There’s a deeply held belief in finance that markets are wise. Millions of participants, each acting on their own information, collectively arrive at the “right” price. If a stock goes up, the thinking goes, the decision behind it must have been good. The crowd has spoken.
But the 18th-century Spanish Benedictine monk Benito Jerónimo Feijóo would disagree. In the very first essay of his Teatro Crítico Universal—titled Voz del Pueblo (Voice of the People)—Feijóo argued that truth rarely belongs to the multitude. Large groups, he observed, tend to amplify fashion, emotion, and imitation rather than reason. What the crowd believes and what is actually true are often two very different things. Written in 1726, the insight feels uncomfortably relevant three centuries later.
Feijóo opened that essay by invoking Seneca: "Aestimes judicia, non numeres”. The value of opinions, Feijóo explained, must be computed by their weight, not by the number of souls who hold them.
Last week, Block XYZ 0.00%↑ announced it would cut over 4,000 employees, reducing its workforce from more than 10,000 to just under 6,000. CEO Jack Dorsey framed the move as an AI-driven transformation, not a sign of trouble. The market’s response was immediate: Block’s stock surged roughly 24% in after-hours trading.
Thousands of people lost their jobs on a Thursday evening. By Friday morning, investors were celebrating. The stock price reflected collective belief—but belief about what, exactly? That the company will build better products? That AI can replace 4,000 people without consequence? Or simply that costs are going down?
Stock prices tell us what the crowd feels. Not what is true.
Before accepting the market’s verdict, it’s worth asking a basic question: what makes a company valuable in the first place? The answer isn’t narrative. It isn’t market momentum. Companies create lasting value through their products, their services, their ability to innovate, and the trust they build with customers over time. A company’s real worth comes from delivering something useful that people repeatedly choose—not from temporary margin improvements that look good on a quarterly earnings call.
So the real question about Block isn’t whether cutting 40% of staff reduces costs. Of course it does. The question is whether it improves the product. Or weakens it.
Do markets reward layoffs anyway?
The mechanics aren’t mysterious. Markets respond to short-term signals, and layoffs send several that investors love: lower operating costs, higher expected margins, faster automation, and an “AI-first” narrative that suggests future growth. Block checked every box. Analysts modeled lower expenses. Investors projected higher earnings. The AI story provided a compelling growth thesis.
But none of this proves the company will create more value. It proves investors believe it will. And if Feijóo taught us anything, it’s that popular consensus deserves scrutiny, not blind trust.
Here’s where things get structurally interesting. Many CEOs are compensated through stock options, performance stock units, and equity-based bonuses. These instruments are directly tied to share price. So when layoffs trigger a stock surge, executives can personally benefit—sometimes enormously—regardless of whether the long-term product improves or deteriorates.
In Block’s case, Jack Dorsey holds roughly 8% of the company’s outstanding shares—making him the largest individual shareholder. When the stock surged 24% overnight, the value of that stake jumped by hundreds of millions of dollars. In a single evening.
This creates a classic principal–agent problem. If the market rewards workforce reductions today, leaders have a rational incentive to cut—even if doing so quietly hollows out the company’s capacity to innovate tomorrow. The incentive structure doesn’t reward building. It rewards the appearance of efficiency.
Markets react in milliseconds. Product quality evolves over months and years. This mismatch matters—and it’s one of the least discussed distortions in how we price companies.
When Block’s stock surged 24% overnight, it wasn’t because anyone had tested whether AI agents could handle the workload of 4,000 people. No customer had reported a better experience. No product had shipped faster. The price moved on a story—a projection of what might happen, not evidence of what already did. This is the fundamental asymmetry: bad news about costs is instantly measurable, but bad news about quality is slow, quiet, and often invisible until it’s too late.
Will AI agents truly replace the expertise of 4,000 employees? Will customer support degrade? Will engineering velocity slow? Will innovation stall as institutional knowledge walks out the door? These questions may take years to answer. Yet the market has already priced in success. The stock delivered its verdict before the experiment even began.
Short-Term Euphoria vs. Long-Term Reality
Markets operate on quarterly expectations, narratives, and momentum. Companies build value through product adoption, user satisfaction, and sustained innovation. These are fundamentally different time horizons.
Block’s own stock history tells this story well. The company hit its all-time high of $289 per share in August 2021—riding pandemic-era digital payments adoption, the meme-stock frenzy, near-zero interest rates, and the announcement of a $29 billion acquisition of Afterpay. Gross profit was growing 62% year-over-year. The crowd was euphoric. Today, even after the 24% post-layoff surge, the stock trades around $63—roughly 78% below that peak. The pandemic narrative faded. The Afterpay deal looks expensive in hindsight. Growth decelerated. What the market celebrated in 2021 it spent the next four years correcting.
Now a new narrative has arrived: AI transformation. And the crowd is euphoric again.
History offers cautionary tales beyond Block itself. Klarna’s CEO celebrated AI-driven workforce reductions, only to later rehire workers when the technology couldn’t deliver what was promised. Companies that pursued aggressive cost-cutting often saw short-term stock gains followed by long-term stagnation. Efficiency alone rarely builds great companies.
A Moment Worth Reflecting On
We don’t yet know whether replacing 4,000 workers with AI will make Block stronger or simply leaner and more fragile. That story will take years to unfold.
But the market’s reaction already reveals something worth examining: investors celebrated the reduction of people before seeing whether the company creates more value as a result.
The question is not whether AI will transform companies, it clearly will. The question is whether the market is rewarding transformation or simply celebrating layoffs.
As Feijóo warned three centuries ago, the crowd’s enthusiasm is not always a reliable guide to truth. Sometimes it’s just noise dressed up as wisdom.