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One big worry for 2024 is the nature of the job sector, especially when it comes to big tech companies. They have been embroiled in a spate of layoffs this month. Historically, January is typically the month when the most layoffs happen, so I am not surprised that the layoffs happened. What worries me even more is that the stock valuations of these companies are now at their highest ever. Microsoft, for example, has touched three trillion dollars of stock market capitalization, and Google is now at 1.8 trillion. Even Meta is close to reaching a trillion dollars. Why are only AI market leader valuations rising so fast?
The answer lies in the AI wave that analysts and forecasters think will be the most significant future wave. They predict that most jobs, especially the highly automated jobs and grunt coding jobs, will be automated out of existence soon. Step by step, all difficult and complex jobs will be automated out of existence one day. It is too much hype and hogwash. There is too much to do before AI begins to replace any entry-level employee today meaningfully. Current AI does some of the grunt work, but only for jobs that can add added productivity to a regular employee. To replace an employee, AI has to do jobs with high fidelity and accuracy, with no mistakes. Our human brains are still way ahead of what an AI program can do. Replacing regular employees can happen much later, but not now.
My instinct tells me that the hype of AI and seemingly improving productivity at big tech companies is sending a signal that the AI market leaders (Microsoft, Google and Meta) can work miracles. In a market desperate to find stellar stock market picks amid a recession-poised economy, analysts want the AI market leaders to use AI inside their own companies to cut jobs and automate work.
That has precisely been what is happening. The AI market-leading tech companies have ruthlessly slashed jobs and returned to pre-COVID employment levels. Some have cut employees even more deeply than the pre-COVID levels. The stock market is happy as they assume that the more jobs are cut, the more productive AI seems to be. This trend is a virtuous doom loop. When more employees are laid off, the more stratospheric the company’s valuations are and the more bonuses the top executives can earn.
I sense a couple of things happen this year inside tech companies:
1) Big Tech will never hire the same numbers as they did in the past. There was a time in 2020 when anybody with the name “product manager” on their LinkedIn profile was being cold-called by FAMG recruiters, offering sky-high compensation. All those good times are over and may never reappear again as long as the US interest rates remain high. Companies have learned that the fewer they hire and the more productive their employees are, the higher the stock valuation. Analysts will watch out if any more bulk hiring happens. They would want Big Tech to use AI in the workplace and hire the bare minimum. This trend means that student hiring will be the hardest hit as they are typically the least skilled and need many months of investment and training by the company before they can add value in the workplace.
2) Skills will be even more critical than before. Companies will quickly fire even average employees and only want superstars. Hence, the best in their jobs will always find roles anywhere, including big tech. The top 5% of employees can expect even more rewards as company valuations climb. So whether the top performers stick around inside their tech companies or move jobs, they will get much more.
3) High compensation will come at a price. Employees will have to do 50-100% more work than they did three years back. As more employees are fired and not replaced, existing employees will face pressure to work harder and longer. From a company perspective, even if you pay employees 20% more for doing 100% more work, it is a sweet deal.
It is indeed a strange world we are entering. One day, if AI becomes top-notch, it will automate even the most skilled jobs out of existence. What will the workplace of the future be like? Interesting times. There is never a better time to identify the one field you are passionate about and become an expert in. The more creative it is, the better. Those are precisely the jobs that AI will struggle to learn the most.
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