Investors Were Promised AI Labor Savings and Got a New Cost Center!

The AI cost story Investors hear is incomplete. Read this before the margins disappoint you.

Author

Glenda Carnate
January 30, 2026

Read time: 2.5 minutes

Investors think of operating leverage with phrases such as "AI is reducing labour costs," and a slide with fewer people and fewer manual processes. Someone confidently said, "AI has reduced labour costs," and all others agreed.

Then, a quarter later, there are new line items: review teams, co-validation layers, oversight committees. The organization seems “thinner,” yet the expense report has become “fatter” due to the addition of these items.

AI has done nothing to remove labour... it has simply rebranded it!

Lessons learned the hard way by investors when it comes to AI cost savings:

1. Cutting labour does not mean cutting costs.

Labour may shift in function but will remain in existence.
Investor perspective: Observe net operating costs and compare them to headcount numbers.

2. The number of review process layers (RPL) scales much faster than the number of automation layers (AL).

With each step taken towards AI-based decision-making, the volume of human input gets larger.
Investor perspective: Rather than figure out how much AI ameliorates a process, ask how much of any part of the process can/does AI eliminate versus how much it adds (more human input) to it.

3. New permanent roles created by AI.

The concepts surrounding AI-based "temporary oversight" are usually not "temporary."
Investor perspective: Develop AI Governance/QA as on-going operating expense versus a transitional cost.

4. Productivity claims come before unit economics are known.

Narratives are available before margins.
Investor perspective: Wait for margin rates to increase versus your success metrics.

5. Real leverage only occurs when work flows are eliminated.

While working alongside others does not create leverage, removing people creates leverage.
Investor perspective: Supporting AI that removes steps will create more leverage than supporting AI that adds further obstacles to an entire workflow.

💡Key Takeaway: 

AI has not failed to deliver labor savings, but it has instead revealed how much oversight the typical office-based worker requires. The real question for investors is not “does AI save labor” but rather “who will pay for the new cost center this creates.”

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