Book Short: Incorruptible, right and timely and inspiring and depressing all at the same time
Incorruptible: Why Good Companies Go Bad… and How Great Companies Stay Great by Eric Ries is the rare business book that is the exception which proves that rule that business books should only be 50 pages long – look at the volume of dog-ears in my already-loved copy.
I’ve known Eric for years, and he invited me to write a blurb for the inside cover of the book. My blurb was “Every founder eventually faces the board meeting where the mission is on the table. I’ve been in that room. Eric has too – and this book will help you walk out with your soul intact. Incorruptible is as practical as it is inspiring.” That is a good place to start my post.
Eric argues that modern capitalism is wired to relentlessly extract short‑term financial value, and that even good companies get bent into serving that extraction at the expense of their original mission. It’s a playbook for redesigning ownership, governance, and incentives so a company can grow without being chewed up and hollowed out by the most extractive parts of capitalism. I’ll write a bit about each of the four descriptors in my headline above.
Incorruptible is Right because founders DO face hurdles and wrenching choices between shareholders and broader stakeholders. I’ve seen it dozens or hundreds of times.
Incorruptible is Timely because the world is unsettled at the moment. Populist movements all over the world are different, but most have one thing in common, which is tapping into the disillusionment of large segments of the general population around elites leaving masses behind as they profit.
Incorruptible is Inspiring because the success stories prove not just that good principles make good business, but actually that good principles outperform in the long run.
Incorruptible is Depressing because so few companies follow the playbook. As much as I love Costco and Patagonia, it would be so much more uplifting to hear the thousands of cases, not just a few.
I’ve spent 30+ years as a senior executive and CEO and have sat on over a dozen boards and helped hundreds of founders think about their own boards and governance — all across a variety of ownership environments: VC, PE, Public, Nonprofit. My experience agrees with Eric’s. There is a better way of running businesses. Even the best founders face moments that require painful tradeoffs related to capital needs or ones that hit their personal lives where they don’t have the luxury of running a portfolio. Even the best long-term investors eventually face pressures from LPs that are exogenous to a company and life-of-fund issues that erode their patience. And we all know that truly outstanding long-term investors — ones who want companies to thrive indefinitely, not just produce short-term returns — are the minority, not the majority.
Shareholders who pop in and out of a company’s cap table for a few minutes shouldn’t have more sway than long-term owners, management teams, customers, and communities. There’s more to a company than a few months or a few minutes of arbitrage. Milton Friedman — perhaps the patron saint of shareholder primacy — once wistfully said “Everybody in the world is a long‑term investor until the market goes down.” If even Friedman acknowledged that long-term commitment is psychologically fragile, then governance structures need to be designed to protect against that fragility rather than assume it away. That’s exactly Eric’s argument.
There is one angle I wish Eric had covered in more depth: potential regulatory and policy changes that could reinforce his proposed governance reforms. For example, imagine a graduated capital gains schedule — say 95% inside a quarter declining to 5% after five years — that creates built-in incentives for shareholders to hold rather than trade. That kind of structural change would do more to align capital with long-term value creation than any amount of moral suasion. It deserves its own book.
But all in, I want to return to the descriptor Inspiring. Incentives and norms and the structures in which they operate matter a lot. What Eric is suggesting isn’t utopian pie-in-the-sky. There may be more to it than what he’s written on the pages of this book, especially when it comes to converting existing companies and making sure there’s enough alignment with the capital ecosystem. But the world he paints — one in which companies can achieve superior long-term results for shareholders AND also for customers and employees — is not as hard as it might seem, and it’s utterly compatible with hard-core capitalist principles.