FTX opposed overexpansion last year, but continues to hire this year with a possible annual growth of up to 50%. What does SBF say about the company culture?

The cold winter of the cryptocurrency industry is coming. Recently, the U.S. listed exchange Coinbase announced an 18% workforce reduction citing "economic recession," while the Gemini exchange will also lay off 10% of its staff. However, another exchange giant, FTX, announced that it will continue to hire employees according to demand. What is the difference?

According to the "2020 Q2 CEO Economic Outlook Report" by the Business Roundtable, the possibility of an economic recession has caused a decline in the confidence of CEOs of large U.S. companies, including worsening expectations for hiring, capital investment, and sales. The economic outlook dropped by 19 points, hiring plans decreased by 22 points, and capital investment expectations fell by 20 points.

The pessimistic economic outlook is reflected in the cryptocurrency industry, where the U.S. listed exchange Coinbase recently announced an 18% workforce reduction citing economic recession, and Gemini exchange will also lay off 10% of its staff. However, other cryptocurrency companies are still expanding gradually, such as the FTX exchange.

FTX Digital Markets CEO: SBF Made the Right Decision

Over the past two years, as the crypto market has rapidly expanded, many companies have been growing at a fast pace, which is quite normal. During a bull market, companies see opportunities and need to expand their teams on a large scale, but no one is certain when the economy might reverse. Coinbase CEO Brian Armstrong admitted that the expansion scale at the beginning of 2021 seemed excessive.

Meanwhile, FTX announced that they will not stop recruiting and will continue to expand services even during a bear market.

FTX Digital Markets Co-CEO Ryan Salame stated that this is because FTX founder Sam Bankman-Fried resisted the pressure from venture capitalists during the bull market and refrained from overexpansion.

Ryan Salame tweeted, "VCs and advisors repeatedly told us that FTX needed to speed up hiring and increase headcount, but SBF insisted: rapidly increasing headcount does not significantly increase output."

Ryan Salame believes that this was the right decision. This decision has put FTX in a very advantageous position, allowing them to continue recruiting and expanding their services.

"FTX is in a very favorable position in the current environment. On one hand, we can continue to recruit employees for expansion, and on the other hand, we can maintain our corporate culture. Ultimately, this will expand our service offerings, benefiting users," he said.

FTX's Culture: Rapid Expansion Leads to Decreased Efficiency

The culture Ryan Salame mentioned is actually the first thing that SBF learned as a CEO.

In a tweet on June 7, SBF mentioned that a few months ago when the price of Bitcoin was at $44,000, he wrote a statement to internal employees, revealing that although he would continue to recruit, it was time to slow down.

As a CEO, SBF believes that the number of team members does not equate to the team's efficiency:

"The first lesson I learned as a CEO is to ensure that the speed at which new hires onboard is proportionate to the number of hires, otherwise everything will only get worse, which took me a long time to realize.

I have repeatedly studied companies that have grown rapidly, and the conclusion is that rapidly increasing from 200 employees to 2,000 will not increase productivity tenfold, or even one fold. Sometimes, the more people you hire, the less you can accomplish."

SFB explained that during rapid expansion, coordination between departments becomes difficult, and the increase in employees also blurs accountability and leads to more passing the buck.

Furthermore, rapid expansion lowers hiring standards, resulting in poor communication among colleagues, rendering incentive mechanisms ineffective.

"As far as I know, this is a common reason for the rapid decline of successful startups. Expansion is like a race to see whether recruiting speed or the speed at which new employees onboard and understand the company culture is faster."

To maintain FTX's corporate culture, SBF resisted the pressure from venture capitalists when they wanted to fundraise. He stated that almost all VCs last year told him that FTX's headcount was not growing exponentially, which would hinder the company's expansion speed.

"At that time, we had about 200 employees, and VCs estimated that we needed to expand to 2,000, but we told them that excessive hiring would not benefit us, so they could choose to invest or not, but FTX would maintain its pace."

Currently, FTX has around 300 employees, and it is continuously growing. Like all companies, there is some turnover among employees, but overall, there was a 50% increase in staff last year. SBF mentioned that they might reach 400 employees next year.

SBF concluded, "When it comes to company growth, you cannot consider 'increased spending' as 'continuous growth'."