Uncapped with Jack Altman
· 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.
· Bret Taylor, Jack Altman
[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. [00:00:00] S0: You mentioned that the pricing scheme was one of the difficult things in the past era. We don’t have to belabor it but obviously, going from just buying a license to a cloud subscription… and now usage-based is the future. What are you feeling is important as you’ve created, and probably continue to iterate, on pricing? What are the important levers for agent companies? [00:00:00] S1: We do something specific at Sierra that I’m an evangelist for, which is outcomes-based pricing. It turns out in our industry, the outcome is usually well-defined. In a service context, the outcome is: could the agent solve the problem? In a sales context—we do a lot of sales agents as well—could it make the sale? Your companies paid your salespeople commissions, right? [00:00:00] S0: Yeah.
· Jack Altman, Bret Taylor
[00:00:00] S0: Yeah. [00:00:00] S1: If you can measure the outcome, you want to incentivize the outcome. The interesting thing about agents is they’re autonomous, or can be autonomous. So if the outcome is measurable and trackable, what an interesting opportunity to actually charge for that. Look at the history of software. Let’s take advertising. We went from impression-based ads to cost-per-click ads to now, for mobile ads, you can do pay-per-install. At least that’s my understanding. Then you had enterprise software where you went from on-premises licenses to subscription-based software. Could outcome-based software be the next? What’s so neat about that is, for a company, what an interesting and accountable business model. There are some challenges to it because you obviously put some revenue at risk. But I don’t think most advertising tech people would say CPC ads put revenue at risk. It’s the opposite. The closer you get to the outcome, the more valuable it is for the companies. They’re actually willing to invest in it. My view is that, to the degree agents have a measurable outcome, outcome-based pricing feels like the secular business model for agents. I think it’s both disruptive and a huge step forward. [00:00:00] S0: Why is it better than token-based? If those are the two reasonable options now, why is an outcome better than token-based, even over the long term?