Two months ago, I asked why Meta appeared intent on destroying its engineering organization, at a time when the social media giant was reporting record revenue and profits. The question was raised after the company did two unexpected things:

1. Laid off 10% of staff. Executed large layoffs in May, with circa 10% of engineers shown the door.
2. Moved 20-30% of engineers to AI training. At around the same time, infra and product teams lost a further 20-30% of their engineers, who were reassigned to data labeling work for AI training.

The outcome of that period was low morale and a string of embarrassing outages, including a “zero auth password reset” outage on Instagram, where anyone’s account – including that of former US president Barack Obama – could be taken over just by asking the AI bot to replace Obama’s email with a different one.

Now, thanks to reporting by Reuters, new details have emerged about a plan for much larger layoffs, which eventually did not go ahead. The news report is pretty damning, and I want to get into what the planned AI job cuts reveal about Meta at this point in its history, what Zuckerberg might have been thinking, and what it could mean for other tech companies.

Making Meta “AI-native:” Project Organization Transformation

The plan was formed in January of this year. As per Reuters:

“In January, Meta CEO Mark Zuckerberg and his top lieutenants gathered for their annual leadership retreat at his Hawaii compound. There they hatched a radical plan to reimagine work at the social-media giant in the age of artificial intelligence.

Code-named Project OT – short for Organization Transformation – the plan envisioned an “AI native” future for the owner of Facebook and Instagram. AI would take over much of the daily work performed by thousands of human employees. Virtual workers would be overseen inside Meta by smaller, “talent-dense” cadres of human staffers, according to one internal planning document reviewed by Reuters and three people familiar with the project.”

The idea was that many existing teams could be reduced by 60% in their size through layoffs and reallocation of workers to other parts of the business. Underpinning this was the assumption that AI would enable these smaller teams to operate as well as before. HR at the social media giant projected that the project would involve a bigger layoff than happened in 2022-2023, when 25% of staff were let go. The new plan was to do one layoff+restructuring in May, and another in November.

I suspect a 30-40% company-wide layoff was planned.

But at the last minute, something changed. From Reuters:

“But on the night of May 19, just hours before the first layoff wave, Zuckerberg blinked. Meta laid off 10% of its employees the next day, but it called off planning for the November cuts, according to one internal document reviewed by Reuters.

By then, Meta employees were in open revolt, convinced that the company’s AI transformation initiatives were partly aimed at replacing them.”

The Reuters report shows those employees were right: Meta’s AI initiatives were indeed aimed at laying off as many of them as possible, without changing overall productivity!

Why did Meta want 60% smaller teams?

You must assume that a company like Meta acts rationally overall, and on that basis it’s worth figuring out what the rationale might be in the case of ‘Project OT’. The article offers a hint: executives at the company had been captivated by “AI-native” businesses in Asia, Reuters claimed:

“Meta executives, including Chief Data Officer Alex Schultz and Head of Product Naomi Gleit, visited Asia last year and admired how startups there had built their organizational charts around AI, according to three people familiar with the trips. Meta executives also commissioned their own research into how AI startups were organized and set up pilot projects to determine what being “AI native” would mean at the company, according to one source familiar with the research and internal documents describing the pilots.”

And indeed, in February Meta experimented with “AI-native pods”. The presentation obtained by Reuters shows leadership intended to achieve 60% reductions in team size with small, 3-5 person, “AI-native” teams doing the work of what had been between 10 and 20 people.

Meta seems to have wanted to become smaller not organically, and over time, but with a brutal layoff and sudden reassignments, in the span of a year, ignoring the impact such a sudden change would have on the company, teams, and employees.

Downsides of tiny teams

In theory, a smaller team could work better with less communication overhead and quicker decision-making, so there are cases where the upsides of a small team outweigh the downsides. However, such expected gains would come with several real costs, mostly associated with losing so much experience and skill:

• Domain knowledge: A lot of personal domain knowledge is suddenly gone.
• Redundancy: In a 10-20 person team, it would mean business pretty much as usual. But in a 3-5 person team, you’re down to two people doing everything!
• Capacity for oncall: A healthy oncall schedule needs 6+ engineers if every alert is to be taken seriously.
• Lack of “slack time”: Innovation often comes from having time to focus on other work, instead of putting out fires.
• Professional growth: Engineers pair with more devs and get more feedback on larger teams.
• Judgment: For honing one’s skills, there’s more experience and mentoring to be gained in larger teams.

Is Zuckerberg’s worst fear being out-executed by a startup?

With Meta’s business posting record revenue and profits, it’s worth asking why the social media giant was in a rush to get to 60% smaller teams. My hunch is that Mark Zuckerberg is paranoid about a startup which executes better and that could “destroy” Meta at some point. After all, this is exactly what Facebook did, back in the day.

Myspace had twice as many employees as Facebook and grew faster than Facebook in 2003-2007. But Facebook out-executed Myspace by being more nimble and more focused. If so, is Zuckerberg being paranoid about a similar threat to Meta today? Anthropic, only five years old, with one twentieth of the workforce Meta has, might be going public at a near $2T valuation. Zuckerberg clearly sees AI companies as a form of competition to Meta’s business model.

Most valuable assets: people or GPUs?

One approach would be to lay off 20-40% of the workforce, but there are consequences:

• Workers reject being treated like “cattle”. When people realize 60% of their colleagues were reassigned or let go because of AI, they might look further ahead: will another 60% be laid off at some point?
• Engineering is officially a cost center, not a profit center. At Meta, software engineering became a cost center pretty much overnight.
• Mission, what mission? People often join a company and stay motivated over time due to a mission they personally believe in.

That’s the problem with large layoffs; they prompt precisely the best employees to quit to join competitors, or launch their own businesses. When leadership declares the ‘bottom’ 20-40% of the workforce is redundant, then very few people feel safe.

Do social impacts matter to Meta?

By executing massive layoffs for the sake of AI, Meta could have invited more regulation of the emerging AI sector. Meta is one of the largest tech employers in the US, and it faces an $18B fine following a legal loss regarding platform harm. If the planned cuts had happened at Meta, the government could decide that Anthropic’s and OpenAI’s CEOs were right about the threat to society of mass job losses and roll out stricter employee protections or taxation on companies that replace staff with AI.

Overall, the canceled plan to cut thousands more jobs in this climate just adds to the feeling that there are no adults running Meta. Since Sheryl Sandberg quit in 2022, Meta has acted irrationally, irresponsibly, and unpredictably.

I’ve long had a generally positive view of Meta’s engineering culture, but with the company’s leadership seemingly worshiping AI and holding their colleagues in disdain, you have to wonder which software engineer would choose to work at Meta if other options are available. There are many tech companies that value their human software engineers, understand that great teams make for great companies, and that AI is a tool and not a replacement for human energy, motivation, and thoughtfulness. But Meta is clearly not among them.