Dialogue. Will AI Destroy the Software Business Model?

Alex (0:06)

Welcome to The Synopsis, a Business Investing Podcast. Today, we're joined by none other than Drew Cohen, and we are talking about, I'm not even going to complain about it this week because I'm actually excited. We're talking AI software. Drew wrote a very long, extensive, well thought out piece for Speedwell Research, which is really about this AI software revolution. I think we've been talking about it on and off, but this is kind of his manifesto about everything his thoughts are, AI and software. We can say he's already changed his opinion about some things in this report, which we'll get to.

I think this is a funny one, not a funny one, but this is going to be such an evolving topic. And I think Speedwell, the foundation of the research that Drew writes is normally very longevity focused. We're writing about LVMH, we're writing about Constellation Software, Copart, I'd say like real stalwarts companies that we think will be around for a long time. And then the reports are going to be very relevant for quite a while. This AI software one might be your most periodic piece. We'll see. I think we're going to find out whether this piece is right or wrong very quickly here in the next couple of years. And Drew, it's a little intimidating because everyone's going to have your thoughts there for the record on what this was, whether you're right or wrong. There's going to be no no hiding here.

Drew Cohen (1:17)

Yeah, I really was kind of resistant to the idea of writing topical things. And that's why with all the other research we've done, they're all in-depth business deep dives. And it's easier to do that in some respect because you can write a lot about the business and a lot doesn't really change quarter to quarter.

Everything from the business history, how they're building it, the opportunity they're going after. I still regularly sell reports that are several years old. And I still think they add a lot of value, even though they are kind of old, I think they're evergreen still and very relevant. I don't think that's going to necessarily be the case with this report. This is the first thematic that I've ever written. I don't know that I want to write many more in the future this way.

Because it does become very speculative very quickly. And I was realizing that more and more as I was writing things.

It was very interesting though to do. And I think it could still provide a lot of value, because you're thinking about things in a different way. And that could still help an investor think about how this could unfold. Or at the very least, you could see how much uncertainty there is. And that alone is informational value. So there's still value in it. And I still like the report. But you're right, there are things that I'm already trying to think through. And maybe some things have kind of changed. But I think some of the framing of it in the overall thinking, in kind of some of the conclusions I made, I still think are at least my latest thinking on this. So yeah, we'll get into all of that.

Alex (2:41)

Yeah, and you know what I like about this report, which is I think it's not a very first level thought process, right? Because I think with the way that the markets reacted to the AI, and I think it is becoming a little more discerning as time goes on. But I think the initial reaction was, shoot all the software companies. AI is going to ruin every software company. There's going to be a whole new paradigm.

We're going to have VibeCode, we're going to all these software companies. I put hundreds of thousands of software engineering hours, billions of dollars of R&D. This is all going to be duplicated and easily matched with the advent of AI, and whether Clodge is going to roll out a product and crush a vertical or something of that nature.

This was kind of the, I think the first idea of the market. I think you did a great job here of delineating what actually is going to happen. And I think that you and I have on some of these previous calls, I've kind of taken that stance of, well, of course, this company is going to die. I think Intuit was the one I first said, it was like, of course, Intuit is going to be done. I mean, accounts are done, everyone's done. I mean, QuickBooks, well, who would need that? And then we kind of started pushing back and, okay, well, how would AI, how is Clodge going to categorize all your expenses and review them and do all these things? I was like, well, I guess they already have smart matching on QuickBooks. They do kind of have these categorized things. I guess Clodge could, and as I was starting to think through it, it became more complicated for me to understand actually how an AI platform would disrupt what is already a very inexpensive and good software.