Digesting a Round of Banking Sector Job Cuts
Greetings from Boston, where I have been spending the weekend with my 12- and 7-year old sons. We went to the Celtics game Friday night to cheer on the Celtics plus Maine’s own Cooper Flagg, and then we spent Saturday at the Museum of Science and riding the T around town.
I’ve been planning some more comprehensive “AI in Banking” articles, but I haven’t had the bandwidth to fully think on them yet. So please consider this week’s article an appetizer of sorts.
Six to twelve months ago, when I would write about an anecdotal example of AI disruption hitting the workforce in these articles, I would call it a “canary in the coal mine.” Today, the analogy that comes to mind is that of the first waves of a tsunami reaching the mainland. Here we are, living our lives on the shore in blissful harmony with one another (stick with me, it’s just a metaphor), when meanwhile, hundreds of miles out to sea there has been a tectonic shift or a volcanic eruption deep underground, the energy waves of which are just starting to hit the beach.
That’s what it felt like this past week reading a slew of stories about AI implementation in banks and other financial firms around the country.
I wrote last week about how we are in a “low-hire, low-fire” job market, and I think that will remain true for a while. Businesses are not laying people off en masse because talent retention (yes, human talent) remains critical to operations, and, further, many workplace leaders just don’t know how to implement AI yet. CEOs, boards of directors, and other leaders know there are efficiencies and cost savings to be had; it’s just this super tangled mess of how and when to cross the Rubicon. There are complicated questions about the human impact of AI-related job cuts, but perhaps just as relevantly, much of the new technology is just hard to implement upon the actual technological frameworks and infrastructure that exist now.
We as a society are better at incremental changes rather than fast, monumental shifts. And yet, I keep thinking of that tidal wave metaphor. Here were some of the early ripples from just recently:
Jack Dorsey, founder and former CEO of Twitter, announced on February 26th that his new company, Block, which is the company that operates Square and Cash App, among other brands, would cut approximately 40% of its workforce. Rather than shy away from the technological impetus or try to hide it or cloud things over for the sake of P.R., Dorsey said, yes, AI would be doing more of the work that humans once handled, saying, “A significantly smaller team, using the tools we’re building, can do more and do it better. And intelligence tool capabilities are compounding faster every week.” Dorsey also said the company preferred to make one large, difficult cut now rather than a series of smaller cuts over the course of time, which would be more damaging to morale. Block shares soared 24% on the news, with investors cheering the move.
A more traditional financial titan also announced job cuts this past week: Morgan Stanley, which is reportedly cutting 3% of its workforce. While not explicitly referencing AI in the announcement, it is notable that the company is not particularly distressed or in any sort of financial peril. In fact, Morgan Stanley is coming off of a record year across its many divisions, with profits being up 50% in its investment banking space. And yet, still it is making notable cuts in personnel.
And yet, the Block and Morgan Stanley examples aside, there was a counternarrative out there this past week, too. Economists at the European Central Bank noted in a blog post that companies heavily investing in AI are, at least for the moment, often hiring more workers, not fewer. New tools require engineers, data specialists, compliance teams, implementation consultants, and all manner of support staff. In the early stages of technological revolutions, the pattern is often expansion rather than contraction, so note the economists at the ECB, so there is a gleam of hope in the financial services industry that it may not be all cuts and, in fact, there may be new jobs created.
For now, many banks and others in the financial services sector are still experimenting. They are testing AI copilots in research departments, for example, and trying out automated customer service responders. Some employees may be using (authorized by their employers, or not) learning models to review materials and to provide recommendations. For now, much of this is either in pilot phases or anecdotal one-offs by employees or departments that are particularly keen to implement AI tools.
It would be easy to close the tsunami metaphor by pointing out that after the early ripples comes the crushing crash of it all. And maybe that is what will happen here. For now, though, it feels a little bit more like a whirlpool. There are scattered (though often significant) layoffs, some contradictions in the data, and anecdotal experimentations. These things are increasingly noticeable, but not yet overwhelming. All that being said, I can’t resist noting that tsunamis also often start with strange behaviors in the tides, including a pullback before the full force arrives.
My recommendation to anyone who works in banking and, indeed, most workers in general, is to at least become AI-aware, or even more specifically, AI-competent. Even if AI doesn’t eliminate jobs, it will become a part of virtually every job whether that’s in a bank, a medical office, a retail shop, or many other office settings.
The comparison I think of (even though it largely unrolled before my own professional career began) is the internet. The internet certainly did destroy many jobs and quietly obliterated entire industries, but it created many others and, on net, the internet was explosive for job growth and economic growth more broadly. But workers who did not adapt to the internet as it became a normal part of the workplace and of the economy in general were basically left behind. So, too, will it be with AI tools. The Industrial Revolution, the Computer Age, the Internet, and now AI: these are the four big waves humanity has experienced over the past 200 years — and we are just starting to learn how to ride this most latest.
Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com. Thoughts and opinions here do not represent First National Bank.
See you next week for more Sunday Morning Post content. Thank you for being here, and thank you for reading.