A recent trend has emerged in the corporate world, where companies are laying off employees and attributing it to the integration of AI. However, a closer examination of the numbers reveals a different story. Despite the initial stock boost, many companies are abandoning their AI initiatives, and CEOs are regretting their decisions to downsize.

Research has shown that AI has significantly compressed execution speed, with prototyping that once took weeks now taking only hours. Nevertheless, the coordination layer, including approval chains, quarterly planning, and review cycles, has not kept pace. This has resulted in a flipped bottleneck, where the primary constraint is no longer the ability to build quickly, but rather the capacity of leadership to determine what to build and keep up with the teams building it.

Companies like Klarna have learned this lesson the hard way, initially boasting about replacing 700 employees with AI, only to quietly rehire humans when quality suffered. In contrast, Monday.com has taken a more innovative approach, automating 100 sales development representatives with AI, but redeploying them instead of firing them. The company’s CEO attributes this decision to the understanding that eliminating one bottleneck often reveals another.

This phenomenon has been observed across various sources, including engineers, economists, survey data, and executives. It raises important questions about the adaptability of the management layer and whether companies are truly leveraging AI as a strategic tool or simply using it as a pretext for cutting headcount.

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