Lenny's Podcast: Product | Career | Growth
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.
00:49:06 · Brian Balfour
But if you only aligned to iOS, you could also be a winner. Right? So, like, that's just right. Like, you you had to have iOS as part of your betting strategy in order to win. So everybody right now, like, you're probably at the cycle in in trying to figure out... Well, y'all need to... Everybody will need to figure out where are they gonna place their chips. How how are they gonna bet? And depending on how you bet really depends on, what your current position is in the marketplace. You know, if you're a late stage startup, let's start with that, or like a late stage company, you can afford the luxury to place multiple bets and kind of spread your chips and kind of wait it out a little bit to see who the winner is and then really throw your muscle behind that winner. You have that luxury a little bit. And of course, but the risk of that, the risk of that is that sometimes the incumbents wait too long to to make that decision, and and that's, like, kind of the key key question they will need to answer. The key question for startups is totally different. You don't have the luxury to spread your chips. Like, you have to go all in. You have to choose one and go all in. You have scarce resources, scarce attention from the market. And so it's a totally different ballgame. Higher risk, higher reward for sure. That's part of the betting strategy for startups. And so that's kind of what you have to do is you kind of have to figure out your betting strategy. And then we talk a little bit about how you might evaluate and pick the right course for you. But, but that's where we're all at right now is we're we're kind of... We're... We just entered the casino. We just cashed... Put some cash in for some chips, and now we've now we've gotta figure out, you know, what tables and and where to to place those chips.
00:50:55 · Lenny Rachitsky, Brian Balfour
[00:50:55] S0: I love this analogy. Okay. So just to be crystal clear about what listeners should do, what founders should do, product teams should do, the advice here essentially is, integrate with ChatGPT, maybe Gemini, maybe if Apple has something. It's like, actually integrate with with what they launch. So it could be a a login thing, could be a search thing, could [00:51:17] S1: be a [00:51:17] S0: connect and suck up your memory in context. The advice here is is you need to do this because this is potentially the way that most companies will start to grow and your competitors may overtake you. [00:51:30] S1: Yeah. Yeah. If we had to, like, really simplify it, it's essentially play the game. Don't opt out of the game. Don't don't trick yourself into thinking that you can't play the game. That's number one. And then number two, no matter who you bet on, just make it a focused bet. Because the the... All... Like, if you look back, all the failures are the ones that tried to, you know, play multiple games at at once with scarce resources, and that just tends to never work if you're you're an early stage startup. So those two things. Play the game. Put a focused bet.