If you haven't read it already, I strongly recommend the Knapp Commission Report. Its about police corruption in New York City in 1972, but its lessons on systemic and institutionalized corruption are highly transferable to other contexts.

Probably the most common naive mistake I see is people thinking their subfield is special and they are the first to really notice / understand fraud within it. I've certainly seen people in the "sleuth community" (scientific fraud whistle blowers) reinvent the wheel a few times.

All fraud is basically the same. Financial, scientific, police corruption...it almost doesn't matter. I'm not even the first to say this. A really good summary can be found in Ashforth 2003 ("The Normalization of Corruption in Organizations").

So, with the caveat that I haven't read your work yet and maybe you already know, I'd say look at past corruption far outside your area of interest / expertise. There's a lot you can learn there. Police corruption reports are usually great because of how accessible they are in several senses (more numerous, usually simple to understand), but I have no police related agenda to push here and it really doesn't matter where you decide to look. Just pick any Commission and read their findings.

In the opening words of the Knapp Commission "We found corruption to be widespread".

"I came to (Jim Sinegal) once and I said, ‘Jim, we can’t sell this hot dog for a buck fifty," Jelineck recalled[..]. "We are losing our rear ends.’ And he said, ‘If you raise the effing hot dog, I will kill you."

That's not structure, that's leadership. They were about to change the price, but one guy at the top with authority and an opinion said no. You could say "it's structure" that there was one guy at the top with authority, but it still depends on him having the right opinion. You need both a good structure and an unwaveringly idealistic (and correct) leader.

If you think Costco has endured only because of leadership, because of its strong ethos and its immense size, because you think it's just too big for Wall Street to mess with, you are not correct. My friend, nothing is too big for Wall Street to mess with. Wall Street has tried many times to dismantle Costco's ethos, and every time the unique structure of Costco is what has allowed them to resist.

Which it doesn’t seem you have refuted in any meaningful way. You just restated what the parent comment is responding to with no further reasoning as to why leadership doesn’t account for it.

What I hear you saying is that the original comment simply said that leadership by itself is enough to preserve the Costco ethos. It didn't say anything about size or Wall Street or anything else. Is that right?

The reason I responded the way that I did is that the claim that something by itself is enough has to explain why most companies are able to be destroyed, even though they have really good leadership. I think the common answer when people ask about Costco is that the reason why, for them, leadership was enough when it hasn't been for other people, is something like they're so large. Does that make sense?

Either way, in order to say that leadership by itself is sufficient, we have to figure out why Costco has been able to endure as a gigantic public company when, for most companies, the larger they become, the more valuable they become as a target. Meaning that Wall Street or other financial forces will intervene to change their values.

And the answer, which I lay out in the book (not in my original comment), is that Costco is protected by a very distinctive thing I call a "governance fortress." This fortress (and not merely their leadership) is the reason why they have been able to endure for forty years.

In fact, the predecessor company of Costco, spiritually speaking, was a company called FedMart that had the leadership and ethos but did not have the fortress. I'll leave it to you to read to find out what happened to them.

I think most of us are happy to believe that most companies simply have bad leadership, that leadership quality really is the axis on which Costco differs from others. If you want us to believe that other (destroyed) companies' leadership is just as good as Costco's, you need to make that case.

> Costco is protected by a very distinctive thing I call a "governance fortress." This fortress (and not merely their leadership) is the reason why they have been able to endure for forty years.

Can you sketch out your actual argument here (I think doing so would help rather than hinder your book sales, though of course that's a biased judgement)? What is this "governance fortress", and why should we believe that that, rather than the personal qualities of this one guy, is the reason they kept the hot dog?

In the book, I give dozens of examples of companies that were well-lead and then suddenly destroyed, often by outside actors who found a way to profit from their destruction. This often happened at the governance layer, while leadership watched helplessly from the sidelines.

So why hasn't this happened to Costco? I don't think it's a coincidence that Costco has a variety of "bad governance" provisions, such as a super-majority (of all shares, not just votes) provision threshold for shareholder votes, as just one example. When activists, analysts and other Wall Street actors have tried over the years to force Costco to change, its leadership has been insulated from this pressure. I think that is a structural factor that is important.

Again, structure does not _cause_ ethos. It protects it. My argument in the book is you need both.

I see size as negatively correlated (maybe as a semi-direct cause) with preserving company mission. Hence why I was confused by you addressing it. It would never cross my mind to argue that size has protected Costco.

I haven’t read your book, just skimmed the post so I don’t know if it’s convincing. But I’d like to argue that those companies failing their mission is proof that they did not have good leadership. however, that makes the argument a little circular.

I’m aware of FedMart (Acquired podcast on Costco is very entertaining). I think Sol Price was a bad leader and selling out to Hugo Mann was putting profit above other things.

If you're right and it is AI, the comment only points out what many of us can already see. If you're wrong and it isn't AI, then the commenter you're responding to can either argue with you about how it's not AI or just say nothing because there's nothing of substance to say.

Yeah, there's no rule structure that can't be skirted and subverted by new owners with different objectives. The most resilient way to preserve your values is to:

    Only take care, and keep your soul diligently, 
    lest you forget the things your eyes have seen, 
    and lest they depart from your heart all the days of your life.
    
    Teach them to your children and to your children's children.

Or, as you say, it could be a really horrible environment - but I don't think you can tell from one anecdote.

As I read through your comments, one question popped into my head: what’s your thoughts about the Friedman doctrine? Do you address it in your book?

Specifically, the Friedman doctrine makes the argument that the social responsibility of the firm is to increase its profits. That policy making should be left to governments.

Milton Friedman states in his essay:

Insofar as [a business executive's] actions in accord with his "social responsibility" reduce returns to stockholders, he is spending their money. Insofar as his actions raise the price to customers, he is spending the customers' money. Insofar as his actions lower the wages of some employees, he is spending their money.

His theory was introduced in 1970 and it seems has since become the standard for the corporate world

How does this square with what you present in your book? Do you disagree with his theory?

For example, we bought a company, and over the next year or so doubled wages in that company. Our "social responsibility" in that case was to spend shareholder money so that workers had a living wage. That doesn't seem to be the story I hear about say Amazon.

Yes, we've also spent money outside of those 3 groups. We contribute to charity. We spend money encouraging staff (and customers) to get cancer screenings etc. We spend (I guess shareholder money) on lots of things that are adjacent to our actual business.

Frankly, in the long run, I think it ultimately helps the business. It makes us "human" and reminds us that we control money, the money does not control us. This permeates through employee relationships, it permeates customer relationships. Ultimately that makes for a stronger company, built to last.

We've had acquisition offers. The shareholders have resisted them so far (despite easy riches) because we've seen what happens to other companies our size when they get acquired. Shareholder interest flows up. Staff (and by extension society) interest goes down. Ultimately most everyone leaves.

I would suggest that there is also some degree of (subconscious?) expectation of higher wages meaning: staff would be happier/performance would be higher/staff retention would be better/absence would be lower.

You weren't just giving (shareholder) money away. You were trying to optimise your team.

That said, you seem to have archetypes above Costco, Patagonia, and Novo Nordisk that avoided it.

Can you comment on not what it takes to build such a company, but rather how to transform companies like those that I worked for into ones that resist gravity? Or is it too late?

I don't really think there's a short way for me to answer this question without having to summarize the entire book. This is what it's about. I'll simply say that the second part of the book, what I call "The Blueprint," is about both the governance and leadership tools that we have available to us to turn these organizations into the long-term, mission-driven, incorruptible places we all want to work at.

Thinking about this problem and extending the average company life seem like worthwhile endeavors while we're trapped on this ball of mud.

I appreciate you engaging with the argument in good faith and I look forward to hearing what you think of the book if you do decide to read it.

I wrote a blog post called "Revenue Model is More Important than Culture" (it made the #1 spot on HackerNews a few years ago) arguing that the way to avoid that corruption is by making sure the business model is immune to it, but having read your thoughts, I'd say your argument (structure being the dominant term) is even stronger.

It's funny we both land on Google as a main example. I had this quote "I’m going to pick on Google a little bit here, but I do love that company. I think there’s a lot it can improve on, but it’s still one of my favorite and least “evil” large tech companies.", and honestly and sadly, I don't even know if I'd agree with the latter part of that statement anymore.

https://somehowmanage.com/2020/09/20/revenue-model-not-cultu...

How is Jeremy Howard doing? I remember studying machine learning with his videos, he’s been so inspiring!

stay tuned

You can also see the various accolades, reviews, and awards that it's accumulated so far.

However, I have to express some skepticism that through regulations and reforms, we can reverse the entire incentive structure for public investment to be aligned with stewardship rather than extraction. How do you plan to defy the "financial gravity" between you and this dream?

Finally, I think that Claude Code has misinterpreted your request to summarize your interviews and events. Instead, it created a marketing and promotional website with not a summary to be found!

Your skepticism is well earned, and all I can really say is that I hope you'll read the book and judge for yourself. I tried really hard to lay out the evidence for two things that are necessary to address this skepticism:

1. We have to see that these structures are changeable. The economy that our grandparents inhabited is almost unrecognizably different than the one we inhabit today. So too, we can imagine that the economy that our grandchildren will work in may be unrecognizably different to us. Why does that necessarily have to be in a negative direction? What was once changed by human hands can be changed again.

2. I know this is hard to believe, but there's actually a lot of evidence that mission-driven, purpose-driven, trustworthy organizations outperform their conventional counterparts. The fact that this is so gives us a lot of tools we can use to drive the change we want to see.

On top of all that, we are living through a massive generational shift. The new generations have lived their whole lives under this maligned structure, and they are sick and tired of it. If you think they are going to sit quietly by and allow those structures to persist, I think that is very unlikely. Which means we're going to have change one way or the other; the only question is how violent and difficult is that revolution going to be? We'd be much better served to change proactively because we know what the right thing is.

I have to say, to your first point, that exploitation (of humans, labor, resources, consumers, etc.) has always been the primary driver of accumulating large wealth under capitalism. Sure, "innovation" sometimes has a role in softening the blow, but let's be real.

That was true in our grandparents' time... and their grandparents' time... and their grandparents' time. While their economies looked very different, the same structural incentives were in place and certainly did not curb unethical behavior one bit.

It has taken a long time for the piper to come for his full payment, but we can all see now that the world is burning, poisoned, and suffering as a result. We can no longer eat freshwater fish due to the massive amounts of PFAS in our lakes and rivers. The billionaires are trying to pretend they can escape the disaster by building their bunkers on remote islands or trying to colonize Mars.

I want to have some optimism in the newer generations to create positive change here, but I can't help but look at what happened to the idealism of the 1960s. The counter culture was right about the societal benefits of renewable energy, organic food, vegetarian diets, ecology, egalitarianism, civil rights, and more. But somewhere around Reagan many in that generation sold out and those great ideas were simply appropriated and fed back into the profit-machine that rewards exploitation. Today we have "certified organic" labels on food products, but that term has been watered down to almost nothing by the marketing departments, politicians, and lobbyists.

Anyhow, I obviously need to keep my pessimism at bay. LOL You have convinced me to give it a read!

Under all forms of human civilization, since the beginning of agriculture allowed one person to accumulate more cattle than another. Capitalism is actually a great equalizing force from that yoke - it allowed for the first time to get out of it through ingenuity and hard work. The rule for practically all of existence before that was "you do what the biggest baddest guy around tells you to do or you die", and your entire life and your children and their children's will be the exact same, with no hope of betterment whatsoever. It's what led to the rise of slave morality religions like Buddhism and the Abrahamics; if you have no chance at happiness in this life, best to believe there's something better after, and that those responsible for your suffering will be punished.

I used AI extensively in the research, editing, and promotion phases of creating the book (and even shared screen with a few podcast hosts who wanted to see the solveit platform from Answer.AI up close). To be clear, I never let the AI write for me; I am not a fan of "vibe creating" of any kind. Instead, I tried to use the AI to improve my own skills so that the final artifact was better than it would have been before.

I know people are up in arms about this right now, but shouldn't at least some of blame for that fall on the tech industry itself, for how these tools are designed, promoted, and sold? I think in the long run, society will achieve a more healthy equilibrium. But in the meantime, it's gonna be a bit rocky.

Is that you, Eric 'Otter' Stratton from "Animal House"? You know, "I'm pre-law." "I thought you were pre-med." "What's the difference?"

What do you say to this interpretation? In particular do you think most cases could be framed as "the key audience/customer/market has shifted"? Is it possible to find greater financial success while doing things the primary audience doesn't like?

This, of course, makes on boarding and new user acquisition harder, and can severely limit product growth. And this also leaves space for simpler products to come along and cater to the novice market. Or, companies can fight this tendency, and remove features, or make them harder to use, in order to cater to less demanding demographics.

What I'd be curious about is what spotify looks like as their market share levels off. Do they keep catering to the automatic playlist crowd, or does their average user get more sophisticated over time?

So make two UIs? Or an API and a novice user / mass market UI, and let the open source community serve fussy power users (and borrow some of their good ideas as a return on your show of good faith)?

I think these changes very rarely have to do with what customers want shifting, but when people say "the market," they are often confused about whether they're talking about customers or our financial markets. Frankly, it's far more often for this kind of correction to originate in the pressure from financial markets than any other single source.

Naively of course it seems like investors don't like it when sales go down, so there'd be an extremely tight link between financial market and product market feedback. But I imagine you disagree, that this breaks down easily and creates problems?

I do attribute a lot to specific people. Concretely, to much of the intitial team, who they recruited on the research/infra side, and some very close personal relationships within research/infra. That dynamic, paired with their unwillingness to accede to something against their values, is what I credit for some atypical decisions and outcomes [1].

Things regulary go "corrupt" in parts of the company; it's hard to scale without importing culture from big tech. Sometimes, the defense was ICs escalating issues, Dario talking to ICs, and then shaking things up.

But this process takes time, and it doesn't lead to a full reversal; a bad/misaligned hire has reverberating impacts. Many folks are still driven by values (even if their values are not your values!), but scaling dynamics seem to be evolving like any other org – just at a higher employee count and revenue numbers.

I do place trust in specific people who work at Anthropic, but I wouldn't place trust in Anthropic the organization. It's an organization that's wont to change, regardless of its structure.

[1]: https://news.ycombinator.com/item?id=47174423

I really wonder if it's possible to avoid these dynamics, even if you try really hard.

If not, it seems to me that goal alignment is the main benefit of a hypothetical lean AI company where the middle management is 1% people and 99% tokens. When most of your decision-making is not being siphoned by politics, your output scales far better with respect to input resources.

With respect to OP (who has a unique vantage from inside), I do agree with this on principle. When there are uncommon outcomes, there must be uncommon structure imho. A "good structure" is like oxygen, water, or peace: When it's well-maintained and well-distributed, one might not even notice it's there, nor spend much time being grateful for it. It's banal, but "what do you mean? isn't this just how things would always have been?" is both beautiful and tragic.

Imho if we could figure out how to have a "loud peace" (in all the ways that this might mean), we'd have figured out an important way of sustaining the world and ourselves.

In all seriousness, yes, individual leadership at the top has to be willing to steelman controversial issues and potential changes of direction, as well engage in unapologetic gatekeeping. At this point we've seen this over and over in tech when observing corporate successes and failures.

I get the sense you were feeling at odds with my framing? I wonder if it's that you're picking up that I believe "structure" is above any one person or set of people. In my conception, leadership is just part of structure, a key maintainer. Leadership are pieces of the structure, but subordinate in scale. They sometimes seek outside help in shaping structure (e.g., ppl like eries), and the structure becomes like another passive actor, not simply "leadership's doing". Leadership are key players taking care of the structure, but they are just one set of players, and in some structures, non-leadership employees play an outsized role (often because leadership knew enough to step back). Sometimes the role of leadership if "fucking right off" in certain domains. Regardless, the structure then guides behaviour of all within it, and hopefully the structure also maintains us, at least as much as we maintain it.

I'm stating the above as if it's universally true, but it's just my take. I'd be curious to know if any parts give you strong YES or NO feelings, if you are open to share your gut reaction. Blunt responses welcome

(Fwiw I lean heavily on the ideas of Christopher Alexander -- the Pattern Language guy -- in regards to my beliefs on "structure": https://dorian.substack.com/p/at-any-given-moment-in-a-proce... )

Is there something that happened which you don't think would have come to pass with a standard PBC/C-Corp (without the LTBT)? I'm trying to think of one, but nothing is coming to mind.

I think the structure attracted many people to Anthropic (e.g. an RSP that could only be overridden by the LTBT), but I'm not sure it has demonstrated a practical impact.

As an aside, I think a lot about this problem too! But the answers that don't reduce to something like "the people, and the people to whom they give power" seem to break down when I look closely.

(Although it does remind me a bit of Google pulling out of China back in the day.)

Unfortunately there doesn't really seem to be a cure for institutional decay. Once unethical people get in power, they hire other unethical people, and then you're just stuck in Game of Thrones. You have to go quit and found another company, and single-mindedly keep all those people away, kinda like Anthropic did when they left OpenAI.

I would argue it's not a real value if you are not willing to lose something in order to hold on to it. It is admirable to want to do the right thing when you can get away with doing the wrong thing. It is only a true value if you are willing to do the right thing when you cannot get away with doing the right thing.

I don't think it's that simple.

For example, let's say your desire is to minimize harm in Area X. While you're on top and in control of Area X, then you can do that easily enough. Suddenly a competitor comes whose values show they're willing to do lots of harm to Area X. And if they beat you in the capitalistic marketplace and gain more control, they'll be able to do lots of harm. In order to beat them, you may have to do a little bit of harm to Area X, which goes against your values. But in doing so, you retain control, and prevent even greater harm to Area X. Is that not a "real" value?

Would it be a "real" value to staunchly refuse to do a little harm to Area X, even if you know that this will result in greater harm in the long run?

This is why I distrust simple ideologies. The world is not simple.

Company A founds itself on doing 0 harm to Area X. Competitor B shows up and starts finding success doing 10 harm to Area X, so Company A makes a "moral" decision: If we do 9 harm to Area X, we are preventing 1 entire harm. Isn't that real value? then Company C shows up and starts finding success doing 100 harm to Area X, so Company A changes it's moral stance to "unless we do 99 harm to Area X ..."

I know an old lady who swallowed a fly kind of logic going on here.

You should investigate the repeated prisoners dilemma.

Well aware. Obviously, the entirety of human civilization is a bit more complicated than a prisoners dilemma, iterated or not. Yet prisoners dilemma's and races to the bottom still exist, and it makes no sense to argue against them in the abstract.

The person I was responding to made the point that if you want to minimize evil in the world, sometimes you have to add evil to a lesser degree. As in my example, if I do 9 points of evil but prevent 10 points of evil then according to OP I've added value to the world in the form of the 1 point of evil I have reduced.

I responded that this can lead to an escalation trap. This assumes that we would all prefer less evil in the world, right? So how do we get out of the escalation trap? Repeated application of the maxim "always do a bit less evil than the worst possible competitor" will not lead to a minimization of evil overall, only a creeping increase in the total amount of evil in the world.

How are you equating this to me arguing against the existence of races to the bottom?

In reality, neither corporate nor personal values are binary, all-or-none propositions. They are more like springs that push you in the right direction. But if something pulls hard enough in the wrong direction, a spring can be overpowered.

If they made that decision and it destroyed revenue, I could see an alternate timeline where a standard C-Corp + board with non-founder control may have ousted leadership. But that wasn't the situation for OpenAI or Google either, and their leadership still made a different decision.

Regardless, it's still atypical in the context of an American company, and it can help explain the differences between Anthropic and its peers. That doesn't mean I agree with their decisions or that they're "the right" decisions, but I think it's a helpful framing in which to understand them.

Some people are unjustly called stubborn when they don't change their position based on a weak argument from an authority figure. And others claim values, but they're just stubbornly adhering to something that feels good to believe.

(This isn't a dig on managers; I've been one. But if a situation doesn't naturally escalate, that usually means a manager in the chain chose not to escalate it, and their reports have to go around them.)

You used the phrase "our industry". Personally, I'm not a huge fan of the 'tech industry' concept, simply because a lot of startups are not in software/computing, and a lot of new technology isn't either. But I get what people mean.

I notice that the companies you mention like Costco and Patagonia are not in the tech industry. Does your new book have any examples which show how to stay incorruptible in the face of the network effects that drive monopolization in the tech industry? Alternatively, have you seen workable ways to split network effects amongst networked affiliates, to spread out the market power?

I know that most founders aren't exactly looking to make a startup with a lot of competition (I'm sure not), but it would be nice to know if someone is fixing problems specific to the 'tech industry'.

I wanted to have a wide variety of stories in the book from many different industries to show just how pervasive these forces are that we're doing battle against. While there are some things that are unique to the tech industry, I think we have more in common than what sets us apart.

FWIW, I wish people would talk about the "startup movement" rather than the "tech industry" for what we do. But maybe that ship has sailed.

In terms of the thesis of Incorruptible, though, I do think that LLMs in particular should be really, really advantageous for managers and leaders who want to create alignment and coherence within their own company. If there's anything that LLMs are extremely good at, it's summarization. So much of the modern leadership challenge is simply figuring out the answer to the question: what is my organization actually doing right now? That's a summarizing problem.

I would not think that LLMs would make very good leadership decisions, mostly because they're too malleable and too easy to manipulate. I do think they're very helpful in helping leaders assess their own context and situation and thereby make better decisions.

Was it "financial gravity" that made the decision at Google to cheat at the ad exchange?

Was it "financial gravity" that made the decision at DuPont to dump toxic sludge in the environment and make unsafe products?

Or perhaps was it just a group of immoral people chasing more personal gain and wealth?

Humans are too weak and too easily corrupted by wealth, power and shiny things and our political and economic systems place way too much power in the hands of fallible individuals. I expect it to be our downfall.

I mean, all of those are examples motivated by sacrificing other principles to make more money.

https://www.harpercollins.com/products/good-to-great-jim-col...

This should be kind of obvious -- if they are avoiding doing awful things in the name of money, then they are leaving something on the table. You can't have your cake and eat it too. This is why the real solution is some kind of governance/regulation, because otherwise the market incentivizes being awful.

If the definition of "awful" is broad enough, I imagine most public companies will fall in the "awful" bucket, probably with the same distribution of stock performance as the whole market. If "awful" is going to mean something truly extraordinarily bad like dumping mercury into a well or whatever, I would still guess there is no correlation as I've read horrifying stories of corporate behavior at companies with unremarkable stock performance.

https://en.wikipedia.org/wiki/Nvidia#Controversies

https://en.wikipedia.org/wiki/Comfort_Systems_USA#Anti-union...

https://en.wikipedia.org/wiki/Intuitive_Surgical#Lawsuits

Depending on your political leanings, you may pick and choose which of these you consider "awful".

Didn't find anything in my five-minute scan for Old Dominion.

That doesn't stand as a reason at all. I think the big contrast isn't as you described. It's more about short-term versus long-term or conflict of interest between principals and shareholders.

But to be specific, Wells Fargo was mentioned, and their downfall was very much driven by doing awful things in the name of money, specifically.

Healthcare is a recurring topic in the book, for the reasons you specify. In fact, I call for the adoption of a Director's Oath similar to the Hippocratic Oath for boards. They can do just as much - or even more - harm.

I listened to a podcast interview you did where you talked positively about the Novo Nordisk Foundation as a successful governance story, but when I think of long lived foundations, I think of the Ford Foundation and the Hewlet Foundation that have significantly drifted from the founders' visions despite being non-profits. Many people think it is better for foundations to spend down all their resources before the founder is gone to prevent this drift and loss of efficacy.

Have you done any studies of what made long lived foundations drift on their mission despite no profit incentive?

(Apologies if you already addressed this somewhere. Thanks for doing this)

Would be interesting to see if other lasting things in other domains, natural or human-made, physical or virtual, are built this way..

It was a big influence on me and something I recommend and quote often.

I'm curious if your perspectives on the topics of "The Lean Startup" have changed I the era of AI tools. Particularly curious what you think about the role of MVPs to test a market.

This has been on my mind the past few weeks because of a recent experience during a company hackathon:

A few years ago I gave a talk about prototyping and MVPs at the Audio Developers Conference and in this talk to explain the concept of an MVP I proposed a silly idea for an audio plug-in (that replaces a singers voice with the sound of flamingos) as a demonstration of how we might test that there is a market for this plug-in before building it. I gave some examples of how we could test this like a landing page MVP, concierge MVP, etc.

Recently during the two days of this company hackathon I was too busy to do a project of my own because I was helping on-board colleagues with Claude and getting sucked into some leadership meetings. During the demos meeting I decided to try to build my voice replaced with flamingos plug-in and built a working plug-in in under two hours and this got me thinking:

If I can build a real functioning plug-in that a user can try in their host application in less than two hours why would I use non-software MVPs to test a market when I can build working software just as fast or faster than I could setup a non-software MVP a few years ago.

Of course there is more to learn from "lean" than just MVP (I'm also a big fan of the andon cord and the 5 why's)

(to anyone commenting on vibe coding I looked at the code and while not all of it was ideal I wouldn't consider this "vibe coded" and for serving the purpose of an MVP a couple things in the code that were a little funny are not a problem)

One question I have for you is on finances, I think that still remains an afterthought in startup hustle culture, and perhaps even by design, I feel like the system is designed so that VCs keep winning and founders rarely get the exit they deserve. What is your take on that?

You're quite right. There are many, many problems with the current "best practices" including that many founders wind up with nothing even if the organization succeeds. In fact, one study I cite in the book found that something like 80% of founders of venture-backed companies will no longer be CEO even three years after an IPO.

Why? Is there something that inherently prevents founders to remain in control after IPO?

That and, don’t accept money from strangers. :)

The way around that is to not take VC money. There are some (not many) startups that got to unicorn status by bootstrapping and not taking outside money. It's harder, yes, but in a way a more pure effort.

Do you have any recommendations for entity formation infra that caters to mission driven companies? Something like Stripe Atlas that can form the more complex structures? Forming a PBC is becoming more standard but tthe other structures seem more esoteric (and expensive).

Virgil is an AI-powered law firm, but it doesn't let the AI do the legal work for you. It actually hires and trains human lawyers to become AI-powered superhumans. It handles lots of the really unpleasant back-office crap that early-stage companies absolutely hate dealing with, from payroll to compliance and a lot of finance stuff.

Of course it also does full-service legal work. Because I'm involved, it is specialized in setting up mission protective structures for startups. We have worked really hard to drive the cost of such structures down.

In fact, many of the implementation guides that you can access from the book if you scan the various QR codes were developed in partnership with Virgil. If you want to DIY it, I think we've given you enough information to do so, including sample templates, term sheets, documents, etc. If you prefer a low-cost, flat-fee subscription, Virgil is also there to help you at any time. The URL is tryvirgil.com.

(And you are welcome to use Virgil alongside your established high-prestige high-cost firm, too, if you prefer to do that. It will still save you considerable amounts of money)

One other thing i've grappled with while reading the book is this:

Some of the internal issues you describe seem to come from companies growing too big. The Founders who lose control, weakening culture etc. The size of a company seems to correlate with so many issues (not all related to financial gravity).

I wonder how much pain can be avoided by just staying small (employee count).

Thanks again for the book(s). It feels very mission driven which perfect.

I hope we get PMF with what we're building. But also hope to stay as small as possible however unrealistic that is.,

Thanks!

I do think the site could use some more prominent CTAs. I think i vaaguely noticed that button but thought it was one of those AI chat bubble.

I like the phrase "financial gravity" as a way to frame the phenomenon in a way that avoids the darker (and broader) connotations of "corruption". At Humanitix we spend a lot of time thinking about this, and have much respect for the likes of Patagonia, Thank You, and others. We took the "charity path" so to speak, which has been both challenging and rewarding. Watching OpenAI's charity orbit decay into IPO fireball has been somewhat depressing, but I think it highlights one of the keys to our own continued success in resisting the pull; we don't need much in the way "capital" from the "ism". We don't need to build data centres, or produce and warehouse goods.

Having said that I don't mean it to undermine your points of "strong ethos". Simply existing in the tech world as a charity takes great strength of ethos. Try explaining to AWS that you should be eligible for "start up credits", but no, you don't have "investors" to prove you're going to the moon.

So I suppose it shouldn't be too surprising that so few other companies have tried low-overhead tech start ups as charities. The ecosystem works against it in many ways, but it has become one of our missions to prove that it can work as a business model.

Anyway, thanks for the book (and this thread). I'll be passing it around on the work Slack.

If so, how is the tradeoff justified? (Make money first, then do "ideal" things?)

If not, why not? (Other than that it's unsuccessful strategically/statistically and wasteful, I guess.)

Any elaboration/response on this theme would be appreciated. Thanks!

Tony's make some of the most delicious chocolate in the world, but their mission is actually to eradicate child slavery in the production of cocoa. I bring this up because before Tony's, it was widely assumed that "the market" didn't care about child exploitation. They just wanted delicious chocolate. Yet Tony's found a way to prove that this was not true.

The more general lesson is that many of the stories we tell ourselves about "what the market wants" are mere fabrications or just-so stories designed to make us feel better about how crappy our alternatives are. Sometimes it just takes a bold entrepreneur to show us that we already collectively are committed to a different set of ideals. We've just never had the opportunity to vote with our wallets to make it happen.

What can a founder do to safeguard his position, interests, and company? A couple of things that come to my mind are: have an aligned/friendly board who believe in you; second, have dual-class shares (like Meta, SpaceX, Google). Anything else you would like to add?

What do you think an experiment needs before it can actually be called learning? And what kinds of product questions should not be done as experiments at all?

Why do you think IMVU never hit escape velocity?

What happened in the years since? I don't really know. The company has not been in close touch with me, so I can only speculate or guess.

I'm curious if you think cooperative businesses leveraging non-voting preferred shares, community shares and other coop investment instruments are more resilient against this type of corruption.

I'm wonder how you see the tradeoffs these models have against traditional LLC/VC models and how you would mitigate them.

I address your question in much more detail in the book, using examples as varied as Mondragon in Spain, John Lewis Partnership in the UK, and Vanguard and credit unions here in the US.

We actually have pretty good evidence that these other structures are more resilient and more stable than the classic "best practices" we have all been indoctrinated into.

Unfortunately, most of us have been told that these approaches are incompatible. You either go "big" and try to make a lot of money, have investors, have a grand vision, etc. Or you go "small" and do something "ethical" and non-extractive. So many of us have been taught that it is the fate of the small to be destroyed by the big, since they are more ruthless and more powerful.

But the evidence doesn't really support this just-so story. My goal with the book is to help those who want to build mission-driven companies to realize that this is a source of strength, not weakness, and act accordingly.

I think we need a "middle path" culture that finds a good balance between these pressures and values.

This is the comment I came here to read. Thank you, I already have a copy of the book and intend to dig in more on these themes specifically.

IMHO we are dealing with a cultural domination movement centered around authoritarianism and its engulfing everything. The business world is being used as a weapon wielded against the world, I don't think this is a leadership problem, its a problem with selfishness and whats going on in the heart.

Now, here is my question. I personally got disappointed in how most “early” and “small” startups operate. I have short experience to be fair but their sole goal seems to be how to get funds and grants and how to get higher valuation. They didn’t have visions and sustainability in mind. It felt like they are doing gambling rather than running a business. What do you think of this and how would you explain?

I was talking the other day to a Silicon Valley OG and he expressed total disgust to me about the "mercenaries" who have overrun the valley right now and who are destroying the very things that made it great in the first place.

By contrast, I can say pretty much anything about Facebook and nobody seems to care. Yet, if you go back and read their S-1, you can see how they very much wanted to be seen as the mission-driven good guys.

It's all quite sad, really. There are plenty more stories of corruption in the book. To be honest, it was a challenge to avoid having the whole thing read as bleak given how pervasive this corruption is today. I did my best to balance it out. You'll have to let me know if you think I got it right.

Can you say more about this? Do you think those tender feelings towards Google track some strain of values which Google still carries? Or does this statement reflect some fear of retaliation or conflict that would drown out the rest of your message?

Genuinely interested in how you think about this, especially in the context of this new book’s topic. Thank you for this AMA.

I suspect that it's largely just that brand reputation tends to be very sticky in the minds of people.

It's the same reason that Pyrex, Harley-Davidson, and Dyson are still high reputation brands even though the product they make today is tragically worse than what gave them their initial reputation.

(I tend to think of private equity as often existing as an arbitrage system to take advantage of the fact that they can buy a loved brand, slash the quality and increase the profit, and continue to sell at its original price based on that brand stickiness for a while until people eventually wise up.)

The idealism that has been sucked out of the tech industry. It was so (naively) hopeful at one point, and now the arms race and profit-maximization has eroded it all. Your observations really resonate with me.

I'm surprised I hadn't heard of the Long-Term Stock Exchange, it seems like a much healthier direction for the market.

This mean you are now under gag order as you rise on the bestseller list? :)

Lean Startup is awesome, can’t wait to read your new. Excited to read about the ostensibly-not-evil Costcos of the world and hope the smartest & wealthiest amongst us grok it, that we win more when others win.

First, the organization must have an original steering body made up of "true believers" in a shared mission and vision. This body must make preventing the short or long term erosion or dilution of its mission a priority. Meaning that there's awareness that this particular corruption is a possibility from the start. Also, an understanding of the typical mechanisms through which it can happen (usually very human).

Second, as part of its survival strategy the steering body has the responsibility to identify other genuine true believers and integrate them in its makeup. There must be built-in assumptions that many outsiders will be attracted to its powers of influence and will try to infiltrate it.

Joining the steering council should thus be done primarily based on "culture fit". Admittedly a rather segregating practice, but one which in this case comes with the advantage that certain signals are just hard to fake on the long run. So, although many could try to dress, look, talk, or walk the part for a while, there will always be some shibboleth that trips up impostors.

I foresaw some problems to this structure that I haven't yet worked out, but it feels like a step in the right direction, if I had to come up with a solution.

Anyway, my question is - Have you had a chance to research OpenAI and it's path to getting "corrupted" i.e. going from Non-profit to this weird structure to then, what it looks like, absolutely regular for-profit company? whats your take on it? what are the lessons of the convoluted company structure they persuaded?

It's a really complicated and confusing company to draw lessons from, partly because there are such big ego, larger-than-life people involved doing crazy stuff. A lot of the inner details have not yet been made public, so I don't think we really, really know what was going on behind the scenes. There have been quite a few factional struggles there, and I'm sure you can find bad behavior on all sides. That's not that uncommon when so much money is at stake.

In the book, I try to get into the structure that seems to be stable over long periods of time, which, because I know more about the details, I felt more comfortable illustrating by telling the story of Anthropic. I had to pick one difference that seems to really matter in these so-called complicated structures. It's whether there is one central point of control or more than one, i.e., if there are checks and balances. That when an outside board of trustees has the power to hold the for-profit board accountable to the mission, that seems to produce more stable results.

Check out the research of Steve Thompson at the Copenhagen Business School, who has been a pioneer in developing the data from which these conclusions are drawn.

Thanks for the pointer. I’ll check it out.

Excited to read the book! Ordering mine today…

Q1: You have done a few friendly interviews on YouTube, but I haven't seen one that challenges you much. Do you know if there are upcoming interviews that you found pushed back?

Q2: Is the idea of shareholder supremacy fundamentally at odds with your with your preferred alternative governance structures, or is it just a time preference and risk attitude issue?

Q3: You will get sympathetic ears easily due to the subject matter. But the same book about non-profits would be a harder sell. Do you agree, and if true does that say something about the marketplace of ideas?

Though I did get a pretty funny piece of pushback on one consulting company's podcast. The person said, "But wait a second, I learned in business school that everything you're saying here is wrong. Are you asking me to rethink that?" Something like that. I said, "Well, are you interested in looking at the evidence that what I'm saying is the truth?"

I think he was really genuinely struggling, because I don't think he was that interested. Many of us are not that interested in seeing the evidence that the things we believe or were taught are not quite true.

Q2: shareholder primacy is a bad idea on its own terms, as I lay out in the book. It doesn't prevent people from adopting any of governance structures I recommend, it just makes it more difficult, by creating career incentives that add friction to doing the right thing. That's partly why it's so value-destroying.

Q3: I don't understand this question, sorry. Maybe it's because I've spent many lonely years being berated for this subject matter and am only getting the sympathetic treatment lately...

It doesn't take much time seeing companies grow to see the cultural differences take hold when a company goes wrong. You end up with execs and middle management that do not want to rock boats, and where any disagreement is clearly career suicide. At that point, people push for what is good for them and is not good for the company, and people realize that letting things decay is in their best interest. Once your org has enough levels of management, anyone that is part of the big decisions and isn't a team player has already been filtered out, so you see large meetings where hundreds of millions are supposedly distributed, yet not one person is ever going to complain about obvious grift, or decisions that will harm the company in the long run. Open discussion is too dangerous, and coordinating action against bad behavior becomes more and more expensive. Therefore, the company just naturally erodes.

You can get there too with just a bad enough leader that values sycophancy enough... and after enough billions, basically every leader ends up having a lot of trouble accepting news of bad behavior from their advisors.

You've probably talked about this before, but with AI speeding up product "delivery" (especially prototypes), what changes have you seen to the lean startup methodology? Is it possible to supercharge the build measure learn loop?

And what good uses for AI have you seen to keep teams "building things people want"?

In terms of good uses for AI to figure out what people want, I really think the best advice is to focus on your own skills and agency. In other words, never ask the AI to make an artifact for you. Instead, ask it to teach you how to make the same artifact.

If you do this over and over again, if you do it step-by-step, having the AI as a teaching companion, critiquing mistakes that you make, breaking the problem down into smaller sub-problems, making sure you've mastered each step before moving on to the next, pretty soon you'll be able to create some really awesome artifacts.

Is this approach, in some sense, "slower" compared to vibe coding everything? Yes. But I think, at least in my experience, this is a go slow to go fast kind of situation. Now I had the benefit of being able to use a completely custom AI rig made by the company I help co-found, Answer.ai (with Jeremy Howard). If you want to learn more about that, you can access it at solve.it.com.

It used to feel completely different a decade ago, no teenagers that couldn't care less, now few of them seem to care.

Tyre centre moved to bookings only but you can't call because there's never anyone on the tyre desk. I know because it's always unattended whenever I walk past.

Gas station staff just chat to each other and put out the traffic cones 30 mins before close leaving a small gap.

Everyone now has to scan their card with a single scanner leaving a huge queue outside just to get in.

Register queues go right down to the back of the warehouse with half the registers closed.

Queue again to get your receipt checked and all you get is departing grunt if you're lucky.

It's sad because I used to rave about Costco and bring the cool new snacks to share at work.

Prices are mostly comparable at the grocery store if you are willing to wait until they go on special so I've given up on Costco.

1. Who lack a legitimate business model hence have resorted to "data collection from/about computer users, surveillance of computer users even when engaged in non-commercial activity and online advertising services" with generally free, so-called "products" and "services" offered as bait

"There's a darkness in our industry that we often don't talk about."

It's "talked" about on HN but voters and commenters working for or aspiring to start/work for these companies don't like the discussion

100% probability this comment will be greyed out to try to hide it from people using graphical web browsers (no effect on monochrome text-only browser users)

The people that start "tech" companies are often soulless and maladapted to society, having hid behind computers to escape their inability to deal with the real world. There are also "tech startups" founded by people who want to take advantage of those who have hidden behind computers and lack social skills, using them as pawns

These founders and pawns do not start, nor do they want to work for, companies like Costco, Patagonia or Novo Nordisk because they only believe in what they see on a computer screen not the real world. They want to operate in Silicon Valley fantasy land

It really isn't surprising what happens to so-called "tech" companies over time considering what they start from

The author worked for Kleiner Perkins, SillyCon Valley VC

After listening to this guy you may feel like you need a shower

Yes. Of course.

You cannot trust anyone to have a rounded mind unless they have actually done more than one thing, broadly speaking.

Having worked at one of these companies, I don't buy for one second, that these companies are not obsessed with financial benefit. You would be an absolute idiot to believe that.

The pawns don't want to work in the IT departments of those companies

They all want to be in Silicon Valley fantasy land

They worship obscene Silicon Valley wealth, they are beholden to venture capital firms and they want to build data centers all over the planet and fill Earth orbit with space garbage

The environment is an afterthought, computers and sci-fi fantasy are what is important to them

To each their own. But...

This is the opposite of the guy who founded Patagonia. For him the environment is forethought, he has spent his life outside, not in front of a computer^1

1. Yes, I am aware Patagonia has made some mistakes with maufacturing

How often do you see companies recover from financial gravity? Or is it mostly irreversible?

How much do you attribute worsening of company values to things like professional managers, too much hierarchy, and less founder-mode; versus financial gravity?

In a case like GitHub where their focus seems less on open-source these days, should developers try to help GitHub better support open-source or should the focus be on building alternatives?

Thanks, Jake

For reasons I try to explain in the book, open source in particular is an example of the kind of mission-driven positive externality type of business that our modern best practices make it hard for people to see and understand. This is going to be a recurring problem in the free software and open source movements for years to come unless we get smarter about these forces.

Ie founders create order out of chaos, then entropy slowly creeps in due to X,Y,Z?

I loved the lean startup I'll be reading this book as well :)

So, to the extent the book is getting attention at all, it's being driven primarily by word of mouth. People who read the book are inspired to become evangelists for it, far more than my prior books. I think this one is more emotionally resonant for folks, and has applicability way beyond founders or even product people. So I'm extremely grateful for all that support.

I've also done a metric ton of podcast interviews, many of which you can watch here: https://howisincorruptiblegoing.com/

But if you look at the view counts on YouTube, you'll see that they are all also suffering from the algorithm's fickle attention. Most have very few views (with a few notable exceptions).