Eric Ries on Financial Gravity and Building Companies That Stay Good
The Long Now Foundation
In a Long Now Talks conversation at San Francisco's Cowell Theater, Eric Ries, author of The Lean Startup, discussed his new book, Incorruptible: Why Good Companies Go Bad…and How Great Companies Stay Great. He opened with the claim that runs through the whole evening: "My view is that a for-profit company is one that maximizes human flourishing. That's what it means to make a profit." The question behind the book is why companies that start with different founders, missions, industries and eras so often end up in the same place, and what builders can do about it. Ries argues that a real, nameable force causes this, that working alternatives already exist, and that the people who build companies have more agency than they believe.
A Slow-Motion Tragedy Seen From the Front Row
Asked why he wrote the book and why now, Ries said it was never a project he wanted. It took years and he described the process as "very painful." He also said he did not expect the subject of corruption to become as topical as it has. The book grew out of his daily work. People still come to "the Lean Startup guy" for advice on starting companies, building them, making them more innovative and improving how they are managed. That work gave him a front-row view of enormous value creation, which he said he is proud of. It also showed him what he called the "dark underbelly" of the business.
More and more, Ries said, it felt like watching a slow-motion tragedy. Companies that had once been special ended up "boring," "indistinguishable," bureaucratic, or in some cases "downright malignant." Some founders were pushed out against their will. Others, like Frankenstein, could no longer command what they had made. At first this was personal rather than philosophical. He was trying to help specific people avoid this fate and felt he was "up against this invisible force that I couldn't name." He had believed management was the most powerful force in the universe and found out it was not. He described watching carefully designed management systems get deformed after a company went public, like time-lapse footage of something in a slow crusher, or an object falling into the gravity well of another planet.
His work inside large companies was frustrating in a different way. When he described the problem, people asked "What problem?" To them it was like gravity, simply how things are. Ries said he is "wired" to believe every problem can be solved once it is understood. So he set out to identify a force "more powerful than all of my rich and powerful friends combined," one that changes people without their noticing and destroys huge amounts of value on top of ecological damage.
The book itself was a last resort. For years he argued with founders one at a time, which he called "hand-to-hand combat," telling them to break the best practices everyone recommended. Eventually founders began to agree and then asked what they could read before raising the idea with a co-founder, board or lawyer. He found that answering "nothing" destroyed his credibility on the spot. Academic papers, single-company case studies and exhortational manifestos did not help anyone prepare for a board meeting. He also said writing was first of all a way to clarify his own thinking. He knew he was ready when he could predict every objection, including the ones investors raised. When a founder said "I talked to my investor," he could guess the reply: "He said it's probably too early to worry about that."
Violent Language and the Reduction of a Living Thing
The host pointed out how visceral the book's language is. Companies are "surgically deboned" or fed into a "meat grinder." Ries said the violent language fits because the system is violent. He, like many founders and builders who are "artists at heart," sees organizations as vital, living things. The current era of shareholder primacy says an organization is not alive at all and is only a financial instrument for maximizing shareholder returns. Ries calls reducing a living thing to a mechanical instrument a form of violence, and he said "something really precious is lost" when it happens.
He also called Incorruptible "kind of an old-fashioned book." It deliberately takes back words and ideas that he thinks earlier generations would have used easily, starting with "corruption" in the title. He said he avoided trendy terms: he writes "ethos" instead of "culture" and "fiduciary duties" instead of "stakeholders." The reason is that management writing usually stays on the visible surface: business models, strategy, culture, vision. Those things matter, he said, but he wanted to reach the forces that act on organizations whether anyone wants them to or not. To do that he borrowed metaphors from biology and physics.
Financial Gravity and the Collapsed Bridge
Ries offered a test as evidence of a hidden force. Take two public companies, remove the names from their press releases, and you will not be able to tell them apart. They come from the same crisis-communication consultants and say nothing. When very different companies all end up with the same values and behaviors, he reasoned, something must be pulling them there. He calls that force "financial gravity."
He explained the concept with a bridge. If a bridge collapses and an engineer says the cause was gravity, the answer is not wrong, but it is facile. The useful questions are whether the bridge was designed for its load, whether the materials were fatigued, and whether the metal had corroded. Studying how gravity stresses a structure is how engineers learn to build stronger ones. Ries described the book's goal the same way: to build an "architecture of institutional longevity."
In his account, the financial system keeps growing and has become a force of its own scale in an age of "total financialization of everything." The laws of financial gravity he works out in the book concern how financial systems pass values on to the people inside them without their awareness. He stressed that the particular values are not fixed. Today's system is "really hardwired for extraction and short-term thinking," but Ries says that is not a law of nature. It is a side effect of the system we built. Organizations operating in this hostile climate therefore have to be built unusually strong, like a spacecraft built for a planet with very high gravity.
Accountability, and the Exceptions Everyone Ignores
The host brought up Dan Davies's The Unaccountability Machine, which argues that complex systems and diffuse, opaque ownership produce "accountability sinks": outcomes no one wants and no one is responsible for. Ries said the idea is very close to his own. The book has a section called "Can a Superorganism Say I'm Sorry?" He asked whether anything in modern life is more ridiculous than a corporate apology. A customer service representative may truly be sorry while explaining a terrible policy, but it makes no difference because they have no power to change it.
Ries also partly disagreed with Davies. He said mechanisms for corporate accountability do exist. His evidence was the exceptions that ordinary people already know about. Ask people why companies go bad and they say it is inevitable wherever there is money, scale and greed. Then ask about Costco or Patagonia and they say those two are different. Almost every industry has well-known outliers, Ries said, but people treat them as "exceptions that prove the rule" and assume nobody could create a new one now.
His example was Vanguard. He recalled speaking with the firm's general counsel around its 50th anniversary. According to that account, Vanguard needed a special exemption from the SEC in 1975 because its structure was "too customer-centric" and not extractive enough, which made people reflexively suspicious. Ries asked whether anyone had applied for the same exemption in the fifty years since. The answer he said he got was no: "Who would copy Vanguard?"
Outliers That Outperform, and "Best Practices" That Destroy Value
Ries said we have to study the dark side to understand financial gravity. The first part of the book is titled "The Shape of the Abyss." But the outliers are important because they exist in the same "fallen environment" and face the same pressures, yet somehow resist them. He studied those companies and began using their techniques in his advising.
One story in the book is his work with Anthropic, where, he said, "we set up" an unusual governance structure called the Long-Term Benefit Trust. He said he claims no special credit for Anthropic's success and played "only a very tiny part." When investors called the structure new and risky, he pointed to the German optics company Zeiss, which he said has had that kind of structure since 1885. "Just cuz it's new to you doesn't mean that it's new," he said. He also noted the irony of self-described bold contrarians objecting that something was too new.
Ries said each kind of alternative structure has its own body of academic research, and his summary of that research is that these structures are "just flat out better." He listed longevity, financial performance, treatment of employees and environmental impact: "You name the metric, someone has studied it and found out that it's better." Researchers who study these structures tend to accept that nobody adopts them, while company builders have often never heard of them. Ries called this almost an "open secret" and an impossibility if markets really selected for value creation as we tell ourselves they do. The fact that these symptoms keep appearing tells him "something's up."
He went further on conventional governance. It took him years to accept that "most of the best practices we've been taught are value destroying," and he said this is supported by research, not just his opinion. Chapter nine has a chart listing best practices, the reason each is supposed to help, and the evidence that it does not. The practice of filling boards with independent directors is one example. Many stories in the book involve such boards deciding "for no apparent reason" to betray the company and sell it. His favorite detail: Enron was once named one of the five best boards in America because it had so many strong independent directors.
Concentric Circles of Agency, Starting With the Definition of Profit
The host described the book as a set of widening circles of leverage. It moves from a founder's commitment to mission, through culture, governance, aligned investors and supply-chain standards, and ends at civic infrastructure. Ries agreed and compared it to the Eames film Powers of Ten. He structured it this way because the underlying problem is a feeling of powerlessness, so he wanted to start with what people control most.
The first thing a person controls is the purpose of their own work. That exists "only between the ears," needs no one's permission, and does not even have to be shared. Ries said there is already "reams" of evidence that having a real purpose beyond financial returns is a competitive advantage. So the solutions part of the book begins by redefining profit. A leader can decide, without asking anyone, that a for-profit company is one that maximizes human flourishing.
Ries said the standard definition, revenue minus cost, does not hold up. He pointed to deferred liabilities, negative externalities and, above all, the idea that "you can consume a human life as an input factor of production and call that profit." Economics courses list these problems, he said, and then go back to the usual definition anyway. In his view, stating any purpose for an organization at all, even one as modest as making a high-quality product, improving customers' lives, or bringing "a little beauty into the world," makes you "a business revolutionary whether you know it or not," because the current business climate is so hostile to that statement.
He calls this the "builder's intuition" and connected it to Tim O'Reilly's phrase "create more value than you capture." There are better and worse ways to make money, and the good way creates new value and keeps part of it. Ries said some money-making methods celebrated today would have been crimes in his grandparents' time. He said share buybacks were illegal until about 30 years ago. When people tell him "you got to hand it to him" because a tactic made money, he answers that the danger comes precisely from the fact that it works.
Each technique in the book is meant to be useful by itself, so readers can go as far as they like, and together the techniques reinforce one another. The next circles cover the management system. Here he criticizes companies he calls "mission hopeful," which have lofty mission statements but a legal purpose that says something quite different. Then comes ethos, the problem of getting people to decide in line with the mission "when no manager is present," which he said can be done. After that come shareholders and boards, then alternative corporate forms, standards, and organizations that do more than resist gravity and actually use it to create positive externalities. Ries called that last part the most exciting and admitted it is not for everyone.
Novo Nordisk: A Nobel Laureate's Structure From the 1920s
Asked which case surprised him most, Ries noted that writing about longevity requires companies that have lasted. As a result, some early readers asked why there were no startup stories in the book, while others asked why there were only startup stories. Companies that are large today were "just two guys in a garage not that long ago."
His favorite is Novo Nordisk, which he identified as the maker of GLP-1 drugs. In his telling, the story begins with Marie Krogh, one of the first women to become a doctor in Denmark, who was diagnosed with diabetes when it was still fatal. She still went on the North American lecture tour of her husband, August Krogh, a Nobel laureate. At a dinner, a scientist told them about researchers in Canada who had just synthesized insulin. She persuaded her husband to visit the lab. After seeing the work, they decided to bring it to Denmark, not only to treat Marie but to treat many people.
Ries said the Kroghs believed the maker of a life-saving medicine should never face the temptation to choose between a fair price and "whatever I want." He said they anticipated Martin Shkreli long before his time. Their answer was to put a nonprofit foundation at the center, which Ries calls a "spiritual holding company" (spiritual in the sense of animating essence, not religion), dedicated to "science as a public trust," with a for-profit company as a subsidiary. The academic literature calls this an industrial foundation or steward ownership. Ries said the structure has lasted since the 1920s, through a public listing and every tactic that has ruined other brands. Private equity and similar approaches were turned away. He said the mission has produced more than $500 billion in shareholder value even though nonprofit trustees controlled it.
He said he now uses the story in meetings. When founders list the bankers, lawyers and VCs who designed their structure, he asks whether they are sure they are smarter than a Nobel laureate who worked this out from first principles in 1920 and saw it succeed.
Why the Book Avoids Policy, and Why Success Makes You a Target
The host, whose background is in antitrust, asked whether it works better for the state to impose measures such as the mandatory IP licensing of the trust-busting era, and noted how much a mandatory licensing regime for creative works used by LLMs could have solved. Ries said he had to answer carefully. He thinks the book's policy implications are obvious, so he chose not to address policy at all. In a polarized time, he said, a great deal has been written about what companies should be allowed to do, and almost nothing about what builders ought to want to do. Limiting himself to that question felt like "a superpower," because it lets builders act now while the policy debate goes on.
Capped margins come up often in the book. Ries pointed to a contradiction in business teaching. Students learn that higher margins are always better, and they also learn Jeff Bezos's line "your margin is my opportunity," which treats high margins as a liability that invites competitors.
He then described what he called his biggest realization. Founders are told to put off these "wacko" ideas until they have product-market fit and leverage. Ries's rule in the book is that "it's always too early until it's too late." Success does not simply bring power, he argued, because the more valuable something becomes, the more attractive a target it is. Founders are building up a huge store of what he considers the most underrated and valuable asset in business, trustworthiness, and leaving it "lying on the floor" with no doors or locks, because accounting cannot even measure it. When they lose control of the company, it is because they built something worth stealing.
AI Companies and the Governance Question
The host called AI companies perhaps the most important design challenge right now. OpenAI and Anthropic both tried to protect themselves from financial gravity. The structure has held up fairly well at Anthropic, the host said, though huge capital needs can distort a cap table, while OpenAI's structure went through a public upheaval. Ries answered about Anthropic with "so far, so good," but said the pressure is "gale force," a level of "insanity" with no precedent, and mentioned a report that the company had passed $30 billion in revenue. He said that on the day Anthropic "stood up to the Pentagon and said no to that contract," someone sent him a video of chalk messages outside its San Francisco office thanking the company. That is not what chalk outside a tech company usually means these days, he joked.
Ries said he has advised companies through the social media era and others, "somehow" made no money in Bitcoin, and had long been "an eccentric collector of obscure governance ideas." Before the pandemic he carried a 52-card deck of alternative structures to show founders.
In his view, AI is different because founders understood from the start that it holds great promise and great danger together. He described a Vatican conference on AI governance, where he sat about 20 feet from the Last Supper on a panel with OpenAI, Anthropic, Google, Meta, Palantir, Cohere and others. He said he noticed that every other panelist had been told by their communications team not to make news, so he was the only one who could speak freely. He asked the panel to acknowledge that none of their companies had standard governance, because handing this technology to a "profit-maximizing, paperclip-maximizing, sociopathic organization" would be almost immoral. Even founders he considers "evil," he said, found that too much. He thinks many AI founders watched what happened with social media and did not want a repeat, and he added that "now we're seeing it happen."
Because Anthropic created and publicized the Long-Term Benefit Trust, Ries said, it inadvertently proved that such structures can raise money, which weakened a common objection. He believes AI has also helped companies in other fields see the risks of their own technology. In one story from the book, a founder insisted he was not building "autonomous murder robots" and could not understand why people kept asking. Ries told him a promise did not reassure him much, and they talked about what would actually earn trust.
Mission Transmission in an AI-Run Organization
An audience member asked how to make an organization run mostly by AI with few people incorruptible. Ries said the answer is the same as for any organization, because a human is always involved somewhere. He added that trying to replace people entirely with AI is both wrong and not workable with current technology, and that an economy of AI agents serving other AI agents is a category mistake: you could turn the planet into the Sims or a titanium cube, but to what end?
He pointed to the long-known pattern in software that an organization's values pass automatically into what it builds, much as the org chart shows up in the software architecture. AI alignment, he said, is at bottom a governance problem, and he asks "who's aligning the aligners?" If the people doing alignment cannot agree on the purpose of their work, the result is incoherence. He cited an 18,000-word New Yorker profile of Sam Altman published that week as a public example of that idea falling apart. The deeper question for him is how to give an organization coherent values in the first place. If it has them, any software it builds or uses will extend them. He calls this "mission transmission" and said it rests on real operating procedures, not metaphor, and applies equally to one employee with a thousand agents or the reverse.
Lean Startup, Velocity, and One Admitted Mistake
Another audience member asked whether Lean Startup's focus on speed makes corruption more likely. Ries said the method has "held up pretty well." Interviewers keep asking whether he feels vindicated. In 2011 he predicted that the means of production would become more democratized, shortening cycle times in every industry, and that uncertainty would rise in every business plan. He said both have increased steadily for fifteen years. The common misunderstanding, he said, is that Lean Startup creates velocity. In fact it is a way of coping with change that is already accelerating.
He also rejected the idea that experimentation conflicts with fixed principles. Experimentation depends on them. If you commit to the scientific method, you do not then run an experiment on using astrology. He said he thought it was clear that Lean Startup stood for long-term thinking, humanistic values about improving the world, and scientific values about finding and sharing truth.
He then described his mistake, which he learned about from the Anakin and Padmé meme, where Anakin says "I'm going to change the world" and Padmé asks, "For the better, right?" The joke got less funny to him over time, until he checked his own book. The introduction to The Lean Startup ends by saying the next generation of entrepreneurs will have the tools "to change the world," period. He had assumed everyone agreed on the reason. "I did get that 100% wrong," he said, and he would fix it first in any new edition.
Costco, Private Regulation, and the Blurring of Sectors
The host cited a figure from the book: Costco controls about 9% of grocery sales but performs about 30% of the nation's food safety audits. Ries said Costco affects hundreds of millions of Americans who have never shopped there. Its standards exceed federal requirements, it audits more often, and it follows what another company calls a "no cherry-picking rule." A supplier's whole facility must pass, not only the product lines that go to Costco. Ries said Costco does almost as many inspections a year as the FDA, that FDA numbers had been falling since those statistics came out, and that newer data is unavailable because publication stopped, which he mocked sarcastically. He sees this as one of many cases where private actors take on the cost of positive externalities with no immediate benefit to themselves.
On the public/private question, Ries said his view is nuanced, partly because he spent years trying to build a stock exchange. Exchanges are self-regulatory organizations, private companies with a grant of sovereign power from the federal government, and according to Ries they have sovereign immunity from some lawsuits. For them the public/private split does not really apply. He said earlier generations kept separate spheres: public, private, civic, sports, and institutions like the Elks Lodge that he could never categorize as a child. Those spheres have declined as everything became financialized. He contrasted today's shrug at gambling in stadiums with Kenesaw Mountain Landis's crackdown after the Black Sox scandal. Since that separation will not return, he argued, new categories are needed, and his definition of profit supplies them. Tax status is not an organization's most basic trait. By his measure, the Smithsonian and Goodwill are "massively for-profit," while Philip Morris is "the ultimate not-for-profit," because he says its roughly $9 billion in net income is dwarfed by about $600 billion a year in negative externalities to the health system. (His father is a pulmonologist, he added.)
Shareholder Primacy as a Young, Fading Normative Consensus
The host mentioned impact-weighted accounting efforts, including one from Harvard, and studies suggesting nearly every company would be unprofitable if externalities were counted. Ries said that objection proves his point. The world's condition shows these firms have become value-destroying extraction machines. That explains why food gets worse after private equity buys a restaurant and why successful firms fail without a clear reason, which he calls "unusual failures." Such activity should be called corruption, not profit, he said.
He then said he believes the era of shareholder primacy "is already over," even though it remains the dominant idea. Young people think it is "completely insane," he said, and it has become "extraction primacy" that no longer even serves investors. He sees builders' responsibility as stating a positive new doctrine rather than only criticizing the old one, and he presents the book as an attempt to identify new best practices and their philosophical basis.
When the host noted that modern ideas of profit are only 100 to 150 years old and asked how they might change over the next century, Ries went back to history. His grandparents' generation lived through even darker times and then built most of the civic institutions that govern modern life. He compared today to the Star Trek planet whose inhabitants no longer know how to run the machines they depend on. Readers close to New York and Washington often tell him change is too hard. He replies that they admit the system is unrecognizable from their grandparents' day, so it could be unrecognizable again by their grandchildren's.
He called shareholder primacy "a very young idea," younger than most trees, not a pillar of capitalism, and something Adam Smith would have found "inane." He said it has never been put to a popular vote or passed by any legislature. It is a "normative consensus" set by a small group of lawyers, judges, academics and board members. The first step to breaking it, he said, is simply to say out loud that you disagree. When the host called it a misreading of the law, Ries said it binds every company, legal scholars cannot quite explain how it is and is not law at once, and board members are routinely told it is their fiduciary duty. So he treats it as law, which can be changed without new legislation.
He criticized reformers for splitting into factions: double, triple and quadruple bottom lines, "good profits" and "eco profits," and B Corp, steward ownership and employee ownership advocates who do not get along. Milton Friedman, he noted, did not propose a new category of "extractive exploitative company." He stated that the purpose of business is to maximize profits, and people found that persuasive. When test readers commented "you can't do that" on his redefinition of profit, Ries asked by whose authority, pointing out that no two companies' financial statements define profit the same way.
"You Are Traffic": The Question to Ask in a Job Interview
The host closed by noting that the book calls the "secret architect" of the economic system not a cabal but everyone in the room, and asked what people should do. Ries said he knew some would expect a disappointing "recycle to fix climate change" answer after an hour on systemic problems, and said that was not what he meant.
His founder habit, he said, is to tell every story from the company's side: mission-driven firms get better talent, more loyal customers and better long-term returns. The later chapters turn those same stories around. Companies are "addicts," hooked on quarterly results, and they are obsessed with the individual. Every action a person takes is "somebody's bonus metric." He said he has seen companies calculate "willingness to pay" in fine detail, testing whether customers will still buy if a product gets 3%, 4% or 5% worse and more expensive, and whether employees will stay under worse treatment. So individual choices about where to shop, work and invest carry real force, with no collective action, secret meetings or courage required.
He told of someone who said they were not courageous. His advice: at the end of a job interview, when asked for questions, ask whether the company is mission-driven. When they say yes, ask how they know. You will hear about free beer, T-shirts and volunteering, but not that the mission is written into the corporate charter. Ask whether it is. Interviewers are expected to answer every candidate question, so the question moves up the chain, and Ries said he has seen such questions reach the boardroom. Charters are public, he noted, and "spoiler alert, it's not in the charter." Asking innocently exposes the gap between a lofty mission statement and a legal purpose of maximizing shareholder value. One person asking may change nothing, he admitted, but two would worry the company, and ten would do much more, "no one had to have any courage."
The book's claims about mission-driven companies can therefore be read three ways, he said: as advice for building a company, as a guide to where to work, as a shopping guide, and, through retirement savings, as an investment guide. The last chapter is titled "You Are Traffic." You are not stuck in traffic; you are the traffic, creating the gravitational field that seems to hold you back. He called this "structuration": organizations shape people's lives and sense of what is possible, and people shape them in return. Because individuals hold what companies most crave, Ries ended with simple advice: "be picky."
My view is that a for-profit company is one that maximizes human flourishing. That's what it means to make a profit.
Hi everyone. I couldn't actually imagine a better conversation for us to be engaging with together tonight because Eric's work has the sort of brass tacks and the decades of experience to bring to these questions of how to make and remake our systems around institutional design questions that sometimes are highly technical but are the real blueprint for how we might reimagine our institutions of tomorrow so that they actually become incorruptible. Eric's work is this incantation to essentially build incorruptible institutions that will last decades and that our ancestors are going to be proud of us for building. So, excited to be in conversation with him tonight.
Hi. Welcome, Eric.
Thank you.
Okay, so the last time Eric was here was 6 years ago, our last Long Now talk right before we shut down for COVID. I remember it well. Yes. And you say that that's sort of emblazoned in your mind, actually.
That was my last event also before... I mean, it was really right before the pandemic shut everything down. So, yes, I have it... It's nostalgia-tinted in my mind as a very special night. So.
Well, we're so glad to have you back with us. So, I'm going to start with a little bit of a lob. I feel so fortunate that I was a pre-reader on your incredible book along with hundreds of other people. I can't claim, you know, that I'm special. But, I'd love for you to orient our audience tonight by just giving a sense of, you know, why this book, why now, why, you know, after the six years that have passed since you've last been here, why did you feel it was important to bring this into the world in this moment?
Yeah, thanks and thanks for having me. It's always a pleasure to be with Long Now. Yeah, this book has been many years in the making and it was very difficult to write. Took a really long time. It was very painful. So, it wasn't like I had the thought, "Oh, that'll be fun to write a book about corruption." And I didn't anticipate it becoming topically relevant in the way that it has. I don't have that kind of timing or prescience, unfortunately.
But, this has been like the natural outgrowth of my other work. My daily practice is still people come to me for advice starting companies, building companies, making them more innovative, improving their management system. That's the privilege, I guess, of being the Lean Startup guy.
And so, for many years I've had the privilege of getting to help people, usually in a very small way, build these incredible companies and create all this value and become incredibly wealthy and go from obscurity to becoming movers and shakers in the world. So, I've had a front-row seat at a lot of value creation, for which I'm very proud. I think it's wonderful. And I've also seen the dark underbelly of this business.
And more and more and more I felt like I was watching a slow-motion tragedy. These companies that used to be so special all wind up in the same really boring indistinguishable place. Some of them like downright malignant, others just bureaucratic, as if that was okay. And others where the founder, the leader utterly lost control of the company either because they got kicked out against their will or just because they were like Frankenstein and his monster, no longer able to command or control the thing that they had made.
And so, that wasn't like... Now I can talk about this in a philosophical way as this global societal problem. But, at the time, as it started to happen to me, it was very personal. It was just I'm trying to help people avoid this fate from happening. And I felt like I was up against this invisible force that I couldn't name. I thought management was the most powerful force in the universe. And turns out it isn't, you know? Who knew? We would create these incredible management systems, sometimes in a startup, and we would take it public and build this incredible thing and then we would watch it be deformed like one of those time-lapse videos of something being crushed in a slow-motion crusher or, you know, falling into the gravity well of another planetary body.
And on the other hand, I also had a front-row seat. I did a lot of work in very large companies helping them transform and become more innovative. And it was maddening because when I would talk to people about the problem they would be like, "What problem? This is just how it is. Like gravity's not a problem. It's just the thing that pulls you down to the earth. Everybody knows that." But I don't know. I'm wired to be like, "No, every problem can be solved. We have to first understand it."
And so, this was a long time coming for me to try to figure out what is this force that is more powerful than all of my rich and powerful friends combined, that seems to change them without them even necessarily having a conscious awareness that the change has happened. And at the same time is causing immense and catastrophic value destruction on top of the ecological catastrophe and these other problems, too.
So, that's how it started for me, as like I need a practical solution that I can help people get out of this bind. And then after a while, you know, it's kind of like hand-to-hand combat. You know, you talk to one founder at a time, one company at a time and you're like, "Hey, I think you should do something different. I think you should change some of your business practices. You should violate the best practices that everyone is telling you are the best." And you get better at it. You know, slowly over time you start to get people being like, "Oh, yeah, that sounds interesting. I think I'll try that." And eventually you reach a stage where people start saying, "That sounds like a great idea. I'm going to go talk to my co-founder or my board or my lawyer about it. What else has been written on this topic that I can read to prepare for that meeting?"
And just pro tip, you don't want to say nothing in a situation like this. Your credibility instantly evaporates. They're like, "Nothing? That can't be... Oh, you had me. I was doing fine, but nothing? Surely something has been written." And so, you know, I tried everything I could think of to avoid having to write this book. So, I was like, you know, you could read these incredible academic papers. Huh? There's these incredible case studies written about these individual companies. There's an endless number of manifestos that will exhort you to do the right thing. Would you find that helpful? For your meeting with your board? And the answer is no. And so, I was like, oh god, it's happening again.
But I think this is what is going to be required. And of course, you know, as a lot of authors have said about this, writing is really first and foremost for your own sanity, to try to understand and give name to and work out this stuff. So, my own thinking improved a lot through the course of writing the book, to the point where I got to that really special point when you're trying to advocate for a new idea. You want to get to a level of mastery of it where everyone asks you the same questions. Every company's like, but what about this? And you're like, well, but what about that? Yeah. Oh, good, I know that one. Like, oh, let me now give you a pre-canned, prefabricated, perfectly attuned answer for the objection that you have.
And then I started to get not just good at the questions that founders would ask me. They'd be like, well, I talked to my investor. And I'm like, let me guess. He said it's probably too early to worry about that. And they're like, how did you know? Yeah. So, you get to really deeply understand a problem. And that to me is like, okay, now it's time for a book.
Well, and I want to talk about that process of finding clarity and also finding clarity in languaging what you're coming to realize about the system, because I found in your book, on the one hand, you use a lot of very visceral language to describe what's happening to companies. You say companies are getting surgically deboned or that it's like they're entering a meat grinder, you know, these very sort of violent... Yeah, these are sort of violent analogies. So, I want you to talk about that. And I also want you to talk about... you propose in your book this notion of financial gravity being this kind of energy, this sort of dark matter, if you will, of our systems that's always present, that is drawing certain outcomes out of the system in ways that we don't even realize. And so I want you to talk us through that concept and how you gave language to what you are seeing companies experience.
Yeah, there is a lot of very violent language in the book because this is a very violent system. I really see organizations, as I think a lot of people who are founders or builders at heart, artists at heart, we see organizations as like vital living things.
And so what... Well, we live in the era of what's called shareholder primacy, which says that an organization is actually, psych, not a living thing at all, actually just a financial instrument for maximizing returns for shareholders. And so this is a form of violence, to reduce a living thing into this very material, very mechanical thing. Something really precious is lost when we do this. And I think it's important... A big part of the book for me was, it's kind of an old-fashioned book, trying to reclaim language and concepts that I think our grandparents would have been much more comfortable applying to the situation, starting within the title with the word corruption.
When we talk about management, we talk about companies, we tend to focus on the surface characteristics, things that... and they're not unimportant, but things like business models, strategy, culture, even vision. These are the things that we can see and control. And I wanted to get at, well, what are the underlying forces that act on organizations whether you want them to or not. And so I borrowed a lot of metaphors from biology and from physics to try to talk about what is going on. Like why do all these companies wind up in the same pathetic place when they started with different founders in different eras, different countries with different cultures, different industries, different missions? Why are they all the same lame end state?
If I take two public companies and I erase the names from their press releases and show them to you, you won't be able to tell me which one. We were produced by the same crisis communication consultants, okay? Like it's the same problem that says nothing. We get used to that. But the very fact that everyone winds up in the same place, to me, it was evidence that there must be a force behind the scenes aligning them to that particular set of values, that particular set of behaviors.
And so I call the force financial gravity, by my metaphor to the thing that pulls us all down to the ground. And in the book I give the analogy that if you see a bridge collapse, if someone says, "Well, why did the bridge collapse?" You ask an engineer, "You saw this bridge design collapsed. Why did it collapse?" You say, "Oh, gravity." That's not a very good answer. It's like, "Well, it's not untrue. It's facile, but you know, I guess that's true, but is that really all we can say about it?" No, we can say, "Well, hold on. Was it properly designed for the load it was meant to carry? How about the materials? Were they fatigued? Had there been corrosion on the metal?" All these questions we can ask about the design of the bridge. And then by studying why it collapsed, yes, in some ways gravity is the proximate cause, but by seeing how that pressure and stress affect the structure, we can learn to build stronger and better structures.
And that to me is the goal of the book, to create what I call the architecture of institutional longevity. What can we do to deal with the fact that we have built a financial system that has gotten ever, ever larger. We live, you know, in the era of total financialization of everything. And that thing has a scale and a size all its own. And the laws of financial gravity that I work out in the book have to do with how financial systems transmit values unconsciously to the people who live in them. And what's interesting about that is it's not about particular values. Like we have a financial system that is really hardwired for extraction and short-term thinking. But that's not a law of nature. That's just a side effect of the kind of system that we have built today. So if we're going to build organizations that have to exist in this very hostile climate, they better be geared up to be very strong to resist all that pressure, like being on a planetary body where the gravity is too high. That's not inconceivable, but you better bring strong materials with you when you build your spacecraft. That's kind of the idea of the book.
There's another book that I really enjoy called The Unaccountability Machine, written by Dan Davies, and his diagnosis is essentially that our systems have now become so complex and, you know, as you say, financial ownership is so diffuse, it goes through layers and layers of ownership, they're often very opaque, and because of the complexity of our systems, we have these accountability sinks where it's very difficult to hold anyone responsible really for what the system itself is producing. And not only that, but that the system itself is producing these emergent outcomes that nobody really wants, but no one's responsible for fixing. And I'm curious how his diagnosis threads with how you're articulating the notion of financial gravity.
Yeah, yeah, it's a very similar idea. The problem of accountability comes up a lot in the book because, you know, if you believe that an organization is a superorganism... I have a section of the book called Can a Superorganism Say I'm Sorry? Because is there anything more ridiculous in modern life than a corporate apology?
Like we all know they don't mean it. Like what is the point of issuing this? Like you're talking to a customer service rep on the phone and they're explaining some completely horrible evil policy to you, and they're like, "I'm very sorry." Are you? They may in fact be very sorry, but what does that matter? They're not empowered to do anything about it.
And yet, contra Davies, I think, we do have mechanisms for corporate accountability, actually. And we can get into the history of how we got here if people are interested. But one thing that's really interesting is, although our modern life is full of these complexities and we have all these companies that have spiraled out of control and all this bad stuff, if you ask people why does it happen, normal people, not governance junkies like us, normal people, they'll be like, well, it's just inevitable I guess, you know. It's like why do things fall down? Because of gravity. Yeah, when there's a lot of money and greed and scale and size, these things just happen. Bureaucracy and these things just happen. But then you're like, oh really? Is that true for every organization you interact with in your life? And they'll be like, yeah, it's inevitable. I just said it was inevitable.
Wait, wait, but what about Costco? They're like, oh yeah, not Costco. Oh, isn't that interesting? And you're like, what about Patagonia? No, no, not them. They're great. And it's like, well, how is that possible?
And it turns out that in almost every industry we have these outlier exceptions that everybody knows, and they're just exceptions. They're the exceptions that prove the rule. We pass right by them not even noticing that they're there.
But if you press, why don't we make a new one of those? Everyone you talk to will be like, oh, we can't do that. That's from the past. That's how we used to do stuff like that. Like I remember meeting one of the executives at Vanguard. Vanguard has a
super weird structure. A lot of you have a Vanguard mutual fund. Probably don't even realize how weird their structure is. And I remember talking to their general counsel and he was telling me they were celebrating their 50th anniversary. I think this year, maybe last year. And he was like, yeah, well, it was so weird that we had to get a special exemption from the SEC for permission to form it cuz it's kind of too customer-centric. It's not extractive enough and people were reflexively very suspicious about it. But it was only 1975, so it wasn't yet like illegal to do that. It was like just suspicious. So, they got this exception and I asked him in the 50 years since, has anyone else applied for that exception? He's like, oh, no. Who would copy Vanguard? Like certainly not.
And there's just a million things like this where we have the evidence right in front of us that there's some alternative way, but we don't feel empowered to make those things anymore. So, I think it's important to study the negative, like the downer, feeding the meat grinder, bad stuff. We have to understand where that comes from, the financial gravity. It can be kind of depressing. The first part of the book is called the shape of the abyss, so you know where my head space was at when I wrote it. But like we have to confront how evil and terrible the situation is. It's very dark.
But, we also have these outlier examples that prove that something else is possible. And what's so interesting to me is these outlier companies exist in today's fallen environment. Like they're facing the same pressure, the same gravity, the same whatever you say is the reason why it's just so, these companies also face and are somehow immune. So, I made a study of those companies and started to incorporate techniques from those companies into my own practice of advising people. And it was like utterly fascinating to watch because
I remember like one of the stories in the book is about how I work with Anthropic, the AI company. And we set up a very unusual governance structure by modern standards. It's called the long-term benefit trust, which we can talk about if you're interested. And again, I don't take any special credit for their success, obviously. I played only a very tiny part. But, when we talked to investors about it, and they're like, "This sounds really weird and new. You know, are you sure you want to do something new and different?" It's like, "Oh, I thought you were a bold contrarian. Really? But you want to do this is bold and new is the problem?" And I was like, "Well, actually, this structure, like the German optics company Zeiss, anyone have Zeiss lenses in your glasses? Zeiss has had this structure since 1885. So, it's not that new, actually. You know, just cuz it's new to you doesn't mean that it's new."
And that's what's so interesting is that not only do we have these exceptions, each type of exception has its own body of academic research that shows that these alternative structures, even though they violate every modern best practice, are better. Just I'll summarize for you, just better. We'll get into the details if you want. They're just flat out better. They have better longevity, they have better financial performance, they treat their employees better, they're better for the environment. You name the metric, someone has studied it and found out that it's better. And if you talk to the researchers who study these things and you say like does it ever bother you that, you know, you have this better thing and nobody does it? They're like, "Oh, I don't know. That's my lot in life. I study this thing that nobody does." But it's absurd and then you get to company builders and they've never heard of it. So how can it be known, some of these things known for hundreds of years to be better, and the people making new organizations have never heard of it? That to me seems like almost like an open secret, an impossibility, if markets were efficient, if they were really about selecting for value creation, if the myth we tell ourselves about what our financial system is really doing were true, then we wouldn't see any of these symptoms. Yet we see them every day, so something's up.
That's what I think the true power of this book is in, is in daylighting these examples and, you know, I've had a number of friends that have worked in alternative corporate governance because that's the company I keep. Yeah, it's just so exciting to see, you know, you with your incredible network and platform, yeah, daylighting these alternatives. And I wanted to say the book sort of traces these almost widening circles of leverage. You start with a founder's dedication to mission and vision and often they feel like that's going to be enough to carry them through the, you know, the meat grinder or the financial gravity, that their kind of sheer force of will alone is going to help them withstand these pressures. And of course you say no, that's not enough, that you need to go through almost these fractal levels of design, of institutional design, including organizational culture, different governance mechanisms, finding aligned investors. Even then, you sort of lead towards the end of the book looking at standard setting, so using your supply chain power once you've actually gained leverage as an institution, and ultimately building civic infrastructure. So I wanted you to just help trace for us how you set up the book that way, you kind of go in these concentric circles, and how you see them fitting together.
That is how the book is constructed, like almost like a zooming out. If you remember that old Eames video, Powers of 10. Kind of how like you start as like a tiny speck, and then you just zoom out, zoom out, zoom out, zoom out till you encompass more and more and more of the world. Because ultimately part of the issue here is our feeling of lack of agency. Everyone just tells me this is too hard, can't be done, everyone knows that it's impossible. Blah, blah, blah. We've been hearing that a long time. And so I wanted to start with the things we have the most agency over.
So, whatever else you do you can decide what is the purpose of your own work. That's a fact that exists only between the ears. No one has any say over that, and no one can influence or control. You don't even have to tell anybody what the purpose is. It's your own private secret if you want it to be. And it turns out just at that level we have evidence that having an actual purpose, not just making financial returns, already is a source of competitive advantage. And if you've never looked at any of this data, there's like reams of it, so we can probably talk about the mechanics of how this works and what it is. So in the book I start with, when it gets into solutions, talking about the definition of what it means to make a profit. Because that's something that we can just choose for ourselves. We don't need anyone's permission to do it. We don't even need our employees' consent. We as the leader can just decide that my view is that a for-profit company is one that maximizes human flourishing. That's what it means to make a profit. And our like formal definition that we carry around in our heads doesn't make very much sense, the one that's about revenue minus cost. And in the book I go through all the problems that I'm sure many of you are familiar with, with deferred liabilities and negative externalities. And more importantly, the idea that you can consume a human life as an input factor of production and call that profit. These are absurdities. And we all know it. If you take an econ class, they'll tell you all these problems, but then it'll be like, "Never mind. Anyway, back to our regular conventional definition."
And yet we have the evidence. We have the evidence that if you commit yourself to some higher purpose, and I know that sounds as like uh-oh, what is he going to talk about? But even if your purpose is as simple as I want to make a high-quality product. I want to make my customers' lives a little bit better. I want to bring a little beauty into the world. Let alone if you want to solve climate change or some other mega problem. The second you say that the purpose of an organization is to do any particular thing at all, you are a business revolutionary whether you know it or not. Because we live in a business climate that is utterly hostile to that simple statement. So that's the beginning. We have to like reclaim what I call the builder's intuition. Tim O'Reilly calls this create more value than you capture. Which is that there are better and worse ways to make money. And the good one is the one where you create net new value in the world and capture some of it for yourself.
Other ways of making money that we valorize and glamorize today, our grandparents and great-grandparents would have seen them not only as morally dubious, but they would have been crimes. Not that long ago. Like share buybacks were illegal until like 30 years ago. And I could list a bunch of other things like that that would have been actual bona fide crimes. Yet we're now celebrating, and yet I'm constantly being told, "Well, you got to hand it to him. At least it works. Made a lot of money. Got to hand it to him." Like, you know what? No, we don't got to hand it to him. Actually, the reason it's dangerous is because it works. That's why we don't do it. So anyway, I feel like our grandparents had a wisdom that we seem to have forgotten.
So we start with the stuff we have complete and total control over and then we gradually make the problem a little bit more difficult. And I kind of felt like people can walk this road with me in this book as long as they want. They can go all the way to the end if they have the courage, but if they just want to take a few steps, every technique in the book stands alone as a useful thing you can do. And yet together they have a symbiotic power.
So yes, then we talk about the management system. The fact that we have companies that claim to be mission-driven, but I would call them more like mission hopeful. Like they hope that they do some good sometime in the future maybe. You know, they have this lofty mission statement but they're committed to a legal purpose that is very different. Anyway, there's all these problems, and as we widen further, we get into what are kind of the cultural issues. I tried really hard not to use trendy modern words like culture and stakeholder. All word choices in the book, I tried to be as old fashioned as I could. We talk about fiduciary duties not stakeholders and talk about ethos not culture. But in this domain, we have to deal with the fact that if we want to have institutional longevity, you have to be prepared for people to make decisions in line with the mission when no manager is present. How can you control such a thing? Well, it can be done.
And then we zoom out even further, we get into issues of shareholders and boards. So many of the stories in the company are just a board full of independent directors just for no apparent reason deciding to betray the company and sell it out. That's like a recurring problem that happens all the time and yet it's considered a best practice to have a board full of independent directors. One of my favorite tidbits I learned in the book is that Enron was named one of the five best boards in America. Because it had all these awesome independent directors. So a lot of the difficulty in the book is just to accept, it was hard for me, it took me years to accept this, that most of the best practices we've been taught are value destroying. And that's not just like my personal opinion but we have reams and reams of research to this point. There's a whole chart in chapter nine that's literally just best practices that destroy value. Practice, the reason it's supposed to be good, what the evidence says, and we just do it over and over and over and over again.
And then as we get further and further out there, yeah, then we get into alternative corporate forms, the power of standards and the ability to create organizations that are not just resisting the force of gravity but using it to create positive externalities. And I think that is actually the most exciting part of the book, but I recognize this is not for everybody.
I was curious, when you were doing the process of writing, what was one case study or example company that surprised you and that was exciting to include?
Gosh, there's so many. That is really hard to choose because part of the fun of this book was I got to learn a lot of new stories that I didn't know, in part of the research, because if you want to write about institutional longevity, you can't only write about trendy new companies that have been around for 2 minutes. You have to talk about companies that have been around for a while, which has led to, interestingly, among early readers, we've had people who are like, why are there no startup stories in here? And other people who are like, why are there only startup stories in here? And it's like, yeah, well, we have to talk about startups that are still around. So, now they're really big, but actually you got to remember that this was just two guys in a garage not that long ago.
You know, one of my favorite stories in the book is the story of Novo Nordisk. Do you people know Novo Nordisk, the makers of GLP-1? And it's just a crazy story cuz they've been around for more than 100 years and they've been owned by a nonprofit foundation this whole time, even though they're a publicly listed company on the New York Stock Exchange. And the story begins when one of the first women to become a doctor in Denmark got diagnosed with diabetes at a time when that was a fatal diagnosis.
Her husband was a Nobel laureate. And despite her fatal diagnosis, she agreed to go with him on a tour, his like lecture tour of North America from Denmark, and they came to North America. They're going on lecturing and one night at dinner, one of the scientists at their table told them about these crazy scientists in Canada who had just synthesized insulin for the first time. Could be a cure for diabetes. And so she convinces her husband that they should go visit this laboratory in Canada. They do. They see the technology with their own eyes and they're like, we've got to bring this technology back to Denmark, not just to cure Marie, but to cure many, many people. This could end a fatal illness once and for all.
And they make an agreement with the Canadians. They're like, look, we don't believe it's fundamentally right for the manufacturer of a life-saving medicine to ever have the temptation to be corrupted as follows. I have your life-saving medicine. I could charge you a fair price for it or I could charge you whatever I want. So like way ahead of Martin Shkreli, they knew what was coming. Okay, they had tremendous foresight that that was a really dangerous and evil thing. So they're like, and the solution to them was super obvious. Well, we'll create a non-profit foundation to put at the center, what I call a spiritual holding company. Not a religious thing. The spirit, the animating spirit or essence of this thing will be science as a public trust. And around that we will build a subsidiary that is a for-profit company. So it's called an industrial foundation or steward ownership in the academic literature.
And they have put that structure in place in the 1920s and it has endured all the way till now. Like I said, it is a multi-hundred billion-dollar company. It has gone public. It has had all the crazy stuff, and we can tell these stories if you want cuz they're really wild. The crazy stuff that's destroyed all your favorite brands and all the companies you know that have gone bad. People have tried all that same stuff at Novo Nordisk and it just doesn't work. They're just like, "No, thank you. Thanks for coming by, but no, we won't sell to private equity or whatever crazy thing you want us to
do. We have a mission to do this thing of science as a public trust. That mission has created literally more than 500 billion dollars of shareholder value. Even though it was done by non-profit trustees.
Anyway, I like this story so much because when people tell me about their corporate structure, then I'm like, "Who advised you?" And they're like, "I got this great banker. I got this great lawyer. I got this great VC. I got all these super smart people." I get to be like, "Oh yeah, that sounds great, but are you sure that you're smarter than a Nobel laureate?" Because before you get all excited about that, why don't you go study what these guys figured out? In 1920, again, it's not some recent thing. They worked this out from first principles and it manifestly worked.
So what's so great about our best practice that we came up with five minutes ago? You know, I don't really understand the appeal. So that was really fun to get those kinds of stories. They're not just fun stories to read, but they're super practical, useful stories to use in a meeting. Cuz I could just tell that story and be like, "Now, what were you saying about how it can't possibly work?" You know, Marie and August Krogh would like a word.
That's interesting because in that story a company is choosing essentially to open source or to cap its own profit margins on something. There's also, you know, I come from an antitrust background and there's precedent in the past, in the trust-busting era, that the government imposed mandatory licensing of IP.
Oh yeah, obviously. And so I'm curious, do you have an opinion on whether it's more effective to come from the state to do mandatory, you know, kind of like open source and or open— How much better off we would be right now if we had mandatory licensing of creative works for LLMs, right? Yeah, anyway. That would solve 25 different problems at once.
Okay, so I think I have to be careful how I answer this question. I think the policy implications of this book are quite obvious. So I decided not to spell them out. The book does not address policy questions directly at all. Because I feel like in our hyper-polarized age we have become obsessed with the question of what companies should and should not be allowed to do. Which is a very important question. I'm not saying we don't need to talk about that, but I feel like plenty of ink has been spilled about that. And comparatively little or maybe even no ink spilled over the kind of old-fashioned question about what we as company builders ought to want to do.
And when I opened up that space for myself to just say I'm going to write a book about what we ought to want to do. What is actually value maximizing? What in fact is profit maximizing as I define it? To me it gave me like a superpower. To be like, okay, well in the meantime while the world is debating this policy, what can we do today, right now, to build an organization that does the right thing? And take capped margins. It's funny you mentioned that because capped margins come up a lot in the book. Margin is a really interesting economic concept because generally speaking we teach in business schools and just in general in business that more is better. So, higher margins are better than lower margins. Everyone knows that higher margins are better than lower margins, right? The more margin you have, the higher your stock price will be, the more power you will have, the more freedom you will have, the more every good thing you will have. But, we also in a different class teach people Jeff Bezos' dictum that your margin is my opportunity. So, how can both things be true? Jeff Bezos would say having an excessively high margin is a corporate liability. It opens up the space for competitors to enter. So, I feel like there's these contradictions lying around everywhere in what we teach.
And the core idea, this blew my mind when it occurred to me, and maybe you'll find it mind-numbingly obvious because I feel like in retrospect it was super obvious, but I lived the majority of my life without ever noticing it, is that we teach people that success will give you power. So, when you talk to someone about doing one of these wacko things that Eric's suggesting, they'll be like, "Oh, that's so nice, but you know, why don't you wait and get product market fit first. Have a bunch of success, have the leverage, and then once you have the leverage, you can make everything just the way that you want it." And we call it, "Oh, okay, good. I can put it off till later." Well, one of the ideas in the book is that it's always too early until it's too late. So, don't recommend you follow that advice.
But, the reason eluded me for a long time, and it finally occurred to me, the problem is that the more successful you are, the more valuable you are as a target. So, if you create something really valuable, have you met human nature? Are you familiar with it? People will try to steal it from you. And we are teaching a whole generation of people to build these really trustworthy, really beautiful organizations. And they're building this massive vault of the most underrated resource on the planet, trustworthiness, the most valuable asset in business. And they're just leaving it lying on the floor everywhere for anyone to just grab who wants it. There's no doors, there's no locks, there's nothing because we can't even account for this asset. We can't visualize it at all. We don't even realize that it's there. So, yeah, no wonder we preach margin and success and these kind of sources of power, and then we wind up losing control of the thing because we've made something worth stealing.
Well, that brings me to, you know, arguably one of our most important, I guess, design challenges of building incorruptible institutions right now, which is with our AI companies. Both OpenAI and Anthropic, you know, in essence, to varying degrees, and sounds like you were involved, attempted to build structures that would insulate them from the financial gravity that you're talking about. That has worked, you know, somewhat well so far for Anthropic. Although, you know, the industry itself requires so much CapEx investment, of course, that they need to take on a huge amount of capital and that can skew the cap table. But, then with OpenAI, of course, we all watched that drama play out in terms of the structure kind of resolving. And so, what are the ways that you would advise founders who are at the beginning of that journey, who do want to go on this exploration of trying to create a kind of ironclad structure that can retain the mission and avoid the perils of having your cap table, you know, dissolve your original mission? What do you recommend that they do? And in particular with our AI companies, are you hopeful, at least with Anthropic, if you're comfortable sharing, that the structure that they've set up will be able to withstand the kind of—
Well, so far, so good, but we're talking about gale force, a level of pressure and insanity that is truly, genuinely unprecedented in the history of the world. I think they just crossed $30 billion in revenue, was reported, something like that. It's crazy over there. So, we'll see. And then, it's gone antagonizing them and everything else. So, yeah. I mean, a lot of really cool stuff happening. I will say though that the day that they stood up to the Pentagon and said no to that contract, someone sent me a video of people who had gone to their office in San Francisco and written chalk messages all around the office thanking them for taking a stand and doing the right thing. Wow. I was like, "Wow, that is not usually—if I hear that there's chalk markings outside of a San Francisco tech company, that's not generally how it's done anymore." It was actually very interesting.
So, yeah, it is super complicated. But, what's interesting about AI—so, you know, I've been advising companies for a while now. So, I lived through the social media era. I've been through a lot of these eras. I somehow managed to make no money in Bitcoin, which I'm very proud of. But, the other eras, pretty much all of them, I have done some level of work with the companies that you've heard of. And I've been talking about these kind of—I was kind of like an eccentric collector of obscure governance ideas. You know, it was like my eccentric hobby that people were like, "Oh, that's nice. You know, some people collect butterflies, you collect this." Okay. Noble purpose, trust. Yeah, exactly. And actually before the pandemic, at the time that we did the last thing, I used to carry around with me in my pocket—I actually made a deck of cards, a 52 card deck. I would sit with founders and be like, "You want an alternative structure? I got one for you right here in my coat." Because I was trying to figure out how to communicate these ideas to people in a way that— Business. Yeah, those cards are going to be hot sellers. But, you know, that was back when people used to meet in person. So, it was really helpful to have it and then all of a sudden it wasn't useful anymore.
So, what's interesting about the AI companies is there's something about AI that people intrinsically understand, that it's super dangerous. Like from the beginning. All the AI founders, even the ones you like and the ones you hate, all started out from a place of understanding this thing has tremendous promise but tremendous peril wrapped up in one. And so, a lot of the standard governance tropes and ideas, those founders are just immune to the temptation to do it. And I was telling the story, you know the story well. I was at the Vatican of all places, that convened a conference on AI governance. And I found myself in definitely one of those record scratch moments like, "What am I doing here 20 ft from the Last Supper?" Having this meeting talking about AI governance. And I was on this panel, it's a classic Italian panel of me and like eight more people all on this giant panel. All the major AI companies were there. It was like OpenAI, Anthropic, Google, Meta, Palantir, Cohere. I can't even remember who else was there. It was like every major AI company and then me. And I was like, "What am I doing here?" And I realized in the course of the meeting that every single person on this panel had been given instructions by corporate communications not to make any news on this panel except for me. I could say whatever I wanted. So, I had a really good time. It was a lot of fun. But, I was pressing the panelists on this. I was like, "Look, we all have to acknowledge this is supposed to be a conference about governance. Can we all just take a moment and notice that not a single one of the companies on the stage with me today has standard governance?" Not one.
Because it would be almost immoral to give this technology to a profit-maximizing, paperclip-maximizing, sociopathic organization. Even the really evil AI founders were like, "That's too evil for me." Like, "You got to be kidding me." Like, "No, obviously we're not doing that. What are you, nuts?" So, there's this intuitive understanding. So, the AI companies have been way more interested in alternative governance structures than the previous era. I think a lot of it's cuz a lot of these people watched social media unfold and it's just very obvious that what happened in social media, if that happens with AI, we're in really big trouble.
Of course, now we're seeing it happen. So, maybe we're all in really big trouble. We could get to that if people have questions. But, I think what's interesting is because the AI companies did that, because Anthropic created the Long-Term Benefit Trust and popularized that, they inadvertently created this proof point that this can work. Because when I used to tell people they should create a trust structure like that, everybody was like, "Well, you're not going to be able to raise any money with that." It's like, "Well, Anthropic seems like they're raising some money." So, maybe actually that talking point is not true. So, that's been super helpful. And it turns out that more and more and more companies outside of AI—I think AI helped them see the danger of their own technology. And I tell a story in the book about someone who, I'm meeting with him and he's like, "I swear I'm not trying to create autonomous murder robots. But, I don't know why everyone keeps saying that about my product." He was like, "Why does everyone keep asking me about that? I promise I'm not trying to murder anybody." And I was like, "Well, that promise doesn't make me feel that much better. Let's talk about what would actually make you trust—like, are you asking me to trust you with this really dangerous technology?" And we're seeing that more and more and more. As our companies become more capable, we're seeing more and more technologies that have this upside but also with immense downside attached to it.
So, we've got an interesting audience question here to extend this conversation a bit, from Joseph, who says, "Extend your concept into an all-AI-run organization with few people. What sort of functions, methods, or guidance will establish an incorruptible operation?"
Okay, and nobody likes this answer, but it's just the same. It doesn't matter because there's going to be some human being somewhere. And we all know people who utterly want to use AI to replace human beings are crazy and bad, so that's not—and it's also not going to work. Technology is not even close to being ready for that. But also it's like a category mistake about what is our goal. What are we trying to create if we build an economy of AI agents for other AI agents? Who's it for? Why are we doing it? Yeah, we can turn the whole planet into the Sims if we want. We have the power. But we could also turn it into a giant titanium cube if we wanted to. But why? What's it for? So, I think that is silly.
So, if there's going to be some mix of humans and AI working together, then this is an old thing that everyone in the software industry has known for a long time: that the values of the organization are passed automatically to the software it creates. So, you see that the org chart of a company shows up in the architecture diagram of the software it makes. Everyone's known this for a long time. Well, we're seeing it now very clearly with AI. The hot problem in AI is the problem of AI alignment. How do you get the software to align its behavior to certain human values? But the problem of alignment is the problem of governance, going back a long time, and I always ask people, who's aligning the aligners? The people doing the alignment, if they themselves can't agree on what is the purpose of the work that they're doing, then we wind up with this really incoherent state. And we've now gotten to watch—there was just an 18,000 word profile about Sam Altman in the New Yorker this week. We're getting to watch the decoherence of this idea right in front of us. You know, it's being leaked like crazy. So there's soap opera and drama. So it's fun to get into the soap opera part of it. But to me the much more existential question is how do we create an organization that has coherent values in the first place? If you do that, any software you make or use will naturally be an extension of those values. I call it in the book the phenomenon of mission transmission.
And I can give examples of how it works mechanically. But again, this is not a metaphor. These are real operating procedures that we can learn to master. And I think that would be
true if we had one employee and a thousand AI agents or the reverse. It doesn't make any difference.
We've got another audience question here from Larissa who says so much of how we work, particularly using lean tactics, is focused on velocity. Looking back, do you think the speed of change at a company impacts its ability to avoid corruption? And if not, would you change anything about your lean methods with these new structures in mind?
No, I think Lean Startup has held up pretty well. But what else would I say? Bye-bye.
But actually, I've been getting the question a lot.
The lobby.
Yeah, yeah, exactly. You could read it for yourself. In that book, you will find there is one thing I got wrong, but I'll get to that in a second. But like, a lot of the people I've been interviewing, I've been doing podcasts and stuff for the new book and talking about it for the first time, I keep getting the question: do I feel vindicated by what's happened since Lean Startup was published? And I started to really like getting that question. I was like, yeah, yeah, I do feel vindicated. That's right. But the first time I was asked I was like, "Vindicated, what are you talking about?" I was like, "Well, you said that the change in technology that we're going through, this is in 2011, is going to continue to accelerate and it will have two very specific effects. One, we will see the increased democratization of the means of production, and so that cycle time in every industry will get faster. It will be faster and faster and faster to build pretty much anything. And secondly, partly as a result of number one, we're going to see increasing uncertainty in every business and every business plan."
I was like, "Oh yeah, that sounds pretty good." I was like, "Yeah, like that is what we were just like, that's not just true of this era, but that's been true of every single year of the last 15 years. We've seen nothing but a monotonic increase in both of those dimensions." And Lean Startup is a system for coping with the velocity of that change. And I think a common misunderstanding of Lean Startup is that Lean Startup is about creating that velocity. But actually, Lean Startup is a response to the capability of that velocity, the rate of change of the underlying thing.
Another way of saying it is people sometimes say, "Well, okay, now you're talking about these immutable principles. But isn't that at odds with Lean Startup, which is about experimenting with everything?" And I realized, when I've been getting that question a lot lately, like, "Oh, I guess I didn't make it clearer." In order to experiment with things, you have to have certain immutable principles. This is like the whole point. It's like if you're going to follow the scientific method, then the scientific method itself is not one of the things that is subject to experimentation. Because we've already said, we've committed ourselves to the principle that we're going to use data and not astrology to make our decision. You can't be like, "Yes, we made that commitment, but now I want to use astrology." It's like, "Well, no, sorry, that's not like, well, I want to run an experiment about using astrology." It's like, "Nope, sorry." Like, we've already committed ourselves to these principles, and I thought it was very obvious from Lean Startup that we were talking about a philosophy of long-term thinking, for which there's tremendously good evidence that that is the foundation of all economic prosperity. We're talking about a humanistic set of values about changing the world for the better, and a scientific set of values about how we discover and share knowledge about the truth.
Now, I will say I made a mistake, and I learned the mistake from a Reddit meme. Some of you may know the Anakin Padmé meme on Reddit. Anakin says, "I'm going to change the world." And she says, "For the better, right?" And then he doesn't say anything. And then she says, "For the better, right?" When I first saw that joke, I thought that was the funniest joke on the internet. And then as the years went on, I found it less and less and less funny.
And then one day I had this moment of crisis where I was like, "Wait a second. I always specified 'for the better' when I told people to change the world, right? I did, right?" And I was like, "Uh-oh." So actually, if you go into the lobby and you grab the copy of Lean Startup, you will find, to my everlasting shame, at the end of the introduction it says such and such and thing so that the next generation of entrepreneurs will have the tools they need to change the world. Period. So
I just thought it was obvious. I thought we were all on the same page about why we wanted to change the world. And I did get that 100% wrong. So if we ever do a new edition, that will definitely be the first thing we change.
I love that.
Okay, so one of our audience questions is about how these principles of how to govern it. And I was going to ask you as well, because in the book, and you mentioned Costco earlier, you talk about how Costco is the single retailer that controls 9% of grocery sales. But simultaneously, it performs about 30% of the nation's food safety audits, because its supply chains are so large. And it brings up this notion of also the kind of private regulatory power of firms that we now have. Talk to us about that and how you see these principles of incorruptibility actually applying to the public sector, given that we need them also more than ever.
No, well, certainly much, much more than ever. And then the issue, like I said, of public corruption is all of a sudden in the news.
So first of all, I want to just go back to the Costco thing for a second, because Costco affects the lives of hundreds of millions of Americans who have never shopped in a Costco. Because not only do they have higher food safety standards than the federal government requires, and not only do they audit more frequently and make all kinds of additional requirements, they have what a different company calls the no cherry-picking rule. If they audit your facility to make a certain product, they don't just audit the products that you send to the Costco warehouse. They audit the whole facility, and the whole facility has to pass or you can't sell at Costco.
So every single one of us in this room benefits from this incredible shield of food safety. They do almost as many inspections every year as the FDA does. And actually, with the FDA, numbers have been going down since these stats were published. It's actually probably even higher now, although new data is not available because they stopped publishing it. I'm sure that's because it's getting a lot better and there's nothing to hide. So, don't worry. Don't worry. I'm sure it's fine.
So yeah, you can say thank you to Costco for keeping your food safe and a bunch of other things. And we see this phenomenon all over our economy where private actors do things, take on the burden of creating these positive externalities for others even though they don't directly benefit in the immediacy of the transaction.
But I will say, back to the question of private and public sector, I have a very nuanced view there, partially because I spent a lot of years in my life trying to build a stock exchange. And stock exchanges are in a special category of company called a self-regulatory organization, which is a private company that has received a grant of sovereign power from the US federal government. Like, literally stock exchanges enjoy sovereign immunity from some kinds of lawsuits, because to sue them you'd effectively be suing the SEC, which I don't recommend. So people always ask me, is that a public sector or a private sector entity?
And it's like those concepts don't really make sense here, actually. Like this clean division: our grandparents thought of the different spheres of civic life as being very independent. Like there was a public sector, a private sector, but there was also a civic sector. They viewed sports as its own thing. Each of the things that you would do in your life, if you read like Bowling Alone or any of the kind of sociological writings about earlier generations, it's kind of hard for us to even understand. There were whole categories of organizations. I remember growing up being like, what is the Elks Lodge? Like, what is it? I don't understand. It's not in any of the categories that I understand or know. And those other things have all gone into decline in our modern world because we financialized everything.
So now we're just like, yeah, of course there's corruption in sports because it's all about the money. Of course they're putting gambling parlors in the stadium. What would you expect? But go watch a movie about the Black Sox scandal or Kenesaw Mountain Landis. They put down the hammer on that kind of behavior. They would have had absolutely no tolerance for that. And now you hear people be like, well, the commissioner just works for the owners. They're all about the money. What do you expect? I was like, man, where is Kenesaw when you need him? He'd be like, what are you guys talking about?
So they had this really strict separation of spheres that we do not have anymore. So I think that's not coming back. We can't undo it. You can't put the toothpaste back in the tube. So I think it's better for us to just build new, better categories about what we're doing.
And in the book I write, like I mentioned before, that my view of what it means to be a for-profit is to maximize human flourishing. This simple definition allows us to break down these categories, I think, in a much more effective way. Today nonprofit and for-profit has to do with an obscure bit of tax law. And the tax status is not an organization's most fundamental characteristic.
So I would say the Smithsonian Institution, Goodwill, those are massively for-profit organizations. And Philip Morris is the ultimate not-for-profit organization, because their $9 billion in supposed net income is dwarfed by the $600 billion in negative externalities they create for our health system every year. My father's a pulmonologist, so it makes him really happy every time I say something bad about Philip Morris.
I think there's also been, I think Harvard had this impact-weighted accounting that
Yeah, yeah, that's a great idea. But also others have, depending, because all of this is, you know, on how you measure it. But there have been some studies that have shown, essentially, if you accounted for negative externalities, every company would be unprofitable.
Oh, oh yeah. People are like, you can't change the definition of profit because it would mean that most companies are not profitable by that definition. I'm like, right. Have you looked out the window? Look at the catastrophe that is our world today. This is why these companies have been converted into value-destroying extraction machines. And that's why the food tastes bad after private equity buys your favorite restaurant, and that's why your favorite brand was ruined. It's why these companies that were super successful spontaneously go out of business for no discernible reason, what I call unusual failures.
So we're living the catastrophe of this idea every day in our lives, you know, all over the place. So I think it's better to just admit that that's what's going on. Say that that activity is not profitable. It is actually a form of corruption, not profit taking. And that allows us to then ask the question, well, how would a different or better way work?
And I've come to think, this will sound outlandish, I know, to some people, but I actually think the era of shareholder primacy is already over. It's the most dominant idea in the world today. We all are supposed to pretend we have obeisance to it, but first of all, talk to any young people and they think it's completely insane. And they've got the right of the argument, because they've grown up in a world where shareholder primacy is the only rule they've ever known. But also, shareholder primacy was supposed to be about making money for investors, and now that it's turned into extraction primacy, it's not even good for investors anymore. It's actually causing its own self-destruction.
So we're watching this order collapse all around us, and it's our responsibility, I think, those who build things for a living especially, to articulate a new doctrine, a new idea that we can move towards, so we don't just spend all our time negatively talking about how that idea is no good, but what can we move towards? The book is my attempt to identify the new best practices and the philosophical underpinnings that make it possible for us to all rally around some new affirmative vision of a better future for our entire economy.
One of the things I appreciated the most about the book is that, yes, exactly. That's nice of them. Thank you. That's lovely. Is essentially this notion that we made all of this up. Therefore, it's our duty to make sure that
Not carved in stone tablets. Like what
No, and I remember even thinking about, if we stick with this notion of profit for a while, that actually the modern conceptions of profit are relatively young in human commercial time. Like only, you know, 100, 150 years old, and also have gone through their own regimes of accounting practices and so on. And so I wonder if you could project 50 or 100 years into the future, how do you think our notions of profit may have evolved or changed? And how would you like them to evolve and change?
Oh, I love this question because we're living through a very dark period in human history. I always have to remind myself that our grandparents lived through an even darker period, so far. And they somehow kept the faith through evils and horrors that I can hardly imagine.
And when they came out of that darkness, they went to work on an incredible building spree of what I call civic infrastructure. Most of the institutions that govern modern life were invented by our grandparents at a very specific time of tremendous energy and output. And it's almost like I feel like we're like those people in Star Trek, that planet where they have the machinery that they've forgotten how to operate. They live in an Eden but it's breaking down. I kind of feel like that sometimes, where we've just forgotten how to operate this machinery. We don't know how to make it anymore. We don't know how to fix it when it breaks, and we're chopping up the foundations for firewood and we're like, "I guess it's fine."
So, we need to go build that muscle back up, and we're going to have to, as this darkness passes, go on a building spree like they did. And what's interesting is a lot of people who've encountered the book so far, especially if they're kind of more of the system persuasion, especially financial journalists or people who are in the New York–DC orbit, they have a reaction that's often like, this just seems too hard. Like the system is unimaginably powerful, and how can we hope that it could be changed in our lifetime or our children's lifetime? And I have to be like, well, you acknowledge that the system is unrecognizably different from our grandparents' day.
So, couldn't it also be unrecognizably different again by our grandchildren's day? The fact that it was done means that it can be done again. Whether my idea is right or wrong, obviously it can be changed.
But unfortunately, I just think a lot of us have this learned helplessness about this. And one thing that's really interesting to me, I spent a lot of time studying the people that advocated for and successfully convinced everybody to do shareholder primacy. Which is a very young idea. There's
We're in a windowless room here, but if there was a window, I always tell people like if there's a window wherever you are, look out the window. If you can see a tree, you're now looking at a biological organism older than this idea, most likely. It's a very young idea in history. It is not a pillar of capitalism. It is not some ancient wisdom that Adam Smith figured out or whatever. Like Adam Smith would have been like, you're talking about shareholder what? Would have found it completely inane.
Despite it being the most powerful idea in the world that governs all modern industrial economies, it has never once in the history of humanity ever one time been subject to any manner of popular referendum or vote, nor was it enacted by any legislative body.
So, why do we all live under what's called a normative consensus in the legal world? They always just say, well, this is what everyone agrees is how it is and is how it should be. They just decided it one day and a very small cadre of lawyers, judges, academics, and board members just decided this is how it's going to be going forward. So, first of all, first step to breaking a normative consensus is just to the courage to just say out loud, "Oh, yeah, I don't agree. That's not what I think the purpose of an organization is."
Simple. I'm doing it right now, but you could do it, too. You could tell a friend tomorrow, just by the way, I also think shareholder primacy is stupid. Just say it out loud. It's okay. They agree with you already. Nobody thinks this idea is any good except in a very narrow slice of our society, I assure you. But we've all been told you're not allowed to say it out loud, you know, what would other... It's like we all, like, what would the other people think? So, you could just say it out loud. Look,
It's like a misinterpretation of the law. It's not actually binding.
It is not the law in any way except it binds every company on Earth. So, yeah, I don't know, that is the law. If you read the legal literature on this, it's hilarious, too, because they can't really explain why it is and is not the law simultaneously. So, they come up with these like incredibly convoluted stories that it's like actually it is a legal duty, but it is not a legal obligation.
Okay, but anyway, every board member I know has been told that this is their fiduciary duty. So, I say it is the law and I say we could change the law. And luckily, we don't need an act of legislation to do it. But we are obsessed... Those of us who want to reform this system are obsessed with factional infighting. I guess it's the human condition.
So, like how many variations on double bottom line, triple bottom line, quadruple bottom line, 12-level bottom line do we have? We have good profits and bad profits. We have eco profits and regular profits. We have extra... Like we have fragmented and split and there's like, even among people who are in favor of alternative corporate forms, the B Corp people don't like the steward ownership people who don't like the employee ownership people cuz we're all doing our separate things and we all have our separate terminology and our... So, it's like fragmentation, fragmentation.
Read Milton Friedman, okay? He never once said, "You know what we should do? We should have a new kind of company, the extractive exploitative company. And then that would be different from regular companies. Now we'll have two kinds of companies and I think my kind of company is better." No. He said, "The purpose of business is to maximize its own profits." He didn't say it should be, it could be, maybe one day in the future it would be. No, he just said it is and made it so. Because people found that argument persuasive.
And for some reason in our era people... I even test readers of the book, not Denise, but others, I mean the section where I redefine profit, so many people were like, the comment they would leave is, "You can't do that. It already has a definition." It's like, says who? Right. According to what authority?
Like first of all, every company already defines profit its own way. Have you read financial statements? No two companies agree on what it means to make a profit. All right, we already do that. So it's like not only, like even if it was true that there was only one definition that we all agreed on, we could still change it even so, but it's like a double, triple, quadruple level of like we've been talked ourselves into this helplessness that is completely ridiculous.
So I think we have to just get much more comfortable as builders reclaiming these words and concepts for ourselves to bring them in line with what we actually, honestly in our hearts believe, which is there are better and worse ways to go about this and our way is the better way.
Yes. Simple, simple, right? Revolution starts here. Amen, right here, right here in the Cowell Theater. I love that. Thank you.
Well, at Long Now, we are students of history and I think it can show us that these institutional forms, even the nation-state was not a foregone conclusion even 100 years ago, which is remarkable. Like when the League of Nations came in, you know, there were, I don't know, there were 30 nations that were part of it or something in the 1940s and then now that's, you know, it's, or there were 80, sorry, and now that's tripled. But that's in less than 100 years. And now we think that this is the inevitable form of all, you know, governance. So I think that's such a hopeful description for us that it's really up to our own ingenuity and imagination and willingness to claim space and to say these paradigms that we have inherited are not the ones that we necessarily need to carry forward into the future.
And actually, I love also in the book, and I want to end with this, that you essentially say that the secret architect of the entire economic system is not some secret cabal, you know, in a smoky room somewhere. It's actually you and me and all of us in this room. And so, what would you leave us with as we, you know, as we go about our night tonight, as we walk away, what is one thing that you would have or recommend for the folks in this room that want to be a part of changing this? How can we go about doing that and recognizing our own agency in the process?
Okay, I really appreciate the question, and I know some people are like a little bit disappointed. It's like after a whole hour and however long of systemic problems with systemic solutions, now you're telling me I can solve climate change with recycling. Right? Like, F you, seriously. I know. I know somebody had the thought. You don't have to raise your hand or anything, but I know it. I know it for sure because a lot of books end this way, and it's just like, "Come on, man, really?"
Okay, but that's not what I'm talking about. Here's what I want to leave you with. Every story... Look, I'm a founder by nature. So, every story I tell always, I can't help it. I read a story about a company, I tell the story from the company's point of view. So, I tell people, "Build a mission-driven company. That will give you a huge talent advantage. Build a mission-driven company. Be purpose-driven. Your customers will be more loyal. Your investment returns will be superior if you take a long-term view." Like I can't help it but frame it as company-building advice. But in the later chapters of the book, I try to show how every one of these stories can be told in the opposite way and still be true.
So, for example, modern companies are addicts. Okay? As much as they make addictive products, they themselves are addicted to quarterly returns and to just like making their algorithms go up and to the right. They'll do anything for a hit. They're pathetic. Right?
But that means as powerless as you feel sometimes, they are as obsessed with you as you can possibly imagine. These are like the stalkers from hell. Every action you take in the modern world, thanks to surveillance capitalism and all these forces, every action, every decision you make, even if you tell not a single living person about it, is somebody's bonus metric. It's somebody's job to make sure you did that thing or didn't do that thing. There's somebody whose compensation depends on surveilling you and finding out if you did it or didn't do it.
I can't tell you, I've been in the room with these companies. I can't tell you how obsessed they are with the question of what they call willingness to pay. Okay? If they make the thing 3% worse and 3% more expensive, will you still pay for it? What about 4%? 5%? What is the number after which you'll finally be like, "Nah, I won't buy it anymore"? They calculate it down to the 12th decimal place. They are obsessed with what can they get away with doing and you'll still work there. Like, can we mistreat them in this way? Will they quit? No, seems like they'll still stay there. Okay, what about this? What about this? It's an obsession they can't stop. They can't help themselves. They are addicts.
So, every choice you make ripples out into the economy with these waves of gravitational force. Even if you never engage in any collective action, even if you never go to a secret meeting, even if you never learn the secret handshake, even if you never join a union, even if you never vote for the right... What? Every choice you make about where you're willing to shop, who you're willing to work for, where you're willing to invest, those choices are surprisingly powerful.
And once you learn to wield this power, you can cause all kinds of miraculous things to happen. I tell a bunch of stories in the book that have this flavor, where it seems like a company did a great thing, but then you realize later, actually no, it's the company's customers who did a great thing. The company just set this action in motion.
So, I'll tell a story. Someone came to me for advice the other day, and I was on my high horse giving this kind of riff, and like, well, you have the power and whatever, and they were like, "Excuse me, but I'm not courageous. So, I'm sorry. I can't do that. What else you got?" And I was like, "Oh, sorry. I'm sorry. I didn't mean to make you feel like you had to be courageous to do this. You don't." And I gave them this example for they would say did, and it's an interesting thing that happened, but I won't reveal their private conversations with me.
But, I said, "Look, just do me this favor. You're going for a job interview? You don't have to get up on the table and scream about profit and the maximization of human flourishing. You don't have to say anything that sounds weird. You don't have to talk about the spiritual holding company even either. Just at the end of the interview when they say, 'Do you have any questions for us?' Just ask them if they're a mission-driven company. Just ask. They're going to say yes. Be like, 'Great. How do you know?'"
You're just asking an innocent question. What evidence do you have to support this contention? And they're going to be like, "Oh, well, we have free beer on Fridays, and we all get together at the pub, whatever, and we give out free t-shirts, and we volunteer." Now, who knows what they'll say? Blah, blah, blah, blah, blah. Great. I know what they're not going to say. They're not going to be like, "Oh, and also we've written that mission into our corporate charter." So, why don't you ask? Oh, that's so interesting. Is it in the corporate charter?
I guarantee you the person you ask is not going to know the answer to your question. And let me tell you, if any of you been on the employment brand side of one of these employment processes, it is absolutely necessary that every person who interviews a person in one of these corporate processes, they must know the answer to every question that a candidate might ask. So, I guarantee if you just ask this question, the person you ask it to is going to have to ask their boss what the answer is. She's not going to know either. I have been in the room where these kinds of questions go straight all the way to the board room. Because somebody needs to know the answer, and nobody knows.
Now, the good news is corporate charters are all public records. You actually could just go look it up yourself, and you'll find out that, spoiler alert, it's not in the charter, okay? So, that's... But, just by asking the question in the most innocent way possible, you have now created a problem. I told you it's somebody's job to get you the answer to this question. They're going to find you an answer, and they're going to say, "You know, no, it isn't." And you can be like, "Oh, why not? I'm just curious." And they're going to be like, "I don't know." Now, they got to go ask another question. They don't know.
They don't know the fact that the company has this lofty mission statement about making the world a better place through Acme widget improvement, efficiency, whatever. And they also have a legal purpose, which is like paper clip maximize shareholder value. And there's this yawning chasm between the two. Just by pointing out this contradiction, you might... Who knows what will happen? Probably nothing.
But, if the next person that comes and asks the question again, cuz you two happen to both be at this event, you imagine how alarmed they'll be if two people ask them the question. Can you imagine what would happen if 10 whole people asked this question? No one had to have any courage. No one had to coordinate. No one had to learn the secret handshake. But, you learn to ask the right question.
In the book, I say mission-driven companies like outperform. They have more talent loyalty. That is a guide to how to build a great company, but it's also an employment guide about where to work. Your career will be accelerated if you choose to work at a place that has this very special attribute. Customers are more loyal to mission-driven companies. That is also a shopping guide. Companies that perform this way, they outperform for their investors. That's your retirement savings. Well, where is it invested? Why not? Do you see what I'm saying?
So, we have more power than we realize. The last chapter of the book is called You Are Traffic, right? You're not in traffic, you are traffic. You are creating the very gravitational field that you feel restricts you from making progress. In the academic literature, this is called structuration. One of my favorite bits of academic jargon. The organizations that you encounter in your daily life, they structure your life and your sense of possibilities, but you structure them right back. You are in a symbiotic relationship with them and you actually have the power, you have the thing that is most scarce that they want, that they are addicted to getting from you, which they desperately crave like you can't imagine. So, you know, be picky. Why not? Thank you.
Thank you so much, Eric.
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