CTO Coach: Why Tech Companies are Really Laying Off Developers (It’s Not Just AI)

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Jan 12, 2026

Stefan Schmidt, a seasoned CTO coach and author of 'The Amazing CTO's Missing Manual,' discusses the real reasons behind tech layoffs, pinpointing a shortage of fresh ideas, not AI efficiency. He stresses the need for AI-ready architecture to unlock productivity gains and highlights the emerging opportunities for junior developers in this AI-driven landscape. Moreover, Stefan challenges the myth of vibe coding and shares strategies for balancing executive expectations with realistic AI adoption plans, urging developers to focus on higher-level decision-making and reskilling.

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INSIGHT

Layoffs Reveal Idea Shortage

Developer layoffs signal a shortage of ideas, not merely automation by AI.
Product management becomes the bottleneck when development capacity outpaces feature ideation.

ADVICE

Make Architecture AI-Ready First

Frame AI adoption as making your architecture AI-ready before promising speedups to executives.
Use prototypes to demonstrate AI benefits while you rework architecture and controls.

ADVICE

Prototype First To Prove AI Value

Adopt a prototype-first approach to show AI-driven innovation quickly.
Deliver many rapid prototypes and MVPs to keep executives satisfied before large re-architecture.

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Why are tech companies really laying off developers? The uncomfortable truth has nothing to do with AI efficiency and everything to do with running out of ideas.

In this episode, Stephan Schmidt, CTO coach and author of “The Amazing CTO’s Missing Manual,” shares a perspective on AI adoption that most tech leaders aren’t talking about. Developer layoffs aren’t about AI replacing jobs; they reveal a deeper problem. Product management has become a bottleneck, creating shallow features just to keep developers busy rather than driving meaningful innovation. When AI accelerates development, this bottleneck becomes impossible to ignore.

Stephan explains why architecture must be AI-ready before teams can benefit from AI tools, how CTOs can manage unrealistic business expectations, and why junior developers actually have a massive opportunity right now. He also challenges the common belief that vibe coding will democratize software development, explaining why you need to be a strong developer to prompt effectively.

Key topics discussed:

Why AI layoffs reveal companies ran out of good ideas
Architecture must be AI-ready for real productivity gains
Vibe coding only works if you’re already a strong developer
Product engineering roles will replace traditional developers
MCP connections unlock AI value beyond code generation
Juniors have huge advantage as AI-native engineers
Iterate on plans, not prompts, when using AI tools
CTOs can finally “rise and shine” using AI strategically

Timestamps:

(00:00) Trailer & Intro
(03:19) How do companies become truly AI-first?
(04:13) How should CTOs manage unrealistic AI velocity expectations?
(08:35) AI Use Cases Beyond Code Generation
(12:04) What is MCP and how does it unlock AI value?
(15:04) Why Developers Resist AI Adoption
(18:35) Are AI layoffs caused by a lack of product innovation?
(21:22) What is the future for junior developers in the age of AI?
(24:36) Critical Thinking and Moving Up the Abstraction Layer
(27:24) Vibe Coding: Benefits and Pitfalls
(31:59) What is the difference between a Developer and a Product Engineer?
(35:59) Building an Effective AI Adoption Strategy
(38:06) AI Adoption Strategy for Development Teams
(40:44) Avoiding the AI Tech Zoo
(44:48) How do tech leaders handle AI data privacy and security?
(50:31) How is the CTO role changing in 2026?
(57:23) 3 Tech Lead Wisdom

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Show notes & transcript: techleadjournal.dev/episodes/243.
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