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a16zThe Rise of the Exponential Organization with Peter Diamandis and Salim Ismail
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65 min read · 12,776 words- 0:00 – 2:37
Introduction
- SSSteph Smith
This is a log scale. Logarithmic scales exist because certain trends, exponential trends, are growing so quickly that they're tough to comprehend on linear axes, and you've probably seen a lot of these lately. Exponential compute, exponential connectivity, exponential energy, exponential research, exponential genomics, exponential AI models, even exponential space exploration. But can organizations also be exponential? It turns out, yes. There are companies with a handful of engineers that outperform others with hundreds. Instagram, for example, had 13 employees when it was sold for a billion dollars, and that was in 2012. Today, we have two very special guests join us to chat about how organizations can indeed turn exponential. Those two guests are Peter Diamandis and Salim Ismail, co-authors of Exponential Organizations and, coming very soon, Exponential Organizations 2.0. So they actually wrote the first book in 2014, but felt the need to come back with round two because of just how much technology had changed in a mere decade. Peter and Salim are also serial entrepreneurs, both well-known for their involvement in XPRIZE and Singularity University, among many other companies. Now, this topic is especially timely given that so many companies are grappling with the macro downturn, potential layoffs and restructuring, trying to keep up with all the latest tech trends, and all while still maintaining a growth trajectory. And it turns out that this may be the perfect window to rethink how your company runs as several technology trends intersect and fundamentally change the way that companies are built, and change is only accelerating. So today, you'll hear stories from two sides of the disruption coin: Kodak and Instagram, BlackBerry and Apple, and a lot more. So what are we waiting for? Let's dive in. As a reminder, the content here is for informational purposes only, should not be taken as legal, business, tax, or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any a16z fund. Please note that a16z and its affiliates may also maintain investments in the companies discussed in this podcast. For more details, including a link to our investments, please see a16z.com/disclosures. [upbeat music]
- 2:37 – 4:15
What is an ‘Exponential Organization’?
- SSSteph Smith
I think the best place that we can start is maybe you guys could just start by explaining what an exponential organization is, and maybe what aspects of the organization are exponential, because I assume we're not talking, like, exponential headcount, exponential capital raised.
- SISalim Ismail
[laughs]
- SSSteph Smith
How do you think about that?
- SISalim Ismail
Sure. So the definition we have for an, uh, EXO, or exponential organization, as we call it, is that it's delivering 10X better, faster, cheaper than its non-EXO peers. The great example is TED, which is just a nice conference, a thousand people a year. Chris Anderson takes it over. He establishes a, a massive purpose, ideas worth spreading. Then he puts all the TED Talks on YouTube, levere- leveraging rich media. Then he allows anybody to, uh, go create a TEDx event, leveraging community, and boom, he has a global media brand.
- PDPeter Diamandis
You know, Steph, I think we're living in a very different day and age. Uh, you know, I've been an entrepreneur now for 35, 40 years, and on my 25th or 26th company. At the end of the day, it's very different right now. I mean, the ability to go from an idea to a billion-dollar startup in record time with a really small number of individuals, there's something different, and it really is, uh, the digitization of every aspect. Both of us were involved in the starting of Singularity University and started studying all of these companies, and why was Uber, Airbnb, different elements of, of, of Google and Tesla, what was going on that was different? And there really are unique attributes that make a company capable of scaling massively. At the same time, you're not scaling headcount.
- SSSteph Smith
Right.
- 4:15 – 6:41
What has changed in business since 2014
- SSSteph Smith
And I mean, you mentioned several of these companies, and I'd say those were companies from maybe a decade or, in some cases, even two decades ago. But here we are in 2023, and both of you felt the need to come back and say, "You know what? We wanna discuss Exponential Organizations 2.0. We, we think there's something new here," right, in 2023. So could you maybe touch on what you think maybe is fundamentally new today?
- SISalim Ismail
[laughs] Everything.
- SSSteph Smith
Everything, right? [laughs]
- PDPeter Diamandis
Everything. Yeah. I mean, it's interesting. Y- you can realize that the technologies that were only available to largest corporations that required tens of millions of dollars to get going are now completely demonetized and democratized. I mean, obviously, unless you're hiding under a rock, it's all about generative AI right now-
- SSSteph Smith
Yep
- PDPeter Diamandis
... which is a tool that's spawning, not thousands, maybe tens of thousands of new startups, um, you know, individual, single-person startups out of no place. But then it's, you know, massive compute. It's 5G capabilities. It is access to not, you know, a few thousand individuals, but the ability to go global instantly and touch the lives of-
- SSSteph Smith
Mm-hmm
- PDPeter Diamandis
... uh, tens of millions, hundreds of millions of people. All these things are just accelerating.
- SISalim Ismail
When we were building Singularity University, uh, we had this amazing experience where the dean of one of the top business schools in the world came to visit. Um, and after, uh, trying to understand the model for about an hour, he goes, "How..." you know, "How many people are you?" And we look around the table, and we're like, "Well, there's the five of us." And you could see his mind break.
- SSSteph Smith
[laughs]
- SISalim Ismail
Like, literally, he left the building. Um, uh, five minutes later, I kid you not, he was like, "Can I play Frisbee outside?" And that was it. He was gone.
- SSSteph Smith
He needed to process.
- SISalim Ismail
And I was, and I was like, "What happened there?" Um, and I... and, um, it wasn't like we were doing anything special. We were using Google Docs for everything. You know, one person was wearing four hats, website developer and this and that. Just the normal startup stuff. And I brought him back, and I tried to query this, and he goes, "You know, my personal staff at my university is 12 people." Uh, how are you building a university with five people? And, and, and I realized something fundamental had changed between the way we used to build companies and the way we were building companies going forward. We have now a dozen technologies that are accelerating all of them individually, and where they intersect, that adds a whole other multiplier to the equation. And so we went back. When we first wrote the book and put the model together for what we call an exponential organization, it was kind of h- of a hypothesis. We're seeing this company do this, we're th- doing this. Now we have 10 years of data, case studies, et cetera,
- 6:41 – 10:47
Building companies with minimal cost supply
- SISalim Ismail
et cetera.
- SSSteph Smith
Yeah, I love that example because sometimes it really is, like, brain breaking when you're like, "This is a reality that I just didn't know existed." And we saw little inklings of this. You know, Instagram's a great example where we saw... I think when they sold, there was 13 employees, right?
- SISalim Ismail
Right.
- PDPeter Diamandis
I love it. Billion, billion dollars.
- SSSteph Smith
People always cite that, right?
- PDPeter Diamandis
Yeah.
- SSSteph Smith
But we're seeing that more and more and more, these tiny teams with outsize returns or outsize impact. Um, but I guess the Uber example's also interesting because it maybe is obvious. Uber's an exponential company. The taxi medallions are not. They're... Y- you guys even use the term linear organizations.
- SISalim Ismail
Yes.
- PDPeter Diamandis
Right.
- SSSteph Smith
How do you differentiate when it's maybe more gray, maybe it's somewhere in between?
- SISalim Ismail
Well, I think what, what we found is there's a set of techniques, and if you're using, uh, more than about half, then you're clearly over that line and you're scaling very, very fast. And the key is that you can keep a very small resource footprint and use a set of externalities to scale very quickly. What we came across over the number of years of studying these is there's a really important economic driver, right? So when you're building a business, you worry about, uh, demand and supply and, and very specifically the cost of demand and the cost of supply, right? Hopefully you're on the right side of that equation. When the internet came along, it allowed us to drop the cost of demand exponentially. Online marketing, referral marketing, every one of your portfolio companies is trying for the viral loop. W- in which case, uh, cus- customer acquisition costs go to zero, near zero, and for the first time in business history, you could acquire customers at very low cost, right? Amazing. What we find with exponential organizations, they found a way of dropping the cost of supply exponentially, right? So you think about Airbnb, the cost of adding a room to their inventory is near zero. If you're Hyatt, you have to build a hotel. Same with Uber and same with taxis, right? Same with Waze. So there's now this whole category of companies that are building with an almost zero cost of supply, and if you take out the cost of supply, the de- the d- you take out the denominator, market cap explodes, right? And so therefore now you have this incredible environment that we've never seen in the history of business where you can acquire customers at a low cost, and you can supply those customers at low cost, and that's just a magical thing to be able to do, and that's the economic thesis and basis for what we call these ExOs.
- PDPeter Diamandis
The challenge is if you're a large established company, trying to retrofit your organization to become an exponential organization is almost impossible, and there's lots of reasons for it, right? You're basically fighting everything you've been doing for the last five, 10, 20 years. And the only way to do it is to rebuild an organization outside of your organization, sort of on the edge. The difficulty is we're gonna see such massive disruption, um, in this decade, right? So if you're a large organization with [laughs] the layers of management and, um, and a, a massive lead keel of, of assets and, and, and, and, uh, and resources that you can't offload during ups and downs, uh, you're likely not to be around by the end of this decade. Uh, so-
- SSSteph Smith
Absolutely
- PDPeter Diamandis
... it's, it's, it's real, it's real disruption. You know, the, um, the analogy I, I use, Steph, is, you know, 65 million years ago an asteroid hit the Earth, a massive 10-kilometer-size asteroid, and it, it changed the environment so rapidly that the slow lumbering dinosaurs all died. They went extinct 'cause they couldn't a- adapt to the rapid change, and it was the furry little mammals, our ancestors, that survived. They were able to be agile enough to change with the environment and become the dominant, um, uh, kingdom, if you would. And it's the same thing going on today. The asteroid that's striking the business world, the entrepreneurial world, are these exponential technologies. They're changing the game so rapidly that large corporations are sort of deers in the headlights and, and they're not gonna stick around. And it's the entrepreneurial companies that are the ones that are [laughs] rapidly iterating. I've a... One of my summer interns is, you know, he started and he's been working on three startups in generative AI
- 10:47 – 15:50
Can incumbents transform?
- PDPeter Diamandis
on his own. It's incredible.
- SSSteph Smith
It's insane. I mean, we interviewed someone who I... Yeah, he's done maybe six projects in the last few months, all revenue generating, all doing very, very well, and so we are seeing this phase of the truly independent entrepreneur. But also tacking onto your dinosaur analogy, something even more recent. I saw this, this infographic that basically showed the largest companies in 1989. The top 10 or top 20, none of them are in the top 20 today. And maybe to some people that's not surprising, but these are the same companies that people back, you know, 30 years ago were saying, "They're too big to fail."
- PDPeter Diamandis
Yes.
- SSSteph Smith
These companies have this huge moat, all the talent, all the capital.
- PDPeter Diamandis
Yeah.
- SSSteph Smith
And you see the same, the same story being applied to some of the companies today. But to your point, we're seeing massive shifts in the market. It sounds like you think that the incumbents can't transform or it's incredibly hard to transform into an exponential organization.
- PDPeter Diamandis
Uh, I mean, case in point, Microsoft bases everything they're doing now on OpenAI, right? OpenAI is 130-person company. Why didn't Microsoft do this? You know, at the end of the day, it was Google buying YouTube And shutting down Google Video.
- SSSteph Smith
Mm-hmm.
- PDPeter Diamandis
Right? I mean, I think in that case it was more the lawyers that were causing the issues, but that's a different story. But it's going to be that the larger corporations are gonna be surviving by buying, um, innovation versus creating it ins- in-house.
- SISalim Ismail
Yeah, you know, this, this goes to when, when a big company tries to do anything disruptive, they get an immune system response from the rest of the company, and they get attacked. And what we found is t- three possibilities for a big company. Either they spin off that, that new co into a completely separate entity like Nestle spinning off Nespresso. Or-
- PDPeter Diamandis
And leave, leave it alone is so very important
- SISalim Ismail
Very important, right? The second is buy them, like Facebook bought Instagram and WhatsApp, et cetera, and then they couldn't have the discipline to leave it alone, and, and they got into a mess there. And the third option i- is to turn into a platform. And you look back on the internet, Yahoo, BlackBerry, Nokia all failed to become platforms, right? Google, Apple, Facebook, Amazon all successfully became platforms, and that business model basically carries you through because now you wire yourself into the infrastructure. And essentially, the future of an exponential organization when it gets big enough is to basically be a platform and be a coral reef and have other things built on top of you, which is where, where they're all trying to get to.
- PDPeter Diamandis
You know, one of the things, Steph, that I, I point out when I'm in f- in the boardroom of large companies or speaking to a group of, of CEOs is, you know, the... We're living in a time of such rapid accelerating change that we're going to be seeing these disruptive breakthroughs all the time, and you've got to be incorporating them. You've got to be experimenting. The challenge is that the day before something is really a breakthrough, it's a crazy idea. If it wasn't a crazy idea, it wouldn't be a breakthrough. It would be an expected incremental improvement. So I turn and say to these, these individuals, "Where's your crazy idea department? Where are you trying crazy ideas, embracing them, trying them, and allowing them to sort of, you know, flourish and fail?" And, and if you're not, then you're stuck in incrementalism, and if that's the case, you're moving backwards and you're not gonna be around 10 years from now.
- SISalim Ismail
Hmm.
- SSSteph Smith
Yeah, you're in a protective phase-
- PDPeter Diamandis
Yeah
- SSSteph Smith
... instead of an-
- SISalim Ismail
That's right
- SSSteph Smith
... innovative one.
- SISalim Ismail
P- Peter uses the asteroid, uh, hitting and that, the big dinosaurs.
- SSSteph Smith
Yeah.
- SISalim Ismail
Uh, I use a different, slightly different framing where we have all these technologies converging, and I say that we have 20 major Gutenberg moments hitting us-
- SSSteph Smith
Mm-hmm
- SISalim Ismail
... at the same time, right? Just solar energy changes the world. ChatGPT completely changes the world. Blockchain completely changes the world. And we've added up to s- roughly about 20 of them. It took us 100 years just to absorb the printing press, right? So now we have 20 of these things hitting us. How are we gonna absorb that in society? And big companies, I think, have a very, very difficult time, uh, dealing with this. To support Peter's analogy, um, there's... The reason for big companies is an old economic paradigm called Coase's law, okay? Uh, this fellow in the 1930s wrote a nine-page paper for which he won the Nobel Prize in economics saying that big companies exist because transaction costs c- are lower on the inside than the outside, and you can get economies of scale. And, and that's essentially the rationale, the thesis behind big companies. Well, today, neither of those true, two are true. So in the book, we actually declare Coase's law, which has been, uh, very touted for 100 years, essentially gone.
- PDPeter Diamandis
[laughs]
- SSSteph Smith
[laughs]
- SISalim Ismail
Because the, the pa- the need to control a big company makes it too slow to navigate all these massive changes that are happening, and B, the transaction costs are actually cheaper on the outside than they are on the inside today with all the web services available.
- SSSteph Smith
Mm-hmm.
- SISalim Ismail
And, and you don't need a big company. And so we think small companies offering powerful services and then scaling to become platforms is going to be the default modality for business building in the future.
- 15:50 – 18:29
Massive Transformative Purpose (MTPs)
- SSSteph Smith
Yeah. Well, let's, let's jump into how companies either start as or transition to EXOs. So I mean, if you are this big company, this incumbent, and you're listening to this, I feel like even if it sounds like it's impossible, they're gonna try, right? They know that they need to innovate in this new environment.
- SISalim Ismail
The way we came up with this was in 2012 to 2014, we analyzed the 200 fastest growing unicorns in the world and said, "How are they doing this? How is Uber scaling so fast, or Airbnb, or TED, or others?" And we found that all of these, uh, organizations had what we call an MTP or a Massive Transformative Purpose, right? Google, organize the world's information. Uber, everybody's private driver. And it was this tagline of what fundamental problem are you trying to solve? What purpose are you there for, right? It goes to the Simon Sinek question of why do you exist?
- PDPeter Diamandis
Let, let me go a bit, a bit deeper on this 'cause MTP, which is core, it's the first step if you're a large corporation, you're gonna adapt an MTP if you don't have one. If you're an entrepreneur, when you're starting out, it's that Massive Transformative Purpose, um, that you need to begin with versus a cool technology. And I think the, the thing for folks to realize is doing anything big and bold in the world is hard, and it's gonna take time. And unless you've got this emotional energy... And an MTP is driven by an emotional energy. It's like the awe of wanting to go and make this beautiful thing that you envision happen, or it's the pain of seeing something that exists that needs to be, you know, disrupted or changed. Like one for me right now, I, one of my MTPs is decimating and reinventing the healthcare industry. I think it's pathetic how expensive it is. But it comes with this, this emotional energy of desiring something extraordinary. And, you know, classically for SpaceX, it's making humanity multi-planetary and going to Mars. And when you've got a powerful MTP, it brings people to you. It brings the smartest talent on the planet. And still, until we have AGI, having smart humans on your team is really important. Um, it brings those people to you in a way that bonds you, and you're driven by something greater than just making money. Making money's fine, but it's gotta be secondary to a huge service, uh, to humanity in some fashion.
- SISalim Ismail
And we found that we, when we analyzed these 200 unicorns, all of them, uh, without exception, all of them had this, uh, tagline, huge problem that they were trying to solve, right? It became an attractor for talent. It became... It generated a community around that startup. Uh, it attracted other developers that wanted to solve the similar problem. And when you're growing very, very fast, it provides focus.
- 18:29 – 20:35
Differentiating good and bad MTPs
- SSSteph Smith
How can you tell a good MTP relative to a bad? Because I can imagine a company with maybe some very inspiring MTP, but at the same time, if it's not grounded in reality, if it's something that people don't resonate with, how, how can you tell? You know, I can imagine many companies have, quote-unquote, inspiring taglines.
- SISalim Ismail
Well, A, it's gotta be massive. Elon, like, let's make s- humanity multi-planetary. B, it's gotta be transformative. It has to be fundamentally different from what we were doing before.
- SSSteph Smith
Mm-hmm.
- SISalim Ismail
And, and finally, it has to be very purpose-driven. It has to be going after some problem that really out, is out there to solve.
- PDPeter Diamandis
And unfortunately, we see historically a lot of the traditional blue chip companies are like, you know, to provide outsized shareholder return.
- SSSteph Smith
[laughs]
- PDPeter Diamandis
I'm sorry. That's just not gonna cut it today. A, a lot of the smartest, um, you know, g- gen-whatever-you-want are looking for purpose in life, uh, not to give a better shareholder return at the end of the day to the investors. Both can come together.
- SISalim Ismail
Let's give the viewers a couple of quick heuristics here. One, uh, if you had a billion dollars, what problem would you go solve with that billion dollars?
- SSSteph Smith
Mm-hmm.
- PDPeter Diamandis
To make the world a better place, right?
- SISalim Ismail
Yeah. B, um, what would get you, what problem would get you up at 6:00 AM every day for five years to solve, that would get you so excited? And if, if you're, if the problem you're going after doesn't hit those criteria, then it's not your MTP, right? So, uh, iterate on it. Figure out what deeply are you here to do on the world, what problem are you there to solve, and that's the one to go after.
- PDPeter Diamandis
And out of that MTP is also gonna come the moonshots, right? Your moonshot is gonna drive a lot of what you're doing. And these moonshots are, you know, going 10 times bigger in the world, 1000% where the rest of the world's going 10%. And it's these combinations of an MTP and a moonshot together that really, uh, you know, wake up, uh, the entrepreneurs in the morning, keep them going. And inside a large organization, that's where the problem occurs that, you know, these crazy MTPs and these moonshots, you know, is the CEO, is the leadership team, is the board prepared to stand up and say, "This is what we're doing, and this is why we're
- 20:35 – 21:22
Unilever’s MTP
- PDPeter Diamandis
doing it"?
- SSSteph Smith
Yeah. I think Netflix is, you know, the canonical example, right, where they've disrupted themselves.
- SISalim Ismail
When we wrote the first book about around 2015, Paul Polman, who was CEO of Unilever, asked me to come and talk to his top 200 executives. And after that session, he ordered every brand in Unilever to take on an MTP, and every brand had to be purpose-driven from then on. Four years later, the five most profitable brands were the ones that were adopting it the most.
- SSSteph Smith
Can you share an example of one of those brands and their MTP? I think that would be helpful.
- SISalim Ismail
They took their soap brands and made them all completely sustainable and, and using only recycled products.
- SSSteph Smith
Mm-hmm.
- SISalim Ismail
All their packaging was created with recycled plastic, for example. And so they were able to kind of live the brand promise of solving for the planet and not just selling more packaged goods.
- 21:22 – 28:21
Staff on demand
- SSSteph Smith
And as people develop these MTPs for their brands, their companies, what do they do next? They've got this great transformative purpose. It's potentially, hopefully, attracting talent who also believe in that. And then what comes next?
- SISalim Ismail
So what we, we found that the MTP was the most important. Then we found after studying these 200 fast-growing companies, there were five externalities they were all using one or more of, and then five internal mechanisms that they were all using in order to manage the control framework and drive culture. The five externalities map to the acronym SCALE, okay? And the first one is staff on demand, like Uber. As much as possible, have a, the workforce that's external so that you have high flexibility, 'cause that's a very important heuristic and-
- PDPeter Diamandis
Can we smash that with COVID-19? I mean, listen, if you have a huge workforce that is on your salary base and, uh, you don't have any agility to flex up and flex down, you can be bankrupted by an externality like a pandemic or, like, whatever it might be.
- SISalim Ismail
Yeah.
- PDPeter Diamandis
And so staff on demand gives you that flexibility. And by the way, you know, uh, the train- you know, what staff you need, uh, is going to be constantly changing faster and faster. We're in this period of massive rapid change.
- SISalim Ismail
Yeah. So you have companies like GigWalk and TaskRabbit and Fiverr and all of these that are now offering platforms for folks to be a- available to companies, right? So that's number one. The second is community and crowd. That's the C. So TED uses community. XPRIZE is famous for taking incentive prizes. And incentive prizes turn crowd into community.
- PDPeter Diamandis
So just to define this, right? Crowd is everybody. It's the world that you can reach when you have an article or a, a blog that goes out to a large group of people. That's the crowd that's being touched. And then how you convert that crowd inwards to you, where you have a two-way communications with them and they become part of your community. For XPRIZE, the crowd was everybody who heard about an XPRIZE. A community are those people who are helping us design prizes or are building teams to compete for prizes. And this, these crowd and community are not la- they're not paid, right? They're not on salary. But they can provide a massive amount of benefit to you, helping you, uh, shape your products and your services, giving you feedback, helping to promote your products and services. The more you can tap that, the more exponential you can be as an organization.
- SISalim Ismail
Yeah. And they're all feeding into the MTP, like Wi- Wikipedia-
- SSSteph Smith
Mm-hmm
- SISalim Ismail
... with all its, you know, millions of editors that help, uh, watch everything. So, so the se-
- SSSteph Smith
That's such a great example
- SISalim Ismail
... so second one is community and crowd. The third one is algorithm, AI and algorithms. And all of these externalities allow you to keep a small footprint and use these to scale fast outside and upward.
- SSSteph Smith
Mm-hmm.
- PDPeter Diamandis
Yeah, especially in a world, in a world of massive amount of data, and your crowd, your community can be feeding you all of this data, right? Um, and we'll talk about experimentation later, but, you know, AI and algorithms are the means by which you manage That crowd and community gather the data, make sense of the data
- SISalim Ismail
The fourth one is the L, which is leveraged assets. So this is Airbnb leveraging other people's bedrooms. Waze piggybacking on other people's GPS devices, right? Bitcoin leveraging other people's compute power to do the nodes. Apple tapping into Foxconn as a manufacturing partner and not owning the manufacturing capability itself, but outsourcing it. Uh, essentially leveraging assets that you don't own become the... Cl- cloud computing was probably the most, uh, relevant here. And the... Kind of we consider the birth of an EXO when Amazon Web Services launched, because now you can take computing off the balance sheet and make it a truly variable cost, right?
- SSSteph Smith
Mm-hmm.
- SISalim Ismail
And so now everything becomes scalable, which becomes really powerful. So that's the L. And the final one is engagement, and, and this is where Peter talked about incentive prizes for XPRIZE, gamification in the community, um, all the digital marketing and digital connection you have with your user base. And now with cryptoeconomics and token economics, uh, all of these NFT projects are basically EXOs. They have a big purpose. They c- they create cryptoeconomics, and they reach multi-billion dollar ecosystems incredibly fast just by incentivizing them in the right ways.
- PDPeter Diamandis
We're entering a massive, uh, a- attention economy, right? We have... The more and more information we're generating on the planet, uh, the more and more we need to be able to get people's attention.
- SISalim Ismail
Yeah, Gary Vaynerchuk is running his VeeCon conference right now, and the best description I've heard about him is he day trades attention, right?
- PDPeter Diamandis
[laughs]
- SISalim Ismail
And you're like...
- SSSteph Smith
[laughs]
- SISalim Ismail
It's just amazing that people can navigate that world. Those are externalities that most of these EXOs use one or more of to, to... It allows them to keep a very small resource footprint and very quickly scale outwards. And then we identified five internal mechanisms that map to the acronym IDEAS. The first of those is interfaces. Uh, Apple's interface to its App Store developers or Uber to its drivers. It's actually a form of IP allowing you to automate the interaction. So Google's AdSense, whether you're the demand side or supply side, right? I mean, you could automate both sides. You can scale very, very fast. All platform businesses are basically, um, fat protocols in the Web3 world are essentially interfaces. APIs is the classic example.
- PDPeter Diamandis
Yeah, yeah. APIs, and say how do you allow individuals to build businesses on top of you in a way that utilize your services without humans in the loop? I mean, let's get those pesky carbon life forms out of the way, so to speak.
- SSSteph Smith
[laughs] Well, I was just gonna say, and it may sound silly to some folks, but you can imagine the human equivalent, right? So for Uber, it was literally calling up someone who then would dispatch a taxi, right? Or, you know, even Google Maps way back in the day, like before we had digital maps, you might even call someone or look up, you know, a physical map and say, "Hey, how do I get here?"
- PDPeter Diamandis
Steph, one of my favorite examples is, um, I'm a pilot and I, uh, fly a few different airplanes. A dear friend of mine, Richard Cane, built a company called VeraJet and uses the Vision Jet. And the traditional aircraft chartering business is literally whiteboards and sticky notes, where I'm, I'm taking this pilot and this airplane here, and the fuel is here, and it's, like, pathetic. So Richard-
- SSSteph Smith
[laughs]
- PDPeter Diamandis
... who's a brilliant computer scientist, built a platform on VeraJet-
- SSSteph Smith
Mm-hmm
- PDPeter Diamandis
... where the everything is optimized. Uh, he'll go to quantum compute later for, for doing it even faster, but where the airplanes, the pilots, where the person's being picked up and dropped off, and how they're being... All of it is fully digitized. And he used the Vision Jet, the SF50, because it is massively connected. When the airplane lands, it sends all of its data of its, uh, systems check back to the AI. So you get humans completely out of the loop, and that's beautiful. It's efficiency, it's safety, and it's speed.
- 28:21 – 29:22
Building interfaces and dashboards
- SISalim Ismail
So, so the first one is interfaces, and we actually think it's one of the most under-recognized aspects of business in the world today. We think books will be written on the, the, the richness of what's needed there. The second is dashboards, uh, and there are two types of dashboards, which is the external metrics that you track your business on in real time, and then internally, the use of OKRs to manage team and performance. So we worked out that only 3.5% of big companies around the world use OKRs. So there's a long way to go to do better team per- and performance management going forward. Using dashboards to track everything becomes absolutely critical. If you're an EXO and, and if something's going right or something's going wrong, you wanna know very fast, right? And so having real-time feedback... Uh, in fact, what we're finding, there's a whole section we have in the book called Death to the Five-Year Plan because for big companies, by the time they finish their five-year plan, it's out of date. And what we're finding is big companies now are operating on an MTP and a one-year operating plan with a dashboard, and using that to steer the company.
- 29:22 – 33:10
The importance of experimenting
- PDPeter Diamandis
Next is experimentation, and for me, this is one of the most critical, uh, and important. And entrepreneurs who are building any kind of companies today, especially if they're part of the Andreessen Horowitz community, know this, right? You're beginning from the beginning as an experimental-based company. Uh, it used to be the tyranny of confidence, right? That you'd have an expert and someone who you would hire, a consultant, to tell you what it should look like, the marketing and such. And today, I, you know, I don't care about human opinion. Show me the data, right? Run the experiments. Iterate on everything from taglines to colors to font sizes, and run the experiments and build from the beginning. We talk about this. You know, uh, Jeff Holden was a friend of mine. He was the chief product officer at Uber and at Amazon, and talked about this experimentation engine that they built called Morpheus back then, and teaching your team how to run experiments. If you're starting a company now, you need to begin it from the inception as an experimentally-minded organization. When someone raises an idea, it needs to be, "Okay, here's the experiment we're gonna run," not, "This is what we're doing."
- SSSteph Smith
Mm-hmm.
- PDPeter Diamandis
Um, the problem is large corporations Are terrible at math. They, they have a hard time navigating it. It's-
- SISalim Ismail
Yeah. If you run an experiment-
- SSSteph Smith
Absolutely
- SISalim Ismail
... and you fail, your career is over, over, right? So you're- there's every disincentive to do that. And we think of experimentation as having kind of two pieces. One is like the lean startup constantly testing assumptions and running them, and also co- inculcating a culture of taking risk so that the organization is constantly learning. We saw, for example, at Amazon, that every team is measured on how many experiments they ran this quarter, how many succeeded, how many failed. If you're not running enough experiments and not enough are failing, you actually, your bonus gets dinged, right? So they w- they're constantly learning on a nonstop basis what pricing models, what customer, what return policies work or don't work, et cetera. And that's never gonna keep... That's always gonna keep them ahead of the game.
- SSSteph Smith
I mean, it's like you both said, it's a cultural thing.
- SISalim Ismail
Absolutely.
- SSSteph Smith
It is also an operational idea, but y- I think most people listening have probably been in different companies, some which have an experimental nature to them, where, to your point, it's like we are open to other ideas, and in fact, we want to be wrong.
- SISalim Ismail
Right.
- SSSteph Smith
We want you to bring a new idea that proves our assumptions incorrect.
- SISalim Ismail
Yeah. You know, the... Peter tells a story of Astro Teller at, at X, where he goes, "Show me the assumptions you've made, and pick the ones that w- that you think will have the product fail, and let's do those first," right? "And let's learn whether it works or not, and then cascade down the list." And I think that's just a great way of thinking-
- SSSteph Smith
Mm. Mm-hmm
- SISalim Ismail
... on a nonstop basis. So that's experimentation. Then we have A, which is autonomy, and this means decentralized org structures, decentralized decision-making, leading all the way to DAOs, right? Eventually, where you programmatically have everything completely decentralized because you, in a highly flexible, volatile world, you not want as much decision-making done at the edges as possible. And empower the individuals and employees like Valve Software in Seattle that has no CEO or reporting lines, job descriptions, management meetings of any kind. They're like a beehive, right? And so more and more companies, we think, will be taking on this attribute. This is, again, very hard to implement in legacy organizations.
- PDPeter Diamandis
Are impossible. I mean, talk about like [laughs] okay, you don't report to anybody anymore. Here's your budget. Autonomy requires having a really clear Massive Transformative Purpose-
- SISalim Ismail
Yeah
- PDPeter Diamandis
... in an organization, so everybody knows why they exist and why they're doing something, and it requires having dashboards. If you've got an MTP as your North Star, and you have a dashboard measuring how you're moving in that direction, then you... And you trust your employees, and they're brilliant, and they care about this, let them go, and let them do their work. Really hard to do in a large organization.
- 33:10 – 36:57
The economic downturn and restructuring
- SSSteph Smith
I mean, you're, you guys are both speaking my language. I've worked remotely for almost a decade now, and I, I completely believe in this idea. But you're also noticing right now, through this downturn, many companies are laying a lot of people off. They're kind of removing that manager layer. And so just any thoughts in this particular point in time as we speak to this idea of autonomy, setting organizations up for success?
- SISalim Ismail
If you have proper dashboards, and you have motivated people that believe in a, in a big purpose like an MTP, you essentially can just let them do their thing, okay? I'll, I'll give you the most extreme example we ever came across with this, is a Chinese company called Haier. They're a appliance manufacturer, and they make 55 million fridges and ovens a year. There were 80,000 people in a classic pyramid structure, command and control, top-down, et cetera. CEO one day wakes up and goes, "Can't meet my corporate goals using this structure," blows it up. Turns 80,000 people into 2,000 individ- teams of about 40 people each, okay? Each team has a P&L, a target. Each team elects their own leader, and each team decides to do whatever they wanna do, right? And you're like, "Wait, how do you make 50..." So you go to any business school in the world and say, "I wanna make, I wanna set up a structure to make 55 million fridges," and they'll gen- design for you a, a incredibly centralized, you know, supply chain, product, uh, uh, uh, d- definition, demand forecasting, all centralized, right? And here, this guy's doing it on a decentralized basis. The quality suffered for the first couple of years while they got their act together, but once they got the, the machine working, GE actually gave up and sold GE appliances to them because they couldn't compete. Like, when they wanted to decide what pro- features should go into the new fridge, they, the teams vote. And because you have 2,000 teams interfacing with vendors and customers and suppliers, they do a much better job and get a much better result than some product strategy team hunkered away with market forecasts and market research. We're seeing the power of this to an incredible degree. There's a Canadian bank called Tangerine Bank, which used to be ING Direct, which actually operates like this. So in a regulated bank, there's no CEO reporting lines, job descriptions, et cetera. And you kind of go, "Wait, how is this working?" When they do an online promotion, everybody goes to the phone banks. And when it's, when it's regulatory reporting time, the chief risk officer goes, "Hey, I need help," and everybody floods to help him, right? And everybody has a ton of fun. They naturally find where they fit the best in the organization.
- PDPeter Diamandis
And they have more of a say, and they're, they feel more control. They feel more ownership. You know, it, it really, during this time of, of rapid change and including downsizing, including competition coming out of no place, right? Your competition is no longer the company you thought it was. It was a startup [laughs] coming in from this crazy idea that's now a breakthrough, and so that agility is key. I think going back to your question around the downturn, um, if you're going to reduce your headcount and flatten your organization, you need these tools. You need the dashboard. You need to give autonomy, uh, to your group, and you need to fully cen- incentivize them, uh, with clear objectives that are tied back to your MTP. And sometimes you're gonna see just massively increased performance. It is the CEO and the board of directors, if they're doing something different that's unlike what they've done for the last 10, 20 years, especially if they're a public company, they need their board of directors to give them top cover. Throughout the organization, it's a, a choice to transform. Now, you've had companies You know, and, uh, incredible leaders like Jeff Bezos or Elon Musk or Larry Page, who from the beginning had this vision. You know, uh, Jeff Bezos' classical, uh, shareholders letters, um, in the early days saying, "Listen, I don't care about profitability. I'm talking about scale." The cojones to go [laughs] in that, but that's what it took, and he was right.
- 36:57 – 41:29
Peer-to-peer collaborative technologies
- SSSteph Smith
If you build the right MTP, the right goals, the right dashboards, that's effectively what a manager does, right? When you think about, like, they're checking to make sure that you're working on the right things, that you are experimenting towards those goals, and then you're meeting them. And again, that's represented through the dashboard.
- SISalim Ismail
We find that the culture of trust gets built in, uh, as a, as an intrinsic outcome of building an EXO. So th- that's, uh, autonomy. And the final attribute, which is S in IDEAS, is social technologies. So these are all the peer-to-peer collaborative technologies like Asana, Slack, Zoom, Yammer, Chatter. We have really good evidence today that peer-to-peer collaboration and communication is much more valuable than traditional top-down, your manager telling you what to do and how to do it. And so the more you can enable that with technology, the better.
- PDPeter Diamandis
If this is of interest to you, if you're an entrepreneur at the beginning of your journey building your company, or if you're a large corporation trying to figure out how do you make sense of this, our new book is coming out, and it's basically, uh, going to be available for free. It's called Exponential Organizations 2.0. We're gonna be doing a three-hour workshop on June the 6th, and it's a free workshop. Uh, Salim and I are gonna be, uh, basically showing you how to build and create your MTP and your moonshot, talk about each of these, of these 10 attributes. It'll be interactive. We'll be answering your questions. If you go to, uh, diamandis.com, my last name .com/exo, you can register. And there's another part we built in.
- SISalim Ismail
Yeah, because, you know, we have to eat our own dog food, so over the last three months, we've been building an AI chatbot to interface with the book. So you can literally go to this chatbot and type in, "Here's what I do with my company. How would I turn it into an EXO?" Or, "How do I apply dashboards, 'cause this is what I got right now?" And it literally researches the entire corpus of the book and all the interviews we've done and all the tapes of recordings we have. So this is now a living book. We're gonna load up into it 700 case studies that we have of EXOs.
- SSSteph Smith
I think the AI is so important because we've talked about how the world is changing, and this is, you know, maybe one small example, but the idea of a book itself is changing. How you can interface with it, how you can have it customized to your specific questions related to your specific organization.
- SISalim Ismail
And any business book today is pretty much out of date by the time you read it. It, it-
- PDPeter Diamandis
Oh my God, it is so-
- SISalim Ismail
This, it's like-
- PDPeter Diamandis
It's so difficult to write a book today
- SISalim Ismail
... it's like the difference between a traditional car and a Tesla. If you had a Honda Civic, it was engineered 10 years ago, designed seven years ago, built three- two, three years ago, and by the time you get it, the design and the technology is 10 years out of date, right? Whereas a Tesla is up to date on the spot because they're constantly updating the software. And we think the future of books is gonna be like this. A book that was... took a few years to write, et cetera, will be out of date if it's not being constantly updated and refreshed. I wanna give you some data that we just came across, Steph, about the, the validity of this. So when we first came up with the model in 2013, 2014, and kind of the... We did an initial test, okay? And what we did was we went and ranked the Fortune 100 by this model, okay? So we looked at every one of the Fortune 100, IBM, Hewlett-Packard, Walmart, you know, and said, "Okay, are th-
- SSSteph Smith
Mm. Mm-hmm
- SISalim Ismail
... to what extent, one to four, are they purpose-driven? To what extent are they using lead startup thinking? To what extent is their decision-making decentralized?" Et cetera, et cetera. And we came up with an index. Uh, and we... I went, I did a segment on CNBC Squawk Box. We presented an index. Here are the Fortune 100 basically ranked by the flexibility, agility, purpose-driven nature of the org structure. Okay? So that was, uh, 2015. Um, a few months ago, we did a seven-year trailing analysis, okay? How did these companies do over seven years? Uh, and what we did was we tracked over seven years the top 10 that you continued to use the attributes the most, and the bottom 10, the least linear, the least flexible, that used the attributes the least. And we said, "All right. Let's compare the top 10 and bottom 10 in our index and how they did over seven years." Over a seven-year period, the top 10 did better than the bottom 10 by 3X on revenue growth, uh, 6.4 times on profitability, 10.9 times on return on assets. But shareholder returns, compound annual growth rate, top 10 outperformed the bottom 10 by 40X over seven years. 40 times.
- SSSteph Smith
40X.
- SISalim Ismail
Right? And you're like, "I should have created an index fund." [laughs] Right? Like, oh, we completely went down the wrong business model. We even looked at it and said, "The, we've gotta see if the R-squared co- uh, is, correlates here," and it absolutely does. So now we have a very, very clear data grounded thesis that if you're not ar- uh, architected in this way, you just won't deliver the returns going
- 41:29 – 42:37
Digitizing your business
- SISalim Ismail
forward.
- SSSteph Smith
I mean, it really represents that order of magnitude, just like your earlier story of saying, you know, five employees versus, you know, 50 or 500 or 5,000.
- SISalim Ismail
And, and what was really incredible was, uh, when the pandemic hit, these, the top 10 did five times better than the bottom 10 in responding to the pandemic, right? Because the more fl- as the external world gets more volatile, your ability to adapt is gonna drive market value. And now we can measure that.
- PDPeter Diamandis
It seems obvious in retrospect, but it's, it's, uh, incredibly important. Now, the challenge is, again, the majority of our large corporations are built for, uh, building a wall, a walled garden. Uh, you know, it is a scarcity mindset. We're gonna own this asset and piece it out a little bit. One of the concepts we talk about that I, was in an earlier book I wrote called Bold: How To Go Big, Create Wealth, and Impact the World, the six Ds of exponentials. Your job as an entrepreneur is to digitize any element of your business that you can Seems obvious, but when you digitize something in the beginning, the growth of that is slow and
- 42:37 – 44:44
Kodak example
- PDPeter Diamandis
deceptive. So digitization is the firx- first D. You know, deceptive growth is the second. Then it, uh, you know, when we double something 10 times, you know, it's 1,000 times better. Double it 20 times, it's a million times. Double it 30 times, it's a billion times, and it becomes disruptive, and it dematerializes, demonetizes, and democratizes. The classic example is Kodak, right? So Kodak in 1996, the top of its game, a $28 billion market cap, 140,000 employees. What people don't realize is that 20 years earlier, Kodak had invented the digital camera in their labs. A guy named Steven Sasson had invented it, and he brings the digital camera into the board of Kodak and goes, "Here it is, the future of Kodak. It takes .01 megapixel images-
- SSSteph Smith
[laughs] Yeah
- PDPeter Diamandis
... in black and white on a tape drive." And of course, Kodak laughs and says, "No, no, no. We're in the paper and chemicals business," right? That was their profit area. And this is a challenge because companies forget, larger companies forget their purpose versus their profit centers, right? George Eastman, the founder of Kodak, didn't build Kodak to be in the paper and chemicals business. He wanted to preserve memories. That was... You look at what he did, that was his mission. And rather than hopping on the digital camera, they didn't, and 20 years later, they were bankrupt by the technology they had invented. In the same year they go bankrupt, going back to our friends at Instagram, right, Instagram gets acquired for a billion dollars by Facebook with 13 employees. And, and then now it's worth $100 billion on, on Meta's, uh, balance sheet. And so it's this notion that as an entrepreneur, you need to digitize, dematerialize, right? The cameras have gone away. They're now, you know, an app on your phone.
- SSSteph Smith
Yep.
- PDPeter Diamandis
You know, y- that allows you... The marginal cost of replication of that app is zero, so it's demonetized, and it can go everywhere, so it's democratized. And this is over and over again. And you're not working to dematerialize, demonetize, and democratize your products and services, someone else will, and they'll put you out of business.
- 44:44 – 51:33
Automation and humans in the loop
- SSSteph Smith
Well, let me ask a question on that. I feel like a lot of companies, if they're listening, are probably like, "Yeah, okay. M- I should probably get some shared assets. I should probably get rid of some W2 employees and have more flexibility in my workforce. I should probably automate a dashboard. I should probably build a platform so that I don't have humans in the loop. Instead, the algorithms are running things." And so, I mean, some people are like music to my ears. Other people are probably like, "But what about my employees? What about the humans that I've employed for years, if not decades?" And so I guess my question is, is this just the reality that we're in, or how would you think about maybe some of that pushback as people think about the transition to an exponential organization?
- SISalim Ismail
So it's a combination of both of those. It's the reality that we're in, okay? And it's like if you were in the '90s and you didn't adopt cloud computing, right? You're not gonna last-
- SSSteph Smith
Mm-hmm
- SISalim Ismail
... very long. You have to take on... The world is changing, so that's just the reality. If you're not building generative AI into your products and services going forward, you're not gonna last. So this is a fundamental reality of adapting to the new world. The second part is, how do you then transform the legacy organization into something different, new, et cetera? And we found that there's a th- And we've, we've now worked with, um, um, dozens of big companies from Procter & Gamble to Unilever to TD Ameritrade to Black & Decker, et cetera, and we found there's a threefold path. Path step one is run a 10-week what we call an ExoSprint, which hacks the immune system and hacks culture at scale. The default answer in a big company if you're trying to do anything disruptive is no. And so how do you switch that to a yes? Step two is do not do disruptive things in the core organization 'cause you'll have this immune system response. They're geared and architected for efficiency and for predictability. Just keep letting them do that. Take the crazy people in your company, the edge, and let them build an exo off the edge. So Google X, uh, does this, et cetera. Um, the a- the master of this technique, by the way, is Apple, okay? And yes, Apple has a great technology supply chain, and yes, they have a great design capability. I will argue that Apple's real, uh, uh, real edge is organizational. Because what they will do is they will form a small team that's really disruptive. They will put that team at the edge of the company. They'll keep them secret and stealth, and they'll say to them, "Go disrupt another industry," right? Whether it's payments or watches or retail or whatever. So they have a portfolio of teams looking at different industries. When they think something is ready for disruption, they go into it and fold it into the broader ecosystem. There's no limit to their market cap. And we think as we move forward, more and more companies will have to adopt this type of a model because doing disruptive things at the edge gives you the upside, and then you fold it into an ecosystem and a platform play. Uh, and we're starting to see that happen, and we think most big companies won't make it, but there are companies learning. Look at the recent, uh, ChatGPT thing. Google was basically the foundation of LLMs, right? They were too nervous and careful and risk-averse to launching, and so they got-
- PDPeter Diamandis
Same thing, same thing with YouTube
- SISalim Ismail
... they got careful.
- PDPeter Diamandis
Yeah.
- SISalim Ismail
Uh, Microsoft went, "Let's just go for it," and they did it, and boom. And so it-- you can't afford to sit back on your laurels today, and less so if you're a big company.
- PDPeter Diamandis
Let's talk about the humanitarian side of this, right? Because people are saying, "Hold it, hold it. You're talking about having my company disrupt and, and reduce the number of jobs and, you know, what about my family I have to feed and, and, and such?" I mean, the... First of all, the reality is this is going to be happening, and what you really need to do is make sure that a company is gonna be able to survive and, and thrive during these times. Uh, it's not like if you choose to be, "We're gonna employ everybody and not change our organization," that organiz- You're gonna lose your job anyway 'cause the organization's gonna be bankrupt soon enough. Now We have another tsunami coming. I track these 20 meta trends, uh, of what's happening. AI is one of them, but humanoid robotics is another, right? We have a, a, at least a dozen, uh, humanoid robot companies that are in development. You know, people might know about Optimus, uh, out of, out of Tesla, or Figure. They are coming, um, and they're going to become a massive workforce. And so there's going to be a transformation in culture and employment, and we have to be ready-
- SISalim Ismail
Yeah
- PDPeter Diamandis
... to deal with this.
- SISalim Ismail
I, I get... I, I wanna touch on this, 'cause I go crazy when I hear this.
- PDPeter Diamandis
Please.
- SISalim Ismail
When we look in the past when we've had disruptive technological innovation to come in and completely clean up, we found that we don't lose jobs. What we do is we increase capacity. I'll give you a very clear example, which is in the '70s we created bank ATM machines, and you could automate banking to a large degree. And there was lots of hand-wringing going on, "Oh my God, what will we do with millions of bank tellers? They'll all be out of work," et cetera, et cetera. What actually happened was the cost of running a branch dropped by 10 times, and the banks went and created 10 times more branches, and the number of bank tellers has not changed at all since the '70s, right? Same thing with truck drivers. When we automate trucking, we'll just be doing a ton more trucking because we just ha- don't have drivers right now. And so what we found is when you automate, for the most part you increase capacity. The most roboticized companies in the... countries in the world that have the highest penetration of robotics are South Korea, Sweden, Germany, which have the lowest unemployment. And so as of... it's very clear from the data, but our minds go straight to, "Oh my God, we'll lose all the jobs," right? And we've never seen it happen.
- SSSteph Smith
Right.
- SISalim Ismail
But, but this is where Peter talks about scarcity versus abundance. It's-
- SSSteph Smith
I was just gonna say, the idea that these jobs, these specific jobs potentially being automated adds more productivity to the system-
- SISalim Ismail
Exactly
- SSSteph Smith
... which then allows more to be created.
- PDPeter Diamandis
Ex- exactly. And, you know, listen, in... I run a program every year called Abundance 360, and I, you know, I coach 360 CEOs and entrepreneurs through- throughout the year through this. And this year we took a look at UBI, right? And so we probably will have some version of universal basic income coming down as more robots and AIs come online. Uh, there will be jobs disrupted, but what we're gonna enable is for people to level up what they do. A lot of people who have jobs didn't dream about waiting tables or cleaning bathrooms when they were a kid, right? What did they dream about? And we're gonna... you're gonna all have an AI co-pilot that helps you learn and do and, and actually pursue your dreams, and we'll probably end up splitting work for income and work for purpose, uh, in the future. Not the subject of the book, uh, but, uh, something that from a societal standpoint we need to be thinking about. But companies have an obligation to fulfill their massive transformative purpose and to do the, do it in the most efficient way possible, and all of this uplifts humanity, and, and that's the
- 51:33 – 56:29
Companies effectively integrating AI
- PDPeter Diamandis
ultimate game here.
- SSSteph Smith
It is just the reality. It is the market dynamic that exists, that if you don't innovate, someone will out-innovate you. And just because we've been touching on AI, I'd love to just hear from both of you, I guess, interesting ways that you've seen companies start to integrate this new technology, because it is so ground shaking and it impacts, you know, just about everyone. Um, but at the same time, you know, a lot of people are familiar with ChatGPT and using that on an individual basis. So how have you seen this really be deployed effectively within exponential organizations?
- SISalim Ismail
So I think what we're gonna do see is, um, for an, for an EXO, there's a very clear place. You basically say to a generative AI and ChatGPT equivalent, Stability, Diffusion, whichever, you say, "Here's my MTP. Here's what I'm currently doing. What experiments should I be running?" Right? And we think the AI will then come back with, "Here's the 55 things you should be considering," et cetera, et cetera, and that performs a great tick list to go off and think about that, and I think that's one. There's a clear huge area in education and training, right? Go learn this job, go learn this function, go learn how to program whatever. The best benefit is we'll replace most of the lawyers, because you can just say, "Generate me-
- SSSteph Smith
There's a lot of lawyers out there
- SISalim Ismail
... a contract that has these characteristics," and it'll throw in the clauses and et cetera, et cetera. It'll go wow. So I think that's for me the most exciting one.
- PDPeter Diamandis
Oh my God. Yeah, so i- listen, when I'm... First of all, uh, one of the things I advise and talk about a lot to a company is every company needs to have what I call a chief AI officer. It is someone who understands what's going on in the AI universe and is sitting next to the CEO as a strategic advisor to say, "We need to be injecting it here, here, and here, and here, and partner with this organization, this organization." And the challenge is, and I, I talk about this openly, I said there are gonna be two kinds of companies at the end of this decade: companies that are fully utilizing AI and companies that are out of business. I need it to be that black and white. And so if you are, you know, a large company CEO or an entrepreneur and you're not sure on how to be utilizing this, it's even more reason for you to go and hire someone who's gonna sit next to you. It's like, uh, call the strategic officer, but it's your chief AI officer, and their job is to be injecting, uh, platforms, partnerships, capabilities at every level. I talk about at every, every board meeting, every management meeting, I want ChatGPT open as another member of the team. It's like when I'm asking questions, I want people using it as a thought partner. We don't know how to think other than the way we know how to think. So it's obviously obvious, but-
- SSSteph Smith
[laughs]
- PDPeter Diamandis
... when you bring in this other perspective that is bringing in the world's knowledge, you get, you get orthogonal thinking. And again, that's where breakthroughs come from. You know, if you limit, [laughs] if you limit yourself to your leadership team, you've got a very narrow window of new, you know, cognitive, uh, surplus.
- SISalim Ismail
The last four presentations I've done to big CPG boards and C- and C-suites, I've said, "How would I disrupt this company?" And it gives me a list, and then I show that on a slide. And the, the looks on their faces, you know. And I go, "That took two seconds to generate," right? How would I attack this company if I was a startup? And I think what's really powerful about today is when we were having this conversation when we first put this model, Tesla was nowhere, uh, Uber and, and Airbnb were just kind of getting started, et cetera, et cetera. Now we can point to 50 things and say, "You have to adapt."
- SSSteph Smith
My favorite thing about interfacing with these AIs is exactly what you said about it kind of extending your own ideas. And I had an experience yesterday where I was thinking through, I was thinking through a tweet actually, and I was just thinking, you know, cities are designed around cars, and offices are designed around meetings, and just, you know, how our current society has been designed around things of the past that are changing. And I asked ChatGPT, I said, "Hey, can you come up with a few more of these?" I just wanted to see what it came up with. But the fascinating thing was not only did it come up with a bunch of them, it had this altruistic view where my original ones were a little more negative, right? Like, oh, you know, we, we need to rethink cities so they're not designed around cars. And they were beautiful. They were like, "Parks are designed around families." And I was like, "Oh, I never really thought about that." It was so surprising. And then I said, "Hey, ChatGPT. Thank you so much for this, but, like, these are really altruistic and, and could you give me a few that I think are maybe more grounded in reality?" And it also spat out, like, the exact same 10 things, but with a totally different viewpoint. And I was like, "Oh, my gosh. This is so clever." And I guess to that end, I agree with you that, you know, having someone within the organization who is solely focused on this is so important, and we're seeing that across
- 56:29 – 59:44
Emerging roles due to exponential trends
- SSSteph Smith
other dimensions as y- you know, you mentioned, Peter, maybe 20 meta trends that are happening.
- PDPeter Diamandis
Yes. Mm-hmm.
- SSSteph Smith
And I wonder, you know, we've seen a couple companies hire head of remote who are thinking about, you know, what, what staff on demand should I be bringing in? How do I incorporate async into my organization? Are there other roles that you both see emerging-
- PDPeter Diamandis
There are
- SSSteph Smith
... due to these exponential trends?
- PDPeter Diamandis
There are. I mean, one of the things I think about, Steph, is a head of mindset in an organization, which is a really w- weird and woo thing to talk about, but your mindset is the single most important thing any entrepreneur or any organization has, right? If I said to you, "What made Steve Jobs, Jeff Bezos, you know, uh, Mahatma Gandhi, Martin Luther King successful? Was it their money, their technology, their network, or was it their mindset?" I think everybody would argue it's their mindset. And if in fact your mindset is the most important thing that makes you successful as a leader or an organization, my next question is what mindset do you have? And I list off, uh, a number of mindsets that I think an EXO needs to have. Uh, it needs to have a curiosity mindset. Uh, it needs to have an abundance mindset, exponential mindset, a moonshot mindset, a gratitude mindset, and a purpose-driven mindset most importantly. Here's the, here's the thing. We're... The world is speeding up, and as a result of that, the way you react to problems and opportunities is a, uh, uh, is a instantaneous reaction to it, right? It's instinct in this regard, and that instantaneous reaction is shaped by your mindset. And so if you have a dystopian negative mindset and you see a problem, it puts you back on your heels, and you're cowering, and you're in fear and scarcity mindset. If you've got a abundance mindset and you see a problem, it's like, "Oh, my God. What's the opportunities coming out of this? How do we, how do we navigate this? How do we bring in new capabilities?" And so, you know, c- I, I haven't really thought about this before, but a chief mindset officer that's really training your employees and your organization. And how do we train ourselves? Same way an AI does, you know? And a neural net is trained by in- showing it example after example after example, and we need to be... You know, I train my own neural net, my own brain, uh, by not watching the crisis news or network CNN, right, and getting, you know, dystopian news all the time. It's by the books I read. I built an AI called Future Scope that searches the world's information and brings me the stuff that's within my parameters of, you know, positive, uh, you know, uh, abundance minded, exponential, uh, in all of these industries. So the news is out there. It's just filtered by, by editors who want clickbait for their advertisers or filtered by what actually serves me.
- SISalim Ismail
There's a company in Australia that I came across that, um, that they read the book a few years ago, and they have every quarter 10 projects running on the 10 attributes. Uh, staff on demand, autonomy. And every quarter they just re-up the projects, and everybody has to pick something they're gonna drive the initiative for. And somebody picks, "I'll drive dashboards this quarter," and figure out how to implement dashboards into some new domain, and they just keep doing that.
- 59:44 – 1:01:13
The framework and diagnostic survey
- SSSteph Smith
If an organization is at a place where it's assessing these different attributes, the 10 attributes, is there a framework or a way of thinking in terms of where to start? Because I assume even not just large companies, but some startups would look at those 10 and say, "Oh, man. There's like eight of these that we are not doing well or we are not tackling."
- SISalim Ismail
We actually have a diagnostic survey where you can score yourself and see where am I weak or strong, okay? Once you kind of have the as is, you can kind of go, okay, how strong do we need to be in AI or in, in autonomy or in community and crowd? Like for example, most big companies in the world don't leverage community, right? They build a product and they, they try and push it into the marketplace, okay? Then you have Xiaomi in China, the second biggest phone company, and they're successful because they have 1,000 super users that vote on what features should go into the new phone, and they get the phone early and can boast to people, "Look, I voted." And the- all their word-of-mouth product development is taken care of, and they have no marketing or promotional costs at all. That me- allows them to keep the cost low just by leveraging community, right? So you can then, once you know this is the baseline, and, and the diagnostic is also f- free to take as how we scored the Fortune 100, um, you can then say, "Where do we wanna be?" And then start filling in the gaps and building that capability.
- PDPeter Diamandis
Actually, every attribute you add moves you in that direction, and it's, it's important to realize you don't need to do everything at once, but you need to have clarity on where you're strong and what to add next. And it's easiest, by the way, when you're doing this at
- 1:01:13 – 1:04:00
Creating APIs you can build on
- PDPeter Diamandis
the beginning. One of the places I've seen people fail is when they start with a massive transformative purpose, and then they bend to the marketplace and deviate from it and follow path of least resistance, and you end up with something that Yeah, maybe you've got some revenue in markets, but it isn't inspirational anymore and it's going to die-
- SISalim Ismail
Guilty as charged
- PDPeter Diamandis
... a slow and painful death.
- SISalim Ismail
Done it a few times. [laughs]
- SSSteph Smith
[laughs]
- PDPeter Diamandis
Yeah. We've all, we've all done it. Yes, exactly.
- SSSteph Smith
We've all done it.
- PDPeter Diamandis
Yeah.
- SSSteph Smith
I mean, Kodak's a great example, where you said they literally got lost. They, they had an MTP, but based on their killer product-
- PDPeter Diamandis
Yeah
- SSSteph Smith
... for a period of time, they got lost, right?
- SISalim Ismail
So, and look, look at-
- SSSteph Smith
They got lost in what their MTP was
- SISalim Ismail
... look at BlackBerry as well. BlackBerry got to the biggest phone company in the world. They didn't have an MTP to sustain what they were gonna do next, right? And then eventually they just imploded.
- SSSteph Smith
Also a great example of building a platform that other people can build on top of, right? That's one of the ways that Apple has succeeded. And I had a BlackBerry back in the day. I remember they had maybe, like, one or two games on the phone, and anything that went on a BlackBerry had to be built-
- PDPeter Diamandis
Yeah
- SSSteph Smith
... by BlackBerry.
- PDPeter Diamandis
Yes
- SSSteph Smith
And so it wasn't scalable-
- PDPeter Diamandis
Yeah, biggest-
- SSSteph Smith
... it wasn't exponential
- PDPeter Diamandis
... biggest problem, right? You really wanna create your APIs, your interface, that allows the world to build business on top of you. The most successful companies in the world. And if you have something that's extraordinary, open source it to share the cost of the operations. It's what Amazon did with their cloud services, which was so brilliant. And I wanna go hit again, you know, uh, Google had Google Videos, and I remember meeting Chad Hurley after Apple... after Google had just bought them. And it was like, "Why? Why did they buy you? They had Google Videos." And it was like, "Well, you know, Google Videos had a whole bunch of lawyers approving what could go on and what could be done. And, and YouTube just had none of that, and it just took off." And so, you know, it gets bought for $1.65 billion 18 months after startup. This agility of a small, nimble mammal compared to the large lumbering dinosaurs is, is going to only be amplified. Let me just say again, uh, please, uh, if this is of interest to you, if you're a large corporation that wants to understand how do you implement this and, you know, hopefully slow or prevent a disruption, or you're a, a startup at any stage, this is a three-hour workshop. We're gonna run through all of these, give you the best examples we can, give you access to the book for free. AI tools to help you shape your moonshot, your MTP. Uh, to access this, it's, uh, diamandis.com/exo. We're bubbling with excitement-
- SSSteph Smith
[laughs]
- PDPeter Diamandis
... to share what we've been-
- SISalim Ismail
It's been-
- PDPeter Diamandis
... what we're working on here-
- SISalim Ismail
It's been deadly
- PDPeter Diamandis
... and getting it out to the world.
- SSSteph Smith
Yeah.
- SISalim Ismail
We've had to-
- 1:04:00 – 1:06:11
Innovation grand challenges
- SSSteph Smith
Given that both of you have been in technology for so long, are there any large, grand challenges that you'd just love to be solved or have founders-
- SISalim Ismail
Oh, wow
- SSSteph Smith
... you know, take a stab at? What's, what's kind of catching your eye in terms of-
- PDPeter Diamandis
Oh my God
- SSSteph Smith
... potential MTPs?
- PDPeter Diamandis
Well, so I, I do this for a living with XPRIZE, right?
- SISalim Ismail
That's right.
- SSSteph Smith
Right. Exactly.
- PDPeter Diamandis
That's all we do is launch XPRIZES. We just launched an XPRIZE for wildfires. You can-
- SSSteph Smith
Mm
- PDPeter Diamandis
... monitor 1,000 square kilometers, detect a wildfire at ignition, and put it out 10 minutes automatically, right? We're getting ready to do an XPRIZE. My biggest area right now is reinventing, disrupting healthcare.
- SSSteph Smith
Yep.
- PDPeter Diamandis
Uh, a health span XPRIZE. Uh, reverse your biological age or your functional age by 20 years, right? Those are areas I care about.
- SISalim Ismail
Uh, I think there's two or three big areas. One is, uh, education, which desperately needs a massive transformation. It... But it turns out our institutions have their own immune system, right? God help you if you try and disrupt academia. Journalism, et cetera, has... We, we have institutional immune systems as well that need to be disrupted. I think the biggest and most important one is that in our general institutions, we don't have a feedback loop, and there's no mechanism to update the UN or the, the healthcare system or the legal system or the education system. And we need to build those. And I know many of your companies attack those areas, but we need to figure out a way of jumping past all of that and going to a completely new model that's actually working for people. I think this is where AI can really help. For example, uh, we've been chatting with Emad Mostaque of Stability AI, Stability Diffusion. And we're like, "Why can't we just use an AI, um, load up all the data in a country, and give every child a tutor, a doctor, a lawyer, and an assistant, and a link for each one, and just let them go nuts? You'll just instantly transform that country." I think that's the kind of thing that we're really excited about seeing tons of.
- PDPeter Diamandis
Yeah. And by the way, Emad is working on that right now, right? He's looking to provide every child, uh, in the nation of Malawi-
- SISalim Ismail
Yeah
- PDPeter Diamandis
... to a, a, a countrywide experiment.
- SSSteph Smith
Amazing.
- PDPeter Diamandis
Yeah.
- SSSteph Smith
And imagine the data you get from that.
- PDPeter Diamandis
Yeah.
- SISalim Ismail
Yeah.
- SSSteph Smith
I mean, it's just fundamentally different. [upbeat music] Thanks for listening to the a16z Podcast. If you like this episode, don't forget to subscribe here on YouTube to get our exclusive video content. We'll see you next time.
Episode duration: 1:06:21
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Transcript of episode SdmqZQLwMD8
