Exonomics | Amin Toufani | Exponential Finance

[Music] [Music] the average person in the u.s. makes just above $3,000 a month these guys made over 300 million dollars a month for every month that they work together they work together for five years and they ended up selling anybody know which app whatsapp exactly to Facebook for 19 billion dollars anybody familiar with this brand care to admit publicly Ashley Madison it's an online dating website for married people after their marriage somebody's writing it down Ashley madison.com but hold on let me tell you more so there was a big hack and the database was leaked to the public and to this day we know that four men have committed suicide because their names were implicated in the database looking at the same database we also know that the ratio of active male to female users on the website was 20 million for 1520 million men for 1,500 women scratching it out not a good website would those men have committed suicide if they had known probably not probably not this gentleman was travelling on our favorite airline United and he received his guitar broken so he wrote in he called he asked for repairs he asked for a new guitar he didn't get anything so he wrote a song about it and posted it on YouTube you know three days following posting the video on YouTube it would viral and the market cap of United Airlines dropped by 150 million dollars in this latest episode when the doctor was dragged the market cap dropped by 450 million dollars the point here is that our assumptions about how economies function no longer seem to hold true entirely because of exponential technology so we need to revisit some of these assumptions and think about how economies function how businesses function and what our individual strategies should be I call this exponential economics or economics and this is going to be a journey where we talk about the seven pillars of economics we're going to talk about people property production price power policy and prosperity I like to point out that this is a journey that connects people to prosperity and that is very much the spirit of what's Reedus cussing here let's begin with people and how technology is empowering us to do things that we could have never done before on our own you're about to watch an accident please don't be alarmed nobody died but have a look and we'll talk about what happened just before the accident what is avocados and this is okay so this is a dashcam of a Tesla that is automatically breaking I'm going to replay the video this time we're going to pause when the first beep first alarm is sounding does this look like an accident to you it doesn't this is entirely 1.7 seconds before the actual accident happens the car is modeling what's happening to cars ahead and is saying no way they're going to be able to stop and it's preventing that accident this is technological empowerment and technological protection now a little bit of bad news there seems to be strong evidence of unequal exposure to the benefits of technology if you look at net productivity over the last 40 years you see the steady rise but if you look at real hourly compensation is quite flat and this gap which is quite problematic it means that people are unequally exposed to the benefits of Technology this gap is in fact correlated with the Gini coefficient which is a measure of inequality in a society my nightmare scenario is that this could potentially lead to species bifurcation this is where some of humanity starts evolving very differently than the rest of us and early access to some of these technologies could change the course of human evolution so are we headed towards exponential inequality potentially this is something that we need to pay attention to this chart shows average household income and you see the top 1% they're seeing that exponential growth the rest of the 99% not so much not so much but at the same time I mentioned that technology is empowering all of us and people seem to be doing what companies used to do and companies seem to be doing what governments used to do we'll talk about what governments are doing this is Stewart Butterfield who founded slack and with a group of 12 code this is the active user growth that they saw over the course of a year and a half in fact this is not it have a look so this is truly a hyper exponential growth curve this was never possible with a small group of people there's a dip for the holidays and then it picks back up it's really amazing in terms of technological empowerment we're also seeing the rise of nano economics what I call nano economics is really the fact that technology is allowing us to measure incremental economic value creation better than ever before we have macro economics micro economics and now we're seeing nano economics which means you can hire people on these platforms and many other for less than five dollars the smallest units of work have shrunk and this is great it means that more people can behave entrepreneurially and be exposed to the upside and also the downside of the market as a side note how do you sue somebody for five dollars you're unhappy with their work you paid five dollars I did this exercise with a group of lawyers immediately they started brainstorming the point is not to sue the point is to rate we're seeing the rise of the long term memory of the market which is very hard to recover from if the market remembers you negatively all these technologies also have a downside have a look at this video and we'll discuss today today today hi I would like to talk about talk about change change change because change is what we are looking for and we have changed absolutely everything mine you're changing the way people people bball paper communicate we've been changing the world is connected connected connected we changed the way people people people people are sharing stuff we know incredible awesome amazing and credible devices but honestly the biggest change change change of Olives is we make people give us all their data data data why because we told them our amazing products are free but in fact all this will cause cost them the most important thing their data a journey has just started the good news is that today we know everything about with everybody you'll be using all this information data to make a lots of incredible lot of money money and it should be shared across government I was talking they're going to like that [Applause] it's fascinating to watch Europe and the u.s. respond very differently to this question we're awakening to the reality of how much data is being gathered about us and Europe has taken the legislative approach whereas in the u.s. I fully anticipate class-action lawsuits but the question of who owns what is a good segue to talk about property I like to start this segment with a question for you what do these three things have in common they sit idle more than 90% of the time but the question is what can you do with that 90% and the answer is of course the sharing economy these are some of the platforms where you can share different things and if you look at the common denominator across all these platforms they're enabling people and companies to share things services and time that they have in excess and that they're not utilizing so I encourage you to reflect on your own organization and ask yourself what are distinct services in time that is underutilized and how can you share those by the way if you go through that exercise and you find that there is no platform to do that build it immediately that is an immediate market opportunity because chances are other companies pretty soon are going to be looking for that opportunity to share things services and time with number one if the world's largest retailer does not have any inventory what is it that the world's most disruptive inserts your business stub need not have what are the things that we hold to be core to our business that in light of exponential change might no longer be as necessary or even relevant I did this exercise with a group of bankers it took us about an hour but the group emerged that money no longer seems to be the core assets for banking you need to have the infrastructure for the flow of money but not so much money itself quit number two if cars are going to be driving themselves and we can over then whatever we need to what could this potentially do to real-estate prices the moment people don't mind living five or ten minutes further away because their time spent in the car is productive they can read they can rest they can watch that movie then the supply of viable real estate goes up demand is the same and we could see downward pressure on price how many people have tried a virtual reality headset wonderful I think by the end of next year all of you will have highly recommended but virtualization is giving rise to an entirely parallel economy with entirely new asset classes but first let me tell you about the home theater of the future this is a device that you mount when you're wearing the goggles and it adds the fourth dimension which is the g-force the feeling that you get when you're actually moving in these virtual environments so as the car is turning you begin to sense what that feels like if you have the space and the money this is the way to invest it I mentioned the parallel economy that is emerging and most of us are not paying attention to this this is planet Calypso which is a virtual planet that was created in an online game the planets a couple of years ago was sold for more than six million dollars sounds like a very stupid investment however considered this more than a hundred percent ROI was realized in less than a year are we paying attention to this are these new types of asset classes on our radar so in summary property dynamics ownership seems to be going down virtualization is on the rise decentralization is on the rise asset values seem to be compressing and production cost seemed to be going down if all of these are true then we're headed towards a very serious oversupply scenario and depending on which industry you're in chances are you already feel the pressure from oversupply which begs the question how do you create value in this new world I have three recommendations these three recommendations pivot around technological empowerment and the need to hyper customize number one is I encourage you to reflect on any products or service and ask yourself whether the virtual digital connected version of it exists if not go build it that's an immediate business opportunity we also talked about uber ization of many different industries the fact that people want what they want exactly when they want it just-in-time delivery as a key motive value creation and hyper customization this is my favorite by the way this guy's 3d printed version looks better than himself the reality is that might be fast approaching how many people have played with origami excellent is a Japanese art form paper folding it has very elegant mathematics a company in New York use the same mathematics to 3d print a dress and this is fascinating because not only can you decide what the dress looks like you can also add an extra dimension you can decide how it moves something that we were never able to do before a great example of hyper customization another way that value is being created is through what I call swarm economics the fact that a large group of people can come together accomplish something and then disperse and go on to other projects on the web the best example of this is crowdfunding Eric majakowski created the Pebble watch which is the granddaddy of the Apple watch the Samsung watch he was ahead of all those guys on kickstarter.com he preached sold 10 million dollars of his prototype over the course of five weeks that was not enough that was 2012 we came back in 2015 with a second version and he raised twenty million dollars in funding on Kickstarter over the course of five weeks but that is not the record the record for crowdfunding is with star citizen it's also an online game that hasn't shipped yet but to stay they have raised 137 million dollars here's what they do they actually have raised this money and they ship small modules of the game and the community gives feedback they're playing the game and it is a great model of co-creation they're developing the whole game together truly inspiring here's another way that value is being created and this is a bit counterintuitive I'm going to play a song for you and then fold the question [Music] me [Music] we all right who wrote that song and a I did a machine wrote that song I couldn't tell so Sony has a research and development lab where they fed 13,000 songs to an AI they made the poor thing listen to 13,000 songs and by the end of it the AI could generate music and in fact this year they're set to release an entire album that the Machine has created so this is a mode of value creation that bypasses humanity all together now the question is are we prepared for that moving on to the next P of the 7ps this is the world space most famous graph supply-demand the intersection gives us what price not anymore not anymore thanks to the fact that the marginal cost of supply the cost of creating one more unit of product or service has gone down some would argue all the way to zero you can price discriminate and the entire area under the supply curve is beginning to be serviceable that means you should dynamically price your product or service and these are some of the platforms on the web that started experimenting with this for the first time a while back they got into hot water because nobody wants to pay a different price but today very few online retailers do not price discriminate the most important message here is to know your customer but what do you do when you don't have perfect information about their purchasing propensity there are a few approaches you can take with dynamic pricing direct auctions of course worth reverse auctions also work this is where you start at a high price point and pick the price down or start at a low price point and pick the price up combined with limited supply you can help the market clear itself at the right price point for each purchaser but my favorite is the following imagine walking up to a shelf in a retail store and the prices are updated how annoying would that be in fact there are startups that are working on affluence detection based on what you're wearing and how you're walking so watch out take some classes let's talk about power and how in this new world power is changing hand this day we know that Skype has disrupted the telco industry out of around thirty seven billion dollars how much of that the disguised capture tiny fraction only two billion so thirty five billion is consumer surplus and right around here I tell folks good luck disrupting yourself because it involves leaving a lot of money potentially on the table but if you're late and you're reacting to change as opposed to being proactive about it you might no longer be in the market so it's a dilemma and we will unpack this over the next two days but let's talk about different types of businesses that you could be in and how much market power you will command the first type of business is a Content business a Content business is very tough you don't have a lot of market power because the marginal cost of copying content has gone to zero you don't pay anything to copy that file in fact H out of ten oscar-nominated movies this year were available online and full high-definition before they were released so it's a tough business it doesn't mean you cannot make money it simply means you don't have a lot of market power further up the power chain you have a product or service this is where most of us play in you have more power than the content business but less power than a platform I define a platform as a value bridge you're connecting two or multiple sides of the market you're allowing for value to flow you don't need to deliver that value directly you're the bridge and if you manage to intertwine and combine interlocked multiple platforms you end up with an ecosystem and there are very few ecosystems in the world the best example of course Google and Facebook are trying but the best example is WeChat out of China encourage you to look into that so let's look at the sp500 and the entries and exits from the index of 500 largest companies in the US since 2002 on the right hand side you see the exits and very few of these companies are platforms most of them are products or service or content businesses on the left you have the entries and you'll notice many of them are platforms you have each raid Netflix Google Amazon and the list goes on so the question is how do you move from a product or service model to a platform model and this is counterintuitive but the headline version is you need to think about the lives of your competitors and find ways to make their lives easier in the process of doing that you forego the profitability of your product or service but you establish yourself as the de facto standard and the platform and then you'll enjoy more market power over the long term there's an example of this Google released tensorflow which is their AI library they spent millions of millions of dollars developing this they release it to the public they said here's our tool go use it they're trying to become the AI platform of the future and in the process they're following the product of service revenue that they might have had here's another example the founder of Tesla released their intellectual property to the public they said go ahead use this and what he had to say about it is very informative we believe that Tesla other companies making electric cars and the world would all benefit from a common rapidly evolving technology platform so platform wars are approaching and you need to be ready if the marginal cost of supply is going down and the marginal cost of demand is also going down thanks to the internet you're addressable market has never been as addressable as it is today if these two are true that we're going to see a rise in market power velocity the fact that power is changing hands faster than ever before and companies are rising to the billion-dollar mark faster than ever before and falling from multi-billion dollar valuations more quickly than we have ever seen so in light of all this exponential change the question is what should your reaction be a lot of companies over index on IQ they believe intelligence is the answer but the recent research has shown that beyond the first two years on the job IQ actually does not predict success let me say that again IQ does not seem to be predicting success so what are we missing I've invented the concept of eight - for adaptability quotient if the world is changing exponentially fast then your ability to respond to that change quickly as the strongest predictor of your success and in our research we're finding very encouraging trends we bring people into the lab to run the experiment of measuring their hu what do you think happens when you tell somebody you're about to measure their 8q they start behaving more adaptively which is very annoying we're trying to measure the thing but it is great news for Humanity unlike IQ EQ seems to be highly coachable that means you don't need to fire anybody because they have low EQ in your assessment you need to coach them and nurture them and here's another insight from our research so far every organization out there is looking for stability we're noticing that the strongest predictor of aq and the end to the extent to which you will enjoy stability is your ability to unlearn your past success is getting in the way of your future success the ability to unlearn is emerging as a core competency that companies need to focus on so I encourage you to reflect on what you might need to unlearn as you hear about different technologies and different trends over the course of the conference alright let's talk about policy a very important topic let's do an exercise let's say you are the CEO of the country's largest shampoo manufacturer you have an R&D budget you divide your R&D team into two groups and you give them six months to come back to you with a new product team a comes back with the same formula but they've made it more watery meaning as people pour shampoo on their head more of it is going to drip down and people need to buy more shampoo it's classic technique and it works to a certain extent Team B comes back with a new product with a new formula that happens to cure cancer okay stay with me you're having dinner with the finance minister of the country which product does she want you to launch specifically what is the impact on the GDP type a increases GDP whereas type B decreases it I call this the growth fallacy in fact that most of our policymakers are tunnel-visioned on GDP as the best measure of the economic well-being of a society type B destroys an entire supply chain and that is not a bad thing by very definition disruptive technologies do that and we need to find models that encourage that as opposed to score them negatively here's another challenge in the policy world these days the D word these stands for deflation there is currently around 13 trillion dollars of negative yielding government bonds in circulation what do you get when you print a lot of money and you push interest rates to the negative territory you should get inflation but a lot of countries are not seeing what is considered healthy inflation my contention is exponential technologies these disruptive technologies are by definition making things cheaper faster and more accessible so there is massive technological deflationary forces in play on the other hand we're printing a lot of money trying to cause inflation and the two seem to be cancelling each other out in fact I believe we're going to look back at this period in human history and see it as a demarcation between the inflationary era and the deflationary era and deflation is good deflation is the mother of innovation if you're trying to solve cancer why don't you love to go to bed wake up and every morning everything has become cheaper you'll have a longer run where you can make and place more bets so we need to rephrase and reconsider our approach here but let's go a little deeper into one policy area self-driving cars we know that self-driving cars are going to dramatically reduce accidents today they seem to be on average around two orders of magnitude safer than the average driver we also know that we are headed towards technological unemployment for a lot of types of drivers and finally this is already shown that with uber and lyft and car sharing people are going to buy fewer cars let's put some numbers on these trends unemployed drivers that's going to be roughly about one percent of the workforce people not buying many as many cars that's going to be probably around two percent of GDP and this part is very counterintuitive and sad in most modern countries 3% of the GDP comes from the death and destruction of car accidents the moment you take care of that what is left I met three prime ministers last year and I can tell you none of them are ready for this world and the implications for our societies more specifically technological unemployment is something we need to respond to very proactively and a famous figure Martin Luther King had a solution he wrote a book about this he said I am now convinced that the simplest solution to poverty is to abolish it directly by and what do you know what he said universal basic income he wrote a book about this one year before he was assassinated in fact there are people who believe this is the reason why he was assassinated now how many people believe that folks are going to become lazier when you're given a minimum basic income let's see a show of hands that seems to be the major concern and it's a valid concern so there happen recent studies around 20 of them that implemented ubi at a local geography and looked at the results here's the amazing outcome entrepreneurship shoots up typically 3x three-fold increase in entrepreneurship and this makes sense think about Maslow's hierarchy of needs when people are covered for their basic needs their risk appetite goes up and they have a higher propensity to start businesses and that is a good thing all right let me attempt to summarize around 10,000 years of economic history in one sentence in fact it's not even a full sentence I think it's about adding certainty to an uncertain world every economic system in human history rewards those who create certainty in an uncertain world and I think there's no better measure of certainty in our lives than this for the first time in human history extreme poverty levels have fallen below 20% this is very encouraging and directionally correct it's a little too slow for my tastes but we do seem to be seeing an accelerating trend and on the note of adding certainty to our lives it's coin and blockchain has a major role to play in my opinion you're going to hear a lot about these bitcoins of course and these other cryptocurrencies they're both currencies and commodities you can invest in them they have a public ledger deflationary over time your purchasing power goes up as opposed to fiat currencies where your purchasing power goes down over time because of inflation very volatile around 18 times more volatile than gold seven times more volatile than the US dollar and highly secure you do not need to trust the middleman but more important than cryptocurrencies themselves is to blockchain technology behind it I don't to give you an example a very concrete example of what you can do with smart contracts think about a typical contract that has has been in use throughout human history in order to have a contract with somebody you need to trust them and you need to have an enforcement mechanism if things go wrong blockchain technology is showing us a path to where you bypass both enforcement is automatic and you do not need to trust your counterparty let me give you a very concrete example you're driving on the highway maybe you're not driving on the highway your car is driving itself but you're in a rush and the speed lane the fast lane is quite busy what if your car offered some bitcoins the car in the front to clear the lane and if and when the cars clear the lane the contract is settled automatically enforcement is automatic and you do not need to trust the cars in the front we'll see more examples like this throughout the conference which brings me to a notes on prosperity and our well-being before we will watch this video let me encourage you invite you rather to go through and exercise with me and I apologize this is a bit of a morbid exercise think about people in this room think about people around you right now and ask yourself how will these people die statistically we have an answer to that more than half of us in this room are going to die from some form of cardiovascular disease heart failure have a look at this video there's some surgical imagery is of a pig's heart [Music] you'll know [Music] this is the global military spend this is the budget for this project you can make 20 million attempts at solving a problem that is going to kill more than half of us let me tell you no innovation in human history has taken twenty million attempts we usually figure it out sooner so why is this not happening what can we do to make sure it happens alright at this point I'd like to do a quick check-in how many people feel like this right now let's see show of hands great how many people feel this way a little bit of that tension is good as healthy and I think it's a healthy response to what you're about to see I encourage you to embrace that tension don't find the easy solution towards positivity or negativity no pressure no diamonds on that note I'm often asked how do you operationalize these insights this is a tool that I use in my own fund it's called Eon exponential opportunity navigator let me walk you through some of the strategies that we use and to make sure everybody is awake what color is this one white thank you what color is this one black who has read the book great how do you recommend that the author argues that we are very bad at estimating extreme events and their likelihood but what color is this one aha this is called the black next one and its sole purpose in existence is for me to make a point let me make that point let's think about things that happen to us at a very simple model normal distribution half of the things that happen to us are positive the other half are negative basic model we know thanks to technology we've added more certainty to our lives and more than half of the things that are happening to us are good less than half or hopefully negative here's the Black Swan distribution talib argues that the tails are fatter than we realize here is a black next one distribution let me clear the graph for you you remember these two examples we started with my belief is that technology is amplifying the extreme negatives and the extreme positives of our lives we're beginning to head towards a world where the average outcome is no longer the most common outcome the tails are actually pointing up which means we need to build a new type of organization that is prepared for the trimodal model of our outcomes you need to have an organization that is resilient enough to withstand negative outcomes but also an organization that can capture the extreme upsides that were beginning to see so I encourage you to reflect on what this means for your world and what your reaction to it should be if you do manage to survive disruption and to potentially disrupt yourself there are a few things we can say about the future of your business you'll be managing fewer people but more information data-driven decision-making you'll be offering fewer products and services and most likely you will be a platform certainly utilizing many platforms you'll have less stability but still manage to generate more revenue and higher impact what about your growth thesis I encourage you to over index on aq have a chief adaptability officer you don't need to call them that but have somebody who is reflecting on what needs to be unlearned within the organization exponential enterprises you'll hear about this throughout the conference and also I encourage you to reflect on the whole spectrum of exponential technologies and do not consider any of them as being out of scope for you we're seeing a lot of value chain crossovers Google a search company is building an electric car pardon me a self-driving car Facebook is looking into insurance and financial services so broaden the scope of what you consider to be relevant to your business and ultimately if you forget everything that I've said I encourage you to remember this triangle I call it the golden triangle people property and information want to move freely but a lot of our business models are predicated on the friction of that movement if you reflect on any disruption story out there it is typically about somebody who has come up with a way for people property or information to move more freely so what can you do to enable that freer movement that's your future business opportunity all right as an economist it is very uncool for me to end on a positive note I have to warn you about something the truth is I'm very optimistic about this future but there's one area that I worry about and that is a crisis of imagination the fact that our reach exceeds our imagination but we're not thinking big enough the biggest risk is not thinking big enough and this is the perspective that is perhaps more salient during an event like this your challenge is to keep this perspective over time a week from now a month from now two years from now to challenge yourself to think bigger and when it comes to perspectives my dad always says that in life perspective is easy to find but hard to keep so we all need reminders I got a reminder from my phone a few months ago I was typing the word impossible when my phone Auto corrected it to I'm possible not that note thank you so much [Applause] [Music]

Channel: Singularity University Summits

Views: 34,319

Rating: 4.9015384 out of 5

Keywords: Singularity, Singularity University, NYC, Finance, Exponential, Exponential Finance, Exonomics, Conference, Technology, Economies, Cryptocurrencies, Business, Disruptive, Financial, Markets, Risk Management, Amin Toufani

Id: jwKztTXdlkQ

Length: 40min 10sec (2410 seconds)

Published: Fri Jul 21 2017

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