Don’t Overreact - Block’s Layoffs Are a COVID Hangover
A reset driven by pandemic over-hiring and a move toward smaller, flatter teams - not solely AI efficiency
Jack Dorsey announced yesterday that Block is cutting more than 4,000 employees (nearly half its workforce) and the tech press lost its mind. Citrini Research’s sweeping thesis went viral about AI agents autonomously rerouting payments onto stablecoin rails, erasing billions in market cap for payment incumbents in a single afternoon. Dorsey himself fanned the flames, writing on X that “within the next year, I believe the majority of companies will reach the same conclusion and make similar structural changes.”
Everyone take a breath.
What happened at Block is real, and it's painful for the people affected. But framing this as the opening act of an AI-driven white-collar extinction event dramatically misreads what's actually going on. At its core, this is a story about pandemic-era overhiring catching up with a company that couldn't outgrow its mistakes fast enough. The AI explanation is partially true, partly convenient, and mostly a distraction.
The numbers tell the real story
Block employed 3,835 people at the end of 2019. By the time Dorsey announced Thursday’s cuts, that number had ballooned to over 10,000. That’s a 160% headcount increase in roughly five years, during a period when the fintech sector was swimming in cheap capital and investors were rewarding growth at any cost. Block’s stock has fallen more than 75% over the past five years. That’s not an AI story, that’s a company that hired aggressively into a zero-interest-rate environment and is now reckoning with the math.
CNN noted that Block is essentially returning to pre-pandemic headcount numbers, and that it isn’t alone: Meta had nearly doubled its headcount over two years before its own rounds of cuts. This is a pattern we’ve seen across tech. The “Year of Efficiency” (remember when Zuckerberg coined that phrase in 2023?) was always about rightsizing after the hiring binge, not about machines replacing humans. Block is just arriving at that reckoning later than most.
The AI attribution is real but it’s doing a lot of heavy lifting
To be clear: AI is genuinely changing how software gets built and how companies operate. Block’s own internal tool, “Goose,” is apparently real and in active use. Dorsey’s claim that smaller, flatter teams using AI tools can outperform larger ones isn’t crazy. There’s something to it.
But Wharton professor Ethan Mollick, one of the more sober and credible voices on AI’s actual workplace impact, pushed back immediately on LinkedIn: “given that effective AI tools are very new, and we have little sense of how to organize work around them, it is hard to imagine a firm-wide sudden 50%+ efficiency gain that justifies [massive] organizational cuts.” He’s right. The honest answer is that Block needed to cut for financial reasons, its stock was down, its cost structure was bloated, and activist pressure was building and AI provided a narrative that sounds visionary rather than reactive.
There’s a term for this: “AI washing.” Executives have figured out that attributing layoffs to AI rather than to overhiring or poor strategy gets a very different response from investors. Block’s stock surged 24% in after-hours trading. That jump has less to do with anyone believing AI will make Block twice as productive and more to do with investors relieved that the company is finally getting serious about profitability. Gross profit grew 24% year-over-year last quarter. The business is fine. The headcount was the problem.
The Citrini report is a scenario, not a forecast
The Citrini Research piece that went viral this past week, modeling a scenario where AI agents route payments onto stablecoin rails and hollow out Visa, Mastercard, and their ecosystem, is genuinely interesting as a thought experiment. But markets treated a speculative research note as a near-term earnings risk, and billions in market cap evaporated before a partial recovery. That’s a market overreacting to a story, not a market correctly pricing a structural shift.
Stablecoin infrastructure at scale, the regulatory frameworks required for AI agents to autonomously execute financial transactions, the consumer trust required for mass adoption - none of that exists today, and none of it will exist within a year. The scenario Citrini describes is a decade-long transition at minimum, and it assumes a level of coordination and adoption that is, to put it charitably, optimistic. Block’s own CFO described Thursday’s cuts as coming “from a position of strength.” If the payments industry were actually facing existential disruption from AI agents, that framing would be laughable.
Why the harbinger narrative is dangerous
The idea that Block is the first domino and that Dorsey’s letter is a preview of mass white-collar displacement arriving within the year, deserves serious scrutiny before we accept it as conventional wisdom. A 2025 McKinsey report found that most firms are still in the early stages of AI experimentation, and nearly two-thirds have yet to scale the technology meaningfully. We have been here before with wave after wave of automation panic, and each time the story turned out to be more complicated than the headlines suggested.
That doesn’t mean AI won’t change work - it will, and in some sectors it already is. But the mechanism is usually augmentation before replacement, and the timeline is usually longer than the headlines promise. The companies announcing AI-driven layoffs right now are, almost without exception, also companies that massively overhired between 2020 and 2022. The causality is muddier than the press releases let on.
Jack Dorsey is a visionary who also knows how to work a narrative. Block cutting 4,000 people is a hard business decision driven by years of bloated hiring, a stock that never recovered from its post-pandemic highs, and investor pressure to deliver profitability. AI gave him a better story to tell. That doesn’t mean the story is wrong - it means it’s incomplete.