Jack Dorsey’s Block Slashes Nearly Half Its Staff in AI Bet

0:00Carol Massar:They told us to expect change. They warned us about the transition. But honestly, they forgot the best part. This is the chapter where we finally focus on us. LifeMD delivers expert menopause and midlife care right from your home. From hormone health to holistic wellness, LifeMD helps you feel your best for the best years of your life. LifeMD, it's just getting good. Visit LifeMD.com slash goodlife. So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need.

0:40Carol Massar:Now, a global workforce of 300 ,000 can use AI to fill their HR questions, resolving 94 % of common questions. Not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business. IBM. Sonesta Travel Pass makes traveling more rewarding, designed to help you get more out of every stay. Sign up at Sonesta.com to enjoy instant savings, bonus points, and valuable perks like early check-in, late checkout, room upgrades, and free stays over time. With Sonesta Travel Pass, every stay brings you closer to your next reward.

1:20Carol Massar:Choose from more than 1 ,100 hotels across 13 distinctive brands and unlock the best available rates when you book direct with Sinesta Travel Pass. Here today, roam tomorrow. Join now at Sinesta.com. Terms and conditions apply. Bloomberg Audio Studios. Podcasts. Radio. News. This is Bloomberg Business Week Daily. reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy. Plus, global business, finance, and tech news as it happens. The Bloomberg Businessweek Daily Podcast with Carol Masser and Tim Stenevek on Bloomberg Radio.

2:07Carol Massar:Shares of Block, the company formerly known as Square, Jack Dorsey's company, up more than 23 % after hours. This after the news that it's cutting 4 ,000 employees. It's reducing its workforce by nearly half. The fintech firm is placing a bet on AI, changing the future of labor productivity. Emily Mason is Bloomberg News fintech and crypto reporter. She wrote the story. She joins us here in our Bloomberg Interactive Brokers Studio. I got to tell you, I was left speechless when I saw this headline because, as I said on air earlier, you see announcements of 6%, 8%, maybe 10%, 40%. 100%. Who is getting let go and why?

2:45Carol Massar:Yeah. I mean, Block has invested in kind of their internal AI tools. So like Goose is one of the things that they're really touting. Is it run on, do we know if it's run on Anthropic or OpenAI or is it? They haven't shared that. Yeah. I imagine what they're doing, which is what a lot of companies is doing. It's probably plugging it into whatever works best for the moment and like constantly reevaluating that. But Jack is a technologist, right? So he clearly has a thesis about how he can build the best products. And he thinks that he can do it with fewer people leaning on tools like Goose. So does this mean that he's already been playing around with it and he's seeing the impact?

3:19Carol Massar:And so he's just saying, I can let go of these folks. Absolutely. He's definitely like hands-on using it. And he must think that he can make this work. And I think one of the things that they're trying to communicate at this moment, which you can take with a grain of salt as you always have to, is that this is kind of coming from a position of strength. Like they're really proud of their financial performance. Well, what's interesting too, though, I mean, this is a stock that's down 80 % since August of 2021. So it's been under pressure, right, to do something. Is this enough in terms of cost cutting to keep this company going forward amid, it's safe to say, an environment that has changed a lot?

3:54Carol Massar:They've made a ton of changes. I think one of the concerns that people watching them had was, like, they weren't shipping fast enough. Like, their products were kind of evolving, like, more slowly than people would have liked. So they've made a ton of changes. Like they've reorganized, like how people report up in the business. They've kind of done rolling layoffs. Some of them were tied to performance reviews. And then they're coming out with a really bold move. And I think I'm hoping that they don't have to let any other people go because it's never great when a company has to let people go.

4:22Carol Massar:But we'll see if this is enough. And as far as who is affected by these layoffs, again, I mean, we're talking about human beings here, right? Like getting laid off is not great. and people being out of work is obviously a challenge for those people. Are they people who are also technologists? Are they programmers whose jobs can be done with LLMs? Do we know who they are? Is it across the organization? I would expect that it's likely across the organization, but I am waiting to get more details on the earnings call. I don't know what you found in your reporting, Emily, but for me seeing this headline, reading your story and thinking, well if this is successful for block and you know mandeep made the point um of mandeep saying a bloomer intelligence he was on our he made the point that hey look at what elon musk did at x when he bought it formerly twitter jack dorsey company he said it was the engineering team was over was bloated uh he cut you know 70 of its workforce or whatever and um it's still around the site is still around say about it you know say what you will about it and look at the ad revenue and whatever, but it's a private company now, so we don't have those details.

5:35Carol Massar:But if this works for Block, does that mean that other companies are going to do this? I mean, that's certainly their thesis. They are kind of saying, we think other companies are going to have to do this, and we would rather do it proactively and on our own terms instead of waiting for a moment where we have to. Maybe other companies do this. I think you've seen some companies implement caps. They'd be like, okay, we're not going to hire more people. We can do a lot more with the people we already have. I think cutting such a significant amount of people is a pretty dramatic step. Well, I mean, he says, right, in the letter, he believes many companies will ultimately have to make similar moves due to AI.

6:12Carol Massar:He doesn't just say companies in his space. He's just saying that the majority of companies will reach the same conclusion and make similar structural changes. And I guess, you know, we'll have to watch and see. Like, you do wonder, is this a sign where other CEOs are going to go back and be like, wait, if this is what these guys are doing, Are we going to be doing the same? All right. I think we have to wrap. I feel like there's going to be a lot more questions, and we're going to have to watch this one. Bottom line, though, investors are kind of loving it. You cut costs, and if there's still growth going forward, investors like it.

6:48Carol Massar:Stocks up about 22.5 % here in the aftermarket. Emily Mason, she is Bloomberg News, FinTech, and crypto reporter. Check out her reporting and the entire team's reporting on the Bloomberg Terminal and at Bloomberg.com. Stay with us. More from Bloomberg Businessweek Daily coming up after this.

7:08Carol Massar:They told us to expect change. They warned us about the transition. But honestly, they forgot the best part. This is the chapter where we finally focus on us. Life MD delivers expert menopause and midlife care. Right from your home. From hormone health to holistic wellness, LifeMD helps you feel your best for the best years of your life. LifeMD, it's just getting good. Visit LifeMD.com slash goodlife. Hello, hello. I'm Malcolm Gladwell, host of the podcast Smart Talks with IBM. I recently sat down with IBM's chairman and CEO, Arvind Krishna. and I asked him, how can companies use AI to its fullest potential to create smarter business?

7:55Carol Massar:My one advice to them, pick areas you can scale. Don't pick the shiny little toys on the side. For example? If anybody has more than 10 % of what they had for customer service 10 years ago, they're already five years behind it. if anybody is not using AI to make their developers who write software 30 % more productive today with the goal of being 70 % more productive. Yeah, wow. So we are not asking our clients to be the first experiment on it. We say, you can leverage what we did. We are happy to bring out all our learnings, including what needs to change in the process, because the biggest change is not technology.

8:40Carol Massar:It's getting people to accept that there's a different way to do things. To listen to the full conversation, visit ibm.com slash smarttalks.

9:15Tim Stenovec:Make it sing.

9:16Carol Massar:AI builds the deck so you can build that thing. Do that, do that, do that with Acrobat. Learn more at adobe.com slash do that with Acrobat. You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business App. Or watch us live on YouTube. Hey, I got to say that there are moments in time like today with all the spend and build out and companies doing things related to AI and questions around the return on investment, the ROI, and the impact of artificial intelligence that we kind of wish we could pull out that crystal ball and see a little bit into the future.

9:58Carol Massar:Oh, I think it's fair to say Chris Miller saw something years ago. He's the author of the 2022 bestseller, Chip War, The Fight for the World's Most Critical Technology. He joins us from Pittsburgh this afternoon. Chris, it's good to have you back with us. Carol and I were just talking and, you know, you wrote this book close to four years ago at this point. How different is the world of semiconductors and the world's reliance on semiconductors now than when you wrote the book? Well, I think the key difference is just the scale of spending that we've got right now on building data centers and buying all of the chips that are required inside of them.

10:40Carol Massar:NVIDIA, first and foremost, but not only we've seen companies transformed by the data center build out. But in a lot of ways, not much has changed other than that. We're still sourcing our key semiconductors from Asia and above all from Taiwan. And so the industry is supercharged its size, growing faster than ever, but dealing with some of the same supply chain choke points that it had a decade ago. You know, we talk a lot with one of our brilliant voices on the chip world, and that is our own Ian King, who has seen a lot of cycles, the ups, the downs. And we talk a lot about that supply-demand imbalance and what happens when there's a lot of demand, there's not enough supply, the build-out continues, the investment, supply goes up, and then there's a glut.

11:23Carol Massar:So I'm just curious what your view is when it comes to the cyclical nature of the semiconductor world. Has AI changed it, or we will see also an overbuild, an oversupply, and then a glut? I think if you look historically, certainly you see cycles up, cycles down. But there are moments when you see step changes in terms of demand for certain types of chips. We saw that with smartphones, for example. There was no demand for smartphone chips. And then now everyone needs a new smartphone every couple of years. And what we're seeing in AI right now is that type of step change, a huge increase in just the baseline amount of chips that we're going to need for data centers driven by AI.

12:05Carol Massar:And so I think we shouldn't expect cycles to be over. Certainly, there'll be ups and downs in the future. But it's now very clear, I think, that we're just going to need a lot more compute for AI purposes in the future. And as a result, we'll need a lot more of the AI chips that go inside of data centers. In your view, is the promise that many people think AI is supposed to deliver, will it actually be delivered? What's the future that you envision after all this CapEx is spent? Well, I think it's in some ways funny when we ask, will AI deliver? Because if you look just three years ago, even after ChatGPT was released, there are so many things that were not possible that are possible today, whether it's the number or the scale of hallucinations and answers that chatbots give you or the scale of work that you can put together today that just wasn't possible in the past.

13:01Carol Massar:We've already had so much new capability generated just in the couple of years since ChatGPT that in some ways I think it's an absurd question to ask, will AI deliver? It already has in a lot of ways. But I think I understand why there's plenty of questions about what about the investment that's happening right now? Will that investment pay off? And I think there are reasons to think carefully about how much each company is putting in over what time horizon. But I guess when I when I zoom out, I ask myself, do I want a world in which there's more access to compute or or less? And it seems to me that we should, rather than being concerned that there's too much compute being put in the ground, be excited that there's actually companies willing to invest in the infrastructure that's going to deliver all these capabilities.

13:47Carol Massar:Well, I think it's an important question to ask for a few reasons. And one of those is because if you look at just the CapEx that these companies are spending, you know, one company,$200 billion in a single year, that's a big commitment. And that's something that they have to convince investors that is money that is going to the right place. That's money that has to be earned back plus on companies coming to a hyperscaler and saying, yes, we think that this money is not only being well spent, but then we can use this compute to actually create a product that will provide a return on investment.

14:21Carol Massar:So, yes, we've seen a lot of the hyperscalers benefit the, you know, the Anthropics and the open AIs and the Mistrales. Like, that's amazing stuff. But at the end of the day, there are a lot of companies that are not necessarily technology companies that maybe aren't yet necessarily seeing an increase in productivity as a result of these tools. So my question is, do those companies start to see that? Do we live in a world where this is a layer just like the Internet was a layer of technology? I think there's no doubt that we're going to have AI as a layer that's embedded into all technology that we use.

14:57Carol Massar:And when I look at the economic question, I say, first off, is it profitable to serve AI systems today? Not train the next generation, but serve today's. And if you listen to what's publicly reported about OpenAI or Anthropic, their margins on their inference business are not just positive, but quite good. And so that, I think, is pretty strong evidence that the delivery of already existing AI services is a pretty profitable business. The next question is, should we be investing in R &D in the next generation, which is, of course, very, very expensive. But I think it's hard to argue we should dramatically slow down R &D and AI, just given all of the extraordinary improvements that we've seen over the past couple of years in terms of capability.

15:39Carol Massar:And so when you start breaking it down and ask, well, which specific investment do we think is excessive? Which specific investment would rather not be doing? Would you really like to be the CEO of the only big tech company that's not investing in AI? That doesn't seem like a very comfortable place to be. And I'd rather have a situation in which the big technology companies are investing more rather than putting money in the bank or buying back their stock because they didn't have any profitable investment opportunities. Well, you know, I would say Apple's doing it differently. And I guess time will tell whether or not their approach works out.

16:09Carol Massar:Chris, I am curious to, you know, who do you talk to? What research do you follow? What are the leading voices? What are the leading companies that you watch to figure out kind of how the semiconductor space is evolving? I mean, we still know TSMC is still the big manufacturer of all chips in the world, and there's geopolitical tensions to that. But give us an idea of where do you think kind of investors and just the world at large need to be focusing their attention on when it comes to the semiconductor world? Is it NVIDIA? Is it China? Is it something else? I think the hard problem is that it's all of the above.

16:48Carol Massar:And we've seen this play out in the GPU supply chain over the past couple of years. We've had shortages in different types of components, different materials and the memory chips that go next to GPUs and AI servers, each part of the supply chain has had to dramatically ramp up its production capacity to respond to this surge in demand. And so if you only look at one part of the supply chain, you miss the challenges that other parts are often facing. And so it's the chip designers, it's the chip makers, but it's also the materials suppliers, which are often not even thought of as being semiconductor firms, but produce many of the capabilities that are critical to actually manufacture the AI chips and servers that we need.

17:33Carol Massar:Do you think the world or do you think the U.S. specifically does need to be restricting sales of its most sophisticated chips to China or on others? I mean, we did see NVIDIA. They still face some uncertainty in China. That's their largest market, or which it is the largest market for chips. The government granting some licenses to ship a small amount of some of its processors to customers there. But NVIDIA is not sure if the Chinese government will give its approval. So there's still some back and forth here. But is it still an arms race of source? Arms race of source, excuse me. Yeah. I think arms race is not a bad analogy.

18:12Carol Massar:When you listen to tech CEOs, they'll speak in the same language. They're struggling to get access to all the computing power that they need, that they envision needing more tomorrow than they've got today. And if you listen to Chinese technology leaders, what you'll hear from them is challenges in getting access to computing power. And the primary reason they've struggled to deploy AI products at scale is because they've struggled to get access to all of the computing capabilities. And it's on a regular basis. We see new Chinese models launched that can actually be deployed at scale because they don't have access to the advanced chips that they need.

18:47Carol Massar:And so this does, I think, seem to me that this is still a very powerful card that the U.S. has to play. And so I think we should be very careful or on any decisions to give China more access or at least make sure that we're getting something in exchange for that. On that, Chris, the U.S. support of TSMC and the U.S. support of Intel, different types of support. And I guess you could call the TSMC one encouragement to build here in the United States. What is the right industrial policy to reduce reliance on companies outside of the U.S.? Well, it's a really hard problem because TSMC is such a capable and efficient manufacturer in their home base in Taiwan.

19:31Carol Massar:But I think the U.S. government is right to say that we need a more diversified manufacturing base for the world's most important semiconductors. I think we've learned over the last couple of years there's no silver bullet. President Trump's tried tariffs. That comes with obvious downside. President Biden tried subsidies. that worked to a degree, but only to a degree. Here's the reality. The chip industry has involved hundreds of billions of dollars of CapEx over the last several decades. And so it's just not going to move fast. And so if you want to slowly change the structure of where chips are produced, you've got to plan for years of implementation of measures designed to shift economics of the chip industry.

20:14Carol Massar:All right, going to leave it there. Chris Miller, thank you so much. Good to check in with you. professor of international history at the Fletcher School at Tufts University, author of Chip Ward, joining us on this Thursday. Stay with us. More from Bloomberg Business Week Daily coming up after this.

20:33Hello, hello.

20:34Carol Massar:I'm Malcolm Gladwell, host of the podcast Smart Talks with IBM. I recently sat down with IBM's chairman and CEO, Arvind Krishna, and I asked him, how can companies use AI to its fullest potential to create smarter business. My one advice to them, pick areas you can scale. Don't pick the shiny little toys on the side. For example? If anybody has more than 10 % of what they had for customer service 10 years ago, they're already five years behind. If anybody is not using AI to make their developers who write software 30 % more productive today with the goal of being 70 % more productive. Yeah. So we are not asking our clients to be the first experiment on it.

21:26Carol Massar:We say, you can leverage what we did. We're happy to bring out all our learnings, including what needs to change in the process, because the biggest change is not technology. It's getting people to accept that there's a different way to do things. To listen to the full conversation, visit ibm.com slash smarttalks.

22:06Carol Massar:We'll see you next time.

22:15Carol Massar:the line. Do that with Acrobat. Learn more at adobe.com slash do that with Acrobat. Support for the show comes from Public. Lately, it feels like there are two types of investing platforms. Some are traditional brokerages that haven't changed much in decades, and others feel less like investing and more like a game. Public is positioned differently. It's an investing platform for people who are serious about building their wealth. On Public, you can build a portfolio of stocks, options, bonds, crypto without all the bugs or the confetti. Retirement accounts, yep. High yield cash, yes again. They even have direct indexing.

22:51Carol Massar:Public has modern design, powerful tools, and customer support that actually helps. Go to public.com slash market and earn an uncapped 1 % bonus when you transfer your portfolio. That's public.com slash market. Add paid for by Public Holdings. Brokered services by Public Investing, member FINRA SIPC. Advisory services by Public Advisors, SEC Registered Advisor, crypto services by ZeroHash. All investing involves risk of loss. See complete disclosures at public.com slash disclosures. You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern.

23:27Carol Massar:Listen on Apple CarPlay and Android Auto with the Bloomberg Business App. Or watch us live on YouTube. I want to bring in Stephen Dickens, CEO and Principal Analyst of the tech researcher and advisory services firm, Hyperframe Research. Stephen, good to have you on the program. You follow this company, among many others, very closely. We did hear yesterday from NVIDIA that they pointed out in that earnings report that about half of revenue for data centers is coming from not the hyperscalers. So my interpretation of that was, OK, maybe it's the core weaves of the world. How do you look at that?

24:03Carol Massar:You're nodding. You're nodding. OK, that's a good sign. How do you look at what CoreWeave is going to report in the context of yesterday's NVIDIA report? So thanks for having me on the show.