this is a transition in business that we’ve never seen before how do we change the game computation is becoming infinite and storage is becoming infinite and that’s the simplest way of framing it over a 100,000 years of human evolution we’ve lived in a world of scarcity and for the first time in the history of humanity we’re now building business models around abundance we’re going to see the first three person billion doll company emerging in the next year or so you will be left behind very fast in this world of exponentials if you are not disrupting yourself than someone else is you got to skate to where the puck is going to be everybody Welcome to moonshots and mindsets I’m here with my dear friend Saleem Ismael uh the first CEO of Singularity University the CEO of exponential organizations and my co-author on a brand new book exponential organizations 2.0 Saleem we are living in a different world and I want to wake people up to the fact that if you’re not building an exponential organization you are moving backwards uh
[00:01:02] the only kind of organizations that going to survive this decade are exponential organizations so when I make that claim everybody’s saying what the heck is an exponential organization so let’s start with that how do you define an EXO so let me touch on the idea that for for 100 200 500 years we’ve been building organizations in a very military top- down hierarchical command and control style and that worked in a world of scarcity where you had to you knew your Market you had to go out and figure how to attack that market you would devise strategies Etc in the 21st century that doesn’t work anymore uh old organizations were designed for efficiency and for predictability and today you need to be architected for adaptability agility flexibility and most of all speed and so if you’re not operating very fast today you’re never going to make it and we’re seeing over the last 10 12 Years a completely new breed of organization that we’ve never seen before and it was very hard this conversation 10 years ago but today with
[00:02:01] the rise of Chachi PT and the explosion of Tesla and others this is a much easier conversation and now we just need to explain it a bit better yeah I just saw a tweet the other day uh from a friend of both of ours that said we’re going to see the first three person billion doll company emerging in the next year or so and I believe it right so I mean that is primarily an exponential organization so when I think about an an exponential org um the in our book we talk about what drives it and the you know the 10 attributes of those organizations and we’ll be talking about those um the reality is we’re getting to a point where the marginal cost of supply of your product or service is trending toward zero and the marginal cost of distribution of your product or service is trending toward zero and acquiring that next customer and you know that’s an explosion on the planet it used to be that your uh your
[00:03:00] clients your the people you sold to were in your town your village you know maybe within 100 kilometers now it’s Global uh at an increasing rate so let’s get into it um talk to me more about in EXO yeah so let you touched on a really important Point let’s look at the economic driver here when you’re running a business you’re worry about a cost of demand and cost of Supply right and hopefully you’re on the right side of the equation uh what the internet did for the first time ever it allowed us to drop the cost of demand exponentially online Market marketing referral marketing every Silicon Valley company is trying to go for that Viral Loop which drives your acquisition cost to near zero right amazing what exponential organizations have figured out is how do you drop the cost of Supply to near zero so you look at Airbnb the cost of them adding an incremental room to their inventory is almost zero whereas if you’re Hyatt you have to build a hotel uh same with Uber adding a car to their Fleet or uh ways Etc we have now a a whole category of businesses is where they’ve learned how
[00:04:00] to drop the marginal cost of Supply now you can scale a business as fast as you can scale technology we’ve learned how to scale technology but building the actual business was painfully incremental and linear now we’re seeing this new breed of business where they can scale the actual organization as fast as you can sale technology we have never seen this before and over time every organization will operate in this way yeah I bet you there’s a lot of folks out there that’s saying listen I sell this widget there’s no way in the world I can scale it you know globally or can bring the cost down to zero and I think people need to start to look a lot more imaginative I know in the in my previous book bold uh with Steven Cotler we wrote about the 6ds of exponentials and just to recall what that is right uh and tell some stories there the 6ds are that any of these exponentials begin very deceptively slow we’ll get back to that and then uh they eventually become disruptive and when they do they dematerialize they demonetize and they
[00:05:00] democratize products and services um the prototypical example that I give in in the book and I love it CU it’s just a great warning for folks was the story of Kodak in the digital camera so uh you know what most people don’t realize that Kodak actually invented the digital camera uh about 20 years before uh they were at their peak in the late 7s a guy named Steven cesan had come with the come up with the digital camera in Kodak abs and back then it took 01 megapixel images I can imagine that right in black and white and they recorded on a tape drive and you know I can imagine this and I don’t have a written record of this but I can imagine Steven San going into the boardroom of Kodak and going here it is the future of Kodak it takes 01 megapixel images in black and white and the board going you’re nuts you know that’s a toy for kids we’re Kodak we make beautiful higher resolution images and besides we’re in the papering chemicals business right and and so
[00:06:02] that’s the challenge that you know these companies are locked into their current business models and exponentials are fundamentally at the core disrupting business model so Kodak says you know if this digital camera thing becomes a thing we’re going to be out of the paper and chemicals business our profit Center and we’ll be decimated a quick break from our episode on June the 6th selem and I are going to be running a free three-hour workshop on how to actually build and Design an exponential organization would love to have you join us if you join us on June the 6th first of all you’ll get free access to the book exponential organizations 2.0 access to an AI that we built that allows you to query the book and helps you design your exponential organization it’s June the 6th it’s 3 hours it’s free we’ve never done this before click on the link below DM andis.com EXO and join us all right now back to the episode I think it’s really important here to to touch on the linear
[00:07:01] to exponential stuff right because you know as you and Ray talk about a lot if you take 30 steps linearly you’ll go 30 m you’ll get to the back of the garden we can all predict really well where we are a third or 2/3 of the way in that progression and all of our education and intuition and training around the world is around that Paradigm linear when you go to a Moors law and you go to an exponential where things are doubling well 30 doubling steps 2 4 86 gets you to a billion meters right which is way past the bottom of your garden it’s 26 times around the world and most importantly it’s really hard to gauge what is a third of the way or 2third of the way in that progression our brains don’t compute that way don’t see it all our brains are linear so um the challenge that you’ve highlighted Ray’s highlighted many of us kind of following is the fact that we have this completely different heris on which the world is operating and if you’re not operating on that hair stick going forward you will be left behind very fast so you know to
[00:08:00] take that codic example and extrapolate it uh you digitize in the early days of that uh digital camera it was 01 megapixels 0204 .08 poor Steven San is showing this and it’s like a straight line on a curve and they’re going I don’t get it what’s the big deal here well 30 doublings later it’s not 01 it’s you know 10 100 megapixel cameras and and they’re they’re they’re bankrupt literally they go bankrupt and the realization was that digital camera uh once it disrupted the industry IT dematerialized cameras you don’t no one has a physical camera or very few of physical camera it dematerialized film and then the marginal cost of a happy pick was Zero the cost of distribution was effectively zero it demonetized it and then democratized it and now we went from I don’t know you know millions of or tens of millions of of happy picks developed to trillions of so happy picks developed around the world we we look at
[00:09:01] it in three ways we say the first thing that happens is you um demonetize it right you you have that you take the cost out the marginal cost of taking an extra photograph goes to zero because of that the domain explodes and now we’re taking billions of times more photographs the cost is gone but the third thing that’s super subtle but really important from a business perspective is you change the problem space so what we what we talk about there is in the film photography world you’re trying to optimize around SC scarcity it’s a dollar per photograph it takes a few days to get your prints back and you get a whole bunch of business models around that scarcity I might offer really expensive cameras I might publish books on composition I might offer courses on how to do the best photograph and you’re teach PE teaching people to optimize for scarcity it’s brilliant now you go to people being able to take a th000 photographs at zero cost the problem is not now how do I carefully craft this image to compose the best image the now the problem we have is we have six copies of our photograph on eight different online
[00:10:00] services and you can’t find anything and you’ve gone from a sourcing problem to a filtering problem and most importantly all the business models that cropped up around that scarcity like expensive cameras Etc are gone right and this is where you talk about the dematerialization of it and the complete demonetization of it the cost of taking a photograph today is free yes it is and it’s interesting right in the same year that Kodak goes bankrupt uh Instagram comes out of no place right and gets acquired by Facebook for a billion dollars with only 13 employees on their on their balance sheet right that was insane it was like a break the way of thinking moment and note that when Facebook acquired Instagram most of the business World said what the hell are you doing how do you pay a billion dollars for this titch of a company with 13 people right um and and and this is I think this whole parad I think has emerged in Silicon Valley because people
[00:11:02] naturally understand exponential curves better than the rest of the world and in my you know listen my rant for entrepreneurs out there is if you’re in a company that’s not actively digitizing dematerializing democratizing and demonetizing your products and services you will be dead within 10 years time you’ve got to be doing this you’ve got to be looking at okay how do we change the game how do we how do we digitize this this product that we’re creating or how do we dematerialize and democratize it because we need to move the marginal cost down to zero and we need to make it accessible to the world uh and and this is fundamental to what an exponential organization is uh in in the biggest way so we we saw this you know you talk about cameras as a product but then we saw entire Industries going this way like music you had about seven or eight major music studios selling cassettes or CDs or DVDs right then we digit music we
[00:12:00] dematerialize the cassette decks and and everything and all the major Studios essentially disappear and now you have two platforms uh iTunes and Spotify is selling you abundance on a subscription model yes I love that so so this transition from a physical scarcity bound environment to an abundant digital subscription model is going to happen in energy it’s going to happen in healthcare it’s going to happen in in education uh you heard it here first folks it so what are you doing to go and make to change your model from scarcity to abundance right cuz the majority of the human over 100,000 years of human evolution we’ve lived in a world of scarcity we’ve lived in a world of I have this and I’m going to meter off a little bit to you and charge you a lot for it and I put a fence around something and say these are mine the the old model was take an asset or a Workforce put a legal boundary around it and sell access to scarcity yes and whether that was a hotel on a beach or a great design team or a chef in a restaurant or Consulting business I’m going to hire the best Consultants right
[00:13:02] and now and now when AI comes along it’s going to bust that model big time well this is where I think your work around abundance is so critical right for 10,000 years we’ve been building businesses around scarcity if you didn’t have scarcity you didn’t have a business pretty much and for the first time in the history of humanity we’re now building business models around abundance and that’s a completely different animal and it’s it’s incredible this transition and the need for new entrepreneurs to understand that and build businesses based on this new paradigm going forward we are heading towards a zero marginal Society in some ways in other words marginal cost for things and what happens is it uplifts the world right we can head to a world in which we have access to all the food water energy Healthcare education and even time and people go well how do you make time more abundant well we’re making time more abundant by first of all extending the human lifespan which is a whole different conversation which uh we’ve had in uh on this podcast but it’s also
[00:14:01] the fact that you know I remember and you do as well when I went to the library searching for a book and would take 3 hours of time and I would hope the book was there and if it happened to have the reference I wanted you know now from 3 hours it’s R reduced down to 3 seconds on a Google search it it’s unbelievable I mean if you just look at a prototypical exos we call it as Wikipedia right it kind of took the world’s knowledge and with the community to help moderate in the entirety of the world’s knowledge now sits in Wikipedia and the the scale of it is unbelievable everybody let me take a quick break from our episode to talk about something important for your diet now as you know I’m a huge longevity and health Champion part of my focus is on exercise sleep and diet and when it comes to diet I’m super careful on what I eat but throughout the day when I need energy I’m looking for a snack and one of my favorite options is macadamia nuts and there are four
[00:15:00] reasons I want to share them with you first macadamia nuts are high in monounsaturated fats which are the good fats for your heart it lowers LDL and raises your good cholesterol second they taste great and they’re rich in fiber which helps with digestion and gut health third macadamia nuts contain antioxidants and flavonoids which protect your cells from damage and inflammation and finally macadamia nuts have a low glycemic index which me means they don’t spike your blood sugar they truly are the king of nuts I get mine from House of macademia which offers the best macadamia nuts in the world they’re sour sustainably from South Africa they offer a huge range of delicious nutritious products uh including roasted and dipped macadamia nuts macadamia nut bars Macadamia oils which are actually better than olive oil for cooking if you want to try House of macademia products for yourself you can get 20% off your first order by using the code peter2 at
[00:16:01] checkout just go to House of macadamias tocom back/ peter2 and enter the code peter2 at checkout that’s House of macademia docomo them as much as I do now back to our episode let’s talk about why this is happening now because it is happening now we’ve seen the roots of this really with uh like you said the the raise the rise of Amazon web servers but also the internet and uh in a whole slew of things but underlying all of this I would say is uh Mor’s law and what Ray kerswell calls the law of accelerating returns I’m going to show an image here one second so this is the law of accelerating returns um people have heard of Mor’s law which is everything to do with Gordon Moore and Intel and
[00:17:00] the integrated circuit so Gordon Moore creates the integrated circuit the first one two transistors together back in the late 50s by 1965 he publishes a paper that says you know we’ve noticed something that the number of uh transistors on a piece of silicon is doubling every 12 to 18 months and it’s likely to continue and it continued for 50 plus years we’re like approaching 60 years right now it’s not slowing down this is a curve of 122 years of Mor’s law what what Ry says is Mor’s law is only about the integrated circuit everything before then and after theg grade circuit is what he calls the law of accelerating returns that we’re using tools to create faster tools that build faster tools and so on and what you’re seeing on this image um is on the leftand uh axis it says calculations per second per constant dollar and it’s like down at the bottom uh you you’re not going to be able to read it but it says the analytic engine right and then it
[00:18:02] goes on to IBM tabulators and uh you know you’ve got the eniac and all of those along the way and that’s like 10 Theus 7th calculations per second per dollar I mean like really slow computational power and then you see this it’s plotted on a log scale and on a log scale a straight line is an exponential but it’s curving upwards which tells me that the speed at which is increasing is itself increasing it’s not slowing down and on the right hand side uh Steve jinson added a few data points and this is around um Google’s new uh computational capability and Tesla’s new computational capability that it’s accelerating and this goes out to 2025 so Mor’s law is not slowing down one of the things that’s important that you and I talk about is this idea of nested S curves that you know every technology has has this period of rapid growth and then it runs out of steam
[00:19:02] like bacteria growing in a in a medium but then some other technology takes over for it uh you know we had mechanical computers and then relay computers and then vacuum tube computers and transistors and integrated circuits and then you know whatever comes next three-dimensional chips yeah this I think was the Real Genius of Ray herwell to identify this right because every time you have some technology like vacuum tubes or transistors you have that scurve and it levels off and people go well okay that’s the end of that technology Etc and he noticed that whenever you have an information-based environment uh when you reach the end of 1 S curve something else always takes over the curve uh and now we have we’re reaching their end of the life cycle of integrated circuits and all the technology presss are like well this is the end of Moors law we’re done Etc but we have a bunch of Technologies like 3D chip design Optical design Quantum Computing Etc uh you remember our colleague Peter Ralph Merkel right I had a chat with with Ralph and I saying what do you think about M he goes I just
[00:20:00] published a paper on uh thermodynamically reversible computation using molecular bonds so you can do computation without heat he goes I think we get 10 orders of magnitude just out of that right and you’re like wow so he’s looking 20 30 years down the line but basically computation is becoming infinite and storage is becoming infinite and that’s the simplest way of framing it I had people literally when I’m on stage talking to an audience people go when is this going to slow down I was like it’s not going to slow down there is no onoff switch there is no velocity meter you can’t slow this stuff down it’s accelerating and I think that’s one of the important things about an exponential organization that people need to realize that you’ve got to skate to where the puck is going to be just to finish the that that exponential discussion off we we’ve realized that once you start an exponential doubling pattern that’s information based it doesn’t stop doubling and it’s the cognitively we have the hor the hardest time time getting our heads around that piece of it but Ry was the first
[00:21:01] identify that this just keeps going and drones are doubling every 9 months in their capability right in Neuroscience the resolution at which we can image the human brain is doubling every year we now have a dozen technologies that are operating on this curve and we keep adding to that basket as we digitize more and more domains so we’re coming into this world of now multiple Technologies all accelerating at the same time and when I talk about this you know in the history of humanity at any point maybe one technology is accelerating maybe another we’ve never had a dozen all accelerate at the same time well I would bet pal it’s 100 um all built on top of these other Technologies right you’re building on top of computation and you know in my last book future is faster I talked about convergence of these Technologies and we talk about that a lot in exponential organizations and it used to be that you could be an expert in any one technology and build a differentiated company but today it’s like the merger of two three or four of these that are making these e xos Reinventing Healthcare Reinventing the
[00:22:00] legal system Reinventing everything well if you take say Uber which is one of our prototypal um uh exos it’s the it’s the doubling of location based services and payment services and online and the whole bunch of things all coming together that suddenly make that magic and then you’ll add autonomy on cars and electric on cars and all of a sudden the marginal cost drops by another 400% and then all of a sudden you know it’s a different game and so when I’m talking to entrepreneurs out there saying like how should I think about this you know where should I be going uh you the advice that I give is number one you’ve got to be skating to where the puck is going to be you can’t build a company based upon the technology that exists today because by the time you’ve built it it’s going to be out of date the second thing is find something that hasn’t been digitized dematerialized demonetized and do that you know I’m doing that right now in the healthcare
[00:23:00] industry uh aggressively because I want to crush the healthcare industry different topic of conversation uh but it’s those what advice do you give to entrepreneurs well I think the key is to build an organization and reinvent yourself every year or two right in the past you build an organization and set it on a path to try and last forever and the world is moving too fast today um you really need to reinvent yourself every year or two and as the the metabolism increases you have to do every 6 months because the stuff that you were bu you know the the story of alumina I think is really relevant here they were building highspeed Gene sequencing machines I guess yeah and they’re the world’s leader at this and it it turns out the shelf life for highspeed Gene it was 9 months you only had 9 months to sell this really expensive machine the product development cycle was 28 months so they had to have four product development Cycles running in parallel to hit the 9month shelf life sales SLI right that’s insane that’s just insane if you think
[00:24:01] about manufacturing cycles and the expertise and how do you the discipline around managing those layers this is a transition in business that we’ve never seen before where markets are appearing overnight and markets are disappearing overnight and I think the rise of chat GPT just highlights it brings it all into sharp relief I I love it one week we’re talking about prompt engineering is the thing to do and then Auto GPT comes out doing its own prompt engineering and that’s thing in the past yeah I mean listen I predict I it just shows you how long you I predicted the prompt engineering as an industry would last about 5 months and it turned out to last about 5 weeks so so there you go yeah in this in this world of exponentials if you are not disrupting yourself then someone else is bottom line and and so so you know we first identified this 10 years ago and you and I worked closely on the original book of EXO and we identifi this model and over the last 10 years we now have unbelievable data to demonstrate that this is the only way way these are the characteristics and if you’re not
[00:25:00] following these characteristics and you don’t have these attributes you won’t grow 10x and if you’re not doing it somebody else is right so it pretty much we’re now clear that every company nonprofit government Department impact project will basically over the next decade be organized this way otherwise it won’t be around hey everybody this is Peter a quick break from the episode you know I’m a firm believer that science and technology and how entrepreneurs can change the world is the only real news out there worth consuming I don’t watch the crisis News Network I call CNN or Fox and hear every devastating piece of news on the planet I spend my time training my neuronet the way I see the World by looking at the incredible breakthroughs in science and technology how entrepreneurs are solving the world’s Grand challenges what the breakthroughs are in longevity how exponential Technologies are Transforming Our World so twice a week I put out a Blog one blog is is looking at the future of longevity age reversal
[00:26:01] biotech increasing your health span the other blog looks at exponential Technologies AI 3D printing synthetic biology AR VR blockchain these Technologies are transforming what you as an entrepreneur can do if this is the kind of news you want to learn about and shape your neural Nets with go to demand.com back/ blog and learn more now back to the episode you know I think about the fact that there are have been these moments in time that have been massive game changers I call them interface moments we talk about you know the 10 attributes that are internal five internal five external that you identified uh that are important and interfaces are are one of them I remember one of the things that really stuck out to me I gotten to know Mark Andre uh after he started Andre harwitz when I went back and looked at mosaic his first company that he created as a platform Mosaic was an interface to the internet right here is arpanet that was
[00:27:00] available at MIT at Stanford at Harvard in the defense department and so forth but it was Arcane in terms of using it and uh and Mark creates Mosaic that allows all of a sudden anybody to use this uh incredible capacity and on the first year there were like 10 websites the next year there was like a million websites and then there was like 100 million websites you see this rapid exponential growth and that was an interface moment that made it made some complex technology available to everyone this is this is what I think you talk about when you say deceptive to disruptive right is a technology goes from deceptive disruptive when it becomes usable uh and that was the Mosaic moment Steve Jobs made the smartphone usable and boom it took off right coinbase coinbase made it easy to buy Bitcoin and boom uh that took off and chat GPT made AI accessible and we saw Zer to a million users in 5 days 0 to 100 million users in 2 months and by the way something’s going to crush that
[00:28:00] record I’m not sure what it’s going to be but it’ll be a thing of the past soon enough it’ll be the next startup that un I launch some I like that I like that so you know listen this has been sort of an introductory conversation on exos I think that it’s important that it lays the groundwork for the rationale right like everything is different we the way we frame it is that we have 20 Gutenberg moments hitting us at the same time we had um the printing press in the 15th century completely changed the world and now we call it a Gutenberg moment because of the utter transformation that caused in society well chat GPT is a Gutenberg moment solar energy blockchain a AI I mean we have this vast number of Gutenberg moments hitting us like a tidle wave it’s going to wash away all of these I like your framing that you should touch on which is the asteroid yeah can I can I do that cuz you know the 9-year-old nine-year-old space cadet me can’t help so if you look back 65 million years ago 66 million years ago this massive 10 km asteroid strikes the Earth Earth and because of that impact it changes the environment so rapidly
[00:29:02] that the slow lumbering dinosaurs are unable to adapt and they die because of this rapid change of the world but the furry little mammals are ancestors proudly as as a furry mammal or uh Survive and Thrive and so the asteroids striking the Earth today are these exponential Technologies they’re changing the business world so fast that if you’re a slow lumbering dinosaur a large corporation unable to adapt uh then you’re dead uh and you’ve got it’s the entrepreneurs I mean open AI effectively with 130 people right does something that no you know that Microsoft and Google had not done now let’s be be fair about it right uh Google had been uh evolving with uh with deep mind a lot of tech but they didn’t release it uh open AI did did uh the same example which I love is I gotten to
[00:30:00] know Chad Hurley in the early days the founder of YouTube and I also knew Larry Page and Sergey Larry was on my board at at at ex prise and I remember asking the question why you had Google videos going as a company a division of Google with Google videos and why did you spend $1.65 billion to buy uh YouTube 18 months after Chad started on his credit cards and the fact the matter was that they were aggressive F little mammals you know they didn’t have an army of lawyers restricting what they would put on YouTube or what how they did it it was easy and it was uh frictionless and they just grew so fast that Google had to buy them and I think this is going to be the only Mo for big companies going forward is to spot the the furry mammals and buy them and Facebook kind of pioneered that with Instagram and WhatsApp and whatever uh that’s going to start to happen more and more cuz big companies just can’t do it and that’s a subject for a whole other discussion it
[00:31:01] it sure is anyway listen I I I hope uh uh folks listening enjoyed this uh sort of teaser taster on exponential organizations the new book exo2 is coming out uh one of the things I love that you’ve done um with your team credit to you was make the book uh actually accessible through an AI can you talk about that a second yeah so um Kent Langley and and Michael jansson and and a couple of other folks on our team basically put together an AI chat GPT style interface they took multiple models together and merged it in so there’s actually a full a text chatbot AI interface to the book so you can literally say here’s what my company does how would I turn it into an exponential organization and it literally queries the entire Corpus of the book and comes back to you and goes here’s what you need to do so this is like my entire community of 24,000 consult consultant is like hey wait what what did you just do um so it’s it’s uh
[00:32:02] but but we have to do it if we’re not doing it somebody else is going to do it right and so I think that’s going to be the Paradigm how people interface with this book which is why we’re so excited about the future yeah the you know like I say the future is only a faster you think it’s the most exciting time ever to be alive yeah all right buddy see you soon great discussion super fun take [Music] care