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Alan Trefler, Founder and CEO of Pegasystems, joins us to unpack how a 40-year-old, $6 billion public company is thinking about AI, why he refuses to charge customers for tokens, and what it actually takes to survive five generational shifts in technology without losing your edge.
You might not know this about Alan, but Pega’s first two clients, Citibank and Bank of America, signed on in 1984 and are still customers today. He shared why he thinks the real risk in enterprise AI isn’t the technology, it’s the incentive: “These guys are a little bit like drug dealers… passing out packets of tokens and getting people hooked.”
About Pegasystems
Pega is an enterprise workflow automation company Alan founded in 1983 on the tagline “build for change.” The company has been public for 30 years, does close to $2 billion in annual revenue with over 5,000 employees, and serves roughly 800 of the world’s largest enterprises, including four decades of continuous relationships with the same banks it started with.
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Throughout this episode, we also cover why Pega put a literal “no token cost” badge on stage at Pega World and how it can actually afford that promise, the vector database strategy Pega chose over building its own foundation model so it can move freely between OpenAI, Claude, and Gemini, why Alan thinks the “cost cap on tokens” debate misses the point because competition, not government, is what brings prices down, and the math behind why a workflow running on a CPU is thousands of times cheaper than a reasoning session on a GPU.
As the SaaS apocalypse debate rages on, we asked Alan directly whether AI coding tools are about to eat Pega’s forty-year business. We learn why he thinks the real moat was never the code, “they can compete on code, but they can’t compete on trust” - why his succession plan is basically “I’m not leaving” (his words: “my exit strategy is going to be a pine box”), and much more.
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Timestamps
(0:00) Meet Alan Trefler
(2:23) What Is Pegasystems?
(5:26) How to Build Trust Today?
(6:32) Being Public for 30 Years
(7:59) The First Year of Going Public
(11:56) Navigating the Frothy AI Market (?)
(14:00) Stock Price Ups and Downs
(20:00) Measuring the Cost of AI Compute
(22:30) Why Absorb the Cost of Tokens for Customers?
(26:57) Will There Be a Cost Cap on Tokens?
(28:02) Treating AI Models with Fungibility
(31:14) The SaaS Apocalypse
(34:35) Does AI Replace Trust?
(35:37) Inside Pega's Opportunities & Challenges
(39:14) New Tools Outpacing Entire Revenue Streams
(41:50) AI Talent & Agent Managers
(43:46) New Roles Being Hired Today
(45:46) Succession Planning
(47:04) Ollie Joins Alan as Chief of Staff
(48:45) Preparing for an Earnings Call
(50:05) Being a Hands-On Leader
(52:28) What Alan Does Outside of Work
(55:03) One Board Member You Would Have on Your Board
(56:11) Alan's Legacy
Lessons from this episode with Alan
1. Customers do not need to pay for tokens
Alan’s explanation for why Pega doesn’t charge customers for tokens: design the recipe once in the test kitchen, serve it a million times, no need to reinvent the dish every order. Concrete framing of design-time vs. runtime AI cost.
2. “A token is just an example of the BS that’s going on”
The token-vs-words rant, why calling it “tokens” instead of “words” obscures cost on purpose.
3. Bubblicious behavior
"I think the reality is that a bunch of what we're seeing is I would describe as bubblicious behavior. And so there is going to need to be some reallocation and there will be corrections."
4. “My exit strategy is going to be a pine box”
Some founders just keep going until the end of life and Alan said he is one of those.
5. The 27-slide self-congratulatory deck
His take on organizational culture and why he actively discourages “brilliant group” presentations.
6. Don’t go public too early
Pega was so advanced but also very early in their journey when they decided to go public. Looking back, Alan says - ‘‘Don’t go public too early’’
7. Trust vs. transactional relationships
“The people in transactional environments only show up when there’s a transaction.”
Links
Follow Ollie on LinkedIn: https://www.linkedin.com/in/ollieforsyth
Follow Alan on LinkedIn: https://www.linkedin.com/in/alantrefler
Visit Pegasystems: https://www.pega.com
Episode Partner - Discover Harmonic, your go-to startup database: https://harmonic.ai
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