Eric Ries: belief

Transcript context

…Okay. So just to kind of plant these things in people's heads as they, okay, we need to really think about this stuff. There's a nonprofit approach to this, there's... What are the terms that people should just think about? So we talked about we need a mission guardian. So first question, is the mission guardian a person or a thing? That's our kind of first decision point. So yeah, some, I think for early stage companies, founder control is fine as a good bridge, a temporary bridge to a more permanent structure. And some companies get really far with founder control. That's okay. But a lot of founders who have founder control wind up really miserable, as you can see by the fact they're having a mental health breakdown right in front of us, all of us on social media basically every day. Because you become like Atlas, you can't even shrug. It's you holding back the abyss. It's a lot. So I think a better, more permanent solution is to encode the protection into the structure. Now that can be done with a single entity like Costco. Costco just has the rules written right into the structure itself. But that means that every time they lose one of the structures, every once in a while when an attack chips off a little bit of it, they don't have any way to grow them back. So it's like you've built this fortress, but you don't have a way to renew it. The better way, I think, according to the evidence, is to have some stakeholder, somebody be the steward of the mission and have a way to renew that person, that set of people. So some people accomplish that by what's called an employee ownership trust. So the employees are the mission guardians, like the John Lewis Partnership in the UK is a famous example. Obviously cooperatives have this... This can work in a cooperative at scale. Mondragon, for example, in Spain has like 80,000 employees. It's a huge company, but they're all employee cooperatives. You can do it through an employee voting trust. That's how Alibaba is protected, where the employees vote for the board members rather than the reverse. But those are much more complicated compared to me, the two simplest solutions are either a nonprofit foundation as in the Novo Nordisk example, or in the case of what's called the Perpetual Purpose Trust or PPT. And Perpetual Purpose Trust is a non-economic entity. So whereas the Novo Nordisk Foundation is the largest charitable foundation in the world because it owns a big chunk of Novo Nordisk and that's worked out pretty well. The Anthropic long-term benefit trust has no economic dimension to it at all. It only has the mission, oversight, responsibility. And what's nice about a Perpetual Purpose Trust, as in the case of Patagonia is governed with a purpose trust also, is you have the trustees, but then you also have someone whose job is actually to sue the trustees if they ever deviate from the mission. So you actually have what's called the purpose protector who's an extra person who can get in there and say, "If things go wrong." So to me, it's like you have checks and balances like in a government. It's more stable. It's a more stable structure. otector who's an extra person who can get in there and say, "If things go wrong." So to me, it's like you have checks and balances like in a government. It's more stable. It's a more stable structure. To me though, I use the omnibus term spiritual holding company to describe this category of things. Because I said before, we have a lot of infighting. The people who advocate for each of these things thinks their version is the best. I didn't even mention the Evergreen, the Tugboat Foundation. They don't believe in having investors at all. So there's people who think the solution to this is no investors involved, that makes the problem a lot easier. So anyway, there's a lot of different ways this can be done. I don't think I even mentioned ESOPs. There's just so many. So we need to have an omnibus term. I call it the spiritual holding company. The holding company, like the Berkshire Hathaway, but rather than having everything be wholly owned, it's the holding company for the spirit, the animating essence of the whole. And it's a lot of evidence in the book, a lot that this structure is more stable, more durable, more likely to invest in quality and R&D and the things we really care about and better for shareholders than the conventional structure.…

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