I often hear friends raising 10, 20, 40, million dollars in the Bay Area. Their company will go on to achieve 100MM ARR.

But what do these tools actually offer in real terms? Do they actually create underlying value? The founders go on to make a quick buck, buy a Porsche, buy a nice house. But when has the value actually been created?

I distill two ideas: the market-creating SaaS, like DoorDash, which creates an actual marketplace of merchants, delivery drivers, and consumers that had never been connected before— and the toll-seeking SaaS.

The market creating SaaS is relatively easy to understand. It physically moves atoms. The moment you place an order, a dasher is sent out to connect a hungry person with a chef. Something pie gets bigger.

The rent-seeking SaaS operates on different physics. It doesn’t grow the pie, it actually just finds an existing pie and makes it thinner.

These tools are effectively digital landlords. They find a bottleneck or inefficiency, create a SaaS, and then sit on it. That bottleneck is often built off corporate or institutional structure, rather than actual human need. Consider the explosion of "Sales Enablement" and "Marketing Orchestration" platforms. If Company A buys a tool to blast 10,000 automated emails, Company B must buy a tool to filter those emails. Company A then buys an AI tool to bypass the filters. Company B buys an AI tool to detect the bypass.

Both owners get their 100MM ARR. Both get their Porsches, they both get their $3 million dollar 1 bedroom bungalow, but nothing materially changed.

It’s like paying someone to throw trash on your lawn, and then paying another to pick it up. It comes from the French economist Frédéric Bastiat. It’s a zero sum game.

This, perhaps, is the most clear example, but in truth, the economy itself is a huge abstraction of this— but we’ve reached a point where the smartest minds of our generation are being weaponized against each other in a digital vacuum. Every engineer working on an 'AI Bypass' for spam is an engineer not working on energy, or transit, or the literal leaking roofs of the $3M bungalows they inhabit.

The Bay Area is perhaps the best representation of this rot. Units are millions upon millions of dollars. That doesn’t actually mean they’re any bigger than a 1 bedroom, 1 floor apartment. Materially, things have not changed. The actually productive capacity of the economy? Stagnant. That 1 bedroom bungalow that cost $3 million dollars? The roof still leaks. The neighborhood is still dangerous. We haven’t actually solved anything.

Why this? It turns out, moving money in a circle is incredibly profitable and low risk. Selling to a VC-backed or big tech company is a hell of a lot easier than materially changing the lives of Americans or building a new type of nuclear reactor. Software takes hours and days to build, not years. Building an AI agent to complain about the roof leak is a hell of a lot easier than finding someone to fix the leak. And that’s the problem.

The time has come to move past digital-only innovation and actually invest in the physical infrastructure—housing, hospitals, and transit—that has remained stagnant for decades.