May 19th, 2021 | By: Jonathan Low | Tags: Strategy
When I (Jonathan) read the book Exponential Organizations 3 years ago, a whole new world opened up for me. Up until then, I didn’t know Salim Ismail that well—just like a lot of other people, I guess.
Today, Salim Ismail is one of the hottest names in the business world. He has spent the last 7 years building Singularity University as its founding executive director and current global ambassador. Prior to that, Ismail was the vice president at Yahoo, where he built and ran Brickhouse, the company’s internal incubator. His last company, Ångströ, a news aggregation startup, was sold to Google in 2010.
Salim Ismail has founded and/or operated seven early-stage companies, including PubSub Concepts, which laid some of the foundation for the real-time Web, and the New York Grant Company, in direct response to 9/11. In its first year, the organization attracted over 400 clients and delivered over $12 million of federal grants to the local economy.
I’m fascinated by Salim’s way of thinking, and I wanted to get to know this passionate businessman and entrepreneur better. We sat down for a chat, and of course, we started by talking about his Amazon number one bestseller Exponential Organizations…
Jonathan: In your book you write that we struggle to understand exponentiality as human beings. What does this concept mean, and why is that?
Salim: Linear vs. Exponential Growth. Linear growth is how we normally perceive the world and business. If you want to move from one place to another, you could calculate your way of getting there into a number of steps. For instance, 30 normal steps. You have then understood the linear development from A to B.
However, exponentiality is something different and hard to grasp for the human mind. If I take 30 doubling steps—1, 2, 4, 8, 16, and so on—at step 30, I’ve gone a billion meters. I’m 26 times around the world, which is a little bit further than a 30-meter stretch, and it’s hard to gauge where I’d be one-third or two-thirds of the way.
Why is that hard for our brains to grasp? We have evolved over 4 billion years—to survive and to co-create. We are basically animals with tools, and our DNA is very close to that of gorillas.
This also means that our brains are programmed in a local and linear way. All of our senses work through incremental steps, and all of our education and training is incremental and based on local materials. This means that we are cognitively bad at spotting exponential growth, because it goes against our senses, against our biology.
Jonathan: How do you transcend biology then?
Salim: You have to understand the doubling patterns of exponential growth. We live in a unique time where we’re experiencing doubling patterns in tech, neuroscience, bitcoins, biotech, drones, 3D printing, and so on. The doubling patterns are faster and faster. With drones, for instance, the growth pattern doubles every 9 months.
Jonathan: And a doubling pattern is what?
Salim: The doubling pattern was identified by Gordon Moore in Moore’s Law. Once the doubling pattern starts, it doesn’t stop. We use current computers to design faster computers, which then build even faster computers, and so on. Let me give you an example…
Ten years ago, we had 500 million internet-connected devices. Today, there are about 15 billion. By 2020, there will be 50 billion, and a decade later, we’ll have a trillion internet-connected devices as we literally information enable every aspect of the world in the internet of things (IoT). Think about that for a second. The internet is now the world’s nervous system, with our mobile devices serving as edge points and nodes in that network. We like to think that 30 or 40 years into the Information Revolution we are well along in terms of its development. But according to this metric, we’re just 1% of the way down the road.
Jonathan: You combine this doubling pattern development with the idea of information enabling.
Salim: Yes. The driver fueling this development is information. Once any domain, discipline, technology, or industry becomes information-enabled and powered by information flows, its performance begins doubling approximately annually.
Several key technologies today are now information-enabled and following the same trajectory—for instance, artificial intelligence, robotics, neuroscience, data science, and nanotechnology.
Jonathan: What does this mean for our society and the different industries?
Salim: One example could be transportation.
In the current reality, we roughly buy one car per family. You take x number of trips per family, and sometimes you invest in two cars.
However, with current developments in the self-driving industry, solar technology, and the IoT, we will have a completely different scenario in a few years from now.
Imagine a near-future where I can access a small solar-powered car just by going to the next street, where it’s parked after someone else has just used it. This will change the supply side and the market, and the nature of demand will change.
Today, Manhattan has 13,000 taxis and 120,000 private cars. If you power the cars using solar energy, make them self-driving, and combine this with the IoT, you can meet the same needs in an area like Manhattan with just 9000 cars. And you would only have to wait 36 seconds for your next car to arrive. Today, people are waiting 10 or more minutes to get a taxi.
This means that you transform the market from scarcity to abundance.
Jonathan: That doesn’t sound like good news for the car industry.
Salim: Last year, 85 million cars were sold in the United States. My estimate is that we need to sell 10%–15% of that. What do we need 20 car companies for? We’ve seen this in the music industry with iTunes and Spotify. So you’re right in the sense that the car companies definitely need to start innovating on their business models.
Jonathan: Can you briefly describe the difference between incremental innovation and the kind of disruptive innovation that’s fueled by exponentials?
Salim: The features and performance of my car improve incrementally at about 2% a year. In fact, most innovation at big companies is incremental. Cleaning products get slightly better or “new and improved” in a linear fashion over time. Over the past few decades, cars have been getting slightly better gas mileage year to year, go slightly faster, and are marginally safer. Even the electric car is still an incremental innovation on the concept of a car.
Autonomous cars, on the other hand, are truly disruptive because they take the driver out of the equation completely with the help of robotics, sensors, artificial intelligence (to route and analyze information), and other exponentials. For the first time in 100 years, Moore’s Law is hitting transportation. All of a sudden, we have “intelligent” cars that can park themselves. The next generation of autonomous cars will drive in bumper-to-bumper traffic, navigate complicated street environments, and so on. The pace of change in cars is moving very fast, indeed, because of information enablement.
Jonathan: Are there any industries other than transportation that will experience the same?
Salim: Yes absolutely. One could be the food industry.
Today, an average meal in the United States travels 4000 km to get to my table. If I start growing tomatoes at local farms, then I do not need vegetables from 4000 km away. This will save transportation and energy costs. Technology can help us get there.
Another example that you use is Nokia and the community-based traffic and navigation app Waze. Yes. So Nokia, after the iPhone was announced in a “big bet,” bought Navtech, which owns all the circular traffic sensors on all the roads in 35 countries or so, and they were figuring they would protect themselves against… By having real-time traffic information and owning the source. At the same time, Waze launched, which piggybacks on your GPS, and 5 years later, Nokia has essentially gone out of business. They get sold for less than what they paid for in Navtech, and Waze gets sold for a billion dollars, and they had 50 million traffic points because of every single GPS, and of course, that’s excluding exponentially.
It’s probably up to about 100 million today. There was therefore a great indication of a few “bank on” physical assets than somebody who was doing the same thing with the digital environment or an information-based environment will surpass you very, very quickly.
Jonathan: At Singularity University, you work with this mindset and try to solve some of the world’s largest problems.
Salim: Our education mission is to educate the world’s leaders that this is happening. We then try to enable them to solve big problems such as pandemics or climate change—real exponential problems. For instance, Ebola is expanding at a doubling rate, so you can’t solve it with a linear solution.
We want to make sure that all business leaders wake up and realize the exponentiality of the problems and figure out ways of solving them.
Jonathan: And your book Exponential Organizations is part of this mission?
Salim: Yes. The mission of my book is to explain how to organize this process, what kinds of organizational structures do we need going forward?
Exponential organizations are governed by an assumption of abundance—unlike linear organizations that are necessarily constrained by limited resources.
Hyatt, for example, is a typically linear organization—which isn’t to say that it isn’t also hugely successful. With hundreds of locations in dozens of countries, Hyatt is one of the most widely recognized hotel chains in the world. But each time it wants to open a new location, Hyatt needs to build a new hotel or buy a preexisting property. It needs to hire cooking, cleaning, and administrative staff. It needs to pay for renovations and maintenance, and any number of other periodic issues that may arise.
Growth is obviously possible within that framework, but it proceeds deliberately and, often, painstakingly, in a roughly linear fashion.
By contrast, Airbnb, the popular short-term real estate rental market, is designed for rapid, almost effortless growth. Its low organizational demands are inversely proportional to its huge business potential. Airbnb doesn’t own any property, but it has already accumulated over 1 million listings in more than 34,000 cities and has been valued at $20 billion.
This article was done by the Danish serial entrepreneur Jonathan Low. Low is based in Scandinavia but has traveled the world interviewing and talking to some of the leading entrepreneurs and innovators on the planet. The article is part of this journey.
Jonathan Low is the founder of 5 tech-companies and the author of two #1 bestsellers about entrepreneurship and marketing. He is also a public speaker at events in both Europe and the US.
Currently, he is the co-founder and CEO of JumpStory transforming the image industry online. JumpStory has experienced massive growth during the last year and has expanded from nothing to customers in more than 135 countries. Major media like Forbes, Entrepreneur.com, The Next Web, etc. have named JumpStory Netflix of images.