The Exchanges

Q Well, the whole other episode just unpacking that. Amazing. Final question. You invented a lot of terms, a lot of concepts. Is there one that you don't think caught fire and that kind of spread as much as you thought it should?

A Oh yeah. Yeah. I got tons. I got tons. Oh man. The, the, the cutting room floor is full of so many things. I, I was, I went through a really extended period of trying to, to use, but it was before lean, lean startup. I tried to use the cell biology as the metaphor for a, for a startup. Uh, I, I should have been, I wanted something more biological and less mechanical. I never got one person to understand what I was talking about. It did not, not work. But I'll tell you the one that surprised me the most. This is such a small one, but I really thought that this would, like, take off, and people would be way into it. I did a lot of writing about it, and then, like, couldn't get, couldn't get the stick. So everyone knows viral loops. There's also engagement loops. And I was like, oh, just like we have viral loops, which is about how come, how products grow. We should also have engagement loops, which is about how people stick. And like, there's a science to stickiness. And like people have written about that, like from the point of view, like how do you make your product more addictive, but that's not really what this is about. This is about being able to model the dynamics of how customers, um, flow through. And I, a version of that is in the lean startup. We have what I call the law of sustainable growth, which is a situation where new customers come as, as a natural side effect …

AI assessment note: “I'll tell you the one that surprised me the most... engagement loops.”

Q to be this like touchy feely business. Like we're trying to like, Capitalism has worked in creating a lot of very successful companies and value and innovation. Capitalism has worked in many ways. Uh, why would we need to do this? And Anthropic being the fastest growing company of all time, just like absurd, breaking all records is a public benefits corporation should make you feel okay about doing this.

A Oh yeah. Anthropic has helped so much because they do many of the things in the book, including this, uh, what they have, we can talk about it from the long-term benefit trust. They had that two tiered governance structure that we were talking about before, but like, 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, like anthropic very famously has lower inference costs than their competitors. The, you know, they have faster product velocity than their competitors. They have, um, you know, what do I hear? Sometimes they say that they, 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? You're like, well, they have lower inference costs. They have better technical infrastructure. Why? Well, cause they had some kind of internal breakthrough. Why? If you keep asking why eventually some are like, well, cause they have the best talent. Why? Because people want to work there.

AI assessment note: “eventually some are like, well, cause they have the best talent. Why? Because people want to work there.”

Q I've heard you describe the combination of the lean startup and this new book is the lean startup was about helping you build a successful company and incorruptible is about helping you protect what you've built. I want to start with that second part of protecting what you've built. What is it that you need protection from? What's this kind of corruption that you talk about that founders run into?

A Yeah, we all know this force. In the book, I call it the force that no one controls, but everyone obeys. That tends to drag organizations down into mediocrity to the point that we lose control of them. Now, sometimes we lose control of them because we get fired. You know, we get ousted from our own company. Sometimes it happens because we're like Frankenstein and his monster. It starts to become malign or bureaucratic or frankly evil, and we can't figure out how to stop it. And all kinds of other ways. I've been, I had a front row seat at this. I've been helping people build companies now for a long time. I've helped people create unimaginable amounts of wealth for themselves and for society. And I'm really proud of the work that they've done. I'm really proud of my bit part that I played in so many of these companies. And yet I've also seen this, this darkness. And it's not just founders getting fired, although we're obviously going to talk about that. But like the other day, I was out to dinner with some friends. We were not at home. We were kind of, you know, away from our usual, uh, our usual spots. And so someone said, oh, there's this restaurant. I haven't been there in a couple of years, but it's really good. Let's check it out. We go, we sit down to dinner. They take one bite of the food, and then they're on their phone. And we're like, dude, you're being rude. Like, wh…

AI assessment note: “the force that no one controls, but everyone obeys. That tends to drag organizations down”

Q Let's dig into the lean startup method and methodology. It feels like we haven't heard an update on just like how things are going, where it's going, this, how popular it continues to be. I'm curious, just what's your sense of the state of the lean methodology and the lean startup movement?

A Oh, it's an interesting question. You know, we used to do a lean startup conference every year and then I stopped because of COVID and we haven't, we haven't resumed yet. So it was like, we used to have like an annual opportunity to like Bring people together, assess the state of things, hear the latest updates and stories. And then we, I, I really feel the lack of it. I miss it. Um, we tried to do online versions, but it just, it wasn't, it didn't, it didn't feel right to me. So part, and that's partly, you know, it's COVID and the thing that our world has been going through the last few years, but it's also partly, I didn't understand what it would be like to start a movement until I'd actually done it. And I just, I remember The first conferences we did, the first events we did, had the feeling of a religious revival. People were like, we've got the new thing. We are going to stick it to the man. And I, I really thought, okay, my job is going to be to lead these hordes into battle. I really had like a martial metaphor. I used it just a second ago. Combat of ideas. I was ready for, like, the old ideas are going to, like, fight us to the death, and we're going to win it. And it's not like that at all. We, we charge onto the field, and no other army ever came to charge us back. Like, it just, we won by default because the people who were doing it the old way didn't really like …

AI assessment note: “we won by default because the people who were doing it the old way”

Q the stuff you're working on now. So you talked about, you're working a lot on helping companies with their governance. Also, I think you work on company culture and helping companies make, make money and profit and build real businesses. And then that obviously connects to long-term stock exchange. So can you just talk about what it is you're spending your time on there and where you see big opportunities?

A Yeah, sure. I mean, I think it's a, it's one of the big, big, big issues that we're grappling with. Like, if I compare the questions I get asked by founders today versus 10 years ago, like, these issues are so much more in people's minds than they were back then. You know, and I often now, when I work with, when I meet, when I work with a founder for the first time, we'll often do a thought exercise that's kind of like, okay, we've talked about culture, we've talked about the company, it's like, okay, great. Why should anybody trust you? You're like, what do you mean? Like you're asking your, and companies are built, like we're talking about companies now building stuff that is so invasive into people's lives, like so much more powerful than what was before. And really, honestly, this is just about taking seriously the rhetoric about changing the world. And like so many tech companies, when they're raising money are going to change the world in fundamental ways. And when they're being asked to take moral responsibility, they're like, I'm just a little database vendor. It's like, can't have it both ways. What do you think? You like a Superman who's reordering the whole world to your whim? Like, well, you have moral responsibility for the outcomes. And, you know, uh, that's like a, a hotly debated point right now, but I feel like it's actually super, people have already made it c…

AI assessment note: “when I work with a founder for the first time, we'll often do a thought exercise”

Q an important point and something I see a lot too. Just companies that founders started that are just like alive, but they were almost never going to succeed and they're kind of stuck. They, they, they don't want to shut it down. They don't want to give money back. What advice to give those sorts of founders that you feel like are just stuck in a zombie company like that?

A It's, it's really hard. I mean, of course, if it's going to fail, you should shut it down, but everyone's like, but I thought it's always darkest before the dawn. And it's like, sometimes it is. It's all, you know, what else is really dark? Like when you're dead, right? So like, what's the, I mean, everything comes back to, I used to tell people the, the most uncomfortable laugh line in my early talks about lean startup was when I talked about the, people used to talk a lot about Steve Jobs and the reality distortion field. And I would be like, okay, you're in the reality distortion field. You're on the flat part of the hockey stick. How do you know the business plans? I actually lived through this once. There's a business plan. Business plan says six months after launch, we will have almost no customers and almost no revenue. And that's when the hockey stick will commence. And I remember being there in month six, being like, we are on time on budget. This plan is cheap. Everything's happening. Just like the plan hockey stick to commence. I'm walking to my watch. And then we just stayed on the flat part into the far horizon. And people would laugh and I'd be like, okay, now if you're following a startup leader, you're in the reality or you yourself are in the reality distortion field. And you're on the flat part of the hockey stick. How do you know if it's ever going to stick o…

AI assessment note: “of course, if it's going to fail, you should shut it down”