Pod Insights Passion Struck with John R. Miles How to Build a Company That Never Loses Its Soul | Eric Ries - EP 775 About this episode Why do so many organizations lose the very values that made them successful? Eric Ries explains how leaders can resist the pull of short-term thinking, build lasting trust, and create companies that grow without sacrificing their mission.
Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 John R. Miles? Coming up next on Passion Struck.
0:02 Speaker 01 And most organizations frankly are lying about what they're all about. They have a mission statement that sounds very lofty. But if you read their legal documents, they have a legal purpose that is something different. Quite often, they have a lofty purpose. Like I tell the story of Silicon Valley Bank, that was my bank before it collapsed. That's why after it collapsed, I wanted to know what happened.
0:24 Speaker 01 They had a lofty mission that was mission statement that was like to advance the innovation economy or move the innovation economy forward, something that sounded really good. It made me so proud to be a customer. Oh yeah, that's exactly right. But you, they're a bank, their legal papers are all public and you can read in the documents, it says that their legal purpose is to maximize shareholder value. If you have this divergence between mission and purpose, eventually the hypocrisy becomes too great and the thing collapses. That's what we see over and over again.
0:50 John R. Miles? Welcome to Passion Struck. I'm your host, John Miles. This is the show where we explore the art of human flourishing and what it truly means to live like it matters. Each week, I sit down with changemakers, creators, scientists, and everyday heroes to decode the human experience and uncover the tools that help us lead with meaning, heal what hurts, and pursue the fullest expression of who we're capable of becoming. Whether you're designing your future, developing as a leader, or seeking deeper alignment in your life, this show is your invitation to grow with purpose and act with intention. Because the secret to a life of deep purpose, connection, and impact is choosing to live like you matter.
1:38 John R. Miles? Hello friends and welcome back to episode 775 of Passion Struck. Today, we begin a brand new monthly series I'm calling The Connection Crisis. Why we feel so disconnected and how we find our way back to each other. Before we begin, I want to take a moment to reflect on where we've just been. Throughout May, our forged in adversity series explored how struggle shapes resilience, meaning, transformation, and ultimately, contribution.
2:06 John R. Miles? We examine how adversity changes us, how people recover from setbacks, and how our most difficult experiences often become the foundation for growth. Last week, Eric Zimmer, host of The One You Feed, joined me for a thoughtful conversation about sustainable transformation and why lasting change is built less through dramatic reinvention and more through small, repeated choices that shape who we become over time. Then Walter Green helped us explore a different dimension of growth: profound human need to know that our lives matter to someone else, and the importance of expressing gratitude, recognition, and appreciation while we still have the opportunity to do so.
2:46 John R. Miles? As I reflected on those conversations, I found myself thinking about a deeper thread connecting them. Human beings can endure extraordinary adversity when they feel connected to purpose, to relationships, to community, and to a sense that their lives carry significance. Yet, many people today are struggling with something that extends beyond hardship itself. They're struggling with disconnection. We see it in rising loneliness. We see it in declining trust. We see it in workplaces where people feel increasingly disengaged, in communities that feel less cohesive, and in institutions that many no longer believe represent their interests or reflect their values. One of the greatest paradoxes of modern life is that we have more ways to communicate
3:31 John R. Miles? than any generation in history, yet many people feel increasingly isolated from the people, places, and systems that shape their lives. When we think about disconnection, we often focus on technology, social media, or changing social norms. Those factors certainly matter, but there's another dimension of the connection crisis that receives far less attention: the gradual erosion of trust. Trust is what allows relationships to deepen. Trust is what allows communities to flourish. Trust is what allows institutions to serve the people they were created to help. And when trust begins to weaken, connection often weakens with it. That idea sits at the heart of today's conversation. My guest is Eric Ries, entrepreneur, innovator, and author of one of
4:16 John R. Miles? The most influential business books of the past two decades, The Lean Startup. In his new book, Incorruptible, Why Good Companies Go Bad and How Great Companies Stay Great, Eric explores why organizations that begin with strong values and meaningful missions often drift away from the very principles that made them successful in the first place. Together, we discuss trust, leadership, mission drift, organizational culture, and the forces that cause institutions to lose sight of the people that they were originally built to serve. But beneath those topics is a larger question that affects every one of us. What happens when the systems we depend upon stop feeling human? And what does it take to rebuild trust once it has been lost?
4:59 John R. Miles? I can think of no better conversation to launch this series. Before we dive in, if Passion Struck has ever helped you see your life differently, please consider sharing the show with someone who might benefit from it. Leaving a rating or a review on Apple Podcasts or Spotify helps more people discover the show. And subscribing on YouTube allows you to catch all our full conversations in weekly clips. Thank you for being part of this community. Now let's dive in to my conversation with Eric Ries. Thank you for choosing Passion Struck and choosing me to be your host and guide on your journey to creating an intentional life that matters. Now, let that journey begin.
5:39 John R. Miles? I am absolutely honored and thrilled today to bring Eric Ries on Passion Struck. Eric, it's so nice to have this opportunity to finally meet you.
5:48 Speaker 01 Oh, thanks so much. Very nice to be here.
5:51 John R. Miles? So am I catching you in Austin today?
5:53 Speaker 01 Oh, no, I'm in the Bay Area.
5:55 John R. Miles? Oh, you're in the Bay Area. I was listening to another one of your podcasts, episodes, and you must have been in Austin on that day. And I just thought I'd ask, because I lived there for many years.
6:05 Speaker 01 Oh, it's a wonderful city. I like it a lot, but I'm not there at the moment. No.
6:08 John R. Miles? Well, it's like the Bay Area of the mid portion of the country now. Given how many people from California have migrated there.
6:15 Speaker 01 I know. I have so many friends there. Yes, I really got to come up with an excuse to get back there.
6:20 John R. Miles? Eric, you have helped a generation build companies with The Lean Startup, and it is such an amazing book. But now you're warning that many of those same companies lose their soul. What did you realize you got incomplete?
6:37 Speaker 01 Well, I wish someone would have told me that the more successful an organization is, the more valuable it is as a target. So I was taught, and I passed this on to others, because of course, it's what I was taught, that success would give you freedom. If you get product market fit, if you build a company that's very successful, you'll be able to make it the way you want it to be. It will stay true to its values. It will have some long-term purpose. And that does happen sometimes, but quite often, the gravitational pressure of our financial system comes in and redirects the company in ways that a lot of founders, a lot of leaders, feel like they've become like Frankenstein and his monster. What is this thing that I have made? What happened to it? I don't understand. So yeah, I've watched so many founders lose control of their company.
7:20 Speaker 01 And I tell the story in the book of going to a celebration of a founder who had made more money for his investors than they could spend in five lifetimes. Really a very successful story. But he had been ousted by those same investors because they wanted more. And I was counseling a new entrepreneur as I was on my way to this event. And I'm explaining to him these dangers and risks. And he was talking to me about this incredible technology that he's building. And he was like, wow, I'm so glad finally someone is willing to talk to me about this. My employees and potential employees are constantly on me to answer this question. How can I assure them that this company will stay true to its values? That it will pursue long-term value creation and not become extractive and exploitative so many other tech companies?
8:02 Speaker 01 But when I ask investors about it, they treat those kinds of questions like, oh, you must not be very serious about business. He's feeling trapped. Anyway, I'm like, look, I gotta go. I can't talk right now because I've got to go to this event. I can watch people streaming into the venue. A thousand people here who've flown in on their own expense from all over the country to be there to celebrate this founder. I saw someone walk in who I was like, I think that person, the founder, laid him off. And here he is at the celebration. And the founder I'm talking to is like, wow, respect. That's the kind of company I want to build one day. Like, man, you are not listening to me. He doesn't work there anymore. This is not a party, it's a wake. And he's like, did he die? He didn't die. Is the company dead? No, the company's not dead. Then what was lost?
8:48 Speaker 01 And well, this was a company we all trusted. And now we don't trust it anymore. Not because the new leadership is bad. I like the new leadership. They're perfectly fine. But I know now in my bones that any promises they make, if investors don't like it, they're going to be gone. And he's like, wait, are you saying that's going to be me someday? Like, that's what I'm trying to tell you. Success will not protect you. So he asked me the question that kind of launched this whole book. Is it possible to build an incorruptible company? And I had to tell him honestly, yes, it is possible. I will help you do that if you want to. But the bad news is you're already not on the right track. Because you have adopted already without knowing it, so many of the best practices we teach today
9:32 Speaker 01 about how companies should be built, structured and governed, that are actually value destroying. So I gotta go to this event. But after the event is done, I'll call you back tomorrow. We'll get to work. We'll try to put this company on a new and better path, which we did. And I want that for everybody.
9:48 John R. Miles? Eric, I should have probably introduced the book instead of having you mention it right there. But I mentioned your first book, but I didn't mention the reason we're here today, which is to talk about your new book titled, Incorruptible: Why Good Companies Go Bad and How Great Companies Stay Great. And I want to start here. When I was at Lowe's, we partnered with Wake Forest School of Business and they took the senior leadership through a series of MBA level courses. And one of these was all on the financial success stories of companies.
10:30 John R. Miles? And I remember in one of the first lectures that the professor gave, he had us do this exercise where he had us look at the Fortune 500 from 20 years ago and then look at it in modern day. And what did we notice? Well, what we noticed is about 80% of the companies were no longer there. And where I'm going with this is I recently had a reach out from Jim Collins's publicist because he's also coming out with a new book.
10:58 Speaker 01 Oh yeah, I've heard it's great.
10:59 John R. Miles? It is great. It's great. Like your book is great. And what's interesting to me, though, is if you go back and you look at From Good to Great, how many of those companies that he explained are great are still considered great? And I think that is an interesting lead in to your book. How do these great companies go bad? So what would be your immediate answer to that? What did Jim Collins get right and what did he get wrong?
11:28 Speaker 01 Yeah, well, Jim Collins is one of the all time greats about management. How do we lead an organization to greatness? And in fact, if you look carefully at the subtitle of the new book and how it's laid out, it's actually a subtle homage to Good to Great. Yeah, I've been very influenced by his writing. I think a lot of us in the management field, though, have been neglectful in focusing our attention on structure, on governance of companies. So what happens is you build these remarkable companies. I've done this many times. And then you get to this stage, this size, when you feel like you're up against this other force, more powerful than management. And you have a hard time even saying what it is. We don't even have good language for it.
12:11 Speaker 01 Mission drift, it sounds like a navigation error. Bureaucracy, it sounds like paperwork. What is this thing? And I decided, after seeing this in action for so many years, we should use the name our grandparents would have used for it, corruption. In the old fashioned sense of corrosion in the joints, there's a weakening of the material, a vulnerability both to inner temptation and outer pressure. That force, that corruption knocks companies off course. It knocks them off their true path and allows people to make money from them without creating any value. So that, to me, seems like the heart of the error that we have to work against.
12:53 John R. Miles? When I think of what you talk about in the book, you describe founders building something meaningful and then watching it slowly get taken from them. And there is no better example of that than I can think of than Tony Hsieh and Zappos.
13:06 Speaker 01 Oh, goodness, goodness. Oh, yeah.
13:09 John R. Miles? Because here you have a founder who built his whole company on belonging, on wanting to see his employees flourish, on concentrating on the customer and wanting the customer to flourish as well. And then when Amazon ends up purchasing them, you see this slow vanishing of the whole value system that he built into the company. Am I explaining it correctly?
13:32 Speaker 01 Well, I think that's fair. I knew Tony before he died tragically, and I had done some work at Zappos when it was owned by Amazon, so I could watch the conflict unfold in real time. This tension between the values of the founder, but I don't like to personalize it. It wasn't so much about Tony's personal disappointment, but rather in the promise that this organization had made to its customers. If you've read Delivering Happiness, this company had a very distinctive ethos that was gradually lost. The same thing happened to Whole Foods under Amazon's management. And that's not to say that Amazon is a bad owner. I think they've actually been a reasonable steward of a lot of companies that they have acquired. But that's not the issue. The issue is not, is Amazon good or bad? But has something
14:15 Speaker 01 been lost, something that was value creating and vital? We just, we see it over and over again.
14:22 John R. Miles? A number of years ago, I was speaking with Jim McKelvey, who you may know.
14:26 Speaker 01 Yeah, sure, sure.
14:27 John R. Miles? Square. And Jim, like you, does a ton of engagements with startups, mentoring new founders and helping them try to escape themselves in many cases. And I asked him, what is one of the biggest issues that you see that stops these startups from becoming successful? And he told me that they go into this finding a problem that needs to be solved. And that's the starting point. All great startups are solving a huge problem that they see that needs a solution to it. And he said, but what ends up happening is over time,
15:07 John R. Miles? Different things start happening to it. They get pressure from their investors. They start getting more attention and all of a sudden they start becoming the opposite of what they set out to be, which is a key component of your book as well. Why did you both reach that same conclusion?
15:26 Speaker 01 Well, I know Jim well and I think highly of him. And if you're paying attention, you will form this conclusion. This is an epidemic. You look around. Let me tell it. Let me try to explain it by way of a story. So maybe sometimes this can sound very abstract or like it's something that mostly affects boardrooms and fancy founders and stuff like that. Let's tell a story. Let's start with the legend of Saul Price. I think this is a good place to begin because Saul is widely considered to be the father of modern retail. You want to understand how influential Saul was when a guy named Sam Walton was thinking about starting a retailer in Arkansas. He called the company Walmart as an intentional tribute to Saul's company, FedMart, the original discount retailer.
16:09 Speaker 01 So FedMart was started by Saul in 1954, I think, in San Diego. And he had been a lawyer before he became a retailer. And so when he was a lawyer, he had this idea that he was a fiduciary to his client, meaning he had to put the client's interest before his own. That was the essence of what the legal code of ethics required. So it was natural to him when he became a retailer to say, the customer is my client. I have a fiduciary duty to the customer. And he built the company on that principle. One of my favorite Saul stories is that when competitors would try to undercut him on price by doing lost leader strategy, he would post their Sunday circular ads inside his own store with signs that said, don't buy this product from me. You can get it cheaper down the street.
16:55 Speaker 01 A level of integrity that today, modern business leaders, we find is almost unthinkable. That was Saul. Company was very successful. He took it public. Everyone made a lot of money. It was going great. But just like Jim was talking about, as the company became public, it faced this pressure, always pressure, to raise prices, to lower wages, to grow faster, to betray the promise of FedMart. Saul was way too stubborn for that, so he wouldn't do it. And so he was always fighting with his investors. He brought in new investors to replace the old investors. It was like, tale as old as time. The new board would be same as the old board, because all of these financial intermediaries were captured by the same gravitational force, the same thinking about how to extract as much value from an organization, rather than how to create as much value
17:40 Speaker 01 with that organization. That is the cardinal sin of our modern finance-driven economy. In 1975, after Saul had been building the company for 20 years, 20 years he built it. He comes into work one day, and just like my founder friend, whose party we were talking about, he can't get in the door, because they've changed the locks. He doesn't work there anymore. And with him gone, the investors could finally get what they wanted. FedMart became a conventional retailer, pursuing faster growth, more profit. What's so interesting to me about our modern economy is how often we see companies utterly destroyed in the name of profit. Isn't that odd? It took the investors seven years to bankrupt FedMart.
18:25 Speaker 01 By 1982, it was completely liquidated, all because they were pursuing profit. But Saul was not done. The reason I like this story. Most stories like this have a sad ending, and that's the end. SAIC, founder was betrayed right before he died. He died not knowing what would happen next. Nothing good. So many of these stories. Edwin Land forced out a Polaroid. Polaroid never invented a single thing ever again. Rare do you have a second act story like Steve Jobs. Well, Saul is one of the second act success stories. So Saul Price took two weeks off after this betrayal. He leased the office upstairs from FedMart, and he was back at work. He built a new company called Price Club, which today is not that well-known, but when I was a kid, it was a major retailer. That's where my family shot.
19:09 Speaker 01 But more importantly, another person quit FedMart in protest when Saul was fired. Someone who had worked his way up from stock boy to executive, because Saul was a big believer in hiring and promoting from within. And after he left, he helped Saul build Price Club for a while, and then he struck out on his own, started his own new company. And some years later, his company and Saul's company merged to form a company that they called Price Costco, but we just call Costco. Today, Costco is a $400 billion public company that still operates the ethos of Saul Price, the fiduciary to the customer, above-market wages, the capital margins, the whole thing.
19:50 Speaker 01 But why did this financial gravity destroy FedMark while Costco endures? Is it just because they're so big, just because they're so successful? Dream on. Wall Street has tried many times to ruin what makes Costco great, but it can't because Costco was built with structural integrity. It is protected by a governance fortress that makes it impossible for outside investors to interfere. That's the formula for building an incorruptible company. We've got to have the ethos of Saul Price and the integrity of Costco.
20:21 John R. Miles? Before we continue, I want to thank all of you who continue supporting Passion Struck and sharing these conversations with others. One of the themes running through today's discussions is trust, how it's built, how it's lost, and why it matters so much to our ability to connect with other people, organizations, and communities. Those same ideas are central to my upcoming book, The Mattering Effect, which explores why so many people today feel unseen, disconnected, and exhausted despite living in a world that's more connected than ever. If you'd like deeper reflections, companion exercises, and weekly insights designed to help you live more intentionally, you can join us at theunitedlife.net. Now, let's take a quick break for our sponsors. Thank you for supporting those who support the show.
21:12 John R. Miles? You're listening to Passion Struck right here on the Passion Struck Network. Now, back to my conversation with Eric Ries.
21:20 John R. Miles? Thank you for sharing that. I spent a number of years earlier in my career at Lowe's Home Improvement, and I absolutely loved working for Lowe's. Even though when I joined it, it was 48 billion in revenue, it felt like it was a small business. You still had many of the original employees. One of the most esteemed was a gentleman named Larry Stone, who similar pattern had started out working in the mailroom and had worked his way all the way up. When I was initially there, he was the head of store operations and then became chief operating officer and eventually president of the company. And the store managers adored him.
22:02 John R. Miles? But what I loved about it at that point in time was everything was about wow customer service. How do we wow the customer every opportunity we have? And every single meeting with the executive team, the CEO or Larry would get up there and they would constantly talk about the core values. And what was crazy to me was there was so much pride in the company that it was one of those environments where I would say at least 50% of the employees that you would see walking around the buildings were wearing Lowe's apparel, whether it was a Jimmy Johnson racing shirt or something branded Lowe's. People were just proud to work there. And I then left there and I went to Dell.
22:47 John R. Miles? And this was during the transition point before Michael ended up taking the company back to being privatized and buying EMC. And no one wore Dell gear, no one talked about core values. And it was just black and white, the difference in the cultures that I saw. So I bring this all up because there is something really important here. And This gap that that gets created is a pattern that has now been repeating as you write about for over 200 years. Why do you think the system doesn't correct itself? Why do we keep doing this?
23:27 Speaker 01 Well, you say it's a thing that needs correcting. I think there's a lot of people that are profiting very handsomely from it being just the way that it is. You don't ask the locusts why they haven't corrected their behavior. You learn to control their population. You learn to harness those kinds of behaviors in a productive way. That's what we have to do. It is important, I think, for founders, leaders of all stripes, to understand how long this mistake has been being made. I tell the story of Robert Owen, poor benighted Robert Owen, who first encountered that same Saul Price story in 1800. This is a longstanding pattern. But it's very important, when we start to talk about the history of this, the pervasiveness of this, people get depressed.
24:11 Speaker 01 Part one of the book is called The Shape of the Abyss. So I promise, I'm not going to sugarcoat anything here, okay? I will tell you straight what is going on. This is not good. But it is not inevitable. People always tell me this is inevitable. They're like, what are you going to do, man? This is inevitable as gravity. No. If it was inevitable, there would be no exceptions. But Costco's an exception. And in fact, in almost every industry, we have these outlier exception companies. Patagonia, Vanguard, Nova Nordisk, IKEA, a lot of companies that have been around for a really long time and are still true to their own purpose. Are they perfect? No. But they endure. The data says companies that are structured in this very particular way that I advocate
24:51 Speaker 01 for in the book are like multiples of times more likely to live to year 50 compared to conventional structures. These companies are strong, whereas conventional structures are weak. So one of the things we have to do is study the outliers. I've had the privilege of helping build some outliers, but we also have these historical examples. What do they all have in common? If you study, you will discover every single one, without exception, violates.
25:19 Speaker 01 Grossly violates today's best practices about how companies are supposed to be structured. And so that was really my clue that it was time for a new theory of corporate governance, like a new idea of what the best practices should be to get us out of this era of what's called shareholder primacy towards something I think would be a lot more productive. I prefer with something like mission primacy where we focus on the beating heart at the center of these organizations, their reason to exist. They're not just financial instruments to enrich shareholders. That's, that sucks. We could do so much better. In fact, in the book, I argue that we should reconceive what it means to be a for-profit
26:01 Speaker 01 company as an organization that pursues the maximization of human flourishing.
26:08 John R. Miles? Are you familiar with Branson's B-Team concept?
26:12 Speaker 01 Sure.
26:13 John R. Miles? Yeah, I think what he was trying to do there with that B-Team, which was to try to get a number of high-powered CEOs of major companies, Marc Benioff was one of them. I think that the person who ran Harley Davidson was another, and to try to get them to start using different metrics of success other than shareholder value. Do you think that is the path that we should be going down?
26:37 Speaker 01 It clearly is. And again, not just my opinion, man, but like we have real data. We have real evidence that there are better ways. And in order to do this, we have to be able to preserve a company's ability to think long-term and to stay on mission. I call it being mission-driven versus mission-hopeful. And most organizations frankly are lying about what they're all about. They have a mission statement that sounds very lofty, but if you read their legal documents, they have a legal purpose that is something different. Quite often, they have a lofty purpose. Like I tell the story of Silicon Valley Bank, that was my bank before it collapsed. That's why after it collapsed, I wanted to know what happened. They had a lofty mission that was mission statement that was like to advance the innovation
27:22 Speaker 01 economy or move the innovation economy forward, something that sounded really good. It made me feel proud to be a customer. Oh yeah, that's exactly right. But you, their bank, their legal papers are all public and you can read in the documents, it says that their legal purpose is to maximize shareholder value. If you have this divergence between mission and purpose, eventually the hypocrisy becomes too great and the thing collapses. That's what we see over and over again.
27:46 John R. Miles? Eric, I want to get into flourishing and do a deep dive into it in just a second. I want to set it up though, before we go there. I think we need to give the listeners an understanding of what financial gravity is. Given the questions I was just asking you, it is the very thing that is shaping many of these decisions that is reshaping the identity of these companies. From leading into human flourishing, at what point does this financial gravity start to point people inside the organizations from stop choosing and really just start conforming?
28:24 Speaker 01 This is a force we all experience. We live with it every day. It's as natural as physical gravity. And the reason I use gravity as a metaphor is because you can say, well, I don't believe in gravity. Gravity believes in you, as it demonstrates every time you jump in the air, it brings you right back down. So if you ever had a meeting where a bunch of people sitting around a table, including your boss and your boss's boss and the big head honcho and you, and the head honcho starts saying something that is really categorically stupid.
28:56 Speaker 01 And you're like, should I speak up and say, boss, big boss man, that just ain't true? Or do you smile and nod like everybody else in the meeting? We've all felt that feeling where you're like, gosh, I want to speak up and say something, but is that going to be good for my career? Probably not. You don't want to be the non-consensus person in the room, just like you have a subtle change in your behavior. If you've ever seen somebody meet a celebrity for the first time, you'll witness the same gross thing. They become weirdly obsequious in ways you don't totally understand why. If you ask them afterwards, why did you do that? They often will say, I don't know, it just came over me. Same thing, you meet a billionaire, I've seen it. People, they just can't help themselves. They really want the approval of this person.
29:40 Speaker 01 They want them to think they're good. And there are levels to this. I once was sitting in a room with a bunch of top executives, meeting Oprah Winfrey. You would think they were a bunch of little kids begging for teacher's approval all of a sudden. Because when you're with someone who has a power disparity with you, you can't help it, you are biologically evolved to be deferential. We have a lot of research on this psychological mechanism. It is an unconscious reflex to try to please and align yourself with those who have resources. You can understand in evolutionary terms why this might be a useful, a trait. But the problem is an organization is made up of many people who are all feeling this gravitational pressure.
30:23 Speaker 01 And because when people's behavior changes consistently over time, we know from the research that eventually becomes internalized as values. We know from the psychology research that consistently performed behaviors eventually become enacted as values. So the right way to think about gravity, it is this unconscious value transmission mechanism from those who have power, resources, status to those who lack it. So what happens is an organization grows. From a very early age, you start hearing people say things like, "Well, we could do that, but investors might not like it." You hear this nonprofits, donors might not like it. You see a company go public and all of a sudden, everybody in the room's like, "The market might not like it." Might. Are you saying you're sure you've gone and interrogated those investors?
31:08 Speaker 01 You know what they want? No, I just think they might not like it. And that subtle change of values happens over time to the point where you often have people change their values completely without even being aware that they themselves had changed.
31:24 John R. Miles? Eric, in my work, and I've got a book coming out in October myself called The Mattering Effect. But in that, I define a term called the mattering gap. And the mattering gap is where we individually start feeling like we're being erased, like we're outwardly visible, but internally, we feel invisible. And how does that relate to cultures of companies and the invisible leader that you bring up in the book?
31:55 Speaker 01 Yeah, so the invisible leader is a really important concept in the book. And to understand it, you got to go back into the past. Everybody knows Frederick, Frederick, everybody who's studied management at all, and at all, knows Frederick Winslow Taylor, the father of scientific management or Taylorism, which for much of the 20th century was a very dominant management idea. And even now, if people want to show their management bona fides, they often feel the need to criticize Taylorism and show how their new thing is a repudiation of it. So he was by far the most famous management thinker of the 20th century and probably of all time. Modern readers can't really appreciate what an incredible celebrity he was when he was alive. But it was a contemporary management thinker named Mary Parker Follett. She lived around that same time.
32:40 Speaker 01 She was very active in the 1910s and 1920s. And her work was diametrically opposed to Taylorism, whereas he saw workers almost like robots. He was very into hierarchy and command and control. He had a bunch of racist ideas, too. She was very far ahead of her time. Many of her ideas, if you saw them today, like on a LinkedIn post, you'd be like, oh, I assume that's from Adam Grant or somebody? That sounds right on. That's just what we talk about today. But she was writing in the 1920s. It's unbelievable. She talked about the preference for power with rather than power over. She said, "The goal of a leader is to make more leaders." Come on, if you saw it on LinkedIn today, you'd be like, damn, right on. Very cool, right?
33:24 Speaker 01 She said that, and asked once if subordinates should obey their superiors. She said, "No. The superior and the subordinate together obey the law of the situation." Meaning they work together to figure out what the situation requires and they do that. She just was way ahead of her time. And one of the things she used to say that would drive her contemporaries just crazy, she would say, "Mr. Roundtree, the most excellent leader, the most excellent owner of the Roundtree Chocolate Factory, is not the leader of the Roundtree Chocolate Factory." And people are like, lady, what? His name, his family owns the building, the company, like everybody works for him.
34:09 Speaker 01 If he's not the leader, who is? She'd say, "Well, he is an excellent leader." But only because he is very effective at instilling in his employees a sense of common purpose. And is the common purpose itself, rather than Mr. Roundtree, who is their invisible leader. If you understand this concept, you can understand so much about what goes wrong in modern companies. Because the vast majority of decisions that are truly consequential to whether a company endures or collapses are made when no manager is present. There are a million little decisions every day. Should we make the product a little bit worse to make a little extra money?
34:51 Speaker 01 Someone calls into customer service with a problem that technically, by the letter of the law, you don't have to fix, but you could. Well, what are they gonna choose? What are they gonna choose? The modern, kind of easy lazy way of business, Jim Senegal, the founder of Costco, he calls it the business equivalent of taking heroin. He told me a story once that you can, if they raise the price of a dollar bottle of ketchup at Costco to a dollar and three cents, no one would notice. Would not affect their sales at all. If they raise prices across the board by 3%, no one would notice, but they would double their net income, which is a lot of money. So why don't they do it? He said, "Well, if you do it once, you gotta do it again. It becomes baked into your forecast."
35:34 Speaker 01 That's the easy way, the simple way. Seems like the seductive way, but if that's the ethos, if you don't consciously push back against it, that lazy default will infect everything in your business. So the goal of our operational leadership should be, as Mary Parker Follett taught, to instill this sense of common purpose into every employee so that they know how they're supposed to behave even when nobody's watching. They still will want to do the same, the right thing. They will still try to earn the trust of our customers, of our employees, of our investors, of anyone that they're interacting with. And so the book is a lot about how to create the operating conditions for this to happen.
36:15 John R. Miles? Eric, in my first book, I had a chapter which has been one of the chapters I get the most questions about. And the whole concept about this was, I think, the modern leader and what people are striving to is the wrong leadership model. So what I suggest in this chapter is the concept of a gardener leader. And to me, what a gardener is really doing is it's all about the development of the culture. And the whole thing is putting the ingredients in place to make your employees flourish. Because coming from a military background, if I'm at Special Operations Command, there's no way I can micromanage
37:00 John R. Miles? a Delta Force team that's 4,000 miles away from me. But I can give them the conditions to have success. I can make them understand what success looks like. I can give them the training to succeed. But there comes a point where you have to delegate and trust that you have developed the culture and they are going to accomplish the mission. And I think it's similar to what a lot of your book is about. Would you say there are common parallels there?
37:31 Speaker 01 Common parallels between?
37:34 John R. Miles? Between that whole idea of gardener leadership, of cultivating this environment, this culture, to really create your, an environment where your employees flourish, where you are eyes on, but your hands off in many ways.
37:48 Speaker 01 Oh, I see what you mean. Yes, absolutely. I say in the book that, that many of the attributes that we're talking about, mission, values, culture, they are what are known as emergent properties in the scientific literature, meaning they are something that can be cultivated, but cannot be commanded. People find this very confusing, in the same way that we all as human beings find the philosophical question of what we are very confusing. Every one of us at some point in our lives has a late night philosophy session with a friend, where you're like, wait a second, what am I? Am I in a body? Or I am a body? Who's in charge here? What's happening? What am I? And eventually, some people will conclude, well, yes, I am in charge of my body.
38:32 Speaker 01 I'm the one who's in here because I tell my arm to raise and it raises. So I have the impulse and the thing obeys. And if you have a friend like that, you can say, oh, really? You're in charge? Can you command a cut to heal? Can you command your body to cure a disease? Can you command your body to be healthy? And like, oh, no. And sometimes after the, oh, no, people descend into nihilism like, oh, no, nothing I do matters. I guess my health is random. I can eat all the Doritos I want. So no, actually, the choices you make have tremendous influence over the emergent properties of your body. You can make choices that will lead to health, but that's something you cultivate. Character is something you cultivate. You don't command. I see managers and leaders make this mistake all the time.
39:17 Speaker 01 They say, I'm in charge of my company. Oh, how do you know? Because I give commands and they are obeyed. Congratulations. Your organization has a functioning nervous system. But what does that prove? Command it to be healthy. Command it to grow. Command it to, to be humane and not sociopathic. You can't command those things, but you can cultivate them. And so figuring out what are the practices that build this asset? I call it the most underrated asset in the world. Trustworthiness. How do we cultivate it? Grow it? Stockpile it? And then, how do we protect it?
39:54 John R. Miles? I want to go through two examples. I want to go through an example where this environment is working in the real world. And then I want to go through another company that we're both familiar with where I don't think it is. So in the book, you describe HEB, which is one of my favorite grocery retailers. Loved living in, loved going there when I lived in Texas. But you describe this story where customers are coming in because there's winter storms coming through, ice storms. And what ends up happening? The customers are picking up all these supplies and then they can't pay. So what, what's going on here?
40:37 Speaker 01 So yes, this is HEB, a really interesting company in Texas. Man, people I know who live in Texas for any amount of time cannot stop talking to me about HEB. So if you have a friend in Texas, go ask them about it. Just my favorite anecdote is that people in Texas often mistakenly think that the letters HEB stand for here, everything's better. When in fact, that is not even the name of the company. It's just the founder's son's initials. Anyway, HEB, there was this ice storm in Texas in the 2020s, a couple of years ago. And it was so severe that the power went out in the store. And I'm talking about hard power out, like backup power out, can't reach headquarters on the phone, hard outage, point of sale systems are down. And a journalist who reported the story later said there was this collective groan
41:22 Speaker 01 that went up among the shoppers. Why? Well, you can imagine why. What did I say? There was an ice storm in Texas. What were people doing in an ice storm in Texas in HEB Grocery? They were stocking up to get the things they needed for their family. Now they're not going to be able to get what they need. A store manager, I think they jumped on the counter or something, asked everyone to huddle up. Please come over. And they said, look, please just take your cart and go home. And someone yells out, how are we going to pay? You're not. You're not going to pay. Just take your things. And customers were in tears, feeling this act of corporate generosity. What I like about this story is when I tell it to managers, sometimes they'll say, wow, what a brave manager, defying corporate that way. Say, why? Why would you assume that they're defying corporate?
42:03 Speaker 01 They're like, well, did anybody calculate the ROI of this action? You're saying they got this tremendous intangible benefit of trustworthiness. But I don't know, in my company, the finance leaders would say, this was ROI negative. Intangible benefit for tangible cost. So were they risking their reputation? No. This was not an exceptional event at HEB. This is the kind of thing they do all the time. They train for this. They drill for it. Not ice storms in particular, but this idea that they have a fiduciary duty to the customer to take care of the people that shop there. So that this was not an exception. This is the rule that they're trying to cultivate.
42:45 John R. Miles? I think it's a tremendous example. And now I'm gonna, I'm gonna lead to another example. So part of my time when I was at Lowe's, I was responsible for all the store systems. And the way we built them was on a Unix-based system, which made it virtually impossible for us to ever not be able to take payment. And then we had processes in place that if we were where HEB was, we had a condition after a condition to give them the ability to take payment, even if it was paper payment. But part of the reason for doing that is HEB ran on Microsoft, like every other retailer did.
43:27 John R. Miles? And they had these issues, which is why we didn't run on Microsoft. And I remember when I was there and in this position, Bill Gates and Steve Ballmer visited us. And they met with the CIO, myself and a couple other people. And I remember Steve Ballmer, big guy, stands up. When we tell him we are not going to switch to Microsoft and just starts pounding his fist in the table and screaming at us about how big idiots we were not to use this technology. And then I fast forward that and I'm at Dell. And we're coming out with a new mobile device. And we had made the decision to go on Android. Well, Steve Ballmer flies out, meets with Michael, and suddenly we're launching on a Microsoft device.
44:12 John R. Miles? And I remember Ron Garag's, who was the head of the division, comes in to the executive room and says, we're dead on arrival. Fast forward about 18 months later, Steve Ballmer asked me to interview to be the CIO at Walmart. And I go into this environment. And I know you're very familiar with it because you were part of it. And I just remember it was such a dysfunctional environment because everyone was scared out of their mind to do anything that might upset Ballmer. What happened from that environment to one? That they're in now where everyone seems to be flourishing. Because I think this is a great example of how a great company went bad and then how it restored itself.
44:57 Speaker 01 I know a lot of funny Steve Ballmer stories and I don't even know which ones are true, which ones are apocryphal. One of my favorites is someone was sent to do a deal with Microsoft and their boss had said, you gotta get this deal done. If you don't get it done, you don't need to come back from Redmond. I was like, we must have this deal. So they tell the story, they go there and they sit down with Ballmer and they had this whole presentation and they said, look, we've got this thing, we're going to do this partnership. We really think it's going to be a win-win for both of us. And he says, that is not a requirement from our point of view. And we're like, oh no. It's like, yeah, we have to win. Whether you win or not is not, that is not our concern. It was just such a harsh judgment. And for a time, that style of leadership is very effective, but it does eventually sow the seeds of its own undoing.
45:42 Speaker 01 As we saw with Microsoft, which had to be, had to be revitalized. You see it in a lot of places. Yeah, at Walmart, the spirit of Sam Walton is very alive. And yet, when I was there in Bentonville, I remember people would say things to me like, well, we have this procedure or policy that Sam Walton, he would have violated. He wouldn't, he couldn't even got a job here. He would have been fired. And there's all these legends about the stuff that he did, selling stuff out of the back of his truck. Our, we could never do that today. And I remember trying to, it's funny because his picture, his quotes and his picture are all over the, all over Walmart headquarters. And I remember trying in some of the workshops and stuff that I did there to channel him and be like, hey, remember as Sam Walton said, and I just want to, people would have this look on their face that would be like,
46:24 Speaker 01 I was summoning a ghost, which I was. He's been gone a long time. So without proper revigoration, re-defending these stories, these values, this lore gets stale. And lore is really the key word. You have to remember that lore is humanity's oldest knowledge transmission technology. It predates writing by thousands of years. And pre-literate cultures have been able to transmit knowledge and values over tremendous distances of time through storytelling. It is just a natural human instinct. Not all human cultures have had writing, but all human cultures have had lore. So in most organizations, the lore is left to just. Become whatever it becomes.
47:07 Speaker 01 Leaders are indifferent to it, but the really far sighted leaders, I think, take an active hand in trying to curate and cultivate the lore. So that the story we tell ourselves as an organization is aligned with the company's deepest values.
47:20 John R. Miles? So Eric, today we've talked about some companies who've gotten this right. And some companies who've gotten it wrong. We've talked about FedMart. I think another company people would understand would be Toys R Us. Another recent example would be Spirit Airlines that have all seen their demise.
47:37 Speaker 01 Yeah.
47:37 John R. Miles? And then we've talked about Costco, Patagonia and HEB. Companies making decisions that might look irrational short term, but build long term trust and cultures of significance. What's the common design principle that people can take away from today's discussion?
47:55 Speaker 01 This is all very dispiriting. We see these collapses. If you haven't seen, there's a new video that came out just very recently about the collapse of Panera Bread. Where not only did the private equity playbook lead to a degradation of quality, but people died. Nobody should die for Panera Bread. What kind of economy are we building? The common formula for the companies that are able to resist this collapse is very simply ethos plus integrity. Ethos is the character of a company, the fiduciary to the customer like Sol Price had, the ability to keep and make its promises. So that it builds up that most precious asset trustworthiness. But so many of the companies that you name, they have this stockpile of trustworthiness.
48:39 Speaker 01 And it's just lying around on the floor. And then they act surprised that somebody tries to steal it. Someone will try. If you have an asset unprotected in this world, someone will try to steal it from you. So we have to build organizations that are structurally strong. We're going to put the trustworthiness in a vault and defend it. And that's where the corporate structure comes in. That's where having a mission guardian is important, being a public benefit corp is important. I really advocate in the book for a multi tiered structure where the board of directors is accountable to a board of outside trustees. There's a bunch of these practices that we have really good data. This is not just my random opinion. We have good data that these are the practices that lead to sustained long term value creation.
49:20 John R. Miles? Listeners, I highly encourage you to pick up a copy of Incorruptible: Why Good Companies Go Bad and How Great Companies Stay Great. Eric, where's the best place people can go to learn more about you?
49:32 Speaker 01 Well, thank you for asking. Of course, you can follow me on social media, but social media is bad for your mental health. So I'd much rather you just go to my website, incorruptible.co. You can sign up for my mailing list, and there we have all kinds of bonuses and extras and downloadable content and a secret chapter that was cut from the main manuscript. So a lot of goodies you can get there. And of course, the book itself, you can buy absolutely anywhere that books are sold. If you want to follow along on the book tour and all the social media reaction without going on social media, we have a website called howisincorruptiblegoing.com, which you can follow as well.
50:04 John R. Miles? Awesome, Eric. Huge honor to have you. Thank you for joining us.
50:06 Speaker 01 Thank you so much. Really appreciate you taking the time and such thoughtful questions. I'm very grateful. Everybody like and subscribe, don't forget.
50:13 John R. Miles? That brings us to the end of today's conversation. One of the ideas that stayed with me long after this discussion with Eric is that institutions rarely lose their integrity through a single dramatic failure. Most often, they drift, priorities change, incentives evolve, decisions that once would have seemed inconsistent with the mission gradually become accepted as necessary or unavoidable. Over time, the organization may continue to function and even appear successful from the outside, yet something important has changed. The original purpose becomes harder to recognize, trust begins to weaken, and people no longer experience the organization in the same way they once did. What makes this conversation particularly relevant is the same pattern often appears in our
50:55 John R. Miles? personal lives. Disconnection develops through accumulated distance between what we value and where we invest our attention. Relationships weaken when they are consistently postponed. Communities become fragile when participation gives way to convenience. Individuals become disconnected from themselves when achievement becomes the primary measure of worth, and reflection is pushed to the margins. As we begin this new series, I think Eric's work offers an important insight. The connection crisis is not simply a story about loneliness. It's a story about trust. It's about whether people believe they matter, the organizations they work for, the communities they live in, and the institutions that influence their daily lives. When people stop feeling seen, valued, and represented, connection becomes increasingly difficult to sustain.
51:39 John R. Miles? Understanding how trust is built, how it erodes, and how it can be restored is one of the most important conversations that we can have today. On Thursday, we continue exploring disconnection from a very different perspective. I'll be joined by physician, researcher, and bestselling author John Lepuma for a fascinating conversation about what he calls "the indoor epidemic" and how modern life has gradually disconnected us from many of the environmental conditions that human beings evolved to thrive within. If today's conversation examines what happens when institutions lose their connection to human flourishing, Thursday's discussion explores what happens when people lose their connection to the environments that support human flourishing itself. It's a powerful continuation of this larger story, and I can't wait to share it with you.
52:22 Speaker 02 In the last couple of generations, we've moved inside as a species and never left. We spend 93% of our time inside, in buildings or in vehicles, 86 and 7 if you're doing the math. And that means we spend our time in the office or in a classroom. Our commute is in a vehicle of some type almost always. Our wind-down rituals at night, what are those? Those are screens for the most part. We're watching TV, we're doing something on a tablet or a computer, or on our phone. For us, the environment made a choice for us to be inside
53:05 Speaker 02 before we knew that there was a choice to be made.
53:08 John R. Miles? If today's episode resonated with you, share it with someone who might benefit from it. Leave a rating or review on Apple Podcasts or Spotify, and explore more, including the workbook for today's episode, at theignitedlife.net. Until next time, remember that trust grows wherever values and actions remain aligned. I'm John Miles, and you've been Passion Struck.
Previous How to Find Meaning When Life Doesn't Go as Planned | John R. Miles - EP 774 Next Why Living Indoors Is Making You Sick, Tired, and Burned Out | Dr. John La Puma - EP 776 Page updated October 30, 2026 · transcript and summary are machine-generated
