A recent Twitter exchange between Marc Andreessen and Ben Horowitz, found on Twitter, explored the surprising idea that building companies might become more expensive in the era of Artificial Intelligence (AI).
Andreessen argues against the common belief that AI will simply cut costs and boost efficiency. He introduces Jevon's paradox to suggest that while AI might decrease the cost of individual software components, the overall cost of building a software company could rise. Customers will demand ever-more-powerful features, leading to an innovation arms race as companies strive to meet these expectations.
The cobbler's children paradox may explain this software-company struggle. Design, engineering, and QA teams are laser-focused on maintaining existing revenue streams, so building new things is a challenge. Additionally, top talent often prioritizes working on established revenue generators, leaving new projects under-resourced.
For outsourcing companies to compete, they'll need to utilize AI and other tools to streamline their marketing, sales, and product discovery processes (building specifications and designs). This will mirror the compression of development and QA thanks to AI.
In essence, AI, coupled with existing trends, will likely compress the entire custom software development lifecycle, leading to an explosion in this market segment – a consequence of Jevon's Paradox at play.
To learn more about how AI can revolutionize software in Oil and Gas or how it can transform challenges into opportunities in banking, check the articles below:
Mike Hogan
September 1, 2024