I’ve read Eric Ries’ blog for a long time but only had the chance to meet him in person for the first time today. He really knocked me off my socks. Not only is he incredibly smart but he’s also wise and has a super strong ethical compass. He seems to be becoming – and I hope he will become – the great pro-meritocracy/entrepreneur advocate of our generation.
A few things we discussed:
– We have both lived through the ups and downs of tech world of last decade+. We know a downturn will come in the next few years (most likely not a true revenue/profit downturn but early stage valuation + coolness downturn) . We talked about ways the tech world could mitigate the downturn effects being as bad as last time.
– Personally I think one of the worst things happening now is that companies lie to employees and only tell them the # of shares they own and not the % they own. # of shares is totally meaningless. Major NYC companies like Gilt Group claim that the # of shares outstanding is a “trade secret” which is a complete joke. Besides being unethical, I worry this deception will create another generation of employees (esp. on the East Coast) who think equity is a scam. I spent the last 10 years recruiting hackers to work for me and my friends’ companies – convincing them equity was risky but not a scam. Please let us teach the next generation it’s risky but not a scam.
– Eric and I also talked about how we hope the 21st century will be about convincing people that they should think about owning part of their employer the same way people in the 20th century wanted to own their house. It’s a capitalist platitude that property renters don’t take care of the property. By the same token, “rented laborers” (people working for salaries) don’t take care of their companies. We are both big fans of a new economy where workers own parts of their companies (“equity economy”) and firms are “small pieces loosely joined” (Coase’s theorem is dramatically over valued).
– Eric had the idea of creating a stock exchange where when you bought stocks you were force to hold them 4-5 years. The quarter-by-quarter mentality is one of the most pernicious concepts that drives our financial markets. I had a similar but probably vastly less implementable idea of trying to convince government to charge 90% capital gains on <4 year trades and 0% of >=4 year trades. I pushed back on Eric and said MVP for his idea would be new stock type for new IPOs like Facebook instead of new marketplace – he seemed to enjoy his own framework being pushed back on him (to his great credit).
– Eric was nice enough to stay after and talk to Hunch employees along with a some friends of ours who hang out in our office (UpNext, HackRuiter). I generally hate business speeches but he was probably the smartest and most interesting person I’ve heard in years. I am not a total lean startup believer but probably 80% of the way there. Eric stayed talking for an extra hour and was extremely generous with his time, talking to each employee about each of his/her questions in depth.
– It probably goes without saying that us “liberals” (me, Eric, Fred Wilson) who believe that hedge fund managers should pay the same tax rate as firefighters who run into burning buildings are in radical agreement about increasing the carried interest tax. Unfortunately every other VC seems to disagree with us. Looks like we lost this one and so need to move on. +1 for aristocrats.
– I was pleased to see Eric agree with me that one of the biggest myths in the innovation economy is the idea that exits are a “fixed pie”. (see this post of mine responding to Fred Wilson and Bill Gurley who as much as I love those guys fall into this trap). We can increase the pie by 1) bringing more smart people into the entrepreneurship/innovation economy (leader here has been Y Combinator), and 2) being more scientific about how to help these companies succeed on less capital (Eric and Steve Blank seem to be leaders here).
Anyways, great meeting Eric, hope you enjoyed the synopsis.