(2025-01-11) Ries What Is The Purpose Of A Company

Eric Ries (newsletter email, no link): What is the purpose of a company? A lot of discussions about corporate purpose are very, for lack of a better word, highfalutin'.

But what if corporate purpose isn’t some lofty, ever-unattainable goal? What if it’s just doing the thing the company was created to do really well? And what if fulfilling corporate purpose in that sense was actually the same thing that made a company profitable all around? (cf Drucker on The Purpose and Objectives of a Business)

one of the most relatable examples of the total misalignment of the two I’ve seen lately was in this Matt Levine column.

He tells the story of how Chipotle discovered many of its franchises were dishing up diminished servings, covered it up, and started spending more money on ingredients. Then, as he writes, “Chipotle did an earnings call saying that it expected its cost of sales to increase in the next quarter as ‘an investment we are making as we focus on outlier restaurants to ensure correct and generous portions,’ which is (arguably) an admission that in fact, it was skimping on portions. And then the stock fell.” The result was that shareholders sued Chipotle for securities fraud.

Chipotle has a very clear purpose: to make food and serve it to people. They were so distracted from this purpose by shareholder value concerns that instead of just doing their one job, they first squeezed their customers and then lied about it, leading directly to the lawsuit filed by the very people they were scrambling to please. If they had instead focused on every franchise upholding Chipotle’s purpose by treating their customers well, everyone from customers to shareholders would have been happy. By separating the two, they cost themselves billions of dollars and betrayed the whole reason the company exists in the first place.

Also:
State Capacity for Building Infrastructure
It’s no secret that getting big infrastructure projects done in the US takes longer and costs more than in comparable countries. This paper takes a look at the top three reasons why (personnel, procedure, and lack of adequate tools) and lines up a lot of practical tips and mechanisms for tackling them.