The Exchanges

Q In particular around the response time, idle time. Okay. Um, what about sandbox?

A Yeah. So one of the fascinating things in the world of agents is that fluid needs to run the code that humans wrote to power your applications. But what's happening is that increasingly more and more code is being created by agents on demand. A good example is when you're working on things like deep research. Let's say you're a big pharmaceutical company or a bank, and you want to create your own deep research system. So first of all, you're going to need this sort of like high efficiency compute, like fluid. You're going to need obviously some of the foundational infrastructure we talked about, like CDNs, firewalls, et cetera. But now you need a new thing that actually quite doesn't exist in the world, which is you need a sandbox, meaning a, a secure place for compute to run that is generated by the model. So when agents are doing research, they might decide, Hey, I need to run a quick Python script to compute some numbers or to produce a visualization of the data or to make up my mind or whatever. So you can think of sandbox as the, uh, Amazon easy two of AI. It's not for the code that your developers wrote is for the code that gets emitted by the LMS and it allows you to create this incredible new products. I mean, you could create your own V zero and lovable. With this sandbox primitive, but also you can create systems where the code runs behind the scenes in the service of…

AI assessment note: “you need a sandbox, meaning a, a secure place for compute to run”

Q Yes. Uh, so you launched it in the, in the fall of, of 24 and you've been on a tear since, uh, are there any, uh, metrics or any qualitative information, uh, you can share to help us get a sense for traction?

A Yeah, it's pretty insane. We've passed over a hundred million generations of applications. For those that don't know, VZero allows you to convert text to application, idea to application. It speaks to an audience that Vercel has typically not spoken to. It's basically everybody with a job or even everybody without a job. Whereas Vercel required any new engineering skills. This requires that you have an idea. I think it's the embodiment of what people have been calling vibe coding. And to give you an idea of the difference between the two personas, every single second, there is seven app generations happening on V zero. VZero has more than doubled the entire user base of Vercel, and Vercel has been around for almost 10 years. Uh, VZero has doubled our number of users in less than a year. And so what's happening really is that coding is being automated. More people can code with the ease that you could type into chat GPT. And I think that's creating more software. Some people call it personal software or hyper specialized applications. But the two things that are driving this is one, I call it. Everybody can cook. You and I have an idea. We can start bringing it to life. As individuals, right? Like during the weekend, maybe with our kids. The other thing that's happening is that within companies, teams, and enterprises, people have the same fundamental need. They need to prototyp…

AI assessment note: “We've passed over a hundred million generations of applications.”

Q Let's spend a second on the implication of all of this, and then we'll go into the, the backend, hideworks, behind the scenes, The AI cloud and, and all of those things, but, um, so vibe coding, uh, curious about your thoughts about, uh, the sort of general implications of this, um, including how does one become a good vibe coder?

A Yeah, I believe that the Rick Rubin thing that went viral quite a few times now, which is, You need taste. You need to have a vision of what you want, and you need to be able to articulate it. You know, those are like the fundamental, like literacy of a, of a person. A successful individual will be able to discern what they want and what they don't want. They'll be able to give feedback, you know, so much of being good at or successful in Silicon Valley is receiving and giving feedback, right? Or, or even paying attention to the feedback that your customers are giving you. In so many ways, I think you and the AI are like you and a coworker are going back and forth. Not unlike if I had an idea and I hired someone off of a jobs marketplace to do it, right? So now you have AI, which never gets tired, which is being kept up to date with everything that's happening in the world. And also has companies like Vercel that are infusing new knowledge and expert knowledge in it. So you're basically having this like worker, That can make your ideas come true. But obviously you still need to come here and input the idea. There's things that we're doing to help you. So a good example is a vZero community. It's massive now. So we help connect people that have ideas with all of these examples that exist in the world of, you know, it might be a dashboard, it might be a crypto app, it might be an…

AI assessment note: “You need taste. You need to have a vision of what you want”

Q virtue of vZero, a new type of users for the sale. We're going to be non-technical people who are going to need different kinds of interaction with the product. And then, presumably, the, over time, the difference between a front-end engineer and a back-end engineer and perhaps a product, all of that is going to blur. So, from a business, product and business standpoint, how do you adapt to that?

A Yeah. One of the, one of the basic things was we talked to so many people using vZero and we, I used the famous Jeff Bezos thing. We doubled down where there was the light. So I think vZero has always been appealing to so many people. Like everybody would use the product. It's just so easy to use. And like everybody would have at least an okay experience, but we doubled down on the people that were telling us this is life-changing. And so for example, within companies, the people that were dev adjacent, the people that were sitting outside of the developer room, but still every single day work with developers. For those people, this product is a superpower. And so that helped us refine the persona because we're like, okay, everybody can use this. I'm never going to turn away a sign up to the product. But for people that are not professional developers, this is transformative. Um, even just before this podcast, I got another message from a father that was like, maybe probably a developer and saying like, I just cooked with my son an application. I could have never done this before. Um, so double down where there is the light is one of my operating principles. The other one again is like realizing how the world of AI is evolving and what are the model capables, what are models capable of? And there's another emergent principle of you have to design from the model forward. If you …

AI assessment note: “that helped us refine the persona because we're like, okay, everybody can use this.”

Q to 100. And I also read somewhere, uh, that you were probably at like one 80 at the beginning of this year. So like 80% growth. What, why was that? Was that, uh, was that v-zero? Was it, um, now you're evolving towards the enterprise? Was it, now you have fluid compute, so you're taking more dollars because you, you're also involved in the back end? All of the above?

A A lot of it is AI. I mean, just to put it simply, right? Like, on both sides, it's, v-zero is growing really fast and is a significant percentage of our revenue, and then you get, and then you get the fact that, like, We are quick to meet people where they are because in order to best serve enterprises, I spend all of my time with the startups and innovators and the startups and innovators, you know, when ChatGPT came out, it became a joke. I never made fun of it. I actually have a, I'm on record on this. People were joking about the ChatGPT rappers. I was like, ChatGPT rappers are amazing. Everything has always been a wrapper of a wrapper of a wrapper, and we leaned in. So we created, um, the AISDK. The AISDK, if you look at the download numbers, I wouldn't be surprised if it surpasses Next.js, right? Like in the trajectory. It's the second biggest module in the TypeScript ecosystem, which is the largest developer, JavaScript and TypeScript are the largest developer ecosystem in the world. It's the second largest AI module behind OpenAI. So we created the next phase of AI because we want to respond to that trend really quickly. And the AI SDK and what do we call the chat SDK, which gives you like the UI primitives to build your own chat GPT style products that gave us a ton of momentum on the cloud infrastructure side, because we realized that's what people want to build today…

AI assessment note: “A lot of it is AI. I mean, just to put it simply, right?”

Q But you would still learn to code? You would still learn the core principles of computer science?

A I would learn how things work. That's the thing. Coding will be done by agents. So I would learn how it works enough that I can tell an agent, this is what I want. It's very important also to understand the limits of the system. Knowing just how fast things can be, for example. Knowing what the hardware is capable of in theory, just ideally you start with the universe. You start with like plank distance and you started with, uh, you know, speed of light and what are the limits of our simulation? Then you get into what are the limits of computers? Then you get into what are the limits of services that exist? Like the things that actually make it plausible to use these computers. Then you get into the limits of LLMs, and that requires a lot of tinkering and exploration and reading and actually a lot of prompting, a lot of curiosity. I do think that there's a bunch of companies that have voiced, we will only, we will use AI literacy, or we will judge AI literacy in our screening when we hire. Shopify said as much, and you guys are in Shopify because I thought I saw a lot, a lot of Shopify, Zapier. Nice.

AI assessment note: “Coding will be done by agents. So I would learn how it works enough”

Q Okay, so this is a pretty spectacular, um, as not just an announcement, but as progress. So to unpack it, you're basically saying that the Vercel AI cloud is making DevOps redundant? I mean, is that a self-healing system?

A Everything is, so there's two parts. I could call it infrastructure and code. Infrastructure, we've been automating for the past 10 years, and of course it's all Automate it's on autopilot is autonomous, et cetera. What's been harder for people is the operations of that, right? For example, someone attacks your website. Uh, I'm talking about a particular targeted attack. We host a really, really popular sneaker website on Vercel. It constantly has bots trying to do credit card stuffing attacks, like trying out stolen credit cards. They're trying to scrape their inventory and they're anomalous in nature. Let's say that, you know, nine to five business hours, you're operating your, your online store. You kind of know for the U S What your hot hours are, what your peak traffic looks like. It's really easy, and Vercel already does this, to detect an anomaly. But what we're doing now is we're deploying the Vercel agent to investigate that anomaly. We're going to tell you what the recommended action is to do. Maybe the attack originates from a country that you don't even do business in. It's like, why did traffic from Argentina, just to throw myself under the bus, I'm from Argentina, because I always say like, what country? Like, I don't want to see a country that's going to get people upset. All right. Your traffic from Argentina on that dot com increased by a hundred X. I don't wan…

AI assessment note: “we're deploying the Vercel agent to investigate that anomaly.”

Q V zero as a result is very, uh, front end centric. Is that, is that fair as of now? And then if so, is part of the roadmap to add more back into it?

A Yeah. So people have asked us for a long time to create entire web applications. When V zero came out, the models couldn't really do it. Like they couldn't generate enough thinking To sustain data flows and state. State is like a really complicated word that we deal with in, in development a lot. So we started out with like more of just, uh, you could call it like simple stateless applications. Over time, we've developed more of an ecosystem of integrations. So it's now possible to get data from other platforms that bring full stack to vZero. So Supabase is a good example of, uh, we have an integration that allows you to basically have a Postgres database so you can read and write data. Another really exciting integration actually, and we haven't really publicized this broadly, but it's the beginning. We built an integration of Salesforce Commerce Cloud. So we showed how you can vibe code e-commerce and you could imagine vibe coding interfaces for sales processes. You know, in so many ways V zero feels a lot like the What the spreadsheet and the word processor allow people to do is that you can, you can turn simple tools into very, you know, flexible and, and potentially sophisticated business processes. We're hoping to do that same thing through this ecosystem of integrations. The other huge integration obviously is the AI models. People want to use AI to create AI apps or to …

AI assessment note: “Over time, we've developed more of an ecosystem of integrations. So it's now possible”

Q what, uh, you think and what you see. And then on the gross margin side, um, same thing, uh, heard in the context of, of cursor that some of those products are, have negative gross margins. So, uh, on a unit basis, people lose money as, as those things are getting used. Uh, same thing. What do you, what do you see? What do you, um, what have you heard?

A Yeah, BZero has positive gross margins. It's a healthy business. The margins are improving, the business is improving, and I think it's rooted in the fact that we designed for an enduring persona. Because vZero is helpful to both companies and individuals by coding, we're not just left with the very volatile world of You know, you saw it on eggs, you saw it on YouTube. You got really excited and rightfully so, right? Like you want to try new tools. You want to try everything that's out there, but you know, your usage of the tool is more sporadic is when the inspiration comes. Whereas, you know, to put it in, in a funny way, like at work, you're forced to be creative, right? Like your, your paycheck depends on your ability to, you know, Produce value and, and, and continue to improve things and talk to customers and talk to your colleagues, et cetera. So I think something has improved. Uh, I think maybe perhaps I don't have the numbers of other products. You do this for a living, but I think something that's making VZero, uh, better in the world of retention in, in margins is that it's actually delivering value for businesses. There is like an economic equation attached to it. The thing that I'm excited about for individuals is that we want to give them ways to make money, right? I think very much like the App Store made it so easy. You know, I've talked shit about Apple's App S…

AI assessment note: “Yeah, BZero has positive gross margins. It's a healthy business. The margins are improving”

Q about their willingness to embrace that world of MCPs and agents because, I mean, certainly if you spend a lot of time building a very nice responsive reactive interface, the idea that all of a sudden you can just be, you know, a feeder for an automated agent may or may not be exciting or may be scary because you're losing control. What is the spectrum of reactions you've seen?

A Yeah, the enterprise appetite for both the Xero and our AI cloud infrastructure has been, to me, extremely surprising. I think it comes from a place of Personal recognition of the decision makers of, look, my entire life I'm spending in tools like ChatGPT, uh, a lot of CTOs and CIOs are starting to vibe code and like teaching their kids, like this is how you create an application. And, and so when you realize that in your personal life, you're using so much AI, but you, you go back to work and you're like, Oh, so we're, everything happens in four meetings, in three quarters, and everything is slow, etc. I do think you start realizing, like, hey, if I don't jump on this AI train, I might just be entirely left behind.

AI assessment note: “the enterprise appetite for both the Xero and our AI cloud infrastructure has been”

Q And Fluid itself is a reasonably recent launch as well, right? That was a few months ago.

A Yeah, it's very recent. Um, one of the things that this You know, cloud one point node or cloud two point node transition has done is that the profile of workloads that run in the cloud has changed dramatically. I cannot emphasize enough just how different these programs are. By and large, the big difference is you can call it a transition from front end to back end. In the past, everything was pixels. Then you render really fast and, and you could have, uh, short bursts of compute. Amazon invented the hundred millisecond rule is a very important rule for the world to know for each hundred millisecond that, you know, Amazon takes longer to load. They would lose one percent in, in conversions. And so we optimize all of our systems around that world of pixels, the world of tokens. I don't know if you've used the new model by open AI or three pro.

AI assessment note: “Yeah, it's very recent.”

Q So that's, that's a way, you know, which is a big problem for AI in general, right? Like we, uh, we in front of a chat GPT or whatever, all of these UIs look the same.

A People, people make fun of this sometimes. Like they take screenshots of like four or five, eight apps and they, and they all say something similar, like BZero asks you, What do you want to ship? If you don't know what you want to ship, you're gonna start with something from the community. Another way to start is from a screenshot, so, or even a diagram. Sometimes people just don't know how powerful these things are. You could literally take a photo of your napkin idea, like you can draw it, take a photo of it, upload it, and it'll give you something pretty good. There's a couple other things. We have a little button called, uh, embellish prompt or enhance prompt. So if you wrote a very simple prompt, It'll enhance it. By enhance it, it's like someone that is giving you ideas, like that friend is like, oh, that's cool, but why don't you do this other thing? So you have to be aware that when you press enhance prompt, somebody else is giving you ideas that are not necessarily yours, right? So I do think it's, it's the, there's still a ton of value for the would-be vibe coder to get a lot of exposure to the world, to get, even just looking at products, Looking at what's, what other people are doing in, in gives you more of that context so that when you prompt next time, you come up with a, with a better thing that you want. And I think the eloquence to express that is also very im…

AI assessment note: “People, people make fun of this sometimes. Like they take screenshots of like four or five”

Q You mentioned, uh, competitors. I think it would be really helpful for people to hear you compare and contrast the various companies and products that fall under the general AI coding umbrella, whether that's Curse or Windsurf or Lovable or Replit. Does everybody do the same thing or different things in different ways?

A Great question. So as of last week, uh, an article came out that I loved by the Zed team, the high performance text editor with AI native, uh, capabilities or code editor. They called what their focus will be agentic engineering to contrast it with Vibe coding. They kind of, I think maybe provocatively some people took it as like, ah, vibe coding is old, agency engineering is new. My framework is that there is vibe coding. And there is agentic engineering in the sense of, look, if you're working on Vercel's mission critical infrastructure, I literally just announced on X that we hit a trillion function invocations on our new fluid compute platform, a trillion function invocations. The people that work on that infrastructure platform, you know, sure they should vibe code maybe to like test things out and whatever, but I want them to even agentic engineering is like, Hey, like you have to be You have to put a lot of attention into everything that the agent generates, et cetera. This is hardcore, deep engineering. Vibe coding is the coding that will be available to everybody in the world, and I think both have a place in this world. And our bet with VZero is actually that there is connective tissue between the two worlds. You can start on VZero Vibe coding, and with our Git integration, for example, you can begin Collaborating with people that are doing more agentic engineering, y…

AI assessment note: “My framework is that there is vibe coding. And there is agentic engineering”

Q How do you manage negative feedback when you get it because you're building and thinking in public?

A So my approach to negativity is like every human being, I have my own. And so I try to catch myself. Like, am I going to say something mean or negative about a person or a product and literally just don't write it or leave it on your drafts, right? So like try really hard to like stay positive. And I think negativity is a, is useful tool. You can just be Mr. Positive all, all day long and You have to deploy it when it's needed and when it's useful, especially with feedback with people like regulate the harshness of the feedback so that, yeah, Hey, this really matters to me and et cetera, et cetera. Um, but I do think that it's really easy to get engagement through negativity. And so I try to resist that. And then when I meet negative feedback, it's always an opportunity as, as long as it's not a troll from a troll farm, Orchestrated by Cloudflare. Just kidding. Uh, you know, I engage in as much as good faith as possible. There's, I always say there's a kernel of truth in everything a customer says. Another operating principle of me, which is more of a traditional, I think American business principles, like the customer is king, the customer is always right. And so if the customer is annoyed and hating on you, they're still right. And so get to that kernel of right in truth. So that's going to be frustrating because when people are acting in bad faith, And this is a promise of r…

AI assessment note: “get to that kernel of right in truth.”

Q So how do you, how do you make people happy?

A Yeah, it's really interesting. So the way to think about agents and the things that the models in vZero need are not too different from what humans need. For example, if you're, if you, if you're a developer tool builder, Something that you would have been known for in the past generation was you put a lot of effort into writing really good error messages. They were being processed by a human. Now it's the same, but they're being processed by an agent. Things, some things are changing. I think the errors that we would give humans needed to have a lot of like visual context. AIs just need a stream of bytes. They just need like raw, like raw information straight into their brains, right? Like pure signal, no noise. So that's kind of the big difference. I've been talking to a lot of researchers that have been working on like deep research for things like open AI and tropic, et cetera, because Vercel is very invested in the future of the web. And it was, we were kind of like, you know, coming up with what is the best framework for how you would present your content, your documentation, et cetera, for the next, for the future of the internet, which, you know, today, if you write a documentation website, you're putting a lot of like navigation and pixels and whatever, and that's great for humans. You still want to have that. But AIs just need raw signal. So there's a new emergence, u…

AI assessment note: “the way to think about agents and the things that the models in vZero need”

Q Uh, but what, what does that mean in practice? If you're, uh, a developer at Vercel, and, you know, you want to do great at your job, and Guillermo says, well, you need to have better taste, what, what do I do?

A Yeah. Maybe just to set the background, I believe that every big intern internet or technology wave has come with a trend and an anti-trend. So when, when the internet came out and when we all got email, we got spam. So it was like the, the, the tale of two cities, email and spam email. Awesome. Connects the world spam. Oh my God. I'm getting fished by a Nigerian prince. I would leave the next one probably happened with Facebook, right? Like, oh my God, we're the world is getting connected, but then people started getting concerned about privacy and, uh, you know, maybe how they were spending their time. Certainly this is the case with TikTok. So you get incredible, like a creator platform, then you get, you know, and TikTok is actually a good example of like, you get a lot of negative externalities. And I think with AI, we have the problem of slop. It's kind of like TikTok in a way, like TikTok could be afraid, like, it could be enhancing our IQs, it could be teaching us Girl Esther Bach all day long, but in reality, we're just like, we're just like, twerking or whatever, right?

AI assessment note: “Maybe just to set the background, I believe that every big intern internet or technology wave”