Infra Play #149: The Dario point of view

As the standoff between Anthropic and the federal government over commercial access to Fable continues, there has been a lot of criticism of the AI lab's leadership team. I was pretty clear about my opinion last week:

At the end of the day, this situation has mostly arisen from the poor communication and negotiation strategy of the Anthropic leadership team. The reality is that you can’t disrupt the workforce while simultaneously refusing to cooperate with the US Department of Defense, and then go and fear-monger about it as loudly as possible.

This is also not something that their lawyers will be able to solve for them. It’s a problem that solely Dario and/or Daniela (who appears to be controlling the majority of key decisions) should be addressing, working with the federal government to reach a reasonable solution. That “fix” doesn’t need to be fully technical. It’s also a question of changing the working dynamic between the two parties.

Sooner or later in life, you’ll have to get deals done with people you disagree with in order to progress. That’s been a foundational cornerstone of what we perceive as the concept of politics. Does Dario or Daniela have the mettle to get a deal done, or will they push the company into the inevitable outcome (destruction or nationalization) for the sake of their egos? Blaming everything on the administration due to political differences is a cop-out here, and a refusal to take responsibility.

Still, as a believer in strong beliefs, loosely held, I think we should evaluate how we got to the current state of affairs based on the direct commentary of the players. The following quotes come from an hour-long interview with Dario, published on 6/17:

The enterprise bet

INTERVIEWER: Early on, others focused on fun, splashy consumer apps. You made a bet on coding and enterprise, and Claude Code is a hit, Claude Cowork is a hit. Why did you make that bet? Was it a values decision or a business decision?

DARIO: When we started Anthropic, the base thing that mattered, the thing that always matters, is we want to do this right. But then you have to ask yourself: in order to fund the very expensive creation of these models, it needs to be a company, it needs to have a business model. Does the business model get in the way of the values? There’s always this question. One of the things I learned from being at other companies and watching other companies is: if you pick a business model that fundamentally conflicts with your values, you’re going to have a hard time. Either you betray your own values, or you become irrelevant. You end up in a catch-22. There are ways to dodge, but it’s a hard situation. It’s far better to pick a business model that is compatible with your values.

So when we thought about it, we said: we’ve seen the world of social media, the consumer world, and it really seems to encourage engagement, even addiction. The slop we’ve seen with AI video models, what’s going on? It wants to maximize the number of minutes that you’re paying attention, because that’s the advertising-revenue-driven incentive. Whereas if we look at enterprise, we want to make these models useful to people. If I think of all the positive things you can do with AI, and I warn a lot about the negative things, but ultimately we think the positive things will outweigh the negative things, many of those fall under the banner of enterprise. We want to use AI to cure diseases that we couldn’t cure before. That’s working with biotech, pharma, academic research groups, all enterprises. We want to use AI to make energy cheaper and more efficient, that’s all enterprise. We want to use AI to help with education, most of that is enterprise. We want to address health in the developing world. There are nonprofits, but those are basically enterprises. We want to increase economic growth, that is basically enterprise as well.

Then there’s another factor, which is that enterprises care a lot about trust and long-term relationships. Consumer can have this gimmicky aspect to it, whereas with enterprise, what matters is you build a relationship where you work with a company for many years, you deliver on what you say, they deliver on what they say, and they basically trust you. So it’s very synergistic with our goal of deploying these models in a positive and safe way. It serves us well to have this business model that largely aligns with our values. Not that there aren’t conflicts sometimes, not that there aren’t hard choices we have to make, but the number of such choices is much lower than it would be otherwise.

INTERVIEWER: A developer can switch from Claude to ChatGPT or Gemini in an afternoon. Is it really possible to have a long-term lead in this industry? How long would it take a serious competitor to replicate what you’ve built?

DARIO: Model quality is the most important thing. We’re very far ahead right now on model quality. There is some amount of inertia, but I’ve never relied on that. Anthropic has never relied on “oh, this is sticky and people won’t switch.” I think you want to have a better model, you want to have a better product. And we see the growth rates haven’t inflected at all. If anything they’ve gone up, at least at the time of taping this interview. So I tend to think that is the most important thing.

A lot of Anthropic's success in the last 18 months is directly tied to their (almost obsessive) focus on delivering what they see as useful models. That is not to say that the other labs are not attempting the same, but as seen with OpenAI, the attempt to expand monetization of the consumer side of that business was detrimental and essentially led to them throwing away their massive first-mover advantage. Other teams had their own struggles, most notably with xAI investing heavily in making Grok the "smartest" model without that really translating into real-world outcomes, while DeepMind continues to struggle to offer a frontier-level model worthy of competing with SOTA, mostly due to what seems to be a lot of internal political games within Google over infrastructure and product focus.

The “SaaSpocalypse,” and how much software gets replaced

INTERVIEWER: Soon after Claude Cowork was released, $285 billion in market value vanished overnight. Traders called it the SaaSpocalypse. If AI continues improving at this pace, how much of traditional software gets replaced, and how fast?

DARIO: This is one of these questions that’s very hard to predict in advance. If you could predict it perfectly in advance, people would, and they’d make a huge amount of money on the market and always be right. So no one knows exactly what’s going to happen. But I would note a few things. All of these traditional software companies have a number of moats. I think what’s going to happen is some of these moats are going to go away, but others are going to stay around. The ability to quickly write software, I definitely think that’s going away. If your moat is “we wrote this complex software that no one else can write,” good luck, you’re not going to be able to defend that. But folks have customer relationships, folks have know-how of how the field works, folks have unique domain knowledge.

So my advice to all of these folks is: obviously don’t be complacent, don’t ignore it. Make a list of all your moats, and be very aware that some of them are going to go away, while others are going to become relatively more important. Because there are limiting factors, and there may also be new moats. Those that deftly respond, that lean into the list of moats that are still present as well as the new ones, will do well. Those that are complacent, that delude themselves that what worked in the past will continue to work, they’re not going to have a good time. That’s the advice I would give.

At the end of the day, and it depends what you call SaaS and what you don’t call SaaS, but I would guess that the software industry gets larger, not smaller. Although there will be some big losers.

INTERVIEWER: Explain that.

DARIO: I just think the pie is getting bigger. With AI, the pie is getting bigger. The existing incumbents may be smaller in relative terms. Some of them may go down in value, some of them may even go out of business if they don’t adapt in the right way. You see this often when growth is really fast: if what’s possible with AI grows by 10x, it’s very easy for an existing incumbent industry to go up by 1.5x, not as much as the whole big pie is growing. So that may happen. That’s not to say we won’t have some big losers. Those who don’t adapt, who put their heads in the sand, who don’t see what’s coming, who don’t identify the moats they have, they’re going to have a really hard time.

The evasive and rather simplistic response shows that Dario is not spending a lot of time really thinking through and caring about the dynamics of the software market. For him, Anthropic's commercial success is a necessary part of achieving his goals, without real opinions or interest in what that success means in practical terms for the ecosystem.

Backers, valuation, and the money

INTERVIEWER: Your biggest backers are companies like Amazon, Google, Microsoft, and Nvidia. These are companies that all have their own agendas. They are partners and rivals. You have huge commercial milestones tied to funding. Who’s really calling the shots?

DARIO: There have been a number of cases where we’ve really spoken our minds about what we think. I’ve been very outspoken about the need for export controls on chips to China. I say this because I think it would be really bad for America, for the state of democracy in the world, for China to be ahead in AI capabilities. Some of the chip makers obviously don’t agree with that view, but it hasn’t stopped me from saying it. I’m saying it again now, even after we’ve signed more partnerships. What they know is that we always work with them. We’ve been good partners, we can work together. I’m sure they wish we didn’t say these things, but these things are what I believe. What are you going to do? At the end of the day, they benefit from these deals as much as we do. We’re all adults here. We can work together on one thing while disagreeing about another thing.

INTERVIEWER: Bloomberg’s reported that you’re at valuations higher than OpenAI. We’re talking nearly a trillion dollars for a five-year-old startup. How do you make sense of that number, and why do you need that much money if you’re more disciplined on compute and have a faster path to profit?

DARIO: The compute is ramping up very quickly. It can both be the case that the fundamentals of the business look good, but that in a year you’ll have three or four times as much compute. I’m not going to give exact numbers, but these compute ramps are very fast. We have every expectation that the revenue ramp will meet and exceed those. Raising money is the buffer against this cone of uncertainty. So it’s a totally rational thing to do. It’s a very small dilution to the business, and it logically is not at all the same thing, in fact it’s compatible with the opposite, as there being anything wrong with the fundamentals of the business.

It appears that Dario is moving away from the mentality he held last year, where he was trying to be very cautious about ramping up since he didn't want to end up holding the bill for compute that's not fully being utilized. The pain of having to introduce so many constraints on how the product is offered due to lack of compute has changed his view, and now he is moving aggressively (with the support of quickly scaling revenue and additional funding rounds) to build out his capacity.

The compute crunch

INTERVIEWER: There have been reports of server strain, reliability issues, people complaining about running out of tokens. You’ve said other companies are yolo-ing on infrastructure. Do you actually have what you need, or are you playing catch-up?

DARIO: One of these things about compute is there’s a market in compute. My view is that over a period of time, even longer than a couple of months, we can get large amounts of compute. One thing worth saying is, I don’t think we bought too little compute by any reasonable standard. We were planning for a 10x-a-year growth in compute. 10x a year is what we expect. That isn’t what we’ve seen over the first quarter of 2026. We saw greater than 3x growth in revenue quarterly, just in the quarter, not annualized, 3x in the quarter. Three to the fourth power is 80x over the course of the year. We didn’t plan for 80x annualized growth. It would not have been rational to plan for 80x annualized growth, because that means if you only get 10x, you have eight times less. So we’re in a locally extreme explosion of compute that’s not going to continue. If that continued, you just get to revenue numbers by the end of the year that no company on earth, I don’t think that’s going to happen. It just can’t. But you can have these short periods where it’s like, “oh my God, this is faster growth than we ever possibly anticipated.” You saw the compute deals with Google, you saw the compute deals with Amazon. There are more that we can and will do. The market’s liquid. If you’re able to use compute really well, and there’s the demand, you’ll get your compute. It might just take a month or two.

At a time when all of the hardware vendors are essentially fully booked for more than 12 months ahead, the statement that you can easily get compute if you want it is rather puzzling. The obvious conclusion is that if you are cash rich, you can bid higher, while you also keep receiving the new compute coming online.

Surpassing OpenAI, and holding values at scale

INTERVIEWER: Does it feel good to surpass your arch rival?

DARIO: We have a lot of difficult challenges in front of us. There’s this race-to-the-top idea that we’re trying to pull other companies along with us. I think we’ve seen that, we have pulled them along with us. Sometimes they don’t admit that’s what they’re doing. Sometimes they copy us while they’re attacking us. But this pull is very valuable. So the value of being the preeminent company, both commercially and in terms of models, it’s not about beating rivals for the sake of beating rivals. It’s about having the ability to pull the ecosystem along with us. We hope we can do more of that in the future.

INTERVIEWER: But winning has to feel just a little bit good.

DARIO: We’re always trying to succeed. We’re not trying to fail here. I’m not someone who believes we should shut this technology down, that we shouldn’t build it. We exist within a free enterprise system, and there’s nothing wrong with this. We just have to mitigate the risks of the models. It’s always been the balance between the two.

INTERVIEWER: For most of Anthropic’s history, you were the underdog. I imagine it’s easier to take the moral high ground when you have nothing to lose. At this scale, how hard is it to stay true to your values?

DARIO: I’ve put a lot of time into thinking about that. As companies scale, I’ve been paranoid at every scale of the company. At every scale there’s some new challenge, some new way the company can lose, either its will to win commercially, or the core of its values. I’m worried about both, because I see them as synergistic. I actually see the fact that we’ve been able to make such good models as the thing that allows us to assert our values in a way that works as the company grows and gets bigger. There are lots of pitfalls here, lots of ways to go wrong. Not because my values, or the co-founders’, or the company leaders’ values change, but because the composition of the company changes very fast. So I spend probably half of my time just talking to the company about the culture of Anthropic and how the culture works. When you’re growing this fast, you’re hiring a bunch of people from big tech companies. If you don’t tell them how Anthropic operates, they’ll simply recapitulate the only thing they know, which is how to operate at the companies they came from. So this is a constant struggle and a constant challenge. Me and Daniela’s, maybe, number-one top priority is figuring out how to preserve this, because we recognize that this is the core of who we are in the long run.

Dario spending 50% of his time as CEO on essentially "preaching" internally is definitely telling. On one hand, this sounds very similar to what Ben Horowitz said in his book on being a Founder/CEO: