20VC: Box's Aaron Levie on Predictions for the Next Wave of AI: Will Foundation Models Be Commoditised | How the Business Model of SaaS Changes Forever | Startups vs Incumbents: Who Wins | App vs Infrastructure Layer: Where is the Value?

Aaron Levie
OpenAI is kind of telling us what they are going to become. Chatubt is going to be this universal assistant interaction interface. You probably don't want to do things that instantly could be subsumed by a horizontal chat interface. You have to do the workflows that eventually a human who wants to go and run a full business process has to implement. We are in at one of these moments with AI, which is a period where we are going to see not only breakthrough technology, but the breakthrough application of those technologies.

That is as much going to be an incumbents game as a startups game. This time around you're going to be working nonstop. If you're in one of these companies, like there is no chance that you should be focused on anything other than just pure survival and execution. This is 20 VC with me, Harry stabbings, and this show today is a special one. It all started on Twitter on the weekend with the one and only Aaron Levy sharing some wisdom on the AI landscape today.

Harry Stebbings
And I said, hey, let's make a show happen. And just three days later here we are recorded released. For those that do not know, Aaron. Is one of the OG founders of. The last two decades as the co.

Founder and CEO of Box. Today, Box does over $1 billion in annual recurring revenue with a market cap of $3.85 billion. Yes, that 3.8 x is something we discussed in the show today, and Aaron has become somewhat of a luminary on Twitter on the evolution of the AI ecosystem. If you don't follow him there, it really is a must at Lavi. But before we dive in, I want to talk about Cooley, the global law firm built around startups and venture capital.

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Harry Stebbings
You have now arrived at your destination. Aaron, I am so excited for this. I'm like a big fanboy of your tweets. I go downstairs, people don't know. This makes me sound really sad.

I go downstairs for like my evening espresso, which is weird in its own self. And I like, read your tweets from the day on AI, and I'm like, oh, this is, this is a good one. So thanks for happy to provide your evening entertainment. I want to start with one of your tweets mentioned, actually, you're living through the transition to cloud, and I just thought you really had such a front row seat to that. Having the experience that you have in terms of living through that transition.

How do you think about what it takes to be successful with this transition in this next wave of AI? We are clearly in this, this window that is going to be relatively temporary. I don't know if it'll be two years. I don't know if it'd be five years. I don't know if it's already over.

Aaron Levie
But basically you have these windows more or less once a decade. We had it in the PC boom, basically the eighties you had it in the web boom in the nineties, you had it in the mobile and cloud booms in the kind of mid two thousands. And in each one of these moments, there's an architecture shift that happens in tech that creates really the only window of opportunity you have for new kind of platform scale, large franchise kind of companies to emerge, because you need a change in the technology industry for new insurgents to be able to enter, or else basically the incumbents will just naturally gobble up all over the market. So we are in at one of these moments with AI, which is a period where we are going to see not only breakthrough technology, but the breakthrough application of those technologies. That is as much going to be an incumbents game as a startups game this time around, because the incumbents have a lot of the data and a lot of the workflows.

So it's even more competitive, I think, than the prior periods of these windows. But you will have this moment of opportunity where startups will emerge that will be able to figure out a set of use cases or a way that they should deliver functionality on AI that an incumbent will not be paying attention to, will not maybe go after in these windows where you can build now very large companies. And so we're in one of these windows and it's sort of, these are the only times when, when you really have that level of clear opportunity in front of you. And so now I was mostly, this is a call to, you're going to be working nonstop if you're in one of these companies. Like, there is no chance that you should be on anything other than just pure survival and execution as an organization.

Harry Stebbings
Do you think new juggernaut companies will be created both in the foundation model layer and in the application layer, or just in the application layer with incumbents gobbling up the foundation model layer? I would say that there will be some foundation model companies, but not nearly the magnitude of the application layer companies. And much of that is due to the trends we've already seen, which is the moment you have people like Zuckerberg that are literally willing to spend billions and billions of dollars commoditizing the model layer. It becomes very hard to figure out, well, how do you differentiate in that space enough where you won't be taken out by one large training run from an open AI or a Google or a zuck? There will be like niche or industry specific sort of approaches you could take or some very kind of specific domains you could go after.

Aaron Levie
Like I think there could be categories where maybe the big incumbents are more nervous about going after audio because there's obviously going to be lots of interesting conversations around copyright and whatnot. But I think for like the pure play horizontal LLMs, I think those will largely be subsumed by the big players with maybe room for one, two, three independent companies at scale that are not in the hyperscalers, but there will not be room for 50 companies. That's just not going to be possible. When you think about, say, like a box today, how do you think about leveraging LLMs? Is it a case of actually using six at the same time and switching between them for different use cases and purposes and being able to transition seamlessly between them?

Harry Stebbings
How do you think about that, the choice that companies have there? So we are building an architecture that lets our customers do what you just said, so effectively switch between models that they want to use for different purposes. I don't think you're going to have complete commoditization of sort of the personality of the models or the sort of style and the response to the point where then if you're a user, any given response could come from Gemini versus GPT four versus Claude. I think that's probably less practical. You're going to be more wired into a particular model for some use case as a user of software.

Aaron Levie
What we did basically is as soon as this wave started 18 months ago, we basically started working on an AI platform layer that connects the data in box securely with any AI model, starting with OpenAI's models. And then over time we will be opening that up to other AI models as well. If you're a customer and you say, ok, I really find GPT four is very good at legal answers, but Gemini is very good at pulling up metadata from documents. Those would be two different use cases you would have with AI within box and we would give you the ability to kind of interact with multiple AI models to go do that on your content. When I speak to large enterprises, they will say the same thing and they say, hey, I want to get the incredible benefits from some of these providers, but fuck, it's really sensitive data.

Harry Stebbings
I'm not willing to put that anywhere near any vulnerable openness. They don't want to put it in the cloud. It's like we're seeing this reversion back to on Prem in a fear of security issues. How do we solve for that? You know, interestingly, I'm not necessarily seeing that.

Aaron Levie
In fact, in fact, I'd probably say the opposite. For the first time ever, we're now talking to customers that have been cloud holdouts that previous to AI. They said, I'm fine with this data being on Prem. I feel like it's safer inside of an on prem environment. AI is kind of the final death knell to that particular approach.

If your data is not in the cloud or in a cloud ready form, I think it's going to be extremely hard for you to get the full value of AI on your information. I had Sam on the show when he was in London, and he said that the biggest rate limiting factor was actually just the rate of model improvement. When you look at it, how do you analyze the rate of model improvement? We have our own internal benchmarking that we do. So we compare models using a set of business documents.

But the rate of improvement has been truly incredible just in the past 18 months. One critical metric for us is basically token window size. We rely heavily on how much data can you give the model and can you get back from the model in a single interaction or inference? When we started this whole exercise with just GPT 3.518 months ago, so the thing that kind of started the chat WT wave, the token context window, was more or less, I think, 4000 tokens. So you kind of give it like a blog post to analyze.

In the past week at Google I O, Sundar announced a 2 million token window model or version of Gemini. So think about that. That's about a 500 x improvement in 18 months of how much data you can give the model or get back from the model. And there's just nothing in technology history that grows at 500 x every 18 months. It's just never been happened.

You know, it's never been been seen before. And that is the kind of pace of innovation that we're able to see in AI right now. So does this completely discard Moore's law? Because, as you said, we've never seen that before. And it's completely atypical compared to previous.

Progressions, to be fair, to maybe like a Moore's law, like religious zealot. This is a sort of a different variable than what Moore's law is, which is about the density of your chip or the performance of your chip. So this is more about model algorithms and how we're actually utilizing these models. There's actually a different law, which is sort of the GPU performance. And I think there's a sort of a Jensen almost kind of created a law around this, but we have seen faster than Moore's law improvement on GPU performance.

So the good news is we get a little bit of a reset on. There's been a lot of talk on hey, is Moore's law slowing down? And GPU's kind of are giving us that maybe next tailwind of compute performance improvement, which is this miracle that we now get to deal with. But I would say I'm seeing no signs of AI models slow down anything, plateau in terms of the innovation curves that we're seeing going through your tweets. There was another cool chapter segment I really wanted to dig in on, which is AI agents.

Harry Stebbings
Why do you believe the next big breakthrough in the world of AI is AI agents? What's interesting is last year when six months or so after the emergence of chat BT, there was this mad rush for basically everybody believing that the paradigm of software was you would just kind of chat with all of your applications. And so everybody launched these chat interfaces for software. And that was good because you sort of had to have some way to get started in this movement and to see what the use cases were. If we're really honest about the chat use case, chat is more of like a UX paradigm shift.

Aaron Levie
It takes what used to be a graphic, graphic user interface and turns it more into a command line. I'm going to talk to it, but at the end of the day, you're still accomplishing the same thing with software. In a lot of cases, you can get to information faster. But if all we've done is move the user interface to a chat interface, that's not taking advantage of obviously the full potential of AI. I think last year we saw the chat interface waveform where that was the initial instinct of software providers.

Then somewhere around middle of last year, tail end of last year, this idea, or at least more established idea of AI agents, has begun to emerge, which is instead of talking to AI to get information back, what if we could talk to AI to have it do something for us and really complete the underlying task that we're actually trying to accomplish, as opposed to just get information to do the task. Can I ask a stupid question? Is that not what RPA is? We have large RPA providers. I always thought that was what RPA was.

Everything I just said is exactly how you would have pitched RPA for the past decade. Everything I just said doesn't sort of negate the need for what RPA would be in the enterprise. The challenge with RPA is RPA is relatively frail. It's often sort of, that's like looking at your computer screen and performing some kind of routine actions, doesn't handle variability very well, doesn't have the level of intelligence that you now have in AI models. So I think RPA actually gives you a little bit of an early preview of what becomes possible when you could apply more general intelligence, maybe not sort of full AGI, but like a general intelligent model, to a large number of business tasks.

So the big breakthrough is what if we could go from a world where software is something that you or I use to get our jobs done faster, or it enables us to do our jobs to where software is something that you or I use to basically farm out work to AI to go do. It's a sort of real shift of how we think about software and the role of information and intelligence in our organization. So the best examples that are emerging now are I could have an AI that is my outbound sales rep, or I could have an AI that basically does full testing of my product as a quality assurance engineer. Or I could have an AI that responds to all my customer support tickets. So when you think about now an organization that has effectively AI agents that augment the labor or the people in the organization, they're not copilots, they're literally autopilots that are going out and doing work for you.

That's a pretty significant revolution in not only the software space, but literally how you'll run a business in the future. How do you think we'll see structures change as a result? Obviously, I'm a content business and it changes content immensely. How do you think we'll see structures change as a result? I think structures somehow seem to stand the test of time on all forms of disruption.

So there's some good books and, like, go back, I don't know, 80 years at this point, 70 years at this point, that basically, like, codified today's. Org structure kind of format. And it has survived the test of the Internet of remote work. So I think structure stays the same. I think what happens is you now have the ability to sort of drop AI labor into any part of that chart, and in fact, in many cases augment whatever you would normally have had people go do.

Now you have AI go and swap in for people where you need more support. But I heard you on the Bill Gurley show. You kind of spoke about kind of doing the work and not selling the tool, kind of similar to Sarah Tabbell, who's kind of selling exactly that. You sell the tool, and I thought, well, you wouldn't have outbound teams if you had an AI tool that was very efficient. So your structure would change immensely.

Harry Stebbings
Yeah, yeah. Sorry, sorry, sorry. I mean, to be very. I mean, yes, at that level of specificity, you might have certain roles that have now turned into AI roles. But, you know, the classic example would be, let's say, customer support.

Aaron Levie
My general view is that you'd have a layer of AI labor that handles the first line of defense on your inbound customer support that will still eventually escalate to the human side, which, okay, I've got to take on the more complicated processes. Maybe I'm doing things that are a bit more proactive with customers that have, you know, that, that have signs of issues. Workday might look somewhat similar. There's just now an extra layer of AI that has been added to parts of the chart. And then similarly, if I have an outbound sales rep, they will generate leads for then the inbound sales rep that has to go and basically pursue these.

What we've done is really just shift the type of work that that team was probably doing previously in most cases. But we can have two customer support reps, not ten, because we've taken away all the annoying frontline stuff, the low hanging fruit that was handled by AI, and then you've just got the complex for a fewer numbers and we've lost the outbound team. So we've gone from like 20 to two. Yeah. So if this is a question on then total number of people in the organization, I think given a couple of interesting questions.

So if you take a mature company, let's just say, let's say box, basically anywhere within box, if we can make that particular function more productive. So if I can take a sales rep and have them sell 20% more, or if I could take a customer support rep and have them handle five times more tickets, because, because AI is helping, at least so far, empirically, every time that we've done that, we will actually reinvest in that area of the business, because there's simply just more work to be done than we've ever had people to be able to go and do. If I can ensure that an engineer at box could develop 30 or 50% more code, we would actually reinvest that productivity gain back into engineering to build even more software. Some companies, I think, will choose to just reinvest those dollars and that efficiency. Even in the customer support case, if we can get rid of some percentage of those frontline customer support tickets, we're going to take the time of those people and have them turn into customer success, where we're going to actually go and reach out to our customers more proactively when they have issues or when we think there's an opportunity to use the product more.

So that's one side of the equation. Then I think you have an interesting example, which is take a company that starts from scratch. They've got one employee, it's the founder. What does that company look like in the future that actually might look like a different company now? I would actually argue that they will actually, if AI is sort of doing what it's supposed to do, I believe that company will actually hire more people over time on a like, for like basis, because what they would be doing is that one or two person company would hire the AI outbound sales rep software company.

They'll actually get more leads faster than they would have as an alternative, you know, kind of way they would run the business. They're going to have to now hire sales reps to handle those leads, and they will literally be scaling more effectively and probably faster as an organization. So there's a lot of belief that like, well, you might have these solo companies that become multi billion dollar companies with just one person or three people and a bunch of AI. I think that will be done by virtue of like, everything happens in the world multiple times, but like, I think that'll be a relatively novel way to run their company. I think most companies would take the AI efficiency gains and then you'll end up hiring the functions that eventually need to be serving all the new growth that you've just developed because of AI.

Harry Stebbings
Many points I want to touch on in that one. Do you think we're still in the experimental budget phase for enterprises? We mentioned there about how we can change functions and optimize them. Do you think we're still in the experimental budget phase and how will the best and the worst enterprises engage and adopt? With AI, I think there's two types of spend happening.

Aaron Levie
There's probably the bulk of the dollars that you see in the headlines, I would argue, are likely experiments where you'll have some kind of hit rate success rate. That happens, and then those experiments graduate into production spend. We just don't have an accurate pie graph yet of what's in the production category versus what's in the experiment category. It would be probably too generic to say it's all experimental, and it's certainly not accurate that it's all production. The exact split of those two things is hard to diagnose at this point.

I've just been on the road. We've done maybe about a dozen or so AI events throughout the US in the past quarter. The vast majority of companies have a meaningful number of AI experiments happening with lots of different kind of areas of their business, lots of different applications, but the vast majority also have areas that are in production already. So unfortunately it all would get lumped into the same category of AI spend by the time the CFO gets the AI bill. But we are seeing real production and lots of experimentation.

Harry Stebbings
That's really interesting. Is it an AI line item or is it actually a fintech line item, a HR line item? Is it segregated by the functional tool that it's in, or in an AI? We're literally seeing both, just simply because of the way that these products get priced are so varied. Sometimes it's included in your SaaS spend, and sometimes it's like, no, here's your consumption of your AI usage.

We mentioned there about kind of selling the work and not the tools, and actually how it changes in terms of providing that output. What does that do to business models because we're so predicated on seats? I'm a SaaS investor. What happens now? Aaron?

Aaron Levie
The good news is that everybody's experimenting with every version right now, so we will eventually see where we, where it lands in six or twelve months. I've certainly had conversations both with customers and then startups, also selling the customers on every variety. So do you price, to what value are you delivering? How much would that workflow have cost you prior to AI? Oh, it's $100,000.

Well, we'll charge you $50,000 for it. That one's tough to scale because everything's bespoke. So let's kind of throw away the value, that kind of bespoke, value oriented approach, except for maybe like a palantir or something. It's very, very hard to kind of make that model work. So eventually you're going to have some unit that we all agree with that you can go off of.

So is it sort of a consumption model of what is your unit of volume? Is it customer support tickets? Is it leads that I generate? Is it emails that I write? We'll have to figure that out on.

Harry Stebbings
The AI agents placement when we look forward. What do you think it looks like. In five years time? I would imagine I can sufficiently say, hey, AI, generate leads for my business, or answer my support tickets, or review my contracts or process my invoices. If I can do that, then realistically you'll have kind of category winners in a large portion of sort of job functions that today exist, and there'll be AI versions of those functions.

Aaron Levie
This is again one of these windows where 1020, 30, 50, companies will get started that were like the window in the mid two thousands where like all of today's SaaS companies basically emerged in like a five year period, essentially. And we'll have that for, for basically AI jobs where you'll have the AI security engineer, the AI customer support agent, the AI marketer. Lots of companies won't work just for the typical reasons, but we will have a landscape of basically labor that you can get from AI. Then there'll be really interesting second derivative effects, which is, okay, how do you manage AI labor right now? When you want to manage lots of software, you implement Okta or you implement a security tool.

Well, it's a crazy world where all of a sudden I have digital labor from a variety of providers. Do I need some way to organize them, make sure that they can interact well, have guardrails around what they can do? You can almost imagine like a workday for AI. Like how do I actually organize what all this work is? How do I actually make sure that it's organized well versus what the humans are doing?

Also, lots of incredibly interesting downstream questions in this world that we're only scratching the surface of. You said we'll see this whole generation of AI versions of each function. To what extent do you think we have that with new players in each of those functions, versus gong salesloft, outreach, Addai and have it as another product which is integrated into existing workflows and is an extension? The cool thing is this. This will be an epic battle of existing incumbents with existing data workflow and customers that will add AI into their platform to deliver a set of services that will work some percentage of the time.

And it's almost like hard to know in advance which categories that works better or worse in by default, that will work a meaningful portion of time. Like when Facebook needed to get into mobile other than Instagram, they basically could get into every mobile category that they needed to when they chose to do that, only the categories that they didn't pay attention to. Did you sort of see these emerging new players in the mobile space. Similarly, in AI, I think there will be some categories where incumbents have the natural advantage, but then there will be either blind spots that those incumbents don't go after, or there will be things so different from their existing business model in kind of classic innovators dilemma fashion, that they just don't understand that they have to go after that particular problem. It looks like it's not like an actual threat, or it doesn't seem to be solving the same problem and then all of a sudden overnight you're like, oh, the business is now over because we were disrupted by the AI version of what we do.

If you're a customer support company, you might think, okay, my classic customer buys seats for every customer's rep that's in the business and that's the business model they have. This AI agent thing looks too different from that business model all of a sudden. And then even what you build to manage the AI agents to do customer support will be different from what the kind of typical customer support software company will be building. That all of a sudden you get disrupted three years later and nobody needs customer support software. That is sort of not going to happen exactly like that.

But that would be the one disruptive angle that we could see with some of these incumbent categories. It's funny what you said about the incoming categories adding on those features and kind of having it as an extension with the distribution benefits that they have already. The one that everyone's shitting themselves about in startup world is well, OpenAI will just do it. And fair enough, it's a warranted worry. And just how do you think about Sam said on the show steamrolly so.

There were some great memes from, from that interview. Well, everybody should thank, thanks Sam, for the clarity and transparency of their, of their model. It's actually very good when, when basically, you know, the lead platform player tells you the types of things they're going to go after versus the ecosystem, people should be paying close attention to that and, you know, really understanding what that advice means. When you look at their releases last week, you're looking at language learning tutors and going, fuck, did Duolingo have a business anymore? And does language learning actually have an independent category?

Harry Stebbings
If OpenAI is able to provide such quality? I think there's a heuristic here that probably works, which is no matter what, I think we agree that OpenAI is kind of telling us what they are going to become, which is chat. GBT is going to be this universal assistant interaction interface. All the subsequent tools to manage that and interact with different AI's that kind of come together there and then they're going to have an API business that will be, you know, you can almost just very quickly, easily understand it's going to be audio, video, text, like it's going to do all the formats of information with kind of complete intelligence on them. So then you're sitting around, you're like, well, what startup should I go build?

Aaron Levie
You probably don't want to do things that instantly could be subsumed by a horizontal chat interface, and you probably don't want to do things in the model area that might just be one training run away on their end of being subsumed by a more superior model. This is sort of like, to me it's the most exciting part of software. To 80% of people it sounds like the most boring part of software, but it's like you have to do the workflows that eventually a human who wants to go and run a full business process has to implement that doesn't want to just do back and forth chatting with a thing to even to your tutor point. Language learning, I don't think chat BT itself is going to become a language tutorial. I think it'll have the full capability to be a language tutor at the model level.

And could you like prompt it to being a language tutor? Seems plausible, but hard to imagine it follows a multi year journey with you exactly in the way that Duolingo would maybe do. But what should Duolingo do is probably as quickly as possible adopt whatever OpenAI is building from a model standpoint and make sure that they are incorporating that into their product. Because what I do tend to see happen way too often is that incumbents will hold onto their own technology way longer than they should because there's some perceived I have to own something that in practice, the moment that whatever you thought you had to own is inferior to what the rest of the market has access to, you need to drop the inferior thing as quickly as possible and adopt whatever is superior, even if it means, you know, potentially supporting what you think emotionally is sort of your long term competitor. What do you think the street's response to that would be if some of the largest public companies today dropped the inferiority problem and said, ah, fuck it, we're going to adopt OpenAI's instead because their models are better.

Probably people would like it if Duolingo announced tomorrow that GPT 4.0 is powering their translation engineer. That would actually be a positive because it would just be like, oh, this is this very powerful AI that now your user base has access to. And we understand that, like, you're selling a different flavor value proposition than what OpenAI horizontally is going to sell. So we think that could be better for your business. But I have no idea.

I mean, this is like, it's impossible to give Duolingo advice on this podcast, but all I would say is, I've seen some people bury their head in the sand being like, no, my custom trained model is so good at this one thing and we don't want to give OpenAI this particular data or we're going to compete over time with them. It's like you can wish all of that to be true, but if what they have is better for the product that you're trying to deliver to customers, that is the only way that you're going to survive this. That's, I think, what a lot of incumbents tend to run into, which is the classic innovator's dilemma challenge that you. See, you've spoken before about the need for just unwavering commitment and speed and working harder than ever because there's a short period of time where winners will be made. That's kind of easy.

Harry Stebbings
If you're a startup and there's three people in the proverbial garage. It's quite hard when you're a large company like box and it's like, oh, no, no, no, hundreds of people, thousands of people. This is the time again. Like back to work. Like proper, proper work, not nine to five.

It's how do you galvanize a team to know this is a sprint? Go. The tweet I sent was not for anybody else other than box employees. So for us, we're 2700 or so employees. We're still enough, though, that we can literally get on a Zoom call.

Aaron Levie
Our all hands is like everybody in the company on one call and then we talk through the strategy, what we have to do. I think we're in a moment where anybody reading the news in tech understands the kind of period that we're in. I don't necessarily know that everybody understands what's on the line. If your company doesn't make it to the other end of this bridge before everything kind of breaks off, you're out of business in this new world. So that's probably the only alarm that needs to be set.

Harry Stebbings
What's the biggest thing that you've lost with scale? Some people lose speed, some people lose creativity, some people lose innovation. If you were to say, yeah, we probably lost that. What was something that you lost at scale that you most want to get back? There is a premium when you're a bigger company, which is when you make a decision, it needs to be a well thought out decision that you're just going to press a button and we're going to go execute and you're going to iterate and you're going to learn lots of things because of the work it takes to drive that alignment.

Aaron Levie
But it means when you do that, you don't want to follow up a week or two weeks later, be like, ah, just kidding. Like, we got to do this thing. When you're a 20 person company, you just get in a room and you're like, okay, here's what I think we should do. It looks like this. It should be priced like this.

Let's go build it, let's test it or whatever. And then the whole company is sort of like fully lined up to go do that thing. You find out that it sucks and you just quickly pivot. And like, everybody was on the same page that, no, no, we were just, this was just clearly a hypothesis. We don't really know for a fact what's going to happen.

We can just pivot through this. In a big company, that team still exists. But the problem is you have everybody else watching that team saying, please tell us when, like, the thing is exactly the thing, and we're going to go off and kind of race. You have to kind of find exactly the right moment where you're ready to now expose the working thing to everybody else. If it's too late, then everybody's going to be like, well, bozos, what were you doing?

And if it's too early, then you're going to have thousands of people kind of go through the sort of like, oh, that didn't work. Or like, hey, that didn't land. Finding that balance is kind of an interesting thing for anybody on the more product development sort of side of these kind of companies. I think of Gemini actually as the first round of Gemini. All the kind of massive mistakes that it made is probably some version of this manifestation, which is like, if it was a 20 person startup, they would have put out there.

Everybody would have known, okay, this didn't, this kind of sucks at these things. Let's go improve it. But at a company, the scale of Google, like, there's some team working on it, they kind of throw it over the fence and then everybody's like, oh, my God, what is this thing? It's just because you had a separation of the people working on the whole thing from then. The ultimate people that needed to, like, you know, flag the alarm, and by then it was too late and just chaos.

Harry Stebbings
Do you think Google smashed it last week? I do. I think last week, to me, the thing that I think it underscores that, I think, honestly, cloud next did as well, is like, Sundar has set a message to the company that AI is the number one most important priority of all things. It's like ten times higher than every other level of everything else. You're working on.

Aaron Levie
It's going to be like the new way to search. It's going to be the new products in cloud, it's going to be in workspace. And I think that message, it was very important, it is now very clearly the evidence of it working is now showing up. And I think Google I O was merely another moment of it manifesting. That company has religion now on AI.

Harry Stebbings
Would you be a buyer or a seller of Google? I don't buy or sell anything, so I'm generally long Google in an AI era. Are you worried about AI regulation? I said, in Europe we favor a very regulated environment. We've made our business constraining our residents and then taxing the shit out of anyone who wants access to them.

And that's been called a business model in this continent. As you know, it's cool that they. Haven'T kicked you out for your views on this. I mean, also just for, you know, 1030 here, and I'm working. So, I mean, it's like, I literally had a reference call before this and they were like, dude, are you european?

I'm like, yeah, I know, I know. Are you nervous about regulation preventing progression in AI? I'm increasingly less nervous only because of what we've actually seen these bills sort of come up with. They don't seem as sort of progress halting as maybe what would have been rumored about a year ago. The scariest moment to me was the pause AI kind of momentum, which was, okay, we need to stop the development of advanced AI for six months until we kind of figure something out.

Aaron Levie
It was like, guys, it's been, let's say a decade of us all as a community talking about AI, if you think that an extra six months is all it takes for us to have some kind of alignment on what is the doomsday AI going to look like? What is sort of dangerous AI? What is less dangerous AI? Six months is not going to solve this. There are very fundamentally different philosophies in the land of AI that are irreconcilable.

They will never fit together. It's just, it's okay. It's great to have actually a dynamic set of perspectives. They will not be able to ever be fully unified. And so I thought that that was going to really kind of gum up the advancements if government started looking at pause AI, and they're like, oh, even the tech community wants us to stop this thing.

And that was what I was kind of most nervous about in that period since then. If I look at what has legs what, where progress has been made, it's often more surgical AI regs. So, okay, we have to deal with, with copyrights and data training, we have to deal with IP protection. I think those are important conversations, actually. I think that, that our IP law did not anticipate a world of AI in the way that we have today.

And I think it's, I think it's a good conversation that is important to solve. There's another conversation of what is the national security issues with super intelligent AI at some distance, at some point in the future, how do we want to make sure to protect against that and regulate that? And I sort of like that this is an open conversation that we should be advancing. The show has been successful because I specialize in dumb questions. From the way that you described agents, it was like the next generation of RPA.

Harry Stebbings
What happens to prior RPA providers? Does Uipath just adopt an agent based model and actually move away from kind of rote learning? But what happens? Yeah, I mean, actually, I think being an incumbent RPA vendor is actually a great spot because if you already are talking to customers about literally automating business processes and workflows, and there's just a better way to do that, and there's nothing in conflict with their business model. In fact, if anything, actually, they probably were the first to have more of a consumption oriented model for automation.

Aaron Levie
So I think, I think you could be very bullish on RPA vendors right now. I do think it means that more players kind of get in and around the space. The thing that will 100% guaranteed happen, like in five years from now, this will be the most obvious thing of all time. But when you look at like RPA, you had to be, you know, a relatively deep expert in RPA. You had to be like a midsize or large enterprise or kind of developer oriented, you know, kind of individual.

The total size of the market was basically arbitrarily or artificially held back by just the complexity of the legacy approach. So if AI makes it ten times cheaper, faster and easier to automate workflows, then it stands to reason that the market will be substantially larger, could be 100 times larger at the end of this whole journey. So what will happen is the market will get much larger. Traditional RPA vendors, if they execute, should take a good portion of that market, and there's going to be a new set of entrants that will bring automation and intelligence to their platforms, that take out parts of the new market that emerges. That's obviously what we're focused on, which is, hey, what about all the parts of the business that you never automated before?

If you go to most companies and you say, show me where your digital assets are, all your marketing materials, they're going to be like, okay, it's in all these folders inside of my hard drive. Well, what if you could just go in and ask a question of show me all of the red dresses? And it just instantly came up. Well, that is what you'll now be able to do with AI. What if you go to your contract repository and instead of it being just a bunch of folders with contracts in them, you just say, hey, what contracts are up for renewal next month with this particular clause in it?

And instantly you now know, what areas of risk does your business have? So these are things that you just could not have done before that AI now lets us do on top of all of our data, do you think. There'S a hard enterprise consumer behavior shift that they have to go through in order to fundamentally change how they work? I mean, probably the long pole of all of AI right now is not going to be the technical breakthroughs, it's going to be the implementation and change management on the human side. So I actually tweeted that AI services companies are going to make more revenue than any foundation model providers.

Harry Stebbings
And then Accenture posted 2.4 billion in revenue and OpenAI posted 2 billion in revenue. So how do you think about that? Do you agree with me? Do you literally mean the accenture type services? I do, actually.

I mean, implementation and education services are. Almost the leading indicator to compute because you need services to implement the thing that then eventually is sort of on autopilot. So I think I would take the bet on AI services for the next five years. Unquestionably the amount of dollars that will go into the change management of systems. The implementation of the technology is going to continue to be massive.

Aaron Levie
On the other hand, the other thing that goes along with that though is a bunch of the AI stack. So the actual GPU's, the data center, build out that as well. At some point, though, the curve, if AI is as meaningful as I believe it is, and I think so much of tech believes it is, at some point the actual AI, the software services of AI, the infrastructure services of AI, will eventually exceed the human services on the implementation, simply because now once it's in production, you don't need that same change management ten years later. Like, it's just literally running. Like, the amount of money we spend today on our cloud infrastructure vastly exceeds the amount of money we spend maintaining our cloud infrastructure versus five years ago when we were first moving more into the cloud, our services were higher than our infrastructure spending.

Harry Stebbings
Is there anything that you think we don't spend enough time talking about, or there's not enough light shone on in the AI discussion and that we haven't discussed today? To me, there's just interesting downstream kind of consequences if everything plays out as, as it should on like, on paper. So I'm fascinated by the idea of, you know, what SAS did was it made it so. I have a friend who has, he sells balloons online. It's actually like, not a bad business.

Aaron Levie
It's like a, like, it makes real money and he sells balloons online. And I don't think he would have started the business if Shopify didn't exist. The existence of Shopify made it so he could be like, oh, well, I have this random idea. Let's just see if it works. It lowered the barrier to then going out and basically starting a business.

And I know that Tobi has thousands or tens of thousands of these types of stories. So if Shopify caused businesses to get started because it lowered the barrier to being able to sell online, if AWS caused applications to get started because I was like, oh, I could just build an app and run it in the cloud, I don't have to think about servers anymore. If stripe caused businesses to get started because I don't think about payments anymore, then in a land of AI agents, you can almost similarly be like, well, somebody literally one day could just be like, well, maybe I should start this idea because I've lowered the barrier to, again, getting customers or supporting customers or testing the software. Like, I now have AI labor that can let me now scale my, my startup idea or whatever. And I think there's an interesting global democratization that could happen where you could be a company based in a place that, like, did not have this type of talent for a business being started.

I don't know which country I should pick on it as a made up, you know, kind of country as this problem. But, like, if you're two or three people in name, your random country, does that country have like the SDR sort of infrastructure that got built out in parts of Europe or the US because of the SaaS boom? Probably not, but, like, now I go and I can just like, literally, like, hire an outbound sales rep with AI. So think about what is that going to mean in terms of where companies get created, how much you can scale up. I think we'll just see a boom in all new ideas begin to emerge.

Harry Stebbings
The one thing I really worry about, and it's slightly on a tangent, but, like, when you have anything kind of generative, AI, essentially supply just becomes unlimited. It could be that outbound sales rep and they can send a million messages a day. Or we could have a podcast logo, cover art, or podcasts themselves. Fuck. People don't know this, but for our intros, it's not my voice, Aaron, because we have thousands and thousands of hours of my voice.

And so my point being, though, is value appreciation going to go to zero when suddenly you get a thousand emails a day from outbound sales reps that are all AI? Yeah. I think you will always see this standard power log dynamic. I think if we were having this conversation, imagine having this conversation 20 years ago. Exactly.

Aaron Levie
And being like, wait a second, if the iPhone lets you have any software and Amazon lets you build any software, aren't we just going to see like, tens of millions of apps? How will anybody even, you know, know what to find or discover? And I don't know. The world, the world magically just kind of figures out this stuff. Like the things that don't work die off.

People don't pay for the outbound emails anymore. The things that do work take off. Creative destruction is, is an incredible thing that's alive and well in the world. Final one, we've talked about regulation model quality. You've tweeted before about kind of the job displacement concern.

Harry Stebbings
If there was one thing that did worry you, what would that be? I think we have ways of defending against this, but, like, you can, it doesn't take, like, that much imagination to be like, ah, you know, one of those like, robot dogs with like a gun and a multimodal AI. Like, wow, wouldn't want that thing running around. So, so I think there are real reasons we should sort of pay attention to some, some of the more dangerous use cases of AI. I just think we have, in many cases, sufficient legal frameworks for addressing those things.

Aaron Levie
And then for any net new one that we come up with, let's actually have regulation to go and support that. But what I'm, I'm less worried about at the moment is probably the more fringe, extreme things of the AI sort of self replicates, jumps over outside of the data center to another data center, and then self propagates. And I'm less nervous that that is sort of on the docket of events. So I want to do a quick fire with you. I love this.

Harry Stebbings
Essentially I say a statement. You give me your immediate thoughts. Does that sound okay? We'll see. Which stage of the business did you suck in as a leader most and what did you learn?

Aaron Levie
Definitely delegation. I like to get my hands dirty with all aspects of the business and so it was very hard to kind of let go of parts of it to other leaders. Can you not micromanage at scale? Jensen Hwang has told us with 60. Direct reports, I cannot wait until we're a $2 trillion company and I will be able to go back into that mode.

I'm in a brief period where I have to delegate to keep people happy, but eventually we will be back to that land. I think the real lesson is now is you choose the areas that you need to exert that level of involvement. So in places like, let's say critical areas like AI or end user experience and some product strategy, I still revert back to early startup self. But there are many areas where just honestly, either because of the amount of hours that the job takes, or just the fact that like, you want to be able to bring on great people that are motivated to go execute delegation is actually extremely important. Why do you think Zuck's crushed it.

So much in life or in AI? I mean, in AI specifically? My read on this is you have one of the best entrepreneurs of our time that has basically all of the right underlying resources for AI. So lots of compute, incredible engineers, billions of users, that is lots of data. And I think he is extremely motivated to have a platform that the Internet builds on and participates in.

And I think AI is sort of his moment to really kind of reestablish the dominance that I think we remember Facebook having in the maybe late two thousands, which was like we were all going to build on the social fabric of the web. Some of that happened, some, some didn't exactly happen as planned. And I think AI is now this moment when actually he can provide a real alternative to more of the relatively closed approaches to AI. And he's sort of set up extremely well to be that kind of counterbalance in this space right now. So I just think it's like all of the stars aligning for his particular, both philosophy and resources.

Harry Stebbings
You can add anyone to your board, but obviously you don't have them already. Who would you add and why them? We had Jensen speak at box six years ago, and Genai was not a thing, but AI was a thing. I'd say Jensen having access to basically the start of the supply chain of AI is such an important perspective on where things are going. If you could just look at his invoices to and from TSMC.

Aaron Levie
If we could just see that data, you would know what to go build next. His window into five or ten years out in tech is unparalleled right now. What did you not do with box that you wish you'd done? Everyone has to prioritize. Everyone has strategic decisions on.

Harry Stebbings
We focus here. What decision did you decide not to do that you wish you had done? Earlier in our journey, I would have focused more on cash flow. I have become a little bit of a religious around cash flow. I think owning your own destiny as a company is important.

Aaron Levie
I think caring about and inspecting every single dollar of spend in the business is very important. In sort of very loose capital environments, it sort of gets forgotten about or people don't really care about it. But actually I think it helps you build a better business because you apply constraints that force better decisions, better strategy, better execution. So I would have done that years earlier than when we ultimately focus on cashflow. You've been married now for a few years.

Harry Stebbings
What's the secret to success as like, fucking on it public market CEO and a happy marriage? Pretty tough to. It helps that my wife is equally busy so I don't get yelled at as much as probably as possible for my own business. I mean, you just probably all the standard things, you carve out the date nights, you have weekends for family time, and then you just ask for forgiveness a lot. Why are you bullish on Apple?

Aaron Levie
I'm bullish on Apple for a variety of reasons, institutionally, how the company operates. But there's some meme probably of, like, why is Apple not fully in AI yet? First of all, if you look at the most immediate threat that AI poses for companies, I don't think Apple is immediately threatened by AI. Most of my AI usage is on an Apple product that I have often paid money to Apple to be able to use. So, like, if I.

So, like, just like on the most immediate basis, all of my usage of AI is not threatening to anything that Apple does and is purely contributing even more to their platform dominance. But now let's go on the offensive side. So that's sort of on the defensive side. You have to first assess, does this new technology hurt a business that I'm in? And I think the answer is largely no for Apple.

They're not selling something that AI is sort of directly threatening. Then you flip to the offensive side, which is, does AI help the business that Apple is in? And I think it's unquestionable that if you could turn this thing into basically a command center. I just say something to AI and it does a thing in the world, gets me an answer to a search query, hey, what's a good way to make dinner tonight? Whatever you do on the personal side, instantly, they'll just do that.

Then if it really turns into a thing of like, hey, book me this flight or call this Uber for me or whatever, that's just an infinite amount of new types of transactions that they can facilitate that they are not currently monetizing in any kind of meaningful way. Now, who knows how they actually monetize those things? But I think it turns your phone basically into your task automation engine. This intelligent device. If you have a billion plus people that are using this device for now, a new set of things that they never used it before.

It's all through your interfaces, your APIs, or your software. I think that puts them in a very powerful position. So then the only question is like, oh, well, so why is it taking kind of quote unquote so long? I would actually argue that any of the kind of quote unquote either delays or slowdown doesn't amount to anything. The AI that I was using a year ago is totally different than the AI I'm using today.

This space is changing so rapidly that it is way better for Apple to enter the moment when they believe that they've built the right user experience, when the technology is sort of stable and when it's high enough quality, we will all use the thing that they launch whenever that point is, or they just. Partner with OpenAI as they're supposedly supposed to be doing. But that's, that's my thing is like, there's not, that's not even an or. Why is that an or? Like, what does it matter to you?

What is the underlying engine in Siri? I don't care. I want to be able to click my phone, ask a question, get something done. So, so I don't even see that as an or. I see that as just a natural sort of technology partner, supply chain thing.

Any, who even knows what they're even doing because it's all rumors. I don't see that as, as any weakness on Apple's front. I see that as a consumer. I just want the best AI to be on my device. Final one, if I said to you it's 20, what is it, 2029, where.

Would you be thrilled for box to be? Then there's certain metrics. Like, you know, we just passed a billion in revenue. We like to get to 2 billion as quickly as possible. That's an important milestone for us at.

Harry Stebbings
Can I be blunt? I'm so sorry for being so rude. You passed a billion in revenue. Your market cap is 3.89. I'm depressed.

Aaron Levie
Don't be too depressed. I was taught at least eight x. This is sort of why I am. The lesson for everybody's future is eventually, at some future point, you will be measured on a set of metrics that are much more boring than AR multiples, and they will be free cash flow multiples or whatnot. We are at the later stage of that journey now.

Forex is clearly way too undervalued. You should be in the kind of six or eight x range. We had a period probably the last couple of years, where the core business slowed down, and we've been launching a sort of second act, as it were, or third act within both. AI workflow automation, more business process that takes time to get to scale before obviously, the top line growth, you know, can slow down. So, so we're kind of in the midst of that transition right now.

But these are the things you deal with as a, as a public company. So where would you be five years then? Sorry, I interrupted you with. No, no, that's fine. So our next set of goals get to 2 billion as quickly as possible.

Market cap, kind of, you know, whatever is associated with that. You know, I don't have a specific, one specific thing as much as kind of back to what we were talking about earlier on. AI. If you think about the information that goes into your content, your contracts, your marketing assets, your, your financial records, your invoices, this is basically, you know, the closest thing that a company has to its digital memory, let's just say. And AI now has the ability to actually tap into your digital memory as a company.

The thing that over the next couple of years, and so let's say five as an arbitrary point, is really enabling just the world to reimagine what they can do with their data. And what if every company had infinite digital memory to make better decisions, to automate more processes? You know, think about the new employee that has to be onboarded, that doesn't know anything about what the hell, you know, the organization's doing instantly. That's now what they can tap into. So, so we think it's just a profound moment for, for how you work with your information in the cloud.

Harry Stebbings
Listen, Aaron, thank you so much for putting up with me, pressing in many different areas, which was totally also like, there was no schedule sent ahead of time, this site arranged on Twitter without the usual process. I'm sure who wants process? Exactly. But thank you so much. Thank you.

I mean, what can I say? I absolutely love doing that show. If you want to watch the full. Episode, you can watch it on YouTube by searching for 20 vc. That's 20 VC on YouTube.

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And when you're ready to launch, go to squarespace.com 20 Vc and use the code 20 VC to save 10% off your first purchase of a website or domain. As always, I so appreciate all your support and stay tuned for an incredible episode this coming Friday, a compilation where we bring together the best minds in AI to understand where they think true value lies, whether it's in the infrastructure layer with foundation models or in the application layer with startups.

Harry Stebbings
As always, I so appreciate all your support and stay tuned for an incredible episode this coming Friday, a compilation where we bring together the best minds in AI to understand where they think true value lies, whether it's in the infrastructure layer with foundation models or in the application layer with startups.

20VC: Box's Aaron Levie on Predictions for the Next Wave of AI: Will Foundation Models Be Commoditised | How the Business Model of SaaS Changes Forever | Startups vs Incumbents: Who Wins | App vs Infrastructure Layer: Where is the Value?

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1: Introduction to the AI Shift

2: Foundation Models and Commoditization

3: SaaS Business Model Evolution

4: Startups vs. Incumbents

5: App vs. Infrastructure Layer

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