Friday Wrap-Up: A Guru of Simplification and the AI Slowdown Debate

Marthe Skaar (0:00)

Hi, everyone, and welcome back to our Friday wrap-up. I'm still Marthe Skaar.

Nicolai Tangen (0:05)

I'm Nicolai Tangen.

Marthe Skaar (0:06)

And this week, I'm in Singapore, and you, Nicolai, you are in?

Nicolai Tangen (0:09)

I'm in New York.

Marthe Skaar (0:10)

So a bit of a time zone difference here.

This week's episode featured John McNeill. Who is he, Nicolai?

Nicolai Tangen (0:27)

Well, he is one of the gurus when it comes to simplification of processes. He worked with Tesla, with Lululemon, and so on. And I think the book he wrote called Algorithm is so powerful. And basically what he talks about is that you have to question absolutely everything that you do. You have to delete unnecessary steps. You have to simplify everything, accelerate the speed and then automate at the end.

It's so important for so many companies, including us in the fund.

Marthe Skaar (0:57)

Yeah, it's really fascinating. I have it in front of me.

It has a very red cover. And the first thing that you addressed is you should question every requirement. But why is that so important in business?

Nicolai Tangen (1:12)

Because we just take so many things for granted. And there are so many stupid rules from prior times that we have just never questioned. And people just take it for given. There are so few people who just really try to push the barriers and get rid of necessary rules, which are there for no reason. So really, really important starting point.

Marthe Skaar (1:33)

And I think it also alludes back to what we talked about earlier about the younger and older companies, right? Where the youngers maybe don't have all this legacy and all these things. Second rule is delete every step.

Nicolai Tangen (1:46)

Well, you don't necessarily want to delete all the steps, but you certainly want to delete everything which is superfluous and unnecessary. Ideally, you want to delete so many steps that you delete one too many, and then you have it to actually add it back.

And that's something that also, you know, Elon Musk talks about in his book, The Importance of Doing That. That's what they've done in SpaceX. That's how they work in many different ways.

Marthe Skaar (2:10)

Yeah, exactly, because the rule is actually delete every step that is unnecessary. If you apply that to the fund, what type of step can be deleted and what can't?

Nicolai Tangen (2:22)

Well, that's what we are going through now. Of course, there are many steps that we have to have for compliance reasons, which are necessary for the governance structure and so on. But there are also things in terms of reporting frequency, how often you revalue assets such as real estate and so on, which we are questioning and which we are changing, which is basically simplifying what we do.

Now, one of the things which is interesting is that when you get new people joining your firm, they oftentimes question things that you do. But within a month, they just take the rules for granted and then don't question them anymore. So important when you people join your firm, that they keep a list of all the things that they think look very stupid, and then that you basically get a rundown within a month.

Marthe Skaar (3:09)

Yeah. So ask them for feedback within a month.

Nicolai Tangen (3:11)

Yeah.

Marthe Skaar (3:12)

You do quite a lot of that. But okay, so it's simplify and optimize, and then at the end, it's automate. He really talks about the importance of doing that last.

And what can go wrong if you don't do it.

Nicolai Tangen (3:24)

Well, really important because when you automate, and sometimes when you put AI on top of things, it's like pouring cement on top of a process. If the process is not simple enough, you just waste a lot of energy. So that's really, really important. Now, I think it's interesting because it's all kind of simplification thing and abstraction is something that I love, not only from business, but I like it in art too.

So I'm a big fan of abstract art where you reduce images down to its smallest denominator and it could be so powerful and so beautiful. And I think the same goes for business.

Marthe Skaar (3:59)

Signal the same things, yeah. But how many companies do you think are jumping straight to automation now when you think about AI and everything, you're just adding AI to a bad process?

Nicolai Tangen (4:11)

It's a very common mistake that people do. I'm sure we do it some places too, but you just really, really have to work on all the steps first so that you don't lock in unnecessary complexities. I think that's really, really important. Now, before you automate, you also want to accelerate the speed.