Lenny's Podcast: Product | Career | Growth
01:06:49 · Eric Ries
[01:06:49] S0: Oh, yeah. Anthropic has helped so much because they do many of the things in the book, including this, what they have. We can talk about the long-term benefit trust. They had that two-tiered governance structure that we were talking about before. But it's so funny, even now, even with Anthropic having such success, people still say stuff like this like, "Oh, I'm worried that I'm not going to be able to raise money." I'm like, "Anthropic's been able to raise some money." That has not been an obstacle. In fact, if you ask people, why is Anthropic winning? They will often cite some surface characteristic. Anthropic very famously has lower inference costs than their competitors. They have faster product velocity than their competitors. What do I hear? Sometimes they say that they have more focus, better focus than their competitors. Those are the most common ones I hear. And for each of those, if you say, "Well, why?" Well, they have lower inference costs. They have better technical infrastructure. Why? Well, because they had some kind of internal breakthrough. Why? If you keep asking why eventually something like, "Well, because they have the best talent." Why? Because people want to work there. Why? And you [inaudible 01:07:52] because people very much want to work. They want to work for the good guys. They think these people, they have the mission to save the world. Why do they have that mission? Because that was the ethos. But why have they been able to protect it? Because they paired the ethos with the integrity. This is at the heart of almost every breakthrough success story you've ever heard. You will find this lurking there as the thing that gave them the competitive advantage to drive that differentiation.
01:08:18 · Lenny Rachitsky
[01:08:18] S1: It's funny you say that. So I just had Cat, the head of product and Claude code, and I asked her just how are you able to ship so fast? They're shipping a massive product or feature every week. Essentially, they were going through a period of force every day. And a big part of our answer was exactly what you're describing, which is we are so mission aligned. It is so easy for us to decide this is something we will do or not.
01:08:39 · Eric Ries
[01:08:39] S0: That is the thing. Remember how we talked about how people say business is hard? Most people have never worked in a mission-aligned company. It is the organizational equivalent of being in the flow state as an individual person. It's a great feeling. And it just makes everything easier. You don't have to have meetings about stuff. You don't have mission misalignment. In most organizations, you have people who I call the torchbearers, which are like the rare person in an organization who's simply committed to doing the right thing no matter what. Steve Jobs very famously would have skip level meetings. He wanted to meet not with his direct subordinates. He didn't care. He wanted to meet with the torchbearers throughout the organization. Those are the people that are going to drive us forward. And if you're a torchbearer, you're just like, think about the designer who simply won't ship slop no matter what. The engineer who will not sacrifice quality or performance. You meet these people every once in a while, product manager who just... They are prioritizing the right things, even if people complain. In a traditional company, if you have that job, if people listening, if you've ever had this job, man, life sucks. Every fricking day, someone's in your office with a spreadsheet being like, "But what is the ROI of doing the right thing?" And you're just like, "I don't know. It's just the right thing." In a mission-aligned company, this doesn't happen two different ways. There's two different antibodies that protect against this. First of all, since everyone's mission aligned, no one's bothering to make the spreadsheet. There's no need. The late great Clayton Christensen once said that it's easier to do the right thing 100% of the time than 98% of the time. Just like because now you don't have to have a meeting about it. At Anthropic people, someone's like, "Oh, I came up with this crazy unsafe thing that will make us an extra dollar." We don't have to have a meeting about it. I already tell you we're not going to do it. We already know. So everyone's incredibly aligned. But the second thing that I think is less appreciated is a practice I call the culture bank, which is when you start to see trustworthiness as an asset, you start to realize that certain actions build that asset and others take it away.
01:10:40 · Eric Ries
So let me teach you a rule I learned from one of my favorite founders, Todd Park. He created Devoted Health, the health insurance company I was mentioning before. But he learned it from Howard Schultz who built Starbucks. If you see in strong culture companies, you always see this pattern where you've taught people that whenever you do the right thing, that is you do something in defense of the company's values that has a sacrifice to it. Saying the values, enchanting them, making a song out of them, that's not it. But if you do something, I tell a story about this grocery store in Texas called H-E-B, where the power went out, there was an ice storm, and the manager let all the customers just take their groceries home. No charge, because the point of sale system wasn't working. People say, "Oh, what a courageous manager." No. That's what they train people in at H-E-B, that you're making a deposit in the culture bank when you do the right thing. So deposits, you make a sacrifice. A withdrawal is the opposite. You do something greedy, self-interested for the organization. The Todd Park rule, as I call it, everyone who hears this rule, the first time they hear it tells me it's impossible and you can't do it. It doesn't make sense, but this is the rule, is really simple. Only make deposits, never make withdrawals. That's it. Because you're going to make withdrawals by accident sometimes because you can make mistakes, but you never intentionally make a withdrawal. And that I think is the true power. When you hear someone who's living that flow, like Cat, you were talking about in Anthropic, that has been internalized in the organization. It's what the pioneering management theorist, Mary Parker Follett called the invisible leader. The person, the thing that people follow even when no manager is present. So no one has to be in the room to remind you to do it. You just do it because you've internalized that this is what we're all about. And when everyone around you is doing that same thing, the whole velocity of the whole organization increases exponentially.
01:12:29 · Lenny Rachitsky
[01:12:29] S1: I want to hear the OpenAI versus Anthropic story because you've mentioned a part of the structural pieces of this nonprofit. So talk about just what happened there and how that relates to what you talk about versus Anthropic. And then I actually want to hear a little bit about just the actual structure. What is this two-tier thing? What's the nonprofit piece?
01:12:46 · Eric Ries
[01:12:46] S0: OpenAI is a really hard case study to learn from because it's such a bizarre story and it involves mega personalities like Elon and Sam dueling to the death, so it's complicated. But we can get into it if you want. But I entered the story. The funny part is like, I played a very bit role in all this. So I'm not an important actor in this story at all. I take no credit for Anthropic success, all the credit to Dario and Daniela and the whole team. But when they left OpenAI, this is two or three OpenAI crises ago, depending on how you count. They left and they wanted to start Anthropic. Now today, people are like, "Oh, sure it works for Anthropic. They're a world beating company." But Dario was a first time founder. I was there. He was impressive, but in the way that a technical founder for the first time is impressive. And he had investors who were excited to back him, but they were like effective altruism, like true believers. It wasn't the top venture fund. None of the top venture funds wanted to participate in this round. It wasn't a hot company at all by modern standards. And generative AI, the boom hadn't happened yet. ChatGPT hadn't been invented yet. So the mass psychosis we're all living through had not occurred yet. Nonetheless, they were true believers in this safety mission and so one of their investors suggested they come talk to me. Everyone knew I was like a eccentric collector of weird ideas. Some people collect butterfly wings or whatever. I collected alternative governance ideas. So when they came to me, I was walking them through the same horror story I'm telling you today. I told them, "Look, if you don't get this right, here's what's going to happen." And they were very determined to do something about it. And so we talked about what we should do. And I advised, again, a very little bit. I don't take the credit for what happened next, but they wrote into their charter that they were going to do this. They were a PBC from the very beginning and they wrote into their charter that they had the right to enact these additional reforms, which they had to defend, all credit to them for taking it seriously, for convincing their investors.