Lenny's Podcast: Product | Career | Growth
00:27:06 · Eric Ries
[00:27:06] S0: So much pain. I'll tell another story. We've been telling happy stories. Let me tell you one not very happy story. I've been doing this exercise for many years where I would ask founders or leaders really of any seniority. I'm just like, "Listen, before we get into the details, first tell me who you think is the most evil company in the world." And sometimes they instantly know who to say. They're like, "Oh, I know." But some people are like, "Well, what do you mean evil?" I'm like, "The company where there's no amount of money they could offer you that you would go work there. You know they're up to no good." Everybody has a company like that in their mind. I don't know if you want to say who is for you. I understand if you don't want to, it's okay. But I'll just, for the sake of us having a hypothetical that we can do, I would always tell ... We go around the room, Some of them are on Zoom, everyone puts in the chat and someone will be like, Halliburton. And someone else will be like ... Increasingly, tech companies are showing up on these lists now, which when I was younger, that would never have been the case. But now you somehow see tech companies there. Some will see Monsanto or you see ... Or some private equity fund. People are mad about something, they can name a company usually. So it's not hard to find examples. Now, my father was a pulmonologist growing up. So I was raised that Philip Morris is the most evil company in the world. So we'll just use that as our hypothetical just for the sake of argument today. If you think Philip Morris is great and you have different values, whoever's listening, fine. You pick the company you really would never, ever, ever want to have to work for no matter what. Now, I ask people to imagine the company they currently work at. If you're a founder, you're a company. If you're an employee, you're a company. But the company you hold dear, just imagine. Philip Morris shows up one day and says, "I'd like to buy this company from you for $1 more per share than it's currently worth." You selling? Most people are like, "Hell no. Hell no, I'm not selling." One person once asked me, "Well, what are they going to use it for?" Oh, sorry, to be clear, they're going to use it to sell cigarettes to children. Now you selling? Yeah. No. No deal.
00:29:08 · Eric Ries
Obviously, F no, but I can't actually say on your podcast the kind of things people say when they were presented with this because there might be children listening. Okay? People get real upset at this idea. And when we talk about ... I'm like, "Okay, well, did you know that according to the legal documents you, yourself, signed, your company's literal charter that you have right now, and this is not some hypothetical future thing. You've already put in motion a rule that says you have a fiduciary duty to say yes in this situation." People are so outraged. They're like, "That cannot be right. My lawyer, my guy, he would never have done that to me." I'm like, "Call him up, ask him if what I say is true and call me back." And they're like, "He said he was doing me a favor by giving me the best practice documents to make it easier to raise money." Yeah. So occasionally though, people will say, Eric, you are exaggerating. Yes, that can happen, but come on, does that really happen in real life? Is that something I really need? I'm Johnny at product marketplace, do I have to worry about it? So before you tell me I'm exaggerating, I want you to consider this from the perspective of the founder scientists of the Vectura Corporation. Vectura was a UK company, a spin out from the University of Bath. They made inhaler therapeutics like for asthma and COPD, you've seen inhalers. Yeah? A medicine company. They were really successful, they raised money, they went public on the London Stock Exchange. And one day, the actual Philip Morris tried to buy them. I only know this story because I've been using the Philip Morris example for years. And when I was researching the book, I was like, "I wonder." I actually asked Claude, "Has anyone ever actually been bought by Philip Morris?" I stretched out the hypothetical and it was like, "Are you asking me about Vectura?" And I was like, "Tell me more." There's this company. This is what happened. Philip Morris said they wanted to diversify beyond nicotine. And they were like, "Oh, we know a lot about inhaling things. So having an inhaler company makes ..." Anyway, normal people hearing about this were like, "This doesn't make sense. Why would big tobacco own a health company? That doesn't seem right." So here were the three choices that were facing the Vectura board. They had this bid from Philip Morris for 165 pence per share.
00:31:16 · Eric Ries, Lenny Rachitsky
They had a bid from an American private equity firm for 155 pence per share. Or in door number three, they could just stay independent because there was really no problem. The company's doing fine. The public in the UK was super outraged. The British Thoracic Society begged them to say no. Every person who thought about this for five seconds could see this is going to be a massively value destroying error. But the only people that mattered were the people on the board of directors of the Vectura Corporation. They had, I think, two meetings about it and they just said, "Our hands are tied. We have a fiduciary duty to accept the highest bid." Which they did. So yes, if you think I was exaggerating, I was. I said it was a dollar per share. In real life, it was more like 15 cents a share. So let's find out what happened next, shall we? Can you guess? [00:32:02] S1: Not great.
00:32:02 · Lenny Rachitsky, Eric Ries
[00:32:02] S1: Not great. [00:32:02] S0: Philip Morris spent £1.1 billion to buy Vectura. Within three years, they had taken a $900 million write down and disposed of the company for peace parts, it doesn't exist anymore. These are the stakes, this is what happens. And I can't tell you, I feel like Perry Mason sometimes when people are like, "I would never do that." I'm like, "Okay, I hear you have good intentions, but can I please see your signature on the document?" Oh, look, Delaware charters are public record, by the way. If you ever want to know, if a friend is a lawyer, just you want to know if a company has a mission or if this is going to happen to them, just pull the charter. You can just read it. Read it for yourself. I'm like, "Is this your signature right here? You, yourself, sign this document and you don't even understand how your company works." The stakes I think are significantly existential, especially now that we're entering an age, the age of wonders. The age of technologies that are incredibly powerful, that have planet scale consequences to them. I think a lot of founders, a lot of product people, they want to build a product that they can be proud of. That their grandkids will be happy to hear that that's how the family fortune was made. And I know a lot of people that are incredibly rich and so miserable. Because the thing, their baby, it got ruined, it got destroyed. Why are we doing this?
00:33:17 · Lenny Rachitsky, Eric Ries
[00:33:17] S1: Okay. Let's talk about what to actually do. And this is going to be a kind of a high level overview. Obviously by the book, if you really want to get serious about this stuff coming out May 26th that all [inaudible 00:33:29] - [00:33:28] S0: May 26. Yes, thank you. [00:33:29] S1: Anywhere you buy books. Talk about what we should do. And I just want to plant the seed of OpenAI is probably on people's minds as they hear this idea of building a nonprofit.
00:33:36 · Eric Ries
[00:33:36] S0: Yeah. Yeah. We'll get there. And obviously in the book, I tell the Anthropic story where I played a bit part. So we'll get to all that. We'll get to all that. But let's start with the easy stuff first because AI is kind of like the humanities final exam. You've heard that joke. These issues are so amplified in AI, of course we have to get it right. I think it's incredibly important and I've done what I can to set us on that proper path. But it's easier to see it, I think, in simpler businesses. OpenAI's business is insanely complicated. So let's look at it in some simpler examples first. Let's start with the principle I call harder is easier. This is the leadership principle that anybody can adopt. There's nobody who's not ... You tell me you have no power whatsoever. Everyone's got some influence. And if you have any influence at all, you can adopt this principle. When I talk to people about business, I don't care if I'm talking to two guys in a garage, founders, or I'm talking to super boards or CEO, C-suite, whatever. Everyone always says to me, just what you were saying a minute ago, it's like, "Man, Eric, business is already so hard. Now you want me to do extra? Now I got to worry about the Vectura thing and this other stuff. Man, I'm already just trying to get through the day. It's so hard." But I think this is a basically backwards way of looking at it. Because I ask people, could it be, just consider the possibility that one of the reasons you're finding business so hard is that nobody trusts you. If they trusted you, maybe it would be a little bit easier. Now, actually, this is not a supposition, we have really good evidence. Companies where their employees trust them, spend way less time on employee communications. They have much better alignment. Everyone's kind of rowing in the same directions. When customers trust you, of course, you have way higher loyalty, your cost of customer acquisition is lower. But also customers more likely to stick with you after you make a mistake. They're more likely to try your new product. So many people are like, "God, customers are so fickle. They have no loyalty. They only care about the slick marketing from our competitors." But maybe because you view these things as extra is part of the problem.