Towards the end Ries made the amusing observation that in his most famous work “The Lean Startup” he ended the introduction with “The Lean Startup movement seeks to ensure that those of us who long to build the next big thing will have the tools we need to change the world.” And he thought it was obvious that it should be “change the world for good”. But, like, if there’s a new edition he’s definitely setting things straight.

Ries observes that companies start with all sorts of idiosyncratic behaviors and values, but somewhere along the way, they all morph into essentially the same beige corporation. It’s the carcinisation of the corporate world: the pressures and incentives of the current ecosystem act as a force which persistently shapes companies into this form. So he wrote the book to describe these forces and more prudently how to setup organizations which successfully resist these forces.

The primary force he identified is the financialization of the firm and the strong emphasis on maximizing (short-term) shareholder value. He makes the point that you can define profit however you want. And he recommends replacing the usual accounting norms with a sense of human flourishing. All very poetic though the standard notion of money in minus money out seems more relevant to the ongoing financial viability of a company. Like I agree that broadly speaking increasing human flourishing is a great thing for a company to maximize, but the runway is rapidly disappearing if you don’t bring in more money than goes out each month. That’s sort of the whole point though: firms that pay a lot of attention to profit are probably going to survive longer. And thus the carcinisation. There is hope however: he suggests that there is an academic literature finding that companies which don’t fixate on profit actually achieve higher profit over time. There’s strong potential for survivorship bias but there’s also a plausible causal mechanism if you think short-term profits maximization leads to inferior local optima.

This meshes with the observation from Matt Levine talking about Jane Street:

These niches are fragile. If solving the puzzles produces too much money, other people will notice, people who are not intrinsically interested in the puzzles but who really like money. Those people might be a bit less creative, a bit less whimsical, than the original puzzle-solvers, but they might be more practical and intense and careerist. … Over time the business will shift from “whimsical puzzle-solvers who make hundreds of millions of dollars and stuff it in shoeboxes so they have more time for puzzles” to “ruthless businesspeople with firm handshakes and yachts.”

As both Levine and Ries point out: the obvious example for this dynamic are the AI companies:

  • You have OpenAI who’s founded with the mission to “advance digital intelligence in the way that is most likely to benefit humanity as a whole”. And they have all of this non-standard structure with the capped profit and later on the non-profit. But it’s fairly clear now that they’ve succumbed (gleefully?) to the increased pressure of financialization: IPO or bust.
  • Anthropic gets founded by the folks who saw the rot starting at OpenAI and like they’re probably still the good guys (provided their CEO stops using AI doomerism as a marketing ploy.)
  • And of course you have the insane capital and attention fostered on disguised (Delve) and just outright rot (Cluely) by the entire ecosystem.

The latter (and well the first one) are more concerning. It’s become clear across all institutions that we do not have robust ways of protecting values from outright corruption. As long as the illusion of propriety was maintained the norms could hold: it seemed like one could get properly outraged at Enron. Now it’s really hard to maintain focus: you’ve got Theranos, FTX, Wells Fargo, Bernie Madoff, Martin Skhreli.

I’m excited to read the book but I do wonder what hope there is of building stronger value-oriented organizations without changing the broader ecosystem which seemingly rewards the opposite.

To that end I had a relatively provocative idea. They show a short video before each speaker as an amuse-bouche for the topic. We saw an onsen in Japan which had continuously run for 1300 years. Quite inspiring until we saw the human cost: the elderly proprietor was proudly talking of passing along the duty to his younger daughter (upsetting the usual oldest son tradition: good for them). But it was very clear she didn’t want the job almost regretted being born into this obligation. It made me wonder if instead of focusing on keeping organizations around for longer, whether we should be making it easier to kill institutions when they no longer provide value. An organization that cannot comprehend dying or views it as failure will inevitably be corrupted by the drive to survive.