Jarvis, immediately lay off 4,000 of my

employees. Let's do it by tweet and

let's make sure that that tweet is all

lowercase letters.

Jack Dorsey just laid off 4,000

employees from his company Block. He

framed it as AIdriven efficiency in the

markets response. That stock ripped up

almost 25% immediately after the layoff

announcement. I got the stock ticker up

here and man, that thing is still

ripping. It's cooled a little bit, but

I'm still seeing up about 18% as of open

business this morning. We're going to

talk about how this underscores the

Catrini hypothesis that's going around

right now, why they did the layoffs and

what that looks like. That's going to be

my perspective as somebody who's been an

engineering director and been in the

room where these decisions get made. And

then we're going to talk about what it

means for you and what's coming down the

pipeline as part of this AI bubble pop.

This is the cleanest, most real world

test we have of a concept going around

called phantom GDP. So what does phantom

GDP mean? I promise it's not a tricky

concept. You already understand it. You

probably just haven't heard the buzzword

term for it. What that means is when AI

massively improves worker productivity,

it improves company output, uh, value,

the type of products they're able to

provide, but it doesn't translate into

earnings for the employees. It doesn't

translate to increased wages and

prosperity for the people in that

society. If you want a really boiled

down way to think of it, it's when the

economy becomes unlin from reality as a

result of the AI productivity gains that

we're getting. What is really stunning

about this layoff in particular, we have

not really seen this yet. Most of the

time we see a layoff, it's phrased as

innovation or AI tooling is making it,

you know, less essential to have

employees. And what we'll see with a lot

of those companies, uh, we certainly see

this with American Express, we see it

with Capital 1, we see it with a lot of

other companies as well, is they they

prep with this innovation sort of

conditioning in their PR speak in the

releases and the earnings calls. They

lay off American employees and they do

one of two things, usually both things.

They staff out their domestic operations

with more H-1B visa recipients so they

can treat them like indentured servants

and just give them in general a horrible

time. uh the people coming here uh get

the raw end of the deal on that. Um it's

really unfortunate. I've talked about it

in other other videos. Um really crappy

thing to do on the part of the

corporations to treat people that badly.

And then the other thing, this is big,

is you know every quarter you're seeing

another announcement of we're building a

new campus in Hyereabad, in Bangalore,

over in India, over in other lowcost

centers in Southeast Asia as well.

you're starting to see a lot of those

crop up. And that's like I said, I've

I've literally been in the room where

these conversations are had at American

Express where the thinking is we can

just replace one American developer with

like five developers in India. It's

lower priced and we can do that and

maintain the same level of product

quality which as you're seeing across

the board, this isn't a dig against

India it. This is like a communication

gap. It happens when you fragment

people. It's a from Phoenix at least,

it's a 12 1/2 hour time zone difference,

which makes communication

extraordinarily difficult with those

teams. So, you just you get what you

might expect. You get what you might

expect. But more often than not, if

there's an AI layoff, these companies

are just using it as an excuse to

offshore and to import foreign labor.

And it's a continued concerted effort of

the executive class to drive down the

wages of the American employee. Very

interesting to note that that is not

what I see going on with the block

layoff. Jack Dorsey in his layoff tweet

talks about the regular talking points

AI tools are increasing efficiency.

We're going to get into that tweet in a

minute, but what I do not see from the

numbers, a lot of people have been,

you've been sending me messages on X.

Uh, by the way, if you don't follow me

over there, I'm dr_jc

Simmons on X. A lot of people are

sending me messages. They're tweeting at

me. They're saying, "Dr. J, you got to

cover, you know, the block layoffs. I've

been getting texts yesterday night

saying, you hey, how how does this

translate into offshoring? And I'm here

to tell you, I I did an early dive into

the numbers uh last evening and I have

not found evidence to indicate that this

is going on at Block. I simply I don't

see it in the numbers. If you have proof

of that or if you think, you know, I'm

getting it wrong, post some evidence

there in the comments because like I

said, I I couldn't find it. no large

footprint in India and Southeast Asia.

Uh more than usual. Um no mass

importation of H1B visas. They're

sponsoring a few, but on average

compared to the rest of the industry,

it's quite low. So I don't really see

that as a valid thesis. It's it's really

important we don't get carried away with

our preconceived notions and apply that

to everything. We got to stay looking at

the data. That's what we do on this

channel. So this seems like a real case

where Jack Dorsey lays off these people

because of AI efficiency. And the reason

is AI efficiency. The tweet is extremely

verbose, but we're going to look at just

one section here that's relevant. He

says, "We're not making this decision

because we're in trouble. Our business

is strong. Gross profit continues to

grow. We continue to serve more and more

customers and profitability is

improving. But something has changed.

We're already seeing that the

intelligence tools we're creating and

using paired with smaller and flatter

teams are enabling a new way of working

which fundamentally changes what it

means to build and run a company and

that's accelerating rapidly. My heart

goes out to you if you were one of the

affected in the layoffs. He goes on to

say that his two main options were to

cut gradually over the next few years

which is the tack that American Express

is taking. That's why you never see in

the news anything about their layoffs is

they just quietly squeeze people out

through performance improvement plans.

They don't backfill them. They fire one

off. You know, a small department goes,

but it's always under the amount where

they have to report a layoff. There's a

lot of other companies doing that. So, I

do respect Block for the fact that they

at least just made the cut all at once.

If that's the business decision and the

differences between, you know, slow

dripping that to avoid a news cycle

versus just saying like we we effed up,

we overhired, things are different now,

AI tools are making it so we don't need

so many engineers. I hate the layoff,

but I do respect that. I think

ultimately that's going to be better for

morale, which is what he hypothesizes in

the tweet. And again, I can tell you

from American Express, I I still talk to

a bunch of employees there all across

the company and morale just gradually

decreases when you do these silent

layoffs. All of a sudden, you know, this

department got cut, but hey guys, don't

worry about it. It's just a it's a

one-off. You know, this is business as

usual. Um, don't even worry about it.

Morale just slips. And eventually your

engineers, all of your talent at the

company starts to think, you know, if

they're going to do these kind of

rolling layoffs every year. There's not

just one big slash and it's done. If

they're going to do this every year, why

why am I working hard? Like, why am I

not just doing the bare minimum to get

by, applying for other jobs on the side,

trying to get a side hustle going? It's

not immediately obvious to me why I'm

going to why I should try it all,

honestly. Back to Phantom GDP. I want to

talk about that a little bit. This

hypothesis comes from Catrini research.

They coined the term. They talk about it

and it has another side that I didn't

get into earlier. AI boosts the

productivity and the profits. But at the

same time, the displaced workers like

these people laid off from block spend

less because they're not making any

money. If you were a software engineer

at block, we have the comp here from

levels.fyi.

I'm going to say senior is probably

level five here. So, your base salary

203,

136,000 uh in stock every year. Uh which

man, if you're able to hold on to that,

that's ripping. So, you got a 25% boon

on that stock since the layoff

announcements. Uh and and it looks like

they don't have a bonus structure set

up. So, that's 339K allin. Um

engineering jobs are just we're not

seeing those compensation packages right

now, at least for for companies that are

not uh hyperfocused in the Bay Area. I'm

sure of a lot of very talented people

got laid off. If they got into block,

it's very, very hard interview process.

They got laid off, they get another job,

they're making maybe 160k a year, maybe

200. You know, that's a 33% to 50%

haircut. They're not going to be, you

know, they're they're not going to be

frivolously spending on anything that

they might have been spending on while

they were working at Block. So, it

really fs the economy up in a number of

ways. And nobody has a great answer for

this yet. I've talked a little bit

before on the channel about, you know,

maybe universal basic income. Don't get

me wrong, I am an unrepentant

capitalist. I I very much disagree with

and don't like socialism, but it's the

best proposed alternative that I've

heard. Again, in the comments, if you

are like, I got the answer to this, uh,

this is what we should do with all of

these displaced workers due to AI

efficiency, po post that in the

comments. I would love to hear it

because right now the best argument I've

heard is is you we need some kind of uh

universal basic income to replace this

which has a ton of downsides. So why is

Wall Street rewarding this? Why did the

stock just shoot to the moon? Well, it's

quick gains, right? You and I know it

takes a lot of time and a lot of effort

to maintain a massive codebase, a lot of

software. But in the short term, these

products are already built. they already

exist. And so if you say, "Hey, we're

just not going to add any new features,

no new features to the cache app, we're

not going to make any changes to Square

or the cash app." Uh, going forward, all

of the remaining engineers, they are

going to shift to just maintenance mode

on keeping this thing alive. Guess what?

That's still generating a ton of money,

and your operational expenditures have

just cut dramatically. So, I did some

really rudimentary math. If I am Jack

Dorsey and I lay off 4,000 employees,

like I said, that senior engineer

salary, total comp package, we're

looking at about 300 350K. Let's be

really conservative and let's say, you

know, they get a lot of people that are

making more towards the median for the

company that are maybe non-technical.

That's let's say a $200,000 total

compensation package is like kind of

average, right? Uh if I lay off 4,000,

that's 800 million annually saved. So

that you're saving instantly today

almost a billion dollar in operating

expenses. And that's not even accounting

for taxes, benefits, anything like that.

So in the short term, financially, any

massive layoff like this, at least to

Wall Street, looks like a huge win

because you've just saved almost a

billion dollars a year. Now, this gets

really interesting because you might

say, "But Dr. J to maintain their

competitive edge. To maintain their

competitive edge, apps like Square and

the Cash App need to be cranking out new

features. They need to be competing with

Stripe. Um Dr. J on his show gets those

two confused all the time. They need to

differentiate theel themselves obviously

and ordinarily you'd be right. But if we

look at the strat treaty hypothesis,

remember the second part of that is that

the people that are displaced, the

people that were earning 300 350k a year

that are now earning 150 200k a year,

they're not spending as much money. So

they're not going to use those apps as

much. It's fintech and fintech is

downstream of consumer spending. and

you've just nerfed 4,000 high earners

and made them take massive pay cuts or

potentially just go on unemployment for

an indefinite amount of time. That is

the dark underside of this. So, what

does this mean for workers, builders,

and investors through the rest of 2026

and moving forward? the people that are

going to be safest while this is

unsettled, let's say, while we're in

transition to whatever is next. Anything

that is high risk, uh, linked to

something with a lot of regulation, that

work is going to be fairly safe. It's

very difficult to replace that with AI.

That's going to be, uh, KYC, like know

your customer, when you have to provide

your ID and stuff when signing up for a

new um, like Cash App account or

something like that. It's going to be

risk and fraud detection. So like the

department that can detect when your

card it city or whatever is being used

in a weird way and they flag it. It's

also going to be risk modeling. What's

the attack surface? How do we minimize

that with our application? Mission

critical hardware that is going to be in

life situations. That's going to be very

high stakes. I talked about that a

little bit with a manufacturing company.

Let me know if you guys want to see more

defense tech videos. I'd love to do

that. It just didn't really get views

last time I did it. But happy to cover

it because for my money, it's the safest

place to be working right now and it's

the safest place to be investing your

money if you're trying to park your

money somewhere. Builders, your your

operator class, they're going to need to

focus on how AI directly improves

outputs. This is going to need to be

measurable as opposed to AI

transformation. In 2026, AI

transformation without figures and facts

behind it is done. You cannot just say

we're adding AI and stock goes up. You

need to say we added this AI and it

improved this metric significantly

because investors are starting to say

where is my payday on this? Where is my

return on investment? So bottom line, I

think block is relatively early in this

trend, but this is something we're going

to continue to see through 2026,

probably ramping up over the near

future. As we've seen with these

layoffs, there's usually a shot across

the bow. somebody goes early, there's a

bunch of copycats because they want that

24% stock velocity so they can pump the

stock, especially if they're an

executive. They can pump the stock and

then they can get the hell out of there

with their nice stock package and do a

big sell-off and profit from it and then

say like, "Peace, I don't care about the

long-term ramifications of this." But

we're going to see this a lot,

especially with like new tech fintech

companies. So again, banks are going to

be a little bit more insulated, but

you're going to look at your Square,

your Stripe, Revolute is another one

that's kind of up and coming. You're

going to see some turmoil there in the

interim places like CLA, Afterpay, any

of the products like that. They're

probably going to do decent business

because people aren't going to just

change their lifestyle when they get

laid off all of a sudden. They're going

to want to maintain that at least for a

little while. And in order to maintain

that, they're going to need payment

plans. So, it's it's very dark. But

remember, I was in charge of line and

lending products at American Express.

So, I know what I'm talking about. The

projections, I think, personal opinion,

no company data. I think that space is

going to be hot for a little while. And

then it's going to cool as uh it hits

the fan, let's say. But here's your case

study for AI era labor redistribution.

Like it is it is happening. It is

happening. Nobody knows what the future

is going to be like. But this is

concerning, especially on the send side,

the layoffs. It's only 4,000 people, but

how much money were they spending on

dumb hobbies, you know, and they're not

spending on those dumb hobbies? And you

may think that's fine, but that's less

money moving through the economy. That's

less companies that need to exist. So,

it really just creates this uh seize of

the whole process. Everything kind of

jams up from every side. We don't know

where it's going to land exactly, but

we'll keep covering it on this channel.

Thank you so much for watching. If you

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