AI Layoffs, Job Reallocation, and Why the Conventional Wisdom Is Wrong

Lately we’ve seen headlines about big tech layoffs and AI replacing jobs.

We’ve seen this before, going back to early days of the industrial revolution. Since then, unemployment has bounced around during periods of economic recession but today remains steady at around 4-5%.

What's happening is more of a reallocation of jobs than a net collapse in employment.

Large tech companies have continued to announce layoffs and thousands of employees were let go in 2025. However, demand remains strong for AI engineers, machine learning specialists, cybersecurity professionals, cloud architects, data engineers, and experienced software developers. Companies may cut some roles while hiring aggressively in others.

Such dislocations have occurred many times in the past.

The retail parallel

Fifteen years ago, analysts predicted the end of retail that would steadily eliminate physical stores in favor of online retailing. That hasn't happened. Instead, E-commerce grew and physical stores adapted. Many successful online brands opened stores. Physical locations increasingly served as showrooms, pickup points, service centers, and marketing channels. Brick-and-mortar retail is not disappearing. In fact, companies now view a physical presence as a competitive advantage rather than a liability.

Yes, but this time is different

With respect to AI, I’ve heard friends say, “Yes, but this is different.”

Changes don’t happen overnight. Anyone who has battled a company’s AI-powered customer service phone line understands AI’s limitations. There will be pushback. “Talk to a real human being” has become a tagline for companies.

AI is working its way into our culture, and like the Internet, it is having a profound impact on day-to-day life.  

But it’s easy to go overboard.

The risk of AI overconfidence

Julie Bort at TechCrunch wrote in a recent article about how some CEOs are suffering from what one founder called “AI psychosis.” They see an AI demo and suddenly think entire teams can disappear overnight. AI still requires humans to review, correct, train, and make judgment calls.

What worries me more is how some leaders talk about their team members. Claire Zillman’s recent piece for Fortune highlights how AI layoff messaging has become dehumanizing, with executives describing employees as “low-value human capital.” Would you like to work at such a company?

What to actually do with AI

My advice about AI? Take what the gurus are saying with a big grain of salt. John Kenneth Galbraith wrote, "The conventional wisdom is always inadequate to the world that it is supposed to explain." (The Affluent Society, 1958)

Remember, we are human beings, hardwired for personal connections and individuality. AI, like all previous technology revolutions, will find its equilibrium.