Bret Taylor: prediction

Transcript context

…If you talk to an economist like Larry Summers who, on the OpenAI board with me, they'll talk about what is the value of technology? Will it help strive productivity in the economy. And if you look at one of the big jumps in productivity in the economy was in the '90s, and I think a lot of folks I talked to think it was actually that very first wave of computing where people made ERP systems and just put accounting into computers and databases, even mainframes, we're talking like the PC era. Because it was such a huge step-up, just imagine the ledgers of numbers that you'd have for a large multinational company before and it truly just transformed departments. I'll give you a little toy example. My dad just retired. He was a mechanical engineer and he was talking about when he first started his career in the late '70s and he went into a mechanical engineering firm, the majority of the firm were drafts people. So basically, you take an engineering design but you needed to do all the different vantage points and for all the different floors and to give to the contractor to do the thing. Now, there are zero drafts people at his company. You just make the design in first AutoCAD and now Revit and it's a 3D model and the drafting has actually been eliminated. It's just not a thing one needs to do anymore. The actual design and drafting, drafting is not a thing that exists. It's just a design. That's true productivity gains, right? It's like the job of the mechanical engineering firm was to do a design. The drafting was this necessary output for the contractor, but it wasn't really adding value. It was just like the supply chain change. If you look at the history of the software industry from the PC on, there's been meaningful productivity gains but just not nearly as meaningful as that first huge jump. And I'm not smart enough to know exactly why, but it is interesting, the promise of productivity gains from technology hasn't been as realized I think as some people thought. I think agents will truly start to bend the curve again like we did in the very early days of computing because software is going from helping an individual be slightly more productive to actually accomplishing a job autonomously. And as a consequence, just like you don't need drafts people in a mechanical engineering firm, you just won't need someone doing that thing anymore. It means they can do something else that's higher leverage and more productive and you can actually... A smaller group of people can accomplish more and truly drive productivity gains in the economy. And I think if you've ever sold enterprise software, you end up in these discussions as a vendor with the customer where you'll have a value discussion and you'll do these somewhat convoluted things like okay, it's like you're selling a sales thing. Okay, well, if every salesperson sells 5% more... And you should pay us a million dollars. discussion and you'll do these somewhat convoluted things like okay, it's like you're selling a sales thing. Okay, well, if every salesperson sells 5% more... And you should pay us a million dollars. And it's roughly that conversation and it's so unattributable especially... And it's why it's so hard to sell productivity software, which I learned the hard way, it's just hard to know what's the value of making everyone 10% more productive? Did you actually make them 10% more productive or did something else change? You don't really know all these things. But now with an agent actually accomplishing a job, not only is it actually truly driving productivity in a very real way, but it's measurable as well. So all those things combined means I think this is actually a step change in how we think about software because it does a job autonomously, which is more self-evident, a productivity driver. It's measurable so people value it differently as well, which is why I also believe in outcomes-based pricing for software. And all of that combined to me, it feels like as significant as the cloud or I think more technologically, but just in terms of how it transforms the business model of the software industry where there's going to be a before and after. I don't know how many people still sell perpetually licensed on premises software, but it's de minimis at this point. I think we're going to go through a similar transition. The whole market is going to go towards agents. I think the whole market is going to go towards outcomes-based pricing, not because it's the only way, but the market is going to pull everyone there because it's just so obviously the correct way to build and sell software. Let me pull on that last thread. So we had Madhavan on the podcast recently, pricing expert, legend, monetizing innovation author and he talked about pricing strategy for AI companies and he was very much in your camp of, if you can, you need to price your product as an outcome-based product and the access uses exactly what you shared, which is, you can do that if you can attribute the impact and it's autonomous, it's running on its own. And he actually used Sierra as one of the shining examples of this being successful. Can you just briefly just explain a little bit what is outcome-based pricing for people that haven't heard this term before and then just how does it work for Sierra to give an example?…

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