Do Managers Actually Understand AI? (I’m Not So Sure.) | AI Reality Check

Do you ever get that sense when you're hearing business executives talk about AI that they seem to be living in a completely different world than the rest of us? I mean, I get that feeling a lot. I want to give you a recent example. Last week, I came across an article from the New York Times business sector that interviewed multiple executives from the German software company SAP as well as several European business and economics analyst. Now, what struck me was how confident everyone was that AI had already started massively disrupting the economy and would continue to do so at an accelerating rate in the near future. Here, let me load the article on the screen here. Look, the title was, "Can you embrace AI without layoffs?" This company says it's trying. Look at the subhead here. The German software giant SAP says, "It's betting that employees can reinvent jobs instead of eliminating them. Experts are divided on whether it will work." All right, so let's think about that wording for a moment. That article, this interview with the SAP executives, takes for granted. The people they talk to take for granted, that AI, if left unchecked, is poised to eliminate large number of jobs. The only question is whether or not there is something we can come up with to stop that by having maybe new jobs to replace all those that we are for sure about to lose. Now, these are incredibly bold claims, and yet they're made so confidently and so casually when you hear business executives talk, and to me, this raises some key questions, such as, "Why is the business community so confident that AI will definitely eliminate lots of existing jobs? What is it that executives and SAP are seeing about their own employees and their clients that make some think that these massive changes are imminent? And most importantly, are they right?" Well, it's Thursday, which means it's time for an AI Reality Check episode of this podcast, which is the perfect opportunity to go seeking some measured answers. All right, so here's my plan. I'm going to dive deeper into this article and try to better understand what the business community over there in Europe actually believes about AI, and then I'll step back and give you my take. Now, I want to give a trigger warning here. If you're an executive at one of these companies or a business analyst, you might not like the conclusions I end up reaching. All right, anyways, let's dive in. As always, I'm Cal Newport, and this is Deep Questions, the show for people seeking depth in a distracted world. All right, so I want to return to the article here and read another quote from it that I think sets the stage for how executives at SAP are thinking about AI and its impacts. So I'll put this on the screen here and read it. It's leaders can see that AI is eliminating the need for humans to do many of the task its software engineers did until very recently, and around of restructuring two years ago, SAP cut nearly 10,000 jobs, some as a result of AI, the company said. All right, I want to stop right there. That's an incredible claim. So the executive cited in this article is said that the job cuts they did two years ago were in part in response to AI. So in the spring of 2024, they claim they were laying people off because of the power of AI. Well, look, I've been reporting and writing about AI since the beginning of chat GPT. Let me bring you back to the spring of 2024. So the state of the art generative AI in the spring of 2024 was chat GPT powered by GPT 40, which its main claim the fame is that there is more input types it could accept in GPT for you could have like, for example, audio as input so as like a multimodal thing. For no real programming harness is back then the very first serious programming harness Devon had just been released that spring in a highly restricted experimental form so there's no one using AI in any systematic way to program we were still mainly talking about the potential for this this technology in the future we are still dealing with relatively limited chat bots. So this sort of this claim yeah those layoffs we did were also part of AI. I mean it feels like that's just essentially made up. Now we have other sources we can turn to here as I covered in an AI reality check episode of this show back in May in the last few months, many technology leaders have come out to say really clearly that that narrative that people were laying people off because of AI just hasn't been accurate. Let me remind you of some of these quotes. The video CEO Jensen Wong said claims that AI would eliminate large number of jobs were quote ridiculous. He also said the following and I'm quoting him here. It was just a way for executives to sound smart and I really hate that I think they're scaring people and that's your responsible venture capitalist mark and recent also has this spring ridiculed the idea that AI could be responsible for software development job losses already given the fact that mature AI coding tools. We're only just became available this fall he notes that cuts and development jobs like the cuts that SAP made two years ago or more a combination of factors such as correcting for over hiring of tech companies during COVID and increase in interest rate which requires them to actually reduce expenditures to keep profit numbers where they need to be. The most recent data backs this up there's a new report out that reveals that tech job openings rebounded sharply in 2026 the number of software development job openings at the moment is at its highest level in three years. Even Sam Altman in a conference last May said his fears of mass job losses had turned out to be wrong. Let me read his quote here. I'm delighted to be wrong about this I thought there would have been more impact on entry level white color jobs being limited by now than has actually happened all right so let's step back I think I think this is really critical. Basically every major figure close to the current AI boon has said this idea that layoffs were happening in the past few couple of years due to AI is just wrong. They also are largely eliminating the idea that we are going to face massive job losses due to AI in the near future and yet the executives from SAP quoted in this article casually just do out. Oh yeah we in the restructuring we did a couple years ago like some of that was AI with the replace people because AI. So they were presenting that claim as if that was obviously true even though a closer look at the reality shows that nothing like that is true. All right let's read further in the article to get some more insight into the way these business executives think about. AI I'm going to bring another quote up here on the screen. I'm reading now from the article I'm not sure I'm not sure if here someone in two or three years will still code software Christian Klein the chief executive told me in a recent interview he said he did not expect to operate with a smaller workforce but with a very very different workforce such a strategy could be a source of hope for Europe economists say it might prevent large scale job losses in some sectors while plugging unfilled vacancies and others Europe and aging continent. It's facing a long fate of slow economic growth has a chronic lack of skilled workers alright I want to break down that passage from the article because there's some. There's some key leaps of logic in here that I really want to emphasize alright so it starts by the chief executive of SAP noting the AI tools are now much more involved in the actual production of computer code. This is true programmers now as of twenty six this service last quarter now nearly ubiquitously work closely with AI agents. They in interactive conversations with the agent specify exactly what piece of code they want the agent produces and test the code the humans look at it and then go back and forth if it's not quite what they want so the actual typing of computer code has been greatly reduced there's more and more of the actual typing a code that's coming out of a model that's working interactively with computer programmers okay but as we just noted with all those quotes we read before this is not led to software jobs disappearing. There's now a record high number of job listings in software development we're still trying to understand exactly the best way to work with these agents but it is certainly not replacing programmers maybe it will but it's not right now it's just as likely that it won't. That reality doesn't show up in this quote because if we go further the chief executive of SAP goes on to imply that if AI's coding capabilities are not addressed those software development jobs will disappear right because remember he said and I'll bring this back up here. He did not expect to operate with a smaller workforce but with a very very different workforce right the implication there is that they would be operating with a much smaller workforce because these jobs are going to go away but he will avoid that fate for his programmers by finding them different types of work to do what he's calling a very very different workforce they get into it later in the article that you know it's going to be more about being a forward deployed engineer and and orchestrating AI or something like this right so his implication is if we don't invent new jobs. We're going to lose all these software development jobs then comes to even bigger leap of logic. The quote goes on to say that actually there will be put this on the screen. Large scale job losses in other sectors of Europe due to AI like that's the default assumption that's what's going to happen if we don't do anything else. But if the rest of the economy that there's some silver linings here is that, actually, if we plug in the SAP strategy of inventing new AI-aware work for these workers, all those jobs won't disappear, and then it goes on to say, and also the fact that a lot of these jobs, of course, can be automated is maybe not that bad of a thing because we have a labor crunch coming as we age out workers, there's not going to be enough skilled workers to fill the current jobs. So maybe it's not a bad thing that a lot of those are going to be automated. So at the core of this sort of logic here from the chief executive is this idea that softer jobs, if nothing else changes will go away, that at SAP, they will find other work for those programmers, new types of jobs that involve coordinating AI, and in other sectors unrelated to computer programming, they're also going to lose a lot of jobs, but some of those they'll be able to redirect to other places, and in other cases, automated jobs will be okay because we don't have enough workers anyways. So again, there's just this casual, confident assumption that AI is in the process of eliminating lots of jobs, or soon will eliminate lots of jobs, not just in computer programming, but in multiple sectors across the European economy. All right, well, you might be wondering maybe like what's really going on here is that internally at SAP, they have found really innovative ways to use AI, and that's why they're so sure that all these other sectors are about to be eliminated. Well, fortunately, we can get some insight because in this article, the SAP executives go on to summarize how they are currently using AI within their company. We're about to see here some truly, I'm assuming, very impressive, super powerful automation. So let's read what they said here. SAP workers use AI tools to try to improve applications for patents, and to handle some customer support request, its AI agents code prototypes for a new software, or add new features to existing programs speeding up the process for developing products. Okay, so within SAP, the way they're using AI is to generate or clean up some writing on applications, to do some, in quotation marks, customer support tickets, the vibe code prototypes, and the developers are using agents to help them when they're adding new features. I mean, I guess humans are obsolete now. I mean, I've been sarcastic, of course, because these are the same narrow use cases we've heard for a long time. The only interesting one is programmers are now ubiquitous in using these tools. We don't know what that means, but they're ubiquitously using those tools. But this idea of it can help you write drafts of things or clean up text, or maybe it can be like a chatbot for some customer service. We've been saying that for years. It hasn't done anything to the economy. And so if that is what is happening within SAP with AI, how do they get from that to multiple sectors of the economy are going to lose huge numbers of jobs because of this technology, but that's okay because we have a labor shortage anyways, and we don't have enough people to fill those jobs anyways. How do you jump from these, there's nothing new here. This is the same narrow use cases we've been hearing about for a long time. And yet they've jumped from that to this confidence of like, yeah, software development jobs are going away, but we can find new jobs for them and other sectors will lose a lot of jobs too, but you know what, it might not be so bad because we don't have enough people to fill those jobs and younger people, we can invent new jobs that are orchestrating AI. So maybe it'll be okay. And the headline of the whole piece is like, yeah, but the experts interviewed are like maybe, but maybe that won't work at all. It's a 50/50 chance about whether we're basically about to go through a massive economic depression or maybe we can kind of muddle our way through it. There is such confidence here that economic devastation is coming, even though we just looked at the last three months of the technology press as all these leaders saying like that's overblown, that's executive trying to sound smart. We don't really expect it to be massive job losses. There is a huge disconnect here between the casual confidence of the business community as exemplified by the quotes in this article and reality. Well what explains this? What explains what's going on here, right? We don't have Hal 9000 right now. We're not in a as-em-off I-Robot short story. We have a cool new programming utility that we're still trying to figure out in some like truly mediocre narrow business applications. That's the reality. How do we get from there to this casual confidence that the economy is going to be destroyed if not for like some like very creative reinvention and pivoting by business leaders? Well here's my emerging theory. Many business executives and analysts don't really understand AI much at all. They are operating on vague vibes or reacting to things that they've sort of heard endlessly repeated on LinkedIn that seem directionally true. I also think that a lot of people in these situations are more afraid of missing a disruption than they are about being wrong about a disruption that doesn't happen. There's just more credibility and feeling like you're very AI forward to say, "Oh yeah, we lead up people." What was it interest rate to say, "Hey, it makes you sound like you're AI forward." They're like, "I bravely know as some C suite executive at a massive software company. I bravely recognize that the economy is about the crater, but we're going to pivot and be smart about it. It makes you seem AI forward. It makes you seem high tech. But I keep hearing this again and again from individuals who are talking to their managers and like, I don't think they understand what AI is at all. They're repeating like slop from LinkedIn that makes no sense. You better be using AI or someone who uses AI will replace you and like to do what though? What part of my job is AI going to make better? What do you want me to do?" And they're just like, "A.I. good? Job go away." "Me see person on LinkedIn say that all software dev go away. Me not want that." I guess the managers talk like, "Cateman, is that how that works?" But I think this is putting us in a difficult situation, right? Think about it as just the American public or the world public here. On the one hand, we have the people who arguably know most about the technology, which are the AI executives that have this weird addiction to doom trolling, so we have a hard time listening to them. They're kind of going back and forth. They seem to be a little bit better recently, maybe because of pending IPOs. They're a little better recently about like, "Yeah, we're okay. It's not going to take jobs." But then everyone's going to be like, "But the AI is going to take over, kill us all!" And then they go back. So they have this weird addiction to doom trolling, so it's hard to sort of pay too much attention to the AI executives. But now we have the people who are most impacted by the technology, the people who run companies, who are dealing almost exclusively in vibes and sort of like things that they heard on LinkedIn that sound directionally true. They seem completely disconnected from the reality of what's really happening with AI. So how are we supposed to understand what's really going on? We can't trust the people who know the most about it. We can't trust the people most impacted by it. Of course, we're all confused about it. I think one of the solutions here is journalism. I think journalists. Here's my idea. I think journalists need to change their frame when they think about AI and they cannot approach it like you would approach like normal technology reporting or business reporting. I think we have to bring a frame of skepticism and criticality to AI reporting that's similar to what we do for political reporting. It's very important what happens in this sector. A lot of impacts are going to happen. But we don't just trust or take for granted or accept whatever the people we interview happen to say because they all have their own agendas or biases or blind spots. So-and-so says this, someone else says this. This claim was made by the CEO. These other people completely dispute that claim. We talk to East Coast computer scientists who don't wear robes and go to ex-risk cult sacrifice meetings about what this technology actually means and here's what they said. We have to bring the same skepticism. You bring to like a presidential or the congressional midterms that are happening now. It's incredibly important. The impacts are big and we don't trust a word out of almost anyone's mouth. And that'll change the way I think the public understands AI as well. We'll be less susceptible to this doom thing we saw over here, this confident prediction here, the skeptic to dismisses everything over there. If we put on our political reporting blinders or glasses or whatever want to call it, I think we'll be able to navigate this important moment better. Now, obviously I want to give a caveat here, many, many business leaders and managers know a lot about AI and they're very savvy about it and they're very clear ahead of about it. I've talked to a lot of these managers, but there is a class of people right now in the business community who are very vocal, who really have no idea what they're talking about. And they're causing a lot of confusion for people who read their quotes and they're causing a lot of pain for the people who work under them who are like, I don't know what you're saying. This is like a Dilbert column cartoon from hell, alright? So that's my plea, be wary, just as wary about what business leaders are confidently and casually saying about AI as you are about the doom that's coming out of the mouth of AI tech CEOs. Alright, that's it for this week. I probably will, I may or may not have another AI reality check up next week. I'm traveling again, somewhere I travel a lot. So we'll see if I can get one in. But otherwise I'll be back to week after and on Monday though there will be an advice episode of this show. So definitely tune in for that as well. And until next time, remember, care about AI, but not necessarily everything. You read about it. Hey, if you've made it this far, you must be ready to join my fight for depth in a distracted world. Now, the best way to do this is to join over 125,000 people who receive my email newsletter each Monday. You can sign up at calnewport.com/ideas. And when you do, I will send you a free guide to my seven best ideas about cultivating a deep life. Sign up today at calnewport.com/ideas.