AI gains will fuel competition as well as efficiency

Transcript

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

1. 38:56

   Super interesting. And then, you know, a lot of what the labs are saying right now is, you know, we're not going to be hiring engineers in the future. Like, uh, there's this big take from the heads of the labs that they're going to reduce their own head count. You know, uh, Sierra seems to be growing. Like, uh, there seems to be a lot of people that you're hiring. Uh, like, um, you know, it seems like you're still hiring a bunch of software engineers and salespeople. Like it seems to me from the outside in that you're building a high growth company and staffing it with the resources that I would have seen for any company growing of this size? Square that. I think it's a correct critique. Yeah, I always laugh. Like if you look at Anthropic and OpenAI, they don't look that different than a high growth

2. 39:47

   company that preceded it, I would argue. Sam and Dario might disagree, but they're not fundamentally different. It's hard to know, though, because on the other hand, OpenAI's revenue scale is truly unprecedented. And there's no way to A-B test what you would have needed, you know, preceding it. So maybe that's an unfair comparison. I think one of the things just to state it is these coding agents have only gotten this level of quality literally over the past few months. So these companies have been built over the past years, not months.

3. 40:22

   And so one of the, I think the, perhaps an interesting question to ask is with the current technology, what shape would you want your company to be maybe, uh, as a proportion of your revenue or users or whatever the right, you know, uh, proportionality might be. And I think one could argue that if you project out the skillset, you may want a different shape in the future. So one reason may be that actually we just hadn't gotten to the point where the kind a new shape of the company were really possible. But for the smart leaders of these labs, they're projecting forward. And it might be right. Going back to my, you know, bank teller example, though, you know, when the banks automated distributing cash with an ATM, they decided to keep their branches and keep employees in those branches, but have them do higher value things. And so

4. 41:17

   we live in a well hopefully in a free market that's very competitive and so uh clearly the people who are software engineers won't be doing they're already not doing the same things as they were a year ago like they're operating you know clod and codex not typing and just nine months ago they were in cursor and like nine months before that they were in vs code so like every you know it's it's incredible how rapidly it changes but will you want the same number of people, I don't know, the way I'd answer that question is, does having more people enable you to gain more market share than your competitors? And if the answer is yes, I think the answer will be yes, because you don't just like recoup efficiencies in your business and pass them on to shareholders, because every one of your competitors has access to the exact same technology.

5. 42:02

   And so what's going to happen is the second order of fact is, if you assume every company in a market has access to this technology, which is truly democratizing. What does every company do with that new higher leverage operating model? And that's what's exciting about it. And this is why I find a lot of people's projections about jobs to be simplistic, because let's just take the mobile phone market in the United States. So you have Verizon, T-Mobile, AT&T, all fighting for the same, how many mobile subscribers are in the US?

6. 42:37

   I don't know, 300 million? I don't know what it is. It's a fixed pie. So like, you know, just assume all of them have access to the same AI technology to improve their business. Well, then the question is like, okay, they're not going to pass that on as cost savings. I mean, they can, but if one of them lowers prices, the other one will have to lower prices. If one of them finds a new interesting channel for customer acquisition, the other person will.

7. 43:00

   And so I think the key in all of this processes in a competitive market with a technology like this, everyone's going to absorb the impacts of the technology and then compete. It's a little bit like, to some degree, if we went back to 1995 and I were trying to sell you the prospect of making a website, and I said, if you make this website, you'll be able to do X and Y and Z. And if I ended that way, then none of your competitors will do that. It would be a lie. In fact, for the benefit of hindsight, the correct sales pit for a website is you should build a website x y and z because if you don't all of your competitors will and here's what's going to happen to your business which will be not have access to these new digital channels and search and you know all the other like demand generation all these things and all

8. 43:49

   of a sudden it becomes an imperative so that's kind of how i view ai is it's sort of a strategic opportunity but it's actually more of an imperative if every software company in the world can produce software to marginal cost, it's like much lower than you can, you're at a disadvantage. And I think because everyone is going to do it, it's going to play out in the second order effect is where all the job creation will be, but also the interesting competition. And it's fascinating. And I think it's very hard to imagine just because, you know, if people knew people would be doing it already, it's like you kind of need this to wash over the market and then, you know, have these companies compete. And I think it will surprise us what comes of that competition. When you think about