> This sounds like an attempt to rationalize the fact that your business isn't that effective, otherwise adding more people would result in making more money.

Yes, or that businesses are expecting a slow down in the economy that hinders their ability to sell (i.e. their customers are going to cutback on spending)

This was the case last year (or maybe it was the year before) where technology companies saw their customers reducing spend and tightening belts.

The current economy feels hard to figure out, in that the market keeps going up but so is inflation and the struggle of the everyday American at least.

Perhaps that is leading technology companies to be more conservative in how much they produce.

You can always find things to do but how much of that work has a positive ROI, or contributes to your business? You always have some bottlenecks, let's say implementing features was your bottleneck before AI, and you had a team of 15 product engineers with a 1y roadmap. With Claude Code a team of 5 was able to get that done in let's say 3 months. You don't magically come up with 9 months of work for 15 people right away. And your bottleneck will now be sales or something else, but your engineers won't convert to becoming sales people (or at least not all of them), and you might only need 1-2 more sales people, not 15.

>I've never worked at any company where there was any limit to the work to be done. Sales people don't give a shit what your product can do, only what they can sell, and they never sleep.

The issue is how much of that work is "valuable" in the sense = makes money.

I have both been in projects and seen projects which were canceled once it turned out they didn't make money (bad sales? bad product? bad market fit? a bit of everything?). This you can only afford when you have money to spare (= with debts? high profits...?).

With the interest rates so high, how can a company justify hiring dozens/hundreds of people more? It's a risk, and what I am seeing now is that companies are shrinking left and right to focus on the business that makes money and reduce headcount on what they believe doesn't make money at all, or it's a cost too high for their "long term strategy" or whatever. Right now the only metrics that they are caring about is EBIDTA. They don't even care anymore about ARR, they are becoming irrelevant as long as they stay within a range (we want 20% increase, but we're ok with 5%).

The AI will replace everything and everyone is working out pretty well for Anthropic/OpenAI, though.

So you never worked at a consulting agency working on bids for outsourced development.

Only if all roles in a company are bottlenecked in the same way.

Example: natural monopoly in some geographically-locked domain. Just to grab an example. You have 150 people in the field, can't let them go because the company still needs hands and eyes on the ground. You have 15 people in some other, paper-pushing department. Thanks to AI advances, you only need 10 of those now.

> This sounds like an attempt to rationalize the fact that your business isn't that effective,

That's actually it. The part that can be sped up with AI don't change how slow everything else still takes. If you need 2 weeks to see the results of a change before AI, you still need that after AI.

Basically, your business is not keeping pace with development.

Try consulting agencies, or freelancing as external contractor.

In consulting firing people “on the bench” happens regularly if the sales pipeline cannot keep everyone busy, there is only so much agencies pay from their own pocket if there are no outsourcing deals landing.

In some of those well known offshoring companies, being on bench automatically means a downcut on the salary as cost measure.

> Layoffs are a strong signal that a business is not investing in growth and is just trying to wring more profit from the same thing. If investors were rational, they'd walk away.

Not always. A buggy whip maker in 1920 should be laying off people. No amount of investment in buggy whips will bring that market back.

A layoff is saying that the investment will not pay off. So long as the company is cutting the right things they are good. Many layoffs are not done with a proper cut of the work do be done and so are bad, but that doesn't mean they are always bad.

I think the issue is that at any given point the work required to fire a 100-200k engineer is less than making that engineer do work to make you that much.

If you're growing obviously it's stupid to fire but if you have plateau'd the easiest gain is to trim the fat, so to speak. Also once a company is acquired by a private fund, everyone becomes a title and a number in a spreadsheet, that's all.

In consulting you don't make magically customers out of nowhere, and there is a limited pool of customers to feed from.

The rational thing is to analyze the opportunity cost of the investment, which is dependent on the always fluctuating prices.

Some businesses can grow, some cannot grow, some grow at different rates. The risk adjusted (subjective) prices determine whether or not an investor should walk away.

Because you don’t have enough work that really needs doing, at least in that particular area. You cut engineers because the bottleneck to increased revenue isn’t software features or bugs, it’s marketing/sales; human beings’ limited attention for which there is now more competition than ever; and customers’ available funds.

ETA: this is sometimes (though not always) very different for a mature company than an early stage startup.

Because the entire structure of the business is designed for approximately the amount of work it currently does and likely has no particular immediate use for twice as much work in most departments.

If one woman can produce a baby on 9 months, why can't you get 9 women pregnant and produce a baby in one month?

I think you're viewing this from the perspective of someone who has a functioning brain and plentiful concepts and ideas that aren't being built because you're labour-constrained. Companies like Meta simply don't have productive uses for all of that human + AI labour. Meta spends tens of billions a year paying people to throw shit at the wall and see what sticks. If the idea well you're going to is running dry, AI with a smaller number of humans can slop out the stuff you do want to build more efficiently is their implicit argument, especially when you don't care about quality (as is the case with Meta). Layoffs are also being used to tell a story around efficiency to investors while companies wait for the billions they're plowing in AI actually show profit.

There's only so much to do and coordination costs (already burdensome) become overwhelming.

Except that comforting C-suite narrative does not reflect reality. 2026 agents both increase productivity by knocking clearly specified but error-prone and tedious tasks out of the park whilst simultaneously vexing and annoying their users with hallucinations and downright lies on tasks with intrinsic ambiguity. This is made worse by the token providers with their constant tweaks to their deployments to cut costs w/o losing accuracy which flat doesn't work out well for the end user.

The demand doesn't necessarily double.

Diminishing returns on additional labor.

AI is definitely not the cheapest it will ever be right now. The frontier is getting more expensive, but the same capability will get cheaper over time.

Why wouldn’t inference just keep getting better and cheaper as hardware and algorithms improve?

Yeah, it's probably be something like:

2025: agents are the future!

2026: we don't need any new employees

_stuff gets real_

2027: wow, employees are actually pretty good value.*