With the caveat that the statement is in accordance with his firm’s core business value, Jensen Huang is right when he says blaming artificial intelligence for mass layoffs is a “lazy narrative” used by executives to reframe older business problems.
Instead, such layoffs are about redeploying assets. Granted, the redeployment is to support spending on AI infrastructure.
But the moves are about capital allocation, not AI job replacement; not yet. Overhiring during the Covid pandemic is more accurately the case, as firms now are rebalancing workforces that had become “bloated.”
Consider Price’s Law.
You might not believe there is a logic to applying Price’s Law to significant large-organization layoffs, but there is a clear rationale.
Price’s Law suggests that in any complex social system, achieving equality of outcome and equality of opportunity simultaneously is fundamentally impossible.
Applied to work groups and teams, Price’s Law suggests that the square root of the number of people in a domain creates 50 percent of the value:
In a company with 100 employees, 10 people produce half the output
In a field with 10,000 scientists, 100 produce half the meaningful research
On a team of 25, 5 people carry the entire operation.
At least in principle, in a sufficiently-large entity, reducing headcount by 10 percent might not reduce total output much, if at all.
Price’s Law is like the Pareto Principle (“80/20 rule”): a relatively small number of actors or actions produces a disproportionate percent of total value in any company, process or value chain.
examples of Price’s law:
Wealth distribution: The “Global Wealth Report” by Credit Suisse says 1.1 percent of the world’s population (56 million people) holds about 46 percent of the world’s total wealth
Savings: A small number of people will have 50 percent or more of the total savings in a society, while most people will have very little — if any — savings
World news: A fraction of world events makes up the vast majority of the news reported on in the media
Number of books sold: A few authors will sell the vast majority of copies (Stephen King, J. K. Rowling, etc.). This can also be seen with music records, movie scripts, paintings, or any other creative product
Classical music: Supposedly, 50 percent of the repertoire of classical music was composed by five composers — Bach, Mozart, Beethoven, Brahms, and Tchaikovsky
Sports: Most tackles in a football game are executed by the same few defensive players. Likewise, most field goals in a basketball game are scored by the same few offensive players. Same in hockey, soccer, other sports
A few metropolises are home to the majority of humans, while a plethora of smaller cities and villages house the rest
About 65 percent of all businesses don’t make it past the ten-year mark, creating relatively little revenue. Of the remaining 35 percent, only a fraction creates most of the total revenue
Web traffic: It is estimated that 90 percent of all websites don’t receive any organic traffic, while the remaining 10 percent get it all.
But there are differences.
Pareto distributions are usually observed in large-scale phenomena such as crop yields, investments or software problems.
Price’s law focuses on social group settings. And, unfortunately, the bigger the group, the more incompetence is found.
The Pareto Principle outcomes tend to scale linearly; Price’s Law outcomes scale exponentially.
But keep in mind that Price’s Law refers only to quantitative outcomes, and does not address qualitative impact.
One scientist might publish 10 papers in one year, but with very little impact on the field, while another scientist might publish just one paper in 10 years and completely revolutionize the field.
The point is that AI is not yet “taking jobs.”
Firms are shifting resource allocations to support AI infrastructure, yes. Yet even so, Price’s Law suggests that a thoughtful rebalancing might not affect firm productivity.
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