The Exponential Organization
In their book, BOLD: How to Go Big, Create Wealth, and Impact the World, Peter Diamandis and Steven Kotler talk about the concept of “Exponential Companies”. These are amazing organizations that can grow from concept to billion-dollar disrupters at breakneck speed and create emergent landscapes completely destroying their lumbering competition. Examples abound, such as Airbnb, Google, Uber, Tesla…
The authors talk about the enabling stages of such companies: the 6 D’s – which they call the six horsemen of the apocalypse. These are digitization, deception, disruption, demonetization, dematerialization and democratization. [We won’t go into all of these here but the book is worth reading for details.]
The Exponential Entrepreneur
In addition to the 6 D’s the Exponential Organization has an Exponential Entrepreneur at the helm. Exponential Entrepreneurs have a bold mindset and a grand vision, they can perform at speed and can think at scale. Jeff Bezos, Larry Page, Richard Branson and Elon Musk fall into this category. These guys are capable of syncing their mental pace with the exponential organization’s break-neck growth curve – Hacking the Flow – in the parlance of the book. According to a McKinsey study they can be over 500% more productive than the average CEO at a sustained rate for many exponential doublings of their disruptive companies.
The first and most important of the 6 D’s is digitization, where a conventional product, not necessarily associated with software, and plodding along at a pedestrian rate of growth, becomes digital. Wham! It starts riding the explosive S-Curve of digital technology.
Tesla today, under the vision of Elon Musk, is digitizing the car industry. (And also the solar and battery industries, but that is the subject of another essay).
The genius of Tesla is that it is the first company to realize that a car is ready to be digitized and therefore ride the disruptive curve of explosive growth. So the car of the future – not so distant future actually – will be like a commoditized piece of hardware, much like a desktop computer with a standard set of capabilities. This standardized hardware, needing a minimal number of parts, will be assembled very cheaply with the price continuously coming down even as new features are added. The explosive new capabilities in driving will then come from software.
Tesla’s Model 3 dramatically underscores this shift
The Tesla Model 3 was unveiled a couple of weeks ago and showed off its minimalist hardware – a new universal, automotive Turing machine, if you will, ready for the emergent, computational age in driving. The basic car, including all the hardware and sensors, but excluding the batteries, costs only $10,000 in mass production. And mass production is happening at warp speed – by 2019 at the latest, when Elon, says, he can make 700,000 cars per year! (He upped it last week from 500,000!) Battery costs seem to be in the $15,000 – $25,000 range but coming down rapidly – they have declined 70% in the last 5 years.
Will the 2019 time frame for mass production hold? Elon has missed deadlines before. What’s his credibility? There are fundamental issues with an exponential growth “S-Curve” Here’s what Musk said at the earnings conference last week:
It’s fundamentally impossible to predict the exponential part of the manufacturing S-curve. It’s crazy hard. The S-curve is a really jagged sort of upward growth and it’ll plateau and then it’ll grow rapidly and it’ll plateau again….
But overall, we’re feeling really good – this is maybe the best I’ve ever felt about Tesla, to be frank. Last week, stressed the hell out of me, but I really think that this is probably the best I’ve ever felt about the company.
I would say that the odds are with him meeting the 2019 target. But does it really matter if he is 6 months late?
The Model 3 is a beautiful beginning and was universally hailed by the early journalists and car buffs that experienced it. Here’s a pretty informative YouTube review of features and plans.
For $35,000 you get the base version:
Over 210 miles of range
Sports Car like acceleration and handling
All the instrumentation for complete autonomous driving
Less than 3 cents per mile running costs
“Zero” maintenance, software upgradable
Long life – over 500,000 miles – low depreciation
Top of the line safety features.
If you want the base version, though, you’re going to have to wait. The first roll-out is the more upscale version for $44,000. It has a stunning 310 mile range, and is faster and sportier. Tesla will also eventually do the “Ridiculous” version in the Model 3 – one with an acceleration rivaling the fastest Ferrari! ( 0 – 60 mph in 2.8 seconds).
Although all the Model 3’s are fully instrumented, software upgrade for autonomous Level 5 driving will cost extra and is probably a couple of years away.
It may seem like a small step but Tesla and Elon have single-handedly changed the entire automotive landscape. Tesla’s strategy was to start at the top end: build a sports car with great cache and automotive gewgaws to get the rich and the trendy to embrace the car at a fancy price. Then use that money to build an affordable car. Then use that money to build an even more affordable car. While doing the above get into the zero emissions game – build unlimited battery factories, and build integrated solar roofs. It’s remarkable how well Tesla seems poised to pull this off, although much remains to be done and there are inevitable roadblocks along the way.
How Quickly Will We Go All-Electric?
In the last months many car companies have announced plans to produce Electric Vehicles (EV’s) within the next couple of years. Volvo will build only fully pluggable electric cars and plans more than a million in two years. Honda, Mercedes, BMW are also joining in the fast cascading new world of EV’s. And Ford’s new CEO has a background in electric vehicles and has been brought in to launch Ford into the inevitable future of petroleum-less cars. GM’s Bolt is a first 200-mile range entry from them.
The UK has announced that it will outlaw petroleum based cars – both gasoline and diesel – by 2040. France will do the same. China is already the world leader in EV adoption and is committing huge resources to green energy – solar in particular, with world leading battery technology research funding. India says they have a goal to go to all electric vehicles in a mere 13 years. One third of their electric power will be solar in 5 years (100 GW).
I wrote about the prospect of all new cars sold in the U.S. being plug-in electric in 8 years – I was quoting the prognosis by Tony Seba, the Stanford economist. Most readers of this blog felt that that was way too fast and indeed it is an ambitious projection. But it is not implausible, and indeed is even probable give the nature of exponentially growing technologies and the change in paradigm when costs, technology and world sentiment converge.
How long before almost all cars on our roads become green? Since there are more than 200 million cars in the US alone it is hard to say, but 10-15 years seems very probable. The disruptive force of the digitized car will be huge and blink-of-the-eye fast, akin to the impact of the asteroid that caused the extinction of dinosaurs 55 million years ago. To quote Peter Diamandis and Steven Kotler:
Right now there’s another asteroid striking our world. It is extinguishing the large and lumbering, and clearing a giant path for the quick and the nimble. Our name for this asteroid is exponential technologies. The name may be unfamiliar but the impact is not.
Tesla is this asteroid and it has taken a giant step in extinguishing the large and lumbering dinosaurs of conventional gasoline-powered cars.
(This blog post was first posted at https://ayecapitalist.com/2017/08/10/are-cars-hardware-or-software/ and is reproduced here with permission from the author.)