Most companies don’t fail because they’re outcompeted. They fail because they succeed. In this episode, JR speaks with Eric Ries, author of The Lean Startup and Incorruptible, about why successful organizations so often lose their mission, values and long-term vision. Eric explains how modern corporate systems incentivize short-term extraction over long-term value creation and that the problem isn’t necessarily bad leaders, but structures that slowly corrupt organizations over time.

Their conversation covers:

• Why “shareholder value” became the dominant philosophy
• How companies like Costco resisted short-term pressure
• The hidden incentives that destroy great businesses
• AI governance and what OpenAI and Anthropic tell us about the future
• How founders can design companies that survive beyond them
• What employees and consumers can do to help companies stay true to their mission

If you’re interested in the impact of capitalism on leadership and innovation, make sure you tune in.

Subscribe to Career Sessions on YouTube and wherever you get your podcasts for weekly episodes like this.

Check out the full series of “Career Sessions, Career Lessons” podcasts here or visit pathwise.io/podcast/. A full written transcript of this episode is also available at https://pathwise.io/podcasts/eric-ries

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Why Success Can Destroy A Company, With Eric Ries

Companies Don’t Fail Because Their Out-Competed, They Fail Because They Succeed

Most companies don’t fail because they are out-competed. They fail because they succeed. It’s a bit of a mind-blowing concept, isn’t it? These are the companies that grow, scale and attract capital. Sometimes almost imperceptibly something changes. The mission starts to get diluted or the company goes in a different direction. Short-term incentives take over. The very systems that ultimately enabled success start extracting value from these companies rather than creating new value.

I’m sure you can relate to this in terms of companies that you have worked for or that you have dealt with in your life. What’s unsettling is that it’s not about the people. The people are not bad. It’s just that the system is designed that way. Our guest Eric Ries has spent more than decades shaping how companies are built. His first book The Lean Startup was a monster. It fundamentally changed how founders think about product development, experimentation, and innovation.

In his new book Incorruptible, he’s taking You on something much bigger. He’s arguing that the real problem isn’t how we build products. It’s how we build companies. His core argument is that most organizations are structurally incapable of staying true to their mission. This is corruption. Not in the legal sense, but in the sense of value extraction. It’s the default outcome. More importantly, he’s proposing something radical that we can design companies to resist.

Governance isn’t just a formality. It’s part of the product. The most important thing you’ll ever build is not the product but your organization itself. In this episode, we’re going to talk about why good companies go bad and what it takes to build a great company that stays great. Whether it’s possible to scale without losing your soul and your company.

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Eric, welcome to the show.

It is my pleasure. Thank you.

We’re going to dive right in. Let’s talk about Incorruptible. The court argument, as I took it away from the book, is that companies don’t fail because the people are bad. They fail because the systems are bad. When was the moment that you had an a-ha moment about that?

I’ve been at this for a long time. I’ve helped a lot of people start companies. I have personally helped create billions of dollars of personal wealth for founders. I’m talking about very significant success and I have zero jealousy of those people. I’m so proud of them and so happy for them with the access they’ve had. I’ve also had to see the dark side of this and I’ll tell you the story. I’m working with a friend of mine. Someone I admire and he got completely screwed by his investors. A classic story.

He was a very values-driven person. He built this incredible ethos in the company and made so much money for his investors. At the end of the day, it wasn’t enough. They wanted more. They were so focused on squeezing every dollar out of it. They got out of the company. Tale as old as time. He licked his wounds and he went through the trauma of that. I was there to help him and support him as best I could. It was sad watching up close. Anyway, he got over it. I’m proud of him and he’s back at it.

He’s incomprehensibly rich. What does he want to do with his free time? Does he want to go buy an island and hang out in the Bahamas? No. He wants to get back in the saddle and do it again. He’s creating a mission-driven company with tremendous social promise. I asked him, “Given what happened to you, what steps do you plan to take in this next company to make sure it doesn’t happen again? Are you considering any governance changes?” He looked at me with his blank expression. He was like, “What?” The answer is no. He’s going to do the same thing over again.

It was heartbreaking to make. Maybe it’ll be fine this time, but I had this sinking feeling. I was like, “This is crazy.” What I realized when I reflected on it later, he has internalized this whole story as his personal failing. That’s how the media tells the story. It’s like the founder versus the activists. The this versus the that. Who won? Whoever’s more savvy is whoever won. This savvy person must be right. Since he’s so focused on it as a personal matter, he’s blind to these systemic forces that he was up against.

As a result, he doesn’t even see that he wasn’t presented with a range of options of which he selected the best one for him and his organization. He was told, “This is the only and best way forward. We have to do better. This is not okay.” If we keep going around and around like this, we’re going to keep having this same result and I can’t let that happen.

You talked about a number of things early in the book that set the stage for this. The whole first part is essentially companies that have gone through situations like what you described. You use a definition of corrupt. That’s not just about illegal behavior but about this idea of value extraction. People who are looking to take as much value for themselves out of your company as possible. Even if it ends up meaning that the company gets destroyed, or that it loses its mission and drifts off into some different form of itself. Why does this happen?

The Adoption Of Value Destroying Best Practices And Financial Gravity

It’s very important to call the behavior corruption. That’s not a new thing. Many of the ways that we make money now in the world are celebrated as legitimate ways of making money. Our grandparents would have seen them as not just morally dubious but they would have been actual crimes. We have legalized so many forms of gambling and value destruction. We have locked a lot of investors into this prisoner’s dilemma. Since every investor thinks every other investor is trying to squeeze all the money out for themselves.

If you don’t get in and out first, you’re going to be the one left holding the bag. The reason it happens is we have made a civilization level wrong turn. Many of the so-called best practices that we teach boards, leaders, executives, founders, investors, everybody about how companies should be built, operated and structured. Not only are they not best practices. They’re literally value destroying but we teach them as if they were immutable laws of capitalism or of business or of whatever.

If you can look out the window now, my guess is you can see a tree older than most of these best practices. They are a very recent invention. It was shocking to me how much research we have. They’re not just inefficient but quite valued destroying. At the same time that we have witnessed the financialization of the economy over the last 100 years, we have adopted this set of best practices that is designed to make organizations weak.

That the outside pressure that is growing, thanks to the financialization, is more and more likely to collapse. To the point now where almost everyone I talk to, they’re not startup people or corporate governance people. They will tell me stories about this for rapacious behavior. I can’t remember who told me this. I think he was going to a restaurant and he was at his favorite restaurant. He took a bite of the food and he’s like, “This doesn’t seem right. Something’s wrong.” He was with a friend he’s like, “Hold on. I need to check something on my phone. I think this restaurant’s been bought by private equity.”

He pulled it up on his phone, he’s like, “I could taste it.” I’ve told that story a lot now. Several people have come up to me to tell me that they know what restaurant I’m talking about. They’ve each named a different restaurant. I call this phenomenon financial gravity. This pressure that companies are feeling to always act in this extractive way. It has blossomed out of the private sector and is now infecting everything. You see it in hospitals, non-profits, governments, Unions and universities. It’s an illness. We can’t ultimately build a civilization that can endure if we’re constantly pushing everything into this short term extractive mindset.

You think about some of the examples that are played over the last 20 to 25 years. The privatization of prisons, as an example. Which seemed like a great idea and then turned into a completely horrible idea. All the private equity companies are buying up care homes. Rolling them up and turning them into something less than they used to be for arguably our most vulnerable population. It’s all over the place where you’ve just got this ruthless overly aggressive form of capitalism.

That’s taken root. To your point, we support this. What I learned in business school back in the early ‘90s, was to maximize shareholder value. It ignores the fact that you’ve got employees, a community, and potentially other stakeholders as well. In some ways, the people who are all about shareholder value, you think that the companies that focus on those other things are stupid. That’s the argument that you make. You had a lot of great examples in the book. Maybe go through one or two that got this idea of staying true to mission and some of the things that they’ve done to protect that.

I had forgotten about this story until just now. For a long time in Silicon Valley, our favorite airline was Virgin America. Richard Branson had an American offshoot of Virgin Atlantic. It was a separate airline and because of American regulations, he could not be the majority owner. I happened to be in DC one day having meetings with regulators and academics and all kinds of people. I was working on this thing called the long-term stock exchange. I’m trying to get it approved.

I had a whole day. I’m walking around with my legal entourage and having these grand poobah theoretical meet discussions like we’re having now about shareholder primacy and short-termism. It was amazing when I was talking to these fancy people. They were utterly contemptuous of the idea that there’s a problem that needs fixing. Anyway, I go to check in for my flight and I happen to be in DC on the day that the board of Virgin America over Richard Branson’s objections decided to sell the airline.

They agreed to emerge to what he opposed. It’s what we call a killer acquisition. I’m checking in for the flight and there’s all these baggage handlers and flight attendants hanging around the checking counter. I said, “I heard this will be this merger. What do you guys think about it?” The baggage handler turns to me and is like, “Corporate greed. Once you take a company public, short-term pressure.” They just gave me the whole thesis.

They were so much more educated than all these fancy people I spent the whole day meeting with. They understood both the human consequences of these choices which are dire but also the financial consequences. They were just like, “This is a valued destroying act being done in the name of shareholders for short term profit.” It was wild to me how many of us, normal people, seem to understand this well and yet our most elite people are deeply confused.

The protagonist of the book is a guy named Sol Price, who anyone in retail will know. He is the father of modern retail. Many of his competitors sprung out of his own ideas. Walmart and Costco was based on his ideas. Anyway, his original concept was called FedMart. Everything you love about Costco was pioneered at FedMart in San Diego starting in the 1950s. He had twenty years of unparalleled growth. It was like a classic product market fit up in the right story. He believed that his purpose was to be a fiduciary to the customer.

If you’re a discount retailer, you are taking financial responsibility for your customers. Quality and discounting was in the blood of the organization that he built. That’s why Costco to this day has capped margins. He believed in treating his employees well. He always paid higher than the necessary prevailing wage. Anyway, he was a good employer and someone who understood this simple fiduciary commitment, “Customers first, employees second and shareholders third.”

After twenty years of unparalleled growth, were his investors happy? Were they satisfied? Were they pleased that this ethos was producing these results? No. They weren’t. They wanted more. They wanted conventional practices. They wanted to raise prices and use the trustworthiness that Sol had built to steal this value for themselves. Giving it away to customers made them uncomfortable. This still goes on now. A couple years ago, a Wall Street analyst wrote this about Costco without irony. They said, “Costco is taking money that right fully belongs to shareholders and investing it in the customer experience.”

That’s supposed to be a criticism. Anyway, investors didn’t like it and they had the votes to get Sol Price out. He comes to work one day in 1975 and the locks on his office door have been changed. The critical thing about the story, shareholder primacy claims to be acting in the best interests of shareholders to help them make the most money. Yet in these patterns, when you do the shareholder primacy thing, you often make things worse for the shareholders. Not better.

FedMart was bankrupt within seven years. They just utterly destroyed it. When they fired him from FedMart, he knew he could do it again and he did. He created a company called Price Club. He took one week off and his new office for Price Club was in the same building as FedMart. He got to the office upstairs and said, “Let’s go. Let’s do it again.” He did it again. Ultimately, his disciple who came to Price Club with him was a guy named Jim Sinegal. He’s the founder of Costco.

Eventually Price Club and Costco merged to create the Costco you know now. That’s the clearest and easiest contrast of, if you build the structure properly, to build this ethos and defendant, you create an awful lot of value in the world. If you don’t, if you insist on the conventional playbook, you will get this golden goose phenomena.

The Governance Class Attacking Successful Companies Like Costco Over Shareholder Primacy

You make the point. For all of the people who are naysayers that Costco had it all wrong, it’s massively outperformed the S&P 500.

It’s something like 60X over the 40 years since it went public. Again, it’s very important to understand this. We have something that I call the governance class of our society. This is an unelected set of elites who sit on boards, who work at law schools, and corporate governance specialized judges. It’s a very small group of people who decide things like what is the purpose of an organization. These people operate with no democratic accountability. Creating rules that have never been subject to any legislative action or referendum. Things like the Revlon Doctrine in Delaware. The court decided one day that this is how it’s going to be going forward.

Although, people like to blame Milton Friedman for this turn of events. It’s not clear to me that Milton Friedman is any more of the cause or the symptoms of this club just deciding that this is how it should be. Every once in a while, these groups of governance experts get together and decide that some company practice that makes the company more resistant to outside pressure is wrong. For example, there was this project called the Harvard shareholder rights project. That was going after companies like Costco. That had what are called classified boards.

This is one of the many defense mechanisms you can have for outside pressure. A study was done that showed that of the 90 companies that they pressured to do this campaign. They cost something like $100 billion of value loss. It’s incredibly destructive, this behavior. Costco was there. Crosshairs for a while and it wasn’t just a Harvard shareholders project. There were a bunch of groups that have tried these attacks and what I call the governance fortress of Costco.

What’s incredible about their arguments is that they require you to close your eyes to the actual facts on the ground for the arguments to make sense. Here’s the argument. If you don’t have the board of directors accountable to shareholders, then management will become what’s called entrenched. Entrenched means managers are going to start serving themselves. They’re not going to be interested in performance anymore. They’re not going to care about their investors.

Why is it bad? It leads to poor performance. I get that. That makes a lot of sense on paper. By the way, it’s not a true argument. If you understand why people would make it in the abstract and if you had a poor performing company that was also an entrenched company. I get it. These same people were using these same arguments and the same attack on Costco. One of the highest performing companies in the whole stock market.

This whole debate to me has become almost surreal in the degree to which it has become an abstraction fully divorced from people’s live realities from our ethical and moral frameworks. That is so important to us as a human species but also, to the economic facts on the ground. It’s become completely unhinged.

You’ve got to ask this question. You’ve come up in Silicon Valley. You’ve dealt with a lot of venture capitalists over the course of your business career so far. You can probably name billionaires whose houses you’ve been to. Do you worry that this turns into a little bit of your own Jerry Maguire moment?

I expect a certain amount of flack and blowback. I’ve been getting that my whole career. People thought Lean Startup was nuts and they came around to the end. It’s interesting. I was nervous. It’s because of Lean Startup, I’m a big advocate for testing iteration scientific methods. I was like, “I can’t just write this book by myself in a cave. I got to show it to some people and get some feedback.” The first people I showed it to were all mission driven entrepreneurs.

It took me a while to work up the courage to show it to some VCs. I have to admit because I was a little bit worried. Earlier drafts of the book, it was hard for me to get the tone. There are a lot of stories in this book that involve investor malpractice. There’s also a lot of stories that involve founder malpractice. People are like, “You think founders should rule the world.” Not really. The evidence is good. There’s problems with that, too. We’re talking about something called the architecture of institutional longevity.

What structures can we build organizations to so that they can last for a long time? That by definition cannot be about any individual person because we’re talking about organizations that endure beyond the human lifespan. I was still a little nervous. I sent it to one of my mentors. Someone I respect. A real Silicon Valley OG who helped build Silicon Valley in the first place. I wasn’t sure what he was going to say. He didn’t read it for a while. I was like, “He hates it.” I was bracing myself.

On the day that the manuscript was due to my publisher, I was literally hours from hitting send on the final draft. He called me out of the blue. My phone rang. I saw him on the caller ID and I was like, “What’s he going to say?” I was so nervous and it was incredible. He was kind. He was like, “This book spoke so much to me.” People have forgotten that Silicon Valley used to have a real mission driven ethos.

It had been overrun in recent years by these mercenaries who preached profit extraction above all but they are destroying what made Silicon Valley great. It made me feel like he saw this as a restoration of Silicon Valley’s true principles. That was such a boost to me. I was like, “It’s going to be alright.” Since then, a lot of investors have read the book and found it compelling. I’ve been very grateful for their support.

I want to talk a little bit about the Lean Startup foundation to anybody who’s starting a company in terms of how people build products and created the vernacular of MVP among other things. Now that you’ve got this new book Incorruptible that’s about how you build companies for long-term success. What do you think about the two? What’s the relationship that you envisioned for the two books?

They are deeply related in a way that I find a little bit embarrassing. You mentioned Star Wars. One of the funniest jokes on the whole internet I think is this Reddit meme that’s been going around for years now. It’s Anakin and Padmé in four boxes. Box one, you have Anakin. He says, “I’m going to change the world.” In box two, Padmé says, “For the better, right?” In box three, you see Anakin with his grin on his face. On the fourth box, she says, “For the better, right?” I just thought that joke was so funny because in the tech industry, that’s so us.

We’ve built so many companies that are like, “We’re going to change the world.” It was like, “Did anybody specify for the better?” After a while, I stopped finding the joke funny though because I thought it was obvious that we were trying to change the world for the better. Everyone should know that. I had someone ask me once, “Hot shot, did you specify for the better in the Lean Startup?” I was like, “I did. How dare you ask me such a question?” I was like, “Did I?”

I went and got a copy off the shelf. I found that right there at the end of the introduction, it says, “Such and such that the next generation of founders will have the tools they need to change the world, period.” I didn’t specify for the better and I thought, “What have I done? I fell into the same trap as everybody else.” We were frankly naïve. We thought we could build these companies to the mission driven, vision driven template and no one would try to steal it from us.

We were encouraged in that delusion by many advisors such as bankers, lawyers, VCs and so many people. We’re just like, “Don’t worry about it. It’s always too early to worry about that. You can always fill it out later.” When something would go wrong, it would always be like, “If only you trusted the right people. If only you had been a little more savvy.” It’s a trap that many of us fell into, myself included.

I’ve been trying over the course of all of my books to create a business culture that is more scientific, more humane and more rooted in long-term values. Somehow, despite my best efforts, I got sucked into the mania, too. This is a very needed corrective to those mistakes that I don’t take full responsibility for, but I take my part for sure.

Ultimately, that meme and what you were just saying, we all make this assumption that you’re going to change the world for the better. It does need to be said.

The reason it’s so important to say is, when you look at startups or Silicon Valley companies, when they’re pitching investors. They’re like, “Rah, rah, rah. I am a world changing and world eating technology.” You’re like, “That’s interesting. You’re changing the world. You’re reshaping the face of reality to your values. Do you have any moral responsibility for the outcomes of your choices?” It’s like, “No. I’m just a little technology. I make databases.” Give me a break. Pick a lane buddy. Either you’re a world beater, man up and take responsibility for your actions or delegate that to somebody else.

Don’t go around lobbying the government. If you don’t want a moral responsibility. Don’t expect the upside rewards of all this power. We’ve seen the worst of both worlds. The socializing of risk and the privatizing of gains. Taking these negative externalities and profiting from them. It’s something that people should be embarrassed to have profited from. Not something to brag about.

AI Governance: Learning From Social Media Failures And Demanding Moral Responsibility

We’ve got a timely example of how all of these forces are playing out with AI now. You talk in the book about how OpenAI and Anthropic are set up as examples to create public trust. Look at what happened with Anthropic in terms of its debate with the US government about how the technology can be used. I’d not heard this quote before, but I liked it. “Most fears about AI are best understood as fears about capitalism.” How do you think this is going to play out?

AI is full of uncertainty. Part of the reason it’s so interesting is that for the first time in a long time, really high business stakes depend on the answer to empirically testable philosophical questions. Which has always been true to some degree, but it’s wild now. For example, everything going on with generative AI is powered by something called the scaling laws of a technology called Transformers. So far for years, every time we’ve increased the amount of computational effort, we put into these models. We get a corresponding return in their capability.

If you tell me, whether this is an unbounded exponential curve or an S curve. I can tell you a lot about the future. If it’s an S curve, if you tell me what year it will level off. I will tell you a lot about the future because this is truly the philosophical state of the art. We are probing the nature of the universe as a fundamental attribute of the universe. Anything we did in a particle accelerator. If anyone thinks they know what’s going to happen here, they are guessing. Nobody knows.

One day, the S-curve will probably level off. If it’s next year or 10 years or 100 years from now, it makes a huge difference to all the questions people want to know about what’s coming with AI. The uncertainty we feel is given by the fact that this technology is so unsettling. It’s changing our ideas about what intelligence even is. Many post-modern abstruse academic theories are going to turn out to be empirically testable.

Anyway, it’s an interesting time. Now, to question Anthropic and open AI. There’s something about this technology. It’s a visceral danger that has made this generation of founders as much more wary of how it should be controlled. It has a lot to do with the fact that social media came right before. Many of the actors, investors and players in this drama are veterans of the social media wars. Even though they unpublic are all talking about how great social media turned out to be because it made them super rich and private. Everyone acknowledges social media has been an absolute disaster.

It’s a society. Our sense of the truth has been utterly fragmented and that is not healthy. Those same rapacious companies that control social media. What if they control AI? Scary. It is telling that we’ve had a big debate about AI safety and governance and how it should be governed. I tell the story in the book. I was once doing an event at the Vatican. I was invited to speak on this panel. It was me and eight people in this giant panel. I looked down the row and every major AI company was there.

It was Anthropic, OpenAI, Google, Meta, Palantir, and Cohere. I looked down the road and I realized, “There’s not a single company on this day with me who has standard governance.” Not one. It’s considered too dangerous. No one would feel ethically responsible doing it. It’s absolutely impossible to imagine. I do think that’s important. Now, we’ve all had a bunch of governance failures already in AI. The founding of Anthropic had to do with a disagreement with OpenAI about the path forward on AI safety.

The recent experience you mentioned with Anthropic and the DOD, leaving aside who’s right, who’s wrong in politics. That also is a very complicated situation. Honestly, I don’t even think Anthropic is the main actor in that story. It’s mostly a story about government overreach and the DOD. To me, it was a very significant thing. Again, regardless of how you feel about the rightness or wrongness of what they did. Anthropic was willing to say, “We will turn down $200 million over a point of principle.”

You could say they were wrong to do that or right to that. In our modern world, it is very rare to see a company that can say no to even $1 of extra profit, let alone hundreds of millions of dollars. In fact, one of their competitors swooped in and grabbed up the contract the second they said no. I thought that was notable. When they did that, I’m sure they did not know what the consequence of doing that would be. They’ve been subject to government retaliation. They’ve been called a lot of names in public by a lot of very powerful people.

People are under rating what a big deal it was. They did this without knowing at all what the result would be. It’s also interesting to me and very validating for these is the book. They have received all these benefits that they could not possibly have foreseen. I remember someone sent me a video the day after they did it. The whole sidewalk around their entire headquarters in San Francisco was chalked up with messages from the public just saying, “Thank you for doing the wrong here.” That doesn’t happen very often with tech companies even in San Francisco. Let me tell you.

Claude rocketed to number one on the App Store. There was this incredible surge of customer loyalty. Even when we disagree with them, we admire companies who stand for something. Being willing to stand for something, in the face of genuine cost, is one of the most important ways to build trustworthiness in a company.

This book relates to the Lean Startup. The Lean Startup was chock-full of great advice for people who are starting companies on the ground perspective. This book operates at more of a system level in terms of how the economy and the capitalist world is set up. For somebody who’s thinking about their career journey, what would you want them to take away from the book that would be helpful to them in terms of how they think about what they choose to do professionally and how they navigate this uncertainty?

I’m glad you asked this question. Although, it is true that the first part of the book has this more theoretical discussion, so did Lean Startup. People forget this. The first chapter of Lean Startup is not about MVPs and pivots, but about the history of management. I believe my whole style of writing is to lay a very solid theoretical foundation. Whether the reader likes it or not. I notice that a lot of people come to my books and that’s not what they’re looking for. They want the practical tools, but I give the practical tools, too.

Here’s my promise to the reader. Every technique in this book is something you can do today. Nothing requires you to wait for some regulatory change or get permission from that. They’re all actual things you can do. Every technique is given in theoretical form but also in story form. We have actual case studies of real-life companies that have done it. We have a lot of academic evidence that these techniques work because many of these techniques are new. Although, for most readers, they have never heard of this before.

I always say, “Only because it’s new to you, doesn’t mean it’s new.” Your question about someone thinking about their career and employee. First of all, if you’re a founder and you’re in it now, like if someone’s reading now and you’re either thinking of or you just started a company. You can skip part one if you need to. Read part two. The book is drawn into three parts Part two is the blueprint and is chapter by chapter. Every chapter is specific actionable techniques you can adopt. The earlier you adopt, the better. Not to say that if you’re a late stage company, you can’t adopt them but the easier, the earlier.

If you’re not a leader or a founder yet, like you’re someone earlier in your career or you’re not sure what your role in this change is. I wanted this book to be useful. I put it in the subtitles. It’s subtle but it’s there. The subtitle of this book is Why Good Companies Go Bad and How Great Companies Stay Great with an ellipsis with my little nod to Good to Great. For those fans of the great Jim Collins. There’s the why readers and the how readers. They’re both equally important.

People don’t realize this. They always say, “Why would I read a book that’s for the founder?” You might be a future founder. The first thing you need to understand is almost all the great founders in this book, the ones who created breakthrough success that not only made a lot of money, but created this tremendously positive change in the world. Most of them had a pre-existing ethos that they brought with them into entrepreneurship. If you’re that person, you need to be developing those ideas and you’re understanding now. As soon as possible. Don’t wait.

Secondly, and this is what part three of the book is about, especially the last few chapters. We all have more power in this economy than we think. Part of the magic of late stage capitalism is to make everyone feel this empowered and helpless. This thing seems inevitable and super powerful, but we don’t realize this system is obsessed with the EU. Which means, every action you take is somebody’s OKR.

You cancel a service. You buy a thing. You are willing to pay $0.3 extra for the higher quality product. I guarantee you. It’s somebody’s job to notice. You refuse to work at a bad company. You ask the right question in a job interview. The next thing you know, those questions are being discussed by the board of directors because they’re obsessed with getting top talent. If you have questions, they need to have answers. There’s so many simple, practical, easy things that individual people can do.

You don’t have to be that courageous even. Put your toe in the water and see what it is like to lean into this other interpretation of what organizations are, what business can be. I have found in my own career and in the many people I’ve counseled and mentored over the years that this can lead to very surprising change. Even if you feel like you are utterly powerless or utterly helpless. Give it a try. If you need to, read part three of the book first. That’s okay, too.

Key Takeaways: Designing Your Company For Institutional Longevity And Enforceable Mission

There is a heavy manifesto component to the book. That was seen true of the Lean Startup. I said to a colleague of mine after reading it, “This book is going to make a big splash.” Partly because it’s you and the ideas are pretty powerful and pretty timely for us to be talking about now. I wish you all the best with your launch and thank you for your time.

I appreciate it. Thank you so much.

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Fascinating conversation with Eric. Let me just try and boil down a few of the key points. The first point is about this idea of designing your company and not just building it. People think about building a great company but you have to design and make sure that what you’re building will last. If you’re a founder, culture, talent, and your personal philosophy aren’t necessarily enough. You’ve got to think about ownership structure, board, composition, and incentives and all of those things.

All of that will determine whether the company survives in the way that you envisioned it. Whether it’s mission survives and maybe whether it even itself survives. Second is this idea of invisible drift. We didn’t talk about it explicitly. Certainly, some of the examples of companies veering off course. We talked a little bit about FedMark and how that company was taken away from the original vision and ethos that Sol Price had when he founded it. There’s other examples in the book.

Johnson & Johnson is one that gets mentioned that Eric walks through about how it went from a very strong ethos to having lost that ethos. Particularly as it related to as best this and talcum powder in the lawsuits that have happened over that. It’s important to be thinking about if you feel like you were overly focusing on short-term gains instead of long-term value, this is not a random occurrence. This is happening all over the place. It’s a structural signal that the system, maybe your system, and your governance model are pulling you off course.

Third is just the important concept of making your mission enforceable. Not just aspirational. Again, there’s a lot of concepts that Eric introduced in the book that we did not have time for that allow you to make sure that what you create will last. Even last beyond your lifetime as a founder. There’s examples of that he covers as well. Finally, it’s this idea that, in some ways, the more likely you are to win, the more likely you may end up being to lose. Success increases risk because it brings the financial players to bear. You’ve got a plan for early.

The more valuable your company becomes, almost the more pressure that it will face to extract that value. You’ve got to build protections before you need them. It’s almost impossible to start worrying about this too soon. Those are the key points for founders or people involved in startups. If that’s not you, you should also consider some of the key lessons for Eric’s book in terms of companies that you choose to work for and how you design the trajectory of your career. We talked a little bit about that at the end.

Otherwise, you could find yourself working for a company that you feel ends up being soulless and feeling completely uninspired by that. I invite you as always to subscribe to Career Sessions on Apple Podcasts and Spotify. You can also subscribe to our YouTube channel. If you found this discussion enlightening, sign up for my membership community, which is called PathWise and our newsletter PathWisdom. Thanks.

Important Links

• Eric Ries on LinkedIn
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• Lean StartUp Co.
• The Lean Startup
• Incorruptible: Why Good Companies Go Bad… and How Great Companies Stay Great
• Jim Sinegal on Facebook
• OpenAI
• Anthropic
• Google
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• Palantir
• Cohere
• Good to Great
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About Eric Ries

Eric is the creator of the Lean Startup methodology, practiced by individuals and companies around the world. He is the author of New York Times bestseller The Lean Startup, The Startup Way, and The Leaders Guide (funded by one of the top Kickstarter book campaigns of all time). He has founded a number of startups, including LTSE, where he is currently Executive Chair and Chairman of the Board, and IMVU, where he served as CTO. He has also advised on business and product strategy for startups, venture capital firms, and large companies across many industries.