How The Best Companies Defend Against Mediocrity And Rot

Ries says companies can lose what made them special as they grow, and that success can increase the pressure to take control of them. He recalls advising an AI and bioscience founder whose team wanted assurances that the technology would not be used for harmful purposes. The founder had no durable answer when investors or future leaders might want a different direction.

Ries argues that shareholder primacy is not an inevitable feature of company building, and that founders can make early choices to protect a company’s purpose. He points to Sol Price’s customer-first approach at FedMart and describes what followed when Price lost control: FedMart adopted conventional practices and went bankrupt within seven years, while Price went on to start Price Club, which later joined Costco. Ries calls for companies governed by their mission rather than solely by investors or a founder.

Ries describes a durable company as needing both a clear ethos and structures that protect it under pressure. He recommends that founders read their governing documents, choose investors and board members who support the mission, and consider forming a public benefit corporation. He also describes nonprofit trustees at Novo Nordisk blocking a proposed merger in the early 2000s, preserving research that later contributed to GLP-1 drugs.

Ries says a PBC can give directors room to defend a stated mission, but does not prevent them from firing a founder. He describes a two-entity structure in which outside trustees can appoint directors, citing Novo Nordisk’s foundation model and Anthropic’s Long-Term Benefit Trust. He says companies using industrial foundation structures are six times more likely to reach 50 years, citing a 10% versus 60% probability.

Ries credits Anthropic’s mission and governance structure with helping it attract talent and resist outside pressure. He says the company spent two years working on its Long-Term Benefit Trust, which gives outside trustees power to appoint directors to the for-profit board. He also points to public support after Anthropic turned down a $200 million contract, while noting that the company’s long-term choices remain to be seen.