689: Eric Ries - The Costco Hot Dog, Why Good Companies Go Bad, Financial Gravity, Building Incorruptible Organizations, and The Lean Startup's Unfinished Business

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The Learning Leader Show with Ryan Hawk Read my NEW BOOK -- The Price of Becoming - www.LearningLeader.com/Becoming Eric Ries is the author of The Lean Startup, one of the most influential business books of the past 25 years, and the founder of the Long-Term Stock Exchange, the first new U.S. exchange to both list and trade multiple stocks since NASDAQ launched 50 years ago. His new book is Incorruptible. Key Learnings The more successful a company becomes, the more valuable it is as a target. Companies are worth stealing and taking over. Most founders are naive about this and don't understand what's coming for them. They've been following the so-called best practices about how companies should be built, structured, and governed. Most of those best practices are value-destroying. Sol Price was a lawyer before he became an entrepreneur. He believed a lawyer had a fiduciary duty to put the client's interests before his own. So when he became a retailer, he asked: "Who's my client?" The customer. He treated the customer as the person he would rather die than betray. When competitors sold a product for less, he'd put up signs in his own store: "Don't buy this from me. You can get it cheaper somewhere else." He capped his margins at 14 percent. He paid above-market wages. It is so much easier to destroy than to create. One day, Sol came into work and couldn't get into his office because the locks had been changed. Investors had pushed him out and forced Fedmart to practice retail best practices. Within seven years, they bankrupted the company. We've built an economy that rewards people for cost-cutting without holding them accountable for the consequences to trustworthiness, brand, or culture. The origin story of Costco: Sol took two weeks off, then leased the office upstairs from Fedmart and started Price Club. One of the young guys who left with him, Jim Sinegal, had worked his way up from stock boy. Jim eventually started his own company using the Sol ethos. A few years later, their companies merged to form what we