49th St. Gallen Symposium "Capital for Purpose": 8–10 May 2019

EDIT HEADER

“We are trying to make an ‘Ideacracy.’”

Dirk Ahlborn is a German-born entrepreneur who found success in crowdfunding projects. Ahlborn, along with a large team of workers spread across the globe, is now working to make Hyperloop travel a reality. The innovative system promises to transform transportation by reducing the cost of travel to almost nothing, decrease travel times tenfold and run on nothing but renewable energy. Both Ahlborn’s past ventures and his leadership of Hyperloop have utilised unique and innovative business structures which Ahlborn claims are ideal for the Internet age. We sat down with Ahlborn and chatted about how Hyperloop’s business model has fascinated business schools across the world. 

What do you believe to be the most interesting part of Hyperloop’s business structure? 
Building the Hyperloop business model taught us a lot about communication. It used to be all about putting as many engineers as possible onto one problem, but we quickly realised that smaller teams are way more efficient. A team of more than eight people tends not to communicate as well as one with fewer members. Rather than having larger teams, we pose the same problem to different groups and see if they come up with different solutions.

How did you begin building the model?
We used a completely new model. I was part of a non-profit incubator funded by NASA that aimed to help entrepreneurs build a better company. Today, we do everything online – you do your grocery shopping, your dry cleaning, and you can find a partner online. When it comes to building a business, it tends to be you and a friend in a closed space trying to fix a problem that, after six or seven months, you realise nobody else cares about. If you could find, say, one hundred people who are as passionate as yourself and are willing to really offer their criticisms, insight, and contacts, you would be able to build a better company. When Elon Musk said he was too busy with Tesla, we used an online platform to source engineers who would be interested in the project and then offered to pick it up. We then asked those we found on the platform if they would like to work in exchange for stock options. If they agreed, we asked them to apply. They would only have to work a minimum of ten hours per week. After that, we continued to expand and went from a team of around one hundred engineers to the team of eight hundred that we have today.

What is the role of management in your business model?
Today, the company has around 800 employees across the world, in addition to fifty other companies and a large wider community that we consult with. Harvard did a case study about us and started teaching the case last year. The model changes the fundamental way we manage. Workers invest their time and spend less time with their families in exchange for engaging work that they know will pay off in the future. Our job as managers becomes ensuring that these people feel that their work is meaningful.

Is the hierarchical business structure a bad fit for the Internet age? 
Some vertical organisation is still necessary, but there must be the possibility to connect the top with the bottom. Without that, the company becomes subject to the same limits that sees communication wither in larger teams. We are trying to make the company an “ideacracy” – based on who has the best idea, rather than who has the best title.

Dirk Ahlborn (Foto: Tobias Schreiner)

Do you think that these horizontal management structures can be applied to companies outside of the tech sector? 
Yes – though it is easier with a fresh company. It takes a lot of commitment and a lot of effort. We do our hiring based on the individual qualities of the person and ensure that they are self-motivated and driven. I always say that if you are working with great people then there is no issue. Management problems come in when you are working with mediocre people who are less motivated. In the end, many people work in a distributed way – though that style of working is not for everybody. Transforming an existing business structure into a distributed model is difficult, and management may not be incentivised to make the switch. In addition, if things are going well for a company they are unlikely to change. A big problem in Europe right now is that the CEOs of the big companies are paid for today’s results, not the results that are coming in ten years’ time. Car companies, as an example, are doing well right now – but they are resistant to change and are, in effect, not futureproofing their business. A solution to this is for big companies to create independent subsidiaries that utilise new business structures.

Do you see it as a problem that managers at many private sector companies are paid exponentially more than their lower-level employees? 
The issue is that you want to attract the best people. Unfortunately, that is the reality, and it is reiterated throughout other levels of management. Less-skilled labour that is easily trained and easily replaceable is a cost factor that must be considered, though having a middle ground that sees all workers participate in the company profits is a good solution to this. In our case, everybody is a shareholder. I think it is important to be transparent about why management earns what it earns, and to ensure that everybody in the company does well when the company succeeds. 

So is class a barrier when it comes to becoming the kind of knowledge worker sought by these new business models?
We have people in India doing ten hours per week and people in the US doing the same work for the same pay. All it takes, in essence, is a computer and an Internet connection. This makes the barrier very low. At Hyperloop, the way we work is, a lot of the time, without direct payment – you, together with everybody else, create the value of the company and prosper with it. It is less of a payment and more of an opportunity. Ten hours per week seems a sweet spot that anybody can manage to do. Two hours over five days is less time than many people spend in the gym. Of course, if you have a very busy life with a new child or something similar, then you may be unable to commit to the time but, mostly, you could take on the work. The only real barrier is motivation. 

What motivates Hyperloop employees?
All of the people at Hyperloop are trying to fix transportation. They have a reason for doing their work, and it is not to become rich. We see this in the company a lot – those who are seeking only the financial benefits tend not to last long. It is about having an opportunity to build a transportation system the way it should be done.