Tech stocks go ever higher, but how much of that is due to real gains and how much is because of layoffs done in the foolish hope that generative AI tools can replace workers?
I’d been writing about the tech industry for years before the dot-com crash of 2000. That bubble popped because of irrational exuberance about how the internet would change everything. Hundreds of thousands of tech jobs were lost.
Today, businesses are going crazy over genAI, which will change everything — and companies are already firing employees because they think bots can replace people. The “smart” money was right (and terribly wrong) both then and now.
In the 2000s, savvy tech business people were correct that the internet would change everything about the economy, but they were way too early. People quickly poured money into early e-commerce businesses such as Pets.com, Webvan, and eToys only to watch their investments vanish. So did everyone’s job who relied on these businesses to keep a roof over their heads.
For every Amazon that survived the crash and became a financial giant, a dozen other companies vanished from sight and memory.
Last year saw the tech industry’s worst wave of layoffs since the dot-com crash of 2001. In January 2023 alone, more than 100,000 tech workers were laid off, according to data from Layoffs.fyi. So far, this year’s level of cuts haven’t been as high, but they keep coming and coming and, well, you get the idea.
At the same time, tech companies’ stocks are doing better than ever, with stock markets reaching ever new heights. Businesses are insanely profitable — just ask NVIDIA — and many are cash rich.
Nevertheless, top tech businesses such as Meta, Amazon, Microsoft, Google, and Salesforce keep cutting tens of thousands of employees. Many of them loudly and proudly proclaim there will be more layoffs.
Why? While there are some rational reasons, including the persistence of high interest rates and continued delusions that a recession is possible, a lot of this involves irrational short-term thinking.
For example, the stock market currently rewards companies for their “cost discipline.” (This is another way of saying they’re reducing costs by firing people.)
Many of those recent job cuts can directly be attributed to AI. Some companies, such as Meta, aren’t even trying to hide it. CEO Mark Zuckerberg recently said, Meta had to lay off employees and control costs “so we can invest in these long-term, ambitious visions around AI.”
Had to? I doubt that.
Many businesses also make no bones about their plans to replace J. Staffer with I. Robot. IBM CEO Arvind Krishna said IBM wouldn’t be hiring while it shifted to AI. Last month, IBM cut marketing and communications jobs, and while it didn’t say this was due to AI, really, did execs even need to? One of the most popular mistakes companies are making in their fast embrace to AI is to replace writers with chatbots.
Other companies are more coy about job cuts. UPS and Blackrock, for example, cut staffers and admitted genAI was making their companies more productive — but didn’t explicitly draw the line between job losses and the much-hyped technology.
Big banks, such as Goldman Sachs have predicted AI could replace the equivalent of 300 million full-time jobs by 2030. They’re far from the only ones predicting radical job changes in the offing.
But they’re wrong. Here’s why: genAI tools are not close to being ready to replace jobs yet — though I can think of some CEOs whose seats could better be filled with AI. (That’s especially true for those whose first priority is to boost their bonuses rather than advance their businesses.)
I’ve been working with genAI for a while now. I’ve used all the major platforms and none of them — none —- are ready to replace anyone’s work yet. They’re great at half-assing jobs, some can be useful aids for productive work, but taking someone’s place? I think not.
GenAI simply isn’t ready yet. Just like the internet of 1999, the genAI tools of 2024 will eventually get there. But in the meantime, I predict, as Gartner would put it, we’re heading quickly to the “Trough of Disillusionment.” That’s where the initial burst of excitement over a new technology runs out and everyone realizes the reality isn’t close to what we all dreamed it would be.
I’ve seen too many of these bubbles over the years and still we fall for it every time. What’s different now, and why the coming fall will hurt so much, is that almost every company has fallen under the genAI spell. Not only are businesses planning to move to it, they’re already replacing the people they need to get their work done with half-baked AI models. This is going to greatly accelerate the coming crash.
Don’t get me wrong. GenAI will eventually replace some jobs. But former US. Treasury Secretary and current OpenAI board member Larry Summers gets it right. He recently said, “If one takes a view over the next generation, this could be the biggest thing that has happened in economic history since the Industrial Revolution.”
Note, he said “generation” — not this year, not next year. I don’t know that it will take an entire generation; technology speeds up economic transformation at an incredible pace. What I do know is it’s not going to be anything like as fast or as successful as so many bosses think.
First, we’re going to endure a crash, and it’s going to be ugly.
Touch base with me again in, say, 2030; maybe by then we’ll see most businesses successfully using genAI. But today? Forget about it.
