Disruptive innovation, education and open data: Tim O’Reilly, CEO O’Reilly Media

In this CXO Talk interview, Tim O’Reilly, founder and CEO of O’Reilly Media, discusses disruptive innovation, education, open data and changing the world by spreading the knowledge of innovators.

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(15:32) And it was a meeting with this guy who is a chief economist at GE. He is just like super engaged with the same problems and it’s just like, oh my god, this is so awesome!

(15:43) You know, we are thinking hard about how we are going to solve these problems for the future. I met recently with Tom Pritzker, the chairman of Hyatt and he is not a guy that is just sitting there, you know being reactionary against the future. He is like grappling with the real problems of ‘how do I transform my business,’ in this era where you know the rules have changed. And since everybody from old industries to new industries see the future and they are trying to guide their company towards that future. And sometimes it’s by sculpting what you’re doing. I mean certainly my own career, where I was originally a disruptor in publishing, and then publishing itself got disrupted and you know we have moved into other businesses, and we’ve had to kind of manage legacy and new stuff.

(16:43) It reminds me somehow back to this idea of having fun, Paul Hawken, once wrote a book called Building A Business, and in it he said, ‘Every business has problems. The difference between a good business and a bad business is that a good business has interesting problems.’

Michael:         (17:09) You know, when I was in high school I wrote Paul Hawken a letter, this was way before the days of the Internet. Because I just admired him so much, and my letter was about how I’m trying to figure out what I should do. Should I get an MBA. And he wrote back you know a paper letter, and he said I never really got an MBA, so I can’t really tell you what to do.

You know part of what you are describing though seems to me, in terms of investments and technologies and so forth, there is a time horizon element because the entire venture or much of the venture capital industry is structured around very short time horizons, whereas in your case you incubated or developed your business organically over a very long period of time.

So it seems like what you’re describing in some sense to some degree is almost incompatible with the typical venture model of that just demands, intense growth very fast.

Tim:                 (18:22) Yes and no; there is the myth and the reality. The reality is you know venture capitalists are better in many cases. I mean, the really good ones actually know how to get in there and help build a company, but there is a huge amount of venture capitalists who are just like they are sitting at the craps table or roulette table and they’re putting their money on such and such and hoping.

(18:56) Yes, they locked that exit. But the good ones know that they are building a business, and they know that they are building a business for the long term. And you know, even when they fail that’s their ambition. And I actually find that there are a lot more entrepreneurs in my opinion who have bought into the quick flip I mean it’s actually a system, both the VCs and the entrepreneurs.

(19:29) But when Larry and Serge started Google, they were not sitting there looking for the flip. They had an engine they had their teeth into and had an interesting problem, and you know they were doing this thing as a project and then it kind of out grew when they were getting picked out at Stamford. You know, and you look at that and then some people came along and said okay, we’ll help you become a business, and then they get some real coaching and some help. And then they build a big world changing business.

(20:03) I think that is really the ambition of every VC and should be the ambition of every entrepreneur. And it doesn’t have to be as big as Google. You know, I looked in my company and there are 500 employees and a couple of hundred million in revenue, where we have I think changed the world, created meaning.

(20:22) There is a lot of Internet companies and very big ones where I started O’Reilly books. In fact one of our slogans that came out that year around 2000 and Brian Irwin again said that should be our slogan, ‘create more value than you can capture.’ You know, we sold you a $35 book, and you made a billion-dollar business, that’s pretty awesome.

(20:50) And it’s exciting, and I love that and I remember once I was in a conference and somebody came up to me. I can’t remember who he was and said, you know I done something innovative and I was really scared that I was going to lose the job. Then in one of your talks, you said it was really cool, and so instead I got a promotion. You know and I love that story.

(21:14) Here we had that at Code for America and I remember it was when we were working on open data in the first year and I think it was in Philadelphia, and this guy was like, well you know I’m not supposed to do this, but I’m going to give you this data that you are asking for. And then they made something of it and it was like, by the end of the year he was a hero.

(21:36)That kind of change in culture that can happen in the course of you know, that’s kind of disruption to, you know when people who have had successful jobs in high-tech and now going to work in government to try and fix really hard problems, that’s disruption.

Vala:               (22:00) Tell us about Code for America. You just mentioned it and our audience would love to know more about that.

Tim:                 (22:06) Yes, first disclosure, its founded and run by my wife, Jennifer Polka, so I’m very definitely an interested party and I’m on the board as well. But a lot of what we do and one way you can think about it is a Peace Corps for geeks. It started out with the program, The Code for America Fellowship, which put small startup teams in the cities to work on interesting problems, and there is a sort of number of route to scaling from there.

(22:40) You know sometimes  the city adopts the technology and it becomes the official program there, but we are also really not just looking to the product, but also to the culture chain. So they go, oh we thought that was a $6 million project that we had to hire a vendor for. You did in six weeks; there must be something wrong with our process.

(23:06) You know, there are all these people that would write white papers about bringing better technology to government, although there is nothing as effective as actually demonstrating that it’s possible to apply these new approaches to the problem that they have been told that are really hard, and you just need that Oracle upgrade and we can do it for you.

(23:28) So that’s one vector, and another vector is one that means you keep going, so we’ve had fellows who have gone on to start companies. We had a project whereby we were doing white status and that meant a lot of data extraction and visualization in the city of New Orleans and now they have a business called Civic Insights, and they help cities that do that kind of thing. Or (Textism?) Is another company that routed a Fellowship project and it was okay how can we use text messaging to have planning departments get input and forces of those who show up at planning meetings.

(24:05) So these are interesting small problems, but then there are other models. In 2013 we worked with a city in the County of San Francisco on a problem that they had with food stamps. They had this churn in the system were people apply and then they fail to meet some requirements. And then they fall out of the program and have to reapply and it is costly for them, and costly for us.

(24:39) We basically just debugged the process. It was hey we’ve got this letter can you tell me what to do, and can you figure out what to do when you get this letter. And it was, well no, so why do you think somebody with English as a second language who dropped out of high school, or doesn’t have a fixed address is going to get this letter from your lawyers and know what to do.

(25:04) Now, we get a text message that says there is a problem with your benefits, call the office. That’s now grown and we are kind of doing some work with the entire state of California, to try and show them, but it is still like a big a vendor who is maintaining this 20 – 30 years old system written in COBOL, and it’s like can you nudge that in the right direction.

(25:32) But there is a lot of different models, and there is now a venture fund called the (Gupvec fund?) which kind of came out of Code for America, where we are funding startups.

(25:41) And again, back to disruption you could say well we are ‘disrupting government’– no. Here’s the thing, Jen gave this great talk once. She said, if we didn’t care about the problems within our society that would be one thing. But we do care about them and we allocate enormous resources to try and fix them, but we fail because we are doing it so badly.

(26:10) You can really say the mission for Code for America is non- (Republican?), if you look at the scale of resources that we are putting towards hard problems, whether it’s you know in policing, healthcare, or access to social services or economic development. And you go making those resources work more effectively actually addresses both the Republican perspective that government is too big and the Democratic perspective, but look we still have all these problems. And you know the answer yes, you’re both kind of saying the same thing, which is allocating these resources to solve important problems, and we are allocating them badly, because we are actually not bringing the latest technology.

Michael:         (27:01) You know, these government technology problems, actually what seemed to be technology problems, we had a show with our mutual friend, David Bray, who is the CIO for the FCC, and Craig Newmark, who of course founded craigslist, and who is working very closely with the VA and other organizations in the government. And the focus of that conversation was on the cultural issues, because simply changing technology alone does not address the issue as you were describing contractors who have a vested interest in multi-decade projects. So it seems like there has to be some sort of intersection between the technology and the culture and the change agents as David Bray describes them.

Tim:                 (27:57) Absolutely, celebrating and enabling and supporting change agents is a huge part of what we do. And again that’s really consistent with everything that we do at O’Reilly too. Because if you look at, again the history of some of the movements that we’ve been involved with, you know in the beginning open source was this thing that nobody took seriously and being able to tell a story that validated it was an important part of that acceptance.

(28:31) And I think again, a big part of what I do is framing in some sense. You know with open source vs. free software for example, the free software narrative was, we are the rebels and we are going to destroy the evil Empire. And you know, the open source narrative was actually no, there is a whole lot of people who are building really really important stuff that you already all rely on. You know I was kind of the one who framed the open source story around the Internet.

(28:58) You think you know it’s just a bunch of long-haired radicals that are going to up end the current order, but guess what – you send emails don’t you? And all that being routed by this guy’s program – oh!

(29:12) You have a domain name. Guess what, this long-haired guy over here wrote the software that allows that domain name – bank of America.com or New York Times.com to work – oh. You have a website, this guy led the project that probably runs in your website. Then all of a sudden they go oh! This isn’t this radical movement, is just something that came from the fringes, and is already central to our lives, let’s validate it.

(29:35) Similarly, after the dot-com bust, it was like why did Google succeed, why did Amazon succeed? What are some of the principles that really mattered? In a way it is kind of teaching and that again is another way of thinking about what we do at O’Reilly, where we are effectively a teaching and learning company.

(29:56) We really support entrepreneurial learners, and I don’t just mean entrepreneurs as learners, but people who want to take charge of their own learning. So many of the technologies that will cover are early stage, and are not widely accepted yet, you learn from your peers and we basically just try to accelerate that learning. Originally by publishing and then later by saying, let’s bring all of these people together so they can learn from each other and build communities of practice.

Vala:               (30:30) Tim I want to shift the conversation a little bit. Before we went live on the air, we were talking a little bit about basketball and we are both Larry Bird fans.

Tim:                 I’m a Warriors fan at the moment.

Vala:               (30:47) That’s right and it was once said that you know the team with the most superstars usually wins and analogous to that is it fair to say that companies with the most data are going to win and I make that comment and I want to follow-up with a question from Twitter from Bala Jaffery, who wanted your thoughts on the Internet of things (IoT), and how that technology will impact customer experience. So what is the importance of data and IoT in terms of customer experience?

Tim:                 (31:20) So the first thing I would say is with qualifications, data is an incredibly important business asset. And at the center of my narrative about what I called Web 2.0 was this notion of data as an asset. In particular, data created through user contribution, but not exclusively.

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