In this episode of Partnering Leadership, Mahan Tavakoli speaks with Azeem Azhar - writer, technology analyst, and creator of the acclaimed Exponential View newsletter. Azeem Azhar is a senior advisor to PwC and is an investor in early-stage startups in AI, renewable energy, female health tech, self-driving cars, and marketplaces.
In the conversation, Azeem Azhar shared perspectives from his book The Exponential Age: How Accelerating Technology is Transforming Business, Politics, and Society. Azeem shared how our societies and ways of life will change due to exponential technologies, why it's essential to understand the exponential changes better ahead, and how to thrive through the many changes ahead.
- Azeem Azhar explained the impacts of technology on society, politics, and business
- Why many people find it hard to understand and keep up with the pace of technological change
- Understanding exponential growth and its potential impact on all aspects of life
- The rise of AI, automation, and other exponential technologies, such as renewable energy, 3D printing, and synthetic biology
- The impact of old tech regulations and approaches in a new digital world
- How leaders can effectively lead through exponential change
- The dilemma of understanding technology in policymaking
Also mentioned in this episode:
- Weapons of Math Destruction by Cathy O'Neil
- Invisible Women by Caroline Criado Perez
- The innovator's dilemma by Clayton Christensen
- Brave New World by Aldous Huxley
Connect with Azeem Azhar:
Connect with Mahan Tavakoli:
More information and resources available at the Partnering Leadership Podcast website:
Welcome to Partnering Leadership. I'm really excited this week to be welcoming Azeem Azhar. While we spend most of our time in this conversation talking about Azeem's brilliant book, Exponential Age. I have to tell you, Azeem is one of those people that as I share in the conversation, I have learned so much from over the past half a dozen years.
He's an award-winning entrepreneur, analyst, strategists and investor, and he shares his insights on a weekly basis in his Exponential View Newsletter with more than 200,000 subscribers. And also the Exponential View Podcast, which is distributed by Harvard business review.
I think a lot of what Azeem talks about is essential for all of us as individuals and as leaders to understand about the pace of change and the impact it's going to have on all of our lives and our organizations. So I've learned a lot from Azeem and really enjoy this conversation too. He is both brilliant with respect to where things are headed and also being able to communicate it in a way that most of us, including me, can follow and understand. So I enjoyed the conversation and I have no doubt you will too.
I also enjoy hearing from you. Keep your comments coming firstname.lastname@example.org. There's also a microphone icon on partnering leadership.com. You can leave voice messages for me there. Don't forget to follow the podcast, that way you'll be notified of new releases. Tuesdays with magnificent changemakers from the greater Washington DC region and Thursdays with brilliant Global thought leaders like Azeem Azhar.
Now here's my conversation with Azeem.
Azeem Azhar. Welcome to Partnering Leadership. I am absolutely thrilled to have you in this conversation with me.
Oh, I'm really pleased to be here, Mahan. Thank you for having me.
Azeem, I love your book, The Exponential Age, How Accelerating Technology is Transforming Business, Politics and Society. I also have to tell you, in addition to a guest you've had on your show, Yuval Harari and Daniel Kahneman. I think you've done the most in helping me view the world around me differently, which is why I am so thrilled to be able to share you with the partnering leadership community.
But before we get to that, your origin soup, and I love how you put that, impacted who you have become. What is your origin story and your origin soup?
First of all, thank you so much for those kind words. Those are incredibly big boots to fill between Harari and Kahneman. I will do my very, very best.
As I was writing my newsletter over the last six or seven years, I started it in 2015 and then did the research for the book. One question kept coming up from people who were reading the newsletter, which is, how come you tell this story about technology, both from the perspective of the technology, but also from the perspective of economics and society and institutions? And I thought a little bit about that because that had always been an interest of mine. And it goes back to the origin.
So, I was born in 1972. It's the year after Intel has its tremendous first package process of the 4,004 that people think really kickstarted the PC revolution. And during the seventies, personal computers were being produced by people like Steve Wozniak and Steve Jobs and the guys behind the Altair and Atari and so on. And I grew up alongside those and I grew up alongside them in the media and cultural consciousness. I saw computers in Star Wars. We saw computers in war games, a 1983 film with Matthew Broderick. And I got my first computer in 1981. So I have grown up alongside these devices as they've developed, as a hundred million other people who were born in 1972 did. But I was lucky, by happenstance of accidents.
My junior school had a single computer, a sharp hems at ATK. My parents got me a computer. My mum had a computer at work and I loved them and I loved the freedom they gave and I became really, really deeply, deeply interested in it. But in the UK at the time, it wasn't so easy to do that.
My school didn't offer a computer science subject formally. So that explains my interest in technology. What about politics, economics and institutions? That's really about the origin.
So I was born in Zambia. My family is from Pakistan, but they have been naturalized and have been living in the UK for a long time. So what on earth are we doing in Zambia? We were there because having naturalized and become a British citizen during his graduate studies, my dad took a job with the British government, the equivalent of the USA ID to go down to Zambia, this newly independent country, and help it build its economic institutions. And that's what they were doing.
And so I had this interest around the home about what work looked like and what outputs look like. If you come from a family of doctors, outputs look like colds and flus and broken bones and surgeries. If you come from a family of retailers, you think about SKUs and stock levels and inventory and cashing up at the end of the day. And if you come from a family that has been working roughly in this field, those are the things that you associate with work. And of course, those are the things that my parents knew about. So they weren't going to come home and talk about the latest medical treatment or see that in the newspaper and discuss it. They weren't going to talk about these issues. So I had a long-term interest in economics and the institutional framing of economics. And ultimately that was one of the things I studied at university. And so my origin story is, it has these two branches to it. And that there are things that are not in it. Like medicine is not in it. Finance is not in it, but these things are in it. And that was the pattern of my career bouncing between those two areas. And ultimately that is what my book has. It grabs hold of that little, me, that I got excited about computers in 1979. And that little me, that was surrounded by people thinking about those types of economic institutional issues in the home.
And I find that's one of the strengths that you bring to the conversation Azeem, whether with your newsletter for years, that now has more than 200,000 subscribers and your book, you're able to explain the technologies and their impact on society, politics, business at large. You're able to translate that impact that I, oftentimes, I find is very difficult for the technologists themselves to be able to do that.
Now, one of the things that you also mentioned is that most of us feel the pace of change because of these technologies is really fast. You quote, 60% of people feel that the pace of change is really fast. I wonder hasn't that always been the case Azeem? Haven't we always looked around, every generation says, "You know what? It is really different this time around, because now we are no longer riding our horses. We are sitting in cars." What is different this time around?
Yeah, I really wanted to challenge that, any idea that this might be a kind of Copernican fallacy. That we think that the world earth revolves around the sun, that is us. And as you rightly say, historically, there are many cases where people have said, oh, the world is moving too quickly. I had a whole list of these that I researched.
For example, someone writing in a newspaper, worried about young women reading late into the night using new electric lights and how that might harm them, probably morally was the idea. And of course the elevator in the first New York buildings was so scary that there was a person who sat in there to make you feel comfortable in a way.
But I think there is a difference. There's a quantitative difference that we can measure. We can measure it by the speed with which new innovations emerge in the economy and the speed with which they distribute themselves into the economy and the rate with which things are change. And in the exponential age and the book, I go into some detail about a number of those mechanics. But perhaps one example that I can share with you is, there was a company called UI path, which makes up a type of technology that automates certain types of business processes. And when I started writing the book, I wanted to just mention the UI path in my section about work because it affects office work. And they were a start up and they were valued pretty handsomely at around $500-600 million. That was in the proposal. By the time I got the book started, which was several months later, the valuation was a billion dollars. By the time I finished the first draft, I hit my deadlines, by the way, I finished the first draft about a year later, the valuation was 7 billion. By the time we got to the final, final draft, which is another four months later, the valuation was 10 billion for this company. And then a few weeks later, the galleys come back from the press. So this is the laid out version of the book in a binding that looks a bit like the real thing. And I say to my editor, listen, these guys have gone public. And that valuation is now $35 billion. And so I had to go in and keep changing the text during this period of time, this process of writing a book. Now, I know book writing is a slow process. But there hasn't been a moment in history where we see this dramatic, dramatic pace of change.
And I look at it in my record collection. I first owned the Saturday night fever album, of the Bee Gees one. When I was seven, when my first record, it was on a vinyl. And then I got it on tape. And then I got it on CD. And then I got it on a sort of MP3 download and then I got it on streaming access. Now, by the way, I've just bought it back on vinyl again, like full circle because I have a vinyl player, but that's five changes. And the thing that's different is that that happened between the age of seven and the age of about 42. So a few years ago, 35 years. Normally these changes would take decades to occur. And so you might see the shift to the car, but you are unlikely to see steam, trains and coal buggies to the car to the Tesla. Whereas now, we see these transformational things happening, for the perspective of your listeners, who are leaders within business planning cycles. And that's, I think, that's a new environment.
And that is an environment that is causing a lot of stress for the leaders, whether it's with respect to their organization's strategy and maneuvering on an ongoing basis. Now, a key part of what you talk about is exponential. It is an exponential age and exponential technologies. It's one of those concepts Azeem that I find people talk about at times, but don't truly grasp. What is exponential?
It's true. It is used a lot, especially after the pandemic or during the pandemic. We understood the idea of the exponential phase. There's a formal mathematical definition of course, of what an exponential is. And there is a formal study of all of this. And then there's just the very, very informal where someone says exponential, what they mean is really fast or ginormous or choose your word. I use a definition that and I mean this in a way that is designed to be a pragmatic understanding of what's going on. So it is not as mathematically formal as you might need to describe exponential if you're doing a graduate degree, but it's not meant to be slack and sloppy.
So the idea is that an exponential change is one that increases by a fixed proportion. It's basically compound interest. It's a bank account that pays 1% interest every year in compounds every year. Now that level at 1% per annum is a very slow exponential and stuff doesn't change that often. In fact, it takes about 70 years for that bank account to double. But in the exponential age, what we see are technologies that are improving but at least 10% per annum. In some cases, 50 or 60% per annum or faster, and that is compounding and it is happening for decades.
Now, what does that mean? A technology that says it gets 35% better every year. So you get 35% more of whatever that technology does next year to this year will double every two years. And quadruple in three. And octuple in four. And then whatever comes after octuple, a hexadecuple in five. And that is really, really remarkable because the flip side, if you invert that, it's getting 16 times cheaper in five years over where it is today. And is 35% a reasonable number that I just plucked out of the air? Well, I use 10% as my floor. And none of the technologies that I looked at are actually at 10%, they're all higher 18, 19 20 percent. Silicon chips have improved at 40 to 45% or roughly on average every year for about 50, 60 years. And in the field of biology, the capabilities to sequence the human genome or any genome, frankly, and the capabilities to synthesize right out synthetic genes have been dramatically declining in price far faster than computer chips ever did.
So what do I mean by exponential? It's that idea of the compound interest on the capabilities of a technology. I insist on a 10 percentage minimum over many, many decades, which means that you see these things double in capability or harving price within business planning cycles.
When I talk about that, Azeem I find people intellectually get it, but it's still very overwhelming. I was talking to the board of an organization that I chaired Leadership Greater Washington, and used the example that actually is an old Persian Indian story about a king that asks a person that had worked on a project for him. Some say in making the chess board, how he wanted to get paid. And if one grain of wheat or rice was put on the first one, by the fifth block, you would have only 31 grains. But by the end of that chess board, you would have 1.4 trillion metric tons, which is more than 2000 times the world's production. So I say that to people and they nod and they're like, “Oh my God, that's crazy.”
However, understanding that exponential change in our own environment and our own world is hard to visualize. So how can leaders better try to grasp the exponential change before we talk about the technologies that will go through that exponential change?
Well, I love that story. I think it's rice rather than wheat, because although I'm from north India where it's more kind of wheaty, I think the original story is somewhere in the middle of the sub-continent, where it was more of a rice-y culture. It's an amazing story. And the challenge is I don't think the underlying basis for why we struggle with this is really well understood. I did a lot of work looking at the research and you're right. It's very, very evident that people struggle with this. They struggled during COVID when we're in the exponential growth phase and they had three weeks worth of data when they were asked for the fourth week, basically underestimated it. They even struggle in highly, highly educated rich societies with simple questions.
So there was a good example where the test around saving for a pension or 401k as you might call it in the US was done in Sweden. And even when the interest rate was low, it was like 7%, people consistently misunderstood what the long-term effects would be. And there's one reason why psychologists think we start saving too late for our retirement. That power of compound interest. It's an area to, I think, understand the psychology and then the tools that would merit a lot more research so that we could understand what's going on.
Specifically what I try to do when I work with leaders is I try to first of all, give them some simple heuristics. A really simple heuristic is if you look at a growth rate and you divide 70 by that growth rate, that gives you the doubling time. So something's improving at 10% per annum, 70 divided by 10 tells you it doubles every seven years. If it's improving at 35% per annum, which is the example I used earlier, 70 divided by 35 means it's doubling every two years. So you can quickly do the maths in your head and get a rough idea of how long the doubling will take place. So that's the first tool.
The second tool to think about is that this is all about declining prices. And so declining prices means that demand will increase. And if demand increases, well, let's just pause there. We'll get onto what happens when demand increases. Then I try to think about stories that I can tell that help people recognize that.
And so the one I use is when I was child, our family had one camera, it was a Polaroid instant land camera. And some 40 years later, I did a count on how many cameras we have in my household. And well, the answer has changed since yesterday because I just got a new camera, but it's now 58. And you're probably not far off, because if you've got a modern car, you've got at least four cameras in that car. If you've got a modern smartphone, you've got four. If you've got two old smartphones sitting in a drawer, that's another six. If you have any smart device kicking around at all, you're likely to have a camera in there. If you counted the number of computers you have in your house, in your household, it is hundreds.
Neither of us are likely to have these, given our age now, but when we were younger with our partners, we probably had those digital pregnancy tests. Those have a small computer inside them. You buy these things for $2 and you throw them away.
And that's what happens when prices decline. So I start to say, let's look at that. So that you've understood that doubling can happen. You've understood where it might go. And then I'd taken it back to something that you might recognize. Because if you're saying to me, there is no way a household will increase the number of anything it has by a factor of 60, over 30 years, I've got evidence points, which is that we've done that with cameras and other things.
And I think that then gets people to start to think about this from a fundamental space, because part of the challenge I think that leaders have run into is that people have sold them so much hoopla and PT Barnum around technology. Over promising without explaining the risks, without explaining the uncertainties, without explaining how this is a complex system where small assumptions changing will radically change the timing of the outcomes of the nature of the outcomes.
So what I tried to do is build people back to those fundamental processes and get them to ask the question. Yeah. I can see that this is happening. And if prices come down this far, how far could this actually go? And then I think once you get there, you're at a point where you can have that next set of questions.
That is a brilliant analogy and a great way for us to see that if we had gone back 30 years ago and told people that they would have hundreds of cameras, as you said in their homes, it would have been really hard to visualize that. So we have reached levels that would have been hard to visualize. And the pace of all of these changes with technology is becoming faster.
You talk about a transition point somewhere between 2011 and 2014, Azeem. And the fact that this is not just for technology companies. One of the frustrations I have is in some of the conversations with leaders and listeners to the podcast, a lot of times in their minds, they categorize the impact of these changes to impact on technology companies, but these impact all kinds of companies and all, as you say, governments and society at large.
So what happened 2011 through 2014 to shift us into this exponentially?
Yeah, that's the inflection point. When you look at it at an exponential curve, it is smooth and it has a kink in it at some point. Now mathematically, there is no kink. As I said, the mathematical formalism tells you that there's no kink because you'll always see that kink because you zoom in or zoom out on the curb and it'll be in a different place. But we see a kink and the scale that matters is what's happening in our everyday lives.
So the underpinning technologies started to move in the late sixties, early seventies, and we're joined by some other technologies. But when do you actually feel that you're at the slightly out of control points of the curve rather than the boring points of the curve.
And as you say, 2011 to 2014, and here's the thing happened in a number of different areas. In industry in 2009, the world's largest companies or America's largest companies, were all companies built on the technologies of the turn of the 19th to 20th century. So it was ExxonMobil, ConocoPhillips, Chevron, General motors, AT&T general electric, Ford, Valero. And then you had Walmart, which is sort of in a strange way as dependent on suburbanization and the car.
Anyway, By 2013, 2014, essentially the largest companies in the world are all built on exponential technologies and network effects and that has only increased since then. So I would go around and talk to people in 2015 and say, can you imagine a time when Apple would be worth $500 billion and they'd go, “No, no way. It's completely overvalued.” Of course, it's worth two and a half trillion now and Microsoft is worth even more. And so, that is one clear moment of the turning point.
But there are other moments in that turning point, there is that sense, somehow in 2016, that social media has changed the way that politics and discourse works in not just the US but also in the UK and in other parts of the world. And our attention has a lot on what's going on within social media, whether it's legitimate activity or disinformation. But it's also the time that you see for the first time, the price of renewable power from solar panels and wind turbines competing with fossil fuels and winning on a price basis, because those technologies have been getting consistently cheaper for decades up until that point.
And then there were a few other sort of signifiers that suggest that some of the more mature exponential technologies are crossing this threshold and they are going into that uptick.
So in 2016, so slightly outside of that original range. About a fifth of all cars sold in Norway were electric vehicles. And that triggers that 20% tends to be a threshold. If for anyone who's a marketer and you think about the bass diffusion curve 20% is a moment you move out of early adopter into early majority. And it's the point that you go through an exponential growth phase in your market. And that's exactly what happened, right?
So as of late 2021, about 95% of all cars sold in Norway, new cars are electric vehicles. So the reason that I point put that kink in the curb in that period, and I say, it's not like the date of the Sputnik launch, which is a single date in history. It is a period of time where these are the moments where there's a distinct before and after when we look at the world, even if analysts like me and historians and others could see that the underlying processes were at work many years before that.
And Azeem, one of the things that I understood better, and many of the leaders I interact with understood better was the growth in computing or the exponential growth in computing, part because of Moore's law and having seen, having heard things like now, we have more computing technology and an iPhone, than most satellite launches or rocket launches had.
So there is an understanding of, to a certain extent, of computing and the exponential growth there. You add to that artificial intelligence, which is critical. You also add three other areas. So it's not just with respect to technology, as we've known it, computing. What are the technologies that you see will grow exponentially and therefore impact how we live in our societies and how our companies, organizations operate?
Moore's law and chips are the ones that we are most familiar with. But there are three other domains that I think are really important.
One is the domain of the new biology where we're able to take our new theory, better understanding of biology, and we can understand the software code of life through DNA sequences and, how genes express proteins and other aspects can known as the omics that we now understand better. And the key point there is that as an example, the first human DNA genome was sequenced and ran to about a billion dollars to do. And we can now do them for a couple of hundred dollars if we do them in bulk. And that price has got much lower than the rate that Moore's law would have predicted for chips.
That's not the only thing else. Another thing that's happening in biology. And I'll just talk about the other two platforms as well. Then we can talk about applications, and impact, if you're interested. Then the second area is in the field of new energies where coal and oil natural gas have reached their limits. Not only will they not get any more efficient, nor will they get any cheaper, but we just can't afford to put the carbon into the atmosphere anymore. Unfortunately, there's a whole slew of energy production technologies like solar and wind that are on these exponential price declines. And there's also, the same thing is happening in storage with lithium-ion batteries, declining in price for the same capacity by about 19% every year for the last 15, 20 years or so.
And then the final area is the area of manufacturing. So largely manufacturing hasn't changed much for hundreds, maybe thousands of years. We either take a block of something and chisel away at it, or we make a mold of something and pull a substance into it and let it solidify that basically what we do. We cut or we mold, or we cast.
Recently in the last 20 years or so, we've started to get better at 3d printing. Additive rather than subtractive manufacturing. So the problem with casting and molding is that you only make the same identical thing all the time. And there's a limit to the amount of intricacy you could get through those molds and costs. The problem with subtractive manufacturing is that you throw away a lot of material because you chip away at it. And the marble pieces that were on the Venus de Milo end up swept away. And there are again, certain types of structures you can't construct because you can't get into them. So additive manufacturing, 3d printing, lets us take a particular substrate and print with it and we can make amazing things.
Right now, it's a tiny, tiny industry and it's aura aerospace and automotive and medical devices, but people are printing houses. One of my colleagues worked for two years in a 3d printed office in Dubai. They're printing with cannabis now. They are printing human organs. And also 3d printed meats as well on the other side. And the thing about 3d printing is that right now it's expensive and it's slow and it's a bit weird, but it's improving on a price performance basis by about 29% every year, which listeners now know equates to an almost doubling every couple of years. And that is quite remarkable.
So those are the three areas, additional areas, the new biologies, these new clean energy stack and additive manufacturing.
That is incredible because I hadn't personally reflected as much on the potential of each one of those impacting society at large, in addition to the leaders, leading their organizations. Now a couple of elements I want to touch on before understanding each one of those a tiny bit better. You talk a lot about the fact that technology is built on the social context that we operate in and give the example, which I wasn't familiar with, that seatbelts when produced were even meant to better protect men than women, average body size, so on and so forth. So as these technologies, most specifically touching on artificial intelligence are being rolled out and scaled at exponential levels. What are things we need to consider in order to make sure that the way to technology impacts society is how we wanted to impact and shape our societies?
We have to make sure that we know who's in the room making those decisions and whose voice is being heard and whose voice is not being heard. And be clear about what shortcuts we are taking in order to ship this. There has been change in how we think about these things and particularly in AI, what would used to happen was that machine learning systems would be built. They would have some horrible outcome in someplace where normally it's a kind of racist or sexist sort of prediction that it makes and people go, oh, no, it hasn't worked. That's an unintended consequence. It hasn't worked. So let's go back up and clean it up. And then you go back, look at the team and the way in which it was produced. And you realize that this risk was never even considered, it was not thought of because no one had that experience.
And you saw this with some of the original voice activated assistance a few years ago where they wouldn't respond to calls of sexual violence. So if you were a woman in a situation and you were, you were in a situation of sexual violence, your Siri was going to be useless at being able to deal with that and turning that into an action. And then of course, the companies went back and they made changes and they made these things responsive to that context.
So technology is an artificial thing designed by people based on their experience for the goals that they want to achieve, given the constraints that their bosses have put on them. And they're imperfect, these technologies. So given all of that, they also don't do the thing we wanted them to do in the first place as well as they might. So technology is designed by people who have never had children. Then thoughts about how this might impact family life or how this might impact kids are going to have to be forced in through some kind of research process if they are indeed at all.
Now what I think has happened in the last four or five years has been that there's been a lot of awareness of this issue. I mean, it was well, well known in the technology studies and science and technology studies, domains and academia. It was well-known within gender studies and feminist studies and raised many, many, many times. But there have been people who have done great work to bring these ideas forward. People like Cathy O'Neil in Weapons of Math Destruction and Caroline Krato Perez who's book, invisible women. And a lot of books have come out in that area to publicize and popularize this issue.
And the way in which companies are at the cutting edge and are thinking about this is they are thinking about inclusivity and social impact to the extent they can in the upfront of the development of these systems. But there's only so much you can even do in that upfront. And as a leader, you should be asking for it. You should also recognize that there will be emergent consequences that are not so much unintended consequences, because those will happen as well. But unintended consequences are often just the reflection of your limited planning horizon. But there will be things that emerge through the interactions of those technologies in the economy that you couldn't have tested in the lab. And you therefore have to have a system that allows you to look at them and constantly fine tune them in flight and figure out what problems are emerging. But it has been a real issue in a really deep assumption.
When I wrote about this, I wrote about this in the Ft, in my column about four or five years ago. One of the things that was fascinating was that buildings have their temperature regulated for the typical male occupant because of our size and we're pumping around more hot blood around our bodies. We can get away with one less layer than someone who's smaller than us aka the 51% of the population. And so these things crop up all over the place. And leaders are the ones in a position to kind of instigate a change.
Now, one of the frustrations I have, Azeem, is when the technologies were for example, cars driving on a road, the policymakers and the regulators understood a car driving on the road and the barriers and limitations that need to be put on cars, driving on different sides of the road. They understood that enough and added to that is the fact that for example, in the US Congress, it was absolutely embarrassing watching some of the representatives asking the technology executives questions. They don't understand the very basic level of the technology let alone the implication of this exponential growth in the technology. Married to something that is very big here in the US which is a dogma that says any involvement by a regulating agency or government in technologies or in companies is wrong. Let the market rule. So how can policy makers, I've a lot of great listeners from this administration, people in policy-making roles that want to do the right thing, how can policy makers think about setting the kind of parameters that are necessary for society, but don't then limit the growth and opportunities that the exponential technologies provide?
I mean, it's such a hard question and maybe let's unpick little bits of it. So one of the issues of course is this point within the U S in particular, but it's also true in the UK.
Technologists believe that any kind of regulation is a bad thing. Regulation is the eclipse akin to the guillotine falling on your loved one's head. I mean, there's no circumstance in which that guillotine is a good outcome, right? Unfortunately it's actually bred of a deep rewriting of the narrative and of the history and of the understanding of what regulation is.
Regulations are the boron rods in a nuclear reactor that stop an uncontrollable chain reaction. Why did Chernobyl blow up? It wasn't because of the lack of regulations because the regulatory system, which with its cooling system and neutron absorbers didn't work. Biological creatures and these technologists, they may not want to be, but they are biological creatures are essentially a system of up-regulatory and down-regulatory mechanisms that maintain the homeostasis in their bodies that keep them alive. So if someone starts from a position that regulation is always bad, I'm afraid we're in an Ivermectin land.
It is difficult from that basis against the enormous amounts of evidence that demonstrates that this isn't the case. It's no way for us to start. Then there are simple questions that you can automate. You can say, well, should we not have regulation in the automotive industry? Should cars have no speed limits and then not be stop signs and there not be red lights? and so on or not. Some people may say, no, the market should decide.
Should there be regulation in airline safety, aviation safety, or should anyone be able to build a plane or should the market decide? Should anyone be able to market a drug and say, this is a drug that will prevent your cancer or should the market decide?
If you find someone who says that in every case, the market should decide, again, where I'm afraid we're now in Ivermectin land. Then they say, okay, well, we recognize that, but there's something special about the technology industry, whether the challenges there's no other industry that's as big as this, that has as little of a regulatory framework around it as the technology industry. And if you look at the financial services industry, which is highly regulated, it has not prevented that industry from being profitable and innovative. Oh, and by the way, blowing up.
And even though there were tougher regulations put in place, in lots of different ways after the global financial crisis, these banks maintain their level of innovation, customer service. They maintain that public service function of moving capital to where it was needed as the arteries of the global economy and of development. And they continue to make money. So where does the special pleading come from?
The special pleading comes because frankly it's a bit of a pain. It's another thing you have to deal with. The special pleading comes because you haven't had it and now I'm going to make you do it. So it's just that loss aversion, right? You're taking away some avenue of freedom that I've had for a really, really long time.
I think that the special pleading is something that is not well grounded because the technology industry exists in the form that it does because it hasn't been demonstrated by many, many academics and researchers because of the interventions of the state in various different regulatory forms. Whether it was the use of tax dollars to fund DARPA in the fifties and the sixties, whether it was the urgency with which the missile threat, the missile gap was tackled, which poured money into high tech in Silicon valley and Los Angeles or whether it is the regulatory framework that provides a tax break on capital gains from private equity, including venture capital to treat it not as income, but as capital gains, which has created a whole bunch of financial incentives for people to get involved.
These are all regulatory interventions. And they are all at the heart of what has built this amazing technology industry. So I need to find a more informed challenge to this question. Of course, there are bad regulations. There are bad laws, there are bad products, and we've had some really, really terrible ones with the debate around section 230 in the U S for somebody who has followed it a little and sits outside is, to me, is really misguided on both sides. The attempt to put in the clipper chip, which Bill Clinton did many, many years ago, was, again, misguided. The misunderstanding around the value of encryption is misguided again.
So there have been many cases of there being really, really poor regulations, but that is not an argument against good regulations and helpful regulations and regulations that can be pro innovation and regulations that can create resilience in our societies and participation.
You make a strong case for it Azeem. And the fact that for many of these companies, they're spending money, trying to keep that regulation from happening. However, you make a strong case for the necessity for a regulation. On the other side of it, though, you do see, even in airplane manufacturing, Boeing 7 37 max in essence FAA had contracted back to Boeing the safety of the aircraft in terms of regulating it. So that gets to the lack of understanding of the policy makers of the technology in order to be able to regulate or have some regulations that make sense, any thoughts or perspectives in addition to reading your book, which as I mentioned at the beginning Azeem, I absolutely loved the book. I love the newsletter. And over the past five, six years through the newsletter, through the podcast, and now through the book, you have helped me understand beautifully the impact that these technologies have on our organizations and on our society. So I do think it's an absolute must read. In addition to that, any thoughts and perspectives on how these technologies that again are very hard for people to understand, as opposed to it's a lot easier to understand the cars driving on the road, how the policymakers can try to wrap their heads around regulations that are needed by society to be able to reign in some of these technologies?
I think it's less about reigning in the technologies than it is about directing them in productive and equitable ways. It may be about reigning in concentrations of power, within particular organizations, companies that may have that and that's where there may be some reigning required. And I think policymakers have to figure out how they rebuild the trust that has been destroyed in the capability of government and policymaking over the past 50 years.
And at this time of crisis, government is not the solution. Government is the problem as Ronald Reagan said, or any number of things that Margaret Thatcher might've said off the back of that consensus that emerged in the seventies. So I think something has to be done around that. And I think that the mood music does change now and people are starting to assess it with more objectivity.
Then if you're a policymaker, I think there are a number of things that have to happen. The first is that you have to do the work. So you have to do the work in trying to understand the technologies from their basics. And there are a number of people who have done that who were politicians, who have started to deeply understand the technologies. And there are people who are coming out of the technology industry, who are now able to do that and speak with more equanimity than someone who works for Facebook's public affairs team in DC. So you have to do the work. So you understand some of the processes in my book and others might help with that.
And I think the second thing is that you're not alone in this journey. There are people in civil society and in other governmental groups in other countries who are working towards these types of questions. And so there is knowledge that is out there that you can tap into that you can access.
And then I think, the third thing that has to emerge is a sense that you're not necessarily going to get this right the first time. So you need to be able to frame this in a way that allows take backs and do overs and iterations. And that might be a little bit complex.
One of the final things that I think remains is that quite often and I see this in the UK, but I've seen it in other countries as well, it may be a politician rather than a policymaker. I found that civil servants are often abreast of many of these issues from a technical and broader basis. When faced with a challenge around technology, they grab for the nearest comfort blanket, but that comfort blanket has to be one of the biggest five or six technology companies in the world. And that might be the wrong place to seek that comfort and that insight. One doesn't necessarily need the insight from the boss of one of the biggest companies to talk to you about what happens when technology prices drop. Maybe you just need someone who can talk about that without being embedded.
In that sense, somehow you have to go back to these captains of industry, which is an absurd title, to give you that insight, I think is something that we need to be a little bit cautious of because those are some of the companies that may need some form of reigning in. I do see this, I see their shyness and their willingness to throw small amounts of money, big in the context of lobbying, but small in their context, at this problem. And the trouble is that the Fox always wants to eat the chickens.
And that's why it's important again, whether it is the different social platforms and the impact they've had in these conversations for us to view things differently. Now, back to organizational leaders, you do mention Azeem that in the exponential age there are winners who take all accompanies. You had a conversation with Hau Thai-Tang from Ford. And he mentioned how even at Ford, they were trying to hedge their bets. So my question is, as the leaders are listening to this conversation, is there any chance for established organizations to make the transition or are the winners taking all companies, the new entrance into the market, the tech companies that grew between 2011, 2014, or can there be re-invention of existing organizations?
It depends how much history they read. Very few magnets of the steam and railway age ended up being successful car companies or electricity companies despite their wealth and connections and access. And Clayton Christianson sadly now passed away, articulated this problem in the innovator's dilemma more than 20 years ago now. And yet here we are. So there is a complex picture here because some companies do things that are just fundamental plumbing back and forth that might not be on the radar and might be not that attractive and industry and area. And so they're comfortable as companies being rentiers in the current economic landscape. They're not seeking to create the kind of brand and that strategic position. They're just happy at their 14% profit margin, as long as they grow 5% every year. And if that's the case you can probably figure your way out of it.
But there are a lot of companies that are going to be on an absolutely existential footing. And I think then the question is how do you choose to respond and how do you build the trust with your shareholder base to give you the space to go off and do that?
So in the case of the car companies, I don't think the car companies will go the way that blockbuster video went, because they've got much more brand equity. There's a bunch of expertise in making a car about how the door closes and the seats and that is not immediately replaced by an electric powertrain. And they have time.
They have time to leverage their balance sheets and get going and figure out how they retool themselves. But the reality is Tesla is 50% of the market cap of the car industry. And so relatively speaking, if you're the boss of any car company, you've done a bad job relative to the industry benchmark unless you're Elon Musk because he's taken 50% of the value that our sector has in the last few years. And I think one of the things that you can do is you can ask yourself and I think both Herbert Diessfrom Volkswagen and Jim Farley at Ford have credited Musk for creating the belief in the electric vehicle.
And the question is what did Musk see that you didn't see? What did he believe that you didn't believe? Go back and do an after-action review. Do a backtesting like any data scientists would do with their algorithm. Figure out where the decision-making went wrong. And who and why, and what were the processes, because then I think you can step in and say, well, these are the changes that we need to make.
Now at some point, Mahan you're going to end up with having to make an allocation decision. And if you're in the hard place where the Capitol, I'm assuming it's a public company, the Capitol says, well, we just want you now to econ operational efficiencies and just give me regularity. We don't want you to make the shift because frankly we've invested in a bunch of VC funds as well. We're going to just back the shift through that and then once they go public, we'll buy in at the IPO and we'll just shift the capital and that might be a completely rational thing to do. And there will be some organizations where that's going to end up being the mix and the match that you face. And there will be others where I think you will be able to step in and say, well, how do we go about making this change?
And I think one of the challenges, it's a deep, deep, deep leadership challenge that people face is how do you attract the talent to come and do this? I wondered about this with the car companies. Everyone knows we're going electric vehicle, autonomous new powertrain platforms, future of the car, micro mobility. I mean, that is not in doubt now. And it hasn't been frankly in my mind for five years. So who are the people in a car company who say no I won't work on the old gasoline platform, but we're not updating for the next four years.
Is it going to be your absolute best and brightest and most dynamic people or is it not? And so I think you end up with this challenge, which is unless you're willing to build for the future and build in the future, the people who want to live in the future, which is most of us will not want to work with you.
So I think it's a super, super hard challenge for leaders. I'm curious about the extent to which the lack of belief in the potential of the technology is still a blocker, because that was the thing that I used to hear five years ago. People would say to me, Yeah but Tesla's run out range. It's like,who does a 350 mile drive without stopping nobody. My bladder breaks before the battery breaks. So I think that kind of skepticism has come up. And so there are lots of decent roll thought-out things to be skeptical of and to be critical of so you have to choose the right ones, but I think it's a really, really hard question. I'm not trying to duck it. I'm trying to give some nuance to the kind of issues that you will contend with as a leader facing these questions.
Part of the value that you add all throughout the book is that nuance because we have to understand the changes in the world around us to be able to lead with that. Now in your book Azeem with thoughts around collective thinking, flexibility and designing in resilience as being critical for leaders to do with their organizations. We'd love to get your perspectives on how that can be done well. There's been a lot of conversation around it. However, the reality of most organizations and most teams hasn't caught up with the language. How have you seen as both an entrepreneur yourself, as an investor in organizations, organizations, and leaders, being able to actually make that a reality?
I think if you talk about these things and you check them, you start to build a discipline and a toolkit that is appropriate for your organization. So the three values that I talk about are the power of collectives and collective structures, both in terms of employees and in terms of how we allocate resources.
The second is in the idea of resilience. And the third is in the idea of flexibility. Now, those are distinct from perhaps some of the values we've had in the previous 50 years, which were about efficiency and growth and private enclosure. And in the same way that you kick off your monthly review with a business review that looks at efficiency. In some way some questions are asked about that. And right at the end, you have your business continuity plan. It's on slide 78 of the 78 page deck that you have to go through as you review this with your business unit head. And frankly everyone's a bit bored, but because you've gone through your executive coaching program, you know that you have to sit up and pay attention to slide 78. And no one cares. So the question is where do you put that in? And how do you start to communicate that back out?
Because the trouble with resilience and flexibility is they’re like insurance products, that have a cost upfront even if the return isn't necessarily visible. So you then have to figure out how you're going to communicate that the stakeholders and the pass holders of all of this. I think that you can do that by changing what you pay attention to, what you ask your leaders about. What things do you measure?
So for example, the question of flexibility. One analysis, one aspect of flexibility, and you understand that Mahan you've read the book you know that these are the distillation of some quite complex ideas that we apply societaly. But one aspect of flexibility is how you learn going through an agile development process of design build, test, learn, design, build, test, learn.
And one of the things that I do with the founders that I work with and the company that I'm invested in is I asked them about their cycle time. How quickly do you go through that DBT TL or OODA loop cycle? Because that, for me, talks me through to how agile and flexible they will be able to be if the external environment changes. It also by the way, connects to one aspect of their resilience. Because if your DBTL cycle is, say, six months and you have a year's worth of cash, you can only go through one cycle before you absolutely have to get it right. Whereas if your DB TL cycle is one day and you have a year's worth of cash, you've got 365 cycles to go through and figure things out. So it talks a little bit also to the resilience and the longevity of the business.
So that's one example that you could use as a leader, when you're asking these questions. How quickly are we learning and how has our rate of learning improving?
Those are really essential because you talk about the fact that the ability to learn really becomes important as we go through. I totally agree with that. So Azeem, how do you manage the information flow? And when you're asked for your leadership references resources that you recommend to others, what do you find yourself typically recommend?
I have increasingly moved on the business side to histories rather than toolkits. And so I find it really, really interesting now at this particular point where no one knows is the answer. I mean, you can read my book, please do. And so the seven step toolkit for achieving this kind of business outcome for where we are today, won't be written for another 10 years. But what is helpful is to look at people who have thought very, very deeply about these issues at previous transition points to start to get an understanding of what's going on. So I'm currently reading a book on the history of work written by a Dutch academic who is 74 years old. He is just encyclopedic in his knowledge. And even though I wrote a book that covers some of this stuff, I'm getting new insights all the time. So that's one aspect of it.
I think the second aspect of it with the personal side is that accessing fictional literature and accessing philosophical framings of questions, I think can be really, really helpful.
I find myself going back to Brave New World, an Aldous Huxley written in 1932, where he really understood fordism just so beautifully. So soon after the fact and a hundred years later, nearly it's still highly, highly relevant. And then of course, I'm reading a lot of newspapers and equity analyst, research and market research and stuff that comes through Twitter.
But one of the beauties for me is I very rarely go directly to the home pages of these products. I tend to go via the personal recommendation of the experts I follow on Twitter. So there is something really valuable about following somebody who you know is an expert on nuclear fusion. When they send out a tweet saying this new paper in nature is interesting for the following four or five reasons. I've got a high signal to tell me that I should go off and read that. And so that's really been my mix. And what you'll notice is that some of it is very long form and very slow and just dated and mulled over and considered. And some of it is much more fast moving, but I'm reliant on the social signal of the people I follow, who I do for deliberate reasons. And what's missing is that middle piece where I'm just getting the bland mileage, apologies for anyone who works at USA today's front cover. And why would I do that? Because those people just don't know as much as the practitioners do. So that has been the way that I've by information mix works.
It's understanding who can become channels to those signals. How can the audience, Azeem, find out more about your book, Exponential Age, your work, your newsletters. What's the best way for the audience to connect with you?
The Exponential View is available at exponential view.co.
You can sign up for the newsletter and there's a free version. There's a premium version and the premium version has this community. So that's pretty interesting. There's a podcast of the same name. The book is available at all booksellers. So you just have to put in the exponential age and my name and the search will show up wherever you want to. And if you're on Twitter, I'm at @Azeem and also on LinkedIn.
I mentioned at the beginning Azeem, you are one of those people that is a real source of signal for me, rather than noise in a world full of noise. I look to you and really appreciate whether it's through your podcast, through your newsletter, now through your book, you have a ton of signal, which is why I'm truly appreciative of you joining me in this conversation for partnering leadership.
Thank you so much as Azeem Azhar.
Thank you so much for having me on.