The Flaws in Mass Layoffs for AI Productivity Are Beyond Obvious Now

Just when I thought I was done calling out tech CEOs for horrible mass layoff decisions, one of those CEOs doubles down on the mass layoff rhetoric. So here’s what we’re gonna do. You know how, when your mom or dad tried to give you solid life advice that just didn’t stick, they ended up sitting you down and listing out the flaws in your reasoning one by one? Well, sit down, kid. And like I tell all my kids: Look, I’m gonna yell at all of you, but I’m really only yelling at one of you. You’ll quickly figure out if you’re the one I’m actually yelling at, but it’s not gonna hurt any of you to hear what I have to say. This Could Be Any Corporate Tech CEO My opening histrionics aside, I want to make it clear that I’m not really trying to smack anyone individually. What I’m about to criticize is not the work of a single misguided leader, it’s the culmination of a spreading misguided follow-on leadership strategy. I also want to apologize if any of this comes off as flaming the writer or the publication behind the article I’m going to use as an example, because it literally could have been any tech CEO speaking to any publication after cutting double-digit percentages of their workforce and being all super-pumped about the future. It is such a bad look, so good job exposing it. But I guess we’re all numb to it now, when we read things like: “What [tech company’s] mass layoff tells us about the future of work” I encourage you to read the article. Go ahead and give the author some respectful clicks, because they get it right at the end, with facts. But ultimately you don’t have to read it because I’m about to take apart the “fire-all-the-humans-and-replace-them-with-AI” strategy point by point. This Isn’t a New or Novel Strategy Let’s start at the top: “Zeb Evans, CEO of the collaboration software startup ClickUp, claims that this shift is imminent. Last Thursday, Evans announced on X that the company, which was last valued in 2021 at $4 billion, had laid off 22% of its workforce.” A couple of things are quickly evident. First, this appears to be the same “everybody’s gonna eventually do it” reasoning that Jack Dorsey used when Block laid off 4,000 people just a couple months ago. Second, it’s not a coincidence that the company was last valued in 2021 at $4 billion or that that might have been its peak. 2021 was the acceleration point of the Great Labor Arms Race, and Corporate Tech companies across the industry started hiring people ill-equipped for poorly-defined roles at salaries that would have broken the bank if money wasn’t so cheap—or even free, via automatically forgiven loans. But the pretzel logic that gets used here is what makes this follow-on strategy especially obtuse. When Cutting Costs Isn’t Cost-Cutting The CEO “characterized that reduction as not a cost-cutting measure, but rather a radical embrace of AI that will propel the company to the next level.” Quick question: When is cutting 22 percent of your labor costs not a cost-cutting measure? I’ll just let that one hang. I’m not a mean person, really. The Biggest Mistake a CEO Can Make “‘Most savings from this change will flow directly back into the people who stay. We’ll be introducing million-dollar salary bands. If you create outsized impact using AI, you’ll be paid outside of traditional bands,’ Evans wrote.” One of the best lessons a mentor ever gave me about leadership is: The worst mistake a leader can make is looking at a chart that goes up and to the right and believing that chart will always go up and to the right. It never works out that way, but the temptation to think it will is always there. Using my mentor’s advice, I have several questions: Is this CEO talking about paying a percentage of profits based on whatever metrics they invent to show “outsized impact created by using AI”? Does the CEO plan to keep paying that employee their $1-million salary when the “outsized impact created using AI” returns to the mean? Quick follow up: Does that keep going until it breaks the budget or is this just, like, an MLM thing? If not, and the CEO does the sensible thing that every other company in the history of companies has called “commission,” won’t that employee just hop to the next company when that company offers them a $1-million salary to do what they just did? And then finally, let’s do the cut-throat AI thing that serves as the reason for the 22 percent “savings” in human labor: Once that “outsized impact created by using AI” materializes, why do you still need that employee? Especially if you’re now paying them a million-dollar salary? Isn’t that more “savings” just waiting to be “saved”? Making a Fortune Babysitting That last question kind of introduces another question: What are we paying these employees a $1-million salary for? “ClickUp recently introduced roughly 3,000 internal AI agents to handle a wide range of complex tasks on behalf of its employees…. Instead of performing the work themselves, staff members are now expected to direct these agents and ultimately review the output to ensure it meets the company’s standards.” Are we planning on paying million-dollar salaries to babysit agents? Because the last year has shown us that’s not where the seven-and-eight figure salaries are going. The 100x Productivity Myth “Evans’s goal, according to his X post, is for AI to turbocharge ClickUp into a ‘100x org.’” I’ve been on the AI front for over 16 years, and I get called a “100x guy” or a “10x guy” a lot. I don’t know what that means, but it sounds cool so I just smile and say thank you and get back to the data. Actually, I do know what it means, in another context, because I’ve spent my entire career as an entrepreneur and/or consultant, and have worked with a vast array of venture capital and private equity firms and their strategies. One of those strategies, familiar to everyone, is to create ROI by what I’m going to dub “numerator-maxxing” (see, I can make up buzzwords too). The strategy starts out logical enough. The company that the firm is investing in is doing something very right. Their numerator—the value that the company is generating—is a lot higher than their denominator—the money and sweat effort and brainpower being put into the company. The firm believes that the company’s numerator is artificially low and is being constrained by a weak denominator. So the firm dumps a bunch of money into the denominator. That’s their bet. When this happens, the numerator almost always increases. Where it goes wrong is when, a couple years into it, the numerator has not increased by orders of magnitude to compensate for being weighted down by a heavy denominator. One hundred over 10 is a much bigger number than 1,000 over 1,000,000. Sorry for the math. So yeah. Machines are less weight in the denominator than humans, and you can also add exponentially more of them to the denominator without it getting much heavier. But what do they add to the freaking numerator? Where AI and agent productivity is concerned, no one—no one—is looking at the numerator. Well, no, wait. Gartner took a look. Vindication Isn’t What It Used to Be Like I said, the writer gets a lot right at the end, and does it without my cartoonish fist shaking. In response to the metric most commonly used to measure that “outsized AI impact”: “[C]ritics argue that “tokenmaxxing”—as this concept is known—is the wrong metric because it simply racks up AI expenses.” In response to the company’s incredibly circular claim that people who automate their jobs with AI will always have a job: “But if AI keeps taking over more tasks, ClickUp will eventually need fewer and fewer people.” However, the most damning truth came from a quick mention of a quiet study from Gartner on ROI from AI-as-labor-replacement, just three weeks ago, from which I wish the writer had pull-quoted: “Many CEOs turn to layoffs to demonstrate quick AI returns; however, this disposition is misplaced,” said Helen Poitevin, Distinguished VP Analyst at Gartner. “Workforce reductions may create budget room, but they do not create return. Organizations that improve ROI are not those that eliminate the need for people, but those that amplify them by aggressively investing more in skills, roles and operating models that allow humans to guide and scale autonomous systems.” Am I still Don Quixote for screaming about this for the last 16 years? In fact, I said the same thing yesterday when highlighting the unintended consequences of this misguided follow-on leadership strategy, and it still feels like the loud part being said far too quietly. It will always be the humans behind the tech that will make the tech successful—not the babysitters, not gamification, not agentmaxxing, tokenmaxxing, or numerator-maxxing. So if any of those leaders see this rhetoric and still believe these mass layoffs are about AI and not about mistakes made by leadership a few years ago in hiring the wrong people for roles that were never clearly defined at salaries that never should have been offered, I’m begging you, think twice before you agentmaxx. The flaws are now obvious and documented. There is nowhere left to hide. EXPERT OPINION BY JOE PROCOPIO, FOUNDER, JOEPROCOPIO.COM @JPROCO