Full transcript
— Companies Are Roman Legions
0:00This is based a little bit off a talk
0:01Diana gave. There's a video up over the
0:03weekend, which is super cool. Um Jack
0:04Dorsey was tweeting some stuff like two
0:06or three weeks ago that I thought was
0:08super cool. And I've kind of um stolen a
0:10bunch of those ideas and shoved them in
0:13here. This talk is like pretty
0:14conceptual and high-level about thinking
0:17about how to build companies. So, the
0:19Roman legions were designed to
0:23project power over two continents or
0:27something from Rome at the center to
0:29like these people on Hadrian's Wall up
0:31in Scotland. And the idea was um this
0:35nested hierarchies with consistent spans
0:37of control. And you had like named
0:39individuals with spans of control to
0:41pass orders down and send information
0:44back up the hierarchy. And if you think
0:46about most companies today, they are
0:48organized like a Roman legion, where
0:50human beings are the conduit for
0:52information flowing up and down. And so,
— Copilots Are the Wrong Mental Model
0:54Jack Dorsey's tweet that I thought was
0:55great was this like this underlying
0:57assumption that hierarchically organized
1:00companies are the are the way that we
1:02should be organizing like our economic
1:03units of value. And I think AI basically
1:06breaks that. If you talked to people a
1:08year ago about how AI was useful,
1:11they talked about productivity. Like
1:15co-pilots making engineers 20% more
1:17productive, adding co-pilots to
1:18workflows, shipping more software.
1:21But I think that is actually a
1:22broken way of thinking about AI. That's
1:25like P had a great blog post where
1:27basically just like taking the old way
1:29of working and adding like a more
1:30powerful engine onto it. And instead of
1:32that, I think you can reimagine like
1:34what a company is and how it acts. And
1:37so, as Gary's talking, like he
1:39I genuinely believe can produce more
1:41code than an entire engineering team.
1:44The thing that's really stuck with me is
1:45this idea of like extracting the domain
1:48knowledge from your company and defining
1:50it as a as like context or a set of
1:52skills or whatever you want to call it.
1:54But like this idea that there's domain
— Extract the Domain Knowledge
1:56knowledge or business knowledge or like
1:58some know-how that's inside the heads of
2:01people and in Slack messages and in
2:04emails and in Notion, all of this like
2:06information together defines how your
2:09company works.
2:11And if you can make that legible,
2:13you suddenly can
2:15can move from this hierarchical
2:16organization to a sort of intelligent
2:19AI-powered organization
2:21with AI-native software. AI isn't the
2:23something It's not something you bolt
— The Recursive Self-Improving Loop
2:25onto the side of a company. It's not
2:26like a tool you give to engineers to
2:28make them more productive. But I think
2:30you can reimagine what a company is as a
2:32set of recursive self-improving AI
2:35loops. I think this is really, really,
2:37really important because when it gets
2:39there, I think the company starts to
2:42self-improve
2:43even when you're sleeping.
2:45So let me give you an example. Diane's
2:46talk talks about this as well. This AI
2:48loop, you start with like a sensor layer
2:50which is like That's a fancy word, but
2:52really it might be like
2:54emails from your customers. Might be
2:56support tickets, code changes, people
2:59canceling their subscription, uh product
3:02telemetry. It's like sensor data to get
3:05information from the outside world. And
3:07then a a policy layer, decision layer,
3:09like rules about what you can do, what
3:11it has to ask a human permission for,
3:13what it must log. A tool layer that's
3:15kind of Gary's skills and code, like the
3:18tool layer is Gary's code. It's
3:20basically deterministic APIs, things
3:21like query my database or look at my
3:24calendar. Um a set of tools that the the
3:28AI can call. A quality gate, like that
3:31might be eval's deterministic checks,
3:32safety filters, human review for
3:34high-risk stuff. And then a learning
3:37mechanism. It's like your system
3:39interacts with the real world, picks up
3:41where it doesn't work and loops back
3:42into the top again. And if you can run
3:44every single step of that without human
3:46intervention without with minimal human
3:48intervention, your system gets better
3:50and better and better
3:51while you're are
3:52And I can give you actual examples of
3:54this that are live right now. We started
3:56with an agent that you can ask and if it
3:58has deterministic tools to query our
4:00database. Pretty simple, like when did I
4:02last have office hours with this
4:03company? Then it got a little bit
4:05smarter, which was like, for this
4:07company I'm doing office hours with
4:08right now, they need introductions for
4:10anyone in petrochemicals or something.
— The Holy Shit Moment at YC
4:12And it could query the database in
4:13different ways and use rag and all sorts
4:15of stuff to like come up with five
4:16relevant founders for you to meet. But
4:18again, this is like this is a sidekick,
4:20right? This is an agent. This is like
4:21the old This is last year's version of
4:23how a how AI is making me better as a
4:26group partner. It's making me 20 or 30%
4:27more effective.
4:29The aha moment for me came when we put a
4:32monitoring agent on top of that, which
4:34looked at every single query every
4:36single YC employee was doing and saw
4:39when it worked
4:41and when it did not work.
4:42And when it did not work, it's like, oh,
4:44why not? What would have made this query
4:46work? Do we need different deterministic
4:48tools? Do we need to update the skills
4:50file? Do we need a different database
4:51for you? Do we need a new index? And
4:53this happened This literally happens
4:54overnight now. Let's write the code, put
4:57in a merge request to the YC code base,
4:59have an agent review it, and merge it,
5:00and deploy it. So, when a human comes
5:02the next day to ask the same query, it
5:05will now succeed. For me, that was like
5:07the
5:08holy [ __ ] [ __ ] But that's not just
5:10AI making you 20 or 30% more valuable,
5:12it is the AI going through this loop to
5:15figure out how to self-improve. And I
5:17think basically, if you can identify
5:19parts of your company that work like
5:21this and eliminate as much of have the
5:24human in kind of a monitoring or
5:25supervisory capacity,
5:28you can just throw tokens at this
5:30problem and your company will get
5:31better.
5:32And so, other examples might be, if you
5:34have product analytics, having an agent
5:36go through your product analytics to to
5:38figure out what part of your sales
5:39funnel is presenting the highest amount
5:42of friction, researching best practices,
5:44putting in place an AB test, running it
5:45for a week, picking the best version,
5:47and deploying it. Then doing that again
5:49and again and again for your product. So
— Self-Optimizing Product and Support Loops
5:50you have a self-optimizing like product
5:52loop. Or you do it with customer service
5:54queries. You have customer
5:56suggestions coming in and in and in. You
5:58triage it with a kind of You have to
6:00have an agent which is like your chief
6:01product officer and your chief
6:02technology officer who make kind of
6:04judgment calls about Okay, this is a
6:06suggestion which we just don't want to
6:07do. We'll discard it. But no, this is a
6:08suggestion which is now in line with our
6:10road map. Um we can do it overnight.
6:12Let's write the code. Let's deploy it.
6:14Let's ship it to the customer without a
6:15human being involved.
6:17So I think if you can think about each
6:19part of your company as a self-improving
6:22like recursive AI loop, it becomes very
6:24very different to this like
6:24hierarchically organized Roman legion of
6:26a company. So what? So like if you want
6:28to do this, what are the implications?
— Burn Tokens, Not Headcount
6:29One is like burn tokens, not head count.
6:32We are seeing companies get to demo day
6:34with about 5x more revenue per employee
6:37than they did 18 months ago. And I think
6:40that's going to continue to series A and
6:42series B.
6:43And so I think you're going to be
6:45constrained on token usage, not on head
6:47count, really really soon. The blunt
6:49measure now is just like measuring
6:50everyone's token usage, which is
6:51obviously like dumb and gameable at the
6:55extreme, but directionally I think is
6:58correct. We're in the phase of like what
7:00is possible right now. And so everyone
7:03should be experimenting to the max to
7:05figure out what we can even do with this
7:07crazy new intelligence we have. As soon
7:09as you turn it into a leaderboard and
7:10people get promoted or fired based on
7:11it, obviously it gets gamed. Obviously
7:13that's dumb. But I think directionally
7:15figuring out who in the organization is
7:17token maxing, who is not, is like a good
7:20way to think about which employees you
7:22should be spending your time with. I
— Middle Management Is Over
7:23think middle management is done. I just
7:25don't think you need middle management
7:26for this coordination problem. I think
7:27AI should be doing it. And for me, there
7:29are two roles. Jack Dorsey has three. I
7:31actually don't like the third one, so I
7:33deleted it. But there are two roles that
7:34really, really matter for me. I think
7:36everyone just has to be an IC now, a
7:37builder, an operator. And I think
7:40crucially having directly responsible
7:42individuals to get anything done, I
7:45think you need a named human. Not a
7:46committee, not a group of people, just a
7:47single person.
7:48And I think you can build companies
7:50based on ICs effectively. I I think just
7:53middle management is is over. So,
7:55building the self-improving company,
7:56that's the dream. And by the way, I
7:58think like people are
7:59at the bleeding edge of this right now.
8:01I'd be interested to see where you all
8:02are, but it feels like people are like
8:04exploring the boundaries here. I'm not
— Make Everything Legible to AI
8:06sure anyone has a truly self-improving
8:08company in every function.
8:10I might be wrong. You might prove me
8:12wrong. What would I do? First of all,
8:13this is really, really important. I
8:14would make the entire organization
8:16legible to AI. What does that mean? It
8:19means you've got to record everything.
8:21Um simplistically, all of our um partner
8:25emails, now if you email a YC partner,
8:27that email is in the YC database. Every
8:30Slack message, every DM, every office
8:32hour we've started recording for the
8:33last three or four months. Every single
8:35thing that happens,
8:37if it is recorded, it happened to the
8:39AI. If it did not get recorded, it is it
8:41did not happen to your intelligence. You
8:43know what I mean? And so, I was talking
8:45with some founders over here um just
8:47now, and we're having like really good
8:48conversations about their company. But I
8:50every conversation I had, I was like,
8:52"Fuck, I need to be recording this
8:53conversation." Because some guy wanted
8:56an introduction to I can't even remember
8:58who the introduction was now. Uh who was
9:00that?
9:01I was talking to someone about and I
9:02promised you an introduction. I said,
9:03"Yes." And I said, "Email me afterwards
9:05cuz I would I I'm going to forget this.
9:07I'm going to talk to 20 people." Yeah,
9:08so it needs to be on my phone or a or or
9:10smart glasses. Or we deck out every room
9:12with like microphones. But basically,
9:15everything needs to be recorded so that
9:16it can be legible to the AI. And then as
9:17Garry talked about like diarization, you
9:20cannot pump in
9:21100,000 hours worth of recordings into
9:23context window. So, you have to diarize
9:26it. You have to basically aggregate it
9:27down, synthesize it into the important
9:29parts, and then give the AI breadcrumbs.
9:31So, like okay, so here's an example.
9:33Who's read the user manual, the YC user
9:35manual? Hopefully, everyone in this room
9:37has at least opened the user manual at
9:38one point in time, right? Like
— Regenerating the YC User Manual
9:40it's fine. It was written 5 to 10 years
9:42ago, most of it. It's kind of out of
9:44date.
9:45So, Harj thought uh last weekend, since
9:47now we've got about 2,000 hours of
9:49recorded office hours from the last 3
9:50months, why don't we regenerate the user
9:52manual?
9:53And so, you can click like you give it a
9:55set of instructions, you basically
9:56diarize it down, synthesis like
9:59categorize it into certain areas like
10:00fundraising, hiring, co-founder
10:02disputes, whatever,
10:04and then write me a new user manual.
10:06And by the end of the weekend, he had a
10:07150 page user manual, which is
10:09dramatically better than the existing
10:11user manual. And now we can also update
10:13it every single month. So, our user
10:15manual becomes self-improving. Every new
10:17piece of advice we give, it's compared
10:20with the existing user manual and either
10:21incorporated or thrown away. So, the
10:23user manual becomes this up-to-date
10:25living brain of the advice we give to
10:26founders.
10:28And obviously, it doesn't stop as a user
10:29manual, you then pump it in as context
10:31to an AI agent, and suddenly you can ask
10:33a superintelligent AI
10:34and get the combined wisdom of 16 YC
10:36partners in one.
10:39But only if it's legible. So, you have
10:41to record everything. The second point
10:43is kind of the same, right? Like if it
10:44creates an artifact that can
10:45self-improve, it's legible. If it
10:47doesn't, you throw it away. The third
10:49point then is that every function can
10:52generate This used to say dashboards.
10:54It's not just dashboards, it's on-demand
10:55software. Codex 55 is now good enough
10:57you can one-shot most simple like
11:00most internal software dashboards you
11:02can one-shot to a pretty high level of
11:04quality. I tried it over the weekend on
11:06a bunch of our stuff. It's just unreal.
11:09So, all of your internal operations
11:10teams should be sitting on this layer of
11:13like kind of intelligence understanding,
11:15and then creating their own dashboards
11:17and their own workflows. And I would see
— Software Is Ephemeral, Context Is Valuable
11:20that those as
11:21entirely disposable. I would very
11:24preciously store all the data. So, as
11:26Garry said, he puts it all all of his
11:28emails in markdown. Never throw anything
11:29away,
11:30but then treat these the software as
11:33ephemeral. You can you can generate it.
11:35You can regenerate it. The valuable part
11:37is like the comprehension inside
11:39people's heads of like this is how the
11:40function works. This is how we run a YC
11:43event, whatever. The software to
11:44actually run the event you can generate
11:46for the event. You can throw it away.
11:47The the models get smarter in a month or
11:49two. Throw the software away. Give it
11:52your original set of instructions and
11:53regenerate the software.
11:54So I think the business context and and
11:57skills are the valuable part. I think
11:59the software on top of it is ephemeral.
12:01So what what are humans for in this
12:03world? I think basically we're talking
12:06about a company brain. And I know a
12:07bunch of people in this room are
12:08building this. But the bit in the
12:10middle, like all of your data, all of
12:12your emails, your DMs, the skills, the
12:14know-how, that is like the company
12:17brain. And I think the humans sit around
— Where Humans Still Matter
12:19the edge of this interfacing with the
12:20real world.
12:22So it's where this intelligence makes
12:24contact with reality.
12:26Human beings reach into places the
12:27models can't go yet. That might be like
12:31a conference. It might be a I'm trying
12:33to think of examples. I I would say a
12:34phone call, but I think the AI can reach
12:35into phone calls pretty easily now.
12:37Um I think it's like novel situations,
12:39ethical considerations, high-stakes
12:41moments. You know, it's like it's where
12:42the founder comes to us
12:45and is like thinking about breaking up
12:47with their co-founder. Right? It's like
12:49those real high-stakes, high-emotion
12:51moments where you really want a human
12:52being. I think that's where the human
12:55fits. For all of you, like sales
12:57conversations. I think that's a human
12:58being in the room for the next 20 years.
13:01So the humans live I think around the
13:02edge.
13:03And I'm over time and Kulveer should
13:05bullhorn me. I will leave you this one
13:07question. If you were building your
13:09company today,
13:11would you start it in this shape?
13:14For most of you, you're small enough to
13:16build it right. And so I don't think you
13:17have any excuse. And I know there are a
13:19few of you who are in the process of
13:22ripping up and rebuilding your company.
13:23So with that I will stop and will hand
13:26over to Pete. Thank you for listening.