The Tree and the Forest: The Labor Market in the Tech Sector.

Who hasn’t heard the saying, “A falling tree makes more noise than a growing forest”?

The recent economic context brings to mind this famous aphorism by Lao Tsu, the ancient Chinese philosopher. Yes, because in the last year, we have seen many trees fall in the tech sector (especially the more innovative one). However, it would be a mistake to confuse the trees with the forest, to be scared by the noise of the falling tree and ignore all the greenery that grows around it. Let’s see why, with particular reference to the world of work.

Let’s start with the fallen trees and those that, although not fallen, suffer during a period of aridity.

The world of cryptocurrencies has just experienced the most difficult year in its (short) history: a year ago, in May 2022, the sector was hit by the sudden collapse of the Terra-Luna system, followed by the default of significant CeFi (centralized) platforms like Celsius, Voyager, BlockFi, and especially FTX. Their clients have seen tens of billions of dollars vanish. This has caused a flight of crypto capital towards non-custodial wallets (virtual wallets where the owners hold the private keys, unlike what happens on CeFi platforms) and back to traditional finance, especially in risk-free instruments.

The result? Thousands of layoffs: crypto companies like Gemini, Genesis, Kuobi, and Kraken have reduced staff. Crypto.com has announced a 20% cut. But the most relevant example is probably Coinbase, the most important North American centralized crypto platform, and the only one listed on Nasdaq: after already reducing the staff by 18% last year, CEO Brian Armstrong announced a few months ago a further 20% cut. Blame “unscrupulous players in the sector who have caused contagion and distrust,” says Armstrong.

From this perspective, trust in the most innovative tech seems compromised, especially in Italy where Web3 and the underlying blockchain technologies are still distant concepts to most, in a specialist job market that is today a small niche of the total.

The situation is exacerbated by the fact that the job market is experiencing a particularly difficult moment even in the “traditional” tech sector: Amazon and Microsoft have announced the cut of 18,000 and 11,000 jobs respectively, and another 11,000 jobs will be cut by Vodafone; Salesforce has reduced staff by 7,000 units (10% of the total) and even more has been done by Meta, with 11,000 layoffs (13% of the total). Not to mention Twitter, where the new CEO Elon Musk took command by cutting about half of the workforce.

The causes are varied, but certainly the economic policies of the central banks play a key role: the FED, in particular, is implementing a rate hike whose steepness is unprecedented. The enemy to defeat is inflation, generated by the enormous amount of money put into the market in the Covid era. The landing, however, could be more painful than desired, with the possibility of a global recession on the horizon that has not yet faded, and further inevitable tensions in the job market.

The seduction of pessimism could prevail…but let’s not forget about the forest.

First of all, it is important to point out that, despite the failures that have characterized the crypto world, none of these were caused by problems in blockchain technology as such. On the contrary, in 2022, large companies, traditional investors, and venture capitalists continued to pour billions of dollars into the most promising Web3 projects.

Facebook, already at the end of 2021, changed its name to Meta; in this regard, Zuckerberg said he is sure that “the metaverse will be the successor to mobile internet” and invested heavily in it. McKinsey recently published a report stating that by 2030, the metaverse has the potential to generate up to $5 trillion in value, asserting that “the metaverse is too big a phenomenon to ignore.” Major financial institutions (JP Morgan, Morgan Stanley, Goldman Sachs, Visa, MasterCard, etc.) are increasingly involved in blockchain and crypto project startups: Blackrock and Morgan Stanley alone have surpassed two billion dollars in investments (blockdata.tech data), while Goldman Sachs is creating, together with Microsoft and Deloitte, a new institutional blockchain, Canton Network. In short, we are witnessing an irreversible trend, despite the stumbles typical of any historic innovation.

Blockchain technology has the potential to be disruptive in a wide variety of sectors, and its adoption continues to grow everywhere in the “real” world. From supply chain to financial services, from healthcare to real estate (with the revolution of tokenization), from digital identity to public services, there are many fields of application where blockchains create value. The world’s major central banks are themselves working on the development of centralized digital currencies (the CBDCs, Central Bank Digital Currencies), which arouse both interest and doubts (especially on privacy issues).

NFTs are no longer just improbable and expensive monkeys, but digital tools that can change for the better the relationship with users in the music, sports, fashion, gaming industries, and potentially many more. Not to mention Artificial Intelligence, which now seems much more than a passing fad, and its future development could usefully be based on blockchain technology.

And the job market? According to Cointelegraph (a specialized online news outlet), which conducted a dedicated survey, “despite the cuts to the tech sector the crypto job market is resisting.” A LinkedIn study published last year revealed that “job offers related to the Web3 sector have increased by 395% in the United States in 2021, compared to a 98% increase in the “traditional” tech sector during the same period. Among the most in-demand positions are blockchain developers and engineers.”

Indeed, new technologies create spaces and roles that did not exist before: in addition to engineers and developers of smart contracts and AI, token economists, DeFi analysts, community managers, blockchain lawyers, and so on are needed. Many of them will initially be engaged in managing the bridging between Web2 and Web3.

At the same time, recruiters need adequate skills, and they cannot pretend to be experts, or they risk losing the trust of their client companies. If a company is looking for a developer, it is at least appropriate that the consultant in charge knows how a blockchain works and what the difference is between programming DApps in Solidity, Plutus, or Rust.

Abroad, especially in the United States and Asia, there have been specialized or dedicated recruiting companies for several years, which help to fill the ever-widening gap between required talents and available roles. Nevertheless, the imbalance pushes the salaries of the most sought-after figures to much higher levels compared to the same roles in the traditional tech sector.

In my work, I face daily difficulties in finding the most qualified profiles: in Italy, as said, the selection sector in Web3 is indeed still a niche market today. However, as we have seen, the potential is also explosive here, and will be driven by so-called mass adoption, which will come along four lines:

1. Gaming, with “play to earn” replacing “pay to play”;
2. Social interaction, especially through the Metaverse, which will gradually replace the current Web2 social platforms (authorities permitting, Microsoft is about to spend $69 billion to incorporate Activision Blizzard, through which to develop metaverse platforms);
3. Sports (the “fan tokens” are already a reality);
4. Mobile phone (the first native Web3 phone with integrated wallet, launched on the Solana blockchain, has hit the market). Blockchain and more generally Web3 will be an increasingly interesting choice for people looking for career and job opportunities.

It is therefore advisable to prepare now, both in terms of training future Web3 professionals (schools, universities, specialized institutes), and in terms of preparing selectors, also hoping for the birth of specialized head hunters in our country.

All this in order to avoid a dangerous inadequacy of supply in the face of the progressive demand from companies, and to allow the forest to grow ever more lush.