Instead of selling software to traditional industries, a more defensible approach is to build vertically integrated companies. This involves acquiring or starting a business in a non-sexy industry (e.g., a law firm, hospital) and rebuilding its entire operational stack with AI at its core, something a pure software vendor cannot do.

The primary economic incentive driving AI development is not replacing software, but automating the vastly larger human labor market. This includes high-skill jobs like accountants, lawyers, and auditors, representing a multi-trillion dollar opportunity that dwarfs the SaaS industry and dictates where investment will flow.

The capital expenditure for AI infrastructure mirrors massive industrial projects like LNG terminals, not typical tech spending. This involves the same industrial suppliers who benefited from previous government initiatives and were later sold off by investors, creating a fresh opportunity as they are now central to the AI buildout.

The economic incentive for VCs funding AI is replacing human labor, a $13 trillion market in the US alone. This dwarfs the $300 billion SaaS market, revealing the ultimate goal is automating knowledge work, not just building software.

VCs have traditionally ignored the massive $16T services sector due to its low margins. AI automation can fundamentally change this by eliminating repetitive tasks, allowing these companies to achieve margin profiles similar to software businesses, thus making the sector newly viable for venture investment.

The most transformative opportunities for founders lie not in crowded SaaS markets but in applying an advanced technology mindset to legacy industries. Sectors like lumber milling, mining, and metalwork are ripe for disruption through automation and robotics, creating massive, untapped value.

The narrative of AI destroying jobs misses a key point: AI allows companies to 'hire software for a dollar' for tasks that were never economical to assign to humans. This will unlock new services and expand the economy, creating demand in areas that previously didn't exist.

The tangible economic effect of the AI boom is currently concentrated in physical capital investment, such as data centers and software, rather than widespread changes in labor productivity or employment. A potential market correction would thus directly threaten this investment-led growth.

The AI investment case might be inverted. While tech firms spend trillions on infrastructure with uncertain returns, traditional sector companies (industrials, healthcare) can leverage powerful AI services for a fraction of the cost. They capture a massive 'value gap,' gaining productivity without the huge capital outlay.