If you haven't read it already, I strongly recommend the Knapp Commission Report. Its about police corruption in New York City in 1972, but its lessons on systemic and institutionalized corruption are highly transferable to other contexts.
Probably the most common naive mistake I see is people thinking their subfield is special and they are the first to really notice / understand fraud within it. I've certainly seen people in the "sleuth community" (scientific fraud whistle blowers) reinvent the wheel a few times.
All fraud is basically the same. Financial, scientific, police corruption...it almost doesn't matter. I'm not even the first to say this. A really good summary can be found in Ashforth 2003 ("The Normalization of Corruption in Organizations").
So, with the caveat that I haven't read your work yet and maybe you already know, I'd say look at past corruption far outside your area of interest / expertise. There's a lot you can learn there. Police corruption reports are usually great because of how accessible they are in several senses (more numerous, usually simple to understand), but I have no police related agenda to push here and it really doesn't matter where you decide to look. Just pick any Commission and read their findings.
In the opening words of the Knapp Commission "We found corruption to be widespread".
> how a handful of companies (like Costco[..]) have successfully been structured to resist gravity
"I came to (Jim Sinegal) once and I said, ‘Jim, we can’t sell this hot dog for a buck fifty," Jelineck recalled[..]. "We are losing our rear ends.’ And he said, ‘If you raise the effing hot dog, I will kill you."
That's not structure, that's leadership. They were about to change the price, but one guy at the top with authority and an opinion said no. You could say "it's structure" that there was one guy at the top with authority, but it still depends on him having the right opinion. You need both a good structure and an unwaveringly idealistic (and correct) leader.
I love that you asked this question, although, of course, you didn't actually phrase it as a question, because this quote is literally in the book. I addressed this particular misconception as it relates specifically to Costco, because I myself once fell victim to the same misconception.
If you think Costco has endured only because of leadership, because of its strong ethos and its immense size, because you think it's just too big for Wall Street to mess with, you are not correct. My friend, nothing is too big for Wall Street to mess with. Wall Street has tried many times to dismantle Costco's ethos, and every time the unique structure of Costco is what has allowed them to resist.
The parent comment didn’t say anything about size or wall street. It said leadership is what has preserved it.
Which it doesn’t seem you have refuted in any meaningful way. You just restated what the parent comment is responding to with no further reasoning as to why leadership doesn’t account for it.
I honestly don't understand your comment, so let me try and recapitulate what I think you're saying and what I think I was saying, and then you can tell me where I missed the mark.
What I hear you saying is that the original comment simply said that leadership by itself is enough to preserve the Costco ethos. It didn't say anything about size or Wall Street or anything else. Is that right?
The reason I responded the way that I did is that the claim that something by itself is enough has to explain why most companies are able to be destroyed, even though they have really good leadership. I think the common answer when people ask about Costco is that the reason why, for them, leadership was enough when it hasn't been for other people, is something like they're so large. Does that make sense?
Either way, in order to say that leadership by itself is sufficient, we have to figure out why Costco has been able to endure as a gigantic public company when, for most companies, the larger they become, the more valuable they become as a target. Meaning that Wall Street or other financial forces will intervene to change their values.
And the answer, which I lay out in the book (not in my original comment), is that Costco is protected by a very distinctive thing I call a "governance fortress." This fortress (and not merely their leadership) is the reason why they have been able to endure for forty years.
In fact, the predecessor company of Costco, spiritually speaking, was a company called FedMart that had the leadership and ethos but did not have the fortress. I'll leave it to you to read to find out what happened to them.
> the claim that something by itself is enough has to explain why most companies are able to be destroyed, even though they have really good leadership
I think most of us are happy to believe that most companies simply have bad leadership, that leadership quality really is the axis on which Costco differs from others. If you want us to believe that other (destroyed) companies' leadership is just as good as Costco's, you need to make that case.
> Costco is protected by a very distinctive thing I call a "governance fortress." This fortress (and not merely their leadership) is the reason why they have been able to endure for forty years.
Can you sketch out your actual argument here (I think doing so would help rather than hinder your book sales, though of course that's a biased judgement)? What is this "governance fortress", and why should we believe that that, rather than the personal qualities of this one guy, is the reason they kept the hot dog?
Sure, happy to. This is a very common source of confusion, so definitely worth clarifying. We agree that Costco's difference is due to its superior leadership. The question is why has the company been able to maintain this leadership advantage over multiple generations of managers, when other companies have not.
In the book, I give dozens of examples of companies that were well-lead and then suddenly destroyed, often by outside actors who found a way to profit from their destruction. This often happened at the governance layer, while leadership watched helplessly from the sidelines.
So why hasn't this happened to Costco? I don't think it's a coincidence that Costco has a variety of "bad governance" provisions, such as a super-majority (of all shares, not just votes) provision threshold for shareholder votes, as just one example. When activists, analysts and other Wall Street actors have tried over the years to force Costco to change, its leadership has been insulated from this pressure. I think that is a structural factor that is important.
Again, structure does not _cause_ ethos. It protects it. My argument in the book is you need both.
> ... Costco has a variety of "bad governance" provisions, such as a super-majority (of all shares, not just votes) provision threshold for shareholder votes
Do you believe there's a fundamental tradeoff between structural constraints (i.e. the 'democratic' model, where dispersed shareholders and markets have a voice) vs. insulated leadership (i.e. the 'benevolent dictator' model, where competent leaders are shielded from short-term shareholder pressure)?
"I think most of us are happy to believe that most companies simply have bad leadership"
I don't believe this for a second.
I don't know if this makes me the minority or not though!
It trivializes forces influencing large public companies.
Yes - there can be good and bad leadership - and bad leadership is just bad.
But good leadership can be totally helpless in a public company.
Not recognizing this is a huge gap.
The other forces that incluence a company:
- Board
- Shareholders (via board)
- Banks. Lots of companies have loans. The banks generally have the companies by the balls and can dictate many things when things go south - either due to leaderhip or just prevailing market winds
As an example of shareholder/board direct and rapid influence: an activist purchases shares. Installs board member. Causes rapid change in one or more aspects of business structure or strategy to support _their_ portfolio strategy (of course aligned with interests of other shareholders).
Thanks for responding, I do think you interpreted my comment correctly.
I see size as negatively correlated (maybe as a semi-direct cause) with preserving company mission. Hence why I was confused by you addressing it. It would never cross my mind to argue that size has protected Costco.
I haven’t read your book, just skimmed the post so I don’t know if it’s convincing. But I’d like to argue that those companies failing their mission is proof that they did not have good leadership. however, that makes the argument a little circular.
I’m aware of FedMart (Acquired podcast on Costco is very entertaining). I think Sol Price was a bad leader and selling out to Hugo Mann was putting profit above other things.
I read the comment as arguing that leadership is necessary, not that it is sufficient. That is, that no amount of governance could have prevented the change in the price of the hot dog; only the leader could.
Interesting in that I wonder whether government organizations and in particular the highly qualified government members and their functions can be protected in a similar manner from political leaders elected in a democracy.
This reply genuinely reads like AI and I don't mean to insult you. Perhaps large language models have been trained too much on your books. Your first 2 to 3ish paragraph (explanation and rephrasing) is very characteristic of an AI when they're pressed (e.g. on why they recently hallucinated).
I think it's kind of counterproductive to call out "this comment sounds like AI."
If you're right and it is AI, the comment only points out what many of us can already see. If you're wrong and it isn't AI, then the commenter you're responding to can either argue with you about how it's not AI or just say nothing because there's nothing of substance to say.
> That's not structure, that's leadership. [...] one guy at the top [...] said no.
Yeah, there's no rule structure that can't be skirted and subverted by new owners with different objectives. The most resilient way to preserve your values is to:
Only take care, and keep your soul diligently,
lest you forget the things your eyes have seen,
and lest they depart from your heart all the days of your life.
Teach them to your children and to your children's children.
Your successors don't need to be your literal children, but if you turn your company over to "strangers with money" you can't be surprised when they do what they want with their new possession.
It is true that most companies fail the test of succession. Even in the comment that you've made here, we've left unanswered the question of who will decide who should be chosen as the successor? That is something that can be influenced, but only at the institutional or structural level of an organization. Obviously, more details in the book.
And leadership that respects and "gets" it's customer base. Customers that feel respected and who genuinely feel like the company they are supporting is in their corner are the most rabidly loyal. If you build a customer base like that, and keep respecting them, the problem solves itself.
So many businesspeople can’t tell the difference between a value-add and a profit centre.
It isn’t about being idealistic, it’s just about understanding what makes people tick, and how to best get them to part with their money - and understanding that a business is not one dimensional.
I'd be more likely to assume that it's a really great one, where folks like and trust each other enough that they can give each other crap like this and everyone understands and appreciates it, like good friends trash-talking each other on the basketball court. I've thought for years that the way you can tell acquaintances have become friends is if they start insulting each other.
Or, as you say, it could be a really horrible environment - but I don't think you can tell from one anecdote.
Considering how many people love telling this story, both within and outside of Costco, I think it's more the former than the latter. One way you can tell is that the COO, who was cursed at in this story, later succeeded Sinegal as the CEO and, in fact, has gone on record defending that hot dog price many times.
They manufactured their own hot dog manufacturing plant:
> "What we figured out we could do is build our own hot dog-manufacturing plant (in Los Angeles) and make our own Kirkland Signature hot dogs. Now we are doing so much hot dog business that we’ve opened up another plant in Chicago. By having the discipline to say, ‘You are not going to be able to raise your price. You have to figure it out,’ we took it over and started manufacturing our hot dogs. We keep it at $1.50 and make enough money to get a fair return."
Eric - I've worked for NASA, ATT, IBM, HP, Amazon, and Google, not to mention a couple of startups that I started in between. None of them (except the startups, but they were brief) stayed true to their original mission. I haven't read your new book, but IMO, it's because the founders leave and the next leadership don't share the vision or values of the founders in the same way. After all, a company is a collaboration among people who want to make a contribution. When the people change, the company changes. It's inevitable.
That said, you seem to have archetypes above Costco, Patagonia, and Novo Nordisk that avoided it.
Can you comment on not what it takes to build such a company, but rather how to transform companies like those that I worked for into ones that resist gravity? Or is it too late?
For NASA I don't know but all others that are private companies the "mission" is never "the mission". The mission is "making more money" and everything else, including the change in culture, is the result of how single focused "good" (according to the market) companies are.
I was pondering about a piece of wisdom people often say, roughly going like "Oh yes, invest in stocks, the market always goes up!" and even though technically true they forget to mention that it's the case because losers get kicked out. A company that doesn't performed is removed from the indices so sure, market goes up BECAUSE losers leave.
This isn't a moral stance by the way, just highlighting mechanisms to participate, and survive, in those environments.
One of the sad truths that the book tries to confront about the world we live in today: that most companies simply fail the test of succession. This does not have to be the reality that we live in. It is absolutely 100% possible to build organizations to resist gravity and even to transform organizations that have fallen into its clutches. The fact that this is rare tells you something about the incentive design and values of our current financial system. This is not a law of nature.
I don't really think there's a short way for me to answer this question without having to summarize the entire book. This is what it's about. I'll simply say that the second part of the book, what I call "The Blueprint," is about both the governance and leadership tools that we have available to us to turn these organizations into the long-term, mission-driven, incorruptible places we all want to work at.
Like a lot of things, bad actors only have to get you to fail the test of succession once while the company has to succeed at it every time. Time is not on any companies side here and the longer it goes the more failing that test of succession starts to look like a law of nature.
That's true, and yet the evidence shows that some companies have been able to do it. I think there's something to be learned by studying those companies as a data set.
They have been able to "so far". This isn't to say that we shouldn't learn from them how to push the failure date as far into the future as you can. I just don't think you can truly make something incorruptible.
It’s perhaps idealistic, but maybe we’ll figure out a way to limit the blast radius of any failures by driving a culture that rewards those that push out the future date as you say
I've always admired Nintendo (NCL) for adequately managing their various successions, even in the case of sudden death (Satoru Iwata). I wish there were deep dives into their practices but they're very secretive.
Eric, thank you for taking time to answer questions! I read The Lean Startup early in my career and it shaped a lot of it. I’m keen to read your new book
As I read through your comments, one question popped into my head: what’s your thoughts about the Friedman doctrine? Do you address it in your book?
Specifically, the Friedman doctrine makes the argument that the social responsibility of the firm is to increase its profits. That policy making should be left to governments.
Milton Friedman states in his essay:
Insofar as [a business executive's] actions in accord with his "social responsibility" reduce returns to stockholders, he is spending their money. Insofar as his actions raise the price to customers, he is spending the customers' money. Insofar as his actions lower the wages of some employees, he is spending their money.
His theory was introduced in 1970 and it seems has since become the standard for the corporate world
How does this square with what you present in your book? Do you disagree with his theory?
I'm not Eric, and I'm not an economist, but I'd suggest this quote is mostly used to drive up profits for shareholders, and not for the benefit of the other two constituencies.
For example, we bought a company, and over the next year or so doubled wages in that company. Our "social responsibility" in that case was to spend shareholder money so that workers had a living wage.
That doesn't seem to be the story I hear about say Amazon.
Yes, we've also spent money outside of those 3 groups. We contribute to charity. We spend money encouraging staff (and customers) to get cancer screenings etc. We spend (I guess shareholder money) on lots of things that are adjacent to our actual business.
Frankly, in the long run, I think it ultimately helps the business. It makes us "human" and reminds us that we control money, the money does not control us. This permeates through employee relationships, it permeates customer relationships. Ultimately that makes for a stronger company, built to last.
We've had acquisition offers. The shareholders have resisted them so far (despite easy riches) because we've seen what happens to other companies our size when they get acquired. Shareholder interest flows up. Staff (and by extension society) interest goes down. Ultimately most everyone leaves.
> For example, we bought a company, and over the next year or so doubled wages in that company. Our "social responsibility" in that case was to spend shareholder money so that workers had a living wage. That doesn't seem to be the story I hear about say Amazon. Yes, we've also spent money outside of those 3 groups. We contribute to charity.
I would suggest that there is also some degree of (subconscious?) expectation of higher wages meaning: staff would be happier/performance would be higher/staff retention would be better/absence would be lower.
You weren't just giving (shareholder) money away. You were trying to optimise your team.
Just dropping in to thank you for writing this book and raising awareness around it. A lot of builders are really disillusioned by how "corruptible" the tech industry has been.
I wrote a blog post called "Revenue Model is More Important than Culture" (it made the #1 spot on HackerNews a few years ago) arguing that the way to avoid that corruption is by making sure the business model is immune to it, but having read your thoughts, I'd say your argument (structure being the dominant term) is even stronger.
I wish I had read that blog post because that is one of the chapters in the new book. I actually think that the phrase "mission-driven" for most companies is a total lie. They are at best "mission-hopeful". In fact, I tried to create a new term for the work that is required: the management system, leadership techniques, and structural elements that are required to 100% align the business model with the mission. I call it "mission drive," as if it was an engine you could install and maintain.
I like the mix of management/leadership/structure. I do think leadership is an important aspect, and leaders who are uncompromising can have a big impact.
It's funny we both land on Google as a main example. I had this quote "I’m going to pick on Google a little bit here, but I do love that company. I think there’s a lot it can improve on, but it’s still one of my favorite and least “evil” large tech companies.", and honestly and sadly, I don't even know if I'd agree with the latter part of that statement anymore.
I cover that specifically about Google in the book rather than summarizing the whole thing here. I'll just say that if you read the essays of people that worked at Google for a long time (and then left), you will see some pretty remarkable patterns.
Maybe "mission-chauffeured." Revenue/business model is in the driver's seat and the mission just comes along for the ride and adapts to wherever the car is going.
An entrepreneur I used to admire a great deal was once described to me this way: "So and so doesn't do what's right. He makes whatever he does right." Ever since I heard that phrase, I haven't been able to unsee it in so many founders who I think sincerely want to do the right thing, but their ego gets in the way.
For those that want to go deeper with _Incorruptible_, I've spent the past few months doing hundreds of interviews and events discussing its various themes and topics. I'm having Claude Code summarize this progress along the way at https://howisincorruptiblegoing.com/
You can also see the various accolades, reviews, and awards that it's accumulated so far.
I agree with your premise that the unethical behavior in the markets is structural. I also commend your work on this book. The creation of the LTSE is also a huge and laudable accomplishment. Kudos!
However, I have to express some skepticism that through regulations and reforms, we can reverse the entire incentive structure for public investment to be aligned with stewardship rather than extraction. How do you plan to defy the "financial gravity" between you and this dream?
Finally, I think that Claude Code has misinterpreted your request to summarize your interviews and events. Instead, it created a marketing and promotional website with not a summary to be found!
Ah! Your point about Claude Code is very funny. At a minimum, you can find links to many of the interviews I've done. If it comes across as too promotional, you can always use the "official" website incorruptible.co which is more staid.
Your skepticism is well earned, and all I can really say is that I hope you'll read the book and judge for yourself. I tried really hard to lay out the evidence for two things that are necessary to address this skepticism:
1. We have to see that these structures are changeable. The economy that our grandparents inhabited is almost unrecognizably different than the one we inhabit today. So too, we can imagine that the economy that our grandchildren will work in may be unrecognizably different to us. Why does that necessarily have to be in a negative direction? What was once changed by human hands can be changed again.
2. I know this is hard to believe, but there's actually a lot of evidence that mission-driven, purpose-driven, trustworthy organizations outperform their conventional counterparts. The fact that this is so gives us a lot of tools we can use to drive the change we want to see.
On top of all that, we are living through a massive generational shift. The new generations have lived their whole lives under this maligned structure, and they are sick and tired of it. If you think they are going to sit quietly by and allow those structures to persist, I think that is very unlikely. Which means we're going to have change one way or the other; the only question is how violent and difficult is that revolution going to be? We'd be much better served to change proactively because we know what the right thing is.
Thanks for being a good sport about my joke! And also thanks for answering a gazillion questions here on HN with care, patience, and curiosity.
I have to say, to your first point, that exploitation (of humans, labor, resources, consumers, etc.) has always been the primary driver of accumulating large wealth under capitalism. Sure, "innovation" sometimes has a role in softening the blow, but let's be real.
That was true in our grandparents' time... and their grandparents' time... and their grandparents' time. While their economies looked very different, the same structural incentives were in place and certainly did not curb unethical behavior one bit.
It has taken a long time for the piper to come for his full payment, but we can all see now that the world is burning, poisoned, and suffering as a result. We can no longer eat freshwater fish due to the massive amounts of PFAS in our lakes and rivers. The billionaires are trying to pretend they can escape the disaster by building their bunkers on remote islands or trying to colonize Mars.
I want to have some optimism in the newer generations to create positive change here, but I can't help but look at what happened to the idealism of the 1960s. The counter culture was right about the societal benefits of renewable energy, organic food, vegetarian diets, ecology, egalitarianism, civil rights, and more. But somewhere around Reagan many in that generation sold out and those great ideas were simply appropriated and fed back into the profit-machine that rewards exploitation. Today we have "certified organic" labels on food products, but that term has been watered down to almost nothing by the marketing departments, politicians, and lobbyists.
Anyhow, I obviously need to keep my pessimism at bay. LOL You have convinced me to give it a read!
>"I have to say, to your first point, that exploitation (of humans, labor, resources, consumers, etc.) has always been the primary driver of accumulating large wealth under capitalism"
Under all forms of human civilization, since the beginning of agriculture allowed one person to accumulate more cattle than another. Capitalism is actually a great equalizing force from that yoke - it allowed for the first time to get out of it through ingenuity and hard work. The rule for practically all of existence before that was "you do what the biggest baddest guy around tells you to do or you die", and your entire life and your children and their children's will be the exact same, with no hope of betterment whatsoever. It's what led to the rise of slave morality religions like Buddhism and the Abrahamics; if you have no chance at happiness in this life, best to believe there's something better after, and that those responsible for your suffering will be punished.
Meh, lazy thinking on religion and oversimplification of history. Yet, there's absolutely an argument to be made that capitalism has provided wider mobility than the Chinese bureaucratic system, the medieval church or merchant states provided before. But mobility is measurably worse in the US now than mid-century and we can and must do better.
I used AI extensively in the research, editing, and promotion phases of creating the book (and even shared screen with a few podcast hosts who wanted to see the solveit platform from Answer.AI up close). To be clear, I never let the AI write for me; I am not a fan of "vibe creating" of any kind. Instead, I tried to use the AI to improve my own skills so that the final artifact was better than it would have been before.
I know people are up in arms about this right now, but shouldn't at least some of blame for that fall on the tech industry itself, for how these tools are designed, promoted, and sold? I think in the long run, society will achieve a more healthy equilibrium. But in the meantime, it's gonna be a bit rocky.
My biggest struggle with this question is that "going bad" sometimes coincides with not just financial incentives, but also more people getting value out of it. For example Spotify gradually shifting from "we make it easy to curate and share playlists" to "we make them for you to use as background music constantly." Sometimes what's bad for the early power user is great for the late adopter, and it's difficult to make any kind of broad judgment about whether the change is better or worse.
What do you say to this interpretation? In particular do you think most cases could be framed as "the key audience/customer/market has shifted"? Is it possible to find greater financial success while doing things the primary audience doesn't like?
They study aspects of this phenomenon in UI design. There is a constant struggle between power users and novices, and a good UI absolutely cannot cater to both. Which means that over the life of a product, its UIs will tend to get more complicated and inscrutable as your user base levels up. Adobe products are often cited as prime examples.
This, of course, makes on boarding and new user acquisition harder, and can severely limit product growth. And this also leaves space for simpler products to come along and cater to the novice market. Or, companies can fight this tendency, and remove features, or make them harder to use, in order to cater to less demanding demographics.
What I'd be curious about is what spotify looks like as their market share levels off. Do they keep catering to the automatic playlist crowd, or does their average user get more sophisticated over time?
So make two UIs? Or an API and a novice user / mass market UI, and let the open source community serve fussy power users (and borrow some of their good ideas as a return on your show of good faith)?
I don't have the link in front of me, but someone who used to work at Spotify wrote a really nice reflection about this change through the lens of incorruptible over on LinkedIn. If someone can find it and post it here, that'd be great. If not, I'll try to remember to come back and post it later.
I think these changes very rarely have to do with what customers want shifting, but when people say "the market," they are often confused about whether they're talking about customers or our financial markets. Frankly, it's far more often for this kind of correction to originate in the pressure from financial markets than any other single source.
I'm not just talking about where the initial pressure comes from, but the effects of the changes. I guess the question becomes about how easily these layers get disentangled. E.g. things investors like that then result in lower sales? Things that result in greater sales but that the customers don't actually like?
Naively of course it seems like investors don't like it when sales go down, so there'd be an extremely tight link between financial market and product market feedback. But I imagine you disagree, that this breaks down easily and creates problems?
Just look at the evidence. Investor holding periods are going down, and there's less and less correlation between value creation and stock price movements.
Easy to see how a North Star (aligned with mission or not) may have shifted this over time. “Hours listened” as a metric. I’ll be interested to read this and see if you mention measuring the rights things as a way to stay on mission.
I haven't read the new book yet, but I'd be interested in your take on Disney's trajectory over the last, say, 2 decades. It seems to have strayed pretty far from Walt's original vision, largely due to the actions of Bob Iger. He took what used to be a company that was fueled by creativity and turned it into a machine that strip mines IP and extracts value. Iger purchased IP (Pixar, Lucasfilm, Marvel, Fox) as a risk mitigation strategy since you get an established brand you can exploit on day 1. But in doing so he killed the soul of Disney, which was built on big creative bets (literally sell the car to make a movie, mortgage the house to build a park).
Disney has an especially difficult problem, as optimizing for revenue for an org might actually lower total revenue for the entire company. See how many movies do badly because people expect them to see them in D+ quickly. A company this complicated need a very special kind of leadership, along with creative teams that reliably deliver hits. Now the batting average is way worse than it needs to be, and a lot of the leadership is just uninterested on the bigger problems, and more focused on personal strip mining. How many RSUs you get becomes more important than making sure the stock ever goes up (and it's not going up)
In some ways that “problem” is an escape hatch for Disney. Other studios have to write off huge losses for underperforming movies (and Disney definitely does this too). But even a flop can drive Disney+ subscriptions, park visits, merchandise purchases, hotel stays, cruise bookings, etc. Star Wars is an excellent example, even though many of the Disney era movies underperformed (it’s hard to say flop), Disney has made back more than the purchase price of Lucasfilm, the budgets of all movies and shows, and construction costs of 2 Galaxy’s Edge lands and turned a profit. They’re like Costco in that way where the food court doesn’t need to profit as long as they sell memberships.
From what I hear it seems like any other large labor hating corporation. Does Disney have a unique take on face stomping compared to Comcast or Walmart?
I happen to think a lot about this exact case. Walt Disney was an innovater who hated to repeat himself. He took enormous leaps of faith multiple times during his career in doing something completely new/different. Snow White: first full length feature film, Disneyland, and then EPCOT. He also hated making sequels on animated movies, he thought of it as a cash grab. That's why sequels like Bambi 2 and Cinderella 2 came decades after his death.
The reason I believe for all this is that founders like this are visionaries that are hard to corrupt. Walt had a strange relationship with money, he didn't long to have a lot of it, yet he knew he needed it to build his extraordinary projects. Ofcourse a founder with no care for money is a recipe for disaster, thus his brother Roy, an accountant often critizing Walt's ideas made the perfect match for the powerful duo that they were.
When Walt died, his vision died with him. The company slowly got handed over to other CEOs like Eisner and Iger. They just see the world very different, they just needed to secure the future of the company and make as much money as possible, sequels started to come out, park prices drastically went up while reinnovation stayed far behind.
We all know that the innovative soul of Disney died with him and that's very sad. But on the bright side, his story can still inspire others to make their magic.
My question to @eries; I studied business in the university of Rotterdam before coming a developer. Our bachelor was a 4 year course with your 'Lean startup method' at it's core. One thing that bothers me a lot in this day and age is the culture of reiterating and 'ship fast'. I look up a lot to Walt and his vision was quite the opposite. He built stuff and had a special eye for quality before releasing anything. He had the nerve to remove parts of a movie where artists had worked 8 months for the sake of the quality of a piece. I feel we live in an age with no sense for quality anymore. We just are to re-iterate as fast as possible and build shitty MVPs to see if there is demand. I get the idea, really.
But honestly, as an industry, at the same the bar for quality is extremely low. And it's in the entire industry from startups to SME to Enterprises. With AI, this trend only seems to become worse, we generate more, but not necessarily better. We are going to be in a time where signal to noise ratio will be incredibly low, and the demand for quality products is going to be up.
I hope it doesn't sound too bitter, but I just long for that old philosophy of quality first. Curious what you think about that!!
I worked at Anthropic, and I wouldn't attribute much to the structure itself – so I'm wary of using it as a positive example here.
I do attribute a lot to specific people. Concretely, to much of the intitial team, who they recruited on the research/infra side, and some very close personal relationships within research/infra. That dynamic, paired with their unwillingness to accede to something against their values, is what I credit for some atypical decisions and outcomes [1].
Things regulary go "corrupt" in parts of the company; it's hard to scale without importing culture from big tech. Sometimes, the defense was ICs escalating issues, Dario talking to ICs, and then shaking things up.
But this process takes time, and it doesn't lead to a full reversal; a bad/misaligned hire has reverberating impacts. Many folks are still driven by values (even if their values are not your values!), but scaling dynamics seem to be evolving like any other org – just at a higher employee count and revenue numbers.
I do place trust in specific people who work at Anthropic, but I wouldn't place trust in Anthropic the organization. It's an organization that's wont to change, regardless of its structure.
The policy decision to silently nerf AI/ML code produced by Fable surely wasn't just something "accidentally imported via a bad hire"? It seems to me like Anthropic wants to control who can develop frontier AI models. Maybe from inside Anthropic that seems like a noble mission, but from the outside it seems like downright shady anti-competitive behavior.
I saw in latest news the decision has been partially reversed -- because of external pressure...
Totally agree about the people. I've seen a bad hire blow up a 20 person startup. I've seen 5 person company excel since they worked more like 5x5 persons than 5 individuals.
> scaling dynamics seem to be evolving like any other org – just at a higher employee count and revenue numbers.
I really wonder if it's possible to avoid these dynamics, even if you try really hard.
If not, it seems to me that goal alignment is the main benefit of a hypothetical lean AI company where the middle management is 1% people and 99% tokens. When most of your decision-making is not being siphoned by politics, your output scales far better with respect to input resources.
Your comment is very astute. A structure is like a shell. It can only protect what is within. It does not cause what's within to be vital, healthy, or unhealthy. But if you think that the courage that Dario has regularly shown would be possible with a conventional "best practices" structure, I think you're kidding yourself.
> But if you think that the courage that Dario has regularly shown would be possible with a conventional "best practices" structure, I think you're kidding yourself.
With respect to OP (who has a unique vantage from inside), I do agree with this on principle. When there are uncommon outcomes, there must be uncommon structure imho. A "good structure" is like oxygen, water, or peace: When it's well-maintained and well-distributed, one might not even notice it's there, nor spend much time being grateful for it. It's banal, but "what do you mean? isn't this just how things would always have been?" is both beautiful and tragic.
Imho if we could figure out how to have a "loud peace" (in all the ways that this might mean), we'd have figured out an important way of sustaining the world and ourselves.
The structure requires maintenance and that is done by an individual or individuals. The real reasons a good company stays good is because the leadership stays good. When the leadership begins to disengage or leaves or changes in some way then the structure will begin to break down. You can't fix it with a "better" structure. It will decay over time unless someone is actively maintaining it.
What you say is true, but there is more to it. Decay is not the only thing that can happen to a structure. It also can be actively destroyed from the outside. Rather than ask whether a structure is right or wrong, good or bad, we instead need to learn to ask whether it is strong or weak.
I get the sense you were feeling at odds with my framing? I wonder if it's that you're picking up that I believe "structure" is above any one person or set of people. In my conception, leadership is just part of structure, a key maintainer. Leadership are pieces of the structure, but subordinate in scale. They sometimes seek outside help in shaping structure (e.g., ppl like eries), and the structure becomes like another passive actor, not simply "leadership's doing". Leadership are key players taking care of the structure, but they are just one set of players, and in some structures, non-leadership employees play an outsized role (often because leadership knew enough to step back). Sometimes the role of leadership if "fucking right off" in certain domains. Regardless, the structure then guides behaviour of all within it, and hopefully the structure also maintains us, at least as much as we maintain it.
I'm stating the above as if it's universally true, but it's just my take. I'd be curious to know if any parts give you strong YES or NO feelings, if you are open to share your gut reaction. Blunt responses welcome
In all seriousness, yes, individual leadership at the top has to be willing to steelman controversial issues and potential changes of direction, as well engage in unapologetic gatekeeping. At this point we've seen this over and over in tech when observing corporate successes and failures.
> If you think that the courage that Dario has regularly shown would be possible with a conventional "best practices" structure, I think you're kidding yourself.
Is there something that happened which you don't think would have come to pass with a standard PBC/C-Corp (without the LTBT)? I'm trying to think of one, but nothing is coming to mind.
I think the structure attracted many people to Anthropic (e.g. an RSP that could only be overridden by the LTBT), but I'm not sure it has demonstrated a practical impact.
As an aside, I think a lot about this problem too! But the answers that don't reduce to something like "the people, and the people to whom they give power" seem to break down when I look closely.
I was at Google when it pulled out of China. GP's post reminds me a lot of early Google - it wasn't evil because there were people in high places, who were critical to its operations, who cared deeply about doing the right thing, and as a result other people who cared about doing the right thing felt like they had cover, and people who were willing to do the wrong thing to hit a short-term number found that they were marginalized. It changed slowly, one departure at a time, as the wrong people got into positions of power and started providing cover to people willing to do the wrong thing. A lot of it also had to do with declining market power: when Google was universally on top, they felt like they could do the right thing without serious negative consequences, but when they were fighting for control of a market, they felt they had to make compromises lest some other firm (being honest: Facebook) would end up in power and do the wrong thing anyway.
Unfortunately there doesn't really seem to be a cure for institutional decay. Once unethical people get in power, they hire other unethical people, and then you're just stuck in Game of Thrones. You have to go quit and found another company, and single-mindedly keep all those people away, kinda like Anthropic did when they left OpenAI.
> A lot of it also had to do with declining market power: when Google was universally on top, they felt like they could do the right thing without serious negative consequences, but when they were fighting for control of a market, they felt they had to make compromises lest some other firm (being honest: Facebook) would end up in power and do the wrong thing anyway.
I would argue it's not a real value if you are not willing to lose something in order to hold on to it. It is admirable to want to do the right thing when you can get away with doing the wrong thing. It is only a true value if you are willing to do the right thing when you cannot get away with doing the right thing.
> I would argue it's not a real value if you are not willing to lose something in order to hold on to it. It is admirable to want to do the right thing when you can get away with doing the wrong thing. It is only a true value if you are willing to do the right thing when you cannot get away with doing the right thing.
I don't think it's that simple.
For example, let's say your desire is to minimize harm in Area X. While you're on top and in control of Area X, then you can do that easily enough. Suddenly a competitor comes whose values show they're willing to do lots of harm to Area X. And if they beat you in the capitalistic marketplace and gain more control, they'll be able to do lots of harm. In order to beat them, you may have to do a little bit of harm to Area X, which goes against your values. But in doing so, you retain control, and prevent even greater harm to Area X. Is that not a "real" value?
Would it be a "real" value to staunchly refuse to do a little harm to Area X, even if you know that this will result in greater harm in the long run?
This is why I distrust simple ideologies. The world is not simple.
Your logic doesn't hold up well to simple escalation logic.
Company A founds itself on doing 0 harm to Area X. Competitor B shows up and starts finding success doing 10 harm to Area X, so Company A makes a "moral" decision: If we do 9 harm to Area X, we are preventing 1 entire harm. Isn't that real value? then Company C shows up and starts finding success doing 100 harm to Area X, so Company A changes it's moral stance to "unless we do 99 harm to Area X ..."
I know an old lady who swallowed a fly kind of logic going on here.
I mean, your proposed logic seems to be quite consistent from a basic game theory perspective. Defecting in a prisoners dilemma and races to the bottom are both well observed phenomena.
We have 10,000+ years of human civilization at this point. There must be some other active ethical maxim operating other than "choose the lesser of two evils" to explain why there is so much cooperation amongst humans. Evidence is not on the side of the preeminence of races to the bottom.
You should investigate the repeated prisoners dilemma.
> You should investigate the repeated prisoners dilemma.
Well aware. Obviously, the entirety of human civilization is a bit more complicated than a prisoners dilemma, iterated or not. Yet prisoners dilemma's and races to the bottom still exist, and it makes no sense to argue against them in the abstract.
I think we are very disconnected on the topic of conversation here. Somehow you've confabulated my point with an attack on the prisoners dilemma or races to the bottom?
The person I was responding to made the point that if you want to minimize evil in the world, sometimes you have to add evil to a lesser degree. As in my example, if I do 9 points of evil but prevent 10 points of evil then according to OP I've added value to the world in the form of the 1 point of evil I have reduced.
I responded that this can lead to an escalation trap. This assumes that we would all prefer less evil in the world, right? So how do we get out of the escalation trap? Repeated application of the maxim "always do a bit less evil than the worst possible competitor" will not lead to a minimization of evil overall, only a creeping increase in the total amount of evil in the world.
How are you equating this to me arguing against the existence of races to the bottom?
> It is only a true value if you are willing to do the right thing when you cannot get away with doing the right thing.
In reality, neither corporate nor personal values are binary, all-or-none propositions. They are more like springs that push you in the right direction. But if something pulls hard enough in the wrong direction, a spring can be overpowered.
I don't know, man. There seem to be enough exceptions in the world to make me at least curious about whether this is really true. For what it's worth, the story of Google and "Don't Be Evil" is in the book.
Yeah, I lean towards the structure not being the cause of the outcome here (i.e. if you rotated the governance structure of Anthropic and OpenAI, I think the decisions at each would likely stay the same).
If they made that decision and it destroyed revenue, I could see an alternate timeline where a standard C-Corp + board with non-founder control may have ousted leadership. But that wasn't the situation for OpenAI or Google either, and their leadership still made a different decision.
Having values doesn't mean they're "the right" values nor the same as your values.
Regardless, it's still atypical in the context of an American company, and it can help explain the differences between Anthropic and its peers. That doesn't mean I agree with their decisions or that they're "the right" decisions, but I think it's a helpful framing in which to understand them.
I think the difference is the ability to be persuaded by a strong argument that you've critically evaluated.
Some people are unjustly called stubborn when they don't change their position based on a weak argument from an authority figure. And others claim values, but they're just stubbornly adhering to something that feels good to believe.
(This isn't a dig on managers; I've been one. But if a situation doesn't naturally escalate, that usually means a manager in the chain chose not to escalate it, and their reports have to go around them.)
You used the phrase "our industry". Personally, I'm not a huge fan of the 'tech industry' concept, simply because a lot of startups are not in software/computing, and a lot of new technology isn't either. But I get what people mean.
I notice that the companies you mention like Costco and Patagonia are not in the tech industry. Does your new book have any examples which show how to stay incorruptible in the face of the network effects that drive monopolization in the tech industry? Alternatively, have you seen workable ways to split network effects amongst networked affiliates, to spread out the market power?
I know that most founders aren't exactly looking to make a startup with a lot of competition (I'm sure not), but it would be nice to know if someone is fixing problems specific to the 'tech industry'.
Yeah, I did my best in the book to find that balance between tech and non-tech stories. You'll find a few tech stories in there, for example Anthropic, GitLab and Cloudflare. And if you want all the horror stories, you can read Cory Doctorow.
I wanted to have a wide variety of stories in the book from many different industries to show just how pervasive these forces are that we're doing battle against. While there are some things that are unique to the tech industry, I think we have more in common than what sets us apart.
FWIW, I wish people would talk about the "startup movement" rather than the "tech industry" for what we do. But maybe that ship has sailed.
Any thoughts on bootstrapping a SaaS in the AI era? Is it more manageable because a single person can leverage more? Or more difficult because of increased resource needs and customer demands? And also how that factors into starting an "incorruptible" company today.
Any time you have a technological change, it's kind of confusing to figure out how it can apply to entrepreneurs. On the one hand, it makes it so much easier to create a new MVP, makes it easier to create distribution and to get connected to customers, to do many of the techniques that lean startup demands. On the other hand, that same capability is now in the hands of thousands or even millions of other people, including other people creating startups to compete with you and the incumbents you're trying to disrupt. It's always an open question whether the so-called attacker's advantage will overcome the so-called defender's advantage with any given technology.
In terms of the thesis of Incorruptible, though, I do think that LLMs in particular should be really, really advantageous for managers and leaders who want to create alignment and coherence within their own company. If there's anything that LLMs are extremely good at, it's summarization. So much of the modern leadership challenge is simply figuring out the answer to the question: what is my organization actually doing right now? That's a summarizing problem.
Isn’t “what” the easy part? I thought the leadership is more about why they are doing what they are doing and why is that important/not important. Something which LLMs are not great at today, but aren’t terrible and can make some good guesses at times.
I would not think that LLMs would make very good leadership decisions, mostly because they're too malleable and too easy to manipulate. I do think they're very helpful in helping leaders assess their own context and situation and thereby make better decisions.
I think that for example Zuckerberg has built a structure where he is basically irreplaceable. It had to do with A/B shares where, while having a lot less shares, he made sure to have the controlling ones.
While this is good while the founder is alive, it sort of begs the question how long will the company that has structure like that run after the founder is gone. I believe it could go to some family foundation that controls the company, but I guess that is still prone to corruption.
I think that there are a lot of interesting examples in gaming industry - founders start something and they are pushed from the company due to acquisition or by the shareholders. Let us not forget hostile takeovers too.
As for startups - I think that it depends a lot from where you come from. For example, being in Europe, Serbia, it is a lot harder to bootstrap startup or to find investors. The best bet is organizing startup as a C corp in Delaware via something like Stripe Atlas in order to get (hopefully) some foreign investors interested. Investors here want to extract value before there is one there, which is a short term thinking. This in turn lead to risk aversion, opening the country for outsourcing model which is now collapsing and where there is small percentage of product based companies.
More or less unless you are considering Zuckerberg a cyborg. But jest aside, I was referring to a unique legal setup where he can not be forced out even if his decisions are catastrophically bad like whole thing with VR or good for shareholders.
It will be interesting to see how many of those companies remain "incorruptible". Your new book seems a bit like a sequel to Jim Collins's 2001 book Good to Great. Several of the "great" companies including Circuit City, Fannie Mae, and Wells Fargo later ran into serious problems. And from an investor perspective, as a group they have underperformed the S&P 500.
> And from an investor perspective, as a group they have underperformed the S&P 500.
This should be kind of obvious -- if they are avoiding doing awful things in the name of money, then they are leaving something on the table. You can't have your cake and eat it too. This is why the real solution is some kind of governance/regulation, because otherwise the market incentivizes being awful.
I doubt there is a statistical correlation between stock market performance and "avoiding doing awful things," though obviously we would need some way to quantify "avoiding doing awful things" before we can evaluate this hypothesis.
If the definition of "awful" is broad enough, I imagine most public companies will fall in the "awful" bucket, probably with the same distribution of stock performance as the whole market. If "awful" is going to mean something truly extraordinarily bad like dumping mercury into a well or whatever, I would still guess there is no correlation as I've read horrifying stories of corporate behavior at companies with unremarkable stock performance.
well, eric's book tries to make the point that these good companies DO overperform the market. after reading the book this past week, im not convinced. feels like heavy selection bias.
I want to appreciate you for this comment, even though I disagree with it, because this is a really articulate version of the conventional wisdom that I think all of us have imbibed since before we could talk.
For that to be the case, wouldn't that mean that companies are awful not in the name of money but just because they're evil? Which I thought was the antithesis of your whole thesis, so maybe I should read your book.
Actually you can have your cake and eat it too. Market incentives aren't awful in most cases. The worst incentives are actually stock standard owner/manager misalignment (or "principal agent problem") whereby the agents are short term oriented because they are comped that way.
I don't understand your comment. Companies like Netflix, Old Dominion Freight Line, Nvidia, Comfort Systems USA, and Intuitive Surgical have all significantly outperformed the S&P 500. What "awful" things have they done in the name of money?
> if they are avoiding doing awful things in the name of money, then they are leaving something on the table
That doesn't stand as a reason at all. I think the big contrast isn't as you described. It's more about short-term versus long-term or conflict of interest between principals and shareholders.
But to be specific, Wells Fargo was mentioned, and their downfall was very much driven by doing awful things in the name of money, specifically.
There is a whole table of examples like the one you mentioned in the book. This has been going on a long time: companies being destroyed, all in the name of profit.
yeah, this is very much the challenge with writing any kind of business book: the book is frozen in time yet the companies grow and change. I tried really really hard not to put any company up on a pedestal, or even make any forward-looking predictions, but merely to show how each company illustrates a specific concept from the book.
Is it realistic to make organizations that stay on mission long after the founder is gone?
I listened to a podcast interview you did where you talked positively about the Novo Nordisk Foundation as a successful governance story, but when I think of long lived foundations, I think of the Ford Foundation and the Hewlet Foundation that have significantly drifted from the founders' visions despite being non-profits. Many people think it is better for foundations to spend down all their resources before the founder is gone to prevent this drift and loss of efficacy.
Have you done any studies of what made long lived foundations drift on their mission despite no profit incentive?
I'm not an academic, so no, I have not done any of these studies, but good news, everyone: other people have. The specific structure of Nova Nordisk is not just a foundation. I think the two-entity structure, where a foundation oversees or governs a for-profit company, is uniquely suited to longevity of a mission precisely because it combines the stewardship orientation of the foundation with the performance orientation of the for-profit subsidiary. The data shows (for what it's worth) that such structures are five or six times more likely to live to year 50 compared to a standard for-profit company. I give examples in the book also of pure foundations that have lost this structure or have lost their mission integrity too. I really think you need both for it to endure.
some association... the Japanese studied their temples that withstood hundreds of years and thousands of earthquakes.. and found that there's one common pattern: there are two skeleton structures inside one another, with different loading and strengths, each keeping the other from falling (and they built the Tokyo Skytree this way).
Would be interesting to see if other lasting things in other domains, natural or human-made, physical or virtual, are built this way..
Do you have any thoughts on Mozilla? It has a two-entity structure, but there are a lot of complaints that it is not sticking to its mission (or, slightly differently, that it's not succeeding at it, due to poor strategic choices).
(Apologies if you already addressed this somewhere. Thanks for doing this)
No question, really - just wanted to say thanks for evangelizing this topic. I'm originally a medical doctor who converted to the ways of computer science, now a founder in the bio space. One thing I've consistently wrestled with is how to structurally defend our company's ability to "first, do no harm." I think the misguided incentives you raise warning about are also the primary reason for the defects we see in our (American) healthcare system today, particularly with the grievances toward big pharma and the insurance industry. So I was pumped watching your interview with Garry a few weeks back, currently working on applying it to our own little lemonade stand.
Healthcare is a recurring topic in the book, for the reasons you specify. In fact, I call for the adoption of a Director's Oath similar to the Hippocratic Oath for boards. They can do just as much - or even more - harm.
Eric, do you recommend, as you hinted in the book, that half of board seats should be appointed by a workers council? Do you think Six-Sigma is net destructive to a company, and why? Which examples in your book do you recommend readers further research and understand?
I read the book last night. While the topic is important, I was disappointed in the content and format of the book. Scatterbrained. Some of the most important questions get a page of content. Scores of offhand comments and examples that get no serious treatment, sometimes contradictory. The topic would have been better served with less examples.
I think what I liked the most about The Lean Startup was how he would reduce experiences into patterns, and then define them. You get a bunch of concrete ideas that look simple enough to add to a checklist. I do think the book dragged a bit toward the end, but I appreciated the humility of the writing.
Incorruptible sounds interesting - I've long thought about how much companies and their output are defined by their social structures. Microslop doesn't produce broken software because they hire stupid or evil people for example.
I've read The Lean Startup during undergrad and it was a bible to me at the time, thank you for your work, you got me into startup culture in a place where everyone else did not support of it.
One question I have for you is on finances, I think that still remains an afterthought in startup hustle culture, and perhaps even by design, I feel like the system is designed so that VCs keep winning and founders rarely get the exit they deserve. What is your take on that?
Thank you for saying that. When I wrote that book, people like you were very much in my mind at the time. I'm really glad to hear you found it useful, even if the people around you didn't understand or support what you were trying to do.
You're quite right. There are many, many problems with the current "best practices" including that many founders wind up with nothing even if the organization succeeds. In fact, one study I cite in the book found that something like 80% of founders of venture-backed companies will no longer be CEO even three years after an IPO.
> In fact, one study I cite in the book found that something like 80% of founders of venture-backed companies will no longer be CEO even three years after an IPO.
Why? Is there something that inherently prevents founders to remain in control after IPO?
Yes, it's called today's governance "best practices." Many of them are actually quite value-destroying, and founders should run for the hills every time they hear that phrase.
When starting a company, perhaps it’s best to consider something you love doing so much that staying there and nurturing the business is more important than exiting.
The way around that is to not take VC money. There are some (not many) startups that got to unicorn status by bootstrapping and not taking outside money. It's harder, yes, but in a way a more pure effort.
Was it "financial gravity" that made the decision at VW to install emission cheat devices?
Was it "financial gravity" that made the decision at Google to cheat at the ad exchange?
Was it "financial gravity" that made the decision at DuPont to dump toxic sludge in the environment and make unsafe products?
Or perhaps was it just a group of immoral people chasing more personal gain and wealth?
Humans are too weak and too easily corrupted by wealth, power and shiny things and our political and economic systems place way too much power in the hands of fallible individuals. I expect it to be our downfall.
By this logic, there are no such thing as psychological forces or institutional structures that affect human behavior unconsciously. I don't think that can quite be right. If you read the book, you can see the much more detailed and (I hope) rigorous argument, and then judge for yourself.
"The Lean Startup" was recommended to me about 10 years ago in the short phase when I was trying to build a startup (cool prototypes, no business model or product market fit, and starting the project with half the seed money I thought I needed to get it off the ground made it a short project).
It was a big influence on me and something I recommend and quote often.
I'm curious if your perspectives on the topics of "The Lean Startup" have changed I the era of AI tools. Particularly curious what you think about the role of MVPs to test a market.
This has been on my mind the past few weeks because of a recent experience during a company hackathon:
A few years ago I gave a talk about prototyping and MVPs at the Audio Developers Conference and in this talk to explain the concept of an MVP I proposed a silly idea for an audio plug-in (that replaces a singers voice with the sound of flamingos) as a demonstration of how we might test that there is a market for this plug-in before building it. I gave some examples of how we could test this like a landing page MVP, concierge MVP, etc.
Recently during the two days of this company hackathon I was too busy to do a project of my own because I was helping on-board colleagues with Claude and getting sucked into some leadership meetings. During the demos meeting I decided to try to build my voice replaced with flamingos plug-in and built a working plug-in in under two hours and this got me thinking:
If I can build a real functioning plug-in that a user can try in their host application in less than two hours why would I use non-software MVPs to test a market when I can build working software just as fast or faster than I could setup a non-software MVP a few years ago.
Of course there is more to learn from "lean" than just MVP (I'm also a big fan of the andon cord and the 5 why's)
(to anyone commenting on vibe coding I looked at the code and while not all of it was ideal I wouldn't consider this "vibe coded" and for serving the purpose of an MVP a couple things in the code that were a little funny are not a problem)
Definitely, AI makes certain kinds of MVPs a lot easier to produce, so that's great. Unfortunately, some people are being encouraged to outsource their own thinking to the AI. For them, it doesn't seem to make the learning any faster. In fact, I know some people that it has made the learning quite obviously slower.
Thanks for doing this, Eric. I'm about halfway through Incorruptible and loving it so far.
Do you have any recommendations for entity formation infra that caters to mission driven companies? Something like Stripe Atlas that can form the more complex structures? Forming a PBC is becoming more standard but tthe other structures seem more esoteric (and expensive).
I got so frustrated that this is so difficult for people at the early stages to do with most law firms that I actually helped start a new law firm (called Virgil) to do it properly.
Virgil is an AI-powered law firm, but it doesn't let the AI do the legal work for you. It actually hires and trains human lawyers to become AI-powered superhumans. It handles lots of the really unpleasant back-office crap that early-stage companies absolutely hate dealing with, from payroll to compliance and a lot of finance stuff.
Of course it also does full-service legal work. Because I'm involved, it is specialized in setting up mission protective structures for startups. We have worked really hard to drive the cost of such structures down.
In fact, many of the implementation guides that you can access from the book if you scan the various QR codes were developed in partnership with Virgil. If you want to DIY it, I think we've given you enough information to do so, including sample templates, term sheets, documents, etc. If you prefer a low-cost, flat-fee subscription, Virgil is also there to help you at any time. The URL is tryvirgil.com.
(And you are welcome to use Virgil alongside your established high-prestige high-cost firm, too, if you prefer to do that. It will still save you considerable amounts of money)
Thanks a ton! I have called several local firms about these structures and it hasn't been very successful (note; i have complex requirements in addition to wanting the protections in your book).
One other thing i've grappled with while reading the book is this:
Some of the internal issues you describe seem to come from companies growing too big. The Founders who lose control, weakening culture etc. The size of a company seems to correlate with so many issues (not all related to financial gravity).
I wonder how much pain can be avoided by just staying small (employee count).
Thanks again for the book(s). It feels very mission driven which perfect.
Staying small is definitely one way to increase your "span of control" over what happens. But honestly, size is not as much up to you as you think. If you hit product/market fit, you often will be forced to scale up whether you really want to or not. Better to have a structure that can handle it.
Good point. I haven't thought much about being forced to grow headcount. One can only hope for such PMF. And if you get it, i guess you become more of the target for the kinds of behaviors mentioned in the book.
I hope we get PMF with what we're building. But also hope to stay as small as possible however unrealistic that is.,
I might be missing something here but the Virgil website doesn't appear to have a CTA / Get Started / Sign Up / Contact Form or any other way to get in touch?
I see a "book a call" button in the lower-right, at least on chrome/macos. Apologies if it's not working on other platforms. TBH, the team has been so overwhelmed with word-of-mouth leads, they probably have neglected the website-entry pathway. We are working hard to scale up so that they can accommodate more demand and then will probably also have time to get a working website :)
Now, that development and prototyping is way cheaper than before, how would you say an approach to ideas validation change? Which types of hypotheses are better and faster tested using via vibe-coding, and which should still be verified like we used to?
A lot of big organizations have absorbed a Lean Startup POV -- don't debate, just ship an MVP and measure. But in practice, we're usually measuring a proxy metric, it's a short-term test, the audience may be unrepresentative and because of all this, the result doesn't generalize.
What do you think an experiment needs before it can actually be called learning? And what kinds of product questions should not be done as experiments at all?
I haven't read the book, but I've thought about similar problems. Sharing my attempt at a solution.
First, the organization must have an original steering body made up of "true believers" in a shared mission and vision. This body must make preventing the short or long term erosion or dilution of its mission a priority. Meaning that there's awareness that this particular corruption is a possibility from the start. Also, an understanding of the typical mechanisms through which it can happen (usually very human).
Second, as part of its survival strategy the steering body has the responsibility to identify other genuine true believers and integrate them in its makeup. There must be built-in assumptions that many outsiders will be attracted to its powers of influence and will try to infiltrate it.
Joining the steering council should thus be done primarily based on "culture fit". Admittedly a rather segregating practice, but one which in this case comes with the advantage that certain signals are just hard to fake on the long run. So, although many could try to dress, look, talk, or walk the part for a while, there will always be some shibboleth that trips up impostors.
I foresaw some problems to this structure that I haven't yet worked out, but it feels like a step in the right direction, if I had to come up with a solution.
That sounds very similar to the Alibaba Employee Voting Trust (EVT). That's one of many, many structures that I cover in the book. I would say, in general, one of the reasons that people have a hard time thinking through these structures is that today we treat the leadership/operation side of things as a different discipline/different problem than the governance/structural side of things. In fact, they are two sides of the same coin.
Do you think that building what the "market wants" (finding traction/gold, and leaning into that) comes at the cost of people (not) making and promoting "things that should exist" (e.g., companies and products/services aligned with ideal visions of the world they want to be in)?
If so, how is the tradeoff justified? (Make money first, then do "ideal" things?)
If not, why not? (Other than that it's unsuccessful strategically/statistically and wasteful, I guess.)
Any elaboration/response on this theme would be appreciated. Thanks!
I'd encourage you to study the story of Tony's Chocolonely. I included a version of that story in chapter 12 of the new book.
Tony's make some of the most delicious chocolate in the world, but their mission is actually to eradicate child slavery in the production of cocoa. I bring this up because before Tony's, it was widely assumed that "the market" didn't care about child exploitation. They just wanted delicious chocolate. Yet Tony's found a way to prove that this was not true.
The more general lesson is that many of the stories we tell ourselves about "what the market wants" are mere fabrications or just-so stories designed to make us feel better about how crappy our alternatives are. Sometimes it just takes a bold entrepreneur to show us that we already collectively are committed to a different set of ideals. We've just never had the opportunity to vote with our wallets to make it happen.
Jokes aside - can’t wait. Your book The Lean Startup helped me so much. I read it tens of times. It’s one of the reason I got great traction with mine startup https://playcode.io - AI App Builder on our custom cloud.
I like the phrase "financial gravity" as a way to frame the phenomenon in a way that avoids the darker (and broader) connotations of "corruption". At Humanitix we spend a lot of time thinking about this, and have much respect for the likes of Patagonia, Thank You, and others. We took the "charity path" so to speak, which has been both challenging and rewarding. Watching OpenAI's charity orbit decay into IPO fireball has been somewhat depressing, but I think it highlights one of the keys to our own continued success in resisting the pull; we don't need much in the way "capital" from the "ism". We don't need to build data centres, or produce and warehouse goods.
Having said that I don't mean it to undermine your points of "strong ethos". Simply existing in the tech world as a charity takes great strength of ethos. Try explaining to AWS that you should be eligible for "start up credits", but no, you don't have "investors" to prove you're going to the moon.
So I suppose it shouldn't be too surprising that so few other companies have tried low-overhead tech start ups as charities. The ecosystem works against it in many ways, but it has become one of our missions to prove that it can work as a business model.
Anyway, thanks for the book (and this thread). I'll be passing it around on the work Slack.
There's actually a whole chapter on this in the later parts of the book. I talk about the phenomenon of non-profit-run companies (think credit unions or Signal or Wikipedia) and how many of us simply treat them as one-offs or singletons. As I write in the book, we admire them but we do not emulate them. I think this is a major blind spot, and I try to explain why it happens and what we can do about it.
What can a founder do to safeguard his position, interests, and company? A couple of things that come to my mind are: have an aligned/friendly board who believe in you; second, have dual-class shares (like Meta, SpaceX, Google). Anything else you would like to add?
Looking forward to reading this. Still have a signed copy of The Lean Startup from an event in Seattle from 15 years ago. The book had a big part in pushing me towards doing my own lean startup just a year later, so, thank you.
I've long been suspicious of the conflicts of interest induced by exit-orientated investment models.
I'm curious if you think cooperative businesses leveraging non-voting preferred shares, community shares and other coop investment instruments are more resilient against this type of corruption.
I'm wonder how you see the tradeoffs these models have against traditional LLC/VC models and how you would mitigate them.
I hate the word "exit" altogether. It's only the investors who are leaving Middle Earth; the rest of us are still try to make this thing work.
I address your question in much more detail in the book, using examples as varied as Mondragon in Spain, John Lewis Partnership in the UK, and Vanguard and credit unions here in the US.
We actually have pretty good evidence that these other structures are more resilient and more stable than the classic "best practices" we have all been indoctrinated into.
Unfortunately, most of us have been told that these approaches are incompatible. You either go "big" and try to make a lot of money, have investors, have a grand vision, etc. Or you go "small" and do something "ethical" and non-extractive. So many of us have been taught that it is the fate of the small to be destroyed by the big, since they are more ruthless and more powerful.
But the evidence doesn't really support this just-so story. My goal with the book is to help those who want to build mission-driven companies to realize that this is a source of strength, not weakness, and act accordingly.
> So many of us have been taught that it is the fate of the small to be destroyed by the big, since they are more ruthless and more powerful. But the evidence doesn't really support this just-so story.
This is the comment I came here to read. Thank you, I already have a copy of the book and intend to dig in more on these themes specifically.
Hi Eric, I worked for IMVU shortly after you left and tbh I didn't see a ton of "lean startup" ideas implemented well. And today, company is not healthy.
Well, there is a reason that I left after all. What's funny is that, although IMVU is today mostly famous because it appears in "The Lean Startup," many of the people who were there at the time were quite annoyed with me and found the ideas grating or even irritating. It reminds me of that old quote that "nobody is a prophet in their own hometown." Well, that kind of happened to me.
What happened in the years since? I don't really know. The company has not been in close touch with me, so I can only speculate or guess.
Is the most important decision to avoid corruption choosing a good business to go into in the first place? Because I feel like some businesses, like free social media which make their money off of ads, are more corruptible than others.
Any examples of corrupted companies that you’d like to share? I’m especially curious about your thoughts on Meta and Google, the biggest startups of their time and how they evolved.
I write about both companies (briefly) in the book. I've noticed in the comments I get from readers that people still feel very tenderly towards Google, remembering that incredible sense of idealism they instilled in so many of us when they went public. So I had to be very careful what I wrote about Google; I actually mostly left the critique to ex-Google employees, by quoting a dataset of people who had been at Google 10+ years and then wrote about their experience after leaving. Put together, those essay are heartbreaking.
By contrast, I can say pretty much anything about Facebook and nobody seems to care. Yet, if you go back and read their S-1, you can see how they very much wanted to be seen as the mission-driven good guys.
It's all quite sad, really. There are plenty more stories of corruption in the book. To be honest, it was a challenge to avoid having the whole thing read as bleak given how pervasive this corruption is today. I did my best to balance it out. You'll have to let me know if you think I got it right.
> So I had to be very careful what I wrote about Google
Can you say more about this? Do you think those tender feelings towards Google track some strain of values which Google still carries? Or does this statement reflect some fear of retaliation or conflict that would drown out the rest of your message?
Genuinely interested in how you think about this, especially in the context of this new book’s topic. Thank you for this AMA.
> Do you think those tender feelings towards Google track some strain of values which Google still carries?
I suspect that it's largely just that brand reputation tends to be very sticky in the minds of people.
It's the same reason that Pyrex, Harley-Davidson, and Dyson are still high reputation brands even though the product they make today is tragically worse than what gave them their initial reputation.
(I tend to think of private equity as often existing as an arbitrage system to take advantage of the fact that they can buy a loved brand, slash the quality and increase the profit, and continue to sell at its original price based on that brand stickiness for a while until people eventually wise up.)
I agree with your take on reputation as a lagging indicator, and your take on PE. But a writer could also feel (if the reputation is truly out of date with the reality) that they ought to point out the disconnect, rather than triangulate between the two.
The idealism that has been sucked out of the tech industry. It was so (naively) hopeful at one point, and now the arms race and profit-maximization has eroded it all. Your observations really resonate with me.
I'm surprised I hadn't heard of the Long-Term Stock Exchange, it seems like a much healthier direction for the market.
This mean you are now under gag order as you rise on the bestseller list? :)
Lean Startup is awesome, can’t wait to read your new. Excited to read about the ostensibly-not-evil Costcos of the world and hope the smartest & wealthiest amongst us grok it, that we win more when others win.
Thank you. I really appreciate your kind words, and I consider myself deeply fortunate that I've been able to speak my mind freely on these topics, at least so far.
I think you’re spot on. Facebook employees have accepted its fate. It has become a company of mercenaries. I’m surprised they folded more quickly than Google.
Congrats for publishing a new book. When I jumped into a startup, everyone seemed to have different definitions of MVP. So I just had to read your book The lean startup and realized that there is no one definition of MVP because every successful business can be different. The book also made me think a lot about profitability and got me into indie hacking mind. Although I read it just three years ago, it still held and helped me shape my views. Thanks. I will try to grab your new book someday for sure.
Now, here is my question. I personally got disappointed in how most “early” and “small” startups operate. I have short experience to be fair but their sole goal seems to be how to get funds and grants and how to get higher valuation. They didn’t have visions and sustainability in mind. It felt like they are doing gambling rather than running a business. What do you think of this and how would you explain?
If you've been around the ecosystem long enough, you eventually realize how these cycles go. When startups are seen as trendy and a good/easy way to get rich, you get a lot of this gambling behavior in response. When the crash comes (just wait) a lot of those people get flushed out of the ecosystem, and things return to the original motivations: building, exploring, discovery.
I was talking the other day to a Silicon Valley OG and he expressed total disgust to me about the "mercenaries" who have overrun the valley right now and who are destroying the very things that made it great in the first place.
Thanks for answering. A crash happened recently to me and I got myself voluntarily flushed out of the company. Mercenaries is a good way to put it. I guess I will have to keep searching for right people.
Q1: You have done a few friendly interviews on YouTube, but I haven't seen one that challenges you much. Do you know if there are upcoming interviews that you found pushed back?
Q2: Is the idea of shareholder supremacy fundamentally at odds with your with your preferred alternative governance structures, or is it just a time preference and risk attitude issue?
Q3: You will get sympathetic ears easily due to the subject matter. But the same book about non-profits would be a harder sell. Do you agree, and if true does that say something about the marketplace of ideas?
Honestly, there hasn't been that much pushback, and I've done something like 200 interviews for the book. I think it might have to do with the fact that we all secretly kind of agree with this thesis, even though we know we're not supposed to say so out loud. I'm sure there will be some pushback coming, especially if the book starts to become more popular or gets more famous.
Though I did get a pretty funny piece of pushback on one consulting company's podcast. The person said, "But wait a second, I learned in business school that everything you're saying here is wrong. Are you asking me to rethink that?" Something like that. I said, "Well, are you interested in looking at the evidence that what I'm saying is the truth?"
I think he was really genuinely struggling, because I don't think he was that interested. Many of us are not that interested in seeing the evidence that the things we believe or were taught are not quite true.
Q2: shareholder primacy is a bad idea on its own terms, as I lay out in the book. It doesn't prevent people from adopting any of governance structures I recommend, it just makes it more difficult, by creating career incentives that add friction to doing the right thing. That's partly why it's so value-destroying.
Q3: I don't understand this question, sorry. Maybe it's because I've spent many lonely years being berated for this subject matter and am only getting the sympathetic treatment lately...
Q3: Direct question: Have journalists and their industries been similarly corrupted from their proclaimed mission to communicate the truth? Do the issues in other groups of people (charity, religion, sport league) share the same root causes, or is the source of corporate corruption unique or at a different scale?
The shareholders have little to do with this, ultimately. You see the same rot happen in private companies where the main investor really has full control.
It doesn't take much time seeing companies grow to see the cultural differences take hold when a company goes wrong. You end up with execs and middle management that do not want to rock boats, and where any disagreement is clearly career suicide. At that point, people push for what is good for them and is not good for the company, and people realize that letting things decay is in their best interest. Once your org has enough levels of management, anyone that is part of the big decisions and isn't a team player has already been filtered out, so you see large meetings where hundreds of millions are supposedly distributed, yet not one person is ever going to complain about obvious grift, or decisions that will harm the company in the long run. Open discussion is too dangerous, and coordinating action against bad behavior becomes more and more expensive. Therefore, the company just naturally erodes.
You can get there too with just a bad enough leader that values sycophancy enough... and after enough billions, basically every leader ends up having a lot of trouble accepting news of bad behavior from their advisors.
I appreciate that you are looking at this problem and I hope you found some interesting things to help point to something worth bringing awareness to. I don't like the business perspective on things and that sounds like the perspective you are coming from. IMHO the world is too focused on business and not enough around creativity, kindness and helping the world heal.
IMHO we are dealing with a cultural domination movement centered around authoritarianism and its engulfing everything. The business world is being used as a weapon wielded against the world, I don't think this is a leadership problem, its a problem with selfishness and whats going on in the heart.
I understand where you're coming from, and if you read the later chapters of the book especially, you may find the book surprising. I won't say more to avoid spoilers.
Not a question, just thought I'd throw out that I worked through Black Art of Java Game Programming when I was learning Java in 1997 or so. I still have my copy because I don't like getting rid of books. I found it really helpful for learning patterns for building medium sized software projects. I hadn't realized that you wrote that until years later when you mentioned something about it in The Startup Way.
No way! I would absolutely love to hear what you thought of that book. In fact, you may be the first person I've ever interacted with who actually read it!
Hi Eric, very excited to read your book. Im fan of The Lean Startup and it helped shape my couple of startups that I did (and got successful exit). Recently i've been having crisis and loss motivation on starting a new one after seeing SV getting corrupted in recent years, but im hoping your new book helps me revive the fire and show that starting a startup with the right ethics is possible.
Anyway, my question is - Have you had a chance to research OpenAI and it's path to getting "corrupted" i.e. going from Non-profit to this weird structure to then, what it looks like, absolutely regular for-profit company? whats your take on it? what are the lessons of the convoluted company structure they persuaded?
Thanks for your kind words. Don't let the mercenaries get you down. They're depressing a lot of us, but they're not here to stay. People always want to judge these trends in the middle of a cycle, but during the hype cycle you can't really tell what's real and what's not. Give it a couple years and then let's revisit, shall we?
It's a really complicated and confusing company to draw lessons from, partly because there are such big ego, larger-than-life people involved doing crazy stuff. A lot of the inner details have not yet been made public, so I don't think we really, really know what was going on behind the scenes. There have been quite a few factional struggles there, and I'm sure you can find bad behavior on all sides. That's not that uncommon when so much money is at stake.
In the book, I try to get into the structure that seems to be stable over long periods of time, which, because I know more about the details, I felt more comfortable illustrating by telling the story of Anthropic. I had to pick one difference that seems to really matter in these so-called complicated structures. It's whether there is one central point of control or more than one, i.e., if there are checks and balances. That when an outside board of trustees has the power to hold the for-profit board accountable to the mission, that seems to produce more stable results.
Check out the research of Steve Thompson at the Copenhagen Business School, who has been a pioneer in developing the data from which these conclusions are drawn.
Can't say I agree with Costco anymore, staff are now rude and needlessly petty at multiple locations which I can only assume is because they're getting squeezed from the top in a similar way to the grocery stores.
It used to feel completely different a decade ago, no teenagers that couldn't care less, now few of them seem to care.
Tyre centre moved to bookings only but you can't call because there's never anyone on the tyre desk. I know because it's always unattended whenever I walk past.
Gas station staff just chat to each other and put out the traffic cones 30 mins before close leaving a small gap.
Everyone now has to scan their card with a single scanner leaving a huge queue outside just to get in.
Register queues go right down to the back of the warehouse with half the registers closed.
Queue again to get your receipt checked and all you get is departing grunt if you're lucky.
It's sad because I used to rave about Costco and bring the cool new snacks to share at work.
Prices are mostly comparable at the grocery store if you are willing to wait until they go on special so I've given up on Costco.
I've read the Lean Startup several times, and I'm a huge fan. Have been wondering this over the past year: Has the notion of MVP changed at all, given more experienced or knowledgable customers, higher expectations, AI decreasing costs, and more saturated markets? Seems like what you could get away with 15 years ago might not fly with customers today
Absolutely. 100% true. But on the other hand, the tools have gotten a lot better, so it's much easier to build a high-quality MVP than it was back then. But in any era, the most important thing to remember is that quality is defined by the customer. Meaning, if you don't know who the customer is, you literally don't know what quality means. So don't fall into the trap of assuming you know what would fly or would not fly with customers today. Test. Experiment. Learn.
How often do you see companies recover from financial gravity? Or is it mostly irreversible?
How much do you attribute worsening of company values to things like professional managers, too much hierarchy, and less founder-mode; versus financial gravity?
In a case like GitHub where their focus seems less on open-source these days, should developers try to help GitHub better support open-source or should the focus be on building alternatives?
You've framed this question as if these things are separate phenomena, but from my point of view, they are all symptoms of the same underlying cause. The sad truth is that, as I say in the book, "It's always too early until it's too late." The truth is we don't ever know if something is too late until we try. If you love an organization and you think you have the opportunity to try to help them get better, go for it. If you decide they've abandoned their ethos, I definitely think you should help support and build the alternative.
For reasons I try to explain in the book, open source in particular is an example of the kind of mission-driven positive externality type of business that our modern best practices make it hard for people to see and understand. This is going to be a recurring problem in the free software and open source movements for years to come unless we get smarter about these forces.
I don't love entropy as the metaphor, because entropy is inevitable. And yet, some organizations seem to not experience it. These exceptions demonstrate that there must be some other variable involved.
Your first book was my like my bible, used many of the concepts when building gomacro.ai, at the same time found it so easy to get sucked into non-lean methodology. Very hard these days to come up with a sound idea, so many people building things that nobody asked for to begin with and in the age of AI its even more so the case. Best of luck with the new one, will give it a read!
Thanks for all your work and books, Lean Startup was invaluable to me starting my career in 2017 working in a feature factory.
You've probably talked about this before, but with AI speeding up product "delivery" (especially prototypes), what changes have you seen to the lean startup methodology? Is it possible to supercharge the build measure learn loop?
And what good uses for AI have you seen to keep teams "building things people want"?
We're certainly seeing a lot of speedup for certain kinds of products, and I expect to see far more. But some of these speedups are dramatically overstated because people are measuring only the time to produce the prototype or the cool demo, not actually the time to get through the full build/measure/learn feedback loop. In fact, if you think about it, I think it's pretty clear that it's the learn step of the feedback loop that has always been and will always be the bottleneck.
In terms of good uses for AI to figure out what people want, I really think the best advice is to focus on your own skills and agency. In other words, never ask the AI to make an artifact for you. Instead, ask it to teach you how to make the same artifact.
If you do this over and over again, if you do it step-by-step, having the AI as a teaching companion, critiquing mistakes that you make, breaking the problem down into smaller sub-problems, making sure you've mastered each step before moving on to the next, pretty soon you'll be able to create some really awesome artifacts.
Is this approach, in some sense, "slower" compared to vibe coding everything? Yes. But I think, at least in my experience, this is a go slow to go fast kind of situation. Now I had the benefit of being able to use a completely custom AI rig made by the company I help co-found, Answer.ai (with Jeremy Howard). If you want to learn more about that, you can access it at solve.it.com.
I’ve been thinking about what objective harnesses can be put around governance for companies and governments as well. Transparency dashboards, clearer real-time feedback mechanisms. What do you suggest especially for governments (local, or even larger). Keep thinking AI might actually help improve our feedback mechanisms given all the noise.
Yes, I do think this is something that LLMs should be very good at. As I've said in a couple of the comments in the thread, summarizing is LLMs' greatest superpower. But I have a whole chapter in the book about the use of metrics and, of course, their misuse. I'd be very cautious here. Government reformers have often assumed that just having better data will cause agencies to make better decisions, but this is simply not true. The choice about which data to pay attention to, whether to make decisions in a scientific or humane way, are values questions, not just data questions. They require the installation of a specific ethos in the organization to stay true to those values. Without that, more data will not have any effect whatsoever.
Not just data but transparency of actions. Open source governance is interesting with some examples through git contributions for code and transparency of contributions to wikipedia, and things like Kanban boards and other lessons from project management. What if required government actions and requests are done with transparency - and so is the spending ledger. Public comments can be public too. It doesn’t replace human judgement but it provides direct feedback and clear sight into things that are normally hidden and deliberately obfuscated.
You frame corruption as financial gravity, fixable by governance design at the firm level. But the dollar's strength has been reinforced for fifty years by oil trading in dollars. Tying our money to a conflict asset implicated in war, pollution, and enormous suffering. Can any company be incorruptible inside a monetary system that isn't?
The founders and business models of Costco, Patagonia and Novo Nordisk are so radically different from so-called "tech startup" founders^1 that one must consider this in any analysis
1. Who lack a legitimate business model hence have resorted to "data collection from/about computer users, surveillance of computer users even when engaged in non-commercial activity and online advertising services" with generally free, so-called "products" and "services" offered as bait
"There's a darkness in our industry that we often don't talk about."
It's "talked" about on HN but voters and commenters working for or aspiring to start/work for these companies don't like the discussion
100% probability this comment will be greyed out to try to hide it from people using graphical web browsers (no effect on monochrome text-only browser users)
The people that start "tech" companies are often soulless and maladapted to society, having hid behind computers to escape their inability to deal with the real world. There are also "tech startups" founded by people who want to take advantage of those who have hidden behind computers and lack social skills, using them as pawns
These founders and pawns do not start, nor do they want to work for, companies like Costco, Patagonia or Novo Nordisk because they only believe in what they see on a computer screen not the real world. They want to operate in Silicon Valley fantasy land
It really isn't surprising what happens to so-called "tech" companies over time considering what they start from
The author worked for Kleiner Perkins, SillyCon Valley VC
After listening to this guy you may feel like you need a shower
"The people that start "tech" companies are often soulless and maladapted to society, having hid behind computers to escape their inability to deal with the real world".
Yes. Of course.
You cannot trust anyone to have a rounded mind unless they have actually done more than one thing, broadly speaking.
Having worked at one of these companies, I don't buy for one second, that these companies are not obsessed with financial benefit. You would be an absolute idiot to believe that.
The founders don't want to work in the regulated environments that Costco and Novo Nordick operate in
The pawns don't want to work in the IT departments of those companies
They all want to be in Silicon Valley fantasy land
They worship obscene Silicon Valley wealth, they are beholden to venture capital firms and they want to build data centers all over the planet and fill Earth orbit with space garbage
The environment is an afterthought, computers and sci-fi fantasy are what is important to them
To each their own. But...
This is the opposite of the guy who founded Patagonia. For him the environment is forethought, he has spent his life outside, not in front of a computer^1
1. Yes, I am aware Patagonia has made some mistakes with maufacturing
Thanks for doing this - I'm an author, and my working theory is that every author is a one-person startup, so I try to think about lean startup principles when I think about the business of being an author.
How do you think Lean Startup principles could be applied to ordinary families looking to navigate the existing economic stresses we're experiencing?
Re: your point about being an author, that has always been my approach, too. For this new book, I took in a metric ton of customer feedback (I had over 600 test readers generate more than 10,000 comments) and it really helped the final product. The challenge, of course, is always how to take in external feedback without losing your vision
I've been a bit reluctant to over-generalize from my own theories, and so am not sure I would want to speculate about how to apply them in a family context.
I am finding this exceptionally difficult, to be honest. It has been nearly impossible (so far) to get traditional media to take the book seriously (there have been a few exceptions). And the perversity of the modern social media algorithms means that it is extremely difficult to get discussions of the book to break through that barrier. I've had people who follow me say their feed is absolutely saturated with content about the book, and others who have no idea the book has come out. The algorithm decides all, having hundreds of thousands of followers is next to useless anymore.
So, to the extent the book is getting attention at all, it's being driven primarily by word of mouth. People who read the book are inspired to become evangelists for it, far more than my prior books. I think this one is more emotionally resonant for folks, and has applicability way beyond founders or even product people. So I'm extremely grateful for all that support.
But if you look at the view counts on YouTube, you'll see that they are all also suffering from the algorithm's fickle attention. Most have very few views (with a few notable exceptions).
I'm not sure I would group all those companies in with each other, and if you read the book, you'll see that I attempted to make at least one important distinction among them.
And it's interesting that people see Lean Startup as short-term; that's really not what's in the book. I tried really hard to make clear that you need a foundation of long-term thinking in order to make any kind of rapid iteration system, whether that's Lean Startup or Lean manufacturing, work. By the way, this is an old finding that shows up in a lot of the management literature going back to the people who originally studied the Toyota Production System.
But all that said, I'm really glad that you feel LTSE embodies a long-term optimistic view of the future. That was absolutely my goal in starting it.
Good companies go bad because the American financial system and thus the companies that live within that system are geared for "shareholder returns" as the primary objective of existence for the corporation. If the objective of the corporation was simply to protect its continued existence, more akin to a nation-state or a club, then it would be possible to have a wider variety of corporations which each behave differently and behave more according to their own internal rules and principles instead of behaving according to the demands of external shareholders who only want money, even if it distorts or kills the company in the long run.
What's interesting is that this is not a long-standing pillar of the American financial system but a relatively recent addition that was done without any democratic legitimacy whatsoever. I think it's pretty clear that if we go a different direction, we can have a different outcome.
In America it's more important to maintain or grow shareholder returns than it is to not poison your customers. Its perfectly alright to give your customers cancer (Roundup, Fracking, Massive amounts of sugars which lead to metabolic disease)as long as it makes someone rich and they can donate to a political campaign. We really are the most evil and corrupt country to ever exist. We need a Mao, Stalin type figure to set things straight.
Reminds me of the question “why do good people go bad?”
What are invisible forces? What is good? What is evil? Physicists, philosophers and theologians alike think about those questions.
Do those questions need a foundation on which they stand to be answered? What is that foundation (are there relative foundations or are they by definition absolute?)?. Is there a moral standard that those handful of companies share? Similar to “success factors”, are there “success ethics” in your perspective?
What would be the elements of success ethics that others can learn from?
Yes, ultimately this is a deep philosophical question. I know most people think it's foolhardy to traverse such waters in a "business book" but I don't mind. If you pay careful attention to the structure of this one, you'll see it's not really a business book at all, at least not in the way the form is normally understood.
Eric, really interested in how you pick the things you work on. I'm a really big fan of the concept of the Long Term Stock Exchange, but projects like that seem to me at times like paddling a canoe upstream using a spoon.
Whats your criteria? Is there an analytical component? Are you willing to work on something even if "success" is unlikely? And with all of this going on how do you have time to work on books!
thank you for your work by the way. It continues to be useful year after year to me and people around me!
I tend to use the metaphor of trying to carve the Grand Canyon with nothing more than water and gravity, but I appreciate you honoring and acknowledging the difficulty of this.
Honestly, I don't have formal criteria. I have young kids now, and I try to ask myself every once in a while, when they're old enough to really understand what I do for a living. When they ask me: "at that moment in history, what were you doing?" I want to be able to answer them and give them an answer that I and they will find satisfying.
I'll also be honest that I've my fill of conventional "success" in my life. I don't feel obligated to use the likelihood of success as a criterion anymore. I tend to just do the things that, in the moment, seem right to me. Or where it seems like, for whatever reason, no one else is willing or likely to try it, and I have been given that lonely assignment.
Many of the things that I've tried haven't worked out, but that's okay. I accept that that is a precondition of the kind of work I like to do.
Thanks Eric - been a fan of your work for years! I remember Steve Blank bragging in his early courses that you evangelized his work to the masses. I applaud writing a book on the challenges of making a business that is net good for society. I've personally found that there are just so many forces pushing towards the status quo (make more $$), that it's really hard to create a company that prioritizes public good.
How much do you blame our values of our society for creating corrupt businesses? Are corrupt businesses just a mirror of our own values?
Yes, that's right. But I also think that business can be the catalyst for getting us out of this mess too, because ultimately, mission-driven companies are a source of tremendous and surprising power.
The question has been also on our mind. We restructure now towards a https://steward-ownership.com/ company structure (in CH). The hard challenge will be fundraising - so we are actually considering selling "Partizipationsscheine" which are stocks without a vote, but still a dividend. On a open market (maybe through polygon / base coins). I just wonder how to resolve the initial funding question on those companies. Any ideas?
Don't think you need anything like polygon or tokens for this. I think you just have to have the courage to ask investors to play the proper role within the governance of your company and, frankly, have the business results such that they are willing to accept those terms.
Coming from the blockchain space, but wanting to build something with bright patterns, while also using DLT and crypto, has been painful, to say the least.
I would like to know how best to stand out from the toxic, finance-driven world that is defi and crypto generally, without getting rolled in with all the clowns. Of course, I know that clear messaging and verifiable, evidence-driven claims are good, but I am thinking about the more abstract, strategic side to things, which I still feel under-prepared for.
I appreciate that you're being honest about this challenge. In the book, I actually say that one of the problems with our modern economy is that we've created too many ways to make money without creating any value at all, in fact sometimes even by destroying value. When I give this talk in public settings, I'll sometimes have someone yell out "crypto" from the audience. That is how the public perceives the whole sector.
The good news is that we all know that being a bold contrarian is the key to returns. If you can figure out a way to structure your initiative such that it literally cannot betray the public, it literally cannot betray your mission, it literally cannot betray human values, you might be able to create something that people are awfully excited about.
Wouldn't simple (political) ponerology describe why does this happen to companies? It's the source of "hard times produce strong people, strong people produce good times..." cycle, and the observation that people who want to live easy lives embracing dark triad patterns slowly rise to the top, gaming perf stats, "playing the game", transforming the company/society underneath in the process.
How would you expect this dynamic to change considering potentially "consistent" actors in AI / Automation?
How do you imagine companies with staying power will be shaped in the future? Will we see new paradigms in management? ie smaller teams, jack of all trade types of individuals vs specialists, potentially the elimination of middle management all together
yes, certainly. There's a section in the bonus content of the book about Answer.AI and how we have attempted to use LLMs to create a company of "management without managers" and how it's going.
what else could the answer be? I feel like this is almost overdetermined, but we will have to slog through a lot of gyrations as people try to make some other answer fit...
As AI becomes more capable, it seems like a company can be a founding charter and a pool of cash to be spent on tokens to achieve the aims of that charter.
How do you feel about these AI only companies, and how do you think they could affect the wider market?
I expect many of these so-called AI-only companies will actually involve quite a few humans. I think the general idea that AI could be really useful at helping an organization stay true to the mission or purpose in its charter is quite right. Although I still think, at the end of the day, humans should be in the loop and not just as an accountability sink, but really truly providing the creativity, the vision, and the direction of the whole organization.
First, I have not read the book.
You mentioned Novo Nordisk, but given the current context and so many changes that employees/company has undergone recently and the way it is performing, do you still think that it was a good example to include here. What factors played for it to suddenly undergo so much when you have mentioned they have been structured to resist gravity and thrive for decades -- or even centuries?
I've been reading the book. The important part is in 2004 they were offered to be acquired by serono. Because of their governance they were able to say no to the acquisition. Meanwhile serono was later acquired by merck and largely shut down. Back in 2004 novo was about $2.5 a share. Now at its current price even after a huge downturn it is $43.3 So that 17x gain you can attribute advantages with how they governed themselves at that time. Is it a silver bullet or always make stock go up and to the right? No of course not. Are they making governance mistakes now? I'm not sure. But most companies probably would have sold for a ton of cash and if so everyone would have missed out on huge gains, not just in money but in technology and public good.
A company's values become even more important with AI accelerating and expanding the mission of traditional Delaware Corporations.
Do you have advice on how to use AI to help teams stay true to their values?
Having not read your book yet, in my mind there's the obvious legal support AI can provide to help navigate complex situations, but maybe there's some other groundwork in the value creation and implementation itself?
If those are your questions, I'm confident you're going to like the book a lot as it gets into precisely those topics.
I will say, in general, I think AI is an amplifier of values, and so it will make the good companies better and the bad companies worse. Or maybe more accurately, it will make the good parts of companies better and the bad parts of companies worse.
Either way, I do think that LLMs can solve many of the leadership challenges that we have to solve today with hierarchy and dashboards and bureaucracy, because LLMs are extremely good at summarizing the context of a given situation. One of the hardest leadership challenges of all is simply answering the simple question: What is my company doing right now?
I'm about to launch a startup, do you do consulting for small companies with what I'd like to think is a big mission (likely similar to all startups lol)? In other words, is there some way to contact you and do you work with non-billion dollar startups if you find it worthwhile? Or is it more in line with 'read my books and call me when you raise your first million'?
I'm glad you're doing this. I am aware of _Incorruptible_ from seeing posts on LinkedIn, but from your description here, I now realize I'm going to love this book! I wasn't going to make time to check it out, but I will now!
Where does Apple fall on the Incorruptible spectrum? Is it covered in the book?
Apple is not covered in the book (except via a few Steve Jobs anecdotes). I'm just not plugged in enough to their internal culture to be able to comment intelligently.
Tell me what's different about this page vs what you've seen on LinkedIn? maybe I can learn how to promote the book better!
I finished The Lean Startup a few days ago, and I really felt the power of the ideas you've shared there coming from a heavily technical background; incredible work.
It's already been 14+ years since you wrote the book; I wonder if a second edition is something you have in mind, or at least on your consideration list
I've thought about it over the years, but never pulled the trigger. This used to drive me crazy when I was younger. When an author who became "older and wiser" decided to make a new edition of the book in which they hedged all their bold claims with all the caveats that they had gained through experience. I always thought such old people were cowards. Of course, now I understand why they do it.
Was Frederic Laloux's work (Reinventing Organizations) an inspiration at all in your journey exploring these topics? Seems like very similar territory, albeit from a different perspective.
I am a few chapters into the book, so maybe this is answered later. Don’t most people who play a part in corrupting companies get away with it? You mention Jack Welch and James McNerney, but it feels like explicit examples of corruption are rare. I imagine that many of the perpetrators move on to other boards and profit off of the decline at the expense of others?
1. Why is the scrolling hijacked (in a super frustrating way) on incorruptible.co?
2. Why do the photos look like they've been mucked with by generative AI?
Okay, I know these questions don't seem like good faith engagement — but it actually is hard for me to separate decisions like these from my assessment of whether a book like this is worth my time! (And you did say to ask you anything...)
I genuinely do not understand what you are asking, but I'd be happy to try and answer it. If you prefer a website not created by humans, you might prefer: https://howisincorruptiblegoing.com/ instead
Just curious what other types of 'gravities' exist in organizations? In a negative gravity example, something I've seen as a social contagion is when some people start resigning it tends to spread and then the organization slowly decays (or quiets quits)
I try to work through a few of these in the book. For example, the "social contagion" theory of layoffs from Stanford Professor Jeffrey Pfeffer. Also, in my previous book and this one, I draw on a concept I call "career equity," which has to do with the fact that people's perception of what will get them ahead in an organizational hierarchy is, in very many ways, more real to them and more valuable to them than any kind of bonus incentive or financial equity you offer them.
More importantly, my goal in the book is to teach the reader how to see these deeper underlying forces that operate below the surface of most organizations. Once you see and identify them, you can learn how to wield them.
not a question just a comment - I read The Lean Startup years ago, still think about it about once a week. I regularly give away copies to people starting companies who I see going down a bad path with no tight feedback loop.
I've talked about this in a couple of recent interviews, and if you can't find one, I'll try to find you the link. This question about what it's like when you're in a platform war and the platforms are like these massive bulldozers is kind of an old bit of entrepreneurial lore that, at least when I first came to Silicon Valley, I was taught many years ago. We haven't had a bona fide platform war in a while, so I think some of that lore has passed out of common memory. Generally speaking, what you want to do is what's called a market resegmentation, where you find some section of the market that the bulldozers are not going to pass over, or where you control the customer because they are loyal to you and you can play the platforms off each other.
In your view, which are couple different companies that aren’t very big (not FAANG level yet), but you think will become quite successful? Which of them are mission driven and you’d be sad if they later become “corrupted”?
Let's say this has already happened and ossified across large, formerly-innovative companies that now have so much size and inertia behind them that it might take decades for one to "fail" in a traditional sense. What can be done to reverse the process?
I won't sugar-coat this, for many companies this will be extremely difficult. but, as I wrote about it my previous book, sometimes conditions conspire to make radical transformation possible. it usually takes a crisis or an extremely bold leader to decide to take such a big swing.
Unfortunately, a lot of leaders who do have the moral authority and power to attempt such a thing do not really know what structural changes to demand. in fact, they tend to focus on the typical management/leadership stuff: business model, org chart, strategy, vision. These things are important. But there is a deeper layer that tends to get overlooked or ignored: structure, governance, boards, the relationship with investors.
In the new book, I try to tackle both topics in a new way, so that future leaders will know what to ask for when and if they have the opportunity to try.
> sometimes conditions conspire to make radical transformation possible. it usually takes a crisis or an extremely bold leader to decide to take such a big swing.
it's funny, people constantly criticize LTSE because it hasn't made "enough" progress (you can see one such example already on HN below). But since nobody has ever done anything remotely like this before, I am not sure how we are supposed to judge how much progress it "should" have made by now.
and since everyone widely agrees that what we are attempting is "impossible" I am pretty impressed that we've managed to make any progress at all :)
How much of the "financial gravity" do you attribute to VCs?
I've noticed that VCs try very hard to separate the world into "VCs + founders" and "everyone else" and that the more time a founder spends in the VC+founders bubble the more distorted their worldview can become.
Unfortunately, that is not unique to VC but happens at every layer of the capital stack for reasons I explain, I hope you'll find convincingly in the book.
The sad fact is that most VCs are not even consciously aware that they're doing this. They are simply the agents of a deeper force.
Hi Eric, thoughts on capitalism? Call it 'financial gravity' but I think capitalism is the underlying insidious force. Obviously there's nuance but a world ran by companies with shareholders and profit margins isn't going to be a good one, is it?
I do make critiques of capitalism in the book, but I try to be very careful when using that word, since at this point most people can't even agree on what the word means.
Here are some things that seem to me unequivocally true if we look at the historical record and the data available to us:
1. These kind of value-destroying actions in the name of profit have been going on for a very long time, at least 200 years.
2. The problem seems to be getting worse in recent decades.
3. The problem seems to be highly correlated with the increased financialization of our economies and the advent of a relatively recent set of so-called best practices about how companies should be built, run, and governed.
4. Companies seem to vary widely in the degree to which they are vulnerable to these forces.
5. I think to be learned by studying the companies that have been able to resist-- as a collective set
Hey Eric, I have a degree in economics and to me it’s very simple. Look up “creative destruction” and Joseph Schumpeter. Whether someone likes it or not, this pattern is the defining feature of capitalism.
The market is very good at solving certain types of problems and not so good at others.
> 3. The problem seems to be highly correlated with the increased financialization of our economies and the advent of a relatively recent set of so-called best practices about how companies should be built, run, and governed.
I have the seeds of a theory that might explain this: this is the inevitable outcome of technological progress.
Like the American democratic system, Capitalism works best when all major parties involved in the system have comparable power and can keep the other in check. The major parties here are the capital class and the labor class, because Capitalism was conceptualized in an era when value creation could not happen without human labor. As such there was some measure of power available to workers, the logical extreme of which were such distasteful words like "unions" and "strikes". Nevertheless, earlier there was some balance and everyone benefitted (after that messy little Gilded Age affair was sorted out.)
However, technology, in the form of automation, has essentially been a force of labor displacement. Yes, we got amazing improvements in quality of life, but every advance also chipped away at the influence and power held by workers.
On the other side, the capital class have not been idle. Money attracts money... and power and influence. Capitalists have been using those levers to ensure most of the gains of technology accrue to themselves. Lobbying is of course the most obvious example, influence campaigns is another. But relevant to your post, another way this surfaces is the "so-called best practices" you mentioned. There is no "collusion" to suppress wages, just "best practices" of amorphous origins. Which somehow always benefit the shareholders. Funny that.
As you said this has been going on for a long time. But technology is amongst other things, an accelerant, and these trends have simply been amplified to become more noticeable.
And now there's GenAI, which is the ultimate accelerant.
Contrary to most media and HN, however, I think GenAI is not just the ultimate win for capitalists. If you think about it, by the same token(s) that GenAI disintermediates labor, it also disintermediates capital! (Who needs VCs when 1 - 2 motivated folks can launch ambititious projects with GenAI and public clouds?
GenAI is a unique opportunity to restore balance, and could actually be the thing that ushers in the post-Capitalism age... whatever that looks like.
What's the first, most practical step a founder can take if they want to start "gravity-proofing" their company today, something they could do by next week?
By far the easiest thing is to file a "public benefit corp" form in Delaware. Two pages, extremely easy, your lawyer can have it done for you by next week without breaking a sweat. By itself, it is not enough, but it solves a genuine problem and has almost no cost/drawback.
Does "financial gravity" imply that noble missions are generally less profitable? Is there a way to align that (maybe by governments structuring the market with taxes / regulations)? Is that realistic?
You're going to find this hard to believe, but actually, mission-driven companies tend to outperform their conventional counterparts. The problem is that financial gravity tends to destroy them before they can become bona fide competitors. In the book, I mostly focus on what we as leaders can do to protect our organizations from this force. Of course, it'd be nice if the people who make market-related policy were busy trying to encourage and inspire and incentivize long-term thinking instead of short-term thinking. That would make all of our lives so much easier and so much better.
Yes, I use AI quite a lot, and I worry a lot about the effect that technology is having on me. Luckily, I have the advantage of using a tool called Solve It from the company I helped found called Answer.ai with Jeremy Howard that is explicitly designed for human-in-the-loop creation of artifacts and the development of human skills even while you use AI. Otherwise, it's likely that LLMs will cause your own skills to atrophy. You can learn more at solve.it.com
You said build-measure-learn principles survive AI. But when an MVP costs hours instead of months, doesn't the bottleneck move entirely to distribution and customer development?
You might be surprised to learn that some of them are, but not if done according to today's so-called "best practices" about how to structure corporations
Hey, Eric! I read Lean Startup many years ago when I was in my "let's do a startup" phase. My idea didn't make it, but I learned a lot and am glad I took the chance. Thanks for the motivation!
You said to "Ask You Anything," so here's my question: I have mostly stopped buying from Amazon. That includes books. I'd like to buy your next book. What's the best way to support you if I don't want to purchase through them? More generally, what's the best way to support authors that _only_ publish on Amazon without supporting Amazon itself?
Luckily, many of us publish in many places other than Amazon, and in fact the best way to support any author is to buy the book from your local independent bookstore. In fact, if you want to do me a big favor, you'll call your local independent bookstore, ask them if they carry the book, and if they don't, berate them for not doing so. But please do it in a polite way. In all seriousness, I actually made a list of bookstores that are selling the book that are not part of the big chains, and you can find all that on my website, incorruptible.co.
Are the lessons you have distilled applicable to other institutions in society which decline due to corruption? How is corruption different from your concept of financial gravity?
Yes. In the book, I do my best to explain how our current for-profit and non-profit labels don't really make sense, and that therefore these issues are pervasive in society (public/private sector has similar issues, as I discuss in the later chapters).
Corruption = the symptom
Gravity = the force that causes it
In the book, I give the example of a bridge that collapses. If you ask an engineer "why did it collapse" you'll be annoyed if they say "gravity" even though that is technically correct. If we go examine the wreckage and notice that the metal bolts have been corroded beyond recognition, we can start to think through what went wrong and what to do about it going forward.
Only an engineer under severe pressure would snark about gravity to leadership about a bridge collapse, though. A good engineer would challenge the missing context instead. If you ask an engineer “why did it collapse” without the correct statement of context, then of course you’ll get an answer you dislike, because they’re going to (as is human norm) assume their own context rather than the none you provided. Instead, ask better questions. “Are we liable for this collapse?” is usually what I would expect a corporate leader to want answered, and so as a senior engineer I would reply to the context-free question “why did it collapse?” with a context clarification request: “Are you asking about the immediate cause, about the root cause, or about which company should be held accountable?”. There’s nothing quite like watching an exec choke out an admission of interest in legal liability rather than engineering factors after interrupting an engineer working on the collapse who knows full well not to write checks that will get them cashiered :)
Eric, it's interesting the companies you've picked that "structurally resist gravity" and the ones you've left out. Costco, Patagonia, and Nova Nordisk are all interesting cases. But you're missing Mondragon, Equal Exchange, King Arthur Flour, and many others.
Basically, you appear to be focusing on investor owned companies and missing the entire class of worker cooperatives where the financial gravity you're talking about isn't merely resisted -- it doesn't exist. These companies have other challenges, to be sure, but if you're going to write a book called "Incorruptible" talking about businesses, not including these seems a significant oversight (at the least).
Do you address these in the book and just fail to highlight them here or is this really something you missed entirely?
Both Mondragon and King Arthur Flour are in the book. I'm not familiar with Equal Exchange, but now that you've mentioned it, I'm going to go learn more.
What do you think of the current efforts to go from quarterly to semiannual corporate reporting in the way it is playing out in the current administration?
Well, given that it was the company I founded, LTSE, that made the original petition at the SEC to try to move in this direction, you can guess. At the time, everyone said it was a fool's errand. Now that it seems likely to succeed, we've mostly been written out of the story.
However, the details matter a great deal, and I don't know that much about what the actual proposal the SEC is going to adopt is going to be. The last draft that I saw left me pretty worried.
What's interesting to me is that, in all the hubbub, neither the journalists nor the policymakers seem that interested in the actual evidence that we have amassed in academia on this question. For example, one important study suggested that moving from semi-annual to quarterly reporting costs companies something like 5% of their market cap. It's incredibly expensive, not because generating the reports is expensive, but rather the evidence seems to be that companies under quarterly reporting start to run the company for the benefit of the report rather than for customers.
That this is bad for investors, I hope you will see as self-evident.
You need to learn the parable of picking up dimes in front of the steam roller, which I think originally is attributed to Jean-Louis Gasset, the founder of BOS. The idea is that in a genuine platform war (which in the tech industry we haven't had for a while), new business opportunities are kind of like little dimes you see in the street in front of a giant platform steam roller. If you're agile enough, you can jump into the street, grab the dime, and jump out. In fact, you can do it repeatedly. The only problem is that if you stumble and fall once, you die.
There used to be a lot of wisdom in the entrepreneurial ecosystem about how to survive such a platform in a more durable way. For example, if you own the customer, then you can play the major platforms off against each other. Or, if you study the case, for example, of Intuit, which survived the attempt of Microsoft to absorb that product feature into their own platform monopoly at the time, there are lessons to be learned. But of course, every platform war is different, and I'm sure there will be new lessons that we will learn from this one.
100% the same. Some people see this as the darkness at the heart of the for-profit sector metastasizing and affecting the other sectors. I think that's a reasonable first approximation of what's going on. But in the book, I tried to make a more intellectually complete case that part of the issue is that our current distinctions that we make between, for example, for-profit and non-profit, are intellectually incoherent. That might be part of the problem, too.
hi Eric, the 'lean startup' & the work you & Steve Blank did was revolutionary in terms of getting products to market quicker.
what are the 'slower' go to market channels that you've seen produce sustainable results also producing sustainable businesses. not the come fast, die fast kind ?
One of the least read parts of The Lean Startup is the chapter on what I call engines of growth. This is my attempt to elucidate what I call the law of sustainable growth, meaning a situation where new customers come as a necessary side effect of the actions of past customers.
Not really related to your question, but Steve recently wrote a great article about the new book that, if you're a fan of his, you might like too: https://steveblank.com/2026/06/09/incorruptible/
Most? I don't think that can quite be right. But I do think the stuff I'm writing about has held up pretty well through many, many cycles of boom and bust. In fact, Steve Blank has a great new essay out about the coming crash and how ideas in the new book might be useful in helping us reorganize our economy afterwards, kind of the same way The Lean Startup did after the dot-com crash.
I find interesting the systemic explanation of Bruce Bueno de Mesquita and Alastair Smith in "The Dictator's Handbook"^1: In any publicly traded company, if the executives (or the board) are not ready to do whatever it takes to maximize profit, they will be replaced by people who are. It becomes a selection process creating tyrants. If you're lucky (as employee, customer, or human living on the same planet), whatever it takes might be aligned with employees and customers' interest. When times are bad, whatever it takes has no limits, it becomes a question of survival or progression for business leaders.
I'm curious to see how much that maps with what you identified in your new book! Patagonia is private and under the control of a few benevolent dictators ; Costco and Nordisk are a bit more surprising, I'm keen to know more.
The fundamental question is what the people who work at an org are incentivized to maximize for "whatever it takes." Today, by default, orgs are aligned to maximize shareholder value (even at the expense of long-term viability) but there is nothing natural or logical about this.
But should they want to game the system? Do you want to game the system? If the answer is no, maybe you have some interest in learning how to build a company that would be able to resist that temptation in the future.
What's funny is when the book was published, I remember someone telling me that I should have included more examples of failed startups in the manuscript. I remember answering them, "Oh, I have. We just don't know which ones yet."
This is the difficulty of writing any kind of business book. There's just no way to use any company as an example to illustrate some principle without people misunderstanding that you're holding them up as the perfect or even great company. I use case studies to illustrate the concepts that I think are useful. I can't guarantee success any more than an athlete can tell you that if you study the way that Tony Gwynn hits the baseball, you too will be able to hit 300 in the big leagues.
That's fair but I felt you held up these companies and founders as these demigods running this well oiled operation and yet I remember looking up those companies and all quietly folded within a few years of your book coming out.
My point is you were not able to demonstrate any correlation with your suggested methods with startup success. A company could do the exact opposite of what you recommend and be successful. Or follow it to a tee and fail which is what all of them did (happy to hear about any counter examples here from the original book). So what exactly is the point if you can't even move the needle a little bit?
Academics have spent the last 15 years attempting to measure these effects, and it's just a very hard measurement problem. There are so many confounding variables. I would say the early evidence is supportive of the thesis, broadly speaking. In the long run, I expect we will eventually be able to speak about this in a much more nuanced way. For example, some of the elements of LS are much easier to test than others, and those have been found to be broadly effective.
This project may take decades, and yet leaders need guidance and useful mental models in the meantime. So, to me, the much more useful data is the literally thousands of founders (and other leaders) who have reported that they have found the framework useful in their own lives and companies. They may all be deluded, of course, but at some point I think we have to acknowledge that _something_ useful is going on here.
In any event, I don't give it that much thought. If a new theory emerges that proves more useful, or if new research gives entrepreneurs new and better tools, I'd be delighted. My only loyalty is to the truth.
You should, however, ( assuming your ideas are correct ) be able to look at a company and tell if it is following your ideas or not and will therefore ( assuming your ideas are correct ) be successful or not, and therefore make billions investing.
I'd also love to see a proper TLDL, since Youtube's own Gemini-powered summary seems a bit too brief:
"This conversation features Eric Ries, the creator of the Lean Startup methodology, discussing his philosophy, the current state of the startup movement, and his vision for the future of business.
Key Takeaways & Concepts:
The Lean Startup Methodology (14:04 - 27:52):
Ries reflects on how his methodology has evolved from a controversial, insurgent idea to the industry standard. He clarifies common misconceptions, noting that a Minimum Viable Product (MVP) is not about low quality or"
Huge fan of lean startup. With being able to build MVP in hours with AI, has the "build-measure-learn" loop collapsed into something fundamebtally different? Or did the bottleneck moved elsewhere?
Learning has always been and still is the bottleneck. You can't outsource it to another country. You can't outsource it to a machine. At the end of the day, the bottleneck exists between the ears, and that process is slow and painful.
It's interesting how none of the top comments mentions capitalism as the reason for companies losing their original mission. It's the same force that causes enshittification: the (unachieavable) infinite pursuit of profit. Sooner or later all companies will fall into the "financial gravity". The ones the author mentioned just haven't gotten there yet.
I know this is a common belief, yet the data doesn't really support it. There are truly exceptions. If you study how they became exceptional, you'll find that they defy so many of the so-called best practices we teach today about how companies should be built, structured, and governed. I don't think this is a coincidence.
Eric, The Lean Startup had a huge influence on how I think about startups and product work, so first: thank you.
Given the current wave of AI-assisted coding (Claude Code/Codex) and the broader enshittification of SaaS/platforms, do you think B2B SaaS founders now face a new "we can just build this ourselves" problem?
How would you think about testing for that risk early?
Of course, many of the tactics and examples in the book are now a bit dated, so if I did an "AI edition" I guess we would update it with new stories and new tips on how to use various AI-powered tools to accelerate. But I think the principles have stood up pretty well.
I want to distinguish between a mission and a mission statement. I will not help you wordsmith your mission statement. I frankly don't think it matters.
But a great mission generally combines three things:
1. a long-term commitment to maximize some aspect of human flourishing (in the book I explain how this is the true definition of what it means to create a for-profit venture)
2. a set of values that include a determination to make principled decisions aligned with this goal, such that every decision the org makes is coherent
3. the strength to resist both the inner temptation and the outer pressure to defect, betray, or otherwise abandon the long-term goal
In the book I go into a lot more detail about how to do this, including how to make fiduciary commitments to the human beings you'd rather die than betray.
"1. a long-term commitment to maximize some aspect of human flourishing (in the book I explain how this is the true definition of what it means to create a for-profit venture"
How does this square with the widely taught business-school definition of a for-profit entity being something that aims to maximize shareholder value?
Not eries (obviously) but if you switch out shareholder for stakeholder i.e. maximise stakeholder value, you gain a wider set of responsibilities more aligned with Eric's comment. This is in itself not a new idea, it partly emerged out of the work of R. Edward Freeman. His original book on stakeholder management was published in 1984 and over the last decade has become at least a regular discussion topic at many business schools. However, the idea needs to gain far more momentum. Hopeful Eric Reis's new book also helps move the discussions forward - looking forward to reading it.
Boy, do I make my best effort in the book to take this idea out to the woodshed and show how this is a complete misunderstanding of what it means to be a for-profit entity. I hope you'll read the book and then come back and let me know if you think I was able to make a convincing case.
I'd say yes, but it's harder. It's actually what I plan to do very soon.
He's not exactly an introvert, but one good example is from the founder of my client. He wanted to stay doing the technical work he enjoyed, so he recruited a CEO above him (although he actually still shares a lot of that role and now they nominally share the role), and also hired others the lead the development teams, leaving him to focus on the one specific area of tech that he really enjoys. I'd say his job is about 80% tech and about 40% CEO (and total 120% load because he never seems to sleep!)
I guess the point is to try to fight the urge to do everything yourself. If you're not an extrovert, you'll need to hire a good sales and marketing team to take that side of the business, or you'll end up hating it and/or having no customers no matter how good your product is.
In some industries, older entrepreneurs have a big advantage over younger entrepreneurs, so it kind of depends on what you've been doing and what you're good at.
“We've all experienced watching a company we love or admire be warped and broken beyond recognition; until it's a husk of its former self, or worse. I wanted to understand why. And I wanted to know what all of us can do to stop that from happening.”
Enshittification and maximizing founder/shareholder/c-suite profit?
Those are symptoms. The real question is, what are the deeper causes? I think the book gives a pretty clear and convincing answer, but then again, I wrote it, so you'll have to judge for yourself.
Most of all, I want to restore people's sense of agency to do something about this. We are not helpless in the face of these forces. In fact, we are the originators of them.
From the outside it seems like the long term stock exchange was a flop. Why do you think it failed to gain traction? Is it that HFT just isn’t relevant to enough key decision makers?
Not sure I agree with your assessment. From my perspective, it’s actually doing well: appropriately funded, its proposal for companies to optionally move quarterly earnings to semi-annual is supported by the SEC, and it trades the same stocks as the other two major exchanges. But it takes time to build something new and innovative.
I've noticed a lot of founders are building bigger and bigger things and still calling it MVP. Thoughts on how to focus the energy to more customer development than product development early on? Wasn't that the point? Focus on the high risk part?
Let me clarify one thing, though, which is that when we call a company "good" or "bad" we can't mean something like absolutely good or evil. No human enterprise can ever be truly perfect.
So, rather, we have to identify what an organization is trying to do and whether the means it has chosen are actually appropriate to that goal. Then we can judge if the goal is aligned with human flourishing (good) or not (bad), and whether the org is consistent in pursuit of that goal (good) or not (bad), and whether it has the strength to continue (good) or not (bad).
Hi Eric, former IDEOer here. I know you spent some time at IDEO observing how we work. In my time there (2014-2024), it felt like most clients misinterpreted "MVP" to mean "the absolute lowest-effort barely-working code that we can rush out to say we shipped something." When they did manage to ship a low-quality MVP, they had no budget for maintenance or iteration. Basically, they shipped a rushed, crappy product, and some of them concluded "well, Lean, Agile and Design Thinking are all BS. We should go back to waterfall."
Sometimes clients asked IDEO to design under this shitty-MVP model (we generally refused), other times we were brought in to clean it all up.
Why do you think the concept of "MVP" was almost universally misunderstood? And, thinking about Incorruptible, how did the best companies out there internalize it?
I don't think you can put an idea out into the world without understanding that some people are going to willfully misunderstand it. We live now, especially in the age where literally ignorance is optional. When you see someone who misunderstands what an MVP is, you know that they haven't spent even five minutes reading the Wikipedia page or made any effort to try to understand it. I don't consider such people to be good faith interlocutors, and therefore I don't really think the fact that they criticize or don't understand the concept is that relevant to the rest of us who are capable of thinking for ourselves.
At the end of the day, I try to lay out in my first book the reasons why the theory that gives rise to MVP and the rest of the Lean Startup makes sense, is logical, and is consistent with a set of first principles. As a result, that theory is capable of making predictions which you can test for yourself.
Writing now for other founders who might encounter this page: If you look elsewhere in this thread, you will find lots and lots and lots of entrepreneurs who are saying how much they found these concepts helpful. You shouldn't do it because other people said so. Rather, you should take that as inspiration to think for yourself, try it, and see if the theory strikes you as valid.
Thanks for the reply, and I didn't intend it to sound as harsh as it came off! I did encourage our clients to actually read The Lean Startup to understand the full context of the MVP concept, and with the benefit of that context, we did use the term "MVP" to describe initial builds. The frustration I describe came mostly from secondary (not day-to-day) client stakeholders, who probably got their information about MVPs by scanning a LinkedIn post (okay, maybe that's harsh).
I'm legitimately excited to read Incorruptible, because in all honesty, 10 years of working with the Fortune 500 left me pessimistic about the ability of $1B+ companies to successfully do anything new. There were exceptions (some of my friends came up with Pay It Plan It for Amex), but they were rare enough that it was hard to come up with themes or patterns that connected them. I'm so curious to hear what you've learned by talking to companies that have been able to avoid ossification and continually reinvent themselves.
Right now I actually think an MVP should be Maximum Viable Product. Partly because of AI but also because it shifts one's perspective to what Viable means.
"Viable" is the core of the misunderstanding. I think some business leaders took "minimum viable" to mean "bare-minimum." It doesn't. In my mind I think of it as a live prototype shipped to real users, built out just enough to answer a clear learning objective.
I agree that AI makes the MVP easier to build, but it makes things so easy to build, there is a slight risk of overbuilding the wrong things, which can distract from the learning goals.
I worked for a lean startup that built a very expensive hardware product. The company kept the team as small as possible and took a ship fast and iterate approach. They shipped hardware that had numerous design and manufacturing defects and failure rates were very high, over 50% required replacement after 2.5 years. For a while the company was relatively generous with out-of-warranty replacements, which helped mitigate the issue, but that became too expensive. So customers spent thousands of dollars on a hardware product that was likely to fail in the year after the warranty expired. The company was also very reluctant to spend on customer service and QA, but spent very generously on marketing.
I'm curious how you would think about this situation from the lean startup perspective. With hardware products, if you don't do lots of initial testing, the scale of problems might not become apparent for years. You can't just fix a problem with a software patch.
I tried to address this in The Lean Startup and also in the follow-up book The Startup Way. Cutting corners, making crap does not help you test your thesis. What's needed is not to ape the techniques and tactics that work in another industry like software, but to really think from first principles about what will create sustained iteration speed even in a hardware context. In The Startup Way, in particular, I give a bunch of examples, including a bunch from old school manufacturing contexts that have applied these techniques successfully.
I've always find it an interesting dichotomy between their public image, retail worker reputation, and corporate reputation. The former two are fantastic. I live in Seattle metro area where they are headquartered, and the last is horrible.
I've had more than one recruiter tell me it's a classic, blue collar, "we've always done it this way" environment since many of their corporate people rose through the ranks in stores, not tech. As I believe Warren Buffet put it, "every company is a tech company these days," so this creates problems. I met someone at a party there about three years ago tell me a data migration went so poorly, they'll have to use two financial systems for at least ten years because the previous system was homegrown with ancient tech.
As an ENTJ, the later would drive me crazy, and I've declined when recruiters want to talk to me about such and such manager position at Costco.
I definitely don't want to paint Costco as perfect. It wouldn't surprise me at all if their ethos is not especially attractive to people who want to work on the tech side of their business. I can easily imagine that at some point that is going to cause some kind of problem for them. But I can also imagine that it's just a very distinctive culture that's not for everybody. The truth is, I don't really know because I've never worked there.
Hi Eric. In this day and age, and in the next year or two, what do you foresee as the most practical first steps for someone to work towards delivering a startup for income they can sustain themselves on?
And how has the traditional loop of validation, delivering and iterating on products, and getting your first paid customers changed since fast output is now possible with AI and technology?
Please structure this for someone with no startup experience, and such that event a child can understand. And please create a version that works for someone to begin to validate their idea right now and measure progress, and modify/iterate towards a goal of money generation for themselves or a team now and long-term. (And would you also describe then how this person can work on attracting a team for someone who has never successfully navigated choosing their own team before.) (And would you also accept my thanks, this is very kind of you)
This is kind of a big and deep question, more than I can get into with so many other questions pending, but let me see what I can offer. First of all, we are living through a golden age of entrepreneurship. Unfortunately, because times of tremendous turmoil are often times of tremendous startup opportunity.
But in particular, this moment, the capabilities of individual people are being amplified thanks to all these new technologies. You have the opportunity to be an early adopter of a technology that billions of people will use just a few years from now, but you get it first. That probably means that the things you care a lot about or know a lot about, you could do something about it that would have been absolutely impossible even five years ago.
Now, you have to avoid that feeling that you're too late. I remember feeling, in 1998, that I'd already missed the internet. The vast majority of people have never used Claude Code. The vast majority of people have no idea how LLMs work or what they do. The vast majority of people simply don't even know that starting a company is something you could use this technology to do.
As inexperienced or behind as you might feel, just the fact that you're here having this conversation right now proves that you are way, way, way ahead. All you have to do is use that advantage.
I don't remember the exact number, but I read somewhere that when Jack Dorsey announced a 40% layoff and claimed it was being caused by AI, his personal net worth went up something like $2 billion. When we outsource judgment to what "the market" wants, this is the result.
HR has been receiving a lot of positive and negative attention over the last 8 years, culminating lately with some CEOs notably eliminating the HR org entirely. Do you see HR as a positive , negative or mixed force for driving “Incorruptibility “ ?
When it comes to this I think that the main problem is with hiring practices of people opa. If you do not have people with education either in legal/economy psychology you are not getting good People Ops team. You need to have a maximum value team.
Also, an HR that has a right education can and will pushback against decisions that do not make sense such as removing employee that has essential know-how knowledge and that brings a value to the team.
The problem is that a lot of people in management do not want to hear feedback and only want to be surrounded by positive thinking and people that they can micromanage (even while the ship is sinking). Hiring people that do not have right education is basically a way to avoid any feedback and criticism, while having people that will do work that they are not really educated for, but happy because of the salary.
Another problem is gender disproportion in this field.
You can't expect a literature major in HRBP role to understand micro and macro organization of the business and how it is affected by various stuff.
There's a whole chapter on this. I actually hate the phrase "human resources," because of course part of the problem with our modern world is that we are treating human beings as a resource to be mined.
If people had paid more attention to the pioneering management theorist, Mary Parker Follett, who wrote more than a century ago, we wouldn't be in this mess. But of course, her work was almost entirely erased and forgotten, only rediscovered in the 1990s.
Don't worry, I have a whole chapter about this in the new book.
I know you meant this comment as a criticism, but it actually raises a really interesting point of what we mean by "real success." I hope you will elaborate.
I've just seen this problem up close and personal for a lot of years in a row. I'm sick and tired of helping people become rich and miserable, creating great companies only for them to be destroyed out of the gates. What is the point of all this carnage? Who is it for?
Why do you anthropomorphize companies? Is it to absolve individuals of responsibility?
> We've all experienced watching a company we love or admire be warped and broken beyond recognition; until it's a husk of its former self, or worse. I wanted to understand why. And I wanted to know what all of us can do to stop that from happening.
I happen to think that organizations are literally alive. They are superorganisms. To be more scientifically accurate, they are examples of the class of beings which are "emergent intelligence."
I don't think there's any way to talk about this without running into the problem of anthropomorphization. So I tried to be really careful with it in the book. You'll have to judge for yourself if you think I got it right.
And I'm especially sensitive to the question of accountability because you're right: today we mostly want to see these problems as being done by individual villains, because at least we can hold individuals accountable. How well is that going? It seems like we are breeding a class of people that are completely above accountability. I don't think that's tenable. I think in the long run, this system will collapse if it cannot hold the people responsible for atrocities accountable.
Personally, I think the best way to do this is to understand the systems that are causing these behaviors today so that we can locate responsibility in the right place.
I think conflating emergent behaviour with life (let alone intelligence) as we had typically defined it, is unfortunate and obliterates a lot of nuance.
I’d much rather we let things burn more quickly - there’s nothing sacred about these companies and no reason to believe they should not be transient.
When you try to halt every small forest fire, like we have done since 2008, then uncontrolled destruction becomes inevitable.
You’re too emotionally and financially invested in the status quo to be an instrument of change.
It's all about specific people at the leadership. No structure is immune to corruption because people come and go all the time. The reason why Nintendo is so resistant to slop for so long is because their key leadership people were homegrown all the way from entry-level jobs and are still there.
>>I kept watching good companies drift away from the missions they were founded on. Not because anyone woke up one day and decided to be evil, but because the structure they were built on slowly pulled them there. I call that pull "financial gravity."
Mate, tried as hard as you like, it's called "fundamental laws of capitalism".
I understand that won't sell books, and denial does, but c'mon.
>> We've all experienced watching a company we love or admire be warped and broken beyond recognition; until it's a husk of its former self, or worse. I wanted to understand why. And I wanted to know what all of us can do to stop that from happening.
Because it's a systemic set of capitalistic incentives, where either you find a way to be ok to forego growth for a different set of non-capitalistic values, which can only work if you're self-bootstrapped and have no investor pressure, or you go the way that making more profit pushes you towards.
You can try as hard to reframe the picture, but those are the objective incentives of the capitalistic market, and what you're selling is illusions for entrepreneurs that want to delude themselves away from personal responsibility in order to sleep at night.
>> My new book _Incorruptible_ is my attempt to explain the invisible forces that shape organizations, and how a handful of companies (like Costco, Patagonia, and Novo Nordisk) have successfully been structured to resist gravity and thrive for decades -- or even centuries.
LOL, Costco? Really?
The only good example here is Patagonia, and it's because they hacked the stakeholder system with a two-entities solution.
Good luck with your book, I'm sure that you'll find enough capitalists that want to hear just another fable to make it successful.
I didn't want to be seen as trying to co-opt Cory's thesis or (very memorable) phrase. His critique is more focused on the tech industry and its particular illness at this time.
I wanted a word that was much broader, capturing how this tech behavior is one symptom of a larger illness that has been afflicting our economy for some time. So I settled on the old-fashioned term "corruption"
Meanings are contested. The way I use the word is much closer to the way our grandparents used the word than our modern usage. How did it change? Could it change back? I think so.
Books like this are for tech bros what horoscopes are for sad old ladies.
They are full of platitudes that sound relevant to people's problems and desires, that pretend to be based on science but have no actual basis in facts, provably do not work, and yet are still popular amongst the people they let down again and again.
Anyone who could write a book with advice that worked the way this purports to would be too rich to need Kickstarter to fund his books, for a start.
My friend, I know you think this is a criticism. It's pretty obvious that you haven't read the book. I'd encourage you to do so, or at least ask yourself, "Why are you commenting on a book you haven't read?" The answer must be that you're upset about a different book or about a whole class of books that have done you wrong. That's fair. I know what you're talking about. But for what it's worth, I tried really hard to make this book different. If you check the end notes, you'll see that I drew on quite a lot of research to try and make a series of evidence-based claims.
And if you really want to live in a world where people should be listened to on the basis of how rich they are, well, you don't really need to change anything, now do you?
My friend, I know you think you're defending your position well, but you've done the opposite. Scrolling to the bottom of the comments and seeing this response from you is like speedrunning your books' one-star reviews and coming to the definitive conclusion that it's not for me. Thanks for saving my time.
It's not about the reviews on some boomer platform like Amazon/Goodreads. It's about how out of touch this kind of book is. You hit the jackpot in the 2010's and because of that you might get some mainstream press and support from hardcore tech-bros for now but... I think you have no idea how culturally irrelevant (ie. uncool) a book like this is in 2026.
This is like an aerobics VHS in the 2000's. You might still get some sales because of older people... but you're done. You're no longer part of the culture. Get your speaking gigs / paid mailing list subscriptions while you can, I guess, because you'll sell 1/5 of what you sold before (being generous). It's all downhill after this.
Noticed how your HN submission is greyed out because of all the downvotes? That rarely happens in this site.
You should watch The Social Reckoning trailer which just came out. Check out the comments.
"Noticed how your HN submission is greyed out because of all the downvotes?"
Downvotes mean nothing on HN, alas.
Factual statements are downvoted because some people don't like the facts quoted.
And, worse, mods find that okay.
It makes HN a worse place for serious discussion and for finding out the facts about an issue, because what is discussed is driven by lazy, stupid people's sentiments.
The original poster wasn't very tactful. But let's see if we can turn some lemons into lemonade. I do think there are a plethora of popular / best-selling "business" genre books that do have the vibe that the OP was hinting at. Reading the book description for "Incorruptible" at Amazon doesn't make me think that this book stands out from that crowd. How could the blurb be rewritten to emphasize that this book is truly different? Just including the sentence "This isn't another book of relavent-sounding platitudes" might help. Are there any falsifiable core principles in the book? If so, could you list those in the blurb? The blurb itself sounds kind of AI-ish:
"Incorruptible argues that this failure is not primarily ethical. It is structural."
...and with at least five em-dashes. Let's assume its not AI, but even then the blurb is very business-esque generic:
"a clear-eyed diagnosis and a practical blueprint for change"
...all sounds cliche. Your comments here on HN make it much more likely for me to read the book than the blurb ever would. But I'm not a best-selling author and maybe this is the sort of blurb that sells books to certain readers? Maybe authors don't have much of a say in how the blurb is worded?
If you haven't read it already, I strongly recommend the Knapp Commission Report. Its about police corruption in New York City in 1972, but its lessons on systemic and institutionalized corruption are highly transferable to other contexts.
Probably the most common naive mistake I see is people thinking their subfield is special and they are the first to really notice / understand fraud within it. I've certainly seen people in the "sleuth community" (scientific fraud whistle blowers) reinvent the wheel a few times.
All fraud is basically the same. Financial, scientific, police corruption...it almost doesn't matter. I'm not even the first to say this. A really good summary can be found in Ashforth 2003 ("The Normalization of Corruption in Organizations").
So, with the caveat that I haven't read your work yet and maybe you already know, I'd say look at past corruption far outside your area of interest / expertise. There's a lot you can learn there. Police corruption reports are usually great because of how accessible they are in several senses (more numerous, usually simple to understand), but I have no police related agenda to push here and it really doesn't matter where you decide to look. Just pick any Commission and read their findings.
In the opening words of the Knapp Commission "We found corruption to be widespread".
"I came to (Jim Sinegal) once and I said, ‘Jim, we can’t sell this hot dog for a buck fifty," Jelineck recalled[..]. "We are losing our rear ends.’ And he said, ‘If you raise the effing hot dog, I will kill you."
That's not structure, that's leadership. They were about to change the price, but one guy at the top with authority and an opinion said no. You could say "it's structure" that there was one guy at the top with authority, but it still depends on him having the right opinion. You need both a good structure and an unwaveringly idealistic (and correct) leader.
If you think Costco has endured only because of leadership, because of its strong ethos and its immense size, because you think it's just too big for Wall Street to mess with, you are not correct. My friend, nothing is too big for Wall Street to mess with. Wall Street has tried many times to dismantle Costco's ethos, and every time the unique structure of Costco is what has allowed them to resist.
Which it doesn’t seem you have refuted in any meaningful way. You just restated what the parent comment is responding to with no further reasoning as to why leadership doesn’t account for it.
What I hear you saying is that the original comment simply said that leadership by itself is enough to preserve the Costco ethos. It didn't say anything about size or Wall Street or anything else. Is that right?
The reason I responded the way that I did is that the claim that something by itself is enough has to explain why most companies are able to be destroyed, even though they have really good leadership. I think the common answer when people ask about Costco is that the reason why, for them, leadership was enough when it hasn't been for other people, is something like they're so large. Does that make sense?
Either way, in order to say that leadership by itself is sufficient, we have to figure out why Costco has been able to endure as a gigantic public company when, for most companies, the larger they become, the more valuable they become as a target. Meaning that Wall Street or other financial forces will intervene to change their values.
And the answer, which I lay out in the book (not in my original comment), is that Costco is protected by a very distinctive thing I call a "governance fortress." This fortress (and not merely their leadership) is the reason why they have been able to endure for forty years.
In fact, the predecessor company of Costco, spiritually speaking, was a company called FedMart that had the leadership and ethos but did not have the fortress. I'll leave it to you to read to find out what happened to them.
I think most of us are happy to believe that most companies simply have bad leadership, that leadership quality really is the axis on which Costco differs from others. If you want us to believe that other (destroyed) companies' leadership is just as good as Costco's, you need to make that case.
> Costco is protected by a very distinctive thing I call a "governance fortress." This fortress (and not merely their leadership) is the reason why they have been able to endure for forty years.
Can you sketch out your actual argument here (I think doing so would help rather than hinder your book sales, though of course that's a biased judgement)? What is this "governance fortress", and why should we believe that that, rather than the personal qualities of this one guy, is the reason they kept the hot dog?
In the book, I give dozens of examples of companies that were well-lead and then suddenly destroyed, often by outside actors who found a way to profit from their destruction. This often happened at the governance layer, while leadership watched helplessly from the sidelines.
So why hasn't this happened to Costco? I don't think it's a coincidence that Costco has a variety of "bad governance" provisions, such as a super-majority (of all shares, not just votes) provision threshold for shareholder votes, as just one example. When activists, analysts and other Wall Street actors have tried over the years to force Costco to change, its leadership has been insulated from this pressure. I think that is a structural factor that is important.
Again, structure does not _cause_ ethos. It protects it. My argument in the book is you need both.
Do you believe there's a fundamental tradeoff between structural constraints (i.e. the 'democratic' model, where dispersed shareholders and markets have a voice) vs. insulated leadership (i.e. the 'benevolent dictator' model, where competent leaders are shielded from short-term shareholder pressure)?
Also, thank you for your quick replies.
Somewhat related: https://en.wikipedia.org/wiki/Benevolent_dictatorship
I don't believe this for a second.
I don't know if this makes me the minority or not though!
It trivializes forces influencing large public companies.
Yes - there can be good and bad leadership - and bad leadership is just bad.
But good leadership can be totally helpless in a public company.
Not recognizing this is a huge gap.
The other forces that incluence a company:
- Board
- Shareholders (via board)
- Banks. Lots of companies have loans. The banks generally have the companies by the balls and can dictate many things when things go south - either due to leaderhip or just prevailing market winds
As an example of shareholder/board direct and rapid influence: an activist purchases shares. Installs board member. Causes rapid change in one or more aspects of business structure or strategy to support _their_ portfolio strategy (of course aligned with interests of other shareholders).
etc.
I see size as negatively correlated (maybe as a semi-direct cause) with preserving company mission. Hence why I was confused by you addressing it. It would never cross my mind to argue that size has protected Costco.
I haven’t read your book, just skimmed the post so I don’t know if it’s convincing. But I’d like to argue that those companies failing their mission is proof that they did not have good leadership. however, that makes the argument a little circular.
I’m aware of FedMart (Acquired podcast on Costco is very entertaining). I think Sol Price was a bad leader and selling out to Hugo Mann was putting profit above other things.
If you're right and it is AI, the comment only points out what many of us can already see. If you're wrong and it isn't AI, then the commenter you're responding to can either argue with you about how it's not AI or just say nothing because there's nothing of substance to say.
Yeah, there's no rule structure that can't be skirted and subverted by new owners with different objectives. The most resilient way to preserve your values is to:
Your successors don't need to be your literal children, but if you turn your company over to "strangers with money" you can't be surprised when they do what they want with their new possession.It isn’t about being idealistic, it’s just about understanding what makes people tick, and how to best get them to part with their money - and understanding that a business is not one dimensional.
It sounds like a really toxic working environment. I sincerely hope they made up this story as an ad about how cheap their hot dog is.
Or, as you say, it could be a really horrible environment - but I don't think you can tell from one anecdote.
> "What we figured out we could do is build our own hot dog-manufacturing plant (in Los Angeles) and make our own Kirkland Signature hot dogs. Now we are doing so much hot dog business that we’ve opened up another plant in Chicago. By having the discipline to say, ‘You are not going to be able to raise your price. You have to figure it out,’ we took it over and started manufacturing our hot dogs. We keep it at $1.50 and make enough money to get a fair return."
https://www.425business.com/news/costco-ceo-craig-jelinek-on...
That said, you seem to have archetypes above Costco, Patagonia, and Novo Nordisk that avoided it.
Can you comment on not what it takes to build such a company, but rather how to transform companies like those that I worked for into ones that resist gravity? Or is it too late?
I was pondering about a piece of wisdom people often say, roughly going like "Oh yes, invest in stocks, the market always goes up!" and even though technically true they forget to mention that it's the case because losers get kicked out. A company that doesn't performed is removed from the indices so sure, market goes up BECAUSE losers leave.
This isn't a moral stance by the way, just highlighting mechanisms to participate, and survive, in those environments.
I don't really think there's a short way for me to answer this question without having to summarize the entire book. This is what it's about. I'll simply say that the second part of the book, what I call "The Blueprint," is about both the governance and leadership tools that we have available to us to turn these organizations into the long-term, mission-driven, incorruptible places we all want to work at.
Thinking about this problem and extending the average company life seem like worthwhile endeavors while we're trapped on this ball of mud.
I appreciate you engaging with the argument in good faith and I look forward to hearing what you think of the book if you do decide to read it.
As I read through your comments, one question popped into my head: what’s your thoughts about the Friedman doctrine? Do you address it in your book?
Specifically, the Friedman doctrine makes the argument that the social responsibility of the firm is to increase its profits. That policy making should be left to governments.
Milton Friedman states in his essay:
Insofar as [a business executive's] actions in accord with his "social responsibility" reduce returns to stockholders, he is spending their money. Insofar as his actions raise the price to customers, he is spending the customers' money. Insofar as his actions lower the wages of some employees, he is spending their money.
His theory was introduced in 1970 and it seems has since become the standard for the corporate world
How does this square with what you present in your book? Do you disagree with his theory?
For example, we bought a company, and over the next year or so doubled wages in that company. Our "social responsibility" in that case was to spend shareholder money so that workers had a living wage. That doesn't seem to be the story I hear about say Amazon.
Yes, we've also spent money outside of those 3 groups. We contribute to charity. We spend money encouraging staff (and customers) to get cancer screenings etc. We spend (I guess shareholder money) on lots of things that are adjacent to our actual business.
Frankly, in the long run, I think it ultimately helps the business. It makes us "human" and reminds us that we control money, the money does not control us. This permeates through employee relationships, it permeates customer relationships. Ultimately that makes for a stronger company, built to last.
We've had acquisition offers. The shareholders have resisted them so far (despite easy riches) because we've seen what happens to other companies our size when they get acquired. Shareholder interest flows up. Staff (and by extension society) interest goes down. Ultimately most everyone leaves.
I would suggest that there is also some degree of (subconscious?) expectation of higher wages meaning: staff would be happier/performance would be higher/staff retention would be better/absence would be lower.
You weren't just giving (shareholder) money away. You were trying to optimise your team.
I wrote a blog post called "Revenue Model is More Important than Culture" (it made the #1 spot on HackerNews a few years ago) arguing that the way to avoid that corruption is by making sure the business model is immune to it, but having read your thoughts, I'd say your argument (structure being the dominant term) is even stronger.
It's funny we both land on Google as a main example. I had this quote "I’m going to pick on Google a little bit here, but I do love that company. I think there’s a lot it can improve on, but it’s still one of my favorite and least “evil” large tech companies.", and honestly and sadly, I don't even know if I'd agree with the latter part of that statement anymore.
https://somehowmanage.com/2020/09/20/revenue-model-not-cultu...
You can also see the various accolades, reviews, and awards that it's accumulated so far.
However, I have to express some skepticism that through regulations and reforms, we can reverse the entire incentive structure for public investment to be aligned with stewardship rather than extraction. How do you plan to defy the "financial gravity" between you and this dream?
Finally, I think that Claude Code has misinterpreted your request to summarize your interviews and events. Instead, it created a marketing and promotional website with not a summary to be found!
Your skepticism is well earned, and all I can really say is that I hope you'll read the book and judge for yourself. I tried really hard to lay out the evidence for two things that are necessary to address this skepticism:
1. We have to see that these structures are changeable. The economy that our grandparents inhabited is almost unrecognizably different than the one we inhabit today. So too, we can imagine that the economy that our grandchildren will work in may be unrecognizably different to us. Why does that necessarily have to be in a negative direction? What was once changed by human hands can be changed again.
2. I know this is hard to believe, but there's actually a lot of evidence that mission-driven, purpose-driven, trustworthy organizations outperform their conventional counterparts. The fact that this is so gives us a lot of tools we can use to drive the change we want to see.
On top of all that, we are living through a massive generational shift. The new generations have lived their whole lives under this maligned structure, and they are sick and tired of it. If you think they are going to sit quietly by and allow those structures to persist, I think that is very unlikely. Which means we're going to have change one way or the other; the only question is how violent and difficult is that revolution going to be? We'd be much better served to change proactively because we know what the right thing is.
I have to say, to your first point, that exploitation (of humans, labor, resources, consumers, etc.) has always been the primary driver of accumulating large wealth under capitalism. Sure, "innovation" sometimes has a role in softening the blow, but let's be real.
That was true in our grandparents' time... and their grandparents' time... and their grandparents' time. While their economies looked very different, the same structural incentives were in place and certainly did not curb unethical behavior one bit.
It has taken a long time for the piper to come for his full payment, but we can all see now that the world is burning, poisoned, and suffering as a result. We can no longer eat freshwater fish due to the massive amounts of PFAS in our lakes and rivers. The billionaires are trying to pretend they can escape the disaster by building their bunkers on remote islands or trying to colonize Mars.
I want to have some optimism in the newer generations to create positive change here, but I can't help but look at what happened to the idealism of the 1960s. The counter culture was right about the societal benefits of renewable energy, organic food, vegetarian diets, ecology, egalitarianism, civil rights, and more. But somewhere around Reagan many in that generation sold out and those great ideas were simply appropriated and fed back into the profit-machine that rewards exploitation. Today we have "certified organic" labels on food products, but that term has been watered down to almost nothing by the marketing departments, politicians, and lobbyists.
Anyhow, I obviously need to keep my pessimism at bay. LOL You have convinced me to give it a read!
Under all forms of human civilization, since the beginning of agriculture allowed one person to accumulate more cattle than another. Capitalism is actually a great equalizing force from that yoke - it allowed for the first time to get out of it through ingenuity and hard work. The rule for practically all of existence before that was "you do what the biggest baddest guy around tells you to do or you die", and your entire life and your children and their children's will be the exact same, with no hope of betterment whatsoever. It's what led to the rise of slave morality religions like Buddhism and the Abrahamics; if you have no chance at happiness in this life, best to believe there's something better after, and that those responsible for your suffering will be punished.
I used AI extensively in the research, editing, and promotion phases of creating the book (and even shared screen with a few podcast hosts who wanted to see the solveit platform from Answer.AI up close). To be clear, I never let the AI write for me; I am not a fan of "vibe creating" of any kind. Instead, I tried to use the AI to improve my own skills so that the final artifact was better than it would have been before.
I know people are up in arms about this right now, but shouldn't at least some of blame for that fall on the tech industry itself, for how these tools are designed, promoted, and sold? I think in the long run, society will achieve a more healthy equilibrium. But in the meantime, it's gonna be a bit rocky.
Is that you, Eric 'Otter' Stratton from "Animal House"? You know, "I'm pre-law." "I thought you were pre-med." "What's the difference?"
What do you say to this interpretation? In particular do you think most cases could be framed as "the key audience/customer/market has shifted"? Is it possible to find greater financial success while doing things the primary audience doesn't like?
This, of course, makes on boarding and new user acquisition harder, and can severely limit product growth. And this also leaves space for simpler products to come along and cater to the novice market. Or, companies can fight this tendency, and remove features, or make them harder to use, in order to cater to less demanding demographics.
What I'd be curious about is what spotify looks like as their market share levels off. Do they keep catering to the automatic playlist crowd, or does their average user get more sophisticated over time?
So make two UIs? Or an API and a novice user / mass market UI, and let the open source community serve fussy power users (and borrow some of their good ideas as a return on your show of good faith)?
I think these changes very rarely have to do with what customers want shifting, but when people say "the market," they are often confused about whether they're talking about customers or our financial markets. Frankly, it's far more often for this kind of correction to originate in the pressure from financial markets than any other single source.
Naively of course it seems like investors don't like it when sales go down, so there'd be an extremely tight link between financial market and product market feedback. But I imagine you disagree, that this breaks down easily and creates problems?
I happen to think a lot about this exact case. Walt Disney was an innovater who hated to repeat himself. He took enormous leaps of faith multiple times during his career in doing something completely new/different. Snow White: first full length feature film, Disneyland, and then EPCOT. He also hated making sequels on animated movies, he thought of it as a cash grab. That's why sequels like Bambi 2 and Cinderella 2 came decades after his death.
The reason I believe for all this is that founders like this are visionaries that are hard to corrupt. Walt had a strange relationship with money, he didn't long to have a lot of it, yet he knew he needed it to build his extraordinary projects. Ofcourse a founder with no care for money is a recipe for disaster, thus his brother Roy, an accountant often critizing Walt's ideas made the perfect match for the powerful duo that they were.
When Walt died, his vision died with him. The company slowly got handed over to other CEOs like Eisner and Iger. They just see the world very different, they just needed to secure the future of the company and make as much money as possible, sequels started to come out, park prices drastically went up while reinnovation stayed far behind.
We all know that the innovative soul of Disney died with him and that's very sad. But on the bright side, his story can still inspire others to make their magic.
My question to @eries; I studied business in the university of Rotterdam before coming a developer. Our bachelor was a 4 year course with your 'Lean startup method' at it's core. One thing that bothers me a lot in this day and age is the culture of reiterating and 'ship fast'. I look up a lot to Walt and his vision was quite the opposite. He built stuff and had a special eye for quality before releasing anything. He had the nerve to remove parts of a movie where artists had worked 8 months for the sake of the quality of a piece. I feel we live in an age with no sense for quality anymore. We just are to re-iterate as fast as possible and build shitty MVPs to see if there is demand. I get the idea, really.
But honestly, as an industry, at the same the bar for quality is extremely low. And it's in the entire industry from startups to SME to Enterprises. With AI, this trend only seems to become worse, we generate more, but not necessarily better. We are going to be in a time where signal to noise ratio will be incredibly low, and the demand for quality products is going to be up.
I hope it doesn't sound too bitter, but I just long for that old philosophy of quality first. Curious what you think about that!!
I do attribute a lot to specific people. Concretely, to much of the intitial team, who they recruited on the research/infra side, and some very close personal relationships within research/infra. That dynamic, paired with their unwillingness to accede to something against their values, is what I credit for some atypical decisions and outcomes [1].
Things regulary go "corrupt" in parts of the company; it's hard to scale without importing culture from big tech. Sometimes, the defense was ICs escalating issues, Dario talking to ICs, and then shaking things up.
But this process takes time, and it doesn't lead to a full reversal; a bad/misaligned hire has reverberating impacts. Many folks are still driven by values (even if their values are not your values!), but scaling dynamics seem to be evolving like any other org – just at a higher employee count and revenue numbers.
I do place trust in specific people who work at Anthropic, but I wouldn't place trust in Anthropic the organization. It's an organization that's wont to change, regardless of its structure.
[1]: https://news.ycombinator.com/item?id=47174423
I saw in latest news the decision has been partially reversed -- because of external pressure...
I really wonder if it's possible to avoid these dynamics, even if you try really hard.
If not, it seems to me that goal alignment is the main benefit of a hypothetical lean AI company where the middle management is 1% people and 99% tokens. When most of your decision-making is not being siphoned by politics, your output scales far better with respect to input resources.
With respect to OP (who has a unique vantage from inside), I do agree with this on principle. When there are uncommon outcomes, there must be uncommon structure imho. A "good structure" is like oxygen, water, or peace: When it's well-maintained and well-distributed, one might not even notice it's there, nor spend much time being grateful for it. It's banal, but "what do you mean? isn't this just how things would always have been?" is both beautiful and tragic.
Imho if we could figure out how to have a "loud peace" (in all the ways that this might mean), we'd have figured out an important way of sustaining the world and ourselves.
I get the sense you were feeling at odds with my framing? I wonder if it's that you're picking up that I believe "structure" is above any one person or set of people. In my conception, leadership is just part of structure, a key maintainer. Leadership are pieces of the structure, but subordinate in scale. They sometimes seek outside help in shaping structure (e.g., ppl like eries), and the structure becomes like another passive actor, not simply "leadership's doing". Leadership are key players taking care of the structure, but they are just one set of players, and in some structures, non-leadership employees play an outsized role (often because leadership knew enough to step back). Sometimes the role of leadership if "fucking right off" in certain domains. Regardless, the structure then guides behaviour of all within it, and hopefully the structure also maintains us, at least as much as we maintain it.
I'm stating the above as if it's universally true, but it's just my take. I'd be curious to know if any parts give you strong YES or NO feelings, if you are open to share your gut reaction. Blunt responses welcome
(Fwiw I lean heavily on the ideas of Christopher Alexander -- the Pattern Language guy -- in regards to my beliefs on "structure": https://dorian.substack.com/p/at-any-given-moment-in-a-proce... )
In all seriousness, yes, individual leadership at the top has to be willing to steelman controversial issues and potential changes of direction, as well engage in unapologetic gatekeeping. At this point we've seen this over and over in tech when observing corporate successes and failures.
Is there something that happened which you don't think would have come to pass with a standard PBC/C-Corp (without the LTBT)? I'm trying to think of one, but nothing is coming to mind.
I think the structure attracted many people to Anthropic (e.g. an RSP that could only be overridden by the LTBT), but I'm not sure it has demonstrated a practical impact.
As an aside, I think a lot about this problem too! But the answers that don't reduce to something like "the people, and the people to whom they give power" seem to break down when I look closely.
(Although it does remind me a bit of Google pulling out of China back in the day.)
Unfortunately there doesn't really seem to be a cure for institutional decay. Once unethical people get in power, they hire other unethical people, and then you're just stuck in Game of Thrones. You have to go quit and found another company, and single-mindedly keep all those people away, kinda like Anthropic did when they left OpenAI.
I would argue it's not a real value if you are not willing to lose something in order to hold on to it. It is admirable to want to do the right thing when you can get away with doing the wrong thing. It is only a true value if you are willing to do the right thing when you cannot get away with doing the right thing.
I don't think it's that simple.
For example, let's say your desire is to minimize harm in Area X. While you're on top and in control of Area X, then you can do that easily enough. Suddenly a competitor comes whose values show they're willing to do lots of harm to Area X. And if they beat you in the capitalistic marketplace and gain more control, they'll be able to do lots of harm. In order to beat them, you may have to do a little bit of harm to Area X, which goes against your values. But in doing so, you retain control, and prevent even greater harm to Area X. Is that not a "real" value?
Would it be a "real" value to staunchly refuse to do a little harm to Area X, even if you know that this will result in greater harm in the long run?
This is why I distrust simple ideologies. The world is not simple.
Company A founds itself on doing 0 harm to Area X. Competitor B shows up and starts finding success doing 10 harm to Area X, so Company A makes a "moral" decision: If we do 9 harm to Area X, we are preventing 1 entire harm. Isn't that real value? then Company C shows up and starts finding success doing 100 harm to Area X, so Company A changes it's moral stance to "unless we do 99 harm to Area X ..."
I know an old lady who swallowed a fly kind of logic going on here.
You should investigate the repeated prisoners dilemma.
Well aware. Obviously, the entirety of human civilization is a bit more complicated than a prisoners dilemma, iterated or not. Yet prisoners dilemma's and races to the bottom still exist, and it makes no sense to argue against them in the abstract.
The person I was responding to made the point that if you want to minimize evil in the world, sometimes you have to add evil to a lesser degree. As in my example, if I do 9 points of evil but prevent 10 points of evil then according to OP I've added value to the world in the form of the 1 point of evil I have reduced.
I responded that this can lead to an escalation trap. This assumes that we would all prefer less evil in the world, right? So how do we get out of the escalation trap? Repeated application of the maxim "always do a bit less evil than the worst possible competitor" will not lead to a minimization of evil overall, only a creeping increase in the total amount of evil in the world.
How are you equating this to me arguing against the existence of races to the bottom?
In reality, neither corporate nor personal values are binary, all-or-none propositions. They are more like springs that push you in the right direction. But if something pulls hard enough in the wrong direction, a spring can be overpowered.
If they made that decision and it destroyed revenue, I could see an alternate timeline where a standard C-Corp + board with non-founder control may have ousted leadership. But that wasn't the situation for OpenAI or Google either, and their leadership still made a different decision.
Regardless, it's still atypical in the context of an American company, and it can help explain the differences between Anthropic and its peers. That doesn't mean I agree with their decisions or that they're "the right" decisions, but I think it's a helpful framing in which to understand them.
Some people are unjustly called stubborn when they don't change their position based on a weak argument from an authority figure. And others claim values, but they're just stubbornly adhering to something that feels good to believe.
(This isn't a dig on managers; I've been one. But if a situation doesn't naturally escalate, that usually means a manager in the chain chose not to escalate it, and their reports have to go around them.)
You used the phrase "our industry". Personally, I'm not a huge fan of the 'tech industry' concept, simply because a lot of startups are not in software/computing, and a lot of new technology isn't either. But I get what people mean.
I notice that the companies you mention like Costco and Patagonia are not in the tech industry. Does your new book have any examples which show how to stay incorruptible in the face of the network effects that drive monopolization in the tech industry? Alternatively, have you seen workable ways to split network effects amongst networked affiliates, to spread out the market power?
I know that most founders aren't exactly looking to make a startup with a lot of competition (I'm sure not), but it would be nice to know if someone is fixing problems specific to the 'tech industry'.
I wanted to have a wide variety of stories in the book from many different industries to show just how pervasive these forces are that we're doing battle against. While there are some things that are unique to the tech industry, I think we have more in common than what sets us apart.
FWIW, I wish people would talk about the "startup movement" rather than the "tech industry" for what we do. But maybe that ship has sailed.
In terms of the thesis of Incorruptible, though, I do think that LLMs in particular should be really, really advantageous for managers and leaders who want to create alignment and coherence within their own company. If there's anything that LLMs are extremely good at, it's summarization. So much of the modern leadership challenge is simply figuring out the answer to the question: what is my organization actually doing right now? That's a summarizing problem.
I would not think that LLMs would make very good leadership decisions, mostly because they're too malleable and too easy to manipulate. I do think they're very helpful in helping leaders assess their own context and situation and thereby make better decisions.
While this is good while the founder is alive, it sort of begs the question how long will the company that has structure like that run after the founder is gone. I believe it could go to some family foundation that controls the company, but I guess that is still prone to corruption.
I think that there are a lot of interesting examples in gaming industry - founders start something and they are pushed from the company due to acquisition or by the shareholders. Let us not forget hostile takeovers too.
As for startups - I think that it depends a lot from where you come from. For example, being in Europe, Serbia, it is a lot harder to bootstrap startup or to find investors. The best bet is organizing startup as a C corp in Delaware via something like Stripe Atlas in order to get (hopefully) some foreign investors interested. Investors here want to extract value before there is one there, which is a short term thinking. This in turn lead to risk aversion, opening the country for outsourcing model which is now collapsing and where there is small percentage of product based companies.
Are we still talking about Facebook?
https://www.harpercollins.com/products/good-to-great-jim-col...
This should be kind of obvious -- if they are avoiding doing awful things in the name of money, then they are leaving something on the table. You can't have your cake and eat it too. This is why the real solution is some kind of governance/regulation, because otherwise the market incentivizes being awful.
If the definition of "awful" is broad enough, I imagine most public companies will fall in the "awful" bucket, probably with the same distribution of stock performance as the whole market. If "awful" is going to mean something truly extraordinarily bad like dumping mercury into a well or whatever, I would still guess there is no correlation as I've read horrifying stories of corporate behavior at companies with unremarkable stock performance.
https://en.wikipedia.org/wiki/Nvidia#Controversies
https://en.wikipedia.org/wiki/Comfort_Systems_USA#Anti-union...
https://en.wikipedia.org/wiki/Intuitive_Surgical#Lawsuits
Depending on your political leanings, you may pick and choose which of these you consider "awful".
Didn't find anything in my five-minute scan for Old Dominion.
That doesn't stand as a reason at all. I think the big contrast isn't as you described. It's more about short-term versus long-term or conflict of interest between principals and shareholders.
But to be specific, Wells Fargo was mentioned, and their downfall was very much driven by doing awful things in the name of money, specifically.
I listened to a podcast interview you did where you talked positively about the Novo Nordisk Foundation as a successful governance story, but when I think of long lived foundations, I think of the Ford Foundation and the Hewlet Foundation that have significantly drifted from the founders' visions despite being non-profits. Many people think it is better for foundations to spend down all their resources before the founder is gone to prevent this drift and loss of efficacy.
Have you done any studies of what made long lived foundations drift on their mission despite no profit incentive?
Would be interesting to see if other lasting things in other domains, natural or human-made, physical or virtual, are built this way..
(Apologies if you already addressed this somewhere. Thanks for doing this)
Healthcare is a recurring topic in the book, for the reasons you specify. In fact, I call for the adoption of a Director's Oath similar to the Hippocratic Oath for boards. They can do just as much - or even more - harm.
I read the book last night. While the topic is important, I was disappointed in the content and format of the book. Scatterbrained. Some of the most important questions get a page of content. Scores of offhand comments and examples that get no serious treatment, sometimes contradictory. The topic would have been better served with less examples.
Incorruptible sounds interesting - I've long thought about how much companies and their output are defined by their social structures. Microslop doesn't produce broken software because they hire stupid or evil people for example.
One question I have for you is on finances, I think that still remains an afterthought in startup hustle culture, and perhaps even by design, I feel like the system is designed so that VCs keep winning and founders rarely get the exit they deserve. What is your take on that?
You're quite right. There are many, many problems with the current "best practices" including that many founders wind up with nothing even if the organization succeeds. In fact, one study I cite in the book found that something like 80% of founders of venture-backed companies will no longer be CEO even three years after an IPO.
Why? Is there something that inherently prevents founders to remain in control after IPO?
That and, don’t accept money from strangers. :)
The way around that is to not take VC money. There are some (not many) startups that got to unicorn status by bootstrapping and not taking outside money. It's harder, yes, but in a way a more pure effort.
Was it "financial gravity" that made the decision at Google to cheat at the ad exchange?
Was it "financial gravity" that made the decision at DuPont to dump toxic sludge in the environment and make unsafe products?
Or perhaps was it just a group of immoral people chasing more personal gain and wealth?
Humans are too weak and too easily corrupted by wealth, power and shiny things and our political and economic systems place way too much power in the hands of fallible individuals. I expect it to be our downfall.
I mean, all of those are examples motivated by sacrificing other principles to make more money.
It was a big influence on me and something I recommend and quote often.
I'm curious if your perspectives on the topics of "The Lean Startup" have changed I the era of AI tools. Particularly curious what you think about the role of MVPs to test a market.
This has been on my mind the past few weeks because of a recent experience during a company hackathon:
A few years ago I gave a talk about prototyping and MVPs at the Audio Developers Conference and in this talk to explain the concept of an MVP I proposed a silly idea for an audio plug-in (that replaces a singers voice with the sound of flamingos) as a demonstration of how we might test that there is a market for this plug-in before building it. I gave some examples of how we could test this like a landing page MVP, concierge MVP, etc.
Recently during the two days of this company hackathon I was too busy to do a project of my own because I was helping on-board colleagues with Claude and getting sucked into some leadership meetings. During the demos meeting I decided to try to build my voice replaced with flamingos plug-in and built a working plug-in in under two hours and this got me thinking:
If I can build a real functioning plug-in that a user can try in their host application in less than two hours why would I use non-software MVPs to test a market when I can build working software just as fast or faster than I could setup a non-software MVP a few years ago.
Of course there is more to learn from "lean" than just MVP (I'm also a big fan of the andon cord and the 5 why's)
(to anyone commenting on vibe coding I looked at the code and while not all of it was ideal I wouldn't consider this "vibe coded" and for serving the purpose of an MVP a couple things in the code that were a little funny are not a problem)
Do you have any recommendations for entity formation infra that caters to mission driven companies? Something like Stripe Atlas that can form the more complex structures? Forming a PBC is becoming more standard but tthe other structures seem more esoteric (and expensive).
Virgil is an AI-powered law firm, but it doesn't let the AI do the legal work for you. It actually hires and trains human lawyers to become AI-powered superhumans. It handles lots of the really unpleasant back-office crap that early-stage companies absolutely hate dealing with, from payroll to compliance and a lot of finance stuff.
Of course it also does full-service legal work. Because I'm involved, it is specialized in setting up mission protective structures for startups. We have worked really hard to drive the cost of such structures down.
In fact, many of the implementation guides that you can access from the book if you scan the various QR codes were developed in partnership with Virgil. If you want to DIY it, I think we've given you enough information to do so, including sample templates, term sheets, documents, etc. If you prefer a low-cost, flat-fee subscription, Virgil is also there to help you at any time. The URL is tryvirgil.com.
(And you are welcome to use Virgil alongside your established high-prestige high-cost firm, too, if you prefer to do that. It will still save you considerable amounts of money)
One other thing i've grappled with while reading the book is this:
Some of the internal issues you describe seem to come from companies growing too big. The Founders who lose control, weakening culture etc. The size of a company seems to correlate with so many issues (not all related to financial gravity).
I wonder how much pain can be avoided by just staying small (employee count).
Thanks again for the book(s). It feels very mission driven which perfect.
I hope we get PMF with what we're building. But also hope to stay as small as possible however unrealistic that is.,
Thanks!
I do think the site could use some more prominent CTAs. I think i vaaguely noticed that button but thought it was one of those AI chat bubble.
What do you think an experiment needs before it can actually be called learning? And what kinds of product questions should not be done as experiments at all?
First, the organization must have an original steering body made up of "true believers" in a shared mission and vision. This body must make preventing the short or long term erosion or dilution of its mission a priority. Meaning that there's awareness that this particular corruption is a possibility from the start. Also, an understanding of the typical mechanisms through which it can happen (usually very human).
Second, as part of its survival strategy the steering body has the responsibility to identify other genuine true believers and integrate them in its makeup. There must be built-in assumptions that many outsiders will be attracted to its powers of influence and will try to infiltrate it.
Joining the steering council should thus be done primarily based on "culture fit". Admittedly a rather segregating practice, but one which in this case comes with the advantage that certain signals are just hard to fake on the long run. So, although many could try to dress, look, talk, or walk the part for a while, there will always be some shibboleth that trips up impostors.
I foresaw some problems to this structure that I haven't yet worked out, but it feels like a step in the right direction, if I had to come up with a solution.
If so, how is the tradeoff justified? (Make money first, then do "ideal" things?)
If not, why not? (Other than that it's unsuccessful strategically/statistically and wasteful, I guess.)
Any elaboration/response on this theme would be appreciated. Thanks!
Tony's make some of the most delicious chocolate in the world, but their mission is actually to eradicate child slavery in the production of cocoa. I bring this up because before Tony's, it was widely assumed that "the market" didn't care about child exploitation. They just wanted delicious chocolate. Yet Tony's found a way to prove that this was not true.
The more general lesson is that many of the stories we tell ourselves about "what the market wants" are mere fabrications or just-so stories designed to make us feel better about how crappy our alternatives are. Sometimes it just takes a bold entrepreneur to show us that we already collectively are committed to a different set of ideals. We've just never had the opportunity to vote with our wallets to make it happen.
Jokes aside - can’t wait. Your book The Lean Startup helped me so much. I read it tens of times. It’s one of the reason I got great traction with mine startup https://playcode.io - AI App Builder on our custom cloud.
Thank you Eric.
I like the phrase "financial gravity" as a way to frame the phenomenon in a way that avoids the darker (and broader) connotations of "corruption". At Humanitix we spend a lot of time thinking about this, and have much respect for the likes of Patagonia, Thank You, and others. We took the "charity path" so to speak, which has been both challenging and rewarding. Watching OpenAI's charity orbit decay into IPO fireball has been somewhat depressing, but I think it highlights one of the keys to our own continued success in resisting the pull; we don't need much in the way "capital" from the "ism". We don't need to build data centres, or produce and warehouse goods.
Having said that I don't mean it to undermine your points of "strong ethos". Simply existing in the tech world as a charity takes great strength of ethos. Try explaining to AWS that you should be eligible for "start up credits", but no, you don't have "investors" to prove you're going to the moon.
So I suppose it shouldn't be too surprising that so few other companies have tried low-overhead tech start ups as charities. The ecosystem works against it in many ways, but it has become one of our missions to prove that it can work as a business model.
Anyway, thanks for the book (and this thread). I'll be passing it around on the work Slack.
What can a founder do to safeguard his position, interests, and company? A couple of things that come to my mind are: have an aligned/friendly board who believe in you; second, have dual-class shares (like Meta, SpaceX, Google). Anything else you would like to add?
How is Jeremy Howard doing? I remember studying machine learning with his videos, he’s been so inspiring!
stay tuned
I'm curious if you think cooperative businesses leveraging non-voting preferred shares, community shares and other coop investment instruments are more resilient against this type of corruption.
I'm wonder how you see the tradeoffs these models have against traditional LLC/VC models and how you would mitigate them.
I address your question in much more detail in the book, using examples as varied as Mondragon in Spain, John Lewis Partnership in the UK, and Vanguard and credit unions here in the US.
We actually have pretty good evidence that these other structures are more resilient and more stable than the classic "best practices" we have all been indoctrinated into.
Unfortunately, most of us have been told that these approaches are incompatible. You either go "big" and try to make a lot of money, have investors, have a grand vision, etc. Or you go "small" and do something "ethical" and non-extractive. So many of us have been taught that it is the fate of the small to be destroyed by the big, since they are more ruthless and more powerful.
But the evidence doesn't really support this just-so story. My goal with the book is to help those who want to build mission-driven companies to realize that this is a source of strength, not weakness, and act accordingly.
I think we need a "middle path" culture that finds a good balance between these pressures and values.
This is the comment I came here to read. Thank you, I already have a copy of the book and intend to dig in more on these themes specifically.
Why do you think IMVU never hit escape velocity?
What happened in the years since? I don't really know. The company has not been in close touch with me, so I can only speculate or guess.
By contrast, I can say pretty much anything about Facebook and nobody seems to care. Yet, if you go back and read their S-1, you can see how they very much wanted to be seen as the mission-driven good guys.
It's all quite sad, really. There are plenty more stories of corruption in the book. To be honest, it was a challenge to avoid having the whole thing read as bleak given how pervasive this corruption is today. I did my best to balance it out. You'll have to let me know if you think I got it right.
Can you say more about this? Do you think those tender feelings towards Google track some strain of values which Google still carries? Or does this statement reflect some fear of retaliation or conflict that would drown out the rest of your message?
Genuinely interested in how you think about this, especially in the context of this new book’s topic. Thank you for this AMA.
I suspect that it's largely just that brand reputation tends to be very sticky in the minds of people.
It's the same reason that Pyrex, Harley-Davidson, and Dyson are still high reputation brands even though the product they make today is tragically worse than what gave them their initial reputation.
(I tend to think of private equity as often existing as an arbitrage system to take advantage of the fact that they can buy a loved brand, slash the quality and increase the profit, and continue to sell at its original price based on that brand stickiness for a while until people eventually wise up.)
The idealism that has been sucked out of the tech industry. It was so (naively) hopeful at one point, and now the arms race and profit-maximization has eroded it all. Your observations really resonate with me.
I'm surprised I hadn't heard of the Long-Term Stock Exchange, it seems like a much healthier direction for the market.
This mean you are now under gag order as you rise on the bestseller list? :)
Lean Startup is awesome, can’t wait to read your new. Excited to read about the ostensibly-not-evil Costcos of the world and hope the smartest & wealthiest amongst us grok it, that we win more when others win.
Now, here is my question. I personally got disappointed in how most “early” and “small” startups operate. I have short experience to be fair but their sole goal seems to be how to get funds and grants and how to get higher valuation. They didn’t have visions and sustainability in mind. It felt like they are doing gambling rather than running a business. What do you think of this and how would you explain?
I was talking the other day to a Silicon Valley OG and he expressed total disgust to me about the "mercenaries" who have overrun the valley right now and who are destroying the very things that made it great in the first place.
Q1: You have done a few friendly interviews on YouTube, but I haven't seen one that challenges you much. Do you know if there are upcoming interviews that you found pushed back?
Q2: Is the idea of shareholder supremacy fundamentally at odds with your with your preferred alternative governance structures, or is it just a time preference and risk attitude issue?
Q3: You will get sympathetic ears easily due to the subject matter. But the same book about non-profits would be a harder sell. Do you agree, and if true does that say something about the marketplace of ideas?
Though I did get a pretty funny piece of pushback on one consulting company's podcast. The person said, "But wait a second, I learned in business school that everything you're saying here is wrong. Are you asking me to rethink that?" Something like that. I said, "Well, are you interested in looking at the evidence that what I'm saying is the truth?"
I think he was really genuinely struggling, because I don't think he was that interested. Many of us are not that interested in seeing the evidence that the things we believe or were taught are not quite true.
Q2: shareholder primacy is a bad idea on its own terms, as I lay out in the book. It doesn't prevent people from adopting any of governance structures I recommend, it just makes it more difficult, by creating career incentives that add friction to doing the right thing. That's partly why it's so value-destroying.
Q3: I don't understand this question, sorry. Maybe it's because I've spent many lonely years being berated for this subject matter and am only getting the sympathetic treatment lately...
It doesn't take much time seeing companies grow to see the cultural differences take hold when a company goes wrong. You end up with execs and middle management that do not want to rock boats, and where any disagreement is clearly career suicide. At that point, people push for what is good for them and is not good for the company, and people realize that letting things decay is in their best interest. Once your org has enough levels of management, anyone that is part of the big decisions and isn't a team player has already been filtered out, so you see large meetings where hundreds of millions are supposedly distributed, yet not one person is ever going to complain about obvious grift, or decisions that will harm the company in the long run. Open discussion is too dangerous, and coordinating action against bad behavior becomes more and more expensive. Therefore, the company just naturally erodes.
You can get there too with just a bad enough leader that values sycophancy enough... and after enough billions, basically every leader ends up having a lot of trouble accepting news of bad behavior from their advisors.
IMHO we are dealing with a cultural domination movement centered around authoritarianism and its engulfing everything. The business world is being used as a weapon wielded against the world, I don't think this is a leadership problem, its a problem with selfishness and whats going on in the heart.
Anyway, my question is - Have you had a chance to research OpenAI and it's path to getting "corrupted" i.e. going from Non-profit to this weird structure to then, what it looks like, absolutely regular for-profit company? whats your take on it? what are the lessons of the convoluted company structure they persuaded?
It's a really complicated and confusing company to draw lessons from, partly because there are such big ego, larger-than-life people involved doing crazy stuff. A lot of the inner details have not yet been made public, so I don't think we really, really know what was going on behind the scenes. There have been quite a few factional struggles there, and I'm sure you can find bad behavior on all sides. That's not that uncommon when so much money is at stake.
In the book, I try to get into the structure that seems to be stable over long periods of time, which, because I know more about the details, I felt more comfortable illustrating by telling the story of Anthropic. I had to pick one difference that seems to really matter in these so-called complicated structures. It's whether there is one central point of control or more than one, i.e., if there are checks and balances. That when an outside board of trustees has the power to hold the for-profit board accountable to the mission, that seems to produce more stable results.
Check out the research of Steve Thompson at the Copenhagen Business School, who has been a pioneer in developing the data from which these conclusions are drawn.
Thanks for the pointer. I’ll check it out.
Excited to read the book! Ordering mine today…
It used to feel completely different a decade ago, no teenagers that couldn't care less, now few of them seem to care.
Tyre centre moved to bookings only but you can't call because there's never anyone on the tyre desk. I know because it's always unattended whenever I walk past.
Gas station staff just chat to each other and put out the traffic cones 30 mins before close leaving a small gap.
Everyone now has to scan their card with a single scanner leaving a huge queue outside just to get in.
Register queues go right down to the back of the warehouse with half the registers closed.
Queue again to get your receipt checked and all you get is departing grunt if you're lucky.
It's sad because I used to rave about Costco and bring the cool new snacks to share at work.
Prices are mostly comparable at the grocery store if you are willing to wait until they go on special so I've given up on Costco.
How often do you see companies recover from financial gravity? Or is it mostly irreversible?
How much do you attribute worsening of company values to things like professional managers, too much hierarchy, and less founder-mode; versus financial gravity?
In a case like GitHub where their focus seems less on open-source these days, should developers try to help GitHub better support open-source or should the focus be on building alternatives?
Thanks, Jake
For reasons I try to explain in the book, open source in particular is an example of the kind of mission-driven positive externality type of business that our modern best practices make it hard for people to see and understand. This is going to be a recurring problem in the free software and open source movements for years to come unless we get smarter about these forces.
Ie founders create order out of chaos, then entropy slowly creeps in due to X,Y,Z?
I loved the lean startup I'll be reading this book as well :)
You've probably talked about this before, but with AI speeding up product "delivery" (especially prototypes), what changes have you seen to the lean startup methodology? Is it possible to supercharge the build measure learn loop?
And what good uses for AI have you seen to keep teams "building things people want"?
In terms of good uses for AI to figure out what people want, I really think the best advice is to focus on your own skills and agency. In other words, never ask the AI to make an artifact for you. Instead, ask it to teach you how to make the same artifact.
If you do this over and over again, if you do it step-by-step, having the AI as a teaching companion, critiquing mistakes that you make, breaking the problem down into smaller sub-problems, making sure you've mastered each step before moving on to the next, pretty soon you'll be able to create some really awesome artifacts.
Is this approach, in some sense, "slower" compared to vibe coding everything? Yes. But I think, at least in my experience, this is a go slow to go fast kind of situation. Now I had the benefit of being able to use a completely custom AI rig made by the company I help co-found, Answer.ai (with Jeremy Howard). If you want to learn more about that, you can access it at solve.it.com.
1. Who lack a legitimate business model hence have resorted to "data collection from/about computer users, surveillance of computer users even when engaged in non-commercial activity and online advertising services" with generally free, so-called "products" and "services" offered as bait
"There's a darkness in our industry that we often don't talk about."
It's "talked" about on HN but voters and commenters working for or aspiring to start/work for these companies don't like the discussion
100% probability this comment will be greyed out to try to hide it from people using graphical web browsers (no effect on monochrome text-only browser users)
The people that start "tech" companies are often soulless and maladapted to society, having hid behind computers to escape their inability to deal with the real world. There are also "tech startups" founded by people who want to take advantage of those who have hidden behind computers and lack social skills, using them as pawns
These founders and pawns do not start, nor do they want to work for, companies like Costco, Patagonia or Novo Nordisk because they only believe in what they see on a computer screen not the real world. They want to operate in Silicon Valley fantasy land
It really isn't surprising what happens to so-called "tech" companies over time considering what they start from
The author worked for Kleiner Perkins, SillyCon Valley VC
After listening to this guy you may feel like you need a shower
Yes. Of course.
You cannot trust anyone to have a rounded mind unless they have actually done more than one thing, broadly speaking.
Having worked at one of these companies, I don't buy for one second, that these companies are not obsessed with financial benefit. You would be an absolute idiot to believe that.
The pawns don't want to work in the IT departments of those companies
They all want to be in Silicon Valley fantasy land
They worship obscene Silicon Valley wealth, they are beholden to venture capital firms and they want to build data centers all over the planet and fill Earth orbit with space garbage
The environment is an afterthought, computers and sci-fi fantasy are what is important to them
To each their own. But...
This is the opposite of the guy who founded Patagonia. For him the environment is forethought, he has spent his life outside, not in front of a computer^1
1. Yes, I am aware Patagonia has made some mistakes with maufacturing
How do you think Lean Startup principles could be applied to ordinary families looking to navigate the existing economic stresses we're experiencing?
I've been a bit reluctant to over-generalize from my own theories, and so am not sure I would want to speculate about how to apply them in a family context.
So, to the extent the book is getting attention at all, it's being driven primarily by word of mouth. People who read the book are inspired to become evangelists for it, far more than my prior books. I think this one is more emotionally resonant for folks, and has applicability way beyond founders or even product people. So I'm extremely grateful for all that support.
I've also done a metric ton of podcast interviews, many of which you can watch here: https://howisincorruptiblegoing.com/
But if you look at the view counts on YouTube, you'll see that they are all also suffering from the algorithm's fickle attention. Most have very few views (with a few notable exceptions).
How do you resolve the difference between the short term nature of the lean startup, and the long term optimistic nature of LTSE?
And it's interesting that people see Lean Startup as short-term; that's really not what's in the book. I tried really hard to make clear that you need a foundation of long-term thinking in order to make any kind of rapid iteration system, whether that's Lean Startup or Lean manufacturing, work. By the way, this is an old finding that shows up in a lot of the management literature going back to the people who originally studied the Toyota Production System.
But all that said, I'm really glad that you feel LTSE embodies a long-term optimistic view of the future. That was absolutely my goal in starting it.
Do those questions need a foundation on which they stand to be answered? What is that foundation (are there relative foundations or are they by definition absolute?)?. Is there a moral standard that those handful of companies share? Similar to “success factors”, are there “success ethics” in your perspective?
What would be the elements of success ethics that others can learn from?
Whats your criteria? Is there an analytical component? Are you willing to work on something even if "success" is unlikely? And with all of this going on how do you have time to work on books!
thank you for your work by the way. It continues to be useful year after year to me and people around me!
Honestly, I don't have formal criteria. I have young kids now, and I try to ask myself every once in a while, when they're old enough to really understand what I do for a living. When they ask me: "at that moment in history, what were you doing?" I want to be able to answer them and give them an answer that I and they will find satisfying.
I'll also be honest that I've my fill of conventional "success" in my life. I don't feel obligated to use the likelihood of success as a criterion anymore. I tend to just do the things that, in the moment, seem right to me. Or where it seems like, for whatever reason, no one else is willing or likely to try it, and I have been given that lonely assignment.
Many of the things that I've tried haven't worked out, but that's okay. I accept that that is a precondition of the kind of work I like to do.
How much do you blame our values of our society for creating corrupt businesses? Are corrupt businesses just a mirror of our own values?
I would like to know how best to stand out from the toxic, finance-driven world that is defi and crypto generally, without getting rolled in with all the clowns. Of course, I know that clear messaging and verifiable, evidence-driven claims are good, but I am thinking about the more abstract, strategic side to things, which I still feel under-prepared for.
The good news is that we all know that being a bold contrarian is the key to returns. If you can figure out a way to structure your initiative such that it literally cannot betray the public, it literally cannot betray your mission, it literally cannot betray human values, you might be able to create something that people are awfully excited about.
How do you imagine companies with staying power will be shaped in the future? Will we see new paradigms in management? ie smaller teams, jack of all trade types of individuals vs specialists, potentially the elimination of middle management all together
How do you feel about these AI only companies, and how do you think they could affect the wider market?
ref: https://www.ft.com/content/b8cc4bf4-6d3c-4974-8428-9a091983c...
Do you have advice on how to use AI to help teams stay true to their values?
Having not read your book yet, in my mind there's the obvious legal support AI can provide to help navigate complex situations, but maybe there's some other groundwork in the value creation and implementation itself?
I will say, in general, I think AI is an amplifier of values, and so it will make the good companies better and the bad companies worse. Or maybe more accurately, it will make the good parts of companies better and the bad parts of companies worse.
Either way, I do think that LLMs can solve many of the leadership challenges that we have to solve today with hierarchy and dashboards and bureaucracy, because LLMs are extremely good at summarizing the context of a given situation. One of the hardest leadership challenges of all is simply answering the simple question: What is my company doing right now?
That is a summarization challenge.
Where does Apple fall on the Incorruptible spectrum? Is it covered in the book?
Tell me what's different about this page vs what you've seen on LinkedIn? maybe I can learn how to promote the book better!
It's already been 14+ years since you wrote the book; I wonder if a second edition is something you have in mind, or at least on your consideration list
Okay, I know these questions don't seem like good faith engagement — but it actually is hard for me to separate decisions like these from my assessment of whether a book like this is worth my time! (And you did say to ask you anything...)
More importantly, my goal in the book is to teach the reader how to see these deeper underlying forces that operate below the surface of most organizations. Once you see and identify them, you can learn how to wield them.
(Reading Joseph Pearson's book on the Berlin airlift, in which he features prominently, do your last name stood out...)
With big companies with large budgets bulldozing smaller players - any advice on finding a niche that is worth pursuing?
Let's say this has already happened and ossified across large, formerly-innovative companies that now have so much size and inertia behind them that it might take decades for one to "fail" in a traditional sense. What can be done to reverse the process?
Unfortunately, a lot of leaders who do have the moral authority and power to attempt such a thing do not really know what structural changes to demand. in fact, they tend to focus on the typical management/leadership stuff: business model, org chart, strategy, vision. These things are important. But there is a deeper layer that tends to get overlooked or ignored: structure, governance, boards, the relationship with investors.
In the new book, I try to tackle both topics in a new way, so that future leaders will know what to ask for when and if they have the opportunity to try.
Example of a company where this has happened?
and since everyone widely agrees that what we are attempting is "impossible" I am pretty impressed that we've managed to make any progress at all :)
I understand the idea that they were after, but it seems like they could have wrapped that up in an ETF.
I've noticed that VCs try very hard to separate the world into "VCs + founders" and "everyone else" and that the more time a founder spends in the VC+founders bubble the more distorted their worldview can become.
The sad fact is that most VCs are not even consciously aware that they're doing this. They are simply the agents of a deeper force.
Here are some things that seem to me unequivocally true if we look at the historical record and the data available to us: 1. These kind of value-destroying actions in the name of profit have been going on for a very long time, at least 200 years. 2. The problem seems to be getting worse in recent decades. 3. The problem seems to be highly correlated with the increased financialization of our economies and the advent of a relatively recent set of so-called best practices about how companies should be built, run, and governed. 4. Companies seem to vary widely in the degree to which they are vulnerable to these forces. 5. I think to be learned by studying the companies that have been able to resist-- as a collective set
The market is very good at solving certain types of problems and not so good at others.
I have the seeds of a theory that might explain this: this is the inevitable outcome of technological progress.
Like the American democratic system, Capitalism works best when all major parties involved in the system have comparable power and can keep the other in check. The major parties here are the capital class and the labor class, because Capitalism was conceptualized in an era when value creation could not happen without human labor. As such there was some measure of power available to workers, the logical extreme of which were such distasteful words like "unions" and "strikes". Nevertheless, earlier there was some balance and everyone benefitted (after that messy little Gilded Age affair was sorted out.)
However, technology, in the form of automation, has essentially been a force of labor displacement. Yes, we got amazing improvements in quality of life, but every advance also chipped away at the influence and power held by workers.
On the other side, the capital class have not been idle. Money attracts money... and power and influence. Capitalists have been using those levers to ensure most of the gains of technology accrue to themselves. Lobbying is of course the most obvious example, influence campaigns is another. But relevant to your post, another way this surfaces is the "so-called best practices" you mentioned. There is no "collusion" to suppress wages, just "best practices" of amorphous origins. Which somehow always benefit the shareholders. Funny that.
As you said this has been going on for a long time. But technology is amongst other things, an accelerant, and these trends have simply been amplified to become more noticeable.
And now there's GenAI, which is the ultimate accelerant.
Contrary to most media and HN, however, I think GenAI is not just the ultimate win for capitalists. If you think about it, by the same token(s) that GenAI disintermediates labor, it also disintermediates capital! (Who needs VCs when 1 - 2 motivated folks can launch ambititious projects with GenAI and public clouds?
GenAI is a unique opportunity to restore balance, and could actually be the thing that ushers in the post-Capitalism age... whatever that looks like.
You said to "Ask You Anything," so here's my question: I have mostly stopped buying from Amazon. That includes books. I'd like to buy your next book. What's the best way to support you if I don't want to purchase through them? More generally, what's the best way to support authors that _only_ publish on Amazon without supporting Amazon itself?
Corruption = the symptom Gravity = the force that causes it
In the book, I give the example of a bridge that collapses. If you ask an engineer "why did it collapse" you'll be annoyed if they say "gravity" even though that is technically correct. If we go examine the wreckage and notice that the metal bolts have been corroded beyond recognition, we can start to think through what went wrong and what to do about it going forward.
Basically, you appear to be focusing on investor owned companies and missing the entire class of worker cooperatives where the financial gravity you're talking about isn't merely resisted -- it doesn't exist. These companies have other challenges, to be sure, but if you're going to write a book called "Incorruptible" talking about businesses, not including these seems a significant oversight (at the least).
Do you address these in the book and just fail to highlight them here or is this really something you missed entirely?
However, the details matter a great deal, and I don't know that much about what the actual proposal the SEC is going to adopt is going to be. The last draft that I saw left me pretty worried.
What's interesting to me is that, in all the hubbub, neither the journalists nor the policymakers seem that interested in the actual evidence that we have amassed in academia on this question. For example, one important study suggested that moving from semi-annual to quarterly reporting costs companies something like 5% of their market cap. It's incredibly expensive, not because generating the reports is expensive, but rather the evidence seems to be that companies under quarterly reporting start to run the company for the benefit of the report rather than for customers.
That this is bad for investors, I hope you will see as self-evident.
There used to be a lot of wisdom in the entrepreneurial ecosystem about how to survive such a platform in a more durable way. For example, if you own the customer, then you can play the major platforms off against each other. Or, if you study the case, for example, of Intuit, which survived the attempt of Microsoft to absorb that product feature into their own platform monopoly at the time, there are lessons to be learned. But of course, every platform war is different, and I'm sure there will be new lessons that we will learn from this one.
what are the 'slower' go to market channels that you've seen produce sustainable results also producing sustainable businesses. not the come fast, die fast kind ?
Not really related to your question, but Steve recently wrote a great article about the new book that, if you're a fan of his, you might like too: https://steveblank.com/2026/06/09/incorruptible/
Sounds like an interesting topic!
> Why do good companies go bad
I find interesting the systemic explanation of Bruce Bueno de Mesquita and Alastair Smith in "The Dictator's Handbook"^1: In any publicly traded company, if the executives (or the board) are not ready to do whatever it takes to maximize profit, they will be replaced by people who are. It becomes a selection process creating tyrants. If you're lucky (as employee, customer, or human living on the same planet), whatever it takes might be aligned with employees and customers' interest. When times are bad, whatever it takes has no limits, it becomes a question of survival or progression for business leaders.
I'm curious to see how much that maps with what you identified in your new book! Patagonia is private and under the control of a few benevolent dictators ; Costco and Nordisk are a bit more surprising, I'm keen to know more.
^1 https://en.wikipedia.org/wiki/The_Dictator%27s_Handbook
What's funny is when the book was published, I remember someone telling me that I should have included more examples of failed startups in the manuscript. I remember answering them, "Oh, I have. We just don't know which ones yet."
This is the difficulty of writing any kind of business book. There's just no way to use any company as an example to illustrate some principle without people misunderstanding that you're holding them up as the perfect or even great company. I use case studies to illustrate the concepts that I think are useful. I can't guarantee success any more than an athlete can tell you that if you study the way that Tony Gwynn hits the baseball, you too will be able to hit 300 in the big leagues.
My point is you were not able to demonstrate any correlation with your suggested methods with startup success. A company could do the exact opposite of what you recommend and be successful. Or follow it to a tee and fail which is what all of them did (happy to hear about any counter examples here from the original book). So what exactly is the point if you can't even move the needle a little bit?
This project may take decades, and yet leaders need guidance and useful mental models in the meantime. So, to me, the much more useful data is the literally thousands of founders (and other leaders) who have reported that they have found the framework useful in their own lives and companies. They may all be deluded, of course, but at some point I think we have to acknowledge that _something_ useful is going on here.
In any event, I don't give it that much thought. If a new theory emerges that proves more useful, or if new research gives entrepreneurs new and better tools, I'd be delighted. My only loyalty is to the truth.
Have you done that ?
Eric did a more recent one about his new book as well: https://www.youtube.com/watch?v=PoJ1vTdHpks
I'd also love to see a proper TLDL, since Youtube's own Gemini-powered summary seems a bit too brief:
"This conversation features Eric Ries, the creator of the Lean Startup methodology, discussing his philosophy, the current state of the startup movement, and his vision for the future of business.
Key Takeaways & Concepts: The Lean Startup Methodology (14:04 - 27:52): Ries reflects on how his methodology has evolved from a controversial, insurgent idea to the industry standard. He clarifies common misconceptions, noting that a Minimum Viable Product (MVP) is not about low quality or"
EDIT: Actual Gemini (not YT embedded) can do a proper summarization: https://gemini.google.com/share/f9e0a84b95be
Who is the target audience for your books? Is it founders? Or is it for people who want to be founders?
Given the current wave of AI-assisted coding (Claude Code/Codex) and the broader enshittification of SaaS/platforms, do you think B2B SaaS founders now face a new "we can just build this ourselves" problem?
How would you think about testing for that risk early?
Of course, many of the tactics and examples in the book are now a bit dated, so if I did an "AI edition" I guess we would update it with new stories and new tips on how to use various AI-powered tools to accelerate. But I think the principles have stood up pretty well.
But a great mission generally combines three things: 1. a long-term commitment to maximize some aspect of human flourishing (in the book I explain how this is the true definition of what it means to create a for-profit venture) 2. a set of values that include a determination to make principled decisions aligned with this goal, such that every decision the org makes is coherent 3. the strength to resist both the inner temptation and the outer pressure to defect, betray, or otherwise abandon the long-term goal
In the book I go into a lot more detail about how to do this, including how to make fiduciary commitments to the human beings you'd rather die than betray.
How does this square with the widely taught business-school definition of a for-profit entity being something that aims to maximize shareholder value?
He's not exactly an introvert, but one good example is from the founder of my client. He wanted to stay doing the technical work he enjoyed, so he recruited a CEO above him (although he actually still shares a lot of that role and now they nominally share the role), and also hired others the lead the development teams, leaving him to focus on the one specific area of tech that he really enjoys. I'd say his job is about 80% tech and about 40% CEO (and total 120% load because he never seems to sleep!)
I guess the point is to try to fight the urge to do everything yourself. If you're not an extrovert, you'll need to hire a good sales and marketing team to take that side of the business, or you'll end up hating it and/or having no customers no matter how good your product is.
Enshittification and maximizing founder/shareholder/c-suite profit?
Most of all, I want to restore people's sense of agency to do something about this. We are not helpless in the face of these forces. In fact, we are the originators of them.
or you can look at this handy infographic: https://www.linkedin.com/posts/eries_incorruptible-new-york-...
[0] https://www.amazon.com/Incorruptible-Good-Companies-Great-St...
Let me clarify one thing, though, which is that when we call a company "good" or "bad" we can't mean something like absolutely good or evil. No human enterprise can ever be truly perfect.
So, rather, we have to identify what an organization is trying to do and whether the means it has chosen are actually appropriate to that goal. Then we can judge if the goal is aligned with human flourishing (good) or not (bad), and whether the org is consistent in pursuit of that goal (good) or not (bad), and whether it has the strength to continue (good) or not (bad).
Sometimes clients asked IDEO to design under this shitty-MVP model (we generally refused), other times we were brought in to clean it all up.
Why do you think the concept of "MVP" was almost universally misunderstood? And, thinking about Incorruptible, how did the best companies out there internalize it?
I don't think you can put an idea out into the world without understanding that some people are going to willfully misunderstand it. We live now, especially in the age where literally ignorance is optional. When you see someone who misunderstands what an MVP is, you know that they haven't spent even five minutes reading the Wikipedia page or made any effort to try to understand it. I don't consider such people to be good faith interlocutors, and therefore I don't really think the fact that they criticize or don't understand the concept is that relevant to the rest of us who are capable of thinking for ourselves.
At the end of the day, I try to lay out in my first book the reasons why the theory that gives rise to MVP and the rest of the Lean Startup makes sense, is logical, and is consistent with a set of first principles. As a result, that theory is capable of making predictions which you can test for yourself.
Writing now for other founders who might encounter this page: If you look elsewhere in this thread, you will find lots and lots and lots of entrepreneurs who are saying how much they found these concepts helpful. You shouldn't do it because other people said so. Rather, you should take that as inspiration to think for yourself, try it, and see if the theory strikes you as valid.
I'm legitimately excited to read Incorruptible, because in all honesty, 10 years of working with the Fortune 500 left me pessimistic about the ability of $1B+ companies to successfully do anything new. There were exceptions (some of my friends came up with Pay It Plan It for Amex), but they were rare enough that it was hard to come up with themes or patterns that connected them. I'm so curious to hear what you've learned by talking to companies that have been able to avoid ossification and continually reinvent themselves.
Right now I actually think an MVP should be Maximum Viable Product. Partly because of AI but also because it shifts one's perspective to what Viable means.
I agree that AI makes the MVP easier to build, but it makes things so easy to build, there is a slight risk of overbuilding the wrong things, which can distract from the learning goals.
I'm curious how you would think about this situation from the lean startup perspective. With hardware products, if you don't do lots of initial testing, the scale of problems might not become apparent for years. You can't just fix a problem with a software patch.
I've always find it an interesting dichotomy between their public image, retail worker reputation, and corporate reputation. The former two are fantastic. I live in Seattle metro area where they are headquartered, and the last is horrible.
I've had more than one recruiter tell me it's a classic, blue collar, "we've always done it this way" environment since many of their corporate people rose through the ranks in stores, not tech. As I believe Warren Buffet put it, "every company is a tech company these days," so this creates problems. I met someone at a party there about three years ago tell me a data migration went so poorly, they'll have to use two financial systems for at least ten years because the previous system was homegrown with ancient tech.
As an ENTJ, the later would drive me crazy, and I've declined when recruiters want to talk to me about such and such manager position at Costco.
And how has the traditional loop of validation, delivering and iterating on products, and getting your first paid customers changed since fast output is now possible with AI and technology?
Please structure this for someone with no startup experience, and such that event a child can understand. And please create a version that works for someone to begin to validate their idea right now and measure progress, and modify/iterate towards a goal of money generation for themselves or a team now and long-term. (And would you also describe then how this person can work on attracting a team for someone who has never successfully navigated choosing their own team before.) (And would you also accept my thanks, this is very kind of you)
But in particular, this moment, the capabilities of individual people are being amplified thanks to all these new technologies. You have the opportunity to be an early adopter of a technology that billions of people will use just a few years from now, but you get it first. That probably means that the things you care a lot about or know a lot about, you could do something about it that would have been absolutely impossible even five years ago.
Now, you have to avoid that feeling that you're too late. I remember feeling, in 1998, that I'd already missed the internet. The vast majority of people have never used Claude Code. The vast majority of people have no idea how LLMs work or what they do. The vast majority of people simply don't even know that starting a company is something you could use this technology to do.
As inexperienced or behind as you might feel, just the fact that you're here having this conversation right now proves that you are way, way, way ahead. All you have to do is use that advantage.
Also, an HR that has a right education can and will pushback against decisions that do not make sense such as removing employee that has essential know-how knowledge and that brings a value to the team.
The problem is that a lot of people in management do not want to hear feedback and only want to be surrounded by positive thinking and people that they can micromanage (even while the ship is sinking). Hiring people that do not have right education is basically a way to avoid any feedback and criticism, while having people that will do work that they are not really educated for, but happy because of the salary.
Another problem is gender disproportion in this field.
You can't expect a literature major in HRBP role to understand micro and macro organization of the business and how it is affected by various stuff.
If people had paid more attention to the pioneering management theorist, Mary Parker Follett, who wrote more than a century ago, we wouldn't be in this mess. But of course, her work was almost entirely erased and forgotten, only rediscovered in the 1990s.
Don't worry, I have a whole chapter about this in the new book.
Those who can do, those who can't teach?
Is that some kind of coaching BS?
> We've all experienced watching a company we love or admire be warped and broken beyond recognition; until it's a husk of its former self, or worse. I wanted to understand why. And I wanted to know what all of us can do to stop that from happening.
I don't think there's any way to talk about this without running into the problem of anthropomorphization. So I tried to be really careful with it in the book. You'll have to judge for yourself if you think I got it right.
And I'm especially sensitive to the question of accountability because you're right: today we mostly want to see these problems as being done by individual villains, because at least we can hold individuals accountable. How well is that going? It seems like we are breeding a class of people that are completely above accountability. I don't think that's tenable. I think in the long run, this system will collapse if it cannot hold the people responsible for atrocities accountable.
Personally, I think the best way to do this is to understand the systems that are causing these behaviors today so that we can locate responsibility in the right place.
I’d much rather we let things burn more quickly - there’s nothing sacred about these companies and no reason to believe they should not be transient.
When you try to halt every small forest fire, like we have done since 2008, then uncontrolled destruction becomes inevitable.
You’re too emotionally and financially invested in the status quo to be an instrument of change.
Mate, tried as hard as you like, it's called "fundamental laws of capitalism". I understand that won't sell books, and denial does, but c'mon.
>> We've all experienced watching a company we love or admire be warped and broken beyond recognition; until it's a husk of its former self, or worse. I wanted to understand why. And I wanted to know what all of us can do to stop that from happening.
Because it's a systemic set of capitalistic incentives, where either you find a way to be ok to forego growth for a different set of non-capitalistic values, which can only work if you're self-bootstrapped and have no investor pressure, or you go the way that making more profit pushes you towards. You can try as hard to reframe the picture, but those are the objective incentives of the capitalistic market, and what you're selling is illusions for entrepreneurs that want to delude themselves away from personal responsibility in order to sleep at night.
>> My new book _Incorruptible_ is my attempt to explain the invisible forces that shape organizations, and how a handful of companies (like Costco, Patagonia, and Novo Nordisk) have successfully been structured to resist gravity and thrive for decades -- or even centuries.
LOL, Costco? Really? The only good example here is Patagonia, and it's because they hacked the stakeholder system with a two-entities solution.
Good luck with your book, I'm sure that you'll find enough capitalists that want to hear just another fable to make it successful.
I wanted a word that was much broader, capturing how this tech behavior is one symptom of a larger illness that has been afflicting our economy for some time. So I settled on the old-fashioned term "corruption"
They are full of platitudes that sound relevant to people's problems and desires, that pretend to be based on science but have no actual basis in facts, provably do not work, and yet are still popular amongst the people they let down again and again.
Anyone who could write a book with advice that worked the way this purports to would be too rich to need Kickstarter to fund his books, for a start.
And if you really want to live in a world where people should be listened to on the basis of how rich they are, well, you don't really need to change anything, now do you?
This is like an aerobics VHS in the 2000's. You might still get some sales because of older people... but you're done. You're no longer part of the culture. Get your speaking gigs / paid mailing list subscriptions while you can, I guess, because you'll sell 1/5 of what you sold before (being generous). It's all downhill after this.
Noticed how your HN submission is greyed out because of all the downvotes? That rarely happens in this site.
You should watch The Social Reckoning trailer which just came out. Check out the comments.
Downvotes mean nothing on HN, alas.
Factual statements are downvoted because some people don't like the facts quoted. And, worse, mods find that okay.
It makes HN a worse place for serious discussion and for finding out the facts about an issue, because what is discussed is driven by lazy, stupid people's sentiments.
"Incorruptible argues that this failure is not primarily ethical. It is structural."
...and with at least five em-dashes. Let's assume its not AI, but even then the blurb is very business-esque generic:
"Drawing on two decades"
https://www.google.com/search?q=%22drawing+on+two+decades%22
"a clear-eyed diagnosis and a practical blueprint for change"
...all sounds cliche. Your comments here on HN make it much more likely for me to read the book than the blurb ever would. But I'm not a best-selling author and maybe this is the sort of blurb that sells books to certain readers? Maybe authors don't have much of a say in how the blurb is worded?
That is deeply disappointing.