Trust, Economics & AI

One of the things that I have been mulling over in my head is the fact that from a unit economics perspective, AI companies are going to look a lot more like payments businesses than traditional SaaS. I’m going to think about this more in the coming weeks but in the near term what does it mean? Generally I think it means that technology investors will have to grow from baseline viewing technology businesses as recurring high margin with predictive revenue streams, to usage based moderate margin businesses with low to medium switching costs. Again more thinking on this to come, but something that was top of mind.

In any event, it feels like a ton of things happened in the tech world this week. Number one, there was the suprising news of Roelof stepping down from Sequoia which led to a ton of commentary and chatter across VC/tech twitter. There was Sam Altman’s feisty comments on BG2 and increasing speculation around OpenAI aiming to become too big too fail. And then there was Marc Andreessen trying (and failing) to dunk on the Pope.

I look back on all of this and can only say, wow.

What a batshit crazy world we live in.

On one hand it’s an amazing technological feat that all of this information is just communicated openly in public. On the other hand, there’s an unusual quality to all of this. People with reach, and people with an audience will use that to their advantage to advance their aims, goals, or objectives. People fully know that we operate in the attention economy, and that in an era of objective abundance, attention is a unit of scarce value. People know that if you can capture the hearts of minds of an audience, if you can stay top of mind, if you can stay relevant - those attention factors will overwhelmingly be net good for you. That’s how we wind up with wonderful pieces of journalism/coverage like Colossus’s article on Josh Kushner that are equal parts revalatory, exhilirating, and uncritical. That’s how we end up with podcasts like BG2 or All in. That’s probably how we end up with a democratic socialist for mayor in America’s hypercapital of capitalism.

To come back to why all of this feels unusual (at least to me), is that these are all public personas. No matter how much time you spend listening, reading, or watching the billions of hours of content that has been (and will continue to be) produced, you never really know how any of those people feel. Yes some people’s gap between public and private persona will be quite small, but other’s may have a gap that could fill an oceanliner. And again, for me, that feels really unusual because whether you want to admit it or not - the people who tend to have garnered an audience have impact! They will directly or indirectly have an impact on your life! And to say that people like Marc Andreessen, or David Sacks, or Chamath, or Elad, or any other first name only individuals in tech don’t have an impact would be crazy. That would be like saying Joe Rogan didn’t have an impact on the 2024 election, if you disagree with the fact you are blinding yourself to reality.

Now, why did I write about this today? I’m not too sure. It’s an observation I have because I consume a lot of this media, and also for better or worse, I like to be in control. I think there are two meta narratives that influenced my thinking here. One I think is eroding public trust in American society. This has been well documented with respect to how Americans feel about their public institutions, but I could pretty easily see how this extends to private institutions in the near future. And before you go, wait wait wait - don’t people already hate big business in America? Sure, maybe. But there’s also stated versus revealed preferences and just based off S&P 500 trailing 20 year earnings, the revealed preferences are pretty clear.

The second meta narrative is what I’ve been trying to think about for the better part of two years. There’s a fun anecdote Pat Grady has when reflecting on his lessons learned from Jim Goetz. In early 2000s land, Pat Grady has just joined Sequoia and it’s like 2007. Jim Goetz is a veteran VC at this point and they are having some sort of debate on the value of on premise software versus the cloud. Jim is at absolute conviction on this future, Pat is skeptical and more circumspect, and Pat recalls Jim saying something to the effect of, “No, no, no, you’re not listening to me. Everything is going into the cloud.” That’s kind of how I feel with AI today. I can’t point to specific evidence but the general trendline feels similar to Jim Goetz in ‘07. Twenty years from now everything is going to be AI. And the reason why that is important and matters today is because whether we like it or not, that future probably results in pretty significant job loss in the US. And the people driving that industry forward, they’re on podcasts, they host youtube shows, they’re writing, they’re tweeting, they are actively pulling forward this future and they have better data and better insight into where things are headed.

Here’s a final thought to leave with you. The Free Press had a good interview with Peter Thiel recently discussing some of these dynamics, but the main thing that stuck with me was commentary on a broken generational compact. Thiel writes, “Younger generations are told that if they do the same things as the boomers did, things will work out well for them. But society has changed very drastically, and it doesn’t work in quite the same way. Housing is way more expensive. It’s much harder to get a house in a place like New York or Silicon Valley, or anywhere the economy is actually doing well and there are a lot of decent jobs. People assume everything still works, but objectively, it doesn’t. Boomers are strangely uncurious about how the world is not really working for their kids. It’s always hard to know how much bad faith there is or how bad the actors are. I think it’s odd that people thought it was odd that I was complaining about student debt in 2010, when even then the growth in student debt was an exponential process. The national student debt was $300 billion in 2000, and it’s now more than $2 trillion. At some point, that breaks.”

Hold this premise of a broken generational compact to be true. Where are we headed from here? And what happens if AI truly is pulled into everything? All I can say is from my view we better buckle and enjoy the ride. Things are only going to get more crazy from here.