Atlassian CEO, Mike Cannon-Brookes on Why Everything is Overvalued & Are We in an AI Bubble

The speaker, embracing the label of an "unreasonable man," discusses the necessity of such individuals for progress, contrasting them with "reasonable men" who adhere to existing boundaries. He reflects on his journey as a co-CEO, emphasizing the importance of equality, balance, and mutual respect in partnership, attributing much of the company's success to this dynamic. The conversation then pivots to the current era of rapid technological change, particularly in AI, and the strategic decisions being made to navigate this landscape, stressing the ongoing need for innovation and adaptation.

The speaker delves into the complexities of the current market, noting that many assets are overvalued, and highlights the challenge of building durable business models, especially in the nascent AI sector where fundamental value and monetization strategies are still evolving. He advocates for making calculated bets, revisiting them regularly, and deeply listening to customers as key strategies for businesses to remain competitive and innovative amidst uncertainty. The discussion also touches upon the evolving nature of software creation, the increased value of design in a democratized landscape, and the future of AI interfaces, suggesting a blend of existing UI and prompt-based layers.

The conversation explores the implications of AI on the software industry, including the potential for increased engineer numbers and efficiency, while underscoring that coding is just one part of a developer's role. It examines the shifting landscape of software pricing models, moving from per-seat to value-based or consumption-based approaches, and discusses the crucial need for companies to build defensibility and navigate low-margin realities. Ultimately, the speaker emphasizes that survival and success in the long term depend on continuous creation and adaptation, rather than defending existing positions, and highlights the importance of people and a positive culture in driving innovation.

• Progress is driven by "unreasonable men" who defy boundaries.
• Successful co-CEO partnerships rely on equality, balance, and mutual admiration.
• The current era, especially with AI, demands continuous innovation, strategic bets, and customer-centricity.
• Design and unique interfaces will differentiate products in the evolving AI landscape.
• Long-term success hinges on continuous creation and adaptation, not just defending current positions.

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The Value of Unreasonable Men [1:01]

• Progress is fundamentally dependent on "unreasonable men" because they challenge existing boundaries and drive change.
• Reasonable men, in contrast, tend to operate within established limits.
• The speaker identifies with this concept, stating it's an apt description of his tendency to push for change when things don't function as he believes they should, even if it sometimes leads to trouble.
• He finds inspiration in figures like David Goggins, who advocates for pushing through suffering and avoiding mediocrity.

This section defines the core philosophy that progress stems from those who refuse to accept the status quo, embracing change even when it's difficult or unconventional.

"all progress depends on the unreasonable man because the unreasonable man is the one who you know doesn't believe in boundaries, makes changes etc."

Lessons from a Co-CEO Partnership [3:52]

• The speaker emphasizes that the company's success would not have been possible without his co-CEO and their strong relationship, particularly given the challenges of starting a company on the other side of the world.
• Key elements for their success included having two equal parties in terms of motivation, experience, and life stage, fostering a collaborative problem-solving approach.
• They balanced life stages, such as getting married and having children, which provided shared experiences and mutual support during difficult times.
• A crucial aspect was each partner believing the other was far better than themselves, creating a dynamic of mutual striving and improvement.
• The relationship was also sustained by genuine friendship, laughter, and the ability to enjoy the journey through its ups and downs.

This part of the discussion highlights the critical role of partnership, balance, and mutual respect in building and sustaining a successful business over decades.

"I think it really helps to think the other person is just far better than you are at pretty much everything because you're both stretching to try to be as good as the other person."

Navigating Co-CEO Dynamics and Advice for New Leaders [6:39]

• For new co-CEOs, the advice is to be as open as possible, especially when dealing with conflicts or perceived conflicts.
• Maintaining balance is crucial, akin to a "balance of the force" or a "yin-yang" dynamic within the partnership.
• A defined "swim lane" is also essential, creating a necessary overlap in understanding goals while allowing for independent work.
• The ideal overlap is estimated to be between 60% and 80%, allowing for shared context but also distinct responsibilities.
• Over periods, founders may switch functions or take sabbaticals, demonstrating flexibility within defined roles and responsibilities.

This section provides practical advice for leadership pairings, emphasizing the delicate balance between collaboration and individual responsibility.

"you have to have a swim lane. That's that's what the magic is somewhere in the both of those things, right?"

Resolving Disagreements and Handling Crises [8:23]

• The initial shareholder agreement included a clause for resolving disputes through a game of scissors, paper, rock, best of three, which was never invoked.
• Major disagreements have occurred over acquisitions and strategic directions, but the speaker's guiding principle has been that if he cannot convince his partner of an idea's merit, it's likely not a good idea.
• This mutual approach meant that disagreements were resolved through persuasion rather than imposition, preventing major singular conflicts.
• A significant security incident decades ago required contacting the co-founder while he was on honeymoon in Africa, highlighting the critical need for co-founders during crises and the problem-solving involved in such situations.

This part illustrates how disagreements were managed and how co-founders supported each other during critical business challenges.

"I've always lived by the maximum. If I can't convince him that something's a good idea, it's probably not."

The Solo CEO Era and Founder Mode [10:35]

• The speaker acknowledges the perception of his recent 18 months as a solo CEO being an aggressive "founder mode" but disagrees with that characterization.
• He states there was no deliberate intention to make "bold moves" simply because he was solo.
• Many strategic decisions and initiatives were planned years in advance, predating his solo leadership.
• He likens the perception of sudden changes to a new prime minister taking office, where subsequent economic shifts are often attributed to them, despite prior planning.
• Acquisitions like Loom, Browser Company, and DX are cited as examples of strategic decisions, with some being long-term plans and others more immediate responses to market opportunities.

This section addresses the transition to solo leadership and refutes the idea that recent actions were purely reactive or a demonstration of solo power.

"There's certainly no intention to be like, 'Let's go make some bold moves.'"

The Creative Chaos of the AI Era [13:01]

• The current AI era is described as a "verdant creative kind of Cambrian explosion period" that will inevitably create change.
• It is a time for founder-driven businesses to make decisive actions and investments.
• The acquisition of Loom three years prior is presented as a "bold bet" that has proven successful and relevant for the AI era.
• The speaker predicts that looking back 10 years from now, this 3-4 year period will be remembered as "crazy" and tumultuous, with some perceived successes becoming failures and vice versa.

This part emphasizes the transformative and unpredictable nature of the current technological landscape driven by AI.

"this is the reason we got into technology. This is amazing. This is like one of the most exciting periods."

Investing and Durability in the AI Era [14:23]

• The speaker acknowledges the difficulty for investors to assess sustainability and durability in the current volatile market.
• He notes that most assets are vastly overvalued, with some being undervalued, making investment decisions challenging.
• The lack of durable business models for many AI companies is a significant concern, referencing the speculative bubble of the dot-com era.
• The speaker questions the long-term viability of business models where companies like AI model providers, cloud providers, and chip manufacturers all spend more than they earn, hoping to make it up in scale.
• While acknowledging the potential of AI as a foundational technology, he stresses that the true monetization and fundamental value are yet to be determined, and anyone claiming certainty is likely misrepresenting the situation.

This section addresses the investment challenges posed by the current market and the speculative nature of many AI-driven businesses.

"Most of the things are vastly overvalued. Probably true. Some of the things will be worth far more and are undervalued."

Strategic Behavior Amidst Uncertainty [16:17]

• The company has made bets and formed hunches about market evolution, committing to re-evaluating these fundamental choices quarterly.
• This strategy involves being willing to walk away from initial hunches when new information emerges.
• Listening deeply to customers is paramount, especially in noisy environments, to identify stable truths and build internal conviction.
• The speaker stresses the importance of talking to the "right customers" and a sufficient number of them to gain reliable insights.
• Customers are seen as a stabilizing force in times of change.

This segment outlines the company's adaptive strategy for navigating market uncertainty through data-driven decision-making and customer feedback.

"you have to be willing to walk away from those hunches that you have, but at the same time, you have to make them."

Proven Bets in the AI Era [18:21]

• A key bet that has proven to be right is the anticipation of multiple competing foundational AI models. This led to building technology to be "multimodel" intentionally.
• The company's expertise lies not in training its own models but in rapidly adopting and delivering the value of existing models to customers. This involves quickly testing, deploying, and integrating new models as they emerge.
• The second major bet is on the fundamental importance of design. Beyond graphic design, it refers to the core principles of how technology is conceived and delivered.
• The speaker argues that during major technological transitions, there's a return to fundamental design, and AI is no different, with "pull to refresh" on phones being a trite example of design-driven innovation.
• The company has heavily invested in its design team to create user-friendly AI experiences that abstract away technical complexities for customers.

This section details two core strategic bets that have guided the company's approach to the AI revolution, focusing on adaptability and user experience.

"what we are good at is adopting and delivering the value of that model in software to our customers very very quickly."

The Future of Business Applications and Design [21:17]

• The speaker views statements about the collapse of business applications in the agent era as potentially self-serving and easy to make when unproven.
• While acknowledging that all software can be seen as CRUD (Create, Read, Update, Delete), he argues that specialized applications, like HR systems or CRMs, offer significant advantages over basic tools like email and Excel for large-scale tasks.
• The "Cambrian explosion" of SaaS apps over the past decade demonstrates the value of specialized tools.
• He doesn't believe all apps will disappear into a single "godlike Siri agent" but concedes that AI will fundamentally change existing applications, leading to the disappearance of some and the success of others.
• The speaker subscribes to the idea that meaningful discussions focus on the future and ideas, not just current events or gossip.

This part challenges the notion of business applications becoming obsolete and reaffirms the enduring value of specialized software, emphasizing design as a key differentiator.

"I don't think that they're all just simple CRUD apps. I think that's usually someone talking their book."

The Evolving Interface of AI [23:20]

• The future interface for AI is expected to be more evolutionary, possibly even involving AI rewriting interfaces dynamically.
• However, the speaker believes users will still desire stability in interfaces, preferring predictable interactions over constant change.
• He suggests the future interface will likely combine elements of modern existing software UI with prompt-based layers, allowing for customization.
• The example of customizing Microsoft Word with a prompt to change the UI based on user needs is given, indicating a future where interfaces adapt to individual users.
• This ongoing evolution underscores the continued importance of fundamental design skills in creating user-friendly technology.

This segment speculates on the future of human-AI interaction, predicting a blend of familiar interfaces with enhanced intelligence and personalization.

"I suspect it might look a lot more like today than we think, but it will be a lot smarter."

Democratization of Software and Value of Design [26:02]

• The democratization and cheapening of software creation are seen as making good design even more valuable, as good design is a scarce resource.
• The speaker predicts that in five years, there will be more engineers working for their company, creating more software, and being more efficient.
• Technology creation is described as "not outputbound," meaning demand for new ideas is virtually unlimited, and human creativity will continually generate new concepts.
• He believes this will lead to both more technology and better technology, as the reduced cost of creation allows for multiple attempts to perfect products.

This section discusses the impact of AI and new tools on software development, emphasizing the increased value of design and the inevitable growth in both the quantity and quality of technology.

"Good design, scarce resources probably get more valuable and I think good design is quite scarce."

Vibe Coding and the Future of Developers [28:29]

• The company is launching a "vibe coding" environment, which involves enabling people, regardless of whether they identify as software developers, to create technology with specific quality and security standards.
• The speaker believes this will lead to more generalists in the workforce who can perform a wider range of tasks, making their jobs more fulfilling.
• Examples include finance professionals using "vibe coding" for applications or marketers creating websites, blurring the lines between traditional roles and technology creation.
• This trend does not diminish the role of core technologists; rather, they will likely focus on building more platforms.
• The goal is to empower a "maker audience" to create high-quality applications at the lowest cost possible.

This part explores the concept of "vibe coding" and its implications for the future of the workforce, suggesting a more accessible approach to technology creation.

"I believe that there is a large group of people who we may or may not call software developers who will want to be able to create technology of a certain quality or level."

The Future of Entry-Level Engineers and Talent [31:34]

• The speaker anticipates an increase in entry-level software engineers, with more graduates entering the workforce, equipped with AI coding assistance making them hyperproductive.
• This influx of skilled graduates is expected to positively impact businesses by shaking up existing talent pools and encouraging innovation.
• Existing 10x engineers are likely to become 100x engineers due to new tools, while the average engineer may also see a significant productivity boost.
• Bandwidth constraints in R&D and engineering will likely persist, but the increased efficiency of engineers will help address this.
• Graduates will bring fresh perspectives and expectations, influencing how businesses adopt and use technology.

This section looks ahead at the evolving talent landscape in software engineering, predicting increased numbers and productivity due to AI and new tools.

"Maybe the average engineer is going to be a 10x engineer and those 10x engineers are now 100x engineers."

AI Tools and Developer Productivity [34:44]

• The dominant tools changing productivity at the company include their own "RoboSearch," "RevoDev," "Cursor," and "Copilot."
• Engineers have access to multiple AI coding tools because they excel at different tasks, from greenfield development to manipulating code across many repositories.
• The speaker would not pay 10x the price for these tools unless they delivered 10x the productivity, citing low switching costs as a market constraint.
• Coding itself is a relatively small part of a software developer's job, with meetings, searching for information, and debugging also consuming significant time.
• AI is also expected to play a larger role in operations and AI ops tools to manage the increasing complexity of software systems.

This part discusses the practical application of AI tools within an engineering team, highlighting their impact on productivity and the economics of AI tool adoption.

"We use Revo Dev, we use Cursor, we use Copilot. Um, we use a lot of things."

Business Models and Defensibility in AI [37:30]

• The speaker notes that the current AI landscape is characterized by low switching costs, as many businesses have been built rapidly without establishing strong lock-in.
• He references Hamilton Helmer's "Seven Powers" concept, where difficulty in switching services is a key trait of great businesses.
• The rapid deployment of large language models globally has created a unique environment where virtually anyone can access them, leading to low switching costs for most current AI-driven businesses.
• Building defensibility in the future will require more than just access to models; it will likely involve value delivered to customers, data, workflows, familiarity, and interface design.
• The low-margin nature of many AI tools is seen as a current state, with monetization models and relative value still being figured out.

This section delves into the sustainability of AI businesses, questioning their long-term viability due to low switching costs and evolving business models.

"The switching costs of almost everything being built right now are quite small and they will have to build up one would argue to build sustainable businesses."

Pricing Models and Future Business Structures [43:43]

• The traditional per-seat pricing model common in SaaS is likely to evolve.
• Logical replacements include per-value-delivered pricing or consumption-based models.
• Customer reception to consumption-based models can be mixed due to uncertainty in costs.
• A blended model is likely to emerge, potentially incorporating elements of both per-seat and consumption-based pricing.
• Value-based pricing, where payment is tied to delivered outcomes, is also considered, but accurately measuring the "value" is a significant challenge.

This part discusses the potential shift in SaaS pricing strategies, moving away from per-seat models towards more flexible and value-oriented approaches.

"I think the only logical replacement out there well there's two logical replacements. One is per value delivered some unit of value. Um and the other one is some sort of consumption based model."

Protecting Creativity and Long-Term Survival [46:46]

• The primary threat to the company is the potential loss of its creativity and ability to innovate.
• The goal is to be a multi-decade technology company that survives technological disruptions, much like Adobe and Intuit.
• Survival requires continuous creation and adaptation, rather than defending existing products.
• The company is well-positioned for the AI era but must actively prove its capabilities and continue to evolve beyond it.
• The ultimate goal is to create and adapt, rather than simply defend, ensuring the company's long-term vibrancy and relevance.

This section outlines the company's core strategy for enduring technological shifts, emphasizing the continuous need to create and evolve.

"If you're not creating, you're dying. We have to create."

Constraints, Talent, and the Founder's Journey [49:30]

• The speaker believes that constraints are essential for driving innovation and making endeavors engaging.
• Without constraints, even a large company with vast resources would lack direction and purpose.
• The primary constraint the company faces is talent acquisition – finding enough of the right people.
• He likens the current state of the company to a large, well-resourced startup, emphasizing the potential to build anything, but acknowledging the need to make trade-offs on what to build.
• The founder's job is to fight the "entropy of ambition," maintaining a sense of urgency and striving even when successful.

This segment highlights the importance of constraints in driving progress and discusses the challenges and mindset required for founders to sustain their drive and creativity.

"Constraints are what makes everything happen."

The Richness of Experience and Leadership [54:06]

• The speaker believes that while not monetarily motivated, the richness of life experiences, including raising children, has made him a better leader by fostering empathy and wisdom.
• He contrasts this with the idea that financial success alone improves leadership.
• He has never regretted the founder's journey, despite its difficulties, because of the enjoyment derived from the people he works with and the collective achievement of goals.
• The joy of the founder journey comes from learning, growing, and building something meaningful with a team.

This part reflects on the personal growth that contributes to effective leadership, emphasizing life experiences over financial gain.

"The richness of the experiences that you've been through than it is some sort of capped downside, right?"

The Core of the Founder's Journey: People and Creation [56:00]

• The speaker would do it all again, attributing success to luck, hard work, and, crucially, the amazing people they work with.
• He stresses that if you don't enjoy the people you work with, the rest of the endeavor is meaningless.
• The joy of a company comes from a group of people striving towards a common goal, akin to a sports team.
• Ultimately, technology is built by people, and enjoying that collaborative process is fundamental to enjoying the founder journey.

This concluding section reiterates the paramount importance of people and shared purpose in the entrepreneurial journey.

"All technology is built by people. And that's that's if you don't enjoy that, man, you're not going to you're not going to enjoy the founder journey."