Damns Given Edition 144
The latest episode from me at Damns Given is out and you can find it on YouTube, Apple, and Spotify. I take you through why the economic situation we're in has little to do with AI and what every founder and fractional can do to fix it. All in 18 minutes.
What a week. Full of threats and gifts as so many have been in the recent era. I suspect this will continue for some time. An economy that is divorced from its fundamentals, struggling to name what's really happening and working, and what that means for actual leadership decision-making. This obscurity of reality is the new normal and its going to be VERY resilient.
I want to get my Friday missives back to their past format, reviewing the week, tying together some red threads, and give you some things to think about in running your own org. So let's get back to YES | NO | MAYBE | NOW. Let me know, readers, if you like the return.
Is this the first time I've ever given a "YES" to Facebook cronies? Maybe. But the big press release, dropped on a Thursday even, not buried on a Friday, about their 10% reduction in staff, adding another 5 figures of people to Microsoft's buyout of the olds announcement, and Oracle's "Sorry/not sorry" email of death, continues our climb of Silicon Valley bloodletting into the hundreds of thousands. Don't call it a PIVOT...
People mistaking noise for signal love to talk about how this is or isn't about jobs being replaced by AI. This gets the goons on LinkedIn riled up and then they'll reshare screenshots of your hot take and type "Put NUMBNUTS in the comments for my guaranteed program on not getting your ass laid off." Riches for all.
But Facebook acknowledged what has been true all along. Their layoffs aren't because roles can be done by AI, their layoffs are to pay for AI. All trapped in that little word "OFFSET." The layoffs of 10% of their workforce wasn't justified by the amazing replacement powers of AI. They just gotta pay for their capital outlay somehow.
I'm not sure why Meta chose to play their cards slightly open face here. I chose to believe hubris, because that is their very clear public brand. And is the primary driver for the last $500B or so they've spent since 2020.
Which leads to this week's NO.
The era of subsidized AI is ending at a rate 3x faster than we saw it with other such "innovations" like cloud or social media. Because the industry gurus who designed this stuff decided to build it on scaling compute power (GPTs) instead of on improving structural design, the cost curve goes up and to the right, and there's only so many fake press releases about how all these companies are giving each other money to pump of share prices for ever.
As I discussed with Tim Marple, PhD, on the podcast, all these AI companies are salivating for IPOs so they can offload their investors risk onto the capital markets, effectingly centralizing the financial benefits of the AI boom to a small number and spreading the risk contagion into every 401k and IRA in America. Smart corporate strategy if you're Lex Luthor.
There just isn't enough real money until they start actually charging. And you know who's panicked? Every tech company in America who spent the last two years rebuilding their offering on the backs of GPT compute and AI infrustructure provided by Nvidia, Anthropic, et al... and they know that 2x and 3x pricing is coming. And they know they can't pass that pricing on their enterprise business clients because they've already sucked those guys dry in contract lockups. Every time Mark Benioff gets on stage and talks about "customer loyalty" just replace it with "vendor lockup" and you'll understand what he means. But eventually those seven and eight year enterprise deals come due.
And where will the money come from then? To be clear, I'm not a doomer. I'm not telling you to prep for some AI apocalypse. I'm saying that the fundamental PR around AI has been the glorious savings of labor displacement. And it's not true. There's no savings there. Only displacement. Plan your venture's strategic growth model accordingly.
Something went wrong in the way we build companies. Not because anyone was evil. Not because the tools were bad. But because a series of well-intentioned shifts — the social web, the data-driven management era, the touchless transaction economy — accumulated second and third level consequences that nobody planned for and have to be named and accounted for.
The question I hear the most about the Big Tech companies that almost all our clients depend on is, "Why are they doing this?" particularly when "they could be doing that?" That is a diverse variable that generally stands in for ANY F–ING THING that would improve the customer experience.
The answer is as obvious as it is disturbing, which is why we usually desensitize ourself to obvious things. We're so used to assuming these jacked and juiced looksmaxxers are the smartest people in the room, that we've ignored a decade of cognitive decline, Blackpilling, and industry dilution along with it.
The reason Big Tech is going all in on AI is because all the metrics of SAAS started blowing up in their face when the money stopped being free in 2022. Absent of government sponsored helium, the balloon was lead-based. And so, a backroom set of theoretical technologies, relegated to once non-profit labs, got pulled into prime time as a way to gas an industry that had seen much better days.
When is the last time a piece of software made your life better without stealing enormous autonomy from you at the same time? For most people it's been years. For most businesses, the "cool look what I made in excel with Claude" is the breath of fresh air they've been waiting for since they started paying $250k a year to their tech stack providers. No wonder they fell in love (if briefly.)
AI as a solution is primarily a geopolitical one. Powered by deep structural fears about the Chinese and a hope that U.S. hegemonic power could last forever. For this solution to rollout at scale, businesses had to see the Chinese threat as personal. Not "the Chinese are coming to get you," but "the world is being remade and you better get on board or get f——ed."
The logic of threat was always the surest sign that our tech lords weren't negotiating from a position of strength or from integrity. They needed (and still need) deep embedding in near every U.S. business to generate the data and license to exist that they need to serve their primary customer: The U.S. government. See Palantir's $300M deal to leverage AI to fix farming? Another way to fix farming might be to not blow up the trading routes shipping their primary inputs and dependencies, but apparently we're not supposed to talk politics in a business setting. Forgive.
The message of Big Tech for the last 24 months has been to invite you to add structural risk by depending more and more on their thoroughly untested solutions. As their social media platforms fail your marketers, as their search engines fail your customers, as their massive SaaS implementations implode under the weight of false promises, they want you to continue to build on the back of systems that continue to disappoint by design.
Systems follow their embedded rules until someone breaks the system. All the incentives continue to reinforce the systems of Big Tech to stay in their extractive place.
So you can't fix that. You can only limit your risk exposure.
The financial and operational opportunities are in the arena of focus, human touch, and offering design.
Let's get to work on what matters shall we?
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