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a16zThe Rise of the Exponential Organization with Peter Diamandis and Salim Ismail
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CHAPTERS
- 0:00 – 7:23
What Is an Exponential Organization and What Has Changed
Steph Smith opens by asking what makes an organization exponential. Salim Ismail defines an ExO as delivering 10X better, faster, cheaper than its peers, using TED as an example. Peter Diamandis and Salim explain why they wrote a second edition, citing democratized technology and tiny teams.
- •An ExO delivers 10X better, faster, cheaper than non-ExO peers
- •TED shows the model: a massive purpose, rich media and community
- •Generative AI, compute and 5G are demonetized and democratized
- •Salim's anecdote about running Singularity University with five people
- •The first book was a hypothesis; there is now ten years of data
- 7:23 – 9:00
The Economics of Near-Zero Cost of Supply
Salim explains the economic thesis behind ExOs: the internet dropped the cost of demand, and ExOs now drop the cost of supply. Examples include Airbnb, Uber and Waze.
- •Companies use a set of techniques; using over half puts them over the ExO line
- •The internet drove customer acquisition costs near zero
- •Airbnb adds inventory at near-zero cost, unlike Hyatt
- •Removing the cost of supply makes market cap explode
- 9:00 – 16:07
Why Incumbents Struggle: Asteroids, Immune Systems and Coase's Law
Peter argues retrofitting a large company into an ExO is almost impossible and uses the dinosaur-asteroid analogy. Salim lays out three options for big companies and declares Coase's law gone.
- •Peter's asteroid and mammals analogy for exponential technologies
- •Microsoft relies on OpenAI, a 130-person company; larger firms will buy innovation
- •Three options: spin off, buy, or become a platform
- •Salim's 20 Gutenberg moments hitting at once
- •Coase's law no longer holds because transaction costs are lower outside
- 16:07 – 20:40
Massive Transformative Purpose (MTP)
Salim and Peter describe the MTP, found in all 200 unicorns studied, as the core starting point. They discuss emotional energy, talent attraction, and how it connects to moonshots.
- •The 200 fastest-growing unicorns each had an MTP, such as Google's and Uber's
- •An MTP is driven by emotional energy and attracts top talent
- •Good MTPs are massive, transformative and purpose-driven
- •Heuristics: what you'd do with a billion dollars, what gets you up at 6 AM
- •Moonshots flow from the MTP
- 20:40 – 21:37
Unilever's MTP Mandate
Salim recounts how Paul Polman ordered every Unilever brand to adopt an MTP, and the most purpose-driven brands became the most profitable. The soap brands' sustainability push is the example.
- •Polman ordered every brand to take on an MTP after Salim's talk
- •Four years later the five most profitable brands were the ones adopting it most
- •Soap brands became sustainable with recycled packaging
- 21:37 – 28:21
SCALE: The Five External Attributes
Salim walks through the SCALE externalities: staff on demand, community and crowd, algorithms, leveraged assets and engagement. Peter adds the COVID flexibility point and defines crowd versus community.
- •Staff on demand gives flexibility, as in the COVID case
- •Crowd is everyone reached; community is the two-way group that helps
- •Algorithms and AI manage the crowd and its data
- •Leveraged assets such as Airbnb, Waze and AWS cloud computing
- •Engagement includes gamification, token economics and the attention economy
- 28:21 – 32:01
IDEAS: Interfaces, Dashboards and Experimentation
Salim begins the internal IDEAS mechanisms with interfaces and dashboards, then Peter makes the case for experimentation. They discuss APIs, OKRs, ditching five-year plans and Amazon's experiment culture.
- •Interfaces automate interactions, with the VeraJet example
- •Only 3.5% of big companies use OKRs
- •Death to the five-year plan: an MTP, a one-year plan and a dashboard
- •Run experiments rather than trusting opinions
- •Amazon measures teams on experiments run, and Astro Teller's assumption testing
- 32:01 – 37:44
Autonomy, Social Technologies and Restructuring in a Downturn
Salim covers autonomy and decentralization, including Valve, Haier and Tangerine Bank. Steph asks about layoffs and flattening, and the guests tie autonomy to MTPs and dashboards. Salim closes the IDEAS list with social technologies.
- •Autonomy needs a clear MTP and dashboards
- •Haier restructured 80,000 people into about 2,000 self-directed teams
- •Tangerine Bank runs without a CEO or reporting lines
- •Flattening in a downturn requires dashboards, autonomy and incentives tied to the MTP
- •Social technologies like Slack and Asana support peer-to-peer collaboration
- 37:44 – 41:55
Exponential Organizations 2.0 Workshop, AI Chatbot and Fortune 100 Data
Peter and Salim promote the free workshop and an AI chatbot built on the book. Salim then presents a seven-year analysis of the Fortune 100 showing outperformance by companies using ExO attributes.
- •Free three-hour workshop on June 6 and a free book
- •An AI chatbot lets readers apply the book to their own company
- •Books are out of date quickly, like a Honda Civic versus a Tesla
- •Top 10 beat bottom 10 by 3X revenue growth and 40X shareholder returns
- •The top 10 did five times better in the pandemic
- 41:55 – 44:44
Digitization and the Kodak Lesson
Peter explains the six Ds of exponentials, from digitization and deceptive growth to disruption. He uses Kodak, which invented the digital camera, versus Instagram to show how companies forget their purpose in favor of profit centers.
- •Digitization starts with slow, deceptive growth before disruption
- •Doubling 30 times yields a billion-fold improvement
- •Kodak invented the digital camera but stuck to paper and chemicals
- •George Eastman's purpose was preserving memories
- •Instagram with 13 employees was bought by Facebook the year Kodak went bankrupt
- 44:44 – 51:41
Automation, Jobs and Transforming Legacy Organizations
Steph raises the pushback about employees and humans in the loop. Salim describes a three-step path, including the ExoSprint and building at the edge as Apple does. Both discuss jobs, robotics, capacity and universal basic income.
- •Adapting is reality, like adopting cloud computing in the '90s
- •Three-step path: ExoSprint, build off the edge, fold into an ecosystem
- •Apple's secret edge teams disrupt other industries
- •Salim argues automation increases capacity, as with ATMs and bank tellers
- •Peter foresees humanoid robots, UBI and work for purpose
- 51:41 – 56:49
Integrating AI and the Chief AI Officer
Steph asks how companies integrate AI effectively. Salim suggests asking AI what experiments to run, and Peter recommends a chief AI officer and ChatGPT as a thought partner in meetings. Salim and Steph share examples of AI offering new perspectives.
- •Ask generative AI which experiments to run based on your MTP
- •Peter: every company needs a chief AI officer
- •Peter wants ChatGPT open in every board and management meeting
- •Salim asks AI how to disrupt a company and shows the list to boards
- •Steph's ChatGPT example of reframing ideas
- 56:49 – 1:01:58
Emerging Roles, Mindset, and Where to Start
Peter proposes a chief mindset officer and lists mindsets an ExO needs. Salim shares an Australian company's quarterly projects, then explains the diagnostic survey and Xiaomi's community model. Peter stresses adding attributes gradually and staying true to the MTP.
- •Peter suggests a head of mindset, with curiosity, abundance and purpose-driven mindsets
- •Peter filters news with an AI called Future Scope
- •An Australian company runs ten quarterly projects on the attributes
- •A free diagnostic survey scores strengths and weaknesses
- •Xiaomi leverages community, and Kodak and BlackBerry lost their purpose
- 1:01:58 – 1:06:21
Platforms, APIs and Grand Challenges
The guests discuss building APIs for others to build on, using BlackBerry and YouTube versus Google Video as examples. Steph then asks what grand challenges they would like solved. Peter points to XPRIZE wildfire and healthspan prizes, and Salim to education, institutional feedback loops and AI tutors for every child.
- •BlackBerry's closed platform wasn't scalable
- •Create APIs so the world builds businesses on top of you
- •YouTube beat Google Video by avoiding lawyer-gated approvals
- •XPRIZEs for wildfires and for reversing biological age by 20 years
- •Salim wants AI to give every child a tutor, doctor and lawyer, like Emad Mostaque's Malawi experiment
