What 'replacing lower-value human capital' actually means

Standard Chartered plans to replace lower-value human capital with AI. What does that even mean, and what are the implications for us?

It's been a while since my last #UnfilteredFriday. I was travelling this week but watched the reports with a morbid sense of fascination. Here are my unfiltered thoughts.

Thousands to go

Standard Chartered CEO Bill Winters received much flak this week after he announced plans to cut 15% of roles at his bank, or 7,000 workers.

"It's not cost-cutting. It's replacing in some cases lower-value human capital with the financial capital and the investment capital we're putting in," he told reporters.

The recriminations came fast and furious, and he later attempted to walk back his remarks in a message to employees.

While one might take some vindictive glee in joking or raging against the callous attitude, don't let it blind you to what is really happening.

Not just one bank

You see, I think Bill was simply being honest. Companies around the world are shedding significant chunks of their workforce.

Indeed, while Standard Chartered's shares were down 0.5% after the announcement, analysts said that is because its cuts were deemed too conservative.

Not two weeks ago, another company with revenue growth of over 30% let go of 1,100 employees. For Cloudflare, this represents 20% of its global workforce. Think about it for a moment.

Cloudflare CEO Matthew Prince explained his decision in an opinion piece in the WSJ, with a title that left no room for ambiguity: "How I choose which Cloudflare employees to replace with AI."

Who AI actually replaces

In his essay, Matthew argues that AI can replace most of the behind-the-scenes employees who are not in the business of either building or selling.

Call them back-office staff, administrators, coordinators, or overseers, these are employees who track, check, and report on how a business is running. He says we'll need a lot fewer of them.

Matthew says the cuts aren't about reducing headcount but about diverting resources towards areas that drive growth. Put another way, leading companies see the future challenges that AI will pose and are reacting preemptively.

Why not retrain instead of retrenching and hiring? The answer depends on factors such as industry, leadership, and stakeholders. For instance, I don't see Singapore banks making similar layoffs. But a global bank or MNC? Expect the cuts to come fast and furious.

So what can workers do? I believe AI has fundamentally changed the nature of work, and I have suggestions on what we can do to stay relevant. I'm out of space though, so I will pen it down in my next newsletter. Use the link below to sign up for it if you haven't yet.