As soon as I say that, they're like, "You can't use data to tell you what to design. Customers don't know what they want." It's like, that is a misunderstanding. In the same way that if I say, "Sorry, you can't do chemistry because the electrons don't know what they want." You'd be like, what are you talking about? You're collecting data to inform your hypothesis, not to choose it for you. And then once you formulate your hypothesis, it's a matter of taste, quality, judgment. It's an inner thing. Then you put it to the test to see if it's really true. And I think a lot of people are afraid of that last step.
Welcome to Tools for Tech Leaders. I'm Eron Tint, co-founder and CEO of Mattermost. Today, my guest is Eric Ries, creator of the Lean Startup methodology and one of the people who fundamentally changed how companies think about building products. What's interesting about Eric's work is that it goes beyond startups. It's really about how any organization operates under uncertainty. How you test ideas, make decisions with incomplete information, and avoid building things no one actually wants. Today, we're going to talk about what it means to build an environment where you don't have clear answers, how organizations try and often fail to adopt entrepreneurial thinking, and how Eric thinks about innovation today, including the systems and incentives that shape how companies behave. Eric, it's so great to have you.
Hey, so nice to be here. Thank you.
Yeah, we met, oh my gosh, like over 10, 15 years ago, I think, in Steve Blank's Lean LaunchPad class with uh...
Yeah.
That was great. And just love the sort of methodology. What Steve would do was tell us to get out of the building, right? We were at Stanford and just like go and talk to users. And that was such a great foundation. And afterwards, like my company, we went to Y Combinator, and it was kind of the same thing. It was just like that was a great prep for, you know, how do you continue going? And even now, like we're a little bit more mature as a company. It's been a minute. We went from video games to enterprise software. But still, I now I've got to tell my people to get out of the building, go in front of customers and actually have that discussion.
Yeah, I can still remember sitting in the very, very first class at the Haas Business School where Steve had just begun teaching what he called customer development. And I was not a student or anything. My co-founders and I were refugees from a startup where we had just lost Steve a whole bunch of money. And my co-founder, the CEO, said we're going to go back to Steve and ask him for money again in the new startup. And I was new to Silicon Valley, relatively speaking, and I was like, that's not going to work. We just lost all his money. He's like, that's not the Silicon Valley way, man. Let me show you. And we went to see Steve. He said, "Okay, I'll give you the money, but you have to audit my class because I'm sick and tired of you guys like not listening to customers, not talking to customers, not getting out of the building, and then losing all my money." So I remember him. Yeah, I can still remember where I was the first time he yelled at me to get out of the building. And it's good advice. He's an OG for a reason.
Oh, yeah, it's amazing how many companies. I think, yeah, the group of four that I was in, like one of us, you know, I started a company, another person started a company. Oh, actually, three out of the four started companies and one became the CEO of Indiegogo. So that was a pretty good track record. Now, you're the OG in terms of Lean Startup and a lot of people try it different ways. Like when you see it implemented, are there things you're like, "Okay, you kind of got most of it, but you're missing this really critical piece over here?" Is there things that you see after a decade where it's like, "Okay, here's the thing people miss when they're actually trying to implement that methodology?"
Yeah, most people, even to this day, think of Lean Startup as a series of techniques. So, you know, split testing or MVP or even a specific way of building MVP. So whenever the technology changes, a whole bunch of people are like, "Oh, Lean Startup doesn't work anymore because now we have AI. Now we're live coding. Now we're this. Now we're that." I've been at this long enough. Lean Startup came out 2011, okay, so I've been at this for a while. Long enough that I don't panic when this happens. Whenever the press writes a big like, "This company X proves that you don't need the Lean Startup anymore," they tend to pick like companies like Quibi.
So it's like I'm always like, "Okay, well, we'll catch you on the next wave, you know, it's cyclical. It's okay." At the end of the day, the number one thing people don't understand about Lean Startup is that it's a series of principles, not tactics or techniques. It is an application of the scientific method, the philosophy of long-term thinking, and a set of really humanistic values to entrepreneurship. So the techniques that are in the book or that are in any of the many spin-off books that there have been—there have been quite a few spin-off books since Lean Startup was published—those techniques are all a matter of logical deduction from a series of very simple premises, simple first principles. Which means that when people get themselves into trouble, it's usually because they're copying or aping a best practice that they don't really understand. Then it doesn't produce the magic outcome that they expected and they blame Lean Startup for it, you know, and it's like, "Well, you know, there's only so much we can do." But yes, I think if people can study the principles, they will be able to think for themselves more effectively and they'll be able to adapt very effectively when the ground beneath them shifts as we see in technological platform changes.
Yeah, I totally love that. So, you got your long-term thinking, your principles, and then scientific method. What do you think about the principles? Like, what are the most important ones to you? What are the ones that float to the top that like, "Hey, these are the guardrails that, you know, when you're in that chaos and nothing's working and you're trying to push your way through." Like, what are the one or two if you had to hang on to something, if you had to write something on the palm of your hand, you know, while you're building that startup in a very hot intense environment, what would you write on your hand?
For years I would inscribe people's books with the simple—I don't know, I don't remember actually who taught me this mantra originally—but it's simply: think big, start small, scale fast. And like just that simple idea, or you know, Kent Beck has an explore versus exploit framework. There's all these frameworks out there that just like try to help me orient me and like basically what's going on. Okay, where am I? And it's just a question of what do I know? Entrepreneurship is defined by its uncertainty. So it's fundamentally an epistemic project. What do I know versus what do I believe or hope? And if you're flailing around and you're like, I don't know what to do, the answer is always like Steve's: get out of the building. Form a new hypothesis grounded in customer feedback and data. Like go ground yourself in reality. Now the tricky part with this thing people really mess up, as soon as I say that they're like, you can't use data to tell you what to design. Customers don't know what they want. It's like, that is a misunderstanding. In the same way that if I say, sorry, you can't do chemistry because the electrons don't know what they want. You'd be like, what are you talking about? You're collecting data to inform your hypothesis, not to choose it for you. And then once you formulate your hypothesis, it's a matter of taste, quality, judgment. It's an inner thing. Then you put it to the test to see if it's really true. And I think a lot of people are afraid of that last step. They want to hide behind some other virtue to say, no, no, no, the test is not invalid, it's too early, I don't know. But like once you get really comfortable with being wrong, comfortable with the possibility that there could be an error in your thinking, you start to really crave the validation, the ability to check yourself with reality. I happen to think entrepreneurship is one of the core truth-seeking professions, right up there with being a scientist or an artist. Because at the end of the day, for an entrepreneur to make something work, you have to be really intimately grounded in the truth. And if you're off by even a few degrees, you're in big trouble.
I completely love that. Very much emphasized. When we were running our—we had a video game company, and like it was like our personal money was going out the door in terms of ad spend. So, you had to have a hypothesis, you had to have data, you had to shut things off quickly. And then when we started B2B enterprise, we had, you know, some folks trying to do split testing, and they had no hypothesis. They were literally trying to get like the—there was just like—it was just like we'll let the results of the split test dictate what the user journey is. I'm like, "Oh my god, like what?" So I'm very much with you. And what do you think that sort of drift happens? Like you're these founders, and they kind of like, you know, how does the founder shift gears from like, "Okay, great. I got to do everything" to now I have to delegate, but they're not doing it the way that, you know, we think it should get done. So how do you do that without sort of micromanaging? Like how do you swing that pendulum?
You can't be afraid of micromanaging. I think that's first of all like, yeah, everybody's in a different place in the spectrum for delegation naturally. So, I would just embrace who you are, okay? Like if you are in the details, stay in the details. The general rule of thumb is simply to do every job yourself before you hire someone else to do it. You will not do a good job hiring someone to do a job you have never done or tried yourself because you'll think it's easy. I can't tell you how many founders are like, "Sales is easy. Coding is easy." Whatever. Even now it's like, "Vibe coding with five is easy." It's like, "Well, why don't you—if it's so easy, why don't you do it yourself?" Or such and such thing is incomprehensibly hard, I'm too stupid, I could never understand it. Well, now you have a problem. You hire someone who tells you they understand it. Are they telling you the truth? You don't know. And now they can do whatever they want to you because they have you over a barrel. They understand and you don't, and they can just be like, "Sorry, need more money. Sorry, need this. Sorry, need that." And you have no idea if they're telling you the truth or not. If you are grounded in the truth yourself, if you tried to make it work no matter how badly you do, you'll be far better informed about how to hire someone who's good at that job.
I completely love that. I feel like there's a lot—I was at the CEO conference, mostly founders, right? That all had this PTSD of exactly what you said. It's that like, you know, you're like, I will delegate this and it's sort of like the—you know, when you're a series A company, like who works for a series A company? Like you join the series B or the series C, right? And kind of get the same equity, right? So like who's crazy enough to work for a first-time CEO that's trying to figure all this stuff out. And then they're like, oh, but you know, you must trust me on this and you know, they're—and it's man, how many times has that happened where like a founder is like, okay, great. I'm going to trust the executive that I brought at series A that is maybe just aping some other process they had.
Well, that's the thing. How do you know that they understand it? As much as a lot of founder mode discourse is frankly ridiculous, okay? So I actually address this in the new book. But the thing about it that I think is really right on—Brian Chesky and I, I really applaud him for being honest about this. Very few founders have the courage to say this out loud, but it happens all the time. He gave an interview where he said, look, I lost control of my company. But this time not to investors, but to my own employees. And I just think the honesty of that is so important. We need to accept it that if you delegate in this way that you don't understand what you're doing, you don't understand the ground truth anymore. You will allow other people to be the intermediary between you and the truth. You don't run the company anymore. I don't care what your title is.
Yeah, 100%. So how do you inoculate yourself? I mean, you're going to do this with every exec that comes on. They're going to say like, you've got to trust me. You've got to trust me. You have to let go of this. And on the one hand, you know, and it goes back and forth, right? So what's that—how do you figure out you're in the right spot? So you've got to do it yourself, but you can't do everything yourself if you want to also move fast.
Well, okay. I got this wrong a lot. I probably wouldn't hire the "you got to trust me" people anymore. I'm old enough now to be like, no, I don't. I'm sorry, I don't. We don't know each other. You're a stranger to me. Someone who's been in the trenches with me for years can say, trust me, bro, I got this, and I'm like, okay, I trust you. But you don't get—you're new. Trust has to be earned. Now, someone who is eager to earn your trust will say, let me get in the trenches with you and together we will figure this out. I will have the humility to say we don't know for sure what's going to work. We got to try it to see if the things that worked before work now. Like there's certain things I look for now in an executive that I wouldn't have looked for when I was younger. And I've just met too many companies now where they just don't have the headcount that you'd expect and they don't need it. There's just—it's like all these fancy people are missing and you look around and you're like, well, how come you didn't hire those fancy people? Like, yeah, we couldn't find somebody that we trusted. So, we'd rather just have a younger person or junior person, someone who's willing to think for themselves, a high potential person, like take a shot at it. Does it always work? No. Is experience bad? No. But you got to find people who actually want to be at your company. So, the guy who's the big boss, VP man, whatever, high resume from some other place. If that's all he's ever talking about, he wants to still be at the other place. Why is he here? You want someone who's like, I will figure out from first principles what makes sense, bringing all my experience to bear to make something that really works for this organization. And those are the hires you need to make it. If you can't find someone like that, just don't make the hire. People are so quick to hire, but most hiring is over hiring. Don't be in a rush.
Oh, that's kind of crazy. That's super interesting. And when you think about like executive hiring, can you—to what extent can you apply some of those principles from Lean Startup, you know, hypothesis, long-term thinking, principles to exec hiring? Is that—can you apply those? Is that just a misfit?
Yeah, it's just build, measure, learn—just trying to figure it out. Most people get it wrong at first. Can't be afraid of getting it wrong. You got to go with your instinct and then you got to learn from your mistakes. You're like, if you do those two things you'll be all right. But the problem is most people don't go with their instinct. They talk themselves into something. And then when it goes wrong they say, I knew it. If you knew it, why did you do it? Okay? No. The critical thing to learn—you have to be willing to accept your own culpability in the failure, which is very painful to do. Nobody wants to do this. But that is how you learn. So you have to be like, form a hypothesis. What do you think this person's going to be able to do? And then hold them accountable and hold yourself accountable for did that accomplish or not. And most people think when I say accountability they say, great, make them make a target, hit the target. That does not work in startups. Because we don't know how to make a target. Even if the VP says they know how to make a target, they don't. Because we've never done this before. It's new. It wouldn't be a startup if it was a copy-paste of something else. It's something fundamentally new. So one of the classic things—I get this all the time at LTSE—people say, how come you've only made this much progress and not more? They've been saying this from when we had no progress to we made a lot of progress. Now it's a going concern, company's doing well. I don't even run the company anymore. That's how well it's going. And yet even now people will say, how come you've only made this much progress and not more? I say, well, how much progress do you think we should have made? And they're like, well, I think you should have made this much progress. It's based on what? Based on precedent? No one's ever done this before. Based on what? Well, just—it should be twice as fast as last year. Why? Says who? It's very difficult to create accountability targets when you don't know what you're doing. So if we're going to have accountability it's got to be based on something else, and of course that's why innovation accounting in the later chapters of Lean Startup—that's really what that's the goal is, to create an accountability system that we can use even in conditions of high uncertainty.
Yep, excellent. And maybe just for folks who might be a little new to it, what is LTSE, Long-Term Stock Exchange?
Oh, oh yeah, that's one of the companies that I have founded in the last 15 years. The idea is actually mentioned very briefly at the end of The Lean Startup. Somebody should really do this. Not me, somebody, but nobody did it, so I tried to do it myself. And the idea is simply to build a new national securities exchange, so the same regulatory category as NYSE and Nasdaq. But one in which the listing standards encourage long-term thinking on behalf of managers and investors both.
Yep, 100%. And now it sounds like there's that sort of a new iteration of that approach. You got this book coming out, Incorruptible. And I'm really excited about it as a founder. You're like, here's all the things you need to do. I'm like, uh, wait, like tell me more. So the premise of the book, which is like, hey, you know, how do you have a company that endures, right? The founders like, you know, we're about—we're happy, we're profitable, we're growing, we're stable, right? So we got to go and make sure we sort of now that we're, you know, default alive, like how do we plant—how do we make sure that, you know, we plant some of these foundational pieces that you talked about. Can you maybe talk about like what was the motivation for that book? Or what was the challenge that you were seeing out there?
Yeah, I've been around a lot of companies at this point. I don't know how many hundreds or thousands of companies I've helped start. A lot. I've helped people make literally billions of dollars of personal net worth. So I've been around a lot of success, and I'm very proud of those people. I'm proud of the work that we've done as a movement. I'm proud of all the people that use Lean Startup to do all kinds of good stuff. But man, I have also seen the darkness in this industry. I've seen the downsides and how many companies are just terrible. They started out so great. We had such high hopes and promise for them, and then either because of what happened to Brian, they lose control to their employees, they get decapitated, founder gets removed, company goes public, fails the test of succession, or just gets taken over by private equity. There are so many ways for this gravitational pressure to come in and cause the company to go from a value-creating to a value-extracting entity.
Yeah, 100%. And then when you think about it, the most important things to take away from that approach, like what are the most important aspects? Like what would you write in your hand?
Okay. It's very simple, actually. There's two dimensions to building an incorruptible organization, one that is capable of having high endurance. The first is an inner thing. We have to first build a company that people can trust. So, I call it having a company with an ethos that stands for something in particular and that has its own idea about what is right and wrong. I'm not trying to fight it, so it doesn't have to follow my values, but it has its own values that it has commitment to. And then it does things like—this is an old Sol Price-ism—to be a fiduciary to the customer. Meaning it puts the customer's interest before its own. Or think about Steve Jobs. Steve Jobs, famously, one of my favorite Steve Jobs stories ever, is—you remember the beige Mac Plus?
Okay. I had a beige Mac Plus on my desk as a kid. One of my first personal computers. In order to open the case of the Mac Plus, you had to buy this expensive and very special screwdriver. Because Steve did not believe that the user should be allowed to open the case of their own computer, okay? That was just one of his quirky beliefs, because he wanted to control the design. Anyway, because of that, he would get into fights with his engineers about what should the Mac Plus look like on the inside. Like we're literally talking about the wiring diagram of the wires behind the screen, inside a case that the customer is not allowed to see. They would say, "Steve, what does it matter? The customer will never see it. No one will ever know." And he would say, "But we're going to know. We stand for design. So it matters whether the consequences are knowable or unknowable, we always stand for this principle." Well, when he did that with little things like that, it started to give people confidence that he would stand for the bigger things, too. That's the first dimension, ethos. Inner trustworthiness. But there's a second dimension. See, Steve Jobs got fired from Apple in one of the biggest business blunders of all time. Why? Because investors routinely kill the golden goose. They can't help it. Companies routinely betray either because of that inner temptation to defect, to betray, but also just...
Sometimes have straight outer pressure. So, the companies that endure have what I call structural integrity. Integrity meaning you can trust them to keep a promise, like with an individual, but also integrity like a bridge. So, when I—if you imagine you have a bridge that collapses and you call me as your engineer, and you say, "Hey, Eric, I need to understand why this bridge collapsed." I'm like, "No problem. I'll do an analysis. I'll tell you what." I come and take a look and say, "Oh, uh, good. Here's my analysis. It collapsed because of gravity."
You're going to be like, "WTF, man? Yeah, I knew that." I'm like, "What? That's true. If it wasn't for gravity, the bridge would not have fallen down." Like, "That's true, but that's not what I was asking you because this other bridge didn't fall down. It's been going for 100 years. This bridge only 15 years old. Why did it fall down?" "Oh, oh, you want a more detailed analysis. Okay, let's go take a look. What do we look at? Load factors, tension, metal fatigue, you know, material fatigue. Oh, look, all the bolts, the metal bolts in this whole bridge, they're all rusted and corroded beyond belief. That's why it fell down." Do we say, "Oh, oh well, guess you can't do—it's inevitable. Bridges fall down. Gravity, what you going to do?" No, we don't. We say, "Wait a second. Why don't we build the next bridge with stainless steel?"
So, the book is really about what is the organizational equivalent of things like load factor, wind load, tension, material fatigue, and more importantly, what are the building materials that are the equivalent of stainless steel, so we can build organizations that are incorruptible.
