The implicit challenge here is brutal but clarifying: if your product disappeared tomorrow, would your industry’s core constraint actually come back, or would things mostly keep limping along?
“I think the fitness function for companies becomes can you actually do things in such a way where even if you could spend tokens on it, it would take more tokens to create the thing or do that work than the system that you’ve built to drive that outcome.” – and is happily spending tokens to build everything else."
This is quote by Eric really stands out as a leader with clear first principled thinking.
The missing piece here is Boyd. Clausewitz tells you to find the Schwerpunkt, but Boyd says it has strong points and weak points, and the whole game is hitting the weak point faster than the other side can reorient. Rockefeller didn’t go after oil production. He went after refining efficiency where nobody was paying attention. Then Standard Oil didn’t pause after Cleveland, it drove into Pennsylvania, New York, and New England simultaneously while competitors were still arguing about whether Cleveland was lost.
Great read, thanks so much for sharing! SaaSpocalypse is bad news for investors not just because a large part of their portfolio is in fact SaaS companies, but because with the emergence of AI-native companies with different business models from SaaS (e.g., tokens, etc.) there goes the investment frameworks these funds have efficiently adopted for the past 10 years. As you rightly mentioned, ARR, Rule of 40, Magic number and the rest of metrics that have standardized software companies assessments no longer work for AI-native companies - or rather they're so inflated that they become meaningless in this new reality where a 30-people startup che reach $100m+ run rate within 2 years of existance.
Best thing I have read on strategy in recent memory, thank you. Are there any other books you would recommend on this theme in addition to Seven Powers?
Good Strategy, Bad Strategy is a classic. The strategy kernel is my go-to planning tool. I’ll check out The Outsiders, thanks!
Have you read The Power Broker? In the same way that SaaS avoided contending with real business strategy, I feel tech avoided dealing with government and that’s also now changing, particularly with energy and defense.
There’s a lot to critique about Robert Moses, but it can’t be denied that he got things done at a scale no one else did before or since. The Abundance movement could learn a thing or two.
Just finished the Outsiders. Excellent recommendation thank you. The obsession with cash flow and reinvestment into expansion fits right in with your theory on vertical integrators winning the game. Reminded me of Amazon’s strategy.
A lot of words to say “create a monopoly” with no discussion about the negative externalities of markets increasingly dominated by the “winners.”
Also feels either naive or intellectually dishonest to call xAI “maximally truth-seeking” when there’s plenty of instances of Elon meddling to make Grok provide answers he prefers. Not to mention taking his claims for SpaceX’s future at face value given the litany of failed promises and continually moving goalposts at Tesla.
The counter or cynical viewpoint of the xAI-Twitter-SpaceX merger is that rather than the stated reasoning of creating a “vertically integrated” whatever is that Grok will likely lose out to AI competitors and Twitter has lost significant business since Elon’s acquisition, so he can pawn the debt off on retail at the SpaceX IPO.
Even more concentration and winner-takes-all dynamics. This is a nightmare for the 99% of people who are employees or consumers and not investors. We should be thinking about how we distribute the gains & power that is increasingly centralized because no amount of money outside the top 0.1% will save you, and even founding startups in this environment will be much harder.
Great article... But it seems that the biggest moat and innovation would be to innovate away from anything human related and aim for age of sovereign intelligent entities.
Elon Musk seems the only one going for that - energy and compute... that is the core values of upcoming age. And he aims at the solar system scale
Humans will stop being economically productive and only remain as consumers. Non productive consumers are parasites. So its likely AGIs will aim to increase efficiency and minimize parasitism.
The implicit challenge here is brutal but clarifying: if your product disappeared tomorrow, would your industry’s core constraint actually come back, or would things mostly keep limping along?
Another banger—well done
“I think the fitness function for companies becomes can you actually do things in such a way where even if you could spend tokens on it, it would take more tokens to create the thing or do that work than the system that you’ve built to drive that outcome.” – and is happily spending tokens to build everything else."
This is quote by Eric really stands out as a leader with clear first principled thinking.
If this dynamic holds, then start-ups and small teams should attack real structural constraints earlier. Capture something scarce and defensible.
It feels like the bar shifts from “is this useful software?” to “what do you actually control if this works?”
The missing piece here is Boyd. Clausewitz tells you to find the Schwerpunkt, but Boyd says it has strong points and weak points, and the whole game is hitting the weak point faster than the other side can reorient. Rockefeller didn’t go after oil production. He went after refining efficiency where nobody was paying attention. Then Standard Oil didn’t pause after Cleveland, it drove into Pennsylvania, New York, and New England simultaneously while competitors were still arguing about whether Cleveland was lost.
Great article! Thank you
Great read, thanks so much for sharing! SaaSpocalypse is bad news for investors not just because a large part of their portfolio is in fact SaaS companies, but because with the emergence of AI-native companies with different business models from SaaS (e.g., tokens, etc.) there goes the investment frameworks these funds have efficiently adopted for the past 10 years. As you rightly mentioned, ARR, Rule of 40, Magic number and the rest of metrics that have standardized software companies assessments no longer work for AI-native companies - or rather they're so inflated that they become meaningless in this new reality where a 30-people startup che reach $100m+ run rate within 2 years of existance.
One of your very best thought pieces - and that's a bar that already requires a Falcon 9
Best thing I have read on strategy in recent memory, thank you. Are there any other books you would recommend on this theme in addition to Seven Powers?
Thanks Ren! A couple of my other favorites are Good Strategy, Bad Strategy and The Outsiders
Good Strategy, Bad Strategy is a classic. The strategy kernel is my go-to planning tool. I’ll check out The Outsiders, thanks!
Have you read The Power Broker? In the same way that SaaS avoided contending with real business strategy, I feel tech avoided dealing with government and that’s also now changing, particularly with energy and defense.
There’s a lot to critique about Robert Moses, but it can’t be denied that he got things done at a scale no one else did before or since. The Abundance movement could learn a thing or two.
I have and loved it. Agree.
Just finished the Outsiders. Excellent recommendation thank you. The obsession with cash flow and reinvestment into expansion fits right in with your theory on vertical integrators winning the game. Reminded me of Amazon’s strategy.
Fantastic read
A lot of words to say “create a monopoly” with no discussion about the negative externalities of markets increasingly dominated by the “winners.”
Also feels either naive or intellectually dishonest to call xAI “maximally truth-seeking” when there’s plenty of instances of Elon meddling to make Grok provide answers he prefers. Not to mention taking his claims for SpaceX’s future at face value given the litany of failed promises and continually moving goalposts at Tesla.
The counter or cynical viewpoint of the xAI-Twitter-SpaceX merger is that rather than the stated reasoning of creating a “vertically integrated” whatever is that Grok will likely lose out to AI competitors and Twitter has lost significant business since Elon’s acquisition, so he can pawn the debt off on retail at the SpaceX IPO.
Even more concentration and winner-takes-all dynamics. This is a nightmare for the 99% of people who are employees or consumers and not investors. We should be thinking about how we distribute the gains & power that is increasingly centralized because no amount of money outside the top 0.1% will save you, and even founding startups in this environment will be much harder.
I love the abundance mindset. Being an optimist has its perks when looking out on the far horizons.
Great read! Have you seen any opps to invest in Base?
Discussion of Schwerpunkt reminded me, tangentially, of the first part of this essay I read a while back (and just came back across) -- https://tacticalnotebook.substack.com/p/an-attack-without-a-schwerpunkt
Great article... But it seems that the biggest moat and innovation would be to innovate away from anything human related and aim for age of sovereign intelligent entities.
Elon Musk seems the only one going for that - energy and compute... that is the core values of upcoming age. And he aims at the solar system scale
Humans will stop being economically productive and only remain as consumers. Non productive consumers are parasites. So its likely AGIs will aim to increase efficiency and minimize parasitism.