David Friedberg

You can lever that business, right?

You can borrow money against those cash flows because it becomes predictable.

And what's happened in the last year in particular is agents have become so good and so fast and so cheap that many enterprises can simply spin up an alternative to a vertical SaaS solution.

And that's crushing the sales team's ability to sell in.

That's who you're competing against.

Now, I want to make one point and just link this with something else that happened this week.

And that's Kevin Warsh's hearing.

for Fed Reserve Chair.

Kevin Warsh went and talked a lot about the deflationary effect of AI.

And I actually think we all talk about the SaaSpocalypse as if it's this sort of like isolated business phenomenon where these SaaS companies are getting blown up.

I think another lens to look at what's going on is the incredible deflation of how much it costs to successfully run a business

and you don't have to pay a premium price for SaaS products anymore.

Meaning that that piece of the business can suddenly get much cheaper.

That AI is delivering on its deflationary promise.

I'll just say one thing about what Warch said.

Warch spoke a lot about the deflationary evolution promised by AI and that he expects that it will drive productivity growth like we've never seen before.

But he said, I don't know what that's going to do to the job market, that there may be a dislocation between that productivity growth being realized and how the labor markets are going to be able to respond to those things.

But fundamentally, he's saying that we're going to see economic deflation.

The problem with economic deflation is that when it occurs, it means some business is seeing their revenue go down.

And if that segment of the economy is levered, if they have debt sitting on top of that piece of the economy where it's supposed to always, always, always grow, like a SaaS company's top line is always supposed to grow, suddenly that debt gets impaired and that can have an economic ripple effect that is adverse.