The Biography of 37signals, Whose Web Apps Are Used By 3 Million People

Andrew: This interview is sponsored by Grasshopper, the virtual phone system that entrepreneurs love because you can use your own phones, and manage it on the web. Check out Grasshopper.com. It’s also sponsored by WuFoo, where you can go right now to get embeddable forms and surveys that you can add to your website for free. Go to WuFoo.com. And it’s sponsored by Shopify. When you go to Shopify.com, you can create a store within minutes, and have all the support and features that you need to make that store grow. Check out Shopify.com. Here’s the program.

Hey, everyone. It’s Andrew Warner, founder of Mixergy.com, Home of the Ambitious Upstart. Today I’ve got with me Jason Fried, co-founder of 37Signals, the bootstrapped company that has over three million users of their web based apps. And the co-founder of Rework. Jason, how’s the book doing, by the way, before we into the rest of the interview?

Interviewee: The book’s doing really well. We don’t have exact sales numbers, but we made the Wall Street Journal Bestseller List and the New York Times Bestseller List. So we’re pretty happy. And we’re the Number One Business Book in the U.K. as well, in the Sunday Times. So we’re pretty pumped about that.

Andrew: That’s great because that’s the kind of title that sticks with you forever. You will forever be the best-selling author. And that adds a lot of credibility, doesn’t it?

Interviewee: I guess so. Yeah, I mean there’s a lot of best-selling authors, so I don’t know how much credibility it lends, but it’s great to have the title. And we’re pretty proud of the performance of the book. Thanks to everyone who bought it so far.

Andrew: Oh, yeah. I bought it on my iPhone. I loved it.

Interviewee: Thank you.

Andrew: It’a a great quick read.

Interviewee: Yes.

Andrew: So here’s the thing. A lot of your ideas go against what the industry is saying. A lot of us have argued with your ideas, or accepted them and championed them. Instead of going in and just arguing over the ideas here again here on Mixergy, instead of rehashing the ideas that I hope people go and buy and read in the book, I wanted to go through your business biography. And along the way, understand how you came to believe that you shouldn’t hire workaholics or be a workaholic yourself. How you came to believe that we need to do less, not more. And I figured by hearing how you did it, we can learn for ourselves how it actually works in the real world.

Interviewee: Sure. Sure. Sounds good.

Andrew: So let’s start off this way. When did you launch 37Signals?

Interviewee: 37Signals launched in ’99, in I think it was August of ’99.

Andrew: And what were you doing just before then?

Interviewee: I was sort of freelancing, doing website design on my own, although I had one employee at the time. But from ’95 through ’99, I was just working on my own most of the time.

Andrew: OK. And your website says that you’re the co-founder of 37Signals. Who else did you launch the business with?

Interviewee: Originally I had two partners. I had a guy named Ernest Kim, and someone named Carlos Seguera. And all three of us founded the company together. Carlos left about a year later, and Ernest left in, I think it was 2002 or so, maybe 2003. I think 2002, though. And then I ran the business for myself for awhile. And now I have another partner, David Hameri Hanson. He’s my current business partner.

Andrew: And co-author of the book Rework.

Interviewee: Yes. That too.

Andrew: OK. What does the name “37Signals” mean?

Interviewee: The name. Carlos, one of the original partners, came up the name. He was watching Nova on PBS, and they were doing a show on the SETI project, Search for Extraterrestrial Intelligence. And apparently in ’99, you know they’d been listening to signals from space for a long time. And apparently in ’99, there were 37 signals that were unexplained, and signs of potential intelligent life. And he thought that was kind of cool, and we didn’t have a name for the company at the time. So he’s like, “Hey guys, what do you think of this?” And we all liked it, and the domain was available, so we ran with it.

Andrew: OK. And at the time, were you just going to be a consulting company? Well actually, what was the vision for 37Signals at the time, in ’99?

Interviewee: Sure. So we were just a web design company. So everyone else at the time, pretty much everyone else, was a full service agency. This was the thing. I’ll put into your design, your programming, your business strategy, your database stuff, all that stuff. And we didn’t know anything about most of that. All we knew how to do was design stuff. So were just going to do design. And we that very successfully for, you know, five, six years or so. And the thing was is that, and this is still our philosophy today, which is we’re just going to do a few things really, really well. We’re just going to focus on what we’re good at, and not try and do a bunch of other stuff that we’re just decent at. And so design was really our focus. And our sites we all very simple, all very streamlined. We were really big into keeping things as simple as you possibly can be, and that sort of carried over into our software development.

Andrew: So you’re just going to design websites. So you’re going to just create the look of it, and hand over the HTML, CSS, all those files, and let somebody else develop it, develop the code underneath it.

Interviewee: Yes, yes. And in fact, there wasn’t even really CSS at the time. It was just kind of really pretty much hacked together HTML stuff,

Andrew: OK.

Interviewee: with a bunch of styles everywhere. But anyway, yeah. That’s what we did, handed it over. And sometimes we were available for, you know, updates or edits or whatever. But for the most part, we handed stuff over, and then moved on to the next client.

Andrew: Were you planning on building from that to something else? Or did you imagine it was always going to be the three of you? What did you think the business would look like in the future?

Interviewee: Well, by the time we were done with the software, with the web site step, we had about 5 people or so working at 37 Signals, five or six. I don’t really ever think about the future, really. I’m just like, what are we doing now, what are we doing in the next few weeks, what are we doing in the next few months, maybe at the most, and that was it. So, I’ve always been somebody who’s just done what we’re doing now, and whatever happens down the road, happens. As long as I enjoyed doing it, the vision worked. The vision is, enjoy doing what you’re doing. It’s not, be this kind of company, or be that kind of company, or do this specific thing or that specific thing. It’s do something you really enjoy doing, and do something really well. And so that’s sort of stuck with us over the years.

Andrew: I see. So why get two partners? Why build a business around this? Why not just…

Interviewee: …do it yourself?

Andrew: Why do that, yeah?

Interviewee: Well, I was doing it with myself for a while. That’s kind of weird. I just kind of got sick of it, frankly. I got sick of working by myself. So, I hired a guy named Matt Linderman, and he still works at 37 Signals today. He’s been with me for 11 years, I guess, maybe even 12. And we got a big project. So, I didn’t hire Matt because I was bored. I hired Matt because I got a big project and I needed some help with that. It happened, we were doing this site called ‘Getty One’. This was in ’99, I think. And I was sort of finding out I liked to work with somebody else. And then, but then I kind of wanted something else too. And so I met Earnest because I was actually interviewing at Organic Online, which was where Earnest worked, which was a big web company at the time. So, I was interviewing for jobs to see what that route looked like in case I wanted to go work for someone else again. And I didn’t like it, but I liked Earnest, so we kept in touch. And about a year later, Earnest was ready to move on, and I was ready to do something bigger with Matt. And we both knew a guy named Carlos, who was a graphic designer, but who also wanted to get into web stuff. So, we all hooked up and started a company together.

Andrew: OK. Why did they leave?

Interviewee: Carlos left about a year in because he had a lot of stuff going on and still does. Carlos is like a guy who has a bunch of businesses going on. He had [Sigur Ink], which was a design firm. He had T-26, which is a type foundry. He had a record label at the time called Thick Face Records. He had some other stuff too, and now he’s got something called Car Type. He’s just this guy who does a lot of stuff. And so 37 Signals was my full time only thing. It was Earnest’s full time only thing. But it was Carlos’ 20% thing. And so that just didn’t work out. We’re all best friends still. I see Carlos all the time. I talk to him all the time. So that just didn’t work, professionally. And then Earnest left, I said, 2002, 2003. He left because he wanted to get out of the industry altogether. So he got married, moved with his wife out to Oregon to live a kind of simple rural life, actually, which turned out not to be the case. Although they live in a beautiful part of the country, but he works for Nike now and he’s back into the old swing of things. But, he just wanted to do something brand new. So, that’s why he left.

Andrew: OK. Let’s talk about Carlos then. You’re partnering up with somebody who’s doing your business only 20% of the time. That seems to be OK with… You’re saying the reason that it didn’t work out was because he was only willing to spend 20% of the time on this business. How does this square with one of your philosophies, which is ‘work part time on your start up, you don’t have to quit your job to fully focus on it.’ Sounds like that’s what Carlos was doing, but you’re saying that’s what didn’t work.

Interviewee: Sure, that was one of the things. I mean, the other thing was that Carlos wasn’t a web designer. Carlos was a print designer. And we thought that his, he’s a fantastic designer, one of the best in the world. We thought his sensibilities would carry over to the web. It just, our feeling is that web design should know each team [elements], all that stuff. And Carlos just wasn’t that kind of designer, which is totally fine. So, that just didn’t work, too. But as far as your point about that, I mean, this is our, we decided to go into this business together. And to have two people putting in full time, and one person putting in part time, doesn’t really work. There’s an imbalance there. If we were all in putting 20% of our time, that would have been fine. But to have one of the three not putting in as much as the other two is where things start to kind of get hairy, I guess.

Andrew: OK, and by the way, …

Interviewee: But again, it was all amicable. I mean, we basically gave Carlos, so here’s what we did. We each put $10,000 in to start the business. And at the time, we had , when Carlos left, like $250,000 or something, in the bank. And we just gave him 1/3 of that, and he went on his way, and we’ve just been friends ever since.

Andrew: OK, how did you get to $250,000 from $10,000 each?

Interviewee: Doing work, charging money for it.

Andrew: How did you find your original customers?

Interviewee: Our first client was actually HP, I think, if I remember correctly. And that was someone who was working with Earnest at Organic, and didn’t really like that apparently….

Andrew: …were you planning on building from that to something else, or did you imagine it was always going to be the three of you? What did you think the business would look like in the future?

Andrew: I see. So why get two partners? Why build a business around this? Why not just…

Interviewee: …do it yourself?

Andrew: Why do that, yeah?

Andrew: OK. Why did they leave?

Andrew: OK, and by the way, …

Andrew: OK, how did you get to $250,000 from $10,000 each?

Interviewee: Doing work, charging money for it.

Andrew: How did you find your original customers?

Interviewee: Our first client was actually HP, I think, if I remember correctly. And that was someone who was working with Earnest at Organic, and didn’t really like that apparently….

Interviewee: …like that apparently. And they came over with Earnest to work with us. And so, that was our big first client. I think it was a couple hundred thousand dollar project or something. So, we’ve been profitable pretty much since day one, 37 Signals is the company. And we’ve never looked back since then.

Andrew: How much percentage of your business were they at the time?

Interviewee: Well, they were all of it, initially. That was our first big client, you know? And then we got a bunch of other clients after that, of course, and things have been fine. And that was our first big client, which was great because we didn’t have to raise money from the outside. We got a client, basically, to pay us, which is sort of great. We had our $10,000 each to do the basic stuff, to get some computers and pay the simple bills. And then everyone else paid for our way, basically, our own clients.

Andrew: And that’s one of the chapters in the book, too, in the book ‘Rework’, right? You don’t have to get investors to fund your business, you can get a client to do it.

Interviewee: Hopefully, I mean, that’s one of the great things of doing something on the side, too, is that you keep your day job in some ways, and that’s kind of your funding for your business. So, for us when we moved in to becoming a software company, we used our web site design clients basically to fund our software development. And then when the software development was making more money than our web site stuff was, we stopped doing the web site and focused only on the software business. So, I’m a big fan of not asking people for money, but doing things for money. So, we’re going to do work for a client, they’re going to pay us, that’s great. Then, when that relationship is over, it’s over. Unlike an investor, they give you money, that relationship isn’t over at that point. It doesn’t end until they leave, or the company goes out of business or the company gets sold. I don’t typically like those sorts of arrangements. Sometimes I do, but most of the time I don’t. Especially up front, early on, when it’s the worst time to raise money, is early on.

Andrew: I think in your first book, ‘Getting Real’, you said… Actually, was the book called ‘Getting Real’, or ‘Get Real’? Getting Real.

Interviewee: Getting Real, yep.

Andrew: Getting Real. I love that book. That’s how I first came to love 37 Signals and your philosophy. And one of the things that you said in that book was ‘sometimes you have to bold, outrageous statements that are black and white, even though we don’t live in a black and white world.’ It seems to me that the idea that you don’t need big funding in order to build a business fits well with somebody who comes into business with the idea that he only cares about what happens today. He’s not looking to build a great business tomorrow. He’s not looking to be the next Microsoft. And if somebody has a different point of view and a different set of goals, they might need to get that funding, because you can’t get a client that’s going to give you millions of dollars to build this great business that you want to build. And you definitely can’t get them to give you all of that as a client, and then step back while you build this next great Microsoft. What do you say to that?

Interviewee: Well, I would say, why do you need all that money up front? What’s up with this day one thing? There’s a lot of talk about on day one we need everything we’re ever going to need. I’m just a big fan of just going slowly and growing slowly over time. We’ve been doing this for 11 years now, and every year we grow, grow our revenues, grow our profits. Our margins have pretty much have stood still in a good way. Our really high margins, and we hire a couple people in a year, maybe. And that’s to me the way it should be done, and that’s the way most of these businesses are done. Microsoft was not big on day one. Apple was not big on day one. They started in a garage. A lot of these companies that we look at today, we think that they were always big. They weren’t always big. They grew relatively slowly for the most part and had very small ideas initially. Or big ideas, but they implemented them in a small way, and then it grew if it was successful. So, I think that that’s the model that for me, works best. It may not work for everybody, but I think that it’s the model everybody should at least try, because I think you have a much better shot at being successful that way than trying to go for the billion dollar company right off the bat.

Andrew: Do you have an example of a company on a scale of the ones that we just talked about? Microsoft, Apple, maybe smaller scale than that, but still a giant company that was built this way with just profits?

Interviewee: I don’t know about just profits, because I haven’t studied every individual company. But I mean, a lot of these great companies that we know of today started very, very small, with very small ambitions. Starbucks is another interesting one. You know, just a coffee shop in Seattle, and it grew and added more outlets and franchi-, well actually no franchises, I think they’re all company owned. I could be wrong, I’m not sure, but anyway, they just kind of grew over time. Nike is another interesting example. Bill Bauerman and Phil Knight. Phil Knight was a track, was a runner at University of Oregon, and Bill Bauerman was his coach. And they wanted to figure out how to make better shoes for runners. So, they made shoes with waffle irons. They came up with a waffle sole, and they started selling shoes in their trunk. The shoes were originally made in Japan by a company called Tiger, I think was the name of the company. I’m getting a little bit off track, but basically they started off like… Hang on, my screen just went out, so let me just make sure everything’s still going here. They went off, they started in the trunk of their car, just sort of grew it slowly, they wanted to make a better shoe. They made a better shoe, then they made some more better shoes, and better shoes again, and it slowly grew. I don’t know if they ended up taking money or not, I’m not even sure. But the point is that Nike, Starbucks, a lot of these big companies today that are very, very successful did not start out with this grand massive vision. It was more like, we’re going to start something, and build something that works, and then hopefully, it’s going to keep working…

Andrew:…and then hopefully it’s going to keep working and we can do more and more and more of it, but it wasn’t ‘we’re going to be the biggest shoe company ever in the world.’ That’s not how Nike started. Starbucks didn’t not start by saying ‘we’re gonna be the biggest coffee shop ever in the world’. That’s just not how these things start. So I think these big huge grand vision statements are typically not how most of the big companies are successful today started out.

Interviewee: Really, I thought entrepreneurs. Have these fantasies of grandeur, and that’s why they started their businesses and along the way they grow them and sometimes they shrink them based on reality, but at least they start out with the big sense of vision and I look at how…

Andrew: Some do…

Interviewee: Ok, some do, some don’t.

Andrew: But that’s the thing. The idea that there’s only one way to build this

company which is to be an entrepreneurs., you kind of go big or you’re going to lose. That small is just this step, it’s not a destination, and it’s just a step on the way to being massive and big. I think it’s just misguided. I think for example, the majority of the companies are small companies had a lot of people are doing quite well are doing good with those companies.

Interviewee: Do you really want to start and be a small company, don’t the big companies leave their mark on the world, change the world, the way a small company can’t really?

Andrew: Well, depends what your goal is…is your goal to leave a mark on the world?

Interviewee: Well, if it was, then I would just stay at a job somewhere and not take the risks and not have to push myself the way that entrepreneurs do.

Andrew: Ok, that’s your choice. It doesn’t seem like that’s what you’re doing though. What are you doing right now, are you making a mark on the world or are you not important at all?

Interviewee: I think the way that I’m doing it right now is not important at all yet. I can’t imagine that what I’m doing right now is changing the world yet.

Andrew: Well, here’s what I think about that. I don’t think that ‘the world’ exists… I think there are lots of small worlds. And I think you are changing your own small world, and I think that that’s a great first step. I don’t think that you’re basically a failure unless you’ve left this massive mark on ‘the world’. The 6 or 7 billion people on the world, or in the world. So, for me I think you are having an impact for entrepreneurs for small business owners, and can’t get this information anywhere else. Can’t see people being interviewed like you interviewing people. So you are actually having a mark, and to me that’s a really good point. That’s fine doesn’t, you’re not failing the issue you haven’t reached because you haven’t interviewed Bill Gates. Or you haven’t interview Steve Jobs, you’re interviewing other interesting people who are hopefully influencing other people and you’re definitely having an influence for sure. SO, I think that that’s in my point of view, that’s sort of the way you should be doing it, which is influence the people you can to start and don’t feel you’re not making it because you’re not reaching every single person, I just don’t buy that.

Interviewee: First of all, two things I have to say about that. Coming from you, that’s one of the biggest compliments because as I said, I’ve admired your work and your ideas for a long time. The second thing is if all it is is this, my life has no meaning. If all of this is just me reaching the handful of people that I’ve reached, and I see one guy in the audience here saying (?) vital source for me, thank you I really appreciate that. If it’s only a couple hundred people like that, I don’t think it’s enough. I would consider myself a failure if I didn’t have the kind of impact that Foley Hill had, or even Malcolm Forbes or B.C. Forbes, or Dale Carnegie what’s the point of living unless you go big?

Andrew: Are you asking that seriously?

Interviewee: YA!

Andrew: Are you being ..

Interviewee: I’m being 100% serious.

Andrew: So you think you’re a failure because you’re only reaching a few hundred people?

Interviewee: No, I think I’m a start…I’m just getting started here…but if this is all it is, it’s not…it’s not…a…

Andrew: Well, so give me some of those people’s names again that you just rattled off..

Interviewee: Lets go with Dale Carnegie.

Andrew: How long have you been doing this?

Interviewee: You’re right…a little over a year…

Andrew: How long has Dale Carnegie been writing books? Do you think with Dale

Carnegie starting a year in, he had as much as you have today? You have a lot more influence than Dale Carnegie had when he first started, so I wouldn’t sell yourself short. Today, you can reach so many more people than Dale Carnegie when he started so I think you’re on the right track. I wouldn’t look at it as you aren’t these people yet. You may be better than them, or maybe you won’t be. I don’t really know, but to say that so far you’re not having an impact to me is selling yourself short.

Interviewee: Alright, fair enough. I used to work for Dale Carnegie and Associates and they used to tell stories about how dale Carnegie would get dozens and then hundreds of people in a room and that’s the way that he would set, the way that he would get his message out and then eventually he wrote a book that reached many more people. So you’re right, the Internet is giving me room to reach more.

Andrew: I mean look what we’re doing right now. We’re on… I don’t even know where you are. I’m in Chicago at my house, we’re talking, people are watching. That’s influence. You have influence right now, so don’t worry so much about what these other people have done in the past. Focus on what you’re doing and you’ll be just fine.

Interviewee: Ok, let’s talk about influence the way 37 signals have influenced entrepreneurs. In 2001, you create signals for signal verse noise, the company blog. What was the point there? What was the vision?

Andrew: Ya, so originally, what we were doing…blogging was kinda brand new back in 2000 or whenever it actually was…

Interviewee: I’m not sure of the exact date offhand now. But we were having these conversations internally about what we thought about this link or this design or this story, or whatever it was. And we just said, “You know, hey, there’s this new blogging thing. Like why don’t we just talk about everything we’re talking about internally. Let’s just talk about it externally. If we’re interested in it, other people probably are, too. Not millions, maybe not even thousands, but maybe a dozen to start, maybe 50, maybe a few hundred, whatever it is. Let’s just start talking out loud. And that’s pretty much what we did. And it grew from… And it was actually interesting. I have to see if I can find some old screenshots. But if you look way, way, way back at the original site, it was more like Twitter is today, in that it was very short-versed. It wasn’t long articles. It was like, “Hey, check out this link”, or “Look at this picture”. Things like that. Very simple stuff. We just started that way, and then it sort of grew over time. And now there’s you know, over a hundred thousand people a day who read it, which is great. It’s a great outlet for us, a great pulpit for us to get our message out today.

Andrew: When I interviewed you about a year ago, I asked you how you were able to get so many people to not just use, but pay for your web apps. And you said, “We had a blog. We had an audience that then became our customers. Was that one of the goals of the blog, to get an audience that would eventually become your customer?

Interviewee: It wasn’t originally. But looking back on it, that was kind of a great mistake. Actually, mistake’s totally the wrong word, because it wasn’t a mistake, it was a huge benefit. But it wasn’t something we thought was going to happen. We just did it because we wanted to try it, and see what happens. And eventually, we found out that having an audience is a huge benefit to a company. You know, companies have fans, have customers, but having an audience is like the real secret, I think, to making it, especially today, without having to spend a lot of money on advertising. So it just kind of happened that way. And we realized when we launched BaseCamp, in 2004, we had a few thousand people reading our blog, and it was a great place to launch it. And so in fact, we launched BaseCamp on our web blog. That’s where we posted the first message about it. That’s where we got the word out about it. And from that point on, we realized that that was a great place to announce new things. And we figured out that the more people that were reading it, of course, the better it was going to be for us because we can now reach 100,000 people a day, instead of having to go out and pay to find these people. These people are coming to us everyday because we have interesting things to say, hopefully often enough for them to keep coming back. So it’s worked out quite well.

Andrew: And there’s a chapter in the book Rework on that. And that’s something actually, that I’ve discovered here in doing interviews, that the people who have audiences don’t just have potential customers. They’re people who help them think through their ideas. They’re people who give them feedback. They’re people who’ll go and sometimes argue on other people’s blogs, to defend them.

Interviewee: Yeah.

Andrew: What kind of benefits, beyond customers, have you gotten from it?

Interviewee: Well, I think that you hopefully, you know, I don’t know what to call people like super fans kind of people. I don’t really know what you’d call them. But people who are really into what you’re saying, good or bad, and they’ll just kind of keep your message alive, and keep talking about it elsewhere. And that’s a really powerful thing. I just keep thinking about what it would take for us every day to reach 100,000 people, who actually want to hear what we have to say. Because it’s really easy to reach 100,000 people who don’t want to hear what you have to say. That’s called advertising. [Laughs] That’s how you reach 100,000 people who don’t care about what you have to say. And maybe a small fraction of those actually care. But it’s very expensive, and very hard. But to actually reach people who are coming back voluntarily to hear what you have to say is an incredibly powerful thing. And I recommend every company start doing that. You can’t just keep talking about yourself, though. You’ve got to talk about things that are interesting, and stories that you have about other

people in the industry or other things you’ve seen, or things you’ve learned along the way. So, it just can’t be this place to only market your products, because that’s not interesting enough for people to keep coming back.

Andrew: You have multiple voices on that blog. People who work at 37 Signals all seem to get a chance write on it. How do you train them to be that kind of engaging and that kind of useful?

Interviewee: You don’t train people to do that. I think who want to write will write and those who don’t, don’t. I that’s pretty much how it goes. And some people are reluctant writers because our audience can be difficult to deal with sometimes. There’s a lot of pushback. That’s fine, I love it. But it’s intimidating for new writers. So, you don’t I think you kind of just sort of lead by example here and hopefully more and more people will write. Everyone’s invited to write on the blog that works at the company, but not everybody does.

Andrew: Do you have to prove it?

Interviewee: No, there’s a few times where someone will run something by me and say ‘what do you think of this?’ And I’ll say ‘yes’ or ‘no’. There’s been a couple situations in the past ten years where we’ve pulled something down because it was just, it wasn’t either the right thing to say, or it was just like, there’s something in it that shouldn’t have been said in a way that would just come off wrong.

Andrew: Can you give me an example of that?

Interviewee: I’m trying to think about, I don’t have any examples off hand. I can tell you an example of a post that was sort of misconstrued or misunderstood a bit. We talked, and this was our controversial post, we talked about certain words that customers use when they write you for service, asking for support. Like words like ‘useless’ and…

Interviewee: …words like ‘useless’ and I forget some of the other ones. It was supposed that we wrote, Matt wrote actually, and it was all about the words that people use and how those words aren’t that useful in terms of giving really valuable feedback. And if you want to give a company good feedback that they can use, try and be more specific instead of saying ‘this sucks, this is useless’ because that doesn’t really help anybody. So we’re trying to kind of explain that, but it came off as like ‘you guys are making fun of, mocking your customers.’ And that’s not at all what it was. So, if I could like go back, I probably would have pulled that post off or something, if I ever had a time machine. But it went out, and that’s fine, and we left it there. So, it’s not controversial posts that we pull off. It might be something that’s said too early, like if we’re releasing a new product or something like that, or some inside info that wasn’t required, or shouldn’t have been out there. So, it’s things like that, but people are allowed to post whatever they want.

Andrew: So, if you were to hire Andrew Warner to come in, day one Andrew Warner would have access to the blog, he could write whatever he wanted, and nobody has to proof it, to make sure that it complies with the company culture or the message you guys are trying to send out?

Interviewee: Well, Andrew Warner thinks he’s a failure [laughter]

Andrew: No, no, no, let me be clear and say that Andrew Warner doesn’t think he’s a failure today. This is the sum total of all my life, what I got here, it’s not enough.

Interviewee: No, I’m kidding.

Andrew: I got visions beyond today.

Interviewee: Good. So, yeah, you can come in and post whatever you want. But, of course, if you have questions about, is this kosher? Is this legit? Should I post this? You can run it by somebody, doesn’t even have to be me, it could be David or anybody else. And sometimes, we’ll say ‘yeah, well, change it, though, this isn’t the best way to say it, or whatever.’ But for the most part, 99% of everything on the blog is up to whoever wrote the post. That’s it.

Andrew: A lot of people are going to hear that and say ‘great. I know the value of an audience. 100,000 would be ideal. I can’t even get to 1,000 or 5,000 or 10,000.’ Jason, what advice do you have for them? How can they practically get this audience?

Interviewee: Well, first of all, it’s going to take time. So, you can’t get it overnight, and we’ve been doing it for a decade. So, you’ve got to be in it for the long haul. And most important of all, you have to have something to say. Because you can talk, and not have anything to say. Talking is easy, anyone can talk. Just move your lips and have air come out of your mouth, and you can talk. But you have to have a point of view, and something to say that’s interesting to people. And there’s a lot of things that are interesting, but you just have to have a point of view. I think, that’s one of the most important things. I think it’s the thing that’s missing in most companies today, which is, a true point of view. And this is the chapter in ‘Rework’ about drawing a line in the sand. What do you stand for? What do you believe? What are you going to stand up for if you’re going to argue something? What is it? And so, I think you have to have that in order to actually build a healthy audience. Because if you’re just saying stuff that no one really cares about, that’s very generic, and it’s always couch for thumb maybe, and it depends. That’s not going to build, I think, a really good audience. I think you want to have a really strong point of view. And most writers have a really strong point of view, most successful writers I would say, have a strong point of view. And that’s where I’d go for it.

Andrew: OK, you’re right, the people who I most gravitate to, and either love or hate, are the ones who have a strong point of view. But I sometimes wonder if they’re closing their minds off to new ideas because they’ve already articulated a strong point of view. For example, we’ve talked about funding and your belief about it. Have you now made it so that if tomorrow you wanted to go raise a lot of money, to build this great idea that absolutely needed money, you’d be closed off to even thinking it through properly, let along going and taking out that direction.

Interviewee: Whatever I want to build I don’t think will need the money that I would need. Like we have the money, first of all, which is one of the good things about being a profitable company is you have money. And second of all, I’m not a big fan of huge, massive ideas that require a lot of money. I like small things that solves simple problems, because I think most people’s problems are simple. So, I don’t have any visions of building something that would require millions of dollars. I’m not building a factory. I don’t need to build a data center. I don’t need to do those things. So, I can’t even imagine

what it would be that would say I would need big, big, big money to start something.

Andrew: So, isn’t that one of the problems with taking such a strong stand, that you can’t even imagine the other side? And so you’ve closed off a lot of options.

Interviewee: No, I don’t think that’s a negative thing at all. I think that closing off options is a really good thing in fact. I mean, I think that’s where you figure out what you want to do. Because to say, I can do anything ever in the world, all the time, whenever I want, like, I don’t know, that’s just not really focused. I prefer to focus on what I think I’m good at. And maybe I’m not the person who’s good at coming up with a massive, massive idea that requires $100,000,000 to get off the ground. Maybe that’s just not me, and that’s fine. There’s other people who can do that, if they want. But for me, and I think, for most people, that way of approaching a problem is typically the wrong way. I think you’re better off, I think most people are better off starting with something that’s simple, that they can wrap their head around, and they can build simply and quickly. And then, if it eventually becomes this big, huge, massive idea, that’s great.

Interviewee: …becomes this big huge massive idea, that’s great. I mean, that’s how I think most things that we’re all familiar with today started. They didn’t start out, everybody keeps thinking that these things started out huge. Facebook did not start out huge. Twitter did not start out huge. Amazon did not start out huge. All of the companies people admire in this industry did not start out huge. They grew eventually over time, a lot of them got a lot of funding but I don’t think that’s absolutely required for the things that they have done. I don’t think Twitter needs $160 million in funding. Now, I could be wrong, but I don’t think that they do. I don’t think that was required to build Twitter into what it is today.

Andrew: Have you ever reversed yourself on one of these strong positions?

Interviewee: Sure. I question myself all the time. I’m always questioning assumptions. As far as funding goes, no, I don’t really believe that funding upfront…

Andrew: What big point have you reversed yourself on?

Interviewee: Why don’t you ask me a few things and I’ll let you know if I changed my mind on them?

Because I’m having a hard time coming up with something specifically.

Andrew: Yeah, I can’t think of anything you’ve changed your mind about, either. What I’m looking for is something like when Jason Callahan has said ‘SEO doesn’t work, it doesn’t make sense. Don’t build it into your business at all. And he went on the tour of tech conferences and said that. And now you see that’s he reversed himself to the point that where he’s now advocating search engine optimization. I don’t know an example like that that you’ve done.

Interviewee: Yeah, yeah. I change my mind a lot, but it’s usually around small things, like things we’re working on internally. Like I’ll have an idea. In fact, just yesterday, I was talking with David and Ryan about pricing, or actually about, not pricing specifically, it was more about the number of users a certain product can have at a certain price. And I was really opposed to doing it this one way, and then like an hour I changed my mind. I said ‘you know what? Let’s try it this other way. It’s not the way we’re doing it today, but I think it will actually be better. So, let’s do that.’ So, we’re always changing our minds about little things, but the things I believe are the things I believe. But I’m happy to change my mind in time. But I don’t that changing your mind about big things every other day is a really good idea. So, I’m trying to think of some other things.

Andrew: I can’t either. But maybe someone in the comments will come up with an example.

Interviewee: I’m not watching the comments. So, if someone says something, bring it up to me. Because I don’t want to be looking up all the time. And maybe I’ll think of something else later during the talk. I’ll tell you what I changed my mind on.

Andrew: OK. David. We talked about David Highmat. Hindmeyer Hanson, right? I’m pronouncing his name properly. David Highmat- Hindmeyer Hanson, key hire. How did you meet him? By the way, he’s got to use all three names to make it really difficult for me? He just can’t go about by David H.., or David Hanson?

Interviewee: Well, that’s his real name. So, it would be like you calling yourself Andrew W.

Andrew: That’s true, all right. I’m just kidding around here.

Interviewee: I know you are. Some people think it’s his middle name. It’s actually not.

Andrew: No, actually, I did think that.

Interviewee: Actually, like two last names, technically. So anyway, David was a reader of our web log, back in early 2000. And I was learning how to program PHP at the time, because I was trying to build something, and I was building it myself and I kind of got stuck. So, I posted stuff on our web log asking people about ‘hey, can someone help me with this PHP problem? And I got a lot of feedback, and the best piece of feedback that I got, the best e-mail I got, was from David. We hadn’t met before, so we were just, I was a designer learning how to program, he was a student actually and a programmer at the time, and he gave me some feedback, and we went back and forth and I eventually hired him to finish the project because I couldn’t quite get it. And that’s how we got started working together. And then I hired him to do a few client projects at the time, and then I hired him in the company and he did base camp. And then I made him a partner in the business a few years back.

Andrew: Why did you decide to make him a partner?

Interviewee: David and I see eye to eye on a lot of things, and we really enjoy working together and I think we have a similar point of view. And I think probably, if I hadn’t made him a partner, he wouldn’t have stuck around. His partially, the case there too, but I think it was just a really important move for the business because he’s a really important part of the business, and that’s just kind of why it all came together.

Andrew: What was the ownership split?

Interviewee: We really don’t talk about that specifically, but one thing I don’t believe in is 50/50 in anything. I think to be 50/50 is the worst number in business. So, I’d much rather 51/49 or something like that instead of 50/50. We are not equal 50/50 partners, but that’s as specific as I’ll get enough.

Andrew: Fair enough. Let’s take a look. Base camp. I think we all know why you built base camp. You talked about it in the book and on your site. You scratch your own itch, you needed a project management application for yourselves and you built it. What I’m wondering is, how did you carve the time out to do it, when you have clients and they’re paying you hundreds of thousands of dollars for a project.

Andrew: It’s hard to cut, to carve that time away. How’d you do it?

Interviewee: Yeah, we treated it like a client, basically. And we just made time. It didn’t take a lot of time. It took about ten hours a week for David’s point of view. And David wasn’t working at the company, so he was a contractor technically, so that he didn’t like interfere with the whole, or that didn’t interfere with the client work. And then myself and Ryan Singer, we did the design work for BaseCamp. And then we just treated it as a client. And when you keep something really simple, too, BaseCamp was ultra simple, especially the first version, it didn’t take a whole lot of time to build. And now we could have gone off and said, “You know, we’re going to build the biggest project management tool ever. Let’s raise ten million dollars to do it because we have kick Microsoft’s ass.” Like we could have done that, but that’s not at all what we wanted to do. We wanted to build something simple and small, that worked really well for us. And now it’s turned into something that’s quite big. But it didn’t start that way. So it wasn’t really that hard to carve time out.

Andrew: How did you decide what to put into that initial version?

Interviewee: We built it for us, so we decided to build just what we needed, which was basically Messages. Originally, it didn’t even have To Do Lists. The first release did, but originally it just had Messages and Milestones. And what we found ourselves doing was adding basically, bullet points to Messages to make To Do Lists. And we realized, “OK. We probably need a To Do List thing. So let’s make a separate To Do.” So BaseCamp when it launched, had Messages, To Do’s, and Milestones. And Milestones were like, you know, dates. Things were due on this date. It didn’t have file sharing. It didn’t time tracking. It didn’t have write boards. It didn’t have a variety of things. It was very, very simple, had three main features, and that was it. And that’s all it needed. And we realized that was all it needed because as we were using it, we realized that’s all we actually needed to solve the problems that we actually had. We weren’t making up other people’s problems. We weren’t imagining other things that you could do because when go down that road, that’s where you need the ten million dollars. That’s where you have the big idea because I can imagine everyone’s problems, and I’m going to make this big thing that solves everybody’s problems. We were just solving our own problems. And we put it out there, and other people started using it. And they told us their problems, and we slowly, you know, changed the product over time, based on a much wider customer base now than just us. But we started out very, very simple.

Andrew: Now I’ve always wondered, how do you make it useful for yourself, but not so personal that it doesn’t make sense to anybody else? And we’ve all seen websites that people have built to scratch their own itch. It fits them exactly, with every tool that they perfectly need, and only they could understand it and use it. And when I look at it, I can’t even figure it out.

Interviewee: Right.

Andrew: How do you make it useful for you, but also makes sense and useful for other people?

Interviewee: The way I think you do that is to make it as simple as you can. I think things become less useful as they add more and more features. And this is sort of counter-intuitive, but when you try and build really specialized tools that solve very, very, very specific sort of detailed problems, that’s when things are only useful for certain small groups. But when you build something that’s very generic, BaseCamp’s very generic, Messages can be used by anybody. Everyone needs To Do Lists, and everyone needs to keep track of when something’s due. And that’s all we needed. And so that’s kind of why we built that. If we built very specific features that were only for web design, for example, because we could have, because we were a web design firm, we could have done like, you know, client design reviews, and approval checkoffs, and all these other things that have been very specific to web design, I think we would have cut off a huge market. And I think this is where a lot of companies go wrong is they they that the more features they have, the bigger their market. I think it’s just the opposite. I think the fewer features you have, the bigger your market, and the more generic, the bigger your market. And that’s kind of how we approached it.

Andrew: What were your sales projections?

Interviewee: We didn’t really have any. I can tell you that we had this one number in mind. We said, “If we, if BaseCamp could make five thousand dollars a month, after twelve months, we’d be happy”. So if it was doing 60 grand a year, because it wasn’t again, this wasn’t a big idea. It was like this project management thing that we needed. And we were a web design company. We didn’t have visions of becoming a software company. So we said, “If we can make 60 grand year, after the first year we’d be pretty happy”. It turned out that we were making five thousand bucks a month in about six weeks, or seven weeks, or something like that. So we knew we were onto something pretty quickly.

Andrew: And then what was wrong with the first version that needed to be fixed? I’m hearing about a lot of extra features that people wanted added, but what was wrong with it?

Interviewee: Nothing was wrong with it. And in fact, I think, it doesn’t mean that like it didn’t have bugs, and stuff like that, but I mean nothing was missing that we needed. And I believe actually today, with the exception of file sharing, we could still use the original BaseCamp today. So nothing was wrong with it in terms of it not working. It could work better, so we added file sharing. We added some, a bunch of other features. You can now comment on everything, pretty much, and we didn’t have that originally. So we’ve added stuff, but that’s more for convenience, and for sort of making it better. But it wasn’t that it wasn’t good when it first launched. It was good at solving the problems that it solved.

Andrew: One of the things that you said in Rework is, “Do your job. Take on all the extra responsibilities that you absolutely have to, before you hire anyone else.”

Interviewee: Yeah.

Andrew: “Just keep piling it on”. At the same time, you also say ‘don’t hire or be a workaholic.’ How do you balance the two?

Interviewee: You just do less work. So, you may have a lot of things to do but you don’t need to do it all at once. Here’s the problem that I think that a lot of people think that everything needs to be done now. There’s this ASAP thing, there’s this urgency. And when you start throwing urgency and ASAP into everything, that’s when you start becoming a workaholic, because you got all this stuff you need to do today, or by Friday, or whatever. That becomes very difficult. So, if you’re just recognizing that things are going to take time, and you can get to that thing later and whatever, then you don’t tend to work yourself to death. It’s only when everything’s urgent and needs to be done by tomorrow morning, that you start working yourself to death. So, that’s kind of how you handle it. The reason I think it’s important for you to do the work first before you hire somebody to do it is so you can judge quality, so you can actually understand the work. And this is a problem a lot of companies have when they outsource hiring internally. They outsource it to the HR department. The HR department does HR. They don’t do design, they don’t do programming, they don’t do all the other things that they’re hiring for. And then they start hiring based on resumes and statistics and facts and bullet points and stuff. And I think that’s where a lot of these companies go wrong is they start hiring bad people because the people who are doing the hiring can’t possibly judge the quality of the person they’re hiring. So, that’s why I think it’s really important to do the work first before you begin hiring other people.

Andrew: When did you start getting comfortable giving people advice?

Interviewee: That’s a really good question. I don’t know. I don’t know if I’m entirely comfortable with it sometimes. But it’s something that I like to do because I like to share our experiences, and I think they can be helpful for other people who are going through this thing. I wouldn’t consider myself an advice giver as a profession. Like I’m not someone who just writes business books, or who just goes on radio shows and gives people advice. I actually run a business, so the things I’m doing, it’s more about for me, it’s more about sharing the things I’ve learned, more so than giving advice that I can’t back up. So, I think, if I ever stop working, I would never probably write another business book, and I would probably never really be out there talking about the things I talk about, because then for me, I can’t prove that…

Andrew: It’s a marketing tactic

Interviewee: You know what I mean? Well, sharing is for sure. Yes, sharing is definitely marketing tactic, but it’s also something we enjoy doing. And I think when you teach and when you share, you learn a lot back, and you have to justify your positions like we’re doing right now. You’re asking me questions, I have to know what I mean, have to know what I stand for so I can answer them. And I think that’s a really valuable exercise too, that you can make sure that what you’re saying is something you actually believe. And that’s another thing that ‘s good with sharing and with teaching.

Andrew: And it forces you to question what you really believe and forces you to think it through, and then you can use it in your business because you’ve sharpened it.

Interviewee: Well, I think it forces you to be clear about it, to really understand it, to really know it, because it’s one thing to do something, but to actually teach it to somebody else, you have to really simplify it and be clear about it. So, I think that’s just a good exercise to begin with, because if you’re not really clear in your own head, like if you can’t explain something to somebody else, then I’m not sure that you really know it that well. So, it really puts a good constraint, to truly understand what it is that you’re saying and what you’re doing.

Andrew: [FatPack] came out 2000, Base Camp 2004, BackPack 2005, ‘Getting Real’ 2006. What were your business projections for that book that you self-published, ‘Getting Real’?

Interviewee: We really didn’t have projections. I’m not a big fan of projections in general. The Base Camp $5000 a month thing was like, well, let’s pick a number that sounds like a lot at the time. And let’s, who knows, I don’t even care. We spent like 1 minute thinking about that. I didn’t know what ‘Getting Real’ would do, but we knew for 20 bucks, we’d probably sell a lot of copies. And we did, we sold tens of thousands of copies, and we continue to sell quite a few copies today even. And we get paid, I think Lulu, so we have a paperback as well. I don’t have the PDF, I could look up the PDF sales numbers in a bit if you want. But we have a paperback from Lulu, and we get paid like 3 or 4,000 bucks, every time we get paid by them. So, I don’t know if that’s monthly, or what, but that’s a great number, still, for something we give away for free as well. But overall, from the PDF sales, the paperback sales and the indirect sales, doing conferences and workshops and whatever. We definitely generate well over a million dollars on that content, on that material.

Andrew: What was the goal behind it? Was it just to bring in another source of revenue?

Interviewee: Well, there is some of that, because what we do, we try and make money. We’re in business, and we believe in selling things that are valuable, and there’s some of that. But we really wanted to share the things that we learned about building software and design and all those things with other people who are going through similar things. It comes back to sharing and teaching again. So, there’s definitely a revenue point. Otherwise, we would have given it away for free. So, we definitely wanted to make money off the content. And we wanted to share the things that we’ve learned, because we think we’ve stumbled onto some things that really worked pretty well. And we thought that, you know, just like we could have kept Rails for ourselves…

Interviewee: …just like we could have kept Rails for ourselves, well we open-sourced Rails. And there’s a variety of reasons why we could do that, but we did that. And in many ways, sort of Getting Real, is sort of, it’s not open sourcing our business methodology. But in some ways, it kind of is, sort of, although other people aren’t really contributing to it. But it’s saying, “Here’s all the things we’ve learned”. Just like a chef has recipes, we’re basically putting together a cookbook, which, for software development, was Getting Real. For business, it’s Rework. And we just want to get that stuff out there because we think that we’re better off if more people know what we think, than if we keep all the stuff inside.

Andrew: Jason, right now there’s an entrepreneur who’s listening to us, who just heard you say that, who said, “You know what? I should write a book, too. It makes a lot of sense. I’ll self-publish it, the way Jason does.” Next week, he’ll find himself really on a roll. Two weeks from now, it will become a distraction from his work. And three weeks from now, both will suffer.

Interviewee: Yeah.

Andrew: How does he do it properly?

Interviewee: That’s a good point. That can happen. The way we did it was, we basically wrote Getting Real without knowing it. So Getting Real was kind of a collection of blog posts that we put up on SignalvsNoise over a couple year period at the time. And we basically kind of picked the best, and refined them a bit, and gave them a unified voice, and then put them together in book form. So if you can write a blog post every day or every few days, maybe in two years, you’ll have a book. You don’t need to do the book next week. You don’t need to have it done in three weeks. You just do it. Whenever it’s done, it’s done. And so it might take two years to assemble that much content, I think it probably took us a couple years, but again, we weren’t thinking about it as we were doing it. We just realized looking back, that hey, we have something that could be compiled into a book. And that’s pretty much how we did Getting Real. So that’s the way you manage it.

Andrew: It seems like the same thing happened with Rework. A lot of the ideas in Rework I read on your blog, or I’ve heard you say somewhere else.

Interviewee: Yeah.

Andrew: And it’s a cleaner, tighter, edited version of what you’ve said in the past. And that’s the way that you write your books.

Interviewee: For sure. And the other thing to keep in mind is that this sort of community that we’re all in, is very insular. But there are, you know, hundreds of millions, billions of people out there who have never read our blog, who don’t know anything about us. So while a lot of people who sort of might be watching this may have heard of us, and may have already read this stuff on the blog, and may find that Rework is sort of a rehash of those things, for so many people, it’s brand new. And we’re actually working on a page right now called “Letters”. We’re getting all these emails from people who read the book, and are saying like, “This is incredible stuff. I’ve never thought you could do this.” All this, so we’re putting this list of things together. And it’s really satisfying to hear people say, “This is stuff that’s going to help me. I really believe in this.” Or people who have been doing this for 20 years, and they go, “I thought I was doing it wrong because all the other business books, and all the other advice I’d read, told me to do it the big way, told me to go big or go home. But I’ve actually been enjoying myself over the past 20 years, so I’m glad to hear that I’m doing it right. That there are other people out there doing it like this, too.” So there’s a lot of validation in this material, too, which is really exciting for us.

Andrew: I hate that cliche, “Go big or go home”. And it always comes from punks who are trying to get you to do something that you don’t want to do.

Interviewee: Right, right, right. Yeah, I just say like, “Go to work and then go home”.

Andrew: [Laughs]

Interviewee: Isn’t that what it’s all about? Like go to work and go home. I mean go…

Andrew: It doesn’t sound like enough of a gladiator thing to say. You’ve got to have that gladiator statement that’s going to make people feel like they’re… Secretly I think, what they’re hoping to do is, with a lot of these statements, is make you feel like a punk, and you feel that they must be great. You know?

Interviewee: Yeah.

Andrew: Because you can’t possibly keep up with this fake projection that they’ve created for themselves at how big they must be, and how hard-working they must be. And neither can we.

Interviewee: Yeah, I mean I don’t concern myself with those people, so I don’t really care what they say. But I think, you know, look, there are certain lottery winners out there, who’ve built huge, massive companies, but that is really an exception. Most companies are small. And there are a lot of business owners who are going to enjoy life for 30 years, building a nice, small company that they make money from, that treat their employees well, and everyone’s happy. Like to me, that’s really what it’s about. It’s not about reaching this artificial milestone of a billion, or 10,000 employees, or whatever. These are just numbers someone made up to just shoot for. And I mean I’m just not a really big fan of that. So…

Andrew: By the way, I know earlier you offered to get us the PDF numbers, the PDF sales numbers.

Interviewee: Yeah.

Andrew: I don’t want to interrupt the interview for that. I’ll email you afterwards, and we’ll put it up on the website so people can look at that there.

Interviewee: OK. I’m actually going to see if I have any of that info handy. Anyway, go on.

Andrew: The next question’s going to be about Jeff Basos, who invested in your company in 2006. Why?

Interviewee: One second, let me while I actually look this up. OK. So Jeff came in in 2006. Hang on real quick. I’ve just got these up in front of me now. So, for example, every week, for the past, as far back as I can see, which is like four months, we’re selling about 40 copies of the PDF a week. And some of those are actually ten license versions, which are 50 bucks and not 20. So you know, we’re still pulling in a thousand bucks a week basically, well, close to a thousand bucks a week, selling the PDF, which is great. And it’s a very…

Andrew: And it’s PDF that people really don’t even need anymore. You make the whole book available for free in HTML format. People can read it on their iPhones, on their iPads, on their computers.

Interviewee: That’s right.

Andrew: They could print it out, if they have the patience.

Interviewee: Yup, yup. It’s free, and it’s in HTML, too. We didn’t start that way, though.

Interviewee: We didn’t start that way, though. We started out only as a PDF for 20 bucks. Then we went to paperback. And then we also put in online for free.

Andrew: You know something? What I did was I got paper, I got the PDF version, I bought it from you guys. I even had my name at the bottom, which was kind of cool. It meant I couldn’t give anyone else the PDF version of it. And I had it printed out on paper with the 3 holes in it. And I got, and I had something to bind them, and I read it, and it was great. Then I heard that you were giving it away for free online, and I said ‘I don’t care. I like the convenience of having the PDF. I don’t even want the paperback version.

Interviewee: Yeah, a lot of people bought two copies, and also have the free version online. So, whatever you want, you’re free to do whatever you want.

Andrew: I love that book. I love it. I’m not creating web apps tonight. I love that book.

Interviewee: Thanks so much.

Andrew: Also, that book and ‘Rework’, it just, it frees your mind. You don’t have to get in your head all the different thaings that you have to do that you wish that you did today, it really is very liberating. What you said in that book, get all the feedback that you can from people, but you don’t have to process

it all and put it on a spreadsheet. That was very liberating. When you say, a lot of the ideas in ‘Rework’, too are very liberating. You don’t have to be a workaholic, you don’t have to do it all, I still have to get to that point. By the way…

Interviewee: Thank you. Let me get back to the base of this thing, because some people may think that I’m ignoring that, and I’m not ignoring it at all. So, in 2006, stepping back a bit, we’ve talked to, at that time, a couple dozen venture capitalists who e-mailed us and wanted to invest in our company. And we didn’t want their money because we didn’t need it, and didn’t know what to do with it, and wouldn’t have used it wisely. And we turned them all down. And then we heard from Jeff. It wasn’t Jeff specifically, but someone who works for Jeff got in touch with us. And Jeff heard me speak at a conference and a couple of the other companies that he invested in I think at the time, were using base camps, so, and we also did a site called 43 Things. We designed a site called 43 Things, which is owned partially, I think, I’m not sure what the structure is, I think the structure is by Amazon, they’re investors at least. And they, sort of, Jeff sort of…

Andrew: By saying that you did 43 Things, you mean you were contracted to build it for someone else. You didn’t own it, did you?

Interviewee: No, no, we just did the website design. It’s the original version. Yeah, it’s different. Anyway, Jeff had been aware of us from a variety of different angles, and he wanted to talk to us. So, you know, to talk with Jeff is an amazing opportunity. So, I said ‘of course, let’s go do that’. I didn’t have any visions of him investing in the company. I know that’s what he probably wanted to do because he doesn’t want to meet with them, he wants to talk to you about something else. So, anyway, I flew out to Seattle and met with him. I was completely blown away by him. Incredibly humble, wickedly smart, great listener, great person to be around, very optomistic, all the qualities in somebody I think is great. He had them all by a factor of 10. I was blown away by him, and when I was talking about 37 Signals to him, he got what we were all about, he totally understood what we were doing. And I went back to Chicago, and thought a little bit about it, and told David about it because David wasn’t part of the company at the time, specifically as a partner I think at the time. Anyway, he was in Chicago, I forget what the details were about that, we went out to Seattle again to meet with Jeff, with David this time. And we both were just blown away again. And we decided to do a deal with Jeff, because we wanted to have Jeff’s advice and sort of guidance available to us, and that’s pretty much why we did the deal. We also took a little bit of money off the table for myself and David, so it was a little bit of a founder’s share thing. [lose audio] really like to have [lose audio] we admire greatly and be able to call on him for advice that we need. We could pretty much do that with selling him a small piece of the company. So we sold him a tiny piece of the company. And we don’t have a Board of Directors, so he doesn’t have a Board seat, or anything like that. There’s no real power associated with his shares. It’s just he owns a piece, and he’s ar

ound for us when we need him. So that’s how that works.

Andrew: So he owns a piece. He allowed you and David to take some money off the table, so that all your money wasn’t tied in the business. But also, some of the money that he invested in the business is used to help grow the business, or it’s in the bank?

Interviewee: No, we’re an LLC, so basically we don’t really keep money in the bank at the end of every year. The money’s distributed. So the money, the piece of the company that he bought, and this was in 2006, we weren’t worth a whole lot back then. So it’s not some massive chunk of money, what went to the founders, basically.

Andrew: OK.

Interviewee: And that’s kind of how that went. So there’s no money that was invested to be put towards the business because we had plenty of revenue from our customers. We didn’t need any additional money. So there’s nothing we could have done with that money. So basically, it sat in the bank and then was distributed back.

Andrew: OK. LLCs though, can leave money in the bank account. You’re saying at the end of the year, you pretty much take everything out and distribute it to the shareholders.

Interviewee: Well, yeah, because LLCs, the founders pay the tax, basically, on the profits. So we can leave money in there, but we’re paying taxes on it, so we just prefer to distribute it. And our cash flow is regular enough that, you know, a few weeks in…

Interviewee: …a few weeks in. We don’t take it all out on December 31st. You know, it comes out like maybe in April, or something like that. So there’s overlaps, so there’s always money in the bank.

Andrew: OK. So you write a check to Jeff Basil every year or so.

Interviewee: Yes, every person who has an ownership stake, which is myself, David, and Jeff, gets a distribution every year. That’s correct.

Andrew: OK, wow. Does Jeff own more than David?

Interviewee: I’m not talking about specific ownership shares.

Andrew: OK.

Interviewee: But I will tell you that Jeff owns a small piece, the smallest piece. So there you go.

Andrew: OK. [Laughs] So we talked about different web applications that you’ve got. BaseCamp, Backpack, Campfire, HighRise. SortFolio we haven’t talked about. How do you manage it all? I mean specifically, what’s the management structure that allows you to run all of these properly?

Interviewee: Well luckily, they’re very simple products, so it doesn’t take a whole lot of management. I mean we have a structure where everyone’s working on different things all the time at the company. So, you know, we might let a product sit for six months unchanged. If we find that it’s getting old or anything, it’s just you know, so you have to maintain a product to make sure that the servers are up, all that stuff. But that’s not what I’m talking about. I’m talking about development of the product. So we can sort of let things hibernate for awhile, and focus on just this, or focus on just that. Or, you know, we have more people than we used to, so now we can work on multiple projects at once, multiple things at once. SortFolio we haven’t specifically touched in terms of the back end for a few months now. And that’s just fine. It continues to grow, and that’s great. So we don’t have to. There’s things we want to do for it, but we’ll get to them down the road when we have time, or when someone wants to work on it. So we’re not constantly touching everything at once. And it’s totally OK to let things hibernate. There’s a lot of fears with entrepreneurs that if they don’t make things better all the time, they’re going to like lose ground or something. I don’t think that that’s true at all. In fact, I think constant iteration, all the time, typically leads to things, that leads to you touching things that you shouldn’t. And it’s OK to let things sort of sit for awhile. So that’s the natural state of things. I mean in some ways you can think of our, this is a little abstract, but like our products have seasons. You know, in winter, maybe things just kind of cool off for awhile. We give things a few months off. So maybe right now BaseCamp’s, it’s winter for BaseCamp right now. And maybe a few months from now it will be spring, where things start to pop up. We start to add a lot more stuff to it. I don’t know. This is a bit abstract. But I

think it’s fair to think about things in that way.

Andrew: Hmm-hmm.

Interviewee: And so that’s kind of how we do it. That’s how we manage it, by not doing everything all the time.

Andrew: OK. We’ve got maybe somebody listening to us right now who says, “I like this lifestyle. I want to get to this, but I’m not starting fresh. I have all these other products that are big headaches, and all these other responsibilities. How do I simplify myself to a place that’s like Jeff Reid and the guys at 37Signals?”

Interviewee: Well, like I mean, you can just stop doing it the way you’re kind of doing it, and slow down. Like everyone can always slow down. You know, we always think about speeding up, but you can slow down, too. So if you’re busting your ass working 70 hours a week, try working 40 hours next week. And I’ll bet what you find out is, everything’s just fine. Everything that you were worried about didn’t happen. And everything’s just fine. And you actually feel better. And once you start realizing that you can get away with not doing as much as you think you need to do, it’s very liberating. And so I would say just try it for a week. I mean I’m not telling you to change your whole life around. Try something for a week. Try something for two weeks. See how it goes. Take two weeks off. Guess what? When you come back, your business will probably still be running. And things will probably still be OK. Now not if you’re the only person running it, but you know, you can take off for a couple of weeks, or take it easy, or whatever. Things will be OK. And once you start to realize that, you know it’s very liberating. And you realize that it’s not all about pounding out every possible hour you can. It’s just about making good decisions as you go.

Andrew: Do you have about five more minutes?

Interviewee: Sure. I have as much time as you want.

Andrew: Oh, wow.

Interviewee: Now that’s not true. I’ll give you up to fifteen more minutes. How about that? If you want.

Andrew: All right. Let’s talk about then, the biggest mistake.

Interviewee: I don’t like to talk about that stuff.

Andrew: Why?

Interviewee: Because I don’t think it’s even worth lingering on. And I don’t really, I don’t care. I really don’t. It’s not that we don’t make mistakes, it’s just that, what’s the point?

Andrew: So you don’t go back. And you say, “Let’s learn from it so that we don’t do it again”. You just say, “Let’s wipe it out of our minds,

Interviewee: Well…

Andrew: and we’ll think about what’s worked, and learn from that.”

Interviewee: I prefer to focus on things that work really well. That’s not to say that we haven’t learned a few things from mistakes, but I think the things we really learn most from are the successes that we have. And so I prefer to focus on things that have gone right for us. And do those thing over and over and over and over. And in my mind, that’s the natural. Again, getting back to the natural state of things, that’s how things progress, is you focus on the things that worked. It’s very much like evolution. Like what works? Keep doing that. The wing? Oh, the wing is working. Let’s make a bigger wing. Let’s make a bigger wing. Let’s not get rid of the wing. Let’s make a bigger. You know there’s all these that, you know, I just like to look at the natural state of things in the world, and try and follow that method. And evolution doesn’t linger on failure. And I think that most things that we’ve done well are because we’ve already done them well before. We’re doing them again.

Interviewee: …we’ve already done them well before, we’re doing them again. That doesn’t say we haven’t learned a few things from mistakes, but I just didn’t want to talk about them earlier on the…

Andrew: My concern is that this, it’s going to be hard for people to relate to a person who tells stories just of his successes and just how simple everything is. It feels like either you got it made and I can’t learn anything from you because I don’t have it made like you. Or, it’s going to feel like you’re hiding something. That’s why I’m looking for some kind of flaw, some kind of set back that made you say ‘I’m not perfect’.

Interviewee: I’m not perfect. I’m not perfect at all, so I don’t want that to come off that I’m not perfect. I just prefer not to talk about those things, because I don’t think there’s a lot of lessons there. I’d rather you ask me ‘hey, what went right?’ I think that’s what more people should be asking, is ‘what went right?’ I know it’s very fashionable to say ‘well, tell me about your biggest failures.’ How about, what are your biggest successes? What are the things that have worked really well for you? So, people can take those lessons and maybe try to reproduce those, instead of trying to reproduce a failure, or learn about something that didn’t go right. So, I’m happy to answer questions about failure. I just don’t think it’s worth spending much time for 15 minutes. But I can give you a couple of quick examples…

Andrew: All right. I’d love it.

Interviewee: So, one thing that we did early on was when we started pricing base camp. I may have told this story before, so people who’ve heard it, hopefully you’ll live with it. We built base camp, we were going to charge an annual fee for base camp, and not a monthly fee. So we were going to charge like 99 bucks a year, I think, and like 149 a year, and something like that. And so we built the system to do that and we went to the merchant account company who was going to take our credit cards. And they asked us to explain our model. We were a brand new company at the time, and they said ‘we won’t let you charge by the year for this because you don’t really have any established business yet and we’re going to be on the hook, if three months from now you go out of business and you charge a customer 99 bucks for a year’s worth of service and you’re gone, then we’re on the hook.’ So, we can’t do that. So, we’re going to force you into charging monthly. And we were kind of pissed at the time because we built a whole system for that. But, at the end of the day, it was the best decision because we actually can charge a lot more. For the product we were going to charge 99 bucks a year for, I think we’re charging now like 200 something dollars a year, because we’re charging 24 bucks a month. I think at the time it was 19 bucks a month. So, we’re charging 240 a year instead of 99 a year. So, that was a good decision. But what’s the lesson there, really? We can talk about the failure. The failure was we built something that we didn’t need and we had to change it. The lesson might have been to ask first, but is that really a lesson? I don’t really know, and that’s kind of my point about these failure things. It’s like, well, something got lost. Well, the lesson is, back up. To me, the failure lessons are very shallow, technically. And I think the success lessons are a lot richer, and a lot more interesting. So, that’s what I prefer to talk about beca

use I think those are more useful for people.

Andrew: I don’t know, I got to say I’ve learned a lot from hearing people talk about their big set backs, their big failures here. But you haven’t had a huge one. When somebody comes on and says ‘look, I almost lost my first company or I did lose my first company. Here’s what I did wrong. I got carried away and spent too much money. I listened to what people were saying, and I’m not a person who listens to what people are saying. I’m an entrepreneur, but I found myself getting sucked into it. When I give you stories like that, you say ‘I can see myself, not now, at some point in the future having the same challenge’. And when I start to doubt myself, I’ll remember, no, don’t go where he went, he’s teaching.

Interviewee: Well, I mean, I’m basically what I’m telling you is exactly what they just told you, which is, keep things simple. And the great thing about keeping things as simple as you can, and I really mean as simple as you can, is that any failure that you have is ultimately very small. The scary failures are not the things you spend a week or two on, it’s things you spent six months or a year on. That is scary. Now we don’t spend six months or a year on those things. There’s a couple of projects that we’ve spent a long time on, but very, very few. So, for us, any mistakes we make are relatively small, so we don’t have those big failures. It’s not that we couldn’t, we haven’t run into those, because most of the decisions that we have made have been very simple to change if we went wrong. So, I wouldn’t consider like a feature we released that people didn’t like to be a failure. It was just like this thing that people didn’t like, we can make it better. A failure to me is like we made a huge investment and it went belly up, like that’s a big failure. Or we took a bunch of VC money, we hired 50 people, and we really only needed 10. That’s a big failure, and that’s a lesson to learn.

Andrew: And a common thing.

Interviewee: For sure, it is, for sure, but all of our advice is completely against that. So, our advice, actually, I think if you follow a lot of the things that we tell people, the failures and the mistakes that you run into are going to be much, much smaller. That’s why I don’t have sort of the big failure story to share. I just don’t. I want to make it clear, that it’s not because I think we’re perfect and we got everything figured out. We just have things figured out…

Interviewee: We just have things figured out that work for us right now. And they’ve been working really well for us. And we are all flawed. We’re all human. And we all make mistakes and everything. But I just find that it’s more interesting to talk about the things that have worked well because I think that’s where the real lessons are. Because those are repeatable. If you talk about your failures, you just know what not to do again next time. And knowing what not to do again next time, doesn’t really tell you what to do next time.

Andrew: Yeah.

Interviewee: Because there’s ultimately a million things you could do. So now you’re a million minus one. Big deal. I’d rather figure out the things that I can do again, that are repeatable. And that’s, I think, where the real lessons are.

Andrew: All right. You’ve seen my work here. What can I do to be more useful?

Interviewee: I think you’re pretty useful. I think actually, I think that you’re asking very good questions. So I would say stick to your interview style because I’ve been interviewed a lot lately, and lot of people basically just like will read a chapter from the book and say, “What do you mean by that?” So, and that’s fine, too, because there are interviews where that’s applicable, but I like the type of questions that you ask.

Andrew: What type of questions? If somebody wants to be a better interviewer, if maybe someone who’s listening to us is preparing to interview you in the future, what kind of questions can they ask?

Interviewee: Well, I think not talking a lot is a good thing. So there are some interviewers who just like to talk forever. I’ve done most of the talking here, which I think means that you’re a good interviewer because you’re getting me to talk. That’s what the whole point of the interview is, not to hear yourself, but to hear the person that you’re interviewing. So I think you’re very good at that specifically. And might just say, “Why” or “Tell me more about that”, and that’s good, instead of being like very long and drawn out about questions. There are a lot of interviewers who are basically interviewing themselves, with an audience member. And I think those are the wrong kind of interviewers. So I like your approach to interviewing.

Andrew: Is there a kind of question that you would like to ask entrepreneurs? Is there a kind of question that, if you were doing these interviews, or were typing them in in the chatroom, that you’d want me to ask?

Interviewee: Ask me or just ask in general?

Andrew: In general. Are you looking for questions about where the turning point is for an entrepreneur? How they convert? How are interviews more useful for you? You’re an entrepreneur who’s always a student.

Interviewee: I like to hear about people’s stories, like behind the scenes. Like where they came from. How long they’ve been doing the things they’ve been doing. How long they sort of were working on other things before they did that. To me, that’s sort of really interesting stuff. Not so much the tactical stuff, but personal stories behind the scenes. I find those to be most interesting. But that’s just maybe just my taste. I just like biographies and, you know, like to hear about people, more so than the tactical recommendations because at the end of the day, you know, everyone’s got to do their own thing. And everyone’s situation is different. And you shouldn’t follow anybody. You shouldn’t only do what I say, what someone else says, like that’s not really interesting. But you should take a little bit about what I say, and maybe a little bit about what you say, and a little bit about what someone else says, and mostly what’s in your own head, and make up your own mind. So that’s why I like more of the personal stories because those aren’t really so much about what to do. It’s just what’s interesting about somebody. Where they started.

Andrew: You mean the non-work personal stories?

Interviewee: Well, no, no, like for me it’s more like work personal stories. Like when did you start working? What did you do when you were growing up? Where you someone who’s always been working? Or did you get your first job out of college? Like I think those kind of stories are interesting. Or what did you do? Like when I was 13, I worked in a grocery store. I sold shoes. I pumped gas. When I was in the summers in high school, I sold computer equipment. I just did a bunch of stuff. And I think that that sort of taught me how to make money. And you know, I think that those are sort of interesting things to talk about. Like, “What did you learn from the shoe business?” Or what did you learn from, you know. Even though that’s not what I do now.

Andrew: What is one of your big take aways from all that?

Interviewee: I think it’s really important to start young, and learn how to make money, when you’re coming up. And not wait until later to like make your first dollar when you’re out of college, or something like that, or even when you’re in college. But my parents put me to work when I was 13. That was the first moment where I could get a work permit. So they went down. I went with my parents down to like the city thing. I don’t even know what it was called.

Interviewee: People aren’t any different today than they were 20 years ago. People weren’t any different 20 years ago than they were 100 years ago. People want simple things that work because they’re busy with their own stuff.

Andrew: What did you do with all the money, by the way, that you made as a kid?

Interviewee: I bought a car stereo. I bought… What else did I do? I bought some stuff. I don’t remember what I bought, though. I bought some stereo equipment. I bought stuff. Shoes, I was really big into shoes at the time. So I bought, I bought a lot of shoes, like you know, basketball shoes and stuff like that. I bought… I actually, what else did I buy? I don’t even remember. I don’t know. I put my… You know, I spent. I kept a lot of that money, and in college I was able to live comfortably, unlike a lot of people who are in college, or you know, just eating Ramen or whatever. I was able to actually get a few nice meals, and live in a nice house, and things like that because I had money that I’d saved up. And I was actually making money while I was in college. So I was freelancing and stuff like that. So to me, those lessons that I learned from when I was 13 on, are always the same. Give people simple things that work. People’s problems are mostly simple problems. And if you do that, and you do that well, and you work with cool people that you like, like I think your life can be great. And you don’t have to go for this big, huge billion dollar crazy, mega-huge idea thing. You just don’t have to do that.

Andrew: All right. Well, let’s leave it there. Thank you for doing the interview.

Interviewee: You bet.

Andrew: I’ve talked a lot about the new book Rework. I really hope people go out there and buy it. I’ve got it on my iPhone.

Interviewee: There it is.

Andrew: It doesn’t have that same cool cover on the iPhone.

Interviewee: No, it doesn’t. But the photos, or the illustrations, the book has a bunch of illustrations, and they all look good on the iPhone, which is actually pretty cool.

Andrew: Actually they really do.

Interviewee: Yeah, they do. I was surprised. I didn’t think they would. They look great.

Andrew: I was stuck on buses for hours and hours in the southern-most part of South America, no bathroom break, no nothing. That book is what kept me going. I can actually read on the iPhone in traffic like that, but the book was so easy to read, and such a breeze, and so inspiring, I was able to just rip right through it on those buses.

Interviewee: If you have a minute, actually I want to talk quickly about that.

Andrew: Yeah.

Interviewee: We specifically wrote this book quickly. You couldn’t do that for two or three hours.

Andrew: Actually, hang on a second. Let’s just let the video catch up with… It looks like we lost each other. And now the video caught up. Sorry. So what were you saying?

Interviewee: No problem. OK. Yeah, the book was written succintly so people could read it in a couple of hours. It’s short effects, the whole point of reading it this book is, hopefully you’re in business, or you’re going to be in business, and that means you should be working, not reading books. So I’ve always had a problem with reading books that take two weeks to finish. Or books that are 300 pages, and are just full of text all through. And I never finish them because I feel like half of the book is valuable, and the second half is just there because it needs to be a thicker book. And so we wanted to be sure that you could finish this book in two hours, or three hours of your day. For those people who don’t like books because they never finish them, they are too heavy or too thick or too dense, this book is going to different. It’s airy. It’s fast. It’s easy to read. And I think hopefully you’ll all get back to work pretty quickly after reading it.

Andrew: Absolutely. It’s the kind of book you could read on the subway into work. It’s the kind of book you…

Interviewee: Yeah.

Andrew: that you can read even in a taxi into work. And like you said, within hours you can read it. And in fact, you can dip in and out of it easily, too, because each chapter, each section, is fairly short.

Interviewee: Yeah, it is. It is. So well, thanks again for having me.

Andrew: For a lot of people…

Interviewee: It was fun, by the way.

Andrew: All right.

Interviewee: I enjoyed it.

Andrew: Thank you for coming back here. Thank you guys all for watching. See you on the site.

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