New and seasonal hires are typically announced during Q4. The opposite is unfolding amid stagflation. UPS announced that, despite favorable earnings, it has cut its operational workforce by 34,000 positions, greater than the initial estimate of 20,000, and an additional 14,000 positions from management. Shrinking a package delivery service ahead of the holiday season signals a broader trend.
Artificial intelligence has been employed in operations to meet growing customer demand. The service has loosened its ties with Amazon, delivering 21.2% fewer packages than last quarter while demand during the first half of the year declined by 13%.
Amazon itself will cut its workforce by 14,000 in the short term. Similar to UPS, the reduction in workforce is not a result of reduced earnings. A leaked memo also detailed that Amazon will need 600,000 fewer employees in the years to come. Careful rhetoric will surround the shift as people fear AI technology.
As Amazon detailed in a blog post:
“Some may ask why we’re reducing roles when the company is performing well. Across our businesses, we’re delivering great customer experiences every day, innovating at a rapid rate, and producing strong business results. What we need to remember is that the world is changing quickly. This generation of AI is the most transformative technology we’ve seen since the Internet, and it’s enabling companies to innovate much faster than ever before (in existing market segments and altogether new ones). We’re convinced that we need to be organized more leanly, with fewer layers and more ownership, to move as quickly as possible for our customers and business.”
This is Joseph Schumpeter’s theory of creative destruction at play. Innovation is paving the way for new technology while leaving the past behind.
Amazon itself and online shopping paved the way for the destruction of the brick-and-mortar stores. By 2020, when the world shut down, consumers relied on the internet for most of their shopping. Amazon expanded by 625% from 2010 to 2020 and continues to grow.
The Industrial Revolution expanded, and the Industrialists, led by the auto stocks, drove the 1929 bull market. The invention of the combustion engine led to tractors for farmers, disproving the theories of Malthus that humanity would starve as the population increased. He never understood the cycles of technology, yet he influenced Gates and the Rockefellers. As farmers had tractors, production increased while employment declined.
The horse and buggy were replaced with automobiles. As they expanded, the suburbs came alive. Suddenly, people could live in places without trains. The town I grew up in flourished because we had a train station, which enabled people to buy land and move out of the cities. The town I grew up in expanded further from the train station with the automobile.
Creative Destruction Waves cause unemployment to rise, but commerce expands. The shift from humans to AI is happening now. This will disrupt the system, but the world will adapt as it always does.