All Segments
LTSE CEO Eric Ries | Full interview | Code 2019
24 segments available
Eric Ries, founder and CEO of Long Term Stock Exchange, sits down with Ezra Klein, co-founder and editor-at-large of Vox, at the 2019 Code Conference. Subscribe to Recode on YouTube: https://goo.gl/FRleYo Recode by Vox is the preeminent tech, media and business brand uncovering and explaining how our digital world is changing — and changing us. Check out https://www.vox.com/recode Check out our full video catalog: https://goo.gl/JeqE6e Follow Recode on Twitter: https://goo.gl/n4jVhu Follow Recode on Instagram: https://goo.gl/k8KXjH Read more: http://recode.net/
Segments Timeline
The SEC Approval: A New Era for LTSE
Eric Ries discusses the recent approval of the Long Term Stock Exchange's application for a national securities exchange license by the SEC. He explains the significance of this approval, positioning LTSE as the fifth company authorized to operate as a national exchange in the U.S. Ries emphasizes the shift from traditional stock exchanges to a model focused on long-term value and stakeholder engagement.
"so something happened with the SEC what happened what did they do yes thank you hi okay this is Yale there's no time for pleasure okay fine the Securities and Exchange Commission you may have heard wa..."
Rethinking Stock Exchanges
In this segment, Ries challenges the outdated perception of stock exchanges as mere trading floors. He highlights the evolution of trading to electronic platforms and the importance of stock exchanges in regulating corporate behavior. Ries introduces the concept of LTSE as a new model aimed at fostering long-term thinking and multi-stakeholder principles in public companies.
"into what's called the national market system meaning that wherever your company lists your stock still trades everywhere and yet stock exchanges have this delegated grant of power from the government..."
The Decline of Public Companies
Ries addresses the alarming trend of declining public companies in the U.S., noting that the number has halved over the past two decades. He discusses the implications of this trend, including the consolidation of power among a few large tech companies and the lack of new entrants into the market. This segment underscores the need for a new approach to public company governance.
"of all the number of public companies is in decline everyone knows this right that over the last 20 years the number of public companies in the United States has been cut in half and it's not like it ..."
The Impact of Short-Termism
Eric Ries elaborates on the consequences of short-termism in the corporate world, explaining how it affects the distribution of wealth and the overall health of the economy. He contrasts the current model, which favors oligarchs and private equity, with the historical model that relied on ordinary people's retirement savings to finance growth.
"the way that we've arranged things it used to be our grandparents built a system for us where growth in the economy was financed by the retirement savings of ordinary people and now we've switched ove..."
A New Generation of Founders
In this segment, Ries highlights the characteristics of the next generation of company founders who prioritize long-term thinking and multi-stakeholder approaches. He discusses the rise of employee activism and the demand for purpose-driven organizations, emphasizing the need for governance systems that align financial metrics with social and environmental responsibilities.
"a challenge I mean this is a huge entrenched system that a lot of people profit from so I don't I really not a believe it we're going to over promise that I'm you know now we've got this approval boom..."
Evidence of Short-Termism's Effects
Ries shares personal insights and anecdotes to illustrate the pervasive issue of short-termism in corporate America. He emphasizes the disconnect between policymakers and the realities faced by middle managers and employees, advocating for a reevaluation of how success is measured in public companies.
"know it sounds kind of boring but like we're gonna start off with governance system sorry that's just how it is governance systems that can actually help companies make the metrics of doing those thin..."
The Disconnect in Corporate Expertise
In this thought-provoking segment, Ries discusses the inversion of expertise in society, where those experiencing the consequences of corporate policies understand the issues better than policymakers. He shares a personal story that highlights this disconnect, reinforcing the need for a more informed dialogue about the challenges facing public companies.
"go talk to them if you go work on the front lines of a fad walk into a factory walk into a any kind of boardroom and listen to what the conversation is do any of those people believe that their compan..."
The Long-Term Stock Exchange Experience
Ries outlines how the experience of being a CEO on the Long Term Stock Exchange would differ from traditional exchanges. He reassures that liquidity and trading rules remain intact while emphasizing the LTSE's commitment to fostering a corporate culture that values long-term growth and stakeholder engagement.
"problem and there's like this bizarre inversion of expertise that we have in our society where the people who are living the problem understand it very well if you've never been in that situation just..."
Reframing Stock Price Perception
In this segment, Ries proposes a new way to present stock price information to employees, focusing on long-term investor stability rather than daily fluctuations. He advocates for a shift in perspective that prioritizes long-term value over short-term stock performance.
"the same places at trades today so you're not sacrificing anything and the rules are completely compatible such that you could even do a list gym between NYC and lt se you don't have to just pick one ..."
Pledges and Corporate Responsibility
Ries discusses the importance of companies making binding pledges to uphold ethical standards and long-term commitments. He argues that these pledges can transform corporate behavior and align executive actions with stakeholder interests, ultimately fostering a culture of responsibility.
"answer you will get if people are being honest is I've asked this question hundreds of times the answer is always gosh now everyone's looking on their ticker to see what the stock price is today every..."
Cultural Transformation in Corporations
Ries emphasizes the critical role of corporate culture in shaping behavior and decision-making. He asserts that culture can be intentionally changed through specific actions and commitments, rather than relying solely on abstract incentives or metrics.
"yes so I mean I could you can tell your employees whatever I mean not whatever you want their rules but well that's actually the issue but this is a key thing like what what power does a stock exchang..."
The Power of Public Commitments
In this segment, Ries elaborates on how public commitments can influence corporate culture and behavior. He highlights the significance of CEOs wanting to be perceived as effective leaders and how this desire can drive positive changes within organizations.
"conversation and the disclosure and the you know the beat and raise game and all this stuff I don't know how much time we have to get into the legal minutiae it's a little boring you can read our SEC ..."
Long-Term Value Creation
Ries discusses the necessity of redefining what it means to be a successful CEO in today's market. He advocates for a focus on long-term value creation and community impact, rather than merely financial performance, to ensure sustainable corporate success.
"is to receive the call from Investor Relations that the CEO needs a new plane so we're doing this one-time one-off bonus thing that no it doesn't make any sense but we're just doing it and what are yo..."
Metrics and Short-Termism
Ries explores the tension between the cult of measurement and the pitfalls of short-termism. He reflects on his experiences with metrics in management and how an overemphasis on quantifiable results can lead to decisions that undermine long-term values.
"instruments we're going to another pledge you could make we're gonna reward our long-term investors we're gonna know who our long-term investors are and then we're gonna reward them for being long-ter..."
Resolving the Measurement Paradox
In this concluding segment, Ries shares insights from his second book, addressing the paradox of balancing metrics with meaningful values. He emphasizes the importance of aligning measurement practices with long-term goals to foster innovation and sustainable growth.
"culture eats at rack culture eats X for breakfast but for all X culture is a progressive like the end of the day what is culture culture is the behavior that managers do when they're not being told sp..."
Short-Term Metrics vs. Long-Term Vision
In this segment, Ries delves into the paradox of short-term metrics in companies, explaining how a focus on quarterly results can lead to bureaucratic slowdowns. He contrasts this with companies like Toyota, which thrive on long-term strategies. Ries argues for the importance of maintaining a vision that transcends immediate metrics to foster innovation and adaptability in business.
"I'm curious how the ideas of the exchange connect the ideas of lean startup when I was starting box I went around talked to investors and actually coupled them like the shoveling started in my house a..."
The Accountability Dilemma
Ries addresses the challenges of holding companies accountable for long-term projects that cannot be measured within a single quarter. He highlights how this leads to a culture of avoidance among managers, who may prioritize short-term gains over meaningful progress. This segment emphasizes the need for a framework that allows companies to pivot and learn from their strategies rather than simply assigning blame.
"everything is buttoned down a highly disciplined that such a company would go fast at everything it does but if you actually study companies you notice that those behaviors actually slow everything do..."
Learning from Failure in Public Markets
In this insightful discussion, Ries explores how public companies can learn from their failures and adapt their strategies. He emphasizes the importance of recognizing moments of maximum learning and the need for companies to be structured in a way that allows for flexibility and growth. This segment highlights the disconnect between investor expectations and the realities of executing long-term strategies.
"bureaucratic and it's this consequence of not having a way to hold people accountable to the things that really matter now this is true and the tiniest startup up to the biggest enterprise that metric..."
Reforming Corporate Governance
Ries discusses the necessity of multi-stakeholder approaches in corporate governance, advocating for employee representation on boards and other mechanisms to share power. He critiques current practices that prioritize compliance over product strategy and suggests innovative solutions to ensure that companies remain accountable to all stakeholders, not just investors.
"century you've talked a bit about the need for multiple stakeholders and the this sort of broad view of this whole space is that companies have become too responsive to markets to investors yeah and n..."
The Future of Company Leadership
In this segment, Ries reflects on the future of company leadership and governance, proposing that board members should be aligned with the company's long-term vision. He suggests that mechanisms should be put in place to ensure that future leaders uphold the values and mission of the company, emphasizing the importance of sustainable governance practices for the longevity of businesses.
"you would do that our securities laws make that illegal today so what do we do about that but then you're like well what if we actually thought of a creative solution to that problem to you know I've ..."
The Role of Long-Term Stock Exchange
In response to a question about penalizing short-term investors, Ries explains that the Long-Term Stock Exchange aims to create an environment where long-term investments are prioritized. He shares a story illustrating the stark differences in investment strategies between short-term traders and long-term investors.
"capitalist it is your turn we have a microphone right there we got a microphone I believe in that area Yeah right there folks should come up and ask Eric their very best questions yes sir I don't know..."
Understanding Market Dynamics
Ries elaborates on the disconnect between quantitative traders and long-term investors, emphasizing how short-term thinking can lead to governance issues. He critiques the current market mentality that treats companies merely as numbers, advocating for a more engaged approach to corporate governance.
"I've been working on this for at least nine years and I first I didn't know anything about public markets capital formation was a phrase I'd never heard in my life before I became CEO of a stock excha..."
Investing in Innovation
Ries addresses the challenges of distinguishing between genuine R&D investments and superficial spending. He argues for transparency in financial reporting, suggesting that companies should clearly communicate their long-term investment strategies to help investors make informed decisions.
"having a really good day you engineered a synthetic short against a company and now the stock is down 10% he was like oh yeah you could see he was like that is a good dog he's like oh I'm tell me more..."
The Future of Corporate Reporting
In concluding remarks, Ries emphasizes the need for companies to present their long-term investment strategies prominently in quarterly reports. He contrasts the approaches of companies like Apple under Steve Jobs with those that fail to invest in their future, advocating for a shift towards transparency and accountability.
"as beleaguered we had two three years of terrible earnings we caught flak every quarter for investing massive amounts of R&D thank God our CEO at the time Steve Jobs said a few I don't care I'm invest..."