Dorsey Fired Half His Company for Software That Isn’t Ready

Block’s co-founder announced the company would slash its workforce from over 10,000 to under 6,000 — a 40% cut he attributed entirely to “intelligence tools.” Wall Street rewarded him instantly: shares surged 24% in after-hours trading. But beneath the stock price euphoria sits an uncomfortable question that Dorsey’s breathless memo never answers: if AI can already do the work of 4,000 employees, why is there almost no evidence of that happening anywhere else?

The Memo vs. the Math

Dorsey’s letter to shareholders was characteristically bold. “A significantly smaller team, using the tools we’re building, can do more and do it better,” he wrote, adding that most companies would reach the same conclusion within a year. The confidence is striking — but the evidence is thin.

Wharton associate professor Ethan Mollick put it plainly: “Given that effective AI tools are very new, and we have little sense of how to organise work around them, it is hard to imagine a firm-wide sudden 50%+ efficiency gain.” He’s right. Oxford Economics found that productivity growth has actually decelerated since the AI boom began — the opposite of what you’d expect if automation were genuinely replacing labour at scale. A Harvard Business Review analysis in January concluded that companies are laying off workers for AI’s potential, not its performance.

Wall Street’s favourite fiction

None of this matters to investors, at least not yet. Evercore ISI called Block’s announcement “a seminal moment” in the AI era. Truist analysts attributed the stock surge to hopes of better 2026 margins. The message to every other CEO in America was unmistakable: fire people, say “AI,” and watch your share price jump. Axios warned this will embolden boardrooms everywhere.

But there’s a pattern forming that should give those boardrooms pause. Klarna halved its workforce for AI, then had to rehire humans when service quality collapsed. Amazon’s “Just Walk Out” AI checkout turned out to be largely managed by remote workers in India. And Forrester Research now predicts that half of all AI-attributed layoffs will be quietly reversed — with the work rehired offshore at lower wages. The dirty secret of the AI layoff wave isn’t automation. It’s labour arbitrage dressed up in a Silicon Valley hoodie.

You still need people — just not where you think

Here’s the part Dorsey’s memo gets half right: employment is changing. The era of bloated tech headcounts — Block nearly doubled its workforce between 2020 and 2025 — is over. AI will reshape roles, eliminate some, and create others. That much is genuinely true. But the leap from “AI changes work” to “we can fire 4,000 people right now” skips over the hardest question in business: what does the transition actually look like?

The companies navigating this well aren’t making dramatic gestures for Wall Street‘s benefit. They’re building smaller, distributed teams that pair AI tools with human judgement. They’re tapping global talent markets — not as a cost-cutting exercise, but because a distributed workforce with AI-augmented processes can genuinely outperform a bloated headquarters. The shift isn’t from people to machines. It’s from where you sit to what you deliver.

This is the opportunity hiding inside the disruption. Fifty-five percent of companies that cut staff for AI already regret it. The ones that won’t are those building hybrid models: leaner teams, globally sourced talent, AI handling the repetitive work while humans handle everything that requires context, creativity, and trust. Outsourcing and offshoring aren’t the relics Dorsey’s memo implies they are — they’re the infrastructure the AI era actually requires.

Courage or theatre?

Dorsey told staff he’d “rather get there honestly and on our own terms than be forced into it reactively.” But Block’s stock has dropped over 75% in five years. The company hired aggressively during the pandemic, then spent years struggling to justify the headcount. Framing a correction as a revolution is a neat trick — and the market clearly bought it. But the 4,000 people now updating their LinkedIn profiles know the difference.

The real test comes in twelve months. If Block is shipping better products with 6,000 people and genuine AI integration, Dorsey will have earned his boldness. If the company is quietly rehiring — contractors, offshore teams, the very roles it just eliminated — then this wasn’t an AI transformation. It was a layoff with better branding.

Employment is changing. AI is accelerating that change. But every company still needs people — fewer in some places, more in others, and increasingly distributed across borders. The CEO who understands that will build something durable. The one performing for the stock ticker is just buying time.

The question for your business

Is your AI strategy replacing workers or repositioning them?

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