The General Manager's Folly

Imagine you are a general manager with a keen sense for business, and you observe there is an opportunity in the market to aggregate tow truck companies. The pathway to profit is strikingly clear: you can distribute the fixed costs of a combined business over a larger base than each company possesses alone, which will in turn naturally increase your profits. This is a straightforward proposition: the business can streamline each function and remove redundancy.

Say you are the general manager who is not particularly mechanically inclined, you see your mixed fleet of trucks as a liability and the plan is evident: dispose of the old diesel fleet and replace them with new counterparts that have modern technology allowing you to centralize maintenance, standardize operations, and distribute trucks along your route more effectively. You paid a high price for these trucks, but this plan is worth it because you believe that the sooner you accomplish this consolidation, the faster you can drive the efficiency that improves your aggregated enterprise value.

Now instead assume that you are the general manager with a particular mechanical proclivity. You see the same mixed fleet and observe that your acquired diesel trucks, if maintained properly, have more useful life left in them than their standard depreciation curves would indicate. You opt to carry a larger maintenance burden over the long run than you would have had should the fleet have been simplified, and you even opt to provide each driver a mobile phone at an added expense to you. On paper, these seem to be profit destructive; however, they allow the business to monetize its crown jewels: the fully paid off fleet that can be dispatched using mobile phones just the same as new digitally-equipped trucks still with their factory sheen, except with every dispatch, net of variable costs which are the same in either case, the business earns a full profit on its revenue. As the business grows naturally and parts become scarce, the general manager will replace each truck opportunistically that naturally cost only a small portion of his overall profits.

In every technological wave, from the iron horse railroads to the agentic software applications, the same question is posed, and the same result rings true. The general manager who can repackage their well-earned systems without building in-place anew reaps the rewards of the natural asset lifecycle. Rewards that far exceed the penny-wise, pound-foolish ideas of throwing away these assets right as they enter their golden ages of monetization just to save on ancillary predictable costs.

The artificial intelligence era has followed this time-tested pattern to a tee, and that is why the General Agentic founders spent their first year building a reference implementation of the entire software supply chain. The market pressure was to sell each piece at every turn; however, the team recognized that without owning their own complete version of the system, they would neither possess the depth of technical prowess to sand down the friction nor see a wide enough aperture to identify the acceleration points attuned to the natural rhythm of the businesses.

Software is entering this period now. Companies have spent years, sometimes even decades, refining their services and validating their value. Every new era of great technological change increases the pace of development while decreasing the cost of creation and culminates in a fundamental change in the mechanism of distribution. Whether it was the revolutions that pushed a message from the old world to the new by ship to plane to machine, the same truth holds: the great builders of enterprise value will be the general managers that have the capability to identify these diamonds and distribute these crown jewels without losing them to the rough.

Jake Chasan & Zach Evans

Founders of General Agentic