Balancing Act: Klarna, AI, and the Future of Work

Can companies continue to be innovative without growing headcount? A look at the balancing act businesses must take as they embrace an AI-first mentality.
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"The AI Economy," a newsletter exploring AI's impact on business, work, society and tech.
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IN THIS ISSUE: Klarna’s bold AI experiment—cutting headcount and leaning heavily on AI—offers a cautionary tale for companies racing to automate. But does this course correction signal trouble for the AI-first future, or simply reflect growing pains on the road to transformation? Plus, why are tech companies eager to help Saudi Arabia build an AI hub? 

And stick around for a tip on how you can keep your prompts private on Meta AI.

The Prompt

When Klarna CEO Sebastien Siemiatkowski announced in 2024 that the company would aggressively adopt AI and move away from using Salesforce and Workday, it sent ripples through the industry. Salesforce CEO Marc Benioff publicly expressed concern, though his reaction was likely fueled by Klarna’s decision to drop his company’s product. “Humans aren’t going away,” Benioff retorted. Intentional or not, Siemiatkowski became the face of an AI movement some companies have embraced, betting that the technology will lead to more prosperity and efficiency than growing headcount.

Eight months later, Siemiatkowski acknowledged that his push may have gone too far. Deploying chatbots was cheaper, and Klarna’s workforce shrank by 40 percent to almost 3,000 employees. However, human support was still needed. The company is now hiring customer service workers. Even still, Siemiatkowski remains bullish on AI, as he tells Big Technology. 

Klarna’s bump in he road is neither a win for the pro-human faction nor a loss for the pro-AI group. Instead, consider it a stalemate, largely a result of the technology’s limitations. The company’s decision highlights a delicate path companies must navigate: How much AI is too much? And Siemiatkowski’s business isn’t the only one turning to AI. Shopify has told its workers that teams must demonstrate why AI can’t perform the job before additional headcount is granted. IKEA, Duolingo, and the telecommunication company BT are among the other companies that have disclosed their adoption of AI over humans.

This trend could accelerate, fueled by the growing hype around AI-first business transformations. Prominent tech leaders are championing a vision of the workplace where autonomous agents collaborate with humans to handle the jobs to be done. The promise is that employees will be freed up to focus on higher-value, strategic, and creative work. While this hybrid workforce could become a reality soon, how fast businesses should move on this is up for debate.

The companies building the AI tech tell me their products keep humans in the loop. But for how much longer? The rate at which agents exhibit human-like behavior and are armed with deep reasoning and better inference while operating behind the scenes and away from a chat interface could usher in this autonomous utopia—or dystopia—that has been foretold.

The quality of AI answers must also be considered. Klarna reversed course because its bots provided “low-quality” responses to customers. It didn’t eliminate them; instead, it brought back level-two support run by humans. Any company considering going full-throttle on AI must be concerned about the Return on Investment. If they have a bad experience or aren’t developing effective AI agents through the platform, their digital workforce won’t be as good or better than the humans already working there. 

This time is not so dissimilar from decades ago when we feared robots taking over factories. Yes, some doomsayers said jobs would be lost, but work in other sectors was created. After all, someone needs to fix the robots in case they break or do something wrong.

“There is no artificial intelligence without human intelligence,” states ServiceNow CEO Bill McDermott, telling 20,000 people at his company’s Knowledge conference last week that AI is all about the people, not the technology. “Humans are now moving up the chain because the thinking machines handle the complexity and the chaos that humans never wanted to do in the first place, and together, we have a great chance to shape the future, and incrementalism won’t do it.”

While his perspective highlights the collaborative potential of AI and human intelligence, the pace at which AI is believed to be adopted raises concerns. The Klarna case demonstrates the risks of prioritizing AI over human talent, leading to unintended consequences. As companies navigate this evolving landscape, striking the right balance between automation and human expertise will be crucial to ensure a future where AI enhances rather than replaces the human workforce.

As bots become more intelligent and autonomous, will the tech companies that made all this possible help generate a solution to keep humans in the loop and avoid a jobpocalypse? As the automation engine continues to gather steam, everyone, from the workers to management and the tech providers, will likely need to come together to come up with an answer.

The challenge for businesses will be to carefully assess the appropriate use cases for AI and find ways to integrate it seamlessly with their human workforce. Implementing AI should empower employees, not replace them entirely. By striking the right balance, companies can harness the power of AI while ensuring their most valuable asset—their people—remains central to their operations and long-term success. This delicate equilibrium will be crucial as the AI revolution continues to reshape the modern workplace.

Getting the balance right won’t be easy, but it offers companies an unprecedented opportunity to redefine productivity, creativity, and growth in the years ahead.

Don’t Miss out on Future Issues of ‘The AI Economy’

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A Closer Look

Saudi Arabia wants to become a global hub for AI, and it has the money and energy resources to make it happen. This week, the kingdom launched Humain, a company backed by the Saudi Public Investment Fund (PIF). It has already secured partnerships with some of the tech industry’s top players—including Nvidia, Groq, and AMD—to support data center development, and with Amazon to create a so-called “AI Zone” in the country. 

PIF is no stranger to Silicon Valley. As TechCrunch notes, it’s seen as a key source of growth capital and has also helped bring companies like Google and Salesforce to the country to help build AI data centers. Everyone wants a piece of Saudi Arabia’s wealth, oil, and energy, all of which are all necessary to fuel AI innovation. Companies are grappling with energy shortages to power their AI, so tapping into the world’s largest crude supply would provide a significant advantage and create an opening to make their technologies available to more people.

As Wedbush Securities Managing Director Dan Ives tells Fortune, the AI embrace of the Middle East is a “watershed” moment, as the region gains a competitive advantage over China. The U.S. has been blocking Beijing from obtaining American-made chips, citing national security risks. Nvidia CEO Jensen Huang claims that missing out on China’s AI market would be a “tremendous loss” and is trying to lobby the Trump administration to ease trade restrictions.

That being said, some U.S. officials are concerned that American technology sold to Saudi Arabia could wind up in the hands of Chinese companies.

Pro-Tip

Are you using Meta’s AI-powered assistant? Did you know that your prompts may be publicly viewable? One of Meta AI’s features is the ability to share prompts and responses, intending to inspire others. While most are probably innocent enough, some are cringey or perhaps even inappropriate for such widespread distribution.

Regardless, if you’re using Meta AI and want to ensure that your prompts stay private, here’s how to do it: In the app, tap your profile and go to “Data and Privacy.” Then, in “Manage Your Information,” go to “Make All Prompts Private.” This should apply to all your posted prompts and make them visible only to you. There is also an option to delete all your past prompts from the app, in case you’re worried you may have inadvertently shared a query you didn’t want publicly visible. 

This Week’s AI News

🏭 AI Trends and Industry Impact

🤖 AI Models and Technologies

✏️ Generative AI and Content Creation

💰 Funding and Investments

☁️ Enterprise AI Solutions

⚙️ Hardware, Robotics, and Autonomous Systems

🔬 Science and Breakthroughs

💼 Business, Marketing, Media, and Consumer Applications

🛒 Retail and Commerce

⚖️ Legal, Regulatory, and Ethical Issues

💥 Disruption, Misinformation, and Risks

🔎 Opinions, Analysis, and Editorials

End Output

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