Lenny's Podcast: Product | Career | Growth
00:02:27 · Benedict Evans, Lenny Rachitsky
[00:02:27] S0: Thank you for inviting me. [00:02:29] S1: You just put out this deck called AI is Eating the World. I want to ask you the flip side of this, of we all know it's a big deal. Knowing that, what do you think people are still not fully pricing in when they think about the change that they're going to experience to their lives and their work?
00:02:46 · Benedict Evans
[00:02:46] S0: An interesting way of thinking about it, I did a podcast last year with someone where I said my most controversial opinion is that I think that AI is as big a deal as the internet or mobile. And only as big a deal as the internet or mobile, because clearly there's a bunch of people in tech who think, no, this is more like the industrial revolution or something. And there are a whole bunch of people underneath saying, "Well, he thinks this is just as big as... Does he not understand how big this is?" And I'm like, smartphones were quite a big deal. The internet was quite a big deal. We wouldn't be doing this if it wasn't for the internet. But then if you dig into that, if you're going to make the internet comparison, it's like we're a 1997. It's very exciting. Most stuff doesn't work yet. Most of the stuff that people are going to do hasn't been built yet, and it's not really clear how any of it's going to work when it does work. And the people who've already got it, who have already taken whichever pill it is, I forget which, sort of imagine that everybody in the world is already there. And the truth is you've got this kind of very wide distribution. So there's people in tech who bought their cluster of Mac minis, and don't use Google anymore. And then you look out side tech and setting aside the idiots who think that this isn't real. Most people who are using this are using this every week or shoot, maybe. So you've got that kind of spread of adoption and that spread of maturity of how well this works. And then within that, you can make specific points about, well, how are the models going to work? And do the model labs have pricing power? And where's the value going to be? And has OpenAI won the whole thing? Or is Anthropic got it this week? And so then you can kind of get into calling those races where, again, it's like being in 1997 and saying, "Well, is it going to be Excite or Yahoo?" And the answer was no, generally. So there's a fractual point here. There's the super high level that this is going to change absolutely everything. I don't think it's particularly productive to say, "Well, is it 20% bigger than the internet or 100%?" Those aren't productive conversations. But it's one of those fundamental changes, but then you don't know how any of it's going to work. In fact, I just published this.
00:05:38 · Benedict Evans
I do a presentation every six months and I just published one yesterday, and one of the comments was, "Benedict, this is 80 slides of saying we don't know," which is slightly facetious, but also kind of true. Well, unquestionably, we are already in that moment in software, and then there's a conversation about, well, what does Agentic and AI software development, three separate things that merge together, mean for the future of the software industry? There's one extreme which is no one really believes, which is, "hey, you'll just vibe create your in Stripe." And no one actually believes that, although briefly you don't believe that, but clearly there's a whole bunch of questions about what this means for the software industry, and how much stuff you'll be able to do yourself, or how much more software there will be. And that's one whole conversation. But the other extreme is, if you're in a law firm, this is all very interesting, but how exactly do we use this, and how do we work out how not to be the next story that we've submitted something with hallucinations in it, and how many associates are we going to hire next year? What does this mean for us? One of the analogies I used in the presentation is, imagine you're an accountant seeing the first software spreadsheets in the late '70s, and this is mind-blowing. You change the interest rate here, and all the other numbers change. And it does a week of work for you in like 30 seconds. And we can talk about what that meant for the accounting industry, but clearly if you're an accountant, this is obviously mind-blowing. But if you were a lawyer looking at that, or journalist looking at that, you'd think, "Well, that's very clever and my accountant should see this," but that's not what I do. I might use it for my time sheet next week if it didn't cost 10 or $15,000 to get the Apple 2 and the monitor and the printer to run it, which is what it costs if you adjust replacing. But that's not what I do. And you need Word processor, which actually came very shortly afterwards. And so that's sort of the moment that we're in of, there's some people like software developers are the accountant seeing VisiCalc. "Oh, my God, this changes everything." Before VisiCalc and after VisiCalc, before Claude Code and after Claude Code. A lot of other people are picking it up using it to varying degrees, but slightly puzzled.
00:08:35 · Benedict Evans, Lenny Rachitsky
So, there's a bunch of survey data that I put in the presentation that, even if you look at like 13 to 18 year olds or something, it's still like 15, 20% of people are daily active users, and another 20% are weekly active users. And then the other 60% of those people in that demographic how on you say they are not using this. So, there's a sort of very widespread of who gets it, and a very wide... Which I think also maps, this is kind of almost a separate point, maps to this sort of jagged frontier question of, where does this work? Where does it not work? Can you tell where it's going to work? Is it intuitive to know where it would work? Can you tell after it worked? Can you work out for yourself what you would do with this? And all of those intersect with your software developer. There's a lot of other people who are like, people are having a moment or they're not, or again, we're in that kind of 1997 moment of, "Okay, what is this?" [00:09:45] S1: Along those lines, something you've been writing a bit about is, this unexpected investment in professional services/consulting services/forward deployed engineers, all the AI labs, at least the two big ones, OpenAI and Anthropic, are investing in buying massive consultancies and PE firms. Talk about just what's happening there, why that's happening.
00:10:06 · Benedict Evans
[00:10:06] S0: Well, it's funny, I was kind of groping for a joke last night when I wrote my newsletter and couldn't quite get to land it. But something like, we know the joke that a machine learning scientist is a statistician who lives in San Francisco. And there's something in there of like a forward deployed engineer is like an Accenture outsource software developer who lives in San Francisco, or works in San Francisco. I mean, joking apart, if you have any experience of professional services, companies do not have lots of people sitting around waiting to build a big new project, or do a big new piece of analysis, or build a big new piece of technology, or a new product, or work out how they're going to redesign their stores, or work out where the store should be, or try and work out why the churn is too high. All of those kinds of questions are reasons why you hire Bain, BCG, McKinsey on one side, or Accenture, Infosys, whoever on the other, or you hire a branding agency, or you hire an arch firm of architects or whatever. And it's always like, well, we could hire some architects, but why on earth would we want to have 15 architects on staff when we would just go and hire an architecture firm, and we just go and hire an ad agency? And so we are supposed to completely reimagine all of the internal workflows of your company, and work out which of them could be automated really quickly with AI. That's a project. That's a project that needs like five or 10 people to sit down and spend a month or two working it out. And then actually doing it is another project. Okay, so you need to plug these three vertical systems into these two horizontal systems and build a bunch of new workflows and train people to do that. Well, guess what? Who's going to do that? Because you don't have a bunch of people sitting around not doing anything. So, on the one side, this is part of the model of some PE firms, which is that they provide support to their portfolio companies to do stuff. And on the other side, that's why you hire, depending on what you're trying to do, you hire Bain, or you hire Accenture, or you hire publicists to help you work that out.
00:12:13 · Lenny Rachitsky
[00:12:13] S1: What's really just funny about this trend is you would think consultants were going to be gone. No, we don't need all these people anymore. AI is going to do their work. Instead, the most cutting edge AI labs are the ones most investing in these folks. I think it's pretty surprising.