#Klarna, a payment company, stopped recruiting in October last year due to #AI. Last week, Klarna's CEO, Sebastian Siemiatkowski, shared some insights:
"Due to the implications of AI since September, October [2023], we have stopped recruitment. With normal attrition rates that most tech companies have, this means we are shrinking in number of employees by about 20% per year. We hope to show revenue growth while costs diminish."
Sure enough - Over the last six months, their average headcount has dropped over 20% according to LinkedIn.
So...At least he's honest? 😅 😬
Klarna, a decade-old medium-sized company, operates in a data-centric business. It benefits from scale as it's digital-first. Unapologetically, Klarna is committed to streamlining operations, which includes reducing staff.
Here’s the issue: if only a few firms do this, it’s fine. But if it becomes the norm, we’re looking at major ripple effects on the labor market, especially for new entrants.
If the incentive is maximizing revenue for shareholders, 'morally virtuous' companies that keep their staff won’t be able to compete and will go out of business.
But Alex - not all companies are prone to automation! My rejoinder: if your company runs its business on software...then it's only a matter of time. I'd argue 'virtuous' companies like Patagonia are exceptions, not the norm.
My point? The current automation-driven economy resembles a #Faustianbargain. Here's why:
1. Companies adopt automation to cut costs, but this leads to job losses.
2. Although goods become cheaper, unemployed workers can’t afford them.
3. Fewer employed means reduced consumer spending.
4. Reduced spendng affects business, leading to more job cuts.
5. The cycle continues - eventually even asset owners (currently benefiting from ATH stock values) will face consequences...stock valuations implode as fewer and fewer people can buy things without also going into debt.
Ultimately, this automation spiral affects everyone.
It’s a self-reinforcing loop that’s hard to escape. We can keep printing/debasing currency, but that's only a band-aid covering up the gaping wound of market incentives, demographics, and debt.
I'd love to be proven wrong, but implosion seems likely.
My questions and ideas:
Will available paying jobs reroute to tourism, civic duty, art or other creative or hard to automate endeavors? If so, what entity will provide payment? Will it be local communities, a nanny-state?
With fewer workers, will all goods/services be cheap? The answer is: probably not 1:1. If history is any indication, prices will go down slightly, and additional margin will go back to the shareholders of assets.
If #2 is true...why not give every newborn 7000 dollars invested in INDEX funds - they'd have a million dollars if it had to mature until the age of 40 (based on historical performance). Could this offset our increasing loss of wage labor?
#AI #FutureOfWork #BusinessStrategy #Automation #LaborMarket
