Eric Ries: prediction

Transcript context

…... oh, other people, they're weak, maybe they're of loose values. The other is just like, do I really need to do this? There's so many companies that are killing it. I don't think they've done any of this. Why do I even need to pay attention to this? So maybe let's start with that first one or this idea of, and this is a core thesis of your book. This is not like an ethical values thing. This is a structural element of building businesses in the US. I'm going to make a claim that's going to sound radical, but I'll back it up. If you don't get this right, no other decision you make about your company will matter for the long term because you're not going to be the one making it. According to Harvard Law School, among venture-backed companies that have the standard best practices set up that you got from your lawyer, only 20% of founders are still the CEO three years after going public. Just statistically speaking, everyone's being told by their lawyers, their bankers, their VCs, everybody that you're the exception. It's not going to happen to you, but statistically speaking, you're much more likely to be in the 80% than the 20%. I'll tell you one story in particular. A very hot company came to see me a year or two before their IPO. They were planning IPO and I built the long-term stock exchange. I've done a bunch of stuff that people come to me for advice about these things. They wanted advice. How can we structure the IPO? We want to think long-term, we're really a mission-driven company, et cetera, et cetera. And I was going through their governance documents. I said, "Oh, good. You have all the best practices. So you're totally like..." I was like, "The good news is you're so screwed you're going to have to do something. This is your [inaudible 00:13:15] guarantee to get this mess." And I had all the data and just like I do in the book, like, here are the examples, here are the case studies, here's the data, you need to know about this. And the founder was really concerned. He's like, "Okay, we're going to definitely do something about this. We're going to fix it up." But then he called me back a few months later. He's like... I said, "Well, what are you going to do?" He's like, "You know what? I talked to my bankers, talked to my lawyers, talked to my CFO, talked to my GC, talked to my VCs, talked my growth VCs. You know what they all said? They all said, 'Man, Eric is such a downer. If he really believed in your vision, if he really saw how special you were, he wouldn't talk like that. You're the exception.'" I said, "Okay, man, good luck." This company went public, had a very successful IPO. A lot of people made a lot of money. And then five months into their IPO, a competitor gets acquired and the whole category, everyone freaks out. Stock price collapses and the founder is ousted after five months as a public company. Now, if you read stories about the company, people were like, "Oh, he made all these mistakes. Their business model sucked. The company..." Blah, blah, blah. Did he make mistakes? I'm sure he did. Were there problems? I'm sure. But had he really earned so little grace that he only got five months, the same people saying that the business model is horribly flawed, they invested in the company five months ago. Had it really changed so much in five months? This is what's going on. These collapses are all around us and we're being told it's normal. orribly flawed, they invested in the company five months ago. Had it really changed so much in five months? This is what's going on. These collapses are all around us and we're being told it's normal. This is just the way it has to be, but it's not. These are choices about the specific structures, cultural practices, the management practices we do on the inside and the structural, the governance practices we do on the outside. On both of them, were being told to do things that are incredibly weak. And again, if you think you're going to be the exception, think again.…

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