What is the "Digitization of the Physical World" according to the Uber founder? - The essence of innovation opened up by trust, purpose, and efficiency
In this article, based on a conversation with Uber founder Travis Kalanick, we explore the essence of AI (artificial intelligence), risk, and the innovation that opens up the future. His words contain many insights, such as entrepreneurship centered on the "digitization of the physical world" and a "Massive Transformative Purpose (MTP)," as well as "building trust to overcome resistance." In this article, we will summarize the professional content in an easy-to-understand manner and explain it with quotes and examples.
1. The trajectory of innovation as seen from the founding of Uber
1-1. "Press a button, get a ride" - The moment of birth
Kalanick, along with co-founder Garrett Camp, came up with the idea of "calling a car with the push of a button" while staying in Paris. It was around 2008, when no one in the world had even thought of "calling a car with an app."
They initially planned to prepare several luxury cars (black sedans) themselves and contract directly with drivers. However, Kalanick pursued efficiency, thinking, "We should be able to utilize existing vehicles and drivers," and established a so-called "asset-light" business model.
"Back then, it was considered impossible to get a car with the push of a button. But that 'impossible' became the breakthrough for innovation."
1-2. The key to growth is "staged expansion"
"Try it in San Francisco first, and if it goes well, then move to New York." Uber spent its first year verifying and improving the service in its home city of San Francisco. From there, it expanded rapidly to New York and then to over 70 countries around the world.
However, it is also said that "they were in such a hurry to expand globally that they even used a term like 'PMD (Parallel Multi-continental Deployment),' which sounds like nuclear development," and behind that was a strong sense of crisis that "if Uber succeeds, copycat services will inevitably appear all over the world."
2. The relationship between innovation and risk
2-1. Risk should be "minimized," not "taken in large amounts"
It is often thought that "innovation equals taking bold risks," but Kalanick's way of thinking is a little different.
"Innovation can be expressed as 'Big Progress (Big P) ÷ Little Risk (Little R).' Risks should be compressed as much as possible, and as they approach zero, innovation becomes effectively infinite."
Investors and those around him often tell him to "take risks without fear," but he emphasizes that "the effort to reduce risk is what accelerates innovation." On top of that, the secret to success is to decide to expand at the perfect timing.
2-2. Determining timing and "failing too early"
For many successful startups, "timing" is often the deciding factor. If you are too far ahead technologically at a stage where the market is not ready to accept it, you are prone to "failing because you are too early."
In Uber's case, it started around 2009, when the spread of smartphones, location information services (GPS), and payment services overlapped, and the support of those external factors brought about "just the right timing." On the other hand, it was not just "lucky to hit it big," but also largely due to the fact that they kept confirming market needs, based on the reality that "services that are not wanted will never grow."
3. Purpose (MTP) and organizational culture
3-1. Know your own "sport"
Kalanick places importance on "correctly understanding which sport you are suited for."
"Know your personality and strengths, and identify the 'sport' you should be playing. I understand that the 'digitization of the physical world' is my sport."
For example, at Uber, he digitizes "physical movement," and at CloudKitchens, he promotes a "food business without storefronts." Both have the common theme of "digitizing the world that deals with visible atoms," and that is his "sport."
3-2. Penetration into the team and shared values
He also states, 'When hiring people, it is important to understand whether they understand their own sport.' Just as Uber experienced cultural friction during its rapid growth, if you gather a large number of people at once, cases where values diverge are inevitable. Therefore, it is necessary to articulate the basic values that the organization should share (e.g., valuing truth, pursuing customer happiness, and balancing speed and efficiency) and for all members to work consistently toward them.
4. Digitizing the physical world
4-1. Controlling atoms with a computer-like mindset
'Digitizing the physical world' also means building what Kalanick calls an 'Atoms-based Computer.' The digital world runs on three elements: 'CPU (computation),' 'memory (storage),' and 'network (movement),' but it can be considered that the physical world also has three major elements: 'manufacturing (making products),' 'warehousing and real estate (storing things),' and 'logistics (moving things).' Uber can be seen as an example of digitizing the 'logistics' part.
4-2. From cars to kitchens: The CloudKitchens concept
Just as Uber makes movement more efficient, can the 'food provision process' also be made more efficient? The idea born from this is CloudKitchens. If restaurants can utilize 'delivery-only' cooking facilities and delivery networks without having large storefronts, the potential to provide meals at low cost and high quality expands.
His view that 'in the near future, cooking meals might change to a preference as much as riding a horse' suggests a future where 'people who love cooking stand in the kitchen as a hobby,' while daily meals can be outsourced cheaply.
5. Building trust: How to turn 'resistance into an ally'
5-1. Understanding the 'immune response' to change
The intense backlash Uber received from the taxi industry is a famous episode, but Kalanick asserts that 'resistance to change is a natural phenomenon.'
'Those who bring about change put great stress on people who want to continue with traditional methods. That resistance is like an 'immune response,' and they are instinctively trying to protect the status quo.'
If you try to crush this 'immune response' with force, unnecessary conflict arises, and time and costs increase. On the other hand, he argues that if you can build a solid relationship of trust with stakeholders, you can turn 'resistance forces into allies.'
5-2. Common goals and consensus building
Despite the backlash, Uber gained the support of many users as a 'cheap and easy-to-use means of transportation.' Although negotiations with local governments and taxi companies were difficult, as long as there was a common goal of 'user benefit,' it was accepted gradually over time.
In the cloud kitchen business as well, if the challenges faced by the food and beverage industry, such as 'high fixed costs' and 'labor shortages,' can be solved, the industry's reason for resistance will diminish. What is important is 'to clearly demonstrate the benefits to stakeholders and carefully carry out the process of finding common ground.'
6. Future of work: Will AI take away jobs?
6-1. Will the day come when 'AI deposits money into a robot's bank account'?
Against the backdrop of the rapid evolution of AI, concerns are growing that 'human jobs will be replaced by AI.' However, Kalanick presented a unique perspective: 'Robots do not have bank accounts.'
'Even if the cost of goods and services drops due to AI, the profits remain with humans or companies, not in a robot's account. That creates new demand and keeps the economy moving.'
Of course, after prefacing that 'some traditional jobs will disappear,' he also states that 'new areas where human value can be demonstrated will expand' even more than that.
6-2. 'Services that bring value will survive'
What kind of business will survive with AI? The answer is very simple and boils down to 'whether or not you provide a service that is valuable to the customer.' To borrow his words, it is because 'services that do not improve anyone's life will fail.'
Taking the consulting industry as an example, companies that can shift toward higher value-added directions, such as 'building mechanisms to support client companies' AI adoption' rather than just 'providing advice on a man-month basis,' will likely survive.
7. Leadership and Mindset
7-1. The 3 Steps of 'When to Quit'
It is said that while continuing to take on challenges, one is often asked, 'When should you give up on a business?' Kalanick organizes this into three questions.
Do I still 'believe' in the business?
Am I the 'right person to see it through'?
Is there a risk of 'serious physical or mental damage' if I continue any further?
He suggests that if the answer to the first is 'I don't believe in it,' the second is 'I am not the right person,' or the third is 'it will cause significant harm,' then you should consider withdrawing.
7-2. 'I am not in control'—But pushing forward anyway
As a business grows globally, the number of 'uncontrollable factors' increases. However, he says it is important to accept that 'it is impossible to control everything' and to 'persistently continue doing what you must do' regardless.
'No one can control the world. I am just shaping the future that I see.'
8. Concrete Example: The Future of CloudKitchens
8-1. Changing the common sense of 'eating out'
The CloudKitchens business model envisions a future where it is standard for meals to be 'delivered from facilities dedicated to cooking' rather than 'going to a restaurant.' While there are currently many challenges such as delivery costs and the cost of installing kitchen equipment, once it is sufficiently efficient, it will likely save a significant amount of time spent on 'grocery shopping and cooking.'
8-2. Automation through AI and robots
The food and beverage industry is facing a serious labor shortage, and concepts are emerging where AI performs demand forecasting and robots handle mass cooking. Kalanick's view that 'AI and machine learning will evolve as "AI for atoms," optimizing not just digital information but actual physical movements,' suggests full automation of the cooking process in the near future. On the other hand, since parts of 'food culture' and the 'dining experience' involve human creativity, it is highly likely that new added value will be born there.
The greatest lesson to be learned from Uber's rapid growth is to create 'overwhelming convenience and value for customers' and to have the courage to 'question and reinvent existing rules.' In doing so, it is essential for long-term success to view resistance as an 'immune response' and to find ways to build trust even with those who oppose you. The vision of the 'digitization of the physical world' that Kalanick repeatedly emphasizes suggests a future that brings 'time and comfort' to people by thoroughly streamlining the process of providing goods and services. While the evolution of AI and the development of robot technology will replace some jobs, they will also bring new demand and innovation. Ultimately, companies that create 'products and services that truly improve customers' lives' will survive, and that is where entrepreneurs and innovators have room to challenge themselves. Setting a 'Massive Transformative Purpose (MTP),' correctly identifying your own 'arena,' and providing new value while minimizing risk are likely the conditions required for companies and leaders from here on out. And in that process, entrepreneurs and leaders who become the 'protagonists of change' must push forward with the resolve that 'I am not controlling the world, but shaping the future I see' as individuals.
These are the essentials of organizational building that look toward AI, risk, and the future, which emerge through the dialogue with Travis Kalanick. How can we update the world into a better form while learning from his journey? Perhaps the era has arrived where everyone can hold their own vision of 'solving things with the push of a button' and realize it.
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