The cool thing right now seems to be to tell the world you are reducing headcount because of AI, regardless of the reason. Although not a recent development, it’s picking up steam. There’s even a term for it, “AI washing.” Although this term began life as a reference to products and services, it’s now right at home in companies’ layoff messaging. The future is bright 😎
There is no doubt that AI is having an impact on the job market, but not necessarily for the reasons people think. It’s not due to massive gains from deploying AI technology, but because of something far simpler, the mere idea of AI.
Before We Start
I try to keep my information diet balanced. As such, I follow a cavalcade of haters and AI hype bros. In this group, some people think LLMs will disappear. For example, if the AI investment bubble pops, LLMs will evaporate, much like the metaverse did. This perspective demonstrates a fundamental misunderstanding of realities on the ground.
Generative AI is seeing some success across various use cases. Two examples are cybersecurity and software development. Sure, the amount of success and the extent to which these use cases can be driven are open to speculation, but denying they exist is delusional. LLMs don’t need to be AGI to be useful. Hell, they can even be kind of bad at something and still be useful as long as you understand the capabilities and limitations.
The disconnect people see is the undertone of the marketing, which casts it as a complete labor-saving device rather than a productivity tool. This is partly what we’ll look at in this article.
Oh, and I’d say the metaverse is down, but not out. Never underestimate people’s desire not to live in reality. It will be back at some point. Now on to AI washing.
AI Washing Layoffs
The biggest layoff news recently is Block. Jack Dorsey is laying off nearly half of his workforce. The reason given is, of course, AI!
Not only is he doing it, but he sees most companies doing the same next year. The issue being he’s not the first. Many tech companies overhired during the pandemic, and they’ve already reduced headcount, specifically Meta and Amazon.
The AI washing of layoffs is something that Sam Altman himself acknowledges, and he specifically uses the term in relation to layoffs when speaking at a recent summit. However, Sam Altman disingenuously uses the term “blame” when he says, “Almost every company that does layoffs is blaming AI, whether or not it really is about AI.”
Business leaders aren’t “blaming” AI for layoffs. They are praising it. Celebrating it even. There’s a pretty wide gap between blame and celebration. In much the same way I celebrate my birthday, I don’t blame my parents for the fact that I have one.
Altman strategically uses the word “blame” here because he’s attempting to rework AI’s image in the face of growing backlash. This is a manipulation. Everyone needs to remain vigilant against these manipulations in our current era. However, I love how Altman goes right back to spouting abundance nonsense, always on-brand.
AI Washing: Performance Art Yields Rewards
Telling the world you are laying people off because of over-hiring, your financials are down, you expect an uncertain market, increased competition, or any number of other factors would cause your stock to drop. Pretty much the only positive way to frame layoffs these days is to say that it’s because of AI.
When you say it’s because of AI, you are sending a positive signal to the market. You are saying, “We didn’t cut headcount; we gained efficiency.” We are now set up to reduce even more headcount in the future, which translates into greater potential profit for investors. Reality has no business here. As I’ve said before, much of this is performance art for investors, and the performances are paying off. Throwing AI in front of layoffs works… for now. Block shares surged after the announcement.
This playbook was repeated with Atlassian.
And of course, this poor soul from Atlassian was promoted and laid off on the same day. All thanks to the overwhelming power of AI!
And we are back to Meta again as they consider cutting 20% of their workforce because AI is so capable right now. I’m joking, of course, they’ve made some terrible AI investments (and hires), and investors aren’t happy. But they are happier now that they are considering laying off 20% of their workforce.
However, it’s not working out so well for Oracle. Oracle’s situation is playing out more realistically. They overspent and then needed to cut jobs to cut costs. This could be more difficult for them to reframe because so much is publicly known about their data center project and their relationship with OpenAI.
Are you sensing a trend yet? Whether AI actually works and replaces staff is irrelevant. More companies will see this and follow suit. AI will be attributed to every layoff from here on out. Even non-publicly traded companies will follow, seeing a more positive framing, even if it doesn’t work out in the end.
The Idea of AI
AI is coming for jobs, but not before the mere idea of AI does. There are people right now either getting laid off or not getting new opportunities, not because of AI’s capabilities, but because of the mere thought of AI doing their jobs in the future. Companies are betting their future on the hype that AI companies are pitching. This is like jumping off of a perfectly good boat in the middle of the ocean because some dudes on the internet claim a better boat is coming soon.
Even if companies aren’t laying people off because of AI, they are certainly slow to open new positions, hoping that AI will alleviate the need. This places more work on the shoulders of current employees, intensifying their workload rather than reducing it.
Look, I’m not delusional. There is no doubt that AI is having some impact on the labor market. How much impact and the reason are hard to decipher. It’s difficult to distinguish decisions made between true capabilities and pure hope. In some cases, where it would seem to impact certain jobs more negatively, the opposite happens. For example, instead of hiring fewer developers, companies are hiring more.
Generative AI models are great at generating initial code. However, it remains to be seen how these tools fare in maintenance over time, especially for larger, more complex codebases. There’s reason to believe it won’t work out as well as people hoped. In a way, we get a glimpse of what could be, but still isn’t. Companies are hoping this gap closes.
However, the hype catches fire because many business leaders have no idea how the technology works. They read news articles, many of which are nonsense, and then assume everyone is doing something except for them. So, they force-feed half-baked technology to everyone at the company and delay hiring in the hope that AI swoops in as a savior.
Layoffs Are The Point
Even if the current spate of layoffs is mostly AI washing, it should be noted that the total reduction of staff with AI is the point. Even if the business leaders won’t admit it, the influencers certainly do. If you ask them, they’ll tell you that the ideal number of employees at a company is zero. This can be accomplished with a far less-than-perfect AI technology.
The pseudo-utopian sales pitch is that the goal of AI in the workplace is to reduce workload, freeing people up to focus on more meaningful and creative tasks. This pitch was always 100% bullshit. The goal of AI in the workplace isn’t to reduce workload. You don’t think people are dumping billions upon billions in investment into AI because it’s a productivity booster, do you?
The famous saying, “AI won’t replace people. People with AI will replace those without,” was always silly. I’ve been saying for years that we don’t need AGI for companies to replace workers. The moment the AI is mediocre enough to pass muster, it will be adopted. Bugs, errors, issues, vulnerabilities, and all. Period. Doesn’t matter if the person has AI or not.
What we are seeing is a dress rehearsal for how a more capable AI offering would unfold. Businesses would replace people as fast as they could. We are already on the precipice of people falling into what I call the “Sucks to be you gap,” a condition in which workers are displaced from the workforce by AI with no alternatives and no support. The sad thing is, they may fall into this gap not because of legitimate AI capabilities, but because of the mere idea of AI.
The Negative Consequences
There are plenty of trade-offs in replacing employees with today’s AI tools, as well as the misconception that we are one iteration away from complete success. As usual, what shouldn’t be surprising to anyone is apparently mind-blowing.
First of all, organizations are cutting headcount, leaving fewer people, and AI doesn’t replace their jobs. So you have fewer people doing more, even with AI tools. This is leading to a kind of AI burnout being labeled “brain fry.” This isn’t sustainable or productive. Most companies are already efficient and can limp along for a bit after drastic cuts, but it catches up with them quickly after a few quarters or even a year. In the long run, these short-term gains turn into long-term losses.
AI adoption over human talent can lead to stagnation. This may seem counterintuitive, but LLMs don’t generate novel ideas. The tools contain a mishmash of already known things. This is like expecting an industrial robot on an assembly line to come up with a new way of working. Humans are where true creativity and novelty still exist, and after cuts, companies may be missing the very people who can move the business forward. Most modern organizations aren’t like factories, but making them more like a factory could be a recipe for disaster.
From a human perspective, an AI-powered organization is fairly uninspiring. So your best people don’t stick around, and attracting new talent may become problematic. Imagine telling someone that their job will mostly be managing a fleet of AI agents. Super fun! Especially since that implies the technological equivalent of a janitor. They wouldn’t be exploring or creating, they’d be cleaning up.
In many cases, companies would be reducing the quality of the products and services they offer. Moving fast, vibe coding, replacing people with agents that have errors, and many other cases cause a degradation in delivery. I’ve written about this before… back in 2023. Companies are running face-first into a wall of technical debt.
For all the talk about competition with China and the EU, it seems our US tech companies may be putting themselves at a disadvantage in pursuit of short-term balance-sheet wins. The sentiment of US tech companies is at an all-time low as countries around the world scramble for alternatives. This will be a space to watch over the next couple of years to see how much damage it causes.
Of course, a huge issue with the public praising of AI as the reason for layoffs is the massive negative sentiment it engenders. The AI backlash is only going to get a lot worse. Please, everyone, Sam Altman can’t handle this much backlash on his own. 😆
At Some Point
At some point, a technology will come along that delivers on all of the promises the AI companies are making. Call it AGI or whatever. The real questions are, will it be built atop LLMs, and how soon will this arrive? Despite their usefulness for specific tasks, I personally don’t think LLMs are the technology to deliver on these promises, though many people disagree. Fair enough.
As far as timing goes, I don’t have a good read on this, and anyone who claims otherwise is full of it and drinking marketing Kool-Aid. If I had to speculate, I think another 15 or 20 years, to which every AI bro on the planet just collapsed on the floor laughing. The running claim in tech circles is 12 to 18 months (it’s always 12 to 18 months), but I believe a reckoning is coming that the AI bros fail to recognize. I’m not saying that AI won’t have an impact on jobs during this time. I’m talking about major employment disruption and workforce displacement due to AI.
I believe that at some point, there will be a significant setback. A reset will cause a reckoning. The buildup of technical debt, the degradation of service, the brain drain from companies, stagnation, the bursting of the AI investment bubble, AI data center sunken cost, or any number or combination of factors will cause a reset. As companies try to reset themselves, competitors without this baggage will swoop in to steal market share, further damaging the organization. It could lead to a situation in which smaller, more agile organizations overtake large competitors.
This may happen because the company spent so much time reworking things for AI that it’s not working for humans. You can certainly do both, but that’s not what companies are doing right now.
And no, LLMs won’t go away. If that’s what you were hoping for, I have bad news for you. Beyond the use cases and tools where LLMs are genuinely useful, LLMs have become a comfort blanket for people. You’ll have to pry it out of their cold, dead hands.
Conclusion
AI washing is here to stay, and pretty much every future layoff announcement will be framed as AI-related. This trend will continue until something breaks. One thing is for sure: the next year is gonna be wild.