Cognition CEO Scott Wu on Acquiring Windsurf: The Process, The Deal, The Rationale

1. 0:00 – 1:02

   Intro

   1. SWScott Wu0:00

      But I think there's an unspoken covenant that, as a founder, you go down with the ship. And I think that, uh, for better or for worse, it's changed a bit over the last year, and I- and I think it's a bit disappointing, to be honest. I think there's some real truth to your point that often there are actually a- a lot of really valuable pieces that get left behind.

   2. HSHarry Stebbings0:14

      The only thing that anyone wants to talk about this week is Cognition buying Windsurf. We unpack it all today with Scott Wu, co-founder and CEO at Cognition.

   3. SWScott Wu0:23

      In AI code, to be truly honest, if there was zero progress, the world would still be entirely different.

   4. HSHarry Stebbings0:30

      Ready to go? (instrumental music plays) Scott, I am so excited for this, dude. I was literally just telling you, it is a cool prep when you get to call up, like, Vinod Kosler, uh, Joe Lonsdale, and you call them and you're like, "Hey, what should I ask?" And they're just like, "Ah, I love this guy." Um, so thank you so much for joining me.

   5. SWScott Wu0:59

      Yeah, thanks for having me. It's, uh, it's been a crazy few days for us

2. 1:02 – 7:19

   How did Cognition pull off the $220M Windsurf deal in just 72 hours?

   1. SWScott Wu1:02

      all. (laughs)

   2. HSHarry Stebbings1:02

      It's been pretty insane. I just want to start, a- and we're gonna start, like, at present day and work our way around.

   3. SWScott Wu1:10

      Yeah.

   4. HSHarry Stebbings1:10

      But I just want to start with, like, how did you learn about the potential ability for you to acquire Windsurf, and how did that opportunity arise?

   5. SWScott Wu1:19

      We found out, honestly, on Friday, the same time everyone else did, that all of this was happening, and that this was the split, and that it was Google, and- and- and here's what happens next, and here's what happens with the team. And- and we were kind of talking about it, which is, you know, on the dev inside, I- I- I- I- I think in a few ways, it- it seems to be a pretty natural fit. One, because I think obviously there was an incredible, um, you know, team left behind. And if anything, I think the, um, you know, what- what we have at Cognition, I would say, is- is es- especially focused on the- the core engineering and product team. Whereas, obviously, like, um, you know, I think Windsurf has built an amazing, um, go to market team, um, you know, marketing team, finance, operations. Uh, and then similarly, in terms of the products, you know, we found that actually it was- there was a very naturally complementary lean. Um, and so we reached out cold, um, uh, Friday evening. A- and our first conversation was Friday night, and, uh, and- and it was, I mean, I- I'm glad I- I- I-

   6. HSHarry Stebbings2:14

      So you knew this was gonna happen.

   7. SWScott Wu2:14

      (laughs)

   8. HSHarry Stebbings2:14

      Just- just take me to it, then. You reach out to Jeff-

   9. SWScott Wu2:16

      Yeah.

   10. HSHarry Stebbings2:16

       ... and you're like, "Hey, figure something is going down. Should we jump on a call?"

   11. SWScott Wu2:20

       Yeah, yeah. And so I- I mean, we basically said, "Look, it's, uh, (laughs) it seems like there's enough here that it's- it's worth having the conversation and talking about it." We got on the call together. We were talking about, um, um, you know, the ways to partner and what things would look like, and I think what we came to pretty quickly, um, you know, I- I- I always think about these things in terms of, uh, call it, like, what- what is the- what- what is the correct way that things should happen here, right? Um, and- and I think from Windsurf's perspective, the way that- that- that- that we kind of saw it was, well, you know, you could talk about the, um, the- the- the product, the team, and the business, right? Um, and- and what is the right thing for each of those? And I think for the business, the thing that ha- that you have to call it is sooner, the better. You could do this and you could have, like, you know, months of diligence and everything, and obviously that has apparently happened multiple times already, you know, in- in Windsurf's company history. And I think in this particular case, eh, I- I think it's, look, it's- it's everyone is scrambling, you know? All- all the customers want to know what's going on. The whole team is- wants to know what's going on. Everyone in Silicon Valley is reaching out to them saying, "Hey," like, "I- I heard the news, you know, you want to come interview here." Um, and- and so, you know, we kind of just came to this conclusion, look, a- a month long is- is not the way to do this, even like a week long, you know? It's- it's- it is Friday night now. We want to have something ready to go by Monday. I'll- I'll pause because it sounds like you have a- you have a question, yeah, yeah.

   12. HSHarry Stebbings3:42

       What I'm just like intrigued, when you look at, like, scale, it's like-

   13. SWScott Wu3:45

       Yeah.

   14. HSHarry Stebbings3:45

       ... you know, there's a husk left behind which kind of deteriorates, and you're seeing that deteriorate in real time. Why did you believe that this was inherently different and that the husk was not a husk, it was actually a-

   15. SWScott Wu3:57

       Yeah.

   16. HSHarry Stebbings3:57

       ... treasure chest of value in a way that was different scale?

   17. SWScott Wu4:00

       Yeah. Yeah, so there is definitely this conversation online, right, about, oh, like all the best, you know, uh, all- all the best researchers left and- and there's just nothing- nothing left behind. And I- I- I- we were, you know, I- I- I don't think so, is basically how we felt about that. And- and we looked at it and I mean, it's, look, it's here's- here's- here's the thing, right? Is- is it's an amazing product that- that a lot of people use. Um, it's the entirety of the customer book as well, right? Um, it's- it's all of the code, um, a lot of the data and the proprietary IP, and then obviously it's a- it's a really incredible team. Um, and- and so it's an interesting, you know, I- I think it's an interesting state in the sense that you could call it perhaps like a somewhat incomplete piece. But- but I- I think that, uh, I mean, as it turns out for us, I mean, (laughs) we- we had the very nice complement of what were the pieces that were needed, right? Um, in order to go and do this.

   18. HSHarry Stebbings4:51

       Those pieces are the rationale that lead to the decision. How do you actually execute it? Like literally, how does that work in process?

   19. SWScott Wu4:59

       Yeah, yeah, for sure. So- so- so we came to them and- and we said, "Look, I- I think there's a very natural partnership here. I think that the team pieces are very complementary. I think there's a lot we can do on the product." The- the thing that just seems, you know, absolutely clear from both of our sides is if we're gonna do something, we want to be ready to do this and announce it by Monday morning. You know? It's- it kind of reminds me of like- like, you know, the- the bank goes into receivership Friday night, you got to have an answer, you know, by- by Sunday and by Monday morning, right? And- and- and I- I- I think we thought of this as a similar situation, which is, look, there's- there's a ton of value here, but- but everyone's wondering what's going on and we need to be able to give them a clear answer as soon as possible that, look, we- we are gonna do this. We're gonna support, you know, the product, we're gonna, we're gonna make sure thing- everything's going smoothly and running smoothly and so on. And, um, and- and so that's what we came to, and- and we gave them, you know, our- our- our honest take of like, here- here's what we think we can do together. Um, it's, you know, we- we- we are not gonna have time to- to get to go, like, as deep into the diligence and details as we would like to, but- but I think at a high level, we- we at least, you know, I think are in a position to understand the business very well. And- and let's just figure out if, you know, like get- get to a verbal agreement on Saturday.... hash out all the details and the terms and the legal on Sunday, get everything signed and done on Monday morning, and then we're ready to announce. Like, that's, it's, it's, there, there's- there's no other way, you know, to- to make this work out. And- and- and Jeff and Graham and Kevin and- and- and the whole crew, honestly, like, I mean, it's, uh, huge shout-outs to them because they really, the- they really worked around the clock for- for their team. So, um, and it's- it's-

   20. HSHarry Stebbings6:33

       Can I ask a follow-up question?

   21. SWScott Wu6:33

       ... now we get to do this all together, right?

   22. HSHarry Stebbings6:36

       W- were they left in the lurch by this deal?

   23. SWScott Wu6:39

       What's that?

   24. HSHarry Stebbings6:40

       Were they left in the lurch by this deal? Are they kind of in-

   25. SWScott Wu6:42

       Oh, I see. So, yeah, so- so I think they had known about the, um, I- I think they had known about the previous, uh, thing, you know, maybe a few days in advance. Um, um, it- it- it was not a ton of, uh, advanced notice, and- and- and I think they were honestly really thoughtful with- with how they went about it, which is, "Look, uh, here are the options. We can operate as an independent company, you know. We can go and raise a new round of venture capital, now that there are actually no investors. Or- or we can find someone who we think are gonna be the right partners to work with. But either way, you know, it's gonna be, we're gonna have to do this quickly, and we're gonna have to- to- to figure out what we think is the right long-term

3. 7:19 – 9:47

   Did Google overlook a goldmine in the Windsurf team and IP?

   1. SWScott Wu7:19

      fit for it."

   2. HSHarry Stebbings7:20

      I think most people see this as a really epic deal make from you, respectfully. And I mean, total hat tip and respect to you for it. The question that I have is, and actually I think it was Ruchi at- at South Park who asked this, but she said, "Was this a Google blunder by leaving such a valuable asset up for grabs and not seeing the true value also in the asset?"

   3. SWScott Wu7:43

      I think there's some real truth to your point, that, uh, often there are actually a lot of really valuable pieces that- that- that get left behind. Um, and so... (laughs)

   4. HSHarry Stebbings7:53

      Can I ask you, given that you've been through this deal structure that's different and novel-

   5. SWScott Wu7:58

      Yeah.

   6. HSHarry Stebbings7:58

      ... do you think this becomes a new norm for how companies are har- acquired and how people join companies today?

   7. SWScott Wu8:04

      I think there's an unspoken covenant that, as a founder, you go down with the ship, you know. Uh, and- and I think that, uh, for- for better or for worse, it's- it's- it's- it's changed a bit over the last year, and I- and I think it's a bit disappointing, to be honest.

   8. HSHarry Stebbings8:17

      Is the talent war getting a little bit out of hand? When you look at Meta's hiring spree and just how much-

   9. SWScott Wu8:24

      Yeah.

   10. HSHarry Stebbings8:24

       ... more. Is it getting out of hand?

   11. SWScott Wu8:26

       Yeah. You know, I- I- I'll give my, um, maybe crazy opinion, controversial opinion, but I actually think it's- it's- it's- it's quite reasonable (laughs) is- is my view. And- and the reason I say that is because I think AI, I- I think we are truly on the cusp of the greatest technology shift in our lives. Um, you know, I- I think that's already clear, uh, and I think it's just... You know, crazy thing is, even if you froze all the capabilities today, you know, and then the question was just, you know, if you said that there were no new research breakthroughs, no new discoveries, you know, you don't even have to bet on that, and you just said, "All right, we're gonna, you know, grow products and- and figure out how to build the right experiences and- and get those out to users and- and- and, you know, meet- meet users where they are in all of these different verticals all over the world," I think it would still be the biggest thing. You know, I- I think the biggest thing, uh, in my mind, the biggest technology shift in our lives has been the internet. Um, you know, I think there are some others which are obviously pretty massive as well, the mobile phone, the personal computer, and so on. Um, but- but yeah, you know, I- I think even if you froze all the capabilities today, I think AI already would be bigger than that. And the thing that's crazy about AI... And- and by the way, I don't think it's gonna freeze. I think it's gonna kee- keep (laughs) moving even faster. Uh, but the crazy thing about AI is there really are so few people that are dr- really just determining the trajectory of AI. But I think in aggregate, I- I- I think the view is right, which is, you know, there's so few people at Meta.

   12. HSHarry Stebbings9:46

       I- can I- can I interrupt

4. 9:47 – 10:40

   Who are the 100 people that secretly shape the future of AI?

   1. HSHarry Stebbings9:47

      you?

   2. SWScott Wu9:47

      Yeah.

   3. HSHarry Stebbings9:47

      Is-

   4. SWScott Wu9:48

      Yeah.

   5. HSHarry Stebbings9:48

      I'm so sorry. I totally agree in terms of what...

   6. SWScott Wu9:50

      Yeah.

   7. HSHarry Stebbings9:50

      Is it, like, 100? Is it, like, 10,000? Just what quantum is it?

   8. SWScott Wu9:55

      Yeah. It's a great question. Um, somewhere in between those two is right, you know. I- I think there are at least 100 folks that- that- that- that are, that really matter in making a lot- a lot of difference. There's certainly less than 10,000, and- and probably a good bit less than that, if I had to guess.

   9. HSHarry Stebbings10:10

      Uh, okay, so we've got, like, 100 to 1,000 as kind of a range there. Do you need those people-

   10. SWScott Wu10:16

       Mm-hmm.

   11. HSHarry Stebbings10:16

       ... unless you're working on the most cutting-edge frontier models? If you're in the application layer, which is-

   12. SWScott Wu10:23

       Yeah.

   13. HSHarry Stebbings10:23

       ... very hard and not .......................... But, like, do you need them if you're in the application layer?

   14. SWScott Wu10:28

       I think the level of talent and the fierceness of competition is, i- i- in many of these, is actually, like, greater even in the application layer, which is crazy to say because I think the competition at Foundation Labs is extremely strong.

5. 10:40 – 16:56

   Can Apps Compete with Model Giants?

   1. SWScott Wu10:40

   2. HSHarry Stebbings10:40

      When- when you think like, "Holy shit, anything can happen," style, which it is today... One of the, like, "oh, shits" that could happen that's very obvious to, I think, me and everyone is, like, the dependency now around Anthropic. You know, obviously Windsurf, you know, when I had Varun on the show, you know, they were very much reliant on them then, and then they got cut off when the OpenAI deal was done. Is the reliance on Anthropic greater than it's ever been?

   3. SWScott Wu11:05

      Yeah. I mean, look, we- we're- we work very closely with Anthropic. I- I- I think Anthropic is a great company and- and, you know, I- I think the Foundation Labs in general are- are great companies. People always ask this question about, you know, where does the value accrue in AI? Does it, you know, is- is it chips? Is it semiconductors? Is it, um, you know, Foundation Models, the application layer, it's the info layer? And- and I- I think the boring but true answer is, it accrues wherever you are able to establish real differentiation in your space. Um, and I think there will be a lot of spaces for which that's the case. And to, you know, to be honest, I- I think the Foundation Labs' businesses will do extremely well. Right? But- but I- I think the thing that we own is, um, a- and that we spend all of our time on, I think is a- is- is actually a nicely complementary piece, which is in some ways really thinking about how to best optimize for very particular capabilities within software engineering and how to deliver, um, and- and ship, like, a- a really great product experience around that. Right?

   4. HSHarry Stebbings12:01

      Do you not want, though, the developer products for these foundation models to commoditize because then you gain leverage? If Anthropics and Claude continues to be so much better than it is, that leverage is gone. Do you not want that commoditization?

   5. SWScott Wu12:17

      Yeah. Yeah. Look, I, I mean, I think it's, uh, it's to be honest, I, I mean, I think whether we want it or not, it seems like fo- folks are, folks are pushing ahead in the foundation model space and making a ton of progress. We've seen a lot of launches even in the last, you know, week or two, right? I mean, there's KeyMe and Grok and, um, a- a- a- and a ton of great progress that's been happening. A- and I think that is the natural way of things, um, which is, you know, there will be competition in, in that layer. And I think some folks will, you know, especially in particular verticals and use cases, be able to establish differentiation, and there will be competition in our layer, and in some folks will be able to establish differentiation. A- as this equilibrium develops, you know, I- I think it is just naturally the case that, that, that folks in these layers want to collaborate, um, you know, and, and figure out the right ways to work together, as long as that, that, that holds.

   6. HSHarry Stebbings13:02

      Why would Anthropic want to collaborate when they could just own it? Sorry, I'm, I'm a VC-

   7. SWScott Wu13:07

      Yeah.

   8. HSHarry Stebbings13:07

      ... so I'm naīve.

   9. SWScott Wu13:08

      No, no, of course, of course. I love it. Have the all, hitting me with all the hard questions. Look, I, I, I think the answer, at the end of the day, is what we focus on is very, very different, right? And, and, and, and the, the, the kinds of questions that we think about, for example, on, on both the Devin or the Windsurf side, by the way, is, is really just like how should humans and AI work together to produce code? It's, it's one thing to just kind of like solve for generally smarter and smarter base models. It's another thing to teach your specific model, "All right. Here's, here's how to go, you know, to Datadog and pull up logs for this thing, and here's how you, um, you know, debug a front end live, and here's what the, the, here's a representation of the code base, which we're learning and iterating over time," and so on. And I, I think at the end of the day, there's, the- there's, there are a lot of different verticals to work in and to solve for. I, I think we have parts of this equation, and, and I think the foundation labs have parts of this equation, but I think the truth is, you really need both.

   10. HSHarry Stebbings14:02

       You prefaced that one with, "You can ask the hard questions," so fuck it.

   11. SWScott Wu14:06

       Yeah.

   12. HSHarry Stebbings14:06

       It's, it's the end of the day in the UK, so I'm like-

   13. SWScott Wu14:08

       Yeah.

   14. HSHarry Stebbings14:08

       ... using that as an excuse. What percent of your revenue goes to Anthropic do you think? Ballpark?

   15. SWScott Wu14:14

       I, I, I have to pass on that one. (laughs)

   16. HSHarry Stebbings14:17

       (laughs) I love it. You, I d- it's like with children, you know? Where they'll push and they'll see how far they can go. (laughs)

   17. SWScott Wu14:25

       Yeah. (laughs)

   18. HSHarry Stebbings14:25

       When you speak about that progress and the incredible progress that we've seen, some think that it will take the same route as self-driving cars, where there is this kind of plateauing and then we'll see-

   19. SWScott Wu14:35

       Yeah.

   20. HSHarry Stebbings14:35

       ... again another inflection point. What gives you such confidence that we will see the continual progression in models that we've seen over the last 12 months over the next 36 months?

   21. SWScott Wu14:46

       Sure. Yeah. So d- I'll give you two thoughts there. The first thought is there's very strong signs of this continued progression, largely because, by the way, there's, there's a lot of specific work, which is you can call it research, you can call it engineering, you can call it infra, or, or whatever you like. But, but there's a lot which is roughly that we know the techniques and we have a lot more to do to go and scale those. You know, it's, it's RL, for example, is, I would say, the, the biggest breakthrough of the last year and a half, call it. Um, and it's, it's really amazing that, it's, it's crazy to think that you, you roughly can solve any benchmark. I mean, that is the, this, it is almost, it, it is, it s- it sounds insane to, to say, but that's, that's really what RL is converging on, right? Which is basically if you have a clean enough set of, "Here are exactly the behaviors that I want, here are the environments that you need to be able to operate in, here's what it means to succeed or fail," you can just train a model that does that. Uh, a- and, and naturally, that is just such a powerful capability, which I think is going to be applied to more and more spaces. And so I, I think we will see that progression. The other thought I would give, though, and, and I mean this tr- truly, sincerely, is, look, th- there are a lot of spaces, uh, you know, and a lot of different things going on in AI. In AI code, to be truly honest, if there was zero progress, you know, the, the world would still be entirely different, you know? I, I think there are a lot of spaces that, that are early today that you see AI making progress, it's getting better and better and you're going to the next step and the next step. In code, y- y- you are just slower as a software engineer if you're not using AI. Th- that is the truth a- and it is a no-brainer already today. And, and look, I think it will be more of a no-brainer, and I think we'll be able to make engineers even more efficient and, you know, be able to do even more with code. Um, but, but I, I think that is already the case.

   22. HSHarry Stebbings16:25

       So many things to unpack there, dude. Do you think tools like Devin and others make 1X engineers 10X engineers, or 10X engineers 100 engineers, uh, 100X engineers, if I were to put you in one camp?

   23. SWScott Wu16:39

       (laughs) Interesting. It actually, uh, really does depend tool by tool. I do think that the product experiences for the, you know, for, for the 1X, the 10X, and the 10X to 100X, or even, you know, the 0X to, to 1X, or, or whatever you wanna call it, you know, um, are, are, are, are somewhat different project experiences.

6. 16:56 – 22:53

   Unpacking AI’s Hidden Complexity

   1. SWScott Wu16:56

   2. HSHarry Stebbings16:56

      I've interviewed Benioff at Salesforce, I interviewed Vlad at Robinhood, both very recently, and they both said that 50% of their net new code is created by AI.

   3. SWScott Wu17:04

      Yeah.

   4. HSHarry Stebbings17:04

      Would you agree with that in what you see with your customers and peers, one? And then where will that be in three years time?

   5. SWScott Wu17:12

      Yeah. Yeah. Absolutely. So people, people often talk about the percent of code that's written. I, I think the, you know, the, the, the obvious thing to call out is, well, it's, it's a little odd because, for one, you have to, you have to factor in how important each line of code is, right? If it's just like a ton of proto buffs, then that's, you know, that's one thing versus, you know, a lot of the core business logic's another thing. And then two, of course, is, you know, written with the help of AI is one thing, but, but how much ... And so, so, uh, for, for those reasons, we often like to think about in terms of like how much faster is an engineer using all these tools? You know, an engineering using the best AI tools and, you know, who really understands how to get value out of them, how much are they doing in one hour versus how much they would do in one hour with no access to AI? And I would say that something in that range of, you know, 1.5 to 2X feels right to me today, uh, in aggregate. Look, I, I think in three years, there's no reason that shouldn't be a 10X. And, and I think it's, it's ... The, the thing that's really fun, by the way, is I think we're gonna have more than 10X more code. It's someth- something I, I've been saying recently is I, I, I, I, I, I keep track of every time in my daily life.... where software fails me. We've become conditioned to be okay with it, but the truth is, it happens all the time (laughs) , you know? I, I, and then it's... You, you think about products out there and, and, you know, the way, the way I, I like to say it is, you know, there, there are, I'd say this top tier of products which are in some sense like, I'll call them the, the best made products in the world, and I'm thinking of, like, YouTube, TikTok, Instagram, and so on. And you can really feel every little detail, um, that, that, that, that they've done with a ton of care. You know, it's the, they're streaming in tons and tons of data and it's always super efficient. It never goes down and it's super reliable. The algorithm basically knows you better than you know yourself. The UX is super intuitive. And that is like, you know, I, I, I don't know, call it like hundreds of millions of hours of engineering time, you know, that went into building that, that piece of software, right? And then you kind of go down to the next layer of, you know, the next order of magnitude of, of, of software that has tens of millions of, of, of, of hours spent, and then single digit millions and so on, you know. A- a- a- a- and you see the differences really quickly and I mean, when you're logging into your bank or when you's dealing with your healthcare, you know, you're working with your insurance and trying to get things going, or when you're trying to go and like, um, navigate your, your customer list or things like that. And, and, and the truth is, all the software can be 10X better, you know, and I think there actually is 10X more of it to write, and, and I think that's one of the fun things in, in code, right, is that it really does have this Jevons paradox.

   6. HSHarry Stebbings19:44

      When you think about that developer efficiency, what are agents not able to do today that they really need to be able to do?

   7. SWScott Wu19:50

      I think there is, um, a real point at which agents are truly able to take over ownership, I guess is how I would describe it, of, of the work that is, is, is done. And the way I kind of want to say it is like, look, I, I think in the future we all get to a point where you're not looking at your code, you know, you're looking at your product, right? A- and you're, you're looking at your product and at the end of the day, code, software engineering, this whole thing is just telling your computer what to do. And code is the language that your computer happens to speak and that's why we all have to learn how to write code in order to do it, right? But, but, but I think over time, yeah, you, you get to the point where you can just say, all right, yeah, like, this website, you know, let's, let's add a new tab here and, you know, let's put this, this and that information, and maybe let's go collect this, this info from the user and we'll save it in the database this way. And, you know, this button should be a little bit rounder. And, and you're just able to make those calls and make all those decisions. And, and I think we'll still call it programming, you know, but, but I think it's going to transition into being more of, like, a technical architect, a, a technical product manager, you know, someone who's really owning these decisions. And, and I think-

   8. HSHarry Stebbings20:52

      Mm.

   9. SWScott Wu20:53

      ... agents have to get to the point where they are basically that high touch and that kind of understanding of context that you can give them that level of instruction and they'll just go and do that.

   10. HSHarry Stebbings21:02

       In a world like that, what skills become more valuable-

   11. SWScott Wu21:06

       Yeah.

   12. HSHarry Stebbings21:06

       ... and what skills become less valuable?

   13. SWScott Wu21:08

       Everything that you, you do is going to be about essentially this, this kind of core thing of deciding what is the, the solution you're going to build, you know? What is the problem that we're facing? What is the solution that we want to build? How exactly do we want to architect that solution? And I think that's going to be the most important skill.

   14. HSHarry Stebbings21:22

       There are so many things I want to ask. I do-

   15. SWScott Wu21:24

       Yeah.

   16. HSHarry Stebbings21:24

       ... just want to go back before I forget it. You said about the one and a half X more efficient and more productive.

   17. SWScott Wu21:28

       Yeah.

   18. HSHarry Stebbings21:30

       Do you think we are struggling now in a value chasm gap? And what I mean by that is, how much do you charge for Devin today per seat, average?

   19. SWScott Wu21:39

       So it's all usage based but it, it's, it's essentially by the hour. Um, and, and we try to make things so that they're about 10X cheaper than, um, you know, than, than basically the value of your time. And going into-

   20. HSHarry Stebbings21:51

       Because if you think about, say, a software engineer being 300 grand a year, give or take.

   21. SWScott Wu21:56

       Yeah.

   22. HSHarry Stebbings21:56

       150K then would be that .5X that-

   23. SWScott Wu21:59

       Yeah.

   24. HSHarry Stebbings21:59

       ... you're adding.

   25. SWScott Wu22:01

       Yeah.

   26. HSHarry Stebbings22:01

       Are these tools going to be sufficiently paid for the value creation that they are enacting?

   27. SWScott Wu22:08

       Yeah. Yeah. Um, look, I, I think the value creation is a beautiful thing. (laughs) Um, and to this point, by the way, of, of where does the value accrue in AI that we were talking about earlier? There are 30 million software engineers in the world, you know, we're gonna make them all 10X more efficient over these coming years. We're gonna be writing 10X more code. We're gonna be doing a lot here. A- and I think that, you know, we could talk about whether it's 5% or 10% or 20% or 30% of, you know, the value that, that actually gets collected, um, by the companies doing this. But, but honestly I, I think that, that, that the highest order bid is actually less that and more about, um, just, you know, getting the technology and, and building the products to, to a point where, where everyone is, is, is going a lot faster

7. 22:53 – 26:51

   50% of new code is AI-written. Where does that go next?

   1. SWScott Wu22:53

      with them.

   2. HSHarry Stebbings22:53

      When you look at something that no one sees that everyone should see, when you think about the future of AI code and the future of software engineering, what does no one talk about that you think more people should be talking about?

   3. SWScott Wu23:06

      A focus on deeped (ph) context. It's already better than us, honestly, at these sandbox problems. A lot of the tough questions are, you know, that, that we answer today are things like, "Well, you know, there, there was this, uh, there's this project that we're trying to do today and it's very similar to what somebody else actually asked Devin a month ago, and how do we use that knowledge and kind of improve on that, um, in order to make Devin smarter?" Or there's these little things of like, you know, you, you want to go test the front end for, for your, your code base and make sure everything looks as expected. You know, you should be able to understand, like, what is that supposed to look like or why is this different from what... You know, if you find a bug, you should be able to understand, like, how you found the bug. And that's a lot of the little detail of, honestly, uh, uh, of, of what makes... I'll call it the difference between code and software engineering, right? Which is basically working in a large complex code base, building some intuition and some representation of all the different pieces and how they interact with each other. Learning how to use all the various tools at your disposal to, to actually understand what's going on and to, to debug and diagnose. Um, and I think that is actually the big problem, honestly, in AI coding, and I, I think that's, that's, that's the big thing that folks will work on next. The thing that's fun, by the way, it's a very practical problem, you know? And so it's a... You can call it a research problem. Obviously in many ways it is a research problem, um, in terms of like how, how to push for these capabilities and make these things better. But it's not the, not the kind of thing that you can solve in a sandbox. You know, it's the kind of thing that you actually really just need to think about the practicality of software engineering to, to, to get into.

   4. HSHarry Stebbings24:36

      You, you said there about kind of, hey, coding agents was what you saw before other people saw and what no one was discussing. It's a hard one and I, so I don't know how blunt I can be, but it felt like Devin fell out of the zeitgeist a bit, if we're honest. Uh, Cursor and Windsurf owned consumer attention and owned the brand. Do you think that was a case that Devin just wasn't very good at marketing or do you think that was like a product misstep?

   5. SWScott Wu25:01

      Yeah, so it's, it's funny because I, I think there's always an external perception and then there's a kind of internal what's actually going on with the numbers. And without going too much into detail, what I can say is that in the last six months, you know, between January and, and now, you know, uh, like even aside from this, you know, obviously the, the latest deal this week with Windsurf, um, the usage of Devin has actually grown something like 5 to 10X, um, and that's been the case in both self-serve and enterprise. Um, and it's, and so, it's been fun to see that, you know, it's like I, I, I think, I think the pattern for, for what it's worth is it's really, like, real engineering teams that bring on Devin and they, they tag Devin all the time in Slack, they tag Devin in Linear and so on. And, and they kind of, you know, use it and, and, and grow it and share it that way. And so in, in many ways, it is not the same kind of like, um, you know, single non-engineer just going and, and, and signing up for an account can immediately just, like, build something, like, really cool with it. Uh, people do use it that way, but it's not the majority of our usage, right? I think the majority is, is really just kind of like real teams using it. But, but I think the point that you're saying I think does get to, uh, I think an important thing, which is that, look, I- IDEs, um, and the IDE experience are obviously, you know, they, they came and, and they really started working, I think, about a year before, um, before the agent experience really did. You know, I, I kind of think of agents as having taken off in the last six months or so, and I think of IDEs as, you know, sometime last year, um, a- as when they really started to become kind of like no-brainer obvious, let's say, in terms of the, the value that they provided. And (clears throat) I think what we're kind of seeing is, is an artifact of that, uh, which is that, um, which is that, yeah, like, uh, fo- folks are more familiar with IDEs because they've been around for a while. I think you fast-forward six to 12 months from now, and I think people will be familiar with agents to the same level, um, that, that they are familiar with IDEs today.

8. 26:51 – 29:51

   “We’ve gone from 0 to $80M ARR in 6 months. Quietly.”

   1. SWScott Wu26:51

   2. HSHarry Stebbings26:51

      5 to 10X is, is mega. Um, it's fantastic. The hard thing is if you compare it to, like, a Replit or a Lovable-

   3. SWScott Wu27:00

      Yeah.

   4. HSHarry Stebbings27:00

      ... the growth is just fucking nuts. Like, I'm in Lovable, Scott, and I just look at the numbers and I'm like, "What? Like-"

   5. SWScott Wu27:08

      (laughs)

   6. HSHarry Stebbings27:08

      "... what? Now how does that work?" (laughs) Um, is that not a fair like-for-like comparison if you're thinking about growth rates?

   7. SWScott Wu27:17

      The reason I would say that it's not... Also but, but actually I, I don't even know the, the number. What are, what are their numbers over the last six months or what are th- their...

   8. HSHarry Stebbings27:24

      Uh, they've gone from basically zero to 80 million an hour.

   9. SWScott Wu27:28

      Yeah, look, I, I, I don't want to get into exact numbers, but even bef- with, with the Windsurf deal aside, like not including that at all, w- we are base- we've, we, we've done roughly that as well in the last six to eight months.

   10. HSHarry Stebbings27:40

       I stand corrected on my consumers' zeitgeist comment. Okay.

   11. SWScott Wu27:43

       (laughs)

   12. HSHarry Stebbings27:43

       All right.

   13. SWScott Wu27:43

       And, and th- th- which is, I, I think an important point to consider, which by the way, I think these are great companies and you know, I, I, I obviously, I, I think they're incredible. Uh-

   14. HSHarry Stebbings27:50

       But then, but then as a marketing problem, dude. I'm saying this to you as now, uh, you know, I hope we can be friends, so I'm projecting-

   15. SWScott Wu27:55

       Yeah.

   16. HSHarry Stebbings27:55

       ... forward this relationship. As a friend, I would say-

   17. SWScott Wu27:58

       Yeah.

   18. HSHarry Stebbings27:58

       ... you guys should be better at selling yourself.

   19. SWScott Wu28:01

       (laughs)

   20. HSHarry Stebbings28:01

       (laughs) Because that's not, that's great.

   21. SWScott Wu28:03

       Yeah. Well, perhaps we should be and, and you know, the great news is we've just now inherited a great marketing team (laughs)

   22. HSHarry Stebbings28:09

       (laughs)

   23. SWScott Wu28:09

       um, and we get to do that. Um, but, but, you know, the, the only thing I would call out, uh, like I, I know Andred from from, from Replit, you know, I, I, I've met a lot of these folks before. I think of it as actually quite different, um, um, products and businesses and so on, which to, to the point that we were saying earlier is, you know, there are a lot of things, uh, a lot of different product experiences that you can solve for in code, right? There's like bringing a 10X engineer to a 100X, there's a 1X engineer to 10X, there's, you know, someone who doesn't know how to code and bringing them to 1X. Um, and, and I think it is a, a bit of a different, um, for, for better or for worse, I, I, I think Replit and Lovable, to my understanding at least, are, are a much more consumery lean, right? And perhaps that's why you hear about them more on Twitter or on YouTube or things like that. Whereas Devin is really, you know, just, it's, it's, it, it can be, it can be anywhere from startups to some of the biggest companies in the world, but it is really focused on specifically engineers on engineering teams trying to do, um, to, to do their work and to go faster that way, right? And so, you know, you can see this in, in, in how this is all set up, right? Like most Devin sessions are started through, through Slack or through Linear and Devin makes these pull requests in GitHub that you go and review and merge. And Devin works with your whole, um, you know, your, your whole development system, right? And, and learns how to get onboarded to your repo and so on. And I think that's, that's kind of one difference there, but with that said, I, you know, point taken. I, I, I, I take the feedback. Yeah, I think it's a very fair point.

   24. HSHarry Stebbings29:33

       Dude, I'm always here to show you how to do a good tweet.

   25. SWScott Wu29:36

       Yeah.

   26. HSHarry Stebbings29:36

       Uh, after 10 years, I now know how to do a good tweet. That's all I know.

   27. SWScott Wu29:39

       You're the champion. I mean, you're, you're the master at it, I was going to say, so I... You know, after this, we'll talk and I want to get your tips. (laughs)

   28. HSHarry Stebbings29:45

       (laughs) Dude, honestly, I have so many for you with those numbers. I'm like, "Wow, dude, you need..." Yeah, anyway.

9. 29:51 – 35:37

   IDEs & Agents: Just Training Wheels?

   1. HSHarry Stebbings29:51

      Um, can I ask you, uh, my job as an investor also is to think about, like, market makeup at an end state-

   2. SWScott Wu29:56

      Yeah.

   3. HSHarry Stebbings29:56

      ... because that's where value kind of also kind of accrues in my mind. When you think about that and you think about, like, developer, where the market shakes out, is it that Cursor win bottoms up developer minds and Windsurf win and, and Cognition now win top-down, large enterprise, super solid blue chip clients? Is that how you think that developer market shapes up?

   4. SWScott Wu30:19

      So, I, I think the honest answer I would say is I think it's far too early to call on any of these. Um, and I think that the reason that I say that is because... I'll give you a hot take, which is none of us are that close to the future of software engineering. You know? And, and, and I think the future of software engineering is, uh, look, this is going to take place over the next couple years or so, but, but it really is this version where it is...It is not ju- you know, we talk, we call it an IDE or a coding agent or this or that. You know, these are the terms that we use. I think if we're being real about what we're building here and wha- wha- what this is all going towards, I think of this as the next generation of human-computer interface is the problem that's being solved here, right? Which is basically, as we said, code ...

   5. HSHarry Stebbings31:02

      Mm-hmm.

   6. SWScott Wu31:02

      ... software engineering, the whole point of that is just telling your computer what to do. At some point, telling your computer what to do is not gonna take place with code. It is going to take place with you just expressing your intent. And there are a lot of things, uh, uh, don't get me wrong, there are a lot of capabilities problems to solve to get there. There are a lot of, you know, interface problems to get there. But, but I think that is essentially what we get to is, you know, a, a simple thing I'd say is, Tony Stark does not pull up his laptop, (laughs) you know?

   7. HSHarry Stebbings31:25

      Yeah.

   8. SWScott Wu31:25

      Tony Stark goes and talks to Jarvis, right? Like, like I, I, I think there's, there is a point at which you, um, um, you, you, you just have, you, you just have a very clean connection, the ability to express your intent and do these things. People talk about generative UI. People talk about sen- single-use software and so on. At the end of the day, what it all really boils down to is you to have a very clean connection and able to, uh, uh, just being able to tell your computer what to do, and it'll do that for you. And I think if we think about where everyone is today, like I think there are 10 or 20 levels of what the product experience looks like until we get there. And the fun thing is, every level is like two or three months. And so if you kind of just multiply that out, it means we're gonna be there in like a few years, you know, (laughs) if this pace keeps going.

   9. HSHarry Stebbings32:06

      I believe a common enemy is a very important thing within a company.

   10. SWScott Wu32:10

       Mm-hmm.

   11. HSHarry Stebbings32:10

       If I were to push you, Scott, and say, "Hey, who is the competitor that you most look to and think about, respect even," who would that be?

   12. SWScott Wu32:21

       Jens, Jensen said this once, and it always stuck with me, of, "When you have figured out a way for your company to win, that means that no one else has to lose. Then you will know that you have found your, your, your, your path." And, um ...

   13. HSHarry Stebbings32:39

       Do you think, do you think he's done that? I think that's a huge amount of ... ... I, I, I certainly think he's done that.

   14. SWScott Wu32:43

       ... ... c- it might push people ...

   15. HSHarry Stebbings32:43

       Yeah. I mean, and, and, you know, NVIDIA is an incredible business. (laughs) And then Jen- Jensen obviously has done quite well with ...

   16. SWScott Wu32:49

       But it's a fre- it's a fre- it's, it's a fricking monopoly. Like the guy, I mean ...

   17. HSHarry Stebbings32:51

       (laughs)

   18. SWScott Wu32:51

       Well, and, and, and, and I think his point, right, is, is that I, I think at the end of the day, there are so many different verticals to serve. There are so many different niches to own, right? A- and there are a lot of businesses which, of course, will work in adjacent spaces and will see things and, you know, you'll, you'll, you'll run into folks on a deal or, or whatever it is. But at the end of the day, people have the things that they specialize in. A- and, and, uh, uh, and I firmly believe that. Like I, I, I think the thing that's been fun, I think, throughout the history of Cognition is for better or for worse, maybe it's 'cause we're insane, I don't know, but we've always had a pretty unique approach and a pretty unique view about like, "Here's, here's what we think the future is gonna be. Here's what we wanna build for." And that's different from, you know, it's different from a Cursor, it's different from a, um, um, you know, OpenAI or Anthropic themselves and how they think about these things and so on, right? A- a- and I think like the, the fun thing about that is, is I think there is so much to build on code, and, and I actually truly do think there will be more than one winner. Um, and, and obviously agents are, you know ...

   19. HSHarry Stebbings33:48

       What have you not built that you would most like to build?

   20. SWScott Wu33:51

       The answer I would give today, which is, which is, uh, I mean, the biggest thing that we've been thinking about in the last few days since this deal, is really in figuring out what is that combined experience of IDE and agent, because I think there really is something here. You know, I, I think, (clears throat) to, to, to, to what we said earlier, you know, I think years from now all these systems will look so different, you know, and, and we may not even have the same terms for them. But I think in, i- i- in the immediate future, I, I think both IDEs and agents will be an important part of a developer's workflow. And you can imagine all sorts of things of, "Hey, I wanna go and plan out a task in the IDE. I wanna be able to use the intelligence and the retrieval and, you know, dev and search and, you know, read on the wiki to understand exactly what, what decisions I need to make or what parts of the code this is gonna touch and, and what things I need to plan out. And then I wanna be able to hand that off to an agent, have the agent go do the bulk of the work, and then I'm gonna go and review the code. And naturally, it'd be great to review the code locally in my IDE. If there's any touch-up that I need to do, I can use that, you know, u- I can use my in-IDE tooling to go and do that." But, but basically, um, you know, figuring out what is that combined experience where you can go from synchronous to asynchronous to synchronous, um, for, for, you know, and, and be there for whatever parts need you and, and be able to go and parallelize and do more for, for the parts that don't need you. Um, I, I think that's gonna be a really fun question to figure out in terms of, you know, what happens with the, the combination of Windsurf and Devin. I think in the immediate short term, obviously, like I think, uh, there, there's a lot of Devin to run and a lot of Windsurf to run, and we plan on kind of like, uh, you know, we certainly plan on, on maintaining the philosophy of both of those products. But I think kind of finding that intersection in between of how do you make it a really smooth experience to, to go between for the folks who use both, um, is gonna be the fun one.

   21. HSHarry Stebbings35:31

       Dude, I've so enjoyed this. I, I, I ...

   22. SWScott Wu35:33

       Yeah.

   23. HSHarry Stebbings35:34

       ... it was, yeah, it's just been a really fun conversation.

10. 35:37 – 51:05

    Quick-Fire Round

    1. HSHarry Stebbings35:37

    2. SWScott Wu35:37

       (laughs)

    3. HSHarry Stebbings35:37

       I do wanna do a quickfire round if that's okay. So I'm gonna say ...

    4. SWScott Wu35:40

       Yeah.

    5. HSHarry Stebbings35:40

       ... a short set. Okay.

    6. SWScott Wu35:41

       I have to say I'm, I'm a bit under-slept (laughs) , and so it's, uh, please, please pardon me if I need like an extra, you know, one or two seconds for the fire ones, but I ...

    7. HSHarry Stebbings35:49

       How, how, like how have you been sleeping?

    8. SWScott Wu35:51

       (laughs)

    9. HSHarry Stebbings35:55

       (laughs)

    10. SWScott Wu35:55

        Next question. (laughs) .

    11. HSHarry Stebbings35:58

        (laughs) .

    12. SWScott Wu35:58

        Uh, no, look, I mean, it's, it, it, we had some crazy, we had some, we've had some crazy days, and I mean, Saturday, Friday, Saturday, Sunday obviously was figuring out, you know, if there was a deal to be done and, and making that happen. And Monday, Tuesday, Wednesday has been figuring out how we bring the teams together and how we build the, the really great thing. And obviously, like the, the immediate thing is going out to the customers and letting them know, "Look," it's like, "we're, we're here, you know. We've got the, the engineering firepower and the work to, to be able to support things. We're gonna make sure you guys have, um, you know, a super solid experience. And, um, and if anything, we're gonna be able to make it better even faster, um, a- a- and figure out the ... "

    13. HSHarry Stebbings36:34

        You th- you could, you could say ...

    14. SWScott Wu36:35

        "... better as it goes straight." But, yeah.

    15. HSHarry Stebbings36:35

        ... you even upleveled the engineering team, hey?

    16. SWScott Wu36:38

        (laughs)

    17. HSHarry Stebbings36:40

        (laughs)

    18. SWScott Wu36:41

        Um, and, uh, and, and look, so, so long story short, not, not a lot of sleep this week.

    19. HSHarry Stebbings36:46

        (laughs)

    20. SWScott Wu36:46

        (laughs)

    21. HSHarry Stebbings36:47

        I love it. Uh, okay, dude, what's one widely held belief about AI that you think is completely wrong?

    22. SWScott Wu36:53

        Yeah, I'll give you a take. You know, it's, uh, Sam Altman had this post 10 years ago called Bubble Theory. Do you remember it? He was basically saying, this was in his YC days, and he said, (clears throat) "You know, everyone here says that all these companies are overvalued and we're in a bubble, and it's obviously fun to talk about bubbles and all, but I don't believe that and I'm gonna give you a bet." (laughs) And he said, "Here are the..." It looks hilarious, by the way, when you read it in retrospect, which is, like, here are the top, you know, YC companies today, and it's literally, like, Uber (laughs) and Airbnb and, like, you know, wha- whatev- and it's like, "Today, these are worth this much. I predict that five years from now they're gonna be worth, you know, 3X more." You know? And then it's like, "Here are these kind of, like, emerging, you know, mid- mid-level companies," and then that list was, like, you know, Stripe and (laughs) , um, a- a- and some of these others, and it's like, "Today, these are worth this much, and I predict these will be up at least 3X," you know? And, and he basically said, "Everyone says we're in a bubble. If you'd like to go and bet on that and put your own money down, I am happy to put, you know, money on this." And I, I have to say, in AI, I really feel this, I, I, I feel this, I think now more strongly than ever, which is over the last two years-

    23. HSHarry Stebbings37:58

        Mm.

    24. SWScott Wu37:58

        ... people kind of think of it as this, this gen AI wave, again, like we were saying, like, lots of incremental jumps. But the truth is, RL is, is, is the master, like, the, the, the, the, the, the big story, I'd say, over the last year or two in capabilities, and I think people have really underappreciated how much is power- ha- ha- possible with RL. And-

    25. HSHarry Stebbings38:15

        What do people-

    26. SWScott Wu38:16

        ... and I would s-

    27. HSHarry Stebbings38:16

        ... what do people not see with RL that they should see? 'Cause I, candidly, I don't.

    28. SWScott Wu38:21

        Yeah.

    29. HSHarry Stebbings38:21

        So help me.

    30. SWScott Wu38:21

        So, so, uh, look, again, RL is, uh, uh, uh, we've had a few years of I would call imitation learning before RL, which is, that's what went into GPT-3 and 3.5 and so on, which is basically you take the entire internet and you read the whole internet and you get, uh, a model that sounds like somebody on Reddit. (laughs)

Episode duration: 51:05