\n<\/p>\n
Today, I\u2019m talking with Matthew Prince, who is CEO of Cloudflare. This episode is part of a two-part series on the future of business.<\/p>\n
Matthew last joined us on the show about two and a half years ago, at what we thought then was a wild pivot point for the internet \u2014 and now it turns out things are even wilder because of AI, and Matthew and Cloudflare are right at the center of it.<\/p>\n
Cloudflare found in June that bots made up more than half of internet traffic. That number just keeps going up as more and more AI companies scrape more and more of the web, and now as more and more AI agents try and do things for people on the web. Cloudflare sits between websites and all those agents, and allows website owners some level of control: Owners can block all those AI tools, allow them, or, as you\u2019ll hear, only allow those that might pay money for access.<\/p>\n
Verge<\/em> subscribers, don\u2019t forget you get exclusive access to ad-free Decoder<\/em> wherever you get your podcasts. Head here. Not a subscriber? You can sign up here.<\/p>\n So Matthew and I talked about how to control all these bots, what kind of mess they\u2019re making of the web, and what kinds of information might be valuable in the future as some of the payment schemes come into focus. You\u2019ll hear me ask pretty directly if some of the outcomes he\u2019s describing are actually good <\/em>\u2014 Matthew is a thoughtful guy, and his answer is something I\u2019m still thinking about well after we had this conversation.<\/p>\n AI is also upending everything inside of Cloudflare. Earlier this year, the company laid off more than a thousand people \u2014 20 percent of the company \u2014 and then Matthew wrote an op-ed about that decision that ran in the Wall Street Journal<\/em> under the headline, \u201cHow I choose which Cloudflare employees to replace with AI.\u201d That\u2019s pure Decoder <\/em>bait in every single dimension: AI, big controversial decisions, and org charts, all in one.<\/p>\n And one last thing, before we get going: You can subscribe to Decoder <\/em>on YouTube, where we put out new episodes every Monday and Thursday.<\/p>\n Okay: Matthew Prince, CEO of Cloudflare. Here we go.<\/p>\n This interview has been lightly edited for length and clarity.<\/em><\/p>\n Matthew Prince, you\u2019re the cofounder and CEO of Cloudflare. Welcome back to <\/strong>Decoder<\/em><\/strong>.<\/strong><\/p>\n I\u2019m really excited to talk to you again. It\u2019s been about two years since you were on the show. I was just looking back over <\/strong>that episode<\/strong> and I said something to you like, \u201cit\u2019s a momentous time for the internet.\u201d And I was not even close. It\u2019s now an even <\/strong>more <\/em><\/strong>momentous time for the internet.<\/strong><\/p>\n You are at the forefront of rebooting how companies work with AI. That is the most <\/strong>Decoder<\/em><\/strong> bait of all time. I want to talk about bots and the internet and publishers and Google and all the things that you are in the middle of. But let\u2019s start at the very beginning. <\/strong><\/p>\n Cloudflare is a complicated, important company. The last time you were on the show, you said, \u201cCloudflare is a service that makes the internet faster and protects it from bad guys.\u201d Is that still how you would describe what Cloudflare does?<\/strong><\/p>\n That\u2019s usually what I say when I\u2019m trying to answer a question at a cocktail party and I don\u2019t want to talk to the person any more. What I say if I\u2019m interested in talking to the person more is that Cloudflare is trying to rebuild the internet the way it should have been built from the beginning if we knew how important it was going to be.<\/p>\n We run a giant network. We\u2019re in over 350 cities worldwide, literally thousands of data centers. We have equipment running in all those places, and then we do a handful of things. If you\u2019re trying to put an application or content online, we make sure that it\u2019s safe. If you\u2019re a person or an employee online, we make sure that wherever you go online is safe. We help give people the ability to write applications that can scale to an entire internet audience and run on the infrastructure that we have. That\u2019s the fastest-growing part of our business.<\/p>\n We\u2019ve recently started to think about how the business model of the internet is changing dramatically and we\u2019re trying to help shape what that future business model of the internet looks like and make it as healthy as possible.<\/p>\n Can I connect the dots between the business model of the internet, how the internet should have worked, and Cloudflare trying to build the internet as it should have been?<\/strong><\/p>\n That is different than, \u201cCloudflare protects from bad guys.\u201d I will note that\u2019s what you said to me last time, which now makes me feel like you don\u2019t want to talk to me at the cocktail party, but that\u2019s fine. That\u2019s a shift. It\u2019s just a notable shift. <\/strong><\/p>\n The business model of the internet has dramatically changed because of AI, because of bot traffic, because of AI scrapers, the whole thing. Describe what you think the business model of the internet is right now and what it should be.<\/strong><\/p>\n For at least the last at least 30 years, the business model of the internet has been advertising. It\u2019s not the entire business model of the internet, but it\u2019s really driven all of the growth of the web and built what we all enjoy today, which really is a miracle.<\/p>\n The company that is responsible for that more than any other is Google, which for the last 28 years has really defined that. We all think about it for search, but they really built out all of the ecosystem around advertising online. They bought DoubleClick, they built things like Google Analytics that let you actually see who was coming to your property. It really is the hero of what I call the first generation of the internet and the first generation of the web.<\/p>\n What\u2019s changing though, very quickly, is who is actually using the web, or what is using the web. Last November I was at Web Summit, the big European tech event, and I was asked, \u201cWhen do you think that non-human traffic \u2014 agents and all of those things \u2014 are going to pass human traffic online?\u201d We have a lot of data because we see a huge percentage of the internet, so we pulled all of that data and looked at it and said that in the second half of 2027, automated traffic would become larger than human traffic. It felt like a big deal that we could see that for the first time in the internet\u2019s history.<\/p>\n I was asked again at South by Southwest in March of this year, 2026, and we pulled the data again and it had moved up, where it was going to then be the first half of 2027. We\u2019re like, \u201cWow, this is growing. This AI thing is a big deal and people are using it like crazy and it\u2019s driving a huge amount of traffic.\u201d<\/p>\n I was stunned when just a few months later in May, the team came to me and said, \u201cYou won\u2019t believe it, but automated traffic has now passed human traffic online.\u201d And that\u2019s just expanding like crazy. If you extrapolate that out, with the giant caveat that I\u2019ve gone wrong so far in every prediction that I\u2019ve made on this, five years from now, we think that automated traffic will be 1,000 times human traffic online. Not because human traffic is going to decline, we think it\u2019ll stay around the same, but because we\u2019re just seeing such an explosion in all of the rest of the traffic.<\/p>\n The challenge of that is, if you have 1,000 times more traffic, someone\u2019s got to pay for the infrastructure to power that. That\u2019s going to require bandwidth, that\u2019s going to require servers, that\u2019s going to require a lot of things in order to make that happen.<\/p>\n And, the traditional model of how to pay for that, which was advertising, doesn\u2019t work for bots. Bots don\u2019t click on ads. They don\u2019t respond to pretty swirls of paint and what we traditionally think of as a brand. We\u2019ve got to come up with something else that\u2019s going to power that incredible insatiable demand that\u2019s going to be put on the internet going forward. I\u2019m spending a lot of my time trying to think about what that\u2019s going to look like.<\/p>\n When you describe that as a business model, that implies that there\u2019s going to be customers and revenue and profits. And I don\u2019t know if any of that\u2019s true.<\/strong><\/p>\n There\u2019s certainly a lot of revenue.<\/p>\n Well, maybe for the CloudFlares and the Googles of the world, but for the \u2014<\/strong><\/p>\n Or for the Anthropics of the world! Anthropic added $10 billion of revenue in a single month. There is enormous demand for these AI services. And if you\u2019re an AI company, what you really need are three things.<\/p>\n You need great talent and researchers. And right now, that\u2019s scarce. Right now we have a scarcity of people who really understand how to build these systems, but that\u2019s going to change. Every single university in the world is standing back up their AI department. We\u2019re training people like crazy. Labor markets are pretty efficient. We\u2019re going to have more and more people coming into the space.<\/p>\n The second thing that you need is chips. You need the silicon to run these things. Today, Nvidia is the best in the world at that, but you\u2019ve got a whole bunch of others, whether that\u2019s AMD or Qualcomm or all the hyperscalers, that are building their own chips in order to power these things. While we have a massive shortage in the availability of silicon and the ability to actually power it up and turn it on, that\u2019s going to change as well.<\/p>\n The third thing that you\u2019ve always needed is the data to feed into all of these different models. And that\u2019s been the one thing that I think is going to go the other direction. Historically we\u2019ve just made the internet completely open and given bots access to all of the stuff that\u2019s being created.<\/p>\n I think that\u2019s starting to change. We\u2019re seeing a shift where more and more of the people who are creating content, really creating information, are saying, \u201cMaybe we\u2019ll give that away for free to humans, but if a bot is coming for it, then bots have to pay for it because they don\u2019t have that traditional give-to-get. We can\u2019t put an ad in front of them and have that be something that allows me to help pay for the content creation that\u2019s there.\u201d<\/p>\n What we\u2019re seeing actually goes back to some of the original protocols of the internet. The 403 protocol, which was written in the very first version of Netscape, was actually payment required, and you actually have to pay for the content that you\u2019re receiving. Oh, excuse me, I said 403, it\u2019s actually 402.<\/p>\n We are working with other leading companies like Coinbase and Stripe in order to say, \u201cHow do we make sure that we can allow people who are creating content, people who are doing things online, anyone who\u2019s putting a website up, to say that in exchange for that thousands and thousands and thousands of times more traffic that\u2019s going to come to you, you\u2019re not going to maybe get the advertising revenue that comes from it, but maybe you can get a fraction of a penny every time somebody actually accesses that information.\u201d<\/p>\n Where does that fraction of a penny come from? It comes from the fee that people are going to be paying for their AI agents and other systems that are out there, similar to how a Spotify or an Apple Music works today.<\/p>\n I like that we\u2019re less than 10 minutes in and we\u2019re already at the 1996 dream of micropayments on the web. We\u2019re going to stick with that for one more turn here. <\/strong><\/p>\n When I said business model, what I was really pushing at was the idea of incentives. So maybe there is some business model for information. You\u2019re going to publish some new information and bots will come and find it and yep, the 402 protocol will come back to life and we\u2019re going to do, I don\u2019t know, crypto micropayments using Stripe powered by Cloudflare. That\u2019s a version of the future that many people have talked about for a long time.<\/strong><\/p>\n The incentives to stand all that up on the web is the thing that I\u2019m worried about, when I say there\u2019s a business model and customers and revenue. If I stand up a website, and I think most of my customers are going to be bots and not people, I might not do that. I might just start a TikTok channel instead, and then monetize my TikTok audience in whatever way I might want to monetize a TikTok audience. That seems like a really big inflection point right now at this second.<\/strong><\/p>\n You mentioned Google, and I\u2019ve asked you about this many times. The incentives to put new information on the web just seem to be in permanent decline. It just doesn\u2019t seem like a good idea any more. On the flip side, the web as an application program, it\u2019s like the absolute apex. Every new app that comes out is a web app, or if it\u2019s a desktop app, it\u2019s just Electron. There\u2019s something happening with the web as an application platform that is incredible, and something happening to the web as an information platform that is devastating. And you\u2019re trying to connect those dots, right? You\u2019re trying to say we can change the incentives over here.<\/strong><\/p>\n What\u2019s a version of the future \u2014 maybe it\u2019s microtransactions, maybe it\u2019s not \u2014 where the incentives to make the web an information platform are as good as YouTube?<\/strong><\/p>\n You\u2019ve illustrated a tough to reconcile dichotomy that\u2019s happening right now. If you look at things like the publicly accessible data on Wikipedia contributions, it\u2019s down significantly, because people are like, \u201cWhat\u2019s the incentive to put information on Wikipedia?\u201d Something that, again, people are doing for a lot of different reasons.<\/p>\n Back in the day, if you were contributing things to Wikipedia, you knew people were at least reading Wikipedia. Now, the interface through which people consume that information isn\u2019t Wikipedia itself. It\u2019s just reading the answer through whatever answer engine you\u2019re using, whether that\u2019s OpenAI, ChatGPT, or Anthropic Claude, or Grok on X or whatever it is. And that means that the people who are the editors of Wikipedia are saying, \u201cMaybe it doesn\u2019t make as much sense for me to do that.\u201d<\/p>\n The flip side of that is, the web as a whole actually had been declining since about 2012. The web grew like crazy in the late \u201890s and through the 2000s. Starting around 2012, you really saw it plateauing and actually decreasing, up until about 2025, where something flipped. Starting in about October of 2025, the various vibe-coding platforms made it easy for anyone to create a website, and so more and more people were creating those applications. And as you said, even your desktop application, your mobile application, increasingly is just a wrapper around what is fundamentally a web application.<\/p>\n The growth of the web itself \u2014 with really high-quality stuff and a lot more people contributing to it \u2014 is faster today than it has been at any time since the early 2000s. That\u2019s the tension between those various things.<\/p>\n What\u2019s unique about Cloudflare is that because we sit in front of more than 20 percent of the web, we have the ability to overcome some of the incentives problems. We can very quickly turn something on and say, \u201cOkay, you have to pay a fraction of a penny in order to get access to this information.\u201d And that can kickstart the beginning of what we need.<\/p>\n If you don\u2019t have something like that, we face a massive tragedy of the commons problem. Let\u2019s say today I ask my favorite AI agent where I should go to lunch.If I were doing research, I might go look at a couple of different menus as an individual. My AI agent today goes and scans every single menu in the local area in order to figure out what\u2019s going on. Only one of those places is going to actually get my lunch dollars. If that just expands infinitely, if there\u2019s no cost to doing that, at some point my agent\u2019s just going to look at literally every resource that\u2019s available everywhere on the internet, and then come back and say, \u201cYou know, you should go to Wendy\u2019s.\u201d<\/p>\n That\u2019s an enormous waste. We\u2019ve got to have something saying that there\u2019s a cost every time you load a webpage. There\u2019s bandwidth, there are servers, there are things that are behind that, and someone has to pay for that. If it\u2019s not going to be advertising and it\u2019s not going to be direct commerce, then there has to be something that actually puts some constraints there. We are in a good place to say, yeah, it can be a tiny amount of money, a thousandth of a penny or something like that. But that\u2019s enough that we can actually start to say, okay, that will help pay for the infrastructure.<\/p>\n If you have incredibly valuable content, if you\u2019re a news publisher or you\u2019re an academic, then maybe there\u2019s a premium on top of that that you charge and say, \u201cHey, I\u2019m not going to give you this content unless you pay even more for it, but I believe that it\u2019s valuable and we can create a market for it.\u201d<\/p>\n In order for that to happen, you\u2019ve got to have a player like us that\u2019s in the market that can kickstart that. But once you kickstart it, we\u2019ve seen from the side of the buyers, the big AI companies, that they\u2019re all willing to do this. We\u2019ve seen from the side of the sellers, the big content creators, that they\u2019re all really excited about this. What\u2019s really been lacking is the technology that links those things together, and that\u2019s what we\u2019re spending a lot of time building.<\/p>\n It feels like the theoretical underpinning of this conversation is the very notion of scarcity itself. I\u2019m an old copyright lawyer, and copyright law for years and years and years had a built-in mechanism to be important, which was that one copy of a CD was one copy of a CD. And if you wanted another one, it was pretty hard to make another copy of a CD. Even when it got easy, you still needed another physical CD-R, and that imposed some cost on how many copies you could make, and then it was hard to distribute them.<\/strong><\/p>\n All of that went away with the internet. We moved everything to digital files and the burden of making another copy fell to zero. And I think a bunch of consumers expected everything would be free. There\u2019s that famous quote, \u201cInformation wants to be free.\u201d There\u2019s <\/strong>a second half of that quote<\/strong> everyone forgets, which is, \u201cInformation also wants to be expensive because it\u2019s hard to generate.\u201d And the internet just turned that upside down.<\/strong><\/p>\n The gating mechanism of physical media, which provided some scarcity, and thus some economic value that you could measure, went away and we decided information should be zero and maybe supported by advertising. There was actually a tension that became valuable, because that was scarce in its way. You\u2019re talking about imposing scarcity with your technology.<\/strong><\/p>\n We always talk about markets needing supply and demand. That\u2019s not exactly right. You need demand for sure, and you want infinite demand ideally, or as much demand as you can get. Infinite would probably be bad, because then it would be hard to discover price, but you want demand.<\/p>\n And then, you actually want constrained supply. There\u2019s no market for air where either of us are sitting right now, because there\u2019s plenty of air. But if we go scuba diving, then all of a sudden there\u2019s a market for air, because air is constrained underwater, and so you have to buy it in order to be able to do it.<\/p>\n Music is the example that I look to when I think about what this could look like in the future. I flew up to Stockholm to meet with Daniel Ek, who started Spotify, and it was just a fascinating conversation. If you think about the history of music, once upon a time, the majority of music sales were from CDs or albums or whatever it was. And then, along came the internet and along with it, Napster and Grokster and Kazaa, and all of the things that essentially commodified music and made it available for free for everyone. Even if you\u2019re an incredibly law-abiding human, the majority of people were just downloading music because they wanted access to music.<\/p>\n If you go back 23 years, the music industry in total was valued at about $8 billion, which is a lot of money, but it\u2019s not a lot of money for the entire music industry. That\u2019s The Beatles and The Rolling Stones and everything else. But people were like, \u201cWe can\u2019t make any money off of this.\u201d<\/p>\n And then, Steve Jobs steps on stage, and announces iTunes and that it\u2019s going to be 99 cents a song, but they include cover art and they\u2019re going to make sure it\u2019s high-quality and all these things.<\/p>\n But mostly it appealed to this emotion of, \u201cyou should be paying for music.\u201d Now, that\u2019s not the business model that won, but it was a flag in the ground that said that this information is actually worth paying for, and it\u2019s really valuable. And it was the iTunes that then eventually begat the Spotifys of the world. And the incredible thing is, just last year, Spotify sent something like $12 billion back into the music creator ecosystem. We can debate whether the right people are getting it and whether it\u2019s fairly allocated.<\/p>\n This is my favorite thing to argue about because I think whatever happens to the music industry happens to everybody else five years later. So I spend a lot of time thinking about it.<\/strong><\/p>\n And the turn there, which I think is fascinating and is either good or bad, is that the amount paid or the music files themselves became very small. You can get a million streams on Spotify and you\u2019re not making any money, but the amount generated by touring, commercial sponsorships, sync licensing, and advertising all skyrocketed.<\/strong><\/p>\n That\u2019s just simply not true.<\/p>\n Why is private equity buying all of the music catalogs for hundreds of millions of dollars? The answer is because actually making money off the streaming of the music is extremely lucrative. Spotify alone is sending $12 billion back to the music industry, back to the actual rights holders behind these various things.<\/p>\n There\u2019s way more money coming from Spotify into this than there is from touring or any of the other things that are there. Those are other ways to make money, but it\u2019s the streaming that is really driving all of the real growth.<\/p>\n I just want to draw a distinction here. You\u2019re not here to argue with me about music, which is my favorite thing to do, so I apologize for just doing it. But private equity is going to make that money, not the musicians. They\u2019re paying some of the catalog holders for some of the things, but that money flooding in \u2014<\/strong><\/p>\n If The Beatles or The Rolling Stones or whoever\u2019s the latest ones to sell their music catalogs had held onto the music catalogs, then the musicians would\u2019ve made that. They are making the determination. And when they sell the rights, they get the check.<\/p>\n They do get the check, but the comparison I\u2019m making here \u2014<\/strong><\/p>\n If you win the lottery, is it better for you to take the annuity of payments over the course of the next 50 years or to take the lump sum up front? That\u2019s the trade-off that they\u2019re making, but there\u2019s more money going into music creation at this point in time than there ever has been in human history. Technology is not inherently a destroyer of value of information. In this case, it has been a massive enabler of value and allowed people to find audiences, and yes, sell more tickets to their concerts as well.<\/p>\n That\u2019s actually the model that we need to think about. How do we take what Spotify has done, which is to say we pool together the resources of a bunch of people that are paying for access to the entire catalog of music, and then give that back to musicians based on some sort of algorithm that hopefully rewards real value creation.<\/p>\n What if you had the same thing where with a portion of what is being paid for for the various AI companies, you had to pay for the researchers that built the AI systems and you had to pay for the chips, but also to pay for the content, which is actually the real knowledge that is training these things? That\u2019s exactly the type of model that you need to actually unlock what could be a real golden age of information creation.<\/p>\n The comparison I\u2019m making is not whether a bunch of aging rock stars are going to sell their catalogs and cash out because they\u2019re old. That\u2019s fine. They can do that. It\u2019s more that the shift you\u2019re describing, into gaining access, into wide open access on Spotify to every song ever made, and then we\u2019re going to move some pennies around and some people get rich, and we\u2019ll create some winners and losers, fundamentally change the entire business model of music.<\/strong><\/p>\n The conversation with Dan was fascinating, but one of the things he said was he said, \u201cOkay, listen, if you go onto Spotify and you search for Taylor Swift, \u2018Shake It Off,\u2019\u201d they return a result and they\u2019re pretty sure that they have given you what you are looking for.\u201d<\/p>\n On the other hand, if you go to Spotify and you search for, \u201cI want a song to a disco beat about how much fun it is to dance with my cat,\u201d there aren\u2019t a lot of songs like that out there. They know that whatever they return is a pretty bad result. But the interesting thing is what happens next. They then take those searches for things that they don\u2019t have good results for, and they publish that back to music creators.<\/p>\n There\u2019s something that\u2019s pretty amazing about that. They\u2019re saying, \u201cHere\u2019s an emotion that someone is searching for, which we don\u2019t have a good answer for, which we\u2019re then going to go and publish back to music creators.<\/p>\n This is one of those moments where everyone\u2019s going to be like, \u201cI\u2019m in the wrong profession.\u201d There\u2019s a guy in Denmark, who makes 40 million euros a year writing songs for unfulfilled Spotify queries, and he\u2019s not alone. He\u2019s the most successful, but there\u2019s a whole bunch of people that are making literally millions of euros or millions of dollars a year doing this thing, writing songs for what people are searching for that isn\u2019t out there.<\/p>\n Now extrapolate that to the next level. For the first time in human history, we\u2019ve built a mathematical model of human knowledge. That\u2019s what the LLMs are. We know where they know things, but we also know where they\u2019re missing things. I picture it like a giant block of Swiss cheese, and there\u2019s a lot of cheese, but there\u2019s a lot of holes in the cheese.<\/p>\n The really interesting thing is, when you talk to the leaders at the big AI companies and you say, \u201cWhat do you want to pay for?\u201d They don\u2019t want yet another story about what\u2019s happening at 1500 Pennsylvania Avenue [sic<\/em>], which is what the current media environment is feeding us like crazy. What they want is to fill in the holes in the cheese. They want new knowledge that no one ever knew about before.<\/p>\n I have an example where this is actually working: My wife and I own a small local newspaper in our hometown of Park City, Utah. I think we will make more money off AI licensing deals this year than we do off digital advertising. Local media is exactly the sort of thing that is much more valuable in the media world that we\u2019re going into, but was completely decimated in the media world that we are coming out of, where what mattered was volume and scale and dividing things. Whereas local media is all about, let\u2019s tell you about the cool new restaurant that just opened down the street.<\/p>\n If you\u2019re an AI company, and you want to be able to be the best travel planner that\u2019s out there, you want to have artificial general intelligence, you need to know what the hot new restaurant is in Park City, Utah. And if you don\u2019t have access to the Park Record<\/em>, our newspaper, you don\u2019t know that.<\/p>\n We\u2019re not going to protect all media. In the same way that with the move to Spotify, there are a whole bunch of losers in the musician space, but there are going to be new winners, like that person in Denmark who\u2019s creating things off unfulfilled Spotify queries.<\/p>\n The winners in this new space might actually be the kind of things that people really want to come back to media: more local news, more unique things, more Reddits of the world, more of what the internet used to be when I was first on it in the \u201890s. I think that\u2019s actually what most internet users are craving. And I think if we get the incentives right, we actually have a way of incentivizing more of that unique original content as opposed to what we have today, which is a media ecosystem that is largely just rage-baiting people into clicking on things so that they can serve them an ad.<\/p>\n One of the things you would need to build in order to make that work is a way to stop the AI crawlers, to stop the model companies from showing up. Just today, there\u2019s yet another lawsuit. The music companies are <\/strong>going to sue Anthropic<\/strong>. The White House <\/strong>came out in support of OpenAI<\/strong> in its case against <\/strong>The New York Times<\/em><\/strong> today, saying that training should be fair use.<\/strong><\/p>\n I think I need to disclose that in some series of corporate mergers, <\/strong>The Verge<\/em><\/strong>\u2019s parent company is <\/strong>now suing Google<\/strong> in some way. I have literally nothing to do with it. It\u2019s just all that. It\u2019s all the swirl, right? And that is a legal swirl.<\/strong><\/p>\n We\u2019re going to use the law to say, \u201cThis is illegal and we\u2019ll punish you if you do the bad thing.\u201d That\u2019s just up for grabs. Those are 50\/50 and maybe existential problems.<\/strong><\/p>\n Maybe not. The law right now in the US is different than everywhere else, and so you\u2019ve got this patchwork around it. But the best case on this is part of the Anthropic case, where the judge basically said that training is fair use against all the books. And by the way, you shouldn\u2019t have stolen the books. That was bad. But if you hadn\u2019t stolen the books, if you had actually bought the books, then it would be okay.<\/p>\n That was a valuable enough result for Anthropic that they settled the rest of the case for $2 billion, which is a lot of money, even for Anthropic.<\/p>\n So when you\u2019re building technology, you\u2019re keeping that in the back of your mind, right? The market is coming to some sort of understanding of what\u2019s valuable and what\u2019s not, and you need to stop them from showing up \u2014<\/strong><\/p>\n Different regulations are going to be passed in different places around the world. Again, as an also recovering intellectual property attorney, I very quickly go to like, \u201cOh, let\u2019s just use intellectual property.\u201d But that\u2019s such a kluge versus the much easier thing, which is, let\u2019s just use technology.<\/p>\n I remember sitting with a bunch of media execs and they\u2019re like, \u201cOh, how are we going to stop these nerds in Palo Alto from scraping our stuff?\u201d<\/p>\n And I was like, \u201cI go to war every day with North Korean and Iranian and Chinese hackers.\u201d They\u2019re really good at it and they hide. Whereas the nerds in Palo Alto have a Delaware-based C-corporation. It\u2019s pretty easy to identify them versus the others. And it\u2019s really difficult for them, at scale, to hide from us.<\/p>\n What we\u2019re seeing is actually much more of them being willing to say, \u201cListen, we will specifically identify when we are coming to a site that it is us, that you can rely on us, and we\u2019ll tell you exactly what we\u2019re doing, so that you can have the right to control how that information is being taken.\u201d<\/p>\n I think that was an interesting question, like, two years ago. But even the Googles of the world, who have been at times challenging through this \u2014 Google is sort of like a Marvel character, like the hero of yesterday becomes the villain of tomorrow. The challenge has been that they\u2019re like, \u201cWe struck all these deals to get access to all the internet and now we can use it for whatever we want.\u201d<\/p>\n We were like, \u201cEh, in the past you were sending people traffic. Now you\u2019re training on things and sending them no traffic. That\u2019s a different give-to-get.\u201d And what I\u2019ve been really actually impressed by with the Google team is that they are much more willing to engage here. They understand the value of the ecosystem. There are people at Google who really do believe in making sure that there is a healthy, sustainable ecosystem going forward.<\/p>\n Some of the things that they\u2019ve already committed to around transparency of their crawler, and some of the things that I expect that they will do over the next little bit, I think that\u2019s a good sign and it\u2019s going to make it so that if even Google is doing it and is willing to say, \u201cI\u2019ll announce what I\u2019m doing, and in many cases I\u2019ll even be willing to pay for content,\u201d that actually makes it even easier to convince all of the other AI companies to do the same.<\/p>\n Do you think you need to turn the screws all the way and actually block the Google crawlers to get them to pay?<\/strong><\/p>\n As of September 15th, we\u2019re going to set the defaults across all of our free customers for it to be that Google is going to be blocked for AI training, but if they won\u2019t differentiate between AI training and search engine training, we\u2019re just going to block them across the board.<\/p>\n If you\u2019re a site owner, you\u2019re like, \u201cI don\u2019t want that to be for me,\u201d we\u2019ll make it easy for you to turn it off. It\u2019s just about what we set the defaults to.<\/p>\n But I\u2019m really encouraged that the good forces at Google are realizing that this has to be a healthy ecosystem, and that they have to play by somewhat the same rules for this new AI market that everyone else is playing by, and that they can\u2019t leverage the monopoly that they had in search yesterday to create a monopoly in AI tomorrow.<\/p>\n I\u2019ve talked to Sundar [Pichai, Google CEO] about this many times. I don\u2019t think he loves the fact that I am the person who <\/strong>keeps calling it Google Zero<\/strong>, but so be it. Sundar is very thoughtful. He\u2019s very kind. Every time I talk to him, I get the sense that what he wants to say is, \u201cWell, you didn\u2019t do anything about it. All you publishers are complaining. You got super addicted to my fire hose of traffic, and you have no leverage. You built no audience of your own. You didn\u2019t do anything. Look at all of these other platforms that I have to compete with. TikTok showed up and YouTube had to compete with them. ChatGPT showed up and the search team had to compete with them, and you did nothing.\u201d<\/strong><\/p>\n This feels like the something. We\u2019re going to block the Google search traffic. We\u2019re going to block the crawler. I think the CEO of People Inc. is <\/strong>talking about<\/strong> literally blocking Google.<\/strong><\/p>\n Steve [Huffman, CEO] at Reddit has really become more aggressive in this line. Google doesn\u2019t work if it can\u2019t search these things. And it\u2019s actually more existential for them.<\/p>\n The very nature of how Google\u2019s search ranking works is it builds a tree. That\u2019s what page rank was. It sort of says, \u201cOkay, here\u2019s a super reputable thing and then let\u2019s see how it\u2019s connected to everything else that\u2019s online.\u201d<\/p>\n The problem is, with Cloudflare being 20-plus percent of the internet, if that just disappears, that\u2019s in a giant hole in the middle of the tree. It doesn\u2019t just break it for this, it breaks it for everything. That\u2019s what we realized, that on behalf of and in conjunction with a lot of our customers, we could say, \u201cListen, this isn\u2019t fair anymore. You are creating costs, you are taking content, you are getting value from that content, either in terms of the subscriptions that you\u2019re selling to your AI tools, or to the ads that you\u2019re running against that. And that\u2019s just not a fair give-to-get anymore.\u201d The deal has to change.<\/p>\n I\u2019m really proud of the fact that we\u2019ve played a role in helping the publishing industry go from what was two years ago when I had dinner with Neil [Vogel] from People. He\u2019s like, \u201cWoe is me. What are we ever going to do?\u201d<\/p>\n I\u2019m like, \u201cI think we can fix this.\u201d<\/p>\n Now, last time I saw him, we gave each other high-fives and said, \u201cI think we\u2019re making progress.\u201d And the deals that large publishers are doing are significantly better.<\/p>\n Now the question is, how do we bring that to the rest of the internet? Because if we don\u2019t, we have this massive tragedy of the commons problem, where it\u2019s just going to be, take, take, take, impose cost, impose cost, impose costs, and there are no incentives for actually creating things, for contributing to the Wikipedias of the world, for putting up a new website, for writing about what the new local restaurant is, for creating local news and local media, for being an academic.<\/p>\n If there\u2019s not some way that you can do those things and still make enough to eat, then people aren\u2019t going to do it. And that harms us all. Again, I\u2019ve been very critical of Google over the years. I will say that their tune appears to be changing over the last few months. I believe that, at their core, they really do understand that this is an ecosystem, and that they play an important role in that ecosystem, and that they need to give back to that ecosystem and play by rules that allow the ecosystem to flourish.<\/p>\n You said Google\u2019s going to make some changes soon. What changes would those be?<\/strong><\/p>\n I think the thing that they\u2019ve already committed to is just a lot more transparency on what their crawler is doing. So what we had pushed them to do is split their crawler apart and say, \u201cWe\u2019re going to crawl for AI separate from crawling for the web.\u201d<\/p>\n They, for a lot of technical reasons, pushed back and said, \u201cThat actually is incredibly inefficient. We now have to crawl twice. It\u2019s going to put twice as much load on everything that\u2019s out there. What if instead, we just said when our crawler comes to a page, we\u2019ll announce what it\u2019s doing, and then give you the ability that if you don\u2019t like it doing something to say, \u2018no, no, that\u2019s not allowed, but this is,\u2019 and put that together.\u201d<\/p>\n They have signaled that, largely in response to what was a ruling out of the United Kingdom, that they were going to put those procedures in place to allow publishers to make that choice, and that they wouldn\u2019t just do it in the United Kingdom, but they\u2019d actually do it on a broader basis. I think we come out of this on the other side with a stronger web, and frankly, with even a better Google, which would be great.<\/p>\n Again, I could argue with you about the music industry all day and all night. I think you know that, but it is true that changing access and copyright law and all that stuff around music industry changed the business. The incentives to put on shows and do residencies and all that changed because of the distribution changing. That I think we can generally grant.<\/strong><\/p>\n You\u2019re describing an information market where the incentives will shift again, where it might be more economically lucrative to make information for the bots than for people. And that might shape the very nature of the information. You run a local paper, maybe your people are publishing restaurant reviews that are best ingested by an LLM and spit out.<\/strong><\/p>\n Or instead of reviewing a hotel, review every hotel room, right?<\/p>\n For every word that appears in a story in The New York Times<\/em>, that reporter has written down probably a hundred words somewhere else. That\u2019s all that other metadata, which traditionally has been constrained by how many column inches you had in the physical paper, or how much attention a human would actually spend on that. Imagine if you could say to the LLMs, \u201cHey, listen, we\u2019re gonna sell \u2014 \u201c and again, there are all kinds of things around protecting sources you have to get right, but if you get it right, there\u2019s an enormous rich catalog of additional information. For every picture you see in a magazine or a newspaper, there are probably 50 or 60 that were taken of that same thing. And that\u2019s all valuable to these AI systems that are out there.<\/p>\n There\u2019s just a bunch of content that\u2019s literally being thrown on the floor today. That can be incredibly valuable.<\/p>\n This is my universe. I feel confident about this one. I was in a packaging meeting today for one of our big stories, and we had a pretty fulsome debate about the lead image in a story we\u2019re going to run in a few weeks. Then we disagreed, and eventually we picked one, or we picked a direction, and that was an editorial choice that was designed to elicit some reaction in humans. We could publish all the rest of the photos. They\u2019re all really, really good. We decided one would be the winner and the rest wouldn\u2019t.<\/strong><\/p>\n But if I publish all the photos and I give them to an LLM, it will change the thing that we made, because its distribution will necessarily change, and its intended audience will change. Maybe the biggest <\/strong>Decoder<\/em><\/strong> trope of all is that your distribution inevitably changes the thing you make, and at the end of the day, maybe my future is just making YouTube face slinging AG1 and that is the future of all podcasting. There\u2019s just some force of distribution that changes the thing that you make. <\/strong><\/p>\n Is the outcome you\u2019re describing good, where we\u2019re just making an infinite flood of information GEO-optimized for some human to consume, digested by a chatbot in the middle?<\/strong><\/p>\n First of all, is the current model good? I\u2019ve talked with lots of people at your parent corporation. I think you guys do a good job. There\u2019s a lot of media that today just tries to create content as inexpensively as possible, and then A\/B tests headlines in order to either stimulate a dopamine or cortisol response to that.<\/p>\n If only the media was that scientific. <\/strong><\/p>\n But a lot of it is. I\u2019ve sat with some of the folks from Huffington Post<\/em>, some of the folks from BuzzFeed<\/em>, where they were like, \u201cYeah, that\u2019s the game and that\u2019s the game that we play.\u201d I don\u2019t know that that\u2019s a game you play everywhere, but you can track The New York Times<\/em>, you can track The Wall Street Journal<\/em>, you can track the FT<\/em> and just watch how much more inflammatory and almost tabloid-ish the headlines have gotten over the last 20 years. Every one of those is an amazing media organization, but in order to win in this space, it\u2019s been, \u201chow do I provoke really a deep \u2014\u201d<\/p>\n Well, what you\u2019re describing is they\u2019re playing to their distribution, which is largely social media. It\u2019s algorithmic, social media algorithms, and that is the distribution, and it\u2019s shaping the content.<\/strong><\/p>\n So I\u2019m asking you about the new distribution that you\u2019re describing \u2014<\/strong><\/p>\n The sentence that I say that gets everyone at Google to yell at me is, \u201ceverything wrong with the world today is Google\u2019s fault.\u201d That is not fair to Google. Google has by and large been a great company, but Google begets Facebook, which begets TikTok, which has us in this attention economy hole, where we\u2019re trying to get as much attention as possible. And the best way to do that is to actually stimulate, again, a deep mammalian response. That\u2019s the media landscape that we live in today. And I think it\u2019s deeply broken and I think it\u2019s what\u2019s divided the world. It\u2019s what\u2019s led to the rise of very destructive populism around the world, rather than real intellectual debate.<\/p>\n So what could we move to? There\u2019s a lot that can go wrong here, but if you talk to Sam [Altman] at OpenAI, or Dario [Amodei] at Anthropic, or you talk to the teams at Google, that are building the AI systems at DeepMind and others, what do they really want? They want new true knowledge. They want the thing that nobody knows about yet. They want the story about the interesting thing that no one else is covering. They want that thing which is actually advancing human knowledge forward.<\/p>\n That\u2019s what I want to read too. I don\u2019t actually want to read yet another take of what happened in the Trump White House today. There\u2019s plenty of that. And they don\u2019t want it either. The best evidence of this is actually how some of these distribution deals have been done.<\/p>\n The<\/em> New York Times<\/em>, amazing media organization, and Reddit, also an amazing media organization, have about the same amount of tokens. The New York Times<\/em> has been publishing for a lot longer. Reddit is a lot higher volume. They do deals. Who gets more money for their tokens? The answer is Reddit, by at least seven, or by some measures, 14 \u2014<\/p>\n Just be clear for the audience, you\u2019re using tokens as a measure of amount of new content.<\/strong><\/p>\n Of content, yeah. Content that\u2019s in there. It\u2019s not just new content, but it\u2019s the legacy content as well. The question is, why?<\/p>\n This is deeply unfair to The New York Times<\/em>, but if you don\u2019t have The New York Times<\/em>, then you can just license The Wall Street Journal<\/em> and ask AI to rewrite it as if it\u2019s a New York liberal and you get The New York Times<\/em>.<\/p>\n Deeply unfair, except that all of these major media publications have made their business of telling the exact same story to their individual tribes. Whereas if you don\u2019t have Reddit, there\u2019s no substitute for it. Reddit is this unique thing that\u2019s out there. I think a media of the future that looks more like truly unique storytelling around, again, local communities, unique stories that no one else has told. Real knowledge creation is what is valuable and is proven valuable by the market that exists today.<\/p>\n But the other side of that market \u2014 just to be reductive here, just so I understand the model \u2014 the market, the buyer in this market is a bunch of model companies. It\u2019s not people.<\/strong><\/p>\n But then ultimately, it\u2019s the customers of those model companies, which is all of us. What\u2019s been amazing is it doesn\u2019t appear like any of these model companies, on their own, is going to run away. People are like, \u201cOh, well, what if OpenAI gets AGI?\u201d<\/p>\n I\u2019m like, \u201cTwo days later, Anthropic will have AGI, and then Grok will have it a couple of days after that and Google will have a couple of days after that. And then AGI won\u2019t be enough. It\u2019ll be AGI Plus or AGI Plus Plus or whatever.\u201d<\/p>\n What is going to be interesting is, what\u2019s going to turn these things from commodities into actually sticky products that people sell? The answer is going to be who has access to the most true knowledge that gets you the right answers. It seems like all of the incentives from the end consumers say, \u201cI want to get as much back to the creators of real knowledge as I possibly can.\u201d<\/p>\n I think we can solve the financial piece. The piece that I\u2019m actually much more worried about \u2014 and again, you should have Daniel Ek on your show, because he\u2019s fascinating to talk about these things. But he\u2019s like, \u201cListen, you\u2019ve been thinking a lot about how to get content creators paid.\u201d He said, \u201cIf you think about musicians, there are two reasons that people become musicians: to get rich and to get famous. And if you, at the end of the day, had to cause musicians to rank which one is more important, fame probably beats rich.\u201d<\/p>\n By the way, it\u2019s a stupid strategy. Being rich and anonymous is the best. But that\u2019s true. I think that a lot of people really do want recognition. This is part of why Wikipedia is seeing a drop in the number of contributors and information that\u2019s contributed, because people don\u2019t get recognized as much because you\u2019re not going to the original sources.<\/p>\n I think we\u2019ll solve the financial problem, but the next problem is, how do we actually recognize the creators? What I\u2019ve been pitching to the big AI labs is we should create, I don\u2019t know if it\u2019s the Nobel Prize or the Academy Awards, but some recognition where we use math to measure who contributed the most to, I don\u2019t know, mammalian biological research in some specific field, and measure it in the last year, and then have a big ceremony and give them an award and celebrate them, and talk about how wonderful they were at advancing this.<\/p>\n I think figuring out how we take the people who are actually out there creating the knowledge, and even though the medium through which that knowledge is going to get disseminated might be removed from the original research, it might be the AI bot or the chatbot that\u2019s out there, we still have to say, \u201cBut you\u2019re doing really important work, and we\u2019re going to recognize you for that important work.\u201d<\/p>\n The last time you were on, we spent a lot of time talking about content moderation, and Cloudflare using its power on the internet to essentially make it harder for sites like Stormfront, the neo-Nazi website, to exist. And you were in torment about it. You had a lot of power, you were going to use it. You published some op-eds about it. We talked about it for a while, and eventually you came to decide you didn\u2019t want to be in business with these folks, and the consequences are the consequences, but there should be some frameworks to regulate your power.<\/strong><\/p>\n Many things have changed, but we\u2019ve kind of had a long conversation about Cloudflare using its power to block AI scrapers and create economic opportunity. It\u2019s the same power in many ways, right? It\u2019s a power of a layer of the internet that is pretty dominant to stop things from happening. Have you changed your mind? Is it just the economic rationale that\u2019s made that more comfortable for you, or is there something else happening?<\/strong><\/p>\n It\u2019s been interesting inside of Cloudflare. When we see these bad things that are using us, there\u2019s a very human reaction. And it\u2019s often my cofounder, Michelle [Zatlyn], who\u2019s like, \u201cListen, I realize all the hard, thorny moral questions, but this is just per se bad. We should do something about it.\u201d<\/p>\n We have largely come out to say, \u201cIt\u2019s tough.\u201d We don\u2019t want to be the ones that are deciding what\u2019s good and bad. And there actually aren\u2019t that many things that are just per se bad that are out there. But wouldn\u2019t it be great if we could change the incentives, so that there\u2019s less incentive to create these various things?<\/p>\n And what I\u2019ve found interesting around the question of what the business model of the future of the internet is going to be is\u2026 Trying to deal with a bad site here or there is basically just cutting down dandelions, more are going to spot up. You\u2019re not solving the root problem.<\/p>\n I think if we can get the incentives around the next business model of the internet to be less about \u201chow do we create rage and emotion\u201d \u2014 being a neo-Nazi is one of the most effective ways to just really piss people off, and they tend to click on your things, and then buy nutritional supplements or whatever. All these things have very weird business models that are behind them.<\/p>\n But if we can get back to something where we\u2019re actually rewarding not rage creation, but information creation and knowledge creation, maybe that\u2019s actually getting at the fundamental roots that are there. And maybe I\u2019m too much of an optimist, but I think the way that you stop a lot of horrible things we see online, is by solving the business model that is really broken, which has led to the online communities that we have today, and by getting away from what has been a very much an attention-based economy to one that is much more of an information knowledge-based economy.<\/p>\n And so, as we are thinking about what the future of the internet looks like, that\u2019s what we\u2019re playing for.<\/p>\n So it\u2019s the same power, right? Cloudflare has a lot of power on the internet. It\u2019s a platform layer, it has a lot of influence. You\u2019re able to stop things. In the case of the neo-Nazi websites, you declined to use your power, right?<\/strong><\/p>\n No, no. We kicked them off our systems.<\/p>\n Right. You said you can\u2019t have Cloudflare protect you from DDoS attacks, and then maybe they\u2019re just going to DDoS into oblivion or whatever.<\/strong><\/p>\n Yeah, they\u2019re all still around, so at some level it shows that it\u2019s limited.<\/p>\n But in this case, you\u2019re going to use your power. You\u2019re going to say we will use Cloudflare to stop things from happening and that will create a market.<\/strong><\/p>\n I guess the question is power. So it takes five minutes to sign up for Cloudflare. We have a free version of service. It takes 30 seconds to leave. So if we\u2019re ever doing something that\u2019s not in our customers\u2019 interest, we\u2019ll lose our customers. And so, we are very much at the service of our customers.<\/p>\n I remember the first time that a media company called me and said, \u201cWe have this new threat, you have to stop it.\u201d<\/p>\n And I was like, \u201cWhat is the threat?\u201d<\/p>\n They\u2019re like, \u201cIt\u2019s the AI companies.\u201d<\/p>\n I rolled my eyes. I was like, \u201cThat\u2019s the dumbest thing I\u2019ve ever heard. Why are all media companies such Luddites?\u201d But then we pulled the data, and we saw that really, again, that there was an existential threat to how the internet was working. I certainly became convinced that this was something that was worth us spending our time and our resources fighting.<\/p>\n We have a really privileged position, because we have provided so much value to so many companies that are out there that they trust us. But if we ever screw that up, they\u2019ll leave us in a second. Is that power, or is that just being a good steward to the internet?<\/p>\n It\u2019s 2026. The valence of speech on the internet has changed. If you had to make the Kiwi Farms, Daily Stormer, decisions again today, would you make them the same way?<\/strong><\/p>\n Each of those things is a moment in time, and I think there are puts and takes under all those things. At some level, at the time, when we made the decision around the Daily Stormer, no one knew what Cloudflare was, and we were seeing a bunch of regulation that was happening online that really could have been a real threat to the underlying way the internet worked, regulating key protocols like DNS and TLS. And we were nervous about that. And so, the question was, how did you make that point?<\/p>\n And so, one of the real rationales of kicking Daily Stormer off, and then writing about it, talking about it, going on the news about it, writing another Wall Street Journal<\/em> editorial about it, was because it helped us then frame the right policy decision that was out there.<\/p>\n We talked about Rawls last time. I\u2019ll talk about Kant this time. We very much offended Kant in that. We were using this site as a means to an end that was not into itself.<\/p>\n But if you\u2019re going to use something as a means to an end, to make a point, neo-Nazis are pretty fun to use for that point. I think we were able to make the point. We were able to change the policy discussion. We were able to talk about what the challenges were, and we could do it.<\/p>\n Today, if the exact same set of facts came up, it just wouldn\u2019t be the exact same set of facts, because today obviously Cloudflare is much more known. We\u2019ve had those policy conversations. It feels like every five years another one of these things pops up, so we\u2019re probably due for one sometime soon. But the situation behind each of them is going to be very, very different.<\/p>\n I usually do the <\/strong>Decoder<\/em><\/strong> questions first, but we just got into it. So I want to ask the first one first really quickly, and then I want to spend a lot of time on structure. The last time you were on the show, I asked you how you made decisions, and we had a long conversation about values and mission and how you kind of came to figure out what your values and mission were and you came back to that. It\u2019s been two years. Are you still there? Is that how you make all your decisions?<\/strong><\/p>\n So, the big decision you recently made: In May, you laid off 1,100 people, which you said was about 20 percent of the company. How many employees is Cloudflare today?<\/strong><\/p>\n Somewhere between 4,500 and 5,000.<\/p>\n So you\u2019re growing compared to two years ago.<\/strong><\/p>\n You very openly attributed the layoffs to AI usage inside the company. And I know that\u2019s true because you <\/strong>literally published an op-ed in the <\/strong>Wall Street Journal<\/em><\/strong>. The title was, \u201cHow I Choose Which Employees to Replace with AI.\u201d<\/strong><\/p>\n I didn\u2019t get to choose the title, because again, the way media works today is they create the titles, but yes, but I wrote the rest of it.<\/p>\n The op-ed supports said title.<\/strong><\/p>\n I don\u2019t know that that\u2019s how you tell that something is true, that somebody wrote a Wall Street Journal<\/em> editorial, but that\u2019s the editorial editor.<\/p>\n That was the headline. And the opening is, two weeks ago you laid off more than 20 percent of your workforce. You wrote that, and then you said you didn\u2019t do it because Cloudflare is struggling. You did it because in the future, Cloudflare needs to change. And then I\u2019m just going to run through your rubric and I just want to ask you about that rubric, specifically.<\/strong><\/p>\n You said you broke people into builders, sellers, and measurers, and you\u2019re basically going to cut all the people who did measurement, all the audit functions.<\/strong><\/p>\n Not all, but a lot. The majority of the people that we laid off came from that category. This all comes back to some old-school basic business research, which is that there are three functions with any firm. There are people that build things, so the engineers, the product managers, the folks that actually create new products. Then people that sell things, the people that are out there actually doing the deals and selling those things. And then the third category is what a lot of every organization is, which is the people that actually measure things. Each of those is going to be impacted by AI in very different ways.<\/p>\n I\u2019ve had a lot of software CEOs on the show recently, and we\u2019ve talked about how AI is scrambling every software company. And I usually ask about product managers, designers, and engineers, the builders. All of those roles are totally scrambled. They\u2019re all kind of doing one another\u2019s jobs.<\/strong><\/p>\n That\u2019s true. I do think that there\u2019s an increasingly jack-of-all-trades aspect to this, where because you can have these tools, someone who\u2019s a product manager can do a lot of what engineers do, an engineer can do a lot of what product managers do. The people that are winning in that space are the people that are ambidextrous. They can do multiple different things out there.<\/p>\n But where I get lost is with some of the AI maximalists who are like, \u201cWe\u2019re all going to lose our jobs.\u201d If I can hire a builder, and they are now 10 times as productive \u2014 which they are, it is wild to watch how much more productive the builders on our team are today \u2014 I\u2019m going to hire as many of them as I can, because I\u2019ve got lots of stuff to do.<\/p>\n That hasn\u2019t decreased the incentive for hiring engineers and product managers and everyone else. It\u2019s actually increased the incentive, because the return that I get for the salary dollars that I spend on one of these people is now essentially 10 times as much. Of course I\u2019m going to hire as many as I possibly can, which is exactly what we\u2019re doing.<\/p>\n So, just walk me through this decision. You woke up one day and said, \u201cI\u2019ve got a\u2026\u201d It\u2019s Peter Drucker, I think is who you quoted.<\/strong><\/p>\n Yeah, the builder \/ seller \/ measurer framework comes out of Drucker.<\/p>\n For the <\/strong>Decoder<\/em><\/strong> heads out there, this is old-school management philosophy.<\/strong><\/p>\n How\u2019d you make this decision? You were like, \u201cI\u2019ve got to do this. I\u2019m going to sort these people into these categories, and we\u2019re going to start making cuts.\u201d Did you see any evidence in the data? Walk me through it.<\/strong><\/p>\n One thing that we saw was that the world was dividing into two camps. One camp tended to be two different demographics within the organization. It was either people who were very, very senior, or people who were very, very junior. And those folks were adopting AI like crazy. The junior folks, because they were just native to it. The senior folks, because they had the confidence to bet their career, that these paradigm shifts would be a way for them to learn new things and take on new challenges, and they were confident enough in their jobs that they could do that.<\/p>\n The other camp was the folks who were earlier in their careers. They might not have been the most senior folks, but they weren\u2019t just the brand-new folks who had come in. So they\u2019d come through and been trained and been taught that the way you succeed at a business was by playing by a certain set of rules. And then, they watched around them as their colleagues were all of a sudden using these new tools that were out there to be able to deliver these things.<\/p>\n There\u2019s a wildly imperfect analogy that I use. If you imagine our job was to screw screws into wood, we hired the best people at using manual screwdrivers. And then all of a sudden we invented an electric screwdriver, or it came along, we were able to buy it. And for not every job, but for most jobs, using the electric screwdriver is just better and you can get a lot more done with it.<\/p>\n The first thing that we started to do back in the middle of 2025 was say, \u201cHey guys, this is what\u2019s going on. I understand all the incentives, if you\u2019re in that second camp, are to fight against the electric screwdriver, but let\u2019s give you the resources to train you. Let\u2019s give you the confidence that you\u2019re going to have a job and you\u2019re going to do these things, but let\u2019s make sure that everybody across every role is learning how they can do that.\u201d That\u2019s just a really important step that you have to do in the first part.<\/p>\n What we then learned, though, is that as we got everyone, not just the engineers, but people on finance and legal and everything else, to start using these tools, we found that one place where AI just shined was in measuring things. One of the places where we don\u2019t talk about the advantage of AI enough is that AI has bias, but the biases are uncorrelated to the rest of the organization. Humans have biases like crazy, but a group working together has biases that are massively correlated together. Even if you\u2019re working on internal audit and you\u2019re supposed to be the bad guy who\u2019s looking over everyone\u2019s shoulder, you still go to lunch in the same cafeteria, you talk to the same people, you participate in the same all-hands, you end up developing the same biases, whereas AI doesn\u2019t. It has a very different set of things.<\/p>\n We found that we could use these tools to do things significantly more efficiently. There\u2019s a woman on our team named Heather. Heather was on our investor relations team. Every time we would close the books before we\u2019d have earnings, because we\u2019re a public company, her team of about 20 people would spend about two weeks working like crazy to generate all of the information. They basically took the measurements and then generated documents that we would then distribute during earnings to all of our investors. And Heather was like, \u201cI think we can use tools to do this better.\u201d<\/p>\n We took what used to take two weeks and we reduced it down to three minutes and our investors are like, \u201cWow, these documents are much better. There are fewer errors. There are less mistakes, and our tools are auditing all of those different things.\u201d So, for those 20 people, we looked for other places for them, but a lot of them, what they liked doing was that sort of work. And they would be great at doing that sort of work as the Heather at some startup or somewhere else, but we just didn\u2019t need some of the functions that were there. And it tended to be all of those functions that were largely measurement.<\/p>\n There were things like internal audit, which we were able to just get actually much more efficient at doing. There are also things like middle management. Traditionally the Harvard Business School number is that on average every manager should have six direct reports.<\/p>\n We found with tooling, we could actually be much more efficient with managers. When we enabled managers to have more tools to better participate in surface issues early and see how their team was doing, we could get up to 12, on average, direct reports and everyone was actually happier. That matters because as you increase the number of direct reports, what you actually do is decrease the amount of hierarchy in any organization. That\u2019s the way of measuring how flat versus how hierarchical an organization is.<\/p>\n Again, we could use these tools to say, \u201cHey, let\u2019s flatten the organization,\u201d which has made the organization much faster and more nimble. But in the process, there are a whole bunch of middle managers that just weren\u2019t the right folks. I think we sat there and we were like, \u201cGosh, we know we\u2019ve got to get rid of these jobs, so the question is, do we do it now or do we do it later?\u201d The problem with doing it now is we feel very exposed, we feel very alone. The number of death threats that I got, not even from our employees, but from just random people who are anti-AI, was really pretty scary.<\/p>\n But at the same time, we\u2019re like, \u201cIs it kinder to say we\u2019re going to make these changes now, and then do the work to not only give great severance and everything else, but actually go place these people? Because they\u2019re great people, and we\u2019ve been very successful at doing that across the board. Or is it better to cover our own ass and wait until everybody else in the industry is coming to the same conclusion?\u201d<\/p>\n By the way, that\u2019s coming. Uber just did a layoff, that same rationale. You\u2019re going to see across the industry, not just in tech, but everyone, start to get to this realization. I think we were early, but was it going to be easier to get a job back in April when we did this, or next April when everyone is doing it? Once we realized that, we were like: If we\u2019re real leaders, we should be the ones taking the arrows. We should be protecting our team. We should be working to make sure that even the people that we said, \u201clisten, we don\u2019t have a role for you any more,\u201d we can help them find great roles at other places because they\u2019re great people. That is what real leadership is.<\/p>\n When I talk to a lot of my peers, they\u2019re sitting around saying, \u201cYeah, I know we need to do this, but gosh, I saw your stock went way down, and you got all these really scary death threats and other things, and I don\u2019t want to have to go through that.\u201d I think that\u2019s chickenshit. If you\u2019re a real leader, get out there and actually do the work.<\/p>\n There are a lot of things about the economy that are going to change. It doesn\u2019t mean jobs are over. We\u2019re going to hire as many builders and as many sellers as we possibly can. And there are still some measurers on our team. Some people have to build the tools and do those things, but it\u2019s going to look very different going forward. Once you realize that as an organization, the sooner that you can do that is the kindest way that you can be to your own team.<\/p>\n Another <\/strong>Decoder <\/em><\/strong>trope is that structure is a rough proxy for culture. I\u2019m always saying, if you tell me the structure of your company, I can tell you about 80 percent of your problems. The 20 percent is usually where the actual magic is. How has your structure changed and how has that changed your culture?<\/strong><\/p>\n The first thing is we\u2019ve flattened the organization a lot. There\u2019s a lot of middle management that went away, and not just because we laid people off. There\u2019s a whole bunch of managers that are raising their hand and saying, \u201cI don\u2019t want to be a manager any more. I want to go back to being an individual contributor.\u201d It\u2019s wild to see all these really senior managers that are leaving big jobs to go to Anthropic to be an individual contributor. And that\u2019s because there\u2019s so much more leverage that you can have.<\/p>\n What is a manager versus what\u2019s an individual contributor is going to get really fuzzy. And that\u2019s one of the things that we\u2019re spending a lot of time thinking about. Does it even make sense to have those as two separate tracks? Maybe that all merges together into one thing, because even individual contributors now are managing a fleet of agents that are working on their behalf.<\/p>\n The biggest thing is that we\u2019ve flattened the organization quite a bit. And then the other thing is that we\u2019ve centralized through something we call Cloudflare OS, which we\u2019ve now open-sourced because enough of our customers were like, \u201cThat\u2019s really cool. We want to use that too.\u201d And so, we\u2019ve got a whole bunch of customers that are taking it and turning it into XYZ company OS.<\/p>\n It\u2019s a set of tools that, essentially takes the knowledge that\u2019s inherent to Cloudflare, the things that have to be true, the things that inform our decisions, and then allows anyone on our team to have access to a wide range of the different tools that are out there, but it\u2019s continuously pulling and updating the information about what has to be true. And having it so that when you want to figure out what information is pulling out of Salesforce or Workday or any of the systems of record that we have at Cloudflare, being able to pull that into one consistent interface has allowed our teams to be significantly more productive and much better at cross-collaboration.<\/p>\n There\u2019s something here which maybe is just the nature of a software company, and that\u2019s the way it is. It\u2019s a worldview that I understand, because of how a software company or a tech company works, where everything that is happening in your company happens in a digital system and then that thing can be measured. You\u2019ve got a line in your piece, \u201cAs CEO, I\u2019ve never had better tools to measure exactly how the business is performing, including identifying our rising stars.\u201d This implies that your rising stars are producing data that can be measured by an AI, and then the AI can tell you these people are rising stars.<\/strong><\/p>\n There\u2019s something about that that is fascinating to me. Not every company works that way where everyone\u2019s job is to tell Slack everything that\u2019s going on or tell Cloudflare OS everything that\u2019s going on. They\u2019re out in the world doing stuff.<\/strong><\/p>\n How do you connect those dots? Because that seems to be the challenge of how Silicon Valley might see the world and how every other business might see itself.<\/strong><\/p>\n I think we\u2019ve all at various times worked in jobs where we\u2019re like, \u201cGosh, I\u2019m just not being recognized for the hard work that I\u2019m doing.\u201d Or other times where you\u2019re like, \u201cI\u2019m kind of over-recognized and maybe I don\u2019t \u2014\u201d<\/p>\n I\u2019ve never felt over-recognized in my life. If I could get some more, that\u2019d be great.<\/strong><\/p>\n You\u2019re doing a great job.[Laughs<\/em>]<\/p>\n [<\/strong>Laughs<\/em><\/strong>] Now, can you get your chatbot to tell me I\u2019m doing a good job? Because that\u2019d be really good.<\/strong><\/p>\n It is absolutely the case that there have been great people who\u2019ve worked at Cloudflare that we just missed in the past. And for a million different reasons. Maybe they\u2019re part of the organization that we just didn\u2019t recognize enough, maybe they didn\u2019t have a great manager. One of the things that\u2019s great about these tools is you can find different ways to say, \u201cWhat do we as an organization value?\u201d And then look more broadly across the people who are really performing incredibly well.<\/p>\n But that has to be legible to the system, right? So it\u2019s like the AI is going to watch every code commit and say that person\u2019s doing a lot or that person is the nicest to their agents in Slack. You have to watch them in some way to get that data back out.<\/strong><\/p>\n Yeah. But there\u2019s all kinds of signal inside of every organization.<\/p>\n I\u2019m just stuck on this and I\u2019m running out time, so I\u2019m sorry to interrupt. But give me an example of signal that helped you through AI identify rising stars.<\/strong><\/p>\n We knew people who were high performers. We trained models based on what their high performers were. We ingested a ton of things across that. Obviously code commits and all kinds of things, but those are gameable in various ways. And so, you really want to look at \u201cthis person did this thing\u201d and then trace it all the way through the organization and see whether it resulted in either higher revenue or lower cost or better collaboration across the team.<\/p>\n Because we are a very digital company, we\u2019re able to pull that. But I think every company has signal in various ways. If you\u2019re a supermarket, you\u2019ve got cameras that are seeing things, you\u2019re going to see the person who sees the spill on the floor and cleans it up. A manager may never see that, but the camera did. And if the AI can say, \u201cHey, that person just cleaned up a spill without having to be asked,\u201d of course we should be rewarding that stuff.<\/p>\n Now there\u2019s plenty of Black Mirror<\/em> horrible ways that this stuff can go wrong. We\u2019re very privacy-respecting. It\u2019s not a gotcha thing. But it was remarkable how much better I found it at being able to say, \u201cWow, there are some people across the team who might be very junior, but are just way outperforming.\u201d<\/p>\n And then what I can do as a leader is go to those people and say, \u201cHey, you\u2019re doing a great job. Keep doing it. By the way, here\u2019s my cell phone number, call me if you ever need anything.\u201d And we\u2019re just watching a bunch of those folks turn into the next leaders at the company.<\/p>\n It goes back to one of the real values that these systems have, which is that AI has bias, but it\u2019s uncorrelated to all the rest of the bias in the organization. That provides an independent outside lens that helps you then better run your organization in order to make smarter decisions. Whether that\u2019s around internal audit functions or identifying great talent, these tools are various ways that you can do pretty amazing things.<\/p>\n In our case, we didn\u2019t go out and buy some widget. We just said, \u201cOkay, let\u2019s take all the things we\u2019ve learned about who\u2019s performing well or what products do well or whatever it is, train models on that, and then run it across the system and see what it shows up.\u201d And yeah, there were some mistakes. There were some people where it said, \u201cthis person\u2019s a huge star.\u201d And then you actually look down and you\u2019re like, \u201cno, they\u2019re not.\u201d But for a lot of times there were people who really were incredible stars and it was great to be able to recognize them.<\/p>\n Do you think being managed in an automated or quantified way will dehumanize or depersonalize your workforce? You can see how management by robot does get pretty blown up.<\/strong><\/p>\n If every promotion decision is made by some totally unaccountable AI system, that seems wrong. But on the other hand, if an AI system is better able to say, \u201cHey, Matthew, CEO, here\u2019s this junior customer support person who\u2019s just been giving amazing answers to customers. You may not have ever seen them before, but you should give them a call.\u201d I think that\u2019s actually incredibly humanizing. That means that you can be seen for the contribution that you\u2019re doing.<\/p>\n There are lots of ways that bad organizations will use these technologies to do bad things, but that comes back to the leadership. Don\u2019t be a bad organization. Be organized around trying to do the right thing. Celebrate your employees, make them rich. That\u2019s exactly what you want.<\/p>\n I feel like we\u2019ve become a better organization, better at recognizing where talent is, better at then being able to reward that talent and invest behind that because of these various tools.<\/p>\n Let me connect that all the way. At the beginning, I asked how you make decisions, and you said you start with mission and values. And a thing that really struck me at our last conversation was that you came to that realization, that was emergent as you began leading Cloudflare. I think you had a joke that was like your mission was to just impress your mom. And then that became this much bigger mission about security and all these other things that you\u2019re doing.<\/strong><\/p>\n How has your relationship to leadership changed as you\u2019ve automated the management function? Because there\u2019s something big in there.<\/strong><\/p>\n I think it is incorrect to say that we\u2019ve automated the management function. I think that what we have done \u2014<\/p>\n We\u2019re collecting a bunch of data on what everyone is doing, we\u2019re measuring it perfectly, and then we\u2019re calling the customers \u2014<\/strong><\/p>\n I don\u2019t think we\u2019re measuring it perfectly. I think we\u2019re measuring it. We\u2019re giving managers more tools to help both recognize the people who are overperforming and to help the people who are struggling get the resources that they need. We\u2019re surfacing data that allows managers to be better managers. I don\u2019t think we\u2019re replacing managers. I think we\u2019re making managers better at their jobs.<\/p>\n And that scales management, right? Actually, it\u2019s funny you mentioned that you\u2019re up to 12 direct reports. The last time, you said \u2014<\/strong><\/p>\n By the way, we\u2019re not there yet.<\/p>\n Two years ago you said your number was about eight, which you called high. So you\u2019re going from eight to 12. Mark Zuckerberg is at like, \u201cWe should have 50.\u201d And I keep saying <\/strong>Decoder<\/em><\/strong> has a long life ahead of it because it\u2019s a show about org charts. We\u2019re on the cusp of the weirdest org charts in history. Are you there? Are you at 50?<\/strong><\/p>\n Oh no, no, no. I really do think that humans are social creatures and we want to be able to know people. And the Dunbar number is real, which is the number of direct social relationships you can keep in your head, which is supposed to be something like 120, but people should have friends outside of work. So you can\u2019t just occupy those all with work colleagues.<\/p>\n If I said eight before, that was wishful thinking. We were probably closer to six, but we are making our way up. We\u2019re probably closer to eight-ish now, but we\u2019re headed more towards 12. You have to be very, very specific because you also don\u2019t want people playing games with that, where they\u2019re like, \u201cI\u2019m going to build out a big team of people\u201d where we don\u2019t need a big team.<\/p>\n I think that can be aspirational and directional, but I don\u2019t think you can be religious. I don\u2019t think you can just say, \u201cOh, everyone has to have at least 12.\u201d You\u2019ve got to figure out where that makes sense and where it doesn\u2019t make sense. As that evolves, you have to also have some foundation that aligns people, and that\u2019s where mission comes in.<\/p>\n And it\u2019s absolutely true. Our mission in the beginning was to take advantage of this interesting market opportunity, hopefully make some money, and impress our parents so that they\u2019d get off our backs about why we didn\u2019t go work at a bank or whatever.<\/p>\n It was only as we started to serve our customers, and we saw just how important the internet was, and how it really lacked defenders, that we realized that our mission was really to help build a better internet. If you talk to anyone at Cloudflare, anywhere through the organization, any country that we\u2019re in, any office that we\u2019re in, I think that what I find amazing is, time and time and time again, they come back to saying, \u201cThe reason I work here is because I believe that the mission is one of the most important things we can do.\u201d<\/p>\n There are a lot of days that people are like, \u201cWhy do you still work at Cloudflare?\u201d And I\u2019m like, \u201cBecause I can\u2019t imagine anything more important right now than helping build a better internet, and I can\u2019t imagine anything that\u2019s more exciting to be working on.\u201d<\/p>\n Well, Matthew, that\u2019s a great place to leave it. We\u2019re going to have to have you back very soon because I feel like the internet\u2019s going to change even faster than I did last time. Thank you so much for being on <\/strong>Decoder<\/em><\/strong>.<\/strong><\/p>\n Questions or comments? Hit us up at decoder@theverge.com. We really do read every email!<\/em><\/p>\n A podcast from The Verge<\/em> about big ideas and other problems.<\/p>\n SUBSCRIBE NOW!<\/span>Follow topics and authors<\/strong> from this story to see more like this in your personalized homepage feed and to receive email updates.<\/span><\/p>\nDecoder with Nilay Patel<\/h2>\n
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