Small Teams, Big Impact: How AI Is Reshuffling The Future Of Work?
Teams are about to get smaller. Meanwhile, entrepreneurship is back in vogue. But let's not sugarcoat the future and instead have an have an honest discussion, shall we?
«The 2-minute version»
Does this sound familiar: “AI won’t take your job, but someone who knows how to use AI will”? Look, I am going to be honest with you all here. While I think there is some merit to this statement in the near term, it is time we have an honest conversation about the “big picture” of how AI will reshuffle work.
What’s the big picture then? There is growing evidence that the US labor market is cooling. Meanwhile, white collar hiring remains dampened while sentiment for income loss in the segment grows. But the truth is, despite all the “cost-cutting” in corporate America, we don’t exactly know the number of jobs that AI has directly replaced. However, companies are increasingly making it clear that they are looking to hire workers with AI skills.
Teams are about to get a whole lot smaller: Unlike previous innovation cycles where certain technologies could substitute certain “tasks” within a role in an organization, genAI technologies are different. They are “goal-seeking” in nature, where they automate parts of a process or entire workflows within individual functions, thus reducing the scope of certain roles. As teams deploy more of these AI capabilities, the number of roles will likely shrink, and yet, they will be able to accomplish the same, if not more, with fewer resources.
With a few exceptions: While the size of the team will shrink in general, there will be an increase in the scope of certain existing roles, such as engineering managers, as well as the creation of net new roles, such as AI Operations Manager, AI Avatar Manager, and more vertical specific roles.
Entrepreneurship and small businesses will thrive: For the first time, entrepreneurs and small businesses will gain superpowers, once limited to the world’s largest organizations, thanks to a growing number of vertical specific AI companies. Think, instead of hiring teams of specialists across every function, small business owners can purchase AI capabilities that will become the “right-hand person” abstracting away the headaches of business operations and enabling the business to do what it does best—build and nurture meaningful customer relations and experiences through their products and services.
It will not be a straightforward line: In fact, quite the opposite. So far, AI workplace assistances have had quite a few hiccups, where they need a fair bit of “handholding," especially if the enterprise data is not accurate. At the same time, adoption of these technologies across functions also remains somewhat low, thus putting certain roles, especially at higher risk than others. Look, the truth is that the pace of innovation in AI is hard to predict. Damn hard. But as long as we don’t “sugarcoat” the future and remain flexible and open to experimenting and adapting, we might do just fine (or exceptional).
🎥Let’s set the stage…
If you have been on social media the last two years, you have seen posts that say something like “AI won’t take your job, but someone who knows how to use AI will.” While I think that may be correct in the near term, I feel people are afraid to talk about the bigger picture.
In fact, Sam Altman, CEO of OpenAI said the following in his discussion with Sally Kornbluth, President of MIT in early May:
One of the things that annoys me most about people who work on AI is when they stand up with a straight face and say, “This will never cause any job elimination. This is just an additive thing. This is just all going to be great.” This is going to eliminate a lot of current jobs, and this is going to change the way that a lot of current jobs function, and this is going to create entirely new jobs. That always happens with technology.
Therefore, in today’s Monday Macro, we are going to zoom out and have an honest discussion about how AI is reshuffling the future of work and what that might mean for you whether you are an employee or a business owner.
And since we are discussing the “future of work,” let’s start with a quick overview of the state of the labor market.
The US labor market is cooling. AI’s impact is still uncertain.
Up until now, the one thing that has allowed the US economy to remain exceptionally resilient during one of the toughest periods of monetary tightening is the labor market. The truth is the US economy still continues to create jobs by adding 206,000 jobs in June, making it the 41st straight month of gains. However, the trend is cooling, as can be seen in the chart below.
Meanwhile, the unemployment rate rose to 4.1%, and while it is still near its 50-year lows, it is also at its highest level since November 2021, with Average Hourly Earnings growing 3.9% from the previous year, the lowest rate since June 2021.
If we drill down further, we can see that the difference in wage growth between “job stayers” and “job switchers” continues to shrink, an indication that employers are no longer offering lucrative pay packages and perks like they did during the early years of the pandemic.
This has resulted in the quit rates falling below the pre-pandemic levels, as employees are choosing to stay put.
In fact, there is a growing number of US workers who are now expecting a loss of income and it is the most pronounced among people earning over $100K in salary.
So far, this makes sense given the actions taken by corporate America over the last year or so, where cost cutting has been on the top of the agenda in order to protect their margins and “do more with less”. When I say “cost-cutting” a good chunk of that is “layoffs” where we can see that hiring has plummeted in the “white-collar” sectors.
The truth is that companies have been heavily investing in their IT budgets on AI proof-of-concepts to automate and augment various tasks across functions since the launch of ChatGPT in late 2022. The idea is that instead of hiring teams of specialists for every function, companies have the opportunity to build or purchase AI capabilities in the form of agent-based tools or “AI teammates” that can automate parts of a process or entire workflows within individual functions, enabling the organization to “do more with less.”
While the number of jobs lost to AI is not fully known in this business cycle, we can get some clues from Fiverr FVRR 0.00%↑, a digital marketplace that connects businesses with freelancers. On an recent call with investors, Fiverr’s management revealed that they are seeing a decline in some of their traditional categories that include copywriting, logo-making and translation services.
However, what is interesting is that Fiverr’s management emphasized that the weakness in their traditional categories is being more than offset by strength in “complex services” which are growing at a double-digit rate with demand for AI services that include AI Avatar Design, Chatbot Development, Custom GPT Applications, and more.
Simultaneously, Allie K Miller, who is a renowned AI thought leader posted the following note on LinkedIn that highlights the importance of AI skills for workers to remain relevant in today’s workforce.
In all of this, there are three things that stand out to me:
Teams are about to get a whole lot smaller, as “goal-seeking” AI technologies will reshuffle the scope of roles in organizations, allowing them to get more done with less.
There may be a renaissance of small businesses on the horizon. Thanks to the growing number of vertical AI companies that will increasingly abstract away the headaches of business operations, entrepreneurs and small businesses can scale faster than was previously possible.
It is not going to be a straight-forward line.
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