Eric Ries wants to retire the word “profit,” or at least the way we usually define it.
In his new book, “Incorruptible: Why Good Companies Go Bad and How Great Companies Stay Great,” the “Lean Startup” author redefines profit as the maximization of human flourishing. He argues that a lot of what passes for profit in today’s economy is actually a form of corruption.
“We’re supposed to all pretend that we think all the ways of making money are equally good,” Ries told a room of startup founders at Seattle Flow Startup Day in Seattle. “But nobody actually thinks that.”
Instead, he calls for a new era of “mission primacy”: replacing the shareholder-first framework that has dominated corporate governance since the 1980s with structures that protect a company’s purpose from being hollowed out by the investors who profit from its success.
After interviewing Ries for the opening keynote session at the May 15 event, I sat down with him for this special podcast discussion, going further into the ideas in the book, and how they apply to recent news events. We talked about the Musk v. OpenAI trial, the fall of Whole Foods, what he told Anthropic’s founders about their corporate structure, and why he thinks shareholder primacy is already dead.
Listen below, and continue reading for highlights.
On corruption: Ries uses the word not in the legal sense but as a description of structural decay. When a beloved brand gets taken over by private equity and the product turns to garbage, or when a great company goes public and loses its soul, that’s “corruption” in his framework.
On the Musk v. OpenAI trial: During the federal trial over Elon Musk’s lawsuit against OpenAI, Microsoft CEO Satya Nadella testified under oath that his primary responsibility is to Microsoft’s shareholders, that he has a fiduciary duty to maximize shareholder value, and that this is because Microsoft is a for-profit corporation.
I brought up that exchange with Ries, explaining how the otherwise matter-of-fact acknowledgment struck me differently after reading his book. He said it illustrates the central tension in the case, and in the business world more broadly. Ultimately, companies in that structure are beholden to shareholders.
On advising Anthropic’s founders: When the founders of Anthropic left OpenAI over concerns about its direction, Ries was one of the people they consulted about how to structure the new company. They had already decided to file as a public benefit corporation — a two-page legal filing in Delaware that commits a company to a mission beyond maximizing shareholder returns. Ries told them it wasn’t enough.
“My job was to tell them that’s good, but insufficient. If you only do that, it’s not strong enough for what your goals are.” They ultimately created the Long Term Benefit Trust, an independent body with the power to appoint and remove board directors. Ries says the research shows this two-tiered structure of checks and balances to be most stable corporate form of the last 150 years.
On Whole Foods: Ries calls the 2017 sale of Whole Foods to Amazon one of the saddest stories in the book. The company was profitable every single quarter. Customers loved it. Founder John Mackey had built it on a philosophy he called conscious capitalism, rooted in love for customers and employees.
None of that mattered when activist investors showed up, forced the sale, and made $500 million for six months’ work. Mackey still sees it as a personal failure. Ries sees it as a structural one. “If you want to build a company with an ethos, the structure has to match. Otherwise, this is what happens.”
On the future: Ries believes the shareholder primacy era is already collapsing under its own weight — it’s just that most people haven’t noticed. “We are like the road runner. We have already run off this cliff, but we haven’t looked down.”
He envisions a replacement he calls “mission primacy,” in which it becomes obvious again that business should be a force for good, and companies are free to define their own version of human flourishing and put it to the test in the market.
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