The NFX podcast is about seeing what others do not and getting at the true mechanisms behind people and companies, then door change in the world. If you enjoyed this episode, let us know by leaving a rating a review and by sharing with friends you think should listen You can also discover more content, like other episodes, transcripts, essays, and videos by following us on Twitter at n f x and visiting nfx.com. And now on to the show. So today, Azim Azar, we've got you here today.
So glad to have you. Oh, it's my pleasure, James. For those listeners who are listening, you know, we've got Azim Azar here. He is got a new book coming out called the exponential age, how accelerating technologies, transforming business politics, and society. And Azim has been doing a newsletter and a podcast and 2015 about this very subject. And so he's been immersed in it for 6 years at least. And so this book is really a culmination of the research the learning you've been doing around this.
So glad to have you here. As you know, we have mostly early stage founders listening to us, and that's who we're trying to help out as they think through what they're doing. We think that, you know, one of the greatest points of leverage in the world is startups, and one of the greatest points of leverage in startups is founder psychology and knowledge. And so if we can help with that, then we can make an impact with the podcast. And so that's our target.
And, you know, look, your background's incredible. You've been at the University of Oxford. You got your MA and politics and philosophy and economics. You've been a founder of a company that you raised money Morgan you sold successfully. You're an advisor to Harvard Business Review. You're very involved with a role that can forum. I mean, you sort of, gone to all the places of the world with the best sorts of thinking or happenings. We're really pleased to have you.
I am really, really excited to be Pete, and I have to just you know, return the compliment if I can. And FX has been a real source of insight for me over the last 4 or 5 years when you fight guys finally start to put your ideas out there. And I had a chance to spend some time with Gigi a couple of years ago and learn quite a bit in the 40 minutes in which he spoke at panel that I had organized.
I know Pete Flint, one of your partners for many, many years, and I was nearly Pete for this recording because I was thing to the amazing interview you did with Ann Hyatt about how she nearly killed Jeff Bezos. So, I mean, you know, I'm learning so much from NFX. So thank you everything that you're doing. Thank you for saying that. And the fact that you're a long term friend of the great Pete Flint, my partner, is just incredible. We love that guy.
And anybody in the family, we're just happy to have here. So You know, one of the things that you say let's just jump into it. You say we are living in the first exponential age. Let's talk about that. Can we define that? What period of time we talk to you about?
Yeah. You know, I think we're talking about a period of time that starts with, you know, roughly the development of the internet the end of the 1960s and the development of the, Intel 4004 processor, in 1971 against the backdrop of the economic ideas of Milton Friedman. And as we know with exponential curves, they start slow and they get very fast at some Flint, and the question is where does that kink in the curve happen?
And I think the way the the place at which the kink in the curve happens society really broadly is some point between 2011 2015. So just before 2011, say, go back to 2008, The world's largest companies were all industrial age companies like Exxon And General Motors And General Electric, and by 2016, the biggest companies in the world are all exponential companies. It's Google, or Alphabet and Apple and Facebook and Amazon and that true in China as well.
And in that period of time, you start to see the smartphone become absolutely prevalent. And in some of the other technologies that I that I look at, they become much, much more affordable. So renewable power from solar and wind generation starts to really, really compete with fossil fuels by about 2015 2000 and 16.
So I think we have this sort of 40 year running period where things are building and people in the tech industry, people like you and other people in Silicon Valley Genzhen have understood the potential of these technologies, but the moment we can say we're really reorganizing society around then, I think, is some point between 2011 2000 and seen. Got it. And, you know, this exponentialness, I mean, it's been building. Right?
I mean, we had the printing press, and then we've had you know, mass production. We've had signs that things have been accelerating for a long time. It might be that we were, Morgan last 100 years, last 100 years at the sort of low part of that exponential Currier. And now it's really trending up. That exponential acceleration is typically hard for people to understand. Governments, for instance, don't work exponentially. They work linearly. People's minds work linearly. Absolutely.
Mean, you only have to look at my pension fund to realize that even I only work linearly because I started way too late putting money into it. And I think the thing that's really distinct now is that when I talk about an exponential technology, I think about one that improves on a price performance basis by more than 10% per year for many, many decades.
And the one we're most familiar with, your listeners, and I will be Moore's Law, which when you annualize Moore's Law, it looks at like a 41% improvement in performance for cost every single year, and it's been running for 50 years. It's that relationship has existed.
And in the other exponential technologies we see, for example, in battery storage for renewables or in solar power generation, an 18 to 20 percent annual improvement in field of genomics and genome sequencing, we see an annualized improvement that is far, far, faster than 41% compounded. Right.
And that is really distinct to what we saw with the diesel engine or electricity where these things at the turn of the 20th century were proving at 1 to 3 percent per annum and only did so for a few years, really. And the the thing is that the question to ask yourself is what actually happens? What does this level of improvement means? It means that the price declines really, really rapidly.
And an activity that was only the kind of thing that perhaps a nation state could contend with become something that we can all do, you know, at home in our bedrooms or in our living rooms just over the course of a few tens of years. And that creates incredible opportunity and incredible change. Yeah. And people have a tough time visualizing this. Right? They have a tough time thinking in exponential.
Do you have any stories or any ways of getting people's eyes to dilate that you have at dinner parties that you could share with us. They're like, oh, I suddenly get it because if we could get more early stage founders to think exponentially, then they would be in a to probably do better. Yeah. I have a personal investing experience. I will tell, and then I will sort of give my anecdote, which I love about this.
The investing experience is that about 15 years ago, I was looking at a company called Powerset founded by a guy called Barney Beller who's based in the Bay Area. And Powerset was doing deep structure sentence analysis. Like natural language processing, and it needed tons and tons of processing power. And I was looking at his financial model, and I said, Bonnie, this is kind of expensive And he just on the phone, it was pre Zoom days. He said, well, der Moore's law.
And his point being that, well, yes, it's expensive today, but it won't be in 3 4 years, and that really sort of sat with me. But at the dinner party, you know, the story that I tell is, you know, I live in Northwest London, and we're not far from the great Wembley stadium, the way football stadium or the soccer stadium.
And there's a really, really lovely way of visualizing this, which is that if you go to Wembley Stadium and you have a terrible Pete, your, you know, is tens of meters up in the bleachers. And you're looking down at the pitch. And this being the the United Kingdom, it's bound to rain. And you see a drop of rain land in the middle of the pitch and a minute later, 2 drops of rain land. And a minute after that, 4 drops of rain land.
And you realize that what you actually have going on is exponential rain. So by the 4th minute, you're going to see 16 drops of rain. And the question is, you're forty meters above the ground at level 3, how soon should you get moving to avoid being drenched? And you can put this question out Pete. And, you know, 8 drops of rain, what is that? That's a nothing.
And the answer is that you should really start moving 17 minutes after the first rain drop lands because it'll take you about 30 minutes to get out of Wendy Stadium because of this doubling by the 47th minute, rain will be dropping at a 141,000,000,000 drops per minute. Which is about 600,000,000 liters of water. The trouble is by the 48th minute, you're at a 1,000,000,000 liters of water. And by the time you get the car, 5,000,000,000 tons of water will be falling from the sky every minute.
So if you're gonna have exponential rain, definitely an umbrella will not suffice, you know, stay at home and stay well away. And it's so hard for us to understand how quickly these things turn. You know, I think there entrepreneurs who get it, but the average person struggles. It looks like nothing at first. And then before you know it, it's crazy and out of control. And and when aren't you describe the exponential rain story, people say, but rain doesn't work like that. And it's true.
Rain doesn't work like that, but many systems in the exponential James. Many technologies in the exponential age do work exactly like that. And these founders need to think that way, then they need to convince their teammates to think that way and believe in the idea and what's about to happen. And then they need to often convince investors. So having ways and hooks of explaining how quickly something's gonna change is really important.
So coming up with stories like this rain and Wembley Stadium is very helpful. Do you have any others? Yeah. Well, I think there's an important mechanism that we need to think about Pete. And it's something that I look at with a seed investing I do as well, which is why does this process of exponentiality emerge in some areas of business, but not in others. Right? So we know chips have got much cheaper. We know disk drive storage has got much cheaper. I'm showing my age.
We don't use disk drives anymore, but memory storage has cheaper. Right? And we know that genome sequencing has got cheaper, but nuclear, large scale nuclear reactors haven't got cheaper. And Boeing's airplanes haven't got cheaper. So what is it about the technologies that actually get cheaper, that makes them get cheaper, and how can you choose those particular ones? And I think that that is a really important essential part of the analysis.
And, obviously, lots of academics have done work in this space, but I identify, you know, 3 key drivers to that. The first is the idea of learning by doing. The second is the idea of standardization and combination. And the third is something that's slightly out of founders control, which is the idea of networks that act as accelerators and catalysts. And those three things are indicators that you use when you're looking at your own investing strategy.
And, you know, the founders are investing their time. You're investing your money. So analysis should be similar in terms of where to put your energy or where to put your money. It should be similar. So let's look at the learning aspect. So we're familiar with Moore's law by and large. Like, Moore's law was articulated 1965 by one of the founders of Flint.
And he had observed that every couple of years, roughly, the number of transistors you could fit on a sort of the same area of silicone was doubling, and that would make those chips affect the James cost.
And Moore's law was a description that ended up being a social fact that all of the players in the Silicon chip manufacturing business from the, you know, the photo lithographers to the people making the chemicals, to the people making the lasers conspired over decades to make work, but Moore's law is not a strongly predictive law. It's a descriptive one, and there's a better way of understand how technologies get cheaper.
And and that goes back to an observation made by someone looking at how aircraft were made. So Theodore Right in 1936 was looking at how people made James, and he realized that for every doubling of production, The unit cost of an airplane declined by about 15%. And that wasn't an economy of scale effect. It wasn't that we could buy the materials cheaper as we were making more.
It was that engineers being engineers had figured out optimizations, and anyone who's worked with developers knows that that's what developers tried to do. Right? We they tried to find out how to do something a bit quicker, use a a little less resource. And that learning by doing is ultimately what drives the price decline in technologies. And it turns out that if you apply rights law to Silicon Chips, it's more predictive than Moore's law.
And if you rights law to a lot of other things, like even wind turbines as big as they are, it's really useful and predictive. So one of the things that I try to look for is If there's a technology, whether it is in cellular agriculture or direct air capture, is the way that the team is delivering this particular solution, does it lend itself to really, really good learning effects? Because if it does, then I can see them getting a cost advantage over the competitor. Got it.
You know, do you have a model for understanding how the technology is evolving? I mean, this one you're mentioning, this right rule, this 15% a year sort of thing. Is that your way of looking at these things? And have you identified certain sectors or technologies which are and are not behaving according to that law? Well, I mean, other people have done a lot of work on the sectors that are doing that.
And, you know, I'll rely on those, but there are some drivers of the things that make rights law work. And it's not necessarily 15%. It can be far faster than that. Mhmm. One driver is a sort of second of my rationales is this idea of combinations and modularity. If you have systems that are quite modular that scale through modularity, you are more likely to benefit from learning effects.
Because if you imagine you're a founder and you're thinking about some particular technology, and if scaling the technology involves literally making the single units you have designed much, much Beller. You have to go through a whole set of new learning about how you scale that up.
But if you have something that's modular and you get to a 100 x scale by taking a 100 of your units and then figuring out how they coordinate, you actually get the volume effect that you see in the rights law predict, you know, at the cost of coordinating, right, because you've now got a distributed system, but you walk down that learning curve quicker than the person who's trying to scale a monolith. So that's the sort of thing that I would look at when I look at a solution.
And I say, well, does this actually work? Does this then lend self to a kind of process of exponentiality that we can live off. And then sometimes there are second order effects. I mean, what's happening? I'm hesitant talking about this because Gigi, of course, your partner such an expert in this space, and then he will no doubt correct me, to you after the recording.
But if you look at what's happened in genomics and up declining price sequencing in human genome, there are a number of different aspects at play. One part of them is actually just the fact that a lot of that relies on computer storage and databases and processing, which are going down their own decelerating price curves sorry, accelerating price curves. And then the other is we've actually started to get better at the electrochemistry in different ways.
So sometimes when you look at a particular technology that you unpick it, you realize there's not just a single clock speed that is forcing its price to decline. There are a number of different things, and sometimes they're coming from other technology domains. So that's part of the lens that I would use when I'm trying to on these things. I mean, modularity in that sense, I think, is a good reasonably good heuristic to use. Got it.
And it seems like if we look at an industry and the declining prices we see or increasing efficiencies. It's becoming so consistent on an annual basis in part because of the network of people working on it so that this group of people might fail to make any progress for a year or 2, but this group will. And so as an industry or as a sector of technology, you see these pretty consistent Currier. Is that about right? Yeah. I think it is.
I mean, it's the beauty of the internet, and we have to go back to our, you know, early readings of the internet, the late eighties, in the early nineties, when people were talking about it as collective intelligence. I think that that is one of the significant drivers. Right? We have shortened the distance from idea theory to implementation that feedback loop, and we have shortened the feedback we get about the experiments that don't work and the ones that do work.
You know, I think back to one story that I tell in the book, you're the exponential age in the US and exponential outside of the US is a title of a seventeen year old girl who's never programmed before and she programs a machine vision system to look at cervical smears and predict which ones are abnormal and which ones are normal and gets a sort of performance value, like, you know, an F score that is better than, you know, a human oncologist. And that's incredible.
And the reason she was able to do that was because of the networks of the internet. So she used YouTube videos and she got code from GitHub, thing that I found most remarkable because she went to a high school outside one of the smaller towns in Ireland, not known for breakthrough AI. And she used a technique that had not yet made it into peer reviewed academia.
It was called the generative adversarial Network, and it had only been written by Ian Goodfellow out of the Bay Area, one of the universities, about 3 or 4 years earlier, but we had compressed the time because of the network of the internet that it took for that innovation to get to her and be put into use.
And of course, GitHub meant that there was already a working code for her to make use of And that incredible story is also a key accelerator and the internet keeps showing up because it shares our success and failures from the theory that lives on the pre Flint servers that which have now grown so vastly through to working code on GitHub through to people discussing showing off their implementations on hacker news. I mean, the whole cycle is extremely compressed.
And I think I mean, I generally that that's, quite a good thing, right, because part of the journey of the founder is also to discover what is currently undiscovered. Right. And by searching around on the internet, you can go and find these little bits of information and weave them together into a unique piece of art, a unique piece of technology that then makes a real impact, whereas before the distance between those two nodes was too Morgan it would just take too long. It was so far.
I don't know, James, if you remember the RSA in algorithm. Right? So this was developed in the mid seventies, and it had to go through the traditional academic you know, publishing roots and then was, you know, IP protected and really didn't become very commonplace for 20 to 25 years. And that was the amount of time it took for ideas to go through from brilliant academics through to, having a positive impact in the world. And today, we can absolutely shorten that.
Now it's it's not just the fact that GitHub exists and, you know, pre Flint servers like archive exists to explore things and we have forums that work effectively. I mean, of course, it's also about technology transfer out of universities and about venture capital firms and incubators but that information dimension is really, I think, an important one.
Yeah. But the overall math of the network that we now have just supports the incubator supports the VCs, supports the academics in ways that they weren't before. Absolutely, Tas. Yeah. Yeah. And then to a certain extent, maybe we should all be a lot less egotistical because it's not really us. It's us operating on this massive mathematical movement up into the right that we're all just part of, and we should be glad to be here. I mean, I think back to Kevin Kelly's, what does technology want?
Right. Right. I mean, it's sort of happening Beller it's you or somebody Beller, it's gonna happen. Yeah. I think that's absolutely right. And I was privileged to hear Len Kleinrot speak. Pete is one of the original texts of the internet. He ran 1 of the 4 INP notes, Zack, in 1969, and, you know, in any kind of traditional history, kind of great men of history. Len would have, you know, been up there with a Marvel bust.
And when you hear him speak, he sort of says, well, I wanna be clear that these ideas were around. And if it hadn't been me, it would have been someone else. Right? This was going to happen. Right? Think thinkers, academics, the industry was looking for this to happen, and it was going to happen anyway.
I think it's a really, you know, humble approach from a man who's had a fantastic and phenomenal impact on welfare around the world, but somehow when you mix That incentive with the kind of commercial gains, you can start to construct that sense of hero worship, right, that we wouldn't have had a global social network if Mark's haven't created this that we wouldn't had, you know, peer to peer Beller of Pez dispensers if Piero media are in Jessica or hadn't got together for eBay.
It's just not true. It's not The math is playing out. I have a similar story with the great Philip Rosedale who founded 2nd life about 20 years before its time. And I was on the board, and we were having a lot problems. There was probably 13 things that were about to kill the company at the same time, and he just didn't sweat. He looked at me and he just kinda put his fingers together. And he said, it'll be interesting to see what happens.
And he was sanguine in the face of it because his perspective was that years of second life already were there under the sand, and he was simply brushing off the sand. And then letting the gear turn. And I thought that was so brilliant. That is brilliant. And it's beautiful because I think it tackles one of the things that I try to express in the book, which is that technology emerges as part of the interplay between kind of societal needs, what technologies have been built before.
I mean, the academic Morgan talks beautifully about the sort of evolutionary process of technology. And what I love about working with founders is that founders are people who somehow bridge that. They bridge a technology that isn't quite ready with, some needs in the Morgan, either by consumers or businesses that aren't well expressed or even expressable Right? It's not like it's a market failure. It's like, we didn't even know we need this thing.
And they commit to figure it out, to in Philip Rosdale's words, like, try to get all the dust off the gears until this machine starts to work. It's like they're uncovering something rather than necessarily building it for the first time because it's going to happen. Yeah. Is there a Morgan framework that you think founders or all of us engaged in developing technologies should be attaching to the technology we're creating? Yeah. It's a really good question.
I think we have to one of the starting points is this recognition that technology evolves with with society. I think the media and the storytellers need people to anchor on. And so they tend to anchor on personalities. And there are incredible personalities and there is a lot of resilience and creativity that comes through the tech industry. But I also believe what you say, which is these things are going to happen anyway.
So the idea that, you know, you're part of a process that is happening rather than, you know, a great man of history, I think, is a really important one to to grasp and to grapple with I also think that the recent history of the technology industry, that period from the seventies through to, you know, roughly about now took place against the backdrop of a really, really particular type of politics.
And that politics was initially the idea that Milton Friedman talks about that the the purpose of a corporation is only to make profits for its shareholders as long as it stays within the rules game.
And in the US and then the UK, we went into this mode where we stripped out a lot of very heavy and onerous regulations and we tack called James Unions, and we essentially put the entrepreneur and the business person front and center, and that transform into this idea that the whole of the world should look like and we got this idea of globalization and the absence of trade tariffs and and so on. And we ignored a lot of other signals that were going on at the time.
Some of those signals were environmental. I mean, that that I pin to the start of the exponential age also pins to the start of the environmental movement, right? 19 68 to 19 sort of 7172.
And I think that we develop technology industry against the backdrop of this economic and political framework, which had a moral sense to it, and we're now at a different point where it point where we have this very challenging climate situation we need to tackle, we also have a recognition that Neo liberal consensus that helped get us here and sped us getting us here isn't functioning according to its design, right?
The idea of trickle down economics largely has been agreed that it doesn't really work. And I think founders being people who construct the future world that we all live in then need to be a little bit more aware of the creations that they are fostering and stewarding into immunomass and widespread use. They might need to be aware of the social contract that they are implicitly part of their users or their the people who are putting labor on their platforms or their employees. You know?
Yeah. I think they absolutely need to have that awareness. I'm not sure it necessarily prevents us from building great companies. I don't think it prevents us from creating amazing outcomes. I don't think it stops great products coming to market, but I think that what it can do is it can tackle some of the sort of negative ramifications that will emerge. And I think that's where we state.
Yeah. Because, I mean, traditionally, even for 100 years, we've thought of entrepreneurs as rushing headlong towards shareholder value, and then the government steps in to make things okay. But The fact is that in the past, it might be that the technologies and the approaches that entrepreneurs are using were more Flint, like the government is linear still today.
But now it's an unfair because these profit seeking exponential companies, which I invest in, which I foster, which I'm here trying to teach them how to build those things. But The government is still linear and their ability, whether it's the FAA with drones or whether it's the SCC with crypto or whether it's, you know, the FDA with drugs, is still linear while everything else going on around them is now suddenly exponential.
And this is creating some of the hot points, right, between, you know, are they gonna roll the guns for crypto? How did it take us a year to bring out a vaccine for COVID when we had developed the COVID vaccine in, like, 2 days. The hot points that we're seeing in society now tend to be the clash between the linear process of government trying to make things right and the exponential processes of these entrepreneurs, how do you see this resolving? I call that the exponential gap. Right?
And I say, you know, as you you rightly point out, it shows up all over the place.
And, you know, I think it's if you imagine two lines, the exponential line racing ahead and the linear line below of pootling along quite slowly, I think it's too much of an ask to say that we will stop the speed of the acceleration because that process of acceleration really emerges in a very decentralized way of lots of people expressing needs and lots of people trying to, you know, figure them What we can do is we can raise the line above and we can get
it to be much more flexible, much more resilient. And Part of this is really tactical. It's about how do you get people who understand this stuff back into public service. And I think, you know, getting entrepreneurs, working regulators, and and so on can be helpful. But partly, I think the argument is more that we need a new set of principles that replace the simple idea of, you know, shareholder value and shareholder maximization.
And the benefit of principles is that We can just decide to adopt. They're not like laws of physics. They are about social consensus. They're about people buying into this idea that we need to do more. To take care of more shareholders other than starkled. Yeah. One of the ideas that I play around with is the idea of collectivity or commons. You know, when I fell in love with the internet, back in 1991, it was this absolutely space of weirdness and purity. Right?
All the protocols were just available as sees on some FTP server and, it was kind of self governing and co designed and, you know, reached its absolute zenith in that that idea with a John Perry Barlow's declaration of the independence of cyberspace in the year 2000. But it was unencumbered. It was a kind of free space, and it wasn't government run, nor was it private? It was something Beller.
You had the government doing its thing through DARPA and the NSF, but, and you had private companies, but largely the internet was a 3rd space. What economists call a commons. And I think we've benefited a lot in the tech industry from the commons, tens of 1,000,000,000,000 of dollars of value. We also, if we're not in the tech industry, use it all the time because that's kind of what the Wikipedia is.
And so I think there's this value around commons and collective based thinking that is really, really Morgan.
And we sort of play with the pandemic So the initial sequence of the, what was then called 2019 Encore, but we now call Sal Koff 2, the initial sequence of the Vireon was put on Genbank, which is a National Institutes of Health website where they just, like, a GitHub for gene sequences, and it was announced on virological, which is like a low traffic version of hacker news for virus scientists.
And Then many of the papers that tackled the disease, its progression, its epidemiology, its public health impacts have been publicly available through Pete servers like med archive and others. And I think we've seen that you can use a commons for common benefit. You know, if you're the Moderna Shareholders you've still done pretty well out of it.
So I think that this idea of mutuality, connectivity, commons based thinking can be a really foundational support for entrepreneurship and even profit making. Mhmm. And it has already been already proven to do that. Yeah. It's been proven to do it. And, you know, it's gonna be a challenge for the government not to wanna to shut it down and control it as the number of people involved grows to everyone, which it already has.
But when you were talking about it 2000, there was only, what, 100,000,000 people on the whole internet it wasn't everybody. And so it was Currier for the government to be hands off, and now it's less easy. Now it's less easy. And I think the question then is How do they choose to make intervention? So at a level below this high level idea of, like, commons, collectivity, and mutuality, which I think is completely consistent with entrepreneurship and profit making as well.
And, you know, I think back to all of the open source software companies that have gone public, like, you know, Red Hat and, you know, search, which came out of an elastic and came out of a an open source search engine. We know those things work together, but then I think that there are tactical interventions that can be made to create more of a dynamic economy, which I think ultimately benefits founders and investors.
You know, I think a lot of plays into your area, right, into the area of marketplaces and platforms and the way in which they achieved dominant market share and and power that is expressed both economically and in other ways. Mhmm. And you were mentioning that you think that maybe government needs to become more flexible, more understanding of these technologies. How is that gonna happen? Well, they're gonna read my book is good. Good. Thank you for putting out the book then.
Yeah. I really hope they will read it because what I tried to do was explain not the symptoms. I talk about the symptoms, of course, later on in the book, but actually tried to explain the underlying processes by which exponential technologies emerge by which we got to the exponential age and how those processes start to unpick our previous institutional thinking. And they also make the point that institutions naturally respond very, very slowly.
So I'm hoping to give them guidance to look at the right Pete. Right? Where are the problems really showing up and how do we get it course. So I think that's one issue. I think the second thing they need to do is they have to be able to tool up. They have to be able to get the Flint that they need. And I think that we are slowly starting to see that that better and better people are starting to move into perhaps not politics, but certainly into the regulatory environment.
So for example, I've seen this in the UK regulators and you look at someone like Flint Khan who you know, understands in quite, challenging terms the nature of Amazon's business and she's now, you know, running the FTC. So they have to be do that. And I think another thing that they need to do is take a lesson from the startup book, which is a lesson of agility, and you know, regulators have often thought of being as being really, really inflexible.
And I was on the board of a regulator in the UK a decade ago, 15 years ago, and I can tell you the way they think about things now is very different to how they think about it, then they think about this absolute balance between allowing a company to innovate and experiment and be successful without putting too many onerous requirements on them.
And what we've started to see in many parts of the world is the idea of sandboxes So regulators like the Monetary Authority of Singapore and, you know, in the UK, the Financial Services, a Financial Conduct Authority the FCA, create Sandboxes where they say to Flint startups, you can play around, and we are going to not worry so much about your regulatory requirements in return for you Beller us what you're going to be doing. And that way, we can figure out how the regulations need to change.
So I think that we are seeing starting to see some regulation three innovation, you know, of course, it needs to go faster. Amazing. Well, that's very, very hopeful news.
I mean, that the people in those Pete are being replaced with folks who think that way or that the people in those spots are learning to think that way because unless they're part of the exponential thinking or the sort of flexible network approach, you know, these hierarchical things that we've been left with from the past just aren't serving us very well. They're not, and it's even more important today because technology matters in a way that it didn't, in 1990.
If all hell had broken loose and Adobe had gone out of business, in 1991, you know, some shareholders would have lost some money and some employees would have had a bad experience and life would have continued. That's just not case now, if something goes wrong in Netflix or in Tesla or in Apple, you know, it's like alderaan being hit by the death You know, there'll be a million voices screaming in the wilderness. Right. Crying out as their stock prices drop and their net worth goes to half.
But also consumers not being able to conduct their everyday lives, right, because their car won't drive and, you know, they can't make book an appointment with a dentist. Just so it's the infrastructure of society. Yeah. You know, like Ford used to be. So all of this stuff is happening faster. What's the cost to us?
Does it feel more good or more bad for the average person Well, the surveys say there's a game called family feud, I think, in the US, right, where they go off and survey a hundred people, right, and and the survey says. And, well, that's what we have. Right? The survey say that people are getting a bit disenchanted with tech, particularly in the west. I haven't seen 2021 data coming out of China and Asia more broadly, but trust in the big technology companies has started to go down.
I'm Edelman, the PR company does this annual survey, and it's pretty marked. But the other cost is that if some of these things play out and I talk about this, for example, in the chapter about workers' employment and labor where you see this incredible bifurcation emerging between highly talented knowledge workers who are treated better and better and paid more and more. And on the other hand, you know, worsening pay conditions and contractual terms for other workers.
What that tends to do is that tends to create what we might consider political risk right, or pitchfork risk. And it doesn't create a society that is running well and running without aggravation, and that in of itself can be dangerous. It can be dangerous for the and for the direction of the society. So, you know, I think that there is a communication problem here as well in terms of how technologists need to talk about what they do.
There's a participation problem about who is actually participating in that dialogue. You know, I don't mean who is Facebook or your DoorDash hiring for their management team. I mean, that's a typical kind of diversity question that companies need to handle. But what I mean is how broadly are people in society who are increasingly impacted by these technologies able to participate in the discussion about them.
And so, you know, one of the things that I think we need to figure out is how do we level people up more broadly outside of the tech industry to be able to ask the right questions and therefore be able to kind of participate and express themselves as consumers or citizens more effectively. Mhmm. And so who do you think ends up winning in the future because look, the internet makes everything transparent.
I can see the best real estate broker is in my town, and I can just go to her and have her sell my house. Why would I trust the greatest financial event of my life to somebody who's not the Beller. And the power law of real estate agents in my town just gets worse and worse and the top 9% make 90 percent of the revenue and everybody else goes home hungry. There are power laws being established all over the place during this exponential age And so who ends up winning and who ends up losing here?
I love your observation about that, and we can't avoid the power law. Unfortunately, I mean, I think it's a really, really difficult 1. And once you get markets that are bigger and bigger, you'll see that power law, accentuate and exacerbate.
And I think that what you end up having to do is once you recognize as a particular nation that power laws are operating and that this is what's gonna happen with economic and political rewards, you then have to figure out what is culturally acceptable in your country. And that culturally acceptable solution might be higher James. It might be higher inheritance taxes. It might be some form of universal basic income.
It might be the fact that you may mutualize part of a business because it gets too big and too successful. But I think it does require a little bit of intervention because otherwise, I think you get into this arena of really, really deep political risk. I mean, highly unequal countries, whether it's a Brazil or a Russia, are really difficult places to live, and they're not well governed. And, you know, unless the dice land for you with the 3 sixes, you don't have the same level of opportunity.
So I think that's one of the things that we have to think about as we step in. But I think there's another dynamic that quite interesting, which is that if we do a good job in this idea of cooperative collective spaces, And one of the areas I think about is health data. Right?
So if health data can be widely shared and aggregated, but not the way that we do with our social data on Facebook where essentially Facebook owns it all and monetizes it as a monopolist and makes incredible profits from But if our health data can be shared in a way that is sympathetic to our own privacy needs, but we still get the collective aggregate benefit on top of which new products and services can be developed, then we can all start to benefit and actually the baseline starts to rise.
And we've started to see experiments like this happen, in the UK, for example, it's quite, you know, administratively quite clunky, but it's quite interesting that all of the chest X rays and CT scans of people with COVID that have been taken are now being aggregated in a semicomons repository where any researcher can come in and take a look at them and then build an algorithm or do research off it.
And that's a really distinct to the model that says, here is, you know, covidview.com that is a startup that went through an accelerator and their special sources they've managed to get a hold of all of this imaging day and they're holding it for themselves. Right?
And so I think what we've established in the UK is that we will build through this many really interesting businesses in machine vision and making predictions of Pete a COVID just from x rays, but we will do so without necessarily creating a monopolist that has managed to hoard all that information. Mhmm. And is this effort in the UK, for instance, done by the government, or is it done by somebody else?
Well, this one happens to be done by the national health which is, you know, sort of civil service state run bureaucracy, but you can imagine that things like that could emerge elsewhere in industry. And in fact, in, you know, in the there is an example from, you know, the days of the Westwood expansion when in the 18 Pete 19th century, steelmakers couldn't produce steel fast enough for the amount of rail track that needed to be laid.
So they got together and started to share their Pete since than their know how, and it was called a process of collective invention. And so although this sort of ultimately ended up with these grand family tunes being made and the sort of the gilded age and the arrival of US Steel, ultimately, it actually started with entrepreneurs coming together and saying, let's share this know how because we're stronger together. Mhmm. Got it. And the internet theoretically should support that more and more.
Yeah. I mean, I think it could support it much, much more in ways that we haven't yet. I mean, I think one of the things that we talked about is this idea that these large companies now are starting to look a lot like infrastructure. And one of the, perhaps, more contentious ideas that I put out there is this idea that if you've got a company that is behaving that has through its own efforts, created a kind of infrastructure and essential facility that has a network effect that pervades society.
It's a utility. That's what it is. Right? And we treat utilities across the world differently to the way we treat things that are not utilities, and they have higher obligations on them and they are often they have their prices regulated and their profits related. And I can think that there is some future mechanism, and I go into some detail actually in the book about what kind of mechanisms we could use there. And the question really is, does that actually harm the journey of the entrepreneur?
And, you know, my argument would be that doesn't that you can still make out standing outsized generation breaking returns well before you get to that stage. Right? So your journey can continue. As long as the people in charge and the government of identifying when you've crossed the line into utility, don't get more and more adventurous and move further further down the stack, but which will happen but we can deal with that when it comes.
One of the things you mentioned is that, you know, we've got these power laws being developed everywhere. We can't deny them. They're happening. One of the things that I find so hopeful about crypto is simply that we can attach crypto to everything. Right? And so I remember back in the 90s, there was a group within my venture firm where I was working called battery ventures. It was, oh, you guys are gonna work on the internet deals. Every deal is now an internet deal.
Internet's been built into everything. There is no such group inside of a venture firm. And I think in 10 years, there won't be a crypto group. Crypto will be in everything.
And there's an opportunity for these power laws, you were talking about politics giving outsized returns to certain people and then economic, outsized economic returns, we could perhaps more, you know, distribute the economic returns to people by using these crypto mechanisms in the various products and platforms that exist out there's utilities. Is that a world that you see coming?
I mean, I think it's a really fascinating possibility that we could go off and, you know, around lots of these mini markets that could be created, the arrival of tokenization that allows me to participate and enjoy some of the economic rewards could really really change things. And if we think about of travel, you know, the very first ventures that went out, which would have been a few 100 years ago, and they would have been seafaring expeditions, the typical sailor got nothing but scurvy.
And as we moved forward, you then started to say, well, the provider of capital and the the owner will take all the rewards and the employees will be paid better. And then we started to introduce the idea of stock ownership and stock and plans and Silicon Valley was well at the forefront of this, and we distributed the wealth from the company's wider than they ever had been before.
And so there is this progression that we see historically and I'm quite excited about crypto as being one of the technologies over the 10 to 15 years that could help us tackle part of that. And I think it's really important because a number of the technologies are they're modular and they're so decentralized. And there are these new frontiers of governance that we haven't had to think about that will start to emerge.
And crypto, of course, not only does it share the economic benefits, or also can, if it's built correctly, share the governance benefits, right, that the power to decide where this thing goes. Yeah. Sure. And last question. What books or what authors would you other than the exponential age your book and which is coming out? What book do you send the entrepreneurs to? I have a, what, an interesting reading list that I share with people.
There's this Chinese science fiction author called Lu Chitin, who has this amazing trilogy called the 3 body problem, but the book I actually send entrepreneurs to is called The Wandering which is a collection of short stories, and they're two short stories in particular that I like.
1 is about there are some scientists who predict a catastrophe, and so they force people to take some real hardships on And the people eventually rebel against the scientists because the scientists can't communicate well enough and the data isn't there.
They kill the scientists and then lo and behold, they avoid the Pete there's a second short story, which I think takes Silicon Valley to its extremist, which has a vignette of someone called the last capitalist, and I won't spoil the story there, but it's quite interesting. So I think literature Chin is pretty relevant. There are a couple of other books that I give people.
One is a book called a bit more technical technological revolutions and financial capital by carlotta Pete, and carlotta essentially connects the cycles of technological innovation with waves of capital formation and entrepreneurship, and it's an absolutely brilliant book. She wrote it the turn of the millennium, I always keep a copy very, very close to me in my study. I mean, even now I've reached out and I've touched it because it's always there.
And the third one that I've recently started to recommend to entrepreneurs is a book called Donut Economics by Kate Rayworth and Kate is a brilliant communicator, and she essentially has come up with this argument for an idea about reframing economics in a way where we live within planetary and social and resource boundaries, and she has a sort of toolkit for how to do that and how to operate and lots of companies that have gone through the way of the
B Corps have taken Kate's work on board, but so have lots of cities and even countries. So I think those are three books that help founders think a little bit about their journey. And, but as you can see, James, they're they're quite big picture books, because I try founders are more than I trust me to figure out the detail and the actual sort of firefights in hand to hand that you do on a daily basis.
What I want to do is help them with a framework that helps them then think about who they are and where they're going. Got it. What is the advice you find yourself giving most to the founders when you're talking one on 1? Do less. You know, you're doing a lot, you're doing really Beller. Just let's figure out what you really think you really need to do. And I just spend time asking questions around that. I mean, I don't know they know.
And one of my questions, I try to guide them to the things that matter most for them and hopefully leave them thinking, okay. Well, actually, if I just do these things, that's gonna get me to the next milestone. It's a more word fewer arrow type of approach. Well, it has just been a pleasure to spend some time with you, Azim. I really appreciate you coming on the pod. James, I love this conversation. I love your podcast.
And I'm really hoping that you will take up my invitation to come on my show as well. I would love to. I would love to. Thank you. Thanks very much. At end effects, we believe creating something of true significance starts with seeing others do not. Send this episode to any friends that may need these insights and frameworks, and feel free to rate and review us on your favorite podcast platform. Thanks for listening to the spotcast.