Lenny's Podcast: Product | Career | Growth
00:38:40 · Brian Balfour
[00:38:40] S1: Yeah. I'm glad you mentioned this because this brings up something that we skipped, which is there are smaller platforms that have existed and will also emerge in this environment as well. And and that's kind of like what you're alluding to is that this tends to happen is like things end up, know, growing into more niches. Even if you look at social, right? Like LinkedIn emerged as a subset of the social world. But even on these smaller platforms, these new distribution channels, they they go through the same cycle. I'll I'll give something, you know, really, a a very opposite example of the ones that I gave. Like, look at the platform Udemy. Right? They they are a platform for course creators. Right? I don't know if most people know this, but when they started, their rev share to creators was something like 80% to creators. They started very high. And that brought on all the course creators, got their whole marketplace going, like so on and so forth. I believe it was about a year ago they announced that they're essentially pushing that rev share down to something like somewhere between 1520%. They're somewhere at like 2530%. So another example of they closed down organic distribution in order to monetize all that kind of stuff. And the same thing will happen in this AI world. I believe you know, Cursor... It's very clear, like, Cursor is on a path to also probably create some type of agent platform, right, for developers. So that'll be like a smaller ecosystem to play in for, some some products. There's all sorts of... It feels like everybody has the same strategy at this point as everybody wants to launch an agent platform. I imagine some of these other horizontal productivity tools will do the same thing, maybe like a Notion or an Airtable or like a monday.com or or something like that. So there there are... There will be smaller platforms that will emerge, and they will follow the exact same cycle that I am... That I'm also discussing. But, yeah, in terms of, like, the biggest kind of consumer one that... That's where I think ChatGPT has probably the the most escape velocity. And, and, yeah, others will focus on different areas. And and just to be clear, I love Claude. I actually use both Claude and ChatGPT all for for different things. I I have lots of love to go around for all these tools. I'm not...
00:41:02 · Brian Balfour, Lenny Rachitsky
My prediction has no no bearing on which which product I I like the most right now. [00:41:07] S0: I also love Claude. So I think with... So the key point here you're making is that there's almost a a number of distribution channels emerging. Many of them will be niche. So I think of LinkedIn if I wanna... Like, LinkedIn for me is a very targeted audience for folks that listen to this podcast. So even though it's not, I don't know, Google or Facebook or whatever, it's still incredibly valuable for this specific thing that I do. For sure. So I think this is even more interesting that there's gonna be a number of distribution channels that emerge out of this whole AI wave. The other thing I'll note real quick, you mentioned this idea of everyone's building agents. I just had Bret Taylor on the podcast who's building Sierra. And we actually... He made me realize why everyone's building agents partly. One is because the the outcome based pricing that you can charge with agents is incredible because one, you can actually attribute their impact on your business' ROI. You can actually see this is saving an agent $15 because it solved the case. And it's attributable and it's autonomous. It's just doing it on its own. So with that, you can charge per outcome. You can say, We'll charge you a dollar every time it solves an issue. So the monetization opportunity is huge and the margins go up like crazy.
00:42:18 · Brian Balfour, Lenny Rachitsky
[00:42:18] S1: Do you... Can I just ask a question about that? Do you think that has longevity, in the sense that, that makes sense in the current environment that we're sitting in right now because people are kind of comparing these outcomes relative to what it costs them today with pure humans. But once again, competition comes in at some point. And so that feels like that creates a pretty ripe opportunity to, you know, undercut and come into... And then then you have, like, whole... All, like, the disruption theory kind of playing out as well. And so, it obviously depends on like the infrastructure costs and compute costs to to to run these things. But I just wonder how much of that is, temporary versus versus something that'll be long term. [00:43:06] S0: So you're saying that dollar will come down to, like, 50¢, 25¢, or are you saying someone's gonna come with a whole new business model and disrupt that whole approach? [00:43:15] S1: More the first. Yeah. Like, it's just competition erodes that away, essentially. Right? Yeah. [00:43:19] S0: Yeah. That's a good point. So margins will be higher for a while, and then they'll come down. [00:43:23] S1: Yeah. In there's, something else that, creates, like, durable pricing power. [00:43:31] S0: Right? I wonder if that... Yeah. So I wonder if what [00:43:34] S1: that is. The second piece of this. Yeah. Yeah. That's probably the second piece of that hypothesis, I I feel like. Yeah.
00:43:34 · Brian Balfour, Lenny Rachitsky
[00:43:34] S1: that is. The second piece of this. Yeah. Yeah. That's probably the second piece of that hypothesis, I I feel like. Yeah. [00:43:38] S0: Yeah. I think... I guess the opportunity there, the moat would be the data, like, similar to how Cursor is collecting more feedback on what is... People want in their code suggestions. Maybe in theory, CRF and has more and more data over time, and there's kind of this network effect. Yeah. That's right. [00:43:54] S1: Yeah. So so let me revise that. Yeah. It's like, I believe in that as long as it's paired with Samote. This this second piece. Otherwise, it gets competed away. [00:44:02] S0: Yeah. Mhmm. Good tangent. Okay. One more question. What's the... What is your prediction on timeline for when things... When the opportunity appears? And what do you predict as of the day we're recording? What do you predict will be the next couple things that open... That ChatGPT, and let's just focus on that releases to start to open up this platform to get everyone in there?
00:44:25 · Brian Balfour
[00:44:25] S1: Yeah. Well, look. I'll I'll first, give the disclaimer that I feel like any thoughts on timing in the AI market are very... Have been very hard to... It... There... It's always shorter. That's where we should bias. It's always shorter than you think, of, like, when something's gonna happen. Like, that's what it's felt like from the seat that I've been sitting in. And... But my guess is this, we're going to see the the next major steps of this play out over the next six months. And so I think we just saw one of the pieces drop around this, which was, their re... Which was ChatGPT's recently launched agent mode. And so it's kind of a general purpose agent. And I think that starts to introduce all of the users to using agents, and they're kind of figuring out and placing it in the different tiers and business models, all of those pieces. But it's likely that no general purpose agent is going to fulfill all of the infinite use cases, successfully. And there's two reasons for this. Right? Users struggle with horizontal tools. They can do everything, and that's exactly why they struggle to adopt. And so they typically need more specific entry points. But also, the more specific use case you get, sometimes you need specific UI, specific data, like other specific ingredients, you know, to properly fulfill, that use case for, you know, for a given audience. And so I think their agent mode was a step in this direction. What I would expect to see play out next is that they will they will either launch... They will announce the platform or what they're gonna now... With preferred partners or what they're gonna announce versus is basically a set of preferred partners, the the guinea pigs. You know, an initial 10 to 20 folks that are, like, bringing agents, to their platform. And, and what that does is it essentially... Once again, it's a credibility card. Right? You you do special deals with, some, like, right brand names to give, the platform credibility, and it kind of creates this desire from everybody else to come on, you know, to the to the platform. And then the step after that is starting to open up the platform. And this is where the real, you know, where we'll really start to figure out what this game is gonna look like because they basically have to define what the value exchange is. What are they giving you access to? Right?
00:46:46 · Brian Balfour
And, like, what are what are they incentivizing you with to to come on to the platform? So that's one version of it. The other version of it is just like the replacement to search. There will probably be, you can also see them starting to make more moves here, which is, like, deeper attribution in some of the results, like, those types of pieces. They're bringing in shopping. Right? Like, that's one of their recent announcements as well, kind of native into the UI. Essentially, they will form new monetization mechanisms around that stuff as well. And that's actually going to be very important because for them to... Going back to the moat around memory and context is that they will want to incentivize as many people to their free tier as possible, but given the cost of AI, they have to cover it somehow. So they're gonna need some monetization mechanisms. So the more that they can cover that free usage with things that aren't subscriptions, I think that probably also kind of feeds them out. So I think it... Those are some of the next steps on two different vectors, more of a, like, a third party developer platform and more of the, you know, kind of content, whatever you want to call it, AEO, GEO. I don't know what acronym is. Every... We've all decided on yet. Let me know if we have. And, and and I think those will be I think those will be the next the the next steps that we'll see. Now that's what I think for ChatGPT. I think the thing that we should talk about is like, essentially, what I would advise folks, especially startups, is you're placing bets. At this part of the cycle, you're placing bets. We don't... The winner is a 100% guaranteed, as I mentioned. And so you essentially, at some point, will need to make some decisions about, you know, where to where to place your bets. In the Facebook days, all those all those other social networks, they also came out, you know, with their own platforms. Right? And, iOS had Android and some failed initiatives from Windows. I don't even remember what that platform was called. Right? Like... And you can look back and whoever placed their... You know, the iPhone was actually a very... And iOS is a good one, which is if you had only aligned your bets to Android, you probably lost. If you somehow find... Found a way to play on both ecosystems, you could be a winner.