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if I had to guess about what has changed from 2021 to 2025 is that most companies have realized
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that buying yet another vertical software solution is not going to help their business that it typically
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adds bloat it adds cost and it adds people and I think starting in 2023 what people started to guess is at some
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point in the near future you're going to have some AI way of rewriting all of this vertical software and I think
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that's why it stopped growing i don't think this SAS market ever had the return on equity that it was supposed to
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and I think so many companies have woken up from this hangover saying there's got
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to be a better way it can't always be yet another tool yet another program yet another multi-year delay
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yet another price escalator and I think that that the jig is totally up for software you're referring to the
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Salesforce and the SAS category Chimoth and what you're doing at 8090 specifically yeah well it's it's not
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just us but like if you look at anybody that's rebuilding software it is so much easier to rebuild software
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from scratch today like my team of 30 people can transact hundreds of millions of dollars of work not because we are so
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prolifically amazing but frankly because well I think the team is good but honestly because the underlying tool
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chain gives you a level of leverage and so if you rebuild the software development life cycle using these tools
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you can't help it but become much more efficient and you can't help it but deliver custom solutions that are
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meaningfully cheaper and I think Jason if you look at the entirety of the software that runs the world we're going
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to rebuild it soup to nuts all of that and the tool you're referring to just for the audience is the AI co-pilots
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that are making that are contributing 30 40% to code bases at Microsoft and less
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less specifically that because those are those are good for individual people but
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the software development life cycle is more the horizontal end to end of making things got it so what we do internally
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at 8090 is we have an entire process that starts from the PRD all the way out to the functioning code and we use
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different techniques at each step but what you get is a 50 60 70% increase at each step which then compounds and so
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you have the ability of a team that would otherwise be able to service tens of millions of dollars be a team that
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can service hundreds of millions and then a team that would otherwise service hundreds can service billions let me ask
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you guys your response to this theory if there is going to be this kind of accelerated
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call it custom software rebuild of business models and you take the S&P 493 do you think that we enter an era where
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there is a similar dispersion as we're talking about seeing in the MAG 7 with the S&P 493 where there are going to be
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probably the biggest money-making opportunities for investors that we've seen in decades
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between those that do adopt and do rebuild using AI and those that don't for 100 100%
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i had a call yesterday with one of the largest private equity funds in the world hundreds of billions of dollars
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under management and we're doing something with them at 8090 with one of their most important assets
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and when you're an owner of a business and you can direct specific change and you can rip out
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hundreds of millions of dollars of software licenses and replace it with tens of millions of dollars of highly
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customized software it's an enormous lift to OPEX and business model quality so why doesn't it
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happen more the reason it doesn't happen right now for this S&P 493 is that the IT organizations inside all companies
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essentially speak a different language than the CEO the CFO and the board so if the CEO CFO and the board of directors
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of the S&P 493 speak English the IT organization speaks Mandarin Chinese and you get away with saying all kinds of
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i'll give you an example i went to a CIO conference one person that I met an $18 billion a year IT budget
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what the does that actually even mean to spend $18 billion a year on it i'm not saying that this is a mag seven
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company guys and when you take that example and you multiply it by 50 and 100 and 493 examples of people spending
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money there's an entire cartel of influence that's been built in software that's going to get undone because
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you're not going to be able to justify it free absolutely correct and the response from the SAS industry is
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changing from the per seat model as the number of employees at these companies continues to get lowered obviously
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Microsoft a lot of layoffs andy Jasse talking about layoffs they're moving from the per seat model they're not
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taking this uh laying down uh they know that people are going to make custom software so what they're doing is
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they're moving to a consumption model so you're seeing people charge per call per
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customer support call etc and well it's I'll tell you why it doesn't work it's working in combination
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hold on hold on let me finish the other thing they're doing is they're dramatically lowering the number of
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people and the developers they have on their team and then a lot of what's happening in the background is the third
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piece they're doing is they're starting to uh do rollups and people are starting
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to talk about how can we take you know 20 of these SAS companies lower them just like you're doing to compete your
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thought playbook well I just wanted to comment on this like consumption based pricing
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it doesn't work and what I mean is you can have some adoption in the short term the best example is Snowflake but in the
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long term it destroys your business and the reason is because you don't know which data is valuable and you're not
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going to put up with a variable business model that increases more and more cost
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because you need to trap everything and so what happens is all of these other companies develop around you people go
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back to Postpress people go to Superbase they find all of these ways of saying snowflake makes no sense and the reason
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is because in this world nobody's going to pay consumption because you're like how do you expect me to you know hold
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and store and pay for terabytes and terabytes potentially a day of data it's not sustainable we'll see if intercom
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Salesforce HubSpot and we see if all of those people start Slack start losing their customer base or if they lower
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their pricing to make it just too easy to keep those systems in thomas your thoughts yeah so two quick thoughts uh
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number one Chimath to put a kind of a mathematical frame on this right we know that Anthropic is kind of the level zero
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of code generation they're they're doing incredibly well powering companies like
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Cursor right i think and this is order of magnitude correct that Enthropic in Q1 added 70% of the net new ARR in the
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SAS industry right defined by public SAS companies right so let's just think that
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the company in AI that is most powering the disruption of SAS added 3/4 of the net new of the entire industry right so
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that's kind of point number one I think Freedberg point number two I think what we're seeing in the Max 7 right where
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we're starting to have debates about who's well positioned and who isn't who's going to win and who isn't right
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is actually as it was in the past 5 years going to be a broader lens into the S&P 493 I think inside of boardrooms
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inside of every investment committee you're going to see the exact same conversations that we've been having
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about the MAX 7 right who who's well positioned who can win what are the management teams maybe like Zuck that
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are being aggressive and bold and capturing the opportunity and which are the ones that are not so for me as a
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stock picker right I think over the next five years