In early February, Anthropic released some plugins for its AI chatbot Claude.
These plugins were for legal, financial and other white-collar work.
There wasn’t even a major announcement, so the market response was pretty muted.
Hahahahaha, no I’m kidding. Everyone is so on edge about AI tools replacing the work of professional services that a few news blurbs about the plugins led to the stock wipeout of $285B in market cap in a single day, per Bloomberg:
Then, earlier this week, a $2B fintech startup called Altruist released an AI tax-planning tool…and that led to a multi-billion sell-off for wealth management firms including Raymond James (down 8.8%), Charles Schwab (down 7.4%) and LPL Financial Holdings (down 8.3%).
These paper-handed reactions capped off a broader B2B SaaS sell-off that commentators are calling SaaS-mageddon or SaaS-pocalypse (inspired by this portmanteau, I’m currently writing a script called Saas-pocalypse Now, about a young Marine who travels up the Mekong Delta to get a 30% discount on next year’s license renewal).
Listed B2B SaaS firms have lost $1T since start of the year. This table of popular tickers is two weeks old but delivers the same point:
Some of the largest software firms — Salesforce ($173B), SAP ($210B), ServiceNow ($100B) — are trading like NFTs.
What happens to SaaS firms in a world when any software tool can be coded up by an AI agent in a fraction of the time and cost?
The SaaS-ma-kick-in-the-nuts has been so wild that people are asking if $3T Microsoft will be OK…which is a bit much. As Tae Kim points out, the sell-off was a misreading of Claude tool’s capability: the plugins weren’t replacing existing software, but actually utilizing them.
Having said that, the coding models (OpenAI’s Codex, Anthropic’s Claude Code) are advancing so fast that it’s worth a conversation. The leaders at Anthropic and OpenAI have straight up said that 90%+ of their code is now created by an AI agent. Spotify announced its team hasn’t written a line of coe since December (FYI: read this piece from Dean Ball on how these AI labs could have 100,000+ AI employees by the end of the year).
Here is my current thinking based on reading the thinking of people much smarter than me:
Let’s unpack these ideas by focusing on one startup: DocuSign, everyone’s favourite legal document signing tool that somehow employs 7,000 people.
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A popular meme in tech social media is, “How does DocuSign have [impossibly large number] of employees?”
It’s just a digital signature tool, right? Hell, they keep your autograph and initials on file and all you have to do is click the box. That’s it? Why can’t I just copy and paste a template online in Word?
I ask these questions every time I’m signing a DocuSign PDF that I didn’t read and hoped that I wasn’t giving away anything important in my life (TBD).
The meme was really funny when DocuSign was worth ~$60B on $1.8B of sales during peak pandemic madness in 2021. It’s now worth a still respectable $10B, but on a much more reasonable multiple on $3B of sales (it went from 33x to 3x trailing-twelve-month sales).
Sufficiently curious about how a software company could employ (maybe) more people than the American federal government, I finally did some digging a few months ago.
I read through financial filings, some analyst reports and forum posts.
Man, was I wrong because DocuSign having 7,000 employees is very reasonable.
My favourite explainer comes from a post in the r/WebDev subreddit. The post has since been deleted but I got a screenshot and let’s go through a fun thought experiment:
I don’t think anyone is vibe coding a DocuSign product and gaining market share by undercutting current prices. Trust me, I tried for a solid 47 minutes. No bueno.
Nor will any serious company build an internal replacement. A 72-hour Claude Code session won’t be able to handle the required 99.9999999% uptime and semi-network effect with all the people that have a DocuSign account.
If none of those numbers convince you of DocuSign’s mission critical moat, allow me to share this glorious qualitative rant from the aforementioned Redditor:
So you’ve got to have multiple international teams of [System Admins] managing data centers all over the world. Except you have to be able to lose one of those datacenters without losing all the signatures stored there. So you need backups. And you need backups for those backups. And you need just-in-case code already written for if that data center goes offline for 5 hours.
And you need HR for those employees. And if you aren’t managing your own centers, you need business [execs to] negotiate contracts with whatever company you outsource to. And you need SO MANY f*cking Zendesk drones handling the infinite influx of people who can’t use the app or used the app wrong or got themselves in a weird situation.
Or sh*t man, what if something VERY IMPORTANT was signed, but the person who NEEDS THAT SIGNATURE RIGHT NOW forgot his password? Like really forgot? Lost access to his email?
He can prove that he was the owner of that real estate conglomerate during those years. He can pull up the proper legal paperwork. But you need a team of trained legal professionals able to sort through it and make sure he is who he says he is.
What happens when your signed documents are needed for a court case? What happens when a judge has a warrant for them? What public-facing service are you going to build and maintain for judges in… oh yeah, every country in the world, using wildly different legal structures.
And they all need access to… potentially thousands of signatures all at the same time.
Nothing. Nothing at “global standard” scale, is simple. You’re looking at the face of it. There’s a monster underneath. Always is.
As fate would have it, DocuSign CEO Allan Thygesen — a former top Google marketing exec — went on The Decoder podcast a few weeks ago and talked at length about these topics.
A month before ChatGPT launched. He’s been competing only in the generative AI world and believes it is much more of an opportunity for DocuSign…rather than a threat.
Even if a legitimate AI-native competitor was launched, DocuSign is sitting on juicy proprietary dataset: 150 million private consented agreements with 10 million being added every month (this legal data set is “orders of magnitude bigger than anybody else”).
DocuSign is using this data trove to help customers create legal documents and find value that may have otherwise slipped through the cracks:
[Customers always have a template] for something really complex (like an M&A agreement) or something really simple (like an NDA) or anything in between. [It] could be a master service agreement between company and another company, or a license agreement. But they always have a template.
Then, they tailor it. Some of that is done sort of legal tailoring, right? [They’re] going to have different limitation of liability. [They] want to have a different payment term. Some of it is just mass customization. [They] want to get the data about [customers and previous negotiations].
Then, they want that to flow automatically from whatever the system of record is. Could be Salesforce. Could be Workday. Could be SAP. And [they] want to populate that into the agreement. […]
The other piece is [that DocuSign will] take AI and…extract data out of the agreements to run [the] business better. That’s something that was conceptually possible…but it was just too heavy and hard to do with legacy LLMs. Now, [DocuSign] can do that in a completely automated way.
So we can go [to customers] and say “Hey, you have 5,000 agreements with me. Would you like to know what’s in them? Let me highlight how these agreements deviate from agreements with peers. You know, your company X is coming up for renewal in 90 days. How can [you review or improve] that?”
Due to the mission-critical (and, errr, legal ramifications) of the work, DocuSign creates all of its workflows to keep humans in the loop:
We have a whole queuing system where a sales rep or a procurement rep can trigger the sending of documents for legal. It can get an automatic first review.
Then it gets assigned to a lawyer. The lawyer does a quick edit. Everyone has real time status.
That’s an example of reimagining the legal workflow, which today is totally asynchronous emails, unpredictable and non-transparent. […]
Of course, we benchmark you versus your existing templates or playbooks, as they’re often called inside of companies. And highlight things that deviate from that. And this is true both for agreements that the company prepares themselves and for third-party agreements that they receive from others. Because, of course, most companies are takers of terms from other companies, right? […]
We also don’t fully automate flows. We deliberately put humans in the loop at key decision points. And I think that will persist for a very long time.
The biggest AI challenge may be the new customer habit of asking ChatGPT or Claude or Gemini to query legal documents. Not because it’s an alternative to DocuSign. But because DocuSign has had to create a chat tool.
Thygesen and his team think this is a valuable feature, especially as they can customize LLM models with the >150 million consented agreements.
However, he acknowledges the models can never be 100% accurate and that’s a risk if the customers believe otherwise and end up making a costly uninformed decision based on the chat tool.
Now, I’m not saying DocuSign is perfect. I’m not saying DocuSign can’t improve. I’m not saying anything about what the proper DocuSign valuation should be. I’m not even saying DocuSign couldn’t run a bit leaner.
I’m just saying, “DocuSign, I’m sorry for laughing at all those Why Does DocuSign Have 7,000 Employees memes. It makes a lot of sense and a one-person AI startup isn’t going to replace you.”
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Going back to my earlier bullet points about AI and SaaS, DocuSign serves a mission-critical task, owns proprietary data and establishes tight customer integrations while taking on legal and regulatory risk.
DocuSign is a good example of this reality: most large firms (>1,000 employees) simply don’t want to waste resources building and maintaining random tools that aren’t their core competency.
On that note, a recent piece from The Economist shared this striking chart.
Over the past 40 years, corporate spend on software to build internal tools has fallen from ~50% to ~15% of budgets. That means the other 85% is third-party custom and pre-packaged software.
Forget AI. There’s literally been free open-source software alternative for decades and people are still paying for third-party software.
Here’s a bonkers stat. Are you sitting down? According to Okta, the average large company in America uses to 350-400 SaaS apps.
Dafuq?!?!?!??!
I fell out of my seat when I heard that stat. Hence, the warning.
The trend to spend on third-party (and non-core) software has only gone in one direction. I don’t think it’ll reverse but change is coming.
Here are some interesting projections on how AI agents will change the software industry:
Finally, David Ondrej makes the case that SaaS Firms Primarily In The UX Layer Will Get Clapped In An AI Agent World:
If 10 AI agents can do the work of 100 employees, you don’t need 100 Salesforce seats anymore. AI doesn’t kill the software directly. It kills the headcount that uses the software. Which kills the per-seat revenue model. Which kills the business.
Right now, value is getting sucked upward into the agent layer and downward into the data layer.
Another point to consider is that the diffusion of technology takes a long time and it often has nothing to do with the quality of the technology itself.
A nuclear viral article from AI startup founder Matt Shumer wrote an essay comparing the AI agent takeoff to COVID in February 2020. As in, most people underestimated the severity of the virus and how fast it would reshape the world.
Shumer extrapolates the recent improvements in Codex and Claude to mass white-collar joblessness in a few years.
In a response to that piece, David Oks points how many human bottlenecks slow tech adoption:
People frequently underrate how inefficient things are in practically any domain, and how frequently these inefficiencies are reducible to bottlenecks caused by humans being human. Laws and regulations are obvious bottlenecks.
But so are company cultures, and tacit local knowledge, and personal rivalries, and professional norms, and office politics, and national politics, and ossified hierarchies, and bureaucratic rigidities, and the human preference to be with other humans, and the human preference to be with particular humans over others, and the human love of narrative and branding, and the fickle nature of human preferences and tastes, and the severely limited nature of human comprehension.
And the biggest bottleneck is simply the human resistance to change: the fact that people don’t like shifting what they’re doing.
Software isn’t going anywhere. But the explosion of AI coding agents will change workflows, business models and source of value capture…and human-centric bottlenecks means it won’t happen overnight.
However long it take, DocuSign’s 4,500,000 employees will have the contracts ready for our new software future.
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Some other wild posts (including 21 Savage rolling up to the Super Bowl with Kylie Jenner):
Speaking of Jony Ive, his firm LoveFrom partnered with Ferrari to design the steering wheel, dashboard and interior for the luxury carmaker’s new EV SUV (Luce).
The vehicle’s body won’t be unveiled until later this year (which gives me just enough time to YOLO some World Cup and midterm election prediction market bets to afford this bad boy).
The design idea was to blend the tactile and digital controls.
My basic read of the timeline was that a lot of techy folk loved it but car aficionados were underwhelmed.
Here’s a representative post from Hacker News:
In case anyone was wondering what the Apple Car would have looked like inside, it would have been roughly this.
As an Apple Car™ it makes sense, but as a Ferrari it’s incredibly soulless and oversimplified. This Ive design aesthetic (Dieter Rams’ aesthetic really) is fine on consumer electronics where you want the device to disappear and give way to the display, but on something as emotional as a vehicle (Ferrari especially), this design falls flat.
I do hope some of the design details work their way through the industry (e.g. using glass instead of gloss black plastic, convex glass to add depth to digital gauges), but I hope the rest of it stays as a one-off experiment demonstrating the hubris and one-dimensionality of a top designer.
LoveFrom is reportedly charging up to $200m a year for top-tier clients and has also worked with Airbnb, Moncler, Christie’s Auction House, King Charles III on his Coronation Emblem and OpenAI (the startup acquired Jony’s separate AI hardware startup “io” for $6B in equity last year).
Ive named the firm — which employs many former Apple colleagues — LoveFrom in honor of Steve Jobs, who said one of the ways to express appreciation for humanity was “the acting of making something with a great deal of care and love”, per NYT.
Jordan Golson has more details on the LoveFrom and Ferrari partnership:
Before LoveFrom drew a single line, they spent six months on research. They presented Ferrari with four books — substantial, rigorous volumes printed in both Italian and English, left page and right page, covering philosophy, design history, the cultural significance of Ferrari within Italy, the relationship between human attention and physical interaction. These weren’t mood boards. They were arguments — about why certain assumptions held, why others didn’t and what first principles should govern the design of a car interior in 2026.
I’m not saying these books are worth $200m but they look real baller.
As for Ive’s former employer, Apple (in)famously shuttered its car project in 2024 after spending $10B over 10 years.
When Apple shut down its car project in 2024, it had spent $10B+ over 10 years.
Jony Ive created a concept that looked like a “European minivan such as the Fiat Multipla 600”.
The NYT has another piece recounts Ive demo-ing the vehicle for Tim Cook:
“One day, in the fall of 2015, Mr. Ive and Mr. Cook met at the project’s headquarters in Sunnyvale, Calif., for a demonstration of how the car might work. The two men sank into the seats of a cabinlike interior. Outside, a voice actor read from a script of what Siri would say as the men zoomed down the road in the imaginary car. Mr. Ive asked Siri what restaurant they passed and the actor read an answer, said two people familiar with the demonstration. But by 2016, it was clear that the car effort was in trouble.”
One reason Tim Cook started Project Titan — which some internally joked about as Project “Titanic” — was because the Watch was just completed and engineers were “restless” looking for the next challenge.
The company went back and forth on whether to make an EV (eg. Tesla) or a self-driving car (eg Waymo).
Apple apparently briefly spoke to Elon about buying Tesla (~$40B market cap at the time and Apple has a $155B cash pile).
On a recent podcast, former senior Apple exec Tony Fadell — who worked with Steve Jobs to create the iPod — said that Apple’s biggest recent fumble was the Car project.
Fadell says it was a mistake trying a create a 4-wheel vehicle, instead of lightweight 2 or 3-wheeler.
Apple had “redefined” categories (eg. desktop publishing with Mac, music with iPod)…so it should have redefined mobility:
When Steve Jobs and I would walk around the Apple campus back in 2008-9, we talked about the Apple Car. What would it be and he was really like ‘we need to do [something as] revolutionary as the Volkswagen (the people’s car).’ What’s the next-generation people’s car? What’s going to be used in the cities? […]
Now you’re seeing the [two-seater] Fiat Topolino. You see the [two-seat quadricycle] Twizy. You see all these different things [in cities]. I live in Europe, right? So, you see all this stuff running around and they’re selling out like crazy.” […]
Don’t make a four-wheel car that competes with everybody else and the Chinese. How would you change mobility in two, in three, and lightweight four-wheel vehicles? How do you do that? [Vehicles that 14-year-old kids] can use.
I think the failed car project is probably the biggest feather in the “Apple has lost its design mojo” cap. The Apple Vision Pro actually shipped and is a technical marvel…and the AI issues are software-related (…also looks like Apple may finally fix Siri with a Gemini partnership).
But man, Apple really should have made some vehicle. A large TAM and right in its wheelhouse. Apple Fanbois were already buying special wheels for their Pro Macs at $700. They woulda forked over for a whip.
In China, Xiaomi started with smartphones and home electronics. Then, its CEO Lei Jun (who is obsessed with Steve Jobs) decided he wanted to make an EV, which are basically smartphones on wheels. Well, he did and Marque Brownlee says the Xiaomi SUV7 is a luxury-calibre EV selling for only $42k.
It’s worth noting that Jobs looked at buying GM during the 2008 financial crisis when the carmaker neared bankruptcy. Another what if. But obviously nothing materialized…and this is why Ive’s partnership with Ferrari is as close as we’ll get to an Apple Car.
His design has a lot of buttons and clicking sounds…which is surprisingly different from Apple’s minimalist glory days.
While we’re on the topic of Apple glory days…
Speaking of Apple, when the iPhone 17 came out in September, I did the standard “hate on the new iPhone for guaranteed engagement” thing.
Turns out the joke is entirely on me.
The iPhone 17 sales have been absolutely gangbusters with its slightly new form factor…and Cosmic Orange has been a massssssssive hit.
In its latest Q4 filings, Apple saw iPhone sales in China jump +38% YoY to a record $26B (nearly 1/4 of Apple’s total $102B).
Why Cosmic Orange? Well, it looks like Hermès orange and the luxury giant is huge in China (the country accounting for 40%+ of the luxury giant’s sales).
iPhones are a total fashion item. in China That’s why market response to the GIANT sales figures were meh. Apple barely moved on the news.
What if the Cosmic Orange is a little less Cosmic-y next year and the form factor is too similar. China sales could go kaput.
Anyways, Tim Cook, if you’re reading this email…I have an idea of how to turn around Apple Vision Pro sales:
