🔥 The AI squeeze

Klarna, the fintech, stopped recruiting in October last year because of AI.

Last week, Sebastian Siemiatkowski, CEO of Klarna, gave some more details:

Due to the implications of AI since September, October [2023], we have stopped recruitment, and in our case, with normal attrition rates that most tech companies have, where people stay about five years… this means that we are actually shrinking in number of employees by about 20% per year.

So we hope that by the time we kind of get to that perspective, we’re going to be able to present something that looks like revenue growth while costs actually diminishing at the same point.

LinkedIn reports 5,162 Klarna employees with a median tenure of 2.8 years. The headcount in operations has dropped by some 21% in six months and in support by 5%.

Klarna is uniquely positioned to be a canary in the automaton coal mine. It’s a medium-sized business, just a decade old, with thousands of employees, and it operates in a data-centric business that doesn’t have physical products. This means it’s big enough to see scale gains, but it is still digital-first with an entrepreneur at the helm.

Slowing down hiring and allowing for natural workforce reductions is one way for firms to adapt to productivity increases from AI. It is less intrusive than layoffs and allows management to invest (and hire) people in new growth areas as they emerge.

If only a few firms are doing this, it is probably manageable. But if it becomes a universal template, it might have real knock-on effects on the labour market, especially for new joiners.