Software Finally Eats Services - Aaron Levie

Aaron Levie 0:00 The universal adoption of this as a consumer technology and then bleeding into prosumer is, it exceeds anything I've ever-

Steven Sinofsky 0:06 It's unbelievable

Aaron Levie 0:06 ... I've ever experienced. And I think it is, it will just fundamentally change people's sort of daily patterns.

Steven Sinofsky 0:11 This is all early adopters, and early adopters are very forgiving-

Aaron Levie 0:16 [laughs] Yeah

Steven Sinofsky 0:17 ... of mistakes on purpose. When something is brand new, a culture around it develops. The early internet people didn't complain that the internet was slow.

Aaron Levie 0:25 Right.

Martin Casado 0:25 The more senior small teams that use AI are superhuman.

Aaron Levie 0:28 Yeah, yeah.

Martin Casado 0:28 'Cause, like, they woke up-

Aaron Levie 0:29 Right

Martin Casado 0:29 ... and they were all [beep] Tony Stark.

Aaron Levie 0:31 Right.

Martin Casado 0:31 It's unbelievable.

Aaron Levie 0:32 Right.

Martin Casado 0:32 And, like, their productivity is insane. [upbeat music]

Erik Torenberg 0:37 First I just wanna comment, uh, you posted in the group chat that the news around autism updates your PDoom. [laughing]

Aaron Levie 0:44 [laughs] Yes. It only works if you show the image, though.

Erik Torenberg 0:46 Yeah. We'll, we'll, we'll tee it up on the screen.

Aaron Levie 0:47 So, so, uh, you'll have to do the overlay-

Erik Torenberg 0:49 Yeah

Aaron Levie 0:49 ... to make that make sense. But, uh, there's so many memes you can do with, uh, with that, uh, Fox News headline. So.

Erik Torenberg 0:54 [laughs] Exactly.

Erik Torenberg 0:55 Um, first I wanna get into the immigration news. Um, re-re-

Aaron Levie 0:59 Oh, you really wanna kick off just like really with the fun stuff.

Steven Sinofsky 1:01 Let's always go in.

Erik Torenberg 1:01 Yeah. Like ex-

Aaron Levie 1:02 Get the blood going.

Erik Torenberg 1:02 Exactly. Um, Martin, you had some interesting reactions.

Martin Casado 1:05 Oh, Martin. Yeah, exactly. Perfect. [laughs]

Erik Torenberg 1:06 Please. What were your reactions to, what you think of the policy?

Martin Casado 1:10 Well, it's interesting because it seems like any time the administration touches immigration, there's a huge outcry, knee-jerk outcry, and we saw a lot of that from VCs even. Um, but it's also very interesting that Reed Hastings, who is a classic lefty, like, and, you know, and has long been, was like, "I've been in-- doing policy for immigration for, you know, 30 years, and this is the right approach." And this is very much my thought, which is this system has been gamed for a very long time. It's very hard for startups to, to hire, uh, because of the lottery system. It's locked up by the large companies, the consultants, Amazon and Google. Um, and, like, that has to change. And I think a very reasonable way to do it is to, to set price because, you know, you've got, uh, a market, uh, [clears throat] and you've got-- you need to allocate supply. Price is a great way to do it. So I'm very, very positive on it. I comment about that and a lot of people seem to disagree, so I think it's an active discussion.

Aaron Levie 2:03 Hmm. Um, well, I think-- Well, there's a couple, couple elements to this. So one is, um, first of all, Reed was ultimately responding to a thing that, that was no longer the actual policy.

Martin Casado 2:13 Yeah.

Aaron Levie 2:14 So, uh, he, he said 100K a year was a great policy, and obviously the internet had moved on. Um, uh, you know, the-- it's not to me obvious... I wouldn't conclude the same outcome, uh, that, that you just concluded in that, that I, I think that you'd have a situation where the Amazons and Googles would, would probably actually capture the, the vast m- uh, portion of the talent in this situation. So it's, so it's not clear to me that like startups sort of are, come out ahead-

Martin Casado 2:42 Well, we'll-

Erik Torenberg 2:42 Or better off in most cases

Martin Casado 2:42 ... well, we'll step back. So, so-

Erik Torenberg 2:43 From, from this particular implementation

Martin Casado 2:45 ... so, so maybe, maybe,

Martin Casado 2:46 maybe Amazon and Google who are-

Aaron Levie 2:47 Yeah

Martin Casado 2:47 ... probably more easy to regulate, but there are a number of organizations that are consultancies-

Aaron Levie 2:53 Yeah, 100%

Martin Casado 2:54 ... that, that actually are price sensitive-

Aaron Levie 2:56 Yes

Martin Casado 2:56 ... that would be squeezed by this. And I would-

Aaron Levie 2:58 Yeah

Martin Casado 2:58 ... I would think that, you know, given that they're in-

Aaron Levie 3:01 Yeah

Martin Casado 3:01 ... in the top, the top 15 they make up like four or five of them, that would be a significant freeing up-

Aaron Levie 3:05 Yeah

Martin Casado 3:05 ... for a higher level label.

Aaron Levie 3:06 I think the-- my, my thing would be like if you could just get all the, all the people in the room that have an opinion on this topic and you, but you, you actually have sort of the, the practitioners in tech in the room as well, and the, let's say the most, um, uh, kind of, you know, you can't even say like right-wing because actually I don't think this is even classic Republican.

Martin Casado 3:25 No.

Aaron Levie 3:25 Um, so, so it's just like-

Martin Casado 3:26 No, not at all

Aaron Levie 3:26 ... the, the, the polls, if you got everybody in a room and you say, you sort of say, "What are we optimizing for?"

Martin Casado 3:30 Yeah.

Aaron Levie 3:31 We are, are we optimizing for we don't want to have pr- like, like wages go down? Okay, that, that's a, that's an interesting thing. Are we optimizing for a particular kind of job not going to, let's say, certain populations of, of Americans? Uh, are we optimizing for just ensuring that we only have the highest merit people on the planet coming here? Like, those are all totally different kind of goals to optimize for, and I think that the, the framework you end up with and the system that you end up with should probably, you know, hopefully have like a c- like a cohesive sort of strategy behind it. My strategy would be, would be we want the absolute best in the world here.

Martin Casado 4:07 Yep.

Aaron Levie 4:07 There's not exactly clear that there's a fixed number on that. Some years there might be 5,000, some years there might be 50,000.

Martin Casado 4:12 Yeah.

Aaron Levie 4:12 Some years there might be 80,000.

Martin Casado 4:13 Yep.

Aaron Levie 4:14 We probably want them to be net positive to wages.

Martin Casado 4:17 Yep.

Aaron Levie 4:18 So let's, let's agree that like, like, you know, in any given, you know, uh, industry or locale, wages should go up with this talent pool as opposed to down. So I think that's actually totally reasonable. And you, so you should add the market kind of, you know, s- you know, sort of some market dynamic to that. And, and you shouldn't be able to kinda game and exploit the talent pools for saying, you know, "Now in Detroit we can go wipe out IT jobs because we can go and offshore those." Like, like, I think you could build a system that, that basically meets all of those goals while still ensuring that you can get somebody that goes to, you know, their master's program and, and name your, name your, uh, your state school. They come out of it, they're an AI engineer. They're not yet at the sort of Meta is gonna pay them $100 million, um, uh, but they are gonna be totally valuable contributors to our economy. It's all sort of positive sum. It's not taking a job from anybody else. It makes us more competitive. And I think there's a way to do that without sort of overly, uh, let's say putting constraints in the system that make it maybe so a startup wouldn't be able to, you know, kind of economically viably participate in this. And I think 100K per year would, would be at a point where the, you know, startups would be directly impacted.

Martin Casado 5:27 Uh, working with a lot of startups, I'm not sure that's the-

Aaron Levie 5:29 The, re-respectfully, respectfully, the kind of startups that Andreessen Horowitz sees aren't, are not all of the base of startups in the world.

Martin Casado 5:37 Before we fall into like... So, so

Martin Casado 5:39 you could quibble about the number.

Aaron Levie 5:40 Yeah.

Martin Casado 5:40 Is it 20K, which Keith Rabois said when I talked to him was very sensible, or is it 100K? I don't know. But like the idea that you get-

Aaron Levie 5:46 Wait, Keith threw out 20?

Martin Casado 5:47 Keith threw out 20.

Aaron Levie 5:48 Well, let's just go with Keith's number. I think that-

Martin Casado 5:49 [laughs]

Aaron Levie 5:49 Like if Keith, if Keith threw out 20, I think we can be good with the Keith number on this one.

Steven Sinofsky 5:53 But I, I think, I, I think the, the, the number, it's easy to fixate on the number.

Aaron Levie 5:57 Yeah.

Steven Sinofsky 5:58 But, but the, the real, the real... You have to always look at what is the number replacing, and I, I don't think the average person having this debate, other than the people-... that really work at this have any idea the amount of productivity that is lost working this system.

Martin Casado 6:13 Yes.

Steven Sinofsky 6:13 I mean, the, the-

Martin Casado 6:14 100%

Steven Sinofsky 6:14 ... the incredible amount of resources. And, and of course, the bigger companies, the, the ones that you mentioned-

Martin Casado 6:20 Yeah

Steven Sinofsky 6:20 ... have enormous teams that spend all of their energy-

Martin Casado 6:23 Yeah

Steven Sinofsky 6:23 ... like, literally, essentially as lobbyists-

Martin Casado 6:25 Yeah

Steven Sinofsky 6:26 ... working the system, and then the back end of that is, are all the justifications and all of the management-

Martin Casado 6:31 Oh, yeah

Steven Sinofsky 6:31 ... all of the hamlet.

Martin Casado 6:32 This is, this is broken.

Steven Sinofsky 6:32 And now they just deployed-

Martin Casado 6:33 This is broken

Steven Sinofsky 6:34 ... all their resources to manage, like, in-house call centers to deal with-

Martin Casado 6:38 Yeah

Steven Sinofsky 6:38 ... getting their employees back to the United States to just deal with it. I do-- You, you hit on one point that I think is really important to this debate that is sort of getting lost, which is the, there's no doubt that within the, the big tech world that they, for the past 25 years or so, they really went on this sort of bifurcated curve, which is hiring o- you know, for the people in the office focusing on, say, 25 or 30 university departments. And then basically, everybody else was like, "Well, it's so much easier if we just hire huge numbers of people from these eight international locations and schools."

Martin Casado 7:15 Yeah.

Steven Sinofsky 7:15 And I think a lot of this is missing the... A big part of this is like, well, the tech industry, like if you look at Intel and where they all went to college, and if you look at the history of Silicon Valley, it's all these people from all the schools in the middle of the country.

Martin Casado 7:29 Yeah, yeah.

Steven Sinofsky 7:30 None of which are, like, the target recruiting schools by the main tech companies these days, and that's been a place where I think that the big companies have become somewhat lazy. And as a person who spent decades flying to all of these schools and recruiting, you know, there's work that the s- the universities have, have not done to be better programs, and that there's work that the big companies have not done to be clear what it is that, why they've stopped recruiting or haven't, had seen the numbers. And that's a th- a change would be better for everybody to really make.

Martin Casado 8:00 I ag- so my, my expectation of what gets impacted is, is, is kind of, um, an even different job set than that, which is if you go

Martin Casado 8:08 to, like, Florida today and you try and get, like, an IT job for 100K, you just can't, right? And so that, I think, is actually the area that's the most directly impacted by the large consultants.

Steven Sinofsky 8:17 Meaning there aren't jobs that pay 100K or that you just can't find a job?

Martin Casado 8:22 They, they're taken. They're all, they're all taken.

Steven Sinofsky 8:24 They're all taken.

Martin Casado 8:24 They just don't exist.

Steven Sinofsky 8:24 There's no-

Martin Casado 8:24 Like, like any sort of IT administrator-

Steven Sinofsky 8:27 Right

Martin Casado 8:27 ... like the, like the, you know, services, like the basic consulting gigs, like all of that has been saturated. It's very, very tough to get a job between, like, 80 and 120K in, in much of the United States because of this, right? And so this isn't about, like, a new grad being a software engineer, 'cause the reality is, is the expected value of a software engineer over their lifetime is, is high enough that I think that, like, the market kind of navigates that. But it's almost these kind of, you know, lower level, more, like, IT admin jobs that have been squeezed out. And listen, if we want to bring them back, then I do think, and we don't wanna do this kind of arbitrage that a lot of these companies are doing, that we're gonna have to-

Steven Sinofsky 9:00 So-

Martin Casado 9:00 ... change the pricing.

Steven Sinofsky 9:01 So but, but don't, but, uh, the w- wouldn't a minimum salary band effectively solve that problem for you?

Martin Casado 9:07 Sure. Yeah, yeah.

Steven Sinofsky 9:08 Okay.

Martin Casado 9:08 For sure. Yeah, I think there's a lot of mechanisms to do it.

Steven Sinofsky 9:10 Oh, okay. Okay.

Martin Casado 9:10 I, I actually agree with you.

Steven Sinofsky 9:11 Yeah.

Martin Casado 9:11 Like, we should actually talk about the problem that we're trying to solve.

Steven Sinofsky 9:14 Yeah.

Martin Casado 9:14 So I think we would all agree if you come to the United States, you get a college degree, you should have a visa, right?

Steven Sinofsky 9:19 Yeah. Yeah, yeah.

Martin Casado 9:19 Kind of, you know, okay. So, like, that's for sure.

Steven Sinofsky 9:21 Well, do we, do we all agree on that?

Martin Casado 9:22 Okay, yes, I agree. [laughs]

Steven Sinofsky 9:24 Okay. So the, but like, as in, like, I don't think that the people proposing this strategy actually agree on that.

Martin Casado 9:30 Uh, well, so Trump famously said this.

Steven Sinofsky 9:32 Oh, he famously said a lot of things. He, for sure. [laughs]

Martin Casado 9:35 [laughs]

Steven Sinofsky 9:35 And then he unsaid it.

Martin Casado 9:36 Yeah, yeah.

Steven Sinofsky 9:37 I mean, I, like this wouldn't be an interesting debate. If we all agree that, that, and we have a policy that says if you, if you go from I-I-I-I-IIT and then you come to Kansas, you know, State, then, then you get a job-

Martin Casado 9:50 But that, that's the problem

Steven Sinofsky 9:51 ... then you can stay here.

Martin Casado 9:51 But that became part-

Steven Sinofsky 9:51 We're good. We're good

Martin Casado 9:52 ... that became part of the gamification of the system.

Steven Sinofsky 9:54 Yeah. Yeah.

Martin Casado 9:54 Because you would do the IIT thing, then you would get a company sponsorship for a master's degree-

Steven Sinofsky 9:59 That's right

Martin Casado 9:59 ... at some school. So it didn't really accomplish the goal of, like, investing in coming to the US the same way that going to a four-year school would've done. It's-

Steven Sinofsky 10:07 Wait, why, wait, why is that? What was the problem with that?

Martin Casado 10:09 Be- because you ended up getting sponsored by a company-

Steven Sinofsky 10:11 Yeah

Martin Casado 10:12 ... and it changed the whole dynamic of, like, were you seeking out the US or did, did a company pull you to the US?

Steven Sinofsky 10:18 Hmm.

Martin Casado 10:19 It's a little bit different.

Steven Sinofsky 10:20 Okay.

Martin Casado 10:20 But I also think so often this discussion goes the direction this one is gonna go, is where we focus on, like, new grad software engineers-

Steven Sinofsky 10:26 Yeah

Martin Casado 10:26 ... and I actually don't think that what's, is getting impacted.

Steven Sinofsky 10:28 Right.

Martin Casado 10:29 I really don't. I really think it is, like, like what do the consulting shops do? They do, like-

Steven Sinofsky 10:32 Yeah

Martin Casado 10:33 ... admin work, [clears throat] IT work, and it, it's, it's, it's just a different salary band.

Steven Sinofsky 10:39 Yeah, I think it's, I think it's the-

Martin Casado 10:40 These are, these are body shops.

Steven Sinofsky 10:41 Yeah.

Martin Casado 10:41 And, like, an approach like this directly targets them, I think, in a way that's actually quite positive.

Steven Sinofsky 10:47 Yeah, I just think there's, I'm, then, I mean, I would just then favor Keith's approach 'cause I think, uh, there, there is a number-

Martin Casado 10:52 Oh, totally

Steven Sinofsky 10:52 ... in which it becomes you're then making other trade-offs in your business-

Martin Casado 10:56 Yeah

Steven Sinofsky 10:56 ... just to be able to kind of pay for this.

Martin Casado 10:57 Yeah, yeah, yeah. The 100K number is, is, is-

Steven Sinofsky 10:59 Well, but I, I do think that-

Martin Casado 11:00 I totally agree with that. Yeah

Steven Sinofsky 11:01 ... that the dollars, but I, I do think that, just to reinforce this, that a, that the whole system can do without this immense cost and uncertainty.

Martin Casado 11:09 Yep.

Steven Sinofsky 11:09 And, and any solution should really be, if you address that-

Martin Casado 11:13 Yeah

Steven Sinofsky 11:13 ... then the whole, the rest of the dynamics will follow.

Martin Casado 11:16 Yeah.

Steven Sinofsky 11:16 But as long as it's a huge, complicated, expensive system-

Martin Casado 11:19 Yeah

Steven Sinofsky 11:20 ... then the big companies are gonna continue to, to benefit from it disproportionately.

Martin Casado 11:24 Yeah. And I will tell you right now, like, it is much harder for a startup to deal with the lottery system-

Steven Sinofsky 11:29 Yes, it's impossible

Martin Casado 11:30 ... than it would be, than it would be for them to pay 100K. I, like, at least-

Steven Sinofsky 11:32 Totally

Martin Casado 11:32 ... for the startups that-

Steven Sinofsky 11:33 But I don't think it changed the lottery system. It's a hun- right?

Martin Casado 11:36 Right. It didn't. That's part of the-

Steven Sinofsky 11:37 It's 100K to participate in the lottery system.

Martin Casado 11:39 Right. Oh, no, no, I understand.

Steven Sinofsky 11:41 That, that's the-

Martin Casado 11:41 I mean, hope, hope, hopefu- hopefully-

Steven Sinofsky 11:43 Sure

Martin Casado 11:43 ... you know, like, a number-

Steven Sinofsky 11:45 Right

Martin Casado 11:45 ... it'll change the calculus of a lot of people that are in-

Steven Sinofsky 11:47 Yeah

Martin Casado 11:47 ... the lottery system.

Steven Sinofsky 11:47 I, I just think there's-

Martin Casado 11:48 But I would, I would prefer to remove the lottery system again, of course. Yeah.

Steven Sinofsky 11:50 Yeah. I think that, that, I think you can absolutely pull off a system that, that for probably in a shared definition for, for us and anybody else would say, this is clearly a high merit job

Aaron Levie 12:01 It's going to increase the wages in this particular sector on average.

Martin Casado 12:04 Yep.

Aaron Levie 12:05 And, uh, and we wanna make sure that we've got the best talent in the world that comes in to, to-

Martin Casado 12:09 Yep

Aaron Levie 12:09 ... do that. It's not gonna drive down wages. We probably want as many of those individuals here as possible.

Martin Casado 12:14 Yep.

Aaron Levie 12:15 And, um, and so I, I think, you know, some elements of this are, are intriguing in that they push the conversation forward on the dimension of, you know, like the 100K is like a, a hammer to do that, and maybe there's a more nuanced approach that I would certainly prefer, but-

Martin Casado 12:28 But, but, but again, it's important to like the, the, the 100K will scale with the skill level, right? So the higher the skill, the more like that is amortized, and so you could argue that this is just kind of a dial to get higher skill.

Steven Sinofsky 12:39 Well, you, you... The, the... Once you put a dollar amount on it, you have to keep in mind that people are gonna pay it-

Martin Casado 12:45 That's right. Yeah

Steven Sinofsky 12:45 ... they're gonna make up their own mind.

Martin Casado 12:47 It's an adaptive market.

Steven Sinofsky 12:47 And, and the skill isn't g- might not be relevant to some people-

Martin Casado 12:50 Yeah, no, fair enough

Steven Sinofsky 12:51 ... because, you know, and so that's

Steven Sinofsky 12:52 the tricky part.

Martin Casado 12:52 Yep, yep.

Erik Torenberg 12:53 I wanna segue from, uh, labor markets to-

Steven Sinofsky 12:55 [laughing]

Martin Casado 12:57 [laughing]

Aaron Levie 12:57 What's the next, uh, what's the next really interesting political topic that we wanna engage in?

Erik Torenberg 13:01 Yeah, exactly. Um, from labor markets to labor productivity with AI. O- offline, Aaron, we were talking about the Meter paper, and it was, the paper s- suggested that their developers were actually less productive with AI, but that doesn't square with your experience talking to a lot of different startups, seeing a lot of different startups and how they're so much more-

Aaron Levie 13:16 Yeah

Erik Torenberg 13:16 ... more productive. So why don't you talk about where, where you're seeing startups say they're more productive and wh- why is it happening?

Aaron Levie 13:22 Yeah. I'll, so I'll, I'll first just represent our own case study-

Erik Torenberg 13:26 Sure

Aaron Levie 13:26 ... and then, and then there's the really extreme version. So, uh, our own case study is we've adopted a, a, a few different kind of, um, AI coding tools, um, uh, you know, Cursor being a, a, a super, super popular one internally. And I, you know, as I talk to people, let's say in the hallway, who have, you know, yeah, maybe they're trying to get me excited by AI-

Erik Torenberg 13:47 [chuckles]

Aaron Levie 13:47 ... but like I think they know I'm, I'm bought in. So, so the, the kind of qualitative answers I get from, from people, and then I'll give you our, our internal metric, you know, some, some people say, "I'm getting, you know, a 20 to 30% productivity gain." Other people will say 75%. Um, interestingly, I have not been able to pinpoint the demographic difference, uh, on the answers.

Martin Casado 14:08 Oh, but this is self-reporting.

Aaron Levie 14:09 This is self-reporting. Um, uh-

Martin Casado 14:11 How, how happy are you? [chuckles]

Aaron Levie 14:13 Uh, yeah. [laughing] So, so, so... No, no, but we have internal metrics as well. So about 30% of our code right now is, is coming from AI.

Martin Casado 14:19 Oh, I see.

Aaron Levie 14:20 So, so, so we've got the-

Martin Casado 14:21 70%?

Aaron Levie 14:22 30%.

Martin Casado 14:22 Oh, 30%.

Aaron Levie 14:23 30%. So we have some of the, uh, kind of pure internal, uh, metrics that, that show this. Um, but what's interesting is, is that, like I have a two by two of I have senior people that are saying that they're, you know, getting 75% productivity. I have junior people that are saying they're getting 75%, and then vice versa, um, on the 25%, let's say. And it's... I, I, I haven't been able to quite figure out a pattern, maybe except for, and we've talked about this a little bit, but you kinda see this online, except for maybe the, the biggest criteria is just the people that actually push the AI to do more, which is sort of this other new kinda psychographic, which is just like, who is willing to just be like, "You know what? I'm gonna YOLO this, this task-

Martin Casado 14:58 Yeah

Aaron Levie 14:58 ... and just see what the AI comes up with." And your, your sort of willingness to just do that, I think probably somewhat, uh, then, then shows up in the, uh, in, in the, the ultimate productivity gain. So that's, that's us as a lar- relatively larger company, uh, on the startup side. But what's crazy, and this is the thing that just blows my mind, I will regularly talk to three, five, 10-person startup founders that, that self-report they might be getting somewhere on the order of like three to five to 10X, uh, productivity improvements. And, and the, the, the big difference is, is that, you know, a year ago if we were to have this conversation, the co- the conversation would be about, you know, AI sort of doing type ahead and, um, and it, you know, it can add maybe like a few lines of code to your productivity per, you know, incremental, you know, sort of unit of work that you give it. And then now obviously the big phenomenon is background agents where I give it a very, you know, detailed prompt. I send it off. It comes back. You know, people talk about it as like a slot machine of like some percent of the time it's not gonna come back with the right thing. You have to decide which, what you actually, you know, kinda pull in from it. But the kinda startups that are getting like real multiples of productivity gain are, are just, they're fundamentally engineering in a different way. They're sending off a task. The task goes off, comes back in 20 minutes, and then they're really in the, in the business of doing code review, not code writing, and it's gonna obviously change, you know, uh, quite a bit of what computer science looks like in the future. And then the only question is like, you know, what are all the things that that's good for? Where does that break down? What, what kinda teams can actually evolve to that state? But that one has been blowing my mind the most recently, and I think that kinda fundamentally changes what, what the future of s- you know, kinda engineering looks like.

Steven Sinofsky 16:36 I think what you said is super interesting, but let me ask you, I, I think that there's an overlay that goes beyond junior, senior and, and there, and which is, is we're all talking about, uh, characteristics that have two, a solution that has two really important characteristics right now. One is that it's engineers doing stuff for engineers and, and they understand the domain super, super well.

Aaron Levie 17:00 Yeah.

Steven Sinofsky 17:00 And I think that that's an really, really important part and a really big thing that people aren't talking enough about, which is maybe what's going on is that you have AI accelerating for people that work in the domain-

Aaron Levie 17:11 Yes

Steven Sinofsky 17:12 ... and are very smart.

Aaron Levie 17:12 Yes.

Steven Sinofsky 17:13 And then the other is we, we shouldn't forget, and this is to your, your self-reporting a little bit, but also, which is that this is all early adopters, and early adopters are very forgiving-

Aaron Levie 17:24 [laughing] Yeah, yeah, yeah

Steven Sinofsky 17:24 ... of mistakes on purpose.

Aaron Levie 17:26 Yeah.

Steven Sinofsky 17:26 And it's a, it's a super interesting dynamic where when something is brand new, a culture around it develops whi- which just lets anything happen.

Aaron Levie 17:35 Yeah.

Steven Sinofsky 17:35 I mean, you know, like n- the early internet people didn't complain that the internet was slow.

Aaron Levie 17:40 Right.

Steven Sinofsky 17:40 The only people complaining the internet was slow were the late adopters-

Aaron Levie 17:43 Uh-huh

Steven Sinofsky 17:43 ... who were like, "Wow, this is so much slower." And/or, or like take online video, which was like I'm watching this tiny, tiny postage stamp video, and the early adopters were like, "This is the coolest thing I've ever seen."

Aaron Levie 17:52 [laughing]

Steven Sinofsky 17:52 And everybody else was like, "Why would I wanna watch anything like that?"

Aaron Levie 17:55 Yes.

Steven Sinofsky 17:55 And the same with downloading music and ev- And so I, I really feel like-What's going on is just this incredible-

Aaron Levie 18:02 Do you remember that you guys, um... Do you remember this watch that you guys made?

Steven Sinofsky 18:06 The Spot watch?

Aaron Levie 18:06 Yeah, Spot watch.

Steven Sinofsky 18:07 Yeah, yeah.

Aaron Levie 18:07 So in, like, 2004, '03 or something.

Steven Sinofsky 18:10 Something.

Aaron Levie 18:10 So, so I bought one, and it used, like, like AM-

Steven Sinofsky 18:14 FM-

Aaron Levie 18:14 Or FM.

Steven Sinofsky 18:15 Unused FM radio-

Aaron Levie 18:16 Un- unused [chuckles]

Steven Sinofsky 18:16 ... white noise.

Aaron Levie 18:17 Yeah. So, so, so [chuckles]

Steven Sinofsky 18:18 So you get, like, stock quotes-

Aaron Levie 18:19 Yes

Steven Sinofsky 18:19 ... 45 minutes delayed-

Aaron Levie 18:20 [laughs]

Steven Sinofsky 18:20 ... if you are outdoors in a field.

Aaron Levie 18:21 Yes. And, and so I had one, and I was, I was in this camp like, "This is the coolest thing-

Steven Sinofsky 18:26 Yeah

Aaron Levie 18:26 ... in the entire world, and obviously this is gonna be this, the most mass market product-

Steven Sinofsky 18:30 Oh

Aaron Levie 18:31 ... of all time." And, you know, I was, like, 20 years too early with the Apple Watch.

Steven Sinofsky 18:34 Yeah, yeah. No, turn-by-turn GPS.

Aaron Levie 18:35 Yeah. [laughs]

Steven Sinofsky 18:36 Like, the first, the first time you could put turn-by-turn GPS in your car-

Aaron Levie 18:40 Yeah

Steven Sinofsky 18:40 ... was super cool, except for the fact that most cars moved faster than the ability for the-

Aaron Levie 18:44 [laughs]

Steven Sinofsky 18:44 ... computer in the car to calculate when you were gonna turn.

Aaron Levie 18:47 Right.

Steven Sinofsky 18:48 And so you co- you just drove around and you dr- it was like a U-turn machine.

Aaron Levie 18:50 Right.

Steven Sinofsky 18:50 And, but I think that it's just, it's so interesting-

Aaron Levie 18:53 Yeah

Steven Sinofsky 18:53 ... because I, I think that people use these, the AI tools today, and they assume, like, "Well, I don't, I'm not a doctor. I don't know anything about being a doctor. Let me ask you to cure me-

Aaron Levie 19:02 Right

Steven Sinofsky 19:03 ... and diagnose me." And it's like, whoa, that is the wor- and it-- just like all the people who seek failure-

Aaron Levie 19:09 Yes

Steven Sinofsky 19:09 ... like, they're just, they weren't great programmers to begin with.

Aaron Levie 19:11 Right.

Steven Sinofsky 19:12 And they didn't know how to ask. They didn't wanna review it. And whereas great programmers or-

Aaron Levie 19:16 Yeah

Steven Sinofsky 19:16 ... just professional programmers know that code review is really important.

Aaron Levie 19:20 Yes.

Steven Sinofsky 19:20 And, and that's just how you do it.

Martin Casado 19:23 The, I think there's an aspect, well, there's, there's an aspect

Martin Casado 19:25 of this that makes it very difficult to measure. One, one of them is, and I don't think it's just an early adopter thing, like, these, these models are so magic that you get dazzled.

Aaron Levie 19:33 Oh. [laughs] Yeah.

Martin Casado 19:34 So even, even if it's not what you want, you're like, "It was great," you know? And I, I think it's very easy to conflate that with being productive. Like, "It's not what I wanted, but it was amazing-

Aaron Levie 19:43 [laughs]

Martin Casado 19:43 ... so therefore, therefore it must be-"

Aaron Levie 19:43 It's still doing great.

Martin Casado 19:44 But no, [laughs] seriously, therefore it must be great. So, so, like, maybe over time we just abdicate having an opinion, and, like, the model does everything.

Aaron Levie 19:51 Mm.

Martin Casado 19:51 But right now, and I see this a lot, people are s- like, they're so enthusiastic about using AI, but it really hasn't impacted, you know, their output. They're just enthusiastic. The second one is I, I feel like there's almost shadow productivity-

Aaron Levie 20:04 Whoa, sorry. How, how would you, uh, how would you, how would you verify that, uh, with the, a five or 10-person company who, who kind of empirically is operating at, like, a 50 to 100-person company? Like, like, you just-

Martin Casado 20:17 Oh.

Aaron Levie 20:17 You can see the, the sheer s-

Martin Casado 20:19 Oh

Aaron Levie 20:20 ... you know, scale of their code, and you're like, "Okay, you could not have done that 10 years ago."

Martin Casado 20:23 Oh. I actually agree with everything-

Aaron Levie 20:24 Yeah, yeah, yeah

Martin Casado 20:24 ... that Steve is saying, which is, so listen, anec- anec- this is anecdotally. Anecdotally, I've worked with a lot of companies. Anecdotally, the more senior small teams that use AI are superhuman.

Aaron Levie 20:31 Yeah, yeah.

Martin Casado 20:32 It's like they woke up-

Aaron Levie 20:33 Right

Martin Casado 20:33 ... and they were all fucking Tony Stark.

Aaron Levie 20:34 Right.

Martin Casado 20:34 It is unbelievable.

Aaron Levie 20:35 Right.

Martin Casado 20:35 And, like, their productivity is insane.

Aaron Levie 20:37 Yeah.

Martin Casado 20:37 But they're all, they're all super senior-

Steven Sinofsky 20:39 And, you know, and look, they were s- they don't... I, I don't wanna take anything at all away, but those companies were also incredibly productive relative to a 10-person team-

Aaron Levie 20:47 Yeah, 100%. Yeah

Steven Sinofsky 20:48 ... at a big company.

Martin Casado 20:48 Yes, yes, yeah, yeah.

Steven Sinofsky 20:48 'Cause there's no code, and, and-

Martin Casado 20:49 Right. Yeah

Steven Sinofsky 20:49 ... they're starting from a clean slate. And-

Martin Casado 20:51 No, no, they, they re- they really wake u- Yeah, yeah, for sure. And, and, like, you know, they're very senior, but they're also almost to a person were AI skeptics to begin with and are incredibly sober about-

Steven Sinofsky 21:02 Yeah, yeah

Martin Casado 21:02 ... like, the value. And so, like, they just use it in these very pragmatic ways.

Aaron Levie 21:05 There's one other category that I'm seeing-

Martin Casado 21:07 Yeah

Aaron Levie 21:07 ... um, 'cause I just wanna be f- intellectually honest on the full spectrum. I'm seeing these 19 and 20-year-olds that are like, first of all, I don't know what is in the water at, like, Stanford, MIT, et cetera, right now, but, like, everybody's dropping out, so-

Martin Casado 21:20 Yeah.

Aaron Levie 21:20 So, like, just, like, literally, like, people are going there for, like, a week just to drop out.

Martin Casado 21:24 Yeah, yeah, yeah. [laughs]

Aaron Levie 21:24 But there is a tendency of that cohort, it's the 996 people, and there is this tendency which is, you know, they would've been may- maybe 10X engineers in a prior world, but now they're like 100X engineers.

Martin Casado 21:35 Yeah.

Aaron Levie 21:35 And so, you know, senior in terms of in their own kind of relative cohort.

Martin Casado 21:39 Yeah.

Aaron Levie 21:40 But, like, the, the, the way that they are building their startups are just, like, completely different w- than... It's probably the, if I look at, at, you know, so we dropped out of college, God, that's scary, 19 years ago. Uh, if I look at how these companies run versus today, it's the biggest change in, in how you start and run a company that I've ever seen.

Martin Casado 22:01 Yeah.

Aaron Levie 22:01 And, like, and I, I think if you looked at, like, in 1995 if you were to drop out of college, uh, versus 2005 when we dropped out of college, I don't think you, like, I don't think, like, the company building process was all that different.

Martin Casado 22:12 I, well, I mean, the, the-

Aaron Levie 22:14 You get, you get into a garage-

Martin Casado 22:14 ... the internet, the internet fundamentally changed everything.

Aaron Levie 22:16 Yeah. No, no, post-internet, post-internet.

Martin Casado 22:17 Okay. Okay, yeah, yeah.

Aaron Levie 22:17 So, so you're, you're building-

Martin Casado 22:18 So you have to rewind-

Aaron Levie 22:19 Yes

Martin Casado 22:19 ... you have to rewind to the internet, 'cause that was a, a very big-

Aaron Levie 22:20 Yeah, 100%, uh, uh, we're not in '85. So at '95 you're dropping out to do an internet startup. Okay, you're dropping out to do an internet startup. By 2005, other than the fact that our resources were in the cloud versus, you know, you had to go to a data center, in our case we actually still went to the data center.

Martin Casado 22:34 Yeah.

Aaron Levie 22:34 Like, not that much about the company building process was different. Today in 2025, everything about how you're starting your company is completely different because of AI.

Steven Sinofsky 22:41 But the, I, I think that, that the key, the, the through line in all that is velocity.

Aaron Levie 22:45 Yes, exactly.

Steven Sinofsky 22:46 And, and I, I think that, that, that cutoff, the internet increased velocity.

Aaron Levie 22:51 Yes.

Steven Sinofsky 22:51 A- and AI increases velocity-

Aaron Levie 22:53 Yeah, I totally agree

Steven Sinofsky 22:53 ... the, the, the same way. And I, I think that that's just super, super important-

Aaron Levie 22:57 Yeah

Steven Sinofsky 22:57 ... to what's going on.

Aaron Levie 22:58 So we're basically-

Steven Sinofsky 22:59 Because if you go back, even with the, in the early internet, like, when you started a company, um, there was still a lot of old school, like, what's your business plan?

Aaron Levie 23:06 Yep, yep, yep.

Steven Sinofsky 23:06 What's your plan? We're gonna be stealth for two years. There was all of this stuff, and it was really Mark and Ben-

Aaron Levie 23:12 Yeah

Steven Sinofsky 23:12 ... at Netscape that changed the velocity-

Aaron Levie 23:14 Yep

Steven Sinofsky 23:15 ... of, of how companies work. And the cloud was an accelerant to that acceleration of velocity. And, and AI is, is a refactoring of how velocity works.

Aaron Levie 23:24 Yeah. Yeah, but what was interesting is even in the cloud, like, that was this great virtualizer of the physical stuff you would have to deal with.

Steven Sinofsky 23:31 Well, but that was a two-year build-out.

Aaron Levie 23:33 Yeah, exactly.

Steven Sinofsky 23:33 You were, you know-

Aaron Levie 23:34 Yeah

Steven Sinofsky 23:34 ... like, you, you had no-

Aaron Levie 23:35 Yes, fair.

Steven Sinofsky 23:35 You, you could have customers-

Aaron Levie 23:36 Yeah, 100%.

Steven Sinofsky 23:37 As soon as you had code-

Aaron Levie 23:38 You're right

Steven Sinofsky 23:38 ... you could have customers.

Aaron Levie 23:39 You're right.

Steven Sinofsky 23:39 Which i- like-

Martin Casado 23:40 I mean-

Aaron Levie 23:40 Yes

Martin Casado 23:41 ... P- I mean, P- PLG and a lot of these kind of high velocity startups actually started pre-AI, where, you know-

Aaron Levie 23:45 Yeah, but the-

Martin Casado 23:46 ... some pretty, like, phenomenal comp- Like, think about, like, GitHub, think about, like, Slack, think about, like, Figma.

Steven Sinofsky 23:49 Yes.

Martin Casado 23:50 Like, you know, you have some pretty remarkable companies that came pre-AI-

Steven Sinofsky 23:53 Yes

Martin Casado 23:53 ... that were drafting on it. And a lot of that was, like, basically cloud and then the SaaSification and then unlocking kind of different routes to go to market.

Steven Sinofsky 23:58 Yeah. But the-

Martin Casado 23:59 Zoom, Zoom was a great early example of this

Steven Sinofsky 24:00 ... this is, the, the thing that AI is is it's an accelerant in building the product.

Aaron Levie 24:03 Yes.

Steven Sinofsky 24:04 Whereas what, what-

Aaron Levie 24:05 Running and scaling

Steven Sinofsky 24:06 ... SaaS and cloud did-

Aaron Levie 24:06 Yeah

Steven Sinofsky 24:06 ... was accelerate getting paid.

Aaron Levie 24:08 Yes.

Steven Sinofsky 24:08 Which was a thing that used to take two or three years.

Martin Casado 24:11 Uh-I, I mean, I would ar-ar-ar-arguably, the cloud also made it much quicker to build a product 'cause you would have, like, these big distributed services-

Steven Sinofsky 24:16 Well, it made it much quicker for customers to all have the same one. I don't think it made it, like, five times faster.

Martin Casado 24:20 Fair enough.

Steven Sinofsky 24:21 So, like, like, I think it was-

Martin Casado 24:22 Yeah, fair enough. Yeah

Steven Sinofsky 24:22 ... like, it was like, yeah, like, you can see your website a lot quicker, but, like, I could see-

Martin Casado 24:26 Yeah

Steven Sinofsky 24:26 ... a website in '98 pretty quickly. Like-

Martin Casado 24:29 Yeah, but well, you know-

Steven Sinofsky 24:30 So

Martin Casado 24:30 ... maybe it is an infrastructure thing, building a big distributed service-

Steven Sinofsky 24:32 No, no. Sure, sure, sure

Martin Casado 24:33 ... it's just really, really-

Steven Sinofsky 24:33 I was not doing distributed-

Martin Casado 24:34 Really, really, really hard

Steven Sinofsky 24:35 ... infrastructure in '98, so.

Martin Casado 24:36 Yeah. So, but, so there's-- Sorry, I just wanna, so, so I think

Martin Casado 24:40 AI productivity is hard to measure for two reasons. The first one I just mentioned, it's just really dazzling, so I think, like, people kind of like-

Steven Sinofsky 24:44 Yeah, yeah, yeah

Martin Casado 24:45 ... they're like, "Oh, it's amazing." The second one is I think a lot of the productivity's actually hidden, and people measure the wrong thing, right?

Steven Sinofsky 24:50 Mm.

Martin Casado 24:50 So get-

Steven Sinofsky 24:51 Shocking that people measure the wrong thing in productivity.

Martin Casado 24:53 That's right. That's right. [laughs]

Steven Sinofsky 24:53 Literally the history of productivity measurement.

Martin Casado 24:55 Well, but, but also what happens here is, like, you have the board, and the board is like, "We need more AI." And then, so what happens? Then they go to, like, some CT or some innovations lab, and then the innovations lab do AI, and so, like, whatever. They, like, bring in, like, build some internal tool, and it'll fail. Of course that'll fail, right? But the reality is, is, like, this AI wave is so personal. Like, probably most people in the company are using ChatGPT. Probably there is, you know, some personal assistant. Probably, you know, they're using Cursor or some coding thing, and that's much, much harder to measure-

Steven Sinofsky 25:24 Yeah, right

Martin Casado 25:24 ... just because-

Steven Sinofsky 25:25 Yeah

Martin Casado 25:25 ... you know, it's not advertised. And so if you actually look at the reports on, like, enterprise things fail, you guys look at, like, what they were-

Steven Sinofsky 25:32 Right

Martin Casado 25:32 ... they're measuring.

Steven Sinofsky 25:32 Well-

Martin Casado 25:32 It's like, yeah, clearly some internal project pushed down-

Steven Sinofsky 25:35 Yes

Martin Casado 25:35 ... by the board where they hired, like, you know, some consultant to do it is gonna fail. Th-those always fail.

Steven Sinofsky 25:40 Yeah.

Martin Casado 25:40 But that's actually not what's going on.

Steven Sinofsky 25:42 Right.

Martin Casado 25:42 Like, the movement that's happening is a very secular thing.

Steven Sinofsky 25:43 Well, so it's, it, this is, uh, this is the, the, the next time that bottom-up a-adoption is really changing-

Martin Casado 25:52 Yeah

Steven Sinofsky 25:52 ... the productivity equation.

Martin Casado 25:53 Yeah.

Steven Sinofsky 25:53 And that's a thing that, that it defies. Big companies do not know how to deal with that.

Martin Casado 25:58 Yeah.

Steven Sinofsky 25:59 Because they, they want, they need to control it. They worry about safety and security and privacy and all of their corporate rules. And, and then also, the other thing I think to overlay on that is AI is, is a very unique, if that's not a bad way to say things, i-innovation in that it's, it's, like, non-deterministic.

Martin Casado 26:17 Yeah, totally.

Steven Sinofsky 26:17 And so all of a sudden you have this very personal and non-deterministic thing, which of, which the real problem in a large organization to all these pilots and AI projects is that they, you can't, you can't, you, not just measure, but you don't even wanna put out there-

Martin Casado 26:31 Yeah, yeah

Steven Sinofsky 26:31 ... a non-deterministic-

Martin Casado 26:33 Uh-huh

Steven Sinofsky 26:33 ... solution.

Martin Casado 26:34 Yeah, yeah. For sure.

Steven Sinofsky 26:34 Because your whole thing is like, well, we operate at scale, and we have 60 countries-

Martin Casado 26:37 Yeah, the, it's a white blood cell sc- I mean, it's just-

Steven Sinofsky 26:39 Like, we can't, we, we can't put-

Martin Casado 26:40 It's just such a-

Steven Sinofsky 26:41 We can't put, like, a customer support solution-

Martin Casado 26:43 Yeah

Steven Sinofsky 26:43 ... out there if five agents in five languages all have different answers-

Martin Casado 26:47 Yeah. Right

Steven Sinofsky 26:47 ... based on the way that the customer or the, the CS agent asked the question. And I, I really feel like that is gonna be the, the hugest challenge in, in large organizations figuring out how to adopt things is, like, they're gonna just get all bunched up over, over non-determinism.

Martin Casado 27:03 Yes. Yeah. I th- um, I, I, I think that the-- We, we will have to have some new form of, of measurement probably in general in this because so much of the, so much of the improvement in productivity will be, will, will sort of be this, like, subtle change of, like, like, I used to go to Google for that-

Steven Sinofsky 27:21 No

Martin Casado 27:21 ... and now I can-

Steven Sinofsky 27:22 Or my, my EA is writing emails using ChatGPT for me.

Martin Casado 27:24 Right. And, and, and so-

Steven Sinofsky 27:25 Like, I'm sure that's-

Martin Casado 27:26 Where is that showing up in-

Steven Sinofsky 27:27 Yeah, yeah.

Martin Casado 27:27 And other than just, like, again, w-when we talked about this in, I think, the last podcast of just, like, we're gonna just start to do higher levels of work.

Steven Sinofsky 27:32 Yeah.

Martin Casado 27:33 And that will just end up looking different.

Steven Sinofsky 27:35 Yeah.

Martin Casado 27:35 But you won't be able to be like, "Okay, how do I measure what the productivity was when it's just, like, I'm working just totally differently?"

Steven Sinofsky 27:40 Yeah. Yeah.

Martin Casado 27:41 And it-

Steven Sinofsky 27:41 Well, but al- I mean, co-code I think is such a great example. So, like, what do people, I, in my experience, the more senior folks actually use AI for code. [chuckles] It's like documentation, writing testing. I mean, it's a lot of the other stuff that may not actually, like, increase, like, the shipping schedule, but, like, you get a lot more robust code.

Martin Casado 28:00 Yeah.

Steven Sinofsky 28:00 A lot more maintainable code, a much better architecture, a much better future-forward architecture. So we could be building tremendously better software but still be shipping features at, at the same velocity, right?

Martin Casado 28:11 We might need to just measure, like, quality of life as another metric of-

Steven Sinofsky 28:14 [laughs]

Martin Casado 28:14 ... like, literally-

Steven Sinofsky 28:15 People don't, they, it's, they, yeah-

Martin Casado 28:16 I'm just happier. I don't have to do stupid shit.

Steven Sinofsky 28:17 Yeah, developers don't wanna-

Martin Casado 28:19 Yes

Steven Sinofsky 28:19 ... write document. Exactly.

Martin Casado 28:20 Right. Yeah.

Steven Sinofsky 28:20 But this is, I, I, you know, it's so, so easy to get accused of hyperbole and, and, and overstating it and things, but what I, I think is just so key to what's going on is this, it, it is what you were talking about, which is, like, the whole notion of what you're gonna do with the job is, is gonna be really different. You know, I'm, this is my obligatory super old person thing, but the-

Martin Casado 28:43 [laughs]

Steven Sinofsky 28:43 ... the pre, pre-spreadsheet, post-spreadsheet is a perfect example of this. The pre-spreadsheet-

Martin Casado 28:47 Classic example. [laughs]

Steven Sinofsky 28:49 I didn't say classic. I said perfect.

Martin Casado 28:51 Okay, okay, okay. [laughs]

Steven Sinofsky 28:52 But, but before spreadsheets, you would be a banker, and, you know, you would be like, "I'm supposed to help this company get acquired." And you would come up with a financial model, and you'd have 50, you know, recent MBAs all churning away with, with their HP calculators figuring out the financial model. And then you'd go like, "Okay, let's do this again, but if the interest rate changes."

Martin Casado 29:12 Mm-hmm.

Steven Sinofsky 29:12 Or if their source of funds change.

Martin Casado 29:14 Yeah. Yeah, yeah, yeah.

Steven Sinofsky 29:14 And you're like, "Okay, well, that's like a week."

Martin Casado 29:16 Yeah. [laughs]

Steven Sinofsky 29:17 And, and everybody has to do it all over again. So you actually, your quality of decision-

Martin Casado 29:21 Yeah

Steven Sinofsky 29:22 ... was-

Martin Casado 29:22 That's exactly right

Steven Sinofsky 29:23 ... was, was really bad.

Martin Casado 29:24 Yes.

Steven Sinofsky 29:25 And, and so what happened was that-

Martin Casado 29:26 Amazing

Steven Sinofsky 29:26 ... just in 1985, like, that job just completely changed. And by 1990, instead of asking the recent grads to do it, you were doing it yourself. I actually remember this absolutely crystal clear. My, my two cousins were University of Chicago MBA grads in 1985. They did not use a computer to, when they got their MBAs.

Martin Casado 29:48 [laughs]

Steven Sinofsky 29:48 And when I was talking to them about going to Microsoft two years later, they were like, "Well, you know, we have these kids who use the computer for us."

Martin Casado 29:55 Uh-huh. [laughs]

Steven Sinofsky 29:55 And they, they ended up using computers and stuff, but, but, like, their whole-

Martin Casado 29:59 Yeah, yeah

Steven Sinofsky 30:00 ... notion of banking-

Martin Casado 30:01 Right

Steven Sinofsky 30:01 ... was defined-

Martin Casado 30:02 Defined, yeah

Steven Sinofsky 30:02 ... by this-

Martin Casado 30:03 Sure

Steven Sinofsky 30:03 ... multi-week turnaround, and then all of a sudden it's just more interns doing their Lotus 1-2-3 thing. And I, th-this is, it gets to the, you know, what's going on with, with code and-

Martin Casado 30:12 Yeah

Steven Sinofsky 30:12 ... startups is, is it's just the, there's just, like, a whole different mindset over how much you can do and how soon and iterate. Figma and Dylan, they're always talking about this.

Martin Casado 30:20 Yes.

Steven Sinofsky 30:20 Like, this is... Like, Figma's gonna now change the trajectory of a design idea-

Martin Casado 30:25 Right

Steven Sinofsky 30:25 ... to go from like, "Oh, let's iterate over here," to like, let's just

Aaron Levie 30:30 Do it. Yes. I mean, the, the, this is-- And this is where it's like a, again, a weird thing to like think about the percentage of my productivity as an example, and like my, my day is like not representative obviously, 'cause I'm bouncing between too many different things. But like there'll be so many times where it's 10:00 PM. In a prior world, I would've sent off a task to somebody, you know, uh, you know, some analyst or chief of staff, you know, type, type role, "Go research this thing." It comes back three days later, and then you find the answer, and then now it's obviously just like kick off a deep research-

Steven Sinofsky 31:00 Yeah. Yeah

Aaron Levie 31:01 ... go to Cursor to generate a prototype-

Steven Sinofsky 31:03 Sure. Yeah

Aaron Levie 31:03 ... do, do some kind of analysis, and then you have it back in 10 minutes or 20 minutes and, and I've just compressed whatever the, what-whatever that was kind of then gonna be as a, you know, serially, uh, connected to that task is now just fully compressed.

Steven Sinofsky 31:18 Yeah.

Aaron Levie 31:18 And so then by the morning, you're now kicking off whatever that project was. Again, like nearly impossible for me to peg like what is that as a number. It's just like a fundamentally different thing on just what work looks like, and 'cause you just compressed so many different steps of a workflow

Aaron Levie 31:32 into a single action, and so we're-- it's just like a completely different way of, of thinking about work.

Steven Sinofsky 31:38 Where, where does that fit in for you in what we were talking about, what I was asking about earlier, which is w- how does the expertise, your expertise really contribute to that?

Aaron Levie 31:47 Yeah.

Steven Sinofsky 31:48 And in particular, I, I think it'd be interesting for people to understand, like when you talk to customers, how do you help them to avoid trying to get people to make AI make them do jobs they couldn't do in the first place?

Aaron Levie 31:58 Yeah.

Steven Sinofsky 31:58 And like how does... 'Cause that's a easy point of failure.

Aaron Levie 32:01 Um, yeah, I mean, it actually is... Th-this is, this is this really, um, counterintuitive thing where, and you've talked about specialization on the last one, is like, it-- the, the, the, uh, biggest gains of AI go to people who have some degree of expertise in an area to know what is actually true, what is not gonna work, what should I, what should I integrate from the output of this AI.

Steven Sinofsky 32:26 Yeah.

Aaron Levie 32:26 You know, um, like what are the 2% of things that maybe are hallucinations or, or, you know, took the data in the wrong direction. If you don't have a deep understanding of your particular space or field or domain, you, you aren't able to then have the right judgment to make all of those decisions. So I think the experts just get more powerful in this world. And so I would... That-that's why I'm not even like convinced that you can tell a college student to learn anything different than ever any other, you know, period in history. Like, like be really good at a particular field-

Steven Sinofsky 32:54 Yeah

Aaron Levie 32:55 ... and then AI is merely a turbocharger of your capability in that particular field. But like if I didn't know, if I didn't just like generally know the things I know about, you know, SaaS, which is like obviously like a really like, like weird expertise, um, but like I'm like okay at understanding SaaS, then I, then the things I give to, you know, a deep research agent that I then go and incorporate back into work wouldn't make sense like to me. I wouldn't have the, I wouldn't have all the context for like that one thing that it mentioned, how do I like form that into the overall strategy? But because I have some understanding of, of this particular industry, that just makes me way more productive. So, so I don't think a-expertise goes away at all, and I think any, any of the experts in their particular area just become more powerful.

Martin Casado 33:37 So we, we actually have a fair bit of anecdotal market data on this, so it's very, very interesting. So if you take like a lot of these, let's just take kind of a non-text example like image or video, and if you look at the customer base for any of the popular platforms-

Aaron Levie 33:49 Yeah, yeah

Martin Casado 33:49 ... very interesting. So if you, if you draw a dollar at random that's monetized, it's from a professional.

Aaron Levie 33:56 Mm.

Martin Casado 33:56 And for obvious reasons because, you know, like y- you know, they can produce... If you draw a user at random, it's, it's casual-

Aaron Levie 34:04 Uh-huh

Martin Casado 34:04 ... and it's in the tail.

Aaron Levie 34:05 Right.

Martin Casado 34:05 And so it's fairly clear that, you know, this is a prosumer movement from monetization. And, you know, I'm in, I'm associated with a number of companies that work with, like say, professional designers or professional creatives. They spend just as much time on the AI tools as they would on traditional tools.

Aaron Levie 34:20 Yeah.

Martin Casado 34:20 It just turns out the out-output is far more rich and like, you know, it, you know, it, it's, it, it tends to be-

Aaron Levie 34:26 They have a, they have a taste that is, that is-

Martin Casado 34:28 Yeah. But I mean, it's still, still human taste.

Aaron Levie 34:30 Yeah.

Martin Casado 34:30 There's still like very specific requirements. And so I think, I think, you know, if there ever is an ads model that ever shows up for AI, I think that there's gonna be a long tail of people that wanna use AI, but they actually don't have the financial incentive to do it-

Aaron Levie 34:43 Mm-hmm

Martin Casado 34:43 ... or it isn't tied to like, you know, their actual job. And we're already starting to see that bifurcate out, and there's gonna be another subsection that do. And, and my sense is, let's say if I'm, let's say, say I'm writing like, whatever. I'm a, I'm a casual developer and I'm writing a 3D game, and I wanna have like a 3D asset. I've got one of two choices. I can have AI create it for me-

Aaron Levie 35:01 Mm-hmm

Martin Casado 35:01 ... or I can, you know, contract a professional to do it. Like me as a, a developer, I'm not gonna g- create... Even if I use AI, it's not gonna be a great 3D asset, [chuckles] right?

Aaron Levie 35:09 Yeah.

Martin Casado 35:09 And so I think that, you know, you're gonna have that same line that you have today-

Aaron Levie 35:12 Yeah

Martin Casado 35:12 ... is either you can ha-hack something up yourself or you can go with a professional, and the professional will be using AI.

Aaron Levie 35:16 And, and I think what's super exciting is, is that the AI has created a third category, which is, which is I am, uh, I'm not trying to do this as a job. I'm never gonna monetize this, but there's some product utility gain to me that is worth 20 bucks a month. So my ability to now generate prototypes-

Martin Casado 35:35 Sure. Yeah

Aaron Levie 35:35 ... when I'm by myself just brainstorming.

Martin Casado 35:37 Yeah, yeah.

Aaron Levie 35:37 Like again, I'm not gonna do anything in the ultimate delivery of that, you know, into any functional code, but like the, like it's worth $20 for me to be able to go and like realize the thing that I'm thinking about.

Martin Casado 35:47 Yeah.

Aaron Levie 35:48 And so, so there's just like all new ways of, of capturing TAM because there's all this utility that gets unlocked.

Martin Casado 35:54 Right. And there's one, there's, there's one more thing that's, that's worth noting, which is people that are interested in an area, in an area get there through AI right now.

Aaron Levie 36:00 Yes.

Martin Casado 36:00 It's like this is the number one opportunity for somebody, you know, that wants to enter an area to do it as an AI native, right?

Aaron Levie 36:05 Right.

Martin Casado 36:05 Because, A, like the tool actually can teach you.

Aaron Levie 36:07 Yes.

Martin Casado 36:08 You know, and then there's just such a paucity of, of talent out there that you can fill.

Steven Sinofsky 36:12 And this is also, I mean, this is the history of, of productivity in general-

Aaron Levie 36:17 Yeah

Steven Sinofsky 36:17 ... which is you, you, the more tools that you have available, first the experts use them-

Aaron Levie 36:23 Mm-hmm

Steven Sinofsky 36:23 ... and then more people are able to become experts.

Aaron Levie 36:26 Yeah.

Steven Sinofsky 36:27 And, and I, and I, as long-- But that's part of your managing your own career. I love that point you made about like you still have to be really good at something. And, and I think that, that-You know, if you wanna be good at finance or-

Erik Torenberg 36:38 Yeah

Steven Sinofsky 36:38 ... at sales, you, you should become really good at it and assume you're gonna use AI for that.

Erik Torenberg 36:43 Yeah.

Steven Sinofsky 36:43 And you're gonna be better than the people pretending. And I, and I think that that's very much like if you just take, you know, we were going back and forth about, you know, oh, it makes a PowerPoint slide deck. Well, it turns out to make a good PowerPoint deck-

Erik Torenberg 36:54 Yeah

Steven Sinofsky 36:54 ... is still a skill.

Erik Torenberg 36:55 Takes some work. Yeah.

Steven Sinofsky 36:55 And people still pay McKenzie huge amounts of money for better PowerPoint decks with better pictures.

Aaron Levie 37:00 Yeah. So, so listen, I, so I, [chuckles] I contract a lot of work for, like, videos and art, and I have for a very long time, you know, as part of, like, different companies or even here at a16z. You know, I have seen the shift for contracting some of these traditional techniques to AI. Dollar amounts are the same.

Steven Sinofsky 37:15 Yeah.

Erik Torenberg 37:16 Yeah.

Aaron Levie 37:16 Right? And so again, like, you know-

Steven Sinofsky 37:17 Yeah

Aaron Levie 37:17 ... this is Jevons paradox all over again.

Steven Sinofsky 37:19 Yeah.

Aaron Levie 37:19 Like, you spend just as much time.

Steven Sinofsky 37:20 Yes.

Aaron Levie 37:20 Um, you know, it's just the output tends to be more dazzling or whatever it is.

Steven Sinofsky 37:24 Yes.

Aaron Levie 37:24 And so I think that-

Steven Sinofsky 37:25 And you should see more versions of it.

Aaron Levie 37:26 Yeah.

Steven Sinofsky 37:26 You should run more simulations and other ideas.

Aaron Levie 37:28 That's right.

Steven Sinofsky 37:28 Yeah.

Aaron Levie 37:28 And you've got more iteration with them.

Steven Sinofsky 37:30 Yeah.

Aaron Levie 37:30 You've got more control. Like, I can ha- Listen, I can have a video where like, "And I want a dragon to fly out of the sky."

Steven Sinofsky 37:34 Right.

Aaron Levie 37:34 You know, so, like, you have, like, a lot more control, um, as, as the customer. But for sure, you know, this is not somehow, like, dropping the cost of output.

Erik Torenberg 37:44 I, I wanna... Were you about to jump in? I wanna circle

Erik Torenberg 37:47 back to a, a point you made earlier about that there are 20-year-olds who are building companies in new ways.

Aaron Levie 37:51 Yeah.

Erik Torenberg 37:51 Because remember a few years ago, I think Patrick Collison and a few others were asking, "Hey, where are all the Gen Z super successful founders?"

Aaron Levie 37:57 [laughs]

Erik Torenberg 37:57 Remember that?

Aaron Levie 37:58 Yeah.

Erik Torenberg 37:58 And, and of course there was Dylan Field and Alexander Wang.

Aaron Levie 38:00 Yeah.

Erik Torenberg 38:00 But they, their companies took a few years-

Aaron Levie 38:02 Yeah

Erik Torenberg 38:02 ... to really... But, but now, you know, we're seeing, uh, the Cursor founders, the Mercor founders sort of, you know, get to massive scale in a very short period of time. And maybe it was the, the foundation model companies required, you know, a certain level of, uh, you know, experienced founder because of the fundraising amounts and maybe the applications are, you know, m- more conducive to younger founders. But what, what's your s- re- reflection on this?

Aaron Levie 38:21 Well, um, the, the, I don't remember exactly the date at which he, he mentioned that, but the, but I do think there was a period, um, between in, in the sort of, you know, mid 2010s to late twen- to early 2020s where, where we were actually in kind of a bit of a lull as an industry.

Erik Torenberg 38:41 Yeah.

Aaron Levie 38:41 And-

Steven Sinofsky 38:42 Yeah, yeah

Aaron Levie 38:42 ... the, the reason for that was, like, it, like we kind of did, like, check off a lot of boxes of, like, the core things that people needed in the world. And so we, like, checked off, like, a lot of the... Like, once you have Slack, you don't need five other chat tools. Uh, once you have Zoom, you don't need five other video conferencing tools. And so it gets kinda derivative, you know, past these kinda core platforms. And so once you had, like, SaaS, you know, kind of check off all the major, like, things you do at work, and then in the consumer world, we, like, we had ways of delivering food and listening to music and watching videos. So, like, there's, like, not an infinite set of things that we, we do as consumers. Then, then what, what is the 20-year-old founder supposed to, to work on? Like, they're gonna... The, it's like you have, you know, pretty finite opportunities as compared to in the mid 2000s, let's say, the whole world was open. You could start anything. And because every single category had to be reinvented-

Erik Torenberg 39:31 Yeah

Aaron Levie 39:32 ... kinda post mobile po- post, you know, kind of cloud maturity. So we now have that era in AI, and that is why I'm, like, so unbelievably pumped up. And, um, and it's because you have a complete reset of the landscape where there, there's, like, on- There, there's incumbent advantage in distribution, but that is it. There's no o- other, other real advantage that an incumbent has.

Steven Sinofsky 39:53 Well, there's a bunch of disadvantages.

Aaron Levie 39:54 Yes. And then there's a bunch of disadvantages.

Steven Sinofsky 39:56 But I think-

Aaron Levie 39:56 So-

Steven Sinofsky 39:56 Yeah, go ahead. Sorry.

Aaron Levie 39:57 No, no, no. But, like, I mean, you know where I'm going. So, like, but, like, so you have this, you have the exact makings of a landscape where, where new startups can come in and do things that incumbents either can't or there's no obvious incumbent to even do that thing. Because again, you're taking maybe, like, services and turning them into AI labor, and there was no software incumbent previously to even attempt to do that. And then you have incumbents that have a whole lot of complexity in terms of their ability to go and execute in some of these spaces, and they're not gonna retool their entire internal engineering workflows to move at 10X the pace. And so a brand new startup can go and do that and then instantly get the scale of a larger company. So it's the first time in history where you have none of the disadvantages of a big company, and the, the traditional advantage you have as a big company is you have scale and you have distribution. Scale because you can look at a feature and you say, "We're gonna go build that next month." And obviously it's harder because there's, like, you know, um, you know, the, there's, there's just lots of complexity to that. But at least you have the, the human, you know, power to go do that. Now, as a startup, you instantly have scale because, you know, background agents, et cetera. And so then it's a distribution game, and a lot of these, you know, pieces of software can go viral now in a way that wasn't possible 10 or 15 years ago. So we've kinda neutralized a lot of the incumbent advantages, and so thus it's a ripe opportunity for brand new startups. Often will be people just, like, coming right out of college saying, "Hey, it's my first time building a company." Like, w- like, they're crazy enough to not know how hard it is, so they'll jump right into markets that otherwise we would assume are like, it's al- like, the, the market's already solved for. There's no way that you're gonna build a company, and you'll just have new startups that actually go and do it and, and actually produce real, you know, real companies in these spaces.

Steven Sinofsky 41:32 Yeah. 'Cause I, I mean,

Steven Sinofsky 41:34 this is just so critical because it, what, what's really happening is this is why you know it's an actual platform shift. So Silicon Valley's seen this movie many times before, and it, that's why often there's a lot of this, you know, is this crying wolf or not? Because everybody knows-

Aaron Levie 41:50 [laughs]

Steven Sinofsky 41:50 ... that when there's a platform shift, that's the moment in time that, that startups are at-

Aaron Levie 41:55 Right

Steven Sinofsky 41:55 ... at an advantage.

Aaron Levie 41:56 Yes.

Steven Sinofsky 41:57 And, and so each time there's a platform shift, like, everybody's like, "Oh, this is it. This is gonna reinvent everything." And then it doesn't, and people get really like, "Oh, it's always incumbents."

Aaron Levie 42:05 [laughs]

Steven Sinofsky 42:05 But historically, like, the advantages to incumbents are wildly overestimated.

Aaron Levie 42:10 Mm-hmm.

Steven Sinofsky 42:11 And really, I, I mean, this is this one where, you know, like, you know, was, did the internet undo Microsoft or not undo Microsoft is a super interesting thing.

Aaron Levie 42:21 Yeah.

Steven Sinofsky 42:21 'Cause of course there's a $3 trillion company now, but not on the internet in a way that you think about the internet. Like, none of the consumers, none of the platforms-

Aaron Levie 42:29 Yep

Steven Sinofsky 42:29 ... none of the assets that we had in the '90s-

Aaron Levie 42:32 Yeah

Steven Sinofsky 42:32 ... became internet assets.

Aaron Levie 42:34 Yeah.

Steven Sinofsky 42:34 I mean, even if you look at Azure today, it's an amazing accomplishment. It's not running Windows anywhere.

Aaron Levie 42:38 Right.

Erik Torenberg 42:39 Yeah.

Steven Sinofsky 42:39 And, and I think that, that that's why, you know, it's not crazy to go, "Wow, is this gonna be good or bad for Google?"

Aaron Levie 42:45 Right.

Steven Sinofsky 42:45 Because there's a bunch of stuff-

Erik Torenberg 42:47 Yeah

Steven Sinofsky 42:47 ... that becomes really, really difficult if you, if you don't make transition. And then it turns out historically, even if you do make the transition, you really didn't, and you just have to wait for time to pass.

Aaron Levie 42:58 [laughs] Yeah.

Steven Sinofsky 42:58 Well, and, and this-

Aaron Levie 42:59 Yeah.

Steven Sinofsky 42:59 No, this is like Intel-

Aaron Levie 43:00 Yeah

Steven Sinofsky 43:00 ... with the GPU.

Aaron Levie 43:01 Yes.

Steven Sinofsky 43:01 Like, they, they missed the GPU-

Aaron Levie 43:03 Right

Steven Sinofsky 43:03 ... in 2005.

Aaron Levie 43:05 Right.

Steven Sinofsky 43:05 And they missed the opportunity to buy the company, to do the work or whatever, and they kind of missed the data center, too.

Martin Casado 43:11 It just took a longer time to figure out that they missed that as well

Aaron Levie 43:14 Well, and we have a pretty narrow definition of, like, disruption in the sense of, like, we expect that the incumbent has to lose-

Martin Casado 43:21 Right

Aaron Levie 43:21 ... for this new startup, and so we-

Martin Casado 43:21 And that never happens

Aaron Levie 43:22 It never happens.

Martin Casado 43:23 Yeah, yeah.

Aaron Levie 43:23 And so i- it's the, it's the whole radio, TV, you know, um, uh, theater, you know, movie analogy.

Martin Casado 43:29 Exactly. Yeah.

Aaron Levie 43:29 And it's like, it's like, no, like, like, it turns out that Microsoft can be a $4 trillion company, and you can have all these new categories emerge that maybe Microsoft should have owned if everything was, like, perfectly analogous to the desktop days. But they just don't, and it all works together as-

Martin Casado 43:42 Right

Aaron Levie 43:43 ... as one sort of ecosystem, 'cause it just turns out, like, software did eat the world, and these markets are actually just, like, 100 times larger than what we realized. And so incumbents can grow, and then you have new disruptors-

Martin Casado 43:52 Yeah, any-

Aaron Levie 43:53 ... that, that sort of emerge along the way.

Martin Casado 43:54 Yeah, any time you bring in a, a new technology that brings the marginal cost down, then, like, the market's gonna expand-

Aaron Levie 44:00 Yeah

Martin Casado 44:00 ... and, like, the incumbents can do it. I will say incumbents are very bad when new user behaviors and buying behavior show up.

Aaron Levie 44:05 Yep.

Martin Casado 44:05 Like, in particular.

Aaron Levie 44:06 Yeah, yeah.

Martin Casado 44:06 They don't know how to cater to it. AI is definitely a new user behavior-

Aaron Levie 44:10 Yeah

Martin Casado 44:10 ... and a new buying behavior. And so this is very much-

Aaron Levie 44:12 Well-

Martin Casado 44:12 ... an advantage of startups just because, you know, to change a, a large company around a new user behavior cuts through the entire company. Everything from basically marketing all the way to support on the back end. That's just too much of a lift.

Aaron Levie 44:23 I mean, if you look at the, if you look at the, uh, b- best practices of, of, like, even how you would create an agent, in the last 18 months, I think we've gone through two to three architecture pattern changes.

Martin Casado 44:35 Yeah. Yeah.

Aaron Levie 44:36 And so, like, it's ju- like, you know, y- I can-

Martin Casado 44:39 No, exactly. Exactly

Aaron Levie 44:39 ... barely keep up-

Martin Casado 44:40 Yeah

Aaron Levie 44:40 ... as a, you know, midsize company. I can't imagine if you just had so many-

Martin Casado 44:44 Yeah, I mean there's-

Aaron Levie 44:44 ... more people you had to, like, organize around that.

Martin Casado 44:47 D- disruptive new technologies require-

Aaron Levie 44:49 Yeah

Martin Casado 44:49 ... you know, people to understand how to use them in consumption in different ways. That evolves over time as you get best practices. Like, that sort of flexibility can only come... It's actually a very interesting question of how, uh, Microsoft actually did Copilot to begin with, 'cause it was actually one of the first ones of these products that was very successful. I learned recently it was created by OpenAI, so that kind of explains it. [laughs]

Aaron Levie 45:07 Well, but, but you had an a- at least, but, but, like, but you had a startup person.

Martin Casado 45:10 You had a person in it.

Aaron Levie 45:11 And you, and, and-

Martin Casado 45:11 Yeah, yeah, yeah

Aaron Levie 45:11 ... and conveniently he was a startup guy.

Martin Casado 45:13 Yeah, yeah, yeah. 100%.

Aaron Levie 45:14 So, and, and conveniently-

Martin Casado 45:15 But, so, but even then, by the way, this is remarkable-

Aaron Levie 45:17 Well-

Martin Casado 45:17 ... that it came out of Microsoft.

Aaron Levie 45:18 But the, it-

Martin Casado 45:18 It's absolutely remarkable

Aaron Levie 45:19 ... what's always remarkable is when, when something new and defining comes from these big companies, basically skunkworks. Basically they had nothing-

Martin Casado 45:26 Exactly

Aaron Levie 45:26 ... to lose.

Martin Casado 45:27 Exactly. Exactly.

Aaron Levie 45:27 Uh-

Martin Casado 45:28 Right. Right. Right

Aaron Levie 45:28 ... and, and it didn't interfere. Like, the iPod-

Martin Casado 45:30 Didn't interfere. Right

Aaron Levie 45:30 ... is this classic one. People al- or the iPhone even.

Martin Casado 45:33 Yeah.

Aaron Levie 45:33 People always talk about, like, the brave... It's like their computer business was dead-

Martin Casado 45:37 Right

Aaron Levie 45:37 ... dead, dead.

Martin Casado 45:38 [laughs] Right.

Aaron Levie 45:38 Like, there was, it was, like, 3% share-

Martin Casado 45:41 Yeah, yeah, yeah

Aaron Levie 45:41 ... and going nowhere. So, like, it, it was like a Hail Mary. The iPod was a Hail Mary.

Martin Casado 45:47 Right.

Aaron Levie 45:47 And then the phone, they weren't in the phone business.

Martin Casado 45:49 Yeah. Right.

Aaron Levie 45:49 It didn't matter. And the fact that they made a phone a little computer is what Nokia was like, "Ugh, what is that?" And I, and I think people really need to wrap their heads around just the fact that, to your point, that the, the big companies stay around a very, very long time. And this is something I've seen a bunch of people in the past couple weeks, you know, "Oh, it's basically Christensen 'Innovator's Dilemma.'" Of course, nobody's ever read the book.

Martin Casado 46:11 [laughs]

Aaron Levie 46:11 And, and, and Clay is a great guy. You know, he was down the hall when I was teaching there. And the, the thing is, is that this is a book, like, about two-and-a-half-inch disk drives-

Martin Casado 46:20 Yeah, I know

Aaron Levie 46:21 ... and a bunch of really crazy-

Martin Casado 46:22 I don't think it app- I don't really think it applies to modern software

Aaron Levie 46:24 ... but, but the thing that he, he missed, aside from he missed the cost and low, high-end and thing, but was also that the companies don't evaporate.

Martin Casado 46:32 Mm-hmm. Right. Yeah, yeah.

Aaron Levie 46:33 And your, your point about that is really important.

Martin Casado 46:34 Yeah, yeah. Totally.

Aaron Levie 46:35 And so what it does is there's this shadow-

Martin Casado 46:37 Yeah

Aaron Levie 46:37 ... that everybody is worried about, and so you just see it constantly. Well, like, the, the... I assume, like, you, you, you... When a company is like, "We're not worried about if Google does this," that's what you wanna hear.

Martin Casado 46:47 Right.

Aaron Levie 46:48 Because, like, it just... I mean, and you've lived this.

Martin Casado 46:50 I mean, I, I mean-

Aaron Levie 46:50 'Cause you, you were, like, the classic s- you know, Steve Jobs said you're a feature.

Martin Casado 46:54 Mm-hmm.

Aaron Levie 46:54 And here, not just that you, there's, like, two whole companies that do this stuff now.

Martin Casado 46:57 Fortunately, he only said that to Drew, so, um-

Aaron Levie 46:59 Right. Right. You know, I, I, I-

Martin Casado 47:00 So I, I got, I got the gay version of that one, so.

Aaron Levie 47:02 Yeah, yeah, yeah. Um, but, uh, no but, but the, the one thing that is very timeless, uh, about, about Clay, uh, would be, would be the thing that has, the thing that does transcend floppies or-

Martin Casado 47:12 Yeah

Aaron Levie 47:12 ... you know, whatever the, whatever thing is, is the incumbent doesn't wanna do something that's against their business model that's working.

Martin Casado 47:17 Of course. Of course.

Aaron Levie 47:18 And that, that part is, is fully timeless.

Martin Casado 47:19 Yep.

Aaron Levie 47:20 And to your point, it's actually very rare whenever we say these companies disrupted themselves, it's almost never the case that they disrupted themselves. It's the case that they, they went after a market that they had no, no actual, you know, ta- uh, you know, market share in.

Martin Casado 47:34 Right.

Aaron Levie 47:34 And it just worked.

Martin Casado 47:34 Which was the development tools for Microsoft.

Aaron Levie 47:36 Yeah.

Martin Casado 47:36 'Cause, like, the Window... There was no business in Microsoft development tools anymore-

Aaron Levie 47:40 Right

Martin Casado 47:40 ... 'cause nobody was writing Windows programs.

Aaron Levie 47:42 Right.

Martin Casado 47:42 So really it was like, "What could we do for the cloud?" And, like- I mean, honestly, it's even a little bit of a silly discussion to do this with AI. Like, AI is very disruptive, so we're like, "Okay, well then it allows startups to, like, work against incumbents." But even in non-disruptive technologies, startups often have a play against incumbents.

Aaron Levie 47:58 Yeah.

Martin Casado 47:58 So for example, every year f- I'm a, I'm an infrastructure investor. Every year for the last 10 years after AWS re:Invent, I move into therapist mode.

Aaron Levie 48:06 [laughs]

Martin Casado 48:06 And all, all of my found-

Aaron Levie 48:07 Yeah. Yeah. Yeah.

Martin Casado 48:07 All of my startups, all, all of my founders call me-

Aaron Levie 48:08 They launched us on... Yeah. Yeah

Martin Casado 48:09 ... and they're, they're, they're launching my open source. They're competing with... It happens every single time, and I'm always like, "You know what?"

Aaron Levie 48:14 That's really funny.

Martin Casado 48:15 "You'll be fine." I can't think of one company AWS has ever put out of business by launching a service, and you know what? They've all been fine. And so-

Aaron Levie 48:21 Yeah

Martin Casado 48:21 ... in some ways, even in-

Aaron Levie 48:23 Uh-huh

Martin Casado 48:23 ... like, the normalLike state of business without massive disruption, startups still have a-

Steven Sinofsky 48:28 Yeah, it was, uh, don't build a SQL server and compete with Oracle directly.

Martin Casado 48:31 Yeah. Don't build-

Steven Sinofsky 48:31 And don't build a word processor. Those are two decisions that were pretty evergreen for a long time.

Martin Casado 48:35 Never do, never do, never do, never do a spreadsheet.

Steven Sinofsky 48:36 Yeah.

Martin Casado 48:36 Like there's a few things that are-

Steven Sinofsky 48:37 No, there are some categories where people should call us first-

Martin Casado 48:39 Yeah

Steven Sinofsky 48:40 ... if they're thinking about a project.

Martin Casado 48:41 100%.

Steven Sinofsky 48:41 'Cause like they, they won't change. But-

Martin Casado 48:42 There's a far side that we should, we should definitely show people that.

Steven Sinofsky 48:45 [laughs]

Martin Casado 48:45 It's a really...

Steven Sinofsky 48:46 Oh, can I have 10 cents? Why do you want 10 cents for your startup? So I could buy a loaf of bread and beat you over the head with it for such a dumb idea.

Martin Casado 48:52 [laughs]

Steven Sinofsky 48:53 Uh, uh, it's a good one.

Martin Casado 48:54 We should, we should have a call-in on this thing, right?

Steven Sinofsky 48:57 Exactly. Oh, yeah, yeah. Here's my startup.

Martin Casado 48:58 [laughs] Yeah, yeah.

Aaron Levie 48:59 The, the thing though that, that,

Aaron Levie 49:01 that, the, but the other thing that I just don't think we've had, at least I don't know of a modern kind of case study for, is, is again this, uh, this opening up of non-software TAM for software.

Steven Sinofsky 49:12 Yeah, yeah.

Aaron Levie 49:12 So it's not even incumbents in the classic sense. The incumbents are, are, are really just professional services categories of work. And so, a- and so it's really, for the first time ever, you're packaging up intelligence for a particular domain and workflow.

Martin Casado 49:27 Yeah.

Aaron Levie 49:27 And so there's no software company you're competing against for those dollars.

Martin Casado 49:30 Yeah, but, but it, but it could be the vertical company, right? Like-

Aaron Levie 49:32 Yes.

Steven Sinofsky 49:32 Yeah.

Martin Casado 49:32 You know, like you have to become an ag company.

Aaron Levie 49:34 But, but then, but the vertical company will probably also be your customer though.

Martin Casado 49:37 You have to become a construction company.

Steven Sinofsky 49:37 Yeah, yeah.

Aaron Levie 49:37 But they're also your customer, so it's actually this amazing thing where, where the people you're probably disrupting on paper are actually the primary users of your technology.

Martin Casado 49:45 That could actually take advantage.

Aaron Levie 49:47 Yes.

Martin Casado 49:47 Yeah.

Aaron Levie 49:48 And so then it's like, it's like there's really no inherent competition until, until, you know, eventually like more companies flood that space to do that idea.

Martin Casado 49:54 So this plays out in practice. If you have a company, an AI company that goes after, say like agriculture or construction, they end up like realizing the competitive set are agriculture and construction. The buyer knows how to price things like agriculture and construction. They end up becoming basically agriculture and construction companies, and then they end up doing exactly what you're saying, is selling to the agriculture. [laughs]

Aaron Levie 50:13 Yeah, yeah. Yeah.

Martin Casado 50:14 'Cause it's like, you know, 'cause they're not good at that, right? That's not what they do.

Steven Sinofsky 50:16 There, there's a whole world.

Martin Casado 50:17 That's exactly right.

Steven Sinofsky 50:17 In fact, the, the earliest PC software-

Martin Casado 50:19 That's exactly right

Steven Sinofsky 50:20 ... was extremely vertical. Like the, if you actually look at the TRS-80 catalog from the early 1980s or nine- late 1970s, it would be like, "This is crop rotation software."

Aaron Levie 50:30 [laughs]

Martin Casado 50:30 This is like-

Steven Sinofsky 50:30 Like literally like, okay, this is what you should do. Like, and you, and the, the salesperson for Tandy-

Aaron Levie 50:36 That's amazing

Steven Sinofsky 50:36 ... would show up in Nebraska and sell crop rotation software.

Aaron Levie 50:39 [laughs]

Steven Sinofsky 50:40 And then there was like, I run a dentist office.

Aaron Levie 50:42 Yes.

Steven Sinofsky 50:42 And this is scheduling for a dentist's office. And what happened was, and this is what I think is gonna happen, is these professional services organizations are, there are gonna be some that are like computer savvy.

Aaron Levie 50:53 Yeah.

Steven Sinofsky 50:53 And today they're really good-

Aaron Levie 50:55 Yes

Steven Sinofsky 50:55 ... at using existing... They, they're just gonna go, "You know what?"

Aaron Levie 50:57 They're gonna be AI savvy.

Steven Sinofsky 50:57 "We should just build like a company."

Aaron Levie 50:59 Yeah, yeah. Yep.

Martin Casado 50:59 Yes.

Steven Sinofsky 50:59 Huge numbers of these verticals are just gonna be-

Aaron Levie 51:02 Well-

Steven Sinofsky 51:02 ... existing pro serve-

Aaron Levie 51:03 Yes

Steven Sinofsky 51:03 ... that turn into software providers.

Aaron Levie 51:05 I, I think it's, I think it's an incredible time where, where if... Let's just pretend that you're just, you just have, are committed to not building a software company, like you don't wanna do that or you don't maybe have the, the team to do that. So you're gonna build like a real world company. It's an incredible time if you started from scratch with now AI as your, as your foundation.

Steven Sinofsky 51:21 Yeah, absolutely.

Aaron Levie 51:21 If you wanted to be a new systems integrator, and your whole point is, is that we are a systems integrator, but we use Cloud Code, or we use Cognition, or we use, you know, Cursor to, to get the output, you will have such an advantage over any incumbent because the incumbent is not gonna be able to rebuild that. So I've seen examples of people building new ad agencies.

Martin Casado 51:39 Oh, yeah, yeah.

Aaron Levie 51:40 'Cause obviously like if you can do-

Martin Casado 51:41 Oh, everything

Aaron Levie 51:41 ... literally a million dollar ad, you know, video, you know, campaign for-

Martin Casado 51:45 Yeah

Aaron Levie 51:45 ... you know, $5,000, somewhere between those two numbers you can charge the customer. So, so there's like this incredible time where you can just be building all new kinds of companies from the ground up, leveraging the breakthroughs that we've now seen in AI.

Steven Sinofsky 51:57 That actually did, that was an early internet thing that did really happen.

Aaron Levie 52:00 Yeah.

Steven Sinofsky 52:00 Which, uh, particularly in the advertising space, and I think it's gonna happen in everything that's text-

Aaron Levie 52:04 Yeah

Steven Sinofsky 52:04 ... and everything. Which was there were these digital native ad agencies-

Aaron Levie 52:08 Yeah

Steven Sinofsky 52:08 ... that just knew how to use Flash.

Aaron Levie 52:09 Right, right.

Steven Sinofsky 52:10 And they got... Like they would get bought for a billion dollars. [laughs]

Martin Casado 52:12 The same, the same thing happened with social, by the way.

Steven Sinofsky 52:14 Yeah, exactly.

Martin Casado 52:14 Like the rise of social.

Steven Sinofsky 52:14 Exactly. What did you think of this survey that was how many people use AI every week? I thought this was pretty interesting.

Aaron Levie 52:20 Um, yes. What was the, what was your res- what was your Pew response?

Steven Sinofsky 52:24 Well, there, it turns out like the number of people, it's like up to 75% of adults are using it many times per week.

Aaron Levie 52:29 Yes.

Steven Sinofsky 52:29 And of course you just see it when you use Google Search.

Aaron Levie 52:32 Yeah.

Martin Casado 52:32 Right.

Steven Sinofsky 52:32 It's, it's all self-reported-

Martin Casado 52:33 It shows up

Steven Sinofsky 52:33 ... so you don't really know.

Aaron Levie 52:34 Right, yeah.

Steven Sinofsky 52:34 But it was pretty interesting because I pulled a 1999 Pew study-

Aaron Levie 52:38 Yes

Steven Sinofsky 52:38 ... on internet usage.

Aaron Levie 52:39 As you would.

Steven Sinofsky 52:40 As I would.

Aaron Levie 52:41 Yes. [laughs]

Steven Sinofsky 52:42 Like basically in 1999, like half the country owned computers.

Aaron Levie 52:46 Yeah.

Martin Casado 52:47 Yeah.

Steven Sinofsky 52:47 And they were all online.

Aaron Levie 52:48 Yeah.

Steven Sinofsky 52:49 Even four years post Netscape-

Aaron Levie 52:51 Yeah

Steven Sinofsky 52:51 ... it was like still half the country.

Aaron Levie 52:52 Yeah.

Steven Sinofsky 52:52 And so you, you look at that as being slow or being fast?

Aaron Levie 52:55 It was fast back then. I mean, that felt fast, actually.

Steven Sinofsky 52:57 But you had to spend $3,000.

Martin Casado 52:58 The activation energy was buying a computer.

Steven Sinofsky 53:00 But, but, but still the, you know, if you discount the search AI-

Aaron Levie 53:04 Yes

Steven Sinofsky 53:04 ... there's still, you know, activation energy to, to figure out what this new thing is. Nobody knows how to ask questions to a blank edit control.

Aaron Levie 53:12 No.

Steven Sinofsky 53:12 Like make me smart about something.

Aaron Levie 53:13 I think the, the, I mean, the, the adopt- the universal adoption of this as a consumer technology and then bleeding into prosumer is, is, it exceeds anything I've ever-

Steven Sinofsky 53:22 It's unbelievable

Aaron Levie 53:22 ... I've ever experienced. And I think it is, it will just fundamentally change people's sort of daily patterns. Like my sister, not in tech at all, a teacher, like she was in town and she was like, "Yeah, I was asking chat this question." And like, I had to like do a double take.

Steven Sinofsky 53:35 Yeah, yeah.

Aaron Levie 53:35 I was like, "Like chat?" And I was like, oh, ChatGPT, that's what they, that's what normal people call this.

Steven Sinofsky 53:39 [laughs]

Aaron Levie 53:39 And it's just like, it's just like it's completely pervasive as just a, a standard technology. And so that to me is just like, okay, we now have the conditions laid for the next phase, which is, and we've, we've now seen this for a couple decades, which is consumer adoption now goes first, and, uh, and then it gets basically pulled into the enterprise because you go to work and you're like, "Why, why can't I ask-

Steven Sinofsky 54:01 Exactly

Aaron Levie 54:01 ... questions of my enterprise systems-

Martin Casado 54:03 Yeah. Yep, yep

Aaron Levie 54:03 ... the way that I can everything else in the world? And why am I not getting that same level of productivity gain?" And then you again have the kids coming outta college that like they only know how to do homework-

Steven Sinofsky 54:13 Right

Aaron Levie 54:13 ... with, with ChatGPT. They come into the workforce and they're like, "Why would I spend two weeks writing this report when I just came out writing essays in an hour?" Like, obviously something has to kinda give on this. So this is why, this is just lays the, the foundation for why we're going to see just a massive upgrade cycle in the enterprise.

Steven Sinofsky 54:30 Also, to build on your point earlier, like about distribution, and the reason that distribution is not the advantage that it used to be is because it's already exists on seven billion phones.

Aaron Levie 54:40 Right. Yeah.

Steven Sinofsky 54:41 And, and so at every other platform shift, there was an upside to getting new distribution-

Aaron Levie 54:46 Right

Steven Sinofsky 54:46 ... that didn't exist before. And but you had to overcome that. Like, you had to get, like, the internet to people who didn't have the internet before. You had to get-

Aaron Levie 54:54 Yeah

Steven Sinofsky 54:54 ... SaaS to people who didn't-- Now everybody has all of the ingredients right now.

Aaron Levie 54:58 Anytime your business strategy relies on Comcast showing up in a neighborhood-

Steven Sinofsky 55:02 Exactly

Aaron Levie 55:02 ... for, for me to get distribution like that, you're gonna have some problems.

Steven Sinofsky 55:05 Yeah.

Aaron Levie 55:06 So this is a very different trend.

Martin Casado 55:07 Honestly, last quick point on this is, like, for the first time in a very long time, we're seeing brand effects with an early technology. And what I mean by that is if you look at, like, whatever the major model providers, you know, how much better are they from each other? Like, you know, maybe, you know, a little bit, maybe not. Like, you know, it changes all the time. But you actually see clear leaders if they break out early just because people learn, like, the household name. Like, people learn Midjourney.

Steven Sinofsky 55:30 Yeah, yeah.

Martin Casado 55:30 People know OpenAI, et cetera. So these markets are so big, they're growing so fast that, like, you know, if you become a leader in your segment-

Steven Sinofsky 55:37 Yeah

Martin Casado 55:37 ... people will just adopt you.

Steven Sinofsky 55:37 But, but don't discount, you know, like, the early leaders of search for, like, Excite and Yahoo.

Martin Casado 55:42 Yeah.

Steven Sinofsky 55:42 And so there's... Like, this is just to not discourage people-

Martin Casado 55:44 Oh, we're, no, no, we're so-

Steven Sinofsky 55:45 From, from thinking-

Martin Casado 55:46 Yeah, yeah. We're still in that early game.

Steven Sinofsky 55:46 Right. Like, it's so early that names that you never heard of existed before Google.

Martin Casado 55:50 Yeah.

Steven Sinofsky 55:50 And that's gonna be really important.

Martin Casado 55:52 Yep. Totally.

Steven Sinofsky 55:52 It's never the first people.

Martin Casado 55:53 Yeah, yeah.

Erik Torenberg 55:54 When, when we look at mobile, there were big companies built, you know, uh, like Uber and, and WhatsApp and Instagram and TikTok, but the biggest beneficiaries were Facebook and, and, and, and Google. Um, in AI, do we think it will be different, that sort of the biggest companies in, in the world in 10 to 20 years from now will be, will have created-

Steven Sinofsky 56:10 Mm-hmm

Erik Torenberg 56:10 ... you know, after ChatGPT, or, um, or will it be similar that-

Aaron Levie 56:14 What's your timeframe?

Erik Torenberg 56:16 Uh, you know, post-2019. I don't know. Um-

Aaron Levie 56:18 No, no, no. How many, 10 to 20 years you said?

Erik Torenberg 56:20 Oh, yeah. Sure.

Aaron Levie 56:21 Okay. So we can't know if we're wrong for until we do this podcast in 10 years.

Erik Torenberg 56:24 [laughs] Yes.

Steven Sinofsky 56:24 Okay.

Aaron Levie 56:25 Um, I think, I... This is so boring, but I think, I think it's gonna look like what we saw in something like SaaS or cloud, which is the incumbents get bigger, but then there's all of these new categories that we would not have been able to predict, and then there's lots of 10 and 20 and 50 and $100 billion companies that also emerge, and then over time those will just continue to scale.

Erik Torenberg 56:46 So similar to mobile?

Martin Casado 56:47 And, and some-

Aaron Levie 56:47 Yeah

Martin Casado 56:47 ... and some don't make the transition.

Aaron Levie 56:48 Yeah. Uh, yeah.

Martin Casado 56:49 Like, you know, some don't make the transition.

Aaron Levie 56:49 Some will go down on a relative basis 'cause their mar- or, like, their market wasn't as ripe for agentic kinda workflows. But I think that you can kinda say, um, you know, maybe this is then for another conversation, is just, like, if you have a current system of record that, that has a set of workflows on it where agents make sense to make that workflow much more powerful, that's a good position to be in. But it t- I bet you that if we look back in 10 or 20 years from now, the vast majority of things agents do don't relate to just those things that we are currently looking at because there's just so many-

Steven Sinofsky 57:22 Yeah

Aaron Levie 57:22 ... more fields that are now open. And so all of those use cases I would favor the disruptor and, or the insurgent. And then in the, in the today's spaces I would kinda favor the incumbent on the margin, but the markets are so large that all... you're gonna see kinda growth in all of them.

Steven Sinofsky 57:36 The, th-there's a key, um, attribute across all of those which, you know, y- is, is sort of like thought leadership or, like, who, who is really setting the agenda for what people are talking about, and I think that's the thing that really changes. The incumbents become bigger, but nobody's wakes up in the morning wondering what they're up to.

Aaron Levie 57:54 Right.

Steven Sinofsky 57:55 Nobody starts to wonder, "Well, if they're gonna do it, we need to understand it." And that's the shift, and you can think of it in the enterprise space or the business space, like what do the CIOs, who do they wake up thinking about?

Aaron Levie 58:05 Yeah.

Steven Sinofsky 58:06 And that, that was a huge shift that sorta goes under the radar. And in the consumer space, it just, like, it becomes the, "I understand. I use ChatGPT at school. I, I need ChatGPT."

Aaron Levie 58:16 Yeah.

Steven Sinofsky 58:16 And y- there's nothing you can do about it as a company.

Martin Casado 58:18 Yeah. I think the more provocative question is, is are there any laggards that will use this to get ahead? And we've seen this in the past, right? Like, will Cisco do something interesting?

Steven Sinofsky 58:27 Yeah, yeah.

Martin Casado 58:27 Oracle is making some kinda crazy moves. Like, are we gonna see those that, like, missed, like, social-

Aaron Levie 58:32 No, I, I think we... Everybody missed Oracle as an example.

Steven Sinofsky 58:35 Yeah, yeah.

Aaron Levie 58:35 Right?

Martin Casado 58:35 No, totally.

Aaron Levie 58:36 From, from three years to, to today, like, you would not have been like, "Oh, definitely the next trillion dollar company."

Martin Casado 58:39 I mean, Mic- Microsoft had its moment of, like, you know, you didn't know the future, and then they used cloud and Azure to kinda come back. And so, you know, this actually is an opportunity for laggards that are behind the curve to come back.

Aaron Levie 58:48 Yeah. Um, to the Cisco point, like, data centers are sexy. Like, it turns out that we're just gonna be building out lots of AI factories everywhere, so you're gonna get more scale-

Martin Casado 58:57 Yeah

Aaron Levie 58:57 ... from, from parts of the stack that we stopped paying... Like Broadcom, like w- again, people were not-

Martin Casado 59:01 Honk, Hon-

Aaron Levie 59:02 Yeah. [laughs]

Martin Casado 59:03 Hon Hai is gonna end up right there. Everybody looks at Jensen and maybe somebody else, so.

Erik Torenberg 59:07 We'll table the rest for the next conversation.

Aaron Levie 59:08 All right. Yeah, yeah.

Erik Torenberg 59:08 Thank you so much for coming on.

Martin Casado 59:08 Thank you so much. Thanks, everyone. [upbeat music]