Why software apps are worth less in the age of AI

HostWe spend so much of our work day clicking through different apps to get things done. But lately, the big companies that make those apps are seeing the price of their stock take a real hit. It seems strange because these tools are everywhere. Why does the rise of smart bots make the software we use every day seem less valuable to the people who buy and sell companies?

GuestIt comes down to how we have valued these companies for the last fifteen years. We used to think of a software company like a digital fortress. They built a specific way for you to see your data and a specific set of buttons for you to click to get a job done. Once you and your team learned where those buttons were, you were locked in. It was too much work to leave and learn a new system. But now, we have these AI agents or bots that can look at any screen, understand what's there, and do the work for us. They don't care about the buttons. They don't need to learn a look or a feel. If a bot can do the task across any app, the fancy screen and the buttons of the original software just don't matter as much. The fortress is starting to look like a simple shed.

HostBut if I still need the app to hold my data, does it really matter if a bot is the one clicking the buttons? The app is still doing the heavy lifting in the background, right?

GuestThat's what the big software companies hope, but there's a big catch. For a long time, these companies made money by charging for every person who had a login. We call it paying for seats. If you have a team of fifty people using a tool to manage customers, you pay for fifty seats. But if a bot can do the work of forty of those people, why would a business keep paying for those extra seats? The math that made these companies worth billions of dollars was based on the idea that more work equals more people, and more people equals more money for the software maker. That link is breaking. If one person and a bot can do the work of a whole department, the software company loses most of its paychecks from that business.

HostWait, that sounds like a big jump. Are these companies really just going to let their main way of making money dry up? They could just change how they charge people.

GuestThey're trying, but it's a very hard pivot to make while you're already running. If they start charging by the task instead of by the person, they have to prove that their bot is better than a bot someone else might build for much cheaper. This brings us to another big problem. In the past, it was very expensive to build good software. You needed hundreds of smart people writing code for years. Now, those same bots that are doing our chores are also very good at writing code. A small team of three people can now build a tool in a few weeks that used to take a giant company a year to finish. The wall that kept new players out of the game has been knocked down. When it's easy for anyone to build a tool, the ones that already exist just aren't as special anymore.

HostI still feel like the big names have a huge head start. They have all our files and all our history. Is that not enough to keep them on top?

GuestIt helps, but it's not the win it used to be. We're moving into a world of what people call headless software. Imagine you want to book a trip. Right now, you might open a travel app, a flight app, and a calendar. Each one of those companies wants you to stay on their page so they can show you ads or sell you more stuff. But if you just tell a bot to book your trip, you never see those pages. The bot talks to the software in the back, gets the data, and leaves. You never see the brand, you never see the extra offers, and you don't feel any loyalty to the app itself. The software becomes a utility, like the pipes in your walls. We know the pipes are important, but we don't pay a premium price for the brand of pipe under the sink. We just want the water to flow.

HostSo the concern is that software is becoming a commodity. It's just a thing we use, rather than a valuable partner we depend on.

GuestExactly. When the value moves from the tool itself to the bot that uses the tool, the power shifts. The company that owns the bot becomes the one in control. They get to decide which pipes to use. If one software company raises its prices, the bot can just move your data to a cheaper one overnight. The friction that kept customers stuck in place is melting away. That's why the people who invest in these companies are worried. They're seeing the end of the era where you could build a set of buttons and charge people forever to click them.

HostIt's a massive shift in how we think about the value of a digital tool.

GuestThe most important thing to watch is who owns the relationship with the person doing the work. If you're talking to a bot and the bot is talking to the app, the app is just a part in a machine, and parts are easy to replace.

HostThe buttons we have spent years learning to click are quickly becoming a language only bots will need to speak.