Risk & Business Magazine CMW Spring 2016 | Page 17

predictions, however, are not the predictions. The genius of the
predictions are the law that governs them.
His law of exponential growth in information technology
is remarkably similar to Moore’s Law, which states that “the
number of transistors incorporated in a chip will approximately
double every 24 months”. The law, named for Gordon Moore,
cofounder of Intel, was first stated in 1965. It remains true to
this day. The law has seen computers go from the size of a room
in a house down to the size of a phone that can fit into your
pocket, while processing power has increased right along with
the change in size.
In the context of business, you can extrapolate that once a
business is able to leverage information technology in its
processes and begins to acquire information, the growth
pattern of that business will begin to double. Once that process
starts it doesn’t stop. That is the seed from which ExO’s are
born. According to Peter Diamondis, author of “Abundance”,
once we are able to harness that power, we will have abundance
in everthing.

Linear vs. Exponential Growth
It is important to understand the difference between linear
and exponential growth as well. Linear growth, as you
would expect, follows a straight line. It is a constant growth
that continually increases at the same rate. 1 + 1 = 2 + 1
= 3 + 1 = 4… and so on. Exponential growth, on the other
hand, grows at a proportion that is relative to the current
value. 1 x 2 = 2 x 2 = 4 x 2 = 8 x 2 = 16 x 2 = 32…and so on.
The curves, as you can see below, look very different. One
interesting thing to note about ExO’s, in particular, is that
when exponential growth is occurring in a field, the experts
in that field almost universally predict linear growth.

in society or the marketplace. Leveraging existing resources
and applying information technology to industries has led to
major upheavals in many industries in the last decade. The
classic cycle of disruption, over time, in any given industry
follows a pattern: overconfidence leads to a sudden collapse, the
response to which is often “too little too late” and is followed by
a continual decline.
“Leveraging existing resources and applying
information technology to industries has led to major
upheavals in many industries in the last decade.”

One of the most well known examples of this is, perhaps, the
hotel industry. AirBnB has been able to leverage an existing
resource (the homes, living spaces, and empty rooms of users) in
order to provide a service to individuals looking for a quick and
easy place to stay. Their overhead cost for this? Next to nothing.
Whereas a hotel would require new infrastructure, years of
construction, and ongoing maintenance costs, AirBnB can add
a new room by simply acquiring a new individual looking to
rent a space out on their service.
Another example is Uber. This one is almost textbook. You
have taxi companies, which have stood largely unchanged
for the last hundred years on one side, and you have a (once)
small company leveraging (again) an existing resource (the
cars of their clients) on the other. What happens? Uber
provides a higher quality services for much less overhead with
an exponential rate of growth.
Perhaps the most popular example, however, is Netflix. Almost
single handedly, Netflix has changed the way we look at movies
and media. Through the implementation of a standard, easy
to operate, streaming platform, Netflix has become a service
that is in nearly every household. Their process has been highly
democratic and information driven right from the very start.
For one thing, they constantly analyze the viewing patterns of
each individual, customizing accounts to the individuals who
are watching them. They also use that data to determine what
to put on their service. In the words of Jenny McCabe, their
Director of Global Media Relations, they “look for those titles
that deliver the biggest viewership relative to the licensing cost.”

Why Traditional Companies Have Trouble Adapting
Linear vs. Exponential
As you can see, there is a big difference in the growth curves
between linear and exponential. This is a key thing to
understand. Once a company reaches a point of exponential
growth, they are no longer going to be limited by a stagnant
(yet constant) growth pattern.

The Concept of Leverage
Leverage, as a concept, is something all of us understand. What
many of us, and many businesses, fail to see, however, is how
to leverage situations (or technologies) to change our positions

Large companies have to, by their very nature, have systems in
place to resist change. After all, they became successful because
of the things that they have already accomplished. Thus, when
changes or disruptions are made in these companies, the
changes are resisted. When something or someone begins to
disrupt the way that an organization functions, the “immune
system” of that organization will come in and try to stop those
changes from taking place.

What Makes an Exponential Organization?
ExO’s spring out of the new wave of entrepreneurs which are
attacking existing industries with relative impunity. They

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