The force that kills companies

When Edwin Land founded Polaroid in 1937, he created more than just a camera company. He built an R&D powerhouse at what Steve Jobs memorably called “the intersection of art and science and business.” Jobs admired how Land “built an organization to reflect that” ethos. His approach produced the revolutionary instant camera and countless other innovations, building Polaroid into one of America’s most admired companies, with over one thousand scientists and engineers working on innovative new research.

But Land’s board was under no obligation to protect him or his ethos, and in 1982 the company directors forced him into retirement. Jobs called it “the dumbest thing I’ve ever heard,” adding, “This man is a national treasure.” New leadership systematically dismantled Land’s culture of innovation. Within just a few years, Polaroid’s research facilities atrophied, key scientists departed, and R&D spending plummeted.

The company began a slow decline and filed for bankruptcy in 2001.

The story of Polaroid, which I tell in Incorruptible, is one of what I call “unusual failure.” Unusual failures don’t come about as the result of ordinary reasons companies go under – competition, creative destruction, or replacement by a superior form of value creation. They’re caused by something altogether different.

Just as surely as physical gravity pulls an apple, organizations face their own invisible force that pulls them down. Understanding it is the only way to understand three otherwise inexplicable truths:

• Investors routinely kill their golden geese, even when these companies are worth far more intact – betrayals that seem irrational when viewed simply in terms of profit and loss. 

• Companies consistently succumb to dependency on bureaucracy, short-­term thinking, hollow culture, and issuing the same anodyne press releases as everyone else, losing what made them special.

• Companies routinely hire outside experts as advisors, seeking out people with deep experience to serve as counselors or independent board members who are far more likely to push “best practices” rather than try to protect a company’s distinctive mission and ethos. They’re more loyal to the financial system than to their actual clients. 

I call the force behind these phenomena financial gravity. It’s the psychological pressure that shapes behavior and, eventually, values based on the desire to succeed at future transactions.

This pressure is real, not imagined, and it emerges from actual resource imbalances that are easy to name and quantify. Investors control capital, employers control livelihoods, and markets control valuations. These imbalances create genuine incentives that, over time, change the way people and companies act. The more valuable a company becomes, the more vulnerable it is to attacks. As at Polaroid, it’s success, paradoxically, that causes failure.

FREE VIRTUAL EVENTS

If the topic of financial gravity is interesting to you, you’re invited to join our free Incorruptible community. It’s a place for thoughtful, mission-driven people to gather, read, and discuss implementing the book’s principles and tools. 

Free Hands On Workshop: Define Your Mission, Purpose, Vision, Ethos
Wednesday, August 26 10-11am PT / 1-2pm ET

Get beyond the mission statement that everyone forgets the minute they've read it. Whether you're founding a company or realigning one that's drifting, this workshop gives you practical tools to craft a mission you can defend.

This month the focus is on 4 foundational tools described in Incorruptible: Mission, Purpose, Vision, Ethos. Join us for guidance and hands-on exercises.

Join the Community and then RSVP for this free workshop

Thursday, August 27 10-11:30am PT

I’m sharing more about financial gravity and related topics next week in a Zebra Growth Playground virtual session on Regenerative Growth in the Age of AI. Healthy growth requires us to examine who holds power, what our measures reward, and whether our organizations can remain true to their purpose as pressure increases.

Register for free here

Hope to see you in the community and these events,

Eric