The Exchanges

Q Yeah. The, the concept of network, uh, is, is fascinating and seems very central to the story. And it's a network of users, but it's also physical network, right? Like what, what you guys did initially was to create this edge network. Like, how does one even go about building that as a young startup?

A I mean, in the very beginning, um, you know, we, when, when we, when we launched, um, we had, um, servers in five cities around the world. Uh, the, the Chicago, Ashburn, Virginia, uh, San Jose, California, um, Amsterdam and Tokyo, except Tokyo sort of, if we had been totally honest, deserved an asterix because we couldn't totally figure out the routing. And if we got it wrong, a whole bunch of traffic from the U S ended up hitting, hitting Tokyo. And so we would literally turn the Tokyo, um, servers on and off throughout the day, depending on, uh, you know, where, where, who is, who is awake. Uh, around the world. Um, today, fast forward, and you know, we're in over 350 cities worldwide. We're in over a thousand data centers, uh, worldwide. And, and we will go from, you know, the minimum deployment is sort of like a rack of servers. In some places, we'll have hundreds of racks, uh, of servers, just depending on what's, what's needed there. Um, but I think that that was the, that was, you know, a huge focus, um, behind the scenes, was how do you figure out How to get into all of these places around, around the world. And it was, um, I mean, it's, it's a, a series of, of kind of stories of how did we create enough value to, you know, the ISPs, uh, around the world, the, the, the internet providers for consumers that they would invite us to be into their, into their buildings. And…

AI assessment note: “how did we create enough value to, you know, the ISPs”

Q And when we say bots, uh, do we mean agents? Do we mean crawling bots? What do we mean?

A I mean, I think that Agent, bot, crawler are all synonyms. It all means the same thing. It depends on whether you want to describe it in a sort of normatively positive way, in which case you call it an agent. If you want to describe it kind of the ickiest way, you call it a crawler or a scraper, but it's the same thing behind the scenes. It's, it's a, it's a machine that's accessing resources as opposed to kind of a human eyeball driving a browser, accessing those, those resources. And, um, and again, in this particular case, Um, you, you still have a whole bunch of this sort of scraper, crawler, hacker traffic. That hasn't changed that much. You still have some of the sort of bots like Google bot that are, that are building search indexes. That hasn't changed that much. If anything, it's gone a little bit down. Um, but the thing that's really driving this is what I think we would all call agents, which is, you know, if, if I go to chat GPT or I go to Claude or I go to, you know, any of these systems and, and I'm shopping for a digital camera. You, you're gonna see, you know, thousands of times more site visits for that same activity, that same job to be done of, of shopping for a digital camera than if I did it myself. I might visit five sites, uh, if I'm, you know, personally trying to figure out what digital camera to, to buy, whereas my agent might visit 5000. And that's, t…

AI assessment note: “Agent, bot, crawler are all synonyms. It all means the same thing.”

Q In terms of breaking, what, what does an agentic internet mean in terms of security?

A Yeah, I mean, it's, it's, that, that security's gonna be, um, I, I think for the next two years, uh, we're going to see just a series of really scary, um, things happen, happen on, online. Um, you know, the, the, probably the worst kind of bug that was out there for a long time was this thing called log for J. Where you could send a very simple command and compromise, um, uh, almost any, any server running anywhere. Um, you know, I think for, for the next, um, uh, you know, a 104 days, a 104 weeks. So two years, um, you're going to see a log for J like vulnerability every single week. Um, because like, and again, we were, we were part of, Glasswing and, and got to use, um, you know, mythos to, to look at software. We, we get early releases of, of, um, you know, various, um, uh, open AI models. We've built our own security models. These models are incredible at finding vulnerabilities and they're going to find them like crazy. And I think security is going to be, it's going to seem really scary for the next little bit. There's going to be a bunch of VCs that invest a bunch of money because you're going to see just, You know, an explosion in cybersecurity companies. They're stopping this. But what's interesting is I think it's going to be a little bit of a head fake. Um, because I, I think that two years from now, um, what's going to happen is software is going to get just massiv…

AI assessment note: “for the next two years, uh, we're going to see just a series of really scary”

Q Yeah. And what, what does that change from, I guess, an infrastructure perspective? Like what you just described, uh, 5000 sites versus five. In some ways that sounds Inefficient? I mean, it's efficient for me as a user, ultimately, because I get the best answer. What does that change in terms of requirements for the infrastructure?

A Yeah, I think, I mean, first of all, there, there, if, if this trend continues, there's just going to be an enormous amount of additional demand on, on the internet. And I go back to, you know, during COVID, where over the course of two weeks, we saw internet traffic double. Um, you know, if, if, if our projections are right, Um, that's gonna seem quaint very soon. Um, you know, in five years you might have a thousand times as much traffic on the internet as you do today, and that's gonna mean more, you know, servers, more network infrastructure, more CPUs, more GPUs, more memory, all of the things that have to serve these bots are, are gonna be very important. And it's also gonna mean we're gonna have to figure out some new business model in order to fund that. Someone has to pay for it. And, um, and, you know, the, the business model of the internet Historically has been ads and bots don't click on ads. So it's, it's going to be something different going forward. And, um, you know, I, I think the most interesting question, uh, that in the world today is over the next five years, the business model of the internet is going to change radically and what it changes to, um, is, is, is totally undefined at this point.

AI assessment note: “more servers, more network infrastructure, more CPUs, more GPUs, more memory”

Q And do you think that there is a painful transition period from the current world to the next world? So do you think everybody's going to have to go through this as organizations recalibrate?

A We laid off more than 20% of our, of our team, uh, and not because the business was struggling, but, and not because they weren't great team members. Um, but we just need fewer middle managers. We need fewer measurers. Um, and, um, And those roles were going away. And as I talked to peers at other companies, they're all seeing the same thing and they're all saying, yeah, we're gonna have to do the same thing at some point. And you're, and you're seeing these sort of trickle out, but there's a real fear in leaders out there that they don't want to be the first ones, um, to, to, to do that. And, um, you know, pardon the vernacular, but I think that's chicken shit because The cruelest thing that you can do is wait. Um, I, I do think in the next six to 12 months, almost every company is going to go through some exercise like this where they're going to cut a bunch of their, their team. Uh, and, and I think a lot of people are wait, a lot of, a lot of CEOs are waiting around to do it because they're afraid that they're going to look bad in the process. What really struck me Was the realization that once you know that that change is going to happen, the kindest thing that you can do for your, your team is to do it as soon as possible, because it's way easier to get a job today than it's going to be in six to 12 months because the market's going to get flooded. And so we put together …

AI assessment note: “in the next six to 12 months, almost every company is going to go through”

Q So what do you do if you're one of those people? If you're a middle manager, and I think earlier you mentioned old Gen Z or young millennial, and you find yourself in that situation, like mid-career, do you just go down a complete rabbit hole of, like, just making yourself as AI-peeled as possible?

A I think, I, I think yes. Um, and And, and recognize that it's natural for that to feel scary and that the, and that your instinct is going to be to fight against it. Um, but that the more that you can embrace these tools, um, the better I've, I've never seen, you know, and again, running this now for, for 17 years, like I've never seen more senior managers on our team say, raise their hand and say, Hey, I want to go back to being an individual contributor. And so we're rethinking like even how compensation works and everything else, because I think that the, the, the power of an individual contributor and the amount of, of, of work that they can do is, is extraordinary. And so I think that for us, you know, our most senior members of our team are embracing this because it's a way for them to reinvent themselves and they're senior enough that they're not scared about it. Our most junior folks. So we, we, we hired 1111. That number is Meaningful to us, but interns this summer, you know, and I mean, it's like they're the most extraordinary humans because everybody stopped hiring interns, which I think is just total mistake. Um, and so we got sort of the pick of the litter and, um, and, and they're, and they're all totally AI native. And what we're trying to do is get both of those groups to get the folks that have been more hesitant Because the fact is, 92% of our organization, en…

AI assessment note: “I think, I, I think yes.”

Q And what was the denominator? Was it like a HTTP request?

A Yeah, so, so Cloudflare sits in front of, you know, a huge percentage of the internet. And so we, and it's in a, and a super representative sample. And, uh, and so as a result, we can always look at what are the general trends, um, across the internet. And we have a, a site we call radar. If you go to radar.cloudflare.com, there's tracking a number of different things. And one of those is how much human traffic is there, how much bot traffic is there. And in, in the last couple of months, it, uh, the, the bot traffic exceeded the human traffic. And I, and I, I think that if you extrapolate this out, you know, in five years, I think you'll see a thousand times more bot traffic than human traffic. And if I had to take kind of an over under bet on that, I'd take the over bet that it's just going to, it's, it's growing at such an exponential rate, uh, that, that you're just going to see an enormous amount of the internet that's driven by, by, by these, by these various bots and agents and other systems.

AI assessment note: “Yeah, so, so Cloudflare sits in front of, you know, a huge percentage”

Q Yeah. And speaking of, uh, VCs, there was, uh, some like fun, uh, back and forth on, uh, X, uh, maybe a couple of weeks ago now, I guess with that, Not necessarily re-litigating the, the specifics, precisely because you had a little bit of a different kind of business. Um, what was your path and what were some of the, I guess, lessons learned in terms of like fundraising?

A You know, I, I think, first of all, I mean, we, we ended up getting to work with just some incredible, um, investors, uh, over time. You know, Carl Ledbetter, um, Scott Sandell, um, Brad Burnham at USV. Um, you know, they, they, they really matched Kind of our style and what, what our style tended to be was we thought of venture capitalists primarily as, you know, sources of money and, you know, mostly sort of, we wanted when, when we needed money, we wanted to be able to, to access capital, no thought leadership, but we, yeah, we, we, we really just weren't like, we didn't need help hiring. We didn't, we, we didn't really want a buddy. We sort of wanted like, we wanted people who, You know, would, would, would push us from time to time would, would sort of say, Hey, have you thought about what's, you know, over the horizon? Um, but, but weren't, you know, in our business being like, well, I think you should price it at, you know, 2299, not, you know, 2199. I mean, like we did, it was like, we were sort of like, we, we know our business better than anyone else. And so like, if you believe in us, um, do that and get out of the way. We saw, we saw lots of other varieties of that, you know, people who, you You know, we really wanted to be kind of operators. Um, and, and I, and again, I think there's not one way of doing this for some founders. That's, that's, that's incredibly val…

AI assessment note: “we thought of venture capitalists primarily as, you know, sources of money”

Q Is that how you How you guys think about it? Like you're, you're, you have another 17 years.

A People are like, why, you know, why do you keep doing this? Um, because there are days that aren't fun. I mean, laying off a bunch of people, I mean, that wasn't, that was, that wasn't fun. Um, and it's, and you know, I've made plenty of money. Um, so it's, it's not about any of that. Um, What it is about is, is really our mission. And we, and we believe in that mission fundamentally. And we, we do things that, that cost us money or, or that certainly don't make us any money, um, because we believe in helping build a better internet. And, um, like I, I, I can't imagine anything that I could possibly be doing that is more rewarding than, than figuring out, um, How do we create some sort of sustainable, um, business for the future? And I think there's, there's a lot that's to be incredibly optimistic about that. The business model of the internet for the last 28 years wasn't the most healthy. Um, traffic has always been a terrible proxy for value. And, um, and, and, and, and, and like so much of like the media landscape was how do you sort of define your narrow audience And then with a headline, piss them off enough that they'll click on a link in order to, you know, drive eyeballs to, to your, to your site. And, you know, so much of this, so much of what is dividing the world today is actually the underlying business model of the internet, which has been traffic based. How do yo…

AI assessment note: “What it is about is, is really our mission.”

Q All right. Fascinating. I'd love to spend a little bit of time on Cloudflare one-on-one. If I put Cloudflare in front of my website, what, what happens?

A Yeah, so, um, you know, what, what Cloudflare started out as was, um, how can you take, um, a, a firewall, like a, a security product, and put it in the cloud? And the, and the original idea came from, you know, a realization that, you know, software was moving the cloud, servers were moving the cloud, Therefore, all the security and networking infrastructure had to move to the cloud, um, as well. And, um, and so that was the basic premise that, that we started with. And so if you signed up for Cloudflare 15 years ago, um, and you put us in front of your website, what you were effectively doing is, is essentially putting a bouncer, uh, in front of the website that could check anyone who was trying to come to it, uh, and then stop the bad ones. And then because we were, we, we needed to make sure we didn't slow things down. Um, we would also then, um, uh, take a lot of the load off of your website, uh, and, and be able to, um, you know, for, for good visitors deliver the content significantly faster. So the original idea of Cloudflare was sort of performance and security in a very easy to adopt, um, package. We knew as a business that in order to succeed, we eventually had to sell our services to, you know, Major banks and governments and health, all the things that we are now count as customers. But in the early days, um, those, those, those things didn't, they were never going…

AI assessment note: “putting a bouncer, uh, in front of the website that could check anyone”

Q Uh, you have some interesting stats that you published, uh, just, um, a few weeks ago in April, uh, where you said the company has 93% of R&D employees using AI coding tools, 3683 internal users, uh, whatever, two hundred and forty-one billion tokens. How did you get there? How do you create that culture for a company that was started in 2009? And two, how do you measure success?

A We were selling picks and shovels and sort of the AI gold rush, um, but we were actually pretty cautious users, um, ourselves. We'd run experiments, but, but we were sort of not Kind of all in on it. Um, and, and we had a bunch of people internally, um, that were, that were skeptical. A guy named Kenton Varda who built the workers platform is incredible. Um, engineer, um, you know, we're not supposed to talk about 10 X engineers, but Kenton is clearly a 10 X engineer. He's just, he's, he's, he's, he's, he's just a genius. Um, and he, you know, last, um, in the spring of, um, 20, 25, He's like, this ASF is, is BS. I'm going to go play with all of these tools and show you just how much of a mess they, they are and why, why, why we shouldn't be relying on them. And, and he did, he went away, super senior guy on our team, went away for a month, played with them, came back, and he was like, oh my God, I am now a hundred times more productive than I was before. Which is, which, if that's right, and he's a Tenex engineer, means that He alone was more productive than our entire team was back in like 2019. Right. And so, um, and, and, and like, I kind of believe that's true. Like it's, it's, it was, it was remarkable. And so internally on the engineering side, I think it spread pretty quickly. And I think the real turning point for us was probably November of 2025, where it felt like, a…

AI assessment note: “internally on the engineering side, I think it spread pretty quickly”

Q Yeah, that's a whole new vocabulary, because it used to be, uh, clicks, and views, and what, what is it going to be now? Like, uh, actions, or?

A We've got to figure out exactly what that is, and it's going to, you know, change a number of things. Like, you know, what is a brand in an agentic world? Um, you know, a brand historically has been, you know, a way, uh, as a, as a shortcut to tell humans, kind of, this is something that has a certain set of expectations, will have a certain Um, set of experience associated with it. If I, if I see a Walmart logo on the side of a building, I know what it's going to be like when I walk in. If I see a Marriott logo, if I see a McDonald's logo, I know what that's going to be like. Um, you know, the, the thing about the thing about bots, they have infinite amount of patience in order to discover, you know, everything that, that might be, might be right. So the, uh, what the, the basic idea of what a brand is going forward is going to be very different Than what it has been in what had been the very much human driven, um, kind of commerce and, and internet experience. Um, and, uh, and again, I, I'm not sure, I'm not sure that I have, I have ideas of what that might look like. Um, and, and I think that Kleffler will play some role in, in helping figure that out. But, but I think it's, it's all going to get discovered over the next five years. And that's, that's incredibly exciting.

AI assessment note: “We've got to figure out exactly what that is”