The Weekend Leverage
Fresh pope, hot software launches, and same old Washington D.C.
The new pope is an American from the midwest, which I’ll take as a divine mark of approval on the superiority of ranch as a condiment. I am also from the midwest, but was not elected as Pope. Catholic Jesus has granted me a higher calling—sending emails to all of you.
Welcome to the third edition of the Weekend Leverage. The meta story this week is that we are out of the experimentation phase of LLMs. According to a survey of 2,000 CEOs only 25% of AI products have delivered their expected return on investment. Budgets are tightening and operators will be expecting real outcomes now. The end of experimentation brings consolidation. This week started that phase off with a flurry of deals, acquisitions, and aggressive launches by incumbents aimed at punching startup challengers in the throat. May the best product win.
Let’s get into it.
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MY RESEARCH
Can AI fix the sins of the internet? In the wild excitement of growth, it’s easy to ignore the second-order effects of a scaling tech company. Social media connected the world and then stuffed our eyeballs with short form. Airbnb gave us new places to stay and then caused rents to rise. If we do not learn the lessons of the internet’s history of unintended side effects we are doomed to repeat them with AI. I published an essay this week classifying where things went wrong and how AI-native startups can fix the mistakes of the past, while still building multi-billion-dollar businesses.
Uh oh, a crypto use case I believe in. Stablecoins are wildly underrated by the broader tech community. I’ve been a noted crypto skeptic for years, so take me seriously when I tell you that stablecoins can make a material improvement in many people’s lives. They are cheaper and faster than traditional banking flows, allowing people to hedge against currency inflation, and would secure the U.S. dollar as the world’s reserve currency. Paying subscribers can see the startup opportunities based on the rise of stablecoins that I’m excited about, including creator micro-payments, currency stabilized marketplaces, and more.
Job displacement caused by AI and whether venture capital is cooked as an asset class were the topics of our Substack Live with my friend Moses. Worth a listen!
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THE BIG THREE STORIES
Regulation finally comes for stablecoins. I know politics is boring and divisive, but this is important. Crypto in the U.S. has spent most of its time in a legal grey area. Sometimes prosecuted, sometimes embraced, depending on the winds of political advantage. This looks as though it may change. Because stablecoin is a digital representation of a currency, the currency that is represented by that coin becomes a reserve currency, increasing its importance and power in the world. Dollars are the most popular general reserve currency and crypto reserve currency. Of the roughly $238 billion in stablecoin market cap, 99.8% of those are dollar denominated. This further entrenches the United States' financial hegemony. Keep in mind how early into this we are! Again, this has all been accomplished without any real clarity from the federal government on how these assets should be treated. Now though, the stablecoin market cap is a little over 1% of U.S. money supply. It’s big enough that the government is forced to develop frameworks, otherwise it will lose out on some macroeconomic control.
Source: Outlier Ventures
Still though, this is the United States government, which means one thing: political dysfunction. The GENIUS act was supposed to provide clarity and pass lasting stablecoin legislation before it was blocked by Democrats this week. I don’t pretend to be a policy expert, but I guess some of the crypto hostility is people close to the current administration doing insider trading to the tune of $100 million in gain with coins like $Melania. (Yes, that is a crypto coin launched using the brand of the First Lady.) There is an arbitrage here—if you believe that stablecoin regulations will be solved soon, you should start building as quickly as you can.
What do we do with way, way more software? Two of the most valuable AI applications in the world are Cursor and Windsurf. Both are tools aimed at helping engineers develop software faster. Windsurf was purchased by OpenAI this week for $3 billion, while Cursor is one of the fastest growing companies in Silicon Valley and just closed a $900 million fundraise at a $9 billion valuation. This is kinda interesting. I’ve written multiple times about how fast these things are growing, so that’s not new info.
What is really interesting is considering the second-order effects of the ability to create software 10 times faster than just a few years ago. It means that software companies can be significantly more aggressive in expanding their software suites. This week we saw two instances of that occurring already. Figma, the darling of designers who wear black everyday, doubled their product offering in one conference. These new suites will directly attack Adobe’s market share. Servicenow, which is one of the legacy companies best positioned for the AI age, launched a CRM product to directly compete with Salesforce.
Going forward, the ability of products to take market share will be on the basis of workflows and data. Is the design of the software—the taste represented by its builders—reflective of how its customers like to work? And does the data the platforms use make new suites more powerful? For example, Servicenow’s bet is that they can use AI to connect their back-office software to the CRM and automate away a large amount of labor.
Beyond that, the go-to-market assumptions of software have to change. It used to be that a customer success team would try to upsell on a yearly basis. How do you sell to a customer when you can do a major release every quarter? The transition from tastemaker to organizational genius will have to happen in a matter of months, versus the multiple years founders used to have to learn into new roles.
Google down $150 billion based on a comment. Its stock price crashed after an Apple executive’s comment on decreasing search volumes on Safari. The bleeding was bad enough that Google had to put out a press release saying that the Apple exec was wrong. I don’t really want to get into the semantics of the dueling statements—I recommend the breakdown from the excellent newsletter Spyglass if you are interested—but what matters is how quickly that shift in stock price occurred. To me, the clear signal is that the market lacks trust in Google’s ability to navigate the transition into AI powered search. Ithas all the building blocks to move to an AI-search age, but can it fight through institutional malaise to deliver a killer product? So far the market doesn’t appear to believe that. For me, I use Google searches 90% less than I used to, but find I use the more specialized experiences (hotels, flights, maps) at the same rate. Have you noticed any changes in your own use?
VISUAL SIGNAL
One common complaint that I hear from my normie friends is that AI is destroying the environment. That doesn’t appear to be true. If you do 100 searches a day, a huge number, you are only increasing your electricity consumption by 1%.
The carbon footprint is miniscule, too.
I think you can even make the opposite case where these AI centers will spark the nuclear power renaissance that makes the world carbon neutral. There are many ethical concerns with this tech! But electricity and carbon are not a substantive issue.
TASTEMAKER
Technology as a moral, spiritual pursuit. I found myself incredibly moved by this discussion with Jony Ive at the Stripe sessions. When I first fell in love with tech markets, it wasn’t money that really interested me, it was the ability of these products to serve the world. I wasn’t alone in that view, but increasingly I feel isolated by it. Too much naked pursuit of power, and too little dedication to service. This talk ignited those old feelings in me, it is a much watch.
Atlas Shrugs is still ass. In many of my talks with right-wing friends over the last year, there have been casual mentions of John Galt and Ayn Rand’s writing. I read the book when I was 11, and was intrigued by the ideas at the time, but remember thinking “this writing sucks.” Now in my 30s, I recently picked it up again and discovered that 11-year-old me nailed it. The book has a hypnotic power to those with a certain strain of thinking, but the actual craft of writing is terrible. Her prose is clunky, her metaphors so heavy handed it appears an elephant operated the keyboard. The only reason to read it is to understand where people are coming from when they advocate for her work.
How do you create a soulful tech company? Blizzard is a study in contrasts. Their original games were just rip-offs of other popular titles. The management was, at best, borderline dysfunctional. And nevertheless, they have managed to create many of the best video games of all time. They’re creative, interesting, and hold legions of fans. Play Nice by Jason Schreier does an excellent job reviewing its history and helped me gain an understanding of what made it all work. The short answer: Obsessive people who are in love with the problem they are solving can make up for a litany of management sins. (Perhaps that is also the lesson of Apple and Ive.)
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