The promise of AI-driven productivity has many employees fearing for their heads. But to Marc Andreessen, cofounder and general partner at Andreessen Horowitz, the technology is more of a bogeyman, masking a long-standing business fluke that has quietly lingered in boardrooms for years.
In an interview on the 20VC podcast with venture capitalist and host Harry Stebbings, the billionaire said AI was the scapegoat for layoffs that are actually the result of overhiring in the wake of the COVID pandemic.
“Essentially, every large company is overstaffed,” he said. “It’s at least overstaffed by 25%. I think most large companies are overstaffed by 50%. I think a lot of them are overstaffed by 75%.” He added, “Now they all have the silver bullet excuse: Ah, it’s AI.”
Andreessen’s comments are nothing new in an industry that is pushing back against the “silver bullet excuse” of AI, which some tech leaders including OpenAI’s Sam Altman have coined as “AI washing,” or blaming otherwise normal layoffs on the increased use of AI.
A long list of business leaders and AI experts have said the labor market is due for a massive upheaval owing to AI. Some have already carried out layoffs and attributed them to the tech. Block CEO Jack Dorsey laid off 40% of his workforce in February, saying he thinks “most companies are late” to the AI layoff trend. Australian-American firm Atlassian made a similar move. Meta is also reportedly planning sweeping layoffs thanks to greater efficiency brought about by AI-assisted workers.
The post-pandemic hiring blitz
Tech companies embarked on a hiring spree in the wake of the COVID pandemic. Following the initial employment shock during the onset of the pandemic, hiring shot up to 8.3 million by May 2020, according to the Bureau of Labor Statistics. The dawn of remote work and the shift to digital opened up a pool of labor that spanned the globe. By June 2022, nonfarm payrolls surpassed pre-pandemic levels. Firms acted like the metaphorical kid in a candy store with talent, grabbing every shiny new candidate that crossed their applicant tracking system, with some, like Amazon, even doubling their headcount between 2019 and 2021.
But many tech firms have cleaned house following the hiring craze. Amazon has cut nearly 30,000 workers over the past year to reduce layers and remove bureaucracy. In 2023, Google parent company Alphabet cut 12,000 jobs after a pandemic hiring spree. Even Dorsey conceded that some of the Block cuts were thanks to overhiring.
“This entire labor displacement thing is 100% incorrect,” Andreessen said. “It’s classic zero-sum economics.” He said that most coders, for example, are employing AI, which is taking over much of the workload. But that’s not a flashing red light that layoffs are on the way. Instead, it just means more work for those workers as AI boosts productivity rather than cutting labor costs.
The venture capitalist argues that fears of AI-driven mass layoffs stem from the “lump of labor” fallacy, the belief that there is a fixed amount of work in the economy at any given time. “It’s always been wrong; it’s going to be wrong again,” he said.
But recent studies on the impact of AI complicate Andreessen’s assessment. An Anthropic study released earlier this month demonstrated that AI is already theoretically capable of performing the majority of tasks associated with engineering, law, finance, and business. And a study from professional services firm Cognizant mapped out the projected magnitude of AI layoffs this year, finding AI-related job cuts could total more than nine times what they were last year, surpassing 500,000. But that number is still a far cry from the sweeping projections leaders like Anthropic CEO Dario Amodei have made about an AI-related white-collar job apocalypse.
Still, Andreessen thinks AI is a smoke screen for layoffs. He doesn’t believe the technology is sophisticated enough yet to replace human workers.
“AI literally until December was not actually good enough to do any of the jobs that they’re actually cutting,” he said. “It just can’t have been AI.”
