Those companies’ plummeting values will create buying opportunities, said Toni Sacconaghi, a tech analyst at Bernstein, a research firm. Large deals may be difficult because the Federal Trade Commission is scrutinizing takeover moves by Facebook, Apple, Amazon, Microsoft and Google, he said, but smaller deals for emerging technology or engineers could be rampant.As people return to work and travel, they are making fewer Amazon purchases, leaving the company with more space and staff than it needs.Roger Kisby for The New York TimesDuring the Great Recession, Facebook, Amazon, Google, Apple and Microsoft acquired more than 100 companies from 2008 to 2010, according to Refinitiv, a financial data company. Some of those deals have become fundamental to their businesses today, including Apple’s acquisition of the chip company P.A. Semi, which contributed to the company’s development of its new laptop processors, and Google’s acquisition of AdMob, which helped create a mobile advertising business.“The big will get bigger and the poor will get poorer,” said Michael Cusumano, deputy dean of the Sloan School of Management at the Massachusetts Institute of Technology. “That’s the way network effects work.”There are caveats to this sense of invulnerability. The big companies’ plans could always change if the economy continues to deteriorate and consumers pull back even further on their spending. And some of the big companies are more vulnerable than others.Meta Platforms, Facebook’s parent company, has fared worse than its peers because its business is facing long-term challenges. It has posted falling profits as its user growth slows amid rising competition from TikTok, and changes in Apple’s privacy policy stymie its ability to personalize ads.Mark Zuckerberg, Meta’s chief executive, has responded by instituting a temporary hiring freeze for some roles. During a recent all-hands meeting with staff, employees asked if layoffs would follow. Mr. Zuckerberg said that job cuts weren’t in the company’s current plans and were unlikely in the future, according to a spokesman. Instead, he said the company was focused on slowing spending and limiting its growth.Amazon sent a similar signal to its employees last month after it posted disappointing results. In a call with analysts, Brian Olsavsky, the company’s finance chief, said Amazon would look to corral costs after it doubled spending on warehouses and staff to keep pace with pandemic orders. As people return to work and travel, they are making fewer Amazon purchases, leaving the company with more space and staff than it needs.But Amazon’s lucrative cloud business, Amazon Web Services, or A.W.S. for short, continues to gush profits. The company plans to lean into its success in the months ahead by increasing its spending on data centers. It also has committed to raising the cap on base compensation of its corporate staff to $350,000, from $160,000. And it is investing in a plan to build a network of satellites to deliver high-speed internet by launching 38 rockets into space.Between them, Facebook, Microsoft, Google, Apple and Amazon had nearly $300 billion in cash, excluding debt, at the end of March, according to Loup Ventures, an investment firm specializing in tech research.The cash reserves could fund accelerated stock buybacks as share prices fall, analysts say. Doing so would increase the companies’ earnings per share, deliver more value to investors and signal to the market that their firms are more valuable than Wall Street is willing to acknowledge.The companies roared ahead during the pandemic as people sequestered at home immersed themselves in a digital world. Customer orders soared on Amazon, for everything from hand sanitizer to Instant Pots. Shuttered stores shifted sales online and ramped up Google and Facebook advertising. Remote students and employees splurged on new iPhones, iPads and Macs.The last tech giant to cull its ranks during a major downturn, Microsoft, is doing the opposite during this turbulent period. Emboldened by a business that has proved more durable than its peers, Microsoft is sweetening salaries, boosting its investments in cloud computing and standing by a $70 billion acquisition of Activision Blizzard that it expects to unlock more sales for its gaming empire.A Call of Duty event in Minneapolis in 2020. Microsoft’s acquisition of Activision Blizzard is expected to unlock more sales for its gaming empire.Bruce Kluckhohn/USA Today Sports, via ReutersSimilar resilience has been on display at Google and Apple. Google, a subsidiary of Alphabet, recently overhauled its performance review process and told staff that they would likely get pay increases, according to CNBC. It also plans to increase its spending on data centers to support its growing cloud business.Tim Cook, Apple’s chief executive, has a longstanding philosophy that Apple should continue to invest for the future amid a downturn. It more than doubled its staff during the Great Recession and nearly tripled its sales. Lately, it has increased bonuses to some hardware engineers by as much as $200,000, according to Bloomberg.John Chambers, who steered Cisco Systems through multiple downturns as its former chief executive, said the companies’ strong businesses and deep pockets could afford them the chance to take risks that would be impractical for smaller competitors. During the 2008 downturn, he said Cisco allowed distressed automakers to pay for technology services with credit at a time when competitors demanded cash. The company risked having to write down $1 billion in inventory, but emerged from the recession as the dominant provider to a healthy auto industry, he said.“Companies break away during downturns,” Mr. Chambers said.Excelling will require disregarding the broader market’s gloom, said David Yoffie, a professor at Harvard Business School. He said previous downturns had shown that even the strongest businesses were susceptible to profit pressures and prone to pulling back. “Firms get pessimistic like everyone else,” he said.The first test for the biggest companies in tech will be contagion from their peers. Amazon’s shares in the electric vehicle maker Rivian Automotive have plunged more than 65 percent, a $7.6 billion paper loss. Apple’s services sales are likely to be crimped by a slowdown in advertising by app developers, which rely on venture-capital funding to finance their marketing, analysts say. And start-ups are scrutinizing their spending on cloud services, which will likely slow growth for Microsoft Azure and Google Cloud, analysts and cloud executives said.“People are trying to figure out how to spend smartly,” said Sam Ramji, the chief strategy officer at DataStax, a data management company.Regulatory challenges on the horizon could darken the big tech companies’ prospects, as well. Europe’s Digital Markets Act, which is expected to become law soon, is designed to increase the openness of tech platforms. Among other things, it could scuttle the estimated $19 billion that Apple collects from Alphabet to make Google the default search engine on iPhones, a change that Bernstein estimates could erase as much as 3 percent of Apple’s pretax profit.But the companies are expected to challenge the law in court, potentially tying up the legislation for years. The probability it gets bogged down leaves analysts sticking to their consensus: “Big Tech is going to be more powerful. And what’s being done about it? Nothing,” Mr. Kramer of Arete Research said.Jason Karaian contributed reporting. More

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    How a Trash-Talking Crypto Bro Caused a $40 Billion Crash

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    Do Kwon, a South Korean entrepreneur, hyped the Luna and TerraUSD cryptocurrencies. Their failures have devastated some traders, though not the investment firms that cashed out early.Do Kwon, a trash-talking entrepreneur from South Korea, called the cryptocurrency he created in 2018 “my greatest invention.” In countless tweets and interviews, he trumpeted the world-changing potential of the currency, Luna, rallying a band of investors and supporters he proudly referred to as “Lunatics.”Mr. Kwon’s company, Terraform Labs, raised more than $200 million from investment firms such as Lightspeed Venture Partners and Galaxy Digital to fund crypto projects built with the currency, even as critics questioned its technological underpinnings. Luna’s total value ballooned to more than $40 billion, creating a frenzy of excitement that swept up day traders and start-up founders, as well as wealthy investors.Mr. Kwon dismissed concerns with a taunt: “I don’t debate the poor.”But last week, Luna and another currency that Mr. Kwon developed, TerraUSD, suffered a spectacular collapse. Their meltdowns had a domino effect on the rest of the cryptocurrency market, tanking the price of Bitcoin and accelerating the loss of $300 billion in value across the crypto economy. This week, the price of Luna remained close to zero, while TerraUSD continued to slide.The downfall of Luna and TerraUSD offers a case study in crypto hype and who is left holding the bag when it all comes crashing down. Mr. Kwon’s rise was enabled by respected financiers who were willing to back highly speculative financial products. Some of those investors sold their Luna and TerraUSD coins early, reaping substantial profits, while retail traders now grapple with devastating losses.Pantera Capital, a hedge fund that invested in Mr. Kwon’s efforts, made a profit of about 100 times its initial investment, after selling roughly 80 percent of its holdings of Luna over the last year, said Paul Veradittakit, an investor at the firm.Pantera turned $1.7 million into around $170 million. The recent crash was “unfortunate,” Mr. Veradittakit said. “A lot of retail investors have lost money. I’m sure a lot of institutional investors have, too.”Mr. Kwon did not respond to messages. Most of his other investors declined to comment.Kathleen Breitman, a founder of the crypto platform Tezos, said the rise and fall of Luna and TerraUSD were driven by the irresponsible behavior of the institutions backing Mr. Kwon. “You’ve seen a bunch of people trying to trade in their reputations to make quick bucks,” she said. Now, she said, “they’re trying to console people who are seeing their life savings slip out from underneath them. There’s no defense for that.”Mr. Kwon, a 30-year-old graduate of Stanford University, founded Terraform Labs in 2018 after stints as a software engineer at Microsoft and Apple. (He had a partner, Daniel Shin, who later left the company.) His company claimed it was creating a “modern financial system” in which users could conduct complicated transactions without relying on banks or other middlemen.Mr. Shin and Mr. Kwon began marketing the Luna currency in 2018. In 2020, Terraform started offering TerraUSD, which is known as a stablecoin, a type of cryptocurrency designed to serve as a reliable means of exchange. Stablecoins are typically pegged to a stable asset like the U.S. dollar and are not supposed to fluctuate in value like other cryptocurrencies. Traders often use stablecoins to buy and sell other riskier assets.But TerraUSD was risky even by the standards of experimental crypto technology. Unlike the popular stablecoin Tether, it was not backed by cash, treasuries or other traditional assets. Instead, it derived its supposed stability from algorithms that linked its value to Luna. Mr. Kwon used the two related coins as the basis for more elaborate borrowing and lending projects in the murky world of decentralized finance, or DeFi.Read More on the World of CryptocurrenciesA Perfect Storm: A steep sell-off that gained momentum this week is illustrating the risks of cryptocurrencies. Crypto Emperor: Sam Bankman-Fried, a studiously disheveled billionaire, is hoping to put a new face on the still-chaotic world of digital assets.Crypto Critic: The actor Ben McKenzie, best known for “The O.C.,” has become an outspoken skeptic of digital currencies. Who’s listening?Fund-raising Efforts: Activists and nonprofits are considering digital currencies as a way to raise funds for causes like abortion rights. Can it work?From the beginning, crypto experts were skeptical that an algorithm would keep Mr. Kwon’s twin cryptocurrencies stable. In 2018, a white paper outlining the stablecoin proposal reached the desk of Cyrus Younessi, an analyst for the crypto investment firm Scalar Capital. Mr. Younessi sent a note to his boss, explaining that the project could enter a “death spiral” in which a crash in Luna’s price would bring the stablecoin down with it.“I was like, ‘This is crazy,’” he said in an interview. “This obviously doesn’t work.”As Luna caught on, the naysayers grew louder. Charles Cascarilla, a founder of Paxos, a blockchain company that offers a competing stablecoin, cast doubt on Luna’s underlying technology in an interview last year. (Mr. Kwon responded by taunting him on Twitter: “Wtf is Paxos.”) Kevin Zhou, a hedge fund manager, repeatedly predicted that the two currencies would crash.But venture investment came pouring in anyway to fund projects built on Luna’s underlying technology, like services for people to exchange cryptocurrencies or borrow and lend TerraUSD. Investors including Arrington Capital and Coinbase Ventures shoveled in more than $200 million between 2018 and 2021, according to PitchBook, which tracks funding.In April, Luna’s price rose to a peak of $116 from less than $1 in early 2021, minting a generation of crypto millionaires. A community of retail traders formed around the coin, hailing Mr. Kwon as a cult hero. Mike Novogratz, chief executive of Galaxy Digital, which invested in Terraform Labs, announced his support by getting a Luna-themed tattoo.Mr. Kwon, who operates out of South Korea and Singapore, gloated on social media. In April, he announced that he had named his newborn daughter Luna, tweeting, “My dearest creation named after my greatest invention.”“It’s the cult of personality — the bombastic, arrogant, Do Kwon attitude — that sucks people in,” said Brad Nickel, who hosts the cryptocurrency podcast “Mission: DeFi.”Earlier this year, a nonprofit that Mr. Kwon also runs sold $1 billion of Luna to investors, using the proceeds to buy a stockpile of Bitcoin — a reserve designed to keep the price of TerraUSD stable if the markets ever dipped.Around the same time, some of the venture capital firms that had backed Mr. Kwon started to have concerns. Hack VC, a venture firm focused on crypto, sold its Luna tokens in December, partly because “we felt the market was due for a broader pullback,” said Ed Roman, a managing director at the firm.Martin Baumann, a founder of the Hong Kong-based venture firm CMCC Global, said his company sold its holdings in March, at about $100 per coin. “We had gotten increasing concerns,” he said in an email, “both from tech side as well as regulatory side.” (CMCC and Hack VC declined to comment on their profits.)Even Mr. Kwon alluded to the possibility of a crypto collapse, publicly joking that some crypto ventures might ultimately go under. He said he found it “entertaining” to watch companies crumble.Last week, falling crypto prices and challenging economic trends combined to create a panic in the markets. The price of Luna fell to nearly zero. As critics had predicted, the price of TerraUSD crashed in tandem, dropping from its $1 peg to as low as 11 cents this week. In a matter of days, the crypto ecosystem Mr. Kwon had built was essentially worthless.“I am heartbroken about the pain my invention has brought on all of you,” he tweeted last week.Some of Mr. Kwon’s major investors have lost money. Changpeng Zhao, chief executive of the crypto exchange Binance, which invested in Terraform Labs, said his firm had bought $3 million of Luna, which grew to a peak value of $1.6 billion. But Binance never sold its tokens. Its Luna holdings are currently worth less than $3,000.That loss is still only a drop in the bucket for a company as large as Binance, whose U.S. arm is valued at $4.5 billion.Expand Your Cryptocurrency VocabularyCard 1 of 9A glossary. More

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    Cryptocurrencies Melt Down in a ‘Perfect Storm’ of Fear and Panic

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    A steep sell-off that gained momentum this week starkly illustrated the risks of the experimental and unregulated digital currencies.SAN FRANCISCO — The price of Bitcoin plunged to its lowest point since 2020. Coinbase, the large cryptocurrency exchange, tanked in value. A cryptocurrency that promoted itself as a stable means of exchange collapsed. And more than $300 billion was wiped out by a crash in cryptocurrency prices since Monday.The crypto world went into a full meltdown this week in a sell-off that graphically illustrated the risks of the experimental and unregulated digital currencies. Even as celebrities such as Kim Kardashian and tech moguls like Elon Musk have talked up crypto, the accelerating declines of virtual currencies like Bitcoin and Ether show that, in some cases, two years of financial gains can disappear overnight.The moment of panic amounted to the worst reset in cryptocurrencies since Bitcoin plummeted 80 percent in 2018. But this time, the falling prices have broader impact because more people and institutions hold the currencies. Critics said the collapse was long overdue, while some traders compared the alarm and fear to the start of the 2008 financial crisis.“This is like the perfect storm,” said Dan Dolev, an analyst who covers crypto companies and financial technology at the Mizuho Group.During the coronavirus pandemic, people have flooded into virtual currencies, with 16 percent of Americans now owning some, up from 1 percent in 2015, according to a Pew Research Center survey. Big banks like Northern Trust and Bank of America also streamed in, along with hedge funds, some using debt to further juice their crypto bets.Early investors are still probably in a comfortable position. But the rapid declines this week have been especially acute for investors who bought cryptocurrencies when prices surged last year.The fall in cryptocurrencies is part of a broader pullback from risky assets, spurred by rising interest rates, inflation and economic uncertainty caused by Russia’s invasion of Ukraine. Those factors have compounded a so-called pandemic hangover that began as life started returning to normal in the United States, hurting the stock prices of companies like Zoom and Netflix that thrived during lockdowns.But crypto’s decline is more severe than the broader plunge in the stock market. While the S&P 500 is down 18 percent so far this year, Bitcoin’s price has dropped 40 percent in the same period. In the last five days alone, Bitcoin has tumbled 20 percent, compared to a 5 percent decline in the S&P 500.Crypto Experiences a Broad Collapse1-year change in the value of cryptocurrencies

    Prices are through 6 p.m. Eastern time on May 12.Source: CoinMarketCapBy The New York TimesHow long crypto’s collapse might last is unclear. Cryptocurrency prices have typically rebounded from major losses, though in some cases it took several years to reach new heights.“It’s hard to say, ‘Is this Lehman Brothers?’” said Charles Cascarilla, a founder of the blockchain company Paxos, referring to the financial services firm that went bankrupt at the start of the 2008 financial crisis. “We’re going to need some more time to figure it out. You can’t respond at this type of speed.”The origins of cryptocurrencies trace back to 2008, when a shadowy figure calling himself Satoshi Nakamoto created Bitcoin. The virtual currency was portrayed as a decentralized alternative to the traditional financial system. Rather than relying on gatekeepers like banks to facilitate commerce, Bitcoin proponents preferred to conduct transactions among themselves, recording each one on a shared ledger called a blockchain.Prominent tech leaders including Mr. Musk, Jack Dorsey, a founder of Twitter, and Marc Andreessen, an investor, embraced the technology as it grew from a novel curiosity into a cultlike movement. The value of cryptocurrencies exploded, minting a new class of crypto billionaires. Other forms of cryptocurrency, including Ether and Dogecoin, captured the public’s attention, particularly in the pandemic, when excess cash in the financial system led people to day trade for entertainment.Cryptocurrency prices reached a peak late last year and have since slid as fears over the economy grew. But the meltdown gathered momentum this week when TerraUSD, a stablecoin, imploded. Stablecoins, which are meant to be a more reliable means of exchange, are typically pegged to a stable asset such as the U.S. dollar and are intended not to fluctuate in value. Many traders use them to buy other cryptocurrencies.TerraUSD had the backing of credible venture capital firms, including Arrington Capital and Lightspeed Venture Partners, which invested tens of millions of dollars to fund crypto projects built on the currency. That gave “a false sense of security to people who might not otherwise know about these things,” said Kathleen Breitman, one of the founders of Tezos, a crypto platform.But TerraUSD was not backed by cash, treasuries or other traditional assets. Instead, it derived its supposed stability from algorithms that linked its value to a sister cryptocurrency called Luna.This week, Luna lost almost its entire value. That immediately had a knock-on effect on TerraUSD, which fell to a low of 23 cents on Wednesday. As investors panicked, Tether, the most popular stablecoin and a linchpin of crypto trading, also wavered from its own $1 peg. Tether fell as low as $0.95 before recovering. (Tether is backed by cash and other traditional assets.)The volatility quickly drew attention in Washington, where stablecoins have been on regulators’ radar. Last fall, the Treasury Department issued a report calling on Congress to devise rules for the stablecoin ecosystem.“We really need a regulatory framework,” Treasury Secretary Janet Yellen said at a congressional hearing on Thursday. “In the last couple of days, we’ve had a real-life demonstration of the risks.”Stablecoins “present the same kinds of risks that we have known for centuries in connection with bank runs,” she added.Workers installing a cryptocurrency mining data center in Medley, Fla.Rose Marie Cromwell for The New York TimesOther parts of the crypto ecosystem soured at the same time. On Tuesday, Coinbase, one of the largest cryptocurrency exchanges, reported a $430 million quarterly loss and said it had lost more than two million active users. The company’s stock price has plunged 82 percent since its triumphant market debut in April 2021.A Guide to CryptocurrencyCard 1 of 9A glossary. More

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    New F.T.C. Majority Gives Lina Khan a Chance to Push an Aggressive Agenda

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    The confirmation of a third Democrat creates an opportunity for Lina Khan, the Federal Trade Commission’s chair, to advance efforts to rein in corporate power.WASHINGTON — The confirmation of a third Democrat to the Federal Trade Commission on Wednesday broke a partisan deadlock at the agency. That’s good news for Lina Khan, the agency’s chair and a Democrat.It is also a test.With the F.T.C.’s new Democratic majority — which came with the confirmation of Alvaro Bedoya, who becomes the fifth commissioner, in a slot that had been vacant since October — Ms. Khan’s allies and critics are watching to see if she pushes forward plans to address corporate power. That could include filing an antitrust lawsuit against Amazon, setting online privacy rules and tapping little-used agency powers to clip the wings of companies like Meta, Apple and Google.As Congress remains gridlocked and the midterm elections near, agencies like the F.T.C. and the Department of Justice are likely the best remaining hope for activists and policymakers who want the government to restrain corporate power. President Biden, who has promised to crack down, last year ordered the F.T.C. and other federal agencies to take steps to limit concentration.Under Ms. Khan, 33, who became the chair in June, the F.T.C. has already tried tamping down mergers by threatening to challenge deals after they close. The commission has said it will punish companies that make it hard for users to repair their products. And it settled a case with the company once known as Weight Watchers over a diet app that collected data from young children.But Ms. Khan’s new Democratic majority is essential for a broader “realization of her vision,” said William E. Kovacic, a former chair of the F.T.C. “And the clock’s ticking.”In a statement, Ms. Khan said she was “excited” to work with Mr. Bedoya and the other commissioners. She did not address how the F.T.C.’s new majority would affect her plans.The F.T.C.’s previous split between two Republicans and two Democrats led to impasses. In February, the commission couldn’t reach an agreement to move forward with a study of the practices of pharmacy benefit managers.Sarah Miller, the executive director of the American Economic Liberties Project, a progressive group that wants more antitrust enforcement, described the F.T.C.’s two Republicans, Noah Phillips and Christine Wilson, as “libertarian holdouts” who have “kind of thrown the brakes” on Ms. Khan’s ability to advance her agenda.Mr. Phillips said in an email that he supported the commission’s “long tradition of bipartisan work to advance the interests of American consumers.” But he will not support Ms. Khan’s agenda when it “exceeds our legal authority,” raises prices for consumers or harms innovation, he said.Ms. Wilson pointed to three speeches she gave over the last year criticizing Ms. Khan’s philosophy. In one speech last month, Ms. Wilson said Ms. Khan and her allies were drawing on tenets from Marxism.Alvaro Bedoya, a Democrat, was confirmed on Wednesday as the fifth member of the F.T.C.Senator Chuck Schumer of New York, the Democratic majority leader, said Wednesday’s vote confirming Mr. Bedoya was “pivotal to unshackling the F.T.C.”Now Ms. Khan may gain the ability to pursue a legal case against Amazon. She wrote a student law review article in 2017 criticizing the company’s dominance. The F.T.C. began investigating the retail giant under the Trump administration; some state attorneys general have also conducted inquiries into the company.Ms. Khan could file a lawsuit to challenge Amazon’s recent purchase of the movie studio Metro-Goldwyn-Mayer. When the $8.5 billion transaction closed in March, an F.T.C. spokeswoman noted that the agency “may challenge a deal at any time if it determines that it violates the law.”Ms. Khan may put her stamp on other deals. The agency is examining Microsoft’s $70 billion purchase of the video game publisher Activision Blizzard and sent a request to the companies this year for additional information.An executive order from Mr. Biden last year encouraging more aggressive antitrust policy pushed the F.T.C. and the Justice Department to update the guidelines they use to approve deals, which could lead to stricter scrutiny. Ms. Khan is likely to need the support of the commission’s two other Democrats, Mr. Bedoya and Rebecca Kelly Slaughter, to approve aggressive new guidelines or to challenge major mergers.Ms. Khan has also said she wants to bulk up the agency’s powers by considering regulations governing privacy and how algorithms make decisions. She has said that the F.T.C. underutilized its role as a rules-making body and that regulations would enhance its mandate to protect consumers.“Given that our economy will only continue to further digitize, marketwide rules could help provide clear notice and render enforcement more impactful and efficient,” she said last month at a privacy conference.The F.T.C. could also act on requests from progressive activist groups that want the agency to ban data-driven advertising business models and forbid noncompete agreements that stop workers from taking a job with a competitor of their current employer.But former F.T.C. officials said Ms. Khan faced challenges, even with the Democratic majority. The creation of privacy regulations could take years, said Daniel Kaufman, a former deputy head of the agency’s consumer protection bureau. Businesses are likely to challenge rules in court that don’t fit into the F.T.C.’s mandate to protect consumers from deceptive and unfair practices.“The F.T.C.’s rule-making abilities are not designed to tackle behavioral advertising so I’ve been telling my clients the agency could kick something off with a lot of press but it’s unclear where it will go,” Mr. Kaufman, a partner at the law firm BakerHostetler, said.Ms. Khan’s efforts are also sure to continue facing opposition from Mr. Phillips and Ms. Wilson. Mr. Phillips has said he has reservations about the agency’s becoming a more muscular regulator. In January, he said Congress, not the F.T.C., should be the one to make new privacy rules.Ms. Wilson recently posted screenshots of an internal survey showing that satisfaction among the F.T.C.’s career staff has fallen. “New leadership has marginalized and disrespected staff, resulting in a brain drain that will take a generation to fix,” she said.To overcome their opposition, Ms. Khan will have to keep her majority intact. That gives leverage to Mr. Bedoya, a privacy expert who has focused on the civil rights dangers of new technologies, and Ms. Slaughter, a former top member of Senator Schumer’s staff.Ms. Slaughter said in a statement that Mr. Bedoya’s privacy expertise would serve the F.T.C. well. She did not comment on the agency’s Democratic majority.Mr. Bedoya was tight-lipped about his own plans, saying only that he was “excited” to work with his new F.T.C. colleagues. More

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    Fear and Loathing Return to Tech Start-Ups

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    Workers are dumping their stock, companies are cutting costs, and layoffs abound as troubling economic forces hit tech start-ups.Start-up workers came into 2022 expecting another year of cash-gushing initial public offerings. Then the stock market tanked, Russia invaded Ukraine, inflation ballooned, and interest rates rose. Instead of going public, start-ups began cutting costs and laying off employees.People started dumping their start-up stock, too.The number of people and groups trying to unload their start-up shares doubled in the first three months of the year from late last year, said Phil Haslett, a founder of EquityZen, which helps private companies and their employees sell their stock. The share prices of some billion-dollar start-ups, known as “unicorns,” have plunged by 22 percent to 44 percent in recent months, he said.“It’s the first sustained pullback in the market that people have seen in legitimately 10 years,” he said.That’s a sign of how the start-up world’s easy-money ebullience of the last decade has faded. Each day, warnings of a coming downturn ricochet across social media between headlines about another round of start-up job cuts. And what was once seen as a sure path to immense riches — owning start-up stock — is now viewed as a liability.The turn has been swift. In the first three months of the year, venture funding in the United States fell 8 percent from a year earlier, to $71 billion, according to PitchBook, which tracks funding. At least 55 tech companies have announced layoffs or shut down since the beginning of the year, compared with 25 this time last year, according to Layoffs.fyi, which monitors layoffs. And I.P.O.s, the main way start-ups cash out, plummeted 80 percent from a year ago as of May 4, according to Renaissance Capital, which follows I.P.O.s.An Instacart shopper at a grocery store in Manhattan. The company slashed its valuation to $24 billion in March from $40 billion last year. Brittainy Newman/The New York TimesLast week, Cameo, a celebrity shout-out app; On Deck, a career-services company; and MainStreet, a financial technology start-up, all shed at least 20 percent of their employees. Fast, a payments start-up, and Halcyon Health, an online health care provider, abruptly shut down in the last month. And the grocery delivery company Instacart, one of the most highly valued start-ups of its generation, slashed its valuation to $24 billion in March from $40 billion last year.“Everything that has been true in the last two years is suddenly not true,” said Mathias Schilling, a venture capitalist at Headline. “Growth at any price is just not enough anymore.”The start-up market has weathered similar moments of fear and panic over the past decade. Each time, the market came roaring back and set records. And there is plenty of money to keep money-losing companies afloat: Venture capital funds raised a record $131 billion last year, according to PitchBook.But what’s different now is a collision of troubling economic forces combined with the sense that the start-up world’s frenzied behavior of the last few years is due for a reckoning. A decade-long run of low interest rates that enabled investors to take bigger risks on high-growth start-ups is over. The war in Ukraine is causing unpredictable macroeconomic ripples. Inflation seems unlikely to abate anytime soon. Even the big tech companies are faltering, with shares of Amazon and Netflix falling below their prepandemic levels.“Of all the times we said it feels like a bubble, I do think this time is a little different,” said Albert Wenger, an investor at Union Square Ventures.On social media, investors and founders have issued a steady drumbeat of dramatic warnings, comparing negative sentiment to that of the early 2000s dot-com crash and stressing that a pullback is “real.”Even Bill Gurley, a Silicon Valley venture capital investor who got so tired of warning start-ups about bubbly behavior over the last decade that he gave up, has returned to form. “The ‘unlearning’ process could be painful, surprising and unsettling to many,” he wrote in April.The uncertainty has caused some venture capital firms to pause deal making. D1 Capital Partners, which participated in roughly 70 start-up deals last year, told founders this year that it had stopped making new investments for six months. The firm said that any deals being announced had been struck before the moratorium, said two people with knowledge of the situation, who declined to be identified because they were not authorized to speak on the record.Other venture firms have lowered the value of their holdings to match the falling stock market. Sheel Mohnot, an investor at Better Tomorrow Ventures, said his firm had recently reduced the valuations of seven start-ups it invested in out of 88, the most it had ever done in a quarter. The shift was stark compared with just a few months ago, when investors were begging founders to take more money and spend it to grow even faster.That fact had not yet sunk in with some entrepreneurs, Mr. Mohnot said. “People don’t realize the scale of change that’s happened,” he said.Sean Black, the founder and chief executive of Knock. “You can’t fight this market momentum,” he said.Jeenah Moon for The New York TimesEntrepreneurs are experiencing whiplash. Knock, a home-buying start-up in Austin, Texas, expanded its operations from 14 cities to 75 in 2021. The company planned to go public via a special purpose acquisition company, or SPAC, valuing it at $2 billion. But as the stock market became rocky over the summer, Knock canceled those plans and entertained an offer to sell itself to a larger company, which it declined to disclose.In December, the acquirer’s stock price dropped by half and killed that deal as well. Knock eventually raised $70 million from its existing investors in March, laid off nearly half its 250 employees and added $150 million in debt in a deal that valued it at just over $1 billion.Throughout the roller-coaster year, Knock’s business continued to grow, said Sean Black, the founder and chief executive. But many of the investors he pitched didn’t care.“It’s frustrating as a company to know you’re crushing it, but they’re just reacting to whatever the ticker says today,” he said. “You have this amazing story, this amazing growth, and you can’t fight this market momentum.”Mr. Black said his experience was not unique. “Everyone is quietly, embarrassingly, shamefully going through this and not willing to talk about it,” he said.Matt Birnbaum, head of talent at the venture capital firm Pear VC, said companies would have to carefully manage worker expectations around the value of their start-up stock. He predicted a rude awakening for some.“If you’re 35 or under in tech, you’ve probably never seen a down market,” he said. “What you’re accustomed to is up and to the right your entire career.”Start-ups that went public amid the highs of the last two years are getting pummeled in the stock market, even more than the overall tech sector. Shares in Coinbase, the cryptocurrency exchange, have fallen 81 percent since its debut in April last year. Robinhood, the stock trading app that had explosive growth during the pandemic, is trading 75 percent below its I.P.O. price. Last month, the company laid off 9 percent of its staff, blaming overzealous “hypergrowth.”SPACs, which were a trendy way for very young companies to go public in recent years, have performed so poorly that some are now going private again. SOC Telemed, an online health care start-up, went public using such a vehicle in 2020, valuing it at $720 million. In February, Patient Square Capital, an investment firm, bought it for around $225 million, a 70 percent discount.Others are in danger of running out of cash. Canoo, an electric vehicle company that went public in late 2020, said on Tuesday that it had “substantial doubt” about its ability to stay in business.Baiju Bhatt, left, and Vlad Tenev, founders of Robinhood, at the New York Stock Exchange last year for the company’s initial public offering. Robinhood recently laid off 9 percent of its workers.Sasha Maslov for The New York TimesBlend Labs, a financial technology start-up focused on mortgages, was worth $3 billion in the private market. Since it went public last year, its value has sunk to $1 billion. Last month, it said it would cut 200 workers, or roughly 10 percent of its staff.Tim Mayopoulos, Blend’s president, blamed the cyclical nature of the mortgage business and the steep drop in refinancings that accompany rising interest rates.“We’re looking at all of our expenses,” he said. “High-growth cash-burning businesses are, from an investor-sentiment perspective, clearly not in favor.” More

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    For Tens of Millions of Americans, the Good Times Are Right Now

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    Their houses are piggy banks, their retirement accounts are up and their bosses are eager to please. When the boom ends, everything will change.This is an era of great political division and dramatic cultural upheaval. Much more quietly, it has been a time of great financial reward for a large number of Americans.For the 158 million who are employed, prospects haven’t been this bright since men landed on the moon. As many as half of those workers have retirement accounts that were fattened by a prolonged bull market in stocks. There are 83 million owner-occupied homes in the United States. At the rate they have been increasing in value, a lot of them are in effect a giant piggy bank that families live inside.This boom does not get celebrated much. It was a slow-build phenomenon in a country where news is stale within hours. It has happened during a time of fascination with the schemes of the truly wealthy (see: Musk, Elon) and against a backdrop of increased inequality. If you were unable to buy a house because of spiraling prices, the soaring amount of homeowners’ equity is not a comfort.The queasy stock market might be signaling that the boom is ending. A slowing economy, renewed inflation, high gas prices and rising interest rates could all undermine the gains achieved over the years. But for the moment, this flood of wealth is quietly redefining retirement, helping fuel Silicon Valley and stoking a boom in leisure and entertainment. It is boosting corporate profits by unprecedented amounts while also giving just about everyone the notion that a better job might be within reach.More than 4.5 million workers voluntarily quit in March, the highest number since the government started keeping this statistic in 2000, the Bureau of Labor Statistics reported last week. A few years ago, the monthly total was between three million and 3.5 million.“Maybe it’s easier to focus on the negative, but a huge number of people, maybe 40 million households, have been doing pretty well,” said Dean Baker, an economist who was a co-founder of the liberal-leaning Center for Economic and Policy Research. “You’d have to go back to the late 1990s to find a similar era. Before that, the 1960s.”This widespread wealth throws light on why the number of workers who say they expect to be working past their early 60s has fallen below 50 percent for the first time. It accounts for the abundance of $1 billion start-ups known as unicorns — more than 1,000 now, up from about 200 in 2015. It offers a reason for the rise in interest in unionizing companies from Amazon to Apple to Starbucks, as hourly workers seek to claim their share.And it helps explain why Dwight and Denise Makinson just returned from a 12-day cruise through Germany.“Our net worth has reached the millionaire level due to our investments, which was unfathomable when we were married 40 years ago,” said Mr. Makinson, 76, who is retired from the U.S. Forest Service.The couple, who live in Coeur d’Alene, Idaho, have company. There are 22 million U.S. millionaires, Credit Suisse estimates, up from fewer than 15 million in 2014.The State of Jobs in the United StatesThe U.S. economy has regained more than 90 percent of the 22 million jobs lost at the height of pandemic in the spring of 2020.April Jobs Report: U.S. employers added 428,000 jobs and the unemployment rate remained steady at 3.6 percent ​​in the fourth month of 2022.Trends: New government data showed record numbers of job openings and “quits” — a measurement of the amount of workers voluntarily leaving jobs — in March.Job Market and Stocks: This year’s decline in stock prices follows a historical pattern: Hot labor markets and stocks often don’t mix well.Unionization Efforts: Since the Great Recession, the college-educated have taken more frontline jobs at companies like Starbucks and Amazon. Now, they’re helping to unionize them.“I used coupons to buy things. One of my daughters would say, ‘Mom, that’s so embarrassing,’” said Ms. Makinson, 66, a registered nurse. “But we believed in saving. Now she uses coupons, too.”Denise and Dwight Makinson in their backyard in Coeur d’Alene, Idaho. Their net worth has reached the millionaire level.Margaret Albaugh for The New York TimesEvery economic transaction has several sides. No one thought home prices in 2000 were particularly cheap. But in the last six years, prices have risen by the total value of all housing in 2000, according to the Case-Schiller index. In many areas of the country, it has become practically impossible for renters to buy a house.This is fracturing society. Even as the overall homeownership rate in 2020 rose to 65.5 percent, the rate for Black Americans has severely lagged. At 43.4 percent, it is lower than the 44.2 percent in 2010. The rate for Hispanics is only marginally better.That disparity might account for the muted sense of achievement.“It’s a time of prosperity, a time of abundance, and yet it doesn’t seem that way,” said Andy Walden, vice president of enterprise research at Black Knight, which analyzes financial data.Shawn and Stephanie McCauley said the value of their house 20 miles north of Seattle had shot up 50 percent since they bought it a few years ago, a jump that was typical of the market.“We are very fortunate right now given the situation for many others during the pandemic,” said Mr. McCauley, 36, who works for a data orchestration company. “Somehow we are doing even better financially, and it feels a bit awkward.”Even for those doing well, the economy feels precarious. The University of Michigan’s venerable Index of Consumer Sentiment fell in March to the same levels as 1979, when the inflation rate was a painful 11 percent, before rising in April.Politicians are mostly quiet about the boom.“Republicans are not anxious to give President Biden credit for anything,” said Mr. Baker, the economist. “The Democrats could boast about how many people have gotten jobs, and the strong wage growth at the bottom, but they seem reluctant to do this, knowing that many people are being hit by inflation.”The initial coronavirus outbreak ended the longest U.S. economic expansion in modern history after 128 months. A dramatic downturn began. The federal government stepped in, generously spreading cash around. Spending habits shifted as people stayed home. The recession ended after two months, and the boom resumed.Jerome H. Powell, the Federal Reserve chair, recently warned that there were too many employers chasing too few workers, saying the labor market was “tight to an unhealthy level.” But for workers, it’s gratifying to have the upper hand in looking for a new position or career.“Both my husband and I have been able to make job changes that have doubled our income from five years ago,” said Lindsay Bernhagen, 39, who lives in Stevens Point, Wis., and works for a start-up. “It feels like it has mostly been dumb luck.”A decade ago, the housing market was in chaos. Between 2007 and 2015, more than seven million homes were lost to foreclosure, according to Black Knight. Some of these were speculative purchases or second homes, but many were primary residences. Egged on by lenders, people lived in houses they could not easily afford.Now the reverse is true. People own much more of their homes than they used to, while the banks own less. That acts as a shield against foreclosures, which in 2019 were only 144,000, according to Black Knight. (During the pandemic, foreclosures mostly ceased due to moratoriums.)The equity available to homeowners reached nearly $10 trillion at the end of 2021, double what it was at the height of the 2006 bubble, according to Black Knight. For the average American mortgage holder, that amounts to $185,000 before hitting loan-to-value tripwires. The figure is up $48,000 in a year — about what the average American family earns annually, according to some estimates.Even very new homeowners feel an economic boost.“We never had enough for a down payment, but then in summer of 2020, we got a good tax return, a stimulus check and had a little money in the bank,” said Magaly Pena, 41, an architect for the federal government. She and her husband bought a townhouse in the Miami suburb of Homestead.Ms. Pena, a first-generation immigrant from Nicaragua, likes to check out the estimated value of her house and her neighbors on the real estate website Redfin. “Sometimes I’ll check it every day for three days,” she said. “It’s been crazy — everything has skyrocketed.”In 2006, homeowners cashed in their equity. Sometimes they used the money to double down on another house or two. In 2022, there’s little sense of excess. One reason is that lenders and the culture in general are no longer so encouraging about that sort of refinancing. But owners are also more cautious.Brian Carter, an epidemiologist in Atlanta, said he and his wife, Desiree, had about $250,000 in equity in their home but didn’t plan to draw on it.“I was 27 in 2007 and watched a lot of people lose their houses because they couldn’t leave their equity alone,” he said. “That included my next-door neighbor and the family across the street. I don’t want to worry.”Those who take a boom for granted often get upstaged by reality. In May 2000, the entrepreneur Kurt Andersen said raising money for a media start-up called Inside was as easy “as getting laid in 1969.” That was a few weeks after the stock market peaked. Seventeen months and one merger later, Inside shut down. (Mr. Andersen clarified in an email that he did not actually have sex until the 1970s.)In 2000, the start-up downturn was the first sign of wider economic trouble. This time it may be simply that people are doing too well. “U.S. households in best shape in 30 years … but does it matter?” Deutsche Bank asked in a research note last month.Its logic: Households have more cash than debt for the first time in decades, which is theoretically good. But all that money is encouraging spending, which is propelling inflation, which is forcing the Fed to push up interest rates. The result: a recession late next year.Ashley Humphries, 31, feels prepared for most any scenario. Six years ago, she was a graduate teaching assistant making $12,000 a year. Now she earns a low six figures as a senior product manager for a parking app developer in Atlanta.“I’ve lived out some childhood dreams like dyeing my hair vibrant colors and seeing ‘Phantom of the Opera’ from the front row,” Ms. Humphries said. She got a dog named Kylo, put a bit of her income in the stock market and bought a Tesla. She just left on a Caribbean cruise. Two of them, in fact, one after the other.Ashley Humphries and Kylo. “I’ve lived out some childhood dreams,” she said.Kendrick Brinson for The New York Times More

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    Amazon Fires Senior Managers Tied to Unionized Staten Island Warehouse

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    Company officials said the terminations were the result of an internal review, while the fired managers saw it as a response to the recent union victory.After Amazon employees at a massive warehouse on Staten Island scored an upset union victory last month, it turned the union’s leaders into celebrities, sent shock waves through the broader labor movement and prompted politicians around the country to rally behind Amazon workers. Now it also appears to have created fallout within Amazon’s management ranks.On Thursday, Amazon informed more than half a dozen senior managers involved with the Staten Island warehouse that they were being fired, said four current and former employees with knowledge of the situation, who spoke on the condition of anonymity out of fear of retaliation.The firings, which occurred outside the company’s typical employee review cycle, were seen by the managers and other people who work at the facility as a response to the victory by the Amazon Labor Union, three of the people said. Workers at the warehouse voted by a wide margin to form the first union at the company in the United States, in one of the biggest victories for organized labor in at least a generation.Word of the shake-up spread through the warehouse on Thursday. Many of the managers had been responsible for carrying out the company’s response to the unionization effort. Several were veterans of the company, with more than six years of experience, according to their LinkedIn profiles.Workers who supported the union complained that the company’s health and safety protocols were too lax, particularly as they related to Covid-19 and repetitive strain injuries, and that the company pushed them too hard to meet performance targets, often at the expense of sufficient breaks. Many also said pay at the warehouse, which starts at over $18 per hour for full-time workers, was too low to live on in New York City.Understand the Unionization Efforts at AmazonBeating Amazon: A homegrown, low-budget push to unionize at a Staten Island warehouse led to a historic labor victory. (Workers at another nearby Amazon facility rejected joining a similar effort shortly after.)Retaliation: Weeks after the landmark win, Amazon fired several managers in Staten Island. Some see it as retaliation for their involvement in the unionization efforts.A New Playbook: The success of the Amazon union’s independent drive has organized labor asking whether it should take more of a back seat.Amazon’s Approach: The company has countered unionization efforts with mandatory “training” sessions that carry clear anti-union messages.An Amazon spokeswoman said the company had made the management changes after spending several weeks evaluating aspects of the “operations and leadership” at JFK8, which is the company’s name for the warehouse. “Part of our culture at Amazon is to continually improve, and we believe it’s important to take time to review whether or not we’re doing the best we could be for our team,” said Kelly Nantel, the spokeswoman.The managers were told they were being fired as part of an “organizational change,” two people said. One of the people said some of the managers were strong performers who recently received positive reviews.The Staten Island facility is Amazon’s only fulfillment center in New York City, and for a year current and former workers at the facility organized to form an upstart, independent union. The company is challenging the election, saying that the union’s unconventional tactics were coercive and that the National Labor Relations Board was biased in the union’s favor. And the union is working to maintain the pressure on Amazon so it will negotiate a contract.Christian Smalls, the president of the Amazon Labor Union, testified on Thursday before a Senate committee that was exploring whether companies that violate labor laws should be denied federal contracts. Mr. Smalls later attended a White House meeting with other labor organizers in which he directly asked President Biden to press Amazon to recognize his union.A White House spokeswoman said it was up to the National Labor Relations Board to certify the results of the recent election but affirmed that Mr. Biden had long supported collective bargaining and workers’ rights to unionize.Amazon has said that it invested $300 million on safety projects in 2021 alone and that it provides pay above the minimum wage with solid benefits like health care to full-time workers as soon as they join the company.More than 8,000 workers at the warehouse were eligible to vote, and the union made a point of reaching out to employees from different ethnic groups, including African Americans, Latinos and immigrants from Africa and Asia, as well as those of different political persuasions, from conservatives to progressives.Company officials and consultants held more than 20 mandatory meetings per day with employees in the run-up to the election, in which they sought to persuade workers not to support the union. The officials highlighted the amount of money that the union would collect from them and emphasized the uncertainty of collective bargaining, which they said could leave workers worse off.Labor experts say such claims can be misleading because it is highly unusual for workers to see their compensation fall as a result of the bargaining process.Roughly one month after the union victory at JFK8, Amazon workers at a smaller facility nearby voted against unionizing by a decisive margin.The votes came during what could be an inflection point for organized labor. While the rate of union membership reached its lowest point in decades last year (about 10 percent of U.S. workers) petitions to hold union elections were up more than 50 percent over the previous year during the six months ending in March, according to the National Labor Relations Board. The number of petitions is on pace to reach its highest point in at least a decade.Since December, workers at Starbucks have won initial union votes at more than 50 stores nationwide, while workers have organized or sought to organize at other companies that did not previously have unions, such as Apple and the outdoor apparel retailer REI.Grace Ashford More

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    Gopuff Buys Time for Its 30-Minutes-or-Less Delivery Promise

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    The $15 billion rapid-delivery start-up decided to do business differently from rivals like Instacart. A changing environment is testing its model.From its beginning in 2013, Gopuff aimed to do rapid delivery differently.The start-up’s founders, Yakir Gola and Rafael Ilishayev, based the company in Philadelphia, away from other delivery ventures in Silicon Valley and New York. They opened warehouses and bought their own merchandise, instead of acting as middlemen who connected retailers and restaurants with customers. And they promised speed, delivering food and other items in 30 minutes or less.By late last year, Gopuff had amassed $3.4 billion in funding, bought the alcohol and beverage retailer BevMo! and was valued at $15 billion. This year, it appeared poised to go public.“We built a sustainable business that thrives and that is set up to win long term,” Mr. Gola, 29, said in an interview last month. Gopuff, he added, is “a disrupter.”Now the question is whether Gopuff has done delivery differently enough. In the past few months, the start-up environment has changed from boom to uncertainty, as tech stocks have cratered, inflation has risen, interest rates have increased and the economic outlook has darkened.In response, Gopuff recently put off its public listing and is trying to raise $1 billion in debt that could potentially be turned into stock. The unprofitable company also lowered its drivers’ minimum pay in California. This year, it has done two rounds of job cuts, including last month when it laid off about 450 people, or 3 percent of its 15,000 workers.Gopuff faces a dismal history of failed delivery start-ups, from Webvan and Kozmo.com in the early 2000s to Buyk, 1520 and Fridge No More in the past few months. Delivery — with high labor and transportation costs, stiff competition and lofty marketing expenses — is notoriously expensive and logistically complicated to provide and make money on.While delivery companies such as DoorDash and Grubhub have gone public, many of them lose money, and some have later been acquired. And with the bump in pandemic orders tailing off, many of these companies are hitting hurdles. Last month, the grocery delivery start-up Instacart cut its valuation to about $24 billion from $39 billion.“These companies are fine during a very ebullient and frothy capital markets environment,” said Ken Smythe, the chief executive of Next Round Capital Partners, which advises investors buying and selling stakes in start-ups. “The world has changed significantly in the past 60 days.”Gopuff’s delivery people are gig workers. The business also has warehouses where its workers are full-time employees.Gabby Jones for The New York TimesIn the interview, Mr. Gola acknowledged that delivery was “very logistically complex — it takes a lot of time and a lot of effort and capital.” But having warehouses and inventory is the only way to profit over time, he said, because it allows the company to make money from selling goods and not just charging delivery fees.“Once you can execute, and obviously that’s hard, it wins in the long term,” he said.Gopuff added that it was putting a public offering on the back burner because the stock market had been volatile and it had enough cash on hand. The layoffs were part of a global restructuring, it said.Mr. Gola and Mr. Ilishayev met as students at Drexel University in Philadelphia in 2011. In their sophomore year, they founded Gopuff for college students, offering fast late-night deliveries of junk food, condoms and smoking paraphernalia. They called themselves a “one-stop puff shop,” which led to the name Gopuff. Deliveries were available until 4:20 a.m.To set themselves apart from DoorDash and Instacart, which connect customers to restaurants and grocery stores via their apps and rely on gig workers, Mr. Gola and Mr. Ilishayev decided Gopuff would buy goods from distributors and wholesalers and have warehouses. Its warehouse workers would be full-time employees, though its delivery drivers and bike messengers would be contractors.Mr. Gola, who dropped out of college, and Mr. Ilishayev, who graduated from Drexel with a degree in legal studies, became co-chief executives of Gobrands, Gopuff’s parent company. To fund the business, they sold used office furniture on Craigslist and eBay. They also offered discounts on orders to attract customers and charged just $2.95 for delivery.As Gopuff gained traction beyond Drexel students, Mr. Gola and Mr. Ilishayev expanded their product offerings and set up warehouses in Boston, Washington and Austin, Texas. Starting in 2016, the company raised money from venture firms such as Anthos Capital and, later, investors including the Japanese conglomerate SoftBank.“We saw it in the data: customers coming back multiple times every month, very strong customer retention, customers who would stick around forever, basically,” said Jett Fein, a partner at Headline, a venture capital firm that invested in Gopuff.In 2020, the pandemic sent Gopuff’s business into overdrive as people shied away from shopping in person and relied on deliveries. Billions of dollars in new venture capital flooded in.Mr. Gola and Mr. Ilishayev went on a spending spree. That November, Gopuff acquired the California retailer BevMo! for $350 million, giving it a foothold in the state as well as the chain’s liquor licenses. In Europe, it bought the delivery start-ups Fancy and Dija.The company also started offering a $5.95 monthly subscription for delivery and began an advertising business.Gopuff now has nearly 700 warehouses that deliver to 1,200 cities in North America and Europe. It also has several retail locations in New York, Texas and Florida, where customers can walk in and shop.But profits have been elusive. The start-up is not cash-flow positive, which means it is spending more money than it is taking in, said Scott Minerd, the chief investment officer of Guggenheim Investments, which has invested in Gopuff. He added that the company had paused some plans to open new warehouses.Gopuff spends more on property and salaries of warehouse workers than its rivals, said John Mercer, head of global research at the firm Coresight Research. Discounts to attract customers have also eaten into revenue.Gopuff said it made money in its first three years. Its 2020 revenue was $340 million, according to a company document for potential landlords that was obtained by The New York Times. The document also showed that Gopuff’s cash balance dropped $111 million that year to $521 million.Revenue totaled $2 billion last year, Gopuff said. The company also lost $500 million, which was first reported by Axios.Some of its spending has gone toward handling delivery issues, said four former warehouse and district managers, three of whom declined to be identified because of severance agreements with the company. Several said they had sometimes spent hundreds or thousands of dollars a day on Instacart or at grocery stores to replenish Gopuff’s “never out of stock” staples like bacon, eggs and milk.At other times, suppliers sent pallets of items like ice cream that were not needed and could not be stored.“I would throw away $1,000, $2,000, $3,000 in inventory as soon as I received it because I had nowhere to put it,” said Anthony Nelson, who managed two Gopuff warehouses in Houston from 2019 through 2021. “That happened at least once or twice a week at bare minimum.”Mr. Gola said Gopuff bought items from Instacart or local retailers less than 1 percent of the time and threw out less inventory than the industry standard.The start-up has also faced questions over its use of gig workers, many of whom sign up for shifts with the company and report to managers. In 2018, the Labor Department found that Gopuff had misclassified delivery drivers in Pennsylvania as independent contractors.“Gopuff’s entire business model depends on flagrant misclassification of a kind that’s shocking well beyond what we see even from other gig companies,” said David Seligman, a lawyer who filed a 2017 class-action lawsuit claiming Gopuff wrongly categorized its drivers as contractors. The suit was settled in 2019.In November, hundreds of Gopuff gig workers went on strike, said Candace Hinson, a delivery driver in Philadelphia who helped organize the stoppage.Mr. Gola said the company used gig workers as drivers, rather than hiring employees, because “that’s what they want.” The company disputed that hundreds had gone on strike and said the workers’ action had not hurt its business.In the interview, Mr. Gola insisted that Gopuff would be the company to crack the instant delivery code.“The world is moving toward instant,” he said, “and Gopuff is at the forefront of that.” More