a16z Podcast - Aaron Levie on AI's Enterprise Adoption

Episode Date: July 14, 2025

In this episode, a16z General Partner Martin Casado sits down with Box cofounder and CEO Aaron Levie to talk about how AI is changing not just software, but the structure and speed of work itself.They unpack how enterprise adoption of AI is different from the consumer wave, why incumbents may be better positioned than people think, and how the role of the individual contributor is already shifting from executor to orchestrator. From vibe coding and agent UX to why startups should still go vertical, this is a candid, strategic  conversation about what it actually looks like to build and operate in an AI-native enterprise.Aaron also shares how Box is using AI internally today, and what might happen when agents outnumber employees. Resources: Find Aaron on X: https://x.com/levieFind Martin on X: https://x.com/martin_casado Stay Updated: Let us know what you think: https://ratethispodcast.com/a16zFind a16z on Twitter: https://twitter.com/a16zFind a16z on LinkedIn: https://www.linkedin.com/company/a16zSubscribe on your favorite podcast app: https://a16z.simplecast.com/Follow our host: https://x.com/eriktorenbergPlease note that the content here is for informational purposes only; should NOT be taken as legal, business, tax, or investment advice or be used to evaluate any investment or security; and is not directed at any investors or potential investors in any a16z fund. a16z and its affiliates may maintain investments in the companies discussed. For more details please see a16z.com/disclosures.

What is the journey over the next decade? It's about the speed at which humans can change their workflows. Why doesn't the breakthrough that we just saw get released? Why isn't that permeate every corporation within six months? It's so strange to me how many disruptions are happening all at the same time. Your R&D is changing. Yeah. Every part of the stack is changing.

Like everything. We're not in like a fear of AI world. We're in a, we know this is going to happen. And it needs to happen to us faster than it happens to our competitors, which is a totally different dynamic than we saw with cloud. What do you think is the best metric for anybody interested in tracking this stuff as far as like how fast this is going? Is it GDP? Is it margin? Is it top line? Is it headcount growth? Is it all the above?

It's basically fully assumed that AI is going to take over the enterprise. How does AI actually change the enterprise? Not just in theory, but in how software is built, sold, and used? In today's episode, A16Z general partner, Martin Casado, sits down with AI. Aaron Levy, co-founder and CEO of Box, to explore what it means to be an AI-first company from product strategy to internal workflows. They talk about why incumbents may be a better position than expected, how startups can still break out, the rise of agents and vibe coding, and what happens when the bottleneck isn't

the tech, but the Oric chart. Aaron also shares how Box is using AI internally today and why he thinks the next generation of employees may spend more time managing agents than writing code. Let's get into it. As a reminder, the content here is for informational purposes only. Should not be taken as legal business, tax, or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any A16Z fund.

Please note that A16Z and its affiliates may also maintain investments in the companies discussed in this podcast. For more details, including a link to our investments, please see A16Z.com forward slash disclosures. Aaron, thank you very much for joining us. Thank you. Everybody here already knows you. However, I still think you should intro yourself, just for completeness.

Okay. Aaron Levy, CEO co-founder of Box, and at Box, we help enterprises basically take all of their unstructured data or enterprise content and turn it into valuable information. And AI is absolutely this incredible accelerant for that problem. I just learned that we're investors, didn't you? Well, many years ago, many years ago. So no claims post-IPO. But actually, Ben Horowitz had this early kind of blog post on basically, I think it was the title of The Fat Startup.

Yeah, yeah, yeah, in response to the Enterprise is the lean startup. Yeah, that's right. And let's just say we very much took that to heart. And we basically, like, deployed every single lesson, which was like the name of the game is you get big fast, you scale aggressively. And that was a very important period in our company's journey. So the notional topic of this is AI and the Enterprise. But I think it's good to be kind of nuanced about this because it's less obvious. some people think, and you've been talking a lot about

AI on X, but also you're thinking about it in the terms of your business. So let me just kind of set up the first question as follows, which is, AI has historically been this very B2B enterprise thing, like chat bots or whatever, personalization systems. But what's unique about Gen AI is a lot of the use cases

are actually like a consumer or prosumer, right? Think like creativity or developers, and it actually hasn't made intros as much into the enterprise yet. It's just starting now. Yep. So maybe just a couple of questions. First off, A, does that match with your experience? And then B, how are you thinking about this transition to the enterprise? Yeah. I think if you were

to probably like do the idiosyncrasies of AI and then reverse engineer why that was the journey, basically up until, let's say, pre-chat to be team moment, AI was extremely hard to use. It required, in many cases, having custom models for basically every problem you tried to solve. And so there was almost no way that a consumer ecosystem could flourish based on that. It was just not generalizable enough. There was really few products other than like maybe Siri, Alexa, et cetera, that you'd interact with that would even have some sense of AI. And so enterprises were the early adopters of AI systems to bring awful automation to their companies. Then boom, chat chit happens. And all of a sudden, it's the exact right form factor

for mass adoption. There's no startup costs. It costs two seconds to learn the product. It's a chat interface. So it was like perfectly ripe for just taking off in the consumer space. And then you have also these incredible conditions set up for mass adoption. You have billions of people on the internet. It was set up as a free product. Again, it kind of solved this sort of latent kind of question mark that everybody had, which is like, when are we going to see AI, you know, work? Work and touch our lives. And so everything was kind of like the perfect conditions to get mass consumer adoption. On the enterprise side, you have unfortunately kind of the opposite, right? You have lots of workflows that have been kind of ingrained for decades and

decades. You have lots of legacy IT systems that have data kind of not set up well to be accessed by AI. You have a sort of shadow IT problem, which is most corporations don't want and users just injecting text into prompts that might contain information that the AI models could learn off of. So it's sort of a difficult environment for that same level of virality. With the exception of a few of these prosumer categories, I have talked to large corporation CIOs that are seeing people just show up with windsurf and cursor and replet.

And so you're getting actually this sort of shadow IT version that we saw 15 years ago. But DevTools has always been... DevTools has always had that. Yeah, 100% fair, 100%. So DevTools have had that. But I think that you're still seeing that now in the chat to BT kind of leakage into organizations.

I'm sure they're prosumer inside of a corporation firewall usage is off the charts, even separate from the people that pay for it. Totally. So now the question, though, is, what is the journey over the next decade for the real change management of deployment of AI systems

that drive the more like GDP changing productivity gains? And that's something where I do think we have to be prepared for this as many years. It's about the speed at which humans can change their workflows as opposed to how kind of quickly the technology can just sort of evolve in advance.

And so we in Silicon Valley, and certainly anybody tuning into this sort of imagines like, well, why doesn't the breakthrough that we just saw get released? Why isn't that permeate every corporation within six months. And it's because, like, people just have meetings and they have budget processes

and they have to go through a governance council and they have to get compliance on board and they have to figure out, like, who has the liability when the thing recommends this stock and then the financial services provider shares that with a client. Like, that takes years. And there's going to be case law that needs to happen. And we still have lawsuits that are going on

about who owns the IP of this stuff. So that part is going to take years. What's interesting, and I think you'll especially appreciate this on the cloud side is I remember when we first were scaling up in the enterprise, let's say 2007, 2008, 2009, let's say that three to five year period, post-AWS, post kind of cloud starting its journey, basically to a T, every conversation you'd have with a CIO or a group of CIOs was basically like, yeah, that's nice, maybe some little corner of our organization could use this. We are never going to go fully to the cloud. They had their

arms wrapped around their servers. I remember. Yeah. And basically, they did not want to give up the infrastructure. There was too many questions, too many compliance issues. There was just existential job questions of, well, what happens when this, you know, gets, delivers a service. Here's a super interesting. Let's say we're now two and a half years into the chat to be team moment. That same group of CIA conversations, none of that. It is basically assumed, it's basically fully assumed that AI is going to take over the enterprise. Like the CEO, the CEO, every job, every org leader is basically like, we know this is going to happen. This is not like a, oh, we're trying to kind of push it off. It is purely a sequence of

events. Who do I deploy? How do I deploy it? How do I drive the change management? Is the model ready? So what's really interesting is I think the level of buy-in you have now in the enterprise is like five times greater than we had in the early days of cloud. And you can even see it. Like to me, the classic litmus test was, if you remember, like 15 years ago, I think Jamie Diamond was probably most famous for saying, like, we're never going to go to the cloud. So like they basically said, J.B. Morgan will never go to the cloud. Today, that equivalent commentary, whether I don't have a perfect Jamie Diamond quote, but David, Solomon at Goldman Sachs has given this anecdote of they can write now an SEC filing or an

S1 for an IPO in like a few minutes that used to take a number of analysts a few days. And so the fact that like those are the anecdotes already coming out of the biggest banks means that we're not in like a fear of AI world. We're in a we know this is going to happen and it needs to happen to us faster than it happens to our competitors, which is a totally different dynamic than we saw with cloud. So do you think this has implications for companies today that are building products that are pre-AI products. So, for example, with the Cloud Wave, you basically had a bunch of cloud-native companies

that ended up taking over. So, for example, Snowflake is a great example of this, which is, like, the ones that decided not to go all in or were hybrid. Like, hybrid kind of became known as like, means it won't work. Right. You know, anything called hybrid hasn't worked.

And they get to do that? So do you think because the buyer and the enterprise is more ready that, like, companies that are pre-AI have more of an opportunity, or do you think that you're going to see the same thing with a lot of AI-native companies do well? I'm going to basically give you the non-answer of, I think, both. And one benefit that the cloud cohort has

or the SaaS kind of posts, like, us all understanding and agreeing on what SaaS would look like, what we all have is whether we adhered to this perfectly or not is a question, but we basically all tried to build API-first platforms. Or at least, like, API kind of like equal platforms. So we have the UI and we have the API. And if you think about it, like AI and AI agents are like the perfect consumers of an API, right?

And so they basically become these super users within your system on your APIs. So if I had to just say, okay, I want to deploy agents to go and automate my ServiceNow workflows, I think I'm better off just deploying the ServiceNow agent to go do that, then do an entire reinvention of my ITSM system

to solve that use case. And you can just go down the list. Like Workday, if I want an AI agent to do some kind of HR-related task, I think I'm better off to just do that within Workday. than I am building an entire new system. So we have a bunch of different factors versus the pre-cloud days.

Like pre-cloud to post-cloud was an entire rewriting of your software. You had to go from single-tenant to multi-tenant. The scaling of the systems were totally different. Even the functionality and application logic was different because, like, it should be real time. It should be collaborative. It shouldn't be as sort of async and batches

as the on-prem systems were. And so in a cloud world, it is a reinvention of the user experience and what you're doing in the system. We should definitely get to that. I just want to make sure I tease this out. actually, it's a very interesting point. So your claim is to go from pre-cloud to post-cloud,

like that ripped through the entire stack all the way down to like the infrastructure, for example, like Tenancy. You have to rewrite everything. And then what you're saying about AI is more of a consumption layer thing, which is you just treat the existing systems as they are, and then the AI becomes the consumption layer. Yep.

Do you think this is like a 1.5 step and like the 2.0 step kind of rips through the entire stack? Okay, so let's bookmark that one for one second. But like if you do pure Clay Christensen sort of approach, you know, sustaining innovation, disruptive innovation. Disruptive innovation is this thing that looks like so much harder, so different, so less profitable.

Sustaining is like, actually, no, I'd like to build that because it's incremental, it's better for our business overall. The on-prem guys had a disruptive innovation. Everything about the business model of SaaS looked different, harder, stranger. I don't have the talent. I'm running a service delivery operation as opposed to I ship you a CD-ROM with my code. Everything goes to the finances and pricing model. Yes, everything, everything.

The business model, everything. AI, again, with the business delivery. bookmark being the really big disruption that you could contemplate. Right now with AI, everything kind of looks like a sustaining innovation if you're an incumbent, which is like, instead of a user pressing the buttons in the application, let's have an agent run through the API and operate as if they were that user. And so all of a sudden, for a lot of SaaS providers, this looks like a TAM expansion because now, for the first time ever, I can actually deploy my software for use cases where the customer didn't have users on the other end before to do those

things. So I think you have a lot of TAM expansion. Now, the good news for a startup, With one caveat, which maybe we've bookmarks and we're going to get to. But let me just say the one caveat. The one caveat is you now have a component that has a very different COGS model if you're a software provider. Yes. And so now it's almost like when we went from like on-prem to cloud, we went from perpetual to recurring. And it feels like with AI, you kind of have to go from recurring to usage base just because... Yeah.

So business model will shift for some of the use cases. Because even if you look at the cursors, replates, windsurfs of the world, there does seem to be this. baseline seat price, and then your consumption usage thing is sort of this ad-on. And so SaaS providers are kind of well-structured to be able to have that kind of dynamic. If it was 100% usage and the user seat goes away, I do agree, then you have this, then you have a little bit of a business model crisis. Oh, so you think, but right now it's not clear that that's going to go all the way over. Well, until the human literally is not a seat on the system, I think you don't remove the end-user

license as a component. But again, that could be like the much bigger disruption. Now, just to fully lay out the market dynamic, I think SaaS incumbents, especially you have a couple other idiosyncrasies right now versus the on-prem days. Another idiosyncrasies, I would say, like, on the margin, you tend to have founders still leading the SaaS companies. And so we didn't really have that in the on-prem world.

And so, like, Siebel already had three CEOs later, and PeopleSoft already had multiple CEOs later. So it was a different leadership structure in these organizations. A lot of time you still have the founder around, they're poking around, they're really into AI. So there can be a more natural pivot of the company from the leadership standpoint. So a bunch of different factors. Now, to the benefit of startups, which is why I can hold both of these in my head, which is I'm very bullish on the SaaS incumbent being the natural place for that AI agent relative to that category, I just think we have this incredible expansion of categories for the first time that we haven't seen in probably 15 years.

So the SaaS 1.Wave actually expanded the software universe where we had these new categories of software that we didn't expect before. Like nobody would have predicted the confluence and the snowflakes in the pre-on-prem days. We didn't have. all of these different cuts of how do you work with data? How do you do this workflow? Like lines of business didn't have 15 different applications they got to use. Post SaaS, they did. So for startups in the AI world, the equivalent of that is I think there's a lot of categories now where there is no actually software incumbent in that category, where AI agents all of a sudden let you go build software for that category, legal, healthcare, education, and so on. So that's definitely true on the consumer side, right? If you look at the top use cases of opening AI,

it's almost like the top of the pyramid of needs, right? It's like creativity and fulfillment, et cetera. I think like number five is like professional coding, but everything above that is one of these. So on the consumer that's very clear, is that clear on the enterprise side? I absolutely think so. I think if we did a snapshot 10 years ago

of the size of the contract management market or the legal document market, it's like sub-2 billion. I'm making up the numbers. It could be plus or minus a billion. Would you agree that in five years from now, the AI agent-related spend on legal services should be in the many, many billions to double-digit billions? Okay, no question. So all of a sudden, there's like not these natural incumbents that were like,

oh, we captured all that market. AI agents all of a sudden expands the size of the software-related spend in that space. So I can underwrite that for health care, legal, consulting services. I think there's entire areas of financial services. Like, we always think, oh, finance has been wired up for so many years. No, banking. Consumer banking has been wired up. Trading has been wired up. Investment banking never went digital. Wealth management never went digital. These were not categories where you ever had like major software platforms to help these entire categories of the economy. And the reason was because the work was unstructured. It's very ad hoc, very dynamic, lots of unstructured data as opposed to stuff that goes into databases. All of that is now ripe for AI. And that will then largely be ripe for many startups because there won't be a natural incumbent in those spaces. I mean, it's so strange to me how many disruptions are happening all at the same time with AI, right?

I mean, if you think about it, like, everything you said, which is basically vertical SaaS or vertical use cases, which a lot of that is actually human budget, right? That's being disrupted. There's a bunch of new use cases that we never really thought about before, which was like the creativity and, I mean, who would have thought that 2D image would be some massive market? Yes. But it's a massive market, right? It turns out, you know, I've been a programmer for 30 years, right? And in that time, like, software would disrupt other things. Yeah.

Like, we'd disrupt all of these things, but we never got disrupted. Clearly, we're safe. We're screwing you guys. But clearly now, software is being disrupted, right? For the first time, like, I've ever seen in 30 years. And so, do you think this level of disruption is something that existing companies will not? Like, maybe a more fine point. You are a business leader right now.

You have to think about product. You have to think about your organization. Does it require you to have to think about too much? Like, how do you structure your company as well? How do you structure your product? Or do you think this is actually all pretty manageable? I think it's your R&D product. Literally, like, I'm putting it.

myself in your shoes, right? Which is like, your CEO. Like, your R&D is changing. Yeah. Every part of the stack is changing. Like everything. Yeah. I think the reason that I'm probably frankly more distracted by what we're building that I don't have enough time to stress out about the actual organizational side. Because I'm stressed out enough about just literally like the actual pure like delivery of the product. I think if I had a little bit more time, I'd get more stressed out about all the other change. We are very much leaning into the idea of being AI first. We have a two-fer on this. One, by being as AI-first as possible, we'll see the use cases that our product should go solve for customers. So, like, check that box. And then second is, I'm just a believer of

the efficiency productivity gains. And I do think it does change basically everything about work. And there's lots of these interesting examples of what it means. So in the future, does the individual contributor basically become a manager of agents? So that's a totally different job. Right, right? Like my recent kind of go-to is just thinking about it as a lot of the productivity of your organization was rate limited by literally like how fast can somebody use a computer to do something to type an email, to write code, to generate a marketing asset. When that's no longer a limiter, how do these jobs begin to change? And it's like, okay, your job is now orchestration, integration of work, planning, task management, reviewing, auditing, and that will radically change work. Interestingly, there probably behooves us to not over-rotate on transforming yet internally. for any given company, simply because the technology is changing so fast that, like, you probably

wouldn't want to snap the line right now, run your whole business on this technology, because in two years from now, it's going to be so much better. And so I think progressively figuring out which workflows have high impact upside, getting it rolled out in a decentralized way so people can experiment. Like, I think you want to do a few of those kinds of things first. I mean, I can't imagine a listener not knowing what box does, but just for completing this, maybe can you just talk to very quickly about what Box does and how you're thinking about how that details with AI. Yeah, so we started the company with a really simple premise, make it easy to access and share your files from anywhere. And we pivoted about two years into the journey to focus on the

enterprise market. And the whole idea was enterprises are awash with all this unstructured data. So corporate documents, research files, marketing assets, M&A documents, contracts, invoices, all of this. And as companies move to the cloud and as they move to mobile, they need a way to access that information. They need a way to collaborate securely on it. They want to be able to integrate that data across different systems. So we built a platform to help companies do that. We have about 120,000 customers, about 65 or so percent of the Fortune 500. And so what's incredible right now is we've had this ongoing problem since the creation of the company, which is with structured data, the stuff that goes into your database, you can query it, you can synthesize it, you can

calculate it, you can analyze it, your unstructured data, the stuff that we manage, you create it, you share it, you look at it, and then you basically kind of gets forgotten about. Like it goes into some folder and you almost never see it again. And maybe you kind of find it once every five years for some task you're doing, but that's about it. And so most companies are sitting on most of their data being unstructured and getting the least amount of value from it relative to their other structured data. AI is basically the unlock.

So AI lets you finally say, okay, we can ask this data questions. We can structure it so we can look at a contract, pull out. the 10 most important fields. Once we have all that data, we can analyze that information, we can get insights from it. And then you can start to do things like workflow automation that was never possible with your unstructured data. So if I want to move a contract through an automatic process, I can't do it if I don't know what's in the contract. And the computer previously was not able to know what's in the contract. So for us, there's just a huge unlock of now what you can finally do with your information and your content. So we're building an AI

platform to handle all of the kind of plumbing, user experience, to make then your content AI-ready effectively. I don't want to be like too bullshitty and provocative, but I have to ask this. Please. I've been an enterprise software for a very long time. A lot of the business model is predicated on the fact that building software is hard and takes a long time. Yeah. To what extent do you worry about that and not being the truth going forward?

Do you think we enter like this time of bespoke software being upon us? I'm bearish on the extreme version of the essence of that. So the extreme version of that, if you imagine the polls of this, Like the extreme, on one poll, basically all software is pre-packaged. It's the Ford Model T. It's going to work only in one way. Everybody uses the same thing. Okay, that's not going to happen.

We get that. The other extreme is like everything is just like homebrew. You wake up in the morning, you utter something. You get to your software for the day. And you get your software for that thing. And then the next day you do it again and you change it. Okay. The downsides of that model of why basically I think it doesn't work is I think if you ask, like,

the world population, you probably find that 90 plus percent just don't care enough. They just don't care about. the tabs on their software and the modules on their dashboard. They want someone else just be like, this is what you should look at in the morning. They don't want to have to even prompt the AI to tell them what to look at. So given that, that's basically guaranteed

to be where 90% of the world, no matter how you cut anything, that means that basically 90% of our software should largely be like, okay, you log into the HR system and it just looks like an HR system. In fact, there's another interesting dynamic, which is like over many years, our software and our actual weight,

that we operate companies, there's this flywheel relationship between them. And so the way we run our HR department is like not so different than the way Workday wants us to run our HR department. And it's fine because that's not the area that we're going to have a lot of upside innovating on. And like the way that we do our ticket management from customer tickets is like the way that Zendes decided to do ticket management. And that's fine because that's not the core IP of the company. In a way, it solves an operational problem for you. Yes. You don't have to figure it out. Right. And people miss that about software. I don't want to have to think about the workflow of an HR payroll process.

Like, I just want the software to do that. And so that's what people are buying. And so nobody wants to customize those things. Now, again, given that we're going to be in this world of many different outcomes playing out, the reason I'm still bullish on Replit and Vibe coding is for a different category, which is like, I'm the IT person, and I just have this crazy queue of tasks. And someone's like, can you build a website for this thing? Can you, like, code up some inventory, random plugin for this product?

It's like that now becomes 10 times easier. So the new prototyping, scripting, the long tail of stuff that we want to do. And that long tail is so long, and people never get to any of those things in that long tail. And so I could underwrite a 10x growth of the amount of custom software that gets written, and the fact that these core systems don't go away, because there's just actually going to be way more software in the world that gets created. Let me pressure test this. So, like, okay, so I can imagine why it would be hard to rebuild bucks, because what you do is actually hard.

This is core infrastructure. You store data, like, that's really important. And so I don't think you just vibe code that away. But from my perspective, a lot of SaaS apps just look like crud. To me, crud is, I don't know what the acronym stands for, but it's basically you're reading and writing data from, like, a back end. And so do you think that there is a world where the consumption layer evolves to just using AI and this class of companies go away?

Or do you actually think, if I heard what you just said, that the durability of these companies is it basically teaches you what the workflow is? Well, I'm still going to say the latter. Now, I don't know if you need to bleep it out, but if you want to share a couple examples of who you put in the not hard crud layer, then we can parse that. But up to you. The not hard crud layer? Yeah.

I mean, I would say most vertical SaaS companies I see, the technology is trivial. Yeah, but the understanding of the domain is not. No, no, this is what you said before. This is why I want a person to say. That's actually a great insight. I've always underestimated vertical SaaS relative to the outcome. Yeah. And 20 years into doing enterprise operations.

I'm just like no longer going to underestimate vertical size. It's not about the technology, it's the fact that somebody else has figured out the business model that works. Like they have 10 people from the pharma industry that is like sitting next to the engineer being like, this is how you should do the clinical trial workflow. And that becomes so much of the IP. Now, that translates fine to agents, but I still would then bet on that vertical player doing that as opposed to somebody prompts their way into chat to BT to build a FDA compliance agent. I would still largely bet on compliance agent.ai to do that over the pure horizontal system

that has no particular domain kind of expertise for that. And then I think the other thing, I still think that there's a relationship between some amount of GUI and the agent and the APIs because, again, like, you don't want to every day of your life go to a blank empty screen and say, what's our revenue today? You just want a dashboard at some point and just shows you the revenue. That's right, of course. It's almost like cash queries in a way. Like somebody has made the decision.

Yes, this is like a known way to solve this problem. the enterprise. And so I think that's why the theory of the full abstraction away from the interface and it's all an API call, I don't think that happens. And so ironically, probably what will happen is in a couple of years from now, we will see agents like rebuild entire webpages and dashboards. And then we're going to find ourselves like, wait, why are we having an age? Why do I have to spend tokens to create a thing that is a config on a dashboard? And we'll just be back to where we started for some amount of software, which will mean that basically these things are going to live together.

Cool. Let's move from software to decision process. So I won't say the name of the company, but I just spoke with a very, very legit company. Household name. It's a private company, though. It's not a public company. We're at the board level for every decision they ask the AI for like basically more information for the decision. And this has actually been great from like discussion fodder to be provocative. And it also shows how like fundamentally unoriginal the board members are. Like this founder was telling me. it's literally better than half of my board members, right? And so, like, how much have you thought about bringing AIs in to, like, help with decision process? Yeah. And, by the way, I think the board is, like, low-hanging fruit because boards tend to not have a lot of context to the business. And so the incidents are probably less anyways.

But is this something that you've thought about? The board one is an interesting one, so maybe we can unravel that one. But, like, I already use it for, let's say, our earnings calls, where we'll do a draft of the initial earnings script. And then, again, because Box A.I deals with unstructured data, I just load up the earnings script and I'll use a better model and say, give me 10 points that analysts are going to ask about this. And, like, how would I improve the script? And it just spits out a bunch of things. And it's... How good is it predictably? Oh, extremely nice. Oh, 100%. But the thing is, that's not surprising. Like, it has access to every public earnings call in history. And, like, at the end of the day, analysts can only ask you, like, tailwinds, headwinds, who's buying what? It's not because analysts are smart or not smart. It's just like, those are the things that, like, you would try and deduce from an earnings call buying a stock. And you wouldn't have thought of these questions beforehand, or is it just like a... I think, yeah, you're doing...

Yeah, on the margin, it seems like, sorry. So what I'm using is then the specific parts of the document that is missing the answers to those questions. So I can actually inject the answers into that. Because, like, you're typing out a thing and they, like, I forgot to give two case studies in this section or whatever. It's a quick way to just do some analysis on something. But, yeah, I mean, so Bezos famously had this memo-oriented, essay-oriented. kind of meeting structure. And we never did that, but I was always fascinated by the companies that could do it. And actually, we're entering a world where probably you could just pull that off,

right? So imagine if, whether it's a board meeting or product meeting, you just do a quick, deep research essay on the topic. Like, obviously, every meeting, every strategy meeting in history would be better off if you probably had that as a starting asset to get everybody informed. I think the argument against that would be the reason Besso said it is because it forced people to think clearly about what they're doing and writing it down. So the exercise met the people walking in the meeting had more context. Yeah. This would almost argue

that they would have less context because something else did the thing. Well, two things. It was to make sure that the person doing the thing had the clarity to write it, for sure. But it was also still to inform everybody else that didn't do that work.

Right. And so it certainly would have helped everybody else in the room. And I'm not 100%... I mean, we should do a full longitudinal analysis of like the people that wrote the essay. Did they actually have the better products? Or, like, I mean, there's some Amazon products

I don't like. And so they obviously wrote an essay also for those. So I don't know the hit rate ultimately on the essay. specifically as much as the idea of like write down a strategy, think it through, and so why not have an agent do 90% of the heavy lifting? So a lot of my workflows are like if I have a topic where, like maybe the direct change of my workflow on this front is the kind of thing that three years ago I might sort of lob over to the chief of staff and say, hey, can you like go

research like the pricing strategy of this ecosystem or something? That's just a deep research query now. And then I'll wake up and it all look at this thing. But what that does is because Now I'm not having to calculate that person's time, their tasks, their tradeoffs. I just do it for the most random things, which means, like, I'm expanding and exploring way more spaces mentally than I would have before. And these are the kind of parts, and this is equally why I'm, like, actually more optimistic on the jobs front, because what we do too many times within AI is we, like, look at today's way of working, and we're just like, AI will come in and take 30% of that.

And it's like, no, no, no, we'll just do totally different things with AI. I wouldn't have researched that thing before when it was people required to research it because that would have been an in inane task to send to somebody. One thing, so when we run the numbers, and by run the numbers, I mean, look through how AI companies are doing, where does the value accrue,

there's basically one takeaway, and that is like these markets are very large and growing very fast. And value is kind of accruing at every layer. Everything from like literally chips up to apps. And so like the only real sin is zero something. thinking, to be like, oh, like, the models are not going to be defensible or whatever your zero-sum thinking is that just hasn't proven out. Now, this is still largely been a consumer phenomenon. So what I've been thinking about, and I don't have an answer. I'd love to hear your thought is, is when it comes to enterprise budgets, like, you can't just create budget out of thin air. So, like, you actually do have a limited resource. And so as budgets get reallocated, to what extent do you think this is, like, zero-sum, like, the old budget gets robbed versus, like, budget accretive. Or, like, how do you think about that? Because, again,

And, like, where we've come from, that has not been an issue. I think in the enterprise, it probably will be. So it does have to come from somewhere. It's fully logical. A couple things. Yeah. A large number for startups can also be a very small number for a large corporation. Yeah.

So you have that dynamic playing out. I'll make up random stats. But you could probably take a meaningful engineering team and probably for the price of five of those engineers or ten of those engineers. You could probably pay for cursor licenses for the entire engineering team. Right. But this would argue that it's actually coming out of head cam. So here's where the asteris is.

There's an infinite set of ways. This is why you can never take a point in time snapshot on these kind of things. There's an infinite set of ways that this actually plays out. Next year's planning process, maybe in a perfectly like parallel universe, the salary increase that year would have been 3.5% for employees. And this coming year, it's 3%. Because we're going to take 0.5% and we're going to deploy AI for the company. Or maybe next year we would have added 50 engineers,

but we're going to add 25 and then pay for AI. But guess what? The year after, we're going to have engineering productivity gains. So it increases because it's still competitive environment. We then now add engineers the year later because we're getting higher productivity gains. I think that most companies of any reasonable scale post 100 employees, let's say, have enough sort of dynamism in the financial model within a one to two year period where it doesn't look like what the economists would think it looks like.

So I just spit this back. So I think this is actually a very good point that's buried in there. I just want to make sure I'm following along, which is the software license cost to a startup relative to like a large people organization is relatively small. It's just a couple of headcount, which if you just look like normal performance management, normal attrition, normal like variability,

and even like hiring timelines is kind of in the noise. And so you already have an annual budgeting cycle to fix that up. And so like basically within the noise, even of just like head count planning, all of this could work out without some massive disruption. Totally. That's such a cool point. And there could be an upper limit of this point, but let's say the going rate in Silicon Valley

of a new engineer coming out of college. Let's just say it's somewhere between 125 and 200. Okay, I'm just making up, okay? Yeah. Let's say your most aggressive cursor usage or something is like $1,000 a year, $2,000 a year. So you're at like 1% salary maybe. Here's the question. Again, do this like crazy apples to Apple's thing. If you went and recruited from Stanford right now, and he said, okay, you Stanford grad have a choice.

You can work at this company and get paid $120. 25K with no AI, or you can get paid 123K with full access to AI. Which one are you going to do? Yeah, they would do the 123 all day long. But even that, yeah, I mean, like your argument, which makes a lot of sense of me, it's kind of on the margin when it comes. Yeah, but just as a way of exploring, like, why these things are not the high order bit of the cost increase on budgets.

Oh, I love that. That's great. And I did one kind of late night sort of like modeling once, but I'm afraid to say all the numbers here because I think they're just going to be so wrong. But I think it's something on the order like $5 or $6 trillion in $1. knowledge worker headcount spend in the U.S. Everybody says for developers, they'll say 40 million, let's say it's 30 million, let's say that the average is 100K or you're at 3 trillion.

Man, these are just massive, massive numbers, so it's many trillion. Yeah, so you have many trillions of dollars. If you take a couple percent of that, or 5 percent of that, you're already doubling the entire sort of U.S. enterprise software spend. So you can just make it work within, and this is why I don't think people will not make cuts because they have to pay for AI. They might make cuts for other reasons, but even in those cases, I think you'll often have it be for myopic reasons temporarily.

Yeah. And there's enough flexibility to basically consume this and then actually like recap on the productivity game. I think that's great. I try and parse everything you say through the lens of like where are you landing on AI coding and you seem to have a very pragmatic view of where things actually are at.

Yeah. Where are you landing right now? Well, it's been an evolve. So I would say in the entire AI thing, the biggest surprise to me is how effective it is at code. Yeah. And so my sense is, So I'm just going to say a couple of, I think, facts,

and then we can kind of back out what this means an aggregate. So I think one fact is the reality is I do think that AI helps better developers more than not better developers. And the reason is you just have to deal with and be able to like know what to ask for and know how to do with the outcome. So I think that's one. Someone said it, I thought beautifully, which was, this is a very good developer. And this was on X. I forgot who it was. I thought it capsulated.

He's like, you know, 90% of what I know, the value of it has gone to zero. but 10% has tripled more than 10x or whatever it is like that 100x. I think that's exactly right. I do think that for a lot of rote use cases, the AI can do it and it doesn't need to be double-checked. So there's a lot, to your point, like things like prototyping, things like scripting.

And so I do think if you look at usage at like OpenAI, if you actually look at code usage, the primary use is actually professional developers, which means it's part of a developer workflow. And then probably the most controversial, stance I have is, and this is probably like sunk cost fallacy because I've been a programmer for, I mean, like my PhD is in computer science, like, you know, so maybe this is such cost fallacy, but I just don't see a world where you get rid of formal programming languages

just because they arose out of natural languages for a reason. Like, we started with English and then we made programming languages so that we could formally describe stuff, and so it would be kind of a regression to go back. So I still think we'll use languages and maybe they'll change, maybe more like a scripting language. But I think like the existing tool set, evolve, but it'll still be a professional developer. Like, I think we'll still have developers, still have developer tools. So that's kind of where I am. I'd love to hear where you're at.

I'm fully in the exact same page. The fun thing to me is how coding is just at the tip of the kind of iceberg. It's the best thing to first sort of experience agentic automation. But I think you'll see this in basically every other space. But what's so fun is just in a one-year shift, let's say, of like the nature of the relationship with the AI. So if you think about the GitHub co-pilot moment was like, oh, this thing is incredible.

It's going to type ahead and predict what I'm typing. And then you're basically using it to work 20 or 30% faster and which parts of it do you take on or not. And now the relationship is like totally different within, again, a year or two period where you're using cursor, Winster, for whatever, and the agent is generating this chunk of an output. And then you're just reviewing it. But what's incredible is like none of your expertise is any less valuable in that review.

In fact, it's probably even more important than ever before. because in some cases, like, it's just going to be wrong 3% of the time, and then you review it, but then you're literally doing 3x the amount of output. And the nature of how that changes both programming, but just like, why not have that for basically everything is sort of this new way that both software should work and then actually we will work is like, you know, the big joke a year after ChatT is like, okay, this thing generates a legal case

and it's like wrong 10% of the time. And it's like, well, actually, hold on, if you think about what the new paradigm of work looks like, And it's like such a weird inversion of, it used to be the AI was fixing your errors. That's what we thought the AI was going to be. And it's just like a total flip. It's like the human's job is to fix the AI errors.

And that's the new way that we are going to work. Right. So this begs a very obvious question. I'm going to work up to the question. So there is a great paper in NSDI from an MIT team, which basically says you can optimize a running system with agents. And the way they did it is they basically have a teacher agent and then like more junior agents.

And then the more junior agents would go try a bunch of, stuff. And of course, they had much more knowledge of the literature than any single human beings. So they try all of different things to try it. And then the one that the senior agent would say, oh, this is good, this isn't good. And then once it optimized the system, they would do it. And then, you know, like the human being is then kind of helping the teacher agent decide what are the parameters, what is good, what is not good, and provide high-level direction, right? And so you're already starting to see cases where human beings are running multiple agents, and even that already is starting to have some kind of bifurcation, which

one way to think about it is in any R&D organization, of course, people start as like ICs, but then they very quickly get interns and go into management, and so maybe we're just skipping that step. So the obvious question is, what happens to entry-level engineers? Like, does this change how people get introduced to computer science, for example? The cool thing is probably more people will even now get introduced to computer science, because you'll be able to... Anybody can learn. Anybody can learn it, and, you know, it's been 25 years for me, but, like, in the early days of programming basic applications or putting other websites, it was just extremely frustrating that you would spend days and days being like, why is that thing not work?

Yeah, yeah, yeah, yeah. And, like, I have very few resources of figuring out why the thing didn't work. It would have been a hundred times easier if I could have had an agent write the thing. I would have learned 10 times faster. Yeah, yeah. Honestly, what you did is you were like, well, not 25 years ago, but 10 years ago, you'd go to Stack Overflow. And so it was like the slow version.

Yeah, but so think about how many people missed the window pre-stack Overflow that got sort of pushed out of the ecosystem. because they're just like, this is too frustrating. And so you're going to have a way bigger funnel at the top of people now learning, programming, computer science. I think a similar percentage of people will fall out. So it's not like, again, you're going to get a 10x increase in programmers because you still have to enjoy it and you have to, like, solving problems and whatnot.

It's going to change the nature of the incoming class of engineers that you hire. They will literally not be able to code without AI assisting them. And it's not 100% obviously that's a bad thing, because assuming you have internet and the site stays up, like we should have access to the agents. So I think it's mostly just like we have to adapt how we think about the role of an engineer and what these tools are giving us

in terms of the productivity gains. Actually, I meet with a lot of larger, not tech-oriented companies as customers. And generally, the thing I'm recommending is hire a bunch of these people because they're going to flip your company on its head of how much faster the organization can run. So I do understand I want to be sympathetic

to the job market for anybody coming out of college because I don't think it's easy right now. and it probably hasn't been easy in a number of years. But if you are graduating, the thing I would be selling any corporation some way or another is that if you are AI native right now coming out of college, the amount you can teach a company is unbelievable.

And then conversely, if you're a company, you should be actually like prioritizing this talent that is just like, why does it take you guys two weeks to research a market to enter? I can do that in deep research and get an answer to you in 30 minutes. they will be able to show companies way faster ways of working. Do you think there's any stumbling into problems this way,

which is like you kind of adopts too quickly? It's like you get into a morass you can't get out of, or you think at this point is pretty clear. The stuff can be practically consumed. What would the morass be that you'd get into? You hire a bunch of vibe coders, and then they create something that nobody can maintain and it's really slow.

Totally. Which, by the way, I will say I have seen this. Yeah, yeah, yeah, yeah. Okay, you could easily overdo this whole thing. So I think, as with anything, like, deploying these strategies in moderation while we're all collectively still getting the technology to work better and better is super important and understanding the consequences of these systems. So, yes, this is not like a moment to just have your whole company vibe code. I will say one of my favorite things that I'm witnessing in the whole coding thing. The point of this talk is kind of the AI and the enterprise generally, but like the coding thing is just so salient, is that a lot of these OG programmers that have known for a long time that are off-creating companies or CEOs of public companies like yourself are all.

back to programming, then you talk to them. You know, many of that, like I code, you know, most nights with cursor just because it's really enjoyable. And the reason I didn't code before is because I just couldn't keep up with the fucking frameworks. I'm like, dude, I don't know how to install the fucking thing, and what is this Python environment stuff? And like, you're literally learning bad design choices

that somebody else just made up. Like, they're not fundamental to the laws of the universe. They don't make you any smarter. It's just like waste of brain space. And so in some way, the AI just gets rid of this kind of cruffy stuff that you probably shouldn't be wasting brain space on. anyway. The amount of frustration I have when I look through, let's say, our product roadmap, let's say pre-AI, although this still obviously happens because we haven't fully transformed

everything about how we work, but pre-AI, when you would see things like we have to upgrade the Python library in this particular product, and it's like three engineer, two quarters. No, exactly. And like at the end of that project, zero customers will notice that we did something. We resolved some fringe vulnerability that is not going to even happen, but you have to do it because there's some compliance thing where you have to make sure you're on the latest version, which is super important.

But, like, the thing is never going to happen, and all of a sudden, like, you are wasting hundreds of thousands of dollars of engineering time. And the fact that, like, that's now, like, a codex task is just unbelievable. And the amount of just now things that you can actually relieve your team

to go and work on is incredible. And the other big, like, boom for the economy, and this is, again, where the economist just totally missed this stuff, is think about every small business on the planet, of which there's millions, tens, millions, whatever, that for the first time ever in history, they have access to resources

that are somewhat approximate to the resources of a large company. Like, they can do any marketing campaign. Did you see the NBA Finals video from Kalshi? No. The V-O-3 video. Oh, yeah, yeah, yeah, yeah. You can now put together

an otherwise million-dollar marketing video for a couple hundred bucks of tokens. And that being applied to every domain in every service area, I can run a campaign that translates in every language, I can have this long tail of bugs that I never got around to automatically get solved. I can have the analysis of a top-tier consulting firm done for my particular business.

So for the people or companies that are resourceful and are creative and imaginative, the access to resources right now is just truly unprecedented. What do you think is the best metric for anybody interested in tracking this stuff as far as, like, how fast this going? Is it GDP? Is it margin? Is it top line? Is it headcount growth? Is it all the above? Like, how do you measure it? Yeah, I mean, for us, so internally first, and then maybe we'll spitball some macro solutions to this, internally, we've actually explicitly taken the stance that we want to use AI to increase the capacity and capability of the company.

So just do more. For anything that you track, just make sure it happens fast. Just do more or do faster. In a given time period. And so that somewhat relieves the pressure from people that, like, this is about cost cutting. It's just like, no, no, just like do more right now. Let's figure out what works. Some things won't work.

We want experimentation. So just use AI to do more. Okay, so that's us. The way you should measure that then in a couple of years from now is either the growth rate of the company should be faster. Or the amount of things that we're collectively doing should be more. And the only reason that wouldn't show up in growth rate is that every other company also does more. And so that gets competed away. Which is like also a very viable outcome is this is just the new standard of running a business.

But there's no shift in the equilibrium. Right. There's no shift in the equilibrium. You just have to do it. And then the ultimate product of all of that is some other kind of metric of satisfaction of like our products get better. It could be like consumer price index or something. Yeah, but like did the iPhone show up in GDP?

I don't know, but my life is better with the iPhone pre-than without the iPhone. I'm pretty sure it did. Okay, yeah, fine. So, but like it would ultimately then show up in like new cures to diseases, better health care. I don't know that the dollars would move around all that differently as much as just like life expectancy should go up. like cost of housing should go down, like weird metrics that productivity gains will then drive that the economists wouldn't naturally associate to like enterprise software and AI.

By the way, this is where I am, which is like clearly there's a disruption because marginal costs are going down on a bunch of stuff like writing code and language reasoning and whatever. And like some companies will take advantage of that. But I don't think like the fundamental equilibrium changes. I think to your point, I think we just do more tech. Products get better, faster. We saw problems that we haven't before. But like it's not asymmetric that we've seen in other.

Yeah. The way I kind of think about is, you know, if we go back to like 1985 and we just looked at how everybody works, I think we would just be totally stunned by how slow everything is. And just like, how long did it take you to research a thing or analyze a market or create a campaign or whatever? But like, it just has now been baked into our human productivity that we just do all those things really fast now. And so in 10 years from now, when we all have AI agents running around, we will just look back to today and be like, how did we function? Like, you spent two weeks to decide, like, the message for the marketing campaign? Like, how is that possible?

Like, what we do now is we run 50 experiments with AI agents. They all come back with versions. We look at them all together, and then we make a decision in an hour and we move on. That's obviously, like, how work works. And, like, that's what we will be saying 10 years from now. Do you think we'll ever saturate the consumer? I caveat this by saying this comes up every one of these inflection points, and so I just wanted to ask it again for the umpteathe's time.

I think I'll say yes, just because it's something. point maybe, but like my list of purely consumer demands has not gone down. Like, healthcare is like a totally unmet, you know, need that I have. I do not like to go to doctors or dentists or anybody because of just how hard it is to get scheduled. I mean, buying a fucking car, man. Like, there's so many things that, like, just need to be. The cost of housing. We clearly don't have enough houses. Like, now, where will AI, you know, drive that? Okay, so, you know, maybe robotics would be then the play there. But, like, I don't think we're anywhere close to consumer satisfaction or satisfying all needs of consumers.

Well, I actually, I meant more, will things change so fast that, like, it saturates the ability to adopt new things? I do think that it's certainly possible. I think I track sort of, let's say, my parents as a decent kind of proxy, or even just, like, college friends that aren't particularly in tech. And they're still, like, in their ChatsbyT phase of adoption, and they haven't moved on from that. They haven't made a VO video yet.

They're just, like, using ChatsbyT to ask questions about life experiences they have. And so maybe ironically, like, one of the problems was chat to BT was so good. If you, like, you know, imagine what people thought AI should be able to do for them. It already met, like, 80% of, like, where they would have sort of projected it. Yeah, yeah. But when we know, actually, no, it can probably still do 10 to 20x more. Yeah. But their needs are going to be satisfied for some time on those core use cases.

Yeah. So I think for, like, the most basic consumer query type things. But then this is the opportunity for startups, which is like, now AI will show up in, sort of ways that maybe the person isn't even, like, in the market for an AI thing. They just want a better version of that category. This could just, like, simply be another market constraint. As soon as it's saturated, you just make the product better given, like, the existing. Yeah, and if I could just get better health care, but I don't need to think about that as an AI problem or not an AI problem,

but AI will be behind the scenes delivering that. Then I don't think you're saturated anytime soon. Yeah, it's just a consumption capacity just becomes another market constraint, but there's a ton of other ways that you can improve things. 100%. That's great. Good. I love that you're so optimistic about it. I am, I think, 98th percentile optimistic.

Same. Good. All right. So I think we've had a fairly pragmatic conversation about the current impacts and the near-term impacts. If you do a longer view, can you dare to guess what things look like in five to ten years? So Sam Altman and Jack Allman had a podcast recently. Yeah, yeah, yeah. And I'm going to paraphrase probably in some wrong way, but they were going back and forth about how, like, we just got what we would have predicted as AGI five years ago. And it's just like we use it.

And it's now just built in. The most anticlimactic. Yeah, it's climactic. And I think that's my instinct for a lot of this is five years, 10 years, whatever your number is. And this is why I'm so optimistic on just society and jobs and all of stuff is I don't think it's the Terminator kind of crazy outcome scenario of we automate away everything. I think the human capacity for wanting to solve new problems, for creating new products, for serving customers in new ways, for delivering better health care to try and do. scientific discovery, like all of this stuff is just built in us, and it will continue. And AI is this kind of up-leveling of the tools that we use to do all those things. And so I think

the way we work will be totally different in five years or ten years. But you're already seeing enough of probably what it will look like that I think it's an extrapolation of that. It's when you want the marketing campaign done, you have a set of agents that go in, create the assets and choose the markets and figure out the ad plan. And then you have a few people review it and debate it and say, okay, let's go in this direction instead. And then you deploy it and you're on to the next thing. And so each company, their units of output grow as a result of that growth.

We're all still in competitive spaces. So some of it gets competed out and others will keep growing faster than they would have before. So they'll hire more people. And you'll have new types of jobs. Like we'll have jobs for people just to manage agents. And like you'll have operations. teams, you know, Adam D'Angelo had this cool role that just kind of got announced.

That was really cool. Yeah, the role is to work with Adam at Quora and figure out which workflows can be automated with AI. I think you'll have a lot of those kind of functions. But I think one of the exciting things about, at least being in Silicon Valley or anybody kind of tuning in being in this ecosystem is like, we're seeing the change happen faster here. And it's going to be five or ten years of this rolling out to the rest of the economy.

And so I think we will spend the next five years making the technology actually deliver on the things that we're going to be. we're all collectively talking about to make it more and more robust and the accuracy goes up and the costs go down and the workflows it can tie into are better and we will be working on that for quite some time. And you think ultimately this leads to the biggest piece dividend of better products for users, better user experience. Yeah, I think the software gets better, our healthcare gets better, the life sciences discoveries increase. I think it's all a society net positive. I love it. Thanks for listening to the A16Z podcast.

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