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KP Unpacked
KP Unpacked explores the biggest ideas in AEC, AI, and innovation, unpacking the trends, technology, discussions, and strategies shaping the built environment and beyond.
KP Unpacked
Paradox Is Your Moat
The #1 podcast in AEC.
In this episode, KP Reddy and Nick Durham unpack why defensibility today looks less like patents and more like paradoxical thinking, and why the smartest move for AI “wrappers” is to act like a services firm that sells results, not features.
5 Big Ideas
- Wrappers = Services Business: If you’re building an LLM wrapper, stop pitching IP. Sell industry outcomes, deliver faster/cheaper with your toolset, and price like pros.
- Moat = Paradoxical Thinking: Your edge isn’t secret code. It’s a founder’s contrarian judgment and speed. Nobody can clone that.
- Guard Your Info Rights: Corporates as investors? Kill board seats/observers and information rights. Money is cheap; data is priceless.
- Monopoly Myths in AEC: Software can show power-law effects; services don’t. Fragmented, regulated markets blunt “winner-take-all” dreams.
- Franchise the Customer: Wild model: sell market exclusivity to be your customer, capture scarcity up front while keeping product margins.
If this made you rethink your go-to-market, hit follow and send this to the one founder who needs tougher advice.
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Hope to see you there!
All right.
Speaker 2:Yeah, we're back, we're back. I've been signed to a contract extension week three. Let's start with some small talk. What's going on in the Bay Area?
Speaker 1:Frank Lozaro filled in for you last week. Oh did he? How did he do? He was okay. He wasn't that great. He was okay Hopefully he doesn't listen to the podcast. Hopefully he's not listening to that we love you, Frank.
Speaker 2:Yeah, small talk. What's going on in the Bay Area? What's new? What's everyone talking about?
Speaker 1:A lot coming up. We've got SF Tech Week coming up. You know, got a SF tech week coming up here soon Okay. Which is kind of fun because a lot, of, a lot of built environment startups actually kind of doing some things. So that'll be fun. But you know, same old, same old. Just had three more meetings today with people building LLM wrappers to solve construction management Okay, with no idea who the customer market is.
Speaker 2:Sounds about right. Can confirm that that is happening?
Speaker 1:Who's your ICP? All of construction, okay.
Speaker 2:Yeah, I did see a post today from someone today about the idea of if you were starting out today, would you build an LLM wrapper, so essentially doing what these founders are doing, or would you build some sort? Versus trying to build a? Build a new model and compete with any? You know foundation models. What's your take on that?
Speaker 1:I don't think there's an issue with building a wrapper right and um, and this founders, one of the founders said today was well, I mean, I was like, so is your technology to compete with open ai or anthropic?
Speaker 1:and like, oh no, like we're not competing with them. I'm like, okay, so you're a rapper. And they're like yep, like okay, cool, and so what's a comparative right? And then they said cursor. I was like, great, so you can outmatch Cursor's revenue growth. And they were like I don't think so. And then like why would I not just invest in Cursor? Then why am I going to invest in you? So I don't think.
Speaker 1:I think the problem with the wrapper it's like some conversations we have about MVPs and this and that I don't think there's anything wrong with any of that. But then you're not being judged on your R&D, like when people talk about OpenAI and Anthropic just did a what a seriesF round from our friends at GC. I mean, it's because they're building really hard stuff, right, they're buying compute, they're building hard stuff, and so the valuation is driven by the r? D and the mode and the ip and all that. So I think when you say I'm building a wrapper, you're building a layer of ip on top of ip, which maybe has value, right. But then this, this shift of as an investor, what we're going to think about is, well, tell me about the market and revenue, and so then it's all about, like revenue growth, right, versus we've built some highly defensible IP. I mean, I don't think we have to get stuck on highly defensible IP and I think if you get unstuck from highly defensible IP, then you're highly going to get to get stuck on. Well, how are you going to get to 100 million in 12 months? And that's when they have they lack. They've spent so much time building tech that they actually haven't spent enough time on the market.
Speaker 1:I really think if I was building a LLM wrapper right now on anything, I would basically be a professional services company. I wouldn't even talk about the tech. I would go out and say, hey, civil engineering firm, we really know civil engineering and we want to help you apply AI to improve your business model. And yeah, you have some tools that you've built, these wrappers or whatever Sure, and that's a differentiator, right. So it's kind of interesting in tech there's such an idea of competitiveness on feature product competitiveness. Yeah.
Speaker 1:And rarely around money, right. So it's usually like, hey, we're head to head with Salesforce, look at our feature matrix, right. But you know, in traditional industries costs matter. So back when I was in the kind of the telecom space, right, we used to go up against systems integrators, ibm, all the big guys right back then. And the reason we were able to do well in telecom is we had some pre-configured APIs into Amdocs and all the prevalent kind of big iron telecom software.
Speaker 1:And so when we showed up and said, hey, we're going to charge you $5 million to do this work, they're like, wow, you're a million dollars cheaper than the last guys. How are you cheaper with all your qualified people? Like, well, we've already pre-built some stuff so we don't have to start from scratch. Those other people don't know your industry. We know the industry. So we've already built connectors to Amdocs and this thing and that thing. We already know how the Lucent 5e switch works and we've already built you know, snmp traps for that. You know, we already knew it, right, we'd already built this stuff. So we're showing up.
Speaker 1:It's like, you know, if a carpenter shows up to do work for you and the first thing they have to do is like create their tools. Let me go build a hammer first and I'm going to hand make all my nails, then I'll be able to frame your house. Yeah Right, that's, that's the difference. And I think some of these wrapper companies should be focused, almost like a consulting company. To say, hey, I already built a tool set Just means I can be cheaper and faster to execute on whatever your problem is.
Speaker 2:Yeah, it's a fascinating thing to think about and I think it actually is relevant to one of the topics that we wanted to get in. Today. We're going to talk about a couple different topics, but on the industry side we've talked about, we wanted to talk about competitive dynamics with corporates and startups, so basically, the services model that you're suggesting. How does a corporate venture capital arm, or even a corporate who's investing in a venture capital firm or investing directly in startups how do they think about and evolve their thinking to meet the current trend that I think AI has really accelerated, which is to do more of the actual services work can do a greater lift of those tasks that you're mentioning?
Speaker 2:So, yeah, I think maybe the broad topic is corporate engagement with startups in 2025 and portfolio in conversations with founders, where you know they're asking like, hey, should I sell to the corporate that you've introduced me to or should I potentially compete with them and try to do more of the actual services work? And I think more and more, both hardware, robotics and even software companies are asking these questions and it's a really interesting question for us as the investor, as their VC. You give, you know, I think, just high quality advice on what to do there, because potentially we're introducing them to their largest potential customer, you know, top 10% in terms of volume of business, that type of size of a customer, and they're asking like, hey, should I go get business from them or should I potentially be more long-term in my thinking and compete directly with them? So how have you had that conversation with founders and overall, on the topic of corporate engagement in this era, when are you leaning today?
Speaker 1:Well, I think there's a couple of things to unpack. One is let's talk about Shadow Ventures when we were talking to LPs about being strategic investors, and why did they invest about being strategic investors, and like, why did they invest? Right, do they invest, you know, multi-billion dollars, companies investing relatively small amounts in a venture fund, you know, for them anyway, meaningful to us, less meaningful to them um, why did they invest? Did they say like, hey, you guys are the top performing, top performing, top quartile venture fund and we'll make more from you than we will in the S&P 500 on a risk adjusted basis, right?
Speaker 2:I don't think we had any of those conversations think there's a single strategic investor that wrote us a check that said hey, we expect you to be, you know, top decile in terms of returns and that's why we're investing with you. It's universally like hey, we know you have great access, we want to learn, we want, we want to get exposure to stuff and the and the you in the markets of where our core operating business sits. We want we don't, we want to know what's happening at the earliest phases of technology development and stay ahead of it. You know I think so a threat, you know. Risk mitigation, learning, understanding where they should go strategically all those are the primary drivers.
Speaker 1:Let's avoid building something that's already in market, like our IT department says this doesn't exist, and maybe you guys say, hey, actually it does exist. I just met a startup doing that. Maybe you should just buy their product right and then also to benefit from the upside right. A lot of our strategics spend a lot of energy helping our founders get to market, improve their product, also to benefit from the upside right. A lot of our strategic spend a lot of energy helping our founders get to market, improve their product, and nobody wants to do anything for free. So now let's say we went to those same LPs like, well, here's what we're doing. We're investing in companies that are gonna compete with you. You should write a check. Is that a positive? Or do they actually say like, well, you know, maybe we should invest more because maybe it's optionality? Right, I'm an investor in coke and pepsi. Do I care who wins? Right?
Speaker 1:I, I got chips on both, yeah yeah, I think that um or would they say like, what the hell, you're investing in companies that are going to disrupt us?
Speaker 2:You know it's. I don't want to help you do that. What are you getting out of?
Speaker 1:your mind, nick, what's going on?
Speaker 2:The reason it's a hard question to answer on if they should be more or less excited is because it's actually why they signed up to invest with us originally.
Speaker 2:Like deep down, they said they wanted to basically be the first to see any disruptive technology that was going to change their core business. And so, let's say, hypothetically, we're putting that right in front of them. It's like, hey, here's the company that is going to potentially beat you and they're going to beat you because they have their operating business, does not have access to, it's completely proprietary. And so, you know, part of me is like they should be excited about that investment because when they get to stay close to it, there could be unique ways for them to leverage it. You know, as a you know licensing partner and channel, at the very least they get information. You know licensing partner and channel, at the very least they get information, you know, through us. Now, from a startup standpoint, the startup you know could be more or less, you know could actually be less excited about our involvement if we're a conduit to, you know, the largest incumbents in the market. Seeing, you know, reading information about what they're doing on the tech side.
Speaker 2:So that's yeah, I think that's maybe a potential adjustment we'd have to make, even selling and pitching the startup on our check. But I think purely from the corporate strategic standpoint, like we're actually checking the box that they originally signed up for. It's maybe just a little uncomfortable when it actually happens.
Speaker 1:Yeah, yeah, and I think it's interesting. You know, when we talk to founders, they talk about negotiating term sheets all the time and a lot of them take corporate venture capital right from some of the big software companies and I'm like you need to kill information? No, they cannot have a board seat. No, they cannot have a board observer seat. And let's kill the information rights clause, regardless of what check size they write. And it's amazing how a lot of founders don't even contemplate like, hey, information rights might be more powerful than the money, right, than the money in many cases.
Speaker 1:And so it was interesting that I was talking to a big corporate this week, probably top three firm in the world Not gonna name names because that would be bragging but talking to their head of innovation and we're talking about something he's like. Well, what if we work with this startup and we take what we learned from them and build a competitive product? I'm like, well, shame on them, right, if a behemoth corporate can out, nimble out, build a startup, that's just like the natural, that's just natural selection, right or no?
Speaker 2:I would think so. Yeah, I think so.
Speaker 1:I would agree with that. So I think they were a little surprised by that. I mean, that's the order of things, right? I mean, come on, you're a big company and you're going to be more nimble and more effective than a 10-person startup. It's hard to believe, and if you are, then kudos to you and shame on them.
Speaker 2:Did they disagree with that assessment? Did they shame on them? Or I mean, were they did they disagree with that assessment? Like where did they argue that they were?
Speaker 1:they could be faster and more nimble I think they were surprised that I didn't want some kind of nda or non-compete or you know they were surprised that I was they were surprised I wasn't much more protectionist about the situation. I'm like no, like whatever man yeah like whatever yeah you know, um the startup.
Speaker 1:If the startup is concerned about sharing something, then they shouldn't share it, right? I mean, like they're not going to give you source code. I mean, come on, like there's certain things that they will not give you, but you know, there's no way to protect knowledge and learning through an NDA. I find it fascinating when people say like, oh, we should execute an NDA. I'm like, are you sharing customer contacts, files, financials, things that I could later use against you in a competitive area? Then sure, we should maybe execute an NDA. But if it's about learning and knowledge, there is no NDA in the world that can protect your ability to learn.
Speaker 2:And there's no from a defensibility standpoint. We get asked a lot about moats and do patents offer real protection nowadays? What does real defensibility look like in this era? And like I've kind of anchored to this position that actually one of our investors has, I think, ingrained in me, which is your paradoxical thinking, is the only moat? Like if you walk into that meeting and you're willing to share all your strategic thoughts and lay it out on the table, maybe you save the last five to 10%, but most of it's known the moat. The reason you're not afraid is because you know that you're always going to have a different perspective and point of view and you're always going to think paradoxically to how an incumbent would think, because of the reason you're building the startup. And I think that's like an underrated way to look at moat. Like no one can copy your thinking, right, yeah, like no one's going to copy KP Reddy's brain. Like you're always going to have a unique spin on on. You know directionally, tactically, what you should do.
Speaker 1:I don't. I don't think anyone wants to spend time in my brain. I don't. Yeah, as Halloween approaches, probably the worst nightmare ever.
Speaker 2:Not a fun place to live.
Speaker 1:Not a fun place to live.
Speaker 2:No, but yeah, but do you hear what I'm saying? Like I don't think. Like that's the. So yeah, speed. You know nimbleness, ability to take risk and move fast. But I also think, like in your you know in the way that a founder thinks, which is why founder-led business is usually so powerful, like you can't really copy that. Like you can't really copy that. Like the CEO of you know so-and-so construction conglomerate is not going to copy the thinking of you know a modern robotics founder that is rethinking how things should be constructed. You know from the nails up right. So you know, regardless of if they're where their strategies meet and you know, in the middle and where they think they're competing like their, their long-term mentality is going to be different.
Speaker 1:Yeah, we didn't. We didn't. I didn't talk to you about this, but I was talking to one of my investors, um, from a long time ago, who's a dear friend and we hadn't talked in like three years, and, um, he's a real estate developer and he told me something that I was just blown away by. It's a company that has a new construction method of how they do things and they do full, like full design build, full design build and they're cheaper, better, faster, proven group. And I was like that's pretty amazing, like I'd love to meet them. He's like, oh yeah, these guys are like they're it, they're disrupting the industry. And I was like that's cool.
Speaker 1:So what's their go-to-market? And he said, as a developer, you have to buy their franchise. You have to write them a check for 5 million bucks for a protected territory to be able to use their system. And these franchises are now getting bid up because of the scarcity. They're basically saying like which zip codes do you want? And you can have exclusivity in those zip codes and that will give you a competitive edge in those zip codes. So how many zip codes would you like to buy, sir? It's a million dollars per zip code or something.
Speaker 2:I mean it was not cheap and we can only, and we can only, we can only provide services in these three zip codes, kind of thing. So they're no no, it was.
Speaker 1:They can provide. I mean the southeast right. They're like, I think, tennessee down to south florida, the west louisiana, I mean. So southeast right now is where they are, but they're full stack. They don't use subs, they're full stack. But it's like to have the right to be a customer in this market. You have to pay a franchise fee because there's scarcity in how many clients we can take on.
Speaker 1:I just thought this was like a fascinating business model. I just thought this was like a fascinating business model and I was like, wow, like if I was a startup and you think I have such compelling technology and I'm early stage Like I mean, they still have to pay for the building, you're still paying for the product, so they're not giving up gross margin. They've just figured out that we can only serve so many customers and we're going to sell the exclusivity not for cheap either, not for cheap. And this real estate developer is like, yeah, man, like I'm putting a group together to buy the franchise from my market. I was like this is why I mean it's pretty wild.
Speaker 1:I think I've never heard of a model like this. I've heard of like buying a franchise, being a master friend franchise or for, like dairy queen or something like that right and you kind of own that market which feels very different than you, have the exclusive right to use my product as a customer in your market. I thought was fascinating. Yeah, that is. But also like so damn clever like I was, I got off that call model was that?
Speaker 1:do you like the model? I love the model. It's such a like you know, you know me, I love throwing elbows right, and any business model that's throwing elbows I love like I just I don like. I'm not saying like financially I get it Like I haven't done the math, but the idea that. So imagine you're a tech startup and you say look, we provide so much value, we will allow you to license being a customer of ours in a market, in a vertical or whatever. You just give us 5 million bucks, you're still going to pay for the product. And as VCs would we say, well, oh, you just limited your market sizing, maybe, but are you ever going to get 100% of the market anyway? So if you think about it, if these guys, if we said, hey, you've now fixed on 20, you own 20% of the market through this franchising model and it's really gonna be hard for you to grow beyond that because you're dependent on these exclusivities. Right, would we be okay with a startup that has the maximum opportunity to penetrate 20% of the construction market?
Speaker 2:I mean it's a clever way to capture 20% of the construction market. I think it's a clever way to capture 20% of the construction market. I think is my take. You know, 20% of the US. I don't know what type of construction they're doing. I'm assuming residential multifamily or something. Right, yeah, multifamily, 20% of that market. You know it's big.
Speaker 2:It's still big. It's a lot of work. So yeah, I mean, without knowing any other details on why a developer would be interested in adopting and licensing the product is the market big enough Because they're ROI, they're seeing deals that did not pencil.
Speaker 1:It's a competitive advantage to get deals done.
Speaker 2:So another developer that runs a typical model. What's that? Because their construction method is cheaper? Yeah, all of it. How do they? And they just say, hey, what are they delivering? What do you get for $5 million?
Speaker 1:Oh, you get to be one of the exclusivity. It's like a country club, so you get access and use and buy their tools basically. You're buying buildings from them. It's just that you get exclusivity to be a customer in that market.
Speaker 2:In other words, we're not going to sell to your competitors.
Speaker 1:So what my friend was talking about is he's now seeing deals that other developers can't get it to pencil out, with inflation and all the different things going on that he can go to these folks that can't make it work, buy them out of their deal at a discount and make the deal work. So it's truly like this competitive I mean people talk about a competitive edge this is like so you can go pick up deals that other developers are like having to fire sale and now you're crushing it. Yeah.
Speaker 2:I think, like you know where my mind goes here is. I think you know scale in our space is always an interesting word and topic to discuss and analyze, like what is scale in our market? And if you're delivering buildings, like you know it's tough to it's it's it's tough to deliver a customized building of a certain size at. You know what the tech industry thinks is scale, like you're just really not gonna. You know you're not to be able to do that, which is why most developers are regional, national developers. Doing hundreds of buildings a year is a pretty rare trait.
Speaker 1:Do we see? Still, because this kind of dovetails into a different concept which I've had. Some of our LPs ask me about this. You know, what I love about our LPs is they're so fucking smart. I mean, some of our LPs are just so smart, right, and it's like you just walk away learning so much from them. And one of them, when they invested in us, had no exposure to VC but then quickly and promptly started doing all their homework on VC, reading the books and listening to the podcasts and everything else. I remember him calling me this was years ago and saying do you think construction tech is a winner-takes-all market? Because it appears to me the history of venture capital, the strategy, has been to fund deals that are with a winner-takes-all mindset. Like, do you think that actually applies in this industry? And I thought that was like a great like. There's a very intelligent, well-researched question. What do you think?
Speaker 2:I think that it depends on the product. Like, for instance, let's take a look at the project management software space, is that a winner-take-all market, I would argue. Actually, yeah, it is Like it has the traditional technology market dynamics where you know there's a, you know, in the construction space, procore is the dominant platform and they have the characteristics of a company that you know dwarfs all the others in terms of size and market cap. Right, like what's the second biggest project management software on the public markets? Like the second and third don't even they're not even close to adding up to the market cap of Procore. They're not even close to adding up to the market cap of Procore. So you know, I think that. So I think, in software that is selling into our space, you do see, I think I don't have the math in front of me.
Speaker 1:This is when we need, like, a producer or somebody on with us to do research live. But I don't think Procore has. I don't think it's a winner takes all. I don't think they are a winner, takes off.
Speaker 2:I mean, if you're looking at it by market by, by saturation in the market, no, but if you're looking at it by, who are the second and third biggest competitors and how much larger are they than them? Yes, that's my, that's kind of my point, but I remember from their S1, when they went public, I think the number they had in their S1 was they have 3% market share, right. So that's the thing that you're making and I agree, right. But from a power law outcome standpoint. They still have dwarfed everyone else in software.
Speaker 1:To me, winner takes all is. You turn into a verb, you Google it, you use Kleenexes, you use a Xerox. I don't think Procore is a verb. I mean no.
Speaker 2:We can agree there.
Speaker 1:It's a really bad. By the way, I've been doing a lot with Procore lately. I was like you guys listen to my stuff, right, and they're like, yeah, like you know, I'm not always, like you know, wearing the team shirt, so to speak. They're like oh no, that's why we like love having you around. Like everybody else just wants to agree with us and get our sponsorship money. You just keep giving us reasons not to sponsor anything you do. Yeah, yeah.
Speaker 2:I mean, you know, but you look at, look at Autodesk. Autodesk is not a perfect comparison to Procore, but they obviously participate in our space and again, I don't have the numbers in front of me today, but, like you know, autodesk and Procore, you know, public company wise are going to be far and away like any other private software company, like far and away larger right.
Speaker 1:Well, I will say with Autodesk, right, we refer to CAD as CAD, we don't refer to all CAD as AutoCAD, and I would say the majority of the US market refers to BIM as Revit.
Speaker 2:Yeah, that's fair, so pretty close. I hear, yeah, I hear.
Speaker 1:Revit way more than I hear bem right, you talk about the revit files and the revit this and the revit that. A lot less just like bam revit plugins what's that?
Speaker 2:revit plugins, yeah, revit plugins. So, agentic, ai revit, revit right.
Speaker 1:So the point is like in the world of building business, um, do you have to be winner takes? Like I don't think.
Speaker 2:I mean it'd be cool to be winner takes all in our market, but if you look at the size, fragmentation and so the point I was making is really specific to software, and maybe you could even say we could probably go to the hardware sector and do some analysis there. But when you look actually at the services aspect to the market, nowhere close to winner-take-all right, like not even. It has zero power law dynamics. But those are also not core technology businesses, right, they're services companies and no one's ever claimed that services companies have a winner-take-all market dynamic.
Speaker 1:Well, here's another signal to that Not to run down this rabbit hole, but we're already in it. This is also an industry that, from a regulatory perspective, this is also an industry that, from a regulatory perspective, there's a lot of sensitivity around bid rigging and collusion, which I don't know where you are. But you know I run these mastermind groups where we have innovation leaders from a lot of the big construction companies that attend and we talk about stuff right, kind of like you know it could be a great podcast, but many of them we had to sign kind of an antitrust, non-collusion waiver that we're not getting together and talking about pricing or projects or things like that where there could be actual collusion, right. And I was at an AGC meeting one time and they had a huge disclaimer up there like just by organizing a bunch of people that compete with each other in the room, that you have to sign like an antitrust waiver. I don't know if you knew that.
Speaker 1:No I didn't know that, and so you think about that and this comes. I'm going somewhere with this, but the reason it matters is because most of these markets are shared monopolies. In other words, if you're building an airport in O'Hare and it's a $10 billion project, how many general contractors can bid on that job?
Speaker 2:Financially, it's like three to five right, you don't get to just show up and say hey, I'm with Nick's Contracting, I'm going to do your $10 billion project.
Speaker 1:I got a truck right. You don't get to do that right, and so I wonder about that. And then I wonder about is that why you're not really going to have a winner? Takes all on the software side? Because you start to pattern your customer base in a way. Right, if your customer base looks a certain way, you, you may be patterned it that way.
Speaker 1:And then there's a question too um, I was talking to a family office the other day and and they buy uh, I'm not going to specify a construction materials business, like manufacturing business, and I was like, well, that's so weird that you're in that business. And they said well, here's the thing, there's only three players in this market and so when they buy smaller players, due to antitrust, they have to get rid of some of the plants that they buy and they don't want to sell it to a competitor, so they sell it to us. So we have this highly frag, like geographically all over the place. We have no concentration, and all three of the big players do this. They sell off the ones that are going to be subject to antitrust and they'd rather if they're going to have to sell it off. They'd rather preemptively sell it off to a small player than one of their big competitors.
Speaker 1:It's kind of like why Bing exists small player than one of their big competitors. It's kind of like why bing exists. Bing exists so that you know, I think microsoft maybe gets a couple bucks from google. It's like what do you mean? We're the only search engine.
Speaker 2:no, there's bing oh, so it's like it's like a ruse to make their competitive monopoly not seem as as uh, as large. Yeah, that's funny, why?
Speaker 1:why is microsoft so supportive of google app? What large corporate in america is using google? They use microsoft office, right? They don't want it to be like oh, we have a monopoly on desktop compute with microsoft office. Everyone has the choice to use Google Apps and it's practically free, so they're choosing to give us money. There's no lock in here. Wink wink, by the way, google, we have Bing running, just in case anyone asks you about search engine monopolies, misdirections.
Speaker 2:I like it.
Speaker 1:It's a do. You just got to be in the right rooms, man.
Speaker 2:You learn all this stuff when you're in the right rooms the um your point on the antitrust stuff around around the construction industry. So so sorry to bring this back to the yeah the natural monopolies for tech companies like what? Um sorry, where were you going with that?
Speaker 1:That maybe because you're there are no winner takes all in the markets you serve, right, it is so fragmented, there is no winner takes all that by virtue of that, the tech companies are going to be highly fragmented and not be winner takes all.
Speaker 2:Yeah, I think the only markets that are going to be highly fragmented and not be winner-takes-all, yeah, I think the only markets that are going to be winner-takes-all in our space so let's call it real estate, architecture, engineering, construction are going to be software companies. And, to your point, these oftentimes may not be, may not be obviously winner take all because they have a limited market share. They're not going to have 50% market share or 80% market share like Microsoft does. They're going to have 7% market share in the built environment and that's going to be, you know, a 20 to $50 billion business, right? Um, but I think so it's going to be software companies that have have accumulated enough market share to be to vastly outperform any other technology software provider, right? I think the second monopoly that could exist is a vertically integrated company that vastly outperforms on the services piece that vastly can outperform, from a cost standpoint and performance standpoint, someone who's actually completing the services work. So, whether they're actually constructing the building, whether they're actually, you know, doing some of the subcontracting work, whether they're actually doing the engineering or architecture design work, if they can vastly, if they can produce a better product at a vastly improved cost, then they can potentially have a winner. Take all dynamic Hasn't happened to date because robots haven't existed right, right For the on the construction side, and because we had limited software capabilities in the previous era, like we could not vertically integrate a stack that could fully design and engineer buildings.
Speaker 2:And I think that's changing right like we can, we actually have a path to designing and engineering, um, built buildings through compute today, and that's, I think, the ethos that people need to be, you know, thinking about as they we enter this new era of like can a natural monopoly exist? I think it can, and like that's why everyone's, you know, feels this existential threat. And it's what you've, it's what you probably see from someone like an open AI who is, you know, taking more, more and more of your, your, of your time on the computer every day. Right, like they're slowly in, you know, infringing on more and more scope, your daily workload in front of a screen and, just as you know, as foundation models can slowly start to scale out to more and more scope of your, you know, design work, and then robots can, you know, scale out to doing more of the actual physical construction piece, and so that's the existential threat that scares everyone. Like that's and that's where a natural monopoly could occur if someone vertically integrates that process.
Speaker 1:I've talked to founders about this. It's kind of funny. What are your next goals and milestones as a founder? Have an exit, then have an IPO. What comes after that? And I'm like DOJ, like an antitrust you're a monopoly that's winning right.
Speaker 2:Relater acronym DOJ.
Speaker 1:When the Department of Justice shows up for like you're a monopoly, that's like as an entrepreneur, that's like winning right.
Speaker 2:That's the biggest one. That's a signal that you've done something well in most cases yeah.
Speaker 1:You always wonder when these guys get these antitrust, like lawsuits, filed against them.
Speaker 2:Are they like, they feel like they're winning, or are they just like yeah, if you're like squirmishly having to sit in front of the senate, senate committee committee hearing, like all the tech executives have done in the last decade, like you're probably doing something right right do I have to be?
Speaker 1:why do I have to apologize for winning? Like what is? Why are you guys sitting me down and saying I'm too good nba, sitting down Michael Jordan and saying like hey, you're just too good, Like we can't have you being, you need to miss some shots, Stop it.
Speaker 2:I've got this Sam Altman meme in my head of him saying like I do this because I love it.
Speaker 1:Not because it's going to lead to me. You know, owning the screens of a billion plus people and creating you know we should partner with them, we should build with them and maybe they're going to compete with us. Because one of the things I love about our industry is when I was in civil engineering, sometimes I was running the project, it was my contract and I would subcontract to competitors and sometimes they would win a big project, like at Hartsfield Airport. It didn't matter who won at Hartsfield Airport, I always got a slice of the work right. It was very because you were still dealing with.
Speaker 1:You know, a human problem is like you don't have enough resources, right, and so you tend to sub-consult and team up and JV, and it's a very collaborative market that way. And so I'd really like to see in my magic wand world that these big corporates think of startups more that way, like as a JV partner, like, hey, we're chasing this project. I mean, wouldn't it be fantastic if one of these companies said, hey, we're chasing this huge stadium? I mean, wouldn't it be fantastic if one of these companies said, hey, we're chasing this huge stadium project? We want you guys on the team, right, looking at a startup from that lens and maybe they do compete. Right, maybe they do compete.
Speaker 2:Yeah, it's way more collaborative than hey. This is like just a tool that I'm using that I have to position myself for to one of the three stakeholders in the AAC space, right?
Speaker 1:Yeah, like back to your first thing about people building wrappers.
Speaker 1:Maybe that's the thing. Like, hey, we're going to be your project data team, your project communication team and we're going to show up because we've built this wrapper, one of the things that keeps coming up in industry and we need to wrap soon. But all these transcriptions, these Zoom transcriptions and team transcriptions that are generated and how they end up in project folders and how do they get QA'd? Because they're discoverable, right, that's the problem. You and I can have a conversation and it's not discoverable. The minute we put it down into a document, it is discoverable, and so maybe you're the LLM wrapper that takes all these transcriptions and assigns them to project folders and QAs them, and you're just the meeting minutes publisher of record and that's your role on a project, because you've built a tool to do that, and everybody which sounds like a really good startup idea, nick to be the minute with all this data, to be the publish, the system of record for meeting minutes, because it's all part of the deliverable and contracts and open to litigation.
Speaker 1:Free startup out there. Put something together. Hit me up on LinkedIn, we might fund it. I like it.
Speaker 2:But I need to get going, man. All right, I had a few other topics. We'll have to save them for next week.
Speaker 1:Yeah, well, that's good, you know, we can start doing this twice a week.
Speaker 2:Yeah, maybe we should. Just to preview. I wanted to talk about the national housing emergency that Scott Bessent, the Treasury Secretary, alluded to. It's clear that the Trump administration is going to do something in housing to alleviate the affordability. So could be, you know, I could see like a yield curve control dynamic where they're setting rates and not letting them go, you know, above a certain rate for a certain type of individual, maybe helping with down payments. But clearly they're architecting something and I wanted to just kind of play that Well, cool.
Speaker 1:Well, shout out to Devin Reddy. Shout out to Devin Reddy, who's in stealth working on that problem. I think he's raising a round now, shout out to Devin.
Speaker 2:Yeah, we'll have to bring him in as a guest.
Speaker 1:The benefits of being my kid. Give the shout out, wrap up your round.
Speaker 2:Free promo Devin there.