Lenny's Podcast: Product | Career | Growth
00:51:17 · Eric Ries, Lenny Rachitsky
[00:51:17] S0: Mission drive, mission drive. [00:51:18] S1: Mission drive, which basically... Is there a structural way to do this or is this just go through everything going on and see is there- [00:51:26] S0: Yeah. It is. I mean, I talk about it in a more formal way in the book, but basically I would say that it is to identify your fiduciary commitments. Who are the people that you're trying to commit to do something good for? What are the metrics or targets that you want to have for each of those people? And then what is the system, the accountability system to make sure that those commitments are as important to you as making money? [00:51:51] S1: So it's essentially these kind of like OKRs for your stakeholder. Let's not call them stakeholders.
00:51:56 · Eric Ries
[00:51:56] S0: Yeah, exactly. I see how hard it is to do this. Yeah, that's exactly right. It's like OKRs for the... And I just, again, people always, when we start using this language, people are like, "You're trying to impose your values on me." No, you tell me what you care about and then you tell me how you're measuring the things you claim to care about. In the book, I have a section called Don't Be Evil versus the Quarterly Report. I made a study of the blog posts that longtime Google employees write when they leave Google. It's like a genre. There's 50 of them. They're incredible documents actually. If you've never read them, they're all linked in the book. You can read them yourself. And they all have this very wistful, sad quality to them because something really... And listen, for the record, Google's a great company. I'm not saying Google's bad, but Google used to have this don't be evil ethos, and it got lost. It got taken off the website. Then it showed up in the employee handbook. Now it's not even in the employee handbook anymore. And in fact, Google's been sued twice now for breaking the don't be evil pledge, and they've had to settle both lawsuits. That's how sad the situation has become at Google. And I remember talking to one of these ex Googlers, he'd been there I think 13 years. And I said to him, look, he was like, "Why did we lose it when we had such good intentions? Why? I wanted to believe management." He's like, "I liked management. I thought they had their heart in the right place." And yet, I said, "Okay, answer me this hypothetical just real quick. What is the probability that Google will file its next quarterly report on time?" He was like, "That's a dumb question, Eric. Obviously they're going to do it." I was like, "No, but give it a number, probability." He's like, 100%. Is it literally 100.0? Yes. As certain as the sun will rise tomorrow? Of course. I said, great. Now tell me the probability that Google might accidentally kill somebody and cover it up. And he was like, "Come on, man. They probably wouldn't do that. That's not fair. Put a number on it. Is it 100%?" He's like, "Well, 90%, 95%." And you could see he was like, "Well, they got sued for this." He's like, "What if the self-driving car hit somebody?" He could already think of the way it could happen.
00:54:06 · Eric Ries, Lenny Rachitsky
I said, "Okay, how can it be that quarterly reporting is the thing that we're sure of?" And manslaughter, we think are human beings confused. They love quarterly reports and they're not sure about manslaughter? No, come on. What is going on here? Google report, it's quarterly report on time because there is a massive, unbelievably expensive apparatus to make sure it happens every time. And don't be evil was just a slogan. So if someone tells you, "I'm serious about something," great. Now show me the apparatus. Show me the commitments you've made to make sure that happens every time, no exceptions. And if you don't have one, then they are lying to you no matter how good their intentions are. [00:54:46] S1: And this might be a good segue to the second bucket of stuff. So the way you described it earlier, I think is a really helpful way of framing it. There's the ethos, which is what we've been talking about, values, purpose, mission, and then there's integrity. So talk about that.
00:54:59 · Eric Ries
[00:54:59] S0: Sure. So why did I use the word integrity? In normal human language, not consultant speak, but among normal people, integrity has two meanings. One is like, Lenny, you're a very high integrity person. If you say you're going to meet me at two o'clock at a place, I know you're going to be there. Everyone's got a friend like that where if they say they're going to do something, they're going to do it. And more importantly, if they're not sure, if they're like, "I think I can be there at two o'clock," they never would say, "I'll see you at two o'clock." They won't do it. They know that to tell the truth requires you to really make a commitment. So that's the ability to keep your promise. But we also have the word structural integrity. I told them before, the difference between corroded bolts and stainless steel. Organizations, these two senses of the word become one. An organization that is weak cannot keep its promises because the person making the promise won't be there. Imagine you got a promise from the founders of Vectura that they'll never sell cigarettes to children. Oops, sorry. No, that's not integrity. So the goal of structural integrity for an organization is to give it the power to resist temptation from the inside, resist betrayal at the board level and resist pressure from the outside. As I mentioned, Costco very famously has this governance fortress that protects it from outside pressure. And people have come for Costco. I quote some hilarious quotes in the book about one of my favorites is Costco takes money that rightfully belongs to shareholders and instead invest it in improving the customer experience. That's meant to be a criticism. That's not what they're supposed to do. So why can they resist? Because they have the tools they need to fight back. Their board seeds its responsibility as a bulwark against pressure rather than as an amplifier of financial gravity. So that can sound very challenging and abstract as now we're talking about board level stuff, IPOs, people, a lot of people are like, "Oh, I don't have the power for that." Okay, that's okay. We can start with something very simple. We started with purpose and ethos. We can start with purpose here too.
00:56:56 · Eric Ries
I mentioned before that most founders have never read their own corporate charter, which if you're a founder and you're listening to this and you've never read your own corporate charter, you have a company that is operating, it is your homework. You have to do this. You have to know what it says. This is so common that the HBO show Silicon Valley makes a joke about it where one of the investors is upgrading the founder to be like, "You don't know how your own effing company works?" Because he loses control of it. So they did their homework. This really does happen. But if you do read your charter, you probably will be more confused than you are now because you will read a sentence like this. It will say: "The Acme Corporation is hereby incorporated to pursue any lawful act or activity." And you read that and you're like, "That sounds pretty open-ended." Wrong. It sounds open-ended, but it's not. Unfortunately, we live in the era of what's called shareholder primacy, meaning that according to this theory, which is the governing theory of our lives, we live under this law today, right now. This says that an organization is not a vital, beautiful, living thing. Rather, it is a financial instrument designed to enrich shareholders and nothing else. And therefore, any lawful act or activity today means maximize shareholder returns under the law. People have been raised... Now we're old enough. This idea is old enough that we now have a generation of people who've been raised as if this was a natural law. This is how capitalism has always been, but that's wrong. For the vast majority of the time, for hundreds of years, we have had joint stock corporations. Only the last 40 have we had this idea. Before the '80s, it was considered obvious. Our grandparents thought it was obvious. Our great-grandparents thought it was obvious. Adam Smith thought it was obvious. Everyone before thought it was obvious that corporations existed to pursue a specific thing, what's called a beneficial purpose in the law. So in the 19th century, for example, if you wanted to make a company, you had to make a declaration to your state legislature that this thing you wanted to make would do something that is publicly beneficial.
00:58:54 · Eric Ries
You'd be like, "I want to make a railroad." They'd be like, "Why?" You had to say it would be beneficial to the public to have a canal between this place and that place. And just to get a sense of how different our best practices are than the historical norms in the 19th century, let's say you were the richest person in America and you're like, "I want to buy this company and change what it does because I can." First of all, the board would be authorized to fight you to the death. They didn't have to say yes. They would do crazy stuff in the night. These battles were legendary. Some of them are hilarious what would go on between these people. But the second thing, let's say you succeeded anyway. You took the company over and you said, "I'm going to change its purpose from make a railroad to maximize shareholder value." That would have been a crime. The courts would void your charter. You would earn the corporate death penalty for having exceeded the authority of your corporation. So this is a new idea that we live under. We think it's natural, but it's very new. So if you don't want that, and that's what doomed Vectura and all these companies, if you don't want that, you can change it. The good news for you listening right now in the year 2026 is that a band of corporate governance rebels have spent the last 15 or 20 years fighting this and building alternative structures that are available to you. One of them is called the Public Benefit Corporation or PBC. A lot of confusion about this out there because people have seen the little B with a circle on it at their farmer's market. It's not that. It's confusing because the same people invented that who also invented this and the word B, the letter B is in both. So I get it's confusing. But no, Public Benefit Corp is the easiest thing I will tell you to do on this whole podcast. It could not be easier. It is a two-page legal filing that you just submit. Your lawyers can submit it for you in Delaware tomorrow. You just say, "This is the purpose of this company, not any lawful act or purpose." And said, "No, this is a company designed to advance human flourishing by creating safe and responsible AI systems. We advance human flourishing by creating high quality products and selling them, whatever." Whatever you do, just write it down. It couldn't be any easier.