I've written a slightly related piece of code (not in Perl). It was a patch for bash with which you can display the working directory in the prompt abbreviated, but so that the abbreviation is still unique (unless the file system has changed since the abbrev is computed).

More information here: http://www.math.bme.hu/~ambrus/pu/compact-pwd

However, this one creates abbreviations a different way, from A A Milne and A A Milner, it will print A and Ar resp.

(I originally wrote this patch because of the silly long directory names of Mathematica.)