Software is Eating Labor
The a16z Show
2025/10/03
Software is Eating Labor
Software is Eating Labor

The a16z Show
2025/10/03
The evolution of software is no longer just about digitizing tasks—it's about redefining how value is created and captured in the economy. As AI agents become capable of executing complex workflows autonomously, the relationship between labor, capital, and technology is undergoing a profound transformation.
Software is shifting from merely digitizing work—like converting filing cabinets into databases—to actively performing tasks and driving measurable business outcomes. With the U.S. labor market valued at $13 trillion, far exceeding the current SaaS market, there’s immense potential for software to capture value by replacing human labor rather than just augmenting it. Traditional seat-based pricing models, such as those used by Zendesk, are under threat as AI enables one agent to do the work of thousands, potentially collapsing demand for per-user licenses. In response, companies are exploring outcome-based pricing, tying revenue to real-world results like improved customer service or healthcare follow-ups. AI is already automating roles in travel, legal, healthcare, and compliance, offering scalable solutions at a fraction of human cost. This shift not only disrupts existing SaaS economics but also unlocks new markets in labor-intensive sectors, from nursing to freight logistics, where automation makes previously uneconomical services viable. The future of software lies in autonomous agents that don’t just store data but act on it, fundamentally reshaping industries and redefining productivity.
01:41
01:41
Current software can do the job end-to-end
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03:42
Most software companies have transformed filing cabinets into databases.
03:50
03:50
Software replaced filing cabinets across industries, starting with airline bookings and spreading to HR, healthcare, and law.
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08:44
The example of a woman shifting from using paper to a computer in customer support illustrates the need for a change in the software business model.
09:02
09:02
If AI answers all customer queries, Zendesk's seat-based revenue could drop to zero.
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10:21
Software can capture value from labor markets much larger than the software market itself.
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16:06
Software performs tasks for $20,000 that humans do for $45,000, expanding market access
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20:46
AI doesn't get tired or bothered by negative interactions in demoralizing jobs like debt collection
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24:33
AI can handle emergency calls, background checks, and reduce cost of goods sold