AI can lower software prices while expanding software demand

Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

1. 31:15

   other big piece here that might be a bigger threat, Sachs, is the deflationary nature of this AI, the super intelligence, rather, movement. We talked last week about people decompiling Photoshop going to zero. Now, this week, Hood Warfare came out. It's basically people are making platform level games for five bucks. It's so deflationary. There's an 11 labs competitor that came out that's incredibly cheap. And then every single open source model being hosted and Elon saying, hey, we'll just route you with our orchestration level to the best model, open source or not. How big of a headwind do you think that?

2. 32:00

   as sacks to our industry, just the commodification and how rapidly things are just having 90% of the value removed from them. And is that going to stop or is it going to accelerate? It feels to me like the deflationary nature of this software, AI, superintelligence is unique and different than anything we've ever seen. People are just able to rip and ship code so fast. It makes me wonder, like, what is the margin of software in the future? Well, we want everyone to be able to create software, especially bespoke software, which is really this new category, right? That is going to be a huge driver of productivity throughout the economy. I mean, it's not all just like zero-sum games or disruption. The value of these coding assistants is that now you can create software for highly bespoke use cases, whereas software used to be created really just

3. 32:54

   for the mass market. I mean, the reason why Photoshop is a successful product is there's a lot of graphic designers who need to use that product. And really, the only software that could ever get created in the past was when there was a large potential customer base for that. Now we're getting all these cases where enterprises can create software just for their particular use cases. And in fact, in a way, that's what agents are, is that they're bespoke software programs to solve a particular task.

4. 33:20

   But if people build those in-house sacks and they're based on open source, you don't need the other piece of software that it's replacing. So isn't that extremely deflationary? Maybe there's some substitution away from established software. But I think the important point is just there's this vast new category of software being created. I mean, the amount of code that's being created now is orders of magnitude already bigger than it was before Coding Assistant.

5. 33:49

   So again, people just tend to think in terms of these zero-sum games and who's going to be wiped out or eliminated. But the really important trend here is just that there's going to be a lot more software created in the world for a lot more of these bespoke use cases. Enterprises are now able to create software for a much broader array of purposes. There's companies that never would have been software companies before that are now creating their own software.

6. 34:11

   And they're hiring coders basically to manage the process. By the way, I think this is a really important point around. Remember with the whole jobs apocalypse, the first job category that predictors of the apocalypse we're saying would be eliminated were software coders, obviously. Then everybody became a developer and now everybody's shipping code. Now we're seeing that actually demand for coders is increasing, even though 95% of the code is written by coding assistants. And the reason for that again is, well, first of all, you still have that 5% and that 5% is of a much bigger pie and you still need someone who could look under the hood and manage the whole process and they need to be somewhat technical. And maintain it, right?

7. 34:47

   They have to maintain it. So the maintenance. So in any event, look, I think this whole, you could say new category of bespoke software created by the proliferation of coding assistants and agents and all of that is just, I think it's going to be just a huge driver of productivity throughout the economy. And is that broadly deflationary? Probably in a good way, because it means that we can do more with less and we need to burn prices down. Certainly great for the country right that everybody is going to be more productive ben but do you worry about our industry the venture industry uh and we have these great hits and then the second they become a hit somebody can decompile it create a competitor and ship it very quickly it feels distinctly different in this uh you know um boom to previous ones so do you think this is going to be a challenge for us to

8. 35:42

   get dpi for our lps um is this going to be a challenge for the sustainability of great software franchises ben i i can yeah look i i don't i don't think so like this has been the ongoing starting with the sasspocalypse yes but i think that david david's right is that what's happening is prices software prices will definitely go down um but the amount of software is going way way up it's the it's the jevons paradox of software uh and you know these companies end up doing other things more than just the software so we had this on the internet the internet information is going to be free that's it all these industries are dead but they kind of re-emerged in a different way um and i think that that's very likely what's going to happen so from a startup's point of view you've got to evolve um and so you know 11 labs does many many

9. 36:47

   things to make their product better over the years since that's the example that you brought up and they've got like licensing agreement like burt reynolds will read you a book or this and that and the third um so they're doing more than just software um because they can because the software is easier to write the model they're training on very very very nuanced cases which is why you know movie dubbing is so amazing now where it sounds like they're just acting in a different language um so there's more to it than just you know speech to text or this and that um and you know those so So I think the products are going to have to get way better and the startups products will have to get way better, which is amazing for everybody.

10. 37:28

    And then that's where the value will be. But yeah, just like writing software is not going to have any more value than like publishing a magazine. So it's creating massive competition. Yeah. Yeah. The most will change.