Tech CEOs are apparently suffering from AI psychosis

Source: TechCrunch

The Wildness of Today’s Tech Industry

There is a certain wildness in the tech industry these days that both mimics previous eras of large changes—like cloud computing (runaway costs in the early days)—and is like nothing we’ve ever seen before (record revenues accompanied by mass layoffs).

A Theory of “AI Psychosis”

A theory doing the rounds attempts to explain the phenomenon: Tech executives, especially CEOs, are collectively suffering from delusions of grandeur thanks to AI. At least one tech CEO has said so out loud: Box founder Aaron Levie.

“CEOs are uniquely prone to AI psychosis because they’re sufficiently distant from the last mile of work that still has to happen to generate most value with AI,” Levie wrote on X.
View the tweet

Levie argues that CEOs “play with AI,” develop a prototype, or generate a contract, and then leap to believing agents can do the work.

CEOs aren’t the people who have to review code, discover bugs, and identify calls to hallucinated libraries before software is deployed.
They aren’t responsible for training AI models on a company’s idiosyncratic contract terms, nor do they have to spend days combing through contracts to find sneaky terms, as Levie indicates.

In other words, Levie’s theory posits that CEOs don’t really understand processes well enough to know what really can and can’t be automated, but that lack of knowledge doesn’t stop them from acting on their beliefs.

It’s important to note that Levie is not an AI hater. Quite the opposite. He mostly posts AI positivity on X to his 2.7 million followers, writing blogs titled “Headless software is the future” on how software built for AI agents is the way forward. He also puts his money where his mouth is, backing AI startups as an active angel investor.
Headless software is the future (tweet)

What CEOs Should Do Instead

Levie advises CEOs to use AI “a ton” to really see what it can and can’t do, and come out the other side with an appreciation for both the upside and the real work.

“CEOs are uniquely prone to AI psychosis because they’re sufficiently distant from the last mile of work that still has to happen to generate most value with AI.”
— Aaron Levie, May 24 2026
Original tweet

I have enough faith in humanity to believe that there are CEOs out there attempting to do just that, but right now they seem to be in the minority.

---

Layoffs, AI, and the “AI Washing” Narrative

In only the first five months of 2026, the tech industry has already had nearly as many layoffs as in all of 2025:

Source: Layoffs.fyi

The bulk of companies have pointed to AI as a reason for cutting these jobs. Many argue that the biggest tech firms are “AI‑washing”—crediting AI productivity gains when other business decisions and metrics are really driving the cuts.

• Example: Zeb Evans, CEO of project‑management startup ClickUp, proudly declared on X that he had laid off almost a quarter of his employees (22 %) after rolling out about 3,000 AI agents to do internal work.

  • Source: TechCrunch – ClickUp mass layoff

  Evans swore this wasn’t done to reduce costs. Instead, he wants a workforce composed of people who run AI agents and spend their days quickly reviewing the agents’ work, believing this will create a “100× org.”

Does the Data Support These Claims?

A meta‑analysis published in UC Berkeley’s California Management Review (Oct 2025) found “no robust relationship between AI adoption and aggregate productivity gain.”
Read the analysis

National Bureau of Economic Research (Mar 2024) concluded AI adoption did improve productivity, but noted a “productivity paradox”—perceived gains are larger than measured gains.
NBER paper

MIT researchers (2025) examined thousands of AI‑agent evaluations and found agents “just aren’t doing human‑quality work yet in many cases.” They predict that, at the current rate of LLM improvement, models will be able to complete most text‑related tasks with success rates of 80 %–95 % by 2029 at a minimally sufficient quality level.
MIT study

Harvard Business Review (May 2026) showed that when everyone uses AI to produce more, the bottleneck shifts to executives, whose work now awaits the people who must authorize all the output.
HBR article

OpenAI’s 2025 experience (TechCrunch, July 2025) highlighted how rapid AI adoption can lead to organizational chaos when decision‑making cannot keep pace.
OpenAI engineer’s account

Bottom Line

• AI is on track to reach base competence on most tasks within about three years, but still needs several more years to consistently outperform humans.
• The current productivity gains from AI are mixed at best, and the perceived upside often exceeds the measured reality.

---

Are CEOs Ready for the AI‑Driven Bottleneck?

If CEOs are not prepared for the shift of bottlenecks to the executive layer, the most certain outcome of the ongoing CEO AI psychosis will simply be organizational chaos.

When … (the original text cuts off here; continue as needed).

You purchase through links in our articles; we may earn a small commission. This doesn’t affect our editorial independence.