How Basecamp Bootstrapped to Tens of Millions in Profits with Jason Fried, 37signals

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AI if your company requires you to work nights and weekends, your company is broken.

40 hours is a lot of time per person per week. Most companies don't give their employees a full eight hour data themselves. Four of those hours are taken up by meetings and there's some other BS thing they need to do. Their mind isn't clear, they're not focused. So they have to work nights and they have to work weekends and they have to work early mornings to make up for the fact that they weren't able to actually work during the day. They were busy during the day. Busy is not work. Work is calm. Work is focused. I need some traction.

You need some traction.

Let's get some tract.

Hey, what's up innovators, entrepreneurs, visionaries and disruptors. This is your Traction podcast host Lloyd Lobo. We're a community of over 100,000 people just like yourself on a mission to help you get the methods, the money and the madness to explode your business growth. Featuring stories and tactical advice straight from those who've done it before, like Shopify, Twilio, Asana, and many more.

Is bigger, always better? There is this big notion that a company needs to have thousands of employees to create value and become successful, and that the people behind it need to be working in the office nearly around the clock in pursuit of double and triple digit growth goals. Anything short of that not only raises eyebrows, but also gets you tagged as a bad word. A lifestyle business. And we've all seen and heard it. Hey, that's a lifestyle business. A soft insult usually used by venture capitalists to look down upon those who dare to wear off the beaten path of unicorn porn. But our guest today has done the opposite. With a team of 80 that only works 40 hours a week, he's managed to rival the growth of his competitors with hundreds of millions in funding and thousands of employees working evenings and weekends while actually generating more profit than all of them combined. So I'm thrilled and honored to interview the CEO of 37signals, the company behind Basecamp Highrise A and many other great products, books and frameworks and building and scaling products. Welcome to Traction, Jason. It's been five years in the making.

Hey, it's good to be here finally. Thanks.

Thanks for joining us. You're an icon in the industry. I read almost every post from you. It's been a big part of my journey. From the first book you wrote, which was the ebook about building simple products, it helped me learn lessons on bootstrapping, which enabled us to bootstrap boast to eight figures in revenue before I could sell a majority stake in the company. But you're an icon in the industry. Give us your backstory. How did you get started? How did you come up with these great ideas?

First of all, it's very kind. I just certainly don't feel like that. I'm just a guy who makes things and people seem to like them, which is great. And we get to work with great people, and that's sort of what it's always been about. I don't know how far back to go, but let's just say we started out as a web design company back in 1999. So the web had hit a few years earlier. 95, 96. I learned website design, graduated college, and then started doing some freelance work and then finally hooked up with a couple friends and we started this company called 37 Signals. We were a web design company and we did a lot of web design work. Our whole style was simplicity and paring things back and just getting to the point. And we started getting really busy and we needed a better way to manage the work that we were doing because we were dropping the ball. We had too many clients. I didn't know who was doing what. It was a mess. We were missing deadlines. It was bad. And this happens to almost everybody. If you have your first client and you get a second one, the third one, you don't want to say no. So you have a few too many and you don't know how to manage them and juggle them and you can kind of fall apart. So we decided to build our own project management tool to manage the projects that we were doing. That turned out to be this thing called Basecamp. At the time, it wasn't meant to be a product. It was just meant to be an internal tool that we were going to use, but we started using with our clients and they started to go, what is this thing that you're using to manage these projects? Because we have projects too, and this would be great for us to use. And okay, maybe There's a product here, so we kind of finished it up, put some prices on it, and released it as software as a service. Early days. This is 2004, one of the first software as a service products. Without really any anticipation of what was going to happen or expectations. This is something I'll talk about in general, probably in other parts of this conversation. I don't have expectations, I don't have goals. I'm not driven by those things. I just try to do the best work I can and put it out there and see what happens. That's truly how I do things. So anyway, it turned out that about a year later, it was doing more money for us, generating more revenue and more pleasure for us than website design. So we stopped doing that and been building software ever since. We built a bunch of products and here we are today, 24 years later, still doing it.

I love that story because it's the DNA of bootstrapping, right? You're addicted to customers paying you, and then there's no other way out of those profits. You build the company, and that's in many ways how we started. I love that you shared your learnings from the early days. Getting Real is like a bible for especially most bootstrap tech entrepreneurs. What led you to the path of writing and sharing this knowledge with the world?

So we've written a bunch of books and Getting Real was the first one. And it started because we were having these conversations internally. A few of us were talking about different topics around the industry and design and programming and product development and marketing and customer service. We're talking about this stuff and there's like four of us talking about it. We're like, why are we just talking about it amongst ourselves? Why not just talk about it out loud? Like, why not? What's the reason not to? So we just decided to share and to write and to publish in the early days. And it was easier back then. I mean, in a sense, it's harder to reach people because there wasn't even Twitter or Facebook actually launched the same exact day basecamp launch. There weren't a lot of tools out there to get the word out. But that was great because it wasn't very intimidating. Like, you just wrote to write and to share. Today you write and you look at your follower count or you look at how many people engage with the post or whatever, and it's intimidating to see zeros everywhere. No one read this, or, hey, six people liked it. Six people. I spent three hours on this at just six. There's all these Reasons to not encourage you to do things today, I think so. I think these counts and these numbers are actually bad things. Back then, we didn't have any idea if anyone was reading this stuff or not. Turned out sharing was a good way to get the word out about our products and ourselves without having to spend money on marketing. Now everyone's doing this content marketing thing. We just were sharing.

We call it sharing.

We don't call it content marketing. Called sharing. After we had enough individual pieces that we'd written, we said, let's put this together in a book, because the books are easier to disseminate. People like the idea of a book. You can give someone a book versus, like, well, here's a link to 43 blog posts. And that turned out to be a great way to get the word out. So we just kept doing these things and kept sharing, and we've done a bunch of workshops about how we work. To summarize, the model I follow is actually the model that a lot of chefs follow. So chefs open restaurants, and then they write cookbooks, and their cookbooks are full of recipes, and the recipes are like, what food is. So it's like, here's how I make this dish. Now, you would think in the business world, you'd think, don't give people the recipe, because then they're going to just do what I do and put me out of business. But that's not how it works in the restaurant world. It's not how it works in the business world. The best thing to do is to share. So these chefs put out cookbooks, which gets them publicity. Someone travels to a city, they have a restaurant, they want to try the restaurant. They want to try the actual food that the actual chef makes. Putting the cookbook out did not hurt them. It helped them. So that's our mentality, too, is to basically write cookbooks, which is, here are our recipes for doing business, and here's how we see the world. And we think it's only a benefit, not a detriment.

I love that analogy. My dad was a chain de Mertissier exec chef, and I wanted to go to chef school, but my Indian mom, culturally, just pushed me into engineering. I'm thankful for that. But the first book, Getting Real, is all about doing less of less, mass, build less, remove, blow, all of that stuff. But with doing less and less resources, can you elaborate on building and marketing a product with less with a small team and limited to no funding?

Yeah. I mean, first of all, all this stuff is hard to do. Raising money is hard to do. Running a business without raising money is hard to do. Finding building a product is hard. Market fit is hard. I think it's all equally hard, frankly. It's just different kinds of hard. Everything's hard here, so you can then choose how you want to do it. It's not like there's an easy way and there's a hard way. All the ways are hard. And so what we found is that by having fewer people, by staying small, and by self funding, we can be independent, which allows us to do the kinds of things that we truly want to do. So if you can do something hard, you better like it too. What I don't want to do is something hard for somebody else. And I don't like the way they want me to do it. And I don't like the expectations they put on me. Like, I don't want to take on that hard problem. I'd rather take on the hard problem and do it the way we want to do it. And the best way we found to do that is to have to answer to nobody but ourselves and our customers. And that's the idea of bootstrapping as the idea of independence. And by keeping things small, what you're forcing yourself to do is be creative, but also it brings a degree of clarity. What really matters, what bits of this really matter. We can't build this big honking product. What's the core? What's the epicenter? What's the stuff that really matters about this? Because we can do that, we can build that. And so it forces you into constantly thinking about what really matters and what doesn't. And it requires you to figure out what not to do. Not what to do, but what not to do. Companies that are very, very well resourced, with loads and loads of people and loads and loads of money, they can do kind of essentially almost anything they want to do. This is the problem. You want to build the muscle that helps you figure out what not to do. That's a good habit to form. And then the other thing that's nice about staying small is that you can achieve profitability faster. Your overhead is lower, simply your costs are lower. This is strangely a forgotten thing in the tech world, like cost. Everyone's thinking about revenue. Cost is important, hugely important. And you know, when you only have three or four, when we started we had like four people, four salaries is not that hard to cover, all things considered, when you have a semi successful thing. And we were able to be profitable basically from day one, and we've been profitable Every year since, we build a company that remains profitable so we will never do something that puts us out of profitability. That again, keeps us honest. It keeps us focused on what really matters. It encourages us not to do things that don't matter. It just forces us to be smart and to be thoughtful about this and to say no to many, many, many things. I think that's one of the most important things you can do is to say no. There's no secret sauce here. It's more about this is hard, all of it's hard. So you got to find a way to do something that's going to be enjoyable and in that joy you find more ease. It's easier to do something hard when you like the way you're doing. I've run into so many entrepreneurs who've taken a bunch of money and put them. You've been through something similar. I'm sure the amount of pressure that's put on you by other people to do things a certain way, to perform a certain way, to show results in a certain way is not enjoyable. And it doesn't bring an ease to the work, it brings stress and anxiety to the work. I don't want to have that being added on to the fact that like business is hard enough as it is.

I've been on both sides. I've only ever worked at startups since I graduated and I've worked for a lot of venture backed companies. None of them worked out. Did a venture backed company of my own and then a bootstrap one and I can totally tell. And then now being a part of a company that's majority owned by a pe, I've seen it all and you've said it right. It's hard to be consistent and show up day in, day out if you don't find joy in something. So eliminate the things that don't bring you joy. And the other thing, when you raise a lot of money, like you're right, Billy said, you take on more than you should because you feel the burden of having to take on. And like Dave Packard said, right, more companies die of indigestion than starvation.

Totally true. Most of that though is driven by the need to grow rapidly because you're funded. Because the whole point of when you're being funded is to exit at some point and you need to grow at a certain rate to maximize return on that investment. And we don't have any of those pressures. We have other pressures, but not those. And to me those pressures don't really benefit the customers. It basically Says from the start this is a temporary company. If you take a bunch of money, like you've got to either sell it, merge with someone else, maybe go public, but that's even pretty rare. That's in some sense you can kind of keep it together. But now the public owns it like it's the end at the beginning. Something about this company is going to change in a pretty well defined period of time. And even if you want to keep running it the way you're running it before, like you can't anymore, I just don't want to be under those pressures. It's not interesting to me. So anyway, these are our choices that we made for us. We value independence more than anything else. Do we miss opportunities? I'm sure we left money on the table. Absolutely, all the things. But you wouldn't have traded any of it for what we have, which is a company we like to be at, a company we like to work at, lots of customers, profitable company. You know, you look at a lot of our competitors who've raised hundreds of millions of dollars and they've lost collectively billions of lost billions. Many of them have never made a single pen in profits like we make profit every quarter, every year. And I'm very comfortable with that. Even if our revenue numbers don't match theirs. Revenue doesn't matter to me. Cares what your revenue is if you lose, if you spend more than you make, doesn't matter. So I just like a nice, healthy, tight, simple company, you know, I was.

Having a chat with Sridhar Vembu, the CEO founder of Zoho, which you may have heard of. He bootstrapped the company and he said when there were 6 or 7 million in revenue, a big venture capitalist from Silicon Valley offered them a term sheet for a massive term sheet. And he didn't like a clause in there, a clause that said 7 to 10 year standard liquidity calls in the term sheet. And he said, take it out. And they refused to take it out. And he said, then I'm not going to sign the term sheet. And they said arrogantly, you're going to turn down our term sheet? And he said, yeah, I'm going to because I'm married to this company. I never want to sell. I want to build a generational company. And today Zoho has done extremely well.

That's an interesting company. I mean they have what, like a hundred products and they've done it their own way. I didn't like their tactics early on. They copied, they directly lifted a bunch of stuff that we were doing and we got into some spats there. But I actually, in the end, I really respect what they built because they've done it their way and good for them. It's a model for others to do things their way. We need more models of companies doing things their way versus everyone merging onto the same highway to go to the same, down the same path, which is like raise a bunch of money actually. There's a lot of traffic on that road. There's a lot of potholes. It's not a pleasant drive actually. The meandering, slower, more interesting view, the scenic route is to me a far more interesting way to run a company.

It's like being on a highway in LA where a lot of people are driving really fast with Lamborghinis and you can't avoid the crashes. But there's something true to this, right? A lot of the people in the venture capital world, they got to return a set of money to their LPs and many of them haven't started a company effectively. You're positioning yourself to be on the right or wrong side of somebody else's pattern matching and Excel models and you don't want to do that. There's multiple ways to build a company.

Yeah, and I don't blame the VCs, I mean this is their job and they have to return one of their LPs totally. That's a business model and it's made many people very, very wealthy. And there's pension funds, there's a lot of people who, they put money in these funds to generate returns. Totally. All fine. But you have a choice as an entrepreneur to decide what model you want. I'm just out there banging the drum. There's another model here. And not only is there another model, but there's another model that can lead to really wonderful outcomes. But you also need to check your ambitions a little bit too. Like grow slowly, grow in control. You have to be able to handle it ego wise that maybe you're not going to have 7 million customers, maybe you're only going to have 75,000. But you know what your economics, having 75,000 paying customers makes you a wonderfully profitable company. That's all that matters. It doesn't matter what your economics are compared to someone else, it's like, what do you need to cover your expenses and generate a profit? That's all that matters. And so if you can keep your ego in check and you can recognize that you're not competing with other people's egos and other people's company size or you do your own thing. If you can get into that mindset. It's a really wonderful, wonderful place to be. And the scenic drive is lovely. Hey, look, everyone's gotta make up their own mind. And I just want people to understand there's other ways to do this and not just other ways to squeak by. You can do exceptionally well. We generate tens of millions of dollars in annual profits every year. That leads to a pretty nice lifestyle for us and our employees. We're able to do a lot of wonderful things that other companies wouldn't do for their employees and can't do. And we're able to do it because we have the profits to do it. And it's. It feels good. So there are ways to do this.

What is your long game here? Because I ask a lot of founders this, and everyone says impact. Nobody really says money, or maybe some people. I just want to have a great lifestyle. But what is a long game? Why keep doing this? And until when?

Look, basically, the way we built this company is to build the company we want to work at. So if I have to go to work every day, which I do, I want to work at the company that we built. And so I want to work with wonderful people. I want to solve the kind of problems I like to solve. I want to serve the kind of customers I like to serve, which is typically small businesses. I don't give a damn about enterprise companies or big companies. Don't care. I'm all about the underdog, the small team, the small company. That's exciting to me. I love to serve those people. That's who we are. And so to be able to build wonderful tools for them. So there's creativity involved, there's ingenuity, there's delivering things. There's fair prices, there's fair treatment of employees and customers. I feel good going to work every day. That's basically the thing for me now. It's not impact, it's not hitting some valuation or whatever. I do have a nice life. I've done well for myself. I'm not going to hide from that. That wasn't important, but it happened. And I'm grateful that it has and continues to happen. But what I do every day is I want to work with great people and build great stuff for great customers, and I want to do it our way. Getting back to the pleasure and the ease side of it, I want to do it that way. How long do I do it? I don't know. I mean, I'm coming up on 25 years, which is Almost more than anyone deserves. In a sense. I still enjoy it every day, so that's good. But 25 years is a long time doing the same thing. But I'm still doing it and still enjoying it. And what I've kind of done though is I've realized I've shifted my role a bit more. And I wrote about this recently. There's a big difference between a CEO and a founder. Even though a lot of founders are CEOs also, like I'm technically the founder and CEO of this company, co founders, you know, I really shifted more into the founder position, which is injecting risk into the company and pushing us to do interesting, unusual things that may not normally come up through the company naturally. So I'm enjoying that again. I found myself enjoying the CEO role less, which is like day to day and managing the risk and sort of being responsible for everyone. I'm less interested in that these days. I've definitely changed a bit there. Luckily we have a wonderful CEO who just joined a few years ago who's really been helping us with that. But yeah, I'm enjoying it. There's no end game until like I decide I don't want to do it anymore. I don't know when that'll happen, but it will at some point. I will tell you this. We're a rambling company. What I mean by this is we make it up as we go. There's no grand plan, there's no five year plan, 10 year plan. The only thing we plan is the next six weeks. That's it. We have six weeks at a time. So my answer is kind of like all over the place because that's how we actually operate. Six weeks of time we figure out what we're going to do next. And there'll be a point where we get to this place where we decide maybe we don't want to do it anymore. But we're not there. We're still enjoying what we're doing and building great stuff. And we're working on two new things right now, two new products that I'm really excited about, which people the world will see within the next year or so. So that'll be fun too.

That's a great way to keep joy in your life, right? And maybe the day you don't find joy in it, you might not do it. But as a founder, you get to reinvent your job in the job every time you want to by reinjecting new risk into the business. And I love your post. You that founder CEO is BS. The founder and CEO's responsibilities are at odds and they're like mashed in the same title as like having someone who's a CTO and a cheap luddite at the cf.

Right? This doesn't make sense. I mean, the founder is really about injecting risk. The CEO is not. In a sense, they're very different roles. So, I mean, you can play them both. I've played them both. But I think you should kind of pick a side and figure out who you really want to be and you have the luxury and the privilege of doing that. As a founder, one of the things I've come to terms with is just admitting that I'm fortunate in that role and I should take advantage of that position. I started this place, I can do some things, I can make some choices that I want to make. And I think that's a very fair thing to do. You don't want to find yourself in a position where you're taking, for example, more vacation or more time off than other people at the company that we don't do. But like, my role is a little more fluid than others and that's how I can serve the company best.

Actually, if you're a founder that who is passionate about injecting new risk, doing new things, reinventing their job in the job, right? New ways, new methods, new channels, new products, who do you need to have or what skill sets do you need to have supporting you to make sure the CEO role doesn't fall off track, which is reducing risk.

I think the thing is that we don't do brand new things that often. We happen to be doing two new things right now, but that's pretty rare. Maybe we make a new product every handful of years, so there's not like this constant turmoil or turbulence in the air where we're getting bounced around all the time. We're very committed to what we're doing and we commit to six weeks at a time and we don't change our priorities during that period of time. And when that's over, we look at what we want to do next and do that and commit to that. It's a very steady, but it's very flowing and that we're making it up as we go, but once we commit, we commit. So there's steadiness in that period of time. So I'm not throwing the company around. There's no whiplash here. But occasionally it feels like we're getting comfortable or we're not taking enough risk, and that's when I'll inject risk we're going to do a new product or we're going to try to tweak the business model in a significant way or and we look at doing something differently than we've been doing it. But most of the time it's stability. So I think what you run into, there's some founders in some places where the founder or the chairman is just throwing the company around all the time. New whim this day, new whim that day, and there's just a lot of bouncing around in turbulence and we try to keep it away from that. But occasionally we jolt the company with something that wakes us up, I guess. So it's not a hard thing to maintain our track because we're not being pushed around all the time, but occasionally we do. So it's not a really big challenge to deal with what you're talking about. I think it would be though if I was constantly messing with everybody. Certainly.

And you said you have a great CEO. What are the responsibilities of a CEO? Skill sets and at what point do you bring on that CEO?

Actually, a little bit more than a year ago, David and I came to the conclusion that we didn't want to run the day to day operations of the company. And that basically means responsibility for a variety of different departments in the organization. Overseeing administrative tasks like overseeing finance, overseeing customer service as well, overseeing marketing. We want to get back to product development, we want to get back into the product side of things. And so if we're going to be heads down in the product side of things, we have to have someone else sort of running the rest. And also someone who's different than David and I. David and I are extremely opinionated and I think that we have some blind spots, but especially when we see things very similarly, you have more blind spots. So it's good to have a balancing force. Someone with a different perspective, a different point of view, someone with real true like executive experience. She considers herself a professional manager in that respect, really knows how to run things, keep things going. Very good people skills, very personable. We just felt like there was a hole, we needed that and we wanted to get back into product. And if we're going to get back into product, we needed someone to run the rest of the business. And we catch up weekly. So we have one meeting every week. Sometimes there's another conversation that happens, but David, Elaine and I catch up for about an hour once a week and we talk about the state of the business and things that are going on and decisions we need to make together, Decisions we're making separately. Just kind of keep each other in the loop at that cadence. And it's been working great. So we confide in each other, we talk about things before we're going to make big changes. We'll talk them over with the three of us versus just the two of us, which is historically what it's been. And so we get a new perspective. It's very healthy. It's been a really nice addition to the company.

If your company requires you to work nights and weekends, your company is broken.

40 hours is a lot of time per person per week. Most companies don't give their employees a full eight hour day to themselves. Four of those hours are taken up by meetings. And there's some other BS thing they need to do. Their mind isn't clear, they're not focused. So they have to work nights and they have to work weekends and they have to work early mornings to make up for the fact that they weren't able to actually work during the day. They were busy during the day. Busy is not work. Work is calm. Work is focused. A lot of companies are very busy. This is why they need more people. We're not making any progress any more people. Well, it's because you're busy, you're not working, you're not calm and focused. Everyone at 37signals gets a full eight hour day to themselves. Their teams can decide if they want to get together and have a team call once a week. That's not mandatory. People talk to each other when they're working on something specific. But there's no daily standups, there's no mandatory multiple meetings per day. It's all related to the actual work that you're doing. There's nothing that the organization is peeling from you and taking time from you. So people here have a full eight hour day themselves and they work it out with the team that they're on. And that's a lot of time. And if you don't think it is, hop on a flight from Chicago to London and just sit there. Takes eight hours. Just sit there and do nothing. It's a long boring time. So to say that if you have that time to yourself that you couldn't be really productive, you can. And in fact, this is why people really enjoy working on airplanes or working nights and weekends when no one else is around is because they're actually able to do things without being distracted. So we basically allow people to do that during the work day, which is why 40 hours is enough. People go home at 5. They have a life they have other things to do in their life. We don't own their time, we don't own their nights, we don't own their weekends. I don't feel like I deserve any of that time at all. And if we take any of it, we're doing it wrong. It's a company's fault and we need to fix that. Now. Some people work different hours because they're on different shifts. Like we have customer service people. They don't work night shifts, but they work in different time zones. So things are staggered in that respect. But I'm talking about someone who works, let's call 9 to 5ish, and then they have to put it in four more hours a night or five hours on Sunday. That's broken, Flat out broken.

The media has perpetuated this addiction to unicorn porn. In reality, the world is run by horses, camels, donkeys, cockroaches. But this unicorn porn has created this guilt feeling in employees that if you're not on my beck and call, we're all hands on deck. And if you're not on a beck and call, then you should feel bad about yourself. And so people feel the urge to respond to messages, IMs, whatever it is, everybody second leave late, come early, work the weekends, answer emails on weekends. I personally hate that we built a remote first company ourselves. I loved what happened during the COVID time, but now people are saying, oh no, we should. We can only work if we all get back in the office together.

Yeah, every company's gonna have to decide what works for them. But urgency is highly overrated. Most things are not important right now. They just aren't. And so that recognition is just fundamentally important for everyone to take. Let it soak in. Just because someone sent you something now does not mean you need to respond now. Pretty much nothing needs to be responded to now. We're having an interview, so we're talking naturally. But if someone sends you something because they just had a thought right now and they sent it to you, you should not assume that means you need to get back to them immediately. You're busy with something else. So whenever you communicate with someone else, you should always in your mind go, they're probably doing something else right now. They're not waiting for me to just send them something they didn't know was coming. They're busy. So I should expect them to get back to me when they're ready to, not when I need them immediately to. Unless, of course, it's like a true emergency or you're literally going back and Forth. And if that's the case, then that's a conversation. That's natural. But out of the blue, someone sends you an email or a ping or whatever, a DM or whatever, you should not expect them to get back to you. And then you should not escalate it. So, like, I ping them and then I call them and then I text them. No, no, wait. Just wait. And everyone can start to do this on their own and just wait and you'll find out, like, while you're waiting, you find something else to do and they'll get back to you when they're ready. That's how it should be. So the expectation of immediate response is a real toxic infection. In a lot of companies. We don't have that here. Sometimes we have conversations that go over a matter of days or asynchronous. They just go over a matter of days. People get back to you at different times or in different time zones, and it sort of settles out when it settles out. Now. If there's something urgent, truly, truly urgent, then you have an urgent conversation. But that should be reserved for a few things a year, not a few things a week or a few things a day. It's a different mindset, though, and it's hard to break into if you're not used to this. But I can only tell you that the payoff is enormous when people can work uninterrupted without the expectation of immediate response. They get so much more work done in so much less time, and they make better decisions. That's what I think we all ultimately kind of want from our teams. Yet if you're not willing to make the change, you're not going to get it.

Rearranging your daily patterns to find time for more work isn't the problem. Too much shit to do is a problem. The only way to get more done is to have less to do. Not like time management hacks and sleep hacks and whatever.

Hacks are just what they are. They're hacks. You don't hack your way to equanimity. You just don't. You change your behavior. It's real, substantial and lasting. It's not like, well, I can fake my sleep or take this pill and sleep. You got to change your behavior. You got to change the fundamentals. You've got to change the foundational stuff. That's where you'll get to a place where you can actually make real gains if that's what you're aiming for. So, yeah, I've never been into this hack thing. They're all shortcuts, they don't pan out in long term.

You understand that well, you're playing the long game 25 years and going. So you've built something great habits along the way. Now, with very few meetings, one would argue that how do you maintain the culture and make sure everyone is on vision, on mission when you guys are not at.

There's a lot of communication that happens at the company, but they're not meetings. So we do a lot of writing internally. And so every day basecamp, the product itself asks all of our employees. There's this feature in basecamp called automatic check ins and you can set them on schedules. So at the end of every day, every one of the companies asks, what'd you work on today? And people in their own words write what they worked on. Some people write a few bullet points, some people write a few paragraphs, some people write whole stories. Some people do it a few days a week, some people do it every day. It's basically like we expect you to kind of do it a few days a week. At the beginning of every week, we ask people what they expect to work on this week. What are you roughly doing? Not like these are the tasks, these are the 43 tasks. But like conceptually, what are you working on this week? Roughly what's on your plate in a big picture way. And this is posted back to this log called the automatic check in log. And everyone in the company has access to it. So you can be as involved or as little involved as you want. If you want to know exactly what's happening across the company or not up to you on a day to day basis, on a weekly basis every six weeks. When our cycle ends, the team leads write up what's called a heartbeat, which summarizes everything the team has worked on over the past six weeks. And these are very detailed write ups. They could be a few thousand words. And they also post a kickoff, which is what are we planning on working on for the next six weeks. That information is so rich and it's all in one place that everyone has access to that. Everyone who wants to know exactly what's happening day to day. Can people want to check in occasionally? Can people who don't want to check in at all, but want to read the kickoffs and heartbeats every six weeks can. So all this information is being shared, all this directional information, all the work that's getting done, celebrations of what people are doing, it's all there. We don't need to pull people off their work all at the same time simultaneously to talk about it. It's published and people can look at it on their own time. That's the key here, is that it's all there but on their own time because it's asynchronous, it's written up. The problem with meetings is that you tell everyone to stop doing what they're doing. No matter what you're doing, just stop, come here and do nothing else for the next hour while we all talk. That can be valuable. In very, very, very small groups. We have teams of two. So everyone who's working in a feature for one of our products, there's just two of them. It's a designer and a programmer. They work on something for anywhere from one week to six weeks, depending on what it is. Could be three or four things over six weeks. They're talking a lot because they're working together. But we don't need seven people to talk about what two people are doing. Two people talk about what two people are doing and that's it. And then they write up everything else for the benefit of the rest of the company. So what we found is interesting is people who join this company who've been used to be in meetings all the time and stand ups and the whole thing, they come here, there's none of those things yet they know far more about what's happening across the entire company here than they did anywhere else. Because it's all written up and published in one single centralized place where they can follow along if they want or not. The other thing is that culture is not meetings. Culture is the byproduct of consistent behavior. Culture is what we do. And I think it's a moving average. I think culture is basically the last 50 days. How do we treat each other, how do we work together, how do we communicate with each other? It's the sum total of our behavior with each other and with our customers. That's what the culture is. It's not a ritual, it's not a meeting, it's not a particular conversation. It's the sum total of all the things we do. And it's a byproduct of how we do those things. That's what your culture actually is.

I love that. Culture is the average. It's not what your mouth says, but it's what your hands do that people observe. Right.

That's a great way of putting it. I mean, I love that you put it that way. It is that. I mean, it's not a plaque on the wall. It's not your employee Handbook. It's not your values on paper. It's not, here's the 10 things we believe. What do you do? How do you act? That's it. That is culture. That is the actual output that becomes. That forms into culture. Then the good news about that is that it can change for good or bad, but primarily for good, because it's a moving average, maybe at a couple shitty months, maybe you had a really hard project and people did work long and they're tired or whatever. Like you can get past that and the average will readjust if you don't act that way again moving forward. So there's always a chance to do better and there's always, of course, a chance to do worse. But I like the positive side of it, definitely.

Now, how do you and your team prioritize things? What to build, what to ship, when to ship? Because with a small team, I think prioritization, figuring out what to work on is also key.

In a way, it is, but also, like, because we choose to do new work every six weeks, priority kind of doesn't matter that much. Honestly, I couldn't tell you how we really choose what to do. It kind of like what feels good to do right now. Where do we think the product's deficient? What have customers been bringing up? What new ideas do we have? What are we excited about doing? What have we been doing recently? Like, let's say recently we've been doing more maintenance work. We want to do something splashier and more exciting, we should do that. But if we've been doing splash and exciting things for three months or three or four cycles, maybe we need to get back into some more infrastructure stuff. It's a feel. You have to feel it out. And the good news is, then again, if we can't fit something in this cycle, we can choose to maybe think about it next cycle. Priority doesn't matter so much to us. It matters to companies who try to plan too far in advance. Because if you only get to choose what you're going to do once a year, here's our next year's worth of work, and you don't get to reconsider as you go, then you have to prioritize. I think that's unnecessary and I think you're going to get it wrong. So by choosing what we're doing every six weeks, we don't really have to prioritize so much. And we can figure out what matters at different times of the year based on how we feel, based on new things that happen. We get to adjust More. I like that method a lot better. I think it's healthier. Some people think it's weird for a company not to know where it's going to be in a year. I don't think any company knows where it's going to be in a year, so why lie about it? I think we can know where we're going to be over the next six weeks and let's just keep doing that and then we'll get there in a year. I just think it's a more realistic way of being. The further out you are, the worse your predictions are going to be. The less useful information you have to make those predictions. You might as well predict as you go. I mean you're just going to have more real time information to make decisions. And I think that's a better way of going about things.

When you say you plan for six weeks, is that a six week release cycle? You release at the end of six weeks.

We release as we go. The whole company runs in six week cycle. So operations and marketing and HR and product, we all run the same six week cycle. In those six weeks we're doing two kinds of projects, something we call six weekers. Like these are like full cycle projects, big new features that are going to take all the time and then often two weekers or one week or three weekers. So it could be a collection of small things. Small things that are done ship. When something's done, it ships. It never waits. We don't want things to wait and sit around because they get out of sync. It just becomes harder to merge other branches together when things are sitting around. When something is done, it ships. Unless in a rare situation there's a dependency. We try to have any dependencies. Like we don't want one thing, you have to wait for another. But sometimes that can happen. It could be a business model change. Where the business model changes are ready to go, but the internal billing system needs to be updated. There's some of that stuff. But for the most part, as things complete, they ship. And we actually ship every single day because there's bug fixes. We're shipping all the time. And on call, which is another team rotating team is fixing little small things that come up. So it's continuous improvement. Essentially things are always shipping. The key thing is things don't wait. When they're done, they go. That's how it works. And sometimes they'll go and we won't announce them. What we tend to do is we tend to wait to announce all the things we've shipped over the last six weeks once in one big release. Even though those things are going out early to customers, we just don't talk about them until we sort of talk about them once. I think it's hard enough to get anyone's attention, so we just prefer to like, here's the six big things we just improved in HAY or in Basecamp, even though people have had these things for three weeks already. I like that approach.

Ship as you go because it gets out of sync. You said one of the biggest challenges of shipping a product is knowing when to put on the shipping goggles. What are shipping goggles?

This is typically when you're building something new, you're exploring a lot of stuff. You're exploring ideas. There's no shortage of ideas. There's a million things you want to get to that you never will. And in the early days, it's really good to explore the wackiest, weirdest, and most novel things. At some point, though, you put on the shipping goggles. It blocks your peripheral vision. And now you're just like, okay, what do we need straight ahead? What do we need to do to get this thing out the door? So I'm not going to look at all the wacky ideas anymore. I'm not going to see the things in my periphery. It's like, what's in front of us and how do we get this done? When do you do that? It's a feeling again. I can only tell you that we run this company by feel. There's just a place, a point where you're like, you know what? There's enough novelty in this right now for V1. Let's make sure we get some of the table stake stuff done. Let's make sure we now hone this. We don't add more stuff. We're now just refining the things that we have and we get this thing out the door. I would say the last 25%, the last 33% of the time spent is with shipping goggles on, which is like, no more new stuff. Refine, refine, refine what we have. Tighten the things up that we have. Eliminate some things that we may even have. We're not bringing new things into this right now. We're tightening this thing up. We're making sure all the screws are tight, all the bolts are there, everything's buttoned down and ready to go. And then we get out the door. So I'd say the last third of the projects like that.

Fantastic. Can you share some specific challenges you faced as a small Team with little to no funding. Maybe two or three examples and what you learned from them.

I got to tell you, I don't have anything because I don't have a counterfactual here. We've never been in a situation where we couldn't hire who we needed. I would say maybe it'd be fun to blitz a bunch of marketing out there. Like a lot of marketing, brand marketing, big marketing. I love. Some of our competitors are spending 50 or $100 million on brand campaign. It would actually be fun to do that. I would enjoy doing that. We cannot afford to do that. I cannot spend $50 million on that. So I don't lose sleep over it. I don't really care. But it would be fun to spend that kind of money and do something big and interesting and really splash the world with something like that. So that's something we can't do.

What do you do instead? Like how do you get customers? How do you grow? Because you are extremely profitable compared to everyone else.

We are. Our growth rate is not exponential though. We're slow and steady. Compounding is the secret to pretty much anything, to saving, to getting wealthy over 40 years, compounding interest, compounding. So as long as we're hopefully growing a couple percent a year, even in some years we do and some years we don't, it's okay. It's all about over the long term, are we compounding our growth? What I don't want to have to do is be forced again to try to deliver double digit growth every year. I don't want to do that. I don't care to do that. I don't want to make the sacrifices necessary to do that. I don't want to make the ethical sacrifices necessary to do that. We don't use target advertising, we target keywords, we don't target personal information. There's a lot of things we will not do that a lot of our competitors will do. We don't do retargeting. We don't do a lot of these things that a lot of other people do. And they do it because it's a great way to grow. But I don't want to do that at the expense of, I think the unethical side of some of that stuff. So for us it's just like over time are we growing essentially not like year to year, but over time.

And not just profits, but you know, the things I love that you said was not just revenue but profits, but lifestyles. But are the people happy? Are you growing some of the other things Right. Are people living to work in my company or are they coming to work and finding joy and having a good life?

Just to be totally honest, like, our profits don't always grow year to year. Sometimes we have, we're less profitable, sometimes our margins are tighter. This year we spent a bunch of money on marketing for the first time to explore something. Our margins are shorter this year. Our profitability is less, but we're still profitable. So we have to remain profitable. But our total profits are less this year than they were last year.

That's fine, that's okay.

We're still profitable. Right. That's the main thing is like, can we make sure we make more money than we spend? That's really important. How do we get the word out? It's the same way we've always done it, which is sharing. Again, we are trying some more traditional marketing. We've explored some brand campaign stuff, but it's a small scale and it's actually quite hard to make small scale brand advertising work. But we're doing some really interesting video work now. We're trying some things, we're exploring some ideas, but fundamentally the majority of our exposure comes from building really good products that people use and tell other people.

About, which is how it should be. Are they staying? Are they paying? Are they bringing their friends?

There you go. So there's that and then the sharing side of it, which we don't ask for anything in return, we share and that builds credibility. Can't measure that. You don't really want to. Just like, we're going to share. And I think ultimately people will look at someone who's sharing and they've taught them something and they'll say, I like these people, maybe I should buy their product, maybe I shouldn't, I don't know. But I like these people. And I think at the end of the day, as the world moves more and more towards commodities, because like everything has basically been commoditized today. This is not a moat. But one of the things that's important, I think is deciding who do you want to do business with? Who do you want to buy from? Who do you want to support? Who do you want to vote with your wallet? And I think people want to buy things from companies that they like, that are respectful, that do things the way that they would like them to do and treat people well and take care of people and share. At the end of the day, if someone's trying to decide between a couple different things and there's this one company and these group of people have been sharing. Maybe I should go with them. Those kind of decisions, I think are going to be the big thing down the road. Because everything else, everything's become commoditized.

You know, you said it right? By sharing and helping people and paying it forward, you've created this huge community. And I truly believe that every innovation eventually becomes a commodity. But if you build this community, you won't become a commodity. Right. People will walk with their wallet.

I like that play on words. And I'm probably going to write something up about this, if you don't mind. Commodity versus community, I think, is a really great way to think about it. And you know, we don't have a formal community. I mean, we do actually do have a basecamp community now, but we have to not really develop this. It's more of a global sense of just share everywhere. We can chip in, pitch in, do podcasts like this, do interviews, talks, give stuff away. I mean, open source software, we built tons of that. We haven't talked about that at all, but we give that away to the community to benefit a lot of other people. I think all that stuff in total helps to define you as a company. People know what we stand for and what we're about. And I think in the end you just, again, you decide who you want to do business with.

And most of your books are free. I mean, I read the online version of Getting Real when I was bootstrapping one of the first books I read. What are some open source products that you've created? I think Ruby being one of Ruby.

On Rails, not Ruby. We put out a lot of stuff, actually. You can find a lot of them on GitHub. There's been a bunch of JavaScript frameworks, some frameworks we put out recently to help people build hybrid mobile apps. A bunch of different stuff is out there now. And the key is everything we built our business on is basically built on open source. And so we feel like it's an obligation for us to give back in that way as well. And Ruby on Rails is a perfect example that Ruby on Rails would never have been able to be as good as it could be had we kept it to ourselves and developed it just internally. These things get better and then we rely on them. Trix is another thing. We put out Trix as a. What you see is what you get text editor. That's an open source thing that we built. We spent a lot of time on it, put that out there. They're all over the place. And our employees have contributed individually as well. To their own projects. It's something we really encourage people to do versus something else we're just putting out right now, which is helping people get off the cloud, for example, which is a big push for us. We're trying to get out of the cloud and getting back to our own hardware. We've built an infrastructure to allow other companies to do that too. So that's out there.

I truly believe in this because we were able to bootstrap both because we built this community attraction, which was literally, I don't know how to build a company. My co founder didn't. So we would just do pizza nights, and every time more and more people would show up. And one day we got kicked out of the coworking space because we had 200 people there. It evolved into a conference and podcast, and today we've got 150,000 people. In the 80s, Harley Davidson almost went bankrupt. They rebuilt the company around the ethos of giving and sharing and community. And today it's an iconic brand. You recognize. A Harley fan might be not our jam, but you recognize them by surely what they're wearing, or CrossFit and Basecamp and 37 signals to me is that you may have not gathered this community like you said, you know, we don't do anything to bring the community per se together. And maybe if you do, it's going to explode enormously. I personally feel you have a lot of fanboys like me who you've impacted over the years, and if you deliberately bring them together, it'll explode the brand. But regardless, people are fans and they are congregating and they're listening to your content and you've helped them through the journey. And that in itself is a massive channel. I have this one question here. You've done so well. How did you resist the urge and pressure to raise funds? Probably getting hit up by every VC&PE firm on the planet.

I mean, we still do. First of all, I wouldn't know what to do with the money, frankly. Second of all, we don't need it. Third, and probably most importantly, we value our independence more than we value their money. I do not want to be on someone else's schedule. I do not want to sell the business on someone else's schedule. I do not want to have to hit growth targets that someone else wants me to hit. I don't want to do any of those things. And there's nothing better than not having to do those things if you don't have to do those things. There's just absolutely not a Single reason for us to do that now, could that spell our demise one day maybe. So who knows, right? I don't care if that's the case.

So what?

Let's say the company lasts for 42 years and had we raised a bunch of money, we could have lasted for 60 years. If we can last for 42 years, pretty good run. We should be happy with that. So this idea that you have to stick around forever and you've got to get as big as you possibly can or have the biggest possible impact you can, I don't buy it. And second of all, I don't think more and more money gets you down that road. I think it actually kills way more companies than it helps. There's so many companies that could have been good, small mid sized companies that aren't allowed to be, they have to only be big and if they're not big, they're basically dumped on the side of the road. Don't like that, don't think that's good. I also don't think it works out for customers very well. There's a lot of companies, products are built and the company gets sold, the product dies and there's a loyal customer base and the product gets shelled, gets killed or whatever. That's not a good thing either. So I want to build a sustainable long term business. We have to do it independently, that's what we want to do. I wouldn't know what to do with their money. I think would ruin the business if we would have to hire a bunch more people. I don't want to do that. All the things I don't want to do would come with money. Money comes with major, major chains. I don't want to wear those and I don't want to deal with them.

Dave Packard said more die of indigestion than starvation and constraints actually force you to be creative. And we've seen this. You're sharing this path of books and paving the way, open source contributions, Ruby on Rails. You've unknowingly, knowingly, you guys have spawned thousands upon thousands of startups, right? And even if you don't last 60 years, you've definitely created lasting impact on people like myself. One thing as we close out I want to dive into. You said valuations are based on fantasy, rightfully so.

Right?

It's all about increasing the price for the next round and the next round. A lot of the times what happens is I truly feel this. As soon as a founder goes into a fundraise, whether or not they're automatically misaligned A VC comes into the equation with, I want to make a return for my LPs in seven to 10 years. A founder never comes with that mindset. They're like, I want to create impact. I want to build this cool thing. So what's your take on the world of artificial valuations? I mean, it's led to two banks or three banks falling in the last little while.

I don't think about it at all. I just don't care. They don't mean anything to me. I don't know what we're worth. I don't care what we're worth. It doesn't matter to our customers, it doesn't matter to me. It just doesn't matter. If one day we were to sell the business or you have some moment where you need to figure it out, then you figure it out at that moment. Until then it means nothing. It's just an ego stat. It really doesn't matter. I don't care what your valuation is if you're not making any money. Also, and so many of these companies have these large valuations and they're losing buckets of money, millions, billions in some cases over 10 years. Just don't care. You're worth what someone says you're worth. Well, whatever, who cares? It doesn't really matter. How much money are you guys making as a business? Are you still profitable? Are you still going to stay in business? Can you sustain yourself on your own? That's the stuff that matters to me, not the false, silly big numbers. Also, you'll see some of these companies, three years ago, some of these tech companies were worth, you know, tens of billions and now they're cut down in half. And, you know, what does that do to morale? This is a made up number to begin with and now it's another made up number, but it's half. And that feels probably pretty bad. And it's like, why do that to yourself? Why put that pressure on yourself? Why do you feel like you have to live up to this big, huge, massive number that really doesn't mean anything anyway until there's a specific point in time where maybe it would.

Until you reach that point in time.

Just don't worry about it.

Nothing pops the valuation bubble like reality. When the interest rates are low, everyone's a unicorn. When the interest rate increases, when the COVID artificial growth stops, everyone's valuation tanks. In the last couple of years there were a thousand unicorns created. And I know at least a couple hundred that are either selling assets or liquidating or Just cutting employees left, right and center because they don't want to raise the next round and wipe out the whole cap table. The reality is there's more than one.

Way to build a business.

Build a sustainable long term business. You can bootstrap and I love how you built the company.

I've also said a lot of conventional stuff which is like, make more money than you spend, watch your costs, don't get ahead of yourself, stay small and nimble. It's funny because a lot of our advice is very boring and mainstream and traditional business style advice because the tech world is in its own weird bubbly world. But you talk to the dry cleaners on the corner or the pizza shop, they're not selling pizzas at a loss. They do that. They're on a business. They're trying to make more money than they spend. Everywhere you look, small businesses, they're trying to run a good, solid, sustainable business where they make more money than they spend. It's only in the tech world where that just doesn't seem to be a thing. We're actually very, very conventional.

Actually, it's funny because the tech world and the surrounding media has made the traditional, conventional advice unconventional. Yeah, that's why I'm saying this.

I mean, we have some unconventional approaches for sure. Like things like we don't plan more than six weeks at a time and we don't have meetings and 40 hours is plenty and all that. There's different cultures where there's different work ethics and whatnot and expectations. But we have some very unconventional approaches to being a conventional business. Let's put it to you that way. The thing I think we haven't really talked about that we'll maybe end here with another piece of advice is just getting good at making money is a skill. And I think a lot of entrepreneurs don't recognize that. They think that their company can lose money for a long time and then they can turn on the profit spigot later when they need to. And we're finding out right now that that is not the case in most cases. A lot of companies had free money for a long time and now they're in deep trouble. It's a skill and you wouldn't expect someone to jump on stage with a guitar for the first time and play well. Why do entrepreneurs think that they'll be able to learn how to generate more money than they spend well the first time when they absolutely need to do it? They need to practice that. You need to practice this. It's a skill. Just like any other skill. And I think people don't recognize that. They think they can just do it. They're doing themselves a major disservice if they think they can just do it on demand the first time they're called to do it. So whatever business you're in, let's say you're in a very unprofitable but like, big market share, you think, start something else on the side in your own business that you can carve out to practice making profitable. So just find another product, find another thing, find it something where you can treat the economics differently so you can begin to practice over there. I think it's very, very, very important. Again, in some ways it's conventional advice, but in our industry, it's not conventional advice. So getting good at making money takes time and practice. And if you don't do it, you're not going to be good at it when you need to.

Most people don't have the liberty of not getting good at making money.

Thank you. That's the thing. That's why it's conventional advice. That's why this industry is so perverse and strange. But, you know, the other thing is, I should say this is like, when we talk about the industry, we're falling into the same trap. Because the majority of every company that exists in any industry really is focused on like paying the bills and making sure they have more money. Very few companies are actually even able to raise money. Very, very few. Many have loans from banks, and banks aren't going to mess around. Many have friends and family money. Many are bootstrapped. These companies have to be responsible with their spend and they are conventional in that respect. So where even us, as we're talking about this, we're falling into the trap saying the tech industry. Now, the tech industry is probably made mostly of solid, thoughtful small businesses that know this stuff. But it's not what you're hearing. And so a lot of people who are beginning companies are looking to what they're hearing and they're hearing about the big, huge, go raise a bunch of money, go get as big as you can kind of stories. And those just are not actually in the mainstream stories at all.

Definitely. As we close out. Any new projects, anything new that you're launching that you can talk about?

Well, working on two new things, one I definitely cannot talk about. The other one is a significant fundamental improvement to hey. Which is our email tool. We're addressing the number one request, I'll tell you, like it has to do with a calendar. So we're going to be building a really novel and interesting calendar as part of hey, but in the hey style. So hey is an email service that is radically different than has radically different priorities and values than Gmail and other tools. Brought a bunch of new ideas to that world and we're doing the same with Calendar. So for us, before we build hey, we felt like email is very, very stagnant. Hadn't really been improved since gmail came out 16 years prior to when he came out. We feel the same way. Same thing is true about calendars. Every calendar basically looks the same, basically works the same. There's been very little innovation. There's some wonderful products out there, but the fundamentals are the same and we have what we think is a very different perspective on time. And so we're bringing a lot of those ideas to this thing which is going to be part of hey. So that's one of the big things we're doing. And then this other thing we're doing I can't talk about yet, but that's the next big, big thing from us.

Wishing you great success with those products. Now you're extremely active on LinkedIn and on the blog anywhere else that you are very active on.

Twitter is still my biggest audience in a sense technically, but I've been more involved in LinkedIn lately. I find LinkedIn to be a really wonderful place to talk business. That's kind of what LinkedIn is. And so Twitter is great to promote something you publish elsewhere to some degree and have some back and forth. But I've been doing less of that and been more involved in LinkedIn because it seems like there's more of a genuine interest in discussing business related topics without injecting all sorts of other opinions into the mix. So it's been a nice place to be. Also the other thing is I have a newsletter. So if you go to world hey, so it's H E Y.com Jason. You can sign up for my newsletter. It's something I periodically write. Sometimes a couple things a week, sometimes one thing every two weeks or three weeks. I don't bombard anybody and there's no marketing stuff in there.

It's just like my thoughts world.hey.com Jason yeah, awesome. I'm going to add that to the show notes as well. And your handle everywhere is J A S O N F R I E D. That's right.

Jason Freed. Yeah, that's my full name. That's basically where you can find me in most places.

This has been a fantastic conversation. Finally, five years later, I'VE been your big fan. Thank you so much and we'll share this out in the coming weeks probably on YouTube next week. Usually gets 10 to 20,000 views in a month and then a month later we post it on podcasts.

Oh great man. Well thanks again for having me on. I'm glad we could finally catch up. And for anyone who's listening, wherever this is posted, if you have follow ups just post comments and I'll try to chime in wherever I can wherever I see them.

Love and peace Jason.

Have a good job. Bye. Take care man. Bye bye.

I need some traction.

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