Real Alpha
Watch modeSubscribed

Training Data · 3 min · May 4, 2026

AI weakens some software moats but strengthens others

Boris Cherny argues AI reduces the value of switching costs and process power, while network effects and scale still matter. He expects AI-native startups to challenge incumbents at far greater scale.

Boris Cherny

Boris Cherny is creator of Claude Code at Anthropic.

  • LR

    Lauren Reeder, Host · Partner, Sequoia

About this segment

Boris Cherny argues AI reduces the value of switching costs and process power, while network effects and scale still matter. He expects AI-native startups to challenge incumbents at far greater scale.

From “Anthropic's Boris Cherny: Why Coding Is Solved, and What Comes Next”, May 4, 2026. Watch the full episode

Answers “Is SaaS dead?” See all 7 answers

“I think what's going to happen is because of AI, some of these moats are going to get more important and some are going to get less important.”
Boris Chernyat 11:23 · Training Data11:23

Takeaways

  1. Switching costs may fall as models make it easier to move between products.
  2. He sees process power as more vulnerable to AI.
  3. AI-native startups can avoid the internal resistance facing incumbents.

In this episode

Full episode
  1. 5:04Coding is solved for the code Boris writes3:42

  2. 10:22AI weakens some software moats but strengthens others2:34

  3. 14:57Software could become as ordinary as reading and writing2:25Up next
  4. 3 more moments in the full episode

Transcript

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

  1. 10:26

    So we talked a bit about what's changing with coding. I'm curious about what you see changing in the world of software or software products. I think as we see AI making writing code 10 or 100x cheaper, what happens to the value of the products that are produced with software? Do we have a Saspocalypse on our hands? How do you think this plays out? And again, you're going to have to make another prediction.

  2. 10:48

    The Saspocalypse question is my favorite question. I think there's two things that are going to happen. And I don't think either of them is the thing that people have been talking about. I think one is, is anyone here an acquired listener, like the acquired podcast? Yeah, it's like the best podcast. I actually, I got to do an Unplugged with them the other week. And I just, I felt like I got to like meet my heroes because they're just like the hosts are the best.

  3. 11:19

    So they have this idea of seven powers. And this is like Hamilton, he kind of wrote, he wrote a book about this. And this is kind of the seven moats in business. And I think what's going to happen is because of AI, some of these moats are going to get more important and some are going to get less important. And so, like, for example, one that gets less important is switching costs because you can just use the model and you can kind of port from one thing to a different thing.

  4. 11:41

    Another one that gets less important is process power. Because for companies whose moat is like workflows and process and things like this, Quad is getting really good at figuring out process. And especially with 4.7, it can just hill climb anything. So if you give it a target and you tell it to iterate until it's done, it'll just do it. I think this is the first model like that. So I think these are going to get less important, but I think the previous modes actually still matter.

  5. 12:05

    So this is like network effects, scale economies, cornered resources, things like that. These are not really changing with AI. I think the second thing is if you look at the number of startups today or maybe in the past 10 years, I think the number of startups in the next 10 years that are just going to disrupt everything is going to increase like 10x because right now you can be a tiny startup you could build a thing that's as valuable as a large company and you We can actually compete head-to-head. Because the large company has to evolve their business process. They have to evolve the way they work. They have to retrain everyone to use technology. They're going to face a lot of internal resistance to that. But, you know, no one here has that problem. If you're starting fresh, then you can kind of build with AI natively from the ground up. So, I don't know. I think it's the best time to build. It's the best time to be a startup. There's so much disruption coming.