Massive workforce reductions often mask a deeper failure to retain the institutional knowledge required for the next growth phase. When companies treat headcount as a variable cost rather than a core asset, they hollow out the very teams needed to execute when the market turns. This cycle creates a permanent state of operational amnesia where the company forgets how it actually wins. We see this play out when the transaction is processed but the underlying value exchange vanishes because the people who built the process are already gone. Sustaining momentum requires protecting the human infrastructure that keeps the engine running through the quiet periods.
The income replacement rate does most of the work here. If displaced workers find comparable jobs quickly, the model can flip from taxing automation to subsidizing it.
Just like over-hiring was a non-permanent phase, when Covid bailout money hit the stock market; there will be an over-layoff period. Executives will dream of getting more productivity from a much smaller staff.
It will “sort of” work. Businesses will get through that year with much lower costs, and therefore AMAZING exec bonuses.
Then they will realize they moved too soon, profit growth without revenue growth is short-lived. So they must back into more staffing for a while.
Later, we find out what the long term impact of AI on business operations is.
The point about faster AI making the gap worse is the one I keep coming back to. As a founder, you'd assume better tools mean more room to build responsibly, but the Red Queen framing shows why that's not how the incentives actually play out. Worth sitting with before writing off the "better AI fixes itself" argument.
The laid off employee then builds a company from scratch, using state-of-the-art tech, that makes a better product at a lower cost than the company that laid her off. And the economy grows. At least that’s how it happened in the first 250 years. What am I missing?
The math: 100% of the savings, absorb only 10% of the demand you just destroyed.
Rational alone, suicidal together. A Prisoner's Dilemma with no exit. 150K-plus jobs gone already this year.
Here's what no spreadsheet catches: whether the savings were even real. That's not an economics gap, that a broken human system, running faster. AI didn't invent this, it just augments what's already running underneath.
So I'll ask: anyone measuring automation's actual net effect... who's truly accountable for these cuts... is there a real business case... who's measuring this 12 months from now or is it forgotten?
Bottom line: Get your human system honest before you let AI augment it. That's the real install.
The most unsettling part is that no company has to act irrationally for this to go wrong. Each firm can make a sensible short-term decision to automate, while collectively weakening the consumer demand on which everyone depends. This is ultimately an incentive problem, not just a technology problem.
I’ve been laughing about this for years: every tech bro entrepreneur dreams about firing all the staff without realizing that employees are customers.
Massive workforce reductions often mask a deeper failure to retain the institutional knowledge required for the next growth phase. When companies treat headcount as a variable cost rather than a core asset, they hollow out the very teams needed to execute when the market turns. This cycle creates a permanent state of operational amnesia where the company forgets how it actually wins. We see this play out when the transaction is processed but the underlying value exchange vanishes because the people who built the process are already gone. Sustaining momentum requires protecting the human infrastructure that keeps the engine running through the quiet periods.
https://cyrilsimonnet.substack.com/p/the-order-went-through-and-the-card?utm_source=substor&utm_medium=substack&utm_campaign=comment
The income replacement rate does most of the work here. If displaced workers find comparable jobs quickly, the model can flip from taxing automation to subsidizing it.
Cutting headcount before you have measured what AI actually automates is a forecast, not a strategy.
Just like over-hiring was a non-permanent phase, when Covid bailout money hit the stock market; there will be an over-layoff period. Executives will dream of getting more productivity from a much smaller staff.
It will “sort of” work. Businesses will get through that year with much lower costs, and therefore AMAZING exec bonuses.
Then they will realize they moved too soon, profit growth without revenue growth is short-lived. So they must back into more staffing for a while.
Later, we find out what the long term impact of AI on business operations is.
The point about faster AI making the gap worse is the one I keep coming back to. As a founder, you'd assume better tools mean more room to build responsibly, but the Red Queen framing shows why that's not how the incentives actually play out. Worth sitting with before writing off the "better AI fixes itself" argument.
The laid off employee then builds a company from scratch, using state-of-the-art tech, that makes a better product at a lower cost than the company that laid her off. And the economy grows. At least that’s how it happened in the first 250 years. What am I missing?
Sharp breakdown of the AI layoff trap.
The math: 100% of the savings, absorb only 10% of the demand you just destroyed.
Rational alone, suicidal together. A Prisoner's Dilemma with no exit. 150K-plus jobs gone already this year.
Here's what no spreadsheet catches: whether the savings were even real. That's not an economics gap, that a broken human system, running faster. AI didn't invent this, it just augments what's already running underneath.
So I'll ask: anyone measuring automation's actual net effect... who's truly accountable for these cuts... is there a real business case... who's measuring this 12 months from now or is it forgotten?
Bottom line: Get your human system honest before you let AI augment it. That's the real install.
The most unsettling part is that no company has to act irrationally for this to go wrong. Each firm can make a sensible short-term decision to automate, while collectively weakening the consumer demand on which everyone depends. This is ultimately an incentive problem, not just a technology problem.
thank you for writing on this!