Lately, I’ve been stewing over increased complexity being generated by companies around their organization approaches. While this activity varies by stage, in many cases the leadership team expands to a large (greater than six) number of people, there become two executive teams (the C-Team and the E-Team), the CEO gets sucked into endless distractions and working “in the company” rather than “on the company”, and I could go on with a 1,000 word rant on the challenges and complexity.
Recently, I saw a structure rolled out by a CEO at a company I’m an investor in that made me pause because of its simplicity and brilliance. I didn’t like the labels the CEO used, but I loved the intellectual approach.
It coincidentally had three categories. Three is my favorite number and has been since I was three years old. While I can carry more than three things around in my head at a time, when there are only three attached to a specific thing I find that it’s second (third?) nature to me and requires no additional processing power to remember and organize my thoughts around three things.
If you recall my post on Three Magic Numbers, this will immediately make sense to you. Or if you’ve ever heard my story about struggling with clinical OCD in my 20s where the number three was one of my key anchor points, you’ll have empathy for my relationship with the number three.
I abstracted the structure I saw from the CEO recently into what I’m currently calling “The Three Machines.” While this can apply to any size company, it’s particularly relevant to a company that is in the market with its first product, or a company that is now scaling rapidly with a set of products.
The three machines are: (1) the Product machine, (2) the Customer machine, and (3) the Company machine.
If you step back and think about all of the activities of a company in the phases I described above, they fit in one of these three machines. However, most leadership teams don’t mirror this. Instead, in a lot of cases, there is a traditional leadership team structure that has a CEO and a bunch of VPs (VP Engineering, VP Product, VP Finance, VP H&R, VP Sales, VP Marketing, VP Customer Care, VP Operations, …) which are often title inflated with CxO titles (CTO, CFO, Chief People Office, CMO, COO, CRO, …) or artificial demarcations between VPs and SVPs (and EVPs.)
Regardless of title structure, the CEO has a span of control that gets wider as the company scales, often with more people being added into the hierarchy at the VP or CxO level. As this continues, and CxOs are added, you end up with the C-team and the E-Team (which includes the non-CxOs). The focus of each person is on a specific functional area (finance, marketing, sales) and traditionally scoped.
In a few cases, big organizational experiments ensue, often after the organization dynamics hit a wall. Holacracy, which is still bouncing around, was a relatively recent trendy one. I disliked holacracy from the first time I heard about it and resisted even experimenting with is, preferring to watch what happened when others tried it. In 2013, Nick Wingfield wrote an often-citied article in the NY Times titled Microsoft Overhauls, the Apple Way that is liked to a now famous graphic of different org charts for Amazon, Google, Facebook, Microsoft, Oracle, and Apple.
I’ve wrestled with hundreds of conversations around this in the past few years. I never have felt satisfied, or even particularly comfortable, until I landed on the three machines recently.
My current hypothesis is that if you are a CEO, focus your organization on the three machines. Product, Customer, and Company. Then, have a direct report own one of them. If you have a sub-scale leadership team (e.g. you are three founders and four other employees), as CEO you can own one, but not more than one. As you get bigger (probably greater than 20 employees), hopefully how you have enough leadership to have one person own each, but recognize that if someone is being ineffective as a leader of one of the machines, you will have to replace them in that role (either by firing them or re-assigning them).
Let’s assume you have enough of a leadership team that you have a key leader who can own each one. Organize the company leadership around each machine. The titles don’t matter, but the hierarchy does. Naturally, you will have a product or engineering leader for Product, you will have a sales, marketing, or operations leader for Customer, and you will have a finance or admin leader for Company.
But, this does not mean that your VP Engineering is your VP Product and Engineering. That rarely works – you want to separate these two functions. But your VP Product, or your VP Engineering, or your CTO could be responsible for the Product machine, with the other VP functions reporting to her. You probably also don’t want to merge your VP Sales and VP Marketing and VP Customer Care function into a VP of Sales, Marketing, and Customer Care. But, if you have a Chief Revenue Officer, you may have done this. While that can work, recognize that it works if the CRO realizes he is in charge of the entire Customer machine.
I’m still in the first few weeks of really building a theory around this so there’s a lot of sloppy thinking on my part so far. For example, I don’t think this necessarily means that the CEO only has three direct reports. But it might. Or, in some cases, at certain scales it might. I haven’t focused on what it means in terms of the overall hierarchy. I haven’t really thought about how multiple different product lines come into play. I don’t know if there needs to be dramatic retitling at the top.
I do, however, have several companies that are very clearly focused on these three machines. Yet, they are at different scale points and have different formal hierarchies. Over the next few months, I’m going to use this lens across every company I’m an investor in as I poke and prod at how it might, can, and should work. And, determine if it’s a valid hypothesis.
Feedback of any type is welcome.
If you are a movie producer and you want to actually make an AI movie that helps people really understand one of the paths we could find ourselves going down in the next decade, read vN: The First Machine Dynasty by Madeline Ashby.
I’ve read a lot of sci-fi in the past few years that involves AI. William Hertling is my favorite writer in this domain right now (Ramez Naam is an extremely close second) although his newest book – Kill Process (which is about to be released) is a departure from AI for him (even though it’s not AI it’s amazing, so you should read it also).
I can’t remember who recommended Madeline Ashby and vN to me but I’ve been enjoying it on Audible over the past month while I’ve been running. I finished it today and had the “yup – this was great” reaction.
It’s an extremely uncomfortable book. I’ve been pondering the massive challenge we are going to have as a mixed society (non-augmented humans, augmented humans, and machines) for a while and this is the first book that I’ve read that feels like it could take place today. Ashby wrote this book in 2012 before the phrase AI got trendy again and I love that she refers to the machines as vNs (named after Von Neumann, with a delicious twist on the idea of a version number.)
I found the human / vN (organic / synthetic) sex dynamic to be overwhelming at times but a critically important underpinning of one of the major threads of the book. The mixed human / vN relationships, including those involved parenting vN children, had similar qualities to some of what I’ve read around racially mixed, religiously mixed, and same-sex parents.
I’ve hypothesized that the greatest human rights issue our species will face in the next 30 years is what it actually means to be human, and whether that means you should be treated differently, which traces back to Asimov’s three laws of robotics. Ashley’s concept of a Fail Safe, and the failure of the Fail Safe is a key part of this as it marks the moment when human control over the machines’ behavior fails. This happens through a variety of methods, including reprogramming, iterating (self-replication), and absorption of code through consuming other synthetic material (e.g. vN body parts, or even the entire vN.)
And then it starts to get complicated.
I’m going for a two hour run this morning so I’ll definitely get into the sequel, iD: The Second Machine Dynasty.
I’m at Startup Iceland today. I like Iceland – this is the second time I’ve been here. It’s the closest place on earth I’ve been to Alaska, which I love dearly. And it’s fun to see and hang out with my friend Bala Kamallakharan. As a super bonus, Om Malik – who I adore – is also here.
Om and I did a fireside chat with Bala. At the end, Bala asked about the future and what we were uncomfortable with. Neither of us is uncomfortable. Instead, we are both optimistic and intrigued with what is going on. Om talked about his view is that this is the most exciting time to be alive and went on a riff about what is in front of us.
I started with my premise – that the machines have already taken over and are just waiting very patiently for us to catch up. They are happy to let us do a lot of work for them, including feeding them with data, building homes for them, and connecting them together. In the mean time, they are biding their time, doing their thing, along side us.
If you wind the clock forward 50 years, our current state will be incomprehensible to that future human. The pace of technological change at all levels is accelerating at a pace we can’t fathom. Some people are pessimistic and now concerned about the notion of a real advanced intelligence. I’m optimistic and accepting of it, not fighting the inevitability of the path we are on or being in denial about our ability as a society to control things.
This is the rant I ended up on. Human structures change slowly. It’s unevenly distributed based on geography, culture, and political philosophy. Our legal system lags far behind what is actually happening, and as a result we are in the middle of a bunch of debates around technology, including things around privacy, net neutrality, data storage, and surveillance. Our existing approach as a species to dealing with the challenges are painful to watch from the future.
It’s fun to ponder how quickly things are changing along with how badly certain parts of society wants to keep them from changing, hanging on to the “way things are” or even the “way things were.” Don’t ever forget the sound of inevitability.
As we roll into the weekend, and I start another digital sabbath, I’ve got the question “what really matters about being human” rolling through my mind.
I spent the afternoon at the Silicon Flatirons conference SciFi and Entrepreneurship – Is Resistance Futile? I thought it was phenomenal and remarkably thought provoking. I came back to my office to find Dane and Eugene playing TitanFall on my 75″ screen. In a few minutes I’m heading out to dinner with my parents, Amy, and John Underkoffler of Oblong who was in town for the conference. The juxtaposition of another intense week rolling into the weekend and a day off the grid intrigues me.
The first panel was a fireside chat between me and William Hertling. William is one of my favorite sci-fi writers who I think has mastered the art of near term science fiction. If you haven’t read any of his three books, I encourage you to head over to William’s website or Amazon and grab them now.
At the end of our fireside chat, we were asked a question. I heard the question as about mortality so I went on a long space jam about how I’ve been struggling with my own mortality for the past 18 months since having a near fatal bike accident (one inch and it would have been lights out.) Up to that point I felt like I had come to terms with my own mortality. I would often say that I believed that when the lights go out, they go out, and it’s all over. And I’m ok with it.
But last fall I realized I wasn’t. And during my depression at the beginning of 2013 I thought often about mortality, how I thought about it, whether I was bullshitting myself for the previous 25 years about being ok with it, and what really mattered about being alive, and being human.
I then handed things over to William. He proceeded to answer the question that had been asked, which was about morality, not mortality.
When he finished and I’d realized what had just happened, I emitted a gigantic belly laugh. And then for the next couple of hours I kept applying the lens of “what really matters” to the discussion about science fiction, entrepreneurship, and the human race.
From the meditation I’ve been doing, I’m definitely exploring “listening to my thoughts” rather than obsessing over them. I’m recognizing that the narrative I’m creating in my brain is just my narrative and doesn’t necessarily have any real meaning, or importance, at all. 150 years from now, I don’t believe any of it will matter. And then, suddenly, the great John Galt quote “It’s not that I don’t suffer, but that I know the unimportance of suffering” comes to mind.
Sometime during the fireside chat, the statement popped out that “I believe the human species dramatically overvalues its importance to the universe.” I think this is going to be a radical point of conflict with the evolution of machines over the next 50 years. At this stage, it’s a part of what gives our lives meaning. There are so many complicated things that happen on a daily basis that create stress, conflict, controversy, and emotional responses. All of them theoretically generate meaning, but when I “listen to my thoughts” I recognize the unimportance of them.
And then I start searching for what really matters. Both to me, and about being human.
See you Sunday.
My partner Jason Mendelson sent me a five minute video from Wired that shows how a Telsa Model S is built. I watched from my condo in downtown Boulder as the sun was coming up and thought some of the images were as beautiful a dance as I’ve ever seen. The factory has 160 robots and 3000 humans and it’s just remarkable to watch the machines do their thing.
As I watched a few of the robots near the end, I thought about the level of software that is required for them to do what they do. And it blew my mind. And then I thought about the interplay between the humans and machines. The humans built and programmed the machines which work side by side with the humans building machines that transport humans.
Things are accelerating fast. The way we think about machines, humans, and the way the interact with each other is going to be radically different in 20 years.
Orbotix just released a new version of the Sphero firmware. This is a fundamental part of our thesis around “software wrapped in plastic” – we love investing in physical products that have a huge, and ever improving, software layer. The first version of the Sphero hardware just got a brain transplant and the guys at Orbotix do a brilliant job of showing what the difference is.
Even if you aren’t into Sphero, this is a video worthwhile watching to understand what we mean as investors when we talk about software wrapped in plastic (like our investments in Fitbit, Sifteo, and Modular Robotics.)
When I look at my little friend Sphero, I feel a connection to him that is special. It’s like my Fitbit – it feels like an extension of me. I have a physical connection with the Fitbit (it’s an organ that tracks and displays data I produce). I have an emotional connection with Sphero (it’s a friend I love to have around and play with.) The cross-over between human and machine is tangible with each of these products, and we are only at the very beginning of the arc with them.
I love this stuff. If you are working on a product that is software wrapped in plastic, tell me how to get my hands on it.
Marc Andreessen recently wrote a long article in the WSJ which he asserted that “Software Is Eating The World.” I enjoyed reading it, but I don’t think it goes far enough.
I believe the machines have already taken over and resistance is futile. Regardless of your view of the idea of the singularity, we are now in a new phase of what has been referred to in different ways, but most commonly as the “information revolution.” I’ve never liked that phrase, but I presume it’s widely used because of the parallels to the shift from an agriculture-based society to the industrial-based society commonly called the “industrial revolution.”
At the Defrag Conference I gave a keynote on this topic. For those of you who were there, please feel free to weigh in on whether the keynote was great, sucked, if you agreed, disagreed, were confused, mystified, offended, amused, or anything else that humans are capable of having as stimuli-response reactions.
I believe the phase we are currently in began in the early 1990’s with the invention of the World Wide Web and subsequent emergence of the commercial Internet. Those of us who were involved in creating and funding technology companies in the mid-to-late 1990’s had incredibly high hopes for where computers, the Web, and the Internet would lead. By 2002, we were wallowing around in the rubble of the dotcom bust, salvaging what we could while putting energy into new ideas and businesses that emerged with a vengence around 2005 and the idea of Web 2.0.
What we didn’t realize (or at least I didn’t realize) was that virtually all of the ideas from the late 1990’s about what would happen to traditional industries that the Internet would distrupt would actually happen, just a decade later. If you read Marc’s article carefully, you see the seeds of the current destruction of many traditional businesses in the pre-dotcom bubble efforts. It just took a while, and one more cycle for the traditional companies to relax and say “hah – once again we survived ‘technology'”, for them to be decimated.
Now, look forward twenty years. I believe that the notion of a biologically-enhanced computer, or a computer-enhanced human, will be commonplace. Today, it’s still an uncomfortable idea that lives mostly in university and government research labs and science fiction books and movies. But just let your brain take the leap that your iPhone is essentially making you a computer-enhanced human. Or even just a web browser and a Google search on your iPad. Sure – it’s not directly connected into your gray matter, but that’s just an issue of some work on the science side.
Extrapolating from how it’s working today and overlaying it with the innovation curve that we are on is mindblowing, if you let it be.
I expect this will be my intellectual obsession in 2012. I’m giving my Resistance is Futile talk at Fidelity in January to a bunch of execs. At some point I’ll record it and put it up on the web (assuming SOPA / PIPA doesn’t pass) but I’m happy to consider giving it to any group that is interested if it’s convenient for me – just email me.
I’m a big believer that the machines have already taken over. I recently gave a talk at the Defrag Conference titled “Resistance is Futile” where I made the point that we don’t know whether – in the future – we will be machine-enhanced humans or biologically-enhanced machines, but that it doesn’t matter. In either case, I’m optimistic about the future and think the machines will be our friends.
In today’s New York Times, Randall Stross has a great article titled Turn On the Server. It’s Cold Inside. In it he talks about a paper The Data Furnace: Heating Up with Cloud Computing. The abstract follows:
“In this paper, we argue that servers can be sent to homes and ofﬁce buildings and used as a primary heat source. We call this approach the Data Furnace or DF. Data Furances have three advantages over traditional data centers: 1) a smaller carbon footprint 2) reduced total cost of ownership per server 3) closer proximity to the users. From the home owner’s perspective, a DF is equivalent to a typical heating system: a metal cabinet is shipped to the home and added to the ductwork or hot water pipes. From a technical perspective, DFs create new opportunities for both lower cost and improved quality of service, if cloud computing applications can exploit the differences in the cost structure and resource proﬁle between Data Furances and conventional data centers.”
As data centers become a more significant part of our universe, I think this is a fantastic idea. In the Matrix, humans were used to power the machines. That’s a classical dystopian view of the machine / human relationship. How about turning it around and having the machines warm the humans.
Think about it. Would you be game to have a data center in your basement if heating for your house was free as a result?