Speaker unverified: prediction

Transcript context

…the most valuable companies of all time and you know in the top five of the you know SMB 500 and all that. But it's so interesting. I remember the book The Long Tale and all that but it's it's created incredible economy. So if you took up the top 100 software companies in the stock market, the top five are you know the meta Google, Amazon, etc. Apple, Microsoft. But like the next 40 are like SaaS companies, many of which most people have never heard of unless you're sort of in our business. What is the sum of the long tale? And I look at like incredible businesses like Shopify as an example and you know Shopify is a beneficiary of that. But there are a lot of businesses on top of yeah. I also give like Patrick at Stripe Taco increasing the GDP of the internet. So I think the long the internet in particular is an extremely long tale and I think it's you know really change the economy in dramatic ways and change distribution mechanics and you know you look at certainly meta TikTok wouldn't exist without the internet and you give credit to the internet or do you prescribe it all there. So I'm happy to answer your question but just to say I don't know actually how to think about that because every company is a digital company at this point. It's interesting. It's an interesting point and maybe I need to reframe how I ask the question because I think you might be right that the totality of the value created on top of the platform itself dwarfs that. It may actually I'd be interested for someone smarter than me to do that analysis. I think it does but I don't know that. It's also hard to define. It's hard to define. Is it bank with 60,000 software engineers a software company or bank? And the HVAC company that can now reach customers in a more meaningful way that grew from one million revenue to 20 million revenue. Who do you give credit to for that stuff? It's interesting but I guess the question I had is there's sort of this I guess the Salesforce and mobile prove to be Salesforce in a lot of ways. It was kind of a continuing at least within that and obviously there's disruption that ended up happening with Uber and taxis or Airbnb and hotels or whatever it is. I guess as you think about those big software players and you mentioned ServiceNow and SAP obviously you know Salesforce in the ecosystem as well. Do you think that the lion's share of those will be the ones that persist if we picked I don't know the 10 industries and who the whores are not horizontal I guess but like who the application players on there do you think the lion's share of those will survive and be the next generation of it a kind of mobile or do you think we'll look at a lot of disruption and that new companies are going to be who captures ITSM or CRM or ERP or whatever three-letter acronym. I think there will be disruption but I don't think any one of those will definitely be disrupted. I actually I think it's just going to require a lot of execution. I was joking over Toby at Shopify one time that you know you find a cynical engineer and like are you just a database in the cloud you're like kind of. Yeah I mean I was like look I mean kind of under I was joking over Toby at Shopify one time that you know you find a cynical engineer and like are you just a database in the cloud you're like kind of. Yeah I mean I was like look I mean kind of under cells the decade plus work I put into this database of the cloud yeah kind of is if you look at software as a service reductively it is a database in the cloud with a lot of workflows on top and what agents will end up doing is those workflows and so you know I haven't done a lot of work on ERP systems but if you just imagine you know the procurement processes and you know contracting and all the things that sort of make up at them and the Ernst & Young auditor using it to you know audit your financials for a quarterly earnings report how much of that will be AI agents and then what is the value of that platform when the forums and fields and the web browser aren't used very much anymore not nothing I actually think that ledger that you know the the balanced books that you have is actually quite useful so it's not zero and then similarly yeah could the company who made the forums and fields in the web browser and make the agents yeah I could definitely see that. The thing that we've seen just time and time again technology though is you know there's all the fancy names for innovators dilemma crossing the chasm I can't remember what they all mean anymore but you know effectively when you're an incumbent you sort of become addicted to your product and business model and as a consequence when there's a big platform shift underneath you you end up usually with a graveyard of companies who usually for business model reasons couldn't make that transition seabull systems with on-premises software relative to some company like Salesforce you could see the you know companies like Microsoft you know had fits and starts with the internet and cloud and came out quite strong and so if you're big enough you get multiple out that's you know with with these transitions so my guess is we will have a few stories you know maybe maybe a such a level story of a company that came out even stronger on the other side of it and we'll have some stories like seabull systems you know of companies that saw the slow motion car wreck in front of them and couldn't turn the wheel fast enough just because of the natural gravitational forces that they keep large companies from from innovating the thing that I feel really grateful to have briefly been you know a public company CEO because you really feel those gravitational forces you know it's investors say they're long-term and every single quarter you go out and you get a report card you know on on your business and you know I have so much admiration for people like Sean to do at Adobe who went through that transition from perpetual license software to routable revenue it's so much a craft and like true business model transitions it changes your balance she changes your like accountings like all of a sudden you look more or less profitable even though I was laughing about accounting it's like it's like the cash flow is the same but all these numbers shift around and then on top of you have to have sudden you look more or less profitable even though I was laughing about accounting it's like it's like the cash flow is the same but all these numbers shift around and then on top of you have to have be a great storyteller and bring your employees along with you your investors along with you your your your customers along with you it's formidable I'd say I said you know I think a lot of entrepreneurs are like yeah we're gonna you know disrupt the incumbents that actually sort of funny having sat in that seat for a while I have a ton of empathy and I think some great leaders will come out of this and and just like the reputation such a house for transitioning Microsoft into the Azure cloud era but it is absolutely not a fair going conclusion in fact I think you know for most of these incumbents the defaults will be that they will be disruptive they don't embrace you know where software is going you've talked about this in the past and you kind of alluded to it there but the the business model elements of it seem far harder with all those constituencies you talked about shareholders and employees and customers and just managing expectations and and taking people through all the accounting and EOS secreties it seems like that in your mind is even more challenging than the technological elements without question in my mind actually I don't at there are points where technology is really hard you know in 1995 is really hard to make a scalable website you know and like the modern practices I don't think like you know things like men cash didn't exist and you know just getting databases to scale was a big deal and I was talking to someone who worked at Oracle when Salesforce was starting and they're talking about multi-tenancy in a database was like a novel concept so yeah it's I don't even minimize the technology but you don't need to be a AI researcher to see like making agents that work somewhat effectively will get really easy relatively soon it's really hard right now and just technology will improve so how you actually build a product that's useful for stakeholders one thing but then what is the business model and the the reason why it's hard to make a business model shift is just the change management of that so if you're a any SaaS company in your portfolio I'm probably has the same incentive structure which is you have your annual recurring revenue and sales people get incentivized to increase it and you might have a team that is incentivized to reduce attrition so you're sort of adding to your annuity and you're trying to keep keep attrition down so you don't lose money value in that annuity it's kind of how all all software is a service company's work okay so now think about it from the perspective of on an individual account they're paying you I'll just make it even numbers they're paying you a million dollars a year and you have a disruptive new technology that in 10 years will mean they're paying you 10 million dollars but if you roll that out that year it would go down to two hundred thousand dollars how do you actually do that if you're a public company that's really hard just because like all…

Stored transcript either side of the excerpt. The highlighted words are the published quote; the surrounding text is unedited source, never generated.