Incorruptible: Eric Ries on Mission, Purpose and the Fight Against Financial Gravity

Success is supposed to be the goal. So why does it so often destroy the very thing that made an organisation great? Eric Ries — author of The Lean Startup — returns with a new book and a sobering answer.

What if the greatest threat to a successful organisation is not competition, disruption, or poor strategy — but success itself?

Eric Ries, author of The Lean Startup and founder of the Long-Term Stock Exchange, has spent the past decade studying a force more powerful than management: a financial gravity that pulls even the most values-driven organisations away from their founding missions as they grow. In his new book Incorruptible, he explains where this force comes from, which organisations have learned to resist it, and what leaders can do — starting on Monday — to protect what they are building.

What we cover:

The one-legged stool — How shareholder primacy became the default setting of modern capitalism, why the evidence for it is shockingly weak, and what the three-legged stool of purpose, stakeholders, and investors actually looks like in practice.

The exceptions that prove nothing is inevitable — Grundfos, Bosch, Novo Nordisk, Costco, H-E-B. Why do these companies consistently outperform their conventionally governed peers — and what structural choices make the difference?

The US healthcare anomaly — The Our World in Data chart that shows the US spending twice as much per capita as comparable countries and achieving lower life expectancy. Eric explains the mechanism behind it — and why it appears in transit, journalism, and sport too.

Devoted Health — Former US CTO Todd Park's full-stack healthcare company, built on the principle that it can only profit by keeping patients healthy. A live demonstration that the alternative is commercially viable.

Mary Parker Follett and the invisible leader — The management theorist written out of history who knew more about purpose-driven organisations than almost anyone since. Her concept of the invisible leader — the shared purpose that guides behaviour when no manager is present — is the foundation of everything Eric argues in the book.

The culture bank — How H-E-B built the most trusted grocery brand in Texas not through marketing but through a hundred decisions to do the right thing, including sending customers home with full carts during a winter storm without taking payment.

You are not stuck in traffic. You are the traffic. — Why individual agency matters more than most people think in an age of surveillance capitalism, and what founders, leaders, employees, and consumers can each do to resist financial gravity in their own sphere.

📊 Life Expectancy vs. Healthcare Spending (Our World in Data): https://ourworldindata.org/grapher/life-expectancy-vs-healthcare-expenditure

📖 Incorruptible by Eric Ries: www.incorruptible.co — bonus chapter, implementation guides, and reader resources

🔗 Connect with Eric Ries: linkedin.com/in/eries

About Eric Ries Eric Ries is the author of The Lean Startup (2011) and The Startup Way (2017), and the founder of the Long-Term Stock Exchange (LTSE). His new book Incorruptible (2026) examines the structural forces that pull successful organisations away from their founding missions and provides a practical framework for resisting them.

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Transcript

Welcome

Eric Ries 0:00

So, like we run rings around our conventional competitors because they can't think past the current quarter and we can make multi-decade investments. So why they were like, would we switch? Are you kidding me?

Mark Blackwell 0:15

Hello, everyone. Welcome to the Arkaro Insights podcast. This is the show where we help business executives thrive in a complex adaptive world. I'm your host, Mark Blackwell. And today we are joined by a guest who needs no introduction for anyone in the world of innovation, Eric Ries. For two decades, Eric has taught us how to build at speed through the lean startup. But today we're pivoting from the act of creation to the act of protection. In his new book, Incorruptible, Eric argues that success itself creates a unique vulnerability, a financial gravity that often pulls our greatest institutions away from their original missions. So today we're going to learn how we can build fortress organizations that can resist these pressures. How can we move from shareholder-only primacy to a model where humans flourish? Eric, welcome to the show.

Eric Ries 1:16

Hey, thanks for having me.

Mark Blackwell 1:18

Well, can Eric, first of all, congratulations. Um I feel this book is very important. When I first read looked at the title, I was wondering a bit. I thought, well, this is going to be good stuff, maybe a bit of mum and apple pie and how we've got to think long term. But as the chapters went along, I realized, no, there's something deeper than that. Very well done.

Eric Ries 1:41

So thank you very much.

Mark Blackwell 1:44

So so what is it that caused you to move away from startup world and then suddenly realize that there was something else to worry about because you know the very thing that got them successful in the first place may make them vulnerable.

Eric Ries 1:58

I mean, that's just my life. Yeah, I'm just describing how life has come at me. It's funny because um uh people project a lot onto this book. Uh yeah. Like I I've heard people be like, why did you why is the book so much about startups? And hug on the book's hardly at all about startups. Because uh it it's a paradox. If you want to talk about long term, we have to study startups that are still around. Because what's the point of studying a company that just started last year? We don't know. We can't we don't know yet. Um so except for a very few exceptions, a lot of the startups are are older than than the vintage

Why Success Creates Vulnerability

Eric Ries 2:31

that are in lean startup. But to me, this is just a very natural extension of what we in the whole movement around lean startup and innovation, what I would call the startup movement globally, has had to grapple with during our lifetimes. That is, we've had this incredible explosion of value creation and wealth generation, incredible technological development, and a lot of organizations I think frankly we can all be really proud of. And we have a lot of the other stuff too. I've just been witness both to incredible organizations that, as I say in the book, got surgically deboned as they got bigger, but also, and this is kind of a little bit more paradoxical, I've worked with really large organizations that were trying to reinvent themselves, bring innovation back into their into their DNA. And I've watched what happens when those organizations confront these same forces. We nonetheless encounter, at least I encountered in my career, this force that I couldn't quite name that I came to feel was like more powerful even than management. I used to think management was the most powerful force in the universe. And then I was like, we're up against something else that we can kind of see and grope and touch, but not quite control. And it felt to me very similar. And it was weird. I was talking about very, I'm doing work with a hundred-year-old company and watching it get, you know, attacked from the outside by activists. I was helping take young companies public and watching them be attacked by their own bankers and lawyers. I was watching very young companies raising, helping them raise money and deal with their own VCs. And I just felt like the same thing is happening everywhere I look. And so I wanted to understand why. This didn't start out as a book, this just started out as a desperate cry for help in my own work. Like, why does this keep happening to me and what can I do about it? And over time, I got better and better and better at navigating and managing these forces. And it really took me a long time to realize that those tools that I had developed might be useful to other people too. And so then I started to try to share them and help other companies, you know, adopt this way of thinking. And I kept encountering the problem that there's nothing that's been written about it. And as an advocate for a new idea, when someone asks you, I would end these phone calls with uh leaders of all different sizes and shapes and different countries. And they would be, you know, I got pretty good after a few years of this at convincing people to try to do things differently. And they say, okay, this sounds great. I'm gonna go try to convince my board or my co-founders and my executive team to do this. What else can I read about it? And you really don't want to say nothing. It makes you sound like a complete lunatic. It's like, come on, what are the odds? And so I'd be like, well, you could read some academic papers, you could read some case, like there's some stuff that tangentially leads to it, but we just we don't even have the language to say what is the topic that this conversation is even about. And that's when I was like, okay, we we desperately need new concepts here. We're gonna and I was like, oh no, I'm gonna write another book, oh Lord.

Mark Blackwell 5:22

No, I I felt it in my my personal journey. First few years of my career was of with a family company, which is how I understood business to be. And a lot of what you described in the book about values and the reason for being and the non-financial metrics that drove decisions in the organization were just natural to me, it's obvious. And then when that company was acquired by the DuPont Corporation, I began for the first time to see some of the things that you were describing. And maybe we'll come back later in the in the podcast to the listeners, but I'll just give you a hint of what might be coming. But there were three ideas that as I was reading each chapter kept coming to me. And I thought that by this podcast we might just explore each of those so that there'd be things that the the audience are familiar with.

Eric Ries 6:11

Sure, sure.

Mark Blackwell 6:13

So there's one chart that I will for those who are listening, I will make sure you can see on the short show notes and look it up. It's uh on the R World in Data website. A great website, by the way. On the Y-axis, it's got the fixed pregnancy of people in each country. And on the X axis, it has the average per capita spend on health care in that country. And the chart largely follows a sort of an XY plan. There looks to be a relationship between the more you spend on health care, the longer you live. With one notable exception. There's one country that spends about twice as much as European countries or in other parts of the world

The US Anomaly And Market Failures

Mark Blackwell 7:00

and has a lower life expectancy for that investment with its population. And that's the home of free market capitalism. That's the m the largest market capture in the world. It is, of course, the USA. And I've had some fun conversations with people trying to figure out why it is that the market should know about good debt distribution of capital, good distribution of resources. Should have found itself in this position. That's factually true. We can argue why, and we can all have our hypotheses, but I think your book sort of unpicks some of the reasons why the US is in that situation on the charts. Comments, please, on that one.

Eric Ries 7:45

Well, yeah, listen, it's unequivocally true what you say. And it's not the only chart that looks exactly like that. It's funny, if you'd said if you wanted to look at transit construction costs by a country, you would see the same chart. We we have astronomical transit construction costs for the same projects or even inferior projects to many, many other developed countries. And there's like 20 things like that that are also true. You see it uh in the performance of sports teams and sports leagues. You see it in uh in the uh spending on customer service. We have all these outlier phenomena. And it's actually funny in the introduction to the book, I give a list of these things. So I wanted to make a promise to the reader. The introduction is a promise of what, if you read the book, what I will deliver for you. And of course, I knew that we would have a lot of people who read the book who are founders and leaders and board members and people who for whom this book is not a work of theory, but like a blueprint for things they need to do, like starting on Monday. Okay. So I was like, look, if you if you're that kind of reader, let me show you how to use this book effectively. But I knew we were also going to get readers who are not in that situation, who are employees or citizens or consumers and want to just I call them the why readers, not the how readers. Like, why is it the way, why are things the way they are? And then, yeah, secondarily, what can we do about it? And so I had this paragraph that was just a list. It's just a list of like, in this book, you will find out about all these different crazy things, like the stubborn persistence of medical errors, the um I can't remember now all the things that are listed, transit, healthcare costs, um, sports teams, just like a hodgepodge, why journalism is collapsing, why political parties are ineffective, just a long list of things. And and so many um editors were like, you can't take, you gotta take this out. It's too big, it's like too long of a list. You can't really deliver it on this promise, can you? And I was like, no, we want the reader to hold us to a high bar. I was like, that's not coming out. We're doing it because all of these um are market failures. And if our modern theories about finance and the moral basis of capitalism were true, this wouldn't happen. This book is really about the things that would not happen if our mythology was true. And each of the phenomena are staring us right in the face. So we actually know that we know these truths really well, but we have, you know, this is how indoctrination works. We have compartmentalized the facts into separate parts of our brain so that we don't have to think, we don't have to experience the cognitive dissonance of realizing that we've been fed an economic dogma that's not true. So, for example, I was watching a video, I think it was with the great British marketing uh guru Rory Sutherland, maybe, who was going through, and when you said family-run businesses, I was reminded me of one of his videos where he's going through this story about how only family-run businesses really can think long-term, can make promises that the uh customer can believe and can resist the allure of excessive cost cutting and the kind of ROI-driven mania of modern business. And he's listing them off on his hand. You know, there's there's Mars and there's, you know, I remember the Ford company, and I don't remember exactly what examples he gives. And at the end of the video, he's like, oh, and also Costco. He's like, you know, Costco's not family run, actually, but for some reason they also seem to be able to do this. Anyway, moving on. And it's like, the moving on is the really interesting part. We actually all know companies that deviate from things that we think are inevitable. Like if you ask people, is this kind of corruption, this kind of like loss of a company's soul, this kind of extractive mindset, you know, wasteful spending, the kind of like parasitic relationship that so many healthcare companies have to actual healthcare, is that inevitable, an inevitable part of capitalism? Is it an inevitable part of scale? And people will basically be like, oh, yes, it's inevitable when it's it's about greed, it's about human nature, it's about my people have all these just so stories. And they'd be like, but can you think of any companies that deviate from this formula? No, I can't. And then you'd be like, well, what about Costco? Oh yeah, Costco. What about Patagonia? Oh, yeah, Patagonia. What about Hershey? Hershey chocolate, if you've heard the chocolate, like, oh yeah, I guess that's and I can I could do this all day. There's so many of these exceptions. We like, we know the exceptions exist, but we are not really able, I think again, this is how indoctrination works. We are not accustomed to drawing the implications from this knowledge and taking it back into our own kind of theories of the world. If you study these exceptional companies, you will notice a pattern that pretty much every single one of them deviates from the modern best practices that we are told are the only and best way to build organizations. And if the modern best practices that were that are rooted in modern finance theory, if they worked, if they were true, these exceptions would be at a massive permanent disadvantage. And yet the evidence is that they actually uh exceed uh the performance of conventional so-called best practice companies. So if we sit with that fact, that just basic fact it actually I think has to up-end many of our economic orthodoxy.

Mark Blackwell 12:28

And so on the things that these companies do differently and the situations that they find themselves in as well that are different. So for example, and they very clearly have a strong mission and a purpose. The aha moment was, you know, US corporations and so many in in Delaware that is now whittled down to you don't need a purpose to register as a company in the USA. So that the three-legged stool has just become fundamentally a one-legged stool of keep shareholders happy, and we've forgotten the other stools, which is clearly having a reason why the company exists in the first place, and then the stakeholders, which has just got lost in time. Which other companies either because they're family companies and hold on to it, or indeed European companies have written this into their structure. Foundations like we talk about Bosch, you talk about Nova Nordisk for for way. So there are some differences in the way companies are structured that help give these different behaviors.

Eric Ries 13:26

Yeah. Yeah, I'll tell you one of the first times I ever encountered this. So I do a lot of traveling and I do a lot of speaking and corporate stuff. People call me to help their company with this. So I've been around a lot of boards, a lot of executives, CEOs, executive teams. I've I've I've seen companies from the inside all over the world. And they're all pretty much the same. You know, like at the end, like the very deep way, companies are very remarkably similar. It doesn't matter what country you're in, it doesn't really matter what industry you're in. And every so whenever you notice an exception, do that kind of work, you were like, oh, that's interesting. And I remember being in Denmark, and in Denmark, there are a lot of these companies that have unusual structures. It's a pioneer of the field. So I was in a company called Grunfos that makes most of the water pumps in the world. Their story is in the book because that was one of the first companies I met. And I was doing this something and I noticed that it was a very different company in certain ways. And I was asking them about their structure. I was just like, seems a little odd. And they were explaining

Ownership Structures That Beat Short-Termism

Eric Ries 14:14

to me that three generations ago, their far-sighted founder, you know, a few years before he died, transferred his ownership and his control of a company into a nonprofit foundation. And so they have this structure that's called an industrial foundation, where the nonprofit foundation oversees the for-profit subsidiary. And I remember saying to the people there, I was like, Oh, I'm so sorry. That must be really rough. And they're like, What do you mean? It's like, oh, well, if you're owned by a nonprofit, you must be at a big disadvantage. You can't access capital markets. You have these global competitors that probably they're much more disciplined and they're more rigorous and they're but are they have the ROI thing. And I was just like going through modern finance theory, all the things you would predict. And they were just like laughing at me, like I was so dumb. They were just like, Real? What are you talking? I was like, wouldn't you, if given the choice, wouldn't you gladly switch to the best practices? And they just start bust up laughing. They just thought this was the funniest thing they'd ever heard. Because they're like, we run rings around our conventional competitors because they can't think past the current quarter and we can make multi-decade investments. So why? They were like, would we switch? Are you kidding me? And I'm just like, oh, okay. So I guess this is a place that like coddles its managers. You don't actually make any money for your shareholders. You know, I was like, that must be that kind of thing. And they were like, no, we're the huge global enterprise. We're doing quite fine. So you're like, they were like, you're really not getting a kid yet. You need to pay attention. And I was like, but that's what I'm talking about. Like the evidence that this was happening was staring me right in the face. But my ideological priors were like, this can't be existing. So I came away from the experience kind of rattled, but being like, well, I guess that's just a one-off. But then, you know, if you study, you'll start to meet other of these companies. And not just in Europe, not just in Denmark, although there are a lot in Denmark, but like I mentioned, there's Hershey, there's Vanguard, there's REI, like there's plenty of American companies that have this unusual structure. And you start to be like, what's going on? Why is this happening? And at the same time, I'm meeting these exceptional companies. I'm counseling so many people, trying to help them start a company. And I want you to imagine what it's like if you go to an American VC or even an American securities lawyer, and you're like, hi, I'm starting a new company in the hot emerging field of AI. I want to adopt this structure with a nonprofit foundation at the center and the da-da-da-da-da-da. They look at you like you are on a different planet. Like, what are you talking about? That is nuts. Yet, and a lot of them will be like, no one's ever done that before. Like, no one's ever done that before. The German optics company, Zeiss, did it in 1885. I understand it's new to you, but that doesn't really make it new. Have you read a book? Like, what is wrong with you? So I was like trying to make sense of the fact that in my day job of helping companies with innovation, I was being told, sorry, there's a one and only one best way. And meanwhile, I'm meeting these companies that like utterly and completely defy these rules and are thriving because of it. And I was like, the contradiction was too great for me to ignore. I'm pretty stubborn. I can, I can do uh cognitive dissonance with the best of them, but eventually the dissonance was too great to ignore. And I started to be like, okay, what if we took this seriously? What if we actually looked at where these best practices come from, where these fiduciary duties, as you were talking about with the three-legged stool, like what is the history of this? How do we get into the situation? And what is the evidence behind this supposition that this is the best way that everyone keeps telling me? And when you look at that evidence, it is shockingly bad. It's completely it's like you go, it's Alice Super Looking Glass, you realize that up is down and left is right. Like almost everything you're told about why these structures are the right ones is been tested empirically and found wanting. Meanwhile, these other structures, the ones that we dismiss and laugh at, have decades of evidence that have accumulated that they're superior. So I was like, oh, I see. Our whole theory of corporate governance is wrong. Good to know. I was like, oh, it's actually like that's that's simpler. I was like, oh, at least now I understand what's happening. Okay, good. We've been taught a wrong theory. Like human beings embrace wrong theories from time to time. You may have heard of it. And it's not the end of the world, but you do have to take a corrective action once you realize you've made a wrong turn.

Mark Blackwell 18:01

So yeah, I've been I've been to Denmark and done a fair amount of business in my time. So I very much feel that. But coming back to the US healthcare anomaly, you've got a great case study in your book of a US company, devoted healthcare, which is trying to do something different to buck the system. And it does provide some good pointers as to how you might deliver healthcare more effectively in a US model.

Eric Ries 18:26

Yeah, yeah. Devoted vote is one of my favorite case studies. Well, first of all, because I'm friends with the founder. His name is Todd Park. He was the former CTO of the United States and a tremendous entrepreneur in his own right, has done multiple healthcare companies. And I'll just set the scene for you. So he was, you know, he was part of the healthcare.gov recovery team, if you remember that era of the Obama administration, basically save the Obama administration. And because of that, he and a bunch of his allies became like government heroes, basically, where they were able to then drive a lot of reforms into the American federal government because people were willing to listen to what they had to say about not just how technology should be built, but about how organizations should be structured. So he, I think he originally had agreed to with the president that he would serve for a year and he wound up having to stay there for quite a while. So he was pretty tired. You know, it was an exhausting and difficult period, but you know, he was a patriot and he did, he did the right thing by his country. And when he

Devoted Health And Full-Stack Care

Eric Ries 19:14

was done with his service, I had him over for just to chat. I had him on my couch, you know, my living room. We were just hanging out. And I was asking him, what's next? And he's explaining to me that he's gonna start this new company. And I was like, oh, tell me all about it. It's like very exciting. And he's like, Well, I'm gonna create a new health insurance company. And again, I was like, Oh, my condolences. That sounds, it sounds rough. You know, like, really? You sure you want to get into health insurance again? He's like, Yeah, but I've decided that in order to solve the problem of American health care, we can't just bite off one little slice of the system. We have to build a full stack ground up replacement for the American healthcare system. And I was like, that sounds even harder. Like, really sure. And he was explaining to me, you know, and of course we all vaguely know this, that the American healthcare system is this incredible thing. Like people criticize it, but the, but they're upset because it's so amazing. This is where so many life-giving therapies are invented. This is where so much RD, like there's this incredible value-creating engine at the heart of it. Doctors and nurses and scientists who give their lives to be of service to their fellow men. So, like, really a remarkable thing. And think of it like barnacles on the ship are like so like billions and trillions of dollars of other stuff that has attached itself to this engine. And some of them are symbiotic, some of them are parasitic, but none of them are really the core delivery of care. And because of that, it's such a complicated system that when you improve one minor part of it, the rest of the system just adjusts to absorb your improvement. And the net effect for patients is not actually that great. So we've seen lots and lots and lots of investment in healthcare improvement that has created local effects only, but at a systemic level has not accomplished very much. So, Todd, yeah, so Todd's on my couch and he's like, here's what we're gonna do. We're gonna create not just a health insurance company, but a care delivery organization. We're actually gonna hire doctors and provide health care to seniors in their home. And the whole thing is gonna be powered by yet another third entity, which will be a technology company. We will basically own the technology, we will deliver the care, and we will be the insurer of record. So we'll be economically responsible for the health of these patients. And if we do that, we will create what he calls the virtuous performance cycle, which works like this. If they keep their patients healthier, then by delivering the right care at the right moment in their home, right when they need it, including preventative care, then their costs will be lower. Because their costs will be lower, they'll be able to invest more money in a superior customer experience. Because they have a superior customer experience, they'll be able to win customers away from the conventional system because they keep them healthier, they make more money. So it's just this like round and round and round it goes. And I remember he's he's pitching this to me, and I was like, Todd, this sounds amazing, almost like a utopia, but it sounds too hard. Like, are you sure you're going to be able to do this? And I wouldn't be easier if you sliced off a little less, you know, and built it up over time. And he was like, no, no, you misunderstand. This only works because it's so hard. Because we are willing to do the work of creating this business model alignment, because we're willing to do the work of creating what I call mission drive, the situation where the company only profits by keeping its customers healthy and can't profit any other way. And by cutting out just armies and armies of middlemen, they're able to, for their patients, not for the whole of the country, but for their patients at least, they create an alternate universe, full stack healthcare company.

Mark Blackwell 22:39

So the healthcare system, you talk devoted health, they've built a full stack.

Eric Ries 22:42

Yeah.

Mark Blackwell 22:43

And I was going to say, well, one of the things I've read in that there's a lot of cost in the UF healthcare system, which is admin cost, which is each part of the value chain, presumably talking to each other. And each part of the value chain has got different missions and different incentives, which creates a per a behavior which is not aligned across the value chain. But by having a full stack system, you've got a more aligned purpose, which is prob potentially more comparable to systems you see in other parts of the world. And also how you find in like the South Korean Kybals, the secret is to find a common purpose. And that helps overcome a lot of these poor effects that we see in delivering value in many different value chains.

Eric Ries 23:27

Yeah. Yeah. You know, it's it's well known in economics that there are all these market failures. Like it's funny, it's not some secret. It's just we don't, again, they always think through what the consequences of that are. Like there's the phenomenon of double marginalization where each entity in a value chain winds up optimizing for its own margins rather than for the total efficiency of the overall chain. I talk a lot in the book about a concept called surrogation, where the metric of a thing becomes the surrogate for the thing itself. We see this a lot where in healthcare, of course, where people are, you know, focused on doing procedures. Now, if you ask them why do you do procedures, they say, well, procedures are supposed to make patients healthy. But if you get paid for procedures, you actually you'll want, you don't even mean to. No, no one involved is like consciously being like, I want to do as many procedures as possible. It's just because that's the thing you're incentivizing. That's the thing you're gonna get more of. You wind up with more procedures than you do with patient health. You want to do unnecessary procedures. And there's a hundred things like that. And, you know, there are many interventions. This is what's so frustrating about this. If you, if you talk to people who are defend the system the way that it is, they'll say, look, the market is about competition and it selects for value creation. Whatever it's a just so story, whatever it's doing right now must be optimal. It must be the efficient market hypothesis, it must be optimal what it's doing. Any change away from that thing must be to make it worse. The issue is that that's not true. The market doesn't select for value creation and it's not actually especially competitive. And the way you can easily prove that this is the case is watch what happens whenever someone comes up with an innovation that in fact saves money or improves patient outcomes. You would think there would be competitive pressure for everybody in the value chain to adopt it. But instead, what you see, and this has been going on for decades and centuries, is people find other ways to avoid having to confront this reality. So they wind up, they find ways to discredit the innovation, to put, to drive the innovator out of business, to acquire the uh innovation and shut it down. People will go to extreme lengths to avoid having to confront this thing. And so that fallacy has a name. Like it's so common it has a name. In pharma, by the way, they're called killer acquisitions. Like there's a data set, there's incredible research that was done that proved that something like 5% of pharma acquisitions are intentionally done with the goal of shutting down the RD of the acquired company. So like they're not actually value accretive, they are value destroying. But because of surrogation, they allow whoever's doing the destruction to quote unquote profit in the short term, even though over the long run they're crossing value destruction. We see that all over healthcare and these other related fields. So instead of having like, instead of allowing people, sorry, a lot of the discourse about this focuses on what companies should be allowed to do, on the regulatory environment of companies, which is fair, absolutely important thing to be discussed. But I didn't want to write another policy screed type book. I feel like we have a lot complaining about this phenomenon and calling on kind of the world to be changed after the revolution, if you know what I mean. And, you know, God bless. But in the meantime, I'm always like, but in the meantime, what are we gonna do? Like while we're waiting for that change to happen, what are we gonna do? And therefore, I feel like this book is kind of an old-fashioned book in a certain way. It's concerned much more with what organizations and their leaders ought to want to do rather than what they should be allowed to do. And I think by being willing to put the question of regulation, just not I'm saying it's not important, but just for the purpose of one book, can we have one book where we put that question aside and ask ourselves, do we have moral responsibility to participate in this value destruction or not? Like what is our responsibility as company builders, as leaders, as board members, as as employees, as customers? And I think when you do that, you actually discover that we have a lot of tools for building a better world that we're currently leaving on the floor, not using. And before we start complaining, we should get to work using those tools.

Mark Blackwell 27:21

Well, we could talk forever about the healthcare system, but I feel we do need to move on. There was a second thing for me was um the timeliness of your book. Recently we had on the show Stephen Wonker, co-author of the book AI and the Octopus Organization. And it's basically saying that AI is going to be a major catalyst to making organizations more adaptive and following an octopus-like structure, which is fundamentally very default decision-making. And but he talks that you need some unification of that, and the analogy is the three beating hearts of the octopus. But among the big aha moments of that is leaders of these octopus type organizations where AI is going to throw are going to have to be very strong at vision and mission and inculcate that within

Mission In The Age Of AI

Mark Blackwell 28:12

their organization and s and all stakeholders. So that's undeniably true. The reality is that far too many companies, what is their creative activity of the month for? It's doing anything you can to meet the numbers at the end of the month at the end of the quarter and keep Wall Street happy. The whole management focus the discussion and meeting seems to be what are we going to do to make the numbers this month, right? Or this quarter to keep our shareholders happy because otherwise they're going to be upset. And then the whole concept of a real strategy within an organization is sadly diluted. There may be some huff and fluff on the outside, but within. And so I loved the emphasis she put on, you know, the purpose and the mission to make an organization successful in the future.

Eric Ries 28:57

I was very skeptical, by the way, earlier in my career about talk about purpose-driven this and mission-driven that. It just felt to me like um a bunch of corporate fluff, you know, consultants speak. I didn't I didn't really believe in it early in my career. And I I it was later in my career. Actually, when you see it up close, you start to be like, oh, oh my God, when someone says a mission-driven company, this is what they're talking about. Oh, yeah, I'll sign up for that for sure. That's not consultant throwing some values up on the wall. That's like the lived reality of people who are aligned to a common purpose. It's actually an incredible rush. It's the equivalent of flow state, but for an organization. And we have wonderful, very thorough evidence that mission-driven companies outperform, that purpose-driven companies outperform, and we know the mechanism by which that happens. So we can obviously talk about that. But in the age of AI, especially, and it's in an age of any decentralizing or democratizing technological change, this becomes exponentially more important. And I took a lot of ideas for the book from a very pioneering but now very little-known management theorist named Mary Parker Follett. She was a contemporary of Frederick Winslow Taylor, but she was utterly written out of the historical record and he became the most famous management theorist of all time. I will leave to the listener the exercise of judging why this might have happened to her and not to him. But in any event, if you read her work now, she wrote so many things that if they were written today, you'd be like, this is cutting edge. And she was writing a hundred years ago, more than a hundred years ago. She talked about power with rather than power over. She had this idea she called the law of the situation. She said that the superior and the subordinate both together have to figure out what is the law of the situation that is, what does the situation require. And then they both obey that situation rather than the superior commands, the subordinate. Anyway, I could do this all day. She had like a hundred of these incredible, incredible ideas. And my absolute favorite of her ideas, and I named a chapter after it, is what she called the invisible leader. And she used to drive her contemporaries absolutely crazy because she would say things like this She would say, Mr. Roundtree, the owner of the Roundtree Chocolate Factory, is not the leader of the Roundtree Chocolate Factory. And people be like, lady, his name is on the door. His family's own that chocolate factory for a long time like there's a lot, like, who else could, if it's not him, who else it could be? She said, No, he is an exceptional leader, but the people do not follow him. Rather, he is really good at instilling in them a common purpose. And that sense of common purpose, rather than Mr. Roundtree himself, is their invisible leader. And I just thought that was such a powerful idea that this, that the thing that people do when no manager is present ultimately is what determines the fate of any organization. And learning to instill that sense of common purpose is one of the principal tools we need if we want to create real alignment among people.

Mark Blackwell 31:37

Yeah, there's so many examples from the book. And one of them You'll know you're in America, there's a big supermarket chain in Texas.

Eric Ries 31:44

Yes.

Mark Blackwell 31:45

And the story of when there was a storm passing through, the electricity's gone out, the queue the checkout queues are enormous. Knowing the values of the company, knowing the policy, which is, you know, this supermarket chain feeds half of Texas or something like that. Instantly made the decision, let them go out with their cards. Because that has a short-term cost but a long-term value. And being able to comfortably make that decision because the values of the purpose-driven company were there. I think that was just a beautiful example.

Eric Ries 32:16

I love that. There's so many great anecdotes about the company's called HEB. And customers in Texas, if you talk to anyone who lives in Texas, they will wax

The Invisible Leader And Real Alignment

Eric Ries 32:24

Rhapsodic about this grocery store to you, even though they're not a regional store, they're not known outside of Texas. Um, customers mistakenly think HEB stands for Here Everything's Better, even though that's not actually the name of the company, it's just the initials of the founder's son. Anyway, and and there, and if you study, I remember the first time someone told me an HEB story, like a genre of stories, and they're things like what you just described. Power goes out because it's a winter storm. And like why people are stocking up. Why? Because there's a winter storm. The store is packed with people getting, and like there's this groan. You can just feel the pain of like, no, now the store can't take our payment. We're screwed. And the store manager calmly just sends everybody out, take, take your cart, go home. And people are

HEB And The Culture Bank

Eric Ries 33:04

like, How are we going to pay you? You're not. Just go take care of your family. And people were in tears. Like, what was the last time people were in tears because of what some corporation did for them? You know, tears of gratitude. It's just very unusual. And you hear the first time I heard one of those stories, I was like, Yeah, yeah, okay. So one manager in one store like did the right thing, like whoopdie do. But they're all over the place. Remember eggflation a couple of years ago when the price of eggs was skyrocketing in the US? It was a major political story. It was uh, you know, a whole whole thing. Anyway, during eggflation, HEB just refused to raise the price of eggs. Just they're like, no, we know it's temporary. We'll just take the hit. And people are like, you can't do that. You're gonna lose money on the eggs. They're like, yeah, but that's our job. Our job is to be a buffer, a shock absorber for the economy. And yes, in the all these stories, they all have the same flavor. In the short run, it will have some cost. But in the long run, why do you think people think it stands for here everything's better? They're just consistently trying to train their people to do the right thing. Now, the late great Clay Christensen had the saying, he wrote this in his last book, that it's easier to do the right thing 100% of the time than 98% of the time. Because when you have a clear, simple rule to follow, especially in questions of values, it's just you don't have to have meetings about it. You don't have to discuss it. You just you know what the rule is. So I want to really emphasize this that they the rule at HEB is not like if you see an opportunity to do something good, like let's call a meeting about it, check in with headquarters or whatever, think about the ice storm. The power was out, communications were down. The store manager was 100% on their own, and they were gonna have to just make a call. They could not consult with headquarters. And if the rule was do the right thing most of the time, they definitely wouldn't have done it because it was a bold thing to do. The store was practically emptied out of inventory. But they knew the rule was that 100% of the time we do the right thing. And in fact, HEB, like a lot of great companies, they drill for this. They do exercises, they prepare for it. They're like they have an emergency response team, they have a whole playbook for what happens. And so, anyway, there's all these stories of them doing the right thing. And none of the individual stories by themselves is that important. But they accumulate. I call it the culture bank. It's like a bank account where if you keep doing the quote unquote right thing, you earn these deposits after deposits after deposits, and then you have this resource of trustworthiness that you can draw upon in times of crisis, in times when you need something from customers or from employees or from anybody, you know, anyone who who touches your organization.

Mark Blackwell 35:28

There was so much we can talk about in this book. As you see, I I enjoyed it a lot. The third takeaway for me was well, maybe it's not so bad to live in Europe after all. I mean, I was for years I've been told that you're you know, the social democratic model of Europe is backwards, that there's over-regulation and having policies designed to create a fair market and standards in particular, a part of that so that people can interoperate in in a market. Yeah, I have to say, as one sums up some of the case studies, there was being a good argument being made for the social democratic model of Europe seemed to be coming from your book. I don't know if that's fair or not, but that that's a takeaway I got from it.

Eric Ries 36:12

Well, it's funny you say that. I mean, look,

What Europe Teaches About Dynamism

Eric Ries 36:15

I spent a lot of time in Europe, and I think I I mean, and and I I have I have a lot of friends who have told me many times that the quality of life where they are is better than the quality of life where I am. And and if you open a newspaper these days, it's hard to be like, oh yeah, great. It's hard to defend hard to defend the American system at this exact moment in time. I will say, though, uh, to be fair, this is not my area of expertise, so I'm not really qualified, honestly, to weigh in on such lofty topics. And I've spent a lot of time with entrepreneurs in European countries who have a lot of complaints about the regulatory environment. So I don't think I think we should never take for granted the entrepreneurial energy of any place, and we should always be thinking about how we can invest more in innovation and in economic dynamism. That said, I think it's it's valuable to learn from the best wherever they are. And so I think there's some things America does well that you know others would be glad to learn from. I I still go to countries sometimes where, for example, entrepreneurs are personally liable for the debts of their startup. What a horrific public policy idea that just, you know, that's I the same the same people who will argue with me about how tying health insurance to employment in America is inhibits entrepreneurship because the fear of losing your health insurance prevents you from starting a company will then defend personal bankruptcy. There's something like, hey, guys, it's the same phenomenon. We need to make it as easy as possible and as democratically available to people as possible to start a company. But I think, yeah, the political polarization we see all over the world right now tends to think that there's like private sector and public sector at odds with each other, as if good policy design doesn't have an influence over economic outcomes. So, for example, we see, you know, we see hotbeds of entrepreneurial activity in places like Stockholm, where the fact of the social safety net makes it more comfortable for people to attempt entrepreneurship. I meet people who who, if they lived in the U.S., would not have had the ability, not had the privilege necessary to start a company. And in fact, we have all those incredible data sets. One of my favorite studies ever, I think it was by the Rand Corporation, one of the exogenous factors in the US is that people become eligible for Medicare at a certain age. I think it's at 65. They keep mucking with the standard, right? It's not determined by your economic station, it's not determined by where you live. It's like a hard rule, you know, you become eligible on this year on average that there's some complexity. But because of that, they were able to look at entrepreneurial um outcomes, like percentage of the population of a given age cohort who start a company in a given year. And it's very consistent at age 55, 56, 57, 58, 59. You get to age 64, it's very consistent. At age 65, it goes way up. And it's like, what 65-year-olds are more creative than 64-year-olds? What are we talking about? Well, no, obviously, what's happened is as soon as you take the health insurance question away, people are more likely to start entrepreneurs. And we now, obviously, with Obamacare and recently, we have a lot of data about this now that when you provide the right supports to people, you create more entrepreneurial um activity. And and there are a lot of details, like if you if you try to understand why Denmark has so many of these particular industrial foundation type companies, a lot of it has to do with obscure policy points of Danish tax law from 100 years ago. And even though in the US we've adjusted the tax law now, you could do that structure now in the US without any penalty, but but it wasn't always true. Denmark has a head start. People, Danish entrepreneurs see other Danish entrepreneurs doing it and they want to do it too. Like we are their areas of specialization. So I feel like we should we'd be better off learning from each other rather than trying to um like defensively and nationalistically claim that anyone has the best system. And furthermore, I'll say one more thing about this. I know there'll be some people who are interested in the policy implications. This book, I tried to write the book in such a way that the policy implications are very obvious, but I don't get into it in the book itself because that's not what the book is about. And because we live in such a polarized age, it was like, who can who wants that headache? But for example, if you want to have more entrepreneurship in your country, people always think about okay, what I need to do is like look at what people are doing as entrepreneurs and do something about it. Make give them tax breaks or give them tax penalties or whatever, like shape their behavior in some way. But the right way to think about entrepreneurship is you have to think about what was somebody doing the minute before they became an entrepreneur. The most critical question is who decides to take the leap? So what were they before? They were very this is actually a very small number of things. They were unemployed, they were a student, they were a worker, and like 0.01% of them were already an entrepreneur. That's it. There's just very few things that we're doing. So if you do the things that provide cushion and support for those people, and especially for immigrants, for people from lower social economic classes, like there's all this data that if you support those people, you create the conditions for more entrepreneurship uh to happen in your country. So so I feel like there's all we all have a lot to learn from each other, and we should be focusing our economic policy to try to create that opportunity for more and more.

Mark Blackwell 40:59

Thank you, Eric. So we have a lot to learn, but I think we also have a a lot to do. I loved it. Towards the end of your book, you've got this phrase you're not stuck in traffic, you are the traffic. So in other words, what you're saying from that is we can do something about it. We've got ownership of this situation. Yes, we certainly do. We started this podcast talking about, you know, the what and the why people. So for those people who are looking forward to something to do on Monday morning after they've listened to this podcast, what will be the three things that they should do?

Eric Ries 41:30

Yeah, okay. So let's let's pick out some different people who might be listening. If you're a founder listening to this, then you need to get to work. Okay. One of the critical principles in the book is that it's always too early until it's too late. So if you ask for advice from bankers, lawyers, investors, they'll always pat

What To Do On Monday

Eric Ries 41:50

you on the head and be like, oh yes, yes, of course. But you can always worry about that later. Get product market fit first, become strong, become successful. And with success, you'll have the leverage to do everything you want. And I hope if you read the book, if you've studied this conversation at all, you'll see the ways in which success makes you a target. The more valuable the thing you create, the more valuable it is to somebody take it away from you. So get to work right now. But this same principle that applies to entrepreneurs also applies to a career. I read in the towards the end of the book. All of the evidence that is in this book, it's nominally on the surface about organizational advantage. So for example, purpose-driven organizations outperform. Okay, that's true. So people read that and they say, that's a strategy guide for me as an entrepreneur. If I'm a leader, this is the strategy I should use to attract and retain talent. But it's also a career guide. If you're an employee, the places that have this special factor are going to be more likely to be successful, meaning you're going to be more likely to be successful if you give your labor and your talent to them. And in fact, if you let your own values guide your individual choices, you will discover all kinds of surprising things that happen as a result, including the surprise of your own power. This is not true just for employees. We know, for example, that mission-driven, purpose-driven companies have greater customer loyalty. Is that a strategy guide or is that a shopping guide? Yes, both. Right. We know that these companies outperform for their investors. So is that a guide about how to raise money or is that a guide about how to invest your retirement savings? Yes. Yes, both. And last thing I'll say it's very disappointing for some people because some people are very suspicious of the idea that individual agency is something we should ever talk about. Because they only want to talk about collective action, government policy, you know, treaties, global stuff. I get it. And so the book is 99% about systemic forces. And then right at the end, we have this switch in genre almost to a completely different genre of book where we start to talk about individual agency. And for some people, they're like, it sounds like a retreat. Like we're going to solve climate change with recycling. That's not what they want to hear. But what I want to do to try to convince your listeners, if they'll give the book a chance, is that they have. We have, everyone has a surprising amount of power that is caused by the very defects that we complain about all the time in our economy. So for just give one example. There's a bunch in the book, but I'll give one now. In the era of surveillance capitalism, which most people are pretty upset about, you have no privacy. Okay. Everything you do is obsessively tracked. That means every decision you make, whether you tell anybody about it or not, every decision you make is somebody's OKR. It's somebody's metric in some company somewhere to get you to do or not do whatever that thing was, which means every decision you make sends out into the world gravitational ripples. And you may feel that you are powerless. You may feel that you have no agency over these mega corporations. But one of the important ideas in the book is that these organizations, they are addicted to you. They are obsessed with you. What will you do and what will you not do? What can they get away with and you'll still buy their product? How can they mistreat you and you'll still work there? They are constantly running this calculation. And so every time you do something, some it's somebody's job to pay attention. And every once in a while, you may never know the impact that your action has. But I tell a bunch of stories in the book of people who did not formally organize with each other. They just did what they thought was right, but through their collective action, nonetheless shape not just whole companies, but whole industries, whole societies. That is actually the fuel that can power all kinds of revolutions. So if we are willing to seize this power for ourselves, we can see our values realized in the world in ways that we may find some.

Mark Blackwell 45:38

Thank you, Eric. Well said. Thank you. Very motivational. And yes, I thoroughly recommend that you pick up a copy of this book. It's going to be published when?

Eric Ries 45:47

It comes out May 26th in both the US and the UK.

Mark Blackwell 45:50

And in the meantime, you've got a very good website, and you're tempting us with lots of added value features if we buy the book to go behind.

Eric Ries 45:57

Well, how about that? Why thank you for mentioning? Yes, you can go to incorruptible.co, incorruptible.co, where you can get bonus features, you can get uh secret extra chapter that was cut from the manuscript, implementation guides, readers' guides. We've tried to really create as much value as humanly possible for the people that are willing to uh to commit to the book early. So thank you for everyone who chooses to do that.

Mark Blackwell 46:16

Thank you, Eric. We're going to be talking about this book for a while, I think. Thank you very much.

Eric Ries 46:20

Thanks for saying so. I appreciate it.

Mark Blackwell 46:21

Thank you. Bye bye.

Eric Ries 46:22

Take care.