Letter #241: Chris Paik (2024)
Thrive Capital Partner and Pace Capital Cofounder & GP | The End of Software + Reading the Comments
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Chris Paik is a Cofounder and General Partner of Pace Capital. Chris started his career as the first hire and later Partner at Thrive Capital when it was just a $10mn fund.
This letter is a little different from most of my letters—it’s a mashup of an essay Chris wrote titled “The End of Software” followed by the transcript of an “interview” with Bryce Roberts, who selected a handful of tweets reacting to Chris’ essay for Chris to respond to.
In his essay, Chris lays out why he thinks majoring in computer science today will be like majoring in journalism in the late 90s. In his sit-down with Bryce, he responds to criticism of and commentary on his essay from a bevy of developers, investors, and internet anons (including Garry Tan, Aaron Levie, Josh Elman, and Sophie Netcapgirl) around everything from writing code and copium to fundamental premises and the ending of the essay.
I hope you enjoy this essay and accompanying Q&A as much as I did! Chris is a young investor I’ve been fortunate to meet, and someone who is as thoughtful as his sense of humor is cynical. Content aside (as readers know, I avoid sharing my own opinions in this newsletter so you can draw your own conclusions), this is particularly interesting for at least four reasons:
Very rarely do we see an author respond to criticism of his/her work. Here, Chris spends nearly an hour going through various criticisms of and reactions to his work, sharing his reaction to those reactions (and more than a few insults), and revealing his thought process that provoked each reaction.
Chris published this essay almost exactly six months ago. And while public market investors will point out that this essay marked a literal bottom, Chris will be the first to tell you that he is terrible at timing, and thus not a public markets investor. Rather, he is thinking for the long term. (Now, if you want to see a case of long-term thinking from someone who *is* good at timing, or at least debate, see this post.)
This is a short essay, but it caused an immediate, but prolonged, visceral reaction. Regardless of whether you think the essay is brilliant or beyond stupid, it is written simply so that anyone can understand it, but with a tremendous amount of thought and care behind each sentence--as you’ll see in his responses to the criticism. And in the process, he makes enemies in one industry (software) while becoming a champion of another (AI).
As a venture capitalist, Chris invests in, and greatly benefits from, the software industry. In effect, he is criticizing an industry that he, his friends, and his colleagues have built, invested in, and greatly benefited from. Even more provocatively, he shares why he believes OpenAI is the AOL of AI, which is particularly entertaining given his former firm’s massive bet on the company. (Read about Thrive’s bet on OpenAI in Letter #236).
[Transcript and any errors are mine.]
Related Resources:
Thrive Capital
Investors
Owners
Letter
Essay
To understand how software will change, we can benefit from studying how technology has changed other industries. History tends to rhyme, if you listen.
Before the internet, media behaved very differently—it was expensive to create. You had to pay people to make content, edit it, and distribute it. Because content was expensive to create, it had to make money. And consumers paid—newspapers, magazines, books, cable, and pay per view. Warren Buffett famously loved newspapers—and who wouldn’t love a predictable subscription business with local monopolistic dynamics?
When the internet happened, media companies viewed it as a way to reach broader audiences and reduce their distribution costs. But what no one saw coming was that the internet not only reduced distribution costs to zero, but it also drove the cost of creating content to zero. User generated content flourished, and when content doesn’t cost anything to create, it no longer has to make money. How does content behave when it no longer has to make money? The relaxation of this economic constraint led to a Cambrian explosion–you can take a picture of a cup of coffee, post it to a million views or none at all and the market clearing price is still met. This produced a deluge of content that none of us could reasonably consume. This necessitated products to direct attention, merchandise this content, and route us effectively–we understand these now as user-generated content platforms.
These platforms completely T-boned media companies. As a media company, you were competing for the same attention of users, but with a strictly higher COGS. The more people you had on your payroll that were creating content, the more exposed you were to being flanked by user-generated content platforms. Structurally, investing in media has been a losing value proposition ever since and value creation has shifted entirely to the platforms that control distribution.
Software is expensive to create. You have to pay people to create it, maintain it, and distribute it. Because software is expensive to create, it has to make money. And we pay for it–software licenses, SaaS, per seat pricing, etc. Software margins have historically been an architectural envy–90+% margins and zero marginal cost of distribution.
Software is expensive because developers are expensive. They are skilled translators–they translate human language into computer language and vice-versa. LLMs have proven themselves to be remarkably efficient at this and will drive the cost of creating software to zero. What happens when software no longer has to make money? We will experience a Cambrian explosion of software, the same way we did with content.
Vogue wasn’t replaced by another fashion media company, it was replaced by 10,000 influencers. Salesforce will not be replaced by another monolithic CRM. It will be replaced by a constellation of things that dynamically serve the same intent and pain points. Software companies will be replaced the same way media companies were, giving rise to a new set of platforms that control distribution.
SaaS, ARR, magic numbers–these are all shorthand to understand the old model of business building in software, one where the expense associated with creating software was a moat. The invisible hand has been stayed in software for a long time, but LLMs will usher in its swift, familiar corrective force. Majoring in computer science today will be like majoring in journalism in the late 90’s.
Reading the Comments
*KG Note: After Chris published the above essay, Bryce selected a handful of tweets reacting to this essay and had Chris respond to them one by one. You can watch the full video here. It’s worth watching if only to see how Chris respond to the memes/insults.
Transcript
Host: I wanted to start with a hard hitting one. And I just want you to read these out loud.
Chris Paik: Dini @floridasiren. What the fuck. Period.
Host: It gets better every time.
Chris Paik: So if we were on Twitter, I would click into the person's profile and I'd read their bio. Just try to understand, like, the context of where is this person coming from? There's this great Upton Sinclair quote, which is, “It is hard to get a man to understand something when his salary depends on him not understanding it.” And so every time I would see something, I would go into the person bio and it’d be like, “software engineer” or like, “CS student,” like “CS 25.” And I'd be like, okay, I get it. I touched a nerve. I touched a nerve.
Host: Could the same be said for you, though? You are historically a software investor, you invested in software related companies. Why do you have a different reaction than, say, a developer to something like this?
Chris Paik: That's a good question. I mean, there's definitely an ego part of just wanting to truth tell, regardless of, like, the longer term ramifications, or whether or not it's actually existential. I think, for better, for worse, the capitalist class is like kind of--it's a broken system for—I mean, like, we can, we can, like, go—we can veer hard right into, like, you know, labor value and capital value. From an investment perspective, venture capital benefits from being able to adjust according to underlying tectonic shifts. And it doesn't have to—few bets in venture capital are necessarily binding. You can always shift. It's maybe like less existential to contemplate the existential threats to software as an investor than it is as a software developer, where the value that you produce to society as defined by GDP is indelibly tied to your role of being a software developer. That was really heavy.
Host: It had a period at the end of it. This was a complete thought. So I think giving it the, you know, giving it that kind of weight's important. I think—how long has this thought been bubbling for you, and how did it make its way into that Google Doc?
Chris Paik: I've been thinking about this for months, longer than months. I've been articulating it for months in words, mostly in verbal conversation.
Host: Has it changed? Has it evolved that you've kind of iterated and gotten feedback on it?
Chris Paik: Yeah, I would say so. I feel like I'm probably stealing this from Steve Jobs, I think. A lot of my thoughts are kind of like rocks in a rock tumbler. And every conversation is a turn of the tumbler, and it gets clearer and clearer. The existential thought had been sitting with me for a while. So much so that I would disclaimer anytime I brought up in conversation with like, this is probably too doomer. This is very doomer to say, but I haven't been able to stop thinking about this as a dynamic, and I haven't been able to think of an incongruous set of things that would invalidate this hypothesis. And it threatens so much of the industry that I work in. Not only does it threaten so much of the industry that I work in, it threatens an enormous amount of the entire sector that I work in. Deeply existentially. Basically, if you thought that the Internet threatened anyone that had people who made content on payroll, this threatens any company that has software developers on payroll. Which is crazy. I mean, it's mind boggling to think about. At the same time, if you were in 1990 and you said “Every media company is going to fail,” you'd probably be laughed out of the room. It is incendiary to publish the idea that it is going to go away. But I also think, I believe it, and I think there's value in putting that belief out into the ecosystem.
Host: I love it. Well, you certainly touched the nerve.
Chris Paik: Oh, Logan. I love Logan. Logan Bartlett says, please delete this. Logan is a goat tweeter, and this is an incredible tweet. The context there is, as you know, Logan is an incredible SaaS investor, incredible software investor. Cut his teeth at a firm called Battery under an incredible SaaS investor, and then went on very successfully to Redpoint. I don't know if SaaS investors will exist in ten years. And I love Logan as a human being. I love a lot of people who invest in SaaS. It's almost like it's too easy. Anytime the capital markets converge around and securitize an asset, it creates a cantilever dynamic, like over a cliff. And then when something fundamental snaps, it just all falls down. The reason why I'm not sure if SaaS investors will exist in ten years is so much of SaaS investing requires really, really, really high margins for software and high net dollar retention. And those are marks of relatively non-competitive dynamics associated with high switching cost, barriers to entry, sales and marketing being somewhat defensible in creating a moat around your product. And I don't know if any of that will exist once the cost of software goes to zero. Not only is free really, really, really hard to compete against, but when the free options are all competing with each other, that's even harder to compete with.
Host: So in your mind, in that cantilever metaphor, has it cracked? Is it swaying? Has it already crumbled and it's starting to fall, or is it in—are we at the free fall moment?
Chris Paik: We're not at the free fall moment at all. I'm sure you've heard gradually, then suddenly. I am terrible at timing. If you ask me to time things, I would be bad. That's why I'm not a public market investor. But I do think about things that will happen eventually. And I think this is going to happen—I think it's probably inside of—
Host: You said ten years, no SaaS investors.
Chris Paik: I think the capital markets will correct really quickly because investment dollars are very sensitive to shifts. Like if you think about the Fed announcing interest rate changes, capital markets respond on a dime. So if something about the underlying ability to durably predict out discounted future cash flows fundamentally changes, capital markets respond immediately. So even if, you know, even if we aren't all the way there—
Host: Didn’t we have one of those moments in the last week kind of leading up to this post?
Chris Paik: Well, so, yeah, I mean, the day before I published this, like, a number of public software companies got destroyed, like 20, 30, 40% drops in stock price. And I think it's because the cracks are starting to show in the core assumptions underpinning the business model of software. When the margins aren't as high, the growth isn't as strong, the efficacy of sales and marketing isn't quite as good. These are all symptoms of the underlying dynamic, which is competition. Competition is the driver of the invisible hand. And I feel like for a long time, the invisible hand wasn't quite as—hasn't been quite as efficient in software. I mean, it's efficient up to a certain degree—
Host: Which seems counter intuitive given how efficient software should be.
Chris Paik: Generally speaking, markets are efficient. And so, I would say in the software ecosystem, you have companies like Constellation Software, right, where like, software SaaS companies are treated like securities, or like, you can, like, LBO them.
Host: We had Chamath, like, packaging up and trying to abstract away any kind of idea that, like, he wanted to index all of them, that these were like the most predictable cash flow you could possibly, you know, invest in.
Chris Paik: Right. Well, I mean, like, when you securitize something, it really, really, really depends on the underlying thing being predictable correctly. And then when it's not predictable, everything falls apart.
Host: So do you think that was just another crack, the CRM earnings, the—
Chris Paik: I don't purport to be a—
Host: Or is that our suddenly moment?
Chris Paik: I would say that's still part of the gradually. I say that's still part of the gradually. The suddenly is gonna be bad. The suddenly is gonna be bad. The suddenly is gonna be tens or hundreds of thousands of people that thought their jobs were secure in tech realizing that that's not the case. It's gonna be bad. It's gonna be really bad. Again, it's like, this is so doomer. I'm like, I sound like the dude from the big short.
Host: The blog post that launched 1000 short sellers. This feels like there's something structural that's going on here.
Chris Paik: The hard part is like, I don't—
Host: At least that's what you're circling around.
Chris Paik: I don't even think you can trade off of this. You can trade off of timeable information. Like, was there money to be made shorting media companies during the rise of the Internet?
Host: Probably would have made a lot shorting Time Warner there at the end.
Chris Paik: Sure. I have another hot take if you want it.
Host: We're in the business of hot takes.
Chris Paik: Unpublished hot take.
Host: I love this.
Chris Paik: So speaking of Time Warner, I think OpenAI is the AOL of AI. What do I mean by that? Okay, so, anytime there's a new—
Host: This is going off the prompt. There is no—just, I want the record to show we’ve barely touched the surface, scratched the surface on tweets over here, but let's go.
Chris Paik: Anytime there's a new technology, it's actually kind of a pain in the ass to use, as a consumer, or as an end user. So the Internet, in the early days of the Internet, browsers were not uniform, site safety wasn't obvious or, like, guaranteed. Even navigating the Internet was hard—pre-search engine. Like, how did you get around? What did AOL do? AOL shipped a closed Internet. When you have an open ecosystem and it's very DIY, AOL shipped a closed Internet. They built a private road and they put a toll booth on it, and they said, Look, we're going to give you messaging, email, message boards, news, sports, weather. And I think for a lot of people, like my parents’ generation, their understanding of the Internet and AOL was one and the same. It's like, oh, like, do you have the Internet? Oh, yeah, of course I have AOL. So you have this private toll road built, and it's great because you're able to deliver a spoon-fed, homogenous product, that is good, to users. And you have this public access road, but this kind of, you need a four by four to drive on this. Here's the issue. Over time, this public access road turns into an eight-lane highway. And your ability to extract rent from your private toll road decreases. AOL bought Time Warner because it thought, Oh, hey, like we're losing subscribers. We need to shore up our user acquisition. Where can we go? Let's verticalize. Let's go direct. What they didn't understand is that they were just at a structural disadvantage, competing against free and open. That had just gotten better. They had this massive leak in their boat and they thought they needed to graft it to another boat. No. So what do we have? OpenAI has built a closed system. I spend time in weird subreddits. One of my favorite subreddits is r/localllama, where it's all—basically hobbyists. They have their own rigs, they run open-source models on their own computers doing their own inference. It's awesome. It's amazing. It's probably too much alpha, so maybe we edit that out.
Host: We'll beep it out so no one else knows. It's amazing. What a gatekeeper over here.
Chris Paik: OpenAI has built a private toll road. It's a great product. It's a great product because it's a new piece of technology. They make it legible to most people. And they charge for it. Again, the problem is the public access road, which is very DIY, it turns into this eight-lane highway, eventually. And you look at WWDC, and Apple has a 3bn parameter model that's just going to run locally on all Apple devices because of the unified memory architecture of their device, which is genius. And so the vast majority of inference is going to be happening locally on device, there's no cloud inference provider, and all of a sudden, the inference is local on open-source models. And then the closed strategy loses its ability to extract rent. So the canary in the coal mine is probably going to be when OpenAI tries to buy distribution—the same way that when AOL tried to buy distribution.
Host: Oh, fascinating.
Chris Paik: Now I—I'm probably wrong. I'm probably wrong.
Host: Hot takes are, you know, if you're right, one out of ten…
Chris Paik: It's a hot take.
Host: I love it.
Chris Paik: @kermankohli says, tell me you've never written code without telling me you never written code. Yeah, that's fair. That is super fair. So in my defense, I have written code—
Host: But you don't identify as a coder or programmer.
Chris Paik: Yeah, I don't identify as a coder. I've never livestreamed myself, yet invested in Twitch. I have never created content to make a living online, yet invested in Patreon. I've never built a mobile game, or game at all, for that matter, but I invested in Unity. I don't think you have to do the thing to necessarily understand the dynamics that impact one's ability to do the thing. And I think you can examine it without necessarily doing it. If I'm going to be like a—if I'm going to be—if I'm going to throw this back at this person, this is, like, very gatekeepery, right? It's a very gatekeepery—
Host: Say more. What do you mean?
Chris Paik: I don't know. That feels—that sounds pretty insecure to me.
Host: Just go back to your earlier quote about, like, someone's salary depending on something, they probably—
Chris Paik: Yeah, yeah. I'll bet $100 this person is a developer. And, like, I get it. The last line in the essay, very incendiary, very incendiary.
Host: By design.
Chris Paik: I think, like, to drive the point home. To really drive the point home.
Host: What was the last line? Just for the record.
Chris Paik: The last line in the essay: “Majoring in computer science today will be like majoring in journalism in the late nineties.” That was the last line.
Host: Okay.
Chris Paik: What's funny is, I feel like people that take issue with that are also kind of telling on themselves or shitting on journalism. There's, like, two things that are going on there. To take it as an insult, you have to also look down on somebody else's decisions. I would say—humans are so bad at understanding the future. The best way that we can understand the future is by putting it in terms of the past. And so I think that's what I was attempting to do. It's funny, though, I feel like I saw some people talk about, like, journalists catching strays. I feel bad about that. I feel bad about that.
Host: We love journalists. We have nothing against journalists.
Chris Paik: I think journalism is so important, so, so, so critically important for humanity. And I am excited about capitalism surfacing—the free markets and capitalism surfacing the right answer to the incongruity of business model in journalism that exists currently, and has existed since the beginning of the Internet. I'll be excited for that.
Host: Yeah.
Chris Paik: I'll be excited. Because I think it's, like, a really important part of society. Okay. All right.
Chris Paik: Courtland Leer says, everyone fired up over this essay, but I only see one thing. And—
Host: What's the image?
Chris Paik: The image is Pepe the frog huffing gas from a—and the gas cylinder is labeled “copium.” It feels good to be white-knighted.
Host: Yeah.
Chris Paik: It feels good. Like, you know.
Host: I'm not gonna hit you just with the ones that are tearing you down the whole time. I was like, we need a well rounded—
Chris Paik: What's like the Kanye West line, right? Like they—
Host: Be careful where we're going.
Chris Paik: That's true. That's true. Yeah, yeah, yeah. Yeah. They're hating, but at least they're saying something.
Host: That's right.
Chris Paik: I think if it didn't resonate at some level, no one would care. No one would care. Everyone would be like, who's this idiot saying this thing that doesn't make sense, because—and then they would, like—nobody would respond.
Chris Paik: Sophie @netcapgirl: “software is totally dead, bro. LLMs are going to replace engineers soon. For real. fr.” From VC associate with an econ degree who spent two years in consulting. The only lines of code they ever wrote were for an intro to Python course, which they dropped after a couple weeks because they were bored. Very specific. Deeply felt.
Host: Just to be clear, you are a Partner and Founder at this firm, ma'am. Not an associate.
Chris Paik: I feel attacked. I feel attacked. I studied economics, so I take—I took that personally. This is fair. This also doesn't say it's wrong.
Host: Yep.
Chris Paik: But it's a lampoon. And I accept it. I accept it.
Host: Here's another one. This is fun. Are you enjoying this?
Chris Paik: This is great.
Host: This is fun.
Chris Paik: ReuroqX says, I was dehydrated when I woke up, but these programmer tears are quenching my thirst. Oh my God, I actually haven't seen this.
Host: I told you, I went deep.
Chris Paik: This is amazing. This deserves a follow back. This is really good. This is really good. I feel this. So I have a personal Twitter policy of not dunking. I feel like the original tweet was not a dunk. If that policy didn't exist, I would have written that tweet.
Host: That's the one. That’s the one.
Chris Paik: It's a great one. It's a great tweet. It's a great tweet. It's a great tweet. I mean, you know, it would only be better served by a picture of a mug that had programmer tears written on it, just drinking it.
Host: Guzzling it.
Chris Paik: Just like, just “programmer tears.” Mmm.
Chris Paik: Tom James, @TACJ. This stuff is like saying because all the tutorials are available online, nobody will ever need to hire developers anymore. They can just do it themselves. This tweet, and other slightly similar tweets, like, there is free software, so it doesn't matter, actually kind of, like, fundamentally misunderstand what's happening.
Host: What's he missing?
Chris Paik: Before the Internet, people knew how to write. People knew how to make content. People like, it was known—but it was still expensive. Like, the cost associated with doing it was still expensive, and the distribution cost was still expensive. Understanding of how to do it isn't actually the fundamental shift. And what this is implying, or trying to say, is that—well, first of all, I would never claim this, because I think what the Internet revealed is that the educational issue was never access to information. It's always been motivation. Like, when Harvard, Stanford, MIT put all their coursework online, I feel like there was this collective sigh of like, oh, finally, now people can be educated. And then we all woke up to like, oh actually, actually—
Host: Didn't want to do homework anyway.
Chris Paik: Ah, shit. Like, people just don't want to do it. That's why people haven't been educated. People are lazy. People are lazy. Motivation is the constraining issue. People are lazy, and they're not going to teach themselves how to code.
Host: I don't hear that as a judgment on your part. I assume you lump yourself into that same category.
Chris Paik: I’m so lazy. I'm like the laziest person you'll ever meet. I don't like doing things I don't have to do. And I think that people—I would never expect anyone to do something if they didn't want to do it. Here's the thing. When the friction to do something asymptotically approaches zero, and then reaches zero, all of a sudden, behavior completely changes. Completely changes. I don't know. I'm pulling analogies out of my ass on the fly. Okay. You're at a buffet. Everything's free. You actually behave differently than if you're ordering a la carte. It's a fundamental difference in behavior because there's zero marginal cost associated with doing something. Actually, like, the biggest issue, the biggest issue at a buffet is like, how big your stomach is, right? How big your, like, how much you're able to eat—physically able to eat. But barring that, everybody would just like, eat everything. So—
Host: Or there's like that tyranny of choice where you just go to the things that you're most comfortable with already, right?
Chris Paik: Yes, I 100% agree. I 100% agree. So there's an interesting parallel here where—think about the content you consume today. Think about the average person. Think about the average person, and their pie chart of information they consume in a day. Like, what percent of the information they consume in a day is pushed to them? It's near 100%.
Host: Near 100%. Oh, absolutely.
Chris Paik: Right? Think about—remember when you used to drive to libraries and check out books? And you had a thought like, oh, I want to read this book. I'm going to go seek this thing out, and I'm gonna go get it. Like, that was pull. Back when people had encyclopedias at home, you sought out information. The way that you consumed information oftentimes was preceded by a desire to learn something or desire to seek out information. That's gone. So now we just, like, we—you fire up TikTok and you're just scrolling and you're just getting—it has root access to your attention. We are in a moment right now where software has an interesting relationship with humans. You—like, nobody opens up software without some intent, right? You wanted to message me, and you probably thought to yourself, oh, I want to send Chris—I want to contact Chris—and you're pretty agnostic, actually, to what thing you use. It could be iMessage or Twitter or email, and you're just like, okay, I'm going to pick whatever tool is best to do this thing. Nobody cold opens software. Nobody's like, Hey, I'm going to fire up this thing without intent. And that's the thing, that's like— software's Achilles heel is if someone or something is strictly better at servicing that intent, has a better mousetrap, it's going to cut out everything else. And it will be rewarded by the firehose of intent—the same way that TikTok, Instagram, YouTube are rewarded by the fire hose of attention. They're just a better mousetrap for attention, and they put everybody else out of business.
Host: Literally teed up this next one perfectly.
Chris Paik: Oh, okay. There you go.
Host: We're moving out of the dunks into a little bit more nuance.
Chris Paik: Gonzalo Espinoza Graham @geepytee: “What's the equivalent for taking a picture of a coffee cup and posting it to a million views, but for creating software?” It's a really good question. I think that this is the question I think that the essay kind of invites people to ask.
Host: So maybe frame it. If people haven't read the essay, maybe frame up the context for that question and kind of what you were getting at.
Chris Paik: Totally. In the essay, I describe how post-Internet, content costs nothing to create, and it costs nothing to distribute, and it no longer has to make money, because it's totally free to create and distribute. You could take a picture of your coffee and post it on the Internet. No one could see it, or a million people could see it. And the market clearing price for the burden of creation is still met. Which is crazy. That's what happens when it costs nothing to create and it doesn't have to make money. Right now, software costs money to make, and so it has to make money. What happens when software doesn't cost anything, and it doesn't have to make money? So what is the equivalent of taking a picture of a cup of coffee and posting it to a million views for software when it costs nothing to create and costs nothing to distribute, and it can be ephemeral or permanent or whatever? It's probably more ephemeral than permanent.
Host: There's no real concept of ephemeral software.
Chris Paik: There is no concept of ephemeral software because it is so expensive to create. Like, if you had asked Universal Studios in 1980 whether or not they would ever make a piece of content that existed for a second and then went away forever, they would be like, You're crazy. You're crazy. There are real fixed costs associated with—film is expensive. All these things are really expensive. So why would we ever do that? Our whole business is built on creating IP and media that can be monetized in a back catalog and act as this kind of perpetuity. We don't have a concept of single-use software. We don't have a concept of ephemeral software. But if software is free to create, it's super malleable. We will. Like, you'll think of something—it will start with intent. It will be, I want to do something. It sounds crazy, but software will be created to help you achieve the thing that you want to do, and then it will go away forever.
Host: What's a scenario for single use software, in that sense?
Chris Paik: I actually have no idea.
Host: Okay.
Chris Paik: Like, if you had asked me what UGC would look like in 1999, I don't know if I would have been able to articulate it at all. I feel like there are some people that are better and more prescient about being able to describe what it looks like, but I'm so limited by my own imagination. It's kind of like the, what's like the Senate definition of porn? Like I, I don't know, but I’ll know when I see it.
Chris Paik: This is Aaron Levie @levie. “Provocative thoughts for sure, but some fundamental premises that are off. Enterprises don't want a “constellation of things that dynamically serve the same intent and pain points.” Instead of Salesforce, their jobs, supply chains and quarterly numbers are on the line. Unlike the risk reward of reading an article from Vogue. AI will definitely change quite a bit about software, but mostly that it will make mostly that it will make it more important and valuable, not less.” So you know what's really funny, actually? Aaron tweeted something and then deleted it and then followed it up with this.
Host: What was the first tweet? Do you remember? Was it more nuanced? Less nuanced?
Chris Paik: His first tweet was just the laughing, crying emoji.
Host: And how did you interpret that?
Chris Paik: He was like, Oh, this is a joke. And then I think he deleted it and realized, Oh, shit, actually, I have to—
Host: I run a public company—
Chris Paik: I have to come up with a more articulate response to this. And then he wrote this. I'm sure that media executives had really, really eloquent defenses post-Internet that probably sound and felt something like this. That's kind of the way I process it. The emperor has no clothes—and I think this is kind of like somebody in the court saying, Oh, no, you have clothes—because they're supposed to say it.
Host: Look at how dependent everybody is on you for this. But the flip side of that is, when I read it, the media analogy that came to mind for me was—
Chris Paik: Here’s the thing. When Aaron says, Enterprises don't want a constellation of things, what does that even mean? Enterprises are a collection of individuals. And, like, so a group will behave according to the sum, the aggregate of the desires of the individuals. And so if all the individuals are like, I don't want to—I want to do this thing, I'm going to use this thing because it's better and it's easier, that's what's going to happen. I mean, like, isn't that—like, wasn't that Box’s, like, original thesis of, Hey, like, people can adopt it from the ground up. Like, you don't have to sell. Like, the CEO doesn't have to make this decision. Like, some rank and final employee can adopt it, and then it, like, disperses within the organization.
Host: I mean, that was the promise of Salesforce with their Force platform too, right? Like, we're going to have this marketplace of anything you want. You just plug it right in.
Chris Paik: Yeah, I don't consider enterprises to be this, like, spooky, like smoke out of the Vatican decision-making black box. It's like—businesses are just a bunch of individuals who are lazy. And so it's like they're gonna pick the thing that allows them to be the most lazy.
Host: Is there a metaphor in here that would harken back to the media that looks something like, We have cable tv—cable tv is the past. The future is a constellation of apps and services that are now trying to get rebundled and somewhat, I mean, the viral tweet always is something like, Okay, hear me out. We have Netflix, we have all these things, we have all this constellation of media properties—what if we package them all together into one monthly subscription?
Chris Paik: You know what I think the actual analogy is for media? It's—remember when people were saying that people trust journalism?
Host: Yep.
Chris Paik: It's like, no, no. People want to hear from trusted sources. Like, you want to hear from this person and this authority. And that's why people will always turn to, like, journalistic integrity. Like, you don't want to hear from some rando Youtuber. Like, you're not going to like, listen to them. You want to listen to like—I don't mean to like, pick on Walter Cronkite or whatever—like, you want to listen to like, the nightly news because it's authoritative. That's what that is.
Host: Interesting.
Chris Paik: It's like, actually, no, no one cares. You're overweighting how much people care about this like, trust. People are more lazy than you think.
Host: Okay.
Chris Paik: Gorkem Yurtseven: “End of software? friends, we just invented the printing press for software.” I agree with the sentiment of this. I agree with the sentiment of this. So admittedly, the title of the blog post, The End of Software, I would say, has multiple meanings. I would say there's one version which is this is the end game for software. We are shifting to this final phase of how software will behave. I would also argue that software as we know it will not exist. Like this idea of this monolith—like companies monolithically creating software and shipping it and us consuming it, that won't exist. We had to come up with the term social media to describe this new kind of thing that people were consuming. There's going to be some other thing to describe it, but it’s not going to be software.
Host: Do you remember—I didn't, when I read the post, I didn't know how intentional you were for using Salesforce—it was because of the earnings or because of their original marketing campaign, do you remember their original marketing campaign?
Chris Paik: Their original marketing campaign was “the end of software.”
Host: Literally.
Chris Paik: 1998.
Host: Absolutely. Protests outside of large software vendor user conferences.
Chris Paik: Look, there's something funny—it's like you either die a hero or live long enough to see yourself become the villain. Feels right. Feels right.
Host: I love that. Speaking of living long enough to become the villain.
Chris Paik: Josh. Josh Elman. Love Josh. “Beautiful post. But you missed one thing. The value will just shift from the individual software makers to the aggregators. This is exactly what has happened in media and exactly what will happen in software if (when) your theory comes true.” I actually 100% agree with Josh, and I tried to—I feel like I said it in the essay, but it maybe got buried. I think one of the reasons why I was drawing parallels between the two things is I expect things to play out basically the same. It's the same movie. We've seen this movie before. Different actors, same ending. There will be aggregators. There will be these platforms—I talked about UGC platforms monopolizing attention—there will be these new platforms that monopolize intent. They will own you at the highest—as close to your brain routing—intent as possible, and you will trust them to do everything. And in exchange, they will monetize your intent. That's what's going to happen.
Host: Interestingly, Josh participated in a lot of startups over the years. Do you know what he's doing now and what might be informing this tweet?
Chris Paik: Yeah. So Josh has always very smartly voted with his feet. I feel like—he worked at Twitter, he was at Robinhood. And now he is at Apple working on AI—Apple Intelligence. And they are as well positioned as anyone to be one of, if not maybe the biggest intent router. Which is crazy. It's crazy. But it requires them to build a product that is good enough that you can be lazy and trust it. And that's hard.
Host: Yep.
Chris Paik: That's really hard.
Host: Oh, my gosh. There's—I mean, we have so many here that I want to get into.
Chris Paik: Greg Hochmuth @grex. “There will be no revolution in software until we can put first-rate, first-class apps on the computer in my pocket without going through a gatekeeper. Either the gatekeeper goes, or we need a new computer in everyone's pocket. Many people seem in denial about this.” I think this underestimates how lazy people are. Let's talk about Apple and antitrust for a sec.
Host: I love how many friends you're winning over. Let's keep pulling on this thread.
Chris Paik: I mean, let's talk about Apple and antitrust for a sec. So the traditional litmus test for antitrust is it is not in the best interest of the consumer. But what if the consumer wants it? What if the consumer is so lazy, they're like, you know what? Just give me the thing. Feels within the best interest of the consumer. So, yeah, I mean, I think—
Host: So he's saying unless something changes, the Josh's, the Apples, the incumbents of the world are just going to keep getting stronger and stronger, because they're going to have a more—
Chris Paik: I don't think the gatekeeper goes away. I think the gatekeeper can be replaced by a bigger, badder gatekeeper, but I don't think the gatekeeper goes away because the gatekeeper, or Apple, is so good at giving consumers what they want, and in exchange, they have this incredible position. As they should. I mean, it's the reason why they can extract the rents they do on the App Store in a way that Google cannot through the Google Play store. They've put the work in to deploy the hardware installation base. And Google didn't. Google just shipped Android everywhere. And it's like, Okay, like, you get an operating system, you get an operating system, you get an operating system! Oh, by the way, we're gonna, like, try to put this, like, rent capture thing on top of it. Every person that buys an iPhone is explicitly opting into the ecosystem. That's the difference. And so, yeah, I think people—people are so lazy. People are so—people are so lazy.
Host: I can't wait for the supercut of this.
Chris Paik: People are so lazy! But—
Host: So okay, how does that dovetail with the enormous bet you've made on Browser Company?
Chris Paik: Sure, sure. The bet that we made on Browser Company is not incongruous with the idea that people are lazy. And I think the bet that we made is that an incredibly talented team like the one at Browser Company can be better at delivering a product that is superior at earning the trust from consumers and that position of ultimate laziness. Like when the thing does more that you want it to do because it is great product, you're willing to entrust it more to do more things.
Chris Paik: This is Garry Tan. And I love—Garry, I love you. I love you.
Host: That was some kind of ring kissing going on there. But yes, proceed.
Chris Paik: Garry says, “Disagree with the ending. When you add a lot of average software to the world, it makes the superlative software more useful because it can do more and have access to better data.” What is wrong about this? So I don't think this is going to be adding a lot of average software. I think this actually just—so there's a bell curve distribution of things, right? Pre-Internet, we had a bell curve distribution of media.
Host: You can hear the media exec right now saying, Whoa, I don't care if anybody like some random person on the Internet—what do they know? They will never be able to compete with us!
Chris Paik: Exactly. Exactly. I think the logical fallacy here is that we have a bell curve distribution of software. Reducing the cost of creation to zero doesn't just increase just average. It actually just shifts the entire bell curve up. And so there's an even farther distribution. And the overall denominator increases. Tremendously. In the same way that we have—there's user generated content out there that has gotten more views than any produced thing has ever gotten—and will continue to. We will have other software or things that are created that are way better, way more impactful, than anything that exists today. So I think we're not just flooding the market with “average” software, we are increasing, or literally just shifting the bell curve up, and it's extending out. And so we're naturally going to have even better things on this side. And we're going to have shittier things, too. So, false premise.
Host: Suck it, Garry!
Chris Paik: Michael Karnjanaprakorn says, “All of the big venture returns will now come from really hard technical problems. Building an easy app will now be considered a hobby or a small business.” I understand why he's saying this. Do I think that all big venture returns will now come from really hard technical problems? I don't know about that. So here's the thing. Distribution, still unsolved. Distribution is always this perpetual unsolved problem with every new technological shift because, drum roll, Humans are lazy. We suck. We suck at finding the things that we want. You know what's really good?
Host: If we find something that's working, we keep doing the thing that’s working.
Chris Paik: And like, we want things that route us to the things that we want. And that is a perpetually unsolved problem. So, like what Josh Elman was talking about, like, Okay, well, this is going to give rise to an opportunity set of people, of things, that deliver what people want more frequently and more effectively, 100%. And actually, those things, those players, are going to be the Facebooks, YouTubes, Twitters, what have you, of software in the future, I'm sure venture returns will come from solving really hard technical problems, but I don't think that that is it. I still think there are—probably the biggest venture returns in this next era, in this next phase, are going to be coming from whomever solves distribution—of this—whoever solves the merchandising, routing, and discovery—sorting amidst this Cambrian explosion of software that needs to be sorted through. That's going to be the trillion dollar thing.
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Wrap-up
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