How might we innovate

"To produce means to combine materials and forces within our reach... To produce other things, or the same things by a different method, means to combine these materials and forces differently" - W. Brian Arthur

The AI-Driven Inflection Point

Despite software having successfully eaten the world, we find ourselves at a curious and rather unexpected period of rapid technological change. The capabilities of massively scaled vector databases and sophisticated language models are triggering fundamental shifts in the economics of innovation. Prototyping costs are rapidly trending toward zero as tools like Cursor, Vercel, and Replit translate natural language into testable code, removing any excuse for not generating a prototype for any software-based idea.

The impending mass deployment of AI agents is similarly poised to permanently reshape labor dynamics. Our current tools (both AI and “traditional” software) are already sufficiently advanced to enable smaller teams of to achieve orders of magnitude greater productivity than in the previous decade alone, and agents, however capable, will only accelerate the leverage offered to fewer collected humans.

Less discussed, the very assumptions underpinning the financial models that have funded startup-powered innovation for several decades are coming under fire. Traditional venture assumes that startups require large, evergreen capital injections to fund their massively scalable missions. When small, AI-augmented teams can rapidly explore multiple directions with minimal fixed overhead and operate with positive cash flows, the funding treadmill shifts from default to choice. The dominant financial paradigm is rapidly misaligning with market realities.

These three shifts – collapsing prototyping costs, transforming labor capabilities, and inverted financial dynamics – demand a reimagining of how innovation itself is organized. We don’t need mere incremental adjustments to existing models but fundamental transformations that require new organizational forms designed specifically for this landscape.

The Three Forms of Capital

Brian Arthur's theory of combinatorial evolution demonstrates how technological progress emerges through novel recombination of existing components. And with this theme of recombination at the fore, I’ve been exploring not just what we build but how we build, framed against three fundamental forms of innovation capital:

• Intellectual Capital systematically transforms ideas into breakthrough products and businesses. Where traditional startups bet on singular product directions based on intuition, we can identify diverse, high-quality combinations of product and business primitives using a series of discovery-focused systems I call the Kensho Model. This approach transforms discovery from commonsense intuition to systematic science, increasing not only the rate of success (the floor) but also the total value it can achieve (the ceiling).
• Human Capital applies combinatorial principles to unlock human productivity. Where traditional companies force talent into standardized roles and static environments, we recognize that human capability emerges from the interaction between individual characteristics and environmental conditions. Our distinctive organizational architecture creates optimal environments for both discovery and scaling, leveraging the full spectrum of human potential through systematic environmental design.
• Financial Capital enables us to maximally extract value from the businesses we build but also create new forms of creation and deployment cycles. Modern tools (not simply AI) enable many software companies to fund their growth through their own cash flows, but more exciting is what emerges when we string together several, many, infinite such companies - a new model of ecosystem capital, in which cash flows not only benefit each company individually but collectively.

Much of what we detail throughout this series of white papers is not yet possible, and lest these concept remain trapped as pixels on on a digital screen, I’m developing a new company, Kandō, to bring these principles to life.