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Moonshot!

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MOONSHOT!

I actually think every individual is now an entrepreneur, whether they recognize it or not.

—Reid Hoffman, cofounder and executive chairman of LinkedIn

In November 1982, few people outside of the Bay Area had ever heard of Silicon Valley, so I was very curious about what my day ahead would be like. At the time, as president of Pepsi-Cola Company, I had been invited to Apple, which then had just $500 million in revenues and was looking for a CEO. As I drove from my hotel, Rickey's Hyatt House in Palo Alto, to Cupertino, I looked around expecting to see some glass-walled, modern buildings peppering the landscape similar to the ones I had become accustomed to seeing on Route 128 surrounding Boston. But this was Silicon Valley, and I was soon to discover that this foreign (to me) world beat to a very different drum. Driving up to Bandley Drive in Cupertino, I thought I must be at the wrong address for Apple Computers' headquarters: It was just five small, one- and two-floor, tilt-up-wall-construction buildings tucked into a residential area.

This was the first time that I met Steve Jobs. After an hour with the then Apple CEO, Mike Markkula, Steve joined us, and shortly afterward he and I split off. Steve and I spent the next hour sizing each other up. I was immediately struck by how self-confident and articulate he was, with his sweeping description of how personal computers were going to be the most important educational tool ever in mankind's history. In those days Steve—at twenty-seven—was healthy, strikingly handsome with thick black hair and dark, penetrating eyes. I had arrived in my business casual khaki pants, open-collar blue shirt, and blue blazer. I immediately felt out of place as Steve, along with everyone else I was to meet, wore blue jeans and T-shirts.

Steve took me across Bandley Drive to a one-story building called Bandley II. I couldn't help but notice a black-and-white Jolly Roger pirate flag flapping from a flagpole atop the building. Once inside, I followed Steve to a small lab with an engineer's bench jammed with lots of test equipment. My eyes quickly focused on a bright ten-inch display and, next to it, a slight, young engineer with a beaming smile named Andy Hertzfeld.

Steve suddenly got very serious. "Nobody outside Apple has ever before seen what you are about to see," he said with gravity. "We are creating the world's first personal media computer that is designed to be incredibly easy for nontechnical people to use and it will be affordably priced. This prototype will become the Mac… and it's going to change the world."

On a nearby keyboard, Andy started typing quickly, and suddenly five animated little Pepsi cans danced across the screen. "This is just the beginning of a revolution where people will be able to publish their own content, combining beautiful fonts, graphics, and even animations like this. It's going to be insanely great!" Steve added with a flourish.

When Gutenberg invented the printing press in Mainz, Rhineland, in 1436, it later enabled Aldus in Venice to print books and sell them from town to town. Nothing like that had ever been possible before, and its effect was to open the minds of anyone who could read to provocative ideas. History, science, poetry, and theology suddenly spread across Europe. This Renaissance was the cultural awakening from the Dark Ages and a thousand years of feudal society to a new world-changing era for mankind.

Steve Jobs had created a cover story for my visit in order to explain to the young Mac development team why I was there and why he was showing me, an outsider, Apple's most secret project. Steve had told them that I was the CEO of Pepsi-Cola Company and that I was potentially the first big corporate customer for the Mac. "So, we should impress him…," he directed. At the time, I didn't fully appreciate how technically advanced and challenging it had been just to make those black-and-white Pepsi cans dance on that small ten-inch display.

This moment was my introduction to the creation of a Moonshot. I had first heard the term in 1961 when then President John F. Kennedy uplifted a still-in-shock American public from the Soviet's successful 1957 launch of Sputnik, the first satellite, into space. JFK had eloquently proclaimed that, before that decade was over, we would send a man to the moon and safely bring him back. It was inspiring… it was maybe possible… but it would be incredibly hard.

Years later, on July 20, 1969, I remember standing on the Sheep Meadow in Manhattan's Central Park with 20,000 other people, watching man's first landing on the moon on a huge screen. The crowd was hushed as the lunar vehicle module, the Eagle, made numerous attempts to land. When it finally came to rest and the hatch opened, astronauts Neil Armstrong and Buzz Aldrin descended the ladder. At exactly 4:18 p.m. Eastern time, Neil Armstrong became the first man ever to step onto the surface of the moon, uttering those famous words: "One small step for man, one giant leap for mankind." At this moment, a deafening cheer erupted and everyone in the crowd hugged one another in celebration. This was the granddaddy of all Moonshots, and it was amazing.

The first man to step onto the moon in 1969 never would have been able to make that journey if the U.S. had not paved the way with a "tubes-to-transistor" moment. The telemetry required to navigate the Apollo 11 rocket ship to the moon would never have fit into the spacecraft if lightweight, miniaturized transistors had not been commercially developed and adapted for this purpose. NASA underwrote this critical tubes-to-transistors research, which led to the founding of Intel by Gordon Moore and Bob Noyce, among other significant high-technology firms. I realized only years later that Neil Armstrong's success inspired many students to take up science, math, and engineering because it was now cool. And some of these students later used their technical skills and creativity to launch the personal computer era—a breakthrough I witnessed firsthand with Steve Jobs.

Larry Page is a business leader who is changing the world by using his exceptional talent and Google's success to continue to make creative leaps. Moonshot is now part of the Silicon Valley lexicon, a designation reserved for only the most game-changing disruptive innovations. Steven Levy's book In the Plex talks admiringly about Google and Larry Page's "healthy disrespect for the impossible." Larry Page is indeed leading the way today with amazing Moonshots like driverless cars. No one has been more inspiring about the possibilities of Moonshots than Google with their creation of an annual Silicon Valley event dubbed "Solve for ×." Astro Teller, Google's captain of Moonshots, calls this, "10× thinking that doesn't break the laws of physics about clearly defined problems."[1] He goes on to say that 10× thinking with a low probability of success is a more inspiring and passionate goal than making the bottom line ten percent better with a high probability of success. One of the most talented individuals who worked with me at Apple is Megan Smith, VP of Google Labs' Solve for ×, further illustrating that Google is committing their best people to 10× innovation. Big corporations aren't usually wired to think this way. Google is.

THE PERSONAL COMPUTER MOONSHOT: WOZ, THE GENIUS INVENTOR

Steve Wozniak invented the first really useful personal computer. He is a rare breed, a "disruptive innovator" genius like Thomas Edison. "So, Woz what did you want to be?" I recently asked him when we were sitting around and chatting. "Well, I never really cared about starting a company," he answered, "that was all Steve Jobs' idea. We actually started five companies, but the one that survived was Apple. Before Apple, I was perfectly happy working at Hewlett-Packard and being an engineer, but I wanted to be the best engineer in the entire world. So I had to figure out how to design things with pen and paper and I would design minicomputers because I didn't have any money. But then HP had this wonderful program, where engineers, if they were working on something that interested them, would let them take parts home for free." He said: "I used to do that and build things. So I would build things with one-dollar chips using some hacker approaches that were being built by other people for thousands of dollars. Why? Because I was a natural hacker and I wanted things for myself and I really wanted to build a computer."

What drove Woz to invent the personal computer? I think it was the passion that emerged when this shy but gifted eleven-year-old realized that he was just naturally brilliant at mathematics. He can still solve any kind of math problem in his head. Woz realized that so much of computing is about math: when to load registers, what you load into each register, when you execute commands, all those kinds of things.

Woz would go to the library and look up technical papers on signal processing of various minicomputers being sold back in the early 1970s. From this research, he just kept increasing his domain expertise about computers. In short order, he learned an incredible amount about computers as they existed at that time.

At the same time, he was a hacker, and so he figured out novel ways of hacking, solving problems cheaply that others solved expensively. So that was a different domain. He coupled the hacker's domain with the traditional computer science domain. All self-taught.

When it came to designing the Apple I board, he solved a problem that hadn't been solved before, in a very inexpensive hacker's way. Woz's first computer, the Apple I, was for hobbyists. The second computer he developed, the Apple II, was for the rest of us. Steve Jobs had declared an incredible vision: "Hey, why don't we build a computer that isn't just a kit with a circuit board connected to a TV, but a complete, easy-to-use, all-in-one device?" And guided by Steve's vision, Woz built the Apple II.

Woz recently told me one of my now favorite stories about him. Back in the late '70s, he'd never been to Las Vegas but had always wanted to go there. Apple was taking the Apple II to the Las Vegas CES, Consumer Electronics Show, for the first time. Because Apple had almost no money, only three people were going to make the trip: Mike Markkula, who was cofounder and head of marketing; Apple's CEO at the time, Mike Scott; and Steve Jobs. But Woz wanted to go and made a proposition to the three: "If I can design a floppy disk drive, would I be allowed to go on the trip to Las Vegas with you?" This was like less than a month away. They said, "Yes," because there was no such thing as a floppy disk drive in the market at that time.

Woz told me that he stayed up night after night with no sleep. He worked around the clock for over a week, churning calculations in his head, figuring out ways to hack it and build it. He did get to go to Las Vegas for the first time, and he brought the first floppy disk drive for the Apple II computer. No one in the world had ever seen a floppy disk drive for a personal computer before. There were disk drives for big minis and mainframe computers, but these things cost thousands of dollars. The idea that you could have an affordable floppy disk for a personal computer didn't seem possible then. Up until this point, an Apple II used a tiny tape recorder to archive its programming code. Inspired by the lure of a first trip to Vegas, Woz invented the first floppy disk drive.

Back in the 1970s, other highly talented disruptive innovators like Bill Gates, Steve Jobs, and Larry Ellison also dropped out of college, as Woz had done, to become entrepreneurs. Why? Computer science programs just weren't teaching the new technologies needed to reinvent the computer industry around the microprocessor and the new kinds of software it required.

Many times, my wife, Diane, and I have watched Woz create seemingly impossible math puzzles and then somehow do massive calculations in his head, no paper required, to solve the puzzle. Truly magical moments, and I have no idea how he does it. But his knack paid off big-time. Woz first created the Apple I, a circuit board with chips and DRAM memory. He and Steve Jobs sold it through Paul Terrell's first Byte Shop for $666.66. Later, Woz invented the Apple II, which included a never-before-seen way to display fonts and graphics on a color TV monitor, a feat no one previously thought was possible.

THE DERIVATIVE EFFECTS OF WOZ'S INVENTION

It was Steve Jobs who saw the promise in Woz's computer inventions and came up with the idea to create the Apple II, an all-in-one-box solution that was easy to learn how to use. One didn't have to program the Apple II as you did with the earlier hobbyist computers, you just inserted a software application into it, and it did useful things like create a spreadsheet, write a letter, or store some data you could retrieve later. Steve Jobs designed the Apple II to have a beautiful ABS plastic case with a built-in keyboard. So began the first computer industry Moonshot of a truly personal computer that was affordable for the average person. Steve Jobs was a different kind of genius from Woz. Steve was not an engineer, but a visionary with a noble cause and an instinctive designer's talent for envisioning end-to-end systems. Steve Jobs was a systemic designer who could not only zoom out and connect the dots, but could zoom in and simplify computers in a way that made them both incredibly easy to use and consistently beautiful machines.

Steve Jobs had a genius ability to see the future possibility of other genius inventions and how to turn these inventions into products that would actually change the world. Steve Jobs likened computers to "bicycles for the mind." Give people computer tools, he believed, and let them change the world one person at a time. He saw that his machines had to be really easy to use and inexpensive enough that most people could buy one. Steve sweated every detail. He had the charisma and focused determination to drive the success of first the Apple II and then the Mac.

Bill Gates is also a true genius. He is very technical and is a self-taught computer scientist who is quite different from Steve Jobs and Woz. Bill Gates is an adaptive innovator who saw that the future of personal computing was going to be about software licensing and creating software applications that could be sold on a disk in a box on a retail store shelf. He had the most amazing focus. The combination of these qualities made him the best business competitor I ever knew. Everyone in the industry was gunning for Bill, but he never lost his focus or his optimism. He was relentless in building Microsoft into the overwhelmingly dominant force in software.

Steve Jobs, in the early days when I arrived, was the visionary, but he was inflexible and trusted only his own instincts. He had to make every important decision in the Mac group. So in those days, Steve Jobs was not yet an adaptive innovator like Bill Gates, because Steve Jobs was not pragmatic, as Bill Gates was. Even after he left Apple in 1985 and founded NeXT and acquired a small media animation technology company, PIXAR, from George Lucas, Steve was still unwilling to compromise on anything. NeXT and PIXAR both almost went bankrupt. Despite this, Steve's genius as a "systemic designer" was important to both of these companies' eventually becoming extremely important to the future of Silicon Valley. While NeXT failed as a computer company, Steve Jobs later sold it to Apple for $400 million in 1996, and the NeXT operating system became the Mac operating system (OS). By the mid-1990s, the ever-improving computational performance predicted by Moore's Law made it possible to make computer-generated animated movies, and PIXAR switched from being a computer company into a creative animated film company—later sold to Disney for more than $7 billion.

By the time Steve Jobs returned to Apple, twelve years after leaving in 1985, he had matured as an executive. He was still Steve Jobs the brilliant systemic designer, but he was now also an adaptive innovator. He adapted the then failing Mac into the successful iMac as the easy-to-use portal device for the recently introduced World Wide Web, using the Netscape browser invented by Jim Clark and Marc Andreessen. It was the perfect adaptive-innovator product at exactly the right time, and it also was the perfect systemic designer product. The gumdrop design of the iMac at that time and its bright attractive colors became the wake-up call for high technology that the consumer electronics digital era had begun. The world loved the concept and the iMac design. By then, Steve Jobs' first decision on returning to Apple as CEO was to cancel the disastrous policy of licensing the Mac OS; a decision made after I had left Apple and a policy that almost bankrupted the company. Later, Steve followed up with another product, the iPod, which combined both his end-to-end systems genius and his love for technology and music. The iPod also demonstrated that Steve Jobs had evolved into an adaptive innovator. By 1997, Steve had expanded his domain expertise to include a new domain for him of consumer entertainment. While it seems obvious today that high tech and entertainment are domains that have converged, it wasn't obvious before Steve had his success in the mid-1990s with both PIXAR's animated movies and the iMac, iPod, and iTunes. His multiple-domain expertise combined computing with recorded music in the beautiful, easy-to-use device and end-to-end system of iPod to iTunes. He redefined the recording industry with the iTunes store, which allowed consumers to buy songs individually for ninety-nine cents, rather than buy the entire album. And Silicon Valley was amazed that Steve made the iPod fully compatible with Windows computers—something the Steve Jobs I knew in the 1980s never would have done.

Unquestionably, the iPhone was Steve Jobs' greatest Moonshot ever. It is the perfect example of brilliant adaptive innovation. It again converged expertise in multiple domains: Low-cost, miniaturized consumer electronic components, able to run a long time on a single battery charge, converged with mobile wireless technology. Timing is everything in the high-tech world, and it would have been impossible for the iPhone to do what it does so well until wireless providers like AT&T made the shift from a slower 2G to enhanced-speed 3G, with expanded services like GPS and faster photo and video transfers. The total end-to-end solution was presented in Steve's handsome systems design of the smartphone, coupled with his brilliant concept of the App Store. The iPhone was a masterpiece, and, through it, the smartphone became the world's most indispensable cultural instrument. Google engineer Andy Rubin was an incredibly smart "fast follower" of the iPhone, with the creation of the open source and free Android platform, while Microsoft found itself completely left out! We will talk later in the book about how mobile devices are changing the world. And the revolution all started with Steve Jobs' iPhone!

THE TSUNAMI OF TECHNOLOGY

Today there is a tsunami that involves four exponential technologies converging at such speeds that they are ushering in a second digital age. Peter Diamandis, in his book Abundance, was the first to explain that, in this new digital era, there is no scarcity of resources. In fact, he points out the most important digital technologies are actually growing exponentially.

The first leg of this technology tsunami is cloud computing. Operational only in the last five or six years, it is an idea we already take for granted today. Why exponential? The power of processing has grown exponentially. If we go back to 2008, some estimates were that there were 800 exabytes of data in the world. (An exabyte is 10 to the 18th power.) Here's a simple story I heard that gives you a sense of just how large an exabyte of data is: Imagine you had just a single DVD and you filled it up with as much information as it could possibly hold. Then imagine a 747's passenger cabin filled with DVDs each packed with data. It would take over 15,000 747s filled with such DVDs to just hold a single exabyte of data. By 2020, estimates are there will be 40,000 exabytes of data! Of course, these are really only guesstimates. In parallel, the cost of data storage in the cloud has dropped in the past two years, from about $5 a gigabyte to less than twenty-five cents a gigabyte. HP CEO Meg Whitman recently announced that her company has invented a way to shrink a large cloud data center down into a refrigerator-size box that HP calls "The Machine." IBM announced it would invest $3 billion on R&D for new microprocessor materials like graphene that may further improve data processing performance by orders of magnitude. We are still in the early days of exponential performance possibilities.

The cloud is far more significant than just a big and more affordable back-office computer system. It enables us to do things we couldn't do before. It fundamentally revalues data. Think about this analogy: In the nineteenth-century Industrial Age, flowing rivers were harnessed to power factories. In the twentieth century, the same flowing river water began to power electricity-generating turbines that are distributed by cables anywhere. Electricity is an indispensable resource and we just assume we can always plug into it. Sometime in the future, cloud data processing and storage will become a utility like city water, electricity, or natural gas that one just plugs into as a customer service.

The second leg of this technology tsunami is termed the Internet of Things, which Cisco's CEO, John Chambers, has forecasted will include 40 billion wireless connected devices by the early 2020s. How is this possible when there are only 7 billion people on the planet and there are only 6 billion mobile cellphones? The answer is, we are in a new era of miniaturized sensors that can communicate wirelessly. Not to humans, but machine-to-machine. This will change every industry and will help make customers smarter. For example, imagine a GE jet engine with 500 onboard sensors monitoring and generating wireless data in flight over an ocean, sending automatic reports back to the airline and to maintenance organizations en route, and to GE too. Or a consumer example might be Apple's new health kit, which creates a new wellness vertical domain platform on top of its operating system, which will enable app developers to use data captured from the ten onboard sensors built into the iPhone. And wireless sensors will be used to monitor medical metrics for patients at home in real time.

When I arrived in Silicon Valley over thirty years ago, it was the early days of the microprocessor. Now the age of sensors is just dawning. Sensors are able to sense light, sound, and heat, and measure bodily motion… all kinds of things. Increasingly, data transfer is the machine-to-machine relay of information. Most of these billions of wirelessly connected sensors will invisibly connect machine-to-machine with data stored in the cloud, where the information will be processed in real time with astonishing speed.

Note the chain sequence of Moonshots in recent years: The Moonshot invention of the microprocessor led to the Moonshot creation of the Internet, which led to the World Wide Web, which led to the Moonshot of Google. In each subsequent reality, people became smarter. Now we are in the era of the Internet of Things, where billions of miniature sensors will use machine-learning systems. This time, it's not just people getting smarter, but machines that are getting smarter, too. Ray Kurzweil, now head of Google's engineering lab, has long predicted what he describes as The Singularity, an event some expect to happen around 2040 or 2045, when machines will achieve consciousness and become a new inanimate species that will be smarter than humans. Whether you choose to believe this prediction or not, machine learning that doesn't require human intervention is already happening, and its growth is exponential.

The third leg of this technological tsunami effect is Big Data: aggregations of large data sets, often from multiple sources and made up of structured or unstructured data. That unstructured data might be a consumer's GPS location using satellites, tracking exactly where that consumer is via transmissions from a mobile device. Or, the unstructured data might be social media. It might be video. It might be audio. It might be text. And, the consumer data might include both structured as well as unstructured data—all kinds of different data sources. This data will allow companies to predict what people will want and why they want it.

When I was in Silicon Valley, we were all using calculus and differential equation math to empower knowledge workers with structured data tools like relational databases. The way engineers work with unstructured data today is very different. It's all about making predictions from seemingly unrelated data sources using probability mathematics. As a graduate student, and later as a consumer market researcher, I became very familiar with Bayesian statistics, Markov chain analysis, and Monte Carlo game theory. Novelties only decades ago, these are the very practical tools today. This field of mathematics is popularly known as data science, and it's centered on predictive analytics. It's termed "predictive" because we are only determining the probability of data accuracy combining all kinds of unrelated data sources. Previously, data modeling created simulations of hypothetical events by manipulating the numeric values of just a very small number of variables; then calculating the results. Probability math gives us the ability to simultaneously consider hundreds, even thousands of attributes with new data being updated in real time from hundreds, even thousands, of sensors. Even a decade ago, it would have been impossible to compute so many concurrent calculations in real time. With the efficiency of cloud computing, these operations are now both practical and quite affordable.

There are many examples of very smart people missing the significance of this emerging disruptive technology tool. A piece of recent history underscores this point: Using data science, experts can gain the insights needed to decide on behavior and influence it. In President Obama's 2012 presidential campaign, as reported in the M.I.T. Technology Review, his campaign managers had a tool that Governor Romney's team didn't. Obama's forces had begun using data science in his first presidential campaign in 2008, and they had accumulated a lot of baseline information about his voters. His 2012 team updated the databases. For Obama to be re-elected, he had to overcome a disastrous change in sentiment marked by the 2010 midterm elections. "Two years after Barack Obama's election as president," the Review reported, "Democrats suffered their worst defeat in decades. The congressional majorities that had given Obama his legislative successes, reforming the health insurance and financial markets, were swept away in the midterm elections…"

Months before the election, while measuring the president's popularity with his base, Obama's team discovered an important fact: The president's most loyal supporters were not as enthusiastic about him in 2012 as they were in 2008. But they also discovered that Mitt Romney's conservative base wasn't very enthusiastic about him, either. Experienced marketers know how difficult it is to significantly change a consumer's behavior. The Obama team didn't need to significantly change the minds of Obama supporters; they needed only to nudge them enough so they would show up at the polls.

Many advisers on the Romney team were highly educated and experienced business consultants who had a lot of structured data experience. The Romney team conducted traditional surveys, typically weekly, where they tracked a small set of key indicators with important demographic groups in swing voter states. "But Romney's data science team was less than one-tenth the size of Obama's analytics department," the Review reported. Meanwhile, the Obama data scientists were tracking hundreds of attributes, using unstructured data from all kinds of sources including social media tracking and TV viewing habits, all the time. As part of their nudge campaign, the Obama advisers concluded that political advertisers had been asking the wrong questions. This led the Obama team "to reimagine the targeting process" and to reach those targets more effectively. For example, they weren't content with knowing viewer habits of a particular niche. They had actually narrowed the message targets down to hundreds of facts about each potential voter, with detailed information resulting from massive data processing that used sophisticated predictive algorithms. They studied every way each individual watched television and used social media. Many of Obama's 2008 Hispanic voters, it turned out, enjoyed watching Spanish language soaps and shopping network shows in the middle of the night.

Then, using this data-backed knowledge, they were able to accurately know whom they most needed to target and when and where to reach them with the right messages. As a result of such remarkably precise tactics, President Obama was re-elected with fifty-one percent of the popular vote, despite the enormous midterm setbacks of 2010.

By the time of the election, the Obama team had consistently outmaneuvered the very smart Romney experts simply because the Obama team had a tool that they knew how to use; the opposition didn't have it or even fully understand its application.

Now imagine a story like this being repeated over and over in industry after industry with the crucial differentiator being: Those who master data science and those who don't. This is the landscape of business change unfolding today.

Combine the power of cloud computing with wireless sensors, allowing you to capture all kinds of data, and the use of unstructured data through predictive analytics, and you have a technological tsunami of epic magnitude. We are in a perfect storm in data science. It is built on the huge systemic changes, which match in importance the original commercialization of the Internet that took place decades earlier.

The fourth leg of the exponential technology tsunami is all about mobile. The smartphone has become the consumer's most important cultural instrument.

In January 1993, I gave one of the keynotes at the Consumer Electronics Show in Las Vegas, where I outlined Apple's breakthrough insight at the time marking the convergence of computing, content, and communications. This convergence foreshadowed a new era we predicted for Personal Digital Assistants (PDAs): small handheld devices with no keyboards and powered with artificial intelligence. Doug Solomon, then Apple's head of corporate strategy, foresaw this convergence at a gathering we'd organized six months earlier. We'd invited leaders from the entertainment and technology industries to Hakone, Japan, to hear and discuss Doug's analysis. In those days, it was rare for the leaders of these different sectors to get together at all. At Hakone, thanks to Apple's talented special-event producer, Satjiv Chahil, we created the perfect venue for these senior executives from major international corporations and different domains—leaders who'd never met one another before—to discuss technologies that would change their industries.

In early 1993, the concept of the PDA probably sounded a little weird to the CES audience, since it was years before digital mobile "feature phones." At the time I didn't realize the controversy I would be creating when I predicted that the PDA industry would eventually see a billion of these mobile devices in the world. The press that followed my speech was scorching, attacking me for making such a ridiculous assertion. After all, the criticism contended, if one added up all the PCs cumulatively ever sold by 1993, it still measured only a few hundred million units! One highly respected newspaper accused me of predicting that Apple was going to sell over a billion of its expected Newton PDA. This paper was so well regarded that others used its story as fact, never bothering to check out that I actually wasn't forecasting Newton's sales. The lesson here: If you seek out publicity, you can't complain just because someone publishes your story in a wrong and unflattering way. The higher one gets, the further the media likes to see them fall. If this bothers you, just learn to get over it. Life isn't just about good publicity.

Smartphones are no longer just about being phones. More importantly, they actually are our personal digital assistants. Our smartphones already are indispensable. Consumer apps are indispensable too. Personalized digital assistants, like Apple's Siri, have been a novelty until now. But all kinds of improved assistants, including Siri, will get better soon. We aren't far off from when personalized digital assistants will know nearly everything about us and a lot more about everything we want or need.

While the first Siri was a novelty, we are already in a second generation of smarter, nonhuman virtual assistants like Google Now, Microsoft's Cortana, and a very smart virtual assistant optimized for Spanish speakers called Sherpa, created by my friend Xabier Uribe-Etxebarria in Bilbao, Spain. Sherpa goes a step further than other PDAs, as it archives a history of each user, enabling it to get smarter as a result; Sherpa connects this personalized data directly to a user's e-commerce transactions.

These early virtual assistants enable users to ask questions and get meaningful answers instantly. More and more, the future will be about machine systems virtually learning from millions of sensors. Inevitably, normal people just using their mobile devices will become smarter consumers. For example, customers using their mobile smartphone will automatically know if a particular retailer has the best products, at the cheapest prices, when they are walking past a store in a mall. The ability today to be able to input how customers feel about a product, or refer a product or service to others from their mobile devices, will become easier, and all this information automatically will be fed into a multitude of cloud systems. Using machine-to-machine (M2M) learning and end-to-end information systems that will be ten times or a hundred times or a thousand times better than we have today, these M2M learning systems, using millions of sensors for data inputs, will know an incredible amount about you. I'll leave the many scenarios to your imagination, but they are almost endless. Machine-to-machine computation and machine learning will automatically make consumers smarter customers, for one very important reason: Machines don't get tired like humans do.

As that happens, economic power will pivot from producers-in-control to customer-in-control. Those producers like Amazon, eBay, Apple, Google, Baidu, Alibaba, and Tencent—which create end-to-end consumer-empowering systems—will be the big winners. What's different in this second digital age? The game-changing future in computer science won't be just about better knowledge worker tools, it will be about artificially intelligent, very smart, very personalized systems using unstructured data and predictive analytics. Incredibly powerful… customizable to every individual on the planet… disruptively affordable… and capable of changing every industry in the global economy!

TODAY'S BIG MOONSHOT: CUSTOMERS-IN-CONTROL

The economic derivative effect of the combination of these four exponential growth digital technologies is creating what I believe is one of the biggest Moonshot effects of all. That is the permanent, irreversible power shift from producers-in-control to customers-in-control.

These incredible technologies are evolving at an unbelievable speed. They are now affordable to both corporations and to individual entrepreneurs. They have the power to reduce the overhead costs of an organization by using automated processes to replace many "white-collar" middle managers. I think about it this way: Outsourcing and heavy lifting robots have replaced many of the traditional medium-skilled jobs in manufacturing. Now very smart, end-to-end computer systems, along with very smart robots, will cause many white-collar jobs to be eliminated. Middle managers have traditionally managed the workers who are in charge of important work processes, and middle managers are measured on improving performance by the quality of their management decisions like hiring talented workers, training workers to do their job better, resolving disputes when they arise, responding to customer issues, meeting important dates, and handing work off to other middle managers. But what if companies had innovative better ways that were disruptively cheaper, faster, and more convenient to solve these issues and that it became obvious that an investment in capital was clearly better than an investment in labor? In a scenario where it might take fewer workers, it might also take fewer middle managers, as computers are better than humans at some things, but obviously not everything. It's not just about the heavy lifting jobs that are at risk; it's now about the smart management jobs that are exposed to disruption too.

Consumers now have access to real-time information on products and services, with complete price transparency and with product reviews from a wide range of web services, notably Amazon. They also have constant contact with their friends, who are instantly connected with various social media sites like Facebook. And they can mobilize huge groups of supporters in no time, almost anywhere in the world. This is perhaps the biggest Moonshot of all time. It is happening now and is rapidly transferring power from producers to consumers.

The power shift to the customer-in-control will open up unprecedented opportunities for entrepreneurs. It will also cause disruptions to traditional industries like never before.

A traditional way of managing might have been to ask: "How can we do this function cheaper?" Now that it is practical and affordable to make customers much smarter, we have no choice but to make producer businesses smarter than they have ever been to keep up with their more empowered customers. So business systems have to be conceptualized and adapted in innovative ways.

Those companies that don't adapt by refocusing their business models and organizations squarely on the consumer will not survive, in my view. Those willing to adapt have the opportunity to both survive and prosper.

THE NETWORK EFFECT

My good friend Bob Metcalfe is co-inventor of Ethernet and the originator of Metcalfe's Law, which quantifies the value of a network. Bob observed that the Internet was enabling computers to connect to computers, which would then connect to other computers. He is also a mathematician and realized that this network effect can be roughly approximated by saying that the value of a computer network system is equal to the square root of the number of other computers that are connected to your computer. Today, Metcalfe's Law, more commonly referred to as the network effect, is as important as Moore's Law. It is a vivid demonstration of exponential growth and supplements the points already made about today's game-changing technologies. The network effect explains why companies like Facebook, Twitter, and LinkedIn have grown so quickly and multiplied their numbers of users to very massive levels so quickly. It's why Facebook, watching Snapchat draw away their younger Facebook users, was willing to acquire Instagram for $1 billion. The network effect explains how Facebook was able to surge from no mobile revenue to a level of fifty percent of its revenues coming from mobile in just two and a half years. Similarly, the network effect explains why it made sense for Facebook to pay $19 billion (mostly with Facebook stock) for WhatsApp in order to get to its 450 million mobile messaging users.

The network effect changes everything, because now consumers are the key influencers for every service on the web. Consumers rate products and services for other consumers; consumers also make recommendations through their networks. Knowing a consumer's behavior profile will increase the value of an instant special discount a producer wants to offer a consumer who is standing right in front of a shelf display in a retail store. The source of influence also changes the entire dynamics of marketing. The power of customer ratings, customer recommendations, and customer complaints cannot be overstated.

Enormous opportunities exist for a new breed of entrepreneurs, whom I call "adaptive innovators," as well as for enlightened companies, "adaptive corporations," that embrace this new age of exponential technologies and the new world of the customer-in-control.

ADAPTIVE INNOVATORS: TODAY'S BUSINESS BUILDERS

Thus far, I have mentioned true geniuses who have created world-changing Moonshots during my lifetime. Most were disruptive inventors like Woz, Gordon Moore, Bob Noyce, and Andy Grove. Steve Jobs was a systemic designer genius who later evolved to become a genius adaptive innovator. Paraphrasing Bill Gates in a recent Charlie Rose interview, it's amazing how much Steve Jobs achieved in his life with his genius for intuitive design sense, as he really wasn't that technical. Two other examples today of systemic designer geniuses include Jeff Bezos, who in Amazon has created an utterly unique e-commerce system that is disrupting retailing, and Elon Musk, who will likely disrupt the auto industry with his Tesla electric car. Bezos and Musk are also adaptive innovators, and it's the adaptive innovators who really excite me today.

Adaptive innovators, I believe, are today's best entrepreneurs. They are highly motivated, highly curious individuals set on their own personal missions, which I call their "noble causes." They do not have to be geniuses like Steve Jobs and Bill Gates. Rather, today they can harness these exponential technologies at affordable prices. Combining their own domain expertise in multiple business sectors with advanced technologies, adaptive innovators will create transformative businesses on a scale never seen before.

What have I done in my life that I've really been proud of and truly enjoyed? Writing this book has allowed me to reflect thoughtfully about that question. The world runs on different types of skills and talents and they all have importance. I'm clearly not comparable to Steve Jobs. He was a systemic designer with exceptional instinctive talents. He was passionately motivated and willing to sacrifice a lot of other things in order to accomplish the many things he achieved in his life.

The best description of what I have done in my life is not as a CEO but as a builder, an adaptive innovator. My life has been focused on transformative businesses. I have focused on developing expertise in businesses that are at moments of transformation. I am curious by nature, and my business experience has enabled a personal journey that has crossed many industries.

Since I left Apple, and largely based on my experience working with the Newton (the first commercial, handheld computer using artificial intelligence) and on The Knowledge Navigator (the concept video of the sort available today on YouTube) while at Apple, I delved deeply into mobile software and mobile services, certain this would be a fascinating part of our future. I became very interested in financial services because my brother Arthur was doing breakthrough work in this domain when he cofounded Intralinks, the first software-as-a-service company for business-to-business. It's now a public company on the New York Stock Exchange. And I've been involved in many other financial service businesses, including an overseas company I recently helped cofound, a credit finance and supply-chain acquisition corporation called Inflexionpoint. I'm passionate about the general world of the supply chain—because it's an absolutely key underpinning to everything that we do in a global economy.

I'm also now very interested in health care and have been for the past eight years.

These are some domains that have spurred my curiosity and satisfied my appetite for working with ideas. They've given me a multidomain perspective. At this stage in my life, I'm not focused on the heavy lifting of running businesses, so I'm never the decider in the companies with which I'm involved. I am always the other pair of trusted eyes who advises the deciders who are running these businesses. There are also great opportunities for adaptive innovators both to actually run existing businesses and to found new ones. With the right mindset and a passionate commitment to excel, you can be an adaptive innovator who can share in today's transformative moment, because present-day opportunities are boundless.

An adaptive innovator of any sort works with incomplete information, especially because they are working at the edges of established domains. Adaptive innovators make decisions about things that haven't happened before. These nonlinear inflexion moments occur when a new trend emerges and is launched on a new path that moves very, very fast. You can easily be unprepared and caught off guard. That's why effectively looking ahead is so important for an adaptive innovator. When domains collide, turbulence occurs, and high-risk moments inevitably ensue. That's when you have to be flexible—willing to look at alternative ways of doing things. That's why the multiple-domain expertise is vital.

You don't necessarily have to be the person with all the needed domain expertise, but you'll need access both to it and to the best talent available, because very tricky, time-sensitive decisions have to be made, usually without complete data.

THE ADAPTIVE CORPORATION: THE KEY TO SURVIVAL AND PROSPERITY

Large incumbent corporations became successful because they learned how to scale process. But the process in which most of them have domain expertise is on the way to becoming outmoded as a result of the customer-in-control power shift we have been discussing. The future will be about the adaptive corporation—large or small, new or old. The brilliant futurist Alvin Toffler was the first to describe the adaptive corporation back in 1985. Today, that idea has become really essential for every transformative company to master.

Business leaders, whether they are entrepreneurs or large company executives, need to learn the skills of an adaptive innovator. It's what this book is about. The ability to adapt quickly is as important now as knowledge work was in an earlier time. Why? Because traditional answers and the processes that generate them have become a commodity.

Asking the right questions is much more valuable than having knowledge (knowing the right answers). In fact, computer and data science is very good at auto-answering questions, comparing and choosing from alternatives, and generating better answers without any human intervention. We actually will need less human intervention to do old process tasks. What computers aren't good at is making judgmental decisions. As a result, adapting by integrating expertise and making judgmental decisions in several domains in parallel will increasingly become an organization's most valuable human skill.

It is no easy task for an established corporation to make a fundamental change. Most business organizations are set up to protect their core products, not to disrupt or reinvent them. These companies empower middle management with the authority to say no, but rarely the power to say yes. They have antibodies in their culture to obstruct anything that gets in the way of continual evolution of what they've been so successful at. They become victims of their own success, and thus often misinterpret why they are successful. You can't assume that the reasons for success a decade earlier will abide as success principles today or tomorrow. The landscape changes all the time.

It's a real feat for an established company to become an adaptive corporation. A great example of a successful adaptive corporation is Starbucks. Howard Schultz built Starbucks into the largest, most successful coffeehouse retailer in the world, and stepped down in 2000. By 2008, according to David Kaplan's insightful article in Inc. magazine, the company had stalled and the stock price was tumbling. Howard Schultz returned to Starbucks as CEO so the company could regain its "soul." He closed 800 stores, fired most of its top executives, and refocused on delivering the kind of customer experience the old Starbucks had been so famous for. He did this by retraining his store employees and incentivizing them with health insurance, even though many were temporary workers. Now he's providing online college benefits as well. He is also at the cutting edge of technology, leveraging digital media like no other retailer. Starbucks is now booming and is expanding everywhere. Today there are approximately 1,200 Starbucks stores in China and Schultz believes there will be "north of 5,000 [there] within the next 10 years."

Howard Schultz's reinvention of Starbucks reminds me of the remarkable turnaround Steve Jobs achieved when he returned to Apple in the '90s and rebuilt it into the most valuable company in the world. Perhaps it is easier to achieve these kinds of big company transformations when the founder returns, but regardless, it isn't easy.

Companies that truly want to adapt often must begin by changing their tracking metrics. They shouldn't, of course, abandon the key financial and sales metrics that must be measured regularly. But they do need to add and give the priority to key consumer metrics like customer satisfaction, customer acquisition cost, customer retention rates, and lifetime value of a customer. The most important of these measures is customer satisfaction, and I'm a big believer in the Net Promoter Score. This is a concept developed by Fred Reichheld, Bain & Company, and Satmetrix. We'll discuss this concept in more depth later when we discuss customer experience, but the metric is simple and powerful. Sharing this metric regularly (even if the news is bad) throughout the entire organization is the first step in placing the customer at the center of the company and the signature first step in becoming an adaptive corporation.

Another example of the adaptive corporation, and perhaps the ultimate one, is Amazon. Jeff Bezos is creating the world's online market place for everything. Amazon is the looked-to model for this new era of customer marketing, with very empowered consumers who expect and get an exceptional customer experience at disruptive prices. Jeff Bezos is also an adaptive innovator. He is constantly experimenting with new services, and he adapts his model whenever he thinks he needs to in order to keep his 250 million credit-scored customers inside the Amazon ecosystem. The Fire Phone, Amazon's new smartphone, is an adaptive innovator's move to prevent Apple or Google from intervening between Jeff Bezos and his customers in the virtual point-of-sale. The Fire Phone includes a novel service that uses imaging technology to identify any product a user sees in the real world and then automatically connects the consumer with smart information and the opportunity to buy that product using Firefly technology. In addition, the Fire Phone includes "Mayday," a button that will connect a Fire Phone user to a real human being who can immediately answer a customer question. It's all part of adapting Amazon's service and continuingly moving the customer experience to a higher place.

The adaptive corporation should be viewed as a highly sophisticated system with its major mission to make its customers very, very happy.

Of course, you want to be profitable, you want to attract and retain talented people, and you want to be a good citizen in your community and have other worthy aspirations. But priority must be given to clear decider authority and accountability for systemic design decisions.

Those closest to the customer experience are best positioned to be the adaptive innovators. They are best equipped to make decisions about everything to do with an exceptional customer experience and assuring that you deliver it at the lowest cost. Adaptive innovators should be strategically placed throughout the organization to foster a dynamic, change-responsive culture and to facilitate implementation. One rule of thumb: Avoid keeping old processes just because they worked in the past and are reliable, and the organization is comfortable with them.

Here's what I might do if I were a CEO of a company wanting to become an adaptive corporation: I would take one of my most important mainstream products or services and ask a small team of my best adaptive innovators to redesign the customer experience and the customer delivery of that product or service. There would be no preconditions to the structure of the redesign—only that it must be cheaper, faster, better, and more convenient for our customers. I would fund the project to prototype this experimental alternative and see if we could improve and surpass the customer's expectation on a small scale. Unencumbered with legacy policies and overhead cost considerations, I know we would learn a lot. It's never easy to replace an old way with a new way. Why? Middle managers, as I have said, when left to their own, are always empowered to say no, and rarely empowered to say yes.

In 1997, Clayton Christensen, the much-admired Harvard Business School professor, published a groundbreaking book, The Innovator's Dilemma, which opened our eyes to the core issues of innovations, and our worldview has never been the same since. The dilemma he describes is the consequence of creating a disruptive new alternative. To do so, you may have to sacrifice your most valuable line of business, the core that has been the basis of your best success. Microsoft chose not to do this when it insisted that Microsoft's mobile platform had to be a derivative of its incredibly successful Windows. But Windows had been designed for PCs, where a long boot cycle was expected, supported by decades of legacy code that would use up battery power just to run the system. Apple chose to start fresh with no legacy requirements left over from the Mac. Apple designed an entirely new end-to-end system with the App Store. Google was a fast follower with Android, and decided to differentiate itself from Apple by giving the Android platform away. In contrast, Microsoft still insisted that users pay for the mobile OS, and without access to the cache of a billion mobile apps that Apple and Google have.

Christensen's inquiry addresses what is for me the central question about scaling innovation in our time: What exactly does it take to create the competence and the culture of an adaptive corporation? Competence certainly requires that a firm have the right domain expertise. Typically, this means adding new domain expertise, because innovation opportunities arise when different domains collide and change the competitive landscape. It's rare that the innovation leader in one era is also the innovative leader in the next era. Not impossible, as Steve Jobs proved, but not typical either. No business wants to be left out of the future—at least not in the first round of competition.

The adjustment to a new world of work is possible in existing corporations only if senior executives understand that knowledge workers and adaptive innovators are different roles requiring markedly different skills. Many knowledge workers can learn to adapt, while others never will. Existing businesses aspiring to become adaptive corporations need to commit to understanding what exactly an adaptive innovator is and how that differs from both systemic designers and knowledge workers. In the end, they will actually need conscious planning to move them from a decades-imbedded orientation of knowledge work, to a new mindset of continuous adaptive innovation centered on the customer.

2.

WHY MOONSHOTS START WITH A "NOBLE CAUSE"

Only one who devotes himself to a cause with his whole strength and soul can be a true master. For this reason mastery demands all of a person.

—Albert Einstein

Recently, I was invited with twenty other senior U.S. health care leaders to attend a private dinner meeting at the home of Dr. Patrick Soon-Shiong, the most successful health care entrepreneur. The topic for the evening was health care policy. Dr. Soon-Shiong has built a $7 billion fortune with his pioneering disruptive inventions in genomics. Having had dinner with Patrick a few months previously, I was already familiar with his breakthrough efforts.

Patrick is a genius inventor with a noble cause: to cure cancer in his lifetime. He has designated $800 million of his fortune to seed-fund a new field he terms "molecular surgery" in major technical universities around the world, including UCLA, CalTech, Stanford, MIT, and Technion in Israel. He believes that cloud computing performance is advancing with phenomenal speed. In the future, gene sequencing on a human genome will be doable in less than one minute instead of the twelve hours it takes today. When that happens, molecular surgery will enable a new era, which Patrick refers to as "precision medicine." Hospitals will monitor a cancer patient's 26,000 genes and 2 million proteins, tracking specific mutations at the molecular level, where precision medicine will have the capability to tweak these deviations with individual genes or proteins. In thirty years, Dr. Soon-Shiong says, we will look back on chemotherapy and radiology as pretty primitive cancer treatments.

Every Moonshot begins with a noble cause—a vision by the founders to make the world a better place. This is not some goal measured in terms of sales or profits. It is a higher calling. It is a mission that can make a real difference in people's lives and a cause that will rally employees, partners, investors, and beneficiaries. Almost by definition, a noble cause is hard to accomplish. It starts by making the nearly impossible, possible. Then the possible, probable. Vinod Khosla, one of Silicon Valley's greatest talents, puts it this way: "An entrepreneur is someone who dares to dream the dreams and is foolish enough to try to make those dreams come true." Guy Kawasaki was chief evangelist in the Mac group back in the early days. He reflects now: "Seize the moral high ground. It's not enough to make a great product or service—you also need to position it and explain it as a way to improve lives." Marc Andreessen is the highly respected Silicon Valley genius who embodies this story. As a twenty-two-year-old student, he got the chance to program a supercomputer at the University of Illinois. After writing the first web browser, called Mosaic, he dreamed of a noble cause that all computers should be connected to make the world better. Marc went on to cofound Netscape Communications with Jim Clark, and so began one of the most remarkable journeys ever.

Some of the best lessons I learned were from Steve Jobs and Bill Gates as I spent hours witnessing their personal dialogue. The two loved to define things into big noble causes, and they both shared an identical noble cause: to make computers personal. Empower people with personal computers and with powerful, easy-to-use software. Give people incredible personal productivity tools at an accessible price, off-the-shelf and a snap to install. Then allow people to change the world, one person at a time.

That's where the agreement between the two stopped. Bill Gates' strategy to do that was all about software. The vista he saw was all about a land grab. So he did everything possible to get everybody to use his product. That's why he invented "shrink-wrapped" software to run on personal computers.

Steve Jobs had another idea. His noble cause was that the personal computer could become a personal appliance for nontechnical people. Not just designed to crunch numbers, the PC could also be a personal media machine that would open people up to all kinds of new ideas, much the way publishing did in the Renaissance. The desktop publishing that Steve Jobs created meant that people could learn things in ways they couldn't before. Individuals were empowered to become the publishers themselves. The Macintosh system became the first successful, remarkably easy-to-use, graphics-based media machine. It offered beautiful fonts, and you could merge documents together on the screen with a point-and-click user interface. With the Mac, you could actually preview the printed page in advance of its being faithfully reproduced by the laser printer. The personal computer as a media machine became the Moonshot that changed the entire computing industry for the decades to follow.

With Bill, it was always about software and a focus on the left-brain computational power of personal computing. Steve's strategy for personal computing was about empowering the right brain of human creativity. With Steve it was also always about the complete end-to-end system. Whether it was building what later became desktop publishing, or whether it was years later when Steve came back to Apple, where he built the iPod and the iPhone, the iPad and the App Store, Steve was ever a systems designer. He thought in terms of systems that could be simplified. He constantly eliminated steps, making an elegantly simplified user experience the primary differentiator of Apple's products. The two were utilizing the same technology, but the different target Bill Gates saw was devising and advancing the dominant underlying software that everybody would want to use. He was willing to add complexity to it if it meant he could improve Microsoft's market position. On the other hand, Steve didn't care if Apple was the largest-selling computer company in the world. What he wanted was to be the best. He was uncompromising in product design, in how it felt to the user, how it was sold, and everything about the user experience, as we later saw with the Apple Stores that he created. End-to-end, for Steve, the store experience had to be as good as the product experience. The "Open Me First" box was totally self-explanatory, without the need to read a manual. All of these attributes were incredibly important to Steve, and they were all part of a consistent, integrated experience. He was a brilliant designer with great taste; and he was able to realize his ideas as simple, memorable notions that people could apply. Everyone knew exactly where Steve was taking the Macintosh and what he wanted to accomplish with it. Steve believed that simplification was the ultimate sophistication… that what you left out was more important than what you put in… that technology had to either be beautiful or it should be invisible.

Today, Bill Gates has an even bigger noble cause—to enhance health care and reduce extreme poverty. He has allocated much of his Microsoft wealth to create the Bill and Melinda Gates Foundation. His and Melinda's goals, among others, are to fight AIDS, tuberculosis, and malaria. He keeps giving back on a scale never seen before. He and Melinda deserve the entire world's admiration and gratitude.

I had a wonderful talk recently with my friend the renowned physician Dr. Mehmet Oz. I asked him about his noble cause. He talked about improving the world's health. He said it is not just about sending sick people to the hospital for treatment, but rather about educating people about wellness and how they can take steps to feel so much better and live longer. He said, "that is why we have to fight the battle for health in our kitchens, in our living rooms and our bedrooms and in our cars. Where we live is where the battle should be fought."

What was truly remarkable? Dr. Oz talks about a noble cause when he says, "We need to start to think of the consumer era of health and wellness and what we can do with well-care." And Wolfgang Puck, one of America's top chefs, articulates an extraordinarily consonant message when he advocates better eating. Wolfgang's noble cause also entails smarter, life-changing behavior that has positive implications on how long people live, the quality of life that they live, and even family happiness. Initially, it's astonishing—but in a pleasing way, not at all unexpected—that positive, rational visions launched from vastly different domains can be mutually supportive.

Steve Perlman, founder of Artemis Networks, is a very successful Silicon Valley serial entrepreneur and also a technology inventor genius. Our friendship extends over a quarter century. Steve invented Apple QuickTime, one of the most important technologies in every Apple product. He also cofounded WebTV and later Mova Contour software, the magical special-effects software that aged Brad Pitt backward in the movie The Curious Case of Benjamin Button. He has been pursuing his ambitious noble cause for ten years: to solve what many thought was an unsolvable challenge, a solution for the reality that the world is running out of wireless spectrum. Motivated by this noble cause, Steve has actually solved the problem, using physics instead of changing government policy. He calls it pCell. It's quite amazing, will change the future, and is now ready for commercial deployment.

These huge, life-changing noble causes are usually reserved for disruptive inventors and systemic designer geniuses like Steve Jobs and Jeff Bezos, who have had their own successful Moonshots. But for the rest of us, there is the possibility of becoming adaptive innovators who want to make a difference in our own smaller universes, embracing a noble cause as a powerful driving force. It can energize an organization and give both purpose and passion to the mission of the new business.

3.

WHY NOW IS THE BEST TIME TO BUILD A BILLION-DOLLAR BUSINESS

Logic will get you from A to B, imagination will take you everywhere.

—Albert Einstein

This is the perfect time to build a billion-dollar business. As we discussed earlier, breathtaking technologies are now accessible to all businesses and entrepreneurs at affordable prices that are real game changers:

Cloud computing

Wireless sensors

Big Data

Mobile devices

Big Data can predict customer purchasing patterns and revolutionize everything involved in the world of selling. These four technologies are driven by bits of data, whether they be numbers, text, images, or video. The volume of these data bits is ever expanding, at exponential rates. This means that these bits will get smarter and smarter… and cheaper and cheaper. This is the first reason that now is the best time to build a transformative business. But there are other compelling factors.

WHY NOW? ATTRACTIVE FINANCIAL INCENTIVES

The good news for economies in the West recovering from a global recession is that money-borrowing costs are low. Inflation is also very low.

Not only that, the cost of starting a business today is a fraction of what it once was. Start-ups and early-stage companies that begin as "virtual organizations" can do so with minimal payroll. Founders often take little or no pay initially, but are incentivized by the appreciation potential in founders' stock. Many other services like accounting or IT can be outsourced on a project-by-project basis at very reasonable costs. An amazing range of specialized services can be bid out online to independent contractors both here in the U.S. and abroad.

Access to capital is also improving, and in some innovative, new ways. Crowdfunding, a new financing concept, is taking off, allowing individuals to invest in early-stage companies without the high net worth traditionally required by venture capital firms. The crowdfunding platform Kickstarter is a leading example of this concept.

Another financing concept, called "shadow banking," is becoming a major factor in world finance, as the Financial Times recently reported in a series. Direct lending to companies by "non-banks" is replacing a sizable portion of the lending of big banks as they shed assets. The Financial Stability Board pegged the size of shadow banking at $71.2 trillion in 2012 versus $26.1 trillion a decade earlier. This represents direct lending by hedge funds, insurance companies, and crowdfunding entities.

In a recent piece in Forbes, Haydn Shaughnessy emphasized the auspicious "financial climate and the superabundance of capital," noting: "Bain recently reported that global aggregate financial assets will increase from $600 trillion to $900 trillion between now and 2020. That means continued very low real interest rates for years to come." The scale of these estimates is astounding. On the one hand, economists are frustrated over the slow recovery from a world recession that almost collapsed the global economy. On the other hand, highly credible experts are pointing out that access to capital and the wealth of assets in the world is expanding at an incredible rate. My Inflexionpoint partner Shane Maine is an incredibly imaginative thinker. His recent ideas about novel ways to use credit to scale large businesses are groundbreaking. The night is darkest before the dawn, and, just when economists think the future is doomed, along comes an adaptive innovator with a new brilliant way of financing growth working capital.

THE COMING DISRUPTION OF TRADITIONAL BUSINESSES

Perhaps the most compelling reason why now is the best time ever to start a billion-dollar business is sheer business opportunity. The number and scale of these will multiply as many, if not most, traditional businesses face the reality of disruption.

We are already seeing disruptions in traditional businesses like brick-and-mortar retailers as a direct consequence of Amazon—Jeff Bezos' trailblazing vision to sell virtually everything online, at an unthinkably low price and with ever-improving customer service. Traditional book chains like Borders have already disappeared and others are seeing their businesses erode. Many more retailers will fall victim to Amazon in the future. Think, for example, of the newspaper business, which has lost readers and advertising to the Internet. Valuations for once-heralded publishing empires have plummeted as electronic publishing models have taken hold.

In my view, the present wave of disruption is just the beginning. As powerful new technologies like cloud computing and mobile devices rapidly shift power from the producer to the consumer, traditional structures will continue to unravel. The customer now has real-time access to market pricing, to more information on company websites, but even more importantly, to outspoken and frontal product reviews on the web, on Amazon and now on huge social media sites like Facebook. The trust that many brands spent years building with millions of advertising dollars can collapse overnight as new rival brands are celebrated as better, sharper-priced options.

While Amazon has already proved to be a disrupter in the publishing world, we made our own discovery when we began this book project. We met with several well-respected publishing houses, but when we learned that their business model would prevent us from getting to market for fifteen to twenty-four months, we searched for another approach. We were very fortunate to partner with Rosetta Books, a leader in e-books, which was interested in reinventing the model for hardcover book publishing. We joined forces with Ingram, a multibillion-dollar book distributor, who was also looking for a different model. Working with these two partners is allowing us to get to market at a speed unthinkable in the traditional publishing industry and without the bureaucratic management-decision layers. We are getting to the shelf in just six months, and this includes the time it has taken us to actually write most of the book. We have seen firsthand why publishing is ripe for disruption.

DISRUPTION IN HEALTH CARE

As you will see, health care—which consumes eighteen percent of the U.S. economy—is ripe for disruption, and new models are poised to redefine the industry. What makes health care a classic broken wheel among today's broken business models? First of all, the current system doesn't work very well. We spend twice as much per capita on health care as any other developed country in the world. We still don't have all of our population covered with health care insurance, but we don't turn anybody away in the emergency room. So there is a way for people to get health care, even if not fully covered by health insurance. The present legacy system is so complicated and so arbitrarily regulated because it's largely defined by special interests in Washington. These governing forces have nothing to do with what would be the best way to deliver the highest-quality health care.

Many have studied Silicon Valley hoping to understand and maybe transplant its best ideas of why it has been such a source of innovation to other geographies. Silicon Valley is best understood as an ecosystem. At one level, it is thousands of independent companies and supporting resources of venture capital, lawyers, bankers, accountants, deal makers, and angel investors. At the same time, it's a living, breathing connected ecosystem that exchanges information in real time, where people move (sometimes in days from company to company) or new companies are created and older companies are acquired or go out of business in a flash. Failure, in the context of Silicon Valley, is accepted as healthy for the ecosystem and a good learning experience for the talent when it happens. No one dwells long on failure; people get past it quickly. Stuff just gets done. Very smart people came there to build new companies and accept the consequences of a decisive world. Deciders rule, frequently without consensus. Information is transparent and accountability is understood. If you aren't competent to do your job, then you are expected to move on.

Both Washington, D.C., and Silicon Valley have very smart, ambitious people and well-intentioned talent. The U.S. government's ecosystem is driven to protect special interests; Silicon Valley's ecosystem is shaped around driven entrepreneurs who are builders. They just want to build businesses to solve customer problems. These are two decidedly different models of human behavior with often-conflicting missions.

How could we ever hope to resolve, for example, the overwhelmingly complex problem of health care? The situation will never change, in my opinion, if you ask politicians to come up with the solutions. That's not what their talent is. They don't have the domain expertise to come up with such solutions, nor is it what our government is set up to do. Our government exists to make political decisions about things that the people who voted for them expect them to do. That doesn't include becoming an adaptive innovator in a massive, rapidly changing and technologically complex industry like health care.

What will drive constructive change in this complex arena of health care? I believe it will be the power shift to the consumer. For example, real-world awareness of actual costs is a powerful incentive. Once shielded from the true costs of an inefficient system, consumers are waking up to the fact that they're suddenly directly responsible for the cost of most doctor visits, which can be $125 or more. An emergency room admission can cost $750 or more. Consumers who were used to very small co-pays are now finding themselves in high-deductible plans, where the first $1,000 or more per year comes right out of their pocket. Consumers who before didn't know or care about how much a medical procedure cost now will, and that will change everything. Significant solutions to the economics of health care will come from adaptive innovators in the private sector, tackling the consequences of bad government decisions.

DISRUPTION IN EDUCATION

What about another huge American industry, higher education? Universities, some with gigantic endowments, are expanding their brick-and-mortar campuses. Harvard, for example, is adding a new campus across the Charles River from its historic center in Cambridge, Massachusetts. Harvard, perhaps the world's most valuable brand name in education, is doubling down on a second brick-and-mortar campus—despite our age's colossal changes in technology and media. Is adding new construction and overhead, at a huge investment cost, the right strategy at a time when the cost of a college education is today so high?

Universities, even with the best of reputations, resemble the most venerated corporations in this regard. Both usually succumb to their internal politics and complex cultures. So, in universities, rarely are courses ever eliminated when the curriculum is expanded… just like governments perpetually solve problems by adding new departments. Not surprisingly, the cost of a college education has exploded, leaving students with massive debt and often uncertain job prospects. Are graduating students—as the most relevant test—converting their diplomas into job-ready skills? Increasingly not. Sound like an industry ripe for major disruption? Few want to talk about the problem, but innovative forces in the market are already chipping away at solutions.

I was on the Board of Trustees at Brown University for seven years and on the board of overseers at the Wharton Business School for fifteen years. I served on the Board of Overseers at the MIT Media Lab for fifteen years. I've been fortunate to have firsthand experience with some really good institutions, run by extremely talented and well-intentioned people. Competence and intention are beyond question, but so many of them are crippled by the powerful forces of organizational culture.

Last winter, I made a two-hour drive through a snowstorm from New York City to Fairfield University in Connecticut, where the snowdrifts were taller than I am. It was the beginning of a wonderful experience. Father Paul Fitzgerald, president of Fairfield University, had grown up in Los Gatos, California, and was friends with many of Silicon Valley's most admired entrepreneurs, like former Apple CEO Mike Markkula and Intel's Andy Grove. Father Paul has crafted the liberal arts curriculum at Fairfield University to integrate high technology and scientific knowledge, bringing together points of view with the liberal arts in imaginative ways. His highly informed and very curious students were making intelligent connections between technology, entrepreneurship, and the liberal arts. The evening made a big impression on me, and I hope other liberal arts schools will take the time to learn from the creative curriculum of Fairfield University.

Let me return, for a moment, to Harvard… not to its liberal arts curriculum, but to the Harvard Business School, that part of Harvard where you would expect the most pragmatic thinking of all. One of the great education debates recently is between two top Harvard Business School professors, both of whom I personally respect, Michael Porter and Clayton Christensen. The debate is over the role of online education at the Harvard Business School.

HBX, the online business program, was designed as a credentialing adjunct for the Harvard Business School. It's intended as a bridge for people with a liberal arts education path to learn some fundamentals about accounting, financial systems, and general business. Enrollment in the online program costs about $1,500, and those who complete the course are invited to take an exam that tests whether they've satisfactorily learned the material.

My take on Michael Porter's position could be summarized this way:

HBX is a good adjunct to the Harvard Business School Program because we can't take what Harvard Business School does, we don't give lectures, we have discussion and debate with our students and that really needs to be a face-to-face between the professor and the students. So we're not trying to replace that, we're trying to add something to the Harvard Business School experience.

I would characterize Clayton Christensen's opposing view this way:

It doesn't make enough sense because it's not disruptive enough. I forecast that in fifteen years, many of our colleges and universities are going to be bankrupt because they aren't facing up to the fact that many of these students are able to afford to go to these universities only if they can go on scholarship and not all schools have the ability to give scholarships, or they take on an incredible amount of student loans, which for many students is not sustainable, they can't pay it back under any reasonable term. Why? Because there isn't the same level of jobs, there isn't the wage growth; the world has changed on us.

The particular debate here is focused on whether an online course can adequately prepare a liberal arts grad for a Harvard Business School learning experience. Christensen, one of the most innovative strategists, thinks Harvard Business School should be far more aggressive than does his much-admired colleague, Porter. Imagine the excitement of these two giant intellects thinking through and considering the possible consequences of a new student experience. Time will tell, but it is clear that the customer value of a college education today in terms of cost and career preparation is very much in doubt. When the value of any industry's core product is seriously questioned, that makes it ripe for major disruption.

Another recent innovation in education is the advent of the Jack Welch Management Institute. Welch, retired CEO of General Electric and perhaps the signature management talent of his era, really understands the importance of recruiting talent, motivating talent, and giving managers greater skills to justify their promotion in an organization. He's very focused on how to construct the learning experience and says, "We do it by treating the student like a customer." That completely changes the paradigm. At his institute, the student grades the professors. What a turnabout… and, what's the consequence? If professors get poor grades from their customers, they get fired. What a big… no, EXPLOSIVE idea!

Go one step further. Imagine if you said to the government, let's treat citizens like customers. As you stand in line to renew your driver's license or as you try to call the IRS to ask a question, does anyone think that government cares at all about how the customers feel? What if the services we are getting from government aren't appreciated by the customers: Should we (the customers) get to fire the services by rating their performance? In a way, the Arab Spring revolt that began in late December 2010 was a dramatic manifestation of this attitude. In more stable parts of the world, there can be good reason to moderate how drastically change occurs. But we also need to be aware that, in a social media—saturated world, the pressure for urgent, straightforward customer-driven change will be increasingly hard to thwart.

If you believe in empowering customers, then patients can be customers… students can be customers… and even citizens can be customers. If you start considering each of these groups as customers, they will increasingly presume their right to vote on the customer experience. If they don't like it, they can fire the provider, be it a doctor, a teacher, or even a government official. And it's all about voting on the quality of the service offered: "It's not that we don't want the service," they may be saying, "but we want it in a cheaper, faster, better way."

No industry that deals with customers is safe from disruption in the future, in my opinion. This opens up huge, unprecedented opportunities for adaptive innovators to create exciting, new substantial businesses. Those new businesses will suck oxygen out of existing industries. That means traditional corporations need to carefully think through the implications of this power shift from producers to customers. They need to become adaptive corporations, with a culture that genuinely embraces and exploits innovations that matter to the customers they serve.

Despite all the problems we hear about in our news media every day, I believe this is the best time in history to build a billion-dollar business. Those adaptive innovators and adaptive corporations that seize the moment, in my opinion, have boundless opportunities.

In the next section, I discuss the huge changes affecting the middle classes in America and abroad today and into the future. These middle-class consumers represent the exciting core of unprecedented future demand.