How much more software do we really need? - by Noah Smith
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How much more software do we really need?<br>Probably a lot, but not necessarily the kinds people have made money on so far.
Noah Smith<br>Jun 02, 2026<br>∙ Paid
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So, Anthropic is going to IPO! The company is valued at almost $1 trillion, so this is going to be one of the biggest IPOs in history — the only other competitor being SpaceX, which is also set to go public soon. It’ll be one of the largest wealth creation events in history — the company’s seven founders are each going to be worth almost $20 billion, and regular employees will be worth in the millions to tens of millions. So much for my chances of buying a house in San Francisco!<br>Whether Anthropic is worth this valuation is not the topic of this post, but I guess it’s interesting to touch on. Anthropic is showing more impressive revenue growth than any company in history, having recently blown past OpenAI to an annualized rate of about $45 billion per year. Worries that the company would be unprofitable have been blown away by this hypergrowth — Anthropic is about to turn its first operating profit.<br>In fact, I think the price being offered for Anthropic is pretty conservative. A multiple of 20x annualized revenue really isn’t that expensive for a company growing at 130% a quarter. Obviously that’s going to level out at some point soon, but it would take only a little over one more year of that sort of growth for Anthropic to be priced like a value stock. The cautious pricing probably reflects the danger of competition, both from OpenAI and from the cheap Chinese open-source models perpetually nipping at the leaders’ heels.<br>The reason for Anthropic’s meteoric rise, of course, is the success of coding agents. For years, OpenAI had struggled to find a market for its state-of-the-art chatbots; everyone was wowed by the technology, and everyone used it, but people couldn’t figure out how to get it to produce lots of economic value. Anthropic basically solved that problem by being the first to invent usable coding agents — AIs that write software on their own. Claude Code, Anthropic’s agentic software, gained a huge amount of brand value, even though OpenAI’s Codex product is competitive in terms of quality.<br>This was true product-market fit. AI had already proved that it worked in terms of the underlying technology — probably around 2024, when reasoning models cut down on the hallucination problem. Now it had found its killer app — the equivalent of e-commerce and search for the internet, or spreadsheets and word processing for computers. Suddenly, everyone in the world was “tokenmaxxing” — trying to use coding agents as much as humanly possible.1<br>I first encountered this trend at a dinner event on the economics of AI (I go to a lot of those dinners these days). An entrepreneur at the dinner breathlessly told me and a couple of other attendees that he ordered his employees to “spend their salary in tokens” — that is, to create so much code with Claude Code and Codex that it cost as much as their entire paycheck. I remember asking him: “What are they using all those tokens to create?” I don’t think I got a straight answer; I’m not sure he knew.<br>He wasn’t alone, though. Plenty of companies encouraged their employees to use AI coding agents as much as possible. Meta even briefly had a leaderboard for who could use the most tokens. One company reportedly spent half a billion dollars on Claude Code — equal to one percent of Claude’s annualized revenue!<br>Reading these reports, I just kept wondering: What are all these tokens actually producing? Just like with that guy at dinner, there never seemed to be a clear answer. Were Amazon and Meta and other software companies rolling out new features? Not that I’ve seen. A lot more apps are being submitted to the App Store, but I’ve only heard of one good one (Refine.ink). I’m sure there are more out there, but so far it’s nothing like the early days of the smartphone, where I was hearing about cool new apps every couple of weeks.<br>Maybe it was all on the back end? I’m not a software guy, so I don’t have a proper grasp of how hard it is to make a website like Instagram run, or optimize the cloud servers at AWS. Sites and apps aren’t loading faster or obviously more reliable. Was advertising getting better? Are click-through rates improving? Were companies fixing their long-standing problems, taking care of “tech debt” so they can avoid paying large costs in the future? Maybe!<br>I kept quiet about these questions, since it’s not really my area of expertise. But I saw a lot of other people — people who know a lot more than I do about software engineering — asking similar things. John Loeber wrote:<br>The stuff I’m hearing is just insane. People are spending hundreds of thousands of dollars a month on tokens? Guys, what are you shipping?…I am seeing people fully enraptured by illusions of productivity. They have swarms of...