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Are the layoffs at Jack Dorsey’s firm an anomaly or an indication of a broader disruption at the hands of AI?
Fintech company Block laid off 40% of its staff overnight, letting go of around 4,000 employees in a bid to slim down and flatten the owner of Cash App and Square.
Writing on X – which he helped found as Twitter in 2006 – CEO Jack Dorsey said, “we’re not making this decision because we’re in trouble” but because “something has changed.”
That something is AI, specifically “that the intelligence tools we’re creating and using, paired with smaller and flatter teams, are enabling a new way of working which fundamentally changes what it means to build and run a company, and that’s accelerating rapidly,” he wrote.
The worrying part for anyone else working in the tech sector is that Dorsey believes his company is ahead of the curve. “Within the next year, I believe the majority of companies will reach the same conclusion and make similar structural changes,” he wrote.
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The stock market seems to think that Dorsey has a point. Block’s share price leapt 23% from $55 at the close of trading on Thursday, before Dorsey made the layoffs announcement, and is now trading at around $67 at the time of writing.
“Clearly the implications of more powerful AI for coders and other tech staff are pretty significant,” says Stefan Stern, a visiting professor in management practice at Bayes Business School. “If you reinvent a process and workflows there could be big reductions in staffing levels,” he recognizes – which may be at play in the Block layoffs this week.
Yet it doesn’t mean that it’s all over for all developers. In Block’s case, pandemic-era overhiring could be to blame, as the firm went from around 3,700 staff members in late 2019 to more than 10,000 before the latest cuts. And while AI undoubtedly has managed to impact the way Block and other companies work, it isn’t a panacea that means you can get rid of all your staff.
“The reality is that these new AI tools will not rip and replace existing software ecosystems and data environments, with these AI tools only as useful as the data it can reach,” says Dan Ives, global head of tech research at Wedbush Securities.
“The reason isn’t AI getting too smart and that’s why they don’t need humans anymore. The reason is their bloated workforce,” Pratham Kumar, developer relations manager at APILayer, posted on X.
Kumar believes that Dorsey has a history of overhiring – pointing out that the same happened with Twitter before it was taken over by Elon Musk, renamed X, and many of the staff fired.
“Wise managers will hesitate before crudely wielding the axe,” says Stern. “This won’t replace people, but enhance them.”
