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Jacob Cow from the Nerd of the Street YouTube channel discusses the process of compiling software from source code. He explains that while most programs can be installed from binary packages, there are times when you may need to compile from the source code to create a binary that your computer can run. This allows you to modify the code and install programs that are not available as pre-compiled packages. The key idea emphasized is the availability of source code for open source software, enabling users to customize and compile programs as needed.