Don't call it a moat
Moats set the ceiling on value capture. Execution determines how close you actually get.
After making all the openclax maxis mad this week I’m back to our regularly scheduled programming. I’ve also got two great events linked at bottom.
Code as execution, not a moat
After writing about the SaaSpocalypse and the headwinds on software defensibility I got some pushback from a founder (h/t Comron):
You’ve been able to outsource software development to India for cheap for a very long time. If you had an idea and a spec, you could ship it overseas and get something back for a fraction of the cost. Why wasn’t offshoring the death of the software industry?
If code was already commodity enough to be a punchline (”all vertical SaaS is just Salesforce with extra fields”), what moat just died, exactly?
TLDR - code was always execution (not a moat) and LLMs are different in both kind and degree from outsourcing.
The outsourcing question
This is the obvious objection: if cheaper code was going to kill software, outsourcing would have done it already.
But outsourcing was a low-tech, shitty attempt to commodify code production. Huge barriers to entry, high cost to manage, bad results. It didn’t actually relieve the bottleneck.
AI code generation is a difference in both kind and degree.
The difference in degree: code generation tools are so much cheaper, so much faster, and roughly at par with anything you would get from an outsourced team. That massively expands the market.
The difference in kind: Outsourcing is basically useless to (and even a burden on) really talented engineers, whereas code gen/LLMs are a massive accelerant/multiplier on their ability to run fast and far.
Code becomes free at the low end (savvy non-technical operators solving problems with code) and amplified at the high end (great engineers being able to do more than ever before). Collectively, this compresses the value of code as a differentiator.
Software is more valuable than ever in that it’s more important. But the ability to do it well is no longer enough to separate you from the pack.
Code is/was a chokepoint on execution, not a moat
There are only a few moats and execution is not one of them (nor is speed), even if it matters a ton and makes some businesses better than the rest.
Writing application software was never a moat but it was more valuable (harder to replicate) as a form of execution. The reason it felt like a moat was that a limited number of people could do it well. That talent constraint made software development look like a barrier to entry when it was actually just a bottleneck on execution.
AI relieved the bottleneck, changing nothing about classical moats. More people can functionally do it well AND those who can do it really well can do much more of it.
Moats and execution are fully independent variables
Execution in the field of writing software is not fundamentally different than execution in the fields of hiring, selling, finance, etc. It matters enormously to how well a business runs, but it doesn’t create a durable barrier to entry or guarantee margins on its own.
Google Search is the definitive illustration. It is probably the best business of all time because it has multiple strong moats: data, network effects, brand, economies of scale. But the execution is notoriously terrible: no product direction, low velocity, bloated, kills products on a whim.
Moats determine the ceiling on how much value you can capture. Execution determines how close to that ceiling you actually get. They are fully independent variables.
The companies in trouble are the ones that confused the execution bottleneck for a moat. AI didn’t kill your moat if you never had one. It just relieved the chokepoint that made it hard for someone else to execute as well as you did.
Everything shifts down one tier
Execution on application-software-shaped problems gets easier, which means you can afford to focus on harder problems. Every company used to have to solve two things: the software problem and their actual hard problem. AI is knocking out the software layer, so now all your effort goes to the hard part. That makes each category one step more tractable.
For pure application software companies, there is no harder problem underneath. Software was the whole thing. When you knock out that layer, there’s nothing left to create barriers to entry. That’s why they look more and more like services businesses: easy to start, hard to differentiate, lots of competition.
But for everyone else, this is a gift. The infrastructure business that used to spend real effort on the application layer can now put all its resources toward systems engineering and reliability. The hardware company can focus entirely on the physical and mechanical problems that actually differentiate it. Same logic, repeated across every tier.
We’re seeing basically everything shifting down click one in terms of risk and feasibility. Pure software companies look more like services companies. Infrastructure companies look like software companies. Hard tech companies look like infrastructure companies in terms of difficulty, specialization, and the ability to start and fund them.
Even as application software becomes non-viable on a TV basis, the rest of the world and the TAM of software writ large is growing exponentially.
From now on there are only 4 jos
There’s a very real possibility that the only jobs in tech companies are going to be:
product eng/vibe coder/PM/slop cannon: self explanatory. this is the high velocity, high tool use generalist. they are obviously not restricted to product and eng roles. Anyone can be commercial and product minded.
security/SRE/infra: we’re going to be producing so much STUFF across every org that there’s going to need to be really really good people stitching it together, making it stable, secure, and robust.
hot people. You will find hot people in roles ranging from sales, to people, to CX. There will always be an important place for those who present an easy UX to the world and are pleasant to be around. Remember, there are many ways to be hot.
grown ups: sometimes you need an adult in the room to just say “hey, come on.” They are effectively a much needed governor on an otherwise accelerating organization. You will find them across roles but there are obvious places like legal and finance. They are basically the non technical equivalents of #2 and might even be able to be bucketed with that.
the latent traits have always cut across job titles and orgs.
Our Cyber Conference: Slow Security NYC
For the last year we’ve been going deep on how AI is changing the threat landscape by creating new surface areas to defend and transforming attacker economics.
At the end of April we’re hosting ≈100 founders, security operators, buyers, and investors in NYC to discuss and learn.
Etiquette School
This is gonna be fun. We’re bringing Slow’s etiquette school to NY in a few weeks to teach founders and builders in NY how to show up the right way. We’re gonna have a bunch of speakers and teachers to help you learn how to present like an adult.
personally i think leaning into software engineering skills, particularly architecture, is the most high value contrarian trade of the moment. the reason i think this is because i think consumer expectations are rising faster than AI code generation capabilities. i work at an AI consulting company by day and had a customer legit request a Zoom style clone in a casual manner, like the kind of thing we could deliver by next tuesday or something. on one hand that is true, we probably could do something like that, but as we add in all the details the complexity will come right back in. basically AI abstracted a lot of complexity, but consumers adapted and added in a whole new level of expectations that put the complexity right back in -- and now you are just dealing with complex engineering issues at a different level. jevons paradox and all that.
i think we saw something similar in other computing innovations, which is why in spite of everyone for decades trying to make software programming easier it has somehow gotten harder. JS frameworks were supposed to help, web-based IDEs, stackoverflow....somehow consumer expectations keep growing faster. in 1999 a business could have a slow loading geocities page without a domain and with HTML tables with thick borders as its UI. nowadays you might get sued for emotional damage if you tried something like that.