Business beyond profit

Welcome to rework a podcast by 37Signals about the better way to work and run your business.

I'm Kimberly Rhodes joined by the co-bounders of 37Signals Jason Freed and David Heinemeyer

Hansen.

If you have followed us on the podcast where Jason and David are on their blog or Twitter

X, you've heard them talk about profit.

And while we've always been a profitable company, we're not always after more, more, more.

Thought we would talk about that I think that's kind of an atypical philosophy for a founder.

So let's dive into it.

Jason, I've heard you say, even on this podcast, like, we have enough, like, we're good.

Tell me, like, where did that come from?

Did you always feel like that or was there a point where you were like, no, we're going

to build the biggest company possible?

Aiming for a size has never really been a thing.

I described it recently in this way that kind of came to me as I was describing it that

I kind of like, which is there's a period in a company's life where I think you need

to achieve some degree of escape velocity, kind of like a rocket.

You got to get off the ground.

You got to get up in the sky.

You got to start moving.

But you don't just keep going.

There's a point where you reach that and then you can just orbit to some degree.

And that's this idea of enough.

It doesn't mean you shouldn't keep making new things or be excited about new things that

work or be disappointed by things that don't work.

But like, generally, you're within some sort of a range, you're no longer trying to achieve

escape velocity.

You're not accelerating eternally.

You've got to a place and now you can orbit and maintain.

You can maintain quality and you can maintain enjoyment and you can still again make new

things and learn new stuff.

All those things are possible without having to have your engines on full blast.

I don't know when that happens.

It's not like you should get there within three years.

I don't know.

It all depends on who you are, what your situation is.

But this idea of finding an orbit, I think, is a good, just thought to keep in mind.

When are you in orbit?

When can you sort of turn the engines back a little bit and then enjoy from where you

are?

Maybe more will come, maybe less will come, things don't always stay in orbit, things

eventually will spiral down.

There's a point where things don't just stay there forever.

But I think it's a good place to find, at the very least, and to know that that does

exist and that it's not afterburners forever.

Because I think you do that like you're probably going to be short-lived.

It's very, very, very hard to always be at the same level you were when you were taking

off.

And hopefully get a chance to take off.

I think that's obviously the hardest part for everybody.

And just personally, from your trajectory, when in this 25-year history, did you guys

orbit?

I'm not really sure.

And by the way, from an orbit, you could also, if we're going to get all spacey about

it, I guess, you could land on the moon.

That could be a base for a while, then you could take off again.

Things can happen, things do happen.

Base camp was our hit for a long time, then we had hay, and for a while that was flying,

and that's kind of settled into an orbit.

And base camp 5 is going to come out soon, and maybe that'll be another accelerant.

But the whole point is, this idea of having to constantly find all the fuel and have the

throttle all the way open all the time, things in nature don't do that.

You grow a lot until you're about 21, and then you kind of don't grow that way anymore.

There's growth spurts.

I think the more we can echo the natural process, the better off it is.

I think any time you're trying to push against what the natural world kind of suggests,

you're in a territory where it's a good chance it's not going to last.

So I think in life, there's a lot of changes early on, and then you kind of eventually find

your way.

And you settle in, and then you get wiser and smarter and do other things, and learn other things

and continue to grow.

But you don't feel like you're chasing anything quite as much anymore.

I think that's what I'm trying to get at here.

And I think part of the benefit of accepting that is managing your expectations, because

if your expectations are, then you will just forever be accelerating and going faster and

faster and getting bigger and bigger.

Just look up the stats.

Look up the stats on how many companies co-out of business, all these promising startups

that explode.

It is such a vanishingly small number of companies that fit that profile of more or less

eternal acceleration, yet they get virtually all of the admiration and all of the emulation

from others who try to fall in their footsteps.

And on the one hand, I think that's good.

I think it's great that we have a subset of the entrepreneurial workforce that's insatiable,

and we have some elons of the world that will not be satisfied until we are literally

populating the stars.

And I think that's great.

And we should have some of that.

And we should also have an enormous amount of room for people who just go like, I'm just

going to build a great business.

And whatever great means, maybe that's seven folks just working in a wonderful niche that

is satisfying everyone and that's great.

Or in our case, it's about 60 some people.

We've been between 40 and 80.

We're actually literally at the average point here, the median between the swings from probably

15 years, that feels like our natural size.

And we've at times tried like, what if we push a little more and we get a little bigger

and then realize quite early, like, ah, if you know what, maybe some of our initial instincts

on staying relatively small, staying around this size, we're correct.

Like that was the right shape form for how we wanted to run the business and what felt

not just comfortable because comfortable often could be taking us a halfway lazy.

I don't think there's anything lazy about what's going on at this company, even though

we're only 60 people and we're not trying to be 600, let alone 6,000, there's nothing

lazy about that.

But there is a comfort in it.

There is a comfort in just knowing who you are and what you're good at and how you like

to work and that you can find an audience and a customer base being that way versus this

constant anxiety about like, I need to go faster, bigger, stronger, whatever.

And again, I know I'm talking sort of out of my mouth in both sides, whatever the American

axiom is there.

Like I have this great aspiration for that class of people who are never satisfied and

I think there's great progress for mankind to have that be an important ingredient.

But then I also just see so many who like try to emulate that and they're just, they're

not going to be there.

I just go like, dude, you could be happy.

You could choose to be happy.

You could wake up tomorrow and go like, holy shit, I built a company that's employing

25 people and we have this nice steady business.

Isn't that amazing?

Or you could choose to wake up tomorrow and go like, damn it, we've stalled, we've plateaued,

we're only 25 people, like look at that competitor or this competitor going much faster or

that product would just launch or what if A.I. is going to eat everything tomorrow?

You're like, you could just choose not to think like that.

You could choose to be happy.

You could choose to be content with what you probably envy once upon a time, not having.

Like this is one of those core stoic principles that everything that you have right now,

you've generally been progressing in the world, was one something you thought my life would

be amazing if I got to this point and then you got to that point and you gave it literally

five minutes and then you weren't happy again.

Some of that is human nature and that's just sort of the instincts pulling in us but

you could also like maybe elevate like one step above just those base instincts and layer

on some cognitive post processing on top of that and arrive at something where you go like,

yeah, do you know what, I really like what I do and I think that is actually one of the great

blessings of Jizz and I working together in this way is that for whatever reason we arrived at a

very similar shape company in our head as the ideal.

This as we are right now 60 people, I'm not dreaming about more, I'm not even really dreaming

about less some days but most of the time I'm like, this is great, this is a great size for

this kind of company, may it last long and by the way, it won't last forever, nothing freaking does

and then when it's over, one way or another, on a slow decline, on a fast decline or

whatever the end comes, I'm going to sit back and I'm going to smile about it.

Holy shit, can you imagine 25 years of working at the dream company?

It is ideal shape for so long, what an incredible gift and pleasure and you can literally just

choose to have that mindset about anything. Oh my god, we got 18 months working on this really

exciting niche before it disappeared and AI ate it all. What a blessing.

I do think the amount of time you guys have been in business in software is rare and I think for

most companies they think success is getting bought out, getting acquired, getting this influx of

unicorn type money. I know you guys don't think about that. Tell me, tell our audience, give me the

blurb why staying independent has been so important to you guys. When you could be quadruple trillionaires,

whatever the number is. I don't know if that's even true. I think that's the other thing. It's like,

I don't know what's possible here. What would have been possible? It's very likely, let's say we

raised a bunch of money. We could have flamed out very quickly. We could have hated the investors.

Dave and I could have been done a year and a half after that. Who knows? It's very easy to assume

that there's actually another way that's better and maybe there was no other way that was better.

Maybe this is the only better way for us. Who knows? I think ultimately we get to work on the

kinds of things we want to work on with the kind of people we want to work with for as long as

we want to until something else happens where we can't. That in itself is a pretty great way to

spend 20 years of your life. Maybe 30 years. Who knows? Maybe more, but to have the option to do

that, to have the opportunity to do that and not be told that you can't because of some other bargain

that you made early on that you have to be done with this in five years or seven years or you have

to go IPO or you have to sell or whatever because of someone else's financial requirements to not

have to have that over you and to know that the sky is blue and like we can do whatever we want

until we can't and we have to live with the outcome there. To me, I won't speak for David.

To me, it's hard to come up with a better way to spend a career. Broadly, I'm sure we both

had moments where like, oh man, it would be amazing to work on this or amazing to be over there

to imagine what it must be like to work at Anthropic right now or something. There's other exciting

businesses in the world and amazing things happening. What would it be like to work for Elon Musk?

I mean, maybe I'd love it, maybe I'd hate it. I don't know, but that's kind of exciting.

It must be incredibly exciting. I definitely can admire people who choose that path and to see

other things going on or wouldn't it been cool to like try to revamp X. There's all these things,

right? But still, I love what we're doing. I love how we're doing it. It's fun to do it the way

we want to do it. And all things considered, it's hard to imagine trading it for anything else

because you can trade things for these short moments. But then you're like, I have to live with

that too. And would I be able to sustain through that too or would I be out the door in three years

and now what? So I have this feeling of just like somehow, some way, we managed to set this thing

in motion, find an orbit where we're able to to maintain and sustain and do all sorts of new

things without getting knocked out of orbit. Try all sorts of different things without getting

knocked out of orbit. And then eventually, you know, the end will come wherever that is. But it's

nice to know that for the most part, we're in a place where we can do what we want the way we

want to do it and do things no one gives permission to do. I think ultimately that's the really

exciting part. That to me really summarizes the prize. And the prize is independence, not having

people tell you what to do. And I knew very early on in my career that I was just an incredibly

bad employee from that perspective. Like I would do very poorly and I did very poorly in a number

of situations working for other people when I thought I knew better or I had a better way of

attacking a problem. And just I couldn't because someone told me, yeah, that's not what we're

doing. We're doing something else, right? We all have different constitutions. I know, I mean,

obviously we have a bunch of great employees at this company who I occasionally do tell sort of

what to do because I have a direction in my head. I wanted to go in the direction. And the world

needs all of it, right? Like the world would be an awful place if it was full of just founders that

couldn't work for anyone else. I mean, how the fuck were we going to get anything done if that was

the only kind of character that had happened at the Earth? Thankfully, that's not true. But coming to

turns with who you are. And I mean, sometimes that takes a little bit of finding. It didn't take me

very long fighting. I knew it like 19. All right. Fuck someone's telling me what to do. Don't

fuck and tell me what to do. Right? I was just like a punk rock rage whenever I could get even to

almost benign redirection from some authority figure. And I'm sure there's a wonderful psychological

journey you could go on there. But I've just chosen to accept that. And she's like, all right,

do you know what? That's me. I'm going to get the best out of that. Thankfully, I am pairing that

revulsion to being told what to do with a fairly burning passionate instinct to doing things. And

dad's actually not a bad recipe for starting a company with someone who's like minded enough that

when you are setting the rules, you feel like you're in charge, even though you're sharing the

charge here. And then you can end up with this place where you can lean back and go like, all right,

I got the most important thing. I got the prize. I wake up most days, not every day, but most days

were whatever fleeting thought, instinct, inspiration, however fleeting it is, little butterflies

sipping across like, oh, I have an idea. I just want to do that. I can just do it. I could just

pursue anything that popped into my little head. And that's very satisfying. I mean, I think we've

gotten a bunch of great things out of it. Sometimes it's products, sometimes it's just experiment,

sometimes it's attention grabbing, takes, sometimes it's software, sometimes it's all these things.

But being in that flow that, do you know what that's okay? I don't have quarterly earnings to

report. I don't have whatever boards to answer to. And none of that. And that's great to have

as the main thing. And then I've also been lucky enough to see what the other side is. Because I

think over those 25 years, Jason and I occasionally have peered over the fence and got like, is it

greener over there? Should we try something else? Peered over the VC fence. Is that the fence we're

talking about? Yes. More resources, bigger company, more dashes and bushes for whatever

definition that is, products, all these things. Like, let's be something else. Let's try something

else. And I think we've done a few of those things. And like, that's turned out. And then we're

also done a few things. We're like, ah, no, actually, we got the right idea from the beginning

on this topic or another. And therefore, we're happy with where to be. But you've got to test

that, right? Especially early on, this is why as much as I say, like, I'm not good at working for

other people, I had to work for other people to find that out. Right? Like, what if I found out that,

like, I just loved working for other people. I just loved narrowing in on sort of a thin slice

and someone else could worry about wherever that's going to go or where we should go or whatever.

I mean, I'd be wasting my time as a founder. So I have to work for a bunch of other people. And I

did. And these are still some of the core memories I have of my career is working for other people,

letting that inform my intuition about how I would want to build a company. If I did,

I actually pity founders who just was straight from school into another running their own empire

and never having to pass through the right of passage that is being incest that some fucking

pointed hair boss is telling you, well, shit, that you don't want to do. And you've got to do it

anyway, right? Like, that's actually a really important experiment. I'm not saying do it for 30 years.

I'm like, I don't know, two, three, you can compress a lot of learning and a lot of actually

productive animosity towards how it's done everywhere else in just a few

a couple of years. And I'm really glad that we did that. And I'm really glad we ended up in this

rocking chair as we are now, right? Like, slightly grain. What a great run. And being able to sit

back with a little bit more relaxed gratitude towards the path than we probably had early on.

Like, even though we were doing the impending thing, even though we were trying to find the

size of the company we were like working on, there was more of a, like, sort of like a intense

burning flame that was kind of a little flickering in different directions than exactly

nowhere was going to go in the early days. I joy having gone through that and joy like,

you know what, we have this nice simmer and we just sit in front of that fire and pursue whatever

inspiration comes out of way without this sort of like, oh my god, this got to work or if we do

this wrong, it's going to, it's going to what? It's going to be another experience. Isn't that

wonderful? Can we get some more of those? I also feel like you guys are looking at profit in a way

where we're also like, if we want to be profitable or continue to be profitable or even be more

profitable, we also need to be looking at our expenses. For me, that's again, outside perspective.

Seems like we go through these periods where we're like, we're going to knock things down. Cloud

Exit is a good example, but like, where are we spending money? We don't need to spend because that

is going to keep us on this trajectory, on this orbit, keep the fire burning, all of the metaphors we've

used today. At the end of the day, you're only real competition are your costs. You've got to make

more money than you spend and we're well beyond that right now, but you don't want to get sloppy

there. You want to be maybe a little bit sloppy, because you don't want to be so afraid of losing

anything that you don't do anything. Obviously. Every penny that comes in is our own money. We don't

owe it to an investor. We're not paying back bank loans. We're spending our own money. So,

we're also saving our own money. And a penny saved is a penny earned, essentially, and it just

makes for a good business too. I have a sharp point for the most part. Again, not always. We don't

want to be pinching pennies in a way where it feels like we're afraid, but ultimately, yeah, if you

want to stay in business, you've got to make more than you spend. And the less you spend, the more

room you have to make mistakes, I like to think of it in this way. We've done this for a while,

which is you can buy marketing, you can buy audience, you can buy, but you can also buy mistakes.

In a sense, by having fat margins, do you have more room to make more mistakes? You have more room

to try things that don't work out. I think that's a good place to spend your money, actually,

is on margin, essentially, and room to screw up and to illuminate some of that fear that a lot of

companies have about getting something wrong. So it feels good. And the best way to do that is

just to lower your costs as much as you possibly can within reason. So you have more room on the

upside to screw around. And that's actually tied very much into independence. The ability to do

what we want to do, make our own mistakes, do things no one gives permission to do, because we

have room to do those things. If we were a grocery store working on one or two percent margins,

you can't do much, but we keep our margins high by keeping our costs low. And that's a wonderful

thing. And I think having some respect for that maintenance burden that, you know what,

when things are just like your vast growth rates are like, ah, who cares about expensive? If we

just keep growing like this for another five years, none of it is going to matter. None of the

expenses is going to matter. This is all just opportunity cost that we should be pursuing. Yet,

do you want to just, you haven't been around long enough, like eventually almost all companies in

this world are a tiny handful of super behemoths. We'll arrive at the day like, do you know what,

if you keep thinking like that, eventually your cost will catch up or exceed, or maybe they even

started exceeding your income and it'll never settle out. You'll never be able to maintain the

prize of independence. Afford all those mistakes as Jason says. Afford, not just even the mistakes,

but also just the relaxed relationship with chasing wild loses of your imagination that just

popped in and going like, do you know what, I'm just going to spend time over here with my little

fees, planning some intellectual seeds, some experiments, and so on. I guess not even like

mistake, not mistake. I don't even have to think about that. I don't even have to think about

the outcome of it. I could just think about, I enjoy entertaining ideas in this domain right now.

That's enough. Like that freedom to live in that moment and only occasionally think about the

longer term is truly special. And I think you will get a very similar answer for anyone who's

sat in the opposite direction or opposite chair where they, on a quarterly basic, for example,

have to report earnings to the market. Anyone who's been a public company and normally,

do any way you get to be a public company is like you've been really successful. I like you look at

companies that are at least under major indexes like, they're all phenomenally successful companies.

Like lots of people, lots of revenue, lots of customers you think they'd have it all. They don't

have this. They don't have the freedom for that quarterly clock. They don't have the freedom for

telling a bunch of investors on an earnings call to go fuck off. Like, they're actually really

constrained a lot of ways now. They get all the things and they get different kinds of impact and

maybe the monetary benefits are better. And oh, great. Wonderful. Awesome. But you don't have this.

And I think this gets to the crux of enough is, wouldn't you realize just how valuable or

these ones I realized and chasing realize how valuable that part of it is, that independence,

that freedom, that relaxed relationship to your work, taking it seriously but not holding

so tightly, it's just bliss. In a way, we're like very few things I would sell this for, very

few things I would sell it for. And then, of course, the other thing I think also being blessed

with, comparatively speaking, modest ambitions for your financial rewards. I don't need to be a

billionaire to have a great time with basically every hobby I've ever imagined. I've been able to

pursue maybe short of owning like a gold stream. Like, those are pretty nice. Okay. It's also good

to have something that slightly beyond your reach, right? Like, something like that you didn't

unlock all the secrets of the game. You don't have infinite money glitch and whatever. And if you

have the constitution that allows you to do that, arrive at that place where you can be comfortable

with what you're able to do financially, you just realized then what is more money going to do,

right? I'm not saying I'd say no to $10 billion, $10 trillion, but I wasn't going to change the

nature of my reality and what I've enjoyed doing. So why would I trade this thing I price so highly

being able to show up at the computer every day and just go like, yeah, today I'm going to do this

or today I'm going to do that and not have these impositions of which direction we have to take.

That seems just like a fool's errand regardless of whatever it is and you should never

that trade anyway, right? Like, it's not like anyone who shows them. Hey, if you follow my

rigid schedule, I'm going to give you a trillion dollars. Yeah. Now, I wasn't trading anyway. So

fall in love with the things you have. That is a great place to wrap it up. Rework is production

of 37 signals. You can find show notes and transcripts on a website at 37signals.com slash

podcast. Full video episodes are on YouTube. And if you have a question for Jason or David about

a better way to work and run your business, leave us a voice mail. You can do that at 37signals.com

slash podcast question or send us an email to rework at 37signals.com.