ACQ2 by Acquired — How is AI Different Than Other Technology Waves? (with Bret Taylor & Clay Bavor) August 18, 2025

Episode Overview

In this thought-provoking ACQ2 episode, hosts Ben Thompson and David Rosenthal dive deep with legendary technologists and co-founders of Sierra, Bret Taylor and Clay Bavor. They explore a central question: Is AI just the next wave of software, or does it represent a fundamentally different technological shift? The conversation weaves through the evolution of technology adoption, AI’s impact on business models and human identity, agent-based interfaces, and how leadership, company building, and even startup culture are adapting to the transformational nature of AI.

Key Discussion Points & Insights

1. The Evolution of Tech Waves and AI’s Place

• Tech Layering and Acceleration

  • AI rides on decades of cumulative infrastructure—PCs, internet, smartphones—resulting in unprecedented adoption speed.
  • Bret Taylor (06:00): “With AI... when you make something like ChatGPT, you can go to 0 to 100 million users, faster than any technology in history, because of the other technologies.”

• The Limits of Rapid Adoption

  • Distribution and awareness cycles are collapsing; S-curves are steeper.
  • AI’s compounding on top of previous waves enables near-instant awareness and distribution.

• Dot-com Comparisons and Value Creation

  • Most people remember failures of the dot-com era, but lasting value eventually dwarfed the hype.
  • Bret Taylor (10:09): “If you look at the S&P 500 now… almost all of the exuberance and hype was totally warranted. And it in fact did change commerce in fundamental ways.”

2. Shifting Lexicon and the Rise of Agents

• AI Jargon and What Will Stick

  • The evolution from ML to AI to GenAI, now “agents.”
  • Bret Taylor (04:03): “My hypothesis is actually the word agent will stick. ...AI has agents. I think it’s going to stick for that reason, a little bit like app.”

• What Sierra Builds

  • Sierra creates customer-facing AI agents—planned to be more important than apps or websites.
  • “We help companies build their own customer facing AI agents for all parts of their customer experience." — Clay Bavor (04:55)

3. Second-Order Effects: AI Agents and the Internet Economy

• Agents Interacting on Behalf of Users

  • Anticipating a future where agents (not just users) are decision-makers in online transactions.
  • What does it mean for advertising, demand generation, and brand differentiation?
  • Bret Taylor (14:04): “If personal agents become a thing, how does that impact that entire funnel? ...Are you going to be generating demand for people, or for their agents?”

• Betting on the Tipping Point

  • Clay and Bret have an internal bet on when the majority of agent-to-agent interactions will outnumber human-to-agent contacts.

4. Practical Applications: Sierra’s Impact

• Resolution Automation Success Stories

  • AI agents solving complex customer service issues (from satellite resets to warranty claims), entirely autonomously.
  • Clay Bavor (16:48): "These agents ... not only answer questions, but do things like...send a satellite signal from space to refresh the encryption keys on your car.”

• Business Model Innovation: Outcome-Based Pricing

  • Sierra charges only when agents resolve a task (“resolution-based pricing”), rejecting traditional seat or consumption-based SaaS models.
  • This model aligns incentives and changes the vendor/customer dynamic.
  • Clay Bavor (42:52): “We only charge our customers when their agent successfully completes the task.”
  • Bret Taylor (44:43): “If the AI agent is supposed to make a sale, it should be paid a commission. If it doesn't do anything valuable, you shouldn’t pay for it.”

5. Is AI “Just Software” or a Societal Shift?

• From Scarcity to Plenitude: The Core Transformation

  • Past waves (energy, food) made scarce goods plentiful. AI is making intelligence plentiful.
  • Bret Taylor (21:29): “I think we have gone through transitions as significant as this in the past...but I think it’s very significant. I don’t think it’s just software.”
  • Raises the issue of identity when human intelligence is commoditized.

• Societal Challenges & Transition Difficulties

  • The transition will be awkward, possibly slow; cultural, regulatory, and sectoral adoption rates will vary.
  • Bret Taylor (25:27): “The technology is transformational...but I think probably it will impact society on a more measured pace...”

• AI in Practice: Talent, Productivity, and Company Culture

  • Even AI-centric companies are hiring aggressively, but using AI for leverage at every level.
  • Shift toward treating the entire business as a “machine to produce happy customers.”
  • Bret Taylor (28:08): “Don’t fix the code. Fix the context that [the AI] had that produced the bad code.”

6. AI’s Changing Economic and Strategic Landscape

• AI Stack and Startup Strategy

  • Bret outlines three categories: Foundation/Frontier Model companies, Tooling/Infra Layer, and Applied AI (like Sierra).
  • Argues that most should not build their own large foundation models due to cost and rapid asset depreciation.
  • Bret Taylor (32:00): “I could not disagree more strongly with [the idea that] every applied AI company needs to build their own foundational model.”

• AI Infrastructure: The New Barrier to Entry

  • Massive capital expenditures are necessary, making asset-heavy business models the new norm for hyperscalers.
  • Clay Bavor (37:36): “The capital outlay for building a data center that can train these multi trillion parameter count models is just enormous.”

• Durability and the Tech Company Lifecycle

  • Barriers to entry go up, but the half-life of big tech companies remains short unless they constantly adapt.

7. Leadership, Company Building, and the Future of Work

• Leading in the Age of AI

  • Smaller company scale allows for hands-on leadership and rapid deployment of innovations.
  • Both emphasize a culture of “using AI to do your job differently”—and being a “poster child” for automation internally.
  • Bret Taylor (61:28): “We can’t succeed as a company if we’re not the poster child for automation in everything that we do.”

• Reflections on Partnership and Career

  • Clay and Bret shared their long history, Google origins, and deep belief in co-founding as a path to resilience.
  • Bret Taylor (65:46): “We just had the premise: this technology is going to change everything. It’s going to create a bunch of business opportunities. Let’s go ride into the darkness and figure it out later.”

Notable Quotes & Memorable Moments

• On Jargon and Agents

  • Bret Taylor (04:03): “My hypothesis is actually the word agent will stick. ...AI has agents. I think it’s going to stick for that reason, a little bit like app.”

• On Autonomy

  • Bret Taylor (17:22): “You're talking to an AI that's talking to a satellite that's sending something to your car. Like, no people involved…It's like science fiction three years ago.”

• On the Human Impact

  • Bret Taylor (21:29): “...Intelligence has gone from something scarce to something plentiful...It's very hard to imagine. Prior to modern farming, most people spent a lot of their time thinking about food. ...Now, that's not a central part of their day. I think we have gone through transitions as significant as this.”

• On Building Applied AI Companies

  • Bret Taylor (32:00): “I could not disagree more strongly with [the idea that] every applied AI company needs to build their own foundational model...Foundation models are the fastest deteriorating asset of all time.”

• On Pricing Innovation

  • Clay Bavor (42:49): “We only charge our customers when their agent successfully completes the task that it set out to do.”

• On Leadership in AI Startups

  • Clay Bavor (58:02): “...a level of being in the details. ...When you’re operating at the intersection between what is possible and what is not yet, this kind of zone of the barely doable, it’s super important...you be able to control your own technology destiny.”

• On Partnership

  • Bret Taylor (65:46): “I’m just a huge believer in the power of partnership. ...It is so nice to have a partner to do it with.”

Timestamps for Key Segments

• AI lexicon, history, and what will stick: 03:06 – 05:39
• Why “agent” is the enduring noun for AI: 04:03 – 05:34
• Sierra’s vision and the agent revolution: 04:55 – 06:18
• Tech layering and acceleration of adoption: 06:00 – 09:23
• Dot-com comparisons, hype vs. value: 10:07 – 11:35
• Impact of agents on the online economy: 13:07 – 15:41
• Outcome-based pricing and aligning incentives with customers: 41:34 – 46:43
• Is AI just software or a societal shift?: 21:29 – 26:27
• Building AI startups—stack, talent, and strategy: 30:04 – 37:36
• Leadership, culture, and using AI internally: 61:21 – 63:37
• Reflections on partnership and tech careers: 63:37 – 69:37

Overall Tone

Intelligent, self-reflective, and occasionally playful—Bret and Clay blend deep technical insight with warmth, humility, and a strong sense of both history and the potential for future upheaval. The conversation is candid, filled with illustrative stories, “you had to be there” startup lore, and thoughtful warnings about prediction in the face of rapid change.

For Listeners Who Haven't Tuned In

If you’re wrestling with questions about whether AI is truly a paradigm shift or just faster, better software, this episode offers a rare window into the minds shaping its frontier. The discussion moves deftly between historical context, economic implications, humans’ place in an age of AI, leadership lessons for today’s builders, and the very real complexities of deciding what to build—and how to charge for it—when the ground is shifting under everyone’s feet.