I think Twitter is as guilty of hiring too fast as Google and most of these other companies, the problem of bloat is just way bigger at Google and has been for over a decade now.

That’s what I said in 2020 while working at Twitter, and I still believe it. Now as I watch companies like Square lay off 40% of their workforce, I’m certain now that this isn’t solely about corporate greed or AI replacing workers — this is a sectoral shift that’s been a decade in the making, and we’re finally seeing it accelerate.

People who have never worked at a large tech company believe that these companies are overstaffed. But workers at these companies will tell you the opposite — convinced their firm is understaffed because they’re constantly fighting for resources. So how do we square this circle? This isn’t directly a symptom of mismanagement, mismanagement is what happens when you underrate the hidden costs of communication.

Size Matters

These moves are rational because large companies aren’t overstaffed or understaffed — they’re overstaffed and under-focused. That’s why everyone at tech companies with 50,000 employees are always complaining that despite 49,999 coworkers, everything is inefficient. The naive solution is to hire more, but the real answer is to reduce bandwidth.

There’s a saying that the job of a CEO is to say the same thing 10 times until everyone hears it. The larger your company, the further information has to diffuse, the more people have to coordinate — and the harder it becomes to actually get anything done. Go ahead and try it out yourself.

Notice that when we go from 1 to 5 people we don’t just have 4 more people, we have 10 new connections between people. Going from 5 to 10 increases connections from 10 to 45. Going from 10 to 500 brings us to 124,750 connections, and 50,000 people takes us all the way to 1,249,975,000 connections. Building a product is a team sport, and it gets exponentially harder to play together the more people you add.

Communication Is Everything

Imagine you’re a CEO and need to make a fundamental shift in your product:

• 1 person: You shift the product instantly.
• 5 people: You get everyone in a room and decide in a few hours.
• 10 people: You do all that and hold a company meeting where you explain why you’re making this change.
• 50 people: You coordinate with your executive team on how to cascade this change through the organization.
• 500 people: You reshape the entire company around this change — layoffs, restructuring, and a redefined mission.
• 50,000 people: You execute this across every organization, team, and product, and make your case to public markets.

This is why the goal of a company is not to grow, but to avoid headcount growth while maximizing revenue and profits. Because the overhead for communication is so high, every employee you hire only produces marginal returns — maybe 10 or 20% more throughput once you account for coordination costs.

AI

It’s hard to ignore the elephant in the room: AI. AI really can make people more efficient and allow them to do more with less. But as this HBR study shows, AI doesn’t reduce work — it intensifies it.

The bottleneck was never the amount of work a person could do. It was always the number of interconnected edges in a system — the communication overhead. AI makes individuals more productive, but it doesn’t make large organizations better at coordinating. The people don’t get better at communicating as fast as the models get better at doing the work. So you can do more, but you still can’t align 50,000 people any faster than you could before.

This is why the layoffs we’re seeing aren’t just about replacing workers with AI. They’re about companies finally accepting what was always inevitable — you don’t need 50,000 people to do the work of 30,000. You never did, but AI has made this reality impossible to ignore.

Workers

Now don’t get me wrong, this essay isn’t meant to be some sort of pro-capital anti-labor screed. My heart goes out to all of the people who were laid off from Square yesterday, from Amazon before that, and from Microsoft, Google, and all the other big tech companies that have done layoffs recently. This all makes me very squirmy as a person who sometimes considers reentering the workforce.

This post isn’t meant to be solace, but a cold hard look at our reality. For companies like Square, this is a reset to focus on what matters most — with fewer employees and more efficiency. I’ve been saying this for 6 years — long before ChatGPT — so I’m confident this isn’t just an AI story.

In response, I always hear an optimistic argument — these smart people will start companies of their own and outcompete the big players. But there’s no evidence the market needs more companies selling the same products to fewer employed people. If 50 people get laid off from TikTok, there’s no natural law that says the market will suddenly clamor for more innovation in short-form video.

Some of these people will certainly create new companies and new jobs. But there’s no guarantee those jobs will be recouped — and even if they are, it may take years. In the meantime, the people laid off today are looking for work in a market that’s contracting, not expanding.

And that’s why my takeaway is that big companies are going to get smaller and smaller, and smaller companies may follow suit. I wish I had tangible advice to share, but all I can say is brace for change across the industry, because it’s a-comin’.