Update 2: Check out this Om Malik look at the Block news. He looks at how Dorsey tried to switch the narrative from bad management to AI. Wall Street rewarded job cuts–as it always does. Not vision.
Update: John Gruber at Daring Fireball takes a similar stance on the news (knowing the history of Jack Dorsey), while The New York Times takes the AI hype road in its headline regarding the news.
Media companies are struggling to get beyond the hype of AI into reality. Once my favorite news source, Axios has suddenly become the media cheerleader for AI. You can still get the gist of news there, but use your BS filter when approaching AI items. Morning Brew is usually much more balanced—and witty.
Case in point. I’m copying news about Jack Dorsey’s layoffs at Block. Remember Dorsey? He led Twitter before it had to sell. Seemingly everyone in Silicon Valley knew that Twitter was terribly bloated. Proof—Elon Musk slashed 80% of the workforce and the company continued to operate.
AI is, of course, another in a long line of automation tools that will assist humans in doing their jobs. Studies I’ve seen reveal some usefulness of AI in programming. But it’s far from actually replacing humans.
Dorsey goes to Block. Hmm. Seems like it was bloated, also. He announces a 40% reduction in workforce. He, like predecessor CEO such as at Amazon, blames AI for the ability of teams to do more with fewer people. Financial analysts typically look beyond AI into the basic financial need to reduce a bloated workforce.
I bet your experience mirrors my experience that smaller teams are more likely to get things done. If you’re not sure, I encourage checking out Jason Fried and David Heinemeier-Hansson of 37 Signals and The Rework Podcast.
As a professor at university used to use on tests—compare and contrast.
From Axios
1 big thing: Radical workforce cut may embolden CEOs
It was only a matter of time before a future-thinking CEO took the leap and replaced thousands of workers with AI, Axios’ Dan Primack writes.
Why it matters: Block chair Jack Dorsey did just that yesterday. Wall Street’s standing ovation — the fintech company’s shares soared more than 20% in today’s premarket trading — gives other CEOs permission, even incentive, to consider the same thing.
Dorsey, an iconoclast who co-founded and once led Twitter, was blunt in announcing via X that Block will say goodbye to 40% of its 10,000-person workforce, cutting the company to just under 6,000. Block, based in Oakland, Calif., includes Square, Cash App, Afterpay and the Tidal music platform.
Dorsey wrote on X that “something has changed. we’re already seeing 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 said he “had two options: cut gradually over months or years as this shift plays out, or be honest about where we are and act on it now. i chose the latter.”
Dorsey added in a shareholder letter: “We’re already seeing it internally. A significantly smaller team, using the tools we’re building, can do more and do it better. And intelligence tool capabilities are compounding faster every week.”
Zoom in: The fintech’s stock rallied as much as 25% on the news, after having been down more than 16% over the past year and 76% over the past five years.
Block’s declining stock price put Dorsey under pressure to make changes, although he denied that the layoffs were related to Block’s financial performance.
Reality check: CEOs will look to see if they can follow Dorsey’s lead, and most will realize they don’t have the talent to do it. This would destroy most companies — it’s very hard to do.
The big picture: Wall Street was captivated early this week by a viral doomsday scenario for AI’s coming effect on white-collar work. But the stated reasons for most other big AI-related layoffs so far have been much less explicit than Dorsey’s.
Many AI executives and investors insist that the tech will lead to temporary labor dislocations rather than net job loss, echoing the Industrial Revolution.
The bottom line: It’s one thing to replace people with machines. It’s quite another to prove that it makes business sense. If Block can grow its top line with a much smaller headcount, the rest of corporate America will take notice.
From Morning Brew
Payments company Block to slash staff by 40% due to AI pivot. In conjunction with its earnings call yesterday, Block CEO Jack Dorsey said it will reduce headcount “from over 10,000 people to just under 6,000.” The company will restructure around “smaller, highly talented teams using AI to automate more work,” according to Block CFO Amrita Ahuja. Affected staff members will receive 20 weeks of base pay, which the company expects will contribute to $450 million to $500 million in charges, primarily in the first quarter. Dorsey also said, “Within the next year, I believe the majority of companies will reach the same conclusion and make similar structural changes.” Block stock rose 24% in after-hours trading following the announcement.—HVL
