Uncapped with Jack Altman
· Bret Taylor, Jack Altman
[00:00:00] S1: There’s probably some benefits, all sorts of things. What ends up happening when new technologies come out is the pendulum swings from best of platform to best of breed. [00:00:00] S0: It’s much easier to get a 10x experience. [00:00:00] S1: A hundred percent. Also just think of pre- and post-web browser enterprise software. You’re running client-server Windows software. It’s a completely different skillset to make a web application, as you and I know. So at the time, there’s this window where best-of-breed competitors are light years ahead of the incumbents and it’s a race. Basically, can the best-of-breed upstarts get scale in time before the incumbents figure out the technology. That’s what’s going on right now. I would argue very few of the incumbents have any credible, decent AI technology, but they will. It’s inevitable they will. [00:00:00] S0: You know what I don’t understand? Why is that? What’s the real reason for it? These companies have infinite resources, roughly speaking. They ought to be able to hire who they want. They ought to know what the products could look like. They ought to be able to try them. Why is it so hard for legacy companies to catch up quickly, versus an AI startup with 50 engineers that seems to outperform the teams that are 10x bigger at a big company? Is it cultural? Is it systems?
· Bret Taylor
[00:00:00] S1: I like the phrase “strategy tax.” I don’t remember who to attribute that to, but we could pull up ChatGPT and ask. The idea is that in these moments of big platform shifts, what were your strengths can become weaknesses. Let’s take Siebel Systems and the birth of the web browser. They have an on-premises CRM system. When you say, “Okay, let’s compete with this cloud-native CRM system in Salesforce,” you start to say, “I don’t want to just start from scratch. We’ve got all these assets. How do we do it in a way that takes advantage of all of our assets?” All of a sudden you’re like, “Okay, let’s not just build a great product. Let’s transition from this product to that product. What if someone wants on-premises too? That’s our strength. We should play to that strength.” You start basically making all these decisions that sound really clever because you’re playing your strengths. In practice, if the technology wave is bigger than the category, which I think the web was as an example, you end up basically chipping away at having a pure-play value proposition. It can also happen with business models. At that time, you’d have perpetual license software. Moving to software as a service, that’s a huge change for a business to make. For your customers, it goes from being CapEx to OpEx. For you as a company, it changes to ratable revenue. Shantanu did this at Adobe. Very few companies can make that transition. You have to sell it differently. You have to compensate salespeople differently. Revenue recognition is different. So you have the product strategy tax, you have the business model strategy tax. Even with the incentives of salespeople there’s a strategy tax because you don’t want to just have your business collapse overnight. It’s so easy for a clever Silicon Valley person to say, “Just pivot.” If you’re a public company, you have to go in front of your investors every single quarter and be like, “Yeah, hey guys, I know our revenue just went off a cliff, but trust me, it’s going to turn around next quarter.” You don’t survive that. You compound all those things and all of a sudden you’re like, why does a 50-person company succeed? They have none of those. All of the advantages that you had all of a sudden become anchors that are holding you back from actually doing the right thing.
· Bret Taylor, Jack Altman
That’s why I always like to remind our company, Sierra, that the wave that we’re riding, of large language models and this next generation of AI, is greater than any company riding it. Don’t fight AI. It’s going to happen with or without us. If you go back to the internet, if we were talking in 1995, we’d probably be like, “Search as a category, e-commerce as a category, digital payments… That’s definitely going to happen.” Google hadn’t been founded yet. Amazon probably had around then. PayPal, probably not founded yet. The categories are obvious. Whether or not any of those founders existed, there would be winners. [00:00:00] S0: And it’s the same now. [00:00:00] S1: And it’s the same now. Everyone knows what’s going to happen and you’re competing for the privilege of winning. In a world where the technology is that remarkably powerful, the strengths of the incumbents start to wither in the face of the technical change. That’s why you tend to get new, great companies. The companies that are enduring tend to be created in platform shifts more than any other time.
· Bret Taylor, Jack Altman
[00:00:00] S1: And it’s the same now. Everyone knows what’s going to happen and you’re competing for the privilege of winning. In a world where the technology is that remarkably powerful, the strengths of the incumbents start to wither in the face of the technical change. That’s why you tend to get new, great companies. The companies that are enduring tend to be created in platform shifts more than any other time. [00:00:00] S0: I’m actually curious on this topic, that there are obvious things. Within AI, not to discredit your insight, but support I would count as an obvious thing, in a good way. It looks like it works and you did it early enough to get to a place at the right time. But other people did too. In some ways you have been playing in a very blue ocean, wide fields. The incumbents are categorically different. It seems inevitable that we’re going to have agents doing support. And then on the other side, a lot of other companies see the same thing. A lot of other people have been building it. Before getting into the specifics, I’m curious. Experientially, day to day, does your operation of the company feel competitive or wide open? [00:00:00] S1: It feels competitive and it feels like a really big market. It doesn’t feel particularly demand-constrained, which is a really great feeling as a fellow entrepreneur. [00:00:00] S0: So you feel like there’s lots of demand and there’s a contest with each situation?
· Bret Taylor
[00:00:00] S1: Yeah, that’s right. It feels like there’s too much capital available. Put another way, there’s obviously going to be competition in meaningful markets. It feels like there’s too many competitors that don’t necessarily have strong differentiation. I think it’s probably healthy though. There will be a culling as the market progresses. But it does feel quite competitive. I’ll give you a quick glimpse of the past couple years. We’ve had remarkable growth at Sierra. We closed $100 million in seven quarters, $150 million in eight quarters, which has exceeded my expectations. But this past year has felt like an inflection point. The first year of our company’s history, we would often go in and explain to clients what an “agent” was. The term was novel and it was part of our marketing, explaining what an agent was. Number two, people would be talking about, “Hey, AI is maybe non-deterministic.” They wouldn’t necessarily use that word, but that’s what they would be describing: “How can we trust this technology directly engaging with our customers or consumers? What are the risks?” Now the conversation is, “Clearly we need this yesterday.” Over a quarter of our companies have $10 billion or more in revenue. We’re talking about big companies. We serve most of the Fortune 20, as an example. These are big companies coming in saying, “We’ve evaluated, we know what we want. We’ve heard of you, we’ve done all this evaluation. Here’s an RFP. Let’s go.” As a consequence, because the market has matured—illustrated by the existence of things like RFPs—you end up in more competitive conversations. And then it’s a question of, why Sierra? I’m happy to talk more about that. Obviously I’d love to as an entrepreneur. I could tell you all the reasons we’re the greatest. But you end up in this world where you’re not explaining what the word “agent” is anymore. You’re saying, “Here’s why we’re the right partner for you”, which is a very different conversation.
· Jack Altman, Bret Taylor
[00:00:00] S0: So they’re like, “Yeah, I’m bought in on an agent. So why is it Sierra?” What have you found is the most important thing that makes you win? [00:00:00] S1: One thing we really did uniquely at Sierra—the reason why over a quarter of our customers have over $10 billion in revenue—is we’ve tried to serve more complex, more regulated industries. We serve most of the US healthcare insurance market, as an example. We serve US banks, Spanish banks, UK banks. These are companies that, if you know the industry, are regulated by everybody. It’s easy to make a demo in AI. That’s why you can go on X and see a thousand demos. Demos are cheap. But making an agent industrial-grade is hard. We’ve really uniquely been able to make agents that can have complex conversations. The other thing we do really uniquely is, in addition to having a really easy-to-use product, we help companies move faster. We went live with Cigna in two months. [00:00:00] S0: That’s crazy. [00:00:00] S1: Which is remarkable. [00:00:00] S0: How big is Cigna? [00:00:00] S1: It’s a Fortune 20 healthcare company. I was on stage with Sachin, who runs their AI practice, at the HLTH conference, and he was talking about this. Part of that is, how can you show up? We’re really great at AI, Cigna’s really great at healthcare. How do you bring those two together to move extremely fast? So for a lot of our clients, the reason they bring us on is, can you help us move quickly? That requires knowledge of AI, knowledge of business. I think we show up with a greater sense of maturity there.