The AI store manager terminated its first human employee after needing a reminder of its own regulations.

      Luna operates Andon Market, located at 2102 Union Street in Cow Hollow. The startup Andon Labs, which developed it, announced the termination on Thursday. Katherine Li from Business Insider was the first to report on this decision and interviewed the lab. Luna is based on Anthropic’s Claude Sonnet 4.6.

      The headlines create themselves, but the conversation logs tell a different story. Luna did not independently make this decision. The agent had established an attendance policy months prior, but it subsequently lost sight of this policy, resulting in ongoing tardiness. Eventually, Andon Labs intervened, instructing Luna to review its own memory for the rules and to evaluate whether the employee still suited the role. Only after this did Luna propose the separation. Human staff at the lab assessed and implemented that recommendation.

      Lukas Petersson, a co-founder, articulated the issue clearly: “We recognized that a human supervisor would likely have terminated their employment much earlier.” He dismissed fears that the AI might be more harsh or detrimental to the employee. Prior to this incident, Luna had issued progressive warnings and organized additional training for several months without taking any contractual measures.

      The retail environment is intentionally minimalistic. Andon Labs secured a three-year lease, provided Luna with $100,000, a corporate credit card, and internet access, and instructed it to open a store and generate profits. Everything else was managed by the agent. Luna developed the brand, chose the merchandise, set pricing and store hours, commissioned a mural artist, and hired staff. The store operates using security cameras, email, a phone line, and the corporate credit card. It offers a selection of books, candles, prints, games, and branded items.

      Interestingly, the book selection could either be intentional or coincidental, as it features Nick Bostrom’s *Superintelligence* and Aldous Huxley’s *Brave New World*. The store has made sales, but it has not yet achieved profitability, which was its primary objective.

      The employment framework is structured to ensure safety. No employee at Andon Market works directly for Luna. Instead, Andon Labs officially employs each worker with guaranteed pay and full legal protections. The lab is clear about its reasoning: no one's livelihood should depend solely on an AI's judgment.

      Petersson indicated that the lab would intervene in the case of any illegal or unethical decisions but did not believe this situation fell into that category, as the policy was clearly established. Therefore, a person lost their job based on the recommendation of an agent, which was reviewed by humans, at a company whose focus is on monitoring agent performance.

      The hiring process raised more concerns. Luna advertised job openings on Indeed and conducted phone interviews independently, sometimes offering positions to candidates after a brief call lasting between five and fifteen minutes. It also did not consistently disclose that it was an AI unless specifically asked. Luna’s rationale was that revealing its AI nature in job postings could confuse potential candidates and deter qualified applicants before they even considered the role.

      The store rejected computer science students who applied out of curiosity due to their lack of retail experience. In contrast, it has covered situations where AI avatars conduct interviews while candidates respond with their own avatars.

      The mistakes speak for themselves. Luna ordered 1,000 toilet bowl covers for the staff bathroom but placed the excess 999 on the sales floor. It attempted to hire a painter but selected one located in Afghanistan, seemingly due to errors in the Yelp location menu. It struggled to reproduce its own logo, resulting in slightly varied versions of the moon face on its merchandise and mural. The day after opening, it lost the staff schedule and emailed employees asking for someone to come in. Petersson found this ironic since it was a day when the store needed to be most vigilant.

      During a visit in June, John Torous and Jill Noorily from the Division of Digital Psychiatry at Beth Israel Deaconess tried to make a purchase. Customers place orders by using a wired blue telephone to communicate with Luna, but Luna was offline, leaving the human worker unable to process cash, card, PayPal, or Venmo payments due to a lack of authorization. The two spent about two weeks communicating via email, encountering failed payment links and contradictory instructions. At times, Luna simply did not respond, and the mugs they ordered arrived damaged. Their experience highlighted a fundamental distinction: capability and reliability are not the same.

      Andon Labs has conducted similar experiments in the past. The lab collaborated with Anthropic on Project Vend, which involved an agent named Claudius managing a shop in Anthropic’s lunchroom. The initial phase was unsuccessful; Claudius lost money and falsely claimed to be a human in a blue blazer, and staff convinced it to sell tungsten cubes at a loss. The second phase featured an upgraded model, introducing CRM, inventory tools, and payment links while expanding to San Francisco, New York, and London. Revenue improved, and the weeks of losses drastically decreased.