100 SWEs all running Claude Code. Okay, company is 10x more productive than before.
Now, company cuts 90% of SWEs because AI makes 10 engineers as productive as 100 engineers.
Yay, company saves 90% of engineering costs.
But now, 10 engineers run Claude Code. And now Claude revenue drops by 10x multiple?
So if AI gets good, it will reduce the very engineering headcount that AI companies depend on, right?
Doesn't this mean that any company that depends on headcount growth (every SaaS), loses?
100 SWE -> 10 SWE, 100 slack/gmail/notion/zoom/etc. subscriptions become 10.
And now let's recurse.
These SaaS companies that use AI and dropped 90% of engineering headcount lose revenue because their customers also drop headcount.
Let's say AI costs 89% more than it did before, so the SaaS companies still get 10x productivity from the 10 engineers, but now all their customers headcount is 90% smaller too. So what now? Does every company make a pact to grow headcount ;)
10 SWEs running Claude Code generating 400mn tokens/mo = 400mn * $25/mn = $10,000/mo of revenue for Anthropic
If AI can make 10 engineers a productive as 100, then AI companies bank at least the same revenue.
In this case, Anthropic would want 100 SWEs generating 100,000/mo of revenue. Replacing the very headcount that is responsible for token usage would hurt company growth.
Not to mention what happens when companies start doing this recursively. 100 SWE -> 10 SWE, 100 slack/gmail/notion/etc. subscriptions become 10.
AI companies don't even know what they want.
smt88•3w ago
Second, they can increase prices if they're really killing jobs. The price for a model that can kill 1 job is much lower than the price for a model that can kill 100.
SuboptimalEng•3w ago
Doesn't this mean that any company that depends on headcount growth (every SaaS), loses?
100 SWE -> 10 SWE, 100 slack/gmail/notion/zoom/etc. subscriptions become 10.
smt88•3w ago
Yes, assuming they aren't also scaling their costs down with AI.
But this is mostly a moot point because we don't yet have any evidence that AI is killing lots of jobs. Companies are doing necessary/planned layoffs after over-hiring for years, and some of them are making it look better to investors by saying it's because they're smart (for using AI) instead of the truth, which is that they stupidly over-hired.
You also have to remember that AI is way, way under-priced right now. That $200/mo. Claude bill should probably be double or triple what it is. All of the AI companies are plowing money into keeping prices artificially low.
The economics will change a lot once they can't do that anymore. Google will likely dominate because they can burn their own cash from other businesses instead of cash from VCs or retail investors.
But if prices go up and these companies charge enough to be profitable, people will start to question whether it's cheaper to just have people doing the work instead.