Dispatch: The Company that Claims it Replaced 700 People with AI - Is the Hype Real?
While companies claim huge success using AI to replace jobs and employees worry for their jobs, whats the truth?
Hello Friends,
I hope you’re well!
One of the major themes thats emerging is how AI might replace jobs. For businesses this promises productivity gains, but for people it can lead to worries about job losses.
I think one of the best ways we can understand this is leaving the hype aside, and actually looking at examples of how real businesses are trying to use AI to solve business problems.
This week we will look at a business that has claimed to have replaced 700 people with AI - a bold claim. But how does it stack up beyond the hype?
More on these below.
Wishing you a great week,
Take care,
Pranath
Klarna says AI replaced 700 people
In a recent announcement, Klarna the buy now pay later service made the dramatic claim of replacing the work of 700 full time customer service agents.
This comes in the wake of the huge AI hype of 2023, but also other trends such as massive tech sector layoffs. The predictions have been that AI will start to make significant impacts on the job market, replacing many jobs which I have written about previously.
On one hand, these are often celebrated by business leaders in the spirit of 'huge efficiency savings' and on the other hand this has fuelled worries and concerns by employees about if their jobs are safe which I have written about previously.
So Klarna has claimed that in the first month of using this AI:
The AI assistant has had 2.3 million conversations, two-thirds of Klarna’s customer service chats
It is doing the equivalent work of 700 full-time agents
It is on par with human agents in regard to customer satisfaction score
It is more accurate in errand resolution, leading to a 25% drop in repeat inquiries
Customers now resolve their errands in less than 2 mins compared to 11 mins previously
It’s available in 23 markets, 24/7 and communicates in more than 35 languages
It’s estimated to drive a $40 million USD in profit improvement to Klarna in 2024
Key features of using AI for customer services include:
Being available 24/7 for customer support queries
Being able to give individual updates on your finance account including updates, payment schedules and balances
Multi-lingual support in over 35 languages
So thats the claim and the hype - but how does it stand up to some scrutiny?
Does the hype stack up?
One notable skeptic of Klarna's claims was
author of one of the top tech newsletters The Pragmatic Engineer who said on X:When something sounds too good to be true - maybe it is? Did Klarna really fully replace 700 customer support agents overnight? I did what few retweeting this do: tried Klarna’s AI assistant. It’s… underwhelming. It recites exact docs and passes me on to human support fast.
We should bear in mind though that this is just one person's account of using Klarna's service.
However, there are other reasons to be a little more sceptical. For example Klarna has said themselves these are the results after only using it for one month, that's not very long at all.
Seasonality and other factors such as the state of the economy can have longer term impact on customer behaviour, this is something that plays out over several months.
So it does seem to be very premature to be declaring success so soon based on just one months statistics.
What about the impact on jobs? if you read most the of media headlines on this it suggests 700 people lost their jobs, but is this true?
Apparently not, this was it seems more media fake news & clickbait. As Yahoo news reported, Klarna actually outsourced its customer service to third party providers, and those companies have plenty of other work for other companies:
“On average, 3,000 full-time agents have been dedicated to Klarna,” the spokesperson told Sourcing Journal. “Since the launch of the AI assistant, we have seen that number reduce to 2,300 agents fully dedicated to Klarna. Because our third-party customer service agents have such a large volume of work from other clients, they are able to redeploy those agents [to those] clients. But for Klarna, that implies a direct reduction in our customer service requirements, and therefore, cost savings.”
So no actual job losses here. But are there any future plans for more redundancies? Again the answers seems no, as Klarna CEO Sebastian Siemiatkowski highlighted:
While the Klarna chief said he did not plan to lay off more workers, he said natural attrition meant the company would shrink over time, and AI would pick up the slack from lost staffers.
This also relates to an issue not well known by the public, the demographic collapse happening in most developed countries. There are going to be fewer and fewer workers available over time due to a dramatic drop in both rates, which I wrote about previously.
What about existing staff at Klarna are they at risk? perhaps not. A Klarna spokesperson mentioned the ongoing need for human customer service employees:
The spokesperson noted that despite the decline in the number of customer service agents needed to fulfill its demands, “There is still a need for more experienced and senior staff…with specialized training in complex or sensitive cases.”
Summing up
So the dramatic claims by Klarna do seem a bit premature after only one month, it remains to be seen if the new AI service really does continue to help solve customer needs more efficiently and better than humans over the coming months.
But even if it does, whats surprising about the Klarna example is that AI job automation may not necessarily lead to people loosing their jobs for many reasons.
In a world where due to demographic problems and other issues we have less and less human workers available, we could use AI to do simpler jobs while using humans to do the more complex tasks they can do better. This might actually allow us to have a future where AI takes over jobs but doesn't actually lead to humans being made redundant.
This is of course completely counter to most media clickbait headlines about 'AI taking people's jobs'. It seems in the case of Klarna, a real business starting to use AI to solve problems, the facts don't seem to fit the media hype.
But this is only one example of how one business is using AI currently, time will tell what the bigger picture and overall trends will be.
What’s your perspective on the issues raised this week?
I’d love to know what you think whatever that is, let me know in the comments and let’s continue this important discussion about how AI is impacting society.