marius on Nostr: Block just fired 4,000 people, jack blamed AI, and the stock jumped 23%. But did AI ...

Block just fired 4,000 people, jack (nprofile…zj6n) blamed AI, and the stock jumped 23%. But did AI replace 4,000 jobs or the explanation to do so?

Block had 3,900 employees in 2019, then hired to 12,400 by 2022. Now it is cutting to 6,000 and calling it “AI transformation”.

Officially, the company explained that this workforce reduction is due to a company internal open-source AI agent called “Goose”. It allows smaller teams to outperform.

This tool is real, 75% of engineers working at Block report saving 8-10hrs per week and the CTO of Block told Sequoia that the most engaged developers have 30-40% of code AI-generated.

But does this all of the sudden justify firing 4,000 roles in a single stroke? The company had Investors Day 3 months ago with materially different targets. AI is real, but what has changed in 90 days is not AI capability but perhaps the permission structure.

And exactly because Block’s stock jumped 23% after-hours, this also created a dangerous incentive loop in corporate governance: layoffs + AI narrative = instant 20%+ repricing of the stock price.

Many other tech CEOs will watch what Jack Dorsey just pulled of and “reverse-engineer” this formula.

Jack Dorsey is not wrong that AI changes software companies fundamentally. But the more honest explanation would’ve been: “we overhired, underperformed for three consecutive years, and had 12,000 people doing the work of 6,000”. But obviously “AI tools changed what it means to run a company” sounds much better on an earnings call.

In this example, AI created a nice alibi for turning something that previously would’ve been a “bloated company finally restructures” story into a “AI-native transformation” story.

Any company with a headcount-to-revenue ratio above 2019 levels will follow this Jack Dorsey blueprint. Those who won’t will face investors pressure who will ask why they haven’t “AI-optimized”.

The most obvious short-term take: screen for bloated public tech companies who match exactly this criteria (headcount/revenue ratios well above 2019 levels) then identify who have not yet announced AI-driven restructuring. These are candidates for similar repricing events over the next 6-12mo.

If this materializes as I expect, this will have second order effects not only on office real estate but also the broader B2B SaaS ecosystem. 4,000 fewer employees also mean 4,000 fewer Slack licenses, Salesforce seats, Okta provisions. Which forces them – more than others – to use this playbook.

At the same time, this will widen the gap between US and EU firms. US companies can make these workforce cuts without a second thought. EU firms cannot, they face labor regulations which make them costly or impossible.