Reflections on a movement | Eric Ries (creator of the Lean Startup methodology)

Eric Ries is the creator of the Lean Startup methodology, author of the New York Times bestseller The Lean Startup, and founder of the Long-Term Stock Exchange (LTSE). He’s also a multi-time founder and currently advises startups, VC firms, and larger companies on business and product strategy. In today’s episode, we discuss: • The current state of the Lean Startup methodology • Common misconceptions about the Lean Startup methodology • Understanding how to actually think about MVPs (minimum viable products) • When to pivot and when to stay the course • Thoughts on AI and how to deal with uncertainty • How to structure your company around core values and create products that benefit humanity • The philosophy behind Eric’s current big idea: the Long-Term Stock Exchange • Much more — Brought to you by Sanity—The most customizable content layer to power your growth engine: https://www.sanity.io/lenny | Jira Product Discovery—Atlassian’s new prioritization and roadmapping tool built for product teams: https://atlassian.com/lenny/?utm_source=lennypodcast&utm_medium=paid-audio&utm_campaign=fy24q1-jpd-imc | LinkedIn Ads—Reach professionals and drive results for your business: https://www.linkedin.com/podlenny Find the transcript and references at: https://www.lennyspodcast.com/reflections-on-a-movement-eric-ries-creator-of-the-lean-startup-methodology/ Where to find Eric Ries: • LinkedIn: https://www.linkedin.com/in/eries/ • X: https://twitter.com/ericries • Website: https://theleanstartup.com/ 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) Eric’s background (04:46) Eric’s recent activities and projects (06:23) Eric’s start in advising and first-principles thinking (10:56) Lessons from designing the Lean Startup process (14:04) The current state of lean startup methodology (22:33) Common misconceptions about the methodology (24:28) Changes Eric would make in an updated version of Lean Startup (27:52) An explanation of minimum viable product (MVP) and why Eric still stands by the process (37:36) An example of “Less is more” (41:24) More on MVPs and the importance of testing your hypotheses (41:24) How LTSE had to pivot after a partnership fell apart (48:37) Eric’s take on the concept of craft (53:36) Why getting fired for standing by your conviction can be a career accelerator (55:17) Tech’s mental health crisis (56:28) Advice for founders stuck in a “zombie company” (1:00:16) How continuous pivots shape a company’s vision, with a real-life story (1:08:20) Challenges in assessing companies from an external perspective (1:13:17) Practical advice for businesses considering a pivot (1:18:42) The impact of artificial intelligence (1:26:59) The current capabilities of ChatGPT and its potential use as an equalizer in the marketplace (1:31:26) Eric’s current work with founders on human flourishing (1:42:40) Advice for founders who want to build ethical companies (1:49:37) Examples of first-principles thinking (1:53:42) Why shareholder primacy theory is wrong (1:55:19) The “spiritual holding company” (1:58:12) Lightning round Production and marketing by https://penname.co/. For inquiries about sponsoring the podcast, email [email protected]. Lenny may be an investor in the companies discussed.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  People act like having a startup fail is the worst thing that can happen to you. And like, man, that's not even in the top 10. Like, it's bad. I've done it. It's awful. Okay, it's really bad. But far worse is to be in a company that won't die, a zombie undead company that you hate, but you can't leave. Oof, have I met people like that? And like, we're having a mental health crisis among founders that's like not talked about enough. You know, people started to talk about like the downside mental health risk. Obviously, the stress of being a founder is hard. But like, look what's happening to the people that are so-called successes.

• 0:31Speaker 00

  Like, when you build a company and you sell it out and it becomes something that you find abhorrent, like, yeah, maybe you get rich, but it's not, it's not good. And so, building a company you hate that that becomes a malign force in the world, you know, that you have to go pretend you weren't involved with or like you feel complicit in what like, that's way, way worse. And I wish more founders would take that more seriously early on.

• 0:58Lenny Rachitsky?

  Today, my guest is Eric Ries. If you're not familiar with his work, I would be shocked. He is most famous for creating the Lean Startup methodology and movement, and also his incredibly influential book, The Lean Startup. He also coined more terms and concepts that are part of the tech culture than anyone I could think of. He currently spends his time advising founders and startups. He was a former founder and CTO, and currently is the founder and executive chairman of the Long Term Stock Exchange. This is now my favorite episode of the podcast, and I can't wait for you to hear it. In our conversation, we cover a lot of ground, including the current state of the Lean Startup movement, where he sees things heading, what Eric would redo if he could do it over again, misconceptions about the methodology that frustrated him most, how AI will likely impact product development in startups,

• 1:42Lenny Rachitsky?

  how to think about MVPs correctly, when to pivot and when to stay the course, also how to build a business with values that are aligned with human flourishing. Also, tons of amazing stories and lessons. And there's just so much gold in this conversation. And so with that, I bring you Eric Ries after a short word from our sponsors. This episode is brought to you by Sanity. Your website is the heart of your growth engine. For that engine to drive big results, you need to be able to move super fast, ship new content, experiment, learn, and iterate. But most content management systems just aren't built for this. Your content teams wrestle with rigid interfaces as they build new pages. You spend endless time copying and pasting across pages and recreating content for other channels and applications.

• 2:27Lenny Rachitsky?

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• 3:12Lenny Rachitsky?

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• 3:24Lenny Rachitsky?

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• 4:11Lenny Rachitsky?

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• 4:46Lenny Rachitsky?

  Eric Reese, thank you so much for being here. Welcome to the podcast.

• 4:50Speaker 00

  Thanks for having me.

• 4:51Lenny Rachitsky?

  This just feels very surreal to have you on the podcast. It feels like a surreal experience. You're such a legend in product and in startups. And I'm just really excited to get to learn from you and for listeners to get to learn from you. And my first question, just what are you, what are you up to these days? I know you work on the long-term stock exchange. What else is going on in Eric Reese's life?

• 5:09Speaker 00

  Yeah, you know, if you can believe it, the lean startup came out in 2011. So it's, it's been a little while now and it's been such a crazy ride. And basically every year since it came out, I keep thinking, all right, that, that's the end. Surely that's enough. And just each year it gets crazier and crazier and new things come my way. So yeah, it's, I definitely, you know, I'm building the long-term stock exchange, LTSC, I'm sure we'll talk about. And, you know, I spend a lot of time still with, you know, with founders and with big company execs, you know, trying to answer their questions about how to build companies in the right way. Obviously been sucked into a lot of AI stuff of late, as, as everybody is. And one of the interesting things that actually surprised me is I spent a lot of time the last 10 years working on the issues of governance and corporate governance and how companies should be structured,

• 5:55Speaker 00

  not really with an eye towards technology in particular, but just, you know, with long-termism and, and humanism really at its, at its core. And it turns out that those questions have just become like really acute for, for AI companies. So, so because of my work on governance, I wound up meeting with and getting to work with some of the top AI companies. So it's been. That's been really interesting. But yeah, I feel like I just, I go where the issues that are on people's minds go. And it kind of pulls me into new and really interesting things all the time.

• 6:23Lenny Rachitsky?

  Amazing. Okay, so I'm gonna wanna talk about all those things as we get into this. Something I wanted to mention is I feel like people don't give you enough credit for how many core concepts of startups and product building you've either invented or popularized. So what I know, obviously lean methodology. Then there's the term MVP, then there's the term pivot. And then also, I think, A B testing, customer development, continuous deployment, vanity metrics as a term. I'm guessing there's many more. And then the long-term stock exchange. And I think the theme I get from this is there's a lot of first principles thinking that you've done. And so just a couple of questions here. One is, did you think you'd have this much impact on startup culture and language?

• 7:07Lenny Rachitsky?

  And then just where do you think this comes from, this first principles thinking that you seem to be really good at?

• 7:13Speaker 00

  Well, first of all, thank you for saying all that. That's giving me too much credit. But I like the idea that it's gonna balance out the too little credit I ostensibly get somewhere else. That's great. You know, no, I mean, to answer your question, no, I didn't know this was gonna happen. This is so embarrassing to admit now, but just to give you a sense of how different the world is now than at the time of the financial crisis. I was so embarrassed to be blogging that I didn't put my name on the blog. I published it anonymously. Because it's like, it wasn't a thing that people did, and people told me it would be career suicide. And there were so few startup bloggers at that time that like, the top three all reached out to me personally. Because they saw it in their referrer logs on their website. That's how little traffic they got.

• 7:57Speaker 00

  That like, when a new person started writing about their thing and linking to them, they were like, who is this guy? What's going on? Like, it was, it was a very different, it was a very different time. And I had, you know, I'd just finished a startup. I'd left a startup that was being successful. And I had this reputation among VCs that, you know, I could make engineering teams be supernaturally productive. I had like the magic pixie dust. And so they would ask me to come in and work with their teams. And I would be like, no, listen, honestly, I'm not that special. It's nothing to do with me. It's just, you know, this framework. I have these ideas that are helpful in a team, they adopt them. And they would like pat me on the head and be like, yeah, kid, I'm sure that's great, but can you please bring the magic pixie dust to my company? You know, anyway, and I would go and have these meetings, and I'm not making this up.

• 8:41Speaker 00

  People would yell at me in the meeting. I would get yelled back. I would be like asked not very kindly to leave. And I'd be like, I don't understand. What are you yelling like? Why are you mad at me? You asked me for this meeting. And they'd be like, what? I'm like, I'm just telling you what I witnessed with my own eyes. We at IMV, we we ship product 50 times a day on average. At a time when people were like lucky to be doing it monthly. If they were really advanced. Remember like it wasn't that long ago that we put the year the product came out in the name of the product. That tells you what cycle times used to be. That was considered normal. And people were like, that's impossible. That could never work. And at that time, I wasn't even propounding a theory or anything. I was just explaining what I had seen and people couldn't couldn't believe it. And so I had this great idea.

• 9:22Speaker 00

  If I write some of these stories down, then when someone asks me for these meetings, I was doing these meetings all the time. I didn't understand the way Silicon Valley worked at that time. I didn't understand why this was happening to me. Having these meetings and I'll write the story down and then I'll send people the essay. And if they think it's crazy, then we don't have to have the meeting and I won't get yelled at. Like that was really as far ahead as I was thinking at that time. And then, you know, it basically took over my life and I was being asked to speak up. If people really wanted to unmask the anonymity, who is this person? And so I came clean. I identified myself and started writing and speaking and working with companies. And it just it became it became a whirlwind. The first principles part of it, I just, I don't know. I've always been wired that way. I feel like maybe I'm a failed scientist. Like I wish I wish I was actually good at chemistry or something.

• 10:05Speaker 00

  I could have actually been a real scientist, but I always really had a respect for the truth for scientific thinking. That was a big cultural value that I was raised with my parents are doctors, you know, just definitely part of my upbringing. And I was really into reading stuff that that worked that way. So it was very natural for me. I felt like as I had success as an entrepreneur, I wanted to know why does this work? And what people give me advice, you know, all the advice used to be of the form, you know, Steve Jobs once did this thing. So if you do it too, you'll be like Steve Jobs. And it's like, well, he also wore the black turtleneck. Is that is that also part of the like, what? Help me understand why does it work? And is it still appropriate? And does it make sense for that industry or not? I didn't like these just so stories. And I realized, looking back, I didn't have this understanding at the time.

• 10:46Speaker 00

  But looking back, I feel like first principles, thinking it really has two components that people pretend are one thing. And it's more one than the other. A lot of my work is just descriptive. It's not actually telling people what to do. It's simply giving a name and a concept to a thing that already happens. Like, that's the funniest part. In the early wave of criticism against lean startup, people were very angry at the idea that I was saying that a startup is an experiment. Like, you can't treat a startup like an experiment. I was like, well, you could treat it however you want, but it is an experiment. People were like, well, I don't think it, you know, like, people don't like the concept of pivot. There's still this anti-pivot people, anti-envy people every once in a while come out of the woodwork still to complain about it. It's like, well, I'm not telling you that you should pivot. I'm just saying like, that is what it's called when you change the strategy,

• 11:31Speaker 00

  but try to have fidelity to the vision. It needs a name because we do it all the time. And even when we don't do it, we talk about doing it and we can't reason about it. We can't, and so that, like, this is descriptive part. And then that's the real work, honestly, is just saying like, what is it? Like, to me, the big question from the beginning was like, what is a startup really? Why is it so different from a big company? Why does, why did none of the best practices that I learned in my career work? It's like, it wasn't, it was like a survival mechanism, I want to know. And then, once you've identified what it is and laid out the original principles of like, what you're trying to do, the prescriptive parts are just a matter of deductive logic. It's like, well, okay, given that we've made this hypothesis, like, what is that? What are the implications of that?

• 12:15Speaker 00

  And of course, the prescriptive parts are important because that's how you learn whether your hypothesis is correct. So that's the other thing I think people don't appreciate. People, people will call me a first principles thinker, which I, you know, I love that. I always think it's a big compliment, but I feel like it conjures up for people this idea that I like sit in a cave for years and years and like conjure up the magic idea. It's like, no, I wish people had all the outtakes of all the concepts I've tried. Like, at least startup was not my first try, you know, the conceptual vocabulary. It was not the first time I got it right. It came through a lot of trial and error, a lot of trying to figure out what works and doesn't work. First, in my own career, my own work, then trying to give advice to other people and trying to translate what worked for me to see what would work for them. And then to answer the questions that I thought were the natural ones. Under what circumstances does it work? And what are, when would it not be appropriate?

• 13:01Speaker 00

  What predictions does a theory make that we could then go see if are true or not true? And then the kind of the bigger picture thing is like, what are we really doing here? Like, what does success even look like? And so like, that, I think is the thing we all really grapple with is, you know, it's very easy to come up with a theory or a method or a process that produces the maximum of something. But then it's like, well, is that is that thing good? You know, is that actually helping us accomplish some kind of goal? And so that, you know, I think that first principles thinking is very helpful for for that, too. But yeah, I don't know. I guess I but to really answer your question, the truth, true answer is I don't know. I was just I've just always felt like I was wired that way. I have a love of ideas and want to know why things work.

• 13:39Lenny Rachitsky?

  So to me, a couple of takeaways from what you just shared. One is just you're wired to think in a specific way of thinking very logically, scientifically. I have a similar feeling where someone tells me a story like the way I started writing partly is people kept asking me questions about how Airbnb did stuff because they're building their marketplace. I'm like, here's what they did, but who knows if that was the way to have done it?

• 14:00Speaker 00

  Yeah, yeah, exactly. Did they succeed because of that or in spite of it all?

• 14:04Lenny Rachitsky?

  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?

• 14:19Speaker 00

  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 I really feel the lack of it. I miss it. 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 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.

• 15:03Speaker 00

  And I really thought, OK, 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 are doing it the old way didn't really like it or want like it was very few defenders of the old way. Like very people came out and said, actually, no, stage gate is actually still the correct product idea. You've, you know, you've got it wrong. It just, it never, it never happened.

• 15:41Speaker 00

  And in fact, in the, like the, the fancy startup people went from dismissing it as like totally pointless to complaining that it was overhyped and over before ever passing through the intervening stage of finding out what it was. That was really interesting. I'll never forget like TechCrunch like had an article, this is years and years ago about how like lean startup is overhyped. And I was like, you haven't even talked like that's the first entry point to talking about it. I was like, would you, could you at least learn to use the word pivot correctly and then then criticize it for being overhyped? Is that all possible? So it went from like insurgent revival to just the default thing that people did.

• 16:24Speaker 00

  Even the people that disagree have to carry the meme in order to criticize it. So it's, it's, it was fascinating to find myself on the other side of this thing. And, and you know, when I would meet young founders coming into the industry for the first time and they're like, seems obvious. And I'm like, what? It was only five years ago that people thought this was like so crazy. They're yelling at me now you think it's obvious. Like it's really interesting to have something go from controversial to obvious. And you know, and of course, like tons of people who were really opposed to it at the beginning came back, you know? Now they say that they knew it all along and they were my big, you know, just you see, you see how it changes people's minds. So it's hard to generate that religious energy and excitement around something that everyone views as obvious.

• 17:06Speaker 00

  And it, it really was hard for my, just like as an ego matter, I want the validation of the winning and the this. And I realized at a certain point that like the victory is not that this fancy company, you know, used it or whatever. Like the victory actually is in the stories that people tell me about how the book was helpful to them. And that's, that's really, that's the whole ballgame. We don't have to do, no one, no one had to lose in order for us to win. You know, there's not people with some used to, I don't do this, people don't do this as much anymore, but occasionally someone still who wants to like make a fight between lean startup and agile or agile and design thinking or this and that. And you know, I tried really hard. If you look at lean startup, it is full of citations and connections to Six Sigma and lean manufacturing and design thinking and customer development and dev ops and software craftsmanship.

• 17:50Speaker 00

  And every, everything I could find is I really wanted to show how these things work together. And then, and then we went through a phase where people wanted, wanted me to like make it into a religion for real. People used to write me and say so and so on the internet is writing about lean startup and they're wrong. You need to make them stop. It's like, what, what power do you think I have to make someone stop writing? And I was like, they can write whatever they want. And then the other thing that people said was, well, lean startup is about this particular set of practices. If someone finds a new practice, they're a heretic and need to be excommunicated. And it's like, guys, no, no, no, we, I wrote extensively in the book, did you read? It's a scientific theory, which means that, that whatever works is lean startup.

• 18:31Speaker 00

  So if someone comes up with something new and it works, we can't be threatened and upset about it. We have to adopt it. Well, when you have that attitude, that whatever works is the thing that like the truth is what matters and like people's quiet moments of helpfulness. Like that's, that's our metric of success. It kind of takes the like hype and drama and you know, stuff that drives like press coverage and what takes it all out of it. And I don't miss it at all. Like I think it's, I feel much happier doing that than I ever did when we, when I used to travel a lot and do a lot more uh, public stuff. And I think partly, again, part of the change is COVID and not, you know, conferences went away for a while. So there was like a quiet, quiet time.

• 19:13Speaker 00

  But I feel like it's actually been really amazing. Like that's what victory looks like. It's not about, they, they don't throw you a parade and say the thing, and even though people who are your critics just still grumble about it. But like at the end of the day, the new entrepreneurs who come in just take for granted that this is the conceptual vocabulary of entrepreneurship. And then they do with it what they will. And I've learned to really, you know, appreciate that as much as my ego, of course, likes to get into fights with people. It's like, no, that's actually, that's, that's better. And that's what winning looks like.

• 19:41Lenny Rachitsky?

  Yeah, it's so interesting that it's just you've done so well in communicating these ideas that it's just become part of the culture and people don't even think about, oh, Eric Ries came up with all these things. I also feel like people push back at you on the things they disagree with and then they never give you credit for like the things that work great. It's only like, oh, no, MVPs don't work anymore.

• 20:02Speaker 00

  Yeah, yeah. People, once a year at least, someone still writes to me and says that they, we should have used a different term for MVP, that the misconceptions around MVP are driven by the choice of the term. I always write them back and say like, please tell me the better term and popularize it and I'll use it. It's a great idea. Like, I'm more aware of the limitations than anybody else. And I'll tell you another thing that I think people don't appreciate. And everyone wants to be a thought leader these days. It's like a disease.

• 20:30Speaker 00

  When Clay Christensen died, you know, I knew him and admired him a great deal. And, you know, his endorsement of my work was like one of the most important, like for me, like from the old guard of management thinkers, for him to say that it was worthwhile was like really a big deal to me. And yet, there was this big debate, it's now a little bit older now, about whether he's responsible for all the bad things people have done in the name of disruption. And the first part of me is like, that's an outrageous slander on Clay. Like, that's so unfair. A bunch of tech bros like use disruption as a code word for all kinds of dumb stuff, has nothing to do with his theory, has nothing to do with his work. It's like, have they even read the work, man? So, so I wanted, like, I was one of his defenders, you know, and especially after he passed, I was feeling, I was very emotional about it. It's not fair.

• 21:15Speaker 00

  But then the more that I've sat with it, the more I thought, gosh, maybe we are a little bit responsible for the things we put into the world. And it's terrifying because of course you can't control what people do, you can't control, like, a lot of people are willfully ignorant. Whenever someone says something where I'm like, gosh, five seconds on Wikipedia and they could have found out the truth about the thing they're talking about. So, you know, we live in an era where ignorance is optional. That's cool. But also a little bit scary. So like, I think taking on that responsibility, this is true for anyone who makes a product, I think it's not actually unique to authors at all. When you make something, put it out into the world, on the one hand, you don't have any control about what happens next. And yet, I do think we bear a certain responsibility about, was it in fact net positive, but wasn't helpful to people. And so I try, it's like

• 21:58Speaker 00

  part of what motivates me to try to really get it right. And not just get it right for my own satisfaction, but get it right as evidenced by what happens when people use it. And that's why, I mean, that's why testing and experimentation is like such a big part of my life and my theory. To me, that's how we, we square the circle of our responsibility in a highly uncertain world, is you go find out what happened when people use the idea. And if it's not right, you know, even out, even after their misunderstandings, it's still not right, then you've got to make it better and find a way to communicate it more clearly. So it's kind of a, an eternal challenge, but I think an important one.

• 22:34Lenny Rachitsky?

  Along the same lines, is there a misconception of lean startup, or any of the other things you put out, that just kind of really frustrates you, that just is a recurring misconception that people just continue to get wrong?

• 22:45Speaker 00

  You know, I wrote an article, God, five or 10 years ago, I can't even remember how many years ago, it was like, top misconceptions about lean startup. And it was like, number one, lean means cheap. So you're doing a startup, it means you're not raising money. It's like, that's, that's not true. And then, you know, I can't remember what they are. It's like, and they're all still prevalent, you know, like, nothing's changed. I could write that same article today. It's like lean is opposed to having a vision. You know, if you have, if you were really visionary, you wouldn't do experimentation. Experimentation leads to local maxima. And, you know, it, whatever, it's just like, I read it in somebody's book, that, that, like, that's what lean is about. And I was like, man, did I forget to write it in the book? I was so gaslighted that I went, I actually went back and cracked

• 23:28Speaker 00

  open a copy of the lean startup. And I was like, on what page do I address this? It was like, on page nine, in the introduction. The first things in the book. I was like, okay, phew, I did say it. So like, that's pretty common. You know, that turn the crank thing about optimization, that's pretty common. And then like pivots, people perennially misunderstand what a pivot is. And like, again, whether that's a descriptive or a prescriptive thing, like, you know, it's, is, is really tricky. And so, you know, like, it's like, those are, I feel like at this point, people are just being willfully ignorant. It's like, it's okay to criticize lean startup. That's no problem. That doesn't bother me. I think you should. It's good to do this. It's healthy to do so, but like, to just trot out those same old things, you know, doesn't, like, what do you, like, how does that advance the state of the art? And how does that help entrepreneurs in any way?

• 24:11Speaker 00

  And it's like, and I'm not even really sure what they're trying to accomplish by doing that. That's the thing that I've grown confused about. It's like, what is the purpose of this discourse, other than just to kind of be reflexively contrarian? I don't know.

• 24:22Lenny Rachitsky?

  Get some likes on Twitter, slash X.

• 24:25Speaker 00

  Hmm, maybe you're right.

• 24:28Lenny Rachitsky?

  So, along those same lines, so you wrote the book 12 years ago. If you could go back and change something in the book, is there something that you would want to change?

• 24:38Speaker 00

  Oh, man, I would, I would change everything about it. It's why, actually, why I won't let myself do it. When I, when I was a consumer of books, I hated it when authors would come out with a second edition that would destroy what was beautiful about the first edition, including the mistakes. Because like, in their attempt to put disclaimers on everything and make everything more nuanced, you'd like, totally lose the thrust of the argument of the thing they were trying to do. And their own, you know, like, becoming famous, like, really messes with you psychologically. So like, you don't, you don't want to expose your readers to that. Like, go, go get therapy. Don't, don't make me, like, destroy the thing that made your book amazing. So, like, as an author, of course, I think so many elements of it could be, could be improved. The one that is the most glaring to me, well, I guess

• 25:21Speaker 00

  there's two. I'll mention two, just, just because they're relevant. One is, I'm a little embarrassed. There's a chapter in, kind of towards the end of the book, where I talk about the scaling of lean startups. So it's like, okay, you've, you've had success now. What are the principles for which, how you scale up a big enterprise now, you know, that has many lean startups within it and stuff like that. And I don't think I wrote anything wrong in that section, but I really cringe to read it now, because it's so blithe and just like, step one, do this, step two, do that. Like, you know, it makes it sound so easy, is so simple. And of course, like, I've subsequently written a whole book, longer than lean startup, just to illuminate those principles and explain how they work in real life. Because I actually had the privilege of getting to go do that with companies of,

• 26:03Speaker 00

  like, really extraordinary scale. So, I'm a little embarrassed now to be like, I made it sound so easy. I hate to, I hate to mislead any entrepreneurs into thinking any part of entrepreneurship was going to be easy, because that's, it's just setting people up for disappointment. And the other funny bit is, you know that meme on Reddit, the Star Wars meme where Anakin Skywalker says, I'm going to change the world? And Padma is like, for the better, right? And then pause. And she's like, for the better, right? I feel like that is like the meme of our time for the tech industry. Like, every company was about changing the world. And we forgot to ask for the better. I always just took it for granted that our goal was to make the world a better place. Like, that's how, those are the values I was raised with. That's what I thought we were doing.

• 26:46Speaker 00

  And I was railing about it for a while and I got really, I would get depressed. Do you remember Don't Be Evil? And there's been all these moments in the tech industry where it seemed like we were going to really do something extraordinary. And then just like the things that these companies become is so depressing. And I was like, well, I at least made it clear. And then I was like, did I? Again, I actually went back and reopened the book and I was like, did I tell anybody that they should change the world? And if I did, you know, I assume I specified for the better. And it's actually right there in black and white, like right in the introduction, Lean Startup, one of the lights, like a throwaway line, you know? This is the technique that will give the entrepreneurs of tomorrow the tools they need to change the world. Period. And I'm like, no, I should have said for the better. I didn't know I had to say it. I thought it was obvious. I thought we all agreed. So I kind of feel like that is also a major oversight.

• 27:30Speaker 00

  And, you know, I'm making light of it now, but like it's had catastrophic consequences. Not really, I think, I don't think Lean Startup has led people in that way. I think it has much more to do, you know, with other, with other social forces. But like, but I feel bad that I missed my chance to like, take a stand on something that has turned out to be quite important.

• 27:46Lenny Rachitsky?

  So you saw me tweet a call for people to ask questions.

• 27:51Speaker 00

  Oh, yes. Yes, I'm really excited.

• 27:52Lenny Rachitsky?

  So I have a few questions from the audience. The first is around the concept of MVPs, MVPs. So Kari Sarnan, who was actually on the podcast recently.

• 28:02Speaker 00

  Oh, great.

• 28:02Lenny Rachitsky?

  Founder of Linear, had a question around MVPs. And his question is essentially, if you still believe that MVPs essentially shipping very basic versions of it already is the way to go, given that user expectations have risen a lot in many markets, iOS apps, for example, where productivity software, things like that.

• 28:20Speaker 00

  Yeah, yeah. I love that question because, first of all, I get it a lot. And also, it's important for us to really understand, like, people, people think that MVP is about a specific tactic. So like, an MVP is like a bare bone, stripped down thing that will crash your computer. But it's not, that's not anything to do with MVP. MVP is simply for whatever the hypothesis is that we're trying to test, what is the most efficient way to get the validation we need about whether a hypothesis is true or not? And so, part of a successful test is to understand what are the demands of customers in our market? Now, the funny part is, people have a real fear of failure in product.

• 29:03Speaker 00

  I mean, we all have this deep, deep, deep fear. So, the first answer is like, you think user expectations are high in the iOS App Store, you should try like the purchasers of, you know, battery backup systems for data centers, or like people who build deep sea oil drilling machines, or you know, like jet engine. I've worked with companies where the standards are like, actually really high, and it makes iOS apps seem like, pretty, pretty basic. It's like, okay, well, nothing blows up if it's like your app. But like, even in these really high-end industries, in really high-stakes situations, like, the cost of offering someone to buy something that they don't like, is really not that high. They just say no. And like, a lot of MVP is just about containing the liability of making a mistake.

• 29:47Speaker 00

  So like, yes, one of the things I really encourage people to do is like, go find 10 customers, not 10 million, but like, find 10 customers, get them to use the product, and have them tell you what's awful. That's okay. And like, I used to be so upset when I used to launch a product, if customers would argue with me. Like, people used to be like, "You idiot, I can't believe you launched this product without features XYZ. They're so essential." And I would be like, "You're wrong, I did the right..." I'd get mad at them. But then I got a little smarter, and I'd be like, "XYZ, you say?" And I'd be like, taking notes, right? Like, "Oh, interesting." Now, sometimes XYZ would be the exact next three features on my roadmap. And again, I want to argue with them, as I know, I was, you know, like, I knew that. And I eventually used to be like, "Oh, thank you for that wise feedback." And then when we launched XYZ, they would feel a sense of ownership.

• 30:31Speaker 00

  "Wow, I'm the one who told them to do that. He would have even done it." But of course, the thing we're really afraid of as entrepreneurs, I think we're really honest, is not that we will say, "You idiot, you didn't launch without XYZ." People will say, "You idiot, you launched without ABC." And you're like, how's ABC? Never heard of that. That's how that that's the much more common response that I get. Like, let's say, so let's grant the premise of the question that like, expectations are high. And if we launch an app and it doesn't meet people's expectations, they won't like it. First of all, what really are the consequences of that? In an early part of startup, we had to do a lot to explain to people the difference between a product launch and a marketing launch. Like, you know, you can launch the product to customers without telling anybody that you did that.

• 31:14Speaker 00

  It's okay, like, no one's gonna find out, it's not gonna be big news. And of course, like, when once you're a big, successful company, that's totally different issue where like now you have to put your corporate brand on stuff. But like, if you're an actual startup, nobody cares. So like, it's okay to try it. But like, the other thing that I think people don't appreciate is that MVP is very flexible. So if you tell me, like, when I work with entrepreneurs, like, listen, I'm sorry, our customers, the bar is here and the thing just has to be that good. I'm like, excellent, and it can't have very many features, I guess, can it? Like, what do you mean? So you just told me the bar is way up there. So we better do like, just the one critical feature at that level of quality. And then if that works, we'll do the next one. And then, of course, like, oh, no, no, no, I need to do all the features at all the quality. It's like, well, then what are we testing?

• 31:59Speaker 00

  It's like, by the time you find out whether that's any good. And look, if you look at the pivot stories, I'm sure you found this too. Like, very often, 90% of the work in the first version is thrown away. No matter how high, how high quality it was. In fact, for as an engineer, that was part of my like, original disillusionment with the agile software movement. That ultimately, lean startups, that people promised me that if I followed these best practices, I would eliminate waste from my work. But if I build something that customers don't want, that's the ultimate waste, and nobody protected me from that. So I don't really care how high quality the initial MVP is, because quality is defined by the customer. And if we don't know who our customer is, we literally don't know what the word quality means. So that's where I think founders really run into trouble.

• 32:43Speaker 00

  And everyone's like, well, I'm Steve Jobs. I'm this, I have the magic taste. And it's like, well, first of all, do you have the years and decades of failures and experience that from which that taste derives? Okay, if you do that, I'm like, I'll give you the benefit of the doubt. And if you don't, then like, definitely don't rely on that. Definitely do some experimentation. Go get those cards. But even if you have the taste, like, if you're completely right, what can it hurt to double check? Like, my view is like, oh, let's have 10 customers look at it and have them throw up about how it's so horrible. That at least confirms that we're on the right track. Okay. And then we call it establishing a baseline when we talk about innovation accounting and the metric side of being startup. Let's go find out how bad the situation is right now so that we can then know that we improve from it.

• 33:24Speaker 00

  Because like, the thing I actually see from people who, in the name of quality, will wait a long time to ship a product, is they ship it with really high quality and nobody uses it. And now we don't know why. Is it because our idea of quality is wrong? Is it because the value prop is fundamentally like? I feel like building a high-quality, wrong value prop is nothing to be proud of. There's no craftsmanship in that. Or is it, you know, like, I once had a company that built a really beautiful product, amazing land. Everything was awesome, but there was a JavaScript error where when you clicked the download button, the signup button, whatever, it just, it didn't click. So they launched this thing, it had 0% signups. And they're like, it's a catastrophe. We made the wrong value prop. So how do you know? From one experiment, you can never know.

• 34:08Speaker 00

  You have to be willing to do a series of experiments. And again, the logic of MVP is just, products take time to build. Like, the best products in the world, everything takes time. I don't need to tell me it takes a month, a year. You're like, AI will mean I could build any product I want and, you know, instantly. But like, it's not instantly, it's gonna take time. So during that time that the product is under construction, there's going to be some moment in time when you have half the product. Just logically speaking, you first have 10%. Like, so when you have half the product, let's have customers use half the product. Well, it doesn't cost you anything extra. You had to do it, you build a natural experiment anyway. Have them use it and tell you what's only half as good. Or it's unusable because it's so bad. Excellent, good.

• 34:49Speaker 00

  But the startup literature is littered with examples of people where less is more. Where the crappy, small thing they did turned out to be more valuable than the competitor. And I'll just give you one example, one of my favorites. I come from 3D graphics and avatars and metaverse stuff, which of course now is bad. It's one of these things that goes through these hype cycles and I'm like, are we actually in the hype cycle or are we in the drop? I think it's trending up right now. Are we trending up again? Okay, it's really hard for me to keep track. Even while I was working on it, every few years, it was either the future or nobody wanted to do it. I bet sales of Snow Crash, you probably have that cyclical thing to them. And it's hot, people read it, otherwise not. Anyway, we built a version, our first version of IMVU, we built with 3D avatars like in a cafe or in a

• 35:33Speaker 00

  scene and the avatars were all anchored in place because we didn't have the technology called inverse kinematics. We didn't have the technology that would allow an avatar to like stand up and walk. You know, when you do this 3D grab, it has to work perfectly. The feet have to like actually glide along the surface and it just, if it doesn't look right, you wind up in the uncanny valley and people find it horrible. So we're like, can't have that. So we just had the avatar to sit there. And people felt the product was claustrophobic. They would always be like, the Sims, let me move around. Why am I stuck here in the chair? I feel that it was a very common thing in customer feedback. But we were like, we can't afford to do the expensive thing. We couldn't do it, couldn't do it. And one day like as a hack, it's like a little demo, I was like, well, I'll just change it so that when you click in the scene to a different spot, we'll just stop rendering the avatar in

• 36:16Speaker 00

  the first place and we'll put it in the second place. So it was like really, we didn't even do the proper cut. The camera would zoom over there. It was really ugly. I was really embarrassed about it. I was like, let me just like play around with it and see what happens. And we shifted to cut and I was like, this is not, this is below the quality bar. This is like, I just like, I felt bad as the engineer. Everyone involved felt really bad, but we had like committed ourselves that we're gonna try to experiment with stuff. We're gonna see what happens. This is before lean start of existence. We didn't even have a concept of MVP. We're gonna try it and just see what happens. And we shifted and nothing happened. No one cared. I was like, phew. But then we used to do these daily tracking surveys. We just sampled people and asked them what they think of the product. And in the tracking surveys, people started to say that IMVU was the most advanced avatar product they'd ever used.

• 37:01Speaker 00

  We were like, people would be like, we used to be compared to the Sims unfavorably. Now people are like more advanced than the Sims. And I was like, what does this mean? How did we get more of like, did we improve our 3D graphics or something like what? And we started to do, no one could understand why they were saying that. We used to do customer interviews and finally a customer was like, oh, oh, it's so great, man. In IMVU, when you wanna go somewhere, you teleport. The Sims, you gotta wait for the guy to get up and walk around. It's so annoying. And we were just like, oh my God. How embarrassing. And for you, I mean, we didn't do inverse kinematics for a really long time.

• 37:33Lenny Rachitsky?

  Wow. I love that story.

• 37:35Speaker 00

  Yeah.

• 37:36Lenny Rachitsky?

  Something that I'm learning as you talk about MVP is that the idea of minimum is very fluid and very context specific.

• 37:43Speaker 00

  Very much.

• 37:44Lenny Rachitsky?

  Essentially, the message isn't build something low quality and simple. It's figure out what is that minimum bar for your market and product? And just like the message is just build as little as possible.

• 37:56Speaker 00

  Yeah, as little as necessary.

• 37:57Lenny Rachitsky?

  For you.

• 37:58Speaker 00

  So like, what's so, it's fascinating. I mean, I'm joking about having worked on jet engines and robotics and cancer therapies and all kinds. I've worked on stuff, and you know, and LTSE, I mean, it took us 10 years to build the MVP for LTSE. So like, it doesn't even, doesn't necessarily mean cheap, low quality. It's just whatever your hypothesis is, whatever you actually believe is going to work. Let's put that thing to the test. That's all I really want. When I work with companies like, you know, first time founders especially are usually very stubborn about this and they don't want to do it. It's like, look, you tell me what you believe. I don't have to be right. And I want to just double check that you're right, what by however we do it. And then, you know, once people actually start to, to turn that idea over in their mind, they often will be like, well, you know,

• 38:40Speaker 00

  like, you know, a classic one is like, we can't, we can't sell the thing till we build the physical equipment. It's like, but do people buy, is your product bought in a showroom where people see the physical equipment? No, they buy it from a brochure. So it's like, okay, well, how about we send them a brochure and ask them to preorder it? And then, then it's like, but what a whole, I can't do that. My, I can't have a crappy brochure. It's like, who said a crappy brochure? Right? Like, we can build a really high quality brochure in a lot, like in a tiny fraction of the time it takes to build the actual machine. And then it's like, well, then what is, what are you talking about? It has really good fonts and it has pretty pictures? Maybe. What's your theory, right? Like, you tell me, what do you believe about? And they're like, well, actually what matters is the quality of the specifications of the equipment in the brochure.

• 39:24Speaker 00

  It's like, now we've got the leap of faith assumption. Let's go find out. And then like, but hold up, we don't know what those specifications are going to be yet. It's like, oh, but I saw this 500 page plan over here.

• 39:36Speaker 00

  What do you want it to be? It's like, well, it'd be really great if customers would accept this set of performance characteristics. Like, well, let's go promise that. Because maybe they'll be like, that's great. And I'll just, I'll give you one example. I was mentioning data centers, this team that sold equipment and data centers. They had a serious, a high-end team of PhDs working on research to make the thing way more efficient. And they're going to win like a Nobel Prize in material sciences in order to make this product a reality. And they put, and I convinced them, instead of paying three years and $18 million, so you don't make the thing, let's go take a brochure, take it to some customers. And I'll never forget, they took the thing into the brochure, they took it into customers, and customers laughed them out of the room.

• 40:19Speaker 00

  And it was like, nothing to do with anything they cared about. It was nothing to do with efficiency, where they're like, this is, we would never buy this. And they're like, but you haven't even looked at page two to see how efficient it is. They're like, we don't pay for efficiency, we build data centers. How much they cost to operate is somebody else's problem. You're like, oh my God. Right? Like, that's the thing people don't appreciate is like, these insights are so obvious in retrospect, that everyone's convinced that they won't, it won't happen to them. When I teach students in lean startup, they're like, this is so dumb. They do, they do one case after another in business school, and they're like, dummy, dummy, dummy, dummy, dummy. Right? Like, they're like, I would never make that mistake. And I'm always like, look, you don't have to argue with me, just call me back when you get a job, and you make, when you make one of these mistakes, like, remember, we had these conversations and go read the book then.

• 41:04Speaker 00

  And I guess by, by random chance, there are some people in the world that just never made a mistake. Just the dice, you know, you roll enough dice, somebody had the experience, the dice came up, you know, double sixes every time, okay? So there are those people, and they, they give a lot of the advice in the world. But I don't know that necessarily those of us who have the double six luck should necessarily be following it.

• 41:24Lenny Rachitsky?

  This will be a really good segue to talk about pivots, because again, a big part of your message is a lot of the work you're doing is just going to go to waste anyway. Why spend all this time building it? But just to kind of put a final point on this idea of MVP, because a lot of questions came in around just like, what is an MVP? Ben Silberman, the co-founder of Pinterest, has this quote, he didn't ask a question in a thread, but he has this quote.

• 41:46Speaker 00

  I make quotes, eh?

• 41:47Lenny Rachitsky?

  Yeah. And his quote is, "The hard part of it about MVP is that you don't know what minimum is, you don't know what viable is." And so just to give founders who are trying to figure out what that line is, some very succinct advice, how would you describe just helping them understand, here's how far you should go with your MVP?

• 42:03Speaker 00

  You didn't. He didn't say you also don't know what product is.

• 42:08Speaker 00

  That's true. I can't tell you how many times a service has turned out to be a product or vice versa. Like people embody their insight about customers in the wrong way all the time. That's super common. That's funny. No, but that, like, all, all the criticisms of MVP are really just people expressing their frustration with how uncertain startups are. Yeah, it really sucks. This is not a good way to make a living if you want to retain your mental sanity. If you can't, if cognitive dissonance, if you find that painful, like, this is not the right job for you because it's really hard to hold in your head. I have this ambitious vision. I know what's gonna work. I'm, you gotta do confidence, get everyone together. Like, there's no substitute in this world for a human being stepping forward and just like, I am gonna make this thing happen. And if you do that, you're putting yourself way out on a limb. It's really difficult.

• 42:53Speaker 00

  It's really hard to admit that, and I also do not know how to make it happen. That's the truth. Whether you admit it or not, that's the truth. So we have to just, that's why I say, let's just double check. So, so simple succinct advice. First, the first tip is, write out the list of features that are necessary in your MVP. Cut it in half and cut it in half again and build that. Honestly, if you just do that, that's really not that bad. The nice thing about MVP is it's one of those U-shaped curves where like, if you get even in the vicinity of optimal, you're gonna be fine. And most people's natural idea of what is necessary is so laughably wrong. People are naturally off by like usually like one or two orders of magnitude. Right? It's very common for me to meet a team that is trying to do a hundred times more work than is necessary to test their assumptions.

• 43:37Speaker 00

  So first thing is just try being uncomfortably small in the thing that you actually make. And if you're having trouble with that, in the, in the startup way, in the SQL building startup, I really go through, because it's really more for a corporate, large company audience. Like, I really go through like, okay, if you want to have a process for determining what to do here, like, you should first brainstorm your leap of faith assumptions and here, and categorize them this way and select them like this. Okay, now, for each assumption, brainstorm the metrics you might use. You know, select the metric you want. What is your learning metric? And then from there, brainstorm MVP, score them according to this formula, and then like, use that to, to help people. Anyway, if people can, can follow that they want. The, the thing I learned is that if people are having trouble coming with MVP,

• 44:22Speaker 00

  the problem is usually upstream. In the chain of deductive reasoning from the vision down to the MVP. It's like usually people are just not super clear on what do I want to learn? And it's the most common reason is because people don't want to admit that they don't know. So to say as an entrepreneur to say that we want to test to find out what customers want is really hard. I'll give you an example from my own experience. You know, LTSC, I said it's taken us like 10 years to get the thing approved and going. It's a really very difficult product to build. One of the early iterations of it, you know, that didn't work. We were building on partner infrastructure, which was a very different product back then. I don't want to get into all the legal nitty gritty because it's kind of dry. But anyway, it took us six whole months.

• 45:02Speaker 00

  Took us, you know, time to raise the money, build the team, do all stuff, you know, get all the lobbyists and lawyers, everything in place. And then we had to go part do this partnership agreement. The partnership agreement itself took like six months to get in place. And then we had to go to the SEC and get approval. And so it was like a very complicated multi-stage process. Probably took, I think I just described two years of my life, you know, end to end there. And the whole time I was talking to the team about our goal with this whole thing is to learn what is actually necessary to get customers to list on our stock exchange. Our goal is learning. People like, but I thought our goal was to get this contract done. I thought our goal was to, it's like, well, yes, but the reason we're doing those things is so that we can learn whether this is actually going to work or not. And so I remember, and I'll never forget during the contract negotiations, people were like, you know, we got to take an extra week to deal with this point.

• 45:47Speaker 00

  And I'm like, we don't have an extra week. It's like, but this thing's taken two years. What's a one week? I'm like, no, every day is so, we have to get the learning as soon as possible. And I was like constantly haranguing everybody involved. We got to go faster, faster, faster. You've got to give on this point. People were walking all over us. We were getting just destroyed in the negotiation. I was like the weakest, lamest person around, just like, we got to raise the money. I was anything to get speed. Anyway, long story short, we get all the way to the end. We get the, you get the thing approved by the SEC staff. And then like we get ambushed and like, long story short, the SEC withdraws their approval and the whole thing is dead. The partner, you know, we have to break up the partnership agreement. Everything goes to hell and I thought the company was going to die. And it was a totally miserable time. One of the worst things that ever happened to me in my life.

• 46:30Speaker 00

  I was totally upset. And in retrospect, I can laugh about it because it turns out, of course, it was the worst thing that ever happened to me, but it's actually the best thing that ever happened to me, as a lot of startup things are, because from that, we were able to pivot into the thing that ultimately got us approved. Well, the reason I tell this story is every bit of work we did that went into that partnership agreement for almost two years turned out to be a waste of time. Because in the end, partnership agreement fell apart. So like, if we had won a few extra, like, our margins would be higher if we'd extracted more fees from the partner, or like, we would have had less liability. People were always like, well, we'll have the liability for this, and liability for that. And I think about all the things, it's like, this thing was hundreds and hundreds of pages long, this document. It didn't matter. In the end, the partnership was never consummated, no customer, nothing ever happened.

• 47:14Speaker 00

  And the interesting thing, the reason for the story, is that the people who went through that experience with me

• 47:20Speaker 00

  were so much faster on the next thing that we did. It was really amazing to see, because they were like, now I understand what you mean. Most people live very coddled lives and have not actually really dealt with this kind of failure in their business career. Obviously, like, in their personal lives, they'll have all kinds of trauma, and you know, like, they'll have worked at a crappy company and have a horrible experience, but they haven't experienced this specific thing where like, you are the hero of the hero's journey, you are the protagonist of the story, and the thing is not just a setback, but you just die, actually fails. It's so psychologically damaging that even people that have had that experience, a psychological defense mechanism is to tell themselves that that didn't happen. And like, you know it better than anybody, how many startup founders are like adamant that they didn't ever fail, they didn't pivot, everything's exactly the way they saw it, you know, at the beginning.

• 48:05Speaker 00

  And it's like, I've been around enough startups to know how often that is just not true, but like,

• 48:11Speaker 00

  we need to tell ourselves that story. But anyway, if you, the number one lesson of the scientific method is if you can't fail, you can't learn. And so if you set yourself up in a position where psychologically you can't admit that something didn't work, you can't learn, and that's like, that really is the essence of MVP. It's just like, whatever the catastrophic thing that's going to destroy your company is going to be, you just want to find out as soon as possible so that there's still time to do something about it. We don't just die and move on.

• 48:37Lenny Rachitsky?

  I'm actually seeing this a lot right now. I'm an investor in a bunch of startups and so many of them are failing right now. And they've built such beautiful products, such amazing products that they spent like years just like crafting, making so great. And then it's all, it's all for naught. And there's actually been a theme on the podcast recently around the importance of craft and design. And I'm curious just to get your thoughts on just when it makes sense to invest deeply into the craft and experience of a product versus, you know, the minimal viable product approach. Do you start very simple and then invest?

• 49:15Speaker 00

  Yeah, well, that's, I think that's a great question. People use the word craft to refer to so many different things. Like, I personally find a tremendous beauty in simplicity. So like, I would much rather people do one thing extraordinarily well than like 20 things half-assed, you know, personally. And like, how many products do you use? We're like, God, could you like, there's like 92 buttons on here, of which I only ever press one. Could you have made that button like, like have a really nice feel? You know, I could, I would have sacrificed all this other stuff. And I mean, I've actually worked on microwaves and refrigerators and stuff with actual physical buttons. And like, even your crappy kitchen microwave that you paid $16 for at Walmart or whatever, if you've never seen one of those things manufactured, it's actually incredible. The amount of craft that goes

• 49:58Speaker 00

  in behind the scenes to wire up every one of those buttons that are never pressed by a human being, it's actually really painful if you start to think about, wow, that's a lot of human energy being wasted. So the, the elements of craft, I think, are critically important. First of all, part of craft is perfection. Perfection is an attribute of quality, and we have to go back to the first thing. In order to know what perfection is, you have to know what the customer believes. You have to know, you have to, it has to be perfect for some purpose, for some person. Some people will just say, well, I'm just going to build for myself. And that way I solve the problem. That's totally fine. That's true. If that's you, go nuts. You might only have a market of one, but you'll be happy. So be it. And I think there are, and there are startups like that where it's like, well, I don't care how big my market is. I'll just build for all the people like me. And well, I have a huge tribe, then I'll be hugely successful. If not, I'll just be an artist doing my thing. I have

• 50:42Speaker 00

  total respect for that. That's like, the ends and the methods are totally, totally aligned. Where people get into trouble, I think, is when they want to use craft as an excuse to not get any feedback. So what I tell people is like, first of all, there's an element of craft that is just like, whatever you do, how are you going to go about it? You know, like whether you're building an MVP or a fully featured, whatever thing you're doing, like, you know, I'm a software engineer by training. Like, my code is a certain way. You know, I have a certain craft in the way that I write software because I think that's the best way and that produces the best outcomes. I will, I would never compromise that. And compromising that in the name of going fast is stupid, right? Like, write crappy code, you spend more time firefighting than you do writing code in the future. So a certain amount of craft is just about keeping your options open.

• 51:25Speaker 00

  And actually, it's very much like favorable to speed, using like the right, the right primitives, having the right abstraction layers, like using the right tools in the right way, you having high quality people in your team, like all those things that you go faster, not slower. And a big part of lean startup is about helping teams get into that optimal configuration by acting as a speed regulator, because there's such a thing as optimal speed, which we can get into if people are interested. But another part of craft is just an excuse for just avoiding feedback, like making things pretty, that, you know, pretty in the way that I want them to be because I want them to be that way. And even there, when I meet people like that, people are just like, sorry, my artistic ethos is this, and it has to be this way. And I'm like, excellent. Then that's not one of your leap of faith assumptions that you're willing to test. So like, so be it.

• 52:10Speaker 00

  Don't, don't pretend to test it. Just be like, I'm not, like, we're just gonna do it this way because that's how we do things and it's fine. And I think like, that's a big, like, when company has like a core value, like, I'd rather go out of business than violate my core value. I also respect that, too. But like, then, that to me, that means like, having a respect for craft, for design, for perfection, that increases the need for experimentation and testing for all the other stuff. Because we've already invested a huge amount of our energy and force into this thing that we really care about, and then the other stuff, you know, like, and do we also have to do like this fancy press campaign? Do we also have to, you know, go put the founder's face on billboards and put them up around town? Like, is that, are those all part of your craft? Like, I just feel like people use that as a, as a catch-all excuse to do all kinds of stuff.

• 52:54Speaker 00

  But I think, you know, the idea that, like, craft is a signal to your customers about the things that you actually care about and that you're gonna take care of, it's like, it's part of making a promise to customer, like, that they're gonna believe. Like, if that's your thesis, that doing an MVP that lacks craft doesn't test the thesis. So I think people want to set up a dichotomy here that doesn't really exist. I'm totally in favor of that when people have that authentic desire. But I also meet a lot of people that are just faking it. They don't have taste, they don't have a design ethos, they don't have. So like, if you don't have that stuff, where are you going to get it from? Well, good news, experimentation will get you there if you let it. Because you will eventually learn the habits of mind, the patterns of the things that work that make sense.

• 53:36Lenny Rachitsky?

  I really like that advice of, as a founder, build the company you want. Like, if you want to build, like, why create a business and a company you're not excited to be working on? And if you end up failing, like, it's on you. That was a big mistake, it turned out. But at least you tried, and you're not building a company you don't want to work at. And then, as a product leader, I don't know if you have as much control to build a product the way you want, but try, basically.

• 53:59Speaker 00

  I always tell people to just get fired for doing it the way you think is right. Like, there's nothing that was a faster career accelerator than being known in the industry as the person who stands for that principle so much that you got fired over it. Like, the people that that magnetizes to you are gonna like, you're way happier, you're gonna be so much happier being a place that appreciates that. That was a big, that was a big career accelerator for me. Not that I actually got fired, but I was willing to be fired for my beliefs. And I remember sitting there, I was going to a board meeting where I was sure I was gonna be fired. And I was like, well, I just don't believe in building products the conventional way. This is again, before lean startups. So I was like, I didn't even have a language for it, but like, I had a strong conviction that the way I was doing it was the right way.

• 54:40Speaker 00

  And I was like, well, I'll just, I'll be known as the guy who got fired for that. And eventually, someone will want to work with me because that's what they want. If nobody wants that, then I'll go find a job in a different industry. Like, I don't want to be in an industry that doesn't, like, that's how I want it to be. And I think that people, people don't appreciate the extent to which, like, people act like, having a startup fail is the worst thing that can happen to you. And like, man, that's not even in the top 10. Like, it's bad, I mean, I've done it, it's awful, okay? It's really bad, but far worse is to be in a company that won't die, a zombie undead company that you hate, but you can't leave. Oof, have I met people like that? And like, we're having a mental health crisis among founders that's like, not talked about enough. You know, people started to talk about like, the downside mental health risk.

• 55:24Speaker 00

  Obviously, the stress of being a founder is hard, but like, look what's happening to the people that are so-called successes. Like...

• 55:32Speaker 00

  When you build a company and you sell it out and it becomes something that you find abhorrent, like, yeah, maybe you get rich, but it's not, it's not good. And I mean, I just, the other day, a friend was telling me about a friend of his who sold this company, exited for like, I'd say $300 million or something, made a lot of money and committed suicide. Like, not that long later, people follow the Tony Hsieh story. I knew Tony, it was a horrible tragedy. Like, what's going on? So I just feel like there are worse things than having your startup fail. And so, building a company you hate that that becomes a malign force in the world, you know, that you have to go pretend you weren't involved with, or like you feel complicit in what, that's way, way worse. And I wish more founders would take that more seriously early on.

• 56:15Lenny Rachitsky?

  That is such 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 don't want to shut it down. They don't want to give money back. What advice do you give those sorts of founders that you feel like are just stuck in a zombie company like that?

• 56:33Speaker 00

  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. You know what else is really dark? Like, when you're dead. So like, what's the, everything comes back to, I used to tell people, the most uncomfortable laugh line in my early talks about lean startups was when I talked about, 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.

• 57:17Speaker 00

  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 real, 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, or you're just going to be? And people would be like, huh, huh, huh, huh.

• 57:49Speaker 00

  And that's like, that is a really scary situation. It's like, we all have these moments of doubt. And sometimes the right answer is to overcome the doubt and go for it. And it's actually part of the genius of the startup system. You know, the people, which is people criticize venture financing and all the problems with the Silicon Valley and of course, do it to ourselves. So there's plenty of things to criticize. Like, one of the genius things about it is like, at the end of the day, you do run out of money. Nothing, you're forced to declare bankruptcy. That's actually a really positive feature of the system. So a lot of founders just can't do it. But I will say, like, the thing I try to ask people to do is like, take them, really take some time to introspect and just ask yourself, do you actually want to be here? If you, if you could magically wave a magic wand and you were to start a new company

• 58:33Speaker 00

  right now, would it be this one? If it's not, just, there's no indentured servitude anymore. It's okay. You know, it's okay to move on. And then, then the question is like, then there's like, everything moves into a tactical conversation about shut it down, give the money back, do a really hard pivot into the new thing. You know, it depends a lot on the specific factors of the situation, but it's, I think we do find founders a disservice if we act like this is easy. Or is it, I mean, it's, it's just, it's gut wrenching and it's really difficult. And like, not to be too spiritual about this, but like, it, it really goes right to the issue of ego identification. For so many people, they are their company. And so for the company to die, they also must die. Like, it feels like you're going to die. And I think that is like, that's part of the mental health problem.

• 59:19Speaker 00

  So like, people, you know, as they get older, as they mature, as they have a spiritual practice, I hope they can learn to disidentify with the company and not feel like it's so personal, so that it is possible for the company to die without them dying. And then they can take what they learned into the next company or the, or into the next pivot or the next iteration of what it should be. Or sometimes the right thing to do is just to step aside and let a different CEO take over. Or, you know, there's just so many ways you can go about it. But as with any pivot situation, the hardest part is always just to admit the facts as they are. And then you do it yourself first, just like, what is the situation? Is it working? Can't tell you how often people just can't accept it's not working. And you get investor updates. How many investor updates have you ever received where it's like, we're crushing it? Everything's going great.

• 1:00:04Speaker 00

  And the very next investor update is we're out of business giving money back. It's like, well, you had no, your last investor update is that you were crushing it. There was absolutely no indication there was any problem like, oh, of course there was an indication, but we're just lying about it. So don't be that person.

• 1:00:16Lenny Rachitsky?

  That's actually an amazing segue to where I wanted to move to, which is around pivoting. So I've done a bunch of research on consumer startups, B2B startups. And the numbers I see, and I'm curious if you see similar numbers, is around a fifth of consumer startups ended up pivoting to a completely different product. And almost half, like 40% of B2B companies ended up pivoting to a completely different product. Does that sound right from your experience?

• 1:00:41Speaker 00

  Yeah, that does sound right. So it's interesting. I used to do this exercise for founders where I would tell them the story of IMPU two different ways. The first way is in one in which, you know, we got everything completely wrong. And it just sounds like we were the complete idiots and we had to pivot so many times. And then I would tell the same story again, but where we got everything right and we were geniuses and everything that happened vindicated. And then people wouldn't believe me. I was like, both stories are true. Like choosing which elements of what actually happened to emphasize and where to put your weight, you can tell the story. So like, yes, I would say there's like the percentage of people that know that they pivoted. And then there's another percentage of people that didn't admit it, but they actually did. And it's really hard to assess from the outside.

• 1:01:24Speaker 00

  I mean, just, I know this from having worked with enough startups where I know the outside story and I know the inside story. And they're just really different. I mean, Paul Graham used to boast about that as one of the features of Y Combinator, that the founders they would get to come to the dinners would tell you the true story of what really happened. And that was critical information you couldn't get anywhere else except at Y Combinator. And I was like, wait a minute, is he saying that everyone just lies on stage when they tell the story publicly? I don't know if that's something to boast about, like you're calling all your guests liars. And then like, I've, I've hosted a lot of those events. I'm like, oh yeah, people, people lie on stage. I see like, so I think part of the problem is just like trying to find out the truth of what happened is really challenging. But there's another element that I think is interesting, which is, so you know, pivot is defined as a change in strategy without a change in vision.

• 1:02:09Speaker 00

  Right? So we have this idea that the founder has the vision, then they try to figure out how to make the vision happen and they find a different way. But like the vision stays constant, but the truth is a little bit more complicated than that because the founder's vision also evolves. Founders discover what the vision actually is through the process of building the company. So again, not to be spiritual about it, but I actually believe that building a startup is, is in large part a, a process of self-discovery. You actually are discovering what is true about the thing that you yourself believe. And part of that's because when we fantasize about the vision, that we never have to make any trade-offs. You know, the product is infinitely popular, infinitely cheap, you know, everything's just like, there's no, no trade-offs to be made. Well, real life forces us to make trade-offs and then you find that like, oh, I have to choose.

• 1:02:55Speaker 00

  Would I rather have a high-end product only for really rich people? Or would I rather have a product for this industry or this sector or this group or that group? Like it can be, it can be painful, but also founders learn to talk about the things they care about over time. So, I mean, go on YouTube. If you've never watched the interview with Zuck on his couch at Stanford, talking about Facebook. It's, it's remarkable that you just, some college, some college news person was like, just happened to catch an interview with this guy. Like at a critical moment in his life, when he just didn't know what he was talking about yet. And like now he's really ambitious and now Facebook's vision is this really ambitious thing. And people are very at pains to say that he always had that vision from the beginning and he talks about it all the time.

• 1:03:40Speaker 00

  Like that may be true, but you, but the documentary evidence exists and I'll just give you one of my own stories about that. In one of my companies, we moved offices relatively early on because we started on a really, really crappy, small office, then we moved to a larger space. And I remember sitting in that office when there was just five of us. And we sat down and we had a meeting where we specked out what we would now call the MVP, as well as the longer-term vision for the company. And we had this whiteboard. We, all of us debated what features should be in and out, or what should be on the whiteboard. And I can remember writing down, I have a visceral, I have a physical memory of writing down the things that were going to be necessary for the company to succeed and being right.

• 1:04:22Speaker 00

  And my co-founders arguing with me about not having their perspective, their being wrong. And I'm like, good thing. And I'm like, I can, I can, I can, one of the things I remember telling this story. Anyway, we moved offices shortly after that time, and that whiteboard was lost. And then, years later, we moved offices again, and someone was cleaning out an old storage closet, and that whiteboard was, just happened to have gotten shoved in the closet. Someone pulls it out, like, what's this? And I looked at it, I'm like, oh, that's the whiteboard we used to hang in our main conference room. And it still had the notes from that meeting are sitting there on the whiteboard. I was like, this is so cool, historical moment, I'm taking a picture. And then I'm like, wait a minute, this is weird.

• 1:05:05Speaker 00

  It's in my hand, I mean, it's recognizably in my own handwriting, but many of the things that I'm writing there are horrible ideas. I'm like, that's not what I thought back then. I was on the other side, like, that's my co-founder's bad idea, that's not my idea. And I had this realization that like, it's not just that I learned something through the course of building this company about strategy. My own understanding of the vision of what we were doing was different. But I don't, like, the thing that's so critical to understand is, I, even to this day, have no psychological memory of having changed my mind about it. I still have the original memory of writing those things on the whiteboard. And I thought, I really thought someone was playing a trick on me at first.

• 1:05:47Speaker 00

  Because what I could witness with my own eyes on the whiteboard contradicts my actual memory of the thing. And I was like, which of us is right? And of course, I had to admit. The physical evidence, you gotta win out. But I think it's important also to understand how much that is true. And that's like, again, go back to like, why science is so important? Like, why do we write our, like, all the elementary things about science? We write our hypotheses down, we subject our things to, like, we do that because human psychology is so buggy. And, and people who are fighting with their, like, generative AI, you know, chatbots and stuff are starting to see, like, those are nothing but a reflection of human theory of minds. Like, trying to see it in an alien creature that, like, wow, our intelligence has all these weird behaviors and gaps and things. And of course, we want our robots to be perfect.

• 1:06:32Speaker 00

  But it's like, well, first look in the mirror and realize that you yourself carry all those cognitive biases. And you gotta put in place a structure to get around them, or they're gonna destroy you.

• 1:06:41Lenny Rachitsky?

  That is an incredible story. It makes me think about just not, like, I think it's exactly what you said. Not only are the stories you hear often intentionally not accurate, they're true, and they're kind of a myth that they've been, that have been created. But also, you forget exactly what happened, and you tell a story that didn't really happen. That's wild. Imagine a place where you can find all your potential customers and get your message in front of them in a cost-efficient way. If you're a B2B business, that place exists, and it's called LinkedIn. LinkedIn Ads allows you to build the right relationships, drive results, and reach your customers in a respectful environment. Two of my portfolio companies, Webflow and Census, are LinkedIn success stories.

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• 1:08:21Lenny Rachitsky?

  So you talked about pivoting and I never knew this about the term pivot is that you keep the vision the same. And I actually have this list of companies, B2B companies in this case, that pivoted. And in their cases, it was very different. And let me go through them real quick. And I'm curious, what do you call it if they don't keep the vision consistent? So Segment started as a university classroom lecture tool. Loom, which just sold for a lot of money to Atlassian, started as a marketplace for companies to hire subject matter experts. Slack famously started as a game called Glitch. Box apparently started as a box to put photos and content in on Facebook. And Retool started as Venmo for the UK.

• 1:09:02Speaker 00

  Oh, that one I didn't know.

• 1:09:04Lenny Rachitsky?

  I heard, I, I found that out through Twitter where one of the YC partners replied and shared that story with me because I also didn't know. And I think that's a good example where no one ever tells you that fact.

• 1:09:14Speaker 00

  Right. It's kind of an important part of the story to know. Yeah, exactly.

• 1:09:17Lenny Rachitsky?

  Exactly. Yeah. I think it was a quick pivot. They think they got to YC and they're like, no, let's do something else.

• 1:09:21Speaker 00

  This is why it's so hard to evaluate from the outside because oftentimes there is a thread of connectivity that from the inside makes sense why we went from this thing to that thing. And it's often something unusual, like it'll be something like, well, while we were building the game, we had to do this thing first because our values were like, you can't build a game without this thing. And then this thing turns out to be more valuable than the game. And then you're like, oh, why are we building this game? This is the thing we actually really care about. So if people are like, well, I thought your vision was to build a game. I was like, well, maybe. But why did they build that thing first? Other people build games without building that thing. So like, that's why I say it's a process of

• 1:10:02Speaker 00

  self-discovery. Oftentimes, the vision is discovered more than chosen in these stories. And from the outside, it can seem really, really weird. And, and part of it is also that some, some people really need the failure of the first thing to appreciate what is great about the second thing.

• 1:10:21Lenny Rachitsky?

  I think Segment is a good example where they tried a bunch of stuff and then they posted this random thing on Hacker News and it just blew up.

• 1:10:26Speaker 00

  Yeah. Sometimes it blows up so much, you're like, wow, that's amazing. But oftentimes, like the new thing will get like 100 signups. And if you'd started with that as your first thing, you would be like, eh, 100 signups. But if you've done 20 things in a row with zero signups, man, you're like, God, somebody likes this thing. Like, you know, sometimes it's your first trip, sometimes not. And again, not to go back to Facebook all the time, but it's such a famous story that people know it. You know, in the movie, there's that famous scene where they live in the house in Palo Alto and they run into Sean Parker and he, you know, does something like that. Apparently, that's, that's real. And they really were living in that house. They really were working on Facebook. But like, the thing that gets missed from the story is that Facebook's already started at that point. It's already being successful and they're

• 1:11:06Speaker 00

  on the break between semesters on the summer. And Dustin Moskovitz and Mark Zuckerberg and Adam D'Angelo and I forget who else are living in this house together. And I remember learning, someone told me this story about what they were actually working on at that time. Was it Facebook? They, like, Zuck and D'Angelo had already moved on from Facebook and decided it wasn't successful enough. And they were like, I forget, one of them was working on like a system where you could like, use gestural controls on your webcam to program computers because they wouldn't get carpal. Like, they were sitting on Facebook and it was like, the story, I think is, I actually asked Dustin if this is true. I believe Dustin Moskovitz taught himself to program so that he could like, keep up with

• 1:11:47Speaker 00

  the demand of people who wanted to open Facebook at new schools because the virality was like so insane. And I was like, wow, you can be even building Facebook and not know. And it's like, people are like, well, if I told you that story without telling you the name of the founder, you'd be like, that's no visionary. I'm like, no, it's Mark Zuckerberg. No one's ever accused him of having a lack of vision, but somehow, like, this is true. Like, so I feel like part of this is about just admitting the complexity of these stories is a little bit more, there's more to the story than you really realize. These are imperfect people. And the pivot is really about like, learning, right? That's to me, like, the thing that matters. You know, the original idea of the pivot was like, one foot anchored in the thing, one other foot moving, like from basketball, right? So like,

• 1:12:30Speaker 00

  anchored in what you've learned and yet so connected. So like, if it was truly a complete shutdown, start over again, nobody and nothing in common, I would like, that is not a pivot. But that's just actually quite rare. Usually, there's some critical insight or element of the first thing that is carried over into the second thing. And if you were there, if you know the story, you'll be like, oh, wow, that makes sense in retrospect. And again, I think this cuts against our whole idea, like, the thing we think it's like to be a visionary, is you just, you know all the answers. You're like a biblical prophet who sees the future. But that's not what it's like. It's really much more about having the courage to see the world as you think it ought to be. And then dance with that wherever it takes you.

• 1:13:13Speaker 00

  And so I think it's a much more an element of courage than of intelligence or anything else.

• 1:13:17Lenny Rachitsky?

  You're so full of amazing stories, Eric Reese. I never knew this Facebook story. I'm thinking about a founder who is maybe going through a period of considering a pivot. There's a lot of startups right now just not struggling. Not struggling, but struggling.

• 1:13:34Speaker 00

  The 2021 vintage is having a rough time.

• 1:13:36Lenny Rachitsky?

  Exactly. And so I'm curious just what advice you have for founders that are trying to decide, is this time to pivot? Should we give up? Should we stay the course? Just any tactical pro tips?

• 1:13:48Speaker 00

  So first of all, if you're asking whether you should pivot or not, you probably know the answer already. That's the first thing to just like straight up say, people call me sometimes, they're like, I want to know if I have product market fit. Well, the fact that you have time to call me and ask me this question already tells me the answer. If you had product market fit, you would not have time for this. There's no time for like, when it's working, there's no time for navel gazing. There's no time for anger. You just, it's, it's, if you've never lived through a company going through product market fit, it's such a rush. It's such an insane thing. The whirlwind of it is so amazing and so horrible at the same time. Like, there's just no time for anything else. So if you're not sure, you're sure. So that's the first thing. It's just, can you admit it to yourself? Can you do it? The thing, then it's like shut down. If you admit that it's not working, then like, what do we do?

• 1:14:30Speaker 00

  And like, I really, what I really ask people to do in these situations is like, give yourself a fixed period of time to take some decisive action and see if it feels better. So like, classic thing, if you can't agree that it's not working, now, okay, can you, can we take six weeks to try to make it work? It's like, we have this assumption, we're going to try to test it and we're going to like, instead of working on the 29 other things that we have to do in the future, can we just spend all of our time 100% on the one and only one thing that matters right now? And just like go heads down on that for a fixed period of time and see, can we move, is it possible to move the needle on that thing? Because one of the things that is true about startups when it's not working is that they're stuck in this, in this kind of law of diminishing returns.

• 1:15:12Speaker 00

  Or like you just, you can test yourself to do, you do, everything you try doesn't work. Then nothing works. It's like, uh, Thomas Kuhn in his, his theory of scientific paradigms. One of my favorite things that he talks about is like, when an old paradigm is replaced with a new paradigm, it's usually only because the old people die out and the new people replace them. But he's, but he did a lot of research into like, why does that happen? It's not that the new people are like magically smarter than the old people. It's just the old paradigm gets to the point where there's no more experiments to run that are fruitful. And young, ambitious people want to run productive experiments. And the new paradigm gives them a thing where like every experiment reveals something really amazing. And they just naturally gravitate. It's not actually a, a formal process of abandoning the old and going to the new. And that's true here too. Most people are not consciously able to let it go.

• 1:15:57Speaker 00

  They can't do it. So, okay, find yourself a paradigm where the, the experiments are productive. Like, I can't tell you how many startups I've been where they're like, it's up to the right. I'm like, oh, really? It's like, yeah. At first it was 10%, now it's 10.5%. Then it was 10.6%, then it was 10.65%, then it was 10.657%. You're like, guys, yes, it's up and to the right, but it's not what you need it to be for this to work. It's just, so try to get yourself, so go give yourself a fixed amount of time on the current thing if you have to. Then, if you can't, you know, once you say, okay, the thing's not working. Do we have enough time for something new? Could you give yourself six weeks to try the new thing? And it's like, you know, if you're a bigger company, like, okay, we're, maybe you can't have a whole company work on it.

• 1:16:40Speaker 00

  But like, can we have a team or can we do something where we just, somebody, at least one whole human being, not a part-time committee. Somebody is full-time, heads down, trying to make the new thing work on a deadline. And if you're a small team and there's only three of you, can you just put the old thing on pause for a minute? And give yourself a fix. And if it was one weekend, that would be better than nothing. Any amount of, what, what can you actually afford? And I suppose six weeks, but if it's only one weekend, like, no problem. Whatever, like, what is the new thing you want to do? And just now that you've agreed among yourselves that you're going to do that for a fixed period of time. Everyone go around the room and say, if I could start this company over again, the thing I wish we were doing was. And no one wants to go first, but since everyone's gonna have to do it, you're like, okay.

• 1:17:23Speaker 00

  I kind of wish we were doing this other thing. Why? Well, everyone say, I'm like, sometimes the first person goes and everyone's like, I've been wanting to say that same thing for months. And it's like, wait, we all actually secretly want to do this other thing, but we all are afraid to let the others down. It's like, that's actually great new. Well, good. Don't mourn that 18 months of your life you just wasted. Be excited about the fact that you actually are on the same page about the new thing. Anyway, everyone says a new thing. See if one of them stands out to you. Do that one. If you all agree, do that one. If you have three things that you're equally excited about, do them in order. Everyone gets one month. We've got three months of runway left. Well, first month, we'll do the first thing. Second month, and we'll just see if anything sticks.

• 1:18:05Speaker 00

  And then sometimes we'll do that and they're like, I'm just exhausted. I just want to die. If everyone goes around and says, I just give the money back. It's okay. Don't die. Let the company die. It's all right.

• 1:18:18Speaker 00

  And like, when you raise, when you raise too much money and you got your cap tables all messed up and you, you know, I feel like for our 2021 vintage brothers, like, and sisters, sometimes you just, you need to try again with the right capital structure. It's not possible. So like, either recap, like make the structural changes you actually have to make to give yourself a chance to do something you care about. If you don't have that, what are we doing here? Life's too precious for that.

• 1:18:42Lenny Rachitsky?

  That is awesome advice. Very tactical, very real. On the point you just asked of what would we be doing? Like, what would you want to be working on? I imagine many people today would be answering AI related products. And this is a good segue to where my next question is just, how are you seeing AI change? The lean approach, product development, the way teams are run? What are things, trends and changes you're seeing in all of the stuff that we've been talking about?

• 1:19:09Speaker 00

  I mean, we're entering into a really interesting phase of humanity and technology and civilization. And

• 1:19:15Speaker 00

  To know the right answers to those questions requires empirical knowledge that nobody has. That's what's exciting about it. And also, of course, some people find it terrifying. I think that what I'm seeing so far is that, first of all, people are afraid of AI, but not really afraid of AI. They're afraid of corporations with AI. Like, AI doesn't do anything by itself. It has to be embodied and deployed by humans who have bad alignment. And so everyone's talking about AI alignment. I'd be a little more sanguine about AI alignment. If the company's doing the aligning, we're better at aligning their human intelligences. Because, you know, I'm blanking on whose law it is. I don't always name laws. The idea that your software comes to reflect the organization that produces it is somebody's law. Conway's law, maybe?

• 1:19:58Lenny Rachitsky?

  Let's call it Reese's law.

• 1:19:59Speaker 00

  No, please don't. I forget whose law. Anyway, that is going to be true on steroids in AI, where we're training in machine intelligence and we're transmitting values to it. Those are going to be our organizational values. And tech has severely under-invested and neglected in creating governance and alignment structures to have those values be explicitly like embodied in the organization. And which is why so many of our companies have become disappointments. And so many people feel betrayed by the companies they themselves helped build. It's actually kind of sad. So AI is going to force us to take those issues seriously, no matter what. The other thing that's interesting, you asked about how it affects the startup. At the end of the day, AI is a management technology. The thing it does is manage intelligence and other intelligences. And if you watch, like, watch

• 1:20:44Speaker 00

  people struggle to make AI agents work, it's been really interesting to me how often I've played with a lot of those tools myself. It's amazing how often you program the agent and it will be like, okay, the job, you know, you give it a task, like, go take over the world, or whatever. Go make a really successful ice cream stand. Or you give it any task you want, and it'll be like, whatever, these AIs are programmed to never say no. So whatever you say is like, no problem. And it'll be, okay, first step, write a business plan for taking over the world. And it will spawn a new agent with a new AI. Okay, your job is to go write this business plan. And sometimes it'll like, you know, go try to write the business plan. But oftentimes, it'll like, it'll spawn, it'll be like, the new, the subtask will be like, oh, first thing I need to do is spawn an AI agent that knows how to take over the world.

• 1:21:27Speaker 00

  And have it write the business plan and it'll just everyone will just pass the buck to somebody else or it'll be like it'll go into an infinite regress was like first thing we need to do is research this and then like the thing that goes back and now that we've learned to research that we need to research 10 more things and each of those 10 things require researching 10 more that's like so many ways to go wrong and anyone who's been a middle manager who reads these transcripts will be like tell me about it buddy right I know I was doing an AI agent I wanted to write me a 30 day course 30 day transcript or 30 day course for teaching people lean startup someone had asked me to do that and I was like great I'll have the AI do it for me and it was amazing it was like okay no problem day one what is lean startup how does it work day two topic you know what is an MVP how's it work dot dot dot continue like this for 30 more days and you'll have a 30 day

• 1:22:12Speaker 00

  course I was like yes is I know that but could you please fill out the other 30 days it was like no problem and it spawned a new sub agent it was like given these two as an example please fill out the other 30 days and it was like got it it was like how to do a task in 30 days well first look at these two tasks then like create similar things for 28 more days then return the results it's like no no I'm asking you to do that they know if you ever watched the money python no can't guard him if he's a guard skit it's like that you're just like no it's like we're not we're talking past each other so yeah I think there's like it's really interesting to see how AI as we learn to understand it we will be able to develop different man it will like really change management a lot because it changes the individual span of control quite a lot it solves one of the

• 1:22:57Speaker 00

  most hard problems in management is that in order to touch a lot of things we need a lot of hierarchy because just the expansion factor of each one has this many reports has this many reports many reports like that's what's required in order for us to like summarize a large amount of information you know if you have 100,000 employees they're having 100 that doing 100,000 things the CEO needs to know what's going on that's really difficult you need to sort of this massive amount of human labor required just to summarize and understand what's happening well AI is really good at summarization it's actually one of its main strengths so it's actually be really easy you know not in the not too distant future it'll be very easy for someone to just be like summarize for me everything my company is doing and you won't need like tons of middle managers for

• 1:23:38Speaker 00

  that for you will just you'll just know that's we don't even know what we would like to build organizations where those kinds of powers are available to everybody and I think the last thing is

• 1:23:51Speaker 00

  People are very focused on whether this is going to lead us to utopia or dystopia. And most people have a very firm conviction about what's going to happen. And therefore, what needs to happen now to prevent something bad from happening. So you have the people who are like, we have to stop, pause, blow up the data centers because it's going to lead to this bad thing. People are like, we have to have government intervention to prevent research on this thing or to ban open source. But like, for every one of the things somebody wants to do, somebody else is saying, that is actually the thing that leads to the dystopia, right? Banning open source is what leads us into like a corporately controlled autocracy that's even worse than the thing that you were afraid of. So a very common question I've been getting from people in the industry, who are having like an existential crisis about what should they do with their life in the face of this AI?

• 1:24:33Speaker 00

  And as you say, all people whose startups are failing, like, I want to be working on AI. Okay, for everyone who's got a grass is greener kind of attitude about that, the people that are actually like doing it and quitting their job and going to work on AI, the first thing they confront is like, what should I do that will have a positive effect? It's like, it's actually really difficult to find out some, you know, like, everything I propose doing, someone's telling me that that's actually the evil thing to do and vice versa. So the other thing I think is really important is like, a big part of lean startup has been, for me, it's been just about learning how to deal with uncertainty in my life, right? So like, how do you deal from a business perspective? How do you deal with situations of high uncertainty? And you be scientific, you be experimental, you be, you know, how do we just like, all these different values that are about coping with uncertainty.

• 1:25:17Speaker 00

  And so the question people are asking me is basically like, how do you take ethical action in the face of high uncertainty? And so the framework that I've been using, I've found very helpful, and I hope other people will get something out of it, is the aperture of possible futures that AI makes possible is so incredibly wide. And like I said, predicting it requires a really deep understanding of a bunch of empirical questions. As far as I can tell, nobody knows the answers to right now. So given that it's not knowable what's going to happen, like, it's not just you don't, you're not an expert enough, but as far as I can tell, nobody knows. And the people who are most expert are actively doing the research to try to find out the thing that will help us predict. So you don't know what you can do about that, you've got to wait for someone to go find that thing out. The thing that makes sense is to pick actions today

• 1:26:02Speaker 00

  that make ethical sense in a wide variety of future scenarios. And do those. And what's really interesting is that takes people out of total paralysis about it into like, there's actually some very clear things that we should do. So like, whatever your doomsday scenario is, we need more transparency right now. Right? Like, that's critically important. We need more state capacity. We need more competent leaders. We need companies who are committed to certain values. Like, it changes the way that we think about these technologies in relation to ourselves as individuals. And that's really my goal, my work here, is just like, how do we get people off the sidelines and into the fight? Like, doing things that are actually likely to be worthwhile. And, you know, as I'm talking to you, I'm like, oh, it sounds a lot like the idea that most of the work you do in a startup is gonna be thrown away after you pivot.

• 1:26:47Speaker 00

  So don't do that work. It's like, it's not really a special, unique insight. It's just taking the same approach to coping with the uncertainty of entrepreneurship and now applying it much more broadly because everything's about to change.

• 1:27:00Lenny Rachitsky?

  It sounds like this connects a lot with the work you're doing now around governance and long-term stock exchange. And I want to get into that, but before I do, I'm curious if personally you're finding AI to be useful in some part of your life using a tool? Or if there's a more interesting example of a company using a lean startup approach with AI integrated? Is there anything that comes to mind of just like something that you've seen to be practically valuable with some of the AI tooling?

• 1:27:24Speaker 00

  When GPT-4 was first launched, I saw a friend of a friend just was posting a friend of theirs, you know, like a story about someone who was using it for cold sales outbound. Right when it first came out and they had like downloaded a list of, you know, 10,000 Shopify stores with metadata, which I Googled, you can like buy that for like a hundred bucks. And then they just told GPT-4, they wrote a little Python script for each store. GPT-4, please pitch this store owner something that my like outsourcing company could build for them and be really creative about it. And then it just, he didn't even read the emails, he just sent them one after the other. And when the person would reply. He would look in the in the email to see what he had pitched them and then talk to get the person on the phone.

• 1:28:10Speaker 00

  And it was like, why the things that it pitched were like so wildly creative and cool. It was like, it was like really interesting. They were in the tone of the store. They were like really like they used clever puns. And so he was showing so many screenshots of like the person writing back being like, you had me at, you know. It was very, it was very good sales prospecting. So, okay, so obviously, like, our, that's like an incredible story about experimentation at a super high rate. Right? Like, just like nothing, we could never have done anything like that even five minutes ago. And now it's going to become completely routine. But it's also a story about how all of our communication channels are about to be super saturated with AI-generated experimentation. You know, like whether we want it to or not. And so if you think, if you just extrapolate a little bit, if this technology holds the way we think it will,

• 1:28:54Speaker 00

  it's pretty clear that every company is going to be sending just huge volumes of AI-generated email, such that people are going to need AI-generated email clients to read the email for them and summarize it for them. And someone was joking, you know, we were making jokes about like, I'm going to write three bullet points. My AI will turn that into an email, send it to you. Your email will redact it back to the three bullet points. Couldn't we have just exchanged three bullet points in the first place? We were like wasting a lot of silicon, you know, a lot of GPUs were burned to, to, you know, move these three bullet points from point A to point B. But I don't think that's as silly a story as it sounds. I actually am kind of excited about the possibility of AI-powered marketplaces to be far more fair than the way we do it today.

• 1:29:34Speaker 00

  Because if you think about that story, the problem fundamentally is that you have a massive number of people who could create things for store owners. And if all of those people emailed every store owner on the planet every day what they could do, it would be an overwhelming amount of information and not, so neither side is really capable of doing that. But like, AI is capable of doing that. So like, imagine a world in which everybody is required, and it's also, but it's also really easy to do, to define like a procurement policy. Like, what am I interested in buying, right? And what, what problems do I want to solve? What am I interested in buying? And what, like, what information do I want to have? And my agent reads my inbox for me with this filter and applies the filter completely fairly.

• 1:30:16Speaker 00

  Doesn't matter if I played golf with so and so last week or whatever, just if the proposal comes in and it's credible and the AI is like really diligent about making sure it's not spam, like, then it will bring the thing to my attention, but it won't show me the email. I won't be tricked by its clever, you know, Al Rees style positioning nonsense. And it'll just like, it will give me the essential information that, hey, did you know that there's this thing that could actually save you a bunch of money? Oh, okay, great. Like, that is so much better than advertising could ever be. And it's also way more fair. We could then say, okay, actually, we would like every conceivable vendor to send me every, as many emails as they want at any time, just blow me away with all the things your thing could do. Let your AI go crazy, trying to convince my AI that your thing is actually good. Like, that's not, that's not wasted time.

• 1:31:00Speaker 00

  That'd actually create a lot more fairness in the world. And like, create a really even playing field for procurement for information. Think about like journalists and pitches, and you just see like so many situations where we've established hierarchical gatekeeping, like, structures, because that was the only way to manage the volume of information that had to be processed for that thing to happen. When those, when those limits are removed, it's, could, it could be terrible, but it could be really awesome.

• 1:31:26Lenny Rachitsky?

  I love your optimistic bent on all the things we're talking about. I really respect that. And that might be a good segue to the final thing I wanted to chat about, which is just 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 could you just talk about what it is you're spending your time on there and where you see big opportunities?

• 1:31:53Speaker 00

  Yeah, sure. I mean, I think it's, 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? They'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

• 1:32:35Speaker 00

  the world in fundamental ways. And when they're being asked to take moral responsibility are like, I'm just a little database. It's like, can't have it both ways. What are you, you like a Superman who's reordering the whole world to your whim? Like, well, then you have moral responsibility for the outcomes. And, you know, that's like a hotly debated point right now, but I feel like it's actually super, people have already made it clear in their rhetoric where they stand there. They're just trying to evade that responsibility. So the next gen of founders don't find this complicated at all. People feel a real sense of responsibility to make the world a better place, like really real things. Okay, great. So you're asking people, you know, like I was, you were, you're like, I was, I'm working on so many companies that are like straight out of science fiction. I mean, like a company that does, you know, travel from

• 1:33:17Speaker 00

  San Francisco to Tokyo in one hour. They're like, that's unbelievable. You know, actual weather changing, like, like the real thing where you're like, we're going to change the amount of habitable land on the planet and solve famine and drought forever. Obviously, AI, there's these incredible, just incredible possibilities. And, you know, in nanomaterials and quantum computing, I should go on, there's so many cool things going on. But they all have really dire consequences. I mean, talking to a really advanced biological AI company, where like, imagine having an LLM, imagine like ChatGPT, but for biological compounds. We'd be like, AI, could you just synthesize for me a molecule that has these properties? Just described in natural language? And it's like, sure. Like, that could be incredible.

• 1:34:01Speaker 00

  Like, think about the cures and the diseases. And I just like, that's going to be an amazing transformational technology. But it has such obvious risk and downside that we have to take it really seriously. Like, why should anyone trust you with this power? And people always say the same thing. Well, I'm a really good guy. And, you know, I'm, I'm, I'm your bro, man. You've, I'm a, I've got good intentions. It's like, well, kiss the crap about that. You could die.

• 1:34:24Speaker 00

  You could be replaced. Some investor could like sweep you like I tell you how many stories I can tell you about startups where the investors changed management involuntarily. And so the fundamental problem is that no individual person can ever make promises on behalf of an organization. It's not possible. It's a category error. You're replaceable. And the reason is because organizations are actually alive. They are super organisms with their own soul and their own life. We are their cells and organs when we make them. Founders don't create them, we birth them. And that's different. We don't own them. They're not slaves. We nurture them. It's different. So if you want to make promise, if you want your organization to be trustworthy, the promises it makes, if you want to win the public's trust by making

• 1:35:09Speaker 00

  promises they can believe, you have to embody those promises in the structure of the organization itself. So that even if you weren't there, the promise would be kept. And people act like that's impossible, but there are lots of examples. I mean, like, think about like the code of medical ethics and the Hippocratic oath. Think about, you know, in the US, you want to do healthcare, you have to have a care delivery organization that is like staffed and run by doctors, not by private equity, you know, guys. Like, there's all these, there's all these things where like, we know how to build structures that are, you know, organized around some purpose. So what should that purpose be? I was talking to a former Googler, and I hate to pick on Google, because, you know, they've always done a lot of good things in the world, but, but they're, they're like, I think the locus of a lot of tech people's disappointment in the world. And so this is nothing unique to Google, but I just happened

• 1:35:53Speaker 00

  to be talking to an ex Googler, and he was talking about the values and the company and his disappointment and what had happened in the many years that he'd been there, the good and the bad. I said, okay, ask, answer me this question. I'm asking you two different things. Now, for each thing, I want you to tell me, what is your assessment of the probability that this thing will happen in the future? Something number one, what do you believe is the probability that Google will file its next quarterly report on time? He was like, 100%. I was like, how 100%? You'd be like, as certain as the sun will rise? Bet your life on it? He's like, as certain as the sun will rise, 100%. I agree. Now, second, second question, what is the odds that Google would be complicit in something that would make them money, but at the expense of murdering somebody? He's like, oh, they probably wouldn't do that. I was like, probably? 100%? As certain as the sun will rise? He's like, well,

• 1:36:39Speaker 00

  I was like, oh, really? What do you have? I was like, well, come on. What if one of the self-driving cars like kill somebody and they cover it up? What if they will a social media product and it's complicit in a genocide like Facebook went through that's like, I don't think they would do that on purpose, but it was like such like the difference between the thing that is certain and the thing that we don't know was like, okay, why is that? We just we treat that like normal, like, of course, companies file their reports on that like, but is it because in the human heart, fidelity to finance rules is like hardcoded, but care for other humans in their life is not like,

• 1:37:11Speaker 00

  people don't give a crap about quarterly reports. We have built a massive apparatus in these organizations to make sure that certain things happen. Companies are really good at the things that they care about. And therefore, we can learn something interesting about the things that they care about by what they choose to be good at, what they perennially are not good at. And so my view is that what it means to be a for-profit company, like we've gotten it wrong. So we're basically incorrect. Making a profit is actually about maximizing human flourishing. That's what it means to be for-profit. So like, our current category says that Philip Morris is a for-profit company and the Smithsonian is a not-for-profit. But that's just backwards. Smithsonian does a lot more good in the world than the merchants of death at Philip Morris.

• 1:37:53Speaker 00

  So I think we've just gotten confused that making all forms of making money are the same, but we all know that that's not true. There's exploitative, extractive ways of making money, and then there's truly additive ways of making money that actually create net new value. And so if companies are dedicated to human flourishing and they want to be the kind of company that will create net new value, and they don't want to become a bureaucratic nightmare, you know, like they don't want to become a rent-seeking, you know, blob of indiscriminate math. Like, we don't want that to happen. We have to encode those promises into the company in a deep way. And I think that's really what governance is about. Like, the whole ESG movement, all the discussion about this has gone totally off the rails. Like, Philip Morris has actually great ESG scores. It's absurd.

• 1:38:37Speaker 00

  So how can how can that possibly be right? We have to find a better way forward. And so like, once you, you know, again, going back to lean startup and first principles, like, once you go back to that first principle, say, what would it look like? If a company, if every person in a company felt fiduciary duty to promote human flourishing? Like, how would you do it? And what would be different? And I've just I've started to meet founders who are building companies like that. And it's almost unrecognizably different. And I've been I've been framing this, of course, in terms of the big things like, you know, obviously, like you think about the weather control startup, like, That needs to be right, not just because like a supervillain got their hands on it, it would be really horrible. But also because like you can easily imagine that they got bought by some private equity firm who's like, this is awesome. We can now like put every town in, you know, in a zero sum competition with their neighbor for the good weather.

• 1:39:22Speaker 00

  And extort them both from that, like that would be just as horrible. We don't need supervillain for this, like none of us should want our technology to be used in that way. So we need to prevent that from happening. But what, so when we put that in that ethos, we make that part of every decision. Like, we finally can create the environment that like people really want to work in. Like just, just to make great products. I feel like most people I meet just want to work on something awesome. And we act like giving, like that, that's just like, just happens. But I've worked with so many companies now, even the ones that are really truly great. You go meet a team, it was, wow, we had, we had the island of freedom. We had the fully, full, we were able to do it exactly right. That's one of the most satisfying experiences in my career. You ask people, why was it, how was it made?

• 1:40:07Speaker 00

  They're like, how was the product made? No, how was the island of freedom that you lived on made? And they're like, I don't know, ask my boss. And I've been, I've done this exercise. I've asked the boss and the boss's boss and the boss's boss. I've gone all, and like sometimes I'll go all the way up and it'll be like, well, actually the founder of the company. Who's still around, like made it so.

• 1:40:26Speaker 00

  But sometimes no one knows. You're like, who's in charge here? The board is in charge? They're like, I don't know. CEO asked me to serve on the board. It's like, who chooses the, the company chose its own board? The board chooses the CEO, like it's all self referential and it's like, where did it come from? So right now, I kind of, we view it as like an accident, it just happens sometimes. But that's because we're not engineering these beings to create the outcomes that we really want. And I just think like, it's like a, a, a blind spot as company builders. We're so focused on the product and not nearly focused enough on the organization. And we, we tend to say at the surface level stuff like culture, we don't get into the deeper stuff. So yeah, I think as builders, as a, as an industry, we need a new movement to say like, we are going to build companies where human flourishing is the thing at the beating heart.

• 1:41:09Speaker 00

  And we're gonna, we're gonna wield that as a competitive advantage to like not only change the world for the better, but also make a lot more money. That's the crazy thing about it is these companies are, are worth a lot more than their, their competitors. Because if you're working, like if you're, without naming the company, I talk about a company that is incredible ethos of love and just like it actually loves their customers. It's amazing. And that's like the whole, everything cascades down from that central premise, including the instruct, like every CEO I meet is like so frustrated all the time. Like I can't get people on the same page. I tell them what to do, but they don't listen. It's like, maybe part of the reason you're having trouble with this is the strategy you're communicating does not actually make sense to people. Well, this one really makes

• 1:41:51Speaker 00

  sense. Like treat your customer like you treat your own parents. People are like, oh, that's actually really, you see in clear, like I understand exactly what that means. And so their customer loyalty is unbelievable. Can you imagine what their retention is like? And you actually felt you call customer service and it's like you're reaching your guardian angel rather than some bored customer service rep. It's amazing. Like, so their competitors are like, this is not fair. We get to, it's like unfair to compete with this. It's like a, something is a monster. But like, when you're going to a customer like, hi, would you rather work with a company that's owned by some private equity schmuck, or a company where some of the prosperity you helped me generate is reinvested in you and your community? Like, it's a competitive advantage to do the right thing. So I feel like that, like

• 1:42:34Speaker 00

  we're gonna have a new wave of founders who take that seriously, who are gonna just, they're gonna steamroll. It's gonna be really awesome to watch.

• 1:42:40Lenny Rachitsky?

  I can see how you started a movement, maybe accidentally. I am mesmerized. I am sold. If people listening are also sold and want to build a company this way, what do you, what can they do? Is it work with the long-term stock exchange? Is it, is there something they could do to help move their company and product team and business in this direction?

• 1:42:59Speaker 00

  I feel like there will come a time when there's a lot of resources about how to do this, and there aren't a lot right now. So it's a bit, it's a bit thin. I'm, I'm, I'm working on it. But, you know, we're still trying to figure out the right, the right way. But I am hoping to start doing some events and some, some things like to talk about this stuff. So people should, should feel free to reach out or follow me on the usual places. If people want to do it themselves, talk to your lawyer. This is like definitely one of these talk to your lawyer moments. I've worked with enough companies. I've actually like been around long enough that I've worked with multiple companies that have gone from zero to IPO and beyond. So I like, I have personal friends who like taken a company public who are like now extremely wealthy and who like sometimes even call me and like, hey, I run this massive multinational company. Can we, can we talk about this like very specific situation that's come up at work?

• 1:43:43Speaker 00

  You know, like I still am involved in those companies. I still get to hear sometimes what it's like to actually do it. And one of my main takeaways of that entire process is that it's always too early until it's too late. So what happens is people hear something like what I'm saying like, oh yeah, we need to make sure, you know, like here's some things you can do. Obviously you can become a public benefit corporation, social, uh, what's it called in California? A social purpose corporation. I mean, it's like there's legal designations you could take. That's fine. You could talk to a company the other day that because their tech, their startup involves um, um, building a technology out of uh, something that comes out of indigenous cultures. They took 10% of their company and they put it in a foundation, the trustees of whom are tribal leaders from the cultures that they interact with. And those people that that has like an economic role and a role in governance.

• 1:44:27Speaker 00

  You can establish like a foundation like that. You can do what's called a board mission pledge where people on your board are required as a condition of being on your board to pledge that they'll use their business judgment under Delaware law to support the mission, not just the narrow interests of shareholders. You can build, we call it an LTSBV, which is basically a financing instrument that operates like a regular SPV. But every LP in the SPV has to sign a contract to say that they will support the mission of the company. If you ever want to do something like a B Corp inversion or you ever, if there's ever a situation where it's unclear whether they're in favor of you doing the thing that's right by your stakeholders long term, they're pre-committed to that. And we assign trustees to oversee those shares rather than just the narrow interests of the shareholders. So like, so anyway, I could go, I can go on and on. There's like all this stuff you can do.

• 1:45:11Speaker 00

  But I get, so I get companies, I get founders excited. I've been getting founders excited about this for a long time. I've now been long enough at this that like founder will go to their lawyer and the lawyer will say, listen, it sounds great. But like, you don't need to do that right now. You can always do it later. And they're like, okay. And then the companies go bigger and they'll, you know, they'll do some financing round. Each financing round is like, is this the time? That's fine, we could just do it later. And then it's like 18 months from the IPO. They've hired a CFO and there's like a bankers and the whole thing's on rails. And the CEO is like, now, hey, did we ever establish that foundation thing for our non-employee stakeholders? And they're like, huh? The thing, remember we talked about, you said it was too early? Oh yeah, I remember that. Have we done it? Oh no, it's too late. It's like, it's too late? Uh, the thing's on a rail. We, the shareholders wouldn't like it. The bankers are like, oh, you don't want to put that in your IPO prospectus. It's like, wait a minute.

• 1:45:55Speaker 00

  Well, when was the right time? You're telling me that like 18 months ago, July 3rd through 7th? There was a four day window and it was the right time? It's never the right time. Why is it never the right time? And I've seen founder after founder after founder get steamrolled. One of the only exceptions I know is a mutual friend of ours who like actually stopped the IPO process. Was like, no, I won't file the paperwork. They, they tried to steamroll him and file the paperwork without him. And like, he said, no, until I see this thing in there, we're not doing it. And it like, it was a very contentious thing. Took a tremendous amount of political capital. I admire him immensely for doing it, but most founders don't. Most founders just go along and the thing never gets done. So the most important thing is to sit down with your lawyer and just take them through a few hypothetical situations

• 1:46:38Speaker 00

  and ask them, are you properly protected against this specific thing? For example, if tomorrow Philip Morris shows up, pick your favorite evil. I use Philip Morris because my dad's a pulmonologist. So I grew up as Philip Morris is the ultimate of evil corporations. But pick your favorite evil. If they show up tomorrow and they offer you $1 per share more than your company is currently worth to buy it from you and your investors in order to use it to sell cigarettes to children? Do you have a fiduciary duty to say yes or a fiduciary duty to say no? Believe it or not, if you got, if you went to a fancy law firm and they filed for you the standard articles of incorporation that are used in Silicon Valley,

• 1:47:18Speaker 00

  most governance experts upon reading those documents would say you have a fiduciary duty to say yes. If that doesn't horrify you and make you want to jump out a window, I can't, I can't help you at all. And if you don't care, fine, I got nothing to say to you. You don't care, you don't care. There are really sociopathic people in this world and they build sociopathic companies. I can't help you. But if you do care, sit down with your lawyer and just be like, hey, is this true? Could this happen to me? And they'll be like, yeah, obviously. And you're like, um, if I like to prevent that, what could I do? And I'm like, well, your investors might not like it. Investors like it this way because it maximizes their returns. And you're like, yeah, but I don't, that's not what I asked you. And your lawyer, all, your lawyer is good enough to know the answer to this question. What can you do?

• 1:48:02Speaker 00

  And if they can't, go back and rewind the video that Lenny I just had. I just named a bunch of things. You can have two founders preferred shares. You can do all this stuff, just. Ask them about some of that stuff and don't ask them, should I do it? Ask them, tell me for each thing, just be like, can you give me the pros and cons of doing it? And they'll be like, the pros are, you know, it might actually allow you to save your company's soul in a dire situation like this. The cons are investors might not like it too much. And you just be like, so sit there and be like, hmm, I'd like to do it. That sounds good. Like, thank you for advising me on the pros and cons. You work for me, you're my lawyer. Like, I'd like to implement this thing. And just honestly, just pick a few of them to get started with. And over time, what you need to do, last piece of advice, every founder wants the one weird trick. This is how lean startup started too. People were like, can you just tell me the one weird trick to keep my company innovative forever?

• 1:48:46Speaker 00

  I was like, there's no one weird trick. You want to do the right thing. It is a relentless and constant process. We need to build a structure of the company so that at every level, at every moment, every decision the company makes, somebody in the room making that decision feels like they have a fiduciary duty to do the right thing. If that's the outcome you want, then this is going to be a perpetual process of constantly trying to find ways to create the alignment that is needed between the governance, the management structure, and the actual operations and culture of the company. Those are not separate things. They're actually only one thing because it's just one being. You have a skeletal system, a muscular system, and a circulatory system, but those things are not separate. They, they work together to produce you, the being, and the same thing is true for these governance structures.

• 1:49:31Speaker 00

  So I think most founders are under indexed, under invested in that, and that's why we get to these horrible outcomes.

• 1:49:37Lenny Rachitsky?

  To give founders a little ammo in doing this, because as you said, investors are not going to be excited to sacrifice profits, employees may not be. Are there companies that you can share that have done this and have implemented some of these things that are public? And if not, what confidence can you give founders to be like, many, many amazing companies have done this and it's actually not that hard?

• 1:49:57Speaker 00

  I don't like to name specific company names in venues like this because then people always are like, well, but what about that? It's just people like to do the what aboutism thing too much. And also, I like to let companies speak for themselves. You know, I weigh too much confidential information and I just have to be really careful about it. But nothing I'm describing here is hypothetical or unreal. Like, I have witnessed this many, many, many times myself. And every story I tell, it's like, it's a real company that you can meet. You know, they're real people that are out there. And they don't, they're not always the loudest. You know, the loud voices in our industry tend to be the ones that, um, you know, have something to sell. And these companies are like just quietly doing the right thing. They don't really need to tell you about it because they're doing it.

• 1:50:37Speaker 00

  So, um, there's like an inverse proportion to, to the loudness and controversy and meme-ness of the thing and how likely it is to be accurate, unfortunately. What I will say is, this is kind of an open secret in the world. So here's the thing that really surprised me. I thought the way that we build companies, like the standard corporate governance practices that we all do, are like, must be well-established in research. They must be well-backed up. Like, it must be the only and best way. But when you start studying these things, like, you find the exceptions really fast. I got into this because of Toyota, only because I called the thing Lean Startups. I wanted to borrow stuff from lean manufacturing. I studied Toyota. Well, Toyota has a really weird corporate governance system, which is like part of the old Japanese Kuretsu system,

• 1:51:22Speaker 00

  where the Toyota family is interwined in its ownership with their supply. It's like, by modern standards, it's a terrible rat's nest of disastrous corporate governance practices. But if you look at the literature, every, everybody who studies Toyota is like, well, the reason they're able to do this awesome stuff is because they have a philosophy of long-term thinking. I used to be like, well, how can you have a philosophy of long-term thinking if you're subject to quarterly returns? And they'd be like, oh, they don't pay attention to that stuff because they have this other structure. I'm like, oh, that's weird. So for a while, I was like, oh, I guess it's just Toyota. We should build more Toyotas. But then, like, there's all these family-run companies out there where the family has produced this outcome. And then I started to meet foundation-controlled companies. You know, it's actually, it's funny, OpenAI is like the hottest new thing. OpenAI is a nonprofit foundation with a wholly-owned for-profit subsidiary.

• 1:52:06Speaker 00

  I thought that was like, wow, OpenAI, so like, that's actually very common. There are a lot of companies like that in the world. In, in certain European countries, it's actually like 20 or 25% of the companies, like, public companies are all structured that way. So it's actually like totally normal. I, I did a talk for one of those companies, uh, a few years ago, and it like blew my mind. Because, you know, when I would go there and talk to them, I was talking to their CEO and their leadership, and I was like, oh, what's it like to deal with the public markets and quarter? And they're like, well, we don't do that. I was like, oh, is that a major source of competitive disadvantage? You know, you guys are a nonprofit and they're like, are you kidding me? We crush our competitors because they have to waste time on all that stuff. We'd always time on it. I was like, oh. And then like, anyone ever heard of Warren Buffett? And why do his companies have a competitive?

• 1:52:50Speaker 00

  Like, he was always like, oh, if you're giving up profit, your investors might not like it. I'm like, these companies are just, are world destroyers. What are we giving up? And that's why I go start with the wrong definition of profit. We're actually make a ton more money if we do it this way. And like Amazon, for all of its flaws, like the long-term thinking, the customer centricity, like that's a major source of competitive advantage. And I've, I've worked with many of Amaz, I've worked with Amazon, I've worked with many of their competitors. And like, the funny part with the competitors sitting there, they're like, oh, man, Amazon's entering our market. We need to do XYZ. And I'm always like, do you think Amazon's doing XYZ? And they're like, oh, no, they don't have to do that stuff. We had to do all this bullshit that our investors require and the activists and whatever. And I'm like, it's like, well, if you're competing against them and they don't have to do that crap, maybe you should try doing it their way and be like, oh, our investors wouldn't like that.

• 1:53:35Speaker 00

  I was like, your investors want you to get your butt kicked by Amazon? Are you sure? So I actually think like, one of my realizations here is that like, the investor-centric view of corporations, what's called the shareholder primacy theory of corporations, is just wrong. It's wrong even if all you care about is maximizing returns for shareholders. Shareholders have this propensity to be the person who killed the goose that laid the golden egg. And it's like, been going on for 150 years. These case studies go back to the 19th century. It's an old, old, old idea. And the solutions are actually all hidden in plain sight. So I was reading a research paper the other day that studied some of these, I think it was in Denmark, foundation-controlled companies versus level-matched public companies that are not foundation-controlled. They found the foundation-controlled companies outperformed from a financial performance perspective.

• 1:54:18Speaker 00

  And I was like, how is this not the most incendiary result ever? This, if this is true, so much of the doc, of the indoctrination we've all received about what it means to be a for-profit company is just wrong.

• 1:54:30Speaker 00

  Because like those companies should be riddled with slowness and agency problems. And I could go, I tell you, I know the theory so well, I can tell you all the things that ought to be true. If those things are not true, what's up? And then I was like, wait a minute, I've been to, I've been to these foundation controlled companies. I've been to Hershey, it's just controlled by, the founder donated the shares to a foundation that like runs a school. Like, I've been, I've seen it with my own eyes. And even having seen it with my own eyes, it took me a while to realize, wait a minute, this is an open secret. So I was kind of horrified to find out that this is well known. And yet was never offered to me. How come no one ever offered me the chance to build a company this way? And if you study even OpenAI or any of these companies that are now structured this way, it's always very idiosyncratic. Like they were on the standard path and then something happened that allowed them to do something unusual.

• 1:55:14Speaker 00

  And I was like, well, I don't understand why we have to wait for it to be idiosyncratic. Why don't we do it on purpose? And so I started to conceive of this idea, I call it the spiritual holding company. Basically, the, the, the thing at the center that is responsible for the soul of the overall ecosystem of companies. That the, that the enterprise, that is the enterprise. And you could see that, you know, obviously in the OpenAI example, if anyone has studied the anthropic long-term benefit trust. It is not, not coincidentally structured that way. But you see, you see lots of examples where, where that's, that's what's done. And I started just pitching it to founders and said, look, let me try to show you what the benefit of this would be. And I've been amazed how many founders like break down and founders like start crying with me where they're like,

• 1:55:57Speaker 00

  this is what I always really wanted to do, but I never felt like, no one would talk to me about it. I didn't think it was possible. I want to put, you know, there's a critical stakeholder I want to put at the center of everything I'm doing. Or there's, there's some reason why we're doing this and I want that to be the thing. I was talking about startup who's trying to get, and again, it's not like a kumbaya thing, you know, do good or whatever virtue signaling bullshit. Like it's a competitive issue. There's a company that is working to recruit academic researchers to leave their lab and come work for the startup full time. It's one of the most difficult recruiting challenges there is because you're talking, you know, it's not talking about like kids out of some school. It's like tenured professors who are leaving behind a very good life to go do this thing. They would only do it if they profoundly believed in your mission, but they're not naive.

• 1:56:39Speaker 00

  And the first question every one of those people asks is like, how do I know this technology is not going to be used for you? Because I like, I have a complete academic freedom. I'm gonna give that up for you. Make me believe that this is the real thing. And if you're like, well, you know, we believed in some manifesto and we're good people and we got money from some investor who's promised he was gonna be a good guy, like that is not gonna cut it. And so they're having to do the whole thing like this, sit down their lawyers. What do I have to do to make this promise real? For these people to make them want to join? And I just, I've just seen that over and over again. If we have the courage to do it, it can solve what are really today considered insoluble business problems. So it's, it's, it's cool, but I think it's scary for people to feel like they're doing something different.

• 1:57:24Speaker 00

  And so I, you know, I think over time we'll get more of these stories on the record. We'll get more, people will have, you know, there'll be more precedent for it. But I gotta say, I just did, not to hearken back to lean startup too much, but I'll never forget sitting with early people who are like, what's the proof? What big company is doing this? And I'll be like, just wait, you know? If you don't want the competitive advantage now, you can get it later. And like many of the people, you know, look back on who was profiled in those books. Like many of the early lean startup adopters are like very successful people today. Because they didn't feel like they had to wait, they were able to think for themselves and apply the principles in their own life. And I don't ask anyone to take this on faith. This is not like you have to do what I say. It's more just like, think for yourself. Like if this makes sense to you and no one can explain to you why it's a bad idea in ways that you find compelling,

• 1:58:09Speaker 00

  give yourself permission to at least try it and see what happens.

• 1:58:12Lenny Rachitsky?

  What a beautiful example of first principles thinking, looping back to our very first question. I think this is gonna be the longest episode we've done yet, which is amazing also. I think it might be my new favorite episode. So that's a good combination. With that, we reached our very exciting lightning round. We'll see what lightning, what sort of lightning we find. Are you ready?

• 1:58:33Speaker 00

  I'm ready.

• 1:58:34Lenny Rachitsky?

  What are two or three books you've recommended most to other people?

• 1:58:39Speaker 00

  There's a book called The Enlightened Capitalists. That is just a hundred years of people trying to fix this problem and failing. And like the detailed case studies and like no founder should ever read it end to end. It's too depressing. But it's important to know some of these stories of founders that like they're, they're willing to talk about their regrets on their deathbed that they like wish they had done differently. And it's just a good, for those who think there's one weird trick that will help disabuse you of that notion. But it's, um, it's, it's helpful to understand the mistakes that have been made before so that we can do better going forward. On a happier note, I really want more people to read Ken Loos' The Dandelion Dynasty. It's a Silk Punk fantasy series, but it's written by, he's a wonderful writer. And it's, it's like, if you want to see what like real optimism about engineering and the ability

• 1:59:24Speaker 00

  of engineers to change the world, like, but transformed into a totally different environment. It's just such a great, such a great read. The audiobook is really good also. And I've been kind of plugging that, plugging that lately. And then if you want just something that's like pure fun, you know, it's not really the season for summer read, but like, and also a really good audiobook is The Murderbot Diaries by Martha Wells. She's just such a great writer. And I know it's, it's a very frivolous thing on the surface, but there's actually a lot in there and it's, I won't, I won't ruin it for, nothing I would say would be a spoiler, but there's actually like a surprising amount of depth for what is really just a fun action adventure kind of read. I can't wait. If, I hope it is someday made into a movie, it'll

• 2:00:07Speaker 00

  be, if they do it justice, it will be really terrific.

• 2:00:10Lenny Rachitsky?

  What's a favorite recent movie or TV show?

• 2:00:14Speaker 00

  I really have been, I don't have time anymore. I have young kids, so my, my media consumption days are extremely, extremely limited, but I have been, I've been kind of forcing myself to slog through a bunch of the Disney Plus Star Wars series, which have been almost universally disappointing with the exception of Andor. For those that have not seen Andor, it really is very good. Not, not good for a Disney Plus Star Wars show. It's like actually good for television, which I couldn't believe when I saw the premise of it.

• 2:00:40Lenny Rachitsky?

  Also a huge fan of Andor and I've recommended it many times. And I feel like now every new Star Wars series, I'm just comparing it to that bar and.

• 2:00:46Speaker 00

  That's the problem. It's just like, if they would just make that, that creative team, or they would just let them make shows, it would be okay. It would redeem all the rest of their failures. Yeah.

• 2:00:55Lenny Rachitsky?

  Or just keep making sequels. I'll watch them all. What is a favorite interview question you like to ask people when you're interviewing them?

• 2:01:02Speaker 00

  My favorite interview question of all time is to ask people to describe a best practice that they learned in their career and to really get into it. Like, tell me the story of how you learned the best practice, like how, you know, whatever, and you just let them go on and then you'd be like, great. Tell me a situation where that best practice would not be applicable. Most people can't do it.

• 2:01:22Lenny Rachitsky?

  So interesting. What is the favorite product? You've recently discovered that you really like, whether it's an app or something physical.

• 2:01:30Speaker 00

  I was just singing the praises of a product to a friend. It's the most boring and stupid product ever. It's just a humidifier. And you'd be like, okay, how can you mess up a humidifier? But like, actually, it's actually very difficult to get it exactly right. It's like, you know, what like, there's always little attention to detail. Craft, this is a group talking about craft. It was on my mind. It's like a very humble appliance. And it's actually like, I've gone through like 10 different models trying to find something that doesn't drive me crazy. Like, you want to run it at night? If it has a light that's on all night, that's really annoying. If it makes a noise, that's no good. If it over, like, there's like all these things where you're like, boy, if anyone had used the jobs to be done framework for one minute on what this physical device is supposed to be, this is the product they would have built. And I can't believe it's like such a, so interesting in modern capitalism.

• 2:02:15Speaker 00

  There's so many categories where they're just, there isn't a product like that. Or there's just one, you know, like, how come every product is not like that? And, you know, the forces we've been talking about are the reason why. It's funny to see it like, you know, represented in such a humble object.

• 2:02:29Lenny Rachitsky?

  What is the actual humidifier that you found?

• 2:02:32Speaker 00

  It's the Levoit 300S, ultrasonic humidifier, Levoit 300S. It's, it's like, it's just a really well-made $60 appliance, you know? It's nothing, nothing special, but.

• 2:02:44Lenny Rachitsky?

  They're about to see a spike in sales. Go Levoit.

• 2:02:48Speaker 00

  I, somewhere, some, somehow, there was a product management meeting where they talked about how to make this thing. And so I just, I can picture it right now. Somebody was like, look, the way we make these things sucks. Like, can you please let me just like, put the thing that's normally on the bottom? Let me put it on the top and let me put this in there and put that in there. And someone was like, oh, who cares? That's going to add three cents to the cost and reduce our margins. And someone was like, no, really think we should do it right. So I would like to reward people like that.

• 2:03:13Lenny Rachitsky?

  Yeah, this is going to take us off topic potentially, but I've just thinking, I've been thinking more recently about how most often, the best stuff comes from just like one person's singular control over how to do that thing over and over and over.

• 2:03:26Speaker 00

  Yeah, there's actually, if you study Toyota Production System, they had this job that's called the Chief Engineer. I wish more founders knew about this because like when you become large, it's important to be able to empower the founders that work for you and not just only see yourself as the founder. So the Chief Engineer is the person with the moral authority over an entire line, like a car from start to finish. And I don't know if this is still true, but back in the days when people were writing a lot about Toyota, inside the company, the car is not called a Toyota Camry. It is called so and so San's car. And the thing about the Chief Engineer is they have no reports. Nobody works for them. They just have like the, they have what's called the big room. If you've studied that whole thing, like there's like a place where they are and they have, they have a small staff, but like they have the design and the car and like

• 2:04:10Speaker 00

  anybody, as the, as the number of people who work on a car, you know, it swells up and then it comes down because you have the design phase and then you go into production and you, and eventually like there are people who go, goes back down. The most important thing you have to do in a product is make trade off decisions. And if you just let people make their own trade off decisions, it's totally different. It's really difficult to have any kind of coherent design like thrust. And so the idea is like, this is the person who makes those two, if there's a fight between two departments about how much the thing should cost, or if someone asks a question like, listen, I can improve the, the aerodynamics of the thing by this much, but it will cost this much and it will mean we have to take this button and turn it from metal to plastic. You have someone who can actually be like, no, that button has to be metal. Like we made a promise that this is going to be like, or

• 2:04:53Speaker 00

  but doesn't matter. Like you just need someone who knows that thing. It has to be that you can keep it in somebody's head. So yeah, call the Chief Engineer.

• 2:04:59Lenny Rachitsky?

  Just when I thought we were done with golden nuggets in this episode, that is so interesting. I think that makes so much sense. And I also agree that should happen more often at companies. Wow.

• 2:05:08Speaker 00

  Yeah, it's very much missing in most company structures. Yeah.

• 2:05:11Lenny Rachitsky?

  All right. Two more questions. Do you have a favorite life motto that you like to repeat to yourself, share with folks, something that you come back to often that helps you do the right sorts of things?

• 2:05:21Speaker 00

  Well, I won't, I won't get into the whole explanation. The, the motto is that nothing real can be threatened and nothing unreal exists.

• 2:05:29Lenny Rachitsky?

  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 cockfired and that kind of spread as much as you thought it should?

• 2:05:43Speaker 00

  Oh, yeah, yeah, I got tons. I got tons. Oh, man, the cutting room floor is full of so many things. I went through a really extended period of trying to use, but this is before lean startup. I tried to use the cell biology as the metaphor for a startup. 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.

• 2:06:27Speaker 00

  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 flow through. And 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 a natural side effect of the actions of past customers. And so that is obviously true of the viral loop. Everyone knows the paid, you know, engine of acquisition where you have, you know, where your marginal profit per customer drives your ability to invest in customer acquisition. But there's also what I call the sticky engine of growth, which is kind of like the vestige of this idea that made it into the lean startup. But, but I actually think that that's a whole really interesting thing where like, if

• 2:07:12Speaker 00

  you think about, the way to think about it is like, if someone is living their life, having a happy time, then for some reason they use your product. Why did they use your product? What made them come back to your product? And it's actually, there's not that many things it can be. Like, it might be because you gave them a synthetic notification, like, hey, please come back to my product. And they did. It could be because some kind of organic notification took place, like that is like they got an email from a friend on your platform that was like, they got a notification that was driven by like their, you know, one of the most successful customer emails of all time is PayPal's, you've got money. Click here to take the money. It has a very high click through rate, maybe second only to Facebook. Someone has tagged you in a photo. But we're not going to tell you which photo it was. So you better click right like so like so

• 2:07:57Speaker 00

  something happened. If it's not one of those two things, then it's got to be because of positioning. Something in your brain on its own told you to use that product. I like, why did you go start playing World of Warcraft? Did someone have to, did you have to get a notification to remind you like, you like playing, you know, I had to tell you like doing it or like, or something happened in your life that like made you need, you're hungry. So you went to the thing to get the food like, because those are the only ways by which people come back to a product. Those are all, those all can be measured, studied, and understood to the same level of precision as we have with viral loops. I can't for the life of me, understand why viral loops gets all the attention and no one is remotely interested in the science of engagement. So I thought, I thought I was a time when

• 2:08:42Speaker 00

  I thought engagement loops would make me way more famous than lean startup ever would. I was very, very wrong.

• 2:08:48Lenny Rachitsky?

  This also reminds me that you also, I think we're the first person to talk about growth as loops and these specific loops and a growth engine.

• 2:08:55Speaker 00

  Yeah, yeah.

• 2:08:56Lenny Rachitsky?

  Which now a lot of people talk about.

• 2:08:57Speaker 00

  Mine, yeah.

• 2:08:57Lenny Rachitsky?

  Yeah. So wow, we discovered another one. I imagine there's many more. Eric, this was incredible. I definitely think this is my new favorite episode. Thank you so much for being here. Two final questions. Where can folks find you online if they want to reach out potentially? And then how can listeners be useful to you?

• 2:09:12Speaker 00

  You still find me at theleanstartup.com. I'm at Eric Ries, E R I C R I E S on all the usual places, although I really don't do a lot of social anymore. So like joining my mailing list at theleanstartup.com is probably the best way to keep track of like the major things that I do in my life. And then, yeah, I do try to get on some, some social from sometimes to make some, some announcements. And if you want to reach out, I'm just [email protected].

• 2:09:34Lenny Rachitsky?

  How can listeners be useful to you?

• 2:09:36Speaker 00

  Oh, that's really sweet. You know, honestly, people need to just take these ideas and do something with them. And then you learn something from it and then tell me what happened. That's all I want in exchange. Just tell me what happened. Even if you like the people I've learned the most from are the people that tried to use my ideas, thought they were like the stupidest thing they ever heard of and like, doesn't work and they're mad and whatnot. Like, tell me, I want to know all about it. Because really, my job, like the way I see myself is like, my job is just to try to understand these things. I just want to know the truth. If I'm wrong, like, I don't like being wrong. I'm not, I'm as attached to my ideas as anybody else. But like, I try really hard to find out what is true. So if you discover something new. Please tell me. That's all I ask. Just let me know. And, and if you don't try, then how are you ever going to discover anything new? So just, you know, do you like lean startup?

• 2:10:20Speaker 00

  If like, you know, every day I meet people who are like, who've just heard about lean startup for the first time. I, for me, it's so old that like, every day there's people read the book for the first time and they're like, they have a question about it. So like, if that's where you're at and you just discovered it, like, excellent, you know, I've, I've read a couple of books, you can go read them, like, please, for those ideas. If you're someone who's like jaded and they're like, oh, I'm so tired of hearing about lean startup. Like, I, I mentioned a few new ideas in this, uh, in this conversation, like, go try one of those. And like, even if, even if it doesn't work, or if it does work, or, you know, like, even the, the people I've learned a lot from are people who, they tried it, and in the process of it not working, they had another even better idea. And then they went and did that. Well, go do that. All I ask is you tell me what happened. I want to learn from, from people who,

• 2:11:03Speaker 00

  who are making this happen. And like, you know, I hope as we come together as a, not just as a lean startup movement, but as a startup, like as a group of people who fundamentally believe that we can make the world a better place through the building of organizations from scratch. Like, we have that as our belief, like, that, that the future is not scary, newness is not something to be feared or opposed. But there is a, like, a responsible, methodical, value-creating way to, to make positive change in the world. Like, that, that's an ethos that is not universally shared. And that if someone's listening to your podcast, my assumption is you're in our tribe. So like, we as, we have a collective responsibility to think about, like, what do we want, what do we stand for? Beyond just my company, my founder, my story, my, but like, what do we as a group, what are our shared and collective values?

• 2:11:48Speaker 00

  And how do we make those manifest in the world? I'll just leave you with one last idea. We collectively have so much power, it's crazy. Because the system, the way it works now, what I've learned about our current, you know, what they call late-stage capitalism, right? Like, financialized engine of capitalism, is that it is value-destroying.

• 2:12:08Speaker 00

  In so many ways, and although markets discipline companies and they require them to create more value than it's destroyed to stay alive, new companies, the ones that we build are so valuable, like the core insight that makes a thing is so valuable that the being that you've built can withstand so much damage before it collapses. And yet, if you look at the average tenure of companies in public companies, like just look at average CEO tenure, like any, all the metrics you look at are really grim here. Like, we're destroying companies faster than we create them. Such as like, the total net number of public companies in America is down more than half from a peak that was in our lifetime. It's not that long ago. What's going on? Well, the system requires a steady supply of fresh meat to replenish that which it

• 2:12:52Speaker 00

  destroys. And if you're listening to this podcast, you probably are one of the peddlers. So you're the manufacturer of the thing that the system requires for its basic survival. And so, as a matter of fact, we, as a group, we get to set the terms by which this is done. And so, if we want to stop selling our beings, our babies, our children for money, we don't have to do that. If we want them to have a certain ethos themselves in the world, we want them to be trustworthy counterparties and do something for the people we care about, we can insist that that is the precondition upon which we will give our everything to. And so, you know, I don't want to say that I know all the answers or that my values are the ones that should win out, but I do think that we do have a certain shared value, set of values that we ought to be more ardent in defending.

• 2:13:36Speaker 00

  And I hope, I hope your listeners will take that to heart.

• 2:13:39Lenny Rachitsky?

  And beautiful and empowering way to end this. Eric Reese, thank you so much for being here.

• 2:13:45Speaker 00

  My pleasure.

• 2:13:46Lenny Rachitsky?

  Bye, everyone.

• 2:13:49Lenny Rachitsky?

  Thank you so much for listening. If you found this valuable, you can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app. Also, please consider giving us a rating or leaving a review, as that really helps other listeners find the podcast. You can find all past episodes or learn more about the show at lennyspodcast.com. See you in the next episode.