Why the Tech World Is Going Crazy for Claude Code

Markets move fast. Get the insights you need in 10 minutes with Barkley's Brief, a podcast from Barkley's Investment Bank. Each week our experts analyse market themes, helping you anticipate what's next. Listen to Barkley's Brief wherever you get your podcasts. Hello and welcome to another episode of The Odd Lots Podcast. I'm Joe Wasntal. And I'm Tracy Alloway. So Tracy, you're cool like if I like, you know, just start doing this part time, as I like build out my software business, right? Like you're cool about that, right? I was going to say I've been thinking about AI and productivity and so far your productivity has gone down, Joe. No. Because instead of doing Odd Lots things, you're coding your own software. Except that I'm creating content for the Odd Lots newsletter about coding and that is productivity accretive, debatable, debatable, but but you're cool with that. You're cool with like me like, I'm just going to like check it part time on Odd Lots when we have a recording. No, of course not. Of course not. Good. That's the right answer. I want you to be really sad. But like a few other people, you know, I have like caught the sort of like bug of like AI coding and I'm totally blown away. I've like played with it from the big, I started playing around with it last year. But then over the holidays, I've been writing about this in the newsletter. Suddenly like my Twitter feed is like clod code, clod code, clod code. And you just cursor before, which I was very impressed by at the time. And so when I got home from vacation, one of the first things I did is like figure out how to install clod code on my computer. And I was like, Oh, I am like hooked. And this is actually like I see why I have my Twitter feed is just like people posting about this. All right. So I have to say I have not tried it because I only have a work computer and I can't install new software. And I probably definitely cannot install new software that then makes changes to existing software. I don't think Bloomberg would like that. But I have seen the hype. Lots of people talking about it. Have you seen clod code work? Have you heard of all? Yeah. Yeah. So one of the criticisms of clod code was that, you know, like, okay, you code, but you still need some background knowledge in coding. Because like, you know, the interface is kind of like 90s and all of that or 1990s. Co-work apparently like goes a step further for for normal people in coding and makes it super super easy. And the funniest thing is that apparently clod code actually coded. Yeah, so the so this is like really relates to my experience last year. And then this year, which is that even last year, like trying to use the ad coding tools. It was an annoying process because there are various things that you had to do in the actual command line of the computer that are like, I don't know command line vernacular. And you have to like install these libraries and stuff. Yeah. So there was this sort of like barrier that existed. And but what's what's really changed in the last year or with the with clod code, which has actually been around for a while. And I should have like played with it before, is that like because it sits on your computer, it sort of takes away. And so when you talk about it does the stuff does it? It just like, oh, it's like, oh, we're going to need to install this open source natural language processing library. It just does it automatically instead of me trying to like figure out like what are the right keystrokes to pull that in or ways this not going into the right file folder or whatever. And so like like co work. It's like all like all of these sort of like little frictions like these technical things like command line user very rapidly are like dissipating. Yeah. And so that like then you have something like co work where it's just like they know they're taking care of that. And so you get this like user interface that's just like, it's just getting easier and friendlier. There's almost no technical frictions at all anymore. Also, it feels very iterative. Like the code is improving upon itself at this point. And I think that was one of clod's main selling points. Well, this is like you've seen like people talk about like, oh, is AGI here. And this is like part of the debate because the prime one of the ideas, I guess behind AGI is like, well, what happens when you have software that can train itself and so forth. And I don't really know if I buy that, but you do just see like how fast the iteration cycles are. And I think we want to get into this in part. They're fast because a bunch of people are suddenly getting excited. So then the human provides this sort of like we're sowing the seeds of our own demise because we're so enthusiastically participating in the evolution. But I just like it's suddenly clear like, oh, this is going to change, I think computing. And the other thing is the code works. Like it creates code that like, this is like, there's no bugs. You know, it works. Did you see, speaking of automating yourself, you see, there was a post on Reddit from a lawyer who said he's basically used clod code to automate like his entire job. And he hasn't told anyone. I'm not exactly surprised because the other thing that I experimented with is, and I haven't 100% verified this, but on jobs day last week, I downloaded the full PDF. And I just typed into the clod code. Like find the most interesting details and make some charts based on and it did it in like a couple minutes. I have no like ability like I've never like built charts myself and or whatever like designing or whatever. And I didn't totally confirm yet that the data was all correct, but I'm pretty sure it was because everything I spot check. So I didn't just that crucial detail. And that's why I didn't want to like, oh, like, here's what here's the today's jobs report and charts, but I did my what application did it actually build it in the charts. I don't know. I just had a file like that's the thing. I had a file on my computer at that point. What kind of file? Like a PNG file, like an image file. Yeah. That's the crazy thing. I don't know. And so there was just this image that had a bunch of charts and my spot checks did suggest like I didn't see anything off. And people get paid money to like build that kind of stuff for like analysts and stuff like that. And right. So this is the other big question. If everyone can build their own software, what actually happens to software. And I was reading something. I forgot who it was by, but someone used clod code to create. They wanted a website that would basically make the money for doing nothing. And that was the prompt. And did they do. Yeah. Yeah. So the idea that the model came up with was you can sell prompts packages of good prompts and sell them for like 40 bucks and you'll make tons of money. And I was thinking about that like, okay, it's possible to make money that way. But also why wouldn't I just use clod code to do the same thing? There are many big questions that we said the convier can have to think about. And I think my main takeaway is we're going to have to think about the sooner rather than later. But what is clod code? Why is everyone so hyped about it? Like, what is it about this particular piece of software that versus what exists from open AI and Gemini on all this stuff? Like, why is this captured everyone's imagination? We really do have the perfect guys because it's someone who unlike me has been getting their hands dirty and the stuff for longer. One of the few people that I know who is into LLMs before chat GPT existed and was actually using them via the API and was actually talking about their technical capacity to do things like coding even before November of 2022. So, truly the perfect guys, we're going to be speaking with Noah Breyer. He is the co-founder of Alefic, which is a consultancy that helps big companies deal with AI stuff. So Noah, thank you so much for coming on out lots. Thank you for having me. What is Alefic? What's the deal? How are you like using LLMs before chat GPT existed? I don't know. I know very few people who are doing that. I had the good fortune of shutting down a startup in 2022 and so I had a lot of free time on my hands. And then how are you using it though? Like, how did you like, how did you wear that there is this thing that could be of potential used to you? So my very first thing I was doing was using GitHub co-pilot, which at the time was built into VS code and it was auto complete inside VS code. So it was a nice and pretty immediately realized that there were certain coding tasks that it could just handle completely. Anything that was very pattern based, so if you write code, you write a lot of tests. If you write tests, every test kind of follows the same pattern. And you want it to follow the same pattern. You're looking for that structure. And over time, because it was looking at your code base, it was able to basically auto complete it. I also started playing with the GPT-3 API, which had come out, I think that came out in November of 2021. And that was the first time it was publicly available to everybody and they had a large language bottle as we know it today available to them. So I was just testing and building things and I pretty immediately realized the very first thing I did where it just blew my mind was I built a web scraper. So I was just trying to pull pricing data from a website. And I've done a lot of this in my career. It's maybe the most annoying task you have to do in all of coding because HTML is the most miserable language to have to parse. And I just had this thing where I took the page, I took the content, I took the text and I gave it to the AI and I asked it to give me back the pricing table and it gave me back the pricing table. And I just thought I'll never do it the other way again. That's it. Um, that HTML mentioned just brought up like memories of me and like the mid 90s on HTML goodies. Do you remember that site? Yeah. I wonder if it's still, is it still up? That would be wild. Um, does cloud code, does that count as a GI? This seems to be the debate, right? Is it a GI? I try not to wait into what's a GI and what's not? I think my guess on an AGI for what it's worth is that it's probably going to be a conversation like the turning test where everybody thought it was really, really important for a really long time. We thought the turning test was the biggest thing for 70 years or whatever. And then Chachy BT very clearly passed the turning test and now everybody pretends like it's not just that they forgot they pretend that it never mattered. Oh, and so I am kind of guessing that that's going to be what the conversation is like it's just going to be a sort of forever moving goal post because it turns out that the idea we had for what general intelligence looks like is not quite that. Um, but I also think, you know, the computer scientist and the sort of serious AI researchers would say that much of what's going on inside cloud code is not the model itself. It's the model paired with a human. And I think that is a pretty important distinction, but I don't know about AGI. Based markets move fast get the insights you need in 10 minutes with the Barclays brief a new podcast from Barclays investment bank through sharp dialogue and scenario based analysis our leading experts analyze key market themes each week. So whether you're managing a portfolio or leading a business, the Barclays brief podcast can help you make smarter decisions today. Stay sharp. Stay briefed. Find Barclays brief wherever you get your podcasts. So okay, so you were using GPT to code prior to the release of chat GPT. So therefore coding models have been around a long time. So what is for those who haven't played around with it, what is cloud code because again, coding models have been around for a long time. If people maybe have heard of cursor or copilot or some of these other harnesses, etc. What is cloud code? So if we back up first and we go to copilot, so copilot was the first sort of commercial application of a large language model by most accounts. And what copilot did in its initial instantiation was just auto Microsoft product. It's a Microsoft product. So Microsoft owns GitHub GitHub, develop copilot. It was Microsoft had the partnership with open AI. And so they built it in. And what it was doing was doing auto complete. So if you're writing code, a lot of writing code is boilerplate or trying to remember the name of a function. And the reason Stack Overflow existed was because you can never remember the exact name of that function or the exact rejects that you need to use in order to find and replace something. And so you would go search for it and they realized that you could just build that into the ID, your code editor and have it auto complete for you. And it was pretty amazing. Then Chatchy PT came out and even before that, I had built a simple chatbot for myself because I realized that hey, I could just ask this and instead of going and searching Stack Overflow, it was totally capable of answering code questions. And it was capable of writing rejects or doing these things and didn't make mistakes. Yes, but like there's famous mistakes on Stack Overflow of incorrect rejects that now exist in every code based in the world. And so, you know, and there were a lot of us just kind of playing with these things and realizing they were a huge boon. And so I think really the next step is cursor comes out and the thing cursor realized that copilot didn't was that it wasn't good enough to have auto complete. You also needed the Q&A because you have these things that you can't just auto complete. You want to be able to ask the question and answer it. And then Chatchy PT came out and everybody was switching between the ID and then I think really the next big piece is that cloud code came out and what cloud code did that was so remarkable was they took the same set of models really. And they took them out of the chatbot and they really just gave it some very basic functionality to operate within your machine. Right. And so, you know, if you really look at kind of what exists within cloud code, you're calling out to a model and you they gave it capability around sort of two big things. One is you can read and write files on your computer. And then two is that you can operate unix the base commands, the bash commands that exist in your environment. And again, because these models were trained on the internet and there's no greater source of information on the internet than how to make the internet. They know how to use unix commands incredibly well right because unix has existed for whatever it is 60 years and the way these commands were designed they're all designed to be very, very simple. There's a fine command and, you know, there's the gold grip and it can search through a code base and unix has this sort of beautiful way of tying one command to another so you can see take the output of one command and send it to another. And they kind of just gave the model access to these two or three very simple things. And it kind of turned out that it unlocked a whole bunch of functionality. I don't think even the people who built it fully realized like one example that I think about a lot is just the challenge you have with all of these AI models is that they're stateless. So every time you talk to chat GPT, it's sending your entire conversation history back to chat GPT because it has no saved history of that chat, right. And that's fine. It's the way it works. It's just fact, but it means that, you know, it forgets things. It doesn't know conversation to conversation and one very easy way to save your state is just write it to a file. And so you give it right access and it can create files and now all of a sudden you've overcome this like probably the single biggest challenge that exists inside these large language models, which is that they're fundamentally stateless. So Claude writes itself little like memory notes, right, to remember the entire context of the conversation. And that's how it solved that problem. No, so there's sort of two things going on in Claude code beneath the hood. There's one thing that works exactly like chat GPT or any of these other ones, which is it's maintaining a conversation history. So every message you send it and every action it takes, it's recording to a log, which is just one big file. That's really no different than what chat GPT can do where it gets really interesting though is it can also write files that it can then read. So whereas that conversation history is all saved off and eventually that conversation gets too long and needs to do a thing called compaction. And when it compacts it, it tries to sort of just remember the bits because they're the total windows is is is large, but I mean it's like 100,000 again. So that's what I mean by memory notes, right, it compacts the information into the important stuff that it then retreat. It does that it only does that at that and like once it runs out of space, once it runs out of context window. So it has 200,000 tokens, I think and 200,000 tokens in rough terms is probably 150,000 words. It says, okay, it's time for me to compact all of this stuff. And so it still saves your whole history on your computer, you still have the entire message, but for that session, it just compacts it down to this, you know, maybe 25,000 token memory of what it was. Yeah. And is this like something that was not obvious before as a solution, like this compaction, how important is it for this being like, okay, as a human, I can work on this on a project for a long time, like how much of an unlock was that? I'm not sure compaction was the unlock. I think the compaction functionality is helpful. The way chat GPT does it for what it's worth is they don't do compaction, they just forget your messages eventually. So if you're in one chat, eventually your oldest message is going to fall off the back for coding, that's probably less helpful, but there tradeoffs, I both techniques work, I think fundamentally the thing that is special about cloud code is not the compaction, it's the, it's the ability to write and read files on your computer, which means you can always write off memories. And then what does that mean write off memory? So you could say, hey, it's really important that I remember this thing for future sessions, I want to always work this way. So in a code base of mine, I have a set of documentation that explains how I like to do things. And cloud code makes a mistake, and so the next time I can write a memory, essentially, it's written as a thing they call skill, and you can write it off and you say, hey, whenever you run into this, I want you to operate in this kind of way. And that existing across every session is really a thing you can only do when you can store it as a file, it's a thing you can't do in quite the same way when you're operating in this environment, where it's just going back and forth to the API. So this access to the file system is one really big piece. And then the second is, it's just the Unix commands, I mean, computers, every computer program lives on top of these sort of baseline functions, and the way that the designers of Unix built them is really elegant, and they're very small, they all do one thing, and they're all composable and in coding terms, composable means they can be, they can be chained together, right? And so you can say, hey, look for files that mentioned this word, and then from those files, I want you to take this second action, and then from the output of that action, I want you to take a third action, and that's just built into Unix, you literally just put a little pipe in between, and you just pipe them from one to another, and that's it. And that's it. And so you give it access to write these commands, and all of a sudden it gets these sort of second and third order effects that are just incredibly powerful and built over a really long time. So how much of Claude code, the way it's different to other models, how much of that was overcoming technological challenges versus like just having a good idea, because hearing you describe it, I mean, giving access to a computer seems like kind of obvious, like let's just do that. I don't have a good answer to that. I think that it was kind of just a good idea. I think they did some patterns really well. They're clearly incredibly talented, not just engineers, but kind of thinkers about how to structure it, like the primitives inside Claude code are just smart. And then the thing that they've done, and Boris Cherny, who's the lead developer on Claude code andthropic, he talks about latent demand a lot, right, and latent demand is basically just, hey, look at the ways people are using these systems and then figure out ways to make that a part of the product itself. I think what they've done brilliantly, and this is kind of easy when you have a community of developers who are nerds who want to go talk about all the ways that they're using these things is they have, I am amazed at the speed in which, you know, I have a small community of 15 CTOs who all use this stuff religiously, and you know, when we first started that community, it took them a month to, I would see it in the chat, and then a month later it would get built into Claude code. And then increasingly, it's like a day later, it feels like they're just, they're just listening to it, but I think they're just not only tapped in, but they're really fundamentally, you know, they're dog fooding it. They use their own products when you, you know, they talk about the productivity, engineering productivity and anthropic, you know, despite growing at a crazy clip, it continues to go up. And, you know, anybody who's built had to manage large scale pieces of software, large scale code bases knows that's not the norm. So VS code and cursor, these are IDEs. Claude code is not an ID, what is it's called CLI as a CLI, a command line interface. Got it. And the other labs now, they also have CLI's. So why are we all talking about Claude code, and I, I, I, chat GPT is called codex. I don't know what Gemini is called. I think it's just called the Gemini CLI. Why are we all talking about Claude code rather than the other CLIs that kind of have the same thing. Like what is the difference? I think first and foremost, they were first. Okay. So, and I think they've, they've had a lot more. And, you know, for my very personal opinion, I think they've done some things smarter and better as far as the permissioning model. So, you know, one of the really dangerous things is you've got this thing running on your computer, you don't want it to go and delete everything. And they have a very fine grain permissioning model where you can say, hey, I want to allow this just this one time. I want to always allow it. I always click always allow. I was living on the edge. You can, you can, next time you run it, you can just do a flag that says dangerously skip permissions. And, and it'll just, they call it your low mode. I think, I think more fundamentally though, if I look at, at codex versus Claude code, I think it's a, a difference in philosophy around what you want AI to do. To me, codex, which is excellent, is very focused on building an agent that you can just give something to and it'll just go do it. So, I want to give it that task. I don't want to intercede. I don't want to give it any more feedback. And Claude code is much more designed to be kind of a pair programmer. And so, you know, in engineering, pair programming has existed for a while. It's a really weird sort of productivity thing where you put two engineers on the same problem and it turns out that you can get better code and the worst multiplier. Yeah. And it sort of makes up for the fact that obviously, you know, you're doubling the staff on it, but because of how many fewer bugs, because even both sets of eyes, it has seemed to work out for many folks. Most companies don't practice it, but I think Claude code fundamentally is much more designed in that way. It's a pair programmer. It's, you know, whenever I start a project, I start in plan mode. So, you start in plan mode. You put together a plan. I really, I mean, it's been a lot of time in plan mode. You go through, it gives you a plan back. It asks you how you feel. You can give it a whole bunch of direction. And then it's only then that it goes off and it goes into it. So, you know, we're working together. And I actually have a whole system now that I've designed where. I use a task management system called linear. So I have Claude code right tasks off to linear. And then I've worked with Claude code to write a document that helps sort of decide a set of heuristics is decide when you should assign it to code X versus when you should give it to Claude code. And so if it's tightly defined enough and simple enough, I just send it off to code X and it does it totally independently. And then if it's complicated enough that I think it requires my time and attention, then it saves it for me. Us to do together. And we'll work on it together. And so if it's sort of touching a kind of important enough, if it's changing some part of the data model, there's these other kind of, you know, fairly basic set of criteria that I use. But that to me is the fundamental distinction. And, you know, I find Claude code in that way to be just it sort of fits what I want to do and how I want to work much better. Talk a little bit more about how it actually impacts the workflow of an engineer because, you know, my impression was people can code right like the coding problem is kind of solved at this point. And even if you can't code, even if you're not a professional engineer, you can hire someone from like India or Indonesia or wherever to just write you a code. Maybe it'll take them a week instead of like two days with Claude code, but how much does this actually change the workflow for an engineer as completely as it could be changed. I mean, I would say that over the last three months, I've written personally, I don't know a few hundred lines of code like I am mostly a manager of a set of agents who are writing code on my behalf. And, you know, increasingly what I think is interesting. I've been thinking about this bunch lately is like in some ways it's just bringing me back to the core challenge that has always existed in software development, which is how do you manage a large scale software development project across it has become a coordination problem. And I spent a lot of time sort of now designing my Claude code system to ensure that code goes through all the proper checks and that it has all these things. The other thing that makes code a particularly good place to do this is that code is verifiable in a way that most other work is not. So, you know, with code, you can verify that the build works. So you can say, hey, I want to build this package. I want to make sure that it's actually going to build and that there's going to be no failures. That's a very easy check. It's either true or it's not true. There's also coders use a linting. And so, linting is a way to kind of look at its static code analysis. So it basically tries to sort of find things in your code base that are not going to work ahead of time where you can predict that. So, you can't predict, Alan Turing, a proof that you can't predict with certainty whether code is going to run, but there are certain patterns and things that it can finance. It essentially does static pattern analysis. And so, you know, you have it run all these things, but the more kind of a pinninated you can be about that and the more steps you can have a go through. So I find, you know, now I'm kind of the designer, which honestly, as an entrepreneur and as a CEO of companies, like that's kind of always been my job. Like I've been, I've less and less been a person who writes code and more and more have been a person who designs a system in that case, a company with a bunch of people who write code. One of the funny things it seems to me is that setting a set of Claude code, Claude itself has a reputation for it's a nicer chat to talk to people find it. And you know, ChatGPT seems to really be psychophantic. I still think it's, I know it's a proof, but I actually don't think it's improved enough. It's still people like the pros style of Claude, Claude. And I'm curious that in the pear trading, pear trading, I'm thinking about finance, the pair engineering model, whether there is also an edge there, which is like here is a chatbot that is not annoying to talk to while you're iterating. And whether that is like a meaningful distinction between, you know, coding with codecs or whatever. Yeah, I don't know. It still can be very annoying. I'll tell you. And it'll still sometimes be overly, overly effusive with me about a design choice. I mean, or sort of notice something, which I could live without. So I'm working on this project that's doing this linguistic things. And I eventually had to say, like, give it to me straight. How bad is this? And then so I said, I said, actually what I said was, and soon for a moment that you are a quantitative linguistics for the PhD, give me your honest assessment of where we are with this. And it said, like, you've developed a nice toy and there's no evidence that it actually does. And I was like, OK, that's nice to hear. I actually like, I don't appreciate that. And it was like, you're very blunt. Not, you know, it's still like polite, but it was like, this doesn't, you don't really show anything. You haven't really established at all that your software does what it claims to. So I think stylistically, I kind of personally agree. My theory, by the way, on Claude versus opening a chat GPT models is, I think Claude is actually better at sort of reflecting what you give it. And so I think part of why we think it's better is it's better at pretending it's us. And so we tend to like that. This is purely speculation, but that's always been my theory on. So it flatters you in a different way. I think it's flattering you in a much more subtle way. Yeah, but for a long time, just anthropic has been producing the best coding models. You know, I mean, there's there can be some debate there now, but you know, there's great story from cursor actually where cursor basically wasn't that good. And then sonnet 3.5 came out and all of a sudden cursor was amazing and cursor became a tool that everybody started using, but it wasn't until this other model came out and they made that the default model. And, you know, I, for what it's worth, I think the other takeaway from that, which is a kind of big theme. We see in the market as a thing that the Claude code team has talked about is use constantly have to be building ahead with AI in a way that is very unique in the world of software where you kind of always want to build that. You kind of always want to build things that are working at like 70 or 80% because if you really spend the time to get it up to 90 or 100, you're going to lose all the gains you get when the next model comes out. And the, you know, with the amount of capex being spent at these models, like there's a next model that's going to come out that's going to be awesome and you just kind of want to be downstream from that. And you don't want to waste six months getting an extra 3% when that new model is going to give you an extra seven. Yeah, this is the only certainty with AI is like there's always going to be a new model. The worst model ever, it's just the one that we're using today. That's right. That's right. Are we all going to become coding illiterate? We're just going to forget how to code if everyone's using, you know, general language to do forget. I never learned. Yeah, okay. You know what I've been thinking about? You know that Scott Carp, the CEO of Palantir is that line, he's like, when I was young, I was too poor to have a car. Or so I didn't get a, so I never learned to drive. And now I'm too rich. So I never learned to drive. I feel like when I was young, I was too dumb to learn to code. And now you leap to head. Yeah, now I'm too smart to learn Python or HTML or whatever. I have a couple of takes on this person, one personally. So first one is I just think like this is the worry of all technology ever. There was a paper that came out that showed that people were, you know, they were forgetting more things or something because they were using chat GPT. But, you know, in Fageress, Plato was worried that people were going to forget things because they started writing things down. And, you know, I think the trade off there was pretty good. We got the scientific revolution and a couple of other things. So, you know, I think that's the sort of natural knee jerk. With that said, it is, it's very strange when you have people, you know, the cloud code team is talking about how little code they write. Now, I draw a distinction between the sort of vibe coding and the kind of amateur people who have never written code. And I think that is amazing, by the way, and I think there's a lot of software developers who are really mad about that because they're, they claim it's for safety reasons or whatever. But I think fundamentally it's just they've got people on their turf. But I think that's incredible. I mean, my nine-year-old vibe coded a website. So, wow. And for Secret Santa, she's now 10. She would get mad at me if I called her 9. I think she vibe good when she was 9. But that's awesome, right? I don't know. That's amazing. That's a way for people to express themselves in a way that they couldn't before you did your linguistics. That's right. That's fun and interesting. But yeah, I also think the other, the thing that's happening with professional software developers when you hear from Anthropiker or, you know, when I'm talking about it's, you know, the code is going through this process. And, you know, all the code still gets reviewed by people and we're not letting it get out the door if it's not at the same level as human. And it's just, but what's amazing is I'm, I'm running five of these sessions at a time. And so I've got like software being developed in parallel in a way that is unimaginable. And, you know, the other thing is just now the best software engineers wrote the least code anyway. You know, the sort of classic story of like the difference between a junior developer or senior developers that a junior developer gets a problem and they sit down and they put their fingers on the keyboard and they start writing code. And a senior developer gets a problem and sits there for three hours and tries to figure out what the best way to solve it is and then spends five minutes writing code to get it done. True elegance is restraint. That's what I say. What are you seeing in the companies you're working for? Like I find it hard to believe and I was maybe skeptical of this, but it feels like right now we're here with technology where like a fire like companies like. Like I said, you can build a charts of data in a way that used to be like someone would have had to get their hands dirty or setter in the companies that you talk to is right now this having an effect on how they think about what positions they're hiring for in the skills they're looking for and so forth. I think that it's hard to answer right now. I think that certainly. I do think I personally think if I look at the sort of layoffs in the technology industry of the last couple years, I think some part of that is just looking at the output of these models and saying hey. These models are able to produce it, you know, the median and I have a whole bunch of sort of middle managers who are producing at the 65th percentile and it's like I can produce median for $1.50 per million tokens or I can produce 65th percentile for $100,000 a year. It's a sort of fairly simple trade off. I think so I do think there's a lot of downstream effects. I think the other thing that's happening is kind of like middle management is under threat because it's the realization that hey, like part of what these models are amazing at is is I think of them as like a fuzzy interface they can sort of turn any data and taking other data right you can sort of transform data from one format to another you can take a PDF and you can turn it into charts right and there's whole people who exist or you know if you think about what product managers do a lot of what product. Managers do a lot of what product managers do is they take how people are using a product and they try to transform it into a format that engineers can then use to figure out what to do and I think a lot of those kind of a lot of those pieces that used to just be kind of transferring knowledge. Tracey, I think a one of the most important roles in any organization is essentially translation work and you see it in the newsroom where it's like here is a team specialized in emerging market currencies. They have to like they have to then tell the senior editors what they're working on but the senior editors who are maybe more generalists don't really know like why like some sort of like you know one and carry is important and that a really important role within any organization is essentially the team that can translate between the generalist team and the specialist team. Absolutely and so I that's an interesting observation in the sort of engineering world of like okay these are tools that are in some sense translation tools. So we talked about I agree completely by the way but we talked about vibe coding and Joe has this application that I don't think you're looking to monetize. No, it's I'm just trying to make it for the good of the world right. Okay. When did that become a crime? I'm not monetizing it. But like this opens up massive questions for software as a service right for SAS because if everyone can write their own software you can replicate anything that's out there that is currently charging money. What's going to happen to software? I think software is pretty screwed. A lot of it at least not all of it you know you still depends on whether you call that cloud provider software or not. You know you still need to run this stuff somewhere and I think there's there's certain kinds of software that you know you just don't really want to be in the business of writing. You know I had someone who's tried to build a project management system I'd really rather I don't think anybody should be in that business. But I do think fundamentally I mean we see this every day inside enterprises the sort of build versus buy. Pendulum has just swung and you know I mean I used to run a SAS company and we sold enterprises and you know for a long time that that I think that made a lot of sense right because like hey it just didn't make sense to try to build this thing on your own. And so but the price of that was you know one the price right like and it got to be more expensive the other price was that you were paying for a lot of stuff you didn't need right because the whole job of building SAS is you need to generalize problems and say you build things that are going to work for everybody and that means either you have to sort of adapter you have to build this sort of very configurable software. And I think and what I see just you know first hand is that inside these organizations you can now solve very specific problems that are highly valuable and not only can you solve them better than generic software but you can actually in a lot of ways do it for less money because you're trying to tackle less stuff you didn't need the 16 other features you bought it for the one that you really really cared about. And so I think that part of it you know I don't like there's I definitely think there are pieces of the software industry that are going to you know come out the other side you're going to nobody wants to deal with payroll right like you know somebody you're still going to buy some payroll software and and you're still going to have that but. You know I do think there are a lot of pieces where the software existed essentially as a kind of wrapper around a database and now you're just going to you know with just the database you can do that and then you know the other piece I'd say here is it's this is not there's a kind of confluence of circumstances where it's not just the coding it's also the fact that you have AI to do a whole bunch of work so you know if we pick on CRM for a second right like you know source. We can you know you look at what the interface of that is and essentially it has existed to get sales people to take unstructured data which is sales meetings and turn it into structured data that so can be stored in the database and now you have AI and AI is very capable of taking unstructured data directly from the source so you have people recording meetings. And then it can structured into any data that you want this is one of the very first sort of mind blowing moments I had was that I could give it a Jason interface I could describe exactly what I wanted the data structure to be and it would give me back that information and that data structure and we've just basically been having a bunch of humans do that work for a very long time whether it's in CRM or project management or any of these other places and the ability to just kind of get rid of that whole thing it I think it really does bring into question. The value of a lot of these software companies so we have seen like a lot of software sucks they look like melting ice cubes right now maybe they so what is it so I want to talk I mean this is like you know or listeners or investors is a pretty high stakes question of like what residual value there is but talk a little bit more about sales force maybe this would be a time to learn what so. When it actually does as it's massively being disrupted now we get around to learning what Salesforce is but I know it's like many things there are apps that people built on to Salesforce but this sounds like we're hitting on when I think probably one the crucial questions for like the future of the software industry so talk a little bit more about like the current approach and what people are buying when they buy a package or subscribe to a service from Salesforce and then what the unlock opportunity is from having AI like live in the same world as all your files. Yeah so I think if we take CRM as a general category so you know the biggest players there are customer relationship customer relationship management that's like what you know Salesforce does it as if he does a hub spot does it for the mint market. You know when I think about that product and I think about the way we've used it inside enterprise sales organizations essentially you know it's a database of companies it's a database of contacts it's a database of deals you have in the pipeline and it's a way to track all those deals you guys hit on something before. That I think is is really it which is like inside companies there is a huge group of people and who exist to answer the question from management of what is the status of something. Right and you know that can be sales management it can be product management it does matter right it could be within a newsroom somebody wants to know what the status is and somebody else exists to go figure out what the answer to that question is and so fundamentally I think those CRM tools are bought first and foremost to answer what's going on. Just to answer what is the status right what's my pipeline look like and to answer what your pipeline looks like you need a bunch of sales people putting deals in and those deals are associated with contacts and companies and they say when is that deal going to close and and and essentially you are asking the sales people to make the updates in the system to do that and just very tactically I mean you know I run a company now we talk to a lot of we have a lot of sales calls we record those calls and they get. And they get transcribed in the AI then looks through them and makes decisions about where this deal should be in the process and. It's much better than having somebody try to go updated because those people never updated anyway the secret of all of this enterprise software is that nobody was using it the way that anybody wanted to anyway. And so you know I think that that is sort of you know a lot of what's happening there again it's sort of some of it's the coding some of it's just the core capabilities and then you know you still need databases right so it's like you know you look at with data bricks and stuff like you know I think those folks are still sort of genuinely sitting in a pretty good place where you know all software has to sit on side on top of some database that you can sort of read and write to. But you know I think some of those categories that were specifically focused on kind of like human input now of course you know Salesforce as a whole AI thing and they're saying hey we you shouldn't have humans input again Salesforce you know to. At sales is just one small piece they have a whole customer support thing which obviously also has an interesting implication where you know you're doing support with AI agents and so some of it comes back to seeds I mean you know it gets me fairly complicated but I do think. I think the fundamental underlying thing is anybody who buy software that is you know SAS you're always buying for a subset of the functionality that that's nobody is using 100% of the functionality of SAS and so there's always a trade off that's happening there where you know you're spending more money than you need to because you're not using all of these pieces. And so you know if you can more narrowly focus that that is where you could say hey we could solve this kind of more narrow problem and not only can we solve it more narrowly we can solve it way more effectively because you know the trick with AI is that the more specific you are with it the better the output is right so it's like if you know if outside of coding if you just ask chat GPZ to write you a story it's going to write you a very very median story right sort of exactly the median but if you work with it and you. You know then you're going to get it the more of your own expertise you in viewing it the further up above the median it's going to be and it's going to be you know of course that also means it's less where the line is between what say I and what's not AI is going to continue to get larrier. Joe how much does cloud code actually cost you know well I paid for the 200 a month 200 dollars a month version but like high roller yeah no but you know I think it's you can get it with the pro version of like or whatever this some the version of that blood 20 dollars but I hit a limit fairly quickly and I was like I didn't have my website up so like and then I bought the fight then I put paid five dollars for the extra compute and it's like this is dumb I think I'm just yeah. Okay so we going out into two nice dinners right month it's not you know when I think about that way doesn't seem that big a deal it's worth it to you okay so I think we can all agree this is like a valuable service that cloud code is providing. But we touched on this in the intro it seems like the models just keep replicating themselves really really quickly so anything that cloud code can do I would expect another model will come in in like a month maybe less and do the exact same thing. What does that mean for the actual like valuations of these companies and the models like how are they going to monetize it when it seems so difficult to actually differentiate yourself especially for like a substantial portion of time yeah well so. Again here I think we have to distinguish between cloud code and the clawed model so in cloud codes case if you're using you know the latest version using opus 4.5 which is the model opus 4.5 has a price of. I don't know something in the dollar 50 to two dollars for a million input tokens and whatever it is on the output which is like roughly the going rate for cutting edge models Gemini 3 pro is the same price. Open AI the 5.2 is they're all the same price so the first thing is is you have to differentiate between those. And so I think a big part of what anthropic is trying to do is they're trying to lock people into cloud code in fact there's just some. Controversy amongst some nerds where open code which is a competitor to cloud code. Use to let you use your clawed max $200 so the trick with the clawed max plan is if you're just buying those that number of tokens it would cost you significantly more than $200 it is a super super discounted plan. So like you you are probably you have the access I have the access to use I would guess in the thousand or two thousand dollars of tokens. For my $200 a month so it's it's a very very heavily subsidized plan and open code which is an open source version of cloud code a sort of competitor. They had found a way that they would let you use your clawed max plan with open code and anthropic last week shut that down. And so open code people got very upset because they said like this is not what you're supposed to do or I'm not sure exactly what they said I never felt like I got a particularly good argument out of it. But you know I do think part of what they're trying to get it because is that you know at the very top models like these are all amazing like the Google opening eye and anthropic their best models are all on par with each other. I would move them around a little bit I still think opus 4.5 is the best model out there but you know I mean that might change tomorrow like it. And that's where something like cloud code is really interesting because it's a product that is very it's just theirs it's not it's a piece of software it's not an AI model. And so it's sort of it's less able to be disrupted now again I think if if somebody else wanted to copy that exactly they could code X has one Gemini has one. I just think they take a very different tact with it where it's much less and so you know I think what they're trying to do is get developers like me to feel very comfortable inside that so that when we go open. And I still open code X or try Gemini or I was playing with open code the other day and it just doesn't feel familiar in the same way that you know if you're trying to move somebody from a PC to a Mac it doesn't feel familiar right they want to own like the ecosystem environment. Work on what a world Noah thank you so much for coming on out lots I was like dying to do an episode about this topic thanks for having me yeah by the way I don't have AI psychosis I have a Claude complex. Why is everyone making that joke wait which joke the psychosis joke I think you're going to be proud of me for saying Claude complex oh that is very good. I do one pun finally for Tracy is like what is over making that joke well I was thinking about the joke I was handing you a sir I finally make a pun and you just jump right over it. Well everyone keeps saying that Claude code is AI psychosis for smart people right like how did that become a thing yeah all right but that was a good pun. It's also very bro-coded I find you think so all of AI is bro-coded this is true we should talk more about this you know we should have David shore on he's been doing a lot of polling about various demographics and how they feel about AI. We should in here some interesting stuff yeah we should do that anyway Noah thank you so much for coming out like thanks for having. Well that was fun Tracy I really like I just obvious to anyone who's been within five minutes five feet of me for the last two weeks I'm like totally addicted and going down I know going down the rabbit hole and stuff but like. I for the first time unironically I'm like okay this is transformative technology beyond being very impressive technology right so I've been coming to a conclusion which is that you know AI can be both under hyped. And overvalued simultaneously like and I feel like that's kind of where we are at the moment that we're making your stock call yeah no but seriously like it. It's a big deal it's going to change the way we work but is it monetizable can you differentiate the actual models the better the technology gets like the easier it is to just do what everyone else is doing and also like the compute gets cheaper and cheaper so I just don't know how you monetize this. Well so that's very interesting his point which is that it's the tokens are heavily subsidized still yeah and so that if you're paying and actually using that two hundred dollar max program and you actually use it to the limit. Claude is going to lose money on this right and the prices keep dropping and I know like Claude code is okay they're attempting to create something that resembles a traditional software ecosystem that you feel is a user that you locked into. But so far in my various like since November 2022 when I started playing with AI it hasn't felt like anyone has established lock in with anything and it's very. It's very movable and I suspect even though I have this file now on my desktop that has a file called plot MD that gives instructions etc I'm certain that if I open this file with codex or Google's I could probably just pick it up the same. Yeah I also think there's a fundamental issue with the lock in strategy because when you're talking about technology in the internet like it just feels very against the grain to try to lock people into anything and we've seen various projects over the years and it's it's a lot harder than it looks. Yeah I mean I guess I would say it's a lot harder than it looks but then we also know the flip side which is that tons of people are locked into software that they hate right people are look I hate people how many times of you I hate outlook right or I hate Microsoft teams and I hate this and I spend money on it every month in my organization can't move off of it or we can't migrate off of it. I do think that cuts both ways I do think he offered the best explanation I've heard of why the AI coding models are a threat to a lot of pretty big software businesses especially especially the point about how the user never uses all of the features that they actually that the software got built for and therefore maybe the build versus buy calculation really starts to shift when they can just design that one feature very quickly. I totally agree on the software side it seems like an existential threat but just like the locked in ecosystem of a particular model I know he said it's not actually a model but that seems like a bigger issue to me I don't know I guess we'll see we're going to see and I don't know I kind of think we're going to see quickly. Yeah that's again that's the only certainty is like stuff is happening now yeah okay shall we leave it there let's leave it there. If in another episode of the AdLots podcast I'm Tracy Allaway you can follow me at Tracy Allaway and I'm Joe why isn't all you can follow me at the stalwart follow our guests Noah Breyer he's at hey it's Noah follow our producers Carmen Rodriguez at Carmen Arman Dashal Bennett at Dashbot and Kale Brooks and Kale Brooks and for more AdLots content go to Bloomberg dot com slash AdLots we have a daily newsletter and all of our episodes and you can chat about all of these topics 24/7 in our discord discord GG slash AdLots. If you enjoy all plots if you like it when we talk about advances in AI then please leave us a positive review on your favorite podcast platform. And remember if you are a Bloomberg subscriber you can listen to all of our episodes absolutely add free all you need to do is find the Bloomberg channel on Apple podcast and follow the instructions there. Thanks for listening. [Music]