[everfrustrated]

There was an recent article on X with an interesting take - it could be that companies are doing layoffs not because AI is making them more productive but because it hasn't. Their costs have gone up paying for expensive AI but haven't seen any revenue benefits to offset it.

Article https://x.com/championswimmer/status/2051807284691612099

[stego-tech]

This genuinely wouldn't surprise me, and I need to go back to looking at balance sheets to see if I can sus out the validity of that narrative. As AI subsidization ends prematurely and costs skyrocket, we should expect to see those costs reflected in the operation statements of major customers.

Since I had Coinbase up for review already, I decided to peek there first for any sort of correlation. In 2023, their "Technology and Development" line item shows $1.32bn going out, and by 2025 it'd ballooned to $1.67bn. This is despite headcount actually contracting by almost a thousand people between those two statements, which would normally mean a smaller technology spend since a lot of corporate software is seat-based nowadays. This suggests that yeah, actually AI spend is creating a heavier drag on the balance sheets and it's being offset with layoffs since the "job replacement" narrative is strong. That said, I'd need to check dozens' more balance sheets to draw any sort of industry-wide conclusion.

[rixed]

And to factor in other infrastructure costs that's become more expensive too, such as hosting or hardware. So unless you can isolate AI spending from others that's not going to be convincing.

[stego-tech]

...hence why I qualified the statement like I did. I'm well aware one example from one company in a budgetary line item that's inclusive of labor and licensing and hardware and purchases and AI is not going to be remotely conclusive on its face.

Yet even taking into account all of that data, a $300m jump in three years must include some significant and growing amount of AI spend; everything else would've contracted (licensing, hardware) stagnated (cloud consumption), or been a singular event (CAPEX purchases) relative to the company's health and headcount.

[rozap]

This is pretty interesting. I'd read your blog if you write a thing about it.

[tmp10423288442]

Ironically an analysis that Codex or Claude Code might be able to perform

[CharlieDigital]

Rings true because now teams end up building a lot of things that may or may not have alignment to customer/business needs.

The slow part has always been figuring out exactly what the customer/business actually needs, not the coding. Now teams are throwing money at tokens without solving the "who's buying this?" part appropriately and end up just building excess.

All judgement seems to have gone out the window.

[itake]

At my last job, within our org, the director had 3 staff engineers building the same, but competing AI tool.

At the last all hands other teams announced their own similar AI engineer productivity tools.

I low-key regret now sticking around long enough to get a layoff package.

[CharlieDigital]

This rings a bell.

Now that you can just throw tokens at it, it seems like actually thinking about what is useful and productive is no longer a practical skill (it still is, just no one in leadership nor product wants to practice discipline any more).

I don't know what to say about it except that it legitimately feels like some folks have just shut off their inquisitiveness and willingness to investigate and think before acting.

Now it's act, waste tokens and time, only to learn that the result of the action was obviously bad from the start because of some real-world human nature that we now no longer stop to try to understand first before applying a technical solution.

[fud101]

I suppose you meant 'not' not 'now' yeah?

[itake]

yeah, my bad. I typo'd on purpose to prove I'm not AI :P :'(

[thrance]

Personally, I think AI is just a convenient scapegoat for these mass layoffs. Also, these kinds of announcements contribute to sustaining the AI hype which all tech investors benefit from. And investors looove hearing about mass layoffs, stock goes up every time without fail.

[Baljhin]

> Personally, I think AI is just a convenient scapegoat for these mass layoffs.

Coincidentally, same day as your post, Forbes published an article stating the same: https://news.ycombinator.com/item?id=48128765

[benmusch]

cloudflare stock went down, genius

investors are not some nefarious monolith cheering for companies to make decisions based on how it benefits The Vibes. they're analysts assessing business decisions.

[oytis]

It went down on poor earnings call. Layoffs were probably an attempt to soften the blow. Hard to tell what was the effect, because the two happened simultaneously

[yellow_lead]

What was bad about the earnings? Every metric I am seeing is beating expectations. Genuinely curious

[matwood]

Most likely poor forward guidance.

[mountainriver]

This is the simplest and almost certainly correct answer.

I’ve seen this at a number of public companies, and is a reason I hate working for them. These decisions are always unbelievably short sighted and ruin companies in the long term.

[surgical_fire]

Wtf are you talking about? Investors are just gamblers with a fancier title.

They absolutely invest based on vibes.

[benmusch]

then why did the riveting stock analysis above mis-predict the market?

[surgical_fire]

Because the market makes no sense. It's just vibes. Trying to make sense of it is a fool's errand.

[harel]

This is no that far fetched... I don't think it's that common that a customer sits on the fence and says "If only company X had Y on their feature list I'll be a paying customer". So the speed at which the company now runs through its roadmap does not equate to new customers joining.

[luke5441]

They are laying people off because the cost of financing have gone up. The risk free rate is now almost 5%. For equity financing you'd need to show revenue growth models that allows repayment at that rate plus equity risk premium (which is quite large for new growth companies).

So the CFO makes a model that allows for this and for sufficient ROI they need less people to be more productive. This mechanically forces them to lay people off.

Of course laying people off might actually not improve productivity, but they need this to have chance.

[bantunes]

They're laying off the people who can't produce a minimum of 2x with AI, and keeping the maximalists with no life outside of work barely keeping up with the 100k LOC a week they're shipping to prod.

Suits have an idea of what the New Model Coder should be, and it's not people who don't burn through 100,000,000 tokens a week.

[kevmo314]

That makes no sense. If that were really true then they could’ve saved a bundle and did that same thing years ago before AI.

[bantunes]

The promise of AI gains with fewer people is what's triggering this - before, you needed ~1 coder to do ~1 unit of work. Suits now think you only need 1 coder to do X units of work because LLMs.

So no, they couldn't do the same thing years ago.

[alex_sf]

I mean, they do (and did). If you aren't shipping, you'll be out eventually.

[bamboozled]

They aren’t, go find the comments of people who worked at the company.

[szmarczak]

I wouldn't argue that it doesn't give any benefits. However, it's not worth the current cost unless you already own RTX PRO 6000 to run any reasonable LLM. I'm using Claude Free and I'm happy with what I get, especially for the cost of $0.

I'm eagerly waiting for the prices to come down so I can upgrade my PC to AM5 and run Gemma 4.

[j2jj]

Its quite possible that LLMs become housed units like the next PC. Initially it starts off as being a large thing in data centers (like computers did) until they got smaller and smaller. Except I expect the time it takes to get smaller and smaller to compress much more - given that we live in a world with far more resources and risk-taking.

[dnsb]

This links closely with this article i came across: https://readuncut.com/the-social-contract-is-broken/ how basically corporations are pursuing greed at such high levels.

[tkin1980]

This is a great article, actually. It does gather many of the empirical data I have seen and felt but were unable to put into word.

[siva7]

Wishful thinking. It may ease minds for those negatively affected by AI.

[boleary-gl]

I mean even this blog from Cloudflare reads a little like that.

[simianwords]

this is such a cope take i don't even know what to say. how can people believe in obviously false things like this? like what's the mental model here?