Genghis Khan as portrayed in a 14th-century Yuan era album;

Genghis Khan created the Mongol Empire, the biggest empire in human history. At its height, the Mongol Empire covered a land area of more than 9.15 million square miles and a population of more than 100 million. Another surprising fact is that the population of Mongols was only a few million.

Why were Mongols able to conquer the world with such a tiny population? One important reason is that Genghis Khan created a specialized organization that could leverage the most advanced technology at the time (Mongolian horses) to solve the most ambitious problem (conquering the world).

Despite the small number of human soldiers, there were a huge number of horses in the Mongol army. Each Mongol soldier has 3-4 Mongolian horses at his disposal at any time. Mongolian horses had very great endurance and were the most advanced military technologies during the cold-weapon era. In contrast, their enemies either don’t have any horses or could only use inferior horses.

More importantly, Genghis Khan organized his Mongol soldiers in a way that could leverage the advantages of those Mongolian horses to the full extent. The command structure of the Mongol army was much more flexible than other armies during the period. Lower-level leaders have significant license to execute orders in the way they considered best. The super flexible organization allowed Mogol armies to attack en masse, divide into smaller groups to encircle and lead enemies into an ambush, or divide into small groups to mop up a fleeing and broken army. Because they could fully leverage the mobility of horses, a few Mongolian cavalry soldiers could easily defeat hundreds of foot soldiers.

Thanks to horses, the Mongolian army could cover up to 100 miles (160 km) per day, which was unheard of by other armies of the time. Mongolian soldiers were able to travel thousands of miles without stopping by rotating horses during the trip. Because of such great mobility, the Mongol empire could allocate resources on a global scale to defeat every local enemy. For example, the Mongols were able to fight with both the Muslim world and China at the same time. After Mongols conquered Muslims, they were able to leverage the technology they got from Muslims (like the counterweight trebuchet) to destroy the Song dynasty.

Genghis Khan and his Mongolian armies have taught us two things:

New technology requires a new form of human organization to fully leverages its power.
An organization that could leverage the new power would be able to unlock even more new opportunities.

In the past few decades, we are creating new technologies to extend our brains. One notable new technology is artificial intelligence (AI), which allows machines to make predictions and decisions autonomously. The relationship between the new AI tools and humans is similar to horses and Mongolian soldiers.

A business would need to transform its organizational structure to fully leverage the power of AI tools.

For a lot of traditional businesses, the bottom of the organizational chart is a huge number of employees who work on operational tasks. As a result, management is based on carrots and sticks. More advantage management like (motivation alignment) is only available for strategic positions.
In AI-first organizations, even junior employees will have hundreds of AI tools at his/her disposal and their influence on the organization is equivalent to a much higher-level person in those traditional organizations. Organizational management needs to be more motivation-driven throughout the organization. The organization also (is able to ) and needs to be leaner and flatter, which encourages innovation.

*The hidden workforce of AI*-first organizations

Proactively leveraging AI tools not only reduces cost but also unleashes new powers (like horses do to Genghis Khan’s troops).

The natural way of organizational growth is to throw hiring humans. However, more people would create a communication burden and operational overhead. As an organization grows, the Return-On-Investment (ROI) of extra hiring will eventually decrease to be below 1, which prevents the company to scale further.
“Hiring” AI systems, in contrast, would not incur extra overhead. What’s more, AI systems typically get smarter as more people use them. As a result, the ROI will increase as the usage of the AI system increases.

The only ceiling floor for the scaling of an AI system is from the technical side. Currently, most of the commercial-viable AI system is only designed for a single problem. And for most of the problems, AI systems haven’t reached the human-level yet. This will be a bottleneck in the foreseeable future but more and more AI systems will be invented as time goes by. Human + AI collaboration would be a strong disruptive power for industries in which AI solutions are available.

Hiring more people doesn’t make the manager’s job redundant. Instead, it makes their jobs more important. Similarly, the adoption of AI systems doesn’t make their users redundant. They will increase the scope of their users and the whole organization. Humans are tremendously flexible and could always find creative new usage of new capabilities. For example, AI may be able to help doctors to diagnose basic medical conditions, but it won’t be able to replace doctors. Instead, doctors would be able to focus on more complicated medical problems. As long as humans haven’t reached immortality, there are always new problems for doctors to solve.

We don’t want another Mongol empire that causes deaths, but we do need business growth that could make human life better. In addition to scaling the human part of the organization, every business leader should also consider where their “horses” are and how to provide organizational support to enable employees to use them.

Reference

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Recently I read The Box, a book about the history of container ships. This is book was recommended by Bill Gates — “you won’t look at a cargo ship in quite the same way again after reading this book.” It indeed changed my view of the shipping industry and here is a summary of my thoughts.

Influence of Containerization

An immediate result of containerization is a sharp decline in international transportation costs, which resulted in an unprecedented globalization process and business paradigm shift.

Globalization is not a new phenomenon — the world economy was already highly integrated in the nineteenth century. However, the globalization caused by containership is quite different because it fundamentally changed the production process itself.

Containerization significantly reduced the shipping cost among coastal cities between America and East Asia, which has abundant cheap and skilled laborers. As transportation costs decline, manufacturers could outsource their manufacturing overseas. Many American businesses only do research & design in the US and delegate the manufacturing to Original Equipment Manufacturers (OEMs) in East Asia. This new type of industrial paradigm would not be possible without container ships.

As a consequence, geographical disadvantage becomes a more serious problem. Because American consumers live in coastal cities, it no longer makes sense to manufacture in inland cities as the shipping costs by sea routes are so cheap. Doing business in those inland cities becomes much harder because of the overseas competitions.

In east Asia, coastal cities also absorb all the foreign investment and markets. Guangdong and Jiangxi are two Chinese provinces that are adjacent to each other. However, the GDP per capita of Guangdong is almost twice that of Jiangxi. The reason is only that Guangdong is coastal while Jiangxi is landlocked.

To reduce the gap, inland cities have to invest heavily in transportation infrastructure to reduce the shipping cost, which is very challenging.

Influence of Deregulations

The U.S. government played an interesting role in the history of containerization. The government regulations initially prohibited corporations to be involved in both land-based and sea-based transportations.

The initial goals of these regulations were to prevent monopoly and to ensure a fair price for consumers. However, the goodwills of lawmakers turned out to be a huge obstacle and made the cooperation among the shipping, railway, and trucking companies very challenging. Railroads and their customers could not negotiate long-term contracts setting rates. Trucks and railcars that had often been forced to return empty were able to be filled in on the return trip.

Deregulation changed everything. In 1980, Congress freed interstate truckers to carry almost anything almost anywhere at whatever rates they could negotiate. 41,021 contracts were signed within five years and by 1988 U.S. shippers saved nearly one-sixth of their total land freight bill.

The ability to sign long-term contracts gave railroads incentive to adapt containerships. On average, it costs four cents to ship one ton of containerized freight one mile by rail in 1982 and that cost dropped 40 percent over the next six years, adjusted for inflation.

Although containers were supposed to help cargo move seamlessly among trains, trucks, and ships, it took 20 years since Malcolm McLean invented the first container for the industry to achieve the goal. The process could be much faster without government regulation. This interesting case is another example that shows that the government should keep itself away from the market most of the time. Governments are too slow to adjust themselves to the market due to bureaucracy, so the best way is to let the market speak for itself.