Dylan Patel

When you look at all the past technological transitions, whether it be railroads or the internet or replaceable parts and drusterization, the cloud, all of these things, each revolution has gotten much faster in the time it goes from technology discover to ramp and pervasiveness through the economy.

Many folks who have been on Dworkesh's podcast believe this is sort of the final technological revolution or transition.

And this time is very, very different.

And at least so far in the markets, it's sort of, you know, in three years, we've already skyrocketed to, you know, hyperscalers are doing $500 billion of CapEx next year, which is a scale that's unmatched to prior revolutions in terms of speed.

And the end state seems to be quite different.

How do you...

Your framing of this seems quite different than sort of the, I would say, the AI bro who is quite, you know, AGI is coming and, you know, I'd like to understand that more.

How much?

So Microsoft historically has been perhaps the greatest software company, the largest software-as-a-service company.

You've gone through a transition in the past where you used to sell Windows licenses and disks of Windows or Microsoft, and now you sell subscriptions to 365.

As we go from sort of that transition to where your business is today, there's also a transition going after that, right?

Software as a service, incredibly low incremental cost per user.

There's a lot of R&D.

There's a lot of customer acquisition costs.

This is why, not Microsoft, but the SaaS companies have underperformed massively in the markets because the cogs of AI is just so high and that just completely breaks how these business models work.

How do you as a...

as perhaps the greatest software company, software as a service company, transition Microsoft to this new age where COGS matters a lot and the incremental cost per users is different, right?

Because right now you're charging, hey, it's 20 bucks for a co-pilot.

The key point here is that GitHub will keep growing irregardless of whose coding agent wins, but that market only grows at call it 10, 15, 20 percent, which is way above GDP.

It's a great compounder, but these AI coding agents have grown from call it $500 million run rate at the end of last year, which was basically just GitHub Copilot to now the current run rate across GitHub Copilot, Cloud Code, Cursor,