For the last few years there has been constant debate about whether AI will actually replace jobs. Then in late February Jack Dorsey laid off nearly 50% of Block’s workforce, specifically citing AI as the reason.

AI may reduce headcount. But it doesn’t reduce the human need for trust, connection, and collaboration. In fact, as teams get smaller, culture will become more important—not less.

Why smaller teams can do more
One of Dorsey’s comments about the layoffs offers some useful insight:

Intelligence tools have changed what it means to build and run a company… we’re already seeing it internally. A significantly smaller team, using the tools we’re building, can do more and do it better.

On the surface Dorsey’s statement looks like an old standard: it’s all about worker productivity. Large organizations accumulate coordination costs. Aligning across departments, negotiating between stakeholders, and waiting for approvals often consume more time than the work itself. When individuals can execute more tasks independently, the need for those layers of coordination shrinks.

Reducing team size or consolidating roles can remove a surprising amount of internal friction. Ideas move faster. Decisions happen closer to the work itself. The compromises and delays that once slowed momentum begin to fade. Suddenly smaller, resource-limited companies can compete with the big players. 

In some ways it might even feel liberating. Cross-functional bottlenecks loosen and people can pursue ideas without navigating a complex web of dependencies.

This shift toward smaller teams is already shaping how founders think about building companies. SNP’s own co-founder Renn Vara has noticed the change firsthand:

Every founder I talk to says, “We’re building smaller teams, leveraging AI so we don’t have this large population of employees we have to manage.” It used to be the opposite—“How do we quickly hire hundreds of people?” I don’t know any founders saying that to me anymore. AI gives them the opportunity to use smaller teams because smaller teams are more effective. Most founders lament the loss of that first team. The common refrain, “Oh my God, remember when we were all in one room together?” If they can build organizations just using small teams, there’s not a founder on earth that wouldn’t want to do that because it’s intimate, it’s quick, it’s creative, it’s solution-oriented, and there’s no bureaucracy. They can focus on the work, on the product, on the art of creation.

Some commentators have accused Dorsey of “AI-washing”—invoking AI as a justification for layoffs that might have happened anyway. Whether or not that accusation holds water may ultimately be less important than what the debate itself reveals. Organizations are still trying to articulate what AI actually changes about work.

The tradeoff
Beyond the obvious hit to morale that comes after layoffs, role-consolidation comes with another side effect that receives less attention: isolation.

As organizations compress, the social buffer of large teams disappears, communication shrinks, and individuals will find themselves supported primarily by tools rather than colleagues.

Left unchecked, that setup can create echo chambers. AI tools accelerate ideation, drafting, and analysis, but they can also reinforce a single line of thinking when people primarily work alone. The informal exchange of ideas—the conversations that challenge assumptions and spark new approaches—becomes easier to lose.

If your teams are getting leaner, leaders should ask:

• Where are people working too independently for too long?
• What conversations are no longer happening naturally?
• Where do we need to challenge ourselves?
• What practices actually create connections beyond just meetings?

Culture can’t be an afterthought
In a previous edition of this newsletter, we referenced Google’s Project Aristotle, which famously found that individuals on a team don’t actually have to like each other to be effective. In large organizations with complicated stakeholder maps, that insight makes sense. When dozens of people are involved in a project, the goal is often to minimize friction and keep things moving. This shift towards smaller teams could very well challenge that. When there are fewer people involved, each relationship carries more structural weight. The difference between collaboration and isolation becomes much more pronounced. In environments where individuals hold multiple roles and teams are lean, the quality of interaction starts to matter more, not less.

To sum up: how organizations hire talent and how they build culture will be exponentially more important.

Interested in learning more about SNP’s team-building classes like Trust or Creating Efficient Teams? Reach out to info@snpnet.com

P.S. You may notice snpnet.com looks a little different next week. We’ve been working on some big changes.