How to build a company that withstands any era | Eric Ries, Lean Startup author · 全文文字稿

all kinds of famous companies. The thing that destroyed them was not competition. Their very success became a liability. >> I want to hear the OpenAI

versus anthropic story. Dario was a first-time founder. Wasn't a hot company at all. The boom hadn't happened yet. Chat GPD hadn't been invented yet.

Nonetheless, they were true believers in this safety mission. And so, one of their investors

suggested they come talk to me. I told them, "Look, if you don't get this right, here's what's going to happen." They were very determined to do

something about it. They wrote into their charter. Anthropic has directors on its for-profit board who are appointed by and are accountable to an

outside group of trustees who are AI safety experts who do not have equity in Anthropic. Whenever you see

Anthropic do the right thing, like when they refuse to release a model because they think it's too dangerous, think about how much that's costing

them. >> This new book, Incorruptible, is about helping you protect what you've built. What is it that you need protection from? We all know this

force. I call it the force that no one controls but everyone obeys that tends to drag organizations down

into mediocrity to the point that we lose control of them. What's a broadstroke solution to this? Harder is easier. If you're willing to be principled

in your decision-m you will get these unexpected rewards. But most leaders when asked to defend their principles can't do it because they've been

taught ROI based thinking, shareholder primacy. That's the path of maximum profitability. That's nuts.

Today my guest is Eric Reese, author of the most influential and impactful book in startup history, the lean startup. Today he is back with a new book

15 years later called Incorruptible: Why Good Companies Go Bad and How Great Companies Stay Great. The way Eric describes the connection between these

two books is that the lean startup was about helping you build a successful company and this book

is about helping you protect what you've built. Eric wrote this book because he's seen way too many founders lose control of their company and end up

being very disappointed and depressed about how things turned out. This is not something that you hear a lot about, but it's a problem that basically

every successful founder will face. Eric shares a ton of powerful stories and specific tactics and

very specific advice for what you need to understand and do as a founder if you want to build something lasting. Before we get into it, don't forget

to check out lennisproductpass.com for a year free of the hottest and most well-crafted AI products in the world, available exclusively to Lenny's

newsletter subscribers. With that, I bring you Eric Reese. Eric Ree, thank you so much for being here

and welcome back to the podcast. >> Ah, it's an honor to be back. Congrats on everything that's happened since I was here last time. >> Wow. Thanks,

Eric. So for people that have been living under a rock, you famously wrote the lean startup uh 15 years ago at this point, maybe the most impactful,

successful founder startup book out there. And it feels like over this 15 years, if you think about

it, it's it's gone through all these waves of just like this is correct the way to do it and no, this completely wrong. Why would anyone build this

way? This doesn't work anymore to okay, this actually is right. I was actually just thinking about this as I was preparing for our chat. It feels like

the way the top AI companies are building now is actually exactly lean startup. Like I just had the

head of product of cloud code in the podcast. Cass >> the way they operate. Okay. We're going to ship the MVP. They don't call it that, but we're

going to ship the MVP research preview. Get it out there. See if people care a lot at all about this thing. We're going to tell you it's not ready for

everyone, but it's out there. And then they iterate and build. I feel like people don't give you credit

for like this is actually the way AI companies are operating now. I appreciate you saying that and it is funny how every wave there's like a backlash

and somebody writes the article like because of this you don't need to do lean startup anymore. I remember when people wrote that about Quibby they're

like Quibby proves that you don't need lean startup. I'm always like why don't we wait till the

companies are successful and then see if it proves it. But also people forget like this is not a religion. So what matters to me is not if people use

the term minimum viable product or whatever. By the way those aren't customerf facing terms. So a lot of companies that use these concepts, they don't

talk about how they use it. They just use it internally to them. It's just, you know, the obviously

right way to go. And it's funny to me, one of the most important aspects of it that I think, you know, stands up really well and it's been 15 years is

that so many of these AI products that if leaving the models and the underlying technology aside, these specific products that have taken the world by

storm, you can really tell that the AI labs themselves did not know they were going to be as

popular as they turned out to be. obviously chat GPT they had no idea claude code co-work like these were small experiments in the grand scheme of

things they weren't the companies like this is our big bet let's go and that's that's just so classic that's a a universal aspect of product

development that you do not have the ability to predict the future and when you pretend you get yourself in

trouble if you hold everything like a hypothesis you know you get the benefits of the scientific method it's uh it's pretty helpful >> this episode is

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you have a new book out called Incorruptible. It's a very different, very different book from the Lean Startup. It feels very personal in a lot of

ways. The way I've heard you describe the combination of the lean startup and this new book is the

lean startup was about helping you build a successful company and incorruptible is about helping you protect what you've built. I want to start with

that second part of protecting what you've built. What is it that you need protection from? What's this kind of corruption that you talk about that

founders run into? Yeah, we all know this force in the book. I call it the force that no one controls

but everyone obeys that tends to drag organizations down into mediocrity to the point that we lose control of them. Now, sometimes we lose control of

them because we get fired. You know, we get ousted from our own company. Sometimes it happens because we're like Frankenstein and his monster. It

starts to become malign or bureaucratic or frankly evil and we can't figure out how to stop it. And all

kinds of other ways. I've been I've had a front row seat at this. I've been helping people build companies now for a long time. I've helped people

create unimaginable amounts of wealth for themselves and for society. And I'm really proud of the work that they've done. I'm proud of my the bit part

that I played in so many of these companies. And yet I've also seen this darkness. And it's not just

founders getting fired, although we want to talk about that. But like the other day, I was out to dinner with some friends. We were not at home. We

were kind of, you know, away from our usual uh our usual spots. So someone said, "Yeah, there's this restaurant. I haven't been there in a couple

years, but it's really good. Let's check it out." We go, we sit down to dinner. They take one bite of the

food and then they're on their phone and we're like, "Dude, you're being rude. Like, why are you on your phone? It's just one sec. One sec." Yep. I

thought so. He turns it around. I could tell that this restaurant got taken over by private equity. I could taste it. And I've told that story a bunch

of times now, and so many different people have told me, "Oh yeah, I know what restaurant you're

talking about." And then they name like 12 different restaurants. So what's going on that like you can taste the ownership structure of a company in

the food? How many people have had a famous brand that they love get ruined? I tell hundreds of years of these stories in the book, all kinds of

famous companies where the thing that destroyed them was not competition. It was not someone else came up

with a better product. No, their very success became a liability because the more golden the goose, the greater the temptation to butcher. >> Well,

that's a very visceral example. I think about vital eggs as a great example of this. It was it was in the news, I don't know, on Twitter, Tik Tok a

while ago. It's the eggs that I we've been getting forever. This like pasture-raised organic in my

fridge. >> Okay. I don't know if you saw this, but everyone was complaining of how they've gotten worse and they're they have all like the highest

level of toxins and then they're owned by Black Rockck now, it turns out. No, I I was just wondering about that. Oh, okay. Now, that's my new favorite

example. That's really fun. I didn't even know that. But yeah, like it's so it's so common. It's the

point now where I was I was doing an interview with someone who was telling me about a certain natural foods brand and the name of the product is the

name of the founder. It's like I can't remember her name now. It's just her name. That's what it that's the name of the product. And she gets ousted

by investors. And he's about to tell me the story. I said, "Let me guess what happened next." The

board pushed her out in pursuit of higher growth, higher margins. As a result, we've seen lower quality. Customers are super pissed. Employees are

pissed. And now it's starting to shrink market share. And he was like, "How did you know? I thought you said you didn't know this company. This

pattern is so pervasive. We don't even have a name for it. We live it every day, but we don't know what to

call it." Well, I know what to call it. I know what our grandparents would have called it. They would have called this corruption, not legal bribery

or embezzlement. No, this is like you're building a bridge. And if your bridge collapses and Lenny, I say you're an engineer and I say, Lenny, why did

my bridge collapse? If you're like, well, because of gravity, I'm going to be like, dude, yeah,

thank you for that genius insight, right? Like, I understand that is correct in some very real way. Like we say, well, it's inevitable. It's greed. I

call it financial gravity. Like there's this kind of like thing, you know, human nature when companies get big, when whatever. Yeah. But I want to

know why did this bridge collapse? And more importantly, how come other bridges didn't collapse? And

they say, "Oh, oh, for that we need to study the load, load factor, wind load, shearing tension." And we go look up close. We say, "Oh, look, all the

metal bolts have been corroded. They're rusted. No wonder it collapsed." And then if you say, "Well, I want to build a new bridge, but I don't want

this one to collapse. What can I do?" You won't say, "Well, gravity. What can you do?" No. You say,

"Why don't we use stainless steel next time on the bolts so they don't get corroded?" Oh, yeah. Good idea. So, this book is about what are the

organizational equivalents of stainless steel? And the book is kind of structured not like a traditional business book, as you say, you picked up on

that. Like, it's much more like a mystery, a double mystery. First of all, why has this been going on for

hundreds of years when we all think that the market selects for value creation? So, this shouldn't happen yet. It happens all the time. But secondly,

if it's inevitable, if it's caused by greed or age or size, why are there exceptions? >> You're actually going to give us answers and solutions like

because it sounds like, okay, this is impossible. You actually have you have some answers for what

founders can do. Real quick, I'll just vital X thing. I'm not exactly sure if the toxins are real. Like there's a whole viral thing on it. I haven't

like looked into it super deep. >> We both have homework to do now because like it's what you feed your kids. You care. I'm definitely worried.

Definitely worried to hear that. I want to talk about two things that are probably in people's minds as

they listen to this conversation and even think about buying your book. One is okay uh I am not going to let this happen to my company like this is

other people they're weak. They're maybe they're loose values. The other is just like do I really need to do this? There's so many companies that are

killing it. I don't think I don't think they've done any of this. >> Why do I even need to pay

attention to this? So maybe let's start with that first one of this idea of this is a core thesis of your book. This is not like an ethical values

thing. This is a structural element of building businesses in the US. >> I'm going to make a claim that's going to sound radical, but is I'll back it

up. >> If you don't get this right, no other decision you make about your company will matter for the

long term because you're not going to be the one making it. Okay? According to Harvard Law School, among venturebacked companies that have the

standard best practices set up that you got from your lawyer, okay, only 20% of founders are still the CEO 3 years after going public. Okay, just

statistically speaking, everyone's being told by their lawyers, their bankers, their VCs, everybody that you're

the exception. It's not going to happen to you. But statistically speaking, you're much more likely to be in the 80% than the 20%. I'll tell you one

story in particular. A very hot company came to see me like a year or two before their IPO. They were pl pl pl pl pl pl pl pl pl pl pl planning IPO.

You know, I build a long-term stock exchange. I've done a bunch of stuff that people come to me for

advice about these things. They wanted advice. How can we structure the IPO? We want to think long term. We're really missiondriven company, etc.,

etc. And I was going through their governance documents. I said, "Oh, good. You have all the best practices, so you're totally like I was like, the

good news is you're so screwed. You're going to have to do something, right? Like just this is you're

this is you're guaranteed to get this messed." And and I I I had all the data just like I do in the book. like here are the examples, here are the

case studies, here's the data. You need to know about this. And the founder was really concerned. He's like, "Okay, we're going to we're going to

definitely do something about this. We're going to fix it up." But then he called me back a few months

later. He's like, I said, "Well, what are you going to do?" He's like, "You know what? I talked to my bankers, talked to my lawyers, talked to my CFO,

talked to my GC, talked to my VCs, talked to my growth VCs." You know what they all said? They all said, "Man, Eric is such a downer. If he really

believed in your vision, if he really saw how special you were, he wouldn't talk like that. you're the

exception. I said, "Okay, man. Good luck." This company went public, had a very successful IPO, a lot of people made a lot of money, and then five

months into their IPO, a competitor gets acquired, and the whole category, everyone freaks out. Stock price collapses, and the founder is ousted after

five months as a public company. Now, if you read stories about the company, it's people like, "Oh, he

made all these mistakes. Their business model sucked. the company of blah. Did he make mistakes? I'm sure he did. Were there problems? I'm sure. But

had he really earned so little grace that he only got five months? The same people saying that the business model is horribly flawed, they invested in

the company five months ago. Had it had it really changed so much in five months. This is what's

going on. These um collapses are all around us and we're being told it's normal. This is just the way it has to be. But it's not. These are choices

about the specific structures, cultural practices, the management practices we do on the inside and the structural the governance practices we do on

the outside. Of both of them, we're being told to do things that are incredibly weak. And again, if you

think you're going to be the exception, like think again. >> I'm excited to talk about what to do with these governance elements, but let's talk about

this other critique that I imagine people have in their head of just like is this like, you know, like okay, I need to figure out product market fit

first. >> Yeah. Yeah. work worry about it later. >> Exactly. There's so much more I need to do. Like

the chances of this working are so low. Why am I I have no time for anything else. >> Oh, totally. You said something interesting in the leadin which

you said like, "Well, a lot of other companies seem to be killing it and they don't have these protections, so they're fine." I would actually check

your math so many times when people give me this argument. They were like, "Well, such and such

company, you know, like I'm someone was like, "Cloudflare, they are just a normal company. They don't do this stuff." I'm like, "Check your math,

buddy. Cloudflare does many of the things that we talking They're one of the examples in the book, so I picked that on purpose. A lot of companies

that you don't necessarily instantly think of as like dogoodter missiondriven companies are actually very

missiondriven in terms of how they're structured and they are almost always protected by at least one of the governance structures from this book. So

check your math. People used to tell me Costco was an example that wasn't protected. So much so that like I was surprised to learn that it was

embodied in a governance fortress. You you'll be surprised if you if you do the math, if you look into it,

you'll be surprised. But let's talk about the product market fit thing because this one is really interesting to me. Generally speaking, this is one

of the most important ideas in the whole book. The most important question about how to protect a product is not what protections it needs, but when

those protections need to be enacted. And it's basically like that old proverb about the best time to

plant a tree was 40 years ago, but the next best time is now. It is always too early until it's too late. And I'll I'll give you like the example. Um

I've seen this hundreds of times myself personally. So I've like l literally been in the room where this kind of stuff gets discussed and it starts

like this. You're going to you're you're incorporating your company. You talk to your lawyer. Hey, I

want to have these are called mission protective provisions in the law. I want to have I heard this guy on Lenny's podcast and your lawyer's like,

"Oh, not again." You know, another guy, right? Like how many good ideas from Lenny's podcast are you going to tell me about? Okay, fine. What's this

one? I he told me I need to have mission protective provisions. He'll be like he'll pat you on the head

and be like, "Oh, that's sweet, honey. That's great. Yeah. Get product market fit. Like get some success. Success is ultimately your source of

leverage. Success will protect you. Don't worry about it. You say, "Okay, great. But just thanks for letting me know. Now you raise some money. You

got these VCs on your board." Say the same thing. They're like, "Yeah, I totally am with you. We're on the

same page. We want the same thing you want. We invested because we believe in you as the founder. There's no need to do this now. Let's just do it

later. Do it when it's the more appropriate time." Okay. You get you got a growth round. Now you got these bold contrarian growth VCs on your board

and they're like, "I don't know. You might not want to be too different from everybody else. Might make

it hard to raise money." You're like, "I thought you were a bold contrarian. What?" Okay, don't worry about it now. We can always do it later. Now

you're doing IPO prep. Now you got bankers and lawyers and you've got a GC and you got the and they're all like, "Yep, yep. This is a great thing to

bundle with the IPO itself. You don't need to worry about it now. First, we got to land the plane. Let's

get our house in order." Blah, blah, blah. Anyway, I've actually been in the room where the founder sits with the CFO and now it's like IPO planning

road show. Here we go. It's go time. We're about to file the papers and the founder's like, "Hey, whatever happened to those mission protective

provisions?" They're like, "I wanted to really make sure we had our customers could participate in our IPO

and I want broadly shared prosperity and I want this thing for our employees and all this good stuff I want to do. Do we uh do we do any of that

stuff? I don't see it in the S1." The CFO is like, "Oh, you were serious about that?" Oh, sorry, man. You should have said something. Now it's too

late. You're like, "Wait a minute. When I talked to you about it last year, you said it was too early."

Yeah, it was. But now it's too late. Was it ever the right time? No, it is never the right time to do this. If you put this off, you will eventually

find yourself in a situation where you can no longer do it. You will have lost the leverage. Success will not protect you because success is what

makes you a target. That story I told you about the five month CEO got fired. That company, everyone who

worked on that IPO, every banker, every lawyer, the CFO, everybody, they profited from all the transaction volume that company generated on the way up

and on the way down. They're all fine. They're all on to the next IPO. The they're like u carnivores, you know? They're on to the next thing to feed

on. Meanwhile, the customers, the employees, the people that cared about their company were not so

lucky. >> Damn, that hit me. That hit me right in the heart. Uh, and it's so obvious just how personal and important this is to you. It's clear you've

just seen this happen again and again in your >> Oh, yeah. I've been in the room where it happens, the proverbial room. >> Okay. So, let's talk about

how to what people should do and we'll poke around in different directions. what's kind of like the

broadstroke solution to this and then what are some say three things say an early stage founder should do this week next week. >> Yeah. Yeah. Yeah.

Okay. So, so broadly speaking there is a blueprint. I promise like when we talk about the the horrors of living in late stage capitalism it's easy to

get depressed and just be like I mean literally part one of this book is called the shape of the

abyss. So you know I'm not I'm not trying to sugarcoat it. This is quite grim and if you haven't studied these case studies, if you don't know the

story of Whole Foods and what happened to it, if you don't know the story of Verura, you know, you don't know these stories, they're really grim and

it's important to grapple with what happened so that so that it doesn't happen to you, so that you're

prepared, but it can feel like we're we're so helpless. But as I said, this is a double mystery. Not just why does this happen, but how can there be

exceptions to a rule that's inevitable? So let me just tell one more story and then we'll get really into the tactical details because I want to

really give I want some stories that we can use as our fact set our database to draw these principles out.

And so the blueprint I'll give you the spoiler alert I just mentioned before ethos plus integrity that's our formula. Ethos meaning internal alignment

character choices integrity meaning the structure to resist to keep ourselves aligned with human flourishing. Let's go back in time a little further.

This time we're going to go to 1920 Denmark. Okay. I want to tell you about a a woman named Marie

Crowe. She was one of the first doctors to uh practice in Denmark, like a credentialed doctor. She was a big advocate for women's medical education

and she lived a very cool life in her own right. But she's famous today mostly because of her husband August who had just won the Nobel Prize who's a

very famous scientist. And she unfortunately right around the same time got diagnosed with a fatal

illness, an illness for which there was no known cure at that time. it was called diabetes. So she gets this death sentence right as he's weighing the

Nobel Prize and he asks her would she come with him to North America for his lecture tour anyway and she says yes. So the two of them travel to North

America. He's going around talking to scientists about his Nobel Prize. And one night at dinner,

Maria is sitting next to a scientist who tells her, "Hey, actually in Canada, there are these researchers who have figured out a new technology to

isolate a substance called insulin, a potential cure for diabetes." So Marie convinces her husband, "We should send our trip, go to Canada, see this

thing for themselves." They do. They are both scientists, so they instantly understand the implications.

this could not only save Marie's life, but millions more. So, they talked to the Canadians. Could we commercialize this technology? And the Canadians

say they're open to it, but everyone involved has a concern. We've been talking so far about the concern of being forced out of your company or having

it taken away from you. That is one danger. But there's also the temptation to harvest what others

plant. The temptation to exploit, to extract instead of creating new value. They were worried about that. Now, Lenny, I want you to imagine this

scenario with me, okay? Imagine that I depend on you for a life-saving cure. I have diabetes. You're the only maker of insulin in the world. In that

case, I would want you to charge me a fair price. Like, very much so. It's it's a it's both morally right,

fair, but also I want you to have every incentive possible to keep making the drug. Otherwise, I might die. Okay. But what if one day you wake up and

you're like, "Wait a second. I don't have to charge Eric a fair price." or you have investors whispering in your ear, Lenny, you don't have to charge

him a fair price. You can charge him anything you want. That's what I would live in fear of. So

decades before Martin Skrey actually did this as a business strategy, the crows and the Canadian scientists, they were worried that this might happen

to their new company. So when they went back to Denmark to create this company, which they called the Nordisk Insulin Laboratorium, they incorporated

it using this very particular structure. It is a for-profit company. It does have outside investors,

but it is owned, governed by a nonprofit foundation, a two-tiered structure that's called an industrial foundation in the literature. And if Nordisk

Insulin Laboratorium sounds familiar, it should. This is the predecessor company to what we today call Nova Nordisk, one of the largest companies in

the world. And what's so interesting to me about this story is this structure has endured and

protected the ethos of scientific integrity of Nova Nordisk for more than a hundred years. Meanwhile, so many of the best practices that your lawyers,

your bankers, whoever advisers you have, they're going to be pushing best practices on you that are younger than the trees in your local park. And so

what I want for everyone who's listening to this, founders, product managers, leaders, board

members, I don't care. The next time someone comes to you pushing a best practice and you're like, "Oh, I guess I have to do it this way because we

live in an ROI dominated culture. We have to stack rank by ROI or whatever the practice is, I want you to be like, well, that person sounds very

smart. They're very well credentialed. They went to business school or whatever." But ask yourself, are you

sure they're smarter than a Nobel laureate? Because August and Marie worked this out a hundred years ago and it has held so many attacks. In fact, I

tell a story in the book, and Lonnie, I know you're going to think I'm exaggerating, or I know at least some of your listeners are going to think,

"Oh, America is an exaggerator." I promise you, this is a 100% true story. The the trustees of the

nonprofit foundation once had to intervene to protect the for-profit from this exact temptation to want to sell it out. And I won't get into the whole

story. They did the right thing in this case because they had the legal power to do so. Their intervention ultimately created more than $500 billion

dollar of shareholder value. I'm not I didn't add an extra zero for emphasis. $500 billion. So when

people hear about these things for the first time, it's natural to feel like we're talking just about business ethics or mission. It's like some extra

nice to have thing that after you do the real serious business, now you worry about this stuff. No, this is one of the most powerful engines of value

creation in the world. And for a lot of people listening, this will be the first time you're

hearing about it. But just because it's new to you doesn't make it new. The German optics company, Zeiss, who make the lenses in my glasses and yours,

too, they had this structure in 1885. So I think it's really interesting that we have enough of these examples to know that there's nothing inevitable

about this financial gravity. We actually have a data set. They can be studied. There's a whole

branch of academic research that has shown, for example, companies with that structure like Novo and Zeiss, they are six times more likely to live to

year 50 compared to their conventional counterparts. We they have superior return on invested capital. They make more money for investors. They're

better in so many ways. So, it's kind of a bit of an open secret that these techniques exist. So, I

want us to kind of have these stories in our mind because it's it's going to sound as we get into the technique, some of them are going to sound

radical. We want to say, "Wait a second. Is this really doable for me? I'm just a little startup. I'm just doing, you know, I'm just trying to get to

product market fit. Why are we talking about this long off stuff hundred-y old companies? No. August and

Marie was just it was they were a tiny startup two once. Now that company's worth hundreds of billions of dollars. So before we get into that, just

let's remind people again why this is worth doing because it's going to sound like oh my god, this is so annoying. I have to do all these weird things

that no one else is doing. I have to convince all these people this is not going to limit us and not

hurt us down the road. Let just let's remind people again just why this is important. Why this is so painful if they don't do it right. >> Gosh,

there's so many things to choose from. >> So much pain. >> So much pain. I I'll tell another story like we've been telling kind of happy stories. Let

me tell you a not very happy story. So I've been doing this exercise for many years uh where I would ask

founders um or leaders of really of any seniority. I'm just like listen before we get into the details first tell me who you think is the most evil

company in the world. And people sometimes, sometimes they like instantly know who to say. They're like, "Oh, I know." But some people are like, "What

do you mean evil?" I'm like, "The company where there's no amount of money they could offer you that

you would go work there. You just, you know, they're up to no good." Everybody has a company like that in their mind. I don't know if you want to say

who it is for you. I understand. If you don't want to, it's okay. But like I'll just for the sake of us having a hypothetical that we can do. I would

always tell if people we go around the room. I go on some of them on Zoom. Everyone puts in the

chat, right? And there'll be someone will be like Hallebertton and someone else will be like increasingly like tech companies are showing up on these

lists now which when I was younger that would never have been the case but now you sometimes see tech companies there some see Monsanto or you see um

you know some or some private equity fund like people are like mad about something they can name a

company usually so it's not hard to find examples now my father was a pulmonologist growing up so I was raised that Philip Morris is the most evil

company in the world so we'll just use that as our hypothetical just for the sake of argument today um if you think Philip Morris is great and you

have different values. You know, whoever's listening, fine. You pick the company you really would never

ever want to have to work for no matter what. Now, I ask people to imagine the company they currently work at. If you're a founder, you're a company.

If you're an employee, your company, but if you've, you know, the company you hold dear, just imagine Philip Morris shows up one day and says, "I'd

like to buy this company from you for $1 more per share than it's currently worth. You selling?" Most

people are like, "Hell no. Hell no. No, I'm not selling. One person once asked me, um, well, what are they going to use it for? Oh, sorry. To be

clear, they're going to use it to sell cigarettes to children. Now you're selling. Yeah. No, no deal. Of obviously, f no, I can't actually say on your

podcast the kind of things people say when they are presented with this. Um, because there might be that

might be children listening. Okay. People get real upset at this idea. And and when we talk about I'm like, "Okay, well, did you know that according

to the legal documents you yourself signed, your company's literal charter that you have right now, and this is not some hypothetical future thing,

you've already put in motion, a rule that says you have a fiduciary duty to say yes in this situation."

People are so outraged. They're like, "That cannot be right. My lawyer, my guy, he would never have done that to me. I'm like, "Call him up. Ask him

if what I say is true and call me back." And they're like, "He said it. He said he was doing me a favor by giving me the best practice documents to

make it easier to raise money." Yeah. So, occasionally though, people will say, "Eric, you are

exaggerating. That is not Yes, that can happen, but come on. Does that really happen in real life? Is that something I really need? I'm trying to get

product market fit. Do I have to worry about it?" So before you tell me I'm exaggerating, I want you to consider this from the perspective of the

founder scientists of the Vector Corporation. Vector was a UK company, a spinout from the University of

Bath. They made inhaler therapeutics like for asthma and COPD. You've seen inhalers. Yeah. Med a medicine company. They were really successful. They

raised money. They went public on the London Stock Exchange. And one day the actual Philip Morris tried to buy them. Okay, I only know this story

because I've been using the Philip Morris example for years. And when I was researching the book, I was

like, I wonder I actually asked Claude, "Has anybody has anyone ever actually been bought by Philip Morris?" Like this. I sketched out the

hypothetical and it was like, are you asking me about Vector? And I was like, tell me more. There's this company. This is what happened. Phil Morris

said they wanted to diversify beyond nicotine. And they were like, oh, we know a lot about inhaling things, so

having an inhaler company makes anyway. No, normal people hearing about this were like, "This doesn't make sense. Why would a why would big tobacco

own a health company? That doesn't seem right." So, here were the three choices that were facing the Vector board. They had this bid from Philip

Morris for 165 p per share. They had a bid from an American private equity firm for 155 pair or in door

number three, they could just stay independent because there was really no problem. The company's doing fine. The public in the UK was super outraged.

The British Thoracic Society begged them to say no. Like every person who thought about this for 5 seconds could see this is going to be a massively

valued destroying error. But the only people that mattered were the people on the board of directors

of the Vector Corporation. They had, I think, two meetings about it and they just said, "Our hands are tied. We have a fiduciary duty to accept the

highest bid." Which they did. So yes, if you think I was exaggerating, I was. I said it was a dollar per share. In real life, it was more like 15

cents a share. So, let's find out what happened next, shall we? Can you guess? >> Not great. >> Philip

Morris spent 1.1 billion pounds to buy Vectura. Uh, within three years, they had taken a $900 million write down and disposed of the company for Peace

Parts. It doesn't exist anymore to me. These are the stakes. This is what happens. And I can't tell you, I feel like Perry Mason sometimes when like

people are like, I would never do that. And I'm like, "Okay, I hear you have good intentions, but

can I please see your signature on the document?" Oh, look. Delaware charters are public record, by the way. If you ever want to know have a friend

who's a lawyer, just you want to know if a company has a mission or if they this is going to happen to them, just pull the charter. You can just read

it. Read it for yourself. I'm like, is this your signature right here? You yourself sign this

document. You don't even understand how your company works. uh this is the stakes I think are significantly existential and especially now that we're

entering an age the age of wonders the age of technologies that are incredibly powerful that have planet scale consequences to them you know I think a

lot of founders a lot of product people like they want to build a product that they can be proud of

that their grandkids will be like happy to hear that's how the family fortune was made and I know a lot of people that are incredibly rich and so

miserable because the thing their baby it got ruined and it got destroyed. Why are we doing this? Okay, let's talk about how to act what to actually

do. And you know, this is going to be a kind of a high level overview. Obviously, buy the book if you're

really get want to get serious about this stuff coming out May 26 that all >> May 26. Yes. Thank you. >> Anywhere you buy books, talk about what we

should do and I just want to plant the seed of Open AI is probably on people's minds as they hear this idea of building a nonprofit. >> Yeah. Yeah.

We'll get there and obviously in the book I tell the anthropic story where I I played a bit part. So,

we'll we'll get to all that. We'll get to all that. But let but let's start with the easy stuff first because like when you like AI is kind of like

the humanity's final exam. You know, you've heard that joke. Like these issues are so amplified in AI. Of course, we have to get it right. I think

it's incredibly important. And I've done my I've done what I can to set us on that proper path. But but

it's easier to see it I think in simpler businesses. Um open eyes insanely complicated. So let's look at it in some simpler examples. First let's

start with the principle I call harder is easier. This is the this is the leadership principle that anybody can adopt. There's truly like there's

nobody who's not who you tell me you have no power whatsoever. Like everyone's got some influence. And if

you have any influence at all, you can adopt this principle. Like when I talk to people about business, I don't care if I'm talking to two guys in a

garage, founders, you know, or I'm talking to super boards or CEO seuite, whatever. Everyone always says to me just what you were saying a minute ago.

I was like, "Man, Eric, business is already so hard. I now you want me to do extra now. I got to

worry about the Vector thing and this other stuff. Like, like, man, I'm already just trying to get through the day." Like, it's so hard. But I think

this is a basically backwards way of looking at it because I ask people, could it be just consider the possibility that one of the reasons you're

finding business so hard is that nobody trusts you? If they trusted you, maybe it would be a little bit

easier. Now, actually, this is not a supposition. We have really good evidence. Companies where their employees trust them spend way less time on

employee communications. They have much better alignment. Everyone's kind of rowing in the same directions. When customers trust you, they are, of

course, you have way higher loyalty. Your cost of customer acquisition is lower, but also customers more

likely to stick with you after you make a mistake. Uh they're more likely to try your new product. Like so many people are like, "God, customers are

so fickle. they have no loyalty, you know, just like they only care about the slick marketing from our competitors. But maybe because you view these

things as extra is part of the problem. So harder is easier is a principle that says if you're willing

to do the work upfront to commit to quality, to design, to ethics, to integrity, to safety, whatever the thing, I don't want to tell you what your

values are, you tell me what they are. If you're willing to be principled in your decision-making, you will get these unexpected rewards. Now, you

can't do it for the reward or it doesn't work. You have to do it for the thing itself. Trustworthiness is

the most underrated asset in all of business. And the things that create trustworthiness by definition stack rank to the bottom if we do it by ROI

because doing the right thing has intangible rewards but tangible costs. So, let me give you another story because now we've been talking about like

lofty stuff and I want to talk about something super practical and that's I mentioned Cloudflare before.

So, let me actually tell the Cloudflare story. I like Cloudflare because Matthew Prince and his co-founders they like they were really anti-

consulting BS talk like they didn't want if you in the early days you know they came out of Harvard Business School and so they were like traumatized.

They were like no I don't want to hear about mission statement. I don't want to hear about values. I don't

just we making a firewall and putting it in the cloud. it's not that complicated like we don't want to hear it. So for years they had no mission

statement and this is a critical point. Uh as leaders we get so focused on value statement mission statements we forget the mission statement is not

the mission. The map is not the territory. Mission is an emergent property of the living superorganism of

the thing we're birthing. Okay? It's not something you can slap on with a label. You have to build it in. You want to have a company that stands for

quality. You got to build quality in from the inside. Deming taught this in the 40s like this is not some new idea. This is a critical idea. This is

what craftsmanship really means. Okay. So, we know that Cloudflare had a mission because quite often

they would do this harder is easier stuff and without even really knowing why. Like there's a very famous example in their history where pro-democracy

protesters want to say, oh, I forget what nation state they were pissing off. I better not say in case I get it wrong. Pissing off some nation state

were having their having like state sponsored hackers try to take their websites down so they

couldn't coordinate their pro-democracy protests. They were going around Silicon Valley begging big tech companies to help them defend their websites.

No one would do it. All these big mega companies, even like Google, were just like, I'm too scared. And so Cloudflare, the tiny startup, is like we'll

do it. These were like free tier customers. They weren't even paying any money. and they're like,

"Yes, we will incur the wrath of nation state level hackers to protect you because it's the right thing to do for no reward whatsoever." That was just

the kind of company they were. So anyway, a couple years in, they're having lunch and one of the engineers says, "You know why I like working at this

company? I just feel like it's the first place I've worked where we're just we're trying to make a

better internet." And everyone at the table's like, "Yeah, make a better internet." Someone asked Matthew, "Oh, is that our mission statement?" Matt,

no. We don't have a mission statement. What are you talking about? note but it actually was over time the engineers people worked there kept saying

make a better internet that was that was how we talk about it and eventually the founders had to be

convinced okay let's adopt this as our mission statement which they did that is their mission statement to this day they had to eventually adopt

formal values like as you get bigger these things really matter it matters that you document those emergent properties otherwise how are people

supposed to know what they are their number one value by the way is be principled which is the ultimate harder

is easier move so this all sounds great It's fun to have values. It's fun to have a mission statement when it doesn't cost you anything. But sometimes

it can be very expensive. Can make your life a lot harder. That's why we call the principal harder is easier. One day, an engineer, a junior engineer,

not like some senior executive or anything, walks into Matthew Prince's office and he says, "Boss,

isn't our isn't our uh mission statement to make a better internet?" Uhhuh. When you're a CEO, any conversation that starts this way is generally

going to be extra work for you. So, you're like, "What is it now?" It's like, well, you were saying at the board meeting that our number one driver of

revenue, the thing that causes people to upgrade from our free to premium plans, this is a few years

ago now, is uh web encryption, SSL encryption, right? You said that makes sense because SSL encryption is expensive to offer. We can't offer it for

free. We have to get the certificates and pay for them. We have to do all this extra cryptographic stuff. It has compute, you know, we have scarce

comput. What boss? Wouldn't a better internet be an encrypted internet? And he's like, "Yes." So what's

your point? So like why? But if it would be better, why are we giving it away for free? And so many people have heard this story. If you've ever been

a middle manager in a company, okay, you know this. You're just like, "Oh my god." Every day someone walks into your office, it's like, "Hey boss,

let's give our product away for free for no reason." Okay? Like your job as a middle manager is to be

like, "No, we have a strategy. Get back on the strategy." Right? redirect. Hey, thank you for your buy in and your input, but we have a job to do. So,

everyone's expecting Matthew to react that way and we be the most normal thing in the world. This is our most profitable product and you're saying we

should give it away for free, get lost. No. Matthew told me once I saw it, I couldn't unsee it. And

he uttered the three key words. He said, "Let's figure it out. Figure it out." This is the leadership principle I think is so powerful. The figure it

out principle. When you have if you're committed to something, you stand for quality or whatever, it is going to make life harder. The best leaders,

the ones I really admire, they revel in it. They love the difficulty because every time you have one

of these impossible dilemmas, it's a chance to teach what you really stand for. So, Matthew insisted the whole team rally to figure out how to give

encryption away for free. Now, they couldn't just give it away for free. He's like, go bankrupting the company won't achieve the mission. We had to

find a way to make it sustainable. And I won't go through all the technical details of like how they

managed to get the cost. They had to hand roll their own software and assembly language. They had to do these complicated bisdev deals with

certificate authorities. Like they figured out how to do it and they drove their own cost down. Now keep in mind that at any time, first of all, they

could have used the difficulty as an excuse. Oh, it's too hard. We can't do it. Give up. Once they did it,

they could have said, "Wait a minute. This is just free margin. We can make our costs lower and then we just get free money." when they shipped it,

they had to report to their board on what happened. The conversion rates for their for premium product went down. So, they could easily have bailed

out at that point, but they didn't. They stuck with it because this is what we stand for. Now, of

course, it's a happy ending story. The top of funnel increased by an order of magnitude. In fact, to this day, people still talk about how Cloudflare

is like the reason you take for granted we have an encrypted internet. The trust that they gained is the reason why they're a 70 billion dollar

company today. But most leaders when asked to defend their principles can't do it because they've been

taught ROI based thinking. They've been taught shareholder primacy. They've been taught that's the path of maximum profitability. To give you like an

easy contrast, um Andrew Mason, the founder of Groupon, once told me this story. Everyone remember Groupon? Maybe not now. It's kind of fallen out of

public consciousness, but there was this time when Groupon was one of the fastest growing private

companies in America. It was powered by a daily email with a cool deal. And the whole thing was you got one email a day from Groupon. They went public

on the one email a day. That's how successful it was. And I remember he told me the story one day, you know, his executives and employees started

coming into his office. And they'd be like, you know, boss, we need to make the quarter. We need to

make more money. We're public company now. We don't want to be better than one email. Have you considered two emails? And he was like, no, one email a

day is like that's our whole thing. But he said over time they ground him down and they kept saying they were using language that sounds kind of lean

startupy shouldn't we do an experiment shouldn't we look at the data what about the IR like it's

just like what about the ROI and so he was like all right fine we'll run the experiment he ran the experiment two emails a day makes more money so he

couldn't he couldn't say no and everything was fine for several months until someone came into his office and said you know boss you know it would be

better than two email you should send three emails and next thing you know they're sending eight

emails and this is not just group on I have had so many CEOs tell me this exact story about email frequency. Email frequency is like for some reason

the tip of the spear where it's like we don't really have any way to defend doing the right thing here. So we do the wrong thing that destroyed the

whole company. But in the short term we made a bunch of money. So if you can stick to the harder is

easier principle that is the first line of defense against losing whatever it is that makes a company special. >> Eric, you're such a wonderful

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just like what do you do? So there's write a mission statement. Values is that a part of this just define your values. Talk about like the >> bullet

point. So again, no writing the statement is not valuable. Okay. The statement is not what it is. The

reason I would use the oldfashioned word ethos. I tried to write this whole book without using any trendy consulting language at all. So I try not to

use the word stakeholder. I try not to use the word culture. I tried to really go old-fashioned. That's why I started with Saul Price. Rather than

talk about stakeholders and mission statement and values, I want to know who are your fiduciaries. It's

like a real oldfashioned word fiduciary. But to me, the question every leader has to answer and this is every product has to answer this question.

What is its purpose? Who would you rather die than betray? Okay. So if you tell me I want to have a high quality product, that's what I would rather

die than ship slot. Like think about how Steve Jobs was like he was this is a guy who would fight with

people over the layout of the wires inside a computer he didn't want customers to be allowed to open and ever see. That's so classic. Harder is

easier, right? Just it has to be a certain way. If you know stories about Ivon Shannard, the founder of Patagonia today, he's more famous for his

environmental activism, but he was a quality zealot. He believed that quality was an objective function and

that every product had a quality level that it deserved. Most people think that's insane. That's why Patagonia is such a success. That idea is

powerful. So whatever that thing is, that purpose, we have to find ways to encode it in our like management system so that there's no way for us to

make money by betraying the principle, whatever it is. So this can happen both like at the operational level

and at the governance level. Both both are really important. people hearing this, I know some people are going to be like, "Purpose? Is this some ESG

nonsense?" Like, okay, there's a very funny quote in the book. Um, Unilver, the big food giant, we went through a phase a couple years ago where they

were going to infuse purpose into all of their products. And a Wall Street investor was just like,

I've had it with this, wrote this wrote them a nasty letter was like, look at the point that we're debating the purpose of Helman's mayonnaise, I

think you've lost the plot. And I love that quote because it's funny, but actually what's so funny about it to me is humble though it is, Helman's

mayonnaise is food. Its purpose is super clear. And again, if you think it doesn't matter what the product

manager who runs Helman's Manise thinks the purpose is, going back to our Vital Farms question, like think how easy it would be when an efficiency

consultant shows up and says, you know, I think we could save 3 cents on the bill of materials if you just make the pro the thing carcinogenic. And

you're like, "Oh, that's wouldn't that come back to bite us?" Yeah, but long after your stock options are

vested, buddy. What do you care? If the product manager thinks their purpose is quality, that matters. If they think their purpose is extraction and

exploitation, it matters. Again, if you think I'm exaggerating, the product managers at Johnson and Johnson put asbestos in the baby powder and

covered it up because although they said their purpose, their mission statement was patient health, their

actual mission had become growth, optimization, quarterly targets. So, what we want to do is that's the first most important technique is like what is

the purpose? Who would we rather die than betray? Like you got to write it down. You got to say, as Saul Price did, customers first, employees second,

shareholders last. Or uh the great Peter Ducker said it would actually he said that's backwards.

It should be employees first, customers second, shareholders last. I don't care. You tell me what you believe. You got to write it down. And then we

have to do a a thing I call mission drive. Companies that claim to be missiondriven, most of them are just mission hopeful. Okay? It's it's It's just

a candy coating on top of an extractive engine. Sorry, I don't buy it. If you're serious about being

missiondriven, you have to show me that you cannot profit except by achieving the mission. That's the audit we have to do. We have to look at if we

were if someone in the company got tempted to cut quality, to cut corners, to decrease performance, to deal with like the things that tend to get cut

first, safety, performance, quality, design, those are always the most vulnerable. Innovation, I

guess, is fifth. So that's like the fi the five horsemen of the apocalypse is like you can get rid of those things and nothing bad happens right away

because the whole point of trust is I can betray you and you wouldn't even notice. So we have those are like the canary in the coal mine. Is there any

way is anyone's bonus target is our OKR system. Is there anyone on this team and again you could do

this at the company level of course but you're just a team a team of five. Is there anyone on this team who could profit by portraying one of our

principles? Is it is it possible? And you mean it's really possible that and this is actually why automated testing is so good, right? Like think

about how many people can just like break the design. No one even notices. Well, it's a test notice. With

with AI, we have so many new capabilities for auditing, for preventing, for making sure, but we have to choose to use the tools for that. That's one.

So that's kind of like the general like category of things um that we can build. >> And so just to just to make sure it's clear. So it's write down

your purpose, whatever that is. And I imagine it's like a sentence is the idea. >> Yeah, that'd be

great. As simple as better, right? Like to make a better internet is such a great such a great purpose. I tell in the story in the book the story of

devoted health. They're a health insurance company, but their instruction to their employees is to treat every customer the way you would your own

parents. >> I've heard that one. >> It's just so easy and simple and clear to understand. >> Okay. So,

let's write down your purpose. Uh describe your mission and more importantly the mission. What is it? Drive the mission or the mission. >> Mission

drive. Mission drive. which basically uh is there like a structural way to do this or is this just go through everything going on and see is there >>

it is I mean I I talk about it in a more formal way in the book but basically I would say that it is to

identify your fiduciary commitments like who are the people that you're trying to commit to do something good for what are the metrics or targets that

you want to have for each of those people and then um what is the system the accountability system to make sure that those commitments are as

important to you as making money. >> So, it's essentially these kind of like OKRs for your stake. Let's not

call them stakeholders. >> Yeah, that's what I see how hard it is to do this. Yeah, that's exactly right. It's like OKRs for the And I and I just

again people always when we start using this language, people are like, you're trying to impose your values on me. No, you tell me what you care about

and then you tell me how you're measuring the things you claim to care about. In in the book, I have a

section called don't be evil versus the quarterly report. I I made a study of the blog posts that longtime Google employees write when they leave

Google. It's like a genre. There's 50 of them. They're incredible documents actually. If you've never read them or all linked in the book, you can you

can read them yourself. And they all have this like very wistful sad quality to them because something

really listen for the record, Google's a great company. I'm not saying Google's bad, but Google used to have this don't be evil ethos and it kind of

got lost. Got taken off the website. Then it showed up in the employee handbook. Now, it's not even in the employee handbook anymore. And in fact,

Google's been sued twice now for breaking the don't be evil pledge. And they've had to settle both

lawsuits. Okay? That that's how sad the situation has become at Google. And I remember talking to one of these ex-goolers. He'd been there, I think,

13 years. And I said to him, look, he could not, he was like, why did we lose it when we had such good intentions? Why? I wanted to believe

management. He's like, I liked management. I thought they were had their heart in the right place. And yet I

said, "Okay, answer me this hypothetical just real quick. What is the probability that Google will file its next quarterly report on time?" He was

like, "That's a dumb question, Eric. Obviously, they're going to do it." I was like, "No, but give it a number probability." He's like, "Literally

100.0." Yes. As certain as the sun will rise tomorrow, of course. I said, "Great. Now tell me the

probability that um Google might accidentally kill somebody and cover it up." And he was like, "Come on, man. They probably wouldn't do that. That's

not fair. Put a number on it. Is it 100%. He's like, "Well, like 90%." 95%. I was like, and he start You could He was like, "Well, they got sued for

this." He's like, "What if the self-driving car hit somebody?" He could He could already think of the

way it could happen. I said, "Okay, how can it be that quarterly reporting is like the thing that we're sure of?" And this and manslaughter. We think

our human beings like confused. They love quarterly reports and they're not sure about manslaughter. No. Come on. What is going on here? Google will

report its quarterly report on time because there is a massive, unbelievably expensive apparatus to

make sure it happens every time. And don't be evil was just a slogan. So if someone tells you, I'm serious about something, great. Now show me the

apparatus. Show me the commitments you've made to make sure that happens every time. No exceptions. And if you don't have one, then they are lying to

you no matter how good their intentions are. >> And this might be a good segue to kind of the second

bucket of stuff. So the way you described it earlier, I think is a really helpful way of framing it. There's kind of the ethos, which is what we've

been talking about, values, purpose, mission, and then there's integrity. So talk about that. Sure. So why did I use the word integrity? In human lang

in normal human language, not consultant speak, but like among normal people, integrity has two

meanings. One is like Lenny, you're a very high integrity person. If you say you're going to meet me at 2 o'clock at a place, like I know you're going

to be there, right? Everyone's got a friend like that where if they say they're going to do something, they're going to do it. And more importantly,

if they're not sure, if they're like, I think I can be there at 2 o'clock. They never would say,

I'll see you at 2:00. They won't do it. They know that to tell the truth requires you to really make a commitment. But we also, so that's kind of like

the ability to keep your promise. But we also have the word structural integrity, right? I told him before like the difference between corroded bolts

and stainless steel organizations these two senses of the word become one. An organization that is

weak cannot keep its promises because the person making the promise won't be there. Imagine you got a promise from the founders of Vectura that

they'll never sell cigarettes to children. Oops. Sorry. Right. No, that's not integrity. So the goal of structural integrity for an organization is to

give it the power to resist temptation from the inside, resist betrayal at the board level and resist

pressure from the outside. As I mentioned, Costco has very famously has this governance fortress that protects it from outside pressure. And people

have come for Costco. I quote some hilarious quotes in the book about um one of my favorites is Costco takes money that rightfully belongs to

shareholders and instead invest it in improving the customer experience. That's meant to be a criticism. Okay,

that's not what they're supposed to do. So why can they resist? Because they have the tools they need to fight back. Their board sees its

responsibility as a bull work against pressure rather than as an amplifier of financial gravity. So that can sound very challenging and abstract and

now we're talking about board level stuff, IPOs. People a lot of people are like, I don't have the power for

that. Okay, that's okay. We can start with something very simple. We started with purpose and ethos. We can start with purpose here too. I mentioned

before that most founders have never read their own corporate charter, which if you're if you're a founder and you're listening to this and you've

never read your own corporate charter, you have a company that is operating, it is your homework. You

have to do this. You have to know what it says. This is so common that the HBO show Silicon Valley makes a joke about it where one of the found one of

the investors is like upgrading the founder to be like you don't know how your own effing company works because he loses control of it in so like they

did their homework. This really does happen. But if you do read your charter, you probably will be

more confused than you are now because you will read a sentence like this. It will say the Acme Corporation is hereby incorporated to pursue any

lawful act or activity. And you read that and you're like, "That sounds pretty open-ended." Wrong. It sounds open-ended, but it's not. Unfortunately,

we live in the era of what's called shareholder primacy. Meaning that according to this theory, which is

the governing theory of our lives that we live under this law today, right now, this says that an organization is not a vital living thing. Rather, it

is a financial instrument designed to enrich shareholders and nothing else. And therefore, any lawful act or activity today means maximize shareholder

returns under the law. People have been raised, now we're old enough, this idea is old enough that

we now have a generation of people who have been raised as if this was a natural law. This is how capitalism has always been. But that's wrong. For

the vast majority of the time, for hundreds of years, we have had joint stock corporations. Only the last 40 have we had this idea. Before the 80s, it

was considered obvious. Our grandparents thought it was obvious. Our great-grandparents thought it

was obvious. Like Adam Smith thought it was obvious. Everyone before thought it was obvious that corporations existed to pursue a specific thing,

what's called a beneficial purpose in the law. So in the 19th century, for example, if you wanted to make a company, you had to make a declaration to

your state legislature that this thing you wanted to make would do something that is publicly

beneficial. You'd be like, I want to make a railroad. They'd be like, why? Right? And you had to say it would be beneficial to the public to have a

canal between this place and that place. And just to get a sense of how different our best practices are than the historical norms in the 19th

century, if say you were the richest person in America and you're like, I want to buy this company and change

what it does because I can. First of all, the board would be authorized to fight you to the death. They didn't have to say yes. They would do crazy

stuff in the night. These battles were legendary. Some of them are hilarious what would go on between these people. But the second thing, let's say

you succeeded anyway. You took the company over and you said, "I'm going to change its purpose from make

a railroad to maximize shareholder value." That would have been a crime. The courts would void your charter. You would earn the corporate death

penalty for having exceeded the authority of your corporation. So, this is a new idea that we live under. We think it's natural, but it's very new.

So, if you don't want that, like that's what and that's what doomed Vector and all these companies. If you

don't want that, you can change it. The good news for you listening right now in the year 2026 is that a band of corporate governance rebels have

spent the last like 15 or 20 years fighting this and building alternative structures that are available to you. One of them is called the public

benefit corporation or PBC. A lot of confusion about this out there because people have seen the little B

with a circle on it at their farmers market. It's not that. It's confusing because the same people invented that who also invented this and the word

B, the letter B is in both. So, I get it's confusing, but no, public benefit court is the easiest thing I will tell you to do on this whole podcast.

Could not be easier. It is a two-page legal filing that you just sub your lawyers can submit it for

you in Delaware tomorrow. You just say, "This is the purpose of this company, not any lawful act or purpose." Instead, no, this is a company designed

to advance human flourishing by creating safe and responsible AI systems. We advance human flourishing by creating high quality products and selling

them. Whatever you do, just write it down. It's couldn't it couldn't be any easier. And most of the

best companies today are using this structure. Like all the major AI labs are incorporated as BBC's. Anthropic most famously of all. It doesn't

guarantee that you're the good guys. Okay? Just writing it down doesn't do that much. But it does solve one very specific problem, which is if someone

one day sues you saying you breached your fiduciary duty to investors, you could say, "Nope, investors

agreed that this is our purpose to do this thing. Why has Anthropic been able to resist all this pressure? This is one of several of the interlocking

components of the armor that protects anthropic from the from outside pressure. If you don't do this, I can't help you, man. This is like the very

minimum. You got to do at least this. Now, if you're not at the founder, you probably are wondering,

have we done this at my company? This is going to sound so dumb, I know, but you can just ask. Okay? Even if you're in a job interview. I remember

someone once came to me and asked me for advice. They wanted to advocate for these ideas, but they were like, I need a job. I don't even work anywhere

yet. And they were like caveat. I was about to give them some advice and before you give me your

advice, you need to know that I'm not courageous. Okay. So, like I can't do anything scary. I'm not willing to be an activist. Like I just need a job,

man. But I am willing to do something. But I felt like they'd asked me for a no bake cookie recipe, you know? I was like a no courage. What can I do?

And I was like, okay. And you can do this if you're in a job interview or just ask your boss.

Either way. that at the end of your interview, we're going to ask you, do you have any other questions? You can say, "Is this a mission-driven

company?" They're going to say, "Yes." Okay, fine. How do you know? Like, like, "What kind of things do we do that's mission driven?" They be, "Oh, we

have free beer on Fridays and we clean up the local park on Saturdays." I don't know what they're going to

say. Maybe something great. Maybe something whatever they say, just nod and be like, "Great." And just ask, "Cool. Is that the legal mission?" Also,

is that in the charter? Almost certainly the person you're asking this question to is not going to know the answer to your question. But it's a

legitimate question because if you're working at a company that doesn't have this in the charter, you're

going to be betrayed eventually. You deserve to know. But more importantly, just by asking, you've now forced them to get the answer. Like you, you

know, I mean, you've been in part of hiring processes. Every hiring process at a well-run company, it's somebody's job to make sure every question a

candidate might ask, there's a like frequently asked questions document with the answer. So, she's

going to have to ask her boss, who's going to have to ask out her boss and her boss, like I've been in boardrooms where this kind of thing comes up

where someone's like, "We're getting this really irritating question from candidates and we don't know how to answer it." Now, maybe just by asking,

the CEO also listens to Lenny because everyone listens to Lenny. The CEO's also been thinking about

doing it too. But he was like, I don't know if I have the support of the board. I'm not really that courageous to bring it up. Now you've created an

excuse. A we got to do it because I mean it's the thing that everyone's doing it. Employees are even starting to ask about it. Like if you read these

postmortems of some of these like crazy things that are going on in the AI wars, a surprising

percentage of the motivation of leadership is like we want to keep our employees happy. So be an be an unhappy employee who wants to know what's our

mission. Is it the real is it the real thing? So, of course, that's not the only thing you can do, but that is the beginning, the easiest one on the

integrity side. And again, a company that hasn't done it is very much at risk of eventually being

betrayed. >> Are there any downsides to filing this charter? >> No, this is the one thing that has no tra tr truly no trade-offs at all. >> Okay.

Okay. Um, I mean, maybe you'll meet an investor who's like suspicious about or doesn't like it. But again, the only situation this would ever become

relevant is if the investor is trying to force you to sell the company and you don't want to. So like you

could just tell them, are you telling me that in that situation you believe you should get to decide instead of me? Just can is that what you're

saying? And then you can ask yourself, is this really the right partner for you? Someone who would say yes to that. Like what are we doing here? All

these VCs are like, I'm founder friendly. I believe in your vision. Do you do you or like what is what's

going on here? So that's really important. Uh the other downside the main downside of almost every technique in this book is that people will waste

your time trying to talk you out of it. Okay, that's really like you have to be ready for that. The book actually has a whole section called how to

talk to your investors and a whole separate section about how to talk to your lawyers. Like detailed

exactly what to say, what are the questions you're likely to get because in the years I've been I work in the book for years. I have been writing down

all the objections I've heard from all the companies I've helped. I always tell me if someone objects please call me and tell me what they said. I

just wrote them all down so I all the answers are there. But if you talk to your lawyers, they'll say

something like,"Well, you know, you might want to just keep your options open. You don't want to prematurely commit to your purpose." And if I hear

that, I'm like, "Really? Keep my options open? That's how you get maximum value. What about the option to convert my customers into soilent green and

eat them? Do I have to keep that option open?" Lawyer, you ask your lawyers this question. They will

say something like, "You never know what you might need to do." And then we're like, "Why does nobody trust me?" Well, cuz you won't even take that

off the table. Come on, man. No. This one has no downside. Absolutely. Absolute no-brainer. This sounds like a a great single takeaway. If there's

anything you take away from this conversation, you should do this. The fact that Anthropic did this is

such a huge deal because I think a criticism of all of this that people probably hear is this is going to limit our growth. It's going to hurt our

potential. You know what I mean? like touchyfey business like we're trying to like capitalism has worked in creating a lot of very successful

companies and value and innovation. Capitalism has worked in many ways. Uh why would we need to do this? And

anthropic being the fastest growing company of all time just like absurd breaking all records is uh public benefits corporation should make you feel

okay about doing this. >> Oh yeah. Enthropic has helped so much because they do many of the things in the book including this uh what they have we can

talk about the long-term benefit trust. They have that two-tiered governance structure that we were

talking about before. But like it's so funny even now even with Anthropic having such success people still say stuff like this like oh I'm worried

that I'm not going to be able to raise money. I'm like anthropic's been able to raise some money. That has not been an obstacle. In fact if you ask

people why is Anthropic winning? They will often cite some surface characteristic like Enthropic Frey

famously has lower inference costs than their competitors. The you know they have faster product velocity than their competitors. They have um you

know what do I hear? Sometimes they say that they have more focus better focus than their competitors. Those are the most common ones I hear. And for

each of those if you say well why you're like well they have lower infra cost. They have better

technical infrastructure. Why? Well because they had some kind of internal breakthrough. Why? If if you keep asking why eventually like well because

they have the best talent. Why? Because people want to work there. Why? And you read because people like very much want to work. They want to work for

the good guys. They think this is these people. They have the mission to save the world. Why do they

have that mission? Because that was the ethos. But why have they been able to protect it? Because they paired the ethos with the integrity. This is at

the heart of almost every like breakthrough success story you've ever heard. you will find this lurking there as the as the thing that gave them the

competitive advantage to drive that differentiation. >> It's funny you say that. So I just had cat

the head of product on clock code and I asked her just how are you able to ship so fast? They're shipping a massive product or feature every week

essentially. They were going through a period of every day and a big part of her answer was exactly what you're describing which is we are so

missional aligned. It is so easy for us to decide this is something we will do or not. >> That is the thing.

Remember how we talked about how people say business is hard? Most people have never worked in a mission aligned company. It is the organizational

equivalent of being in the flow state as an individual person. It's a great feeling and it just makes everything easier. Like you don't like you don't

have to have meetings about stuff. You don't have mission misalignment. Like in most organizations you

have people who I call the torchbearers which are like the rare person in an organization who's simply committed to doing the right thing no matter

what. Steve Jobs very famously would host have skip level meetings. He wanted to meet not with his direct subordinates. He didn't care. He wanted to

meet with the torchbears throughout the organization. He those are the people that are going to drive

us forward. And and if you're a torchbearer, you're just like think about like the designer who simply won't ship slop no matter what. The engineer

who will like not sacrifice quality or performance, right? That they just you meet these people every once in a while, product manager who just they

are prioritizing the right things even if people complain. In a traditional company, if you have that

job, if people listening, if you've ever had this job, man, life sucks. Every freaking day, someone's in your office with a spreadsheet being like,

"But what is the ROI of doing the right thing?" And you're just like, "I don't know. It's just the right thing." In a mission aligned company, this

doesn't happen two different way. There's two different like antibodies that protect against this. First

of all, since everyone's mission align, no one's bothering to make the spreadsheet. There's no need. The late great Clay Christensen once said that

it's easier to do the right thing 100% of the time than 98% of the time. Just like because now you don't have to have a meeting about it. We just you

don't have like at an like oh I came up with this crazy unsafe thing that will make us an extra

dollar. We don't have to have a meeting about it. I already can tell you we're not going to do it. We already know. So it's just incredibly you know

everyone's incredibly aligned. But the second thing that I think is less appreciated is a practice I call the culture bank, which is when you start to

see trustworthiness as an asset, you start to realize that certain actions build that asset and

others take it away. So, let me teach you a rule I learned from one of the one of my favorite founders, Todd Park. He created Devoted Health, the

health insurance company I was mentioning before. Um, but he learned it from Howard Schultz, who built Starbucks. Like if you see in strong culture

companies you always see this pattern where you've taught people that whenever you do the right thing that

is you do something in defense of the company's values that has a sacrifice to it saying the values enchanting them you know making a song out of them

that's not it but if you do something you know I tell a story about this grocery store in Texas called HB where there was a the power went out there

was an ice storm and the manager let all the customers just take their groceries home no charge

because the point of sale system wasn't People say, "Oh, what a what a courageous manager." No, that's what they train people in at HB that you're

making a deposit in the culture bank when you do the right thing. So deposits, you make a sacrifice. A withdrawal is the opposite. You do something

greedy, self-interested for the organization. The Todd Park rule, as I call it, everyone who hears this

rule, the first time they hear it tells me it's impossible and you can't do it. It doesn't make sense. But this is the rule is really simple. only

make deposits. Never make withdrawals. That's it. Because you're going to make withdrawals by accident sometimes because you're gonna make mistakes,

but you never intentionally make a withdrawal. And that I think is the true power. Like when you hear

someone who's living that flow like cat you were talking about anthropic that has been internalized in the organization. Uh it's what the pioneering

management theorist Mary Parker followed the invisible leader. the person, the thing that people follow. Even when no manager is present, so no one

has to be in the room to remind you to do it, you just do it because you've internalized that this is

what we're all about. And when everyone around you is doing that same thing, the whole velocity of the whole organization increases exponentially. I

want to hear the uh kind of the OpenAI versus anthropic story because uh you've mentioned a part of the structural pieces this nonprofit. So talk

about just like what happened there and how that relates to what you talk about versus anthropic and then

I actually want to hear a little bit about just actual structure like what is this two-tier thing? What's the nonprofit piece? OpenAI is a really hard

case study to learn from because it's such a bizarre story and has involves like mega personalities like Elon and Sam like dueling to the death. So

it's complicated. Um but we can get into it if you want. But I entered the story. The funny part is

like I have this very I played a very big role in all this. Okay? So I'm not an important actor in this story at all. I take no credit for anthropic

success. All the credit to Daario and Daniellea and the whole team. Uh but when they left OpenAI, this is two or three OpenAI crises ago, depending on

how you count. They left and they wanted to start Anthropic. Now today, people are like, "Oh, sure

it works for Anthropic. They're a worldbeating company." But like Dario was a first-time founder. I was there, okay? He was impressive, but like in

the way that a technical founder for the first time is impressive, you know? And he had investors who were excited to back him, but they were like

effective altruism like true believers. wasn't the top venture fund. None of the top venture funds wanted

to participate in this round. It wasn't a hot company at all by modern standards. And Generative AI, the boom, hadn't happened yet. Chad GPT hadn't

been invented yet. So the mass psycho this mass psychosis we're all living through had not occurred yet. Nonetheless, they were true believers in this

safety mission. And so one of their investors suggested they come talk to me. I was like um everyone

knew I was like an eccentric collector of weird ideas, you know, like some people collect butterfly wings or whatever. I collected alternative

governance ideas. So when they came to me, I I was walking them through the same horror story I'm telling you today. I told them, look, if you don't

get this right, here's what's going to happen. And they were very determined to do something about it. And

so we talked about what we should do. And I and I advise a again a very little bit. I don't I don't take the credit for what happened next, but they

wrote into their charter that they were going to do this. They were a PPC from the very beginning and they wrote into their charter that they had the

right to enact these additional reforms which they had to defend all credit to them for taking it

seriously for convincing their investors and they had to defend it for like two years because they didn't actually implement what's called now the

long-term benefit trust until their series C. But they had the right and the intention to do it in all their legal documents from inception. That was

a really important uh important choice. And so even today, Anthropic has directors on its for-profit

board who are appointed by and are accountable to an outside group of trustees who are AI safety experts who do not have equity in Anthropic. So they

do not have a financial incentive in its growth, they have an incentive to see it done properly. So whenever you see Anthropic do the right thing,

like when they refuse to release a model because they think it's too dangerous, think about how much

that's costing them. People say, "Well, they do it for the publicity." But like publicity is nice, but you know what would be really nice is having

the number one top model that everyone has to pay you to use. Okay, that's really nice. They people say that like they got into this fight with the

Pentagon. And to be clear, I don't think that they're even the primary actor in that story. Okay, this

is a story of government overreach. They were an impossible situation. Even people who say they did the wrong thing, when you're in an impossible

situation, what are you going to do? It's the Kobashi Maru. Like, what are you going to do? You're in an impossible situation. There's no right

answer. But like even people who think they did the wrong thing, like tactically speaking, admire them because

we live in a time when it's so rare for companies to turn down money ever. And here they turned down, say what you want about them, but they turned

down a $200 million contract and bore the wrath of the world's largest army and government. Okay, that took a lot of courage. Part of that courage is

enabled by the fact that they have this structure and investors can't just oust Daario on a moment's

notice. I think the structure frankly is better than founder control. Daio does not have dual class shares the way that Mark Zuckerberg or Larry and

Sergey had. Um it's more institutional in its nature. But to kind of answer your question, the critical thing we need if we're going to really resist

outside pressure, we need what I call a mission guardian. It has to be somebody or some entity's job

to make sure that the thing remains mission locked or mission aligned. That does not happen by accident because gravity is such a powerful force. So

Anthropic's solution to that is to have a mission guardian in the form of the long-term benefit trust. Um OpenAI very famously had the nonprofit

foundation although now they've converted to a public benefit corp structure. Obviously Google and

Facebook are protected by founder control. The founder is the mission guardian. Those are the structures and I I tell the story in the book a very

weird experience I had. I was literally at the Vatican of all places. I mean look at me. What am I doing at the Vatican? No. But it was cool. Vag had

convened a conference on AI governance and they invited me to speak. So I was on this panel at the

Vatican with every other AI company and me. It was weird. It was actually strange. It was like me literally me. I go down. I was looking down the row.

Me, Anthropic, OpenAI, Google, Coher, uh, Palanteer, everyone on this found this panel together. And I looked down the panel and I realized not a

single one of these companies has standard governance. That's how bad it is. Nobody making this

technology would say, "Oh, yeah, standard governance. That's fine. I'm sure that it's just too dangerous. But they of course take different approaches

to mission guardianship. Some of which are better, some of worse. Like founder control, I think actually has a lot of downsides to it. So, and when

you say standard govern, like every one of these AI companies is not doing it the way every other

startup is doing. They understood they needed to do something different to protect >> humanity essentially from AI. Okay. >> Yeah. Yeah. Exactly.

Because otherwise, it's just this technology is so valuable. If you say that shareholders should run it, then you're saying literally whoever can

borrow the most money should be able to control this technology, it's just that's nuts. That can't be how

that can't be how it works. No way. I don't think any company should be governed that way, but certainly not AI companies. Certainly not. Okay. So,

just to kind of plant these things in people's heads as they Okay, we need to really think about this stuff. There's like this uh there's a nonprofit

approach to this. There's what are the kind of the terms that people should just think about? So, so

we talked about we need a mission guardian. So, first question is the mission guardian a person or a thing. That's our kind of first decision point.

So, yeah, some I I think for early stage companies, founder control is fine as like a good bridge, a temporary bridge to a more permanent structure.

And some companies get really far with founder control. That's okay. But a lot of founders who have

founder control wind up really miserable as you can see by the fact they're having a mental health breakdown right in front of us, all of us on social

media basically every day because like you become like Atlas. You can't even shrug. It's you holding back the abyss. It's a lot. So I think a better,

more permanent solution is to encode the protection into the structure. Now that can be done with a

single entity like Costco. Costco just has the rules written right into the structure itself. But that means that um every time they lose one of the

structures, every once in a while want an attack chips off a little bit of it. They don't have any way to grow them back. So it's like you've built

this fortress but you don't have a way to renew it. The better way I think according to the evidence is

to have some stakeholder somebody be the steward of the mission and have a way to renew that person that set of people. So some people accomplish that

by what's called an employee ownership trust. So the employees of the mission guardians um like the John Lewis partnership in the UK is a famous

example. Obviously cooperatives have this um like this can work in a cooperative at scale. Mandreon for

example in Spain has like 80,000 employees. It's a huge company, but they're all employee cooperatives. You can do it through an employee voting

trust. That's how Alibaba is protected where the employees vote for the board members rather than the reverse. But those are complicated compared to

me the two simplest solutions are either a nonprofit foundation as in the Nova Nordisk example or in the

case of what's called the perpetual purpose trust or PPT. And perpetual purpose trust is a non-economic entity. So whereas like the Nova Nordisk

Foundation is the largest charitable foundation in the world because it owns it owns a big chunk of Nova Nordisk and that's worked out pretty well. Um

the anthropic long-term benefit trust is has no economic dimension to it at all. It only has the mission

oversight responsibility. And what's nice about a perpetual purpose trust um as in the case of Patagonia is governed with a a purpose trust also is

you have the trustees but then you also have someone whose job is actually to sue the trustees if they ever deviate from the mission. So you actually

what's called the purpose protector is like an extra person who can get in there and say like if

things go wrong. So you have kind of to me it's like you have checks and balances like in a government. Um it's more stable uh it's a more stable

structure. To me though I use the omnibus term spiritual holding company to describe this category of things because I said before we have a lot of

infighting. The people who advocate for each of these things thinks their version is the best. And I

didn't even mention the evergreen the tugboat foundation. They don't believe in having investors at all. So there's people who think the solution to

this is no investors involved. That makes the problem a lot easier. So anyway, there's a lot of different ways this can be done. I don't think I even

mentioned ESOPS. There just so many. So we need to have an omnibus term. I call it the spiritual

holding company. The holding company like the Bergkshire Hathaway, but rather than having everything be wholly owned. It's the holding company for the

spirit, the animating essence of the whole. And I has a lot of evidence in the book, a lot that this structure is more stable, more durable, more

likely to invest in quality in R&D and the things we really care about and better for shareholders than

the conventional structure. >> If this all sounds like a huge drag and a lot of work and really annoying, I'd say go back an hour when we talked a lot

about just what is it you were trying to avoid and the pain. >> Yes, that's the thing. It's like, well, you know what's really a drag? I'll tell you a

story. The a friend of mine got ousted by his investors. Okay. And I was going to this party to

celebrate him. And it was like people had flown in from all over the country to celebrities he laid off came to this party. It must have been a

thousand people there. It was amazing. And I was describing to a new founder like I'm sorry I can't help you with your company right now. I got to go

to this party. And he was like okay. I'm describing to him and he was just like wow what respect that

founder sounds. That's just the kind of company I want to create. I'm like, "Dude, you have not been listening to anything I'm saying. He doesn't work

there anymore. He's like Saul Price. This is not a party. This is awake." He was like, "What? Did he die?" "No, man. He didn't die. Did the company go

bankrupt?" "No, the company's fine." That's not the problem. The new And he was like, "Do you is

the new CEO an or something?" I was like, "No, I like the new CEO. He's a friend of mine also. Perfectly fine. The problem is" He's like, "What's the

problem? The problem is if a company can be decapitated at any time, you can no longer trust it. All the promises that this company had made over its

15year life, nobody believes them anymore. The new CEO is like going around making new promises, but

we're like, an activist investor owning.5% of the company can oust you at any time. Why should I believe anything you say? And then we're like, why is

trust collapsing in our institutions across the board? We are teaching a leadership philosophy that is antirust, antirustworthy. So yeah, if it sounds

like if it sounds like this sounds like a bummer to have to worry about this stuff, you know

what's really a bummer? Come to that party with me. That sucks. And that's a founder who made literally billions of dollars for his investors, but it

wasn't enough. It's never enough. and hearing these from you is so is important and powerful because you see so many founders like I don't there's few

people in the world that see the number of founders meet with the number of founders work with as

many startups as you and like this is not an easy place you're in trying to convince people to do these very annoying things >> it's very annoying I

know I do agree >> and so it just says a lot that you're putting yourself out there this much for you guys pay attention this is even though it feels

weird now the ideas this should not this should be >> our grandkids will think this is the was the

most obvious thing they've ever heard about. So yeah, you can you can get you can get ahead of it now. You know, people when I first started talking

about lean startup, people thought it was so weird. >> As weird as you think this is, people thought lean startup was a lot weirder. So like I've been

through this before. And when I when I write, I don't write very many books, okay? I'm not like an

influencer. I don't I don't tweet every 30 minutes. Like I'm not that kind of person. It takes me years to put these things together. And I only do it

when I have figured something out that like I have personally lived myself and found useful in my own work and I've helped lots of other people do it.

So it takes me a long time because I it takes a lot of experimentation, a lot of testing. Like

this is the work of hundreds and hundreds of companies who have who I have worked had a chance to work with and seen what works and what doesn't work.

So the pain that I'm describing to you is like this is not some hypothetical thing. I'm not I'm not trying to trick you into something. I have nothing

to sell you. This is just what the data shows can prevent this like epidemic of value destruction

that we're seeing all over our economy. >> So maybe it's just a final uh tactic say an early stage founder is listening to this and like oh I got to

really do some here. What are say three things they should do in the next week or two? >> Okay, here just let's just let's just do the really easiest

things. First of all, if you haven't raised money yet or you've only done raised money on safes,

okay? You can do absolutely whatever you want. So, do not waste this moment. Everyone's in such a rush to get big, such a rush for the next thing, but

you have a precious, precious moment here. The founders who have already raised their series A or they're in preip like the founders that you envy,

they're ahead of you. It's more of a pain for them. They got to go get investors on board. They got

to go, they need to do it. Okay, I told you the next best time to plant a tree is today. Okay, so they still have to do it, but you have an incredible

privilege. Just please, please, please do because here are the basic things I think are really easy to do that are super low cost. Um, be a public

benefit corp. Do the file, but that's so easy. And write a mission there that is something you really

will feel good about. And the way the test for if you wrote the right thing is try to brainstorm with your co-founder, not for like you don't need to

spend like 10 weeks on this, like spend an hour and just adversarial prompting. Okay? Can you think of any way you could make money while violating

this statement? And if you can, would you be happy or sad in that scenario? If you'd be sad, write it.

Write it into the thing. Don't let your don't ever be a situation where you're rich and miserable. Write it down. Okay, easy. Second thing that's

super easy. We didn't get a chance to talk about I call it the director's oath. This came up obviously because there's this big fight going on between

uh Anthropic and Figma and a reporter just got reported um you know reported on the idea because it was

like what are our responsibilities in these weird situations? It's actually really tricky. Every company's calling me being like is it are you saying

I can't have an AI person on my board because having an AI person on my board seems really dangerous. But I was like you know what's really dangerous?

Not having an AI person on your board. So yeah like everyone's kind of stuck. What do we do? It's

impossible situation. We need to have like just like we have doctors have a hypocratic oath first do no harm. Why don't we have that for directors?

It's insane to me. Directors control like have far more make far more consequential decisions than nurses. So why do we hold nurses to a higher

standard than directors? No. So you we can wait for us to standardize on an oath for everybody, but you

could implement one right now. You could just write it into your corporate charter. Everyone has to do this. It's a precondition of being on the

board. And then the third thing is I'm going to presume again for founders, we'll talk about non-founders in a second, but for founders, I'm going to

presume you've already got what are called founders preferred shares. If you don't know what that is, you

need to ask an LLM to explain it to you. And just say, Eric said founders preferred shares could potentially make me like personally an extra billion

dollars someday. So, can you explain to me why? Type that prompt and read what it says. You need to understand the economics of what are called

founders preferring. So, I'm going to assume that you understand that and you've already done it. If you

haven't, that don't that doesn't count on my bill of extra things you needed to do because you needed to do that anyway for personal reasons. But if

you have that, then that's the logical place to do things like founder control, extra votes, board votes for board control, stuff like that. So, so

talk to your lawyer about um about what are called mission protected provisions. If your lawyer is kind

of being a drag or you don't like having to pay them by the hour, I actually helped start a law firm just because this drives me crazy. So, there's a

law firm called Virgil. They'll be happy to help you and they don't charge you by the hour. Um, this is not the main thing that they do. They mostly

do AI assisted back office acceleration, which is also very cool. But anyway, you make sure you have

somebody you can talk to about it. Okay? And then after you figured out which of those things you want to do, then put yourself, imagine yourself in

the seat of an investor saying, "It sounds like you're a greedy sob. You're all this power for yourself. You're like a power- hungry emperor. Why do

you want to be emperor for life?" So, you don't want to be emperor for life. Right now, we kind of

have this dichotomy between what I call investor controlled companies and founder controlled companies. And everyone's like, "You got to pick one or

the other." But neither alternative is very good. What we want to create are what I call mission controlled companies. So a mission controlled company

is one where the mission itself has sovereignty. And so if you're feeling a little greedy about

grabbing all this power for yourself, that's the time to do something like the anthropic LTBT. It's very easy to implement in the early stages because

you don't need a nonprofit. Like let's say you don't want to be Nova Nordisk. You don't actually have to boot up the nonprofit right now. All you have

to do is write it into the charter the way Anthropic did. Just say 10% of the equity is hereby

pledged to a nonprofit foundation and 1% of future revenue. the foundation gets a board seat or whatever you want to say. Like those things are really

easy. Just write them into your charter, fire and forget and then boot it up later, but make sure you have the right to do it now. Those are the bare

minimum easiest things in the book to do. Um a total piece of cake. >> It's interesting how so much

of this is similar to not similar but uh to AGI alignment, finding a way to align AI, finding a way to align your business. >> It's not a coincidence.

Okay, there's a deep philosophical reason why this comes up. >> I'll give you the simple version and then we'll do the complicated version. The simple

version is who aligns the aligners. >> This is the number one unsolved problem in AI. It's not the

tech. We're making great progress on the technical alignment problem. But we haven't made jack progress on the human alignment problem which is that

we've known since the development of Conway's laws Conway's law decades ago that software products the organizational imprint of the humans who make

the software shows up in the technical architecture of the software like it's really weird actually we

don't think about it that much but like the org chart is visible in the architecture diagram why because human values flow from the parent to the

child so that's one reason we have to make sure that that If you're trying to solve the alignment problem, but you can't agree on what the human

values are to align to, you're already cooked. But the deeper and more interesting problem, I don't know, I

don't know if your listeners will be familiar with this or not. There's this concept in the scientific literature called emergent intelligence. And I

write about it in the book because corporations, organizations are the oldest form of artificial intelligence on the planet. They are an example of

this emergent intelligence. The same scientific principle that makes the transformer architecture

work. and appear intelligent. That same principle is at work in organizations. Organizations are literally super organisms. They are alive in the same

way that these models are emergent intelligences. And if you don't know what this is, it can sound very metaphysical and weird and spooky. So if you

want a physical demonstration, I promise no metaphysics required. One of my favorite demonstrations

of emergent intelligence, I don't know, maybe Lenny, maybe you can link the video. Um I have it in the book, too. There's a video where researchers

created this thing they called the piano movers puzzle. You remember that famous clip that I don't know if you know the meme of friends where they're

trying to get the couch down the stairwell and he's like pivot pivot. People send it to me all the

time for obvious reasons. >> Um they created a version of that puzzle that they had ants solve. So visualize there's like two slits, two walls with a

gap in each wall and a big Ibeam shaped irregular object. And if you watch a human solve the puzzle, it goes like this. They like try one thing. They

think about it, they rearrange you. You go back, you back. You know, you've ever got to do a puzzle

like that. You can just tell watching the video that an intelligent person is trying to solve this puzzle because they try logical things that don't

work and then they learn. If you give one ant this puzzle, he cannot solve it obviously. But put a thousand ants in there and they can solve the

puzzle. And if you watch the video of the ant colony solving this puzzle, you will swear you can see an

intelligence at work because it does just like a human. It tries something, it pauses to consider, it re reorients, tries something different. It's

spooky. And the researchers found this is what we have to understand for humans. The more ants you put in the puzzle, the faster the solution. But the

more humans you add, the worse. Unless the humans are very carefully aligned, this is the key lesson

for organizational design. We are birthing these things left and right. And if we don't tend to them properly, they develop emergent characteristics

that we don't like. We don't want that to be like that. And no amount of founder mode is going to clean that up because you're talking about something

that's deep in the in the DNA of the thing you made. Beware. What I'm hearing here is we should be

hiring more ants for our organizations. Um, >> Eric, we've given people a lot to think about. I think there's a lot of just like, "Oh, wow. I should

really think about this and take this seriously. What's a final thought, final nugget, final lesson you want to leave listeners with before we get out

of here?" Let's talk about Mary Parker Flet. I mentioned her in passing and I feel like, you know

what? I bet a bunch of people have never heard of her. So, let me let me give you one more one more blast from the past. Most people have heard of

someone named Frederick Winsow Taylor. Fred Taylor is a good friend of mine. You know, one of the pioneering original management theorists. You know,

he wrote the principles of scientific management in 1911. And tailorism was one of the most popular

management fads of all time. If you think we have fads now, you should see Taylorism. It was like debated at the Supreme Court. It was front page news

in the 19s. Taylor, they made movies about him. He was an incredibly famous person. But one of his contemporaries was a woman, her name was Mary

Parker Flet. and her work is so far ahead of its time that if you read it today, you would think you

were this person lived in 2026. She would write things like um we need to focus on power with not power over. She said the superior and the

subordinate together obey the law of the situation. Meaning we work together to figure out what the situation requires. We don't just tell the

subordinate what to do. She said the job of a leader, the the hallmark of a leader is can they create more leaders.

So like if someone said that to you right now, you'd be like, "Oh, that's going on TikTok right the second." Like Twitter, that's awesome. What

podcast was that on? No, she wrote that in 1920. Um now, unfortunately, for reasons you probably can guess, she was utterly erased from history. Like

her work was utterly lost. Nobody studied it at all for most of the 20th century. And then it was totally

rediscovered and she and was republished in the 1990s. The great Peter Ducker called her the prophet of management. Okay, so one of her most important

concepts is what she called the invisible leader. And I just love this. She just imagine someone a woman in 1920 going around saying this to people

how it would blow their minds. She would say, "Mr. Roundtree, the owner of the Roundtree Chocolate

Factory, is not the leader of the Roundtree Chocolate Factory." And people be like, "Lady, what are you talking about? His name is on the door. His

family has owned this thing. Like, what? How? If he's not the leader, who is?" She'd be like, "Glad you asked." Mr. Roundtree is an excellent leader

because he's very good at instilling in his people the sense of common purpose of what this factory is

about. And the common purpose rather than Mr. Roundtree himself is their invisible leader. And this is maybe the most powerful concept. If you if you

want to manage something like as a leader, you have to understand that the most consequential decisions that will affect any organization's life are

almost by definition made when no manager is present. You think you made the decision when you told

everybody, "We're going to build a high-quality product. Our vision is this. Our plan is this." But you're not there when the product managers and the

designers and the engineers make the actual tradeoffs, right? somebody sitting there with the code and being like rounded corners or straight corners,

skuorphism or not. When person clicks this button, do we double check? Do we understand what they

meant or do we just erase their hard drive? Right? Like thousands upon thousands of these tiny little decisions get made. Only the invisible leader is

present. So if you don't cultivate that sense of common purpose, you have no control over what's going to happen. Again, your promises are worthless.

So if you want found want a little homework, read Mary Parker, follow it. Uh she will she will

enlighten you. >> If any of this is at all interesting to you, if you want to explore this, if you want to implement it, buy Eric's book,

Incorruptible, is there a website to look at or just Google and find it? >> Yes. Yes, of course. You can find it anywhere books are sold. Um but yes,

we do have a website, incorruptible.co. Please join the mailing list. We have tons of bonus content, especially

for those who are impleers. We have implementation guides and advanced implementation guides and readers guides. Lots of extra content, uh, including

a secret chapter that got cut from the original manuscript. Tried to make it really worth your while to go to the website, pre-order, and sign up for

the mailing list. Um, but you don't have to buy it from me. You can buy the book anywhere books are

sold. It's in hard coverver. It's in uh audiobook and ebook if you want to. One of my favorite things about the website, we have a list of I more than

hundred last time I counted of local independent bookstores that are carrying the book and where you could order online. So, if you want to, not only

could you do me a favor and buy a copy or 10 or 20 or however many you want and give them away, but

if you'd like to make the day of your local independent bookstore, you want to support a local community like a pillar of your community and be their

favorite customer, you call them up and say, "I have this book coming out. I'd like a bunch of copies to give away. Can I get them on launch day?" You

your friends will thank you. The bookstore will thank you. And I will thank you. >> A great pitch.

Incorruptible. Why good companies go bad and how great companies stay great. Eric Ree, thank you so much for being here. >> Hey, thank you, Lenny.

Appreciate you giving the chance to talk about it and congrats on all you're doing. >> Thanks, Eric. Bye, everyone. Thank you so much for listening.

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