Latest / MBA Training AI / AI spend per employee: why the falling metric misleads
Transcript
- 0:00Host: Welcome to the Leaders Insights Podcast. Today's episode AI spend per employee is falling.
- 0:11Host: Efficiency win or adoption stall? Enterprise AI spend per employee dropped in August 2026.
- 0:17Host: Everyone's calling it either the efficiency dividend or the beginning of the crash. You
- 0:21Host: think both camps are wrong? Convince me.
- 0:24Expert: They're both looking at a ratio and pretending it's a story. Spend per employee is spend
- 0:29Expert: divided by headcount. If either number moves, the ratio moves. And right now, both are moving
- 0:34Host: at once. So the number went down and told you almost nothing.
- 0:38Host: Break it apart then. What's actually happening underneath?
- 0:41Expert: Two things. First, prices collapsed. The cost per million tokens, a token being roughly three
- 0:48Expert: quarters of a word the model reads or writes, has fallen by more than half at the frontier
- 0:52Expert: labs since early 2025. So you can do the same work for less money. That's not a slowdown.
- 0:59Expert: That's deflation. And the second thing?
- 1:02Expert: Headcount grew at the firms doing the most AI. When your denominator, the number of employees,
- 1:08Expert: swells because you're hiring. Spend per person drops even if total spend climbs. The top
- 1:13Expert: quartile of adopters increased absolute AI budgets in August. The per head figure fell
- 1:19Expert: anyway. It's an arithmetic mirage in…
- 1:22Host: Google AI put out numbers suggesting productivity gains are driving the efficiency. You buy that?
- 1:28Expert: Google AI says teams using their tool ship features around 30% faster. But they sell
- 1:33Expert: the models, so that figure has a thumb on the scale. Cross-check it against O'Reilly
- 1:38Expert: Radar, which surveys practitioners who don't have anything to sell you. O'Reilly's
- 1:44Expert: read is messier. Real gains in coding and drafting. Near zero gains in workflows, nobody
- 1:50Expert: bothered to redesign. The tool got cheaper. The habits didn't change.
- 1:55Host: So the falling number could be hiding a genuine adoption stall in some places.
- 1:59Expert: Exactly. And that's the part both camps miss. Averages lie. If 10 teams cut spend
- 2:05Expert: because they gave up quietly, and 10 teams cut spend because they got ruthlessly efficient,
- 2:10Expert: the average looks identical. Same number, opposite meaning. You have to look at usage,
- 2:15Expert: not dollars.
- 2:16Host: How does a manager tell the difference from inside their own company?
- 2:19Expert: Look at active seats versus paid seats. If you bought 500 licenses and 120 people log
- 2:25Expert: in weekly, your spend per employee looks lean and healthy because 380 people abandoned the
- 2:31Expert: thing. That's the stall wearing efficiency's clothing. Cheap because unused is not a win.
- 2:37Host: That's the uncomfortable version. Give me a company example that's real.
- 2:41Expert: Klarna made noise in 2024 about replacing customer service headcount with AI, then
- 2:47Expert: quietly rehired humans when quality slipped. The lesson wasn't AI failed. It was that
- 2:53Expert: they cut cost before they fixed the workflow. So the savings evaporated the moment customers
- 2:58Expert: complained. Cost per employee looked brilliant for about two quarters. Then it didn't.
- 3:04Host: So what does a smart spend per employee drop actually look like?
- 3:08Expert: It looks boring. Total spend flatter up, usage up, and the per head number falling
- 3:14Expert: because the price per unit of work dropped and people are using more of it, not less.
- 3:20Expert: Rising volume, falling unit cost. That's a company eating the deflation and putting
- 3:24Expert: it to work.
- 3:26Host: And the dangerous drop?
- 3:27Expert: Spend down, usage down, and someone in finance calling it discipline. That's not discipline.
- 3:34Expert: That's a pilot project dying in a spreadsheet where nobody has to watch it.
- 3:38Host: Give me the dry version of that.
- 3:40Expert: A dead subscription is the most cost efficient subscription you'll ever own. Zero usage,
- 3:45Expert: predictable bill, terrible outcome.
- 3:48Host: So the headline metric is basically useless.
- 3:51Expert: It's worse than useless because it's confident. It gives aboard a single tidy number that
- 3:56Expert: feels like insight and hides whether your investment is compounding or rotting. If
- 4:01Expert: you only track dollars per head, you've optimized for the one thing that can't
- 4:05Expert: tell you if the strategy works.
- 4:08Host: And what should someone track instead starting tomorrow?
- 4:11Expert: One number. Weekly active users divided by paid licenses per team tracked over time.
- 4:18Expert: If that ratio climbs while your bill holds steady, you're winning on efficiency.
- 4:23Expert: If the ratio falls, you're not saving money. You're abandoning the tool in slow motion.
- 4:28Expert: And the falling spend is the receipt.
- 4:30Host: Usage over seats, not dollars over heads. That's the takeaway.
- 4:34Expert: That's the whole game.
- 4:35Host: Sources for today's episode, the decoder, Google AI vendor, AI lab, TechCrunch AI,
- 4:42Host: K nuggets, ours, Technica AI, O'Reilly radar.
- 4:46Host: That's your five. The full AI track, structure, no fluff, is at MBA-training.com.