Harvey's Margin Whiplash, Human Powered Agents, McLaren Rebrand, Insects > Humans? | Ben Thompson, Gagan Biyani, Alex Ratner, Peter Kalogiannis, Daniel Petkevich

John Coogan (0:00)

You're watchin TBPN.

John Coogan (0:02)

Today is Tuesday, September 22nd, 2026

We're live from the TBPN altar down in the Temple of Technology, the Forks of Finance. Let me tell you about ramp.com. Little teaser, that's foreshadowed. When you see me wear the yellow suit, I tell you about ramp. Time is money, save both, easy use corporate cards, bill pay, accounting and a whole lot more, all in one place. Jordi, his hat game has evolved. He's now wearing the fedora with the black stone cap on top, which I assume can only mean one thing. It means that your top priority is safety in-

Jordi Hays (0:35)

Financial markets.

John Coogan (0:36)

Financial markets and the financialization-

Jordi Hays (0:39)

But also my safety as well.

John Coogan (0:41)

Oh, you care about both. I care about both. You want to accelerate the AI buildout safely.

Jordi Hays (0:45)

Safely.

John Coogan (0:45)

Yes. I thought it was you're going to blend the two and you're like, look, I want insane private credit deals, trillion dollars of capital to flow into the AI buildout, but I wanted to do it safely.

Jordi Hays (1:00)

I want to prioritize safety on the whole frontier.

John Coogan (1:04)

Okay.

Jordi Hays (1:05)

Safety around the models.

John Coogan (1:06)

The capital markets frontier? Safety and financial. In the capital markets. Got it. Okay. Okay. I'm seeing where you get there. Well, there's no safer place to participate in the capital markets than on the New York Stock Exchange. Want to change the world? Raise capital at the New York Stock Exchange. Just do it. Stop making excuses.

Mabel. Ridiculous.

Anyway, I got some Harvey takes. Should we run through those? You want to do Harvey first?

People are taking shots at Harvey. I won't stand for it. I won't stand for it. No, I like Harvey. We've talked to some lawyers that use Harvey. Seems like a great product. We also had LaGora on the show just last week. Had a good time with them. Seems like a very competitive space. But the headline that grabbed attention actually came from Bloomberg reporting. But then this company called the Redline HQ actually did a pull quote on that, got the reporting, repurposed it. So you don't even have to go to Bloomberg. We'll talk about that later too. No one's going to news websites anymore. But they say, track changes. Harvey's gross margin fell from about 50% to negative 50% by June as agent token use spiked 20-fold on rented OpenAI and Anthropic Models Bloomberg reports. And so it seems really bad. You definitely don't want negative gross margins as a software company, as a tech company.

Jordi Hays (2:33)

As any company.

John Coogan (2:34)

Really, as any company, actually, you don't want to be selling a dollar for 50 cents. And that's exactly what they did in June, basically. That's what they were doing. They were selling tokens at negative gross margins. Not good. But there's way more details in the actual reporting. So you should go read the Bloomberg report, subscribe and actually read it because there's way more details. So the first thing is like cost did explode.

But it was on the back of more product usage, which is good. They're growing ARR. We'll get into that. And token consumption increased 20x this year. So basically, they are feeling the reasoning era, the agentic era. One job, one process in Harvey is generating a lot more tokens.

Jordi Hays (3:16)

Had seat-based pricing. And then AI got a lot better. So every seat was just using it way more. Very simple.

John Coogan (3:22)

It's not just using it more. It's that the lawyer might be saying the exact same thing as they did a year ago. They might say, review this. But instead of one-shotting it with no reasoning, they went to reasoning, which generated way more tokens. And then they went to agents. They were like, okay, it's actually gonna fan out, look at everything across your firm, all the other records that you have, all your different policies and MD files. Everything that you have is gonna be worked through this agent, and so you're generating way more tokens. So that created negative gross margins. But the good news is that they're already back to positive gross margins, which is in the Bloomberg article. Kind of criminal not to repurpose that, because it really makes it look like they are running at negative gross margins. They had a negative 50% gross margin in June, but they are back to positive gross margins. They changed their model usage, of course. There's a whole bunch of models that are cheaper and better for certain things, and they actually fine-tuned an open weight model. So they did post-training on an open weight model, and they're calling it Harvey Tenet. And there's some interesting details there. I want to debate with you on the value of that, where that goes.