Moonshots with Peter Diamandis - EP #24 Astro Teller’s AMA: Allocating Resources for Audacious Ideas

Episode Date: January 26, 2023

In this episode, recorded during the 2022 Abundance360 summit, Astro Teller answers questions regarding Google’s OKR framework (and how it doesn’t work for Moonshots), financial incentives vs. intellectual honesty, and resource allocation for endless new ideas. You will learn about: 01:58 | Pre-mortem exercise 07:30 | OKRs don’t work for Moonshots 09:49 | Moonshots vs. equity 19:11 | How to allocate capital for each idea Dr. Astro Teller's expertise lies in intelligent technology as the CEO of Alphabet's X, The Moonshot Factory. X is a company dedicated to bringing extraordinary, audacious ideas to reality through science and technology. He was previously the founding CEO of Cerebellum Capital. _____________ Resources Visit X’s website.  Learn more about Abundance360. Read the Tech Blog. Learn more about Moonshots & Mindsets.  _____________ This episode is brought to you by: My executive summit, Abundance360 Levels: Real-time feedback on how diet impacts your health. levels.link/peter  Consider a journey to optimize your body with LifeForce. Learn more about your ad choices. Visit megaphone.fm/adchoices

That's the sound of unaged whiskey transforming into Jack Daniel's Tennessee whiskey in Lynchburg, Tennessee. Around 1860, Nearest Green taught Jack Daniel how to filter whiskey through charcoal for a smoother taste, one drop at a time. This is one of many sounds in Tennessee with a story to tell. To hear them in person, plan your trip at tnvacation.com. Tennessee sounds perfect. We're not interested in something where we're not going to find out for five or 10 years if we're on the right path. We're obsessed with tight learning loops. So tell us a story about how this would change the world. Sounds like you have that. And then for a small amount of money and a small number of months, certainly under a year, how are we going to find out

that we have evidence, that is not progress, evidence that we're on the right track. If you don't have, if your moonshot isn't structured that way, it doesn't mean you shouldn't do it, I guess. It just means it wouldn't fit at X because it's not, we're obsessed with efficiency and you can't drive efficiency if you don't have tight learning which by the way makes a bunch of health care stuff pretty hard for us to do and a massive transform to purpose is what you're telling the world it's like this is who I am this is what I'm gonna do this is the dent I'm gonna make

in the universe Astro you do not disappoint my friend. And it's so I could listen to you and I have and thank you for the wisdom. My pleasure. You know, it's wisdom that I want you all to internalize. If we're easy, it would have been done already. If you think you know how to do it, probably not a moonshot or else you're really lucky. There's a couple of things and please go to the

mics, but I've got to pull out a few more things from you. One of the things I learned from you that I love is the idea of a pre-mortem. Do you want to share what that is? Sure, so there Sure. So we get excited about what we're doing, and that is an emotional process that is hard to fight. And so finding intellectual architecture to give to teams to help them get out of those emotions for just a little bit and sort of structure their thinking differently. We have lots of those at X.

I would recommend that you practice some of them. But one of the ways to do that is to ask them to come up ahead of time with what's going to go wrong. If you're really excited, you can end up with blinders about what's going to go wrong. So there are different ways to do pre-mortems, but here is an example that I really liked. It was about two months before Wing was going to do its first public launch. This is maybe 2013, 2014.

And I could feel that the team was suffering from launch fever, where they were just kind of excited about how great it was going. And maybe it was going to go great. Maybe. And I got them in a room and there was pads of paper and pens in front of the seats. Everyone sat down and I said, it's three months from now, one month after our launch. And it was an unbelievable failure. I mean, just gut-wrenchingly bad. So bad we can't even look each other in the eyes when we walk down the hallway. And you know why it was so bad.

You knew it the whole time. This is a test, two minutes, write down why the whole thing blew up in our face. And that, like, 16-year-old, I want to get an A on the test, kicks in, and everyone starts scribbling frantically all of the things that are going to go wrong. And afterwards, we spent several hours, like, organizing the thoughts and talking about it. Everyone starts scribbling frantically all of the things that are going to go wrong.

And afterwards we spent several hours organizing the thoughts and talking about it and nothing went wrong. Maybe nothing would have gone wrong, but I seriously doubt it because we then did two months of work to get ahead of all those problems. That's an example. There are other ways to do premortems, but that's an example. And I love that. So simple.

Is that a nugget you guys can bring back to your companies? It's extraordinary. One more thing, then we'll go to your questions here. I asked you at our patron lunch how many companies you've killed. Now, as entrepreneurs, we love our

darlings, and being proud of how many companies you kill is not typically what people think about. What was that number again? 2,000. 2,000. Roughly. And we have a graveyard.

We keep track of them because they do come back. They've come back several times. Technology changes. Technology changes. So one of the ones that was the most painful for us to kill, the internal name for it was called Foghorn. We were so proud of this. We had a working system. It was about the size of a couch,

for turning seawater into methanol using green energy. You could stick it right in a gas tank and it would go. Unbelievable, save the world kind of stuff. Except we couldn't convince ourselves, this was about six years ago, that the cost gallon of gas equivalent was going to get down below $15, even if we were kind of optimistic about a bunch of things. So we shut it down. And the team was awesome about that.

We published in the International Journal of Greenhouse Gas Control the sort of science side of what we did. We published in Fast Company the business side of why we killed it so that other people could build on top of this, and then we went on with our lives but we'd also been working on green hydrogen for a long time and it's now turned out that we might have a real breakthrough in how to make green hydrogen way cheaper but wait a second the reason we killed that thing like five six years ago was that the single most expensive part of making a synthetic fuel was getting the hydrogen.

Oh, wait a second. Maybe we could go back there. Amazing. Can you describe, is it weekly or monthly when you have your ceremony to kill your companies? It's more mixed now. There isn't a single day when we have it. Describe what it's like.

So most typically, these these are projects sometimes we've closed down projects as big as you know 50 or 70 people um and there's a lot you know a 50 person team at x is usually functioning like something at least double its size because we have a lot of shared infrastructure so that we don't have to find jobs for you know 100 people if we close down a 50 person team that was using a lot of that infrastructure we only have to find jobs for, you know, 100 people if we close down a 50-person team that was using a lot of that infrastructure. We only have to help 50 people find new jobs around X. More typically, it's three, four, five people

we're going to need to find jobs for that sort of functionally, when they show all the people working on the teleporter project or whatever it is, there might be 20 faces on the slide, but only maybe three, four, five people are going to need to find new jobs full-time. And we will, at our all hands, which happens every two weeks, celebrate them, give them a chance to describe what excited them about the idea in the first place, what experiments they ran, why they've decided to kill that thing, and then we celebrate them as part of that that gets their the failure into

the moonshot compost it also allows for people to see that a failure is not a bad thing it is an experiment where we have successfully decided not to do more of it for good reasons the awesome kick-ass it was a gorgeous idea super well executed stopped at the right time, what could be better than that? But you have to practice that and celebrate that in front of everybody for people to start to feel it. Yeah, so much wisdom.

Ultimately, you're giving back to the company the time you would have wasted going forward, all the money would have wasted. So celebrating that is extraordinary. George, let's go to you first. Okay. Hey, Asriel, that was awesome. Okay, let's go to you first. GEORGE SIEMENS- Hey, Astro. That was awesome. OK, great.

The mic's on. So I run an emerging venture studio here in LA. We're just bringing to market our first two moonshots. So hearing everything you said was just totally awesome. I have a two-part question. So the first one is, as Google's kind of like the OKRs king, and you talked a lot about habits, not outcomes. So I imagine you've kind of reframed your OKRs around driving the habits.

I'd love to hear how you approach that from top down. What is Google X's OKRs and down to the individual? How have you guys reframed that from maybe the classic Google model? Great question. I think there are probably situations in which OKRs can be a good way to drive things. I think it is a horrendous way to drive moonshots. Really, an OKR is something that you pretty much care about, but if you get 70% or 80% of the way, you celebrate it. I find that really bizarre, especially with moonshots and I think maybe more generally in life, whatever you're trying to do, there are actually two buckets and neither of them is 70% is okay.

There are like no messing around, we have to get these things done. Even if we're a total experimental mode, if you want to run an experiment but you're expecting something from me two months from now, I need to deliver that to you, not like 70% delivered to you, you can't run your experiment. There's like the no messing around stuff. That's not really an OKR, like 70% is OK. That's like, get it done. That should be a small set of things that are these non-negotiables. Beyond that, everything else should be an audacious goal. It should be an experiment. You don't even know what the right answer is. How can you set your key results most of the time when the real thing is, I don't even know if we should go over there and I don't know

what we're going to find. You should have a reason to go looking over there, but you shouldn't be determined to find something that just blinds you to the thing you're trying to learn. So we structure what we do around audacious goals and try to help people practice learning where they say, we're going to try to do this thing, I bet it doesn't work, we're going to bust our ass trying to accomplish this or learn this or head in this direction, and we're going to report back to you all of X next quarter on how that went. And frequently they'll just give themselves a zero or say, you know what, halfway through the quarter we realized that wasn't even the right thing

to be working on and we just headed in this other direction instead. And that's okay. Patrick, mic three. Thank you, George. Thank you, Astro. That was awesome. As a bootstrapped company

with the team having equity I struggle with the balance between the moonshot we drive habits to hey we actually need to succeed on a monthly basis why we grow into that how do you find that balance right we choose not to go the VC route so you know they and they know the financials there's full transparency so how do you find that balance i mean i'll give you the answer i don't mean to be depressing but i want to be transparent with you i don't know that you can do a moonshot while people have to be worried about their kids college fund at the same time i think that that isn't rational and so as a result

while you're at x five six seven years probably till you're at least 100 people as a team, you don't have equity in what you're doing. If it turns out that this option, not a business, we're exploring, we're answering the question, we're buying options in the future for Alphabet. If we then decide to turn it into another bet, at that point, there can be equity and you, the founding team, can get equity alongside of Alphabet and own this business once a lot of the risk has been removed because then your interests and their interests haven't diverged.

But it doesn't make any sense for me to say, kill your darlings and you've been paid for the last couple of years in darling stock options. Like, that becomes impossible to kill. But think about what that means. That means that intellectual honesty becomes harder in the face of financial incentives.

So you had better not give anyone financial incentives while the single most important thing is exploration and intellectual honesty. Once it's flipped and you've done more than 50% of your exploration and you want to harness entrepreneurial zeal, then stock options, then equity makes sense. There will still be some intellectual honesty, but it will go down some relative to the blast through the walls attitude that stock options or equity drives.

Astro, we need to hit one other thing you've talked about in the past we didn't touch on today, which is you have an organization with a number of people running medium and large size companies. And I want to do moonshots inside my organization. And it's like, no, no, no, no. It's need to put the moonshot organization on the outside. And your key point that you've made and like you to amplify on is, this is my 10% people and this is my 10x people. Can you play on that a little bit? Sure.

I mean, I don't think that's totally fair to Google. I think Google is still a very inventive organization in lots of ways. Not saying in alphabet. Well, but I am actually. I'm saying the reason that X can do what it can do is because we are part of a company that does have people working incredibly hard to make sure that over the next year or two, good things happen and the lights are kept on. And we are the 10%, not the only 10%, but one of the

important 10% as it were for Alphabet. So if I were running a large company and I wanted to start up a moonshot factory within my company, what I would do isn't say to the people who aren't in that like you stop being innovative now, that's not a thing, but to say to this relatively small group of people relative to the size of my overall company, I'm going to create a meaningful barrier between you and the rest of this company. Don't worry about what our company is now, and there's barriers to protect you from all of the antibodies and innovators' dilemma that can tend to kill organizations like this. I want you to go figure out what problems we should be solving in 10 years

and how to solve them. That's your job, Moonshot Factory. That's my job for Alphabet, is to help them get into new areas where we have at least some, you know, the beginnings of some solution. One of the things I heard you say as well, which I want the membership here to hear,

is if you're in the Moonshot group, I don't want you thinking about 10%. I want you thinking about crazy, you know, the day before something is truly a breakthrough, it's a crazy idea. For sure. When someone brings an idea at X, the single most likely reason we would stop doing it is because it's too obvious and it will probably work. As soon as somebody brings something to us that doesn't sound crazy, we're like, yeah,

that'd probably work. Nope, not interested. Because if we can all say, yeah, that'd probably work, everyone else in the world is going to like, yeah, that'd probably work. Nope, not interested. Because if we can all say, yeah, that'd probably work, everyone else in the world is going to say, yeah, that would probably work. Once you've proposed something that fits with those three circles, huge problem with the world, radical proposed solution, breakthrough technology, you have a hypothesis we could go test, and it sounds bonkers, and I'm sure you're wrong.

The answer is awesome, gorgeous idea. You're're wrong. The answer is awesome, gorgeous idea, you're probably wrong. What is the fastest, cheapest way you can explore that idea, verify that you're wrong, so we can move on to the next thing? Because if you have a 1% chance of being right, which is sort of typical of moonshots, if your pride is going to be connected to being right, you have a 99% chance of being miserable at X. You have to get into the mode of being proud of killing things for good reasons, not being proud because you were right about your idea,

because you're probably not right about your idea. Mike. Yes, I was wondering, is that space elevator in your opening slide one of your moon shots? No, we did investigate it. Weirdly, we investigated it somewhat seriously after the New York Times erroneously, this is like 2011 or something, said we were making one. And so we just went a couple rounds sanity checking, can we make one?

And the strength to weight ratio isn't there yet to make a space elevator you'd need to have something that could make you know tens of thousands of miles of something as strong relative to its weight as carbon nanotubes we're just not there yet so let's go to zoom francois what's your question my friend Francois, what's your question, my friend? Hey, Astro. Wonderful implementation. We enjoyed it. We have started a company in the

oncology space, and our moonshot is to cure head and neck cancer. And it's a wonderful opportunity. A lot of genetics behind it. A lot of very, very smart people helping us doing that from UC Moore Cancer Center and

NYU. And we have a couple of platform technologies that we're working on that are very promising, like a very super-duper animal model for head and neck cancer. My question to you as a startup and looking at the world of possibilities here in terms of therapeutic development. You know, I understand, you know, maybe it's not the time for a moonshot, but if I really want to transform the world

and develop something extraordinary in a very difficult cancer to treat, that's what I'd like to do. I'd like to experiment and so on and so forth. Where do you find the source of money to do that i suppose that this is difficult but have you had opportunities with financial peace to find this first part of the moonshot how does it work well i'm not sure if this is clear i mean we don't raise money from the outside that's not really how it works. We get money from Alphabet and we run a process which, as I was describing it, produces a lot of what looks like waste, at least after

the fact, because things didn't work out. But, you know, roughly once a year, we produce something that Alphabet's pretty excited about, like more recently intrinsic or everyday robots, which have now become, have graduated from X in the last year or two. So we don't go out and seek for money. If your effort was at X, and I'm not pulling you into X or telling you you have to do it this way,

but if your effort was at X, then we would say, we're not interested in something where we're not going to find out for five or 10 years if we're on the right path. We're obsessed with tight learning loops, so tell us a story about how this would change the world. Sounds like you have that. And then, for a small amount of money and a small number of months, certainly under a year, how are we going to find out that we have evidence, it is not progress,

evidence that we're on the right track? If you don't have, if your moonshot isn't structured that way, it doesn't mean you shouldn't do it, I guess. It just means it wouldn't fit at X because it's not, we're obsessed with efficiency and you can't drive efficiency if you don't have tight learning loops, which, by the way, makes a bunch of healthcare stuff pretty hard for us to do. Nora. When you take an idea out of the freezer, do you have a resurrection ceremony? And

if so, what does that look like? We don't. What an awesome idea. God, it's a miss. Our love of the idea of a resurrection ceremony. Let's hear it for Nora's resurrection. I'll give you a hug afterwards, and we're going to do that at our next Dio de los Muertos. There you go. Happy Easter. You're right. We should do it at Easter. That's even better. Daniel, mic seven. Thank you. Loving this session. So you're an idea factory. How do you start to think about capital allocation on an idea-by-idea basis?

I get that there's kind of a meritocracy around the best ideas earning more weight, but you're allocating capital and focus with a lot of competing new ideas to pursue. So how do you start thinking about capital allocation, and do you have any concentration concerns? Is there a certain point where you say, okay, we're too heavily weighted on this idea or this type of idea? Yes, certainly that the conversation, oh, how did we get to the place where almost a third

of our total resources on one project that has happened before and that's not a good thing. It ends up being a little bit feeling too big to fail, which is dangerous given the process I just described. That stopped being a problem for us. Like this is one of the many things we did wrong, learned about it, got ahead of, and now that doesn't happen anymore. I would say here's the most non-obvious and an uncomfortable part of our capital allocation process. Everyone at X hears me say what I've just said to you, and they nod, they feel somewhat inspired, and they kind of go back and at least sort of do business as usual

because they're really used to just being an entrepreneur and I'm really smart and I'll build some cool stuff. So we are purposefully under-resourcing the teams because I don't want them to do it the normal way. it is crazy making for them because they think they have a great idea and if mean Astra would just give me like twice the resources I could do it but I could do it is shorthand often for I could do it the normal way I don't want them to do it the normal way I would rather turn it off it is our job to look for cheats in the video game of life. That is what we're being paid by Alphabet for, to find these kind of end runs around the problem,

not to spend a huge amount of money blasting through the middle of the problem. But that is a very painful thing when you're on the receiving end of that capital allocation and have maybe intellectually, but not in your heart or in your gut, really gotten what we're doing yet. You can feel like, I don't love you, we're not supporting you because you're under-resourced. That is an example tension that happens at X.

Brilliant. Thank you. Let's go to Edwin at mic four. This is great. It's so refreshing. So I'm working on a moonshot to reinvent the broken recruitment industry with a blockchain smart contract, which is inevitable, it's gonna happen. But a leading crypto researcher with a million followers

posted a tweet saying, well, whoever does this is gonna be a unicorn within a year. And so I'm going through all of the respondents. I think there might be 50 teams all working on the same thing. The thing we're working on is a unification of an entire industry to align incentives. So I've written a white paper. People are all excited, but every time I'm talking to potential co-founders, they're posturing around why they're the best to do it and almost wanting to compete. And I want to try to unify and collaborate with people. So just what general advice do you have for me to how to take, you know, your talk

to people who actually want to, in a way like posture and say, like, you know, I'm the best person to do this alone. I don't know. I mean, collaboration is a very powerful tool that is massively underused in most of the world. I think exercising a lot of trust, you'll get hosed semi-regularly if you exercise what is thought considered too much trust, but I also think you'll get paid back. You will net to the positive with the opportunities for collaboration. So finding even a few people who will join that club might be a way to get the ball rolling. I would also say that at X, you could look at Alphabet and say it's like the ultimate platform

building business. Surely everything that X is doing could be very platformy, so they're probably building a platform from the beginning. It's actually kind of not like that. What we would say on every single thing we're doing is let's aspire to a platform that can help the world, but let's also shoot for a beachhead where we don't have to boil the whole ocean to prove we can boil the first bucket of water. Let's get a bucket of water, let's boil it, show that we can do that, then we'll get a swimming pool,

we'll boil that. So I would also try to design some way for you not to need everybody to participate in order to win. Like find a way where you can win. Design it so that when one person joins you, you and they are better off. I think that'll be a faster path to everybody joining you than trying to get everyone to join you from the beginning. Beautiful. Let's go to Zoom. Andrew.

Thank you, Peter. Arthur, it's been one of the best talks I've heard in my whole career. It's been really amazing. Thank you for that. Let's hear it for Doug. Come on, baby, let the blue tide roll. Come on, baby, let the blue tide roll. I mean, you inspired me for a lot of ideas for sure for me and my team and I'll make

sure that everybody my team sees this call. I have a global team located in many countries Brazil, Uruguay, San Francisco, China, Singapore. I wonder how you think about global talent in your case and does X work mainly in one area of the country do you how do you diversify across the globe to still keep you know the ideas flourishing but at the same time harvest maybe a higher diversity great question great question this is an awesome example of how we harvest you know open-mindedness and everyone having the opportunity to be right and to prove me in particular, but all of us at X wrong. I've been on this thing for a long time. I wish we could have offices around the world, but I don't know how to do that. I can't even get people in the same

floor of the same building that I'm in to be doing what I'm talking about. Like, what I've described to you is aspirational. We're doing a weak version of what I'm describing. It's probably better... Our joke is that we're the worst moonshot factory in the world except for all the other ones, which is like, you know, we could have some pride in what we're doing, but we have a long way to go still. So I've been resisting having offices...

We have people sprinkled all over the place, but we haven't really set up a proper office. It's mostly been these sort of rogue groups. I'm like, fine, I won't fight that one. And finally, someone convinced me about a year ago that we needed to try it. And she was just so persistent and she's been at X for a long time. And I said, fine. So she's now set up our first real X satellite office,

which happens to be in Tel Aviv. And I told her, I don't care what you do. I don't care what you produce. There's no measure of success for me in this experiment other than how X-y are they. If you can get those people in Tel Aviv to be at least as X-y, at least with the program that I've described,

as the people who are in our building, you win. And no matter what they produce, if that's not true, you lose. It wasn't a success. I'm not mad at you, but it won't be a success, and we'll close the office down. It's only been nine months, and I was totally wrong. I think what I have learned is I was right, big asterisk, unless a really XE person goes to that office and opens it themselves

She was so personally sold on the things that I've been talking about that She's actually been more successful than me because she has like eight or ten people right now and day and night She's with them talking like this and that's more successful than having like hundreds speaking times as many people passionate Israelis when you go to our last question here from Yali thank you thank you for setting the office in Israel you know we really need it so that's good for us and unfortunately in Israel we all the time have to reinvent ourselves. But short question. Okay. I want you to tell us the story of what happened with Google X because I think it's coming back now, if I'm not mistaken. So it's a resurrection story.

So can you tell us about that? You mean literally how the word Google left our brand? No, no, no, no, no. Google Glass. Oh. Google Glass. Oh, Google Glass. Yes, sorry. I mean, the very short version of that is we had a vision of how AR would work into people's lives,

professional lives into their personal lives. And I think, and it's fine, it's how it is, we were too early. That part I'm not at all sorry about. That's kind of our job to be somewhat too early. The part that we got wrong was we pretended we were done when we weren't done. We had built an awesome learning platform, and somewhere along the way, because X was still young, we started kidding ourselves and kidding the rest of the world that it was a product when it was not yet a product.

And that then set expectations really high that we couldn't meet. That was really bad. So it looked like Google Glass went away, but that's actually not what happened. It was focused on the B2B market. It's been at X for on and off, actually, for the last 10, 11 years.

It's been in the rest of Google the rest of time. Google Glass is still produced. It is being used in professional settings like doctor's offices and wherever. It's actually being used in prototyping for some of our moonshots. And yeah, I don't think it's dead. So maybe that was what you're referring to. Ladies and gentlemen, give it up for AstroTeller. Thank you. Everyone, this is Peter again. Before you take off, I want to take a moment to just invite you to subscribe to my weekly tech blog. Today, over 200,000 people receive this email twice per week. In the tech blog, I share with you my insights on converging exponential technologies, what's going on in AI, how longevity is transforming, adding decades to our life. In the tech blog, I often look at the 20 meta trends that are going to transform the decade ahead and share the Thank you. enter your email and let's start this weekly conversation let me share with you the incredible

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