37signals Earns Millions Each Year. Its CEO’s Model? His Cleaning Lady
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I love this quote. It reflects my sentiments to a T.
I just spent 20 minutes writing an email with detailed screenshots of how to add a menu item to a CMS. I can't stand the CMS that this client uses. We inherited it and it blows. They're an awesome client though, nice people, and above else, they're my customer. I have no problem going out of my way to ensure that they've got detailed and easy-to-understand instructions.
A startup that some friends and I started a few years ago: schoolrack.com. Our users were teachers from elementary to high-school. You can imagine we dealt with TONS fo technical support requests from both confused parents and teachers. A lot of teachers are still forced to use IE6. Patience and always putting the customer first is what made us successful. Our users adored us. We'd start at a school and overnight every teacher there would be using us. Our users always had nice things to say about us because we always put them first.
When I worked in Apple retail, they reinforced the same principles. Understand the customer. Put yourself in their shoes. Frame your questions so that they are not misconstrued. Make technology friendly. Know your customer. If they're coming to you wanting Final Cut and a few Mac Pro's, don't try and offer them lessons on how to use a word processor (exaggeration). Of course not every Apple employee is a saint, and sometimes you have a bad experience. We're humans, after all. But the principles work.
Bend over backwards for your customer. Treat every single person you interact with on a day-to-day basis with respect and kindness. Even the UPS who comes to pick up your deliveries.
Customers won't give you, hapless employee, job security if your employers can easily replace you with someone cheaper because you have a flimsy (or no!) contract, nor will customers help you with disputes with management, or wrongful termination, or promotion from within, or even the too-little-emphasized increased potential for synergy between the ranks that unions afford, or any of the many other things that unions afford.
Customers might help prevent a company going out of business, and that, to be sure, is good for job security. But a company that's flourishing customerwise can still have rapacious or simply bad management.
Business owners do not have an obligation to keep everyone employed, they have an obligation to make a profit, if there's no profit, then they won't be able to employ anyone for very long.
Good employees are an asset to any company. You don't get "wrongfully" terminated if you are adding value of a company.
I will never hire union labor ever. I would close down a business before I submitted to the extortion of unions. If I hire people, I treat them really well because they add value not because a contract says I must. Google employees aren't unionized -- Google understands that to attract the best talent you have to treat people well. Google employees don't need a union -- they know that if they're providing value, their jobs are very secure. It's the lower-skilled workers with chips on their shoulders that are the first to cry about needing a contract to "protect" their rights.
Contracts protect the employees that strive to do the minimal possible under the terms of the contract. Unions have made employees interchangeable because you get paid based on your job title and seniority, not necessarily the value you bring to the organization. The big tragedy is that in union shops, when layoffs happen it's the junior guys that go first, even if they're better workers than the more senior. It's disgusting that years on the job mean more than actual job output. Unions had their place before OSHA came along, but now they are corrupt labor monopolies where the bosses get paid millions each year cronyism and corruption are the norm. If you don't like a company, you're free to quit, but in closed-shop states, if you don't like the union, too bad, you have to be a member (or pay the dues) if you want to be employed in that field in your state. Detroit is 1993 Sarajevo because of unions, while North Carolina is doing pretty well. The difference is the unions.
Wonderful! There you are, being a positive influence on your organization, knowing that you shouldn't need a contract. But! Suppose some manager doesn't recognize that you're being a positive influence? Or just wants to throw his weight around? Certainly, a person in a position of power who wants to throw his weight around shouldn't target someone who's a benefit to his organization. But perhaps he's perverse, or doesn't care, or views you as a threat, or (again) has made a mistake in his estimation of who's "adding value" and who isn't. You shouldn't need a contract in part because your superiors shouldn't do that kind of thing. But hey! They might do it anyway! The wonderful thing about being contract-free, or in an at-will employment state (i.e. almost any state) is that there's no such thing as wrongful termination and you have no recourse if you're fired---"but I was adding value!", in particular, is not going to be effective. In this sublunary world, you'd have to be delusional to maintain that if you're adding value, you don't need a contract.
Actually, I can't resist; let's look at the rest of the first paragraph in this light. How do you know that union employees in, say, Flint, were uninterested in "adding value" to the manufacturers who shut down the factories? People working manufacturing jobs---a skilled trade, you know---take pride in their work and I'm willing to assert, just as blithely as you were willing to assert the opposite, that they'd be plenty willing to try to improve the product, improve processes, etc., if they were but asked (and lots of improvements can, indeed, come from the rank-and-file in that way). It's true, of course, that when residents of Michigan are asked to add value to the company by accepting wages no greater than those commanded in Mexico, they are likely to balk.
Then one of you is wrong.
Yes, bad managers make bad decisions. A contract doesn't protect you from bad managers - it merely makes it easier to stay around to be subject to their badness. Why do you think that's worth something?
Contracts actually make bad managers look better that they would otherwise. Yes, bad managers survive longer when unions are involved. Why do you want that?
Life's too short to work for a bad manager. Of course, if all managers are bad (for you), maybe they're not the problem.
> People working manufacturing jobs---a skilled trade, you know---take pride in their work and I'm willing to assert, just as blithely as you were willing to assert the opposite, that they'd be plenty willing to try to improve the product, improve processes, etc., if they were but asked (and lots of improvements can, indeed, come from the rank-and-file in that way).
We can test that hypothesis by looking at what they demanded through their union representatives. Care to predict the result of said "look"?
I'll save you the trouble - they didn't demand anything to improve product quality or increase productivity.
On a related note, the head of one of the US teachers unions said that he'd start caring about kids when they started paying dues.
You have to turn those "what ifs" into "so whats" because there is always the chance that a manager is going to fire you unjustly. If the organization is setup properly, the loss of your employment would adversely affect your department's profit numbers. Since the manager is responsible for those numbers, one can assume there will be repercussions for a decrease.
This all assumes that the organization is a well-oiled machine, but since a vast majority aren't, you have to assume that you will be fired for any reason. The good thing is that if you can provide value to one company, you may have a good chance at providing value to another company (especially if it can be quantified on a resume). These are known as transferrable skills, and they're what good employees retain in order to get a high-paying job.
Most employees at auto manufacturers do not have this same leverage. They can't threaten to leave for higher salaries or better working conditions because they are in large supply, small demand. Forming a union gives them this leverage so that they can negotiate at the same level as their employer.
I feel like the negativity towards unions is a result of some recently holding more power than the employers and getting unsustainable pensions and other extravagant benefits. But when the balance of power is closer then unions have been successful and often in necessary in making sure that employees are working in a safe environment, getting paid a living wage and generally not being taken advantage of.
TLDR; Labor unions are not all bad/good. They simply give employees the same leverage as their employers in industries where the supply for workers outnumbers the demand. It's not good for that balance to get out of hand in either direction.
Spoken as someone with specialist skills that are in sufficient demand and business critical enough.
> I will never hire union labor ever. I would close down a business before I submitted to the extortion of unions.
So in other words, clearly people need contracts - and some will need unions -, since you're making it very clear you have preconceived notions about employee behaviour based on external factors that have nothing to do with their job performance, and you're not the only one.
Unions were formed because people realized their negotiating positions were excessively weak compared to the employer-side who held all the cards. E.g. getting to the 8 hour working day, for example, took American unions many decades of struggle to achieve (and the rest of the world commemorated that struggle by making May 1st the international day for workers demonstrations in direct response to the Haymarket massacre)
> Contracts protect the employees that strive to do the minimal possible under the terms of the contract.
Contracts also protects great employees of employers that strive to do the minimal possible under the terms of the contract.
Somehow you seem to expect that employees should trust you implicitly.
> If you don't like a company, you're free to quit, but in closed-shop states, if you don't like the union, too bad, you have to be a member (or pay the dues) if you want to be employed in that field in your state.
So why are you making your arguments about unions in general when you then go on to describe features of unions in some locations that are by no means universal?
There's no doubt that there are unions that have managed to push things too far, but your argumentation is like saying all companies are bad because some companies have been abusive.
Unions (and companies, countries, etc.) can't ride the wave of their past successes forever. Saying that unions were a good thing 100 years ago is not an argument that they still are.
I don't think it's at all arguable that unions--at least American unions--are detrimental to the health of the businesses their employees work for.
Fundamentally, these unions are parasitic. They treat the wealth of its host as a given and find ways to extract more of that wealth. The flaw behind this is that the wealth of a company is not a given--it depends upon the customers, and the more you try to extract wealth from the company, the greater the impact on the customer. Either that, or the company just goes flat broke[1]. A company that doesn't have these additional costs and distractions is more able to focus on the customer, or at the very least can do just as good a job without going flat broke. The experience of US automakers vs foreign competitors, or Boeing vs Airbus, or unionized retail vs. Wal-Mart and Amazon, bears this out.
[1] If the company just goes flat broke, then the union isn't a problem per se, just a con game on shareholders. Airlines are an example: http://philip.greenspun.com/flying/unions-and-airlines
The free market generally does not have the power to correct for overreaching management. In many cases the signal necessary to make a judgement is not propagated to consumers, at least not in such a way that it will cause a change in consumers purchasing decisions. This is where unions are necessary to correct against overbearing and unrealistic management. Society is stronger, and the economy is stronger, when the "wealth" of a nation is well distributed among everyone. Wealth here being everything from health, leisure time, assurances against bodily injury, etc. Unions are but one tool to ensure this equitable distribution.
I'll agree with that, but I think regulation and Big Government™ are a better solution and unions have outlived their usefulness. You can tell because most people who advocate for unions just rest on past glories.
Can you explain this claim? Specifically, why "overreaching management" is bad for consumers, and why the market can't correct for it?
As to why the market won't necessarily correct for it, is because many times overreaching management is effective (at least in the short term). Degrade working conditions to cut costs and the consumer benefits. The information about how these lower prices were brought to the consumer is usually lost in the process. That signal simply doesn't reach all interested parties, and thus they aren't able to adjust their behavior in response. Some situations it can work, for example a business where customer service is a large part of the experience. The signal of overreaching management does eventually filter down to the consumer.
Sure it does. I, the customer, see both the price and the service. If I'm willing to pay more for more service, I can do so.
And, this signal also reaches the employees as well. If you don't like it, go elsewhere. If you're right about how valuable your service is, customers will make the same choice. If you're wrong....
There are often niche producers who target the small fraction of consumers who care, and market their wares in part based on this. For example, see Fair Trade coffee producers (appealing to do-gooders) or American Apparel (appealing to US nationalists).
Your claim that markets can't transmit this information to interested consumers seems incorrect.
Seriously, you need to work on your language and mindset if you think profit is evil.
Profit is just a surplus of outputs for inputs given. It's what makes people get out of bed in the morning. It is most definitely not evil.
You say "profit" like it's a bad thing. It's not, it's what funds new good things. And, reducing costs is a good thing. It produces "more".
BTW - Management's goal is to extract as much profit for managers, not for the enterprise.
One big problem with the corporate model is that no one has a long term interest. No one at GM ever got fired for agreeing to the contracts that broke the company. Instead, folks did get fired for not giving in.
Even if that's true, unions aren't a balancing force to the "incentives for all sorts of bad things". The only role that unions will play here is in trying to get their cut.
Actually, that's wrong. Unions will often actively help commit said "bad things" because they'll benefit. For example, unions are often quite protectionist.
The question isn't whether unions are good or evil, it's whether they're actually a counter to a specific evil that companies might commit.
Since that evil produces more money for the company, you need an example where a union did something to reduce a company's profit other than by trying to increase the union's cut.
Unions are not new, so if you're going to suggest that they're useful for doing something, you should have actual examples of them doing said something.
All of those things are the union (members) taking more of the profit.
"work environment" (as you're using it) isn't some abstract good that the unions are protecting. It's "what do I have to do for the money I make?"
Changing that balance one way is reducing the union members' take. Changing it the other way is increasing the union members' take, that is, trying to reduce a company's profit by increasing the union members' share of the revenue.
We're still waiting for "an example where a union did something to reduce a company's profit other than by trying to increase the union's cut."
>The question isn't whether unions are good or evil, it's whether they're actually a counter to a specific evil that companies might commit.
The specific evil being detrimental work environment, its obvious that unions are a balancing for to that.
I'm not trying to be snarky. I'm trying to point out that your thinking is muddled.
> I was clear that I meant "profit" in terms of money.
And the things that you listed were benefits received by union members, benefits that cost money, which reduces profit. What do you think the same money for less work is?
> clarified my point by listing the ways unions benefit their members.
No one is suggesting that unions don't benefit their members. Your claim was that unions were combatting some evils. I asked for an example, and you started ranting about profits, so I pointed out that the only effect that unions have on profits is to increase expenses that directly benefit their members.
> If you consider work environment, etc as part of "profit
Work environment is expense. Profit is revenue - expense. Which statement do you disagree with?
Some work environment details affect quality and/or productivity and some don't. Of the former, some provide more increased revenue than their costs while others don't.
Do you really want to argue that unions only ask for work environment and compensation things that "pay for themselves"? (Given your model of management, unions don't have to ask for those things.)
If you've got examples of unions acting other than in their own self-interest, let's see them instead of vague theories.
How can you be so certain that unions act a certain way yet not have any examples?
>Work environment is expense. Profit is revenue - expense. Which statement do you disagree with?
I have no problem with the definition of "profit" you used, I already made this clear. All that matters is that we're on the same page.
>No one is suggesting that unions don't benefit their members. Your claim was that unions were combatting some evils
I clearly defined what "evil" I spoke of that unions are a balancing force against--"overbearing" management. Things like dangerous work environments, extreme work hours, lack of health insurance, etc. It is clear that unions are a balancing force to this "evil". If you disagree with this, then provide an argument. This is the only point I've made. I never claimed that this wasn't in the self-interest of its members. Your points are completely tangential to anything I've said.
This does not at all correspond to my experience.
If true, so what?
You're assuming that this undefined "good management" has value that isn't reflected in the customer experience. That's simply not true. Even if the bad management only directly affects employees, they affect customers. (Good employees leave unless shackled by seniority rules, which is the only rational way to run a union.)
see the sickness in our industry
He's not in "our" industry. He runs a small business that makes good money, and it happens to use technology. Not the same thing.
Are you profitable? Are you building something great?
These are not always relevant questions for a startup, depending on what phase of its life it's in. You certainly try to build something great—or better yet, solve a problem!—but you may very well have to change (yes, I mean "pivot"). See Inside the Tornado for info about having to not worry about treating customers well at some stages.
I'm not sure I'd call any of 37 Signals' services all that great, however, if by "great" we mean innovative. There's nothing special about them except that they were there early and they're simple. But that's not what I'd call innovation, and I don't think it makes them great. I think his cocky attitude has a lot to do with the constant feedback loop in the town he lives in. In SV, I don't see many founders praised for judging other people's work; usually, they're too busy trying to build something truly great, even if it's yet another photo-sharing site. Hell, Flickr was just another photo-sharing site, but I think of that as far, far greater than something like Basecamp.
Pot, meet kettle.
> He's not in "our" industry. He runs a small business that makes good money, and it happens to use technology. Not the same thing.
I presume you're defining "our" industry as consumer focused Internet services that plan to IPO or get acquired? Not sure everyone would agree with you, I don't.
Your comment actually reiterates what he's talking about. The mentality of what a "startup" is and how you go about building it is (in his opinion) a bit toxic.
To tell you the truth, the longer I live in Silicon Valley the more I agree with his point of view.
I guess I had naively been assuming that a "startup" was effectively a phase in business, where you are working hard to build a product early in the businesses life. You are "starting up." However, I assumed that the end goal is to make sure that product grows and supports a viable business that enriches customers lives and provides a stable business for the people involved to do what they love.
Reading Sabats comment though, it sounds like his definition of a startup doesn't involve starting a small business. If it doesn't, then what are you doing? I have some things in mind, but I leave the question open to others to fill in.
The biggest problem in Silicon Valley is that people don't think about what they're building. There are so many stories of founders receiving millions in funding and startups being acquired for tens or hundreds of millions of dollars that it creates a really unique subculture.
That subculture is what Jason Fried is referring to. I don't have a problem with it per se but I do wish everyone here would stop and ask "is this the best way to create value for customers?".
There's a lot of talk here about changing the world and delighting customers but if you look deep into most of these venture backed companies it is strictly about big exits. It's what the VCs want, what the media hypes and what founders (blindly?) follow.
Your statement is both pedantic and incorrect.
I may be a bit off, or poor in my ability to communicate my point, but it it seems you are appealing to authority in your argument for the use of IPO as a verb.
My anecdotal evidence dates back to Netscape, so 1995. Shortly thereafter, the Valley was deluged by people with limited knowledge of financial markets who might have been reaching for the faux sophistication you describe, but this was before all that (and long before SOX). Bankers still usually got it right back then, but they didn't do most of the talking.
Anyway, I'm all for pedantry. I do take issue with your assertion that inappropriately verbing the acronym will hold younger entrepreneurs back in some way. I do not believe it.
It seems to me that you might have some special reverence for the term. Fair enough. Surely you've seen this happen before though, to lesser words?
> He runs a small business that makes good money, and it
> happens to use technology. Not the same thing.
> if by "great" we mean innovative
I got pretty tired of all that useless social hypeware with no purpose (other than burn VC's money) and business model.
I'm sure he's trying to tell us he values the little-guy/gal. Great!, we do too, but then don't pretend her job is more exciting than a whole industry, and you're just sitting around in gushy anticipation of your fresh flowers. ugh :p
Also, painting the valley as "sick" and "disgusting", feels one sided.
Sure there are problems with some startups being over-hyped, but bubble or not, companies are getting real shit done here, and it's pretty unique place, simply in terms of raw tech innovation density. Giving credit where due, doesn't need to take away from all the rest of the good stuff that goes on elsewhere in the world too, like at 37 Signals, Chicago IL.
It's clear that the press would write about revenues if they could, because they write a lot about the revenues of public companies. They're able to do that because public companies have to disclose their revenues.
Private companies never publish their revenues. Including 37signals. So if Jason really believes this is a terrible problem and wants to set things on the right course, he should set an example and start publishing 37signals' revenue numbers.
Jason's problem doesn't seem to be with the reporting; it's only coincidental that it's easier for press to report on the businesses he finds fault with.
In startup's context, fund raising is definitely a change, and revenue numbers may be a change (when they are surprising or previously undisclosed). But building a sustainable business, treating customers well or even being profitable should be long-lasting and timeless. It's interesting to keep reading about these issues in Hacker News, but these are not exactly news.
It's like business fundamentals ("common sense"). The press never talks about them but it doesn't mean the industry doesn't care or doesn't treat them as important.
From the article: "What matters is: Are you profitable? Are you building something great? Are you taking care of your people? Are you treating your customers well?"
All of those questions can be answered without needing access to a companies ledger. Jason answers those questions himself in the article.
I think his point was that stories about those questions don't get as much readership per unit of reporter effort, hence they aren't being written.
Posting 37signals' revenue numbers would have zero impact on that.
And plenty of these plumbers and barbers and cafes probably do great work and treat their employees well. Do you really want to read articles about all of them? I don't. What makes a company newsworthy (unless it's as a case study) is its size, or potential size.
Companies would also pick vendors based on financial stability, for which profit is probably a major factor, although cash in the bank would also be.
Or maybe it would happen if investment rules relaxed and private equity (Private Equity or direct investment like second market in non-public companies) happened, as communicating financials to lots of investors would still be relevant.
In his books he develops a very humanistic look at the role of businesses in our lives. As entrepreneurs, employees, and as customers. I won't be able to do the ideas justice here, but I will try:
A business obsessed with revenue and growth is like a person obsessed with how many breaths they have taken, or how much food is in their pantry -- these are means to an end, not ends in themselves. Food is required for life but it's not the purpose of living. Businesses as conceived by Semler and Fried aren't designed to maximize revenue so much as make the world a better place (#include your essay about google being almost a nonprofit).
It may be that stories of plumbers, barbers, and cafes wouldn't be interesting to you. I like to hear about people living enjoyable lives, delighting their customers, and making their corner of the universe a better place. It's a lot more psychically healthy than reading about people trying to gain the most while providing the least (the tech crunch articles Jason refers to)
So many people seem obsessed with getting a large quantity of money, and only then trying their hand at building a fulfilling life. I have always thought of Semler as running things in reverse: how do we design a seven day weekend that is cash positive?
(Semler's book, The Seven Day Weekend, is highly recommended to anyone who wants to hear more)
then "But articles of that type are case studies, not news"
first "Do you really want to read articles about all of them? I don't."
then "I've been running one for the past 7 years. And I'm interested in reading about others."
I think what you want is for Jason to have said "I wish the technical community were focused on case studies of awesome companies rather than news stories about funding and growth." Which I think he would agree with, and would remove your points.
(Not that case study vs news is a real dichotomy -- what's stopping someone from calling news about a round of funding a "case study about getting funding"? Why can't there be news stories about how awesome the customer experience at X has gotten?)
"Why can't there be news stories about how awesome the customer experience at X has gotten?": If you really want to know, I advise you to read "Storytelling: Branding in practice".
You are logically incorrect. Well, by your own logic. How can you publish news about a current event? To be written as news it has to be happened in the past.
In fact, we see case studies as news (and even less-than-news) all day long here and elsewhere. You can tell by the titles that generally come from blogs and usually look clickbait-y: "How Company/Developer X achieved goal Y," "Why Language Z helped us triple our revenues," etc.
Although one part of me says that the message is good, the other part says - why dont they publish their size? Like you rightly said, the value that many people would attribute to their words would vary based on size.
And the other thing is, many of these concepts that they tout might only work for a particular size. that is another reason we need to know how big they are.
I myself side with the 37 signals guys that profit is king, but that takes nothing away from my friends that are in start ups chasing big coin.
Either is a viable strategy and i think it's terrible that this community doesnt allow both to co-exist as viable options.
I think it does. There are many of us that are focused on either lifestyle or profit-driven businesses and those articles are often received well. What isn't are articles attacking the funded companies' approach.
Personally I believe there are many great lessons to be learned from those local/profitable businesses which if written I'd gladly consume. If the press would only dig for those types of stories I'm sure they would come back up with gold.
As an entrepreneur who is interested in growing a long lasting and sustainable business there are many lessons which I can imagine a seasoned business owner, no matter the market, could teach me (i.e,: how had they dealt with times of feast as well famine. What was it like when they had they'r first repeat customer, etc.).
"What makes a company newsworthy (unless it's as a case study) is its size, or potential size."
To be honest I believe this sums Jason's point in one line.
The current tech culture doesn't seem to acknowledge nor celebrate the stories of those founders, entrepreneurs, developers, or business minds whose offerings are geared towards providing impecable customer service; so that doesn't get written about fairly frequently.
Now I may be wrong in my observations but it would seem as if this current generation of the tech vanguard simply aren't interested in those things. The signal, which has become an ever increasing continuous one, seems to be about more, more and bigger, bigger, bigger.
Hey, maybe that's all there is to it, but I'd like to believe we've got much more in us than simply who can amass the largest seed round, or who has had their Series A round over subscribed.
Again, I may be wrong but just a thought.
The real world is a better movie. Real people, real work, real life make for interesting stories. I would much rather read about healthy business, regardless of size, than sizeable business, regardless of health. Jason Fried was on target.
What makes a company "newsworthy" is a good PR firm!
I believe that businesses in this space are run with old-fashioned tools (management methods, process optimisation techniques, technology) for reasons of tradition and lack of information sharing rather than anything inherent to the businesses themselves. My experiences with business growth accelerators leads me to believe we as a community re-invent the wheel an enormous amount, and anything that helps me reduce that is of interest.
Sure, we have a different metric for success, but that doesn't mean there aren't unusually successful small businesses (that will remain comparatively small) that might have something interesting to say.
Well you know that's not going to happen especially since he made this statement below:
"We have 35 employees at 37signals. We could have hundreds of employees if we wanted to--our revenues and profits support that--but I think we’d be worse off."
So he isn't simply saying that he feels he could expand his business and have "hundreds of employees". He is saying that his "revenues and profits" would support "hundreds of employees".
Think for a second how much profit you need to support "hundreds of employees".
I'll give him the benefit of the doubt that he was misquoted on that. If not, he's simply full of shit. This is BS to challenge Donald Trump.
Second, I think you are underestimating just how profitable 37signals probably is. They have scaled a few tight products with high recurring revenue to a very large number of customers with a tiny team. I've worked at companies with hundreds of employees and knew their revenue numbers and the model 37signals is executing puts those numbers well within reach.
"just how profitable 37signals probably is"
As an aside to this discussion: If they are actually that profitable it's a good idea to fly below the radar and resist making statements about how wildly profitable they are. Doing that might entice competitors to enter the same market and regardless of whether they succeed or not that could kill the goose.
Sometimes of course things are out in the open and it can't be avoided (lines at the restaurant or with public companies, or Oracle posting their 24x7 software support rates where a guy out of his house can do the math). Sometimes you want the publicity for one reason or another. But despite the openness of the internet there are still things that you want to keep to yourself lest everybody and their uncle decides to move into your neighborhood.
37Signals' numbers are not public. "Talk is cheap" as they say.
I don't disagree with what he is saying in the quotes - that people focus too much on raising money as "business success". This is without question. But then again I still do not understand the value of 37Signals (compared to any other software company with aggressive marketing), at least not from the press they get. How are they being any more transparent?
All I know from recent reports is employees supposedly work 4 days a week and they have some sort of brainstorming sessions to come up with new ideas. What does the 37Signals software do? Specifically, not just some marketing buzzword. What does it do that I can't otherwise do without it? Are there some YouTube videos showing the software in action?
How do I know it's not just a Ruby on Rails consulting business for a few steady clients (who have an inseparable attachment to Rails), as opposed to a "unique" software company with amazing products? How do I know they're not just selling a Rails framework? So I have to install Ruby, Rails and a gazilion of their custom scripts to use their "product"?
I guess you've not looked at http://37signals.com before posting this?
> So I have to install Ruby, Rails and a gazilion of their custom scripts to use their "product"?
No. You need a browser though, because it is web-based.
I have looked at their website several times. It just never grabs me. And I'm not inclined to give them my email address to try out their amazing "solution".
Do you also sell something people do not need? And does it make you uncomfortable when people who do not need it mentions that to an audience via HN, the same way 37Signals keeps working to make mention of itself, or have others do so, in publications with large audiences.
If I have no need for a service someone is selling and I never hear about that service, then I have no reason (maybe even no ability) to to state what I think about that service. But if in the course of reading the "news" I am continually reminded of the service's existence, I may be inclined to comment. That is the risk you take with PR and advertising, or internet-based hype in general.
So it seems that 37Signals sells the use of their forum software (constructed from Ruby on Rails, i.e., free software), hosted on 37Signals' computers. I am getting a clearer picture now.
I'm not by any means suggesting that you're stupid or out of your league, but simply that you are talking about something that you are clearly completely unfamiliar with. Have you ever managed a team of people and projects? Once you do you will understand what an incredible pain in the ass it is to rely on email and spreadsheets. Full disclosure- I am NOT a 37Signals customer, nor do I know anybody affiliated with the company. Simply that project management software is a very real need for a very large number of teams. One of their partners created Ruby on Rails to create Basecamp, then released the framework for anybody to use and remained as a core contributor.
Why would you care about that? How could this person from antiquity know anything useful?
Interesting.
I personally don't think it is that great, with many pain points that I encounter - which, I will concede, may be a case of using the wrong tool for the job over any shortcomings in the product itself - but it is better over having no group messaging system at all if you are working with multiple people at a distance.
It's surprising that 37 signals isn't labeled a "lifestyle" company, which is practically like leprosy when it comes to funding and media attention.
I think a lot of people are sick of the crap written on TechCrunch for reasons that are hard to define. Mostly they have turned the innovative process into a form of TMZ, which glamorizes a field that is meant to build things to make lives better. Very few articles have anything to do with companies building these types of innovations, and profits have nothing to do with it. A response might be, well Scientific American writes those stories. Yes, and that's precisely why Scientific American is a respected publication oft-cited by Steve Jobs.
Too many stories on TechCrunch are titled something like "[Insert clever startup name] raises [insert some absurd amount of money] to become the [Facebook, Twitter, Foursquare, Birchbox] for [Work, Finding a cab, Healthfood]. These stories are ridiculous and cover mostly crap ideas that don't solve any real problems.
There's something a bit... I don't know quite how to put it. Let's just say that I bet she'd willingly trade places with him, cash out, and go enjoy herself instead of cleaning up after other people day in and day out. (Edit to change the wording just a bit)
> The other interesting thing about restaurants is you could have a dozen Italian restaurants in the city and they can all be successful. It’s not like in the tech world, where everyone wants to beat each other up, and there’s one winner.
That's because the economics of a highly local business are very different from one that can have customers all over the world.
Also: restaurants fail all the time - it's a stressful business to be in, and not generally the sort of relaxed, easy-going picture he makes it sound like. You can bet that most restaurants do not have the option of doing 4 days a week, unless they have big margins the other days, which means they probably have something very special about them.
I admire and respect those guys, but there's something too glib about some of their communications that turns my cynic sense on.
Edit: furthermore... live and let live, no? I'm more interested in a 37 signals style business myself, but let the people in Silicon Valley do their thing even if it doesn't float your boat. It'll all work out. As one example, I think the world is better off with PG running Y Combinator instead of having slogged on with Viaweb.
My mother isn't a cleaner (she's a nurse) but I talked with her before about whether or not if she had the chance she would quit her job and sit on the beach all day doing whatever she wanted and she said that no, she would never be able to stop working because it has been a part of her entire life and if she was going to quit her job and do anything she would open a book shop (I think it was a book shop).
I think for a lot of people work is a part of who they are and it's not as simple as just taking money and spending life on a beach, I'm sure the cleaner would love financial freedom but I would suspect she would keep working. For a lot of people they don't have things they enjoy that have some sort of output (for most of HN that's programming, or design) so working is all they have to feel like they have value in the world.
Maybe his cleaner has financial freedom already (saving, inheritance etc) and chooses to work.
To each his own, but would someone really want to keep cleaning professionally even if they were wealthy? I could easily seeing less-than-profitable but creative hobbies being way more interesting for hypothetical cleaners who were wealthy and wanted to stay busy.
The reality though, is that unless the cleaning lady is good at hiring and managing other cleaners, she's never going to get the chance to cash out, or sell the company or any of the other avenues the 37 signals guys have.
I felt the same way until I actually met a wealthy cleaner. All I can say is never underestimate the power of habit and the difficulty of breaking routines.
I used to intern at a small investment manager years ago where one of the clients was a cleaning lady. Every couple weeks she would come into the office to deposit a portion of her modest housecleaning income into her investment account. I didn't think much of it until I found out she was actually a multi-millionaire. This cleaner had been investing with the investment manager for years and (at ~20% annual returns) her small contributions compounded into millions of dollars. It was pretty mind blowing. Why didn't she just retire!? She just loved her job and the routine...
Anyway, the best part is she refers her high net worth customers all the time to the fund and they all sheepishly try to explain how they heard about the fund from their cleaning lady. Little did they know that their house cleaner was actually richer than them.
Not all cleaning people work for investment managers that cut them in on sweet deals. Truth be told, I would guess that those are probably a minority.
My main point is it's hard to break years of routine/habit. If someone has done the same thing for 20 years, I don't expect them to suddenly change. Even when change would bring greater happiness over the long-term, I'm not betting against the comfort of status quo.
Oddly, first time I saw the world this way was after watching Shawshank Redemption as a kid and seeing Brooks killing himself after he was freed. From that point on, a lot of the seemingly irrational decisions people make made a lot more sense to me.
See, the typical problem with claims like Fried made is that they're idealizing lives they don't know much about. But Fried didn't walk into that trap.
He doesn't remark on her home life. He doesn't remark on her happiness. He doesn't remark on her hopes and dreams. He says she's "respectful, nice, and awesome". His point is that her business is sustainable, adds value, and does good. He doesn't say, "I wish I was a cleaning lady." All he says is that her business model is a good business model, and he's inspired by it.
37signals used to be in that business, but moved towards providing products, rather than services. Presumably because it scales better and makes more money, even though doing design/programming/sites certainly makes good money in a sustainable way.
Put another way: each additional cleaning lady client consumes more of her time, and pays her more money in a fairly linear way. Google search users do not fit that pattern, and, more importantly, neither do Adwords customers.
Where do you get this strange taxonomy of "products" versus "services" anyways?
It's pretty obvious that by "service" he means a business where you are paid per hour you work: all freelancers, consultants, and all other businesses where the owner is a critical daily employee.
Yes, that's not a typical word for the distinction, but you know what he means.
Um, no. I was being exactly as pedantic as he was.
The difference was that my word choice was actually correct.
It does not seem like a difficult concept, so cut out the "Comic Book Guy" routine. Go ahead and actually correct my terminology if you care to - furthering everyone's knowledge is always a plus - but otherwise you are not adding anything.
As far as I can tell, you were trying to use made-up words to say that Jason Fried was lying when he said he was inspired by his cleaning lady's business model because there was some particular difference between those two business models that you found significant but could not express except to vapidly define "services" as "that which cleaning ladies do" and "products" as "that which 37s is moving towards".
Product business and service business are fairly common labels.
http://swombat.com/2011/4/26/services-products
http://techcrunch.com/2011/04/24/what-should-you-do-with-you...
So I don't think they're made up at all, seeing as how they're in common use. It's probably true that there is not a black or white line between the two, and both can be good businesses, but I did think it fair to point out that cleaning is very much a "service" whereas 37 signals started out doing services (sites and so on) and moved towards products, which tend to scale up more.
He says:
"She’s been doing it some twenty-odd years, and that’s just an incredible success story. To me that’s far more interesting"
I have absolutely no idea why he feels that someone who has cleaned homes for 20 years is an incredible success story. It's almost as patronizing as it is naive.
What would be at least somewhat interesting is if she figured out a way to get paid 2x the hourly rate and/or get houses cleaned in 1/2 the time. Her station in life is to be happy cleaning homes. So she's a happy person. Great. What I'm not hearing is that he's living in her neighborhood or having her over for dinner etc. I hate this "I'm just a simple person let me go visit an ashram and live in nature" crap.
If you set your sites low enough you can have a sustainable business. You can mow lawns or you can paint houses. That's being self employed with essentially what amounts to a job. That would be appropriate to talk about in a post about why it's better to do that rather than work for a large company.
Project much?
> What would be at least somewhat interesting is if she figured out a way to get paid 2x the hourly rate and/or get houses cleaned in 1/2 the time.
How do you know that she hasn't?
He says that she's happy. He doesn't know much about how it makes happy or how it has developed. You think that you do and you think that she's doing it wrong....
However, in the aggregate, I'd be willing to bet on most cleaning people preferring the income, and freedom that 37 signals have. With that kind of money, you have a lot of options that someone making cleaning wages just doesn't have.
Not speaking about this person (who neither of us know) but strictly about people in general by using an example of cows in a field.
A cow in a field can stand there all day and just graze on grass. Our cat can sit there all day and just do nothing. Could you do that? All day, every day?
People with brains are more complex. In general if she is happy doing cleaning work we can presume she doesn't have the same brain or needs, of, say someone with higher intelligence. People are different in what their needs are.
"he might see her happy because people are pretty good at putting on a mask in professional situations."
True.
That's almost as patronizing as it is naive.
I stand behind what I have said.
Would you be happy doing the simple tasks of cleaning houses everyday? Or do you prefer something more challenging like what you are doing (software development it appears). Or at least managing others doing the drudge work?
From the OP it doesn't appear that we are talking about someone making their way to something greater by cleaning houses but somebody who's station in life is cleaning houses.
Regardless of whether she was forced to clean houses because, for example, she was an immigrant or needed to feed a family she could have, with greater intelligence, risen to employ others to do the work for her at the very least. (My cleaning lady, from Brazil, has about 5 people working for her and I've seen examples of this with all sorts of people who start doing a task and rise to employ at least a few people to help out).
Why do you have this mindless obsession with ranking things in some arbitrary manner and then requiring that people climb your ladder?
Guilty as charged.
"How do you know that she hasn't?"
Well then that's a pox on his house for not bringing up that very important point in a discussion related to how much he admires her when discussing business.
"You think that you do and you think that she's doing it wrong...."
My issue isn't at all with the cleaning lady. It's with the specific example of using the cleaning lady to make this point:
"She’s been doing it some twenty-odd years, and that’s just an incredible success story. To me that’s far more interesting than a tech company"
I don't even think he really means that actually. I fail to see what makes that "far more interesting than a tech company".
Let me help you. But first I have to get my shovel. Because that's the typical shit that is heaved by the "haves" on the "have not's" try and make them seem humble and not anything special. Take Oprah. She just loves to talk about how this and that are so expensive as if she's just an ordinary person like the rest of us. He laid it on a little to thick with the cleaning lady spiel.
Particularly this part about the cleaning lady:
"she’s just respectful and nice and awesome. Why can’t more people be like that? "
Well for one thing he could start and figure out why in particular DHH is such a, well, asshole:
From wikipedia:
"Hansson is an outspoken character known for the crude and brutal way he expresses his opinions, both online and in real life. Hansson and his company have been accused of arrogance,[7][8][9], which he does not deny"
And of course I can't believe the example of why restaurants last 30 years (the ones that do that is) and tech companies don't last or whatever the point he was making.
Why not just compare cars which change every year vs. a burberry coat which is essentially the same?
It is interesting how DHH thought seems to get a pass on his behavior on HN in a "boys will be boys" kind of way because what he has accomplished.
Hilarious given that Jason Fried was on the board of directors of Groupon (his comments on this "disgusting scenario" here: http://news.ycombinator.com/item?id=2617160).
Ego has this astonishing effect of completely bending[1] the space-time-reality fabric of the universe.
1. Or ripping it apart, depending on how well off you've become and how many sports cars you've bought.
Which is mighty fine.
I'f I'm telling you to be good and I'm bad, them I'm a hypocrite.
That doesn't mean that my advice is bad, or that you shouldn't follow it.
Follow an advice (or not) by the intrinsic value of it, not by who the one giving it is or what he does.
However, if he actually believes them, and if Groupon really is "absolutely disgusting," why would have he not only given advice but retained shares in in the company? Personally, I don't even give free advice to things I think are "absolutely disgusting" unless it is to clean up before talking to me, and I'm not sure why we should expect anything different from Jason.
Like I said, I'm open to the idea that Jason is simply exaggerating to set his "slow company" apart from the pack, but if I'm going to write a critique it is going to have to be with the words on the page, not my idea of what is going on in Jason's head.
edit: will accept a third possibility, that Jason's ideas have grown stronger as he has witnessed Groupon from the inside.
2nd edit: "invested" -> "retained shares in"
If you're just saying that you think owning equity in a company not run the way he runs his own company undercuts everything he writes... ok, but what a boring objection to raise.
I know this is a message board and we're all committing message board thinking, but snap out of it for just a second.
We're talking about a real person --- a person who by the way is posting on this very thread --- who runs a real business. From what I've seen of that business, it runs, successfully, the way he describes it. I wish we'd stop talking as if Fried was Chairman Mao and we're really debating global communism.
He's a great CEO (at least in the context of 37 Signals), and has a set of values which are internally consistent, and sits on a board of a company which is inconsistent with those values. I'm not sure how to reconcile this with my belief that boardmembers have a responsibility to exert governance and oversight over their companies.
Based on reading his responses elsewhere in the thread (left the board in 2010, was his first board seat, novelty, etc.), it makes more sense. I guess I am overly sensitized to passive board members from watching HP, Yahoo!, eBay, RIMM, etc.
Options presented by me:
A) "absolutely disgusting" is an exaggeration
B) JF is a hypocrite
C) JF has changed his mind over time
On the link you posted he mentioned that he hasn't invested on the company, and that the options he sold were ones he received as compensation for his work on the board.
Thing is Jason is all about living the good life not being rich. Good life != rich. He was doing well for himself before Basecamp and Basecamp was just part of his strategy to manage his own work more effectively so he would have time for stuff that is actually better than coding or designing - like spending time with family or driving race cars a la DHH.
First, let's get your facts straight: I have not invested a penny in Groupon. I haven't put any personal money into any private company other than my own. I was awarded options as compensation for participating on the board, just as other board members were.
Why did I give them advice? Because they asked me for it and I thought I could help. A lot of people ask me for advice, and i'm happy to help where I can. I don't have to agree with someone on everything to give them advice. I like Andrew, he asked me to help him, I wanted to help him, I'd never served on a board before, so it sounded like a great learning experience. It was - I don't regret the experience at all.
Andrew knew where I stood - and where I stand - on VC, investments, growing quickly, hiring a bunch of people, etc. He was interested in my perspective on product, design, and user experience, not on financing, growth, etc.
I was asked to leave the board in 2010.
Is it better to stand by and let them get on with it, or to join them and provide a different opinion? A counterbalance?
I'm in the second camp; work with people, spread your ideas. Give it a try.
Of course I'm also of the opinion that, at board level, it's healthy to have a range of opinions. Only then can you make informed and reasonable decisions.
For the observant (or the fellow Hollanders), we call it the Polder Model (http://en.wikipedia.org/wiki/Polder_Model).
This is very true... perhaps its one reason why Groupon is struggling so much. Without knowing the board dynamics, its impossible to say, but if I was in their position, I'd want people on the board criticizing every move. So long as it wasn't a majority of the board that is...
But all jokes aside, its not uncommon to have BOD compositions of mixed expertise. Having a design or product guy. A Politician, etc. As a group, they need to be effective. But singling out one individual, for "guilt by association" is perhaps stretching a bit. (edit: Unless he was on the audit comittee!)
The fact that he sold his shares, in some ways, also not per-se a bad sign if it reflected his views (it became public information). This is signalling to the public, and seems consistent with his other expressed opinions.
* as a personal favor to Andrew Mason
* to get some board experience
* he had not changed his stance on bootstrapping companies
* his board involvement was not an endorsement of groupon
* he sold his shares when given the chance
I wish people would at least read the link they paste, if they intend to use it for their arguments. The link answered/refuted his own 'claims'.
However, the saying "If you lay down with dogs, then you get up with fleas" still applies. Even if you publicly disavow the fleas.
Fried was on GroupOn's board way before any of the investment scandals came up.
The part of the rhetoric I'm not as fond of is this false dichotomy that he often raises of "either small business is right or big-startups are right". Both can be right--they just have different goals. And there are strong relationships and dependencies between each type that make it particularly disingenuous to slander each other.
It reminds me a bit of the "you didn't build that" hubbub happening in American politics lately. There seems to be a "I did this" hubris, as you create high-quality web services catering to small teams.
Let's get real: you are building web services consumed by a browser (Netscape) on someone's Macbook Pro (Apple); your data found its way there over some serious switching infrastructure (Cisco); you stock your offices with goods from the best online retailers--oh yeah, and they host a bunch of your bulk data too (Amazon); your site is indexed by the major search engines and you expose your brand to potential customers via sophisticated advertising networks (Google); your keep your friends and fans in the loop on what your business is up to via massive social networks (Twitter).
Many of these companies were ambitious, they had low probabilities of success, they had much higher capital needs and a tighter window to hit the market.. than a slightly better product management system for small teams. But these VC-powered longshots--the lucky few winners--now form the beating heart of our industry. They provide good jobs to hundreds of thousands of people. And.. would 37 signals even exist without them?
Jason wants to make great money and have a good business and take Friday off. That is fine, that is seriously great. I'm not sure why the tone is so defensive, b/c, really, who's attacking that? That's a damn good way to go.
But some people want to "make a dent in the world". They need some money to do that! And they might fail! And rich guys are willing to gamble on the outcome! Who cares? It's audacious fucking fun to try to change the world, and sometimes it works. Afterwards, we can take a shower and feel clean and wholesome about the birth of 38 signals.
My guess it is in response to some quarters not respecting "lifestyle business" startups. There ARE (or were) people attacking that.
When anyone starts a business you can shoot for living a nice comfortable life (and lets be honest if you're running a business making millions per year, you've nailed it), or you can push and push to become the business. Both have chance of failure, both require devotion. I'd take the same route as 37signals. Having enough money to live comfortably and enjoy life sound much better than the constant grind to get to the next boss level.
Some enterprises are fictional starships.
Is 'true potential' only evaluated based on attainment of maximum dollars per day of business? I don't see how he has failed anything but living up to your idea of achievement which, frankly, seems a lot more shallow then his.
Do you have logic? Data? A Delphic oracle? Perspectives into a parallel universe where they hired a sales team? Something more substantial than feelings?
37signals once built software I loved. Salesforce builds software I loath. 37signals could have been great -- a Salesforce with wonderful software -- but the CEO is happier to pat himself on the back and brag about laziness. That's my logic. Do you feel that I am incorrect?
Yup. That's exactly how I feel. I don't know why you're bragging about your incorrectness all over the internet, though.
Not to put too fine a point on it, but your attitude is exactly the kind of thing he's talking about in the linked interview. Mega growth and mega profits are one measure of success. A life with low stress and plenty of time for your family (and by the way, making all that possible for your employees, too) is another one.
But I would have liked to see him say "we could have been far more profitable, but we didn't care about that, so we limited hours and didn't hire salespeople." Instead what I hear him saying is "we are the best business we could be, because we limit hours."
Rather than the main focus being happiness, I think the main focus is:
Are you building something great?
And he believes maximizing happiness and job satisfaction is a core component of achieving something great.
[1] From the article.
[2] http://37signals.com/svn/posts/2593-official-pictures-of-our...
As far as the car goes, very little info on that and additionally you are drawing a conclusion as far as DHH's money which could have come from other sources as well as 37signals.
I'd say it's equally likely that 37Signals could have failed utterly in rapid expansion as they could have succeeded if they made their moon-shot.
Everyone has infinite potential.
The result is 70 or 80 hour work weeks and burnout. The VC don't care because they will be done in the short-term anyway.
It's the reason why I refuse to work for startups.
the startup community ... get funding and VC wants to make a profit within a year and get out, at the expense of any long-term goals
This is not unheard of, but certainly not the norm. Successful VC firms invest of big growth, but over a longer term. Look at the huge VC-backed successes in SV (obvious examples like Google, LinkedIn) and you'll see anything but a build-it-and-flip-it mentality.
Really? That small business is financially more successful than most crazy ass VC backed startups with the latest photo sharing solution will ever be.
</rant>
But who the hell cares?
Of course, some businesses can run on fewer hours from the start, but many require a lot of sweat and long hours to get the engine running.
Sure. But they're not trying to build the same thing. I think it's mainly a midwestern attitude vs. Californian. Fried just wanted to build a business. Startup founders want to build companies.
Startup, n.: A small business that is not successful yet.
Typical returns take 5-7 years for a VC. < 1 year returns tend to be low.
You are presenting things you believe as facts. Please don't do that.