I'm Eric Ries, author of "The Lean Startup" and new book "Incorruptible" – AMA
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:
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.
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 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...
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?
You can also see the various accolades, reviews, and awards that it's accumulated so far.
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?
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 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.
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.)
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.
https://www.harpercollins.com/products/good-to-great-jim-col...
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?
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.
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).
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?
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.
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.
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?
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.
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!
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?
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 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.
Why do you think IMVU never hit escape velocity?
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.
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.
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.
How is Jeremy Howard doing? I remember studying machine learning with his videos, he’s been so inspiring!
stay tuned
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.
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.
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.
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.
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
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
How do you think Lean Startup principles could be applied to ordinary families looking to navigate the existing economic stresses we're experiencing?
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.
How do you resolve the difference between the short term nature of the lean startup, and the long term optimistic nature of LTSE?
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).
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?
How much do you blame our values of our society for creating corrupt businesses? Are corrupt businesses just a mirror of our own values?
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 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.
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...
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
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?
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
(Reading Joseph Pearson's book on the Berlin airlift, in which he features prominently, do your last name stood out...)
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?
With big companies with large budgets bulldozing smaller players - any advice on finding a niche that is worth pursuing?
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.
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...)
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
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?
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?
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 ?
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.
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?
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.
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'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)
> 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.
Those who can do, those who can't teach?
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.
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.
That is deeply disappointing.