Lenny's Podcast: Product | Career | Growth
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.
00:37:35 · Eric Ries
Pissing off some nation state, were having state-sponsored hackers trying to take their websites down so they couldn't coordinate their pro-democracy protests. They were going around Silicon Valley begging big tech companies to help them defend their websites. No one would do it. All these big mega companies, even Google were just like, "I'm too scared." And so Cloudflare, the tiny startup is like, "We'll do it." These were free tier customers. They weren't even paying any money. And they're like, "Yes, we will incur the wrath of nation state level hackers to protect you because it's the right thing to do for no reward whatsoever." That was just the kind of company they were. So anyway, a couple years in, they're having lunch and one of the engineers says, "You know why I like working at this company? I just feel like it's the first place I've worked where we're trying to make a better internet." And everyone on the table's like, "Yeah, make a better internet." Someone asked Matthew, "Oh, is that our mission statement?" Smack. "No, we don't have a mission statement. I know what you're talking about? No." But it actually was. Over time, the engineers, people who worked there kept saying, "Make a better internet." That was how we talk about it. And eventually the founders had to be convinced, "Okay, let's adopt this as our mission statement," which they did. That's their mission statement to this day. They had to eventually adopt formal values. As you get bigger, these things really matter. It matters that you document those emergent properties, otherwise how are people supposed to know what they are? Their number one value, by the way, is be principled, which is the ultimate harder is easier move. So this all sounds great. It's fun to have values. It's fun to have a mission statement when it doesn't cost you anything. But sometimes it can be very expensive. It can make your life a lot harder. That's why we call the principle harder is easier. One day, a junior engineer, not like some senior executive or anything, walks into Matthew Prince's office and he says, "Boss, isn't our mission statement to make a better internet?" When you're a CEO, any conversation that starts this way is definitely going to be extra work for you.
00:39:34 · Eric Ries
So you're like, "What is it now?" It's like, "Well, you were saying at the board meeting that our number one driver of revenue, the thing that causes people to upgrade from our free to premium plans," this is a few years ago now, "Is web encryption, SSL encryption. You said that makes sense because SSL encryption is expensive to offer, we can't offer it for free. We have to get the certificates and pay for them. We have to do all this extra cryptographic stuff as compute ... We have scarce compute, da-da-da-da-da." "Sure." "But boss, wouldn't a better internet be an encrypted internet?" And he's like, "Yes. So what's your point?" So if it would be better, why are we giving it away for free? And so many people have heard this story. If you've ever been a middle manager in a company, okay, you know this, you're just like, "Oh my God. Every day someone walks into your office that's like, here you boss, let's give our product away for free for no reason." Your job as a middle manager is to be like, "No, we have a strategy. Get back on the strategy. Redirect. Thank you for your buy-in and your input, but we have a job to do." So everyone's expecting Matthew to react that way and would be the most normal thing in the world. This is our most profitable product and you're saying we should give it away for free, get lost. No. Matthew told me once I saw it, I couldn't unsee it. And he uttered the three keywords, he said, "Let's figure it out." Figure it out. This is the leadership principle I think is so powerful, the figure it out principle. If you're committed to something, you stand for quality or whatever, it's going to make life harder. The best leaders, the ones I really admire, they revel in it. They love the difficulty. Because every time you have one of these impossible dilemmas, it's a chance to teach what you really stand for. So Matthew insisted the whole team rally to figure out how to give encryption away for free. Now they couldn't just give it away for free. He's like, "Bankrupting the company won't achieve the mission." We had to find a way to make it sustainable. And I won't go through all the technical details of how they managed to get the cost. They had to hand roll their own software and assembly language. They had to do these complicated biz dev deals with certificate authorities.