I'm not defending it, but I can explain it, since it was the same strategy used in drug development in the early to mid 2000's.

Essentially, you have labor costs on your financial reports.

• If you have a blockbuster product, layoffs improve your financials even more.
• Poor product? Layoffs make your financials not look terrible.
• Work productivity goes up too much (unit of work measured / hours of labor)? Well, that means you can do layoffs because you don't need productivity that high. Plus, at least initially it will look even better since you lowered the denominator.
• Terrible productivity? Layoffs make it look better quickly.

Why the fuck would anyone do this? Because individuals are held accountable to quarterly financials instead of long term success. You can only "hold off the wolves" so long before the leader either gets forced to do layouts, quits, or is fires. Companies that are privately owned don't have the same pressure though. Of interest, employee owned companies are also much better, but often take on a terrible work life balance culture due to massive peer pressure without oversight. So even though the "easy" solution is to have employee owned work environments with no management, even that can lead to toxicity.

Interestingly this is the reason so many companies are focusing on using Unreal. It's easier to get new people every x months after layoffs, if they are all using the same tools (vs the past where basically every big game studio had their own engine).

Tldr:

Unreal is slop and enables this behaviour.

Because leadership at many companies suffers from the recency effect and only remembers what you've done for them lately.

"I saved us lots of money in staffing this quarter" gets rewarded, not "I'm leaving the short-term money on the table now so that we'll be more successful in 7 years"

It only makes sense if the company is getting paid to make the gaming industry worse.

Because capitalism doesn't seek perfection, and it's far from a fair system