There's a lot of weird stuff going on with the layoffs. Maybe the motivation is compensation but I have a feeling it's a confluence of things. From what I've been observing a lot of the layoffs seem to be in unprofitable business units. At the same time companies are dumping a ton of investment into generative AI and the salaries in that space are even crazier. So possibly what's happening here is these companies are making a bet that GenAI is the next big thing and they're shutting down or scaling back unprofitable businesses to pay for it. In other words AI is taking jobs but not in the way people thought it would.
I don't think it's that complex really - in economic downturns big companies do mass layoffs. It's standard capitalist behavior to do cuts during recessions and hire more during booms.
It's similar logic to keeping the unemployment rate at ~4%
In fact, Powell recently screamed the quiet part out loud, making clear the largest central bank in the world is in fact an adversary to workers, when he declared that his goal is to “get wages down.”
When the Fed raises their rates, the wealthy move their capital from the economy to risk-free, high-yield US Treasury notes, which cools the economic system, which causes layoffs. It also causes loan interest rates to go up, which pops the cheap money bubble.
That is an interesting hypothesis that I had not considered but can agree with - it will happen. Not sure if it is happening right now at the scale of ongoing layoffs. It probably is part of it, but another portion is just companies cutting costs to make up for their quarterly numbers to turn on a profit.
For the past few years companies have been turning a profit and in order to keep the trend, since last year they’ve been cutting costs and corners where they can. Any strategy to cut costs at this point is game for them, and it is not only the investment in generative AI, but the hope they can make it do with machines and code what humans are doing. In my mind we are probably out a few years from that turning reality for most companies though.
There's a lot of weird stuff going on with the layoffs. Maybe the motivation is compensation but I have a feeling it's a confluence of things. From what I've been observing a lot of the layoffs seem to be in unprofitable business units. At the same time companies are dumping a ton of investment into generative AI and the salaries in that space are even crazier. So possibly what's happening here is these companies are making a bet that GenAI is the next big thing and they're shutting down or scaling back unprofitable businesses to pay for it. In other words AI is taking jobs but not in the way people thought it would.
I don't think it's that complex really - in economic downturns big companies do mass layoffs. It's standard capitalist behavior to do cuts during recessions and hire more during booms.
It's similar logic to keeping the unemployment rate at ~4%
The Federal Reserve raised rates specifically to cause layoffs and discipline labor. It wasn’t even a secret.
Jacobin: To Fight Inflation, the Fed Is Declaring a War on Workers
When the Fed raises their rates, the wealthy move their capital from the economy to risk-free, high-yield US Treasury notes, which cools the economic system, which causes layoffs. It also causes loan interest rates to go up, which pops the cheap money bubble.
That is an interesting hypothesis that I had not considered but can agree with - it will happen. Not sure if it is happening right now at the scale of ongoing layoffs. It probably is part of it, but another portion is just companies cutting costs to make up for their quarterly numbers to turn on a profit. For the past few years companies have been turning a profit and in order to keep the trend, since last year they’ve been cutting costs and corners where they can. Any strategy to cut costs at this point is game for them, and it is not only the investment in generative AI, but the hope they can make it do with machines and code what humans are doing. In my mind we are probably out a few years from that turning reality for most companies though.