The AI Boom Is Just the Feeling of Productivity | Tool Shaped Objects | The Learning Corner

It's so hard to find product market fit when you add distance to it. You're taking something that's really hard and you're making it even harder. Why would you do that to your startup? But I've started asking people, is your company in the optimal place for the business that you're in and do you have the optimal configuration? I just want people to make sure that they're making a reasoned, thoughtful decision about this stuff as opposed to just either what feels easiest or what they read online.

It's the week of February 16th. Welcome to the Learning Corner, a Precursor Ventures podcast. Welcome to the Learning Corner by Precursor. I'm Mia Farnam and I'm joined by our Managing Partner NGP Charles Hudson, where we will be talking through the articles and Goodreads that caught our team's attention over the past week. For our first good read of the week, we are in luck. We've got our first ever Precursor portfolio company founder as our guest for the podcast. Ariana for Worda, CEO and Co Founder of Half Days, a skill ski and outdoor wear brand for women by women. Arianna, thank you so much for making the time in the middle of your peak busy season for you.

Of course. Thanks for having me excited.

We're super excited. You wrote a piece recently titled why My Team Will Always be in the Office and it highlights the journey Half Days made about going remote, becoming distributed, and then ultimately building IRL in one office. Headquartered in Denver. Half Days raised its entire pre seed over zoom and you credit the pandemic for changing fundraising forever. But what worked maybe for pitching investors doesn't always translate to building the fabric of a company. And for a while Half Days intentionally split into two offices, New York City for design talent and Denver for marketing and ops. You had each co founder manage one location and on paper it did make sense. But in practice, distance created friction, marketing and product fell out of alignment and context got lost and decisions really just took longer. In subtle but compounding ways. You noted that once the company crossed the $10 million revenue mark, those gaps really became impossible to ignore and the shift to one office in in one city was immediate. Your ideas moved faster, feedback got more honest, and problems really just surfaced earlier. And you closed the piece saying that you know that you're not anti Remote days. Half Days is in office three to four days a week, but you're deeply pro presence, especially for early stage companies where speed, clarity and shared context are everything. And throughout the piece you walk through the different orientations Half Days took remote, distributed completely in one office. I imagine that the realizations didn't happen overnight. That illuminated it was time for a new physical version of the team. Do you mind sharing some of those inflection points? I know you talked about crossing the $10 million mark as a moment where growth demanded in person, speed anything else that comes to mind.

There's really so many things on the realization of needing to have the entire team under one roof. I would say that the marketing and product misalignment was a huge one. Mia, you said it perfectly. But we split our offices. So we were New York City for product and design talent. And we did that from day one, kind of. We hired our first VP of design in New York and sort of just let her run with building the team there. Because my co founder Kylie and I had zero product manufacturing design expertise. We're like, okay, you're the expert, you can do this. So she built out a team there. We ended up having like eight or nine full time people in New York. I ended up moving out there to be with them. And it was just so clear that having my co founder still in Denver and me in New York and all the product fittings happening in New York City and then the marketing team also being in Denver, not being like around those product fittings, understanding the context of why did we design this product, why did this is zipper get moved from this place to this place, what is the, the technical features of the fabric and just not having a lot of that context, I think really started to show in our marketing capabilities where the marketing team just lacked so much. Like I think they got to a point where the product team would just pass off a deck or do like a quick presentation about the products. But you really have to be so intertwined across so many areas of the business for it to all feel so seamless and cohesive. And we are just too small to have two places. And also the office culture was very different in New York versus Denver. Like just started to be things where I'm like, wow, we really need to be building this like singular brand. And I kind of felt like it was. We were like starting to do two different things. So there were, there were a lot of things that happened, but I would say that the biggest one was just the lack of cohesion between the product and marketing side. And then, yeah, like when we got to, you know, the, the eight figure mark, I would say things just started to feel a little bit more serious. We had retailer relationships, these like big partners like Nordstrom and REI and Dick's Sporting Goods wanting to expand our door counts. And we were so misaligned on what was getting put on hang tag because the product team was in one place and the marketing team was over here and just really, really hard to manage. And honestly, it just became inefficient and we were just spinning our wheels unnecessarily.

And it sounds like you guys came to that realization on your own. It's really time for us to start building in person. But Charles wanted to ask you, are there any other kind of flags that you see along the journey that maybe it shows? Ooh, it's actually a physical location issue that is inhibiting on speed.

I feel like coming out of the pandemic, I felt uncomfortable as an investor telling, hey, you should get back in the office and be the same. Even even though I felt like this will be better for your company. A, I was like, it's not really for me to dictate that to anybody. And B, I know a lot of founders were, like, working through things, and maybe it was sort of the end of 22 or beginning of 23, where a handful of founders started coming to me and saying, like, is it okay for me to pull the team back into office together? I'm like, what do you mean, is it okay? They're like, well, I want to do this. I feel like something is off in my company. In some cases, they're like, I'm worried about looking like the Grinch, or I'm worried about being one of the first people to do this. And should I mandate. Should it be five days in the office? And I feel like what I saw in 23 and 24 was a lot of our strongest companies were coming back together for two reasons. One, either they were pre product market fit and they realized things were going too slowly, or to Ari's point, they'd gotten to a scale where they're like, oh, I can really see the cost of being in multiple locations, or I can see the cost of being fully remote and distributed now that we're at scale. And I don't like this. This is not what I want for my company. I want something different. And that honestly seemed to drive a lot of the decision making that I saw from people was this desire to sort of fix something that founders intuitively knew wasn't working. What I started to tell people, Mia, is it's so hard to find product market fit. It's really difficult. And when you add distance to it, you're taking something that's really hard and you're making it Even harder. And why would you do that to your startup? Like, we have companies where there are familial or lifestyle reasons that are legitimate. Kid needs specialty care in a place where it's only available in that location. Spouse slash partner is doing some kind of graduate or educational program that's rooted in one place. But in all of those cases, every one of those founders has always told me, I realize this is not optimal for the company. So what I've started asking people is like, do you think you have the configuration that's optimal for your company? And that's how the whole field trip thing started to happen where we had people come work out of our office in San Francisco because, you know, they were in other places. And I'd say, is that the optimal place? So now I always ask people, is your company in the optimal place for the business that you're in and do you have the optimal configuration? And there are very few companies in our portfolio where I think five days in office in San Francisco is the right answer. But maybe if you're building an AI application layer company, maybe that is the right answer for you. So I just want people to make sure that they're making a reasoned, thoughtful decision about this stuff as opposed to just like either what feels easiest or what they read online.

For me, it was also, I could just feel it. I felt that being in New York City felt inauthentic for my brand. And we realistically could have been like, hey, let's center the company in New York City. City. I actually think we had more full time employees in New York City than we did in Denver at the time that we made the decision. And I was just like, it, this isn't, this isn't it for us. It's hard to get to the mountains. The other weird piece of it is that New York City is actually our number one market in terms of E Comm revenue. So it, it literally goes Manhattan and then Brooklyn are like number one and number two. So from that perspective, it could have made sense. But I was like, you know, having a store here at some point will make a ton of sense from like a revenue and customer perspective. But like our team, we started the business in Colorado where Kylie and I met. It's where we both love to ski. It's where we're doing all of our photo shoots. Like it just felt way more authentic for us. And there have been challenges that come from that. Right. Finding really good design and marketing talent in Denver, Colorado versus Manhattan or LA is is hard. We've had Instances where we've missed out on amazing talent because we're requiring people to live here. And it's just something we've kind of like had to put our foot down about. And unfortunately there are some cons, but the pros certainly outweigh the cons.

There's a couple threads on what each of you said that I want to pull on, but one of which Charles touched upon. I know that there are versions of in office culture that aren't actually productive or feel more performative than their outputs. I'm thinking 9, 9, 6 culture. I'm thinking just like honestly, office environments where everyone's too terrified to just voice their opinions at all and you could be in person for like 10 hours a day. So when you were bringing everyone back into the office, Ari, four days a week, what culture did you know you didn't want to build? Knowing that being together in person really was the key component.

Yeah, I think the, the biggest thing for us, and we've honestly had this culture from the beginning, is we understand that we're all living our lives and work is not the center focus of a lot of my employees lives. Right. Like it is absolutely mine, it's absolutely my co founders. But a lot of my team have kids and several of them, they go and pick up their kid at 3:30pm every day. And that's just something that's really important to them. So that's important to me. And I think that there's just certain things. Sometimes I go get a haircut at noon on a Tuesday because that's when I need to get it done and that's when the appointment was. There's just certain things and I think that we've really established that as a huge part of the culture. Just being flexible and understanding that we're going to work really hard and we are going to get things done and move things forward and really rally around things when we're in office and that, that we all have to have a little bit of balance. And I think that anytime anyone's taken advantage of that, like, they probably don't work here anymore. Right. So like, I think it's just a matter of knowing where that line is and people, people respect it, but they also are like, I have a life and I'm gonna get my work done too. And that's definitely how we've built the culture.

Last question for you. I know in the piece you said proximity isn't just about having an office. It's about being in the same room building in real time and I want to talk specifically about, you know, what was the experience of building when specifically your co founder is located in a different location?

Yeah, that was really hard. I think that oftentimes something would be progressing in New York with the product decision that Kylie just wouldn't be aware of, and then I'd have to, like, fill her in after the fact and maybe she wasn't aligned with it or whatever. Like, that was definitely a tricky component. I will say, though, Kylie and I, from the very beginning have had a really, really seamless relationship because we focus on such different parts of the business and, like, we both really, really trust each other. And at the end of the day, she runs a lot of our creative and photo and. And I'm a CEO and she trusts the decisions I'm making. And I think that that's like such a critical part of a co founder relationship. So it wasn't like the main thing that I would say. I think the thing that between the two of us that was most difficult was us not being together with the product team. The biggest difference, hands down, for us with having an apparel business is that Kylie and I are in two to three fittings a week with our team in Denver, and Kylie and I try on every single product at every single sample stage of the process for, like, months before the product actually comes out. So I have really felt like our product has been so positively impacted by that. We just don't miss anything anymore. And it fits exactly how we want it to fit, and it looks exactly how we want it to look. And the colors and the names of the products, like, everything is really. And I think at some point, like, we'll have to figure out how to operationalize that without us. But I think for as long as possible that we can be really embedded into it, the better.

Well, Ari, thank you so much for hopping in and walking through everything. I'll let you go back to the slopes and supplying people with the best fashion there on the mountains.

Thank you guys so much.

Well, our next piece is titled Bubbles and Balloons, written by Connie Makubela from Kindred Ventures, exploring the difference between how markets actually unwind. The core metaphor is that a bubble exists until it doesn't. It pops and that's it. But a balloon can spend a long time in the in between. Less pressure than before, but still very much there. The argument is that 2021 and 2022 was a balloon, not a bubble. The major indexes sold off really hard, roughly a quarter off the S and P and about third off high Growth tech. But earnings bent without breaking and capital didn't evaporate. It just took a breath in ventures. Global startup dollars fell sharply from the 2021 peak, but didn't revert to some pre Internet baseline. They just reverted to pre2021 levels. And then AI showed up to reinflate the balloon. So by 2024, total startup funding had stabilized and nudged back up, but the composition had radically shifted. With AI pulling in over a hundred billion dollars and accounting for a huge share of global venture volume. The piece makes the investing era. The constraint is no longer whether an asset is actually mispriced on fundamentals, but whether there's a large enough crowd willing to believe the story. At the same time, the access from 2021 didn't disappear. It just transferred from everything growth to everything AI. One quote that stuck out was a close investor friend that told Connie, it feels like it's 1999, but it's like 1999 forever. So Charles wanted your thoughts on bubbles and balloons and the thesis entirely.

I talked to him about various elements of the arguments in this piece and I asked a few LPs. I think I've told the team this like, you know, in 2021, it's quaint to think that people were writing all of these blog posts about capital efficiency and we're never going to pay these crazy multiples. That was just three or four years ago where like efficiency and, you know, output. This was the thing we talked about in 2021, 2022 and part of 2023. And then AI happened. Everyone's like, okay, just push reset. We're doing this again. I remember the distinct feeling that it's 1999, but all the time is the perfect I we just did this. We're going to do this again. And apparently the answer is yes, we're going to do this again. And you know, I have a bunch of friends who are in crypto and I talked to them about just like, you know, the roller coaster that crypto's been on. And I asked one of my friends that said, what's driving this roller coaster? He said, vibes. I kind of laughed and I was like, I think you're also kind of right. Crypto is very much a sentiment. Seems to me to be a very sentiment driven market. And when people are excited about crypto, it goes up and people are not as excited about it, it goes down, down. And I find this to be the best explanation for the behavior of many firms in our industry. If you're just like hey, this is about fundamentals and this is about multiples and underwriting. You would say, well, a lot of this feels very bubbly. I remember I wrote a few years ago to some of our LPs. I was like, it feels like it's 1999. He said, no, it's like 1996. This was maybe two or three years ago. I didn't realize that, but I'm like, yeah, it was 1999. It just stayed 1999. And I think right now there's so much money in private assets that if AI went away, we'd kind of have to find something else to get excited about. And something else. In some ways, I don't know whether AI is the tail or the dog. Is it? There's so much more money in private assets because AI is this amazing mega cycle. Or is that AI is the perfect mega cycle to consume massive amounts of private capital, both on the equity and the credit side, because the CapEx requirements are so great that it gives the credit credit dollars somewhere to go. And the application layer solutions are so attractive. It brings in all the equity dollars. Maybe you don't get this kind of private capital mega cycle without AI, or maybe it's the other way around, I don't know. But it's made me think a lot more about what gets valued. And if you think, like, what matters is moats and business model and metrics, you make one decision. If you're like, what really matters fundamentally is attention, then hypey buzzy, AI things make sense. People who can break through the noise makes sense. And you're sort of back to a momentum investing style that, like, presumes that the good times will continue. But I think private assets are so big now, I don't know where we'd put all this money if we didn't have AI. There's no single theme that could absorb it.

Yeah, and that's. I guess my next question is like, I obviously know hindsight bias is. Is always a thing, but this time it actually, to me kind of feels way more like a bubble than a balloon because it feels very finite. Like, when it ends it. I don't know if it's going to reinflate just because what you mentioned, the sheer amount of private capital just going into AI feels way more concentrated, that if it does deflate, it's hard to imagine what the next wave of air, where it will come from. Do you think that that's the core piece of where the balloon metaphor breaks down here?

But I think what if we'll always find something. I like talking to Kanye because he always challenges my thinking. And I was like, well, at some point things have to reset to sanity, but maybe they don't. Maybe, maybe we never go back to something that feels. The scary thing is maybe it was never that way. It just felt that way. But you know, it could be humanoid robotics, it could be data centers in space, it could be computational biology. It could. I'm convinced we will find something because, like, capital needs a home, right?

Because we all.

And I just hope whatever we find is a good investment. The bigger question is we haven't really solved the problem of 2021. We had a bunch of really expensive SaaS companies that neither went out of business, nor got acquired by pe, nor got acquired by other ventures. Now we're beginning to see more of these, like merger of equals. And we're see more of these 7, 1012 year old companies that are merging. But it's unclear to me whether the merged entities will go anywhere either. And so we left all of this detritus behind in 2021. And I don't mean that the companies are bad, it's just we created all of this stuff and all this energy and then everybody just moved on. And you left all of these SaaS founders to run businesses. And it's like unclear to me, like where those or where many of those businesses will go.

Probably investors who back those same businesses are arguing that like SaaS is dead now. So like, let's move on. But we haven't even done the unpacking of what it actually happened before. We start with the. But that's, I guess, how balloons work in the way Connie described it.

The reason I think it's a balloon is I've asked a few LPs and like, well, who did you like take to the woodshed because of 2021? You guys all said VCs blew it. We invested in all these companies. The valuations were too high. What were you thinking? And most of the firms that were at the forefront of that era are also at the forefront of AI. So what if the like market signal conclusion is that the consequences for balloon. We won't say for balloon behavior that you get to stay in business so long as you can to ride the balloon. It creates a very weird incentive structure.

Our last piece is a post on X from Womanidus titled Tool Shaped Objects. As a reflection on the viral post Something big is happening. I'm sure everyone who listened to this podcast also saw that come across X. It had millions of views over the last week. For context, Something Big Is Happening was written by Matt Schumer, clearly sharing alarm, concern and advice pointed at every person as it pertains to AI and how it's threatening everyone's world and job jobs. Will introduces the idea of a tool shaped object. Something you can hold, you can use. It fits in your hand the way a tool should. It produces the feeling of work, but it doesn't actually produce work. The piece opens with this great example of a 300-year-old Japanese blade making tradition where the setup and the shavings are the entire point. From there the argument is that the current AI boom is the most sophisticated tool shaped object ever created. We're spending unprecedented sums on GPU farms, this billion dollar training runs and trillion dollar infrastructure buildouts and the primary product of that spending is the experience of spending it. The piece is careful to say LLMs aren't worthless. They'll of course become very good and have real effects on productivity, but the diffusion into the real economy will take much longer and look much different than the current hype suggests. The line that stuck with me was the market for feeling productive is orders of magnitude larger than the market for being productive. Reading this article felt like borderline therapeutic after seeing the amount of chatter and conversation and concern sparked from Something Big Is Happening. And I've said it with the team before, but I it's always fascinating to me what pieces in the tech and venture ecosystem permeate out to people who are not in those areas and this was one of them. So wanted to pause here for your reactions to both Something Big is Happening and then Will's post.

You know, I feel when we had Sass Apocalypse and Matt's piece piece I was just like, oh I forgot there is a lag time between things that are obvious and visible in the private markets first, then getting to be digested by public markets and then being promulgated to the wider world. And I read that post and I was like I don't understand why this was the one. Why was. Why was this one the one? Many people have made very similar arguments and I'm like, I feel like whenever these posts have this moment it's either engineered or all of the preconditions of people's brains being primed to hear this were right. And I think it's I don't know Matt. So I'm going to assume that it's more the timing on this was just was at a moment where people's consciousness had really been raised about what all this Stuff means. And I kind of laughed because a friend of mine was showing me his open claw setup and all the things he could do. I go, does any of this stuff matter? He goes, what do you mean? I go, it's cool that you can do all of this, but, like, does any of this stuff matter? And he's like, no. And it's like that, like, Jeff Goldblum line from Jurassic Park. You're so busy trying to figure out if you could do something that you never asked whether you should do something. Something. And I find myself sometimes building things in AI or starting to build things. I'm like, you know, I could do this myself faster. It'd be cool to have AI do this task for me. But actually, I could do it faster just myself. And, like, yes, I get a certain amount of. You know, I get a lot of joy from building things in AI, but the principal output of building a lot of things I build is, like, the joy of creation. I built some things that are very, very useful, that do actually save me time, but half of the things I build are because they're fun. And it's in the same way I tell our portfolio companies, never confuse activity with productivity. Think there's some of that in AI too. People, like, we automated this process. I'm like, maybe you should have just eliminated it. Maybe the answer was, instead of, like, making it run faster with less human contact, you should have figured out how to simply get rid of that process. And I think we're in this moment where people are just infatuated with, like, what they can build. So they're building a lot of stuff, my friend. I was like, yeah, you bought a Mac mini and did all the stuff to, like, do some things that he was very proud of. And I felt bad, but even he said I was living fine without all this stuff. And so I. I do think that these tools can make you feel amazing because you're like, wow, I just did this thing, and I made a PowerPoint deck in three minutes. It would have taken me three hours. And, like, a. Maybe some of the value of that three hours was, like, wrestling with the underlying concept of whether the deck needed to be exist. Exist in the first place. And second, maybe the answer was you just at the end of the three hours, you would have decided there was no deck that needed to be created. I've thought through this issue, and that's it. I don't know.

I mean, I love Will's comparison to farmville. As, like a previous farmville farmer myself, you're Literally building an entire farm. And the whole point is to amass more hay, amass more animals for no purpose. There's no outcome outcome at the end. No one wins anything. You just get to look at your giant virtual farm at the end of the day. And that for some reason makes you feel so productive when in fact I can't do anything with this after. So it felt so perfect for the article when he was describing tool shaped objects. I mean, I do think a bit of media and written content. Not a bit. A lot of media and written content about AI these days is optimized for views and reshares. Exactly. Kind of what you gleaned earlier. And I think that people in tech and inventure might know that. But how do you have these same types of conversations or level setting with folks who are outside of this bubble? I'm thinking teachers, I'm thinking kids who started their first job out of college, et cetera. They read something like this because it's the first time something of this magnitude has hit X for them on their feed and they're like, oh wait, should I pause planning for a wedding because this article told me to save up as much money as possible, or should I really rethink making major life decisions with money because somehow this feels 10 times more magnitude than anything else I've experienced.

I think we go through these cycles all the time. It'd been interesting just seeing how something is definitely shifting. I look at a lot of the local pushback on big data center projects and I've read and listened to some of the audio trans. It's beginning to dawn on them the scale of the transformation that this stuff represents. And I think people are like, I don't, I don't want a repeat of social media. I don't want to let the cat get so far out of the bag that like I, as an autonomous individual have no ability to stop this. Maybe maximum speed, all systems go isn't the way to handle this. I don't know if they'll be successful, but I see that happening. I, I talked to someone whose company has a token leaderboard. I was just like, so you're keeping track of who's spending the most money? I was like, isn't this just like when you used to count lines of code? And there was the belief that, that more, more is better. And it turns out that if you incentivize people to write more lines of code, you get more lines of code, which does not necessarily equate to better code. And some of the Best projects I've written are very token efficient by design. The goal is to not burn tons and tons of tokens, but if you have a token leaderboard, you will incentivize the people. So I think we haven't even figured out like, what is it exactly that we're trying to measure. And right now people are trying to take the most crude course measurement tools available to get some sense. And you know, I'm sympathetic to CEOs. You know, if you're a CEO of a company, your board or your shareholders are like, tell me that you are. All systems go on AI. I am. And they're like, well, where is it showing up? You're like, let me see if I can find second order effects, token usage or other things. And then I saw a chart I think Jason Lemke might have posted it on just the decline in customer support hiring in the last three years. A real thing. So I don't know. I think this might be the first technology wave in I can think of in my life. Like, people were generally enthusiastic about the Internet. People were generally enthusiastic about mobile. People were generally enthusiastic about the cloud. Not. Not universally, but generally. This is the first thing where I'm seeing general unease. And that's a new thing for tech outside of defense and missiles and all that stuff.

Going to the customer success piece. We hosted a customer success dinner for our precursor portfolio companies last week, and as you can imagine, AI was a center conversation topic. Naturally, I didn't geek started off. And it's funny because I think everyone went around the table and in today's world they're like, I wish AI could do the heavy lifting of my job. I wish I could just show the transcript of what the customer said to me to prove to them that they agreed to these terms. I can't, because that's not how this job works. And so there's general pushback, but also interest in learning more. And I think that's where we haven't quite struck the balance at what's the correct amount to spend as you yourself an individual with just a job. And Ari said it great in our first good read. There's a lot of people who work is not the center of their being. And so how do you find time out of your day to get, I don't know, smart on AI?

Also, one thing my friend told me this weekend, he's like, you got to remember the experience of the average person just using ChatGPT as a Google replacement is very different than you building things in cloud code on GitHub. If they knew what this stuff was really capable of, they might be actually even more concerned.

We are all out of time today. Thank you Charles for jumping in. Thank you to our subscribers for hopping in as well. Please like and share with others and we will talk with you all next week. Thank you.

Bye.

Mike.