Meta CEO Mark Zuckerberg steered the company through a “year of efficiency” that saw massive layoffs and record profits. Alex Wong – Getty Images
Many large technology companies are downsizing and downsizing their workforce. This corporate fat-cutting has become common in the tech sector in recent years.
Noted marketing professor and media impresario Scott Galloway has a theory as to what's behind the layoffs: AI. The catch is that many executives are hesitant to admit that they are laying off employees to replace their jobs with artificial intelligence.
Galloway compares the move to the open secret that many people use to lose weight on their own, calling AI “corporate Ozempic.”
“My theory is that companies (particularly technology companies) have also discovered a weight-loss drug and are also cautious about using it,” Galloway writes in his blog No Mercy/No Malice. “There are two stories in recent financial news: layoffs and record profits. These are connected.”
A spate of tech companies have made layoffs in recent months. Meta, a Silicon Valley stalwart, has laid off around 20,000 employees since November 2022. Apple could lay off hundreds of employees from its self-driving car division after canceling the project. Salesforce laid off about 700 employees earlier this year after cutting more than 7,000 employees in 2023. In January, Alphabet laid off over 1,000 employees in two rounds of layoffs affecting its ad sales and hardware teams after handing out 12,000 pink slips in 2022.
Galloway notes that all of this comes at a time when the technology industry has achieved excellent business results. Some of them even delivered historic numbers: Meta announced record revenue of $40.1 billion for the fourth quarter of 2023, while tripling net profit compared to the same period last year. Galloway says the discrepancy points to a strategic shift rather than a need to right-size a struggling company.
“I believe AI plays a bigger role in layoffs than CEOs want to admit,” Galloway writes in the post. “CEOs are cautious about this, at least in public, because there is a sense of fear surrounding the brave new world of AI.”
Galloway declined to comment.
So far, tech companies have not said their layoffs are the result of a transition to AI. In fact, some like IBM CEO Arvind Krishna have said that the company's investments in AI will lead to an increase in headcount. Others, like Alphabet, which became a giant in AI with its acquisition of pioneering startup DeepMind in 2014 and the release of tools like the Bard chatbot (now Gemini), have clearly said that AI and layoffs are nothing have to do with each other.
“We’re not restructuring because AI is taking away roles — that’s what’s important here,” Alphabet Chief Business Officer Philipp Schindler said on an earnings call this month.
It was these denials that “perked up my antennae for the first time,” Galloway says. Extending his Ozempic analogy, he compares these company statements to people saying they will “give up gluten” to lose weight, rather than admitting that they have started taking the drug for weight loss. Ozempic makes losing weight easier because it essentially eliminates cravings. In business, AI can eliminate a desire that Galloway believes companies would like to eliminate.
“If consumers were willing to pay $1,000 a month to lose weight without cravings, what would a company pay to achieve the previously unthinkable: reduce costs while increasing sales?” Galloway writes.
This does not mean that all jobs will disappear. Galloway believes AI will also help employees improve their work, allowing companies to do more with less. “Managers can take on new initiatives and areas without the hassle of hiring more employees,” he writes.
The concept of a future workplace where AI and humans work together in harmony is becoming increasingly common. One of the most widely held views today is that AI will simply replace routine, repetitive work. In this scenario, AI will likely replace certain job functions, if not entire roles. This does not mean that the impact of AI will be negligible: the International Monetary Fund estimates that around 60% of jobs in advanced economies will be affected by AI. However, about half of them could see an increase in productivity. Another estimate from Goldman Sachs suggests two-thirds of jobs and up to a quarter of current work could be affected.
This new focus on AI means that the few people with expertise in this area will be in high demand. Companies will be eager to hire these people, and many of the tech companies have already done so, but the trend is starting to spread to other sectors throughout corporate America.
Galloway predicts that over the next year, executives will talk openly about replacing humans with AI as its use in the workplace becomes more common. When that happens, “the pundits will clutch their pearls for a hot minute until the stock explodes and the secret hiding in plain sight becomes visible to everyone: [AI is] Company Ozempic. It's not about less bread, but about less desire for bread. Read: Hire people,” Galloway writes.