When to enact protections: always earlier

Eric Ries is the author of The Lean Startup, a book that reshaped how a generation of founders think about building companies. His new book, Incorruptible, explains how successful companies are destroyed by failing to protect what makes them valuable, and how to change it.

In our in-depth conversation, we discuss:

1. Why 80% of venture-backed founders are ousted within three years of going public

2. The governance structures that protect companies like Anthropic, Costco, and Novo Nordisk

3. The simple legal filing that takes two pages and could save your company

4. Financial gravity: why successful companies predictably get corrupted into mediocrity

5. Why mission-aligned companies like Anthropic reap major benefits from protecting their mission through governance

6. Why success won’t protect you—it instead makes you a bigger target

—

Brought to you by:

WorkOS—Make your app enterprise-ready, with SSO, SCIM, RBAC, and more: https://workos.com/lenny

Vanta—Automate compliance, manage risk, and accelerate trust with AI: https://vanta.com/lenny

—

Episode transcript: https://www.lennysnewsletter.com/p/how-to-build-a-company-that-withstands

—

Archive of all Lenny's Podcast transcripts: https://www.dropbox.com/scl/fo/yxi4s2w998p1gvtpu4193/AMdNPR8AOw0lMklwtnC0TrQ?rlkey=j06x0nipoti519e0xgm23zsn9&st=ahz0fj11&dl=0

—

Where to find Eric Ries:

• X: https://x.com/ericries

• LinkedIn: https://www.linkedin.com/in/eries

• Website: https://www.incorruptible.co

• Newsletter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://news.theleanstartup.com/

• Podcast:⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://ericriesshow.com

• YouTube: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://www.youtube.com/@theericriesshow⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠

—

Where to find Lenny:

• Newsletter: https://www.lennysnewsletter.com

• X: https://twitter.com/lennysan

• LinkedIn: https://www.linkedin.com/in/lennyrachitsky/

—

In this episode, we cover:

(00:00) Introduction to Eric Ries

(02:26) Introducing Incorruptible

(06:26) Protecting what you’ve built

(11:35) Why founders get ousted

(14:58) Too early, too late

(19:32) The blueprint: ethos plus integrity

(20:49) Novo Nordisk’s 100-year governance fortress

(26:41) The Vectura Group and Philip Morris

(33:16) The “harder is easier” principle

(37:22) Cloudflare’s mission emergence story

(42:43) Groupon’s email frequency death spiral

(45:37) How to define your purpose

(51:09) Mission-driven vs. mission-hopeful companies

(54:46) Integrity: structural and personal

(57:47) Shareholder primacy: the 40-year-old “natural law”

(01:00:04) Public benefit corporations: the easiest protection

(01:04:24) Downsides and objections

(01:06:08) The Anthropic example: fastest-growing company ever

(01:08:39) The torchbearers in every organization

(01:10:37) The culture bank: deposits and withdrawals

(01:12:28) OpenAI and Anthropic governance

(01:16:21) Mission guardians explained

(01:18:29) Spiritual holding companies

(01:21:53) The founder control trap

(01:25:25) Three things to do this week

(01:30:10) AI alignment and human alignment

(01:34:00) Conway’s law: org charts in architecture

(01:37:31) Book resources and farewell

—

References: https://www.lennysnewsletter.com/p/how-to-build-a-company-that-withstands

—

Production and marketing by https://penname.co/. For inquiries about sponsoring the podcast, email podcast@lennyrachitsky.com.

Lenny may be an investor in the companies discussed.