Public benefit corporations and long-term benefit trusts are essential to insulate companies from short-term public market pressures that destroy customer trust and brand value.
## Background
This episode was published by TBPN on YouTube on May 26, 2026. It features a full conversation recorded live with Eric Ries, author of The Lean Startup, focusing on why successful companies drift away from their core principles and how alternative governance structures like public benefit corporations and long-term trusts can protect long-term mission and value creation.
## TL;DR
In this wide-ranging discussion, Eric Ries re-examines the legacy of The Lean Startup in the modern era of AI, massive funding rounds, and market volatility. He argues that short-term shareholder primacy and quarterly public reporting destroy long-term enterprise value by forcing companies into value-extracting behaviors. Drawing on real-world examples ranging from Costco and Patagonia to Anthropic and the Mondragon co-op network, Ries outlines how mission-locked governance models—such as Public Benefit Corporations and Long-Term Benefit Trusts—provide executives with the legal and structural insulation needed to resist predatory Wall Street pressure and prioritize human flourishing.
## Atmosphere & style
The conversation carries an intellectually engaging, reflective, and candid tone, balancing high-level corporate theory with grounded real-world anecdotes. Eric Ries and the hosts share an easygoing dynamic marked by moments of humor and mutual curiosity, shifting fluidly between lighthearted jabs at overfunded tech failures and sharp critiques of modern financial engineering. The dialogue creates a compelling, thought-provoking atmosphere that feels like an insider masterclass on how to build resilient, ethical, and enduring institutions.
## Key takeaways
- [00:00](https://www.youtube.com/watch?v=AWuE2Ru2SrE&t=0s) The core principles of *The Lean Startup* remain valid because macro trends like rising world uncertainty and technology democratization have continued to accelerate.
- [01:54](https://www.youtube.com/watch?v=AWuE2Ru2SrE&t=114s) The modern venture funding landscape is starkly bimodal: hype sectors receive massive capital over-allocations, while scrappy companies like TurboPopper build fortress balance sheets with minimal capital.
- [04:03](https://www.youtube.com/watch?v=AWuE2Ru2SrE&t=243s) Taking on excessive venture capital often forces founders to forfeit mission control, as board dynamics and short-term financial systems pull startups toward mediocrity.
- [06:48](https://www.youtube.com/watch?v=AWuE2Ru2SrE&t=408s) Financial engineering and private equity rollups routinely destroy downstream brand equity and unique customer experiences to realize immediate balance sheet gains.
- [09:26](https://www.youtube.com/watch?v=AWuE2Ru2SrE&t=566s) Quarterly financial reporting creates an approximate 5% drag on public company equity value by incentivizing executives to manage for quarterly updates rather than long-term product innovation.
- [14:04](https://www.youtube.com/watch?v=AWuE2Ru2SrE&t=844s) Shareholder primacy is a modern doctrine from the 1980s; Public Benefit Corporations (PBCs) provide legal protection for executives to prioritize mission primacy and refuse short-termist acquisition offers.
- [15:32](https://www.youtube.com/watch?v=AWuE2Ru2SrE&t=932s) Enduring companies like Costco and Anthropic systematically reject standard corporate governance norms, utilizing dual-entity structures like Long-Term Benefit Trusts to guard their core missions.
- [19:38](https://www.youtube.com/watch?v=AWuE2Ru2SrE&t=1178s) The Mondragon Corporation in Spain illustrates a successful 'mission-locked constellation' of federated worker cooperatives scaling to tens of thousands of employees without sacrificing self-governance.
- [22:41](https://www.youtube.com/watch?v=AWuE2Ru2SrE&t=1361s) Founders are trapped in an 'always too early until it's too late' paradigm where early legal advisors dismiss mission protection, only to claim structural changes are impossible once VC control is established.
- [02:27:28](https://www.youtube.com/watch?v=AWuE2Ru2SrE&t=8848s) Data across thousands of companies demonstrates that higher degrees of employee ownership directly correlate with improved employee welfare and stronger long-term business performance.
- [02:30:31](https://www.youtube.com/watch?v=AWuE2Ru2SrE&t=9031s) Extractive margin strategies sacrifice long-term customer trust for short-term profit boosts, whereas companies like Costco treat high customer trust as an unassailable competitive advantage.
- [02:33:04](https://www.youtube.com/watch?v=AWuE2Ru2SrE&t=9184s) Building incorruptible, mission-driven companies requires pairing operational ethos with explicit structural safeguards like PBC status and specialized term sheets.
## Detailed walkthrough
Here is a detailed, faithful walkthrough of the provided transcript section:
[00:00](https://www.youtube.com/watch?v=AWuE2Ru2SrE&t=0s) Reflecting on *The Lean Startup* and Enduring Entrepreneurial Principles
The conversation opens with a reflection on the legacy of *The Lean Startup*, which was foundational for many tech founders entering Silicon Valley around 2012. Looking back, while specific tactics and case studies—such as Groupon—feel dated from the book's 2011 release, its underlying core principles remain remarkably accurate. At its core, the methodology taught founders that "money is not infinite" and provided a blueprint for how to survive by avoiding burning through all their capital. When the book came out, it unlocked entrepreneurship for a generation of teenagers and young founders who used to read TechCrunch and believe starting a company required millions of dollars. Suddenly, realizing it only took $20 to get started made capital far less of a constraint than previously thought.
Reflecting on why the framework has held up so well, Eric Ries notes that two major macro trends predicted in the book came to pass: world uncertainty increased—making long-term forecasting and planning progressively worse—and technology became deeply democratized, allowing people to build faster, cheaper, and better products. When those two forces intersect in any industry, lean methodology holds up well.
[01:54](https://www.youtube.com/watch?v=AWuE2Ru2SrE&t=114s) Leanness in the Modern Era: AI, Mega-Rounds, and Capital Scrappiness
Addressing whether startups are actually getting leaner or less lean today, the discussion highlights a paradox. On one hand, the market routinely sees headlines about $200 million seed rounds. On the other hand, the idea of a "mythical one-person, $1 billion company" feels increasingly attainable. Even with lower legal bills and leverage from SaaS products or AI agents to answer key questions, the funding landscape has become starkly bimodal during modern speculative manias. Founders outside favored tech trends struggle to raise anything, while those in hot sectors receive absurd amounts of capital.
Eric laughs off periodic media declarations that the framework is dead, pointing out that critics always pick failing, overfunded examples like Quibi to prove their point. Ultimately, managing resources wisely remains an eternal virtue. Overfunded startups frequently falter because they lack the constant pressure of reality forcing them to build products people actually want. Conversely, some of the most capital-attractive companies—like TurboPopper—raised very little money, reached a nine-figure run rate, and maintain a "fortress balance sheet" simply by preserving a scrappy ethos focused on customer value.
* Periodically, articles claim the methodology is obsolete by citing overhyped failures like Quibi.
* Modern leverage (AI agents, SaaS tools) allows small teams to run leaner operations with reduced overhead.
* Capital-efficient companies like TurboPopper achieved a nine-figure run rate while raising minimal initial capital.
[04:03](https://www.youtube.com/watch?v=AWuE2Ru2SrE&t=243s) The Trap of Capital and the Evolution of Corporate Governance
Taking in massive sums of venture capital often destroys the exact scrappy ethos that made a company worth investing in initially. Founders frequently celebrate fundraising milestones by "ringing the gong" or making noise with airhorns, but raising money for the sake of media hype distracts from the single thing that actually matters: building a great product and a great company. While some founders brag about raising a massive war chest and never spending it, over-raising early often causes founders to forfeit control over their mission.
This dynamic manifests in shifts within corporate governance. The traditional startup trajectory once involved a small seed round, a Series A, and two VCs taking control of a three-person board. Today, startups often feature five co-founders on a board while VCs write $100 million checks without getting board seats. Founder control can range from single-founder dominance (like SpaceX) to Public Benefit Corporations (PBCs) and diffuse co-founder arrangements. While extreme founder control can lead to "hubris syndrome," investor-dominated companies frequently underperform because short-term financial systems pull companies down toward mediocrity.
> "If you don't get the governance of a company right, no other decision you make will matter in the long run because you won't be the one making it."
[06:48](https://www.youtube.com/watch?v=AWuE2Ru2SrE&t=408s) The "Private Equity Effect": Cost-Cutting vs. Long-Term Brand Value
The discussion illustrates how financial engineering degrades product quality through the "parable of the goose that laid the golden egg." When investor-owned entities take over mission-driven or family-operated businesses, they routinely gut the subtle details that customers love in order to show immediate balance sheet gains. A prime example shared is a favorite boutique hotel with roughly 20 keys that was acquired by private equity; the new owners immediately eliminated the hotel's signature nightly ritual of delivering warm chocolate chip cookies and milk to every guest's room.
Modern capital structures have a distinct "flavor" that consumers can literally taste, whether in private-equity-owned hotels or degraded restaurant chains. Financial reporting routinely rewards executives for short-term cost reductions while ignoring the long-term destruction of brand equity and customer loyalty. To resist this financial gravitational pull, companies must build governance structures that align stakeholders around a mission and protect that core purpose from outside corporate raiding.
* Short-term financial incentives reward cost-cutting while ignoring downstream brand erosion.
* Modern capital structures often destroy the unique customer experiences that made the business successful.
* "Mission-controlled companies" use tailored governance to insulate their core values from outside Wall Street pressures.
[09:26](https://www.youtube.com/watch?v=AWuE2Ru2SrE&t=566s) The Cost of Quarterly Reporting and the Semi-Annual Alternative
Shifting to public market pressures, the conversation centers on how quarterly reporting cycles destroy long-term value creation. While some fear that moving to semi-annual (six-month) reporting might just create a "closet where you hide the bodies" twice as large, academic research demonstrates a severe penalty: quarterly reporting reduces a public company's total equity value by roughly 5%. This loss occurs not merely due to the administrative expense of filing quarterly, but because executives begin running the business to satisfy the quarterly report rather than building real products.
Eric Ries notes that his organization, the Long-Term Stock Exchange (LTSE), filed a formal petition with the SEC to permit public companies to transition from quarterly to semi-annual reporting. Instead of sparse quarterly updates or gamesmanship, public markets need a more full-throated disclosure framework where long-term investors can actually evaluate what is happening inside companies.
* LTSE filed an official petition with the SEC to shift public company reporting requirements from quarterly to semi-annually.
* Academic studies show quarterly reporting mandates cause an approximate 5% drag on total equity valuation due to short-term executive behavior.
* Companies trapped in quarterly cycles risk turning into "meme factories" focused on short-term messaging over long-term innovation.
[12:44](https://www.youtube.com/watch?v=AWuE2Ru2SrE&t=764s) Navigating Public Benefit Corporations and Stakeholder Alignment
The section concludes by exploring how Public Benefit Corporations (PBCs) attempt to balance shareholder fiduciary duty with broader corporate purpose. In standard Fortune 500 companies, a CEO holding a tiny fraction of equity reports to a board representing diverse equity holders. Introducing multi-stakeholder governance models or "double bottom lines" often creates confusion for leadership when stakeholder interests conflict—such as customers wanting lower prices while employees demand higher wages.
Rather than forcing CEOs to constantly swap "hats" and make soft compromises between competing interests, effective corporate governance must provide clear mechanisms that align long-term incentives across shareholders, founders, and the broader mission.
[014:04] Overturning Shareholder Primacy and Reclaiming Profit as Human Flourishing
Eric Ries traces the modern corporate governance landscape back to its origin, emphasizing that for almost the entire history of joint-stock corporations on the planet, it was universally understood that companies were incorporated to serve a specific purpose. The concept of "shareholder primacy"—the idea that a company exists solely to generate short-term financial returns for its investors—is not an ancient pillar of capitalism at all. It only took root in the 1980s. Pointing out that standard trees in a local park are older than shareholder primacy, Ries argues that when companies exist purely to make money for themselves without a higher purpose, they inevitably wind up hollowing themselves out and becoming dangerous.
Attacking shareholder primacy is straightforward because the empirical data overwhelmingly demonstrates how destructive short-termist "best practices" actually are. However, Ries asserts that the crucial challenge lies in defining its replacement: **mission primacy**. Being a for-profit company is inherently valuable; making a profit is literally defined as a positive margin transformation that makes the world a better place. Referencing points similar to those expressed in papal encyclicals, Ries argues that true profit is about maximizing human flourishing.
Within this framework, a **Public Benefit Corporation (PBC)** serves as a practical corporate governance tool. It provides the CEO and the board of directors with explicit legal cover to pursue long-term value creation and protect the core mission even when facing hostile investors. Without a PBC structure, if a predatory buyer like Philip Morris offers to pay one dollar more per share than a company is worth, leadership faces intense legal pressure to sell out. A PBC gives executives the legal mandate to refuse those offers and stay true to their original purpose.
- Shareholder primacy is a surprisingly young doctrine, originating only in the 1980s.
- Public Benefit Corporations (PBCs) shield executive leadership from shareholder lawsuits when rejecting short-termist acquisition offers that compromise the corporate mission.
---
[015:32] Real-World Model Exceptions: From Costco to Anthropic
When discussing corporate decline, most people treat the corruption of large companies as an inevitable byproduct of human nature, scaling, and massive capital. Yet those same people will immediately point to loved and trusted brands as exceptions to the rule:
* **Costco** (a public enterprise valued at hundreds of billions of dollars)
* **Patagonia**
* **Vanguard mutual funds**
* **The John Lewis Partnership**
* **Hershey's**
* **Novo Nordisk**
These enduring institutions—many of which have thrived for decades or over a century—form a compelling dataset. Crucially, every single one of them systematically violates modern "best practices" regarding how corporations are supposed to be structured and operated.
Ries details how these principles apply to cutting-edge technology, specifically recalling when the founders of Anthropic departed OpenAI to set up their governance structure. To avoid the standard founder-control trap while insulating the company against short-term incentives, Anthropic implemented an innovative governance architecture known as the **Long-Term Benefit Trust**. Instead of forcing the founders to personally carry the burden of being "mission guardians"—a role that causes immense stress for standard founders—Anthropic created a multi-branch system where the for-profit PBC board is directly accountable to an independent, outside trust entity. Data indicates that companies utilizing these dual-entity trust structures are roughly five times more likely to survive to year 50 while producing significantly superior long-term value creation metrics.
- Many of the world's most resilient and trusted enterprises (e.g., Novo Nordisk, Hershey's, John Lewis Partnership) explicitly reject conventional corporate governance norms.
- Anthropic created a Long-Term Benefit Trust (LTBT) to act as an external mission guardian, balancing their for-profit Public Benefit Corporation (PBC) status.
- Empirical data shows that companies structured with mission-lock mechanisms are approximately five times more likely to reach their 50th anniversary.
---
[019:38] The Basque Experiment: Mondragon and Mission-Locked Constellations
The conversation shifts to one of the most remarkable corporate structures in global history: the **Mondragon Corporation**. The origin story reads like a fable: following the devastation of the Spanish Civil War, a Catholic priest entered the war-torn Basque region. Rather than simply offering spiritual comfort, he envisioned an economic framework where workers learned trades and directly controlled their own destinies. This led to the creation of a network of worker cooperatives where the employees owned the means of production, initially manufacturing basic industrial equipment.
Today, Mondragon has grown into a massive global powerhouse:
* Employs approximately 90,000 people across Europe.
* Operates as one of Spain's largest industrial enterprises.
* Manufactures heavy equipment like elevators and operates major grocery store chains.
From the outside, Mondragon appears to be a standard, highly profitable industrial conglomerate. Upon closer inspection, however, it functions as a decentralized network of roughly 80 to 90 independent worker co-ops that self-govern through a central representative congress. Individual co-ops retain the right to leave the federation if the central services cease to provide value. Ries classifies this phenomenon as a **"mission-locked constellation"**—a collection of distinct entities that appear as a unified corporate giant to external customers and markets, but operate internally through cooperative self-governance.
- **Origin:** Founded in Spain's Basque country by a Catholic priest following the Spanish Civil War.
- **Scale:** Employs ~90,000 workers worldwide and stands as one of Spain's major economic entities.
- **Structure:** A federated ecosystem of 80–90 semi-autonomous worker cooperatives bound by a shared governing congress.
---
[022:41] Why Mission-Locked Structures Are Rare in Silicon Valley
The hosts question why Mondragon-style entities or cooperative networks are so rare in the modern American technology landscape. While alternative corporate structures collectively command roughly 5% of global GDP—and credit unions serve roughly 40% of American households—mainstream startup culture heavily favors standard C-corporations backed by Simple Agreements for Future Equity (SAFEs) and traditional venture capital.
> "Honey, that's so sweet that you're concerned about mission... Why don't you worry about getting your first customer?"
Ries explains that founders rarely build alternative structures because lawyers, bankers, and advisors actively discourage them early on. Founders are routinely trapped by a principle Ries terms: **"It's always too early until it's too late."** During the early days, legal counsel tells founders that setting up mission-protection mechanisms is premature and unnecessary. Yet, once the company achieves significant scale and investor pressure mounts, those same advisors inform the founder that it is now too late to make structural changes because control has already been surrendered.
- **Global Reach:** Alternative corporate structures generate approximately 5% of global GDP.
- **U.S. Credit Unions:** Serve as a major non-profit alternative in finance, holding accounts for ~40% of American households.
- **The Founder Trap:** "It's always too early until it's too late"—advisors dismiss governance setup as premature in early stages, only to declare it impossible once investors hold control.
---
[025:21] Toyota, Keiretsus, and the Mission-Driven Revolutionary
The discussion moves to Japanese industrial organization, exploring whether **Keiretsus**—interlocking networks of business entities and banks—fit the definition of alternative mission-locked structures, and whether modern Big Tech companies (like Microsoft funding OpenAI, or Google investing in SpaceX and Anthropic) are evolving into modern tech Keiretsus. Ries reflects on how studying the **Toyota Production System** originally inspired *The Lean Startup*. When he first began presenting Lean Startup concepts around 2012, observers frequently pointed out the inherent contradiction: he was advising founders to emulate Toyota's disciplined operational long-termism while simultaneously urging them to raise venture capital and float shares on short-termist public stock markets.
Legacy institutions like Toyota manage to balance public capital with family-style stewardship because they possess a strong, foundational ethos focused on achieving something beyond merely churning out quarterly profits. Whether a founder's goal is grand (e.g., solving climate change or making humanity multi-planetary) or focused (e.g., building exceptionally durable products), having a genuine long-term vision makes them a business revolutionary. Because standard financial systems are explicitly designed to strip resources from companies that lack structural defenses, mission primacy is the only shield that allows long-term visionaries to survive.
- *The Lean Startup* framework originated directly from studying Toyota's long-term manufacturing philosophy.
- Companies operating with unique hybrid governance structures (combining family stewardship with public markets) rely on a deep-seated ethos that transcends pure quarterly profit extraction.
- Standard public market infrastructure is incentivized to extract short-term value unless explicit, mission-locked governance mechanisms are embedded from the beginning.
[02:27:28](https://www.youtube.com/watch?v=AWuE2Ru2SrE&t=8848s) Corporate Structures, Mission-Driven Companies, and AI Disruptions
Protective corporate structures are only effective if the mission they are safeguarding is fundamentally good. The central challenge for founders, investors, board members, and executives is discovering how to construct organizations with enduring, authentic missions—moving beyond being merely "mission-hopeful" to becoming truly mission-driven. Adopting this long-term orientation yields surprising economic advantages alongside moral and ethical benefits, providing a compelling commercial justification independent of purely ethical arguments.
The rapid rise of artificial intelligence is poised to force legacy corporate structures to undergo deep, systemic overhauls. A recent notable example occurred at Samsung, where approximately 48,000 workers organized to demand a significantly higher share of AI-driven profits, initiating major labor negotiations. This type of collective action represents a growing trend as companies face existential technological disruption.
* **Employee Ownership Data:** A comprehensive meta-study examining 55,000 companies demonstrated a clear "dose-response" relationship regarding employee ownership. Companies with 10% employee ownership outperform those with 0%, 50% outperforms 10%, and 100% outperforms 50% in both employee welfare and business metrics like revenue growth.
* **Lean Transformation Philosophy:** Standard lean production systems dictate that asking employees to assist in their own layoff is neither ethical nor effective, as it breeds internal sabotage.
* **Criticism of AI-Driven Layoffs:** Many CEOs pursuing immediate layoffs through AI are missing the true competitive potential of technology; true long-term value creation comes from enlisting labor as allies to scale the business and build sustained competitive advantage.
[02:30:31](https://www.youtube.com/watch?v=AWuE2Ru2SrE&t=9031s) Cultural Primacy, Extractive Margins, and the Costco Model
Modern corporate culture has largely accepted the premise that companies should treat customers and employees as resources to be mined. This extractive mindset was famously illustrated when a Wall Street analyst criticized Costco by complaining that the retailer takes money belonging to shareholders and reinvests it into improving customer experience.
Costco’s former CEO, Jim Sinegal, famously embodied a countercultural resistance to short-term extraction. When then-COO Craig Jelinek suggested raising the iconic $1.50 hot dog price in 2008, Sinegal famously warned: "If you raise the effing hot dog price, I will kill you. Figure it out." Sinegal also noted that while raising prices across Costco stores by just 3% would boost net income by 50% without losing sales, doing so would be "the business equivalent of taking heroin"—a short-term fix that destroys long-term trust and undermines their low-price leadership positioning.
* **Costco PR Confirmation:** Eric Ries personally verified the authenticity of the $1.50 hot dog anecdote by speaking directly with Jim Sinegal through Costco PR.
* **Extractive Margins as Vulnerability:** While traditional business culture views high margins as strength, excessive extraction creates long-term competitive vulnerability.
* **The Bezos Doctrine:** Jeff Bezos captured this dynamics with his famous principle: "Your margin is my opportunity."
> "If you raise the effing hot dog price, I will kill you. Figure it out."
> — **Jim Sinegal to Craig Jelinek**
[02:33:04](https://www.youtube.com/watch?v=AWuE2Ru2SrE&t=9184s) Everlane, Incorruptible Frameworks, and the Path Forward
The acquisition of Everlane—a venture-backed Silicon Valley darling originally founded on strong ethical values—by fast-fashion giant Shein highlights the systemic pressures that undermine mission-driven startups. Founders routinely blame themselves for misplaced trust or poor board choices when their companies fall off track, failing to recognize the hidden structural incentives pulling them down.
To build enduring, incorruptible companies that resist external pressure, founders must pursue two parallel tracks:
1. **The Path of Ethos:** Building operational frameworks anchored in a core commitment. Sol Price (the pioneer behind Price Club and Costco) described this as being a "fiduciary to the customer." Founders must identify who they would rather die than betray and embed that commitment directly into the business model, culture, and management incentives.
2. **The Path of Integrity:** Establishing structural safeguards—such as Public Benefit Corporation (PBC) status, long-term benefit trusts, and explicit board mission pledges—that grant companies the resilience to reject hostile buyouts, predatory incentives, or short-term Wall Street pressure.
* **Implementation Resources:** Ries's book includes a QR code linking to an implementation guide, featuring an "incorruptible term sheet" and legal templates for founders.
* **Testing and Feedback:** Over 600 test readers reviewed the manuscript, generating over 10,000 comments during its development.
* **Founding New Categories:** Nearly 1% of early readers reported developing new startup ideas using the book's governance framework, targeting industries plagued by extractive incumbents by competing specifically on customer trust.
## Notable quotes
> [04:03](https://www.youtube.com/watch?v=AWuE2Ru2SrE&t=243s) If you don't get the governance of a company right, no other decision you make will matter in the long run because you won't be the one making it.
> [22:41](https://www.youtube.com/watch?v=AWuE2Ru2SrE&t=1361s) Honey, that's so sweet that you're concerned about mission... Why don't you worry about getting your first customer?
> [02:30:31](https://www.youtube.com/watch?v=AWuE2Ru2SrE&t=9031s) If you raise the effing hot dog price, I will kill you. Figure it out. — Jim Sinegal
## Mentioned
Eric Ries, The Lean Startup, Groupon, TechCrunch, Quibi, TurboPopper, SpaceX, Public Benefit Corporation, Long-Term Stock Exchange, SEC, Costco, Patagonia, Vanguard, The John Lewis Partnership, Hershey's, Novo Nordisk, Anthropic, OpenAI, Long-Term Benefit Trust, Mondragon Corporation, Basque Country, Toyota, Toyota Production System, Microsoft, Google, Samsung, Jim Sinegal, Craig Jelinek, Jeff Bezos, Everlane, Shein, Sol Price, Price Club, Philip Morris
Eric Ries argues that good companies are routinely degraded by modern financial incentives that prioritize short-term extraction over mission, urging founders to adopt governance structures that insulate their core purpose from investor capture.
The Capital Trap and Short-Term Financial Pressures (4:03)
Taking in massive sums of venture capital frequently destroys the capital efficiency that made a startup viable in the first place. While speculative environments yield extremes—from struggling niche founders to $200 million seed rounds—Ries points out that overfunded operations often collapse like Quibi because they lack market pressure to build what customers actually want. In contrast, capital-efficient businesses like TurboPopper have achieved nine-figure run rates with minimal funding by maintaining a focus on customer value.
This erosion accelerates through private equity buyouts and public market mandates. When financial buyers eliminate subtle, brand-defining details to boost balance sheets—such as a boutique hotel scrapping its nightly cookie service—they trade long-term customer equity for quick accounting gains. In public markets, academic research indicates that quarterly reporting mandates inflict an approximate 5% drag on total equity valuation by forcing executives to manage for short-term earnings reports rather than durable products, prompting Ries's Long-Term Stock Exchange (LTSE) to petition the SEC to allow semi-annual reporting.
Replacing Shareholder Primacy with Mission Primacy
Ries emphasizes that shareholder primacy—the doctrine that an enterprise exists solely to produce short-term financial returns for investors—is not an ancient capitalist rule, but an ideology that emerged in the 1980s. When firms exist purely for extractive margins, they inevitably hollow themselves out. He advocates for mission primacy, viewing genuine profit as a margin transformation that enables human flourishing rather than arbitrary cost-cutting.
To safeguard that vision, companies require legal architecture. Under standard corporate structures, leadership faces severe legal pressure to accept buyout bids that offer even a marginal premium over share value, regardless of the buyer's reputation. Public Benefit Corporation (PBC) status provides boards with explicit legal protection to turn down hostile, extractive offers. Modern tech organizations like Anthropic have extended this protection by combining PBC status with a Long-Term Benefit Trust, a separate governing entity designed to hold the operational board accountable to its stated purpose without overburdening individual founders.
Enduring Alternatives to Corporate Extraction
Durable commercial institutions often systematically violate standard governance playbooks. Examples include Patagonia, Vanguard, Hershey's, Novo Nordisk, and Spain's Mondragon Corporation—a federated network of 80 to 90 worker-owned cooperatives employing around 90,000 people. Data cited by Ries indicates that companies operating with mission-lock mechanisms are approximately five times more likely to survive to their 50th anniversary. Furthermore, a meta-study of 55,000 firms revealed a dose-response relationship with employee ownership: higher percentages of employee ownership directly correlated with superior business metrics, including revenue growth and worker welfare.
Resisting short-term margin extraction also forms a durable competitive moat. Costco demonstrated this when former CEO Jim Sinegal rejected raising the signature $1.50 hot dog price, arguing that taking an easy margin boost would behave like an addiction that erodes customer trust. Drawing on Jeff Bezos's aphorism that 'your margin is my opportunity,' Ries stresses that excessive extraction creates strategic vulnerability rather than operational strength.
The Advisor Trap and Building Incorruptible Companies
Despite alternative governance models driving roughly 5% of global GDP and credit unions serving around 40% of American households, Silicon Valley startup culture remains dominated by standard C-corporation playbooks. Ries observes that founders are ensnared by the trap of 'it's always too early until it's too late': legal and financial advisors dismiss mission-protection governance early on as an unnecessary distraction, only to inform founders later that outside investors hold too much control to permit structural changes. This institutional drift was illustrated when ethically marketed startup Everlane was acquired by fast-fashion giant Shein.
To construct enduring companies, Ries argues founders must simultaneously pursue operational ethos and structural integrity. Operationally, leadership must act as a 'fiduciary to the customer,' identifying the stakeholders they refuse to exploit. Structurally, founders must introduce legal mechanisms—including incorruptible term sheets, benefit trusts, and formal mission pledges—early enough to withstand downstream acquisition pressures and Wall Street short-termism.
Ries maintains that resisting corporate degradation requires both cultural conviction and enforceable legal barriers before capital is raised. However, the framework leaves open whether high-growth startups can widely adopt mission-locked structures without encountering resistance from traditional venture capital markets that demand rapid liquidity.
[4:03] If you don't get the governance of a company right, no other decision you make will matter in the long run because you won't be the one making it.
[22:41] Honey, that's so sweet that you're concerned about mission... Why don't you worry about getting your first customer?
[150:31] Jim Sinegal: If you raise the effing hot dog price, I will kill you. Figure it out.
Original transcript
[0:00] The Lean Startup was foundational to me
[0:03] when I came to Silicon Valley. I
[0:05] remember I went to a Lean Startup book
[0:07] event
[0:08] probably back in 2012. You spoke there
[0:10] and it was very inspiring as I was
[0:12] starting my first company.
[0:14] And I took away from it just
[0:16] you know, money is not infinite. Don't
[0:19] die. Don't burn all your money. But I
[0:21] mean maybe we can start there and sort
[0:23] of reset like what are the correct
[0:25] lessons that you think should endure
[0:27] from the Lean Startup and then we'll go
[0:29] into Incorruptible and sort of all of
[0:31] the all of the evolution but I'd love to
[0:33] sort of have a reflection
[0:36] incredibly influential on on my career
[0:39] and journey Really like unlocked
[0:40] entrepreneurship for a lot of people
[0:42] because
[0:44] perfect time where like it was you
[0:45] needed $20 to be a business
[0:47] >> for me for me as somebody who just grew
[0:49] up obsessed with startups and beyond
[0:51] TechCrunch everyday and all the startups
[0:53] that I thought were cool and crushing it
[0:55] were in TechCrunch every you know, 12
[0:58] months raising all this money and it
[1:01] feels like out of you know, it feels
[1:02] like out of reach when you're a teenager
[1:05] and then you realize like hey
[1:07] capital
[1:08] capital is way less of a constraint than
[1:11] than you would think. So thank you for
[1:13] that.
[1:14] Well guys, thanks to you. Thanks and
[1:15] first of all congrats to you
[1:17] success.
[1:18] You know,
[1:19] what's really held up like a lot of the
[1:21] techniques and the specific tactics from
[1:22] Lean Startup are a little dated now. I
[1:24] mean you know, Groupon is a case study
[1:25] like it's it's it's old now. It came out
[1:27] in 2011. But I think the principles have
[1:29] held up really well and especially if
[1:31] you think about like from a mega trends
[1:33] perspective, the book said that the
[1:35] world's going to get more and more and
[1:36] more uncertain. So our ability to plan
[1:37] and forecast is going to get worse. I
[1:39] think we I think we nailed that one. And
[1:41] that the democratization of technology
[1:42] is going to mean that more and more and
[1:44] more people are going to be able to
[1:45] build faster, cheaper, better products.
[1:48] And so you put those two things together
[1:50] every industry that's been hit with a
[1:51] double whammy with those two things Lean
[1:52] Startup holds up real well. Yeah.
[1:54] Do you think startups are getting leaner
[1:58] or
[1:59] less lean in [snorts] the modern era?
[2:01] And what I mean is that I will see we we
[2:04] have folks on the show all day oh
[2:06] $200 million seed round. It doesn't feel
[2:08] lean. At the same time we hear about the
[2:11] mythical one bill one person one billion
[2:14] dollar company and although there's been
[2:17] some reporting that's been a little bit
[2:18] debunked on it hasn't happened yet, it
[2:20] feels like it is becoming more
[2:22] attainable. You you can run run leaner
[2:25] even if you're just using SaaS products,
[2:27] but also AI agents can do a lot of
[2:29] things. You can answer a lot of
[2:30] questions. You might have slightly lower
[2:32] legal bills just because you're a little
[2:33] bit sharper going into that negotiation.
[2:36] And so I'm wondering on the the net
[2:38] leanness. How how are you processing the
[2:40] modern era? Well, every time we have a
[2:42] mania or a bubble, you [laughter] know,
[2:43] whatever you want to call it, right? The
[2:45] the situation goes bimodal real fast.
[2:47] You have people who are struggling to
[2:48] raise money if they're uh not in the
[2:50] favored category and then uh obviously
[2:52] the money is flowing ridiculous. What's
[2:54] funny is that I've been at the lean
[2:55] startup long enough that people
[2:56] periodically write these articles that
[2:57] are like such and such company proves
[2:59] that lean startup is over. And they
[3:00] always pick a company like Quibi. Okay.
[3:03] So it's like you know, you you just
[3:04] never know what it's going to be the
[3:06] thing. I I think fundamentally like
[3:07] using resources well is an eternal
[3:10] entrepreneurial virtue. So even the
[3:11] people that are over funded, a lot of
[3:13] them run into trouble because now you
[3:15] don't have that uh that reality kind of
[3:17] barking at you all the time to make sure
[3:19] that you're actually building something
[3:20] that people want. It becomes easier and
[3:21] easier to delude yourself the more money
[3:23] you raise. The other the other kind of
[3:25] startup that's emerged is the is the is
[3:28] the lean startup that ends up raising a
[3:30] lot of capital, but simply because they
[3:32] were lean and they were like really
[3:34] scrappy and so they grow super quickly.
[3:36] I'm thinking of like, you know, a Turbo
[3:38] Popper, right? Uh our our friend's
[3:40] company where you know, raised very
[3:43] little money, at a nine-figure run rate
[3:45] now, but extremely attractive to
[3:47] capital.
[3:48] But but but but his entire approach is
[3:51] like how do I maintain that scrappiness
[3:53] even once I have a fortress balance
[3:55] sheet because that's what made the
[3:56] company great from the beginning. It's
[3:58] just like doing things that customers
[4:00] want that they'll pay for, you know, all
[4:02] these things.
[4:03] When it's so easy when you take in that
[4:06] level of money to lose that ethos. Sure.
[4:09] The thing that made it worth investing
[4:11] in in the first place. Yeah. And I think
[4:13] it's interesting like I know quite a few
[4:14] companies that like what you're
[4:15] describing where the fundraising was
[4:17] done for some other reason than for the
[4:18] money. In fact, I I know a bunch of
[4:19] founders who bragged to me, we raised
[4:21] this money and never spent it. Yeah. Um
[4:23] because it can it can make sense to have
[4:24] a fortress balance sheet, but to me the
[4:26] real question is not about like how big
[4:28] or or small is the organization, how
[4:29] much money was they raise, but how much
[4:30] control
[4:32] do the people who are locked into that
[4:33] mission actually have over what happens
[4:35] next? And sometimes when you raise too
[4:36] much money, especially too much money
[4:37] too early,
[4:39] you think, you know, you ring the gong
[4:40] and you're really proud and that's
[4:41] [laughter] great. You know, like it's
[4:43] Okay, that's really fun, but then like
[4:44] have you actually Yeah, or you I get the
[4:46] airhorn. I get you guys with the sound
[4:47] effects. And like sometimes, you know,
[4:49] this you don't the media environment.
[4:51] Like steadily building a product that
[4:52] people love day in day out. Like it's
[4:54] hard. That's not the sexiest story and
[4:55] so sometimes, you know, we get we get
[4:57] distracted by all these other things
[4:59] that that take us away from the one and
[5:01] only one thing that truly matters, which
[5:02] is can you build a great product, build
[5:04] a great company? Yeah. Yeah. I mean,
[5:06] there there are so many uh and a lot of
[5:08] financial reporting sort of misses the
[5:11] changes of control that happen. Like
[5:13] there might be a company that's raised a
[5:15] $1 series seed and then a $5 series A
[5:19] and there's two VCs on the board and one
[5:20] founder. And then there might be five
[5:22] founders on the board and VCs are
[5:25] stuffing $100 checks and they can't even
[5:27] get a board seat because there's so much
[5:28] demand. And which one tells you more
[5:30] about the future of that company?
[5:33] Potentially the governance side. How how
[5:35] are you grappling with the just
[5:37] governance in the modern era? There I
[5:39] mean, I feel like that's a lot of what
[5:40] this book is about. There's so many
[5:41] different paths. There's, you know, PBCs
[5:45] and and really diffuse lots of, you know
[5:48] lots of co-founders having even stakes
[5:50] and then you have the the SpaceX AI
[5:53] men's control in a single founder both
[5:56] can produce you know fantastic products
[5:58] and good financial outcomes but like how
[6:01] should we interpret all the different
[6:03] roads that are available to founders
[6:05] these days?
[6:06] >> Yeah.
[6:06] It's really confusing that's actually
[6:07] part of the reason I wrote the book.
[6:08] Book is meant to blueprint to actually
[6:10] show a new better way forward like the
[6:12] extreme founder control has its problems
[6:15] you know that's like it's called hubris
[6:16] syndrome not the name not to name check
[6:18] any particular founder but you know that
[6:20] can cause some issues but also investor
[6:23] dominated companies really underperform
[6:26] precisely because we have this financial
[6:28] system that pull has this gravitational
[6:30] force that pulls companies down into
[6:32] mediocrity or worse. And the book I
[6:34] document like over and over and over
[6:36] again we we reenact the parable of the
[6:40] the the goose that laid the golden egg
[6:41] and just stab it right through the the
[6:43] heart when we by removing the thing that
[6:46] actually made it worth investing in in
[6:47] the first place. How many times have you
[6:48] gone to a restaurant and you're like
[6:49] look on your phone you're like take one
[6:51] bite and you're like
[6:52] did private equity buy this restaurant?
[6:54] >> [laughter]
[6:55] >> It tastes disgusting.
[6:56] >> No I have the best I have the best
[6:57] example of this my favorite my favorite
[6:59] hotel in the world
[7:02] was bought by private equity
[7:04] and one of the things that every guest
[7:07] would talk about didn't matter at all
[7:09] it's just like it barely contributed to
[7:11] the cost of like you know having a guest
[7:13] there was that every night the hotel
[7:15] would walk around and they would leave a
[7:17] warm chocolate chip cookie and milk for
[7:19] each guest.
[7:20] And literally and and private equity
[7:22] bought the hotel which only had like
[7:25] something like 20 something keys and
[7:27] they immediately removed the free
[7:29] chocolate chip cookie with milk at night
[7:31] thing and I was just so [laughter]
[7:33] such a funny thing to like take out but
[7:36] is exactly the kind of thing when you
[7:38] met you transitioning from
[7:40] you know
[7:41] the this like founder led, you know,
[7:44] family operated business to
[7:47] investor owned.
[7:49] Yeah, what's sad about it is we built an
[7:51] economy where people are routinely
[7:52] rewarded for cutting costs, but never
[7:55] held accountable for the downstream
[7:57] brand and quality consequences of that.
[7:59] So like on the balance sheet, getting
[8:01] rid of the cookie is immediate ROI
[8:02] positive.
[8:04] Yeah, and you can justify it. You can
[8:05] justify it cuz they're Well, the
[8:06] cookie's still on the menu, so people
[8:08] want the cookie, they'll just order. We
[8:10] looked at the data. We looked at the
[8:12] data, a lot of people don't even eat the
[8:13] cookie, right?
[8:15] And so it doesn't matter. And of course
[8:16] No, you got it right. Like how is it
[8:18] possible that the capital structure of a
[8:20] company has a flavor?
[8:22] Like you can literally taste it and it
[8:23] cuz like notice how when you said that
[8:25] private equity took over your hotel,
[8:26] we're all ready to give you condolences,
[8:28] right? Like you could in theory you
[8:29] might be like, "Well, uh having those
[8:30] resources made it better, right? Go grab
[8:31] That's great. And now they're going to"
[8:33] No, no one ever feels that way. And
[8:35] everywhere I go, you know, I've been as
[8:36] I've been doing this book tour and the
[8:36] new book,
[8:38] people are coming up to me to be like,
[8:40] "I know that story. Yes, that happened
[8:41] to me." And they've named like 20
[8:42] different restaurants to me, hotels,
[8:44] like so many service products where And
[8:47] again, it's not about private equity per
[8:49] se, it's that we've built this pervasive
[8:50] force that is just dragging companies
[8:52] down. So if we're going to get down get
[8:54] to the governance question, and I know
[8:55] for founders listening it's like, "Oh
[8:56] god, governance is so boring." But like
[8:58] Important. As I say in the book, if you
[8:59] don't get the governance of a company
[9:00] right, no other decision you make will
[9:03] matter in the long run because you won't
[9:05] be the one making it.
[9:07] So we have to figure out how do we
[9:09] create that like incredible alignment?
[9:11] You've seen it in mission-driven
[9:12] companies, right? Where everyone's on
[9:13] the same page. And how do we protect
[9:15] that special thing from outside
[9:17] pressure? And when you put those two
[9:18] things together, we can create what I
[9:19] call mission-controlled companies that
[9:22] cannot be corrupted by this temptation.
[9:24] Yeah. Uh
[9:26] there's a bunch of different uh
[9:28] things that I want to like click through
[9:30] to get to interrogate that. The first is
[9:34] probably quarterly results, quarterly
[9:36] earnings. Uh I've seen proposals to go
[9:39] to uh every 6 months reporting, and it
[9:43] seems like, okay, that would align
[9:45] public companies with like the CEO could
[9:47] think for 6 months instead of 3 months
[9:49] and take bigger risks and and and uh
[9:51] think longer term. That feels very good.
[9:53] At the same time, it feels like uh the
[9:56] the the the rug that you sweep things
[9:58] under is potentially just getting bigger
[10:01] twice as large or the the closet where
[10:03] you hide the bodies is getting twice as
[10:05] big. Um and I'm wondering, is there a
[10:07] tension there? Am I wrong to think that
[10:09] there's a tension there? Uh because a
[10:11] lot of a lot of like I I I I think
[10:13] about, you know, problems in the public
[10:15] markets with long-term value creation,
[10:17] long-term alignment, but then I also
[10:18] think about uh
[10:20] the the transparency that comes with
[10:22] being public, the regulation that comes
[10:25] with being public, the access to public
[10:27] investors, retail investors that can
[10:29] participate in a company before it's a
[10:31] trillion dollars if it's going to be a
[10:32] great company. So, how how are you
[10:34] dealing with those tensions if there are
[10:36] tensions? Yeah, okay. First of all, the
[10:37] tension is completely real. And you
[10:40] think you got to know is is Long-Term
[10:41] Stock Exchange, the company that I
[10:42] founded,
[10:43] um is the one who filed the petition
[10:45] last year to the SEC to switch from
[10:47] quarterly to semi-annual.
[10:48] >> You're the one. Okay.
[10:49] >> [laughter]
[10:49] >> I somehow just put that together. Sorry.
[10:51] So, obviously I have a I have a a strong
[10:52] strong view about it.
[10:53] >> Cash.
[10:54] Oh, nailed it.
[10:57] Exactly. So, uh and what's funny about
[11:00] it is, okay, so first of all, we have to
[11:01] understand the scale of the problem.
[11:02] You're not going to believe this, but we
[11:03] have really good
[11:04] >> sorry sorry, before we continue, you
[11:05] should have named it like, you know,
[11:08] Eric's Eric's Law or something like
[11:10] that. You're not You're not getting
[11:11] enough credit for this. You're not
[11:13] getting enough credit for this. That's
[11:14] Listen, the memes and everything, that's
[11:15] your department, okay? I just I just So,
[11:17] all right.
[11:18] >> Okay.
[11:18] So, okay, but you've got to understand
[11:20] the magnitude of this problem is insane.
[11:22] >> Yeah.
[11:23] If you look at um other countries as
[11:24] these natural experiments where certain
[11:25] countries have have switched from
[11:27] semi-annual to quarterly reporting or
[11:29] vice versa, and they happened to do it
[11:30] in such a way that not every company
[11:31] changed at the same time and it was
[11:32] random who did which.
[11:34] So, we actually know the valuation
[11:36] consequences of quarterly reporting and
[11:37] it's roughly a 5% loss of total equity
[11:41] value. Wow. Companies are 5% less
[11:44] valuable Interesting.
[11:45] >> when they report quarterly than
[11:46] semi-annually. So, the academic research
[11:48] on this is pretty good and the magnitude
[11:50] of the cost we're talking about so much
[11:52] so many billions of dollars of lost
[11:53] value. It's not because the the like you
[11:57] know, effort to do a quarterly report is
[11:59] expensive although it is expensive and
[12:01] annoying. Rather, when people report
[12:03] quarterly they start to run the company
[12:05] for the quarterly report. So, companies
[12:07] no longer make products, they start to
[12:08] view the quarterly report as the product
[12:11] which means they're basically meme
[12:12] factories. What do I have to do to
[12:14] generate the report that will get me
[12:16] what I want. Now, getting rid of
[12:18] quarterly reporting just by itself I
[12:19] don't think is a very good idea and
[12:20] we'll see what the SEC ultimately
[12:21] decides to do. I think we should replace
[12:24] quarterly reporting with a better like
[12:26] more fullsome disclosure project where
[12:28] long-term investors can actually find
[12:29] out F is going on at the companies they
[12:31] invest in where today companies are
[12:33] strongly incentivized to get out as
[12:34] little information as possible. But,
[12:36] that's kind of broken the partnership we
[12:38] need between long-term companies and
[12:39] long-term investors. That's
[12:41] of course part of why we we created the
[12:42] exchange in the first place. Yeah. Uh
[12:44] talk about uh
[12:46] public benefit corporations and how uh
[12:49] incentive alignment might play out like
[12:51] in in in the longer term when there is,
[12:54] you know, when you get to a stage of a
[12:56] company that's a lot more like Apple
[12:58] than a founder-run like Anthropic is a
[13:00] unique example with set of co-founders
[13:03] but uh that like the the normal Fortune
[13:05] 500 company has a leader at the top that
[13:08] might have 1% equity uh and a board seat
[13:11] but there is a chairman of the board,
[13:13] there's a board of directors, it's much
[13:14] less controlled. But, in that scenario
[13:18] they're reporting to shareholders and
[13:20] they have a fiduciary duty to
[13:21] shareholders. Uh if, you know, you have
[13:23] a company that's, you you broadly held
[13:26] and has diversified board and
[13:29] diversified ownership structure, but is
[13:31] a PBC,
[13:33] how does that play out? Like, what are
[13:35] they doing differently? Is it that the
[13:36] CEO has two different hats and they're
[13:38] mentally taking these on and off
[13:40] throughout as they're decision-making?
[13:42] Or or what is
[13:44] How does that actually play out?
[13:46] Yeah, that would be too hard. The
[13:47] so-called double bottom line, triple
[13:48] bottom line, I think is not worked out
[13:50] very well precisely because it leaves
[13:51] CEOs really confused. Okay, you want to
[13:53] be multi-stakeholder great. Customers
[13:55] want lower prices, but employees want
[13:56] higher wages. Now what? Yeah. So, it
[13:58] kind of leads to compromise. Yeah. But
[13:59] what's interesting, PBC is actually not
[14:02] that new. Okay. For the vast majority of
[14:04] time there have been joint stock
[14:05] corporations on this planet, it was
[14:07] considered obvious by everybody that
[14:09] they should be incorporated to do a
[14:11] specific thing.
[14:13] Mhm. When they're just trying to make
[14:14] money for themselves, they wind up
[14:16] hollowing themselves out. That's what
[14:17] makes them dangerous. It was only in the
[14:18] 1980s that the idea of so-called
[14:20] shareholder primacy came into effect.
[14:22] So, if you like walk by your local park,
[14:24] you will see trees that are older than
[14:26] this idea. This is not some like pillar
[14:27] of ancient pillar of capitalism.
[14:30] >> And in the book I make the case for
[14:31] first of all, we got to get rid of
[14:32] shareholder primacy. I think it's a it's
[14:33] just a terrible idea. But the question
[14:36] is kind of like attacking it is easy cuz
[14:37] the data is so good about all these best
[14:39] practices being so bad.
[14:40] The issue is what do we replace it with?
[14:42] What does mission primacy look like? And
[14:44] I think the key to that is to understand
[14:46] that being a for-profit company is
[14:47] actually great.
[14:49] Making a profit is actually about making
[14:51] the world a better place. That's
[14:52] literally the definition of it. It's
[14:53] like a positive margin transformation.
[14:55] So, in the book I argue and I feel weird
[14:57] doing it on the same day that like Pope
[14:58] Leo made this same point in way in way
[15:01] better fashion. You know, I had hundreds
[15:02] of pages. I only mentioned it in
[15:03] passing. But like literally to make a
[15:06] profit
[15:06] >> Yeah. is to maximize human flourishing.
[15:09] That's what it means.
[15:10] So, now coming back to the PBC, all a
[15:12] PBC does is give the CEO and the board
[15:14] the legal cover to pursue long-term
[15:17] value creation
[15:18] >> Oh. in the face of hostile investors.
[15:20] So, if you go there and say, "Listen,
[15:21] I want to sell the company to Philip
[15:23] Morris cuz they're willing to pay a
[15:24] dollar more per share than it's worth."
[15:26] You need the tool to be like, "No,
[15:27] that's ridiculous. Of course we're not
[15:28] doing that." And that's what PBC allows
[15:30] you to do. Interesting.
[15:32] Uh what do what do you think are some of
[15:34] the most underappreciated
[15:36] companies in history that had that you
[15:39] feel like had mission primacy?
[15:42] Yeah. Yeah, obviously these are profiled
[15:43] in in great deal in the in the book. And
[15:45] what's really interesting is if you talk
[15:47] to people about corruption and say like,
[15:49] "Why do these companies go to you know
[15:50] go to bleep after they get big or
[15:52] whatever?" Most people be like, "It's
[15:54] inevitable. It's human nature. It's
[15:56] companies get old, they get big, there's
[15:57] a lot of money involved, blah blah
[15:58] blah."
[15:59] But those same people if you're like,
[16:01] "Are there any companies you trust?"
[16:02] They're like, "Man, I love Costco."
[16:04] Yeah.
[16:05] It's like, "Well, interesting. Like how
[16:06] come but I thought it was inevitable.
[16:07] Costco's a $400 billion public company."
[16:09] Oh yeah, well they're the exception.
[16:10] You're like, "Well, what about
[16:11] Patagonia?"
[16:12] You got a Vanguard mutual fund? You
[16:13] think? What about you know John Lewis
[16:14] partnership or you already know
[16:16] Hershey's chocolate bar? You ever taken
[16:17] a Novo Nordisk medication? Like there's
[16:18] all these weird exceptions. Mhm. Many of
[16:20] which are decades or even like more than
[16:22] a hundred years old. And what's
[16:23] interesting to me is if you take that
[16:25] whole category of companies as a data
[16:27] set and say, "What do they have in
[16:28] common?" Every single one of them
[16:30] violates pretty much all of today's
[16:33] so-called best practices about companies
[16:35] are supposed to be structured, built,
[16:36] and run.
[16:38] So I think that we actually have really
[16:40] good data
[16:42] that this is not some abstract thing. So
[16:44] like so for example when the founders of
[16:45] Anthropic left OpenAI. So what is that
[16:47] like three or four OpenAI crises ago?
[16:50] >> [laughter]
[16:51] >> Crack up. Anyway, it's like hard for me
[16:52] to keep track but anyway it's like it's
[16:53] been it's been a rough you know it's
[16:54] been a rocky road. Um
[16:56] when they left like was one of the
[16:57] people that they talked to setting up
[16:59] their governance structure. And not only
[17:01] and again I am not taking credit. Okay,
[17:03] don't do the meme thing, okay? I'm not
[17:04] taking credit for Anthropic's success.
[17:06] Obviously I played only a very big part.
[17:07] >> They wanted to call it the Eric PBC but
[17:10] you said I I and I had to talk them out.
[17:11] I was like, "Guys, please please no no I
[17:13] don't you know I
[17:14] >> No no no
[17:15] they they were looking for an idea and
[17:16] you told them like I think you should
[17:17] work on AI. That's what happened.
[17:19] >> Yeah, yeah. They they were [laughter]
[17:20] like maybe thinking of pivoting out cuz
[17:21] they left Open AI and they were like
[17:22] maybe we should give up on AI. They were
[17:23] going to do protein shakes or they were
[17:25] going to do an energy drink and you were
[17:26] like I think
[17:27] >> Don't do this. I just I just talked to
[17:28] you. I said about the IRS CEO. Don't get
[17:29] me in trouble here. Who's going to clip
[17:31] this out of context? You're going to get
[17:32] [laughter] me fired.
[17:34] Okay. But listen, I so I'm not for the
[17:36] record I'm not taking credit [laughter]
[17:37] for their success, nor am I trying to
[17:38] talk smack about Open AI. I know you
[17:40] guys love them. Yeah, yeah. The issue
[17:42] but but the specific thing I think is
[17:43] really interesting is because they were
[17:45] really worried about this specific
[17:47] issue. When I gave them my typical
[17:48] litany of like founder loss of control
[17:50] horror stories,
[17:51] they could see how bad that would be.
[17:54] And in fact
[17:55] it's funny talking about about the about
[17:56] the Pope.
[17:57] I was at an event at the Vatican last
[17:59] year talked about AI governance and I
[18:01] was on this panel with every major AI
[18:03] company, Open AI, Anthropic, Cohere,
[18:05] Palantir, Google, Meta, everyone on the
[18:07] one panel together and me for some
[18:09] reason. And I'm looking down this row
[18:11] and I'm like, oh my god, not a single
[18:12] one of these companies has standard
[18:13] governance.
[18:14] They all consider it to be too
[18:16] dangerous. They got to have somebody
[18:18] playing the role of what's called the
[18:19] mission guardian. But Anthropic to their
[18:22] great credit I think did not want it to
[18:23] be the founders personally holding that
[18:26] uh that special responsibility cuz it's
[18:28] stressful as
[18:29] I know many founders who are trapped in
[18:30] that situation. So they created
[18:32] something called the long-term benefit
[18:34] trust which is like a multi-branch
[18:36] government, right? So you have the the
[18:38] the for-profit PBC and then you have the
[18:40] board of directors accountable to a
[18:42] second entity, this this outside trust.
[18:44] And the data shows that companies with
[18:46] that structure are something like five
[18:48] times more likely to live to year 50 and
[18:50] have like way better long-term value
[18:52] creation metrics, too. So again, I think
[18:54] we have the evidence that there are
[18:55] these better structures, yet most
[18:56] founders are never given this as an
[18:58] option and by the time they find out
[19:00] about it it's too late, they've already
[19:01] lost control. I want to talk about
[19:04] >> one interesting thing is is
[19:06] uh
[19:08] if we move to bi-annual reporting,
[19:11] there's going to be a lot of work,
[19:12] accountants, lawyers are going to have
[19:14] less work, but you're creating a new
[19:16] struc- you know, these much you know,
[19:18] these complicated structures. They can
[19:20] just shift their attention to working on
[19:22] mission mission-aligned companies.
[19:25] Uh yeah, sorry. That wouldn't be that
[19:27] bad, would it? I think I'd like what
[19:30] compared to what they're working on now,
[19:31] [laughter] I think that No, no, I I I'm
[19:32] I'm I'm sort of joking, but at the same
[19:34] time I think it would be a much better
[19:36] use of
[19:37] much better use of their time.
[19:38] >> I I I want to talk about Mondragon. Is
[19:40] that how you pronounce it?
[19:43] I I'd like you to introduce it though
[19:44] first for those who aren't familiar, and
[19:46] then I have some questions about
[19:48] you know, where we go, what lessons we
[19:50] learn from it. But first, how how do you
[19:52] understand that? See, I don't get to
[19:54] talk about Mondragon very often, so I
[19:55] know you did your homework and I just
[19:57] A+. Awesome.
[19:59] Okay, so so it's funny we're talking
[20:00] about the day of the Pope's encyclical.
[20:02] So so a Catholic priest walks into the
[20:05] war-torn Basque region after the Spanish
[20:07] Civil War. So this is not the setup for
[20:09] a joke. It's not like a priest walks
[20:10] into a bar. He actually like went there.
[20:12] Um and instead of like preaching, you
[20:15] know,
[20:16] just
[20:17] comforting people who are being
[20:19] devastated, he had this vision for a new
[20:21] kind of economic reality where workers
[20:24] would be empowered to learn a trade and
[20:26] to own and to control their own destiny.
[20:28] And to make a very long story short, he
[20:29] started to create this network of worker
[20:31] cooperatives.
[20:33] Um where the workers themselves own the
[20:35] means of production and they build all
[20:37] kinds of started with like industrial
[20:38] equipment and now make all kinds of
[20:40] stuff. And and if you zoom out today,
[20:42] Mondragon is this gigantic company that
[20:44] employs 90,000 people in Europe, one of
[20:46] Spain's largest companies, makes
[20:48] elevators and and have a
[20:50] grocery store chain and all kind of like
[20:52] if you look at it from the outside, you
[20:54] say, "Oh, that's like a fully
[20:55] diversified industrial conglomerate."
[20:57] Makes sense. Like making a lot of money,
[20:59] that's perfectly sensible. But if you
[21:01] zoom in,
[21:03] there's nothing about Mondragon that
[21:04] actually resembles a typical for-profit
[21:06] corporation at all. It is a network of I
[21:08] think 80 or 90 of these independent
[21:10] worker cooperatives that work together.
[21:12] They have like a congress where they
[21:14] send representatives and they
[21:15] self-govern. And any of the cooperatives
[21:17] can leave the network if they don't get
[21:18] benefit from the central services that
[21:20] it provides. So this is an example of
[21:22] what I call a mission-locked
[21:24] constellation. Which is
[21:26] a a set of entities that when you zoom
[21:28] out, the customer, the investor, and
[21:31] even from the outside perceives it as
[21:32] one thing, but it's actually uh many
[21:35] things. Now, be honest. If I pitched you
[21:39] this is my business plan that I was
[21:40] going to create 90,000-person network of
[21:42] 80 like if I pitched it to you, wouldn't
[21:44] you say it was impossible?
[21:47] Um well, that's my question.
[21:49] >> work.
[21:50] Uh yeah, I I would I would say
[21:54] it's not that it could never work, it
[21:55] would just be extremely hard to
[21:56] reproduce. Like I think if you got a
[21:58] really talented group of people and you
[22:00] tried to rebuild something like this,
[22:02] even knowing all of the mistakes and
[22:05] challenges that this last one had, it
[22:07] would still be very difficult and
[22:09] probably end in failure. But
[22:12] Right. So isn't it possible
[22:15] >> Well, it's clearly the fact that it
[22:16] exists obviously proves that it's
[22:18] possible, but I think most people when
[22:20] they're thinking about how to start a
[22:21] company, like just have a very narrow
[22:24] view of what can be done. Cooperatives
[22:25] employ I don't have the stat in front of
[22:27] me like millions of people worldwide.
[22:28] Like this is not some like weirdo niche
[22:30] thing.
[22:31] It's actually like it's a tool that we
[22:34] can use. Now, in the book I try to go
[22:35] through all the different ways you can
[22:37] create mission lock.
[22:41] Yeah, [laughter] you guys you guys know
[22:42] REI. REI is a huge Vanguard episode like
[22:44] REI is well known. I guess my I I guess
[22:46] my question with it is that so I I I I
[22:49] agree with you. Like you got me. If if
[22:51] somebody came to me and pitched me that,
[22:52] I'd be like, "Ah, that's too
[22:53] complicated. That doesn't pattern match
[22:54] to like the usual series A. Like I
[22:57] I don't I don't get it. I'm out." Right?
[22:59] But is that why we don't have an
[23:02] American Mondragon in the modern era?
[23:04] You know, like that like why is there no
[23:07] Why aren't there as many like, you know,
[23:09] Mondragon style counterparts to the
[23:13] monolithic traditional founder-led
[23:16] companies? Because the I've heard people
[23:18] pitch this as like America would be
[23:19] better if we had more co-op network to
[23:22] like Mondragon style entities. And And
[23:26] And And my initial pushback has always
[23:28] been like, well, it's a free country.
[23:29] Like I don't I don't know that that's
[23:31] illegal. I think it's legal. I think you
[23:33] could just go do it if you wanted to.
[23:34] So, is it that people don't want to or
[23:36] is it that like Jeff Bezos is secretly
[23:38] out there like killing people who want
[23:39] to try to start the Mondragon of Amazon
[23:42] and like compete with them? Like what's
[23:43] going on? It's a That's a really good
[23:45] question. And like so for example, so
[23:46] credit unions. Credit unions are the
[23:48] closest thing we have in the US that
[23:49] serves like I think it's like 40% of
[23:51] American households have an account at a
[23:52] credit union. So, they're pretty big.
[23:53] They're all not, you know, they're
[23:54] not-for-profit member-owned financial
[23:56] institutions. And the fact that they
[23:57] exist holds big banks accountable in
[23:59] really interesting ways. So, that's like
[24:01] maybe the closest. The The point that I
[24:03] was trying to make in this book is not
[24:05] so much that we need to copy Mondragon
[24:06] or any particular company, but rather
[24:09] collectively these are called
[24:11] alternative structures control something
[24:13] like 5% of world GDP.
[24:15] >> Yeah.
[24:16] So, I don't want to convince anybody to
[24:17] do anything. But for founders that want
[24:20] to attempt something like this, most of
[24:22] them have never been given the
[24:23] permission to even try. Like if you talk
[24:25] to most lawyers, bankers, like and you
[24:27] just say, "I'm thinking about doing
[24:29] this." They're always like, "Oh, honey,
[24:30] that's so sweet that you're concerned
[24:32] about mission."
[24:32] >> a lawyer C corp with a safe note? Why
[24:34] don't you worry about getting your first
[24:36] customer? Yeah. Yeah, exactly. Just go
[24:38] focus on the selling stuff. But one of
[24:39] the most important ideas in the book is
[24:41] this principle I call it's always too
[24:42] early until it's too late.
[24:44] >> Mhm.
[24:45] So, what happens is you talk to all
[24:46] these advisors and like, "Oh, it's too
[24:48] early." Oh, they're so condescending
[24:49] about it, too. Like, "Don't worry about
[24:50] that. Just get And then one day I've
[24:52] actually been in the room with the CEO
[24:53] like talking to their CFO and bankers
[24:55] and GC and everybody there and being
[24:56] like, "Hey, whatever to that like
[24:57] mission protective provision thing that
[24:59] Eric was talking about? Did we ever get
[25:01] around to doing that?" And they're like,
[25:02] "Oh, you were serious about that?"
[25:05] Yeah, I told you to do it. You said it
[25:06] was too early. I got yeah, now it's too
[25:08] late. Uh, it's too late. When was it the
[25:10] right time?
[25:11] That's wild. Yeah, you should have said
[25:12] something, man. Like I did say so. I
[25:15] just feel like that has become
[25:17] the way that this is done and it's why
[25:18] so many founders lose control. Mhm.
[25:21] Japanese Keiretsus.
[25:23] Alternative? Do they fit in the category
[25:25] of alternative structures? Are they
[25:26] good? Are they bad? Like I only know
[25:28] about them from the very highest level.
[25:31] Tell me I I imagine you've interrogated
[25:33] them more. Uh, are do they fit it? And
[25:36] and is Big Tech emerging into Keiretsu?
[25:38] Like Google owns Anthropic and SpaceX
[25:41] and and Microsoft owns Open AI. Like
[25:43] we're sort of maybe walking our Yeah,
[25:46] we're maybe walking our way into a
[25:48] Keiretsu. I don't know. Uh, but
[25:50] >> Let's see. Let's see after the financial
[25:51] engineering recedes. Yeah, yeah, yeah.
[25:53] Who owns who owns who owns who? Yeah.
[25:55] >> [laughter]
[25:55] >> The accounts while I feel like
[25:57] Yeah, I I got into the I originally got
[25:59] into all this from studying Toyota. Do
[26:01] you remember lean startup comes from
[26:02] lean manufacture. Yep. And it's really
[26:04] funny. I can remember when I first was
[26:06] going around just like when we met 2012,
[26:08] talking about lean startup. People would
[26:10] sometimes be like, "Hey, you're telling
[26:11] us to create the next Toyota, but you're
[26:13] also taking up telling us to build a
[26:14] venture back company and take it
[26:15] public?" Yeah. Like WTF? Like I thought
[26:18] the public markets are super short term,
[26:19] but if you read any books about Toyota,
[26:20] they're super long term. So I actually
[26:22] like spent a lot of time on that
[26:23] question of like have we just
[26:24] grandfathered Toyota into the modern
[26:26] economy, but even when I was in Japan, I
[26:28] remember people talking to me about we
[26:29] don't even create them anymore. Yeah.
[26:31] Like we we have these legacy companies
[26:33] that have this really unique cool
[26:34] structure Mhm. uh, that are kind of a
[26:36] hybrid of public and family run. Like
[26:38] it's a little bit in between both.
[26:39] I think
[26:41] if you look at the data,
[26:42] these structures only work if the
[26:44] company in question has a really strong
[26:46] ethos to accomplish something other than
[26:48] making money. Mhm. That really is like
[26:50] that's what you see like what's that's
[26:51] what unites everybody from like these
[26:53] like really progressive companies we've
[26:54] been talking about to Elon to everybody.
[26:56] If you have a larger vision
[26:58] that is long-term in nature that is like
[27:01] trying to to whether whether something
[27:03] really lofty like I want to fix climate
[27:05] change or I want to go multi-planetary
[27:06] or something really simple like I just
[27:07] want to create high-quality products.
[27:10] No matter what it is,
[27:11] if you have that vision, you are a
[27:13] business revolutionary whether you know
[27:15] it or not, whether you admit it or not
[27:16] because the economic system we have has
[27:18] been designed to destroy these companies
[27:20] to to suck the marrow out of them cuz
[27:22] they're too weak to stand up for
[27:24] themselves. So, if you look at the
[27:25] historical examples whether you're
[27:26] talking about Mondragon or the Keiretsu
[27:28] or all these different structures like
[27:30] they're only good if the thing they're
[27:31] protecting is good.
[27:33] So, the question for me is like as
[27:35] founders, as investors, as leaders, as
[27:37] board members, like how can we create
[27:39] more and more and more of these
[27:40] companies that have a real long-term
[27:42] mission that are what I call
[27:43] mission-driven, not just like
[27:44] mission-hopeful.
[27:46] And when you do that, you see this like
[27:48] really counterintuitive economic
[27:50] benefits that you get. So, it's like you
[27:52] also get moral and and ethical benefits
[27:53] too, you know, like but that's not even
[27:56] really the reason to do it. You can do
[27:57] it just on the basis of that economic
[27:59] argument alone. Do you think that AI
[28:02] will force companies where it was
[28:05] otherwise maybe too late to maybe over
[28:08] time, you know, sort of massively
[28:11] sort of rework any of any of their
[28:13] corporate structures? I mean, the
[28:14] example I'm thinking of
[28:16] that is notable recently is Samsung had
[28:19] 48,000 workers basically say like give
[28:22] us a much greater share of, you know,
[28:25] AI-driven profits or we're not going to
[28:28] work anymore and started a, you know,
[28:31] pretty big negotiation. I could see over
[28:35] time that happening at at more
[28:37] companies, specifically
[28:39] um ones that are, you know,
[28:43] you know, facing uh
[28:45] disruption due to due to artificial
[28:47] intelligence.
[28:49] Yeah, there's two things I think that
[28:50] that are are pushing in that direction.
[28:52] The first is the data on employee
[28:54] ownership creating commercial advantage
[28:56] is actually really strong. So, I didn't
[28:58] know this I I was always a big everyone
[29:00] in Silicon Valley like we're into
[29:01] employee ownership, but I didn't know it
[29:03] was like an ideological thing. I thought
[29:04] it was just good good practice. But
[29:06] actually we have really good data. There
[29:07] was a big meta study of like 55,000
[29:09] companies with various levels of
[29:12] employee ownership and they found that
[29:13] employee ownership exhibits dose
[29:15] response. Like 10% ownership is better
[29:17] than zero, 50% is better than 10, 100%
[29:19] is better than 50. Not just in terms of
[29:21] employee welfare, but in terms of
[29:22] commercial success of the company,
[29:24] revenue growth, stuff like that.
[29:25] The second thing is I really think
[29:28] AI is going to make collective action
[29:31] problems like very different, very
[29:33] different than it was before. So, for
[29:35] example, an alternative production
[29:36] system piece of wisdom was that if
[29:38] you're doing a lean transformation,
[29:39] taking cost out of a business, it's not
[29:41] ethical nor is it effective to ask the
[29:43] workers themselves to contribute to
[29:45] their own firing.
[29:47] Like nobody wants that. So, so they're
[29:49] going to sabotage the effort, but also
[29:51] it's just not right. You're that's just
[29:52] fundamental right. You should take the
[29:53] savings you're getting from whatever the
[29:55] thing is and use it to grow the
[29:57] business. Like if the all these CEOs who
[29:59] are like they're getting a hard-on for
[30:00] laying people off using AI, like if they
[30:03] were serious about how powerful they
[30:04] think AI is, they'd be trying to use it
[30:06] to gain competitive advantage. Like I I
[30:07] call BS on that whole thing. So, I think
[30:10] you're going to see a lot of a lot of
[30:11] companies who who actually sincerely
[30:13] believe in this possibility realize that
[30:14] we have to enlist our employees in it.
[30:16] This is existential for our business.
[30:18] We're going out of business if we don't
[30:20] do it. We need to be allies with labor
[30:22] to get it done together. I think that
[30:23] alliance is going to be far more
[30:25] powerful than what we currently teach
[30:27] the way we teach leadership today, which
[30:28] is this very zero-sum game thing. Well,
[30:31] what was cultural the primacy is really
[30:32] the idea that companies should treat
[30:35] their employees and their customers like
[30:36] a resource to be mined. One of my
[30:39] favorite quotes in the book is, if
[30:41] you'll indulge me, there's a Wall Street
[30:42] analyst who was criticizing Costco.
[30:45] He said something like, "Costco takes
[30:47] money that rightfully belongs to
[30:49] shareholders and instead invests it in
[30:51] improving the customer experience."
[30:53] >> [laughter]
[30:53] >> Like, that's supposed to be a criticism.
[30:55] Like,
[30:56] "Yeah, but what are we doing here?"
[30:57] >> [cough]
[30:58] >> That's how you get $1.50 hot dog.
[30:59] >> My favorite my favorite bit in here from
[31:01] Costco is I I'd heard this quote before.
[31:04] I thought it was just a meme, but from
[31:07] Costco CEO Jim is it Sinegal? Sinegal.
[31:10] Sinegal, yeah. Sinegal. If you if you
[31:12] raise the effing hot dog price, I will
[31:14] kill you. Figure it out to then CEO
[31:18] Craig Jelinek in in 2008. I always I
[31:21] seen that quote before. I thought it was
[31:22] just a joke, but I guess he actually
[31:24] said it, which is remarkable.
[31:25] >> Oh, he actually said it and in fact he
[31:26] said that and another quote, which is he
[31:28] said that if if Costco raised the price
[31:31] of a of a dollar bottle of ketchup by 3
[31:33] cents,
[31:34] they would sell the exact same number of
[31:36] ketchup, right? Like, no one would
[31:37] notice.
[31:37] >> Yeah. They did that across the whole
[31:39] store, 3% across the board raising
[31:41] prices, they would increase their net
[31:43] income by 50% and not lose any sales.
[31:47] Yeah.
[31:47] So, why don't they? He says, "It's like
[31:49] the business equivalent of taking
[31:51] heroin." Mhm. You do it once and then
[31:54] you got to do it again and again and
[31:55] again. Next thing you know, you're not
[31:56] the low price leader. Low price leaders
[31:58] are the are the easy way. Now, that
[31:59] quote and the hot dog quote are the
[32:01] source.
[32:02] >> Yeah. They are memes online and I was
[32:03] like so worried that I was going to
[32:05] quote him incorrectly that I actually
[32:06] contacted Costco PR and they put me on
[32:08] the phone with him. They were so nice to
[32:10] them. They put me on the phone with him.
[32:11] I was like, "Is it Did Is this really
[32:12] true? Did this really happen?" He
[32:13] confirmed it to me.
[32:15] >> He confirmed it to me personally. So,
[32:16] yeah, I think this like very distinctive
[32:19] countercultural way that they have run
[32:21] that company now for 40 years. The $1.50
[32:23] hot dog and everything. Like, what's
[32:25] interesting to me is
[32:27] when I tell people that story about the
[32:29] hot dog,
[32:30] nobody ever says like, "How come the COO
[32:32] was trying to raise the price?"
[32:34] Cuz of course he was. Like, we've all
[32:36] been trained that that's You can you if
[32:38] you can get away with screwing people
[32:39] over, you always do it no matter what.
[32:41] You raise margins, margins are a source
[32:42] of strength. But Costco is
[32:44] I think built on a very different
[32:45] philosophy, which is that margins can be
[32:47] a source of weakness. Jeff Bezos
[32:48] understood it. He used to always say,
[32:50] "Your margin is my opportunity."
[32:52] So, when you are too you're making too
[32:54] much money, when you are being too
[32:56] extractive, you're actually harming your
[32:58] competitive position in the long run.
[32:59] And the fact that we're consistently
[33:00] incentivizing that all across our
[33:02] economy is I think a bit of a travesty.
[33:04] Uh
[33:05] there was a recent story
[33:07] Everlane was acquired by Shein.
[33:09] Everlane, you know, darling of Silicon
[33:12] Valley, you know, raised a bunch of
[33:13] venture, very strong mission, ultimately
[33:17] to get swallowed up by the beast that it
[33:20] sought to displace. Uh Michael,
[33:24] uh the founder, is a buddy of mine. I He
[33:27] seems very fired up. There was a leak
[33:29] earlier today that he's working on
[33:31] something new in apparel. How would What
[33:34] What is your What is your kind of
[33:35] general advice to
[33:38] somebody that wants a mission a a
[33:41] company to have mission primacy? Like
[33:43] what is what is kind of the
[33:46] There's no Stripe Atlas equivalent
[33:48] today. You can't just go press a button
[33:50] and make one of these. But how does
[33:52] somebody get started?
[33:54] I'm working on it. I'm working on it,
[33:55] obviously. Yeah. The book The book has a
[33:57] QR code actually has a really detailed
[33:59] implementation guide. And we have like
[34:00] an incorruptible term sheet, all kinds
[34:02] of doc like legal docs, the whole thing
[34:03] if you want to for those that want to do
[34:05] that.
[34:06] But but for for your friend and for so
[34:08] many people who've been through this,
[34:10] I've personally counseled I can't tell
[34:12] you how many mission-driven founders who
[34:13] get betrayed.
[34:15] The company gets destroyed. They get
[34:17] ousted, whatever. And then you talk to
[34:19] them afterwards. I I just had this
[34:20] conversation with Whole Foods' John
[34:21] Mackey.
[34:22] I I tell a bunch of stories in the book
[34:24] of people who've been through this. And
[34:26] you ask them about it and they really
[34:28] take it personally.
[34:30] They're like, "I failed. This happened
[34:31] to me. I should have tried I didn't
[34:32] trust the right people. I told I told a
[34:34] story in the book of a founder who who
[34:35] on their deathbed was like, I just
[34:37] didn't trust the right people, I put the
[34:38] wrong people on my board. We personalize
[34:40] it, which means we keep the structural
[34:43] causes invisible. We don't see how it's
[34:46] not personal. This is a force that is
[34:49] dragging us down. So, I tell the story
[34:51] even of a really close friend of mine,
[34:52] great entrepreneur who was just
[34:54] tragically ousted by his employees onto
[34:56] a new mission-driven company. I remember
[34:57] asking him, "Dude, on the new company,
[35:00] what are you doing differently by way of
[35:01] governance?"
[35:03] And he was like, "Like what?"
[35:05] It didn't even occur to him that there
[35:06] was like any possible any possibility
[35:09] that the new company could have a
[35:10] different outcome. So, for your friend,
[35:12] there's two things we got to do, okay?
[35:13] Just two.
[35:14] One is what I call the path of ethos. We
[35:16] have to build the company operationally
[35:18] to stand for something. The great Sol
[35:20] Price, the father of modern retail, the
[35:22] the progenitor behind Costco, he called
[35:24] it being a fiduciary to the customer.
[35:27] Who would you rather die than betray?
[35:29] Write it down. Make that the operating
[35:31] system of the company in its management
[35:33] structure, in its business model, in its
[35:35] culture. The second thing we have to do
[35:37] is what I call the path of integrity. We
[35:39] have to create companies that are
[35:40] capable of making and keeping promises.
[35:43] Like that have structural integrity, so
[35:45] they don't give in to inner temptation,
[35:46] they cannot be bullied from the outside.
[35:48] You try to buy them, they can say FU. If
[35:50] you try to incentivize them to do some
[35:52] bad things, they have the structural
[35:54] strength to resist. And that's where
[35:56] things like PPC, board mission pledge,
[35:58] the long-term benefit trust, like that's
[35:59] where many of the kind of so-called
[36:01] governance structural best practices
[36:03] that we currently are taught have to go
[36:04] by the wayside. When you have that
[36:06] special formula of ethos plus integrity,
[36:09] you have a company that is, wait for it,
[36:12] incorruptible.
[36:14] >> [laughter]
[36:16] >> I have to tell you this.
[36:19] Thank you.
[36:22] I was
[36:23] I was talking to a founder yesterday, I
[36:24] was giving them advice, and uh they're
[36:27] with a with an idea that a lot of people
[36:29] have raised venture to do in the same
[36:31] way Bezos talks about your margin is is
[36:34] is
[36:35] uh my opportunity. I was telling this
[36:37] founder like your competitors raising
[36:39] venture is your opportunity because
[36:42] they're going to have to do a bunch of
[36:43] things that aren't really aligned to
[36:46] what would make the product great for
[36:48] customers or what would make the the
[36:49] product that you really want. And what I
[36:52] like about this approach is setting
[36:54] things up in a way
[36:55] that uh a lot of the problems that
[36:57] you're talking about are problems where
[36:58] you have other shareholders and there's
[37:00] other people that have a stake in what
[37:02] you're doing and that's most businesses
[37:04] will end up that way over time. But if
[37:06] you can find a way to create a corporate
[37:08] structure that mimics the found the the
[37:11] insane mission-driven founder and allow
[37:13] that that that uh you know the the
[37:16] entity to maintain that even after the
[37:18] founder is gone, this sort of permanent
[37:20] structure, I think it would be
[37:22] incredibly powerful. So, thank you for
[37:24] coming on.
[37:24] >> Yeah. Uh thank you. Thank you for saying
[37:26] that. I will say, you know, obviously
[37:27] you've heard I believe in feedback. I
[37:29] really like it. It's kind of my thing.
[37:30] Anyway, so I had a lot of people test
[37:32] read the book, you know, maybe 600
[37:33] people generated something like 10,000
[37:35] comments. So like I really I I eat my
[37:37] own dog food, you know.
[37:37] >> Yeah, that's right. And the thing I'm
[37:39] the most proud of of that set of people
[37:42] is I'm I think we're up to five or six
[37:43] of them now. You know, it's like we're
[37:45] coming up on 1% of the people who read
[37:46] the book so far have reached out to me
[37:48] to say that they had a new business idea
[37:50] >> Mhm. that they wouldn't even considered
[37:51] before. Mhm. Because they were able to
[37:53] use this framework to see new
[37:55] opportunities to make a profit that they
[37:57] they just were blind to before. And a
[37:58] bunch of them have that just the thing
[37:59] you were talking about a second ago like
[38:01] that there's some category where
[38:04] everybody hates all the vendors. Mhm.
[38:06] Cuz they're all like they're all
[38:08] you know, they're all
[38:09] extractive. You know,
[38:10] they're like what if we had a category
[38:12] what if we had a company that category
[38:13] that competed by being trustworthy to
[38:14] companies? You're seeing that obviously
[38:16] in AI, but you're seeing that in so many
[38:17] categories where it's like, oh,
[38:19] that's actually very simple to make a
[38:20] business like that if you take this idea
[38:22] seriously from the beginning. So,
[38:24] anyway, very excited to be here on
[38:25] Launch Day with you guys. What else What
[38:26] else can you do but TVM to get the word
[38:28] out about? Congratulations. Super super
[38:30] super exciting. And that's to you, too.
[38:32] Hopefully we can talk soon. We'll see
[38:34] you. Goodbye.
