Gene Kim

Good morning. How is everyone doing this morning? Great.

Fantastic. Did everyone have fun last night? Yes. Awesome. Thank you to Delphix for sponsoring the industry party.

What I want to do this morning is share some reflections I had thinking about yesterday, and substantiate a couple of claims I had made yesterday, and maybe describe why I have so much conviction about them.

The first reflection is something that I thought was so exciting about the Adidas presentation by Fernando and Marcus. I think what we all have in common in this room is that we all are dissatisfied with the current ways of working. We all know that how we work typically now is not going to help our organizations survive and thrive in the marketplace.

And my general belief is that the people in this room, these are the people who are going to be pioneering the practices that in 10 years we will all be taking for granted.

What I thought was so interesting about the Adidas presentation was what they pulled off. So Marcus described that 2:00 a.m. meeting with their CIO, right, about how that kicked off something that led to the birth of this platform team.

And what I loved about that was what that agreement was. Essentially, the agreement was that 5% of all the software engineers and technologists from each one of the business units would be essentially given to this shared service to create the platform team. And so they were all given the option of opting out. In other words, they could keep their 5% of software developers, but then they would be able to leverage the platform that they're creating. In other words, they could do it themselves. And they had 100% adoption rate.

So one of the things I genuinely believe is that in the years to come, I think we're going to be hearing many stories about how people heard about what Adidas did, and will be sharing how they were able to replicate those outcomes. So that was something I just found really, really exciting.

And I think what all of the presentations yesterday have in common is that they're all stories of transformational leadership.

One of the coolest findings from the State of DevOps Report actually came out last year. And one of the things that we looked at was, to what extent do organizations exhibit these traits from their leadership? And there are five domains of capabilities, or five domains.

The first is vision. To what extent do their leaders understand where the organization is going? What are the most important problems and goals and aspirations of the organization? And to what extent can that leader get in front of those goals, not just to be relevant, but to help with the achievement of the most important things facing the organization?

The second one is intellectual stimulation. To what extent does a leader challenge status quo? To what extent do they question basic assumptions of how we do work?

The third is inspirational communication. To what extent can the leader create a sense of excitement, maybe overcome very deeply seated fears about what does this do to our careers or to our functional silo? And can they create coalitions around them to create the coalitions of the willing?

The fourth is supportive leadership, and the fifth is personal recognition.

So the last two, personal recognition and supportive leadership, that's often characterized as servant leadership, as popularized by the Agile movement. The difference between servant leadership and transformational leadership is that transformational leaders also focus equally on the needs of the organizations, not just on the needs of the followers.

And one of the most decisive findings from the State of DevOps Report last year was that leadership matters. If you took the bottom third of those organizations with self-reported transformational leadership leader behaviors, only one half as likely to be high performers. In other words, it's possible, but just a lot less likely.

And what was also astonishing is that the study also showed that leadership is not enough, right? Leaders don't actually do any work, right? Leaders hang out with other leaders, they just give PowerPoint presentations to each other, right? Leaders need great teams. They need great technical practices and architecture that helps enable teams to work independently, right?

And so all those in combination, right, that is what leads to high performance. So leadership amplifies all those characteristics that we talked about. So I hope you saw that in the presentations from yesterday.

The other thing I mentioned yesterday is I had made this claim that I believe that the majority of economic value that DevOps will create is not going to be through the FAANGs, the Facebooks, Amazons, Netflix, and Googles. But instead, it is organizations represented in this room today, right? The largest brands across every industry vertical, every not-for-profit, government agency.

And that belief actually began probably around 10 miles from here. I was at DevOpsDays in London in 2011. I was talking to a good friend of the DevOps Enterprise community, Chris Little, who's now at Gartner. And he said, "I agree with you, Gene." He said, "In fact, there's probably going to be a 20- to 30-year period of a golden age of unprecedented economic prosperity."

And so my reaction is like, that was a very specific claim he made, right? So on what basis does he believe that? And that's when he introduced me to the work of Dr. Carlota Perez, and she's now at the London School of Economics here.

And so what was so appreciated by her work was certain observations that she made. She noticed that there's these economic cycles that we go through, that there's been five major surges in development, including the Industrial Revolution. And essentially, her claim was that we are now entering the fifth.

But what made her work novel was that essentially she was positing why we go through this boom and bust and why it creates these multi-decade periods of economic prosperity. And so, in other words, she was positing a causal mechanism of what causes these economic cycles.

And by the way, the book is called Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages. And so here's what she says. She says, essentially, the causal factors are because of these six reasons.

One, a critical factor of production suddenly becomes very cheap. So whether that was the Industrial Revolution, the use of steam and rail, steel and heavy engineering, mass production in the automobile, and now with information, computer, and technology, something that was very expensive now becomes very cheap.

That then leads to a whole new set of infrastructure being built and this Wild West period of a laissez-faire period of wrenching innovation that's followed by a bubble. That always is followed by a post-bubble crash, a reassertion of institutional authority and regulation, and then finally, a period of consolidation and widespread gains in the productivity from using this new technology. Right?

And her claim is that it is in this second phase of production capital that really is where the wealth is created. She calls it the turning point between the deployment period and the installation period.

Her observation is that the first phases are fueled by financial capital. So that's raising money from Wall Street or our banker friends from across the street here, venture capital, right? Those are what fuel this innovation. Then comes the boom, then comes the crash, and then we figure out what this technology's actually good for.

And that is fueled not by financial capital, but that is fueled by production capital. So all the stories that we heard yesterday were not organizations like Nike raising money to improve the technical practices. They were using their own operating capital to win in the marketplace.

And so, I think we are seeing this happening right now as we talk about digital disruption. You can see it in, I love this graph that shows the market caps 2006 versus 2016, right? And this shows how disruptive the FAANGs are.

But I love this observation that history doesn't repeat itself, but it does rhyme. In other words, there's this great graph that was released by Goldman Sachs that shows essentially the percentage of all retail transactions of Amazon and Walmart. That's on the Y-axis, and the X-axis is versus the years since their IPO. And what you can see is that Amazon's share of all retail transactions is tracking almost exactly like Walmart did when they went public.

And so I think it's amazing to see that these things have happened before, and they will be happening across every industry vertical.

So I believe the stories at this conference are exactly as Dr. Perez describes and predicts: that it is the largest, most respected brands in every industry vertical exploiting the technology miracles that were created by financial capital, by the FAANGs. That the productivity gains will be so evident that we'll finally solve this 30-year mystery we have about the productivity paradox, right?

The economists, they've had trouble for decades identifying where is the productivity gains from technology, and I think we are now going to see it over the next 20 to 30 years, and it does really set the stage for a multi-decade period of economic prosperity.

I think the other thing that I find very hopeful about this is that the age before the crash, the age of financial capital, that is typically a period of ever-increasing wealth inequality. And it is only through the deployment age, as we deploy production capital that rises, that's the tide that lifts all boats, and that actually does create prosperity across a much broader population. And that's what leads to, I think, a more just society as well.

So one of the things that Jeffrey Snover mentioned yesterday was the notion of the inflection point. So that phrase, inflection point, came from a book called The Structure of Scientific Revolutions, written by Dr. Thomas Kuhn.

And his observation was that whenever you have these immense changes in scientific worldview, whether it's from Copernican to Newtonian, or Newtonian to Einsteinian, from a distance it looks like it happened overnight, right? It looks like it was actually done by one person.

But in reality, in each one of these revolutions, it was actually done by a whole bunch of people, by community, sometimes competitors, sometimes collaborators. And the Kuhnian moment is really, he compares it to sublimation. Like, in an instant, air becomes like a gas becomes like a solid.

And I think what I find so exciting is that the Kuhnian moment of the deployment age, I think, is going to be created by this community. I've had the privilege of studying this community for five years, and to see how we've advanced the practice and learned from each other, this conviction I have that the Kuhnian moment will be created by organizations just like in this room.

So, another aha moment I had yesterday was this maybe new conviction that the most important business leaders who will be driving their organizations forward, helping advance the most important business objectives in the next five to 10 years, are likely in this room.

I love what Randy Lyons from Nike said. He said, "Business leaders..." He's not a technology leader playing business. He is a business leader with a technology background. And so, for me, that was a startling difference in perspective, and I think I'll be carrying that around for years to come.

And so I think all the people who have been presenting, they either are business leaders with a technology background, or they will become the business leaders with a technology background that have earned the right to lead some of the most important initiatives of the organization because everybody knows they have the best long-term interests of the organization at heart.

So the reason why I share that with you is just I had made some very wild claims yesterday, and I'm hoping that you find this as persuasive as I have.

So a couple of announcements, to change the tempo slightly. One big thing that we're going to be doing differently in 2019 is that we're actually going to have three days of programming instead of two.

One of the things that we discovered on the programming committee side is that there aren't enough speaker slots. And so we're actually going to be increasing the conference to three days, just like the US conference, and I think that will be hopefully a great thing. So stay tuned for more news on that. Yes, feel free to applaud.

The second thing is I want to announce that we actually did a special print run of these USB drives with an abridged version of Beyond The Phoenix Project. I have to tell you, this was probably one of the most intellectually satisfying achievements of my professional career. This is something I did with John Willis. We recorded eight hours of audio based on hundreds of hours of research.

And so everyone, if you go to the IT Rev booth, and we'll post exact details in the Slack channel, you can get a USB drive with the... I think many of them are actually signed. So I'm delighted that they actually made it here. It's the first that we actually made them just for this event.

Last announcement. Dr. Richard Cook mentioned yesterday that he will be hosting a session yesterday. So here are the details. At 15:15, that's 3:15 today, breakout room D.

If you want to hang out with Richard Cook and either learn more or hear the questions that he has for you, I highly encourage you to go to this. One of the things that we got to do in Beyond The Phoenix Project is spend time with Richard Cook, and I hope that you find your experience collaborating with him as rewarding as it has been for me.

So this is the details for Richard Cook's session, and he actually posted this slide in the Slack channel, in the general channel.

So with that, Jeff Gallimore.