Opinion
Ries: Founders prop up a value-destroying corporate governance system
“Founders either have to agree to or not this system. And so we actually are the ones propping it up. We're giving it the fresh meat it needs to survive because it's so value destroying.”
Opinion
Ries: Traditional corporate governance 'best practices' destroy corporate value
“The thing I didn't really understand is how much evidence we have that these so-called best practices suck. They're like literally value destroying.”
Insight
Ries: Mission-controlled governance outlasts founder or investor control models
“What I really think is that we shouldn't be just building Investor controlled companies or founder controlled companies. There's a third way. Interesting. We can be building mission controlled companies where the mission itself has sovereignty and these compan…”
Assertion Supported
Ries: Philip Morris generates $600B in annual US external costs
“They have something like eight billion dollars a year in net income. But there's been all these studies. They create six hundred billion dollars a year in costs just in the U.S. That have to be borne by others. I think it's three hundred billion in direct heal…”
Insight
Ries: Founders Forget VC Investment Ties Control to Firms, Not Partners
“You forget that you take a venture investment from a venture firm. You're not taking investment from that individual person. You're taking investment from a company. Then that person leaves. And now you're stuck with some new person and you've given all these …”
Assertion Supported
Ries: Shareholder primacy was never enacted by statutory law or referendum
“In the history of the world. Shareholder primacy has never been subject to any referendum, any legislative action, nothing. So it's weird. If you learned in school, how a bill becomes a law, There's no law for shareholder primacy.”
Insight
Ries: Founder control is not a viable long-term governance model
“Founder control is not that great either, because I know a lot of people who are like basically trapped They can never quit their company because they're like the one, they're like literally the human shield blocking every, that's too much. And of course peopl…”
Opinion
Ries: A 2-2-1 startup board structure effectively gives investors control
“So if you have a board, like classic Silicon Valley board would be two VCs, two founders, and an independent. That's supposed to be fair because it's two and two balance. That is basically just investors control your company.”
What-if
Ries: Novo Nordisk would have canceled R&D without foundation merger veto
“So we know for sure That if they had not done this, all of the major R&D programs of Nova Nordisk would have been canceled. We know because the company they were going to merge with two years later was bought by Merck, and that's what happened.”
Assertion Partly supported
Ries: Foundation-owned companies are 6x more likely to reach year 50
“Companies with this structure are six times more likely to live to year 50. 10% versus 60% probability.”
Insight
Ries: Early Governance Choices Protect Multi-Decade Startup Longevity
“There are actually choices we can make as founders, and especially choices we make early that can change the trajectory of the company so that, as you say, its longevity could be measured in decades and centuries, not quarters.”
Assertion Supported
Ries: Twilio fired Jeff Lawson despite revenue growth since IPO
“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 the business go down? Was revenue down? Was there some k…”
Assertion Not checkable as stated
Ries: Polaroid never invented another major product after firing founder Edwin Land
“Polaroid used to be an R&D powerhouse, had like, 1500 research scientists on staff. Steve Jobs, like, loved that company, admired them so much. When Edwin Land was fired, he called it the dumbest thing he'd ever heard. Yeah. And like, they never invented anoth…”
Insight
Ries: Making shareholder value the primary goal degrades product quality
“Everyone who's ever studied this and looked at it seriously understands that shareholder value is like the exhaust that comes out of the engine. When you take the exhaust pipe and put it in the intake and make that your explicit goal, now you don't stand for a…”
Assertion Partly supported
Ries: Costco routinely receives the worst corporate governance ratings
“Costco came under attack in the early 2000 for having these non-standard governance practices. In fact, Costco routinely gets the worst possible governance rating from governance rating people.”
Opinion
Ries: Incorporating as a PBC is an absolute must-do for founders
“I think PBC is an absolute must do and kind of like an utter no brainer of all the things in the book. It's by far the easiest thing. If you want to pick one thing to do, it's the easiest thing to do. It's a two page legal filing in Delaware.”
Insight
Ries: Dual-class voting structures fail when companies need capital
“Dual class is defeated all the time. I give a bunch of examples in the book, like, you know, the stock price drops. Everyone panics. Founders forced out anyway, because at the end of the day, like having the votes is not the only thing that matters. There's a …”
Assertion Contradicted
Ries: FTX bankruptcy's Anthropic stake exceeds the entire fraud value
“Apparently the stake that the bankruptcy has of those shares is worth more than the whole, than all of the entire fraud by a lot.”
Opinion
Eric Ries: Lean Startup Failed to Give Founders Governance and Control Tools
“So I feel like Lean Startup, we created so many companies worth protecting, but we didn't give them the tools they needed to actually stay in control, to actually protect the trustworthiness of the thing that they made.”
Assertion Partly supported
Ries: 19th-century corporate charters never specified maximizing shareholder value
“If you look at the 19th century, like companies that were created and you read their charter, none of them say maximize shareholder value. That would have been considered a crime.”
Assertion Supported
Ries: Anthropic created a perpetual purpose trust at Series C
“I think it was a series C when they finally established this thing called the long-term benefit trust, which is not a nonprofit foundation. It's actually what's called a perpetual purpose trust, which is a different legal category, but the same idea outside tr…”
Assertion Supported
Ries: Stock holding periods, company lifespans, and executive tenures have dropped dramatically
“Average holding time of stocks is like dramatically down. Lifespan of companies is dramatically down. Average tenure of executives is dramatically down.”
Assertion Supported
Ries: FedMart went bankrupt within seven years of ousting Saul Price
“In branch A, FedMart's investors got what they wanted. They got Saul out of the way. They converted FedMart to traditional business practices. It was bankrupt within seven years.”
Eric Ries