(not saying at all if this was appropriate or not)
Well it's important to keep the context in mind here: "the holocaust reference" in this case was a chart from the Anti-Defamation League making the case that normalizing seemingly minor bad behavior makes it easier to go on to slightly worse behavior, which now doesn't seem that different from what you're already tolerating, and so on, and so on.
https://www.adl.org/sites/default/files/documents/pyramid-of...
This is not a terribly controversial assertion, in and of itself. Was it a stretch to use it in this context? You could definitely make that case. (I've long been fond of the quip, "If you use a slippery slope argument once, you'll start using it everywhere.")
But I would argue that when DHH acknowledged the list making fun of 'funny names' was a bad idea, apologized, and promised to shut it down, he had the choice to stop talking at that point. He didn't have to publicly chastise the employee who brought up the Pyramid of Hate. He took positive steps toward putting out this fire, but then threw on a match of his own -- and then doubled down on that, publicly calling out an employee who kept at it.
So, if we're talking about DHH-the-manager, I would suggest he maybe didn't do the bestest job of managing here. He could have said, "yes, we'll take down the list"; instead, he went with "yes, we'll take down the list, but don't you think you're being a drama queen about it."
What do you do when a (previously-complicit) employee keeps an issue going on and on and on?
A little 'hey, get off your high horse, you were involved too' doesn't go amiss.
(As a first, second or even third reaction it's not great - but it sounds like there had been a lot of talking preceding this).
One thing that I think gets lost in discussions of hypocrisy is that there are actually two types, and they should be handled very differently.
The first type is when an alcoholic tells you to slow down on your drinking, e.g. "do as I say and not as I do" hypocrisy. This kind is usually ok, because it tends to be more of a "learn from my mistakes" situation than a failure to understand the contradiction in your own words.
The second type is "rules for thee and not for me" hypocrisy – people that try to catch others out in their "bad behavior" but then think it is totally fine when they do it themselves, as they provide some sort of post-hoc rationalization for why it is ok for them to do it ("because context" or whatever) but totally unacceptable for others to do so.
Most people conflate the two types, but I try to only refer to the latter type as hypocrisy, and I think it is generally bad to be a hypocrite in that way. And from the sounds of it, the Basecamp employees in question were definitely more of the latter than the former.
The damage done to Basecamp's public reputation, internal morale, and now all the projects set back by losing a third of their employees is unfathomable -- all for the satisfaction of "by gum, at least I don't have to say I put up with one of my now-former employees talking back to me in a way that was arguably hypocritical." On balance, was that really the right tradeoff to make here?
But it doesn't really matter if the manager (or owner) believes they handled it well. It matters if the employees thought it was handled well. In the case at least a third of them didn't.
Even putting aside the substance of the no politics policy, the delivery and crafting of it was terrible. There was a DEI committee, and it and all other committees were unilaterally dismissed. The no politics rule was decided with zero employee input. And worse than that it was delivered via public blog post that had to be hastily edited after the fact.
Had DHH and Fried carefully taken employee input and crafted a policy that took their concerns into account, and delivered with care and respect, they could've still ended up with a no politics policy. But employees would not have been blindsided and maybe more people would've bought in.
But maybe DHH and Fried really want a company culture devoid of significant employee input into how the company is run.