Coinbase Cuts 14% of Its Workforce: Blame on Generative AI

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Key Takeaways

1Coinbase announces the layoff of 14% of its employees, citing the impact of generative AI on its operations.

2Generative AI is redefining roles in software engineering and customer service, creating paradoxes in the job market.

3Economist Torsten Slok compares the impact of AI to automation in China, highlighting immediate job losses but compensatory gains.

💡Why it matters — Generative AI is transforming employment dynamics, causing layoffs while promising new strategic roles.

The Impact of Generative AI on Employment: A Complex Reality

Generative AI, often seen as a revolutionary technology, is expected to drive large-scale job creation. However, it is also causing significant transformations in certain positions, particularly entry-level roles, across various sectors. Fields such as software engineering and customer service are particularly affected, creating new dilemmas between labor supply and demand. A recent example is Coinbase, the cryptocurrency exchange platform, which announced layoffs of 14% of its staff, partly due to the impact of AI.

AI "Washing": A Recurring Strategy

In Silicon Valley, it is not uncommon for tech companies to justify workforce reductions with arguments related to AI, often to appease shareholder expectations. Brian Armstrong, CEO of Coinbase, illustrated this trend by explaining that AI is profoundly changing work methods. According to him, engineers can now accomplish in a few days what previously took weeks, thanks to the automation of processes and the increased speed of small specialized teams. Furthermore, non-technical teams are now capable of delivering production code, and many workflows are automated, thereby accelerating the pace of work.

The Promise of New Jobs: Myth or Reality?

This raises the question: where are the jobs that AI is supposed to create? Economists, who analyze the historical impacts of technologies, offer varied perspectives. Torsten Slok, chief economist at Apollo Global Management, argues that AI is an additive force for the economy. He compares the impact of AI to automation in China in the early 2000s, although this analogy is contested. According to him, AI causes major disruption, with immediate job losses in vulnerable sectors, but also compensatory gains that stabilize the overall unemployment rate. The shock of AI follows a similar scenario, impacting cognitive and office work this time rather than production lines.

The Jevons Paradox and the Future of Employment

The history of automation seems to be repeating itself with generative AI, raising questions about the Jevons Paradox. This suggests that improving the efficiency of a resource can paradoxically increase its total consumption. In the context of AI, this could mean increased demand for cheaper and more efficient jobs. However, the question remains: where will the new jobs emerge?

The Uncertain Beginnings of the Generative AI Era

Although generative AI began to emerge in 2017, it truly took off in 2023. Its impact remains uncertain. If AI increases the productivity of software engineers, it could lead to a new surge in demand after an initial decline. Similarly, if AI alters roles within tech companies, it could create a heightened need for product managers.

The Evolution of Roles in Tech Companies

Ironically, while AI makes software development faster and cheaper, the demand for product managers continues to grow. Although process-oriented positions have decreased, those requiring a strategic and creative approach are on the rise. This illustrates how AI, while automating certain tasks, can also stimulate demand for unique and irreplaceable human skills.