Why Building Again Can Be Harder After Success | Eric Ries

23:17See, in traditional business, and this is a business issue, modern management practice, you know, it's about a century old, depending on where you date it to, you know, like some people date it to Frederick Winslow Taylor in like 1911. I think it's also really important to look at the, that Alfred Sloan and the development of what he called decentralized management with centralized control, which is a fancy way of saying like our modern idea that the way you work is you delegate to teams, you give those teams a target, you estimate what's supposed to happen. And then you judge them by their say-do ratio.

23:46Do they achieve what they said they were going to achieve? Like that was actually like, we now treat that kind of like obvious. Of course, everybody does that. But you have to understand this was invented. This was an idea that was not handed down by on Mount Sinai by Moses. Okay, this is an idea. It was invented by a certain guy at a certain time that you can go read it. I strongly recommend the autobiography of Alfred Sloan. It's an amazing book. And part of what's amazing about it is you just realize how primitive business thinking was in the 1920s. It just didn't have the modern ideas that we take for granted thanks to the people who figured it out.

24:12Well, the issue with this, this has been going on a long time now, is it presupposes that we can predict in advance what success is supposed to look like. And for people who are entrepreneurs, they often are like, when can you ever do that? Like, what are you talking about? Right? I remember meeting somebody, you know, who was like a Six Sigma, you know, black belt. And he had this mug that said, failure is not an option on his desk. And I was super distracted because I was like, failure is not an option. I was like, yeah, I was like, if I had a mug, my mug would say, I eat failure for breakfast.

24:40Like if I don't fail 10 times by lunch, that's a good day. And of course, like the reason we have such different values is he works in a world where success can be forecasted. And therefore, failure is always due to inadequate planning, always. Whereas for us, failure is due to the fact that we're doing something highly uncertain. So fear of failure is deeply ingrained in our modern business culture in a way that is very, very unhealthy. Not only psychologically unhealthy, but illogical. Because if we want to do innovation, we want to do experimentation, we're going to have to have quote unquote failures.

25:09Now you asked me the key question very beginning of this interview, what is success? And so you can't define failure unless you could define success. In articular business culture, success is what you predicted will happen is what happened. But if you're gonna do innovation, that cannot be your, if that's your goal for success, you're in such big trouble. It's better, of course, not to see an experiment as a failure. Like imagine you told a scientist that every time they had an experiment go in an unexpected direction, that's a failure. Most scientists would be like, you can't go. That would be no innovation ever.

25:33You know, like if you study the history of science, some of the most important breakthroughs came from the most ridiculous experimental failures. I think it was the discovery of the X-ray or I forget which, one of the fundamental forms of radiation that was discovered because a certain guy had an apparatus. He was doing experiment on something totally unrelated. And he happened to notice that when he did the experiment in this part of the lab, a different part of the lab would start glowing. You know, that's how it was discovered. And what's funny about that story is he wasn't the first one to notice the glow.

26:02He was just the first one to not dismiss it as something random and be like, huh, that's not what I expected. I need to go investigate this other thing. I think you want to know about prize because he actually had the curiosity to understand the failure. He wanted to know what's going on. So our most important attribute when we're doing innovation is curiosity, not judging failures and ROI and efficiency. No, our first question is curiosity. Something unexpected happens. I need to know why. Now, just like in regular business, sometimes, why? Because we suck. Why? Because again, sometimes it will be a failure of execution or a failure of planning.

26:32That happens too. I'm not saying that all failures are good, But like sometimes we'll have executed beautifully and customers still don't want it. That's interesting. We have to learn to get curious about that, to get interested in that. And when we do that, we start to develop a different fear, not a fear of failure, but a failure of imagination, failure of curiosity, a failure of integrity. And this is something I think people really miss with Lean Startup because I've been getting this question a lot, you know, with the new book, because people are like, well, I thought Lean Startup was about going fast and rapid experimentation.

26:58And the new book is about enduring principles and commitments. In a startup, shouldn't everything be subject to experimentation? And just in that question, already the person asking has revealed their confusion. Because if you say everything should be determined by experimentation, well, that means that some things must not, by definition, the fact that we're going to experiment, the definition of what makes a good experiment, our commitment to scientific truth is by definition not subject to experimentation. We must have some priors. We must have some first principles that we're committed to.

27:30That's what makes iteration, scientific discovery, anything important has to be powered by those principles. And those principles have to be enduring. So a huge part of dealing with this psychology that you're describing is trying to connect with, well, what are those enduring or higher principles that we're committed to no matter what? And when you feel that way, if you commit yourself, even forget mission, driven purpose, all that stuff, but like simply in lean startup terms, if you can commit yourself to science as a form of truth seeking. So we're not going to accept astrology as fact. We're going to insist on data-driven, scientific-based decision-making.

28:05Yeah, so you're creating constraints that actually also save you a lot of time and resources because you're not going to bump your head against those constraints unnecessarily, right? So I find people who follow first principles thinking when they can also ahead of time to define constraints, which is very dangerous, right? Because yeah, you don't want assumptions. You really want to have proper constraints there. But Eric, I would like you to help me apply your amazing wisdom and thinking about experimentation and first principle thinking and all of that to our personal life after success. Here is why.

28:46Because I personally believe that this kind of thinking is exactly what happens, that what helps us to untangle all the confusion and this feeling of being overwhelmed and sad and emotional after we sell our business, this is what helps us untangle all of this. If we give ourselves permission to experiment wisely and to come up with hypotheses that actually make sense, then we can go through this journey in a way that is less difficult because it is. And you know how hard it is and how people get completely lost for years. Actually, on average, it takes us 10 years to just adapt to post-exit life, which is such a horrendous waste of human potential from my standpoint.

29:28So may I ask you to go on this journey with me and treat an exited founder as an experiment or a startup that has to deal with confusion, uncertainty, chaos. How would you think about it? I've counseled a lot of people in this exact situation. So this is no hypothetical to me. And well, I guess it's okay to talk about people might find this to be a little bit strange. But I think one of the first things we have to admit is that in an exit situation, and it's the same whether that's a successful exit, a startup failure, or the most common case is actually the founder would kick out of the company.

30:00That happens too. It doesn't matter in any of those situations. Yeah. Voluntarily, involuntary, positive, negative. We also see a lot of cases that are called by the press positive, but then the actual thing is destroyed. Horrible. So we have to deal with the trauma of it. Okay, let's just be honest. This is you mentioned like the why do you feel sad when your baby is destroyed? Well, that's actually really natural. That's a very natural experience. And I don't mean to make light of real, quote, unquote, real trauma, people obviously have their actual child killed. And that's truly terrible. But there's something like that here, too, that it can be traumatic to have your life's work ripped away from you.

30:34And we have to understand this is the thing I really feel sad about most founders I've talked to have been through an exit who have regret, or there's some kind of angst about it. Do you ask them what went wrong or how did it happen, they always blame themselves. So I was talking to a founder the other day who I really respect, someone I just have deep admiration for, made so much money for their investors and got completely screwed. And so their company is nominally a success. They made plenty of money. Everything was great, but their ability to be part of it, they were in a very cruel way kicked out.

31:08And they were starting a new company, as they tend to do. And I said, given what lessons did you learn from last time? And he said, all the things I hear every time. Well, I should have trusted the wrong people. I should have been stronger. I shouldn't have compromised. That was all, I shouldn't have done this. I shouldn't have done that. I shouldn't have done this. I said, great. Given what you've learned, what governance changes are you going to make in the new company to make sure none of those things happen again? And he looked at me with a completely blank expression and said, like what? He had not identified even one systemic factor about what had happened to him, which means it's going to happen to him again.

31:38Well, I was really very sad to have this conversation. And part of my goal in writing this book is to help founders identify these structural, systemic factors that are causing them to have all this trauma and misery and teach them structural, systemic protections, solutions that can prevent it. So that would be the thing we really need to understand is like, what is the trauma and what is needed to heal that trauma? And then what is needed to protect the next creation from having that happen again? I very much agree with you and I love it. I think that's exactly why in the beginning of the interview, we talked about how it's actually very important to take some time to process our experience, crystallize it into something that will help us going forward.

32:19So in case of failures or some kind of self-blame, we can transfer it into those protective policies, for example, in the next business, but also in our personal portfolio, for example, right? There are lots of places where we could build structurally, build these protections. You could resolve not to pay this trauma forward. How about that? How about the founders that you invest in and mentor? How about if you protect them from what happened to you? Well, we all know that cycles of abuse don't always work that way. Sometimes we become the traumatizer as a way of processing what happened to ourselves.

32:50Well, don't do that. Break the cycle. Let the next generation of founders benefit from protections you never had. And I love that. And I think that's one side of how we absolutely need to process our experience before we move forward for success. But there is also a brighter side, which also very often gets overlooked because we are often in this pain. Something went wrong during the exit. We didn't quite get to the point financially or emotionally that we expected. But I think we tend to overlook the positive results of experiments. Because when we build our company and at the same time experiments with our own psychology, if you wish, there are so many experiments going on.

33:32We learn very fast. And yes, we learn from failure what doesn't work. But we also learn what works. And for me, this is even more precious. Because what doesn't work is still a hypothesis in a way, right? Because you still need to find what actually works, right? It's just the next hypothesis. It leads you to the next hypothesis. But when we find what definitely works, that is precious. And what I see again and again and again is that founders, when they start another company, they completely ignore what they've learned through these precious experiments about what actually definitely clearly works.

34:06But it took so much effort. It probably took so many failures to find this out about yourself. How do I personally win? And also about how companies like this win. And it's kind of a positive side, but it becomes a very negative, kind of sad side of repeat businesses if we don't use what we learned through experiments. You know what's really crazy? It's funny you mentioned how Lean Startup helped you so much in your second company. And Lean Startup, in the early days especially, Lean Startup had a lot of people on their second company. Our highest early adopter people were not first-time founders, but second-time founders.

34:41Now it's conventional wisdom. But back when it was still a very controversial theory, I met so many founders who'd be like, I don't need that. Yeah. This is for people who are wrong. I'm not wrong. You know, this is for people who don't have vision. Steve Jobs would never have done this. But I'm like, have you read any books about Steve Jobs? He was really into this stuff. Anyway, and then a lot of those people, and I always told people the same thing. I was like, listen, I hope you're right. And when you make it big on your first try, I hope you'll call me back and gloat. I actually want to hear it.

35:05Tell me, because I want to know, like, maybe I'm wrong about something. And so many of those people, they did call me back to be like, I'm on my new startup now, and I'm going to do things a little differently. You know, I'm like, oh, whatever happened to that startup? I was like, well, I thought I was right, but actually I'm not right. You know, I wasn't right. That's not that uncommon. That's fine. But I remember doing a lot of research for Lean Startup. And one of the things I was really curious about is, is it better to invest in first-time founders or repeat founders? And I thought, oh, because of my experience with Lean Startup, surely repeat founders would be better, but no.

35:29Statistically speaking, there's no difference between first-time founders and second-time founders. And when I looked at the research, I found it really surprising. They said, well, the reason is because, yes, you have some founders who learn from their first time mistake, and therefore their subsequent startups are more likely to succeed as they go. And each one is more, but the vast majority of founders are so stubborn that they just bang their head against the wall, making the same mistakes they made the first time. So statistically speaking, those people are dragging the average down enough that it makes no difference whether you go first time or second time.

35:58And yeah, it's actually more like a trade-off. First time people, you know, I think in the evidence are more likely to try something a little bit more wacky and bold. And repeat founders tend to be a little bit more conservative, but that conservatism can actually not be good. So I think it's actually really important to learn the right lessons from your experience, not to overgeneralize, but to really reflect. And it goes back to the inner part of entrepreneurship, which is like, what is your motivation? What did you, you know, what really, really worked and didn't? And don't let it just be an ego story of like, well, if I'd only been smarter, if I'd only been this, I would have been that, it would have worked out.

36:25Or like, or some people are like, it's everybody else's fault but me. This guy screwed me and that guy screwed me and this guy and that. And therefore I learned nothing. Like you have to be able to not take on all the responsibility, but really try to understand what happened. And that's why I'm so focused these days on systemic forces. Because the other thing that is really interesting to me is if everything was personal, the outcomes would be basically random. But they're not random. Companies wind up in the same place, even though they started out very different. Like think about most companies today, most successful companies today, they sent you a press release and I blacked out the name of the company.

36:55You couldn't even tell me what company it was. They all write the same crappy, boring press releases. You know, their employee comms are all the same. Their mission statements are indistinguishable. like how did they wind up so homogeneous? The only way that can be is if there's some force behind the scenes aligning their trajectories. So if we see ourselves as the superhero prime mover, we're the only one who made it happen. We become blind to these more physical forces that act on organizations. And a big part of my goal these days is to help founders, especially who have exited, who have some freedom and discretion as they think about what they're doing next, who frankly have power that they can exercise to help them see the structural patterns, the structural forces that are acting upon them and so that they can use their power not to just blindly promulgate or perpetuate the values that got them where they are, but they can see their own personal values more likely to be realized in the world.

37:45I'm very, very curious about this. So can you give me a bit more examples of how it would play out in real life, positively or negatively? For example, if people are not aware of this versus when people are very intentional about this, especially ExitFound? I think one of my favorite stories in the book is a guy named Saul Price. Saul Price created a company called FedMart in the 1950s. And I talked about he was a lawyer before he became a retailer. So he saw his job as having a fiduciary to the customer. So he started FedMart, I think, in 1954, something like that. And over the course of the next 20 years, it was a huge success.

38:18It started in San Diego, where I grew up and expanded all over the Southwest United States. I can't remember the numbers now, but it was a super successful company. He took it public. And he hated being a public company because he was constantly under pressure from his investors to cut corners to basically break the ethos that had gotten him where he was. So he arranged a new set of investors to take the company private and took it private. And yet the attacks continued. His investors were always dissatisfied because he was so stubborn. He only wanted to do the right thing. And they were like, we could make a lot more money if we did the wrong thing.

38:45So he was constantly fighting with them, fighting with them, fighting with them. And finally, they kicked him out of the company. He literally came to work one day and the locks on his office were changed. He couldn't get into the building. And he was super pissed. You can imagine how traumatic this was for him. Now let's separate out what happened next to FedMart and what happened to him. First of all, FedMart switched to a more conventional business playbook. You know, no longer a fiduciary to the customer, didn't do the cap margins and all the other stuff that made it great. So within seven years, it was bankrupt.

39:11The investors got what they wanted and they killed the golden goose. It's like as clear an example of like killing the golden gooses you'll ever see in business. But Saul was not satisfied to just go quietly into the night. He called the same realtor who he had used to open the original FedMart office and said, you have another office in that same building. And so he literally opened a new office. He took one week off. He opened a new office literally upstairs from the FedMart office that he used to work at. Started a new company called Price Club and was back at it a week later. And he basically, while FedMart was setting itself on fire, he just rebuilt that ethos and had success.

39:42Now, what's interesting about this story is ask yourself, like, why would investors be so naive? Why would investors be so evil to destroy the golden goose? Or sometimes we're like, why was he so naive? I can't believe he lost control of his company, right? So we see these stories as personal dramas, Saul Price versus evil investors, who's the villain, and therefore we miss the structure. Well, anyway, meanwhile, FedMart had a one year, he hired a stock boy, like literally an entry level employee named Jim Senegal, who worked his way up to become an executive at FedMart over the course of its history.

40:15When Saul Price was fired, he and a bunch of other executives quit in protest, and they all went to work at Price Club. But Jim Senegal wasn't satisfied with either of the stories that I just told you. He wasn't willing to see Saul Price as a victim, nor was he willing to see the investors as the villain. And so he actually went up creating his own company called Costco. And eventually Costco would merge with Price Club and the company you now call Costco is actually the price, it was called Price Costco. Now it's just called Costco. Anyway, Costco was built on the same principles as FedMart and Price Club, but with a different governance structure.

40:50So people know a lot of famous stories about Costco, like the famous$1.50 hot dog, if you know that story, or just the fact that they pay higher than average wages in all their markets, that they have a different effect on the communities they operate in than say Walmart. They create a lot of economic prosperity wherever they go. Their employees have tremendous retention. During the Great Recession in 2008, when everyone else was slashing wages, they gave their employees a raise. They did it over three years instead of over a longer period, even though that cost them an extra$20 million, they just didn't care.

41:17And as a result, Costco has had all the same problems with investors that FedMart had. Investors constantly are complaining about Costco. And activist investors and governance experts have for decades been attacking Costco, trying to get it to change to become a more conventional company. One of my favorite quotes, I think this was from a Deutsche Bank analyst, it said, Costco is spending money that rightfully belongs to investors on improving the customer experience. That's supposed to be a criticism. Remember what I said about the builder's intuition? These people do not understand what creates value.

41:48So anyway, this has been a big fight. I remember a story that the CFO of Costco told, this is years ago, one of these times when Wall Street had a freak out about Costco, the stock price plummeted, you know, 20 % or whatever. And the CFO went to Jim Senegal and was like, listen, we have to do a road show. You got to go around and meet the investors and reassure them. He was like, fine. And they went to have these meetings and the meetings were a disaster. Because in every meeting, the CFO is telling the story years later, Jim Senegal would hear the person's complaint and Jim Senegal would say, I don't care.

42:13Now, everyone who hears the story is like, you can't say that. What are you talking about? If you're a CEO and you're a public company, you have to do what Wall Street wants. Everyone knows that, right? Except Costco is not structured like an ordinary company. It has what's called a governance fortress that protects it from having to care what these people think. And I won't get into all the mechanics of it. You can obviously read the book and you'll learn all about it. But the key is that Jim was there the day that investors turned on Sol Price. So he understood that he needed to do something more than just be smarter and savvier and more clever.

42:42He had to invest in structures that would protect what he had built. And one of my lessons of the last 20 years building companies is that in this world, everything that is worth protecting will eventually need protection. So we'd better learn how to do that as builders and stop being so naive about it. So what would you say is worth protecting in any company that doesn't want to just be mercenary, that actually wants to be a missionary company creating value and impact? Yeah. So there are four dimensions of what I call the new governance. So today, when founders hear that we're going to talk about governance, they're like, oh, right, that sounds like I'm like, let's talk about building permits.

43:19Let's talk about like the importance of brushing your teeth, right? Like it's just this like administrative hassle, something for lawyers and bankers to fuss over. Yet the governance decisions you make about a company are the most fundamental foundational decisions you will ever make. And in fact, I would go so far as to say for most companies, if you don't get your governance choices right, no other decision you make ultimately will matter in the long run. You will not be the one making the decision in the end. So if you don't care, okay. But if you care better, pay attention. So I think that today, most people will talk about governance, think governance just means compliance.

43:50And compliance is definitely one of the four dimensions of governance. Of course, compliance is very important. But I think we also need to be thinking about purpose, coherence and integrity as the essential building blocks of an organization. Now today, purpose, people are like, oh God, purpose. It sounds like some vague hippie thing. Like, so what, right? Or some like personal growth thing. Like, you know, people are like not that keen to take it seriously because today we have bamboozled people into thinking that companies have no purpose. What we call it, we mostly incorporate using what's called a neutral charter.

44:18So if I pull your corporate charter for most companies and I say, and I like to say, what does it say in your charter. First of all, most founders are like, I don't know, what is my charter? I never looked at it. I have to be like, I feel like Perry Mason sometimes. Like, is this your signature right here on this document? You sign this. It says here, the purpose of the Acme Corporation is, it's the first sentence of every corporate charter. It is incorporated to, and today we usually use a boilerplate formulation, something like to pursue any lawful act or purpose, which sounds super neutral.

44:44Oh, I can just pretty much do whatever I want. That sounds great. Except, and this is going to sound crazy to some listeners who are hearing this for the first time, In today's world, most governance experts would say that this supposedly neutral charter means that the purpose of the company actually is to maximize shareholder returns. So there's no neutral. You've got to serve somebody, as the old song says. So if you don't choose, it will be chosen for you. And what it will be is choosing investors, which means literally this is the hypothetical you have to really consider. If you just, whoever's listening right now, just take a minute.

45:14You don't have to tell anybody your answer, but just privately think to yourself, who do you think is the most evil company in the world today? The one company that you would rather die than have to go work for. You don't have to tell anybody. But just for me, my father's a pulmonologist. So I always use Philip Morris as my, like cigarettes. Like that's really evil. Anyway, you could choose, but your values are different than mine. Maybe you pick somebody else. Fine. Whoever you choose. Now, I want you to imagine that that evil company shows up one day and offers you to buy your company from you for$1 more per share than it's worth.

45:40I always ask founders to do this hypothetical with me. I say, would you sell? Every single person is like either no, hell no, or something I really probably shouldn't say on your podcast. People get real agitated at this hypothetical. Like, of course, we're not doing it. Okay, cool. That's great. But did you know that most governance experts would say that actually, if this ever happened, you have a fiduciary duty to say yes. Most founders are shocked to hear that. They're like, that can't be right. They're always like, you can't. I'm like, call your lawyer, ask him, and then call me back. And they call me back.

46:06And they're so shocked. They feel betrayed. Like, why would he do this to me? But the lawyer doesn't understand why they're upset. The lawyer gave them the best. This is the best practice. This is what you get by default. Anyway, so what passes for purpose today is just you sell out if investors demand you sell out. I understand why some people feel like the word purpose is a little bit silly. Like a lot of ESG debates are kind of surreal. So I get it. Like I remember one of my favorite quotes from a big investor. I think he's in the UK. He wrote when Unilever was doing this big campaign to infuse purpose in all their products.

46:34At the point that we're trying to discuss the purpose of Hellman's mayonnaise, like something we've clearly lost the plot, you know, like it was like so derisive about it. And I was like, oh my God, what an incredible quote. First of all, because I hear you, bro. Like, I know things do get a little bit ridiculous. People start talking about the virtue signaling crap. And yeah, I hear you. But on the other hand, humble though it may be, Hellman's mayonnaise is food. Its purpose is actually super clear. It's food. It's supposed to delight and nourish the people that eat it. So I think how the people that work at Unilever think about the purpose of Hellman's mayonnaise matters a great deal.

47:07Because let's say an efficiency consultant shows up one day and says, hey, why don't we replace one of the ingredients in Hellman's mayonnaise with something cheaper? more addictive and carcinogenic. We can say it happens all the time. You need the product manager to be like, no, of course we're not doing that. But the problem is if you see your purpose is maximizing shareholder returns, you can do this calculation. You can like, well, in the long run, this might be bad, but in the short term, it's going to make our stock price go up. And my stock options vest in four years. So as long as the bill doesn't become due in that timeline, like the efficiency consultant will be long gone by the time the bill comes due.

47:38So that's the kind of thinking that we routinely see in companies left, right and center because they're confused about purpose. I won't go through coherence and integrity in the same level of detail, but just to say that I think they're equally important. Coherence is to what degree is the whole organism, all its parts swimming in the same direction? Is our business model aligned with our mission? Is our culture aligned with that strategy? Are we all moving together to achieve this purpose? And integrity is like, can we keep a promise? And do we have structural integrity? Can we resist outside pressure if someone tries to force us to do the wrong thing?

48:09Do we have the strength to resist? If we build with those four dimensions, compliance, purpose, coherence, and integrity, we build an organization that can actually be an incorruptible force for good in the world. How do you think about incentive structure here? Because you are talking about constraints and it sounds very much like a fortress and I get it because it's a fortress to protect what we stand for, right? Why we're doing what we're doing, why we're creating the value and how we do it. And I have huge respect for it. But I also wonder if there is some flexibility built into your thinking in terms of how we incentivize people to be aligned with that.

48:47Yeah, incentives are super important. And obviously, we're not going to get into the whole, there's a lot of detail about this in the book, you know, because analytics and metrics, that's a big part of my work. And I've always wanted to really believe in getting it right. In Lean Startup, you remember, remember, we introduced a term called vanity metrics, which are metrics that make you look good, but don't reflect actual success. So the vanity metrics of this book are what are called false proxies. In academic literature, this is called surrogation, where the metric becomes a surrogate for the thing itself.

49:14So think about stock price. People are like, I understand that my company is being successful at its mission, the stock price should go up. But that's a very short step from that to whatever makes the stock price go up is by definition success. And that's danger Will Robinson, right? Like that's a dangerous idea. So again, like, you know, I give the example in the book, how come customer service has gotten so much worse over the last 50 years? Like we have really good evidence that customer service on average is twice as bad as it used to be. It's not your imagination. Customer service really is collapsing.

49:40Well, during that time, the customer service profession has become professionalized. So we didn't have customer service as a distinct corporate function that 100 years ago, but we started roughly 50 years ago to really invest in it. And we have all these metrics that we've been trying to optimize around customer service. Like think about average hold time. If I call in, like the idea is if I have a strong relationship with a customer and I take care of their problem quickly, they're happier. So therefore, the faster I get to each customer and the less time I take with each customer, the better.

50:09That's true. That's like the exhaust from the engine, right? If my engine is working well and it has, you know, there's some exhaust, like the faster I go, the more exhaust I have. But that's not the same as saying the more exhaust I have, the faster my engine is turning. There are lots of things that cause exhaust that are not velocity. Well, this is the same thing. Unfortunately, while trying to make customer service better, we have actually made it worse because it turns out the best way to improve average hold time is to be rude to customers and make them hang up. and like not like fundamentally be so unhelpful that they're less likely to call in the first place.

50:38So we've discovered accidentally and we've incentivized all these behaviors that make customer service worse while patting ourselves on the back that we're making it better. So in the book, I talk about an alternative, which is called holistic metrics, a way to actually measure and incentivize mission aligned behavior at every level of the organization. It's a really important discipline. Yeah, brilliant. I'm happy to hear that. When is the book out? The book is out May 26th, wherever books are sold. You can get it obviously on Amazon in hardcover, audiobook, ebook, but especially those who are listening, if you wouldn't mind supporting your local independent bookstore and buy it there, you just have to walk in and tell them you want this book.

51:13You know, local bookstores are such an important community resource. You could be strengthening them if you want. But I also understand the convenience of other paths, whatever you need to do, you can get it. And for those that are watching this right around release day in May, if you go to incorruptible.co, we have a bunch of pre-order bonuses. We're gonna do a special offer Q &A. We have a bunch of special like secret chapter that got cut from the official manuscript and a bunch of other cool stuff available only to those who pre-order. So go to incorruptible.co. There is something very important, very personal that I want you to share with us.

51:40So many successful exited founders don't want to go and build another business, especially these days. They want to go and write books and teach and mentor and share their experiences. And you are a big inspiration naturally for all of us. But I know that your path through fame wasn't all that simple and easy and caused quite a lot of spiritual growth. And I admire how you've gone through this, but I really want my audience to hear it from you, what it actually meant for you to write that book, to experience being an author, and then also, very importantly, experience kind of losing control of your ideas and how people use them.

52:24I'm from the Bay Area. So when I start talking about spiritual topics, I know some people will be like, oh, it's another woo-woo Californian. Like I hear you. And I was as skeptical as anybody about trying to mix even psychology, let alone spirituality into business. And it's for me anyway, business has been very much a spiritual path. And I think there's just I talked about how entrepreneurship is a truth seeking discipline. That really is how I've experienced it. And as a result, like just like someone who's dedicated to art or to science, the truth can crack you right open. You know, the suffering that you get by trying to make things be the way you want them to be when in fact reality is not like that.

52:57you crack your teeth against that, eventually your whole sense of self, your whole identity can be split wide open when that happens. And that definitely was my experience. So as a result, I've learned to try to cultivate equanimity. I could name one thing that's been the most helpful to me because in entrepreneurship especially, but this is true in all of life, we want to judge things as good or bad. So it's like, I'm trying to raise money and I couldn't raise money. That's bad. So I made a compromise. Now I can raise money. Ooh, that's good. Uh-oh, but the person I put on my board is a raging, you know, horrible person.

53:28Now I have not stuck with him. That's bad. But then like we have a crisis that rocks the business. You know, that's bad. But then the person I hate the most, he gives up on the business and he quits. Ooh, that's good. Oh, but now I can't raise money anymore because he's a bad reference for me. So that's bad. But actually, no, that forces me to convert into a new business model that doesn't use venture capital. Ooh, that's good. But then I'm out of favor with the press and they write takedowns about you're Like each thing, when you look back on it, you can say, oh, that was the best thing that ever happened to me.

53:55But at the time you're judging it as really bad and vice versa. And eventually I think the path of sanity is to recognize that since you're always wrong about whether something's good or bad, maybe stop doing it. You don't need to tell that story to yourself. You could just experience what is actually happening. And I'll tell you, you asked me about, you know, when I was younger, my definition of success. When I was younger, I would have found this terrifying because I was worried that being equanimitous, like being calm, being willing to accept what is would lead to passivity. I would have said my judgments about good and bad, my fear of failure, my ache to be successful, those are important motivators.

54:30And they were, but they were also tremendous distractions. So I can tell you so many stories about times when I did the wrong thing because I just, I couldn't bear to miss out on some critical opportunity that, oops, that was the wrong thing. So over time, what I've learned is to accept that you can have acceptance about what is happening. You can have equanimity about what's happening while still acting with urgency. In fact, in some ways, it's easier to do the right thing. And it's easier in a crisis and an emergency to let those fears and all those stories go and just be really present to like, this is what I must do right now.

55:02But I'd be lying if I said I find this easy to do even today. You know, it's always a struggle. But I do think that is an important part of the entrepreneurial journey. It's fascinating because I have a rather similar framework that helps me. Instead of equanimity, I'm thinking of contentment. I actually was quite shocked when I realized that it's when I am content, then my decisions are better, but also then I actually have more drive and energy because I'm not wasting all this beautiful energy and drive on things that don't matter. So it's very similar, I think, in how you think of equanimity that gives you more energy and drive.

55:38But Eric, I still want to hear your personal story of how you wrote the book, how you became famous, and how that fame transformed you into, I would say, a more spiritual person you are today from how I see it. But I really want you to talk about this from the perspective of someone who is thinking, you know what, I am done with my business. I've learned so much. I feel this desire to crystallize my thoughts and experience, which is great, right? And maybe I'll go and I'll write the book as good as The Lean Startup. Oh, I hope so. Please do. Sure. Yeah. And listen, I like the reality of being an author and a successful, widely successful.

56:19Well, thank you. Can you share that? But not just the facts, but also how you changed. Yeah. I'll tell you exactly what it was like for me. And I appreciate being able to talk about this because, of course, this new book has a esoteric or deeper dimension to it. So I'm excited for those who like such things. hopefully to encounter the book and to feel that deeper presence while still, I hope, being extremely practical and useful for everybody else. Well, because you evolved and this is the book that you write from where you are today. And where I am today. Yeah, exactly. It's a very difficult, I hope people will find it deeper and more nourishing than what I wrote before.

56:51We'll see. Okay. But for me, it was not an easy, like today it's considered a common knowledge that founders and CEOs blog and tweet and go on social media and are desperate for attention and fame and books and whatever. You got to understand how different the landscape was 20 years ago. It was very different. I mean, entrepreneurs did not blog. They did not tweet. There wasn't this kind of rampant attention seeking that we see today. And we didn't live in an attention economy the same way we do today. So it was just a very different reality. So when I thought about blogging, let alone writing the book, all of my key advisors and mentors told me not to do it.

57:24They were like, that's an old man's game. Do that when you're retired. In the meantime, go do another company. And so I was like already very countercultural thing for me to do to share what I had learned. But I liked it. I enjoyed doing it and I wanted to do it. How old were you? I would have been 20, 25, maybe 26. Super early for somebody to write a book. Yeah, yeah. Way too early. Yeah, exactly. I guess I didn't blog until I was 30. Now that I think about it. Yeah, yeah. So like, but I had started to think about and talk about these things like very, very early. I always wanted to learn from what I was doing.

57:54I always thought that was very natural. and you know, Lee's Herb didn't come out until 2011. So, you know, I was 33 when that happened. Yeah. So I was 33. Still way too young by the conventional view to be doing this kind of thing. But I just wanted to get to the truth. I didn't, at that point I was like, I don't care. I think this is true and people don't agree. And I'm just going to tell them how it is. But I remember, I'll tell you a story. I very vividly remember the first really big talk I got invited to give. I was super nervous. You know, it was like me in front of 800 people. I had never given a talk to an audience that large ever before in my life.

58:27I actually had a moment of crisis right before where I was like, what am I doing with my life? I'm an engineer. You know, I was a computer programmer. I was like, wait a minute. I'm not a fame seeking person. I'm not a celebrity. I don't want to be a celebrity. Like what have I done with my life? I just, why am I doing this talk? Why am I so nervous? I was like hyperventilating in the bathroom backstage. Like what am I doing? I realized I had to come up with a reason why I was doing it. I was like, okay, what can justify the suffering that I'm going through right now? Why am I doing this? And I was like, am I trying to get famous?

58:54Am I trying to get this? And I can remember being like, okay, okay, clear all that stuff aside. I didn't even know if anyone was going to come to the talk. Simultaneously nervous there'll be too many people there and also nervous there'll be nobody there. Nervous and embarrassing myself. It's just a fear of failure again, right? I was going to humiliate myself to this talk. And I thought, okay, but in that audience, if there's even one founder who, because of what I share today, will avoid the pain that I experienced in failing, if I help one person, this suffering is worth it. And I just, that was my North star as I went through this transformation of like, I was just like, okay, I can't solve everybody's problem for everybody.

59:27I can't guarantee that I'll be a success or whatever, but I can help one. I can help one person. And maybe this will be the last talk I ever give, but if it helps one person, it'll be worth it. So it allowed me to move away from this, like, what is the long-term plan here to just like, let me just put one terrified foot in front of another and see what happens. Now it blew up. It became this whole phenomenon. Of course, the book sold millions of copies. Like all these good things have happened to me as a result. And you have to realize how unusual that is. Most people who write a book about entrepreneurship, you know, doesn't sell any copies at all.

59:54And it does not provide the career acceleration that it did for me. And you got to understand that I had no idea that was going to happen. I had no inkling about it. I had to choose to do it for its own sake. And I think that is the thing, a lot of people who want to become more famous, or they want to become more their wisdom to be acknowledged, they have to really get clear. It's like, well, are you actually trying to help people? Or is this just a new kind of status farming for you? And a lot of people who become wealthy, they don't like it. They want more people. They want to be treated with respect.

1:00:21They want to be listened to. They want to have influence. They want to run for office. They want to run the world. You know, like they need more. They already have more money than they can possibly use, but they want what they want more. And I think although those motivations sometimes work, if someone works out, I think that is a really sad path. So for me, trying to figure out like, who is this for? And how can I be satisfied? Even if it fails, quote unquote, I'll still be satisfied because it will have been useful to somebody. I'll be proud to tell my kids that this is something I did. whether or not it quote unquote works like that.

1:00:47That has been a very helpful question for me as I've plotted my next steps all through this journey. That's amazing. I love it. So very early on in your early 30s, you already focused on whether I'm quietly creating value for the world as opposed to what am I getting out of it? Because this brings us to the question of meaning and purpose on the personal level. We talked about purpose for products and businesses, but I'm actually very curious to hear evolution of your thinking of meaning and purpose as you were going through this unexpected fame and success. And where are you today on that? Well, you know, most days I still feel like a failure.

1:01:27So, you know, just to be honest, like, yeah, I, you know, I can think of all the mistakes I've made and all the other things I could have done that would be worth so much more money today. You know, like when you're on Silicon Valley, the opportunity cost of all your mistakes is super high, right? Like I could have been a seed investor and like so many companies that are worth billions or tens of billions or hundreds of billions of dollars today. And I missed my chance. You know, it's like, so how do you deal with that? Yeah, yeah. It's listen, the first time it happens, it's super hard. And then, you know, you start to get used to it to be like, oh, this is just this is just what it means.

1:01:55And there are people a lot of people even in Silicon Valley who think what I do is very disreputable, because I don't spend all my time building companies, I waste a lot of time talking and writing and doing this other stuff. And you know, and then some people would say, I'm not a very good CEO. You know, I'm not good at this. I'm not good at that. Okay. Like I accept all those criticisms as, as perfectly valid. You know, for me, I love ideas. I want to get to the truth. That's more, that's more motivating to me than making money. So, so you basically found what it is that drives you personally on a very deep level and will continue driving it probably for, for a long time.

1:02:25Yeah. I would say it's not so much that I found it as I accepted it. Once I realized that like, I'm going to do what I'm going to do, like, that's just who I am. And it found inside of yourself essentially yeah it was i feel like it was more of a discovery than a choice and i'll give you just well since we're talking about it like this is another thing about being a founder i feel like people who i work with they expect me to be able to do this magic trick like when i'm really working a company especially it's just i can somehow manifest all these incredible things right like people invest all this money in what we're doing that we have people have all this belief in where we're at you know incredible people want to come work with us and so there's so many times when someone comes to me and they say look we have this impossible problem can you solve it.

1:03:03And I'll come up with a solution that blows their mind. Like how on earth? And to them, it's like a magic trick. And when I was young, I was like, I'm a genius. I can do this magic. I have this magic power. I must be so much smarter than everybody else. I thought I was the one doing. But then what you discover, I found this a couple of times in my life where all of a sudden the magic stops because I'm being called to do something else. And it's very painful actually, because I was like all in a hundred percent on this thing. And now it's time for me to do something different. And a lot of founders struggle with this.

1:03:30I've had to exit. I had leave the company. I've had to bring somebody else in. I've had to hand over the reins. I don't even want to. I'm like, this is so frustrating. I liked what I was doing before. Why do I have to do this new thing? But that's just, that's how it is. That's the superpower of an entrepreneur. It's only present when you have that real authentic alignment with what you're doing, it can go away. And I've had a lot of people in my life who don't understand that. They feel betrayed. They're like, how come you won't do the magic trick for me anymore? I'm like, I'm not really in control of it.

1:03:55I don't make the magic happen. And in the book, I actually try to explore the deeper question of where does this magic come from? What creates it? And I try not to be mystical or supernatural about it. I actually think it has a material, scientifically valid explanation, but you can also interpret it in a different way if you choose. I'm really intrigued. Any chance you can actually share? Oh, sure. Yeah. I'm happy to talk about it if it's of interest. Take, for example, how come the French restaurants in France are better than the French restaurants in America? Because anyone can learn to cook French food.

1:04:25You can go to the Cordon Bleu, You know, you can learn from a book. You can watch Julia Child. You can get excellent ingredients. You can make food. And in fact, or if you want to create a French business, French food business, you could go hire the best chef in the world in France and convince them to come to America and set up shop here. And yet it won't be even the best French restaurant in America is like maybe on a par with like the average French restaurant you can go to on the street, walk down Paris. Okay. Like it's just there's this disparity in quality that people make up all kinds of stories about why, you know, the food is better.

1:04:54They use better. There's something in the generally genetically about being in France, but it's like, it doesn't really, like none of these explanations make any sense. You're like, but I took the actual chef. We imported the special ingredient. We did everything the same, and yet it's still not as good. And you see that, of course, I'm not, this is not unique to French cooking. This is true for almost any kind of regional product where like being in the place that that's the, that's like company town of that thing is better there than it is anywhere else. Why? And you eventually, if you study this, you will eventually come to realize that it is actually not the chef that makes this happen, but the customers.

1:05:24The reason it's so much better there is because to be successful at even a minimal level there, you have these extremely discerning and demanding customers who have all these options. And it's just, you have this pressure, this natural selection, this gravity that is pushing everybody to up their game. Whereas if you're the only one in town, you just can't do, you try your hardest, but you don't have to actually do it that well to be successful. And like, I was like in Italy this last year doing some entrepreneurship stuff in Italy, which was super, super cool. And of course, they were very keen to feed me really well.

1:05:54But it was really funny to hear them talk about what it's like to travel to America and eat the food here. And like what we call Italian food in America, they find inedible. I just like, I can't believe anyone would have just like, what is wrong with you? They're just, they can't understand it. But it's just like, so you know, and there's this, the people of a place, the customers, the employees that like everything about that exerts a force on the people in that ecosystem. And we understand this as a kind of collective intelligence. For those who study this scientifically, an organization is actually literally alive.

1:06:24It's intelligent in the same way that you or I is. That's also true at the ecosystem level. So if you want to try to understand like, where does this magic come from? You have to understand that it is a synthesis. It is a combination of your innate, like the entrepreneur is not useless. They are a conduit for this other thing happening. And neither can exist without the other. So when you see people have kind of confusion about entrepreneurship, it's because we have dueling stories about who is the actor in the story. You know, you hear an entrepreneur talk about it. You talk about like, you go to Silicon Valley, like how does a startup form?

1:06:57But like the genius visionary person plants the flag and says, I will do this thing. And then all the other things happen. But if you go to an economics professor or you go, you know, New York and ask people like, how does a startup form? They'll be like, well, first there's a market need. The market need summons forth the firms to compete in that need. Those firms create networks and ecosystems. And the last part of the story is like some founder winds up being the person who arranges things to their benefit to make it happen. So in one story, the founder is the first part of the story and the other, they are the least important part of the story.

1:07:28And one of the things that I've learned in my life is that these two stories are the same. They're linked together in a circle. They're both true. And the dynamism of this situation is that entrepreneurship is ultimately a collaboration of which the founder is the conduit or the orchestrator, but they're not the one who makes the music any more than the conductor is the one who makes the music. On the other hand, it's pretty good to have a good conductor. So anyway, talking about conductors, do you think in the age of AI entrepreneurs will be more of conductors of AI orchestras rather than those who channel human effort into an outcome?

1:08:04No, I think that's ridiculous. We'll see. Look, I understand that this is a contrary view right now, but I think that ultimately AI is going to be a technology that we use to amplify human creativity, not to replace it. Eric, thank you so much. This was such an amazing interview. And thank you for opening up on a very personal level. And I'm so excited about reading the book. I'm going to go right now and pre-order it. Thank you so much for doing this, because I'm sure this book will be at least as impactful as the first one, even though it's hard to imagine. but I think it's timely and needed and deeply important.

1:08:40And I love that it's so deeply personal. I think only deeply personal businesses and books truly succeed at the end of the day. Thank you for the kind words. Thank you for saying that. Congratulations to all of your listeners who have had success in their careers and thinking about what's next. And I wish them the very best of luck. I hope they will also choose to be incorruptible forces for good. Thanks a lot. Absolutely. Thank you. All right, take care, everybody. Thank you.