Answered raw tape
D 5 · C 5 · P 5 · Cm 4 4.85
Q Lawson at Twilio built that company from nothing. To four billion dollars in, you know, actual revenue, like stock up 390% since IPO. I mean, by all accounts, you know, smash rip roaring success. And then his super voting shares, uh, expired after 199 days and he's out. And so less than half a percent of shareholders did that. You know, how did that happen? Like, What, what's going on?
A It's like, it's honestly unbelievable to me. Well, here, let me make the case for why he needed to be fired. And then you'll see if this makes sense to you. So what happened was, so he took the company public. He agreed as part of the IPO prep process, as a lot of founders do, that he would have dual class control, founder control. He'd be the mission guardian. The protections would sunset after seven years. Man, you're taking a company public. Seven years sounds like a long time. But man, in the public market, seven years is just, that's barely a beginning. It's like a handful of quarters. Anyway, that was the deal. He made the deal. His advisors and everybody told him, don't worry about it. You can always extend it. You know, you could, it's always too early until it's too late. It's kind of the idea from the book, like, okay, whatever. So seven years come and go. Now it happens to be Those seven years include the pandemic years, as you well remember, the run-up in telecom and tech stocks we had. It was like Golio stock was just up an insane amount. That bubble burst and the stock came way down. So at the time he was fired, the stock was down like 80% from the peak. And it's like, oh, well case closed. But if you measure from the IPO or even from the pandemic peak, revenue was up. It's like, did, did the business go down? Was revenue down? Was there some kind of problem? No. …
AI assessment note: “The protections would sunset after seven years... the stock was down like 80%”
Answered raw tape
D 4 · C 4 · P 4 · Cm 4 4.00
Q Basically there's, um, Delaware bylaws. Is that right? Basically, you know, if you're a Delaware C Corp, you have to relentlessly pursue profit. Otherwise there's grounds to remove you. That specific principle is exactly how, uh, you know, the end of that founder's reign of that particular company happened.
A I still remember the professor being like, Cause I was like, you're not listening to me, right? You're not getting it. And he's like, wait, are you saying that's going to be me someday? I'm like, you're on a one way ticket to this exact outcome because you've adopted the so-called best practices of corporate governance of how companies are supposed to be built and run and structured. One of them of course is what's called shareholder primacy, right? This idea that if you are Delaware C Corp, the thing you make is not a beautiful living thing that creates products and, you know, delights customers and, and it's like a good, no, It's just a financial instrument for investment returns. That's what, that's all it is. That's actually a very new idea. And I think one of the things that's a big misconception for founders is they assume that this is some kind of natural law or like a pillar of capitalism going back to Adam Smith or whatever. No, Adam Smith would have been like, what the F you guys talking about? This idea dates to the 19 eighties. The professor was saying to me, he was just like, wait, so is it possible to build an incorruptible company? That's kind of how the book got its title. And I was like, well, it's a good news, bad news kind of thing. Everyone says this is impossible, that like this kind of corruption of the mission is natural. It's just, as you get bigger, as …
AI assessment note: “One of them of course is what's called shareholder primacy, right?”
