Pod Insights a16z Podcast The Rise of the Exponential Organization with Peter Diamandis and Salim Ismail About this episode Many companies today are grappling with a few things: an economic downturn, potential layoffs and restructuring, and trying to keep up with the latest tech trends… all while still maintaining a growth trajectory.
In this episode, you’ll learn which companies are uniquely designed to weather this storm and what attributes these exponential organizations have. We’re joined by the co-authors of Exponential Organizations, Peter Diamandis and Salim Ismail, both also well-known for their involvement in XPRIZE and Singularity University, among many other companies.
Topics Covered:
00:00 - Introduction
02:37 - What is an ‘Exponential Organization’?
04:15 - What has changed in business since 2014
06:41 - Building companies with minimal cost supply
10:47 - Can incumbents transform?
15:50 - Massive Transformative Purpose (MTPs)
18:29 - Differentiating good and bad MTPs
20:35 - Unilever’s MTP
21:22 - Staff on demand
28:21 - Building interfaces and dashboards
29:22 - The importance of experimenting
33:10 - The economic downturn and restructuring
36:57 - Peer-to-peer collaborative technologies
41:29 - Digitizing your business
42:37 - Kodak example
44:44 - Automation and humans in the loop
51:33 - Companies effectively integrating AI
56:29 - Emerging roles due to exponential trends
59:44 - The framework and diagnostic survey
01:01:13 - Creating APIs you can build on
01:04:00 - Innovation grand challenges
Resources:
* Attend the Exponential Organization workshop on June 6: https://www.diamandis.com/exo
* Learn more about Peter: https://www.diamandis.com/about
* Learn more about Salim: https://salimismail.com/
Stay Updated:
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* Find a16z on LinkedIn: https://www.linkedin.com/company/a16z
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* Follow our host: https://twitter.com/stephsmithio
Please note that 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. For more details please see a16z.com/disclosures.
Transcript 12,708 words · 3 speakers
Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Speaker 00 Instagram gets acquired for a billion dollars by Facebook with 13 employees. And then now it's worth 100 billion dollars on Meta's balance sheet.
0:08 Speaker 01 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.
0:14 Speaker 00 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.
0:22 Speaker 01 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.
0:31 Speaker 00 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.
0:38 Speaker 01 If you had a billion dollars, what problem would you go solve with 10 billion dollars?
0:42 Speaker 00 The asteroid that's striking the business world.
0:45 Speaker 01 And we look around the table and we're like, well, there's a five of us. And you can see his mind break.
0:49 Speaker 00 We all have 24 hours in a day, seven days in a week, no matter who you are on the planet. And it's how you use that to make a dent in the universe.
0:59 Steph Smith? Welcome back to the A16C podcast. Look, many companies today are grappling with just a few things. One, an economic downturn. Two, potential layoffs and restructuring. Three, trying to keep up with all the latest tech trends. And doing all of this while still maintaining a growth trajectory. And look, not every company will make it to the other side, but some are uniquely designed to weather this storm. Today, you'll learn exactly what those attributes are of exponential organizations and how exponential technologies, from exponential compute to exponential connectivity to even exponential talent, have fundamentally changed company building.
1:42 Steph Smith? You'll learn how companies can adopt these technologies, from dashboards and automation to emerging technologies like AI, allowing you to do more with less capital required. Joining us to discuss are Peter Diamandis and Salim Ismail, co-authors of Exponential Organizations and very soon, Exponential Organizations 2.0. They actually wrote the first version in 2014, but felt the need to come back with 2.0 because technology had fundamentally changed company building. Peter and Saleem are both serial entrepreneurs, both well-known for their involvement in XPRIZE and Singularity University, among so many other companies. So today, you'll hear stories from two sides of the disruption coin,
2:24 Steph Smith? from Kodak to Instagram, BlackBerry to Apple, and a lot more. The first voice you'll hear is mine, Ben Saleem's, then Peter's. With technology moving so quickly, let's not wait any longer. Let's dive in.
2:42 Steph Smith? 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.
3:11 Steph Smith? I think the best place that we can start is by explaining what an exponential organization is, and maybe what aspects of the organization are exponential. Because I assume we're not talking exponential headcount, exponential capital raised. How do you think about that?
3:26 Speaker 01 So the definition we have for an EXO, or exponential organization, as we call it, is that it's delivering 10x better, faster, cheaper than its non EXO peers. A great example is TED, which is just a nice conference, a thousand people a year. Chris Anderson takes it over. He establishes a massive purpose, ideas worth spreading. Then he puts all the TED Talks on YouTube, leveraging rich media. Then he allows anybody to go create a TEDx event, leveraging community, and boom, he has a global media brand.
3:56 Speaker 00 Yeah, Steph, I think we're living in a very different day and age. You know, I've been an entrepreneur now for 35, 40 years, and I'm like 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 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?
4:30 Speaker 00 Different elements 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.
4:44 Steph Smith? Right. 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 want to discuss exponential organizations 2.0. We think there's something new here, right, in 2023? So could you maybe touch on what you think maybe is fundamentally new today?
5:07 Speaker 00 Everything.
5:08 Steph Smith? Everything, right?
5:10 Speaker 00 Yeah, I mean, it's interesting. You can realize that the technologies that were only available to the 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, which is a tool that's spawning not thousands, maybe tens of thousands of new startups, 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 tens of millions, hundreds of millions of people. All these things are just accelerating.
5:53 Speaker 01 You know, when we were building Singularity University, we had this amazing experience when the dean of one of the top business schools in the world came to visit. And after trying to understand the model for about an hour, he goes, 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. Like, literally, he left the building. Five minutes later, I could not, he was like, can I play frisbee outside? And that was it, he was gone.
6:15 Steph Smith? He needed to process.
6:17 Speaker 01 And I was like, what happened there? And 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. How are you building a university with five people? And I realized something fundamentally 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, right? 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 a hypothesis, we're seeing this company
7:00 Speaker 01 do this, we're doing this. Now we have ten years of data, case studies, et cetera, et cetera.
7:04 Steph 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 thirteen employees, right?
7:18 Speaker 01 I love it.
7:18 Steph Smith? And people always cite that, right?
7:20 Speaker 01 Yeah.
7:21 Steph Smith? But we're seeing that more and more and more, these tiny teams with outsized returns or outsized impact. But the Uber example is also interesting because it maybe is obvious, Uber's an exponential company, the taxi medallions are not. You guys even use the term linear organizations.
7:38 Speaker 01 Yes, right.
7:39 Steph Smith? How do you differentiate when it's maybe more gray? Maybe it's somewhere in between?
7:44 Speaker 01 Well, I think what we found is there's a set of techniques, and if you're using 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. When you're building a business, you worry about demand and supply, and very specifically the cost of demand and the cost of supply, right? Hopefully 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, in which case customer acquisition cost could have been 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
8:26 Speaker 01 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 hired, 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 almost zero cost of supply. And if you take out the cost of supply, you take out the denominator, your 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 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.
9:09 Speaker 00 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 going to see such massive disruption in this decade, right? So if you're a large organization with layers of management and a massive lead keel of assets and resources that you can't offload during ups and downs, you're likely not to be around by the end of this decade.
9:50 Steph Smith? Absolutely.
9:51 Speaker 00 It's a real disruption. You know, the analogy I use, Steph, is, you know, 65 million years ago, an asteroid hit the earth, a massive 10 kilometer size asteroid, and it changed the environment so rapidly that the slow lumbering dinosaurs all died. They went extinct because they couldn't 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 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 deer in the headlights and they're not going to stick
10:34 Speaker 00 around. And it's the entrepreneurial companies that are the ones that are rapidly iterating. One of my summer interns, he started and he's been working on three startups in generative AI on his own. It's incredible.
10:48 Steph Smith? It's insane. I mean, we interviewed someone who'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 on to your dinosaur analogy, something even more recent, I saw 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, thirty years ago, we're saying they're too big to fail.
11:24 Speaker 00 Yes.
11:24 Steph Smith? These companies have this huge moat, all the talent, all the capital.
11:28 Speaker 00 Yeah.
11:29 Steph Smith? 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.
11:45 Speaker 00 Case in point, Microsoft bases everything they're doing now on OpenAI, right? OpenAI is a hundred and thirty 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.
12:01 Steph Smith? Mm hmm.
12:02 Speaker 00 Right? 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 going to be surviving by buying innovation versus creating in-house.
12:14 Speaker 01 Yeah, you know, 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. Right? I was the head of innovation at Yahoo, running their incubator before we started Singularity University. And the more disruptive an idea we came up with, the less the company could handle it. I'm like, wait, my job description is to do disruptive things and you can't handle what I do. Right? And what we found is three possibilities for a big company. Either they spin off that new co into a completely separate entity, like Nestle spinning off Nespresso, right?
12:46 Speaker 00 And leave it alone is so very important.
12:48 Speaker 01 Very important. 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 they got into a mess there. And the third option is to turn into a platform. And you just 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, be a coral reef and have other things built on top of you, which is where they're all trying to get to.
13:25 Speaker 00 Yeah, one of the things, Steph, that I point out when I'm in the boardroom of large companies or speaking to a group of CEOs is 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 individuals, where's your crazy idea department? Where are you trying crazy ideas, embracing them, trying them, and allowing them to sort of flourish and fail? And if you're not, then you're stuck in incrementalism.
14:09 Speaker 00 And if that's the case, you're moving backwards. You're not going to be around 10 years from now.
14:13 Steph Smith? Yeah, you're in a protective phase instead of an innovative one.
14:17 Speaker 01 Peter uses the asteroid hitting in dinosaur.
14:20 Steph Smith? Yeah.
14:21 Speaker 01 I use a slightly different framing where we have all these technologies converging. And I say that we have 20 major Gutenberg moments hitting us at the same time. Right? Just solar energy changes the world. Chat GPT completely changed the world. Blockchain completely changed the world. And we've added up to 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 going to absorb that in society? And big companies, I think, have a very, very difficult time dealing with this. To support Peter's analogy, the reason for big companies is an old economic paradigm called Coase's Law. This fellow in 1930s wrote a nine-page paper for which he won the Nobel Prize in Economics,
15:02 Speaker 01 saying that big companies exist because transaction costs are lower on the inside than the outside, and you can get economies of scale. And that's essentially the rationale, the thesis behind the companies. Well, today, neither of those two are true. So in the book, we actually declare Coase's Law, which has been very touted for 100 years, essentially gone. Because 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. 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.
15:43 Steph Smith? Let's jump into how companies either start as or transition to EXOs. If you are this big company, this incumbent, 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.
15:59 Speaker 01 There is a path.
16:00 Speaker 00 And there are examples, by the way. There is a mechanism and a means to do that.
16:04 Speaker 01 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's Uber scaling so fast or Airbnb or TED or others? And we found that all of these organizations had what we call an MTP or a massive transformative purpose. And Google organized 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? It goes to the Simon Sinek question, why do you exist?
16:36 Speaker 00 Let me go a bit deeper on this because MTP, which is core, it's the first step. If you're a large corporation, you're going to 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 that you need to begin with versus a cool technology. And I think the thing for folks to realize is doing anything big and bold in the world is hard and it's going to 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 envisioned happen, or it's the pain of seeing something that exists that needs to be disrupted or changed. Like for me right now, one of my MTPs is decimating and reinventing the healthcare industry.
17:21 Speaker 00 I think it's pathetic how expensive it is. But it comes with this emotional energy of desiring something extraordinary. And classically for SpaceX, it's making humanity multi-planetary and going to Mars.
17:35 Speaker 00 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. 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 is fine, but it's got to be secondary to a huge service to humanity in some fashion.
17:59 Speaker 01 And we found that when we analyzed these 200 unicorns, all of them, without exception, all of them had this tagline, huge problem that they were trying to solve, right? It became an attractor for talent. It generated a community around that startup. It attracted other developers that wanted to solve the similar problem. And when you're growing very, very fast, it provides focus.
18:21 Steph 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 can you tell? You know, I can imagine many companies have quote unquote inspiring taglines.
18:41 Speaker 01 Well, A, it's got to be massive, right? Elon, like, let's make humanity multi-planetary. B, it's got to be transformative. It has to be fundamentally different from what we were doing before. And finally, it has to be very purpose driven. It has to be going after some problem that really is out there to solve.
18:57 Speaker 00 Unfortunately, we see historically, a lot of the traditional blue chip companies are like, you know, to provide outsized shareholder return. I'm sorry, that's just not going to cut it today. A lot of the smartest, you know, gen whatever you want are looking for purpose in life, not to give a better shareholder return at the end of the day to the investors. Both can come together.
19:18 Speaker 01 Let's give the viewers a couple of quick heuristics here. One, if you had a billion dollars, what problem would you go solve with that billion dollars?
19:25 Speaker 00 To make the world a better place, right?
19:27 Speaker 01 Yeah. B, 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 the problem you're going after doesn't hit those criteria, then it's not your MTP. Right, so 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.
19:46 Speaker 00 And out of that MTP is also going to come the moonshots, right? Your moonshot is going to drive a lot of what you're doing. And these moonshots are, you know, going 10 times bigger in the world, 1,000%, where the rest of the world's going 10%. And it's these combinations of an MTP and a moonshot together that really wake up 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, 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, this is why we're doing it?
20:22 Steph Smith? Yeah, I think Netflix is, you know, the canonical example, right? Where they disrupted themselves. Can I just ask one question related to some of the kind of last generation defining companies? We mentioned Instagram. Like, what would Instagram's MTP be? Because SpaceX, I'm like, okay, yes, multi-planetary species, disrupting healthcare, multi-trillion-dollar industry that's totally broken. What would something more like Instagram be? Which also was like, obviously a massive company now touches billions of people.
20:51 Speaker 01 Sharing memories?
20:52 Speaker 00 You know, I do want to say there is a point at which, and I joke about this all the time, I'm saying, let's go do something big and bold in the world and not build another photo sharing app.
21:01 Steph Smith? Yeah.
21:01 Speaker 00 You know, at the end of the day, the first time it's done is great. Now, when it's working and working well, the idea of incremental improvement on something, the question is, do you want to spend your time doing that? And we have a limited amount of time on this planet. You know, a lot of the work I'm doing right now is in longevity and age reversal, so I hopefully will extend that. But until then, we all have 24 hours in a day, seven days in a week, no matter who you are on the planet. And it's how you use that to make a dent in the universe.
21:32 Speaker 01 When we wrote the first book around 2015, Paul Pullman, 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 purchased from him from then on. Four years later, the five most profitable brands were the ones that were adopting it the most.
21:51 Steph Smith? Can you share an example of one of those brands and their MTP?
21:55 Speaker 01 They took their soap brands and made them all completely sustainable and using only recycled products. 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.
22:14 Steph 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?
22:29 Speaker 01 So we found that the MTP was the most important. And 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. Okay, and the first one is staff on demand, like Uber. As much as possible, have a workforce that's external so that you have high flexibility, because that's a very important heuristic.
22:55 Speaker 00 Can we smash that with COVID-19? I mean, listening, if you have a huge workforce that is on your salary base and 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.
23:12 Speaker 01 Yeah.
23:13 Speaker 00 So staff on demand gives you that flexibility. And by the way, you know, what staff you need is going to be constantly changing faster and faster. We're in this period of massive rapid change.
23:25 Speaker 01 Yeah, so you have companies like Gig Walk and TaskRabbit and Fiverr and all of these that are now offering platforms for folks to be 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.
23:47 Speaker 00 So just to define this, right? Crowd is everybody. It's the world that you can reach when you have an article or 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 X Prize, the crowd was everybody who heard about X Prize. The community are those people who are helping us design prizes or are building teams to compete for prizes. And these crowd and community, they're not paid, right? They're not on salary, but they can provide a massive amount of benefit to you, helping you shape your products and your services, giving you feedback, helping to promote your products and services.
24:30 Speaker 00 The more you can tap that, the more exponential you can be as an organization.
24:35 Speaker 01 Yeah, and they're all feeding into the MTPs, like Wikipedia with all this, you know, millions of editors that help watch everything. The second one is community and crowd. The third one is AI and algorithms. And all of these externalities allow you to keep a small footprint and use these to scale fast outside and upward.
24:52 Speaker 00 Yeah, especially in a world of massive amount of data and your crowd, your community can be feeding you all of this data, right? 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.
25:09 Speaker 01 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, not owning the manufacturing capability itself, but outsourcing it. Essentially leveraging assets that you don't own. Cloud computing was probably the most relevant here. And how 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. And so now everything becomes scalable, which becomes really powerful. So that's the L. And the final one is engagement. And this is where Peter talked about incentive prizes for X Prize,
25:52 Speaker 01 gamification in the community, all the digital marketing and digital connection you have with your user base. And now with cryptoeconomics and token economics, all of these NFT projects are basically EXOs. They have a big purpose, they create cryptoeconomics, and they reach multi-billion dollar ecosystems incredibly fast just by incentivizing them in the right ways.
26:13 Speaker 00 We're entering a massive attention economy, right? The more and more information we're generating on the planet, the more and more we need to be able to get people's attention.
26:23 Speaker 01 Yeah, Gary Vaynerchuk is running his VCon conference right now. And the best description I've heard about him is he day trades attention, right? You're like, it's just amazing that people can navigate that world. So those are externalities that most of these EXOs use one or more of. 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. 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 can automate both sides. You can scale very, very fast.
27:07 Speaker 01 All platform businesses are basically fat protocols in the Web three world. They're essentially interfaces. APIs is the classic example.
27:14 Speaker 00 Yeah, APIs would 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.
27:26 Steph Smith? Well, I was just gonna say, 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?
27:46 Speaker 00 Steph, one of my favorite examples is I'm a pilot and I fly a few different airplanes. A dear friend of mine, Richard Kane, built a company called Verjet and uses the Vision Jet. And the traditional aircraft chartering business is literally whiteboards and sticky notes, where I'm taking this pilot and this airplane here and the fuel is here. And it's like pathetic. So Richard, who's a brilliant computer scientist, built a platform on Verjet where everything is optimized. He'll go to quantum compute later for doing even faster. But where the airplanes, the pilots, where the person is being picked up and dropped off, all of it is fully digitized. And he used the Vision Jet, the SF50, because it is massively connected.
28:30 Speaker 00 When the airplane lands, it sends all of its data of its systems check back to the AI.
28:37 Steph Smith? Amazing.
28:38 Speaker 00 So you get humans completely out of the loop. That's beautiful. It's efficiency, it's safety and it's speed.
28:44 Speaker 01 And God help us, whiteboards and post-it notes should be automated.
28:47 Speaker 00 Oh, my God.
28:50 Speaker 00 That's an MTP right there.
28:53 Speaker 01 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 richness of what's needed there. The second is dashboards. And there are two types of dashboard, 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. We worked out that only three and a half percent of big companies around the world use OKRs. So there's a long way to go to do better team and performance management going forward. And try using dashboards to track everything becomes absolutely critical. If you're an EXO, and if something's going right, or something's going wrong, you want to know very fast. Right? And so having real time feedback. In fact, what we're finding, there's a whole section we have in the book
29:38 Speaker 01 called depth 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.
29:53 Speaker 00 Next is experimentation. And for me, this is one of the most critical 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. 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, you know, I don't care about human opinion, right? Show me the data, right? Run the experiments, iterate on everything from taglines to colors to font sizes to whatever experiments and build from the beginning. We talk about this. Jeff Holden was a friend of mine. He was the chief product officer at Uber and at Amazon and talked about this.
30:40 Speaker 00 Experimentation engine that they built called Morpheus back then, teaching your team how to run experiments. And if you're starting a company now, you need to begin it from inception as an experimentally minded organization. When someone raises an idea, it needs to be, okay, here's the experiments we're going to run, not this is what we're doing. The problem is, large corporations.
31:03 Speaker 01 Are terrible at this.
31:04 Speaker 00 They have a hard time navigating it.
31:06 Speaker 01 Yeah, if you run an experiment and you fail, your career is over. Right? So 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 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, your bonus gets dained, right? So 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 always going to keep them ahead of the game.
31:46 Steph Smith? Like you both said, it's a cultural thing. It is also an operational idea. But 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.
32:03 Speaker 01 Right.
32:03 Speaker 00 Yes.
32:03 Steph Smith? We want you to bring a new idea.
32:05 Speaker 00 Want to learn.
32:06 Steph Smith? That proves our assumptions incorrect.
32:08 Speaker 01 Yeah. Peter tells a story of Astor Teller at X, where he goes, show me the assumptions you've made and pick the ones 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 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
32:50 Speaker 01 that has no CEO, reporting lines, job descriptions, management meetings of any kind. They're like a beehive. And so more and more companies, we think, will be taking on this attribute. This is, again, very hard to implement in legacy organizations.
33:04 Speaker 00 I'm possible. I mean, talk about like, okay, you don't report to anybody more. Here's your budget. Autonomy requires having a really clear massive transformative purpose 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, 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.
33:35 Steph Smith? You guys are both speaking my language. I've worked remotely for almost a decade now, and 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?
33:58 Speaker 01 If you have proper dashboards and you have motivated people that believe in a big purpose like an MTP, you essentially can just let them do their thing. I'll give you the most extreme example we ever came across with this. There's a Chinese company called HAI. They're an appliance manufacturer. They make 55 million fridges and ovens a year. There were 80,000 people in a classic pyramid structure, command and control, top down, etc. CEO one day wakes up and goes, can't meet my corporate goals using the structure, blows it up, turns 80,000 people into 2,000 teams of about 40 people each.
34:31 Steph Smith? Wow.
34:32 Speaker 01 Okay. Each team has a P and L target. Each team elects their own leader, and each team decides to do whatever they want to do. And you're like, wait, how do you make 50? So you go to any business school in the world and say, I want to make, I want to set up a structure to make 55 million fridges. And they'll design for you incredibly centralized, you know, supply chain, product definition, demand forecasting, all centralized. Right? And here, this guy's doing it on a decentralized basis. And the quality suffered for the first couple of years while they got their art together. But once they got the machine working, GE actually gave up and sold GE appliances to them because they couldn't compete. Like when they want to decide what feature should go into the new fridge, the teams vote. And because you have 2,000 teams interfacing with vendors and customers and suppliers,
35:15 Speaker 01 they do a much better job, get a much better result than some product strategy team hunkered away with market forecast and market research.
35:23 Steph Smith? Yeah, with four layers of managers.
35:24 Speaker 01 And so 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 regulatory reporting time, the chief risk officer goes, hey, I need help. And everybody floods to help him. And everybody has a ton of fun. They naturally find where they fit the best in the organization.
35:53 Speaker 00 And they have more of a say and they feel more control. They feel more ownership. You know, during this time of rapid change and including downsizing, including competition coming out of no place. But your competition is no longer the company you thought it was. It was a startup 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, 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 to your group and you need to fully incentivize them with clear objectives that are tied back to your MTP. And sometimes you're going to see just massively increased performance.
36:37 Speaker 00 But 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. So it really is throughout the organization, it's a choice to transform. Now you've had companies and incredible leaders like Jeff Bezos or Elon Musk or Larry Page, who from the beginning had this vision. You know, Jeff Bezos' classical shareholders' letters in the early days saying, "Listen, I don't care about profitability. I'm talking about scale. And if you don't like that, don't invest in us." I mean, the cojones to go in that, but that's what it took. And he was right.
37:17 Steph Smith? Yeah. 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.
37:35 Speaker 01 We find that the culture of trust gets built in as an intrinsic outcome of building an EXO. So that's 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.
38:04 Speaker 00 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 going to be available for free. It's called Exponential Organizations 2.0. We're going to be doing a three-hour workshop on June the 6th, and it's a free workshop. Saleem and I are going to be basically showing you how to build and create your MTP and your moonshot, talk about each of these 10 attributes. It'll be interactive. We'll be answering your questions. If you go to diamandis.com, mylastname.com/exo, you can register. And there's another part we built in, generative AI overlay.
38:46 Speaker 01 Yeah, because, you know, we have to eat our 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 do I turn it into an EXO? Or how do I apply dashboards? Because 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 going to load up into it 700 case studies that we have of EXOs.
39:14 Steph 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?
39:30 Speaker 01 And any business book today is pretty much out of date by the time you read it.
39:34 Steph Smith? That's so true.
39:35 Speaker 00 Oh, my God. It's so difficult to write a book that.
39:37 Speaker 01 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 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 going to be like this. A book that took a few years to write, et cetera, will be out of date if it's not being constantly updated and refreshed. I want to give you some data that we just came across, Steph, about the validity of this.
40:06 Steph Smith? Please.
40:06 Speaker 01 When we first came up with the model in 2013, 2014, we did an initial test. Okay. 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, to what extent, one to four, they're 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. I did a segment on CNBC Squawk Box. We presented the index. Here are the Fortune 100, basically ranked by the flexibility, agility, purpose driven nature of the org structure. So that was 2015. A few months ago, we did a seven year trailing analysis. Okay. How did these companies do over seven years?
40:50 Speaker 01 And what we did was we tracked over seven years, the top 10 that you continue to use the attributes the most and the bottom 10, the least linear, the least flexible, that use 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 three X on revenue growth.
41:11 Steph Smith? Wow.
41:11 Speaker 01 Six point four times on profitability, 10.9 times on return on assets. But shareholder returns, compound annual growth rate, top 10 outperformed the bottom 10 by 40 X over seven years, 40 times.
41:25 Steph Smith? Forty X.
41:26 Speaker 01 And you're like, I should have created an index fund. Right? Like, oh, we completely went down the wrong business model. We even looked at it and said, we've got to see if the R squared is what correlates here. And it absolutely does. So now we have a very, very clear data grounded thesis that if you're not architected in this way, you just won't deliver the returns going forward.
41:46 Steph 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.
41:56 Speaker 01 And what was really incredible was when the pandemic hit, the top 10 did five times better than the bottom 10 in responding to the pandemic. Right? Because as the external world gets more volatile, your ability to adapt is going to drive market value. And now we can measure that.
42:12 Speaker 00 It seems obvious in retrospect, but it's incredibly important. Now, the challenge is, again, the majority of our large corporations are built for building a walled garden. It is a scarcity mindset. We're going to own this asset and piece it out a little bit. One of the concepts we talk about that was in an earlier book I wrote called Bull, How to Go Big, Create Wealth, Impact the World, is 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 deceptive. So digitization is the first D. Deceptive growth is the second.
42:56 Speaker 00 When we double something 10 times, you know, it's 1,000 times better. Double it 20 times to 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 Sisson 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 in black and white on a tape drive.
43:38 Speaker 00 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.
44:23 Speaker 00 And then now it's worth $100 billion on Meta's balance sheet. And so it's this notion that as an entrepreneur, you need to digitize, dematerialize, right? Cameras have gone away. They're now an app on your phone.
44:36 Steph Smith? Yep.
44:37 Speaker 00 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.
44:53 Steph 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, I should probably get some, you know, shared assets. I should probably, you know, 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, you know, I don't have humans in the loop. Instead, the algorithms are running things. And so some people are like music to my ears. Other people are probably like. But what about my employees? What about the humans that, you know, 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
45:37 Steph Smith? to an exponential organization?
45:40 Speaker 01 So it's a combination of both of those. It's the reality that we're in. And it's like if you were in the nineties and you didn't adopt cloud computing, right? You're not going to last 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 going to 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've now worked with dozens of big companies from Procter and Gamble to Unilever, to TD Ameritrade, to Black and Decker, et cetera. And we found there's a three-fold path. Step one is run a 10-week, what we call an EXO sprint, which hacks the immune system and hacks culture at scale.
46:25 Speaker 01 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 because you will 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 does this, et cetera. The master of this technique, by the way, is Apple. And yes, Apple has a great technology supply chain, and yes, they have a great design capability. I will argue that Apple's 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?
47:09 Speaker 01 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. 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 chat G P T thing. Google was basically the foundation of L L Ms, right? They were too nervous and careful and risk averse to launching. And so they got careful.
47:53 Speaker 01 Microsoft went, let's just go for it. And they did it and boom. And so you can't afford to sit back on your laurels today and less so if you're a big company.
48:02 Speaker 00 So 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 disrupting and reduce the number of jobs. And, you know, what about my family I have to feed and such? 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 going to be able to survive and thrive during these times. It's not like if you choose to be, we're going to employ everybody and not change your organization. That organization, you're going to lose your job anyway because the organization is going to be bankrupt soon enough. Now, we have another tsunami coming. I track these twenty meta trends of what's happening. A I is one of them, but humanoid robotics is another, right? We have at least a dozen humanoid robot companies that are in development.
48:47 Speaker 00 You know, people might know about Optimus, Tesla or Figure, but they are coming 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 to deal with this.
49:04 Speaker 01 I want to touch on this because I go crazy when I hear this. When we look in the past, when we've had disruptive technological innovation coming in 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 seventies, we created bank A T M 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 ten times. And the banks went and created ten time ground branches. And the number of bank tellers has not changed at all since the seventies, right? Same thing with truck drivers. When we automate trucking, we'll just be doing a ton more trucking because we just don't have drivers right now.
49:46 Speaker 01 And so what we found is when you automate, for the most part, you increase capacity. The most robotic sized countries in the world that have the highest penetration of robotics are South Korea, Sweden, Germany, which have the lowest unemployment. And so 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.
50:06 Steph Smith? Right.
50:07 Speaker 01 But this is where Peter talks about scarcity versus abundance.
50:10 Steph Smith? I was just gonna say, the idea that these jobs, these specific jobs, potentially being automated, adds more productivity to the system, which then allows more to be created.
50:21 Speaker 00 Exactly. You know, I run a program every year called Abundance 360, and I coach 360 CEOs and entrepreneurs 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. It 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 you're gonna all have an AI co-pilot that helps you learn and do and actually pursue your dreams.
50:59 Speaker 00 And we'll probably end up splitting work for income and work for purpose in the future. Not the subject of the book, but 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 it in the most efficient way possible. And all of this uplifts humanity, and that's the ultimate game here.
51:23 Steph Smith? Yeah, and 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, 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. 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?
51:57 Speaker 01 So I think what we're gonna see 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 fifty five things you should be considering, et cetera, et cetera. And that performs a great checklist to go off and think about that. 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. Because the best benefit is we'll replace most of the lawyers.
52:34 Steph Smith? There's a lot of lawyers out there.
52:36 Speaker 01 Because you can just say, generate me 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.
52:45 Speaker 00 First of all, 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. And this is not someone in the organization who is writing code. 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 talk about this openly, so there can be two kinds of companies at the end of this decade. Companies that are fully utilizing AI and companies that are out of business. And these be that black and white.
53:24 Speaker 00 And so if you are 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 going to sit next to you. It's like a call as strategic officer, but it's your chief AI officer. And their job is to be injecting platforms, partnerships, capabilities at every level. I talk about at every board meeting, every management meeting, I want chat GPT 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. It's obvious, but
54:04 Speaker 00 when you bring in this other perspective that is bringing in the world's knowledge, you get orthogonal thinking. And again, that's where breakthroughs come from. If you limit yourself to your leadership team, you've got a very narrow window.
54:20 Speaker 01 The last four presentations I've done to big CPG boards 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 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, Uber 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.
54:52 Steph Smith? I mean, 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 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.
55:14 Speaker 01 Yeah.
55:14 Steph Smith? 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 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 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.
55:58 Steph Smith? 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 other dimensions. As you know, you mentioned, Peter, maybe 20 meta trends that are happening. And I wonder, you know, we've seen a couple of companies hire head of remote, who are thinking about, you know, 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 due to these exponential trends?
56:28 Speaker 00 One of the things I think about, Steph, is a head of mindset in an organization, which is a really weird and woo thing to talk about. But your mindset. Is the single most important thing any entrepreneur, any organization has. Right. If I said to you, what made Steve Jobs, Jeff Bezos, you know, 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 a number of mindsets that I think an EXO needs to have. Needs to have a curiosity mindset.
57:11 Speaker 00 It needs to have an abundance mindset, exponential mindset, a moonshot mindset, a gratitude mindset, and a purpose driven mindset, most importantly. And these are mindsets that drive behavior. And here's the thing, the world is speeding up. And as a result of that, the way you react to problems and opportunities 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?
57:56 Speaker 00 How do we navigate this? How do we bring in new capabilities? And so 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? A neural net is trained by showing it example after example after example. And I train my own neural net, my own brain, by not watching the crisis network CNN, right? And getting, you know, dystopian news all the time. It's by the books I read. I built an AI called Futroscope that searches the world's information and brings me the stuff that's within my parameters of, you know, positive, abundance minded, exponential in all of these industries. So the news is out there.
58:41 Speaker 00 It's just filtered by editors who want clickbait for their advertisers or filtered by what actually serves me.
58:49 Speaker 01 There's a company in Australia that I came across. They read the book a few years ago and they have every quarter 10 projects running on the 10 attributes. Staff on demand autonomy and every quarter they just re up the projects. And everybody has to pick something they're going to 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.
59:13 Steph 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.
59:32 Speaker 01 We actually have a diagnostic survey where you can score yourself and see where am I weak or strong. Once you kind of have the as's, you can kind of go, okay, how strong do we need to be in AI or in in autonomy? Or in community and crack? Like, for example, most big companies in the world don't leverage community. Right? They build the products and they try and push it into the marketplace. Then you have Xiaomi in China, the second biggest phone company. And they're successful because they have a thousand 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 all their water mouth product development is taken care of. And they have no marketing or promotional costs at all. That allows them to keep the cost low just by leveraging community.
1:00:13 Speaker 01 Right? So once you know this is the baseline and the diagnostic is also free to take us how we scored the Fortune 100. You can then say, where do we want to be? And then start filling in the gaps and building that capability.
1:00:25 Speaker 00 Actually, every attribute you add moves 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 the beginning. When you're, you know, a guy and a gal and you've got your MTP. And 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 a slow and painful death.
1:01:06 Speaker 01 Guilty as charged. Done it a few times.
1:01:09 Speaker 00 Yeah, we've all done it. Yes.
1:01:10 Steph Smith? We've all done it. I mean, Kodak's a great example where you said they literally got lost. They had an MTP, but based on their killer product for a period of time, they got lost, right? They got lost in what their MTP was.
1:01:22 Speaker 01 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 going to do next. Right? And then eventually they just imploded.
1:01:33 Steph 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 by BlackBerry.
1:01:50 Speaker 00 Yes.
1:01:50 Steph Smith? And so it wasn't scalable, it wasn't exponential.
1:01:53 Speaker 00 Biggest problem, right? You really want to 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 want to hit again, you know, Google had Google Videos. And I remember meeting Chad Hurley after Google just bought them. It was like, 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, what could be done, 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.
1:02:35 Speaker 00 And this agility of a small nimble mammal compared to the large lumbering dinosaurs is going to only be amplified in the world ahead. And you'll have companies like Disney that have an engine. And then they'll buy Lucas and Marvel and put those creative products through their engine that goes out to movies and theme parks and so forth, the large companies.
1:02:59 Speaker 01 You know what we're finding also is that this EXO model is extending way past just companies into government departments, nonprofits, impact projects, et cetera. I came across the Minister of Oceans in Mauritius. And he was like, oh, I'm really happy to meet. I met him at an X Prize dinner that Peter put together. And he goes, I run my whole ministry based on your book. I'm like, wait, what? He goes, yeah, we have a massive ocean area that we can't possibly cover effectively using old style thinking. So we built an old community and all the fishermen tell us what's going on. We gather all the data. We have dashboards. And I'm like, wow, this is like.
1:03:31 Steph Smith? That's amazing.
1:03:32 Speaker 00 Let me just say again, please, 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 startup at any stage, this is a three hour workshop to access this. It's dmantis.com backslash EXO. I mean, we're bubbling with excitement to share what we've been, what we're working on here and get it out to the world.
1:03:56 Steph Smith? Yeah. And I think it's worth mentioning again, you guys wrote this book originally in 2014, right? And maybe we could just close out with one question. I mean, we've talked a lot about finding a big moonshot, a big purpose that others can buy into. 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, you know, take a stab at? What's kind of catching your eye in terms of potential MTPs?
1:04:22 Speaker 00 So I do this for a living with X Prize, right?
1:04:24 Steph Smith? Right, exactly.
1:04:25 Speaker 00 That's all we do is launch X Prizes. We just launched an X Prize for wildfires. You can monitor a thousand square kilometers, detect the wildfire at ignition and put it out 10 minutes automatically. Right? We're getting ready to do an X Prize. My biggest area right now is reinventing disrupting healthcare.
1:04:42 Steph Smith? Yep.
1:04:43 Speaker 00 A health span X Prize, reverse your biological age or your functional age by 20 years, right? Those are areas I care about. Saleem?
1:04:51 Speaker 01 I think there's two or three big areas. One is education, which desperately needs a massive transformation.
1:04:57 Speaker 00 Yes, for sure.
1:04:57 Speaker 01 But it turns out our institutions have their own immune system, right? God help you if you try and disrupt academia, journalism, et cetera. 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 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. So, for example, we've been chatting with Imad Vustak of Stability AI and Stability Diffusion. And we're like, why can't we just use an AI,
1:05:40 Speaker 01 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.
1:05:55 Speaker 00 Yeah, and by the way, Imad is working on that right now, right? He's looking to provide every child in the nation of Malawi to do a countrywide experiment.
1:06:02 Steph Smith? Amazing, and imagine the data you get from that.
1:06:05 Speaker 00 Yeah.
1:06:05 Steph Smith? I mean, it's just fundamentally different.
1:06:11 Steph Smith? If you liked this episode and you'd like to learn more about exponential organizations, check out our workshop on June 6th. You can learn more at dmantis.com/exo or check out the link in our show notes.
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