From NewCo Shift:
The
author of the New York Times bestseller The Lean Startup wants to
reinvent how stock markets work. Everyone thinks he’s nuts. But we
currently fund US innovation with Russian mafia money and autocratic
sovereign wealth funds, so….
Equity markets are literally the beating heart of capitalism, and Eric
Ries wants to reinvent them. Is he crazy, or on to something big? Read
on (or watch the video) for one of the most stimulating and
insight-laden sessions of this year’s Shift Forum.
John
Battelle: All right. I’m really pleased that Eric Ries is coming and
speaking with me. He has an idea for markets that is very important for
all of us to consider. He’s well known, of course, for his book, “The
Lean Startup,” and his follow-up to that book.
What
we’re going to be talking about primarily is his Long-Term Stock
Exchange. Please join me in welcoming Eric to “Shift Forum.”
[applause]
You’ve been around the block a few times.
I guess so.
You
wrote a book that sold over a million copies. As an author, I’m not at
all jealous of that. Now you’ve decided you wanted to start another
company. This was a company of companies in a way, right?
Yeah.
Tell us what the Long-Term Stock Exchange is.
Sure.
Let me just say, from a lifestyle point of view, no author ever wants
to start a company. This is a significant downgrade. Let me just get
that clear.
[laughter]
I was not on the market for another company. This is an idea I first floated in The Lean Startup.
If you are one of the 27 people who read all the way to the last
page — which, out of a million, that’s not too bad of a ratio — one of
the very last things I suggested in The Lean Startup was that somebody really ought to do a bunch of things.
That’s
the best part about being an author. “You should do this. You should do
that. You should reform education. You should reform public policy,
government. While you’re at it, we have to think of a new better way to
do capital markets.”
Because
if you’re going to do a lean transformation, going all the way back to
Toyota, if you study Jeff Bezos or any of the great long-term-oriented
CEOs or investors, everyone understands that to do this better
management system requires a philosophy of long-term thinking.
Yet
at the same time, we’re telling venture-backed companies to go public,
to be acquired by a public company, to enter into a corporate governance
paradigm that is as short-term as it can be. We can’t reconcile those
two things.
Although
here in Silicon Valley, people say, “Oh, it’s Wall Street. It’s so
short-term. It’s Wall Street’s fault,” investors don’t benefit from
this, either. If companies are distracted from fundamental value
creation, then they’re worth less money because they’re not doing the
right things.
My
idea was, “there ought to be a way to change the incentives of managers
and investors at the same time. We would call it a Long-Term Stock
Exchange or LTSE.” Somebody really ought to build that.
Of
all the ideas in Lean Startup, almost every single one, somebody has
run with in the intervening years. I never got the phone call from
someone, “Hey, can I do the stock exchange one?”
Was that not, maybe, a signal that perhaps you shouldn’t have?
[laughter]
If I had a sensitivity to those signals, I certainly wouldn’t have done Lean Startup in the first place.
That’s a good point.
I’m
defective in that way. For whatever reason, it was an idea that just
wouldn’t leave me alone for many years. I started to investigate what
would it take to build the new exchange. I spent a lot of years with
people telling me that it was impossible and crazy. I said, “Oh, I
remember that feeling from when I first started talking about lean
startups.”
That’s
like waving a red flag to a bull, to me, anyway. I wanted to
understand, at least, if it’s a bad idea, why is it a bad idea? If it’s
impossible, why is it impossible? The more I learned about corporate
governance and about the way our capital markets work, I learned that
not only is it not impossible, it’s actually, to me, seemed like a
pretty reasonable idea.
Very
few people are able to defend the way we currently run companies and
the way that we hold them accountable in any first principle’s way other
than, “This is just how we’ve done it.” My thought was that there has
to be a better way.
We’ve
built a company. It’s a real-honest-to-God company. We have raised
money and have a petition before the SEC to get their approval to
operate a new stock exchange.
Do
you think a petition before the SEC to get approval to make a market
that the SEC doesn’t probably want to deal with a difficult thing? It’s
like you’re trying to invent a new form of nation-state.
People
do look at me that way. In Silicon Valley, by the way, this is
considered the craziest idea anyone is working on. I’ve had people who
are working on quantum computers and immortality tell me that they think
this is a crazy idea....
...
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