The Event That Changes the Framing

Jack Dorsey announced this week that Block would cut nearly half of its total workforce in a single action, explicitly framing the decision as an AI-enabled restructuring rather than a conventional cost reduction. This is categorically different from the pattern of repeated, incremental layoffs that characterized Big Tech between 2022 and 2024. The signal Dorsey is sending is not about efficiency margins. It is about a threshold claim: that AI substitution has matured to the point where organizations can eliminate entire capability layers at once rather than trimming around the edges.

I want to resist the temptation to read this primarily as a labor story. The more analytically interesting question is organizational: what theory of competence is Dorsey implicitly operating with, and is that theory well-founded?

The Competence Assumption Embedded in Mass Displacement

When an organization eliminates half its workforce in a single action predicated on AI substitution, it is making a very specific claim about the nature of the work being replaced. It is asserting that the displaced roles were executing procedures, not generating adaptive responses to novel problems. This distinction matters enormously. Hatano and Inagaki (1986) drew a foundational line between routine expertise, which is the execution of well-learned procedures under stable conditions, and adaptive expertise, which is the capacity to generate new solutions when conditions shift. Procedural roles are, in principle, substitutable. Adaptive roles are not, at least not yet.

The question Dorsey's decision forces us to ask is whether Block has correctly diagnosed which of its eliminated roles were genuinely procedural and which only appeared procedural from the outside. This is harder to determine than it looks. Kellogg, Valentine, and Christin (2020) documented extensively how algorithmic management systems routinely misclassify the cognitive content of work, treating adaptive judgment as rule-following because the outputs are consistent. Organizations that optimize on the basis of that misclassification will discover the error only when novel conditions arise and the system fails to generate an adequate response.

The One-Action Restructuring as an Organizational Schema Problem

The shift from repeated incremental cuts to a single catastrophic restructuring event is itself a structural change worth examining. Repeated cutting, whatever its costs in morale and uncertainty, generates organizational feedback. Each round of cuts produces information about what was actually essential, what dependencies existed, and where the AI substitution assumption broke down in practice. A single catastrophic cut eliminates that feedback loop entirely.

This connects directly to a problem I have been working through in my own research on application layer coordination. The Algorithmic Literacy Coordination framework predicts that competencies in algorithmically-mediated environments develop endogenously, through participation and feedback, not through pre-specified procedures. When Dorsey bets that AI can absorb half of Block's workforce simultaneously, he is betting that the knowledge those workers held was fully codifiable and transferable to an algorithmic system before it was lost. That is a very strong claim about the completeness of Block's internal knowledge architecture.

Gentner's (1983) structure-mapping theory offers a useful frame here. Competent performance in complex environments requires actors to have accurate structural schemas, not just surface-level procedural knowledge. When you eliminate the people who hold those schemas before the schemas have been successfully transferred, you do not simply slow down - you lose the structural understanding entirely, because the schemas exist partly in practice and partly in the tacit coordination between individuals.

What This Predicts for Block's Near-Term Performance

The organizational theory literature is fairly consistent on what happens next. Rahman (2021) documented how organizations that rely on algorithmic substitution for coordination functions tend to discover invisible dependencies only under stress conditions. Block will likely perform adequately on its existing product lines under stable conditions. The stress test will come when a novel problem arises that requires the kind of structural judgment the eliminated workforce carried. At that point, the question of whether the restructuring was based on an accurate or inaccurate theory of work content will become answerable.

I am not arguing that the cuts were necessarily wrong. It is genuinely possible that a significant fraction of Block's eliminated roles were procedural in the relevant sense, and that the AI substitution claim is accurate for those specific functions. What I am arguing is that the single-action format of the restructuring makes it nearly impossible to course-correct if the underlying competence theory is even partially wrong. That is a different kind of organizational risk than anything Big Tech's incremental approach produced, and it deserves a more precise analytical vocabulary than either the celebratory or the doom-laden framings currently on offer.

References

Gentner, D. (1983). Structure-mapping: A theoretical framework for analogy. *Cognitive Science, 7*(2), 155-170.

Hatano, G., & Inagaki, K. (1986). Two courses of expertise. In H. Stevenson, H. Azuma, & K. Hakuta (Eds.), *Child development and education in Japan* (pp. 262-272). Freeman.

Kellogg, K. C., Valentine, M. A., & Christin, A. (2020). Algorithms at work: The new contested terrain of control. *Academy of Management Annals, 14*(1), 366-410.

Rahman, H. A. (2021). The invisible cage: Workers' reactivity to transparent algorithmic evaluations. *Administrative Science Quarterly, 66*(4), 945-988.