AI will pressure generic software and reward distinctive tools

Transcript

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

1. 24:23

   There's a line of thinking that says, hey, now that the switching costs, or now that AI is here, the switching costs are very low. There's no code moat. There's no data moat. There's no UI moat. And there's a set of SaaS companies that are on the conveyor belt on the way to the guilty. And maybe it's monday.com first and maybe it's Atlassian and companies that aren't systems record. And then maybe it's coming for them too.

2. 24:46

   There are a lot of people who say, hey, you're not going to vibe code Atlassian, you're not going to vibe code these incredible products with all these integrations and all these distribution, et cetera. What say you in the SaaS apocalypse? How do you make sense of it? I think both things are true. So I would give you a different rubric to think about it, which is what software is really fundamentally about beta and what software is about alpha?

3. 25:09

   And I think that the software that's about beta is going to really struggle. This is software that made you more similar to everyone else. And this has been my historical critique of the software industrial complex, which is that the feedback loop for the people building the software is, can I sell it? Not did it add value, which is downstream of can you sell it? And so you can think of almost like vibe coding, the advent of AI, it allows you to make software that's specific to you. It's inherently alpha focused if you do it right. But so I think that the platforms that are already focused on alpha are going to continue to have an advantage.

4. 25:47

   It's like actually going to be a wind that fills their sail up. On the other side, the stuff that's all beta is really going to struggle. And you can almost argue like maybe the beta wasn't that valuable to begin with. One of the jarring moments for me was in COVID. If you really look back at what were CEOs talking about in their earnings calls about software, no one talked about the $5 billion ERP implementation they did that saved their supply chain because all of them fell over like paper tigers in two weeks.

5. 26:17

   and what they were talking about was Zoom and Teams and how that enabled them to go remote. And you cannot think of, like, that's crazy. That should have been a Sputnik moment for the software industry to say, wow, we haven't built shit that's valuable. How depressing. And on the flip side for us, at least, COVID was a huge tailwind because it's specifically because we were able to help our customers adapt to this reality at the speed of the disruption.

6. 26:47

   I think it kind of separated the wheat from the chaff. And I think we'll kind of see that, you know, maybe there's a lot of things we've been spending on almost mimetically, like, well, other people use it for this. This is a standard industry solution for X. Those things are going to feel a lot of pressure. And on the flip side, they're going to be software. It's almost like a toolkit, an approach that allows you to express how you're more different than other companies.

7. 27:09

   It's almost become software that allows you to express your competitive advantage. Your strategy is going to be a premium. On the day two stuff, like vibe coding, you can't do it. I think that's actually true. Like, I think it's actually true that day two is much harder. A lot of it's unsolved, and you're going to have to figure that out. But I don't think that's going to preclude the pressure on the beta, on the beta software.

8. 27:29

   Yeah. In terms of accruing value,