It's been fifteen years since I wrote The Lean Startup, and in that time I've seen some things. In both big companies and tiny startups, NGOs and governments, in almost every industry you can name.
I've helped a lot of people create a lot of amazing companies, but I've also seen so many ways this can go wrong. There's a darkness in our industry that we often don't talk about.
I kept watching good companies drift away from the missions they were founded on. Not because anyone woke up one day and decided to be evil, but because the structure they were built on slowly pulled them there. I call that pull "financial gravity."
We've all experienced watching a company we love or admire be warped and broken beyond recognition; until it's a husk of its former self, or worse. I wanted to understand why. And I wanted to know what all of us can do to stop that from happening.
My new book _Incorruptible_ is my attempt to explain the invisible forces that shape organizations, and how a handful of companies (like Costco, Patagonia, and Novo Nordisk) have successfully been structured to resist gravity and thrive for decades -- or even centuries.
Along the way, I founded the Long-Term Stock Exchange, co-founded an AI R&D lab called Answer.AI with Jeremy Howard, and helped a number of notable companies with their governance (yes, including Anthropic).
I won't pretend I have this all figured out, but I've probably spent more time than is healthy on the "why do good companies go bad" question. Ask me anything!
Now, here is my question. I personally got disappointed in how most “early” and “small” startups operate. I have short experience to be fair but their sole goal seems to be how to get funds and grants and how to get higher valuation. They didn’t have visions and sustainability in mind. It felt like they are doing gambling rather than running a business. What do you think of this and how would you explain?
"I came to (Jim Sinegal) once and I said, ‘Jim, we can’t sell this hot dog for a buck fifty," Jelineck recalled[..]. "We are losing our rear ends.’ And he said, ‘If you raise the effing hot dog, I will kill you."
That's not structure, that's leadership. They were about to change the price, but one guy at the top with authority and an opinion said no. You could say "it's structure" that there was one guy at the top with authority, but it still depends on him having the right opinion. You need both a good structure and an unwaveringly idealistic (and correct) leader.
If you think Costco has endured only because of leadership, because of its strong ethos and its immense size, because you think it's just too big for Wall Street to mess with, you are not correct. My friend, nothing is too big for Wall Street to mess with. Wall Street has tried many times to dismantle Costco's ethos, and every time the unique structure of Costco is what has allowed them to resist.
Which it doesn’t seem you have refuted in any meaningful way. You just restated what the parent comment is responding to with no further reasoning as to why leadership doesn’t account for it.
What I hear you saying is that the original comment simply said that leadership by itself is enough to preserve the Costco ethos. It didn't say anything about size or Wall Street or anything else. Is that right?
The reason I responded the way that I did is that the claim that something by itself is enough has to explain why most companies are able to be destroyed, even though they have really good leadership. I think the common answer when people ask about Costco is that the reason why, for them, leadership was enough when it hasn't been for other people, is something like they're so large. Does that make sense?
Either way, in order to say that leadership by itself is sufficient, we have to figure out why Costco has been able to endure as a gigantic public company when, for most companies, the larger they become, the more valuable they become as a target. Meaning that Wall Street or other financial forces will intervene to change their values.
And the answer, which I lay out in the book (not in my original comment), is that Costco is protected by a very distinctive thing I call a "governance fortress." This fortress (and not merely their leadership) is the reason why they have been able to endure for forty years.
In fact, the predecessor company of Costco, spiritually speaking, was a company called FedMart that had the leadership and ethos but did not have the fortress. I'll leave it to you to read to find out what happened to them.
I see size as negatively correlated (maybe as a semi-direct cause) with preserving company mission. Hence why I was confused by you addressing it. It would never cross my mind to argue that size has protected Costco.
I haven’t read your book, just skimmed the post so I don’t know if it’s convincing. But I’d like to argue that those companies failing their mission is proof that they did not have good leadership. however, that makes the argument a little circular.
I’m aware of FedMart (Acquired podcast on Costco is very entertaining). I think Sol Price was a bad leader and selling out to Hugo Mann was putting profit above other things.
Yeah, there's no rule structure that can't be skirted and subverted by new owners with different objectives. The most resilient way to preserve your values is to:
Your successors don't need to be your literal children, but if you turn your company over to "strangers with money" you can't be surprised when they do what they want with their new possession.It sounds like a really toxic working environment. I sincerely hope they made up this story as an ad about how cheap their hot dog is.
Or, as you say, it could be a really horrible environment - but I don't think you can tell from one anecdote.
That said, you seem to have archetypes above Costco, Patagonia, and Novo Nordisk that avoided it.
Can you comment on not what it takes to build such a company, but rather how to transform companies like those that I worked for into ones that resist gravity? Or is it too late?
I don't really think there's a short way for me to answer this question without having to summarize the entire book. This is what it's about. I'll simply say that the second part of the book, what I call "The Blueprint," is about both the governance and leadership tools that we have available to us to turn these organizations into the long-term, mission-driven, incorruptible places we all want to work at.
I wrote a blog post called "Revenue Model is More Important than Culture" (it made the #1 spot on HackerNews a few years ago) arguing that the way to avoid that corruption is by making sure the business model is immune to it, but having read your thoughts, I'd say your argument (structure being the dominant term) is even stronger.
It's funny we both land on Google as a main example. I had this quote "I’m going to pick on Google a little bit here, but I do love that company. I think there’s a lot it can improve on, but it’s still one of my favorite and least “evil” large tech companies.", and honestly and sadly, I don't even know if I'd agree with the latter part of that statement anymore.
https://somehowmanage.com/2020/09/20/revenue-model-not-cultu...
What do you say to this interpretation? In particular do you think most cases could be framed as "the key audience/customer/market has shifted"? Is it possible to find greater financial success while doing things the primary audience doesn't like?
This, of course, makes on boarding and new user acquisition harder, and can severely limit product growth. And this also leaves space for simpler products to come along and cater to the novice market. Or, companies can fight this tendency, and remove features, or make them harder to use, in order to cater to less demanding demographics.
What I'd be curious about is what spotify looks like as their market share levels off. Do they keep catering to the automatic playlist crowd, or does their average user get more sophisticated over time?
I think these changes very rarely have to do with what customers want shifting, but when people say "the market," they are often confused about whether they're talking about customers or our financial markets. Frankly, it's far more often for this kind of correction to originate in the pressure from financial markets than any other single source.
Naively of course it seems like investors don't like it when sales go down, so there'd be an extremely tight link between financial market and product market feedback. But I imagine you disagree, that this breaks down easily and creates problems?
You can also see the various accolades, reviews, and awards that it's accumulated so far.
However, I have to express some skepticism that through regulations and reforms, we can reverse the entire incentive structure for public investment to be aligned with stewardship rather than extraction. How do you plan to defy the "financial gravity" between you and this dream?
Finally, I think that Claude Code has misinterpreted your request to summarize your interviews and events. Instead, it created a marketing and promotional website with not a summary to be found!
Your skepticism is well earned, and all I can really say is that I hope you'll read the book and judge for yourself. I tried really hard to lay out the evidence for two things that are necessary to address this skepticism:
1. We have to see that these structures are changeable. The economy that our grandparents inhabited is almost unrecognizably different than the one we inhabit today. So too, we can imagine that the economy that our grandchildren will work in may be unrecognizably different to us. Why does that necessarily have to be in a negative direction? What was once changed by human hands can be changed again.
2. I know this is hard to believe, but there's actually a lot of evidence that mission-driven, purpose-driven, trustworthy organizations outperform their conventional counterparts. The fact that this is so gives us a lot of tools we can use to drive the change we want to see.
On top of all that, we are living through a massive generational shift. The new generations have lived their whole lives under this maligned structure, and they are sick and tired of it. If you think they are going to sit quietly by and allow those structures to persist, I think that is very unlikely. Which means we're going to have change one way or the other; the only question is how violent and difficult is that revolution going to be? We'd be much better served to change proactively because we know what the right thing is.
I have to say, to your first point, that exploitation (of humans, labor, resources, consumers, etc.) has always been the primary driver of accumulating large wealth under capitalism. Sure, "innovation" sometimes has a role in softening the blow, but let's be real.
That was true in our grandparents' time... and their grandparents' time... and their grandparents' time. While their economies looked very different, the same structural incentives were in place and certainly did not curb unethical behavior one bit.
It has taken a long time for the piper to come for his full payment, but we can all see now that the world is burning, poisoned, and suffering as a result. We can no longer eat freshwater fish due to the massive amounts of PFAS in our lakes and rivers. The billionaires are trying to pretend they can escape the disaster by building their bunkers on remote islands or trying to colonize Mars.
I want to have some optimism in the newer generations to create positive change here, but I can't help but look at what happened to the idealism of the 1960s. The counter culture was right about the societal benefits of renewable energy, organic food, vegetarian diets, ecology, egalitarianism, civil rights, and more. But somewhere around Reagan many in that generation sold out and those great ideas were simply appropriated and fed back into the profit-machine that rewards exploitation. Today we have "certified organic" labels on food products, but that term has been watered down to almost nothing by the marketing departments, politicians, and lobbyists.
Anyhow, I obviously need to keep my pessimism at bay. LOL You have convinced me to give it a read!
I used AI extensively in the research, editing, and promotion phases of creating the book (and even shared screen with a few podcast hosts who wanted to see the solveit platform from Answer.AI up close). To be clear, I never let the AI write for me; I am not a fan of "vibe creating" of any kind. Instead, I tried to use the AI to improve my own skills so that the final artifact was better than it would have been before.
I know people are up in arms about this right now, but shouldn't at least some of blame for that fall on the tech industry itself, for how these tools are designed, promoted, and sold? I think in the long run, society will achieve a more healthy equilibrium. But in the meantime, it's gonna be a bit rocky.
I do attribute a lot to specific people. Concretely, to much of the intitial team, who they recruited on the research/infra side, and some very close personal relationships within research/infra. That dynamic, paired with their unwillingness to accede to something against their values, is what I credit for some atypical decisions and outcomes [1].
Things regulary go "corrupt" in parts of the company; it's hard to scale without importing culture from big tech. Sometimes, the defense was ICs escalating issues, Dario talking to ICs, and then shaking things up.
But this process takes time, and it doesn't lead to a full reversal; a bad/misaligned hire has reverberating impacts. Many folks are still driven by values (even if their values are not your values!), but scaling dynamics seem to be evolving like any other org – just at a higher employee count and revenue numbers.
I do place trust in specific people who work at Anthropic, but I wouldn't place trust in Anthropic the organization. It's an organization that's wont to change, regardless of its structure.
[1]: https://news.ycombinator.com/item?id=47174423
I really wonder if it's possible to avoid these dynamics, even if you try really hard.
If not, it seems to me that goal alignment is the main benefit of a hypothetical lean AI company where the middle management is 1% people and 99% tokens. When most of your decision-making is not being siphoned by politics, your output scales far better with respect to input resources.
With respect to OP (who has a unique vantage from inside), I do agree with this on principle. When there are uncommon outcomes, there must be uncommon structure imho. A "good structure" is like oxygen, water, or peace: When it's well-maintained and well-distributed, one might not even notice it's there, nor spend much time being grateful for it. It's banal, but "what do you mean? isn't this just how things would always have been?" is both beautiful and tragic.
Imho if we could figure out how to have a "loud peace" (in all the ways that this might mean), we'd have figured out an important way of sustaining the world and ourselves.
I get the sense you were feeling at odds with my framing? I wonder if it's that you're picking up that I believe "structure" is above any one person or set of people. In my conception, leadership is just part of structure, a key maintainer. Leadership are pieces of the structure, but subordinate in scale. They sometimes seek outside help in shaping structure (e.g., ppl like eries), and the structure becomes like another passive actor, not simply "leadership's doing". Leadership are key players taking care of the structure, but they are just one set of players, and in some structures, non-leadership employees play an outsized role (often because leadership knew enough to step back). Sometimes the role of leadership if "fucking right off" in certain domains. Regardless, the structure then guides behaviour of all within it, and hopefully the structure also maintains us, at least as much as we maintain it.
I'm stating the above as if it's universally true, but it's just my take. I'd be curious to know if any parts give you strong YES or NO feelings, if you are open to share your gut reaction. Blunt responses welcome
(Fwiw I lean heavily on the ideas of Christopher Alexander -- the Pattern Language guy -- in regards to my beliefs on "structure": https://dorian.substack.com/p/at-any-given-moment-in-a-proce... )
Is there something that happened which you don't think would have come to pass with a standard PBC/C-Corp (without the LTBT)? I'm trying to think of one, but nothing is coming to mind.
I think the structure attracted many people to Anthropic (e.g. an RSP that could only be overridden by the LTBT), but I'm not sure it has demonstrated a practical impact.
As an aside, I think a lot about this problem too! But the answers that don't reduce to something like "the people, and the people to whom they give power" seem to break down when I look closely.
(Although it does remind me a bit of Google pulling out of China back in the day.)
Unfortunately there doesn't really seem to be a cure for institutional decay. Once unethical people get in power, they hire other unethical people, and then you're just stuck in Game of Thrones. You have to go quit and found another company, and single-mindedly keep all those people away, kinda like Anthropic did when they left OpenAI.
I would argue it's not a real value if you are not willing to lose something in order to hold on to it. It is admirable to want to do the right thing when you can get away with doing the wrong thing. It is only a true value if you are willing to do the right thing when you cannot get away with doing the right thing.
I don't think it's that simple.
For example, let's say your desire is to minimize harm in Area X. While you're on top and in control of Area X, then you can do that easily enough. Suddenly a competitor comes whose values show they're willing to do lots of harm to Area X. And if they beat you in the capitalistic marketplace and gain more control, they'll be able to do lots of harm. In order to beat them, you may have to do a little bit of harm to Area X, which goes against your values. But in doing so, you retain control, and prevent even greater harm to Area X. Is that not a "real" value?
Would it be a "real" value to staunchly refuse to do a little harm to Area X, even if you know that this will result in greater harm in the long run?
This is why I distrust simple ideologies. The world is not simple.
Company A founds itself on doing 0 harm to Area X. Competitor B shows up and starts finding success doing 10 harm to Area X, so Company A makes a "moral" decision: If we do 9 harm to Area X, we are preventing 1 entire harm. Isn't that real value? then Company C shows up and starts finding success doing 100 harm to Area X, so Company A changes it's moral stance to "unless we do 99 harm to Area X ..."
I know an old lady who swallowed a fly kind of logic going on here.
In reality, neither corporate nor personal values are binary, all-or-none propositions. They are more like springs that push you in the right direction. But if something pulls hard enough in the wrong direction, a spring can be overpowered.
If they made that decision and it destroyed revenue, I could see an alternate timeline where a standard C-Corp + board with non-founder control may have ousted leadership. But that wasn't the situation for OpenAI or Google either, and their leadership still made a different decision.
Regardless, it's still atypical in the context of an American company, and it can help explain the differences between Anthropic and its peers. That doesn't mean I agree with their decisions or that they're "the right" decisions, but I think it's a helpful framing in which to understand them.
Some people are unjustly called stubborn when they don't change their position based on a weak argument from an authority figure. And others claim values, but they're just stubbornly adhering to something that feels good to believe.
(This isn't a dig on managers; I've been one. But if a situation doesn't naturally escalate, that usually means a manager in the chain chose not to escalate it, and their reports have to go around them.)
You used the phrase "our industry". Personally, I'm not a huge fan of the 'tech industry' concept, simply because a lot of startups are not in software/computing, and a lot of new technology isn't either. But I get what people mean.
I notice that the companies you mention like Costco and Patagonia are not in the tech industry. Does your new book have any examples which show how to stay incorruptible in the face of the network effects that drive monopolization in the tech industry? Alternatively, have you seen workable ways to split network effects amongst networked affiliates, to spread out the market power?
I know that most founders aren't exactly looking to make a startup with a lot of competition (I'm sure not), but it would be nice to know if someone is fixing problems specific to the 'tech industry'.
I wanted to have a wide variety of stories in the book from many different industries to show just how pervasive these forces are that we're doing battle against. While there are some things that are unique to the tech industry, I think we have more in common than what sets us apart.
FWIW, I wish people would talk about the "startup movement" rather than the "tech industry" for what we do. But maybe that ship has sailed.
In terms of the thesis of Incorruptible, though, I do think that LLMs in particular should be really, really advantageous for managers and leaders who want to create alignment and coherence within their own company. If there's anything that LLMs are extremely good at, it's summarization. So much of the modern leadership challenge is simply figuring out the answer to the question: what is my organization actually doing right now? That's a summarizing problem.
I would not think that LLMs would make very good leadership decisions, mostly because they're too malleable and too easy to manipulate. I do think they're very helpful in helping leaders assess their own context and situation and thereby make better decisions.
https://www.harpercollins.com/products/good-to-great-jim-col...
This should be kind of obvious -- if they are avoiding doing awful things in the name of money, then they are leaving something on the table. You can't have your cake and eat it too. This is why the real solution is some kind of governance/regulation, because otherwise the market incentivizes being awful.
If the definition of "awful" is broad enough, I imagine most public companies will fall in the "awful" bucket, probably with the same distribution of stock performance as the whole market. If "awful" is going to mean something truly extraordinarily bad like dumping mercury into a well or whatever, I would still guess there is no correlation as I've read horrifying stories of corporate behavior at companies with unremarkable stock performance.
https://en.wikipedia.org/wiki/Nvidia#Controversies
https://en.wikipedia.org/wiki/Comfort_Systems_USA#Anti-union...
https://en.wikipedia.org/wiki/Intuitive_Surgical#Lawsuits
Depending on your political leanings, you may pick and choose which of these you consider "awful".
Didn't find anything in my five-minute scan for Old Dominion.
That doesn't stand as a reason at all. I think the big contrast isn't as you described. It's more about short-term versus long-term or conflict of interest between principals and shareholders.
But to be specific, Wells Fargo was mentioned, and their downfall was very much driven by doing awful things in the name of money, specifically.
I listened to a podcast interview you did where you talked positively about the Novo Nordisk Foundation as a successful governance story, but when I think of long lived foundations, I think of the Ford Foundation and the Hewlet Foundation that have significantly drifted from the founders' visions despite being non-profits. Many people think it is better for foundations to spend down all their resources before the founder is gone to prevent this drift and loss of efficacy.
Have you done any studies of what made long lived foundations drift on their mission despite no profit incentive?
Would be interesting to see if other lasting things in other domains, natural or human-made, physical or virtual, are built this way..
(Apologies if you already addressed this somewhere. Thanks for doing this)
Healthcare is a recurring topic in the book, for the reasons you specify. In fact, I call for the adoption of a Director's Oath similar to the Hippocratic Oath for boards. They can do just as much - or even more - harm.
It was a big influence on me and something I recommend and quote often.
I'm curious if your perspectives on the topics of "The Lean Startup" have changed I the era of AI tools. Particularly curious what you think about the role of MVPs to test a market.
This has been on my mind the past few weeks because of a recent experience during a company hackathon:
A few years ago I gave a talk about prototyping and MVPs at the Audio Developers Conference and in this talk to explain the concept of an MVP I proposed a silly idea for an audio plug-in (that replaces a singers voice with the sound of flamingos) as a demonstration of how we might test that there is a market for this plug-in before building it. I gave some examples of how we could test this like a landing page MVP, concierge MVP, etc.
Recently during the two days of this company hackathon I was too busy to do a project of my own because I was helping on-board colleagues with Claude and getting sucked into some leadership meetings. During the demos meeting I decided to try to build my voice replaced with flamingos plug-in and built a working plug-in in under two hours and this got me thinking:
If I can build a real functioning plug-in that a user can try in their host application in less than two hours why would I use non-software MVPs to test a market when I can build working software just as fast or faster than I could setup a non-software MVP a few years ago.
Of course there is more to learn from "lean" than just MVP (I'm also a big fan of the andon cord and the 5 why's)
(to anyone commenting on vibe coding I looked at the code and while not all of it was ideal I wouldn't consider this "vibe coded" and for serving the purpose of an MVP a couple things in the code that were a little funny are not a problem)
Sounds like an interesting topic!
> Why do good companies go bad
I find interesting the systemic explanation of Bruce Bueno de Mesquita and Alastair Smith in "The Dictator's Handbook"^1: In any publicly traded company, if the executives (or the board) are not ready to do whatever it takes to maximize profit, they will be replaced by people who are. It becomes a selection process creating tyrants. If you're lucky (as employee, customer, or human living on the same planet), whatever it takes might be aligned with employees and customers' interest. When times are bad, whatever it takes has no limits, it becomes a question of survival or progression for business leaders.
I'm curious to see how much that maps with what you identified in your new book! Patagonia is private and under the control of a few benevolent dictators ; Costco and Nordisk are a bit more surprising, I'm keen to know more.
^1 https://en.wikipedia.org/wiki/The_Dictator%27s_Handbook
If so, how is the tradeoff justified? (Make money first, then do "ideal" things?)
If not, why not? (Other than that it's unsuccessful strategically/statistically and wasteful, I guess.)
Any elaboration/response on this theme would be appreciated. Thanks!
Tony's make some of the most delicious chocolate in the world, but their mission is actually to eradicate child slavery in the production of cocoa. I bring this up because before Tony's, it was widely assumed that "the market" didn't care about child exploitation. They just wanted delicious chocolate. Yet Tony's found a way to prove that this was not true.
The more general lesson is that many of the stories we tell ourselves about "what the market wants" are mere fabrications or just-so stories designed to make us feel better about how crappy our alternatives are. Sometimes it just takes a bold entrepreneur to show us that we already collectively are committed to a different set of ideals. We've just never had the opportunity to vote with our wallets to make it happen.
One question I have for you is on finances, I think that still remains an afterthought in startup hustle culture, and perhaps even by design, I feel like the system is designed so that VCs keep winning and founders rarely get the exit they deserve. What is your take on that?
That and, don’t accept money from strangers. :)
You're quite right. There are many, many problems with the current "best practices" including that many founders wind up with nothing even if the organization succeeds. In fact, one study I cite in the book found that something like 80% of founders of venture-backed companies will no longer be CEO even three years after an IPO.
Why? Is there something that inherently prevents founders to remain in control after IPO?
The way around that is to not take VC money. There are some (not many) startups that got to unicorn status by bootstrapping and not taking outside money. It's harder, yes, but in a way a more pure effort.
First, the organization must have an original steering body made up of "true believers" in a shared mission and vision. This body must make preventing the short or long term erosion or dilution of its mission a priority. Meaning that there's awareness that this particular corruption is a possibility from the start. Also, an understanding of the typical mechanisms through which it can happen (usually very human).
Second, as part of its survival strategy the steering body has the responsibility to identify other genuine true believers and integrate them in its makeup. There must be built-in assumptions that many outsiders will be attracted to its powers of influence and will try to infiltrate it.
Joining the steering council should thus be done primarily based on "culture fit". Admittedly a rather segregating practice, but one which in this case comes with the advantage that certain signals are just hard to fake on the long run. So, although many could try to dress, look, talk, or walk the part for a while, there will always be some shibboleth that trips up impostors.
I foresaw some problems to this structure that I haven't yet worked out, but it feels like a step in the right direction, if I had to come up with a solution.
Do you have any recommendations for entity formation infra that caters to mission driven companies? Something like Stripe Atlas that can form the more complex structures? Forming a PBC is becoming more standard but tthe other structures seem more esoteric (and expensive).
Virgil is an AI-powered law firm, but it doesn't let the AI do the legal work for you. It actually hires and trains human lawyers to become AI-powered superhumans. It handles lots of the really unpleasant back-office crap that early-stage companies absolutely hate dealing with, from payroll to compliance and a lot of finance stuff.
Of course it also does full-service legal work. Because I'm involved, it is specialized in setting up mission protective structures for startups. We have worked really hard to drive the cost of such structures down.
In fact, many of the implementation guides that you can access from the book if you scan the various QR codes were developed in partnership with Virgil. If you want to DIY it, I think we've given you enough information to do so, including sample templates, term sheets, documents, etc. If you prefer a low-cost, flat-fee subscription, Virgil is also there to help you at any time. The URL is tryvirgil.com.
(And you are welcome to use Virgil alongside your established high-prestige high-cost firm, too, if you prefer to do that. It will still save you considerable amounts of money)
One other thing i've grappled with while reading the book is this:
Some of the internal issues you describe seem to come from companies growing too big. The Founders who lose control, weakening culture etc. The size of a company seems to correlate with so many issues (not all related to financial gravity).
I wonder how much pain can be avoided by just staying small (employee count).
Thanks again for the book(s). It feels very mission driven which perfect.
I hope we get PMF with what we're building. But also hope to stay as small as possible however unrealistic that is.,
Thanks!
I do think the site could use some more prominent CTAs. I think i vaaguely noticed that button but thought it was one of those AI chat bubble.
What can a founder do to safeguard his position, interests, and company? A couple of things that come to my mind are: have an aligned/friendly board who believe in you; second, have dual-class shares (like Meta, SpaceX, Google). Anything else you would like to add?
What do you think an experiment needs before it can actually be called learning? And what kinds of product questions should not be done as experiments at all?
Why do you think IMVU never hit escape velocity?
What happened in the years since? I don't really know. The company has not been in close touch with me, so I can only speculate or guess.
It used to feel completely different a decade ago, no teenagers that couldn't care less, now few of them seem to care.
Tyre centre moved to bookings only but you can't call because there's never anyone on the tyre desk. I know because it's always unattended whenever I walk past.
Gas station staff just chat to each other and put out the traffic cones 30 mins before close leaving a small gap.
Everyone now has to scan their card with a single scanner leaving a huge queue outside just to get in.
Register queues go right down to the back of the warehouse with half the registers closed.
Queue again to get your receipt checked and all you get is departing grunt if you're lucky.
It's sad because I used to rave about Costco and bring the cool new snacks to share at work.
Prices are mostly comparable at the grocery store if you are willing to wait until they go on special so I've given up on Costco.
I'm curious if you think cooperative businesses leveraging non-voting preferred shares, community shares and other coop investment instruments are more resilient against this type of corruption.
I'm wonder how you see the tradeoffs these models have against traditional LLC/VC models and how you would mitigate them.
I address your question in much more detail in the book, using examples as varied as Mondragon in Spain, John Lewis Partnership in the UK, and Vanguard and credit unions here in the US.
We actually have pretty good evidence that these other structures are more resilient and more stable than the classic "best practices" we have all been indoctrinated into.
Unfortunately, most of us have been told that these approaches are incompatible. You either go "big" and try to make a lot of money, have investors, have a grand vision, etc. Or you go "small" and do something "ethical" and non-extractive. So many of us have been taught that it is the fate of the small to be destroyed by the big, since they are more ruthless and more powerful.
But the evidence doesn't really support this just-so story. My goal with the book is to help those who want to build mission-driven companies to realize that this is a source of strength, not weakness, and act accordingly.
I think we need a "middle path" culture that finds a good balance between these pressures and values.
This is the comment I came here to read. Thank you, I already have a copy of the book and intend to dig in more on these themes specifically.
Q1: You have done a few friendly interviews on YouTube, but I haven't seen one that challenges you much. Do you know if there are upcoming interviews that you found pushed back?
Q2: Is the idea of shareholder supremacy fundamentally at odds with your with your preferred alternative governance structures, or is it just a time preference and risk attitude issue?
Q3: You will get sympathetic ears easily due to the subject matter. But the same book about non-profits would be a harder sell. Do you agree, and if true does that say something about the marketplace of ideas?
Though I did get a pretty funny piece of pushback on one consulting company's podcast. The person said, "But wait a second, I learned in business school that everything you're saying here is wrong. Are you asking me to rethink that?" Something like that. I said, "Well, are you interested in looking at the evidence that what I'm saying is the truth?"
I think he was really genuinely struggling, because I don't think he was that interested. Many of us are not that interested in seeing the evidence that the things we believe or were taught are not quite true.
Q2: shareholder primacy is a bad idea on its own terms, as I lay out in the book. It doesn't prevent people from adopting any of governance structures I recommend, it just makes it more difficult, by creating career incentives that add friction to doing the right thing. That's partly why it's so value-destroying.
Q3: I don't understand this question, sorry. Maybe it's because I've spent many lonely years being berated for this subject matter and am only getting the sympathetic treatment lately...
It doesn't take much time seeing companies grow to see the cultural differences take hold when a company goes wrong. You end up with execs and middle management that do not want to rock boats, and where any disagreement is clearly career suicide. At that point, people push for what is good for them and is not good for the company, and people realize that letting things decay is in their best interest. Once your org has enough levels of management, anyone that is part of the big decisions and isn't a team player has already been filtered out, so you see large meetings where hundreds of millions are supposedly distributed, yet not one person is ever going to complain about obvious grift, or decisions that will harm the company in the long run. Open discussion is too dangerous, and coordinating action against bad behavior becomes more and more expensive. Therefore, the company just naturally erodes.
You can get there too with just a bad enough leader that values sycophancy enough... and after enough billions, basically every leader ends up having a lot of trouble accepting news of bad behavior from their advisors.
By contrast, I can say pretty much anything about Facebook and nobody seems to care. Yet, if you go back and read their S-1, you can see how they very much wanted to be seen as the mission-driven good guys.
It's all quite sad, really. There are plenty more stories of corruption in the book. To be honest, it was a challenge to avoid having the whole thing read as bleak given how pervasive this corruption is today. I did my best to balance it out. You'll have to let me know if you think I got it right.
Can you say more about this? Do you think those tender feelings towards Google track some strain of values which Google still carries? Or does this statement reflect some fear of retaliation or conflict that would drown out the rest of your message?
Genuinely interested in how you think about this, especially in the context of this new book’s topic. Thank you for this AMA.
I suspect that it's largely just that brand reputation tends to be very sticky in the minds of people.
It's the same reason that Pyrex, Harley-Davidson, and Dyson are still high reputation brands even though the product they make today is tragically worse than what gave them their initial reputation.
(I tend to think of private equity as often existing as an arbitrage system to take advantage of the fact that they can buy a loved brand, slash the quality and increase the profit, and continue to sell at its original price based on that brand stickiness for a while until people eventually wise up.)
The idealism that has been sucked out of the tech industry. It was so (naively) hopeful at one point, and now the arms race and profit-maximization has eroded it all. Your observations really resonate with me.
I'm surprised I hadn't heard of the Long-Term Stock Exchange, it seems like a much healthier direction for the market.
This mean you are now under gag order as you rise on the bestseller list? :)
Lean Startup is awesome, can’t wait to read your new. Excited to read about the ostensibly-not-evil Costcos of the world and hope the smartest & wealthiest amongst us grok it, that we win more when others win.
1. Who lack a legitimate business model hence have resorted to "data collection from/about computer users, surveillance of computer users even when engaged in non-commercial activity and online advertising services" with generally free, so-called "products" and "services" offered as bait
"There's a darkness in our industry that we often don't talk about."
It's "talked" about on HN but voters and commenters working for or aspiring to start/work for these companies don't like the discussion
100% probability this comment will be greyed out to try to hide it from people using graphical web browsers (no effect on monochrome text-only browser users)
The people that start "tech" companies are often soulless and maladapted to society, having hid behind computers to escape their inability to deal with the real world. There are also "tech startups" founded by people who want to take advantage of those who have hidden behind computers and lack social skills, using them as pawns
These founders and pawns do not start, nor do they want to work for, companies like Costco, Patagonia or Novo Nordisk because they only believe in what they see on a computer screen not the real world. They want to operate in Silicon Valley fantasy land
It really isn't surprising what happens to so-called "tech" companies over time considering what they start from
The author worked for Kleiner Perkins, SillyCon Valley VC
After listening to this guy you may feel like you need a shower
Yes. Of course.
You cannot trust anyone to have a rounded mind unless they have actually done more than one thing, broadly speaking.
Having worked at one of these companies, I don't buy for one second, that these companies are not obsessed with financial benefit. You would be an absolute idiot to believe that.
The pawns don't want to work in the IT departments of those companies
They all want to be in Silicon Valley fantasy land
They worship obscene Silicon Valley wealth, they are beholden to venture capital firms and they want to build data centers all over the planet and fill Earth orbit with space garbage
The environment is an afterthought, computers and sci-fi fantasy are what is important to them
To each their own. But...
This is the opposite of the guy who founded Patagonia. For him the environment is forethought, he has spent his life outside, not in front of a computer^1
1. Yes, I am aware Patagonia has made some mistakes with maufacturing
How often do you see companies recover from financial gravity? Or is it mostly irreversible?
How much do you attribute worsening of company values to things like professional managers, too much hierarchy, and less founder-mode; versus financial gravity?
In a case like GitHub where their focus seems less on open-source these days, should developers try to help GitHub better support open-source or should the focus be on building alternatives?
Thanks, Jake
For reasons I try to explain in the book, open source in particular is an example of the kind of mission-driven positive externality type of business that our modern best practices make it hard for people to see and understand. This is going to be a recurring problem in the free software and open source movements for years to come unless we get smarter about these forces.
Ie founders create order out of chaos, then entropy slowly creeps in due to X,Y,Z?
I loved the lean startup I'll be reading this book as well :)
How do you resolve the difference between the short term nature of the lean startup, and the long term optimistic nature of LTSE?
And it's interesting that people see Lean Startup as short-term; that's really not what's in the book. I tried really hard to make clear that you need a foundation of long-term thinking in order to make any kind of rapid iteration system, whether that's Lean Startup or Lean manufacturing, work. By the way, this is an old finding that shows up in a lot of the management literature going back to the people who originally studied the Toyota Production System.
But all that said, I'm really glad that you feel LTSE embodies a long-term optimistic view of the future. That was absolutely my goal in starting it.
Do those questions need a foundation on which they stand to be answered? What is that foundation (are there relative foundations or are they by definition absolute?)?. Is there a moral standard that those handful of companies share? Similar to “success factors”, are there “success ethics” in your perspective?
What would be the elements of success ethics that others can learn from?
How do you imagine companies with staying power will be shaped in the future? Will we see new paradigms in management? ie smaller teams, jack of all trade types of individuals vs specialists, potentially the elimination of middle management all together
How do you think Lean Startup principles could be applied to ordinary families looking to navigate the existing economic stresses we're experiencing?
I've been a bit reluctant to over-generalize from my own theories, and so am not sure I would want to speculate about how to apply them in a family context.
Whats your criteria? Is there an analytical component? Are you willing to work on something even if "success" is unlikely? And with all of this going on how do you have time to work on books!
thank you for your work by the way. It continues to be useful year after year to me and people around me!
Honestly, I don't have formal criteria. I have young kids now, and I try to ask myself every once in a while, when they're old enough to really understand what I do for a living. When they ask me: "at that moment in history, what were you doing?" I want to be able to answer them and give them an answer that I and they will find satisfying.
I'll also be honest that I've my fill of conventional "success" in my life. I don't feel obligated to use the likelihood of success as a criterion anymore. I tend to just do the things that, in the moment, seem right to me. Or where it seems like, for whatever reason, no one else is willing or likely to try it, and I have been given that lonely assignment.
Many of the things that I've tried haven't worked out, but that's okay. I accept that that is a precondition of the kind of work I like to do.
With big companies with large budgets bulldozing smaller players - any advice on finding a niche that is worth pursuing?
I would like to know how best to stand out from the toxic, finance-driven world that is defi and crypto generally, without getting rolled in with all the clowns. Of course, I know that clear messaging and verifiable, evidence-driven claims are good, but I am thinking about the more abstract, strategic side to things, which I still feel under-prepared for.
The good news is that we all know that being a bold contrarian is the key to returns. If you can figure out a way to structure your initiative such that it literally cannot betray the public, it literally cannot betray your mission, it literally cannot betray human values, you might be able to create something that people are awfully excited about.
(Reading Joseph Pearson's book on the Berlin airlift, in which he features prominently, do your last name stood out...)
How do you feel about these AI only companies, and how do you think they could affect the wider market?
ref: https://www.ft.com/content/b8cc4bf4-6d3c-4974-8428-9a091983c...
Who is the target audience for your books? Is it founders? Or is it for people who want to be founders?
How much do you blame our values of our society for creating corrupt businesses? Are corrupt businesses just a mirror of our own values?
Where does Apple fall on the Incorruptible spectrum? Is it covered in the book?
Tell me what's different about this page vs what you've seen on LinkedIn? maybe I can learn how to promote the book better!
It's already been 14+ years since you wrote the book; I wonder if a second edition is something you have in mind, or at least on your consideration list
Do you have advice on how to use AI to help teams stay true to their values?
Having not read your book yet, in my mind there's the obvious legal support AI can provide to help navigate complex situations, but maybe there's some other groundwork in the value creation and implementation itself?
I will say, in general, I think AI is an amplifier of values, and so it will make the good companies better and the bad companies worse. Or maybe more accurately, it will make the good parts of companies better and the bad parts of companies worse.
Either way, I do think that LLMs can solve many of the leadership challenges that we have to solve today with hierarchy and dashboards and bureaucracy, because LLMs are extremely good at summarizing the context of a given situation. One of the hardest leadership challenges of all is simply answering the simple question: What is my company doing right now?
That is a summarization challenge.
More importantly, my goal in the book is to teach the reader how to see these deeper underlying forces that operate below the surface of most organizations. Once you see and identify them, you can learn how to wield them.
Let's say this has already happened and ossified across large, formerly-innovative companies that now have so much size and inertia behind them that it might take decades for one to "fail" in a traditional sense. What can be done to reverse the process?
Unfortunately, a lot of leaders who do have the moral authority and power to attempt such a thing do not really know what structural changes to demand. in fact, they tend to focus on the typical management/leadership stuff: business model, org chart, strategy, vision. These things are important. But there is a deeper layer that tends to get overlooked or ignored: structure, governance, boards, the relationship with investors.
In the new book, I try to tackle both topics in a new way, so that future leaders will know what to ask for when and if they have the opportunity to try.
Example of a company where this has happened?
and since everyone widely agrees that what we are attempting is "impossible" I am pretty impressed that we've managed to make any progress at all :)
I understand the idea that they were after, but it seems like they could have wrapped that up in an ETF.
Basically, you appear to be focusing on investor owned companies and missing the entire class of worker cooperatives where the financial gravity you're talking about isn't merely resisted -- it doesn't exist. These companies have other challenges, to be sure, but if you're going to write a book called "Incorruptible" talking about businesses, not including these seems a significant oversight (at the least).
Do you address these in the book and just fail to highlight them here or is this really something you missed entirely?
I've noticed that VCs try very hard to separate the world into "VCs + founders" and "everyone else" and that the more time a founder spends in the VC+founders bubble the more distorted their worldview can become.
The sad fact is that most VCs are not even consciously aware that they're doing this. They are simply the agents of a deeper force.
You said to "Ask You Anything," so here's my question: I have mostly stopped buying from Amazon. That includes books. I'd like to buy your next book. What's the best way to support you if I don't want to purchase through them? More generally, what's the best way to support authors that _only_ publish on Amazon without supporting Amazon itself?
what are the 'slower' go to market channels that you've seen produce sustainable results also producing sustainable businesses. not the come fast, die fast kind ?
Not really related to your question, but Steve recently wrote a great article about the new book that, if you're a fan of his, you might like too: https://steveblank.com/2026/06/09/incorruptible/
There used to be a lot of wisdom in the entrepreneurial ecosystem about how to survive such a platform in a more durable way. For example, if you own the customer, then you can play the major platforms off against each other. Or, if you study the case, for example, of Intuit, which survived the attempt of Microsoft to absorb that product feature into their own platform monopoly at the time, there are lessons to be learned. But of course, every platform war is different, and I'm sure there will be new lessons that we will learn from this one.
Corruption = the symptom Gravity = the force that causes it
In the book, I give the example of a bridge that collapses. If you ask an engineer "why did it collapse" you'll be annoyed if they say "gravity" even though that is technically correct. If we go examine the wreckage and notice that the metal bolts have been corroded beyond recognition, we can start to think through what went wrong and what to do about it going forward.
However, the details matter a great deal, and I don't know that much about what the actual proposal the SEC is going to adopt is going to be. The last draft that I saw left me pretty worried.
What's interesting to me is that, in all the hubbub, neither the journalists nor the policymakers seem that interested in the actual evidence that we have amassed in academia on this question. For example, one important study suggested that moving from semi-annual to quarterly reporting costs companies something like 5% of their market cap. It's incredibly expensive, not because generating the reports is expensive, but rather the evidence seems to be that companies under quarterly reporting start to run the company for the benefit of the report rather than for customers.
That this is bad for investors, I hope you will see as self-evident.
What's funny is when the book was published, I remember someone telling me that I should have included more examples of failed startups in the manuscript. I remember answering them, "Oh, I have. We just don't know which ones yet."
This is the difficulty of writing any kind of business book. There's just no way to use any company as an example to illustrate some principle without people misunderstanding that you're holding them up as the perfect or even great company. I use case studies to illustrate the concepts that I think are useful. I can't guarantee success any more than an athlete can tell you that if you study the way that Tony Gwynn hits the baseball, you too will be able to hit 300 in the big leagues.
My point is you were not able to demonstrate any correlation with your suggested methods with startup success. A company could do the exact opposite of what you recommend and be successful. Or follow it to a tee and fail which is what all of them did (happy to hear about any counter examples here from the original book). So what exactly is the point if you can't even move the needle a little bit?
Have you done that ?
Given the current wave of AI-assisted coding (Claude Code/Codex) and the broader enshittification of SaaS/platforms, do you think B2B SaaS founders now face a new "we can just build this ourselves" problem?
How would you think about testing for that risk early?
He's not exactly an introvert, but one good example is from the founder of my client. He wanted to stay doing the technical work he enjoyed, so he recruited a CEO above him (although he actually still shares a lot of that role and now they nominally share the role), and also hired others the lead the development teams, leaving him to focus on the one specific area of tech that he really enjoys. I'd say his job is about 80% tech and about 40% CEO (and total 120% load because he never seems to sleep!)
I guess the point is to try to fight the urge to do everything yourself. If you're not an extrovert, you'll need to hire a good sales and marketing team to take that side of the business, or you'll end up hating it and/or having no customers no matter how good your product is.
Of course, many of the tactics and examples in the book are now a bit dated, so if I did an "AI edition" I guess we would update it with new stories and new tips on how to use various AI-powered tools to accelerate. But I think the principles have stood up pretty well.
But a great mission generally combines three things: 1. a long-term commitment to maximize some aspect of human flourishing (in the book I explain how this is the true definition of what it means to create a for-profit venture) 2. a set of values that include a determination to make principled decisions aligned with this goal, such that every decision the org makes is coherent 3. the strength to resist both the inner temptation and the outer pressure to defect, betray, or otherwise abandon the long-term goal
In the book I go into a lot more detail about how to do this, including how to make fiduciary commitments to the human beings you'd rather die than betray.
How does this square with the widely taught business-school definition of a for-profit entity being something that aims to maximize shareholder value?
Sometimes clients asked IDEO to design under this shitty-MVP model (we generally refused), other times we were brought in to clean it all up.
Why do you think the concept of "MVP" was almost universally misunderstood? And, thinking about Incorruptible, how did the best companies out there internalize it?
I don't think you can put an idea out into the world without understanding that some people are going to willfully misunderstand it. We live now, especially in the age where literally ignorance is optional. When you see someone who misunderstands what an MVP is, you know that they haven't spent even five minutes reading the Wikipedia page or made any effort to try to understand it. I don't consider such people to be good faith interlocutors, and therefore I don't really think the fact that they criticize or don't understand the concept is that relevant to the rest of us who are capable of thinking for ourselves.
At the end of the day, I try to lay out in my first book the reasons why the theory that gives rise to MVP and the rest of the Lean Startup makes sense, is logical, and is consistent with a set of first principles. As a result, that theory is capable of making predictions which you can test for yourself.
Writing now for other founders who might encounter this page: If you look elsewhere in this thread, you will find lots and lots and lots of entrepreneurs who are saying how much they found these concepts helpful. You shouldn't do it because other people said so. Rather, you should take that as inspiration to think for yourself, try it, and see if the theory strikes you as valid.
I'm legitimately excited to read Incorruptible, because in all honesty, 10 years of working with the Fortune 500 left me pessimistic about the ability of $1B+ companies to successfully do anything new. There were exceptions (some of my friends came up with Pay It Plan It for Amex), but they were rare enough that it was hard to come up with themes or patterns that connected them. I'm so curious to hear what you've learned by talking to companies that have been able to avoid ossification and continually reinvent themselves.
Right now I actually think an MVP should be Maximum Viable Product. Partly because of AI but also because it shifts one's perspective to what Viable means.
I agree that AI makes the MVP easier to build, but it makes things so easy to build, there is a slight risk of overbuilding the wrong things, which can distract from the learning goals.
I'm curious how you would think about this situation from the lean startup perspective. With hardware products, if you don't do lots of initial testing, the scale of problems might not become apparent for years. You can't just fix a problem with a software patch.
or you can look at this handy infographic: https://www.linkedin.com/posts/eries_incorruptible-new-york-...
[0] https://www.amazon.com/Incorruptible-Good-Companies-Great-St...
Those who can do, those who can't teach?
Is that some kind of coaching BS?
I've always find it an interesting dichotomy between their public image, retail worker reputation, and corporate reputation. The former two are fantastic. I live in Seattle metro area where they are headquartered, and the last is horrible.
I've had more than one recruiter tell me it's a classic, blue collar, "we've always done it this way" environment since many of their corporate people rose through the ranks in stores, not tech. As I believe Warren Buffet put it, "every company is a tech company these days," so this creates problems. I met someone at a party there about three years ago tell me a data migration went so poorly, they'll have to use two financial systems for at least ten years because the previous system was homegrown with ancient tech.
As an ENTJ, the later would drive me crazy, and I've declined when recruiters want to talk to me about such and such manager position at Costco.
And how has the traditional loop of validation, delivering and iterating on products, and getting your first paid customers changed since fast output is now possible with AI and technology?
Please structure this for someone with no startup experience, and such that event a child can understand. And please create a version that works for someone to begin to validate their idea right now and measure progress, and modify/iterate towards a goal of money generation for themselves or a team now and long-term. (And would you also describe then how this person can work on attracting a team for someone who has never successfully navigated choosing their own team before.) (And would you also accept my thanks, this is very kind of you)
But in particular, this moment, the capabilities of individual people are being amplified thanks to all these new technologies. You have the opportunity to be an early adopter of a technology that billions of people will use just a few years from now, but you get it first. That probably means that the things you care a lot about or know a lot about, you could do something about it that would have been absolutely impossible even five years ago.
Now, you have to avoid that feeling that you're too late. I remember feeling, in 1998, that I'd already missed the internet. The vast majority of people have never used Claude Code. The vast majority of people have no idea how LLMs work or what they do. The vast majority of people simply don't even know that starting a company is something you could use this technology to do.
As inexperienced or behind as you might feel, just the fact that you're here having this conversation right now proves that you are way, way, way ahead. All you have to do is use that advantage.
Let me clarify one thing, though, which is that when we call a company "good" or "bad" we can't mean something like absolutely good or evil. No human enterprise can ever be truly perfect.
So, rather, we have to identify what an organization is trying to do and whether the means it has chosen are actually appropriate to that goal. Then we can judge if the goal is aligned with human flourishing (good) or not (bad), and whether the org is consistent in pursuit of that goal (good) or not (bad), and whether it has the strength to continue (good) or not (bad).
If people had paid more attention to the pioneering management theorist, Mary Parker Follett, who wrote more than a century ago, we wouldn't be in this mess. But of course, her work was almost entirely erased and forgotten, only rediscovered in the 1990s.
Don't worry, I have a whole chapter about this in the new book.
> We've all experienced watching a company we love or admire be warped and broken beyond recognition; until it's a husk of its former self, or worse. I wanted to understand why. And I wanted to know what all of us can do to stop that from happening.
I don't think there's any way to talk about this without running into the problem of anthropomorphization. So I tried to be really careful with it in the book. You'll have to judge for yourself if you think I got it right.
And I'm especially sensitive to the question of accountability because you're right: today we mostly want to see these problems as being done by individual villains, because at least we can hold individuals accountable. How well is that going? It seems like we are breeding a class of people that are completely above accountability. I don't think that's tenable. I think in the long run, this system will collapse if it cannot hold the people responsible for atrocities accountable.
Personally, I think the best way to do this is to understand the systems that are causing these behaviors today so that we can locate responsibility in the right place.
I wanted a word that was much broader, capturing how this tech behavior is one symptom of a larger illness that has been afflicting our economy for some time. So I settled on the old-fashioned term "corruption"
They are full of platitudes that sound relevant to people's problems and desires, that pretend to be based on science but have no actual basis in facts, provably do not work, and yet are still popular amongst the people they let down again and again.
Anyone who could write a book with advice that worked the way this purports to would be too rich to need Kickstarter to fund his books, for a start.
And if you really want to live in a world where people should be listened to on the basis of how rich they are, well, you don't really need to change anything, now do you?
That is deeply disappointing.