WEBVTT - Make good things last, with Eric Ries 0:00:02.960 --> 0:00:09.240 Welcome to Before Breakfast, a production of iHeartRadio. Good Morning, 0:00:10.200 --> 0:00:15.280 This is Laura, Welcome to the Before Breakfast podcast. Today's 0:00:15.320 --> 0:00:17.840 episode is going to be a slightly longer one part 0:00:17.840 --> 0:00:20.920 of the series where I interview fascinating people about how 0:00:20.920 --> 0:00:23.400 they take their days from great to awesome and any 0:00:23.400 --> 0:00:26.320 advice they have for the rest of us. So today 0:00:26.400 --> 0:00:29.040 I am delighted to welcome Eric Rest to Before Breakfast. 0:00:29.160 --> 0:00:31.480 Eric is the creator of the Lean Startup method. He 0:00:31.560 --> 0:00:33.640 is also the author of The Lean Startup and the 0:00:33.680 --> 0:00:36.920 brand new book Incorruptible. So, Eric, welcome to the show. 0:00:37.040 --> 0:00:38.000 Thanks so much for having me. 0:00:38.520 --> 0:00:40.720 Yeah, I'm excited to have you here. So why don't 0:00:40.720 --> 0:00:42.440 you tell our listeners a little bit about yourself? 0:00:42.680 --> 0:00:44.479 Sure? Yeah, I was one of those people that grew 0:00:44.560 --> 0:00:47.440 up programming computers. I couldn't believe it when I found 0:00:47.440 --> 0:00:49.479 out you could get paid for computer programming, like it 0:00:49.479 --> 0:00:51.599 was a job you could have. I was so excited 0:00:51.640 --> 0:00:54.080 as a kid, and I thought technology was the most 0:00:54.080 --> 0:00:56.080 powerful force in the universe, so I wanted to learn 0:00:56.120 --> 0:00:58.720 to harness it. And my career is basically a series 0:00:58.800 --> 0:01:01.000 of me realizing that there's something more and powerful than 0:01:01.040 --> 0:01:02.920 whatever I previously thought was the most powerful force in 0:01:02.960 --> 0:01:04.640 the universe. So when I found out that technology is 0:01:04.640 --> 0:01:07.399 created by human beings, I realized that actually management is 0:01:07.400 --> 0:01:10.319 a more powerful force. And lately I've been helping so 0:01:10.360 --> 0:01:13.440 many companies develop these incredible management systems, only to watch 0:01:13.440 --> 0:01:16.040 at the board level once they get dismantled. And I've reize, 0:01:16.080 --> 0:01:18.920 wait a minute, governance is even more powerful than management. 0:01:18.920 --> 0:01:20.760 So it's kind of been like digging, digging down into 0:01:20.800 --> 0:01:23.280 the substrate layers that power our modern world. That's kind 0:01:23.280 --> 0:01:23.839 of how it's a felt. 0:01:24.080 --> 0:01:26.240 Yeah, I think a lot of people hear the word governance, 0:01:26.319 --> 0:01:28.000 governance and their eyes kind of glaze over. 0:01:28.080 --> 0:01:29.199 Oh god, it's so boring. 0:01:29.319 --> 0:01:33.039 It sounds like the worst thing ever. And since I mean, 0:01:33.040 --> 0:01:35.200 you're kind of known for talking about companies in the 0:01:35.240 --> 0:01:37.440 startup stage, like the early stages, it seems like this 0:01:37.480 --> 0:01:40.039 new book is about how not to fall apart as 0:01:40.080 --> 0:01:42.880 you become a grown up, right that you can actually 0:01:42.880 --> 0:01:45.920 transition into middle age and maybe even a ripe old 0:01:46.000 --> 0:01:48.320 age as a company. I'm curious what did lead you 0:01:48.400 --> 0:01:50.120 in that direction of making that pivot. 0:01:50.400 --> 0:01:53.480 Yeah, listen, I've actually helped I don't know how many 0:01:53.480 --> 0:01:56.720 companies now start and have success. I've personally helped people 0:01:56.760 --> 0:01:58.840 create billions of dollars in personal wealth, you know, Like 0:01:58.840 --> 0:02:01.760 I've been around Silicon and it's incredible engine of wealth 0:02:01.760 --> 0:02:03.840 creation for a long time. So I'm very proud of 0:02:03.880 --> 0:02:05.520 that work, and I think it's amazing and very proud 0:02:05.560 --> 0:02:07.960 of the people who have who have done that successfully. 0:02:08.000 --> 0:02:10.240 And yet I have also been keenly aware of the 0:02:10.320 --> 0:02:13.840 dark underside of this whole thing, the human costs. And 0:02:14.200 --> 0:02:16.040 when we say that, people instantly think they know what 0:02:16.040 --> 0:02:17.760 I'm talking about, and it really depends on what their 0:02:17.760 --> 0:02:20.440 background is. What I'm talking about. Is it the like 0:02:20.600 --> 0:02:24.040 the mistreatment of employees and the burnout. Is it the 0:02:24.200 --> 0:02:27.080 loss that those founders feel themselves when the creation that 0:02:27.120 --> 0:02:29.680 they made they lose control of it, it becomes something 0:02:29.680 --> 0:02:32.200 that they come to hate. Is it about the environmental 0:02:32.600 --> 0:02:35.280 or community effects of our Like there's so many things 0:02:35.320 --> 0:02:37.079 that was funny I say, the negative effects. Everyone thinks 0:02:37.080 --> 0:02:39.079 they know what I'm talking about. And my thesis in 0:02:39.120 --> 0:02:43.280 this new book is that all these different downsides are related. Yeah, 0:02:43.400 --> 0:02:46.520 not many different things, but one central error that we 0:02:46.560 --> 0:02:47.600 have made that we need to undo. 0:02:48.080 --> 0:02:50.600 And the book is called Incorruptible. I mean, the word 0:02:50.680 --> 0:02:52.880 corruption sounds like kind of a hard word. I mean, 0:02:52.880 --> 0:02:55.720 I think of, you know, people passing money in a 0:02:55.800 --> 0:02:58.919 dark alley. Why did you choose corruption? 0:02:59.160 --> 0:03:02.399 As I struggled this a lot, because I think part 0:03:02.440 --> 0:03:04.440 of the problem in our modern world is we've lost 0:03:04.480 --> 0:03:07.919 the ability to name things properly because we're so afraid 0:03:07.960 --> 0:03:10.280 of saying anything that might offend anybody else. And I 0:03:10.360 --> 0:03:13.200 just felt like, this, this is what our great grandparents 0:03:13.240 --> 0:03:15.360 would have called it. If they could see all the 0:03:15.360 --> 0:03:17.919 different ways we have invented in our modern world of 0:03:17.960 --> 0:03:21.160 making money without creating any value at all, many of 0:03:21.200 --> 0:03:24.639 those practices they would have seen not just as morally dubious, 0:03:24.680 --> 0:03:26.800 but like quite a few of them would literally have 0:03:26.919 --> 0:03:30.280 been crimes in our grandparents' time. So I feel like 0:03:30.480 --> 0:03:32.640 one of the changes over that period of time is 0:03:32.639 --> 0:03:35.040 we have just narrowed our sense of the word corruption. 0:03:35.120 --> 0:03:37.720 Now we think it only means embezzlement or fraud, but 0:03:37.800 --> 0:03:40.280 I think it should be we should embrace an older, 0:03:41.280 --> 0:03:44.640 more thorough understanding that it really involves any behavior in 0:03:44.680 --> 0:03:46.840 which people are making money without creating value. 0:03:47.720 --> 0:03:49.400 And I'm sure there's a lot of it. We could 0:03:49.400 --> 0:03:53.200 all point to our least favorite industries that may be 0:03:53.560 --> 0:03:56.440 making money without adding a huge amount of value to 0:03:56.480 --> 0:03:59.720 our lives. But the thing with this, I mean, I imagine 0:03:59.800 --> 0:04:04.480 almost every company would claim to be mission driven. I mean, 0:04:04.600 --> 0:04:07.320 you know, maybe if running a running a scam front. 0:04:07.320 --> 0:04:10.480 I just got a scam call right before we so sorry, 0:04:10.800 --> 0:04:12.880 So it was the worst. It was somebody claiming to 0:04:12.880 --> 0:04:15.520 be from our sheriff's office, like saying that there was 0:04:15.520 --> 0:04:17.680 like a bench warrant out for my arrest. So there 0:04:17.720 --> 0:04:19.000 is not I looked. 0:04:19.600 --> 0:04:21.800 But so I'm so glad to hear it. But no, listen, 0:04:21.800 --> 0:04:24.159 we're seeing an epidemic of that stuff because AI tools 0:04:24.200 --> 0:04:25.200 make fraud and. 0:04:25.160 --> 0:04:28.800 Scar's so easy. But you know, that's clearly not adding value. 0:04:28.839 --> 0:04:30.520 And I don't think that company is claiming to be 0:04:30.560 --> 0:04:34.400 a mission driven company, but most normal ones probably are. 0:04:34.480 --> 0:04:39.000 So what what's the difference between you know, any random 0:04:39.000 --> 0:04:41.640 company claiming I am mission driven, you know, that is 0:04:41.680 --> 0:04:46.280 our central thing, and and those that really are incorruptible 0:04:46.279 --> 0:04:48.160 because they are so focused on that mission. 0:04:48.240 --> 0:04:51.320 Yeah, I call them in the book mission hopeful, because 0:04:51.320 --> 0:04:52.960 I don't think you have to You don't have to 0:04:53.000 --> 0:04:55.279 assume any ill intent on the part of people that 0:04:55.320 --> 0:04:56.880 are saying this, and in fact, in the book, I 0:04:56.920 --> 0:04:58.520 say something that a lot of test readers had a 0:04:58.520 --> 0:05:01.000 hard time with because the look if someone tells you 0:05:01.000 --> 0:05:03.320 that their mission driven, tells you that you can trust them, 0:05:03.400 --> 0:05:06.599 but they haven't made the corresponding investments in an apparatus 0:05:06.640 --> 0:05:09.600 to keep those promises, then they are lying to you. 0:05:10.640 --> 0:05:12.120 And a lot of people are like, you can't say 0:05:12.160 --> 0:05:15.080 that about my boss. It's not fair. You know, he's 0:05:15.080 --> 0:05:19.560 a good guy, always a good guy. But like I 0:05:19.600 --> 0:05:21.640 was like, well, what's unfair about it. He doesn't mean 0:05:21.720 --> 0:05:24.600 to be lying. He sincerely believes he I'm like, that's 0:05:24.640 --> 0:05:27.160 not what I'm saying. He said you can trust him 0:05:27.200 --> 0:05:29.520 in the future, but he's lying because he doesn't even 0:05:29.560 --> 0:05:30.920 know if he's going to be there in the future. 0:05:31.839 --> 0:05:34.000 And I think that again, it's like we've lost our 0:05:34.040 --> 0:05:36.880 ability to say this with any kind of clarity. I 0:05:36.960 --> 0:05:40.359 tell a story in the book of I read dozens, 0:05:40.400 --> 0:05:43.240 I mean literally dozens of essays that people have written 0:05:43.279 --> 0:05:47.600 after leaving Google, longtime Google employees ten plus years, every 0:05:47.600 --> 0:05:49.919 single one of them talking about the loss of the 0:05:50.000 --> 0:05:52.960 don't be evil ethos at Google, one of the things 0:05:52.960 --> 0:05:54.880 we love the most. Anyone who was around for the 0:05:54.880 --> 0:05:58.440 Google IPO remembers the moral clarity of a slogan that's 0:05:58.480 --> 0:06:01.800 so simple, don't be evil, really simple words that that's 0:06:01.800 --> 0:06:03.720 something that can be lost. And listen, Google's a great company, 0:06:03.760 --> 0:06:05.200 I mean to say, at Google's like they're not even 0:06:05.200 --> 0:06:06.680 the close to the worst of the worst, Okay, But 0:06:07.160 --> 0:06:10.440 the fact that it's so publicly documented that despite every 0:06:10.480 --> 0:06:14.279 apparent best intention that I can find, they nonetheless felt 0:06:14.279 --> 0:06:16.920 this loss. You can see in these essays people write 0:06:16.960 --> 0:06:20.440 about this feeling that something mysterious was going on, that 0:06:20.520 --> 0:06:23.159 something vital was being lost, but they couldn't even say 0:06:23.160 --> 0:06:27.880 who was causing the loss. And that feeling of helplessness, 0:06:27.920 --> 0:06:32.160 of confusion, of mystery characterizes almost everyone I know who's 0:06:32.160 --> 0:06:35.440 trying to do anything good in business today, employees, customers. 0:06:35.480 --> 0:06:38.720 I mean, I keep telling this story about the economist 0:06:38.760 --> 0:06:40.200 John Kay I think is the one I had first 0:06:40.240 --> 0:06:42.120 heard it from, who went into a restaurant one of 0:06:42.160 --> 0:06:44.359 his favorite restaurants, took one bite and told his friend, 0:06:44.640 --> 0:06:47.000 I bet this restaurant's been taken over by private equity. 0:06:47.360 --> 0:06:51.200 I can taste it. And he looked, and so many people. 0:06:51.240 --> 0:06:52.680 I probably had a dozen people come up to me 0:06:52.720 --> 0:06:55.080 after giving this saying the story and telling me they 0:06:55.120 --> 0:06:58.919 know what restaurant I'm talking about, and it's twelve restaurants 0:06:58.920 --> 0:07:01.560 can be twelve different rests, which. 0:07:01.480 --> 0:07:04.120 We also So it's just private equity right now, I said, 0:07:04.200 --> 0:07:06.279 any you know you write in the book that profit 0:07:06.360 --> 0:07:10.440 attracts predators. Yes, but it's like, you want to make 0:07:10.520 --> 0:07:13.000 a profit, and I'm sure a great many founders would 0:07:13.040 --> 0:07:16.800 like to have some exit or otherwise, you know, get 0:07:16.840 --> 0:07:20.920 the financial benefits. So I mean, is there an actual 0:07:21.000 --> 0:07:26.320 governance structure that allows you to keep the original mission 0:07:26.360 --> 0:07:30.520 in the face of wanting to get good returns for 0:07:30.560 --> 0:07:32.280 everybody who put their money in at the beginning. 0:07:32.360 --> 0:07:36.680 The simple answer is yes, and most people don't believe it. 0:07:36.760 --> 0:07:39.240 Like we're so cynical and we're so been told that 0:07:39.240 --> 0:07:40.760 the way things are is the way they things have 0:07:40.800 --> 0:07:44.600 to be for natural law reasons that we actually often 0:07:44.640 --> 0:07:47.120 ignore the evidence that this is true. That's like staring 0:07:47.160 --> 0:07:49.800 us in the face. One of my favorite examples is Costcokay, 0:07:49.800 --> 0:07:52.920 everyone knows Costco, and yet most people don't understand the 0:07:52.920 --> 0:07:55.200 magic of how Costco has made So Costco's one of 0:07:55.200 --> 0:07:57.760 these companies. I call them the exceptions that prove the rule. So, 0:07:57.800 --> 0:08:00.800 like I was watching a video the other day economist 0:08:00.800 --> 0:08:03.560 I think, was talking about how only family run businesses 0:08:03.600 --> 0:08:07.600 can truly maintain brand integrity over generations, because if you 0:08:07.600 --> 0:08:09.200 want to have you want to have a brand promise 0:08:09.200 --> 0:08:10.840 that endures for more than ten years, you have to 0:08:10.840 --> 0:08:13.720 resist all the temptation of the ROI stuff and the 0:08:14.000 --> 0:08:16.360 spreadsheets and the quarterly targets and blah blah blah blah. 0:08:16.360 --> 0:08:19.600 Bah's going and he's listing off the companies for Toyota Mars. 0:08:19.600 --> 0:08:21.040 You know, there's some family run companies. And then at 0:08:21.040 --> 0:08:22.520 the end of the video it's like, oh, and also 0:08:22.600 --> 0:08:25.800 Costco for some reason, Costco's not family run. They're not 0:08:25.800 --> 0:08:27.560 family run at all, but they're actually able to do 0:08:27.600 --> 0:08:29.440 this like kind of by magic, Like we treat it 0:08:29.440 --> 0:08:31.520 like this magic trick. And yet Costco is not alone. 0:08:32.480 --> 0:08:34.959 You know, anyone listening you have a Vanguard Mutual fund, 0:08:35.320 --> 0:08:37.719 do you ever buy everybody a Patagonia fleece? You ever 0:08:37.800 --> 0:08:41.360 drake Carlsberg beer and taken ozempic, you know, if you 0:08:41.360 --> 0:08:43.160 ever run for the Green Bay Packers, if you've ever 0:08:43.240 --> 0:08:46.199 watched Wallace and Grommet, like there's all these companies. Practically 0:08:46.240 --> 0:08:48.640 in every industry there's one that has some kind of 0:08:48.720 --> 0:08:52.720 unusual long term commitment to some higher value than just 0:08:52.760 --> 0:08:55.800 making money for itself. And if you study those exceptions, 0:08:56.559 --> 0:08:59.160 not a single one of them follows what I would 0:08:59.160 --> 0:09:03.719 call today's practices for corporate governance. So when people say 0:09:03.720 --> 0:09:06.040 that this is impossible, and you're like, okay, but if 0:09:06.040 --> 0:09:08.760 it's impossible, how come we have these exceptions, They'll be like, well, 0:09:08.800 --> 0:09:10.880 those exceptions are idiosyncratic, but they're like, but then how 0:09:10.880 --> 0:09:13.640 come they all follow this pattern? Like then you say, well, 0:09:13.640 --> 0:09:15.920 it's probably a coincidence. But then I'm like, oh no, actually, 0:09:15.920 --> 0:09:18.160 this pattern is old enough and we have enough examples 0:09:18.160 --> 0:09:21.559 that there's extensive academic evidence that this is a better way. 0:09:22.320 --> 0:09:27.000 And it's that they are not what are they not doing? 0:09:27.240 --> 0:09:29.760 Yeah, So I don't want to be simplistic about it, 0:09:29.800 --> 0:09:31.400 because of course, this whole book is my attempt to 0:09:31.400 --> 0:09:34.080 put down the blueprint of how this works. And in 0:09:34.200 --> 0:09:36.439 order for this to work, people like to focus on 0:09:36.480 --> 0:09:38.920 the structures, of course, because they're very interesting. But first, 0:09:39.320 --> 0:09:41.600 before you can adopt any alternative structure, you first have 0:09:41.640 --> 0:09:45.120 to build something worth protecting. So the thing that makes 0:09:45.120 --> 0:09:48.760 these structures work is the internal alignment, the coherence that 0:09:48.920 --> 0:09:51.079 having a strong, purpose driven mission that is aligned with 0:09:51.160 --> 0:09:53.240 human flourishing makes possible. If you don't have that, you 0:09:53.280 --> 0:09:55.520 will not be able to achieve institutional longevity, and if 0:09:55.520 --> 0:09:57.600 you do, you will not sleep well at night by 0:09:57.720 --> 0:09:59.679 on when it came comes. So it's just like disclaimer, 0:09:59.720 --> 0:10:02.240 please don't skip over that. But yeah, if you look 0:10:02.240 --> 0:10:04.840 at these companies that I just named, they all have 0:10:05.000 --> 0:10:08.559 rejected the most important business idea of the twentieth and 0:10:08.559 --> 0:10:11.640 twenty first century, which is called shareholder privacy, which holds 0:10:11.679 --> 0:10:14.880 that the purpose of a corporation, the purpose of an 0:10:14.960 --> 0:10:17.680 organization really, because this is metastasized out of the public 0:10:17.679 --> 0:10:20.680 markets and into nonprofits and governments, you see it everywhere now. 0:10:21.200 --> 0:10:25.040 Its purpose is to create financial prosperity, to create financial 0:10:25.040 --> 0:10:28.120 returns for its investors or donors or for whoever. Sometimes 0:10:28.559 --> 0:10:30.080 we can't even say who it's for, which is like 0:10:30.080 --> 0:10:31.520 what we have to grow, we have to get bigger, 0:10:31.520 --> 0:10:33.400 we have to have more money. A lot of nonprofits 0:10:33.440 --> 0:10:36.200 schools fall into this trap all the time, and the 0:10:36.320 --> 0:10:38.760 desperation to make money first of all, makes you very 0:10:38.800 --> 0:10:41.400 weak because it makes you vulnerable to anyone who can threaten, 0:10:41.640 --> 0:10:43.920 credibly threatened to take your money away or offer you 0:10:43.960 --> 0:10:46.760 more money. So these companies are easy to tempt. They're 0:10:46.880 --> 0:10:49.280 basically addicts do anything for a hit, which is really 0:10:49.360 --> 0:10:53.920 quite sad. But worse than that, they have a governance 0:10:53.920 --> 0:10:57.040 structure that allows anybody who wants to take them over. 0:10:57.720 --> 0:10:59.160 And what's so interesting is if you do the first 0:10:59.200 --> 0:11:01.520 thing I talked about, build a company that accumulates this 0:11:01.600 --> 0:11:04.720 incredibly valuable asset. I call it the most underrated asset 0:11:04.720 --> 0:11:08.440 in the world today, trustworthiness. When people can trust you, 0:11:08.440 --> 0:11:09.959 you're going to make more money, You're going to have 0:11:10.000 --> 0:11:12.360 these huge competitive advantages. You're going to have higher employe morale, 0:11:12.440 --> 0:11:14.880 can have longer customer attention. There's amazing data about this. 0:11:14.920 --> 0:11:18.000 Companies that are trusted can raise money cheaper, Customers were 0:11:18.080 --> 0:11:19.559 more likely to stick with you if you make a mistake, 0:11:19.600 --> 0:11:21.600 Customers more likely to try your new products. I mean, 0:11:21.640 --> 0:11:25.240 just the benefits of trust. It's a compounding asset, and 0:11:25.320 --> 0:11:29.440 yet most leaders today are horribly naive about this. It's 0:11:29.440 --> 0:11:31.800 as if we've taught them how to create this vault 0:11:32.200 --> 0:11:35.199 full of this incredibly valuable asset. The most valuable asset 0:11:35.200 --> 0:11:37.080 in the world, and we're like, just leave it unlocked. 0:11:37.920 --> 0:11:40.600 Someone someone tries to steal it from you. Act shocked. 0:11:40.600 --> 0:11:42.880 It's like, what wilely shocked? It's valuable. Of course people 0:11:42.880 --> 0:11:44.040 are going to try to steal it from you, So 0:11:44.080 --> 0:11:46.319 you need to learn to build organizations that are strong 0:11:46.440 --> 0:11:48.360 enough to resist. And we see some of these structures 0:11:48.400 --> 0:11:52.080 like employee ownership, like having an industrial foundation of perpetual 0:11:52.080 --> 0:11:54.600 purpose trust, you know, being a public Pedican corp. Are 0:11:54.840 --> 0:11:58.320 our structural mechanisms. They're just locks on the door to 0:11:58.360 --> 0:12:00.280 prevent outsiders from taking what you've done. 0:12:01.040 --> 0:12:02.560 Well, we're going to take a quick ad break and 0:12:02.600 --> 0:12:11.920 I'll be back with more from Eric Reese. Well, I 0:12:11.960 --> 0:12:14.640 am back talking with Eric Reese, who is known as 0:12:14.679 --> 0:12:17.199 the founder of the lean startup method. He's also the 0:12:17.280 --> 0:12:21.160 author of the brand new book Incorruptible. You have a 0:12:21.320 --> 0:12:25.360 different definition for profit in your book, and we've talked 0:12:25.360 --> 0:12:27.680 about We've had other guests talk about this concept of 0:12:27.720 --> 0:12:30.400 flourishing on this show in the past. I wonder if 0:12:30.400 --> 0:12:32.920 you could talk a little bit about your definition of 0:12:33.440 --> 0:12:35.240 profit and what you mean by that. 0:12:35.520 --> 0:12:37.280 Okay, it's going to sound radical at first to people 0:12:37.280 --> 0:12:40.000 who are not used to rethinking what profit is. But 0:12:40.880 --> 0:12:43.480 I assure you it's backed by really good evidence, and 0:12:43.520 --> 0:12:45.000 we'll walk you through the logic of why I think 0:12:45.040 --> 0:12:47.320 it's right. So I think to make a profit is 0:12:47.320 --> 0:12:50.680 simply to maximize human flourishing. That's literally what it means 0:12:50.720 --> 0:12:53.760 to be a for profit company. So already you can 0:12:53.800 --> 0:12:56.200 see that our current labels of for profit and nonprofit 0:12:56.240 --> 0:13:00.559 make no sense because you know, the Smithsonian Institute technically 0:13:00.559 --> 0:13:02.920 a nonprofit from a tax status perspective, but it creates 0:13:02.960 --> 0:13:05.640 lots of human flourishing and makes pretty good net income too. 0:13:06.720 --> 0:13:09.160 Philip Morris is a merchant of death, so although it 0:13:09.160 --> 0:13:11.760 has a lot of net income, it's not actually making profit. 0:13:11.840 --> 0:13:17.000 It's extracting money value out of the bodies, the human 0:13:17.080 --> 0:13:21.240 bodies that it destroys. So that's that's just a statement 0:13:21.240 --> 0:13:23.120 of fact. Like I don't think that's actually that radical 0:13:23.160 --> 0:13:25.000 when you think about it. But people say, well, okay, 0:13:25.040 --> 0:13:26.280 but if that's true, then we need to have like 0:13:26.320 --> 0:13:28.800 a new term we can't use. We can't redefine profit. 0:13:28.840 --> 0:13:30.959 We have to have double bottom line, triple bottom line. 0:13:31.480 --> 0:13:33.400 Fred Reikeld, who I really admire, has a concept be 0:13:33.400 --> 0:13:35.360 called good profits and bad profits and it's basically like, 0:13:35.400 --> 0:13:37.559 good profits are the profits that like create long term 0:13:37.600 --> 0:13:40.360 sustainability and allow customers to trust you and build your brand. 0:13:40.480 --> 0:13:43.480 Bad profits are any anything else. But I actually really 0:13:43.480 --> 0:13:45.240 want to push back on that. I don't understand why 0:13:45.240 --> 0:13:47.280 we have to say that bad profits are profits because 0:13:47.320 --> 0:13:49.920 these terms, we can define them however we want. And 0:13:49.960 --> 0:13:52.240 the most important thing I learned while writing this book 0:13:52.640 --> 0:13:55.240 was I really studied, like, how did we wind up 0:13:55.480 --> 0:13:59.480 in this shareholder primacy situation in the first place. And 0:13:59.679 --> 0:14:02.920 if you look at Milton Friedman and the other thinkers 0:14:02.960 --> 0:14:06.120 who really advanced this idea that the responsibility of a 0:14:06.120 --> 0:14:08.280 corporation is just to maximize its profits, it was a 0:14:08.320 --> 0:14:13.120 relatively small cabal of academics, judges, board members, lawyers who 0:14:13.120 --> 0:14:15.720 became enamored with this idea starting in the sixties and seventies, 0:14:15.800 --> 0:14:19.160 and it only really became like real judge made law 0:14:19.160 --> 0:14:20.840 in the nineteen eighties. So it's not even that old 0:14:20.880 --> 0:14:22.640 of an idea. If you can see a tree right now, 0:14:22.680 --> 0:14:25.320 probably you're seeing something older than this idea. Okay, it's 0:14:25.360 --> 0:14:28.000 not some bedrock principle of capitalism. It's a new idea. 0:14:28.080 --> 0:14:29.880 And the key if you study all the stuff that 0:14:29.920 --> 0:14:32.840 they did. They never said, Look, we think it's better 0:14:32.840 --> 0:14:36.320 to have ruthlessly exploitative companies, So we should have two 0:14:36.360 --> 0:14:39.000 kinds of companies, the old kind, the purposeful based companies, 0:14:39.000 --> 0:14:40.720 and the new exploitave companies. And therefore we're going to 0:14:40.760 --> 0:14:42.520 have a double bottom line. We're not going to have two. 0:14:42.760 --> 0:14:43.960 They didn't do any of that. They never did that. 0:14:43.960 --> 0:14:47.000 They just said, the purpose of business is to do 0:14:47.040 --> 0:14:49.600 this thing. The definition of profit is this narrow thing. 0:14:49.640 --> 0:14:52.360 They just created a new business orthodoxy that we mostly 0:14:52.360 --> 0:14:55.360 have inherited unchallenged. So I think it doesn't make sense 0:14:55.360 --> 0:14:57.400 for us to go around creating all this new vocabulary 0:14:57.520 --> 0:14:59.960 when we could just define things properly in the first place. 0:15:00.080 --> 0:15:03.200 And if you take an economics class you will learn 0:15:03.560 --> 0:15:05.880 that the way we define profit today most people might say, 0:15:05.880 --> 0:15:07.280 what is a profit? They say, Oh, it's simple, it's 0:15:07.360 --> 0:15:09.120 just how much money do I have left over after 0:15:09.160 --> 0:15:13.040 I pay for all my expenses has these catastrophic conceptual 0:15:13.080 --> 0:15:16.120 flaws in it, because if you create massive deferred liabilities, 0:15:16.160 --> 0:15:17.960 like in the case of a Ponzi scheme, you can 0:15:18.040 --> 0:15:20.400 appear to be profitable when you're really not. If you 0:15:20.400 --> 0:15:23.600 don't account for your negative externalities, like if you do tobacco, 0:15:23.600 --> 0:15:25.920 smoke or pollution, and somebody else has to pay for 0:15:25.960 --> 0:15:28.560 the cleanup of the thing that you do. And most importantly, 0:15:28.880 --> 0:15:32.440 if you profit from the destruction of human lives. We 0:15:32.480 --> 0:15:34.120 don't have a good way to account for that as 0:15:34.120 --> 0:15:37.320 an input factor of production. So the costs of this 0:15:37.480 --> 0:15:41.560 behavior are not properly accounted for, so are we have. 0:15:41.640 --> 0:15:43.280 So we have to come up with a new definitive profits. 0:15:43.280 --> 0:15:44.560 Our conventional want is superflawed. 0:15:44.920 --> 0:15:47.440 Well, you talk about the idea of creating more value 0:15:47.480 --> 0:15:49.680 than you capture. I guess as a way to think 0:15:49.680 --> 0:15:54.840 about then the excess on top of the yeah, okay profit. Well, 0:15:55.080 --> 0:15:58.280 and you know it has business ramifications too. I imagine 0:15:58.320 --> 0:16:00.200 that people are more likely to stay with an organization 0:16:00.280 --> 0:16:01.920 that seems to be creating more valuable Oh. 0:16:02.000 --> 0:16:04.640 Yes, there's so much evidence. I mean, the book is 0:16:04.720 --> 0:16:06.400 just low. The citations of this book are almost as 0:16:06.400 --> 0:16:08.880 long as the book itself, because we're just I was like, 0:16:08.880 --> 0:16:10.480 I got to show you they have people are skeptical, 0:16:10.520 --> 0:16:12.080 so I got to show the evidence. I showed my work. 0:16:12.120 --> 0:16:14.160 You can reread the citationcy for yours that we have 0:16:14.240 --> 0:16:17.040 massive amounts of evidence that companies that have as their 0:16:17.080 --> 0:16:20.840 explicit intention to create more value than you capture, instead 0:16:20.840 --> 0:16:22.240 of just make as much money as they can by 0:16:22.240 --> 0:16:26.080 whatever means necessary, just reap all these counterintuitive benefits, including 0:16:26.120 --> 0:16:28.120 being more competitively advantageous. 0:16:28.520 --> 0:16:31.040 Yeah, so, Eric, I want to pivot from that to 0:16:31.240 --> 0:16:33.800 talking a little bit about your schedule, since this is 0:16:33.840 --> 0:16:37.680 a show where we talktivity this the time. What does 0:16:37.720 --> 0:16:40.560 your schedule look like on a usual day. 0:16:40.840 --> 0:16:44.200 Boy, I have three young kids and twenty different jobs, 0:16:44.200 --> 0:16:48.000 so it's actually very very very chaotic. Yeah, you know, 0:16:48.080 --> 0:16:51.640 I'm I'm especially since my kids, you know, have gotten 0:16:51.640 --> 0:16:54.600 to three kids now, Like I'm very family oriented and 0:16:54.760 --> 0:16:56.960 very like a very local Whereas I used to travel 0:16:56.960 --> 0:16:58.600 all around and give lots of lectures and stuff, and 0:16:58.640 --> 0:17:01.520 now now I tend to mostly do stuff, uh work 0:17:01.520 --> 0:17:04.880 from home, And you know, it's so different when I'm writing. 0:17:05.400 --> 0:17:07.040 That's I try to do that all day, and I 0:17:07.080 --> 0:17:08.399 try to carve out as much time as i can 0:17:08.400 --> 0:17:10.000 for when i'm writing. You know, when I'm promoting and 0:17:10.080 --> 0:17:11.760 I'm doing a lot of interviews and I'm out there 0:17:11.800 --> 0:17:14.320 talking about the book. So you know, when companies call 0:17:14.400 --> 0:17:17.280 me for advice, which they do almost every day. Then 0:17:17.320 --> 0:17:19.560 I'm in the trenches with them. Like while while we're 0:17:19.560 --> 0:17:22.040 talking to someone, a founder is raising a Series A 0:17:22.119 --> 0:17:24.639 and he's texting me for term sheet, you know, tips, 0:17:24.640 --> 0:17:26.639 and what do they say to this investor, like literally 0:17:26.720 --> 0:17:29.400 as we talk. So yeah, I feel like the privilege 0:17:29.440 --> 0:17:32.640 of what I do is just it's endlessly intellectually stimulating, 0:17:32.680 --> 0:17:34.320 and it has so much variety to it. It doesn't 0:17:34.520 --> 0:17:36.560 tend to stay stable from day one day to the next. 0:17:36.880 --> 0:17:38.880 But do you have any routines that you think make 0:17:38.920 --> 0:17:39.800 you more productive? 0:17:40.760 --> 0:17:44.400 Yeah? I mean, I'm very I'm very clear about my priorities. 0:17:44.920 --> 0:17:47.680 So I'm willing to tolerate a lot of schedule chaos 0:17:47.720 --> 0:17:49.720 because it's just like, look this, this is these are 0:17:49.720 --> 0:17:51.240 the priorities. These are the ways in which I need 0:17:51.280 --> 0:17:52.760 to I need to schedule. I you know, I'm up 0:17:52.840 --> 0:17:55.920 very lucky to have a long time and very trusted 0:17:55.960 --> 0:17:58.800 assistant who can help me manage manage my time, and 0:17:59.119 --> 0:18:01.959 I just try really hard not to spend time on 0:18:02.040 --> 0:18:06.119 logistics and scheduling and the meadow work about work, and 0:18:06.160 --> 0:18:08.239 as much as possible delegate that so that like my 0:18:08.440 --> 0:18:11.600 time is spent on the actual substance whatever that substance 0:18:11.640 --> 0:18:12.880 may be all right. 0:18:12.840 --> 0:18:14.359 We're going to take one more quick ad break, then 0:18:14.359 --> 0:18:23.720