- In today’s CEO Daily: Geoff Colvin on how CEOs are becoming bolder about replacing human workers with AI.
- The big story: White House considers reducing tariffs on food imports.
- The markets: Down bad.
- Plus: All the news and watercooler chat from Fortune.
Good morning. The wave of layoff announcements over the past few weeks is telling us something, most importantly, something that isn’t as easily measured as the number of jobs eliminated. It’s a change in the business environment. We can see this especially in big-company culture, a shift in what is OK and even virtuous to say out loud. Just maybe it’s signaling a new norm for employment and leadership. At its foundation, of course, is AI, regardless of whether companies say so directly.
Over the past two weeks, we’ve learned that Amazon will eliminate 14,000 jobs with plans to eliminate more. Target will cut 1,800 corporate jobs, the company’s biggest layoff in a decade. United Parcel Service reported it had eliminated a staggering 48,000 jobs so far this year. Verizon will lay off 15,000. Nestlé said it will cut 16,000 jobs, mostly white-collar, in the next two years. Why all those mega-layoff announcements in just a few weeks? The usual reasons don’t explain it. The economy hasn’t suddenly changed significantly. Companies could conceivably be bracing for a recession, though it’s far from clear when or if that might arrive; the Wall Street Journal’s October survey of economists shows growth increasing next year. The traditional season for general “slimming-down” layoffs is December and January.
The obvious explanation is AI. Amazon CEO Andy Jassy had already warned employees what was coming: “In the next few years,” he announced in June, Amazon “will reduce our total corporate workforce as we get efficiency gains from using AI extensively across the company.” The recent announcement emphasized “removing layers.” Target COO Michael Fiddelke (becoming CEO in February) didn’t say “AI,” but he said the company had “too many layers and overlapping work” and would “accelerate technology.” JPMorgan Chase isn’t announcing layoffs but is taking a stance to avoid hiring even as the company expects to grow. The company has “a very strong bias against having the reflexive response to any given need to hire more people,” CFO Jeremy Barnum told analysts recently. “There are definitely productivity tailwinds from AI.”
Note the language. It isn’t defensive or apologetic. Just the opposite—it’s direct and confident. Among Fortune 500 CEOs, having fewer employees is becoming a badge of honor. Call the new model Human Capital Lite, or from employees’ perspective, Right Sizing, Left Standing.
In January 2024, OpenAI CEO Sam Altman said, “In my little group chat with my tech CEO friends, there’s this betting pool for the first year when there’s a one-person billion-dollar company—which would have been unimaginable without AI and now will happen.” We’re not there yet, and we may never go there. But we’re getting closer.—Geoff Colvin
Contact CEO Daily via Diane Brady at diane.brady@fortune.com
Top news
White House considers reducing tariffs on food imports
Following a series of losses to Democrats in midterm elections—whose candidates often highlighted cost-of-living issues—the White House is considering reducing tariffs on various food imports, including beef, bananas, coffee, and fruit.
Trump receives BBC apology over January 6 speech
The BBC has formally apologized for editing footage of President Trump’s speech on January 6 to make it look like he had urged his supporters to immediately invade the Capitol building. In fact, the edit spliced together remarks from the president’s speech that were far apart from each other and out of context. The BBC is hoping that Trump won’t now sue the corporation for defamation.
No silver bullet for New York
In the latest Fortune Leadership Next podcast, JLL CEO Christian Ulbrich tells Diane Brady and Kristin Stoller that most global cities are grappling with affordability issues. "New York is a global capital, but it comes at a price,” he said, citing Vienna as a city that’s doing well but weaponizing affordability as a political tool while London is “dark and it’s not lively anymore” because too many wealthy buyers have bought second, third and fourth homes in the city center.
AI bubble fear hurts stock markets
Stocks markets fell dramatically yesterday—and the selling looks set to continue today, according to the futures markets—led by investors expressing their disapproval over spending on AI. Oracle shares are down almost 30% over the last month as investors flee Larry Ellison’s debt-fuelled pivot to AI.
“The Big Short” investor closes investment firm, maintains AI bubble stance
Investor Michael Burry, famous for predicting the 2008 housing bubble and dramatized in the film “The Big Short,” closed his investment firm on Wednesday and quickly took to X to continue his warnings about an AI bubble. Burry, who has already bet $1 billion against an AI bubble, explained how companies like Meta and Oracle are understating the depreciation of their AI investments to inflate profits and play down their massive capital expenditure programs.
Microsoft and Amazon want restrictions on Nvidia sales to China
The two AI hyperscalers have been lobbying for a change in the law that would keep Nvidia’s best chips in the U.S. market and curb its access to Chinese customers.
Delta CEO criticizes government shutdown
Delta CEO Ed Bastian blasted the U.S. government for expecting employees to work without pay during the government shutdown, which he described as “disruptive both for his business and its customers. “It was completely unnecessary,” Bastian said in conversation with Yahoo Finance Executive Editor Brian Sozzi, and customers had to “bear the brunt of the dysfunction.”
OnlyFans CEO has no middle management at her company
OnlyFans CEO Keily Blair decried “that squidgy layer of middle management in the middle” during an appearance at Web Summit in Lisbon on Thursday, arguing that “nobody’s ever had a really good middle manager in my experience.” Instead, at her company, they hire only “incredibly senior talent” and “incredibly hungry junior talent.”
The markets
S&P 500 futures are down 0.21% this morning. The last session closed down 1.66%. STOXX Europe 600 was down 0.79% in early trading. The U.K.’s FTSE 100 was down 1.18% in early trading. Japan’s Nikkei 225 was down 1.77%. China’s CSI 300 was down 1.57%. The South Korea KOSPI was down 3.81%. India’s NIFTY 50 is down 0.45%. Bitcoin was down to $97K.
Around the watercooler
Top economist Mohamed El-Erian warns the AI bubble will ‘end in tears’ and credit ‘cockroaches’ abound by Nick Lichtenberg
Economist behind K-shaped economy sees a ‘sea of despair’ for the bottom 90% and a ‘crisis of confidence’ in the American dream by Sasha Rogelberg
Credit card tier discrimination may be coming: New Visa-Mastercard swipe settlement could reshape rewards—and surcharges by Preston Fore
Legendary DC diplomat feels ‘like Paul Revere’ about the $38 trillion national debt: ‘The crisis is coming!’ by Eva Roytburg
CEO Daily is compiled and edited by Joey Abrams and Claire Zillman.
