The Honesty We Didn't Expect
At Block, CEO Jack Dorsey blamed a recent round of 4,000 layoffs — a whopping 40% of the company's workforce — on the emerging technology, warning of more to come. "We're already seeing that the intelligence tools we're creating and using, paired with smaller and flatter teams, are enabling a new way of working which fundamentally changes what it means to build and run a company," he wrote on X. "And that's accelerating rapidly."
This is remarkable for its candor—and its implications.
Dorsey's public reasoning was direct: By early 2026, Block determined that its AI systems had reached sufficient maturity to eliminate roles across customer support, compliance processing, internal operations, and mid-level management.
But let's examine what actually happened: The market response was complex. While some investors rewarded the efficiency gains — Block's operating margin was projected to improve by 8 to 12 percentage points following the restructuring — labor economists and tech workers expressed alarm at the scale and speed of the displacement.
Here's the tension nobody discusses publicly: Were those roles actually redundant because AI proved it? Or did AI prove capable enough that Block could eliminate them and accept some degradation? These are different claims with different implications.
The unreported reality: Graham said what executives are seeing with productivity today is actually more of a wish than a realized fact. Companies see the potential of AI without the financial results to match. "Companies have invested and they're realizing all these kind of cool things that they're either starting to do or they hope to do in the near future," he said. "But it's not really showing up yet in revenue."
My analysis: Block is executing the strategy that will define 2026: cut to fund AI, hope AI ROI materializes, accept customer experience degradation in the meantime. It's a bet. A rational one, perhaps, but still a bet.
