Cloudflare CEO Matthew Price recently wrote an editorial for the Wall Street Journal. It took me quite a while, but I found a non-paywalled link.* It’s called “How I Choose Which Cloudflare Employees to Replace With AI.” As you might imagine, it’s gotten some attention. I’m not going to pile on too much about the […] The post Builders, Sellers, and Measurers appeared first on Lazy Man and Money.
Cloudflare CEO Matthew Price recently wrote an editorial for the Wall Street Journal. It took me quite a while, but I found a non-paywalled link.* It’s called “How I Choose Which Cloudflare Employees to Replace With AI.” As you might imagine, it’s gotten some attention.
I’m not going to pile on too much about the lack of humanity. I’d much rather cover some of his justifications. I’ll get to those in a bit, but these two sentences stood out right away:
We haven’t found another example in U.S. business history of a public company growing at more than 30% that laid off more than 20% of its workforce. Yet what we did is likely going to become the norm over the next year.
If he’s right, the economy will face very serious problems over the next 12 months.
He explains the layoffs using a book by Peter Drucker, published in 1954, called The Practice of Management. I’ve heard of Peter Drucker, but I’m not familiar with the book. It’s far from the equivalent of the Bible when it comes to business, but let’s presume it is very good. The concept that Price focuses on is that there are three main roles in business: builders, sellers, and measurers. Price describes them: “Builders create products. Sellers sell those products. Measurers do everything else: internal audit, revenue recognition, finance, legal, compliance, middle management, operations, and on and on.”
So, now we can get to some of his first very unusual statements:
“Contrary to what some analysts predict, builders aren’t going anywhere. If an engineer on my team can now be 10 times as productive, I’m going to hire as many as I can find.”
On the surface, that may make sense. However, it’s quite possible to overbuild. Let’s presume that the demand for product is X and you can meet that demand with 100 engineers. If the engineers become 10x more productive, it’s not useful to make 10x the product. The smart business would match the supply with the demand and save money by getting rid of 90 engineers.
This is essentially what the big tech companies in Silicon Valley are doing with the layoffs. It’s possible that the business could expand into other areas with the engineers, but keep in mind that other companies are doing the same thing. It doesn’t seem like every business could just expand into ten other businesses with their engineers. Eventually you have too many companies competing in the same businesses. Not only that, but it is unlikely that the demand supports all those businesses.
Next Price says:
“Sellers, too, are safe from extinction. Humans still control budgets, and they want to buy from people who take the time to understand their needs, build trust and fix whatever goes wrong.”
I think this depends on the business. How many sellers does Walmart or Amazon need? It feels to me like the shelf or computer system does the selling. You would need a seller to get your product on Walmart’s shelves, but that would be relatively few people and a one-time thing, since there are fewer retailers to sell to.
Price then moves on to measurers. It’s a long quote, so I will simplify it to say that’s important, but it’s what AI is replacing. Specifically, “Tireless, independent, efficient and available, AI systems can now measure an organization with a level of objective detail and precision that was previously impossible even for the best employees.”
So who did Cloudflare lay off? Price says he laid off middle managers, which I suppose could make sense. Still, I’d argue that they do communications that are thought to be one of the resistant jobs in a world of AI. He also says, “We significantly reduced our marketing team, which, like in most companies, was teeming with measurers.”
In what world is the marketing team a measurer instead of sales?!?! I guess you have to measure the sales, but marketing goes hand in hand with sales.
He pivots to an area of hiring and says, “We received almost a million applicants for 1,111 paid internships this summer. The interns we hired are extremely qualified and AI-native. They’re all builders or sellers, and we expect that the majority will get full-time offers.”
I know it’s a US-based business (he says it above), and there are probably international hires. I would expect most of the hires to be in the United States, though. I find it hard to believe that Cloudflare got almost a million real applicants. I suspect that they are counting something similar to the Common App, where people can apply en masse to a bunch of businesses. Can you imagine how many applications much, much bigger companies like Microsoft, Google, Oracle, Amazon, Meta, etc. get?
Perhaps it’s time to turn off electric submissions and make job seekers prove their interest the old-fashioned way- they write a cover letter, attach a resume, and hope to get a call from a real person. If I were hiring, that’s the kind of applicant that would get my attention.
Final Thoughts
Despite my criticism above, there’s some real value to what Price was saying. If he can grow the company 30% while shrinking headcount 20%, he’s almost forced to make that move to, as they say, “increase shareholder value.”
We’re just at the beginning of AI. ChatGPT hasn’t been public for four years yet. It’s difficult to see where this is going, and it’s only going to get crazier with quantum computers coming in 8-12 years (I think). My kids are about 10 years away from entering the workforce. For the first time in forever, I don’t know what that’s going to look like.
* Why do CEOs write editorials in newspapers that are paywalled? And why do newspapers paywall articles that aren’t done by their journalists or writers? This drives me crazy. I get that there’s print distribution for the CEO’s message, but it’s awful for 95% of the population that will find the article online.
The post Builders, Sellers, and Measurers appeared first on Lazy Man and Money.
