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Eric Ries, Found, Author of Incorruptible, Partner
This corruption comes for us all. It’s this inevitable force that we have to gravel with and he’s like, oh no. You could see the panic in his voice and he says, wait a second, and he kind of asked me the question that in a way launches the whole book. He said, but is it even possible to build an incorruptible company or is this my fate automatically.
Lizzie Wilson, Partner, Mishcon de Reya
So welcome everyone, thank you for joining this Mishcon Academy session. It’s part of a series of events, videos and podcasts that are looking at the biggest issue faced by society today. To introduce myself, I’m Lizzie Wilson. I’m a corporate partner here at Mishcon and I’ll be hosting today’s event. So without further ado, can I please introduce you to our guest, Eric Ries.
Applause
So I’m sure Eric doesn’t need much introduction to this room but I’m going to give one anyway.
Eric Ries, Found, Author of Incorruptible
Oh no.
Lizzie Wilson, Partner, Mishcon de Reya
So Eric is probably most well-known for The Lean Startup which I’m sure many of you will have read in your own startup journeys. Eric has since founded the Long-Term Stock Exchange and co-founded Answer.AI and most recently he’s written his second book, Incorruptible: Why Good Companies Go Bad and Great Companies Stay Great. So this new book obviously explores why successful companies can become vulnerable to corruption and helped by the blue print to protect their success. So huge welcome to Cambridge and the UK. I
Eric Ries, Found, Author of Incorruptible
Thank you
Lizzie Wilson, Partner, Mishcon de Reya
I know it’s a whistle stop tour for you but we’re so delighted that you’re here. So what are you up to these days other than obviously enjoying the fantastic British weather and promoting your new book?
Eric Ries, Found, Author of Incorruptible
Yeah we came in, I brought my family, we were pretending to be tourists in London and getting over the jetlag over the weekend and the weather’s been lovely and I thought, why does everybody complain? It’s like the weather is so nice but now I have a reminder.
Lizzie Wilson, Partner, Mishcon de Reya
You’ve got a real…
Eric Ries, Found, Author of Incorruptible
It’s not hard for me to understand. No it’s been, it’s been really great, I appreciate being welcomed. Yeah, this book has consumed years of my life so, so if you looked at a graph of how I spend my time, you would see this like dark blob consuming more and more, pushing all the other things out of, out of the way. And you know, to launch a book in 2026 it doesn’t end when the book is written so I’m, I’m still not yet quite to what’s next. But yes, as you mentioned, I have these other companies that I’ve helped start like LTSE and Answer.AI. Yeah but, uh, AI in startup, a practice called Virgil and you know, beyond my own projects the really interesting part about having written The Lean Startup is people invite me to be part of their startup journey all the time. So it’s actually been a really wonderful privilege. I’ve gotten to work on every conceivable kind of company, product, industry, size, region, geography – you name it, someone has asked me to weigh in on it and that is what keeps my life, you know, fresh and interesting and it makes one year unlike the one before, each month unlike the one before. So you just, you never know what is going to be next and many of the books, many of the stories that I tell in these books are stories of founders who I met, you know, because they read the book and they were excited or they were talking to a friend and they said, or to one of their investors and said, I have a problem who can I talk to about this. I have, especially in Silicon Valley I’m well-known for having a series of idiosyncratic interests which every once in a while turn out to be useful.
I spent a lot of time working on the Stock Exchange so I inadvertently became an expert in corporate governance. Not that anyone is born with an interest in corporate governance let me tell you. And for many years I was like an eccentric collector where I would collect alternative governance ideas. Weird corporate forms that you could have, you know, different ways that you could handle equity and ownership and, uh, what they called for a long time, stakeholder capitalism stuff. But also like really interesting like HR practices, um, different ideas about how management leadership… I was like an eccentric hobbyist. I had my weird collection of butterflies, preserved butterflies and if people would come over I would show them and for a long time people had had very little interest in it. But then, um, with the AI revolution all of the AI companies have significant governance problems and challenges, really from the beginning. So that’s, all of a sudden my obscure hobby became super relevant to a really hot industry and then I got sucked in to generative AI and I tell some of the stories in the book too. So yeah, so it’s definitely kept my, kept my life very interesting.
What all the stories have in common I think is I’m always writing about the things that I personally experience. So there’s a lot of data and analysis in the book. I try to build a data set of the companies that have had this experience versus not. I draw on a lot of academic research, much of which I’m surprised as a practitioner, I never encountered. And most leaders, most founders that I meet have never encountered much of this research, you know, some of it’s quite old. That was a bit scandalising to me, I was wait a second, why am I not like, how come I never heard about this. How come I didn’t know this was an option. So that’s part of what motivated the book but primarily I witnessed this corruption up close and personal. I got a front row seat to it, I’ve been active in Silicon Valley during this period. As you can imagine, corruption is more on people’s minds these days than I anticipated when I embarked on writing this book so I wish that was not true, I wish it wasn’t quite as well timed as it is. But yeah, that’s been you know, consuming a lot of my time. It’s just this kind of very raw and for me, very visceral, how can I stop feeding these companies like, feeding them into a meat grinder. You know, I used that metaphor in the book, like I felt I am creating these beautiful, wonderful companies with idealistic founders with these incredible missions and then look what happens. It’s kind of grim.
Lizzie Wilson, Partner, Mishcon de Reya
Yeah and that meat grinder anology was quite powerful and actually was part, very early in the book when you bring that up.
Eric Ries, Found, Author of Incorruptible
Yeah, yeah.
Lizzie Wilson, Partner, Mishcon de Reya
And it is sitting alongside actually a story that I wanted to ask you about which is about this Professor. Now I’ll let you explain the story.
Eric Ries, Found, Author of Incorruptible
Oh sure, yeah, yeah.
Lizzie Wilson, Partner, Mishcon de Reya
But I immediately felt very, like that story could have been happening in Cambridge it felt very like…
Eric Ries, Found, Author of Incorruptible
Oh yeah, yeah.
Lizzie Wilson, Partner, Mishcon de Reya
…the kind of story that, you know, people that we work with on a daily basis could be, um, tackling. So can you perhaps tell them in, um, what that story sort of reveals around some of the challenges and these companies once they have developed some success…
Eric Ries, Found, Author of Incorruptible
Mm.
Lizzie Wilson, Partner, Mishcon de Reya
…are actually facing?
Eric Ries, Found, Author of Incorruptible
Yeah, so this was, this is not an uncommon occurrence in my life but it’s definitely more like these record scratch moments where it’s like, wait how did I get here, why is this happening to me? So, I had to be very careful, you know, for this audience especially, talking about the Professor because if I talk too much about his credentials, people will probably be able to figure out who I am talking about. But I anonymised this story to protect his privacy with his consent. He saw the story and said it was okay to use. So this is someone who has an incredible, you know, tenured Professor with a research lab that had a breakthrough. The breakthrough relates to AI and bioscience together so you can imagine a technology that could be used to save millions of people’s lives or pick your favourite dystopian sci-fi disaster movie, you know, it could be that. He could be the super villain in that story very easily by accident right, so it has a lot of promise and peril all wrapped up together. And he called me for advice because he had been having this problem. This is like very classic so he was trying to recruit people out of the top university labs all over the world to join his startup. So imagine trying to recruit a tenured Professor, leave their research lab behind and come work for a startup to commercialise this technology that was going to take years, it would take many years to bring it to fruition but if it could be made to work, it would be transformational.
And so people would naturally ask him about the company’s mission. How do I know that if we use, if we build this technology it will be used for something good? Used to create long-term value? Used to build cures and to help people, um, couldn’t it just as easily be used for something extractive or exploitive? Could it be used for something downright evil if you weren’t careful? And he would say, well but don’t worry, I have such good intentions. And that wasn’t really getting it done, you know, it was not satisfactory to people. They were like, okay but aren’t we building a for profit company? What if we attempted to make money by, you know, committing blackmail of by using, you know, by withholding the lifesaving cure and demanding payment? They had these stories in their minds because they read the same news that you read and we’re seeing it all over our economy now. And he said, well don’t worry, I would never do that, I have such good values. You don’t need to worry about that. They said, but yes aren’t we raising money from investors? What if the investors told you to do it? He said, well I would say no. But don’t you work for them if we take their money, couldn’t you be replaced as the CEO? And he had no answer to these questions. He could not provide reassuring enough answers.
But then when he would go meet with investors – he was raising quite, this was going to be an expensive technology to build – so he’s meeting with investors at all time. Investors were so unbelievably condescending. They’d be like, oh sweetheart, I guess you’re not very serious about building a for profit company now are you if this is what you’re worried about. Right, we need you to do whatever it takes to make money, that’s what it means to be for profit. Any of you had an experience like this? Maybe it should be familiar, yeah. Maybe a friend of yours has heard that from an investor, yeah. It’s not uncommon. So he’s like, what am I supposed to do? Now the story is kind of funny in my life because it was juxtapose with something that happened around that same time. I was going to this event to celebrate a founder who I’d known for a long time. So this Professor is just embarking on his entrepreneur journey, he’s just incorporating this company, it’s very new but I’m describing to him, I’m like, look I can’t talk to you right now I have to go to this event for a founder who’s been in entrepreneurship for 15 years, he’s created immense wealth for himself and his investors, he’s created literally billions of dollars of shareholder value. And, um, he’s come to the end of his journey so we’re going to commemorate him, to celebrate.
And he’s like, and I’m explaining as I’m talking to the Professor, I can watch people streaming into the venue, I’m parked in my car, I can’t talk to you right now, I’ve got to go. And there’s people walking in and I see people walking into the venue who were once laid off by the same CEO, now returned to celebrate him anyway. You know, how rare is, and the Professor is so impressed he’s like, whoa man, respect, that’s the kind of, that’s the kind of CEO I want to be one day. And I am like, my man, you’re not hearing what I’m trying to tell you. He doesn’t work there anymore. We’re not there to celebrate, we’re there to have a memorial for him being ousted from his own company because although he made billions for his investors, that wasn’t enough, they wanted even more money than that. And he was like, oh no, did he die? I’m like, no he’s fine. Oh did the company go out of business? No it’s making every bit as much money today as it made yesterday. So what is the problem? And this is one of the weirdest parties I’ve ever been to in my life because all of us, it was like I don’t know, a 1,000 people there. Really a big party. The board of directors had not been invited in case you were wondering, um, but many of us, I might have been the only non-employee there really, I mean it was like people who had been around this company for a long time and we all had this queasy sense that something had gone wrong, that this is not how it’s supposed to be but we couldn’t quite put our finger on what the problem was.
And the Professor as he’s hearing me describe the situation is like, wait a second. Are you saying that’s going to be me some day? And I’m like, that’s what I’ve been trying to tell you. This corruption comes for us all, it’s this inevitable force that we have to gravel with and he’s like, oh no. You could see the panic in his voice. He said, wait a second, and he kind of asked me the question that in a way launches the whole book. He said, but is it even possible to build an incorruptible company? Or is this my fate automatically? And I remember answering him, kind of good news and bad news. The good news is that contrary to what most people believe, I do think it is possible, this force is not unstoppable and inevitable, it can be done, we know what to do. He’s like, oh good I’m relieved. But I said, the bad news is because you have already followed many of the startup best practices that we’ve all been taught, you’ve already taken steps in the wrong direction that will set you up on the same path that consumed my friend and his company. And that’s really what this book is about. There is a force in the world, a force that acts upon companies and drags them down into mediocrity, I call it financial gravity. And the symptoms that we observe of this force are a form of corruption. Not the way we currently in the modern era use the word corruption, an older connotation of it, a way that our grandparents or great grandparents would have used it. A way of making money without creating any value thereby corrupting the moral logic of our economic system.
So that’s the bad news, sorry this force exists and if you are not prepared, it will come for you. But the good news really is that we know how to build companies that can resist this force. We have the precedents and the data and the knowledge of how to do it and so most of the book, of course some of it is, is concerned with documenting and explaining this problem but the vast majority of it is about the blue print that I used to help the Professor build his company in a better and stronger way and I’ve helped many others do the same and I would want for all of you to.
Lizzie Wilson, Partner, Mishcon de Reya
Thank you. And so you obviously talked about financial gravity there. So just coming back to that quickly, what early signs might business leaders be able to look out for in their own company as to their company and their mission being vulnerable to this force?
Eric Ries, Found, Author of Incorruptible
Um, it’s very subtle. So what is financial gravity? Financial gravity is the unconscious transmission of values from those who have resources to those who want resources. It is not voluntary okay, it is an involuntary psychological reflex. It is the same as the fact that your eyes dilate in the dark. Have you ever met somebody who, or been with a friend who’s meeting a super celebrity or sports star or something for the first time? Anyone ever seen this? Or like if, have you ever seen someone meet a billionaire for the first time? It is fascinating. I know a lot of billionaires so I’ve been in the room when this happens all the time and it is pathetic. They become, they could be the strongest, most high integrity person you know becomes incredibly obsequious, all of a sudden, just like, is there anything I could do to please this person. And when that person leaves and in their wake it’s like they snap out of the spell and if you ask them why did you behave this way, they don’t know. They didn’t plan to, it just, do you know what I’m talking about, you’ve seen this? Okay. So in a company what it looks like is something like this. I think we should give this, uh, benefit away to customers for free instead of charging them. Now that’s an idea we could debate on the merits. We could do it or we could not do it, maybe it would be positive. But you’ll often hear someone say something like, well, but investors might not like it. They might not like it? Have you asked them? No I didn’t ask them I just, I worry that if we do that we might be seen as you know, not very serious about business. Anyone ever been in a meeting like this? You see this in startups worrying about VC’s. You see it in non-profits worrying about donors. You see it in public companies excessively watching the stock price. What might they want to do and it operates insidiously in so many ways. If you align yourself with the value system of our economic financial thing, you know, whatever, we don’t even know what to call it. This, this pressure we all feel. If you align yourself with those values your career will be accelerated. Have you noticed? People who preach fidelity to this exploitation and extraction, they seem to be able to raise money so much more easily for their company when their company fails, they’re back at it the next day, no problem. And think about all the difficulties that are raised in terms of something mission driven, trying to do the right thing. It’s like, well are you sure, what’s the ORI? You want to lay a bunch of people off you will not be asked about the ORI I assure you.
So why is that, it’s an asymmetry that shapes everything that we do. So it starts out very benign sounding. It’s like a commitment to ORI or efficiency. It begins, um, by people saying like, are you sure we can afford that? Only to certain kinds of questions. Are you familiar with this? You felt that before? So I think it’s important that we, before we can learn to defy this force, we have to learn to name it and understand it’s laws so that just like physical gravity doesn’t mean that we cannot fly. Aeroplanes, you know aerodynamics can work if you understand gravity but you have to understand it first, that’s really the knuckle.
Lizzie Wilson, Partner, Mishcon de Reya
So you talk about, so you talked about, um, sort of projecting the best practice.
Eric Ries, Found, Author of Incorruptible
Yeah.
Lizzie Wilson, Partner, Mishcon de Reya
And how that can help founders and companies to intentional build a governance that could withstand these sort of corruptible forces…
Eric Ries, Found, Author of Incorruptible
Yeah.
Lizzie Wilson, Partner, Mishcon de Reya
…that exist within. So if you were in a room with a founder who was looking to, you know, start that journey on building that governance. What would be the first or most important structural safeguard that you would suggest that they put in place?
Eric Ries, Found, Author of Incorruptible
Yeah, so I do this all the time. So like a lot of the book is based on me having had that conversation more times than I can count and look, it’s taken me years to learn how to do it because most founders who are, who I talk to are not very interested in corporate governance to be honest. Most of them have never read their own corporate charter and have no idea what it said. Their lawyer told them it was good, they signed it and that’s it. It’s like a building permit. They have no clue. So we’ll do a little exercise. This is how, so I’ll tell you how I actually do this with founders for real. We always do this exercise which is everyone – we can do this together – there’s a video so if you don’t want to shout out, it’s okay, you can just think to yourself but if you feel like shouting out, please do.
First question is, who is the most evil company in the world? Anyone have a contender for me? Anybody. What’s that?
BP.
Yeah BP okay. That’s a reasonable choice. Anybody else?
Meta.
We always get Meta. No matter what else we get in a session we always get, it’s fascinating, that is new in the last few years, Meta has risen very high in this leader board. Anyone else got one? A company you would never work for them no matter how much money they offered you because you know they’re up to no good? Yeah. Anybody else? Palantir, we get Palantir fairly often. Okay. My father, for people who don’t know, my father is a Pulmonologist. So to me Philip Morris is the most evil company in the world, that’s how I was raised. But your values could be different from mine so if you want to pick a different corporate villain for your mental exercise, feel free, okay. You don’t have to. Um, some of you are founders in the room, yeah? Right. So if you’re a founder I want you to imagine this for your company but if you’re not, you can imagine for a company you really admired of you work for, you, you, um, care a lot about okay. I want you to imagine, I’ll just do it with Philip Morris but you can substitute if you need to.
Philip Morris comes to you one day and says, I would like to buy your company from you for one dollar more per share than it’s currently worth. Anyone selling? Anyone like, oh thank goodness a chance to get liq… no of course not. I’ve never had a founder in all the times I do this exercise tell me they’d like to do it. I did once get a founder who asked me, um well hold on, what are they going to use it for? Fair question. I said, well imagine they’re going to use it to sell cigarettes to children. Does that change your answer? No of course it didn’t change his answer, it was going to be hell no or something far worse anyway. So we all know that that’s an absurd hypothetical, like what an exaggeration, that would never happen, we would never do it. I said, oh good. Well let’s consult your articles of incorporation shall we? Shall we read what it says here? Oh look here, it says here did you know that you have a fiduciary duty to say yes if this should happen to you? They are always so disbelieving. No Eric you must have gotten it wrong, my guy, my lawyer would never – it’s always a guy for some reason – my guy would never have done that to me, I’m sure you’re wrong. I say, great, why don’t you call him and call me back. Ask him, just say Eric says this is what it means, is that true? And they call me back and they always act so betrayed. He said he was doing me a favour. He gave me the best practices documents. The ones that make it easy to raise money but this sounds terrible, you know, what am I missing. And I think this is like the simple beginning of an understanding that the best practices are not your friend, okay.
We live in an era of what’s called shareholder primacy. The idea is that you may think you are creating a company, you know, if I ask first timers, what is a company? What does it mean? What is your company? Metaphysically, what is it? They’ll say, ah it is a beautiful, vital living thing designed to create quality products to enrich the lives of my customers. Anyone feel that way about their company? Yeah. Sucker. Oh you think that’s what it is, oh no my friends. You live in the era of shareholder primacy which holds according to the law that a corporation is nothing more than a financial instrument designed to enrich its shareholder. How strange. Is that an odd definition of a company? That’s what we live under, that is our legal doctrine. You’ll be delighted to know by the way that this idea is relatively recent. I always tell people, if you’re in a park and you see a tree, it is probably older than shareholder primacy. This is not some ancient pillar of capitalism that Adam Smith figured out or whatever. Most of the key precedents that are established in the United States date to 1986. Not 1786, 1986 and people sometimes ask me, well if it’s such a bad idea, how did people ever vote for it? Good news, it was never voted for. It had no democratic legitimacy, there is never in the history of mankind ever been a referendum on this idea. It was just decided by an incredibly small condray of legal academics, lawyers, economists and judges. And it has been as an idea I think, more or less a disaster since it’s, uh, since its implication is you wander why everything in our economy seems like it’s been going bizarrely wrong for just about 40 years. You can do the math. Since 1986, that’s when this started.
So okay, but a lot of books like this, a lot of people talk about that some social problem like this is going to affect your company. People feel like, okay so what, you know, that seems like a bigger problem than I’ve got to start a company right now. What am I supposed to do about it. But it turns out that this idea that companies own their fiduciary duties only to shareholders is a choice, it’s like the default that you get if you do nothing, if you follow the best practice but it is a choice. There is a whole cornucopia of alternative where you can establish other fiduciary priorities in your company. And so when we start with founders, this is always the very first thing we start with. Would you like investors to be able to steal your company from you whenever they feel like it? If the answer is no, then we must do something, we can’t just do the best practice thing. Now we can talk about there’s a whole variety of techniques for what to do about that. We can get into those if you are more interested but the first and most important thing is to establish what I call, emission guardian. Who is responsible for making sure that the company’s mission will endure beyond the first quarter of temptation, the first investor pressure activist, you know, action. And sometimes that pressure and that temptation comes early. I know many startups that collapse in the early stages. I don’t know here if the Purdue Pharma scandal was news? Here this was a major cause of the opioid crisis in the United States and, uh, the family that ran the company that did that stuff.
Lizzie Wilson, Partner, Mishcon de Reya
I think there might have been a Netflix documentary?
Eric Ries, Found, Author of Incorruptible
Oh yeah.
Lizzie Wilson, Partner, Mishcon de Reya
Something along those lines.
Eric Ries, Found, Author of Incorruptible
They caused so much collateral damage it’s, it’s really sickening but anyway, one of the very minor pieces of collateral damage is there was a health, electronic health records company, a high flying startup that was offered one million dollars by the opioid people to push the opioids to doctors when they would log into the, uh, software platform and like in a lot of these cases of malpfizers, there was eventually litigation. It came out in the litigation of how they did this and this like company with its billion dollar valuation was like instantly destroyed because it just, you know, they did this act of evil. And I want you to imagine being in the room when this decision was made because one million dollars is not that much money. The company did not need a million dollars so why would they trade all of their integrity for such a paltry amount of money. The only possible answer is that the person who made the decision thought, my job is to make money for this company by any means necessary. And I tell founders this is the most critical thing to understand. Most companies have a really lofty and wonderful sounding mission statement. How many of you have a mission statement? You word specced it, you really worked hard to make it good? If you have a mission statement that says, we care about whatever but I look in your corporate charter and I see shareholder primacy, then you are lying. You are lying to your employees, you are lying to your customers and you’re probably lying to yourself about what your company actually stands for. So this disconnect between mission statement and actual mission is the first and most urgent priority to cover.
Lizzie Wilson, Partner, Mishcon de Reya
Um, yeah that’s brilliant. Uh, so the final question that I’ll ask because I’m conscious of the time. Um, if the three lessons from any of your books that you want everyone in this room to walk away remembering.
Eric Ries, Found, Author of Incorruptible
Hm hmm.
Lizzie Wilson, Partner, Mishcon de Reya
If you can limit it down to 3.
Eric Ries, Found, Author of Incorruptible
3, oh goodness.
Lizzie Wilson, Partner, Mishcon de Reya
What would those be?
Eric Ries, Found, Author of Incorruptible
Okay. Yeah so, so I’ve written, I’ve written a number of books and if you look at kind of the arc of my work and it’s been to try to establish a new theory. First a new theory of entrepreneurship, then a new theory of management and accountability and in this book, what I call the new governance. And I kind of feel that those are the most boring topics in the world. Accounting, management and governance, you know, it’s like, what can I possibly pick next to be even more boring, I don’t know. A book about paint drying or something. Um, that’s been my curse to try to make those topics interesting because those are the foundations of the world. It’s kind of boring down there in the boiler room where the actual, the actual machinery that drives so much of the surface level thing that we see, uh or live. So, um, if you think about the elements of those new theories, the science of entrepreneurial management with the new, the new idea about management was to incorporate uncertainty into managerial decision making. That was really the breakthrough behind main startup. But if you strip out all the exciting bits, that’s what left behind. The idea that most of our management theory comes from, you know, earlier errors when we had much more accurate ability to plan and forecast the future. So in times of uncertainty those techniques break down and if you study the history of management you can understand why those techniques worked really well when they did, why they, everything that happened made a lot of sense but it doesn’t make much sense now because we cannot forecast unless we have a long and stable operating history from which to extrapolate. And who feels that the world is getting more and more stable every day? Right, so that would be one.
Um, the next is that when we want to hold people accountable we are used to having a target or forecast by which to do so which doesn’t work if they’re trying to do something new. Now in The Lean Startup we talked about that in the context of an individual team. Many people encounter lean startup when they’re starting a company and it’s them and their co-founder and a few employers, some of you encountered it in that situation and it’s like, we don’t have time for theory. Yeah, we’ve got to get to the minimum of our product, we’ve got to get product to market it’s very urgent. But as companies grow eventually founders' face this existential crisis that a lot of them do not pass which is that as you grow, you go from being the entrepreneur, the innovator to being the leader of an organisation which contains multitudes. It contains entrepreneurs, it contains innovators and now you need to be able to transmit your knowledge and know how to them but you have to be able to hold them accountable in the way you wished someone would have held you accountable when you were just beginning. And for a lot of people that’s very difficult. So that’s covered in a book called The Startup Way. The mechanics of how that can be done leading to a new accountability system I call innovation accounting which is the mathematical basis for doing venture portfolios or, um, any kind of innovation situation where we need to be able to quantify what is being learned. So to me, although that is, um, a very dry subject for a lot of people, I feel like intellectually it is a much, it is very important scaffolding to be able to understand what it is we all do in an innovation ecosystem.
And from this book, we’ve been talking already about purpose but the structure of what I call the new governance has 3 elements to it. First, purpose, second, coherence and third, integrity. And today none of that, very little of that is discussed in board meetings because it’s not considered in scope for what governors cover. We mostly see governors and operations as separate domains so much so that there’s many companies where the board and the executives don’t ever talk to each other and have no interaction whatsoever, speak almost a completely distinct lexicon and can hardly communicate except by having the lawyer or to see if somebody translates for them to understand what these different languages are. I think that’s a mistake. I think we have to get, um, we could bring these operational concerns into governance, um, and so just very briefly, purpose we’ve already discussed. What is the like, the true mission or the true purpose of the organisation, can we establish that in the book. I make the argument that to be a for profit company means to maximise human flourishing. That’s what it is. So if we can establish something like that as our purpose, we can then ask the question, to what degree is every resource the organisation commands, committed to the essential purpose. That’s coherence. Most organisations when they bring investors in to the equation, fracture the coherence without realising it and now they have an incoherent or multi mastered situation which is fundamentally unstable. And third is this question of integrity. How can we build an organisation that is capable of making and keeping promises? This is the only way in the world you can earn the most underrated and valuable asset in all of business which is trust. So a key idea in the book is that trust is an asset that is worth accumulating but then it also has to be protected. Most of the mission driven companies I know are incredibly trusted by their employees, by their customers, by their investors, by everyone that they touch and that’s why they seem to have these bizarre super powers that no one quite understands. Think about you feel about Costco or Patagonia or any company, you’re like how did they, it just seems like they effortlessly solve problems that take others down. You have a company like that you can think of? When I’ve been on tours people tell me companies I didn’t even know about so, come up and tell me after. The problem is a lot of these companies are leaving this most valuable asset like lying on the floor everywhere. You know, the windows are open, there’s no locks on the doors, there’s just piles of trustworthiness everywhere and then they act so shocked that someone might try to steal it from you. Have you met human beings? Are you familiar? Yeah, if you stockpile an incredibly valuable asset, you must be prepared for people to try and take it from you. We live in an economy where the more successful a company becomes, the more valuable it is as a target. And so integrity is not just about promises, it’s also about structural integrity. Can we build a company that is, you know, today we think about companies as like low growth or fast growth, big or small, old or new, we have all these different ways of categorising companies. I want to introduce a new one to you all. Is a company strong or weak? A strong company can protect itself against both temptation and pressure to betray its promises and only a strong company is capable of keeping promises which means that only a strong company is capable in the long run of stockpiling this trust asset. So there’s a lot of information in that shelf life.