When Eric Ries published “The Lean Startup” in 2011, he handed Silicon Valley a new bible. Entrepreneurs and investors quickly embraced the gospel of minimum viable products, rapid experimentation and “failing fast.”
Fifteen years later, Ries is wrestling with a question that many of those startups have come to face: how to keep companies from losing their soul once money, scale and power arrive. His new book, “Incorruptible: Why Good Companies Go Bad and How Great Companies Stay Great,” is out May 26 with publisher Author’s Equity.
“There’s a throughline through all of my work, which is really about how to build great organizations,” Ries says on the latest Agents of Impact podcast. “How do we create innovation that can really work in any kind of environment, no matter how much uncertainty?”
The core argument of “Incorruptible” is that many of the failures associated with modern corporations flow from corporate structure and governance systems. Human flourishing, he says, not profit maximization, should be the true purpose of companies. And this purpose should be enshrined in a company’s operating rules, not just gestured to in toothless or hypocritical statements.
Over the past decade and a half, Ries has watched many companies he admired achieve breakout success, only to be hollowed out under pressure from investors, boards or acquirers. He describes a taxonomy of “unusual failures” that can follow initial success – founders being ousted or losing control of their companies “like Frankenstein and his monster,” and even outright betrayal by a board or private equity firm.
“A lot of those companies have ultimately been destroyed,” he says. “Their very success becomes a liability, and they lose that special spark, the thing that made them worth creating in the first place.”
Following the success of “The Lean Startup” Ries began to shift his attention to corporate governance, fiduciary duty and the incentives embedded in modern finance. He launched the Long-Term Stock Exchange, an effort to reorient public markets toward long-term value creation instead of quarterly earnings pressure. (The exchange today has three listed companies, which Ries, who is no longer involved in its management, considers a success).
“Many of the so-called best practices that we’re teaching people about how organizations need to be are actually value destroying,” he says.
Spiritual holding company
Ries argues that companies become vulnerable to corruption when their legal and financial structures allow them to profit even if they betray their mission. Conventional accounting systems, he says, routinely ignore externalities, deferred liabilities and social harm.
Ries’ solution is what he calls the “spiritual holding company,” a catchall term for governance structures that preserve a company’s mission across generations and protect it from short-term financial pressures.
The model draws on existing stewardship structures behind companies and organizations ranging from Patagonia, a perpetual purpose trust, to Novo Nordisk, an industrial foundation, to the John Lewis Partnership, an employee-ownership trust, and cooperative models like REI.
“What’s wild to me is that I thought when I first encountered these structures, they were very niche and weird and uncommon,” Ries says. “But that’s not really true.”
Such structures may produce not only more resilient missions, but more resilient businesses, Ries says. “Companies that have this structure are much more likely to live to year 50 than companies with a conventional structure.”
AI and the lean startup
Anthropic is a live case study. Ries says he played a small role in helping the AI startup design its Long-Term Benefit Trust — well before the company became the massive success it is today. “They took the need to protect the mission really seriously,” he says. “They have the ethos, the strong internal alignment around a principle and they have this structure.”
The trust is set up as a two-tiered structure in which a perpetual purpose trust with independent trustees has the power to appoint directors to the for-profit board. Getting it implemented took two years.
Anthropic has taken principled stands, such as insisting that the US Department of Defense not sue its technology for mass domestic surveillance and fully autonomous weapons — a position that angered the Trump administration and landed the startup on a blacklist.
“They’re under an unprecedented amount of pressure for a private company,” notes Reis. “I don’t think we’ve ever seen anything like this before.”
The Silicon Valley startup ethos that Ries road to prominence has given way to AI-induced consolidation and anxiety. Nevertheless, Ries says that the uncertainty caused by the AI boom makes Lean Startup principles more relevant than ever.
“Agility really is the only rational response to that level of uncertainty,” he says.
Still, his focus has shifted from individual startups to the civic infrastructure surrounding them. Society has lost the ability to build institutions capable of governing transformative technologies and markets, he says, and such infrastructure is exactly what is needed to protect human flourishing in a machine-learning age. The Long Term Stock Exchange, he says, was his attempt to demonstrate that civic institution building is possible even in these fraught times.
“I would like those of us who care about organizations just not being so naive about how to protect them,” Ries says. “And to give them the tools they need to resist both the inner temptation to betray and the external pressure to do the same.”
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