The headcount hard reset

TL;DR: Jack Dorsey may have read that infamous Citrini report a little too closely. Yesterday, he announced that Block, the fintech company that owns Square, Cash App, and Tidal, is cutting 40% of its workforce (4,000 jobs) and tied the move directly to AI. Some industry analysts say it’s the biggest workforce reduction as a share of total employees in S&P 500 history, and depending on who you ask, it’s either a serious warning sign or a prime example of “AI-washing.”

What happened: Dorsey said Block is restructuring around “intelligence tools,” arguing that smaller, flatter teams can operate more effectively with AI embedded into workflows. The cuts reduce the company to fewer than 6,000 employees. Notably, this wasn’t framed as a downturn response. Executives emphasized that gross profit is still growing and described the decision as proactive rather than reactive. Dorsey said he’d rather make a decisive shift now than trim headcount slowly over time because the latter can be “destructive to morale.” Also, presumably for morale, he wore a hat that said LOVE during the town hall where he spoke about the layoffs.

Some analysts point out that Block did triple its headcount between 2019 and 2022 (a claim that Dorsey acknowledged), and Dorsey is famously the man who simply couldn’t make Twitter’s economics work. To some, this looks like an overhiring correction with a new explanation. Or, as one person put it, “At this point it doesn’t really matter if AI actually will work. Companies are going to use it as an excuse to cut bloat.”

What’s next: Dorsey, probably the least popular person at a Silicon Valley party this weekend, predicts “the majority of companies will reach the same conclusion” within a year. And some say he just gave CEOs cover to make bigger cuts in their organizations. (Here’s a look at how AI could broadly change corporate structures.) The larger implication: As AI tools improve, companies won’t just automate tasks. They’ll redesign around smaller teams from the outset. So far, Wall Street appears to be rewarding that logic; Block shares jumped at the announcement. In the meantime, the company has offered few details on how AI is replacing 4,000 roles.

Bottom line: Block’s move may be the clearest example yet of a profitable tech company making a massive reduction explicitly because of AI. And despite disagreements around whether Block grew too fast, too quickly, this may be the first true stress test of how far AI-driven austerity can go. —AC