Lenny's Podcast: Product | Career | Growth
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.
00:35:36 · Eric Ries
So harder is easier is a principle that says, if you're willing to do the work upfront to commit to quality, to design, to ethics, to integrity, to safety, whatever the thing, I don't want to tell you what your values are, you tell me what they are. If you're willing to be principled in your decision making, you will get these unexpected rewards. Now, you can't do it for the reward or it doesn't work. You have to do it for the thing itself. Trustworthiness is the most underrated asset in all of business. And the things that create trustworthiness, by definition, stack rank to the bottom if we do it by ROI. Because doing the right thing has intangible rewards, but tangible costs. So let me give you another story. Because now we've been talking about lofty stuff, and I want to talk about something super practical. And I mentioned Cloudflare before. So let me actually tell the Cloudflare story. I like Cloudflare because Matthew Prince and his co-founders, they were really anti-consulting BS talk. In the early days, they came out of Harvard Business School and so they were traumatized. They were just like, "No, I don't want to hear about mission statement. I don't want to hear about values. We are making a firewall and putting it in the cloud. It's not that complicated. We don't want to hear it." So for years, they had no mission statement. And this is a critical point. As leaders, we get so focused on value statement, mission statements. We forget the mission statement is not the mission. The map is not the territory. Mission is an emergent property of the living superorganism of the thing we're birthing. Okay? It's not something you can slap on with a label. You have to build it in. You want to have a company that stands for quality, you got to build quality in from the inside. Deming taught this in the 40s. This is not some new idea. This is a critical idea. This is what craftsmanship really means. Okay. So we know that Cloudflare had a mission because quite often they would do this harder is easier stuff. And without even really knowing why. There's a very famous example in their history where pro-democracy protesters, I want to say ... I forget what nation state they were pissing off. I better not say, in case I get it wrong.