The Cashflow King: “Here’s How I Do It”, Negotiating w/ Jeff Bezos, Elon’s Cracked Rocket
No Goals, No Regrets, Just Profit - March 20, 2024 (about 1 year ago) • 01:05:02
Transcript:
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Shaan Puri | I got four words for you: **self-funded cash cow**. That is what today's guest, Jason Fried, has built with his company, 37signals. It's awesome! You've probably heard of it. I heard of it because I read his book, *Rework*. I read this thing like a decade ago, and I still have so many of these pages folded because it's full of gold.
But the best part is, he's not just an author. He actually is an entrepreneur; he runs his own company and has done it for like 25 years now. These guys say next to nothing about their numbers. The only thing they've ever said is, "We make tens of millions a year in profit." But I do think this is actually kind of a juggernaut. Jason Lemkin, a great investor, once said that the two greatest self-funded cash flow companies he's ever seen are Craigslist and 37signals.
The best part is, they do it by kind of kicking the traditional playbook to the curb. They set no goals, work four days a week in the summers, and spend next to nothing on marketing.
So, I wanted to ask Jason three questions. The first is: **How did you build this low-stress cash flow company?** You are the cash flow king. How did you do it?
Then we asked him, **What was it like being face to face with Jeff Bezos negotiating a deal?** He got to know Jeff Bezos 20 years ago, and I wanted to know what it was like to be in the room with him.
Lastly, he's got this skill where he's able to generate massive interest in his products pre-launch, and I wanted to steal that superpower. **How do you do this before you've even launched a product?** He uses these founder letters to blow up his products, and so we talked about it. We got him to sort of explain bit by bit how he does those and how he writes those things.
Alright, no more teasing. Enjoy this episode with Jason Fried!
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Sam Parr |
We were doing research before this podcast, and I've looked into a bunch... I'm inspired by you. Is it weird that we know that you spent something like $30,000,000 on homes in the past two years? You know, you started like a tech company, not looking to get into this, and now your home purchases are on the blogs.
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Jason Fried |
It's embarrassing, and frankly, I tried to hide them. I tried to do all the things like double LLC and the whole thing. I like architecture, I like houses, I like land. That's really the thing I found myself liking a lot. Unfortunately, it's very hard to just...
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Shaan Puri |
How do they find it? How do they know? Because they're like, "Jason Fried bought this house." And me and Sam, we're supposed to be prepping for this spot, and we spent like 20 minutes clicking through these photos being like, "This house is sick!" How do they actually find it?
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Jason Fried |
I don't know, my guess is... so, like, technically it's hidden in a sense, but I think that all you gotta do is probably ask a real estate agent. You know, you kind of have NDAs, but someone knows something. Or like the electrician or the cable company... someone hangs out and finds out, or they look in the mailbox and see the... you know, there's a million ways, unfortunately.
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Shaan Puri | What's cool about you, and what I honestly admire, is that we started off talking about how big the business is. But the reality is, what I admire is that some guys are into beautiful eyes, some guys are into butts. Me and Sam, on this podcast, we are into people who define their own game and then play it. That's the one thing I think you do really, really well.
You've gone viral many times by putting out there some of your philosophies on how you approach business. What I want to do is read you a quote, and I want you to react to it. I want you to explain and unpack a little bit for each one of these, and we can go fast.
So the first one is your anti-long-term planning. You don't do long-term plans, and here's the quote I like: "Long-term planning is a fantasy. I don't plan long term because I want to do what I think, not what I thought."
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Jason Fried | That's right.
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Shaan Puri | Explain that one. | |
Jason Fried | Yeah, long-term planning is what you thought, and like doing figuring out as you go is what you think. I don't like the idea of having a thought 6 months ago, 8 months ago, or 12 months ago and feeling like I have to follow that whim just because I happened to write it down. I don't get that.
I know a lot of people think there's a lot of certainty or comfort in setting out a plan, but really, that plan is just based on a moment in time. Then people are like, "Well, you can adjust." Well, if you're going to adjust, just adjust! Just don't even do the first plan.
So my feeling is just to make it up as you go. Frankly, we think about things 6 weeks at a time and go from there, adjusting all the time, and that's fine. We've always done it that way, and I feel most comfortable, frankly, just paying attention to reality in the moment and making calls along the way.
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Sam Parr |
You also wrote that you've never had a goal. You said you had this whole blog post that you don't like goals. I think you might be... maybe you were quoting another person, but you said:
> "The reason that most of us aren't happy most of the time is that we set goals not for the person we're going to be when we reach them, but we set our goals for the person we are when we set them."
I don't think you explicitly said that the company doesn't set goals, but you sort of implied it. Is that the case?
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Jason Fried | Yeah, by the way, that quote is from a fellow named Jim Cudall, who is a good friend of ours and runs Field Notes, which a lot of people know.
You know, our goal, our only goal, is to be profitable in a given year. We've been profitable every year for 25 years. That's the only thing we look at: we want to make sure that we make more money than we spend. Otherwise, we don't really set goals or have expectations other than just to do our best work.
I'm not a fan of thinking that you're going to do better work if you set a goal. I think you should do your best work all the time, as best you can, and again, let the chips fall where they may.
The way I think about this, which I think helps people understand it more, is if you want to go out for a run and run a 6-minute mile, and you end up running a 6:04, you might feel like you didn't hit the goal and be upset, like, "I almost got it."
Now, some people might say you're going to work harder next time, but what if the goal was 6:05 instead? It's a 5-second difference, and you would have beaten it and felt differently.
It's like, does 5 seconds matter? To me, the right question is: was it worth it? Did I enjoy the run? Did I have a good time? Do I feel good now? Do I want to do that again? Am I injured? No? Great! Did I get some fresh air? Yes!
If you ask different questions, then you're not so obsessed with this...
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Jason Fried | This goal line that you set up is really arbitrary and made up to begin with. So, I've never believed in goals. I just kind of do the best I can and see where it goes.
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Sam Parr |
So... I want to agree with you because I think I would be happier if that were the case, but there is some logistical pushback. Like, well, you guys launched Hey.com a few years ago, and you have to plan how much to allocate towards that project. Otherwise, potentially you could be unprofitable. So how do you justify looking at, "Well, this needs to hit this metric," or...?
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Shaan Puri | Let's ask the question slightly differently. I come to work, you're the CEO, and you're like, "No plans, no goals." I'm like, "Alright, so then what are we doing here? How do we do it? What is the answer?"
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Jason Fried | Well, this is going to sound strange, but we don't think that way. We look at the big pile and go, "At the end of the year, do we have more money than we spent?"
Is it because of this product or that product? Or this endeavor or that endeavor? Or this cost savings or that expense? Frankly, I don't really care. To me, it's just one big pile. It's a range; it's a feeling.
We actually feel it's more of an aesthetic for us. David and I talk about the aesthetic of running a high-margin business. It feels right to do it that way. I don't want to run a business where I'm nervous all the time.
You're nervous when you're looking at 1 or 2 points here and there, and you're like, "Shit, we're barely breaking even." I don't want to be in that kind of company.
So, we keep our costs low. We have a huge customer base—over 100,000 people pay us on a monthly basis for a variety of different products. Given the fact that our costs are low and our revenue is high, and we have a very diverse customer base, things can be sloppy in a good way.
I feel like it's a comforting way. It's not like a reckless way. We are careful about costs; we think about costs a lot, actually. But we don't worry too much about points. You know, that's just not how we look at things.
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Shaan Puri | And so this approach, where you're like, "Let me give you what I see from the outside. You tell me which parts of this are me fantasizing versus reality."
The way I view you guys is that you kind of think about what needs to exist in the world. For example, you're like, "There needs to be email that doesn't stress you out," or "Software that you pay for once and not every single month for the rest of your life." Every additional employee you have costs more and more, right?
It's sort of like, first, there's a view on what needs to change in the world or the way you want things to be, or what you wish existed. Then you're like, "Probably some second check," which is like, "Can we build it? Are we the right team to build this? Do we have an approach that we think might work?"
Then you budget this like 6-week sprint where you're like, "Let's try to make a version of that that we like," and then we'll iterate from there. We're willing to tolerate like 6 weeks of attempt at this to get to the next milestone of belief. We'll give it, you know, a leap of faith for 6 weeks, and then after that, we reevaluate and decide what to do from there.
Is that correct? What parts of that are incorrect?
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Jason Fried | Partially. So, we will spend a lot more time than 6 weeks exploring an initial idea. For example, when we're going to make a brand new product, we might spend 6 months wandering around an idea and seeing where it ends up.
Then, at some point, I don't know... it's just a feeling. Like, we spent enough time on this. We're feeling good about this; this is feeling better and better as we go. Let's do this.
Then you commit to doing it, and you do it 6 weeks at a time. Or you get into something, and you just wander for a while. You go, "I'm just bored," or "I don't know where else to go," or "This doesn't really seem interesting," and you stop.
You just give up, frankly. You just give up, which is something I think more people ought to do.
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Sam Parr | Alright everyone, a quick break to tell you about HubSpot. This one's easy because I'm going to show you an example of how I'm doing this at my company. When I say "I," I mean not my team; I mean I'm the one who actually made it.
I've got this company called Hampton. You can check it out at **joinhampton.com**. It's a community for founders, and one of the ways that we've grown is by creating these surveys. We ask our members certain questions that a lot of people are afraid to ask. So, things like what their net worth is, how their assets are allocated, and all these interesting questions.
Then, we'll put it in a survey. I went and made a landing page, so you can actually see it at **joinhampton.com/wealth**. The hard part with this is that with Hampton, we are appealing to a sort of higher-end customer, sort of like Louis Vuitton or Ferrari. So, I needed the landing page to look a very particular way.
HubSpot has templates—that's what we use. We just change the colors a little bit to match our brand. It's very easy. They have this drag-and-drop version of their landing page builder, and it's super simple. I'm not technical, and I'm the one who actually made it.
Once it's made, I then shared it on social media. We had thousands of people see it and thousands of people who gave us their information. I can then see over the next handful of weeks how much revenue came in from this wealth survey that I did. I can track where the revenue came from—Twitter, LinkedIn, whatever. I can actually go and look at it and say, "Oh, well that worked, that didn't work. Do more of that, do less of that."
If you're interested in making landing pages like this, I highly suggest it. Look, I'm actually doing it! You can check it out; go to the link in the description of YouTube and get started.
Alright, now back to MFM.
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Shaan Puri | Sam, do you do this wandering thing too? I've seen your process, and I feel like it's kind of similar.
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Sam Parr | Yeah, it's... you know, I don't want to sound like I'm "stiff in my own farts," but it's a little bit of an art. I feel like an artist a little bit where I'm exploring a concept.
It takes about six months for some inspiration. I feel inspiration, and then I have to wander to kind of hone in on the painting and the concept a little bit.
It's sort of like one of those things where you take a lot of showers and get different ideas, or you go for a walk and get a different idea for like six months until it's like, "Alright, I think I've honed in on this concept. Let's move forward." Is that what you do?
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Jason Fried | Yeah, that's really a big part of it. It does feel like an art. Not to get stuffy about it—I'm not an artist—but we just explore and leave room to explore. The margins allow us to explore, and being profitable allows us to explore. Not having investors allows us to explore. Not having a board allows us to... all these things allow us this independence. It allows us to do the things we want to do, the way we want to do them.
But at some point, you also don't want to be reckless with money, time, and people. At some point, you go, "This just isn't going anywhere. Let's stop." So we really do take our internal motivation temperature. A lot of it is wrapped around motivation. Like, are we pumped about this? Does this feel good? If so, let's keep doing this.
Then you finally kind of come into something. For example, with Hey, briefly, Hey didn't start out as an email service. It started out actually as a rethink of Highrise, which is our CRM product. We stopped developing it years ago; we still offer it to existing customers, but we don't sell it anymore.
We had this thought: "What if we explore that again?" So we began to explore that, and through that exploration, we realized what we were doing was building this sort of email system that we wanted for all of our emails—not just business communication emails, but all of them.
So we thought, "Ah, that's interesting. This is actually like an email thing." I remember bringing this idea to David. I had been exploring it with one of my designers for a while, and he said, "Yeah, that is interesting. Let's see where this goes."
So we started kind of hooking it up. We did the UI first—this is what we always do—and showed a bunch of UI. Then we started making it work. There's something here, and you feel this pull of something here. There's a certain gravity to these ideas, and it pulls you towards it, and you keep going for a while. Then at some point...
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Jason Fried |
Though you've got to get serious, and that's when you begin to break this into 6-week chunks essentially of work, or monthly chunks depending on it. But you've got to have some end to these things so you can get on to the next feature, and the next feature, and the next feature. Otherwise, you'll spend too much time trying to perfect just one thing. Yet a product has to do a lot more than just that, so you kind of have to... you've got to time-box these things in a sense.
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Shaan Puri |
Well, you said two things that I liked:
1. You said one of your superpowers is focus.
I'm sorry, I was saying this about you, and what you said was, "No is just saying no to one thing. Yes is saying no to a lot of things."
I really love that. "No" is just saying no to one thing, but "Yes" is saying no to kind of the whole future set of things. Because you've now taken up your mindshare, your talent, and your hands with the thing you said yes to.
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Jason Fried | Yeah, "no" is a very precise, you know, precision instrument. Because you get to evaluate a thing and say no to it. Then you have the whole spectrum of everything else that's possible available to you at that moment.
So, I think "no" is a great tool. It's very specific. "Yes" is a blunt force instrument that kind of damages a lot of things, essentially. Now, it might be worth it because that thing you choose to do might be the thing that you needed to do. But it does force you to say no to a bunch of other opportunities.
The longer you spend on that "yes," the more "no's" you are throwing off, and you don't even realize it. So, I do think it's very important to figure out what you're doing, then why you're doing it, and then commit to doing it. Get it done in a reasonable amount of time, partially because you don't know if it's going to be any good or not. I mean, you might have a feeling, but the market's going to tell you for sure.
So, you want to get out to the market as soon as you can, ultimately. Then you'll find out, and you can iterate from there. That's kind of our general approach to things.
We don't make new products that often. Like, we used to make them a lot. When we first launched, we had Basecamp in 2004, Backpack in 2005, Campfire in 2006, and Highrise in 2007. We were making a new product every year.
Now, we make a new product once every handful of years. But yeah, in general, we don't say "yes" that often, and when we do, we try to get it right. | |
Shaan Puri | So, you mentioned the job boards. There's an interesting story here. Andrew Wilkinson bought the job board you guys created, We Work Remotely, because you were really far ahead of the trend on remote work.
He had We Work Remotely as a remote work job board. You sold it to Andrew Wilkinson, a friend of the pod. He's probably the most frequent guest on our podcast.
I want to ask you about this because for him, it's like he loves this story because it's a great buy. He bought it for really cheap, and now, I don't know what that thing does, unless I think it's something like $5,000,000 a year in profit that comes off the job board.
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Sam Parr | I think it's 4. It's in his annual report. You can kind of dial it down.
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Shaan Puri |
So let's say $4 million a year profit. I wanted to ask you, for you guys, is that a "we wish we had kept it" bad sale because it's now a lot more profitable? Or is it "no, that was the right thing to do" because it cleared us up to do other things? How do you think about that transaction?
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Jason Fried | Well, it's easy to look back on it and make a different decision now. The reason we sold that at the time was because we were selling off a bunch of stuff. We were consolidating to kind of go all in on one thing—on Basecamp, essentially.
It's kind of around that time we've since decided to make more things than just Basecamp, so we're kind of in a multiproduct world again. I think they got a very good deal, let's just say.
The thing that I will say bugs me about our decision regarding that is that that was the easiest month—not the sale, but the product. It was the easiest money. We built the job board in two weeks, and it was generating at the time for us something like $30 a month, something like that, with no work.
It was literally next to nothing to do. It was all self-service, automated. Maybe there was a customer service question here and there, but essentially nothing. I wish we still had that. We could still launch another one.
There's nothing that says we couldn't do it again—StillWorkRemotely.com. I think we could do something different. I have some ideas on that, and we might do something like that at some point. | |
Jason Fried | I don't really know, but I would say it was a very good buy. Now, I'm an investor in his company, so I own a little tiny piece of that. Anyway, not on the other side.
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Sam Parr | You know, Jason, what I think is cool is if I remember correctly, you guys started almost as an agency and then kind of became a software company because you solved recurring problems. You built that, and I think it's been something like 25 years.
I don't think there's any great resource out there that says your guys' revenue, but it's definitely tens of millions. Who knows if it's even north of $100,000,000? But it's a very big business.
You do marketing in the sense that you have these really cool books. "Rework" is awesome, and you're a public figure. You blog a lot.
But if I'm listening to this from the outside, I would think, "Well, it works because Jason and David were early, and they kept at it for 25 years." That's the reason why they have such fat margins—not just because they're smart, but because they were early in the game.
What would you say to that?
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Jason Fried |
I think you're right, by the way. As far as numbers, we've only ever shared that we generate tens of millions in annual profits. Because I don't really care about revenue numbers. You can go broke generating as much revenue as you can imagine.
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Sam Parr | Do you measure profit on a GAAP basis, or do you use a non-GAAP approach where you just look at cash flow?
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Jason Fried |
No, it's GAAP [Generally Accepted Accounting Principles] okay? Like net profit, legit after everything. Right, so we're... we're proud of that. You know, we're really proud of that and we work hard at it.
But I do think timing and luck have a lot to do with it, and market conditions. Like, could we launch this again today? No, we couldn't. That's fine too. Like, who cares? It doesn't really matter, right?
People ask that all the time: "Could you do it again?" No, probably not. Who cares? Why... why would I need to?
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Shaan Puri | I don't have to.
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Jason Fried | Debt doesn't have to like you, you know? This is one of the reasons why we've kept this business going for so long. I don't think lightning strikes that often. We've had a couple of really, really big hits. We've done it the way we wanted to do it. We've got a lot of momentum, we're well known, and we've built this business our own way.
I would hate to give this up. Selling this would be sad; I'd lose something. You could say, "Well, look at all the money I'd lose, more than I'd make." Now, that's not to say that that couldn't happen at some point down the road, of course. A business is either going to die or be handed off, so it's not going to last forever. That could change next year; I don't even know, right? Who knows?
But this is the whole thing: we don't plan. I don't really know what's going to happen, but right now it feels like a loss to sell the company. So that's why I'm actually, frankly, nervous about that. I'm afraid of what I would do. I'm afraid of having nothing to do that I'd be good at. I know I'm good at this; I like doing this. Why would I want to stop, you know? That's sort of how I look at it. But yeah, to your... | |
Jason Fried | I don't take credit for being able to do this again. I think a lot of... I mean, you guys speak with a lot of entrepreneurs. Sometimes people hit it big twice. Sometimes, though, those are more like sales, you know? Where they're in a world where you can keep selling companies that don't work.
As far as actually finding people who've started multiple businesses that have been profitable and really successful, it's not that common. It's really hard to do. | |
Sam Parr |
By the way, that was my big fear. So I sold my company, and I had a guy sit down and talk to me. He said, "How many people do you know who have started two successful businesses?"
In my head, I was like, "**** you, man! I'm gonna do it!" You know? I was angry.
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Jason Fried | Right, right. | |
Sam Parr | Yeah, I was angry. I was angry because I was afraid, in reality. After I sold, I dabbled in real estate and I failed. I was like, "Shit, I'm human. I'm not the man." There was some skill involved, but there was also a whole lot of luck in my exit. I also had that fear.
Then, after about six months, I was like, "I gotta do something. I can't just do nothing." I felt like a bum. A lot of starting things was rooted in fear and in not wanting to be lonely. So, I needed to create something where I could hire people and be around them.
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Jason Fried | I hear that. I also think, you know, like I'm turning 50 in a few weeks. I don't have the stamina to start another business and wait 20 years. You know, I just don't have that. When I was 25, I could do it. At 35, I could do it. But I don't want to do it anymore. I want to keep this thing going until I don't.
I think that we really like doing this. We have got some new ideas. The one stuff has really kind of injected us with some new ideas. We're about to start on another product, which will be a SaaS product. So we're going to do SaaS and non-SaaS products again, and we'll see what happens.
Again, we'll see what happens. It could be a year from now where I change my mind. I don't know. We really don't know. But I think David and I both feel that if one of us decided to go, we would have to sell the business because I don't think that either one of us would stick around.
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Shaan Puri | One of my favorite stories is about Mark Zuckerberg. Early on, I think he was around 21 years old when he received an offer to sell Facebook for **$1,000,000,000**.
The story goes that he went into a board meeting and said, "Yeah, you know, we technically have to discuss this. I got an offer from, I think, Yahoo to sell for **$1,000,000,000**. Obviously, we're not going to take it. On to the next matter."
Then Peter Thiel and others were like, "Hey, Mark, hey, yo, you know you're going to have like whatever, **$500,000,000** after if you did that. Maybe we should just chat about this for a second."
So they decided to talk it over. One of the things he said was, "But I like this business. If I had the money, what would I go do? I would just want to build a social network. I think that's the coolest thing I could do right now, and I like the one I've got. Why would I want to go start over and try to build a new one?"
Totally, I loved that. I don't know how much of that story is true because, yeah, there's a lot of lore, but that's okay. It's still a cool story.
Have you guys ever had a moment where somebody comes to you with an offer you have to discuss? What went down in that conversation?
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Jason Fried | We've never been... we've never allowed that to happen. No one... like, I still get a handful of emails every week from VCs or PE firms, and I just say no. I have a default "just no," so we don't even have conversations.
We did take some money from Jeff Bezos, though, back in 2006 or 2007. I think it was like a secondary thing, so he bought some shares from me and from David. That money went into our pockets and never went into the business. No money's ever gone into the business except customer revenues.
We did that to take a little bit of risk off the table because, in 2006, Basecamp was 2 years old. The product... and we're like, "This could be a fluke. I don't know what the hell is going to happen in this industry. Who knows? We could get wiped out tomorrow." You know, could we put a few million dollars in the bank each and just take some of that risk off the table?
Also, it would give us some confidence to just go forward at that point. Because if it all went to hell, we would have something to show for it personally. So we did that. Jeff found us because a couple of his companies that he was invested in had used Basecamp. He saw me speak at a conference in San Diego in 2005 called ETech. I don't know if that conference is still around anymore. He was speaking, I was speaking, and I think he liked what I had to say. The way I was... we were very different, as we still are now, but way back then, we were way different in terms of our approach.
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Jason Fried | Of view and the things we were saying. He likes those kinds of...
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Sam Parr | Companies mean you're more... you're more harsh or, or more... what? I was a young punk. We'll call it punk rock. You're more punk rock.
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Shaan Puri | More punk rock. The answer to this question is kind of actually that Jeff was a fan. Jeff was a fan, so he reached out.
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Jason Fried | He was... I mean, Jeff was a fan. Let's just say it. Anyway, he was a fan. He's a fan of people who think differently about how to run a business, as he thinks differently about how to run a business.
So, we just kind of chatted. We went to Seattle to meet him. I didn't really... I knew this was like an investment opportunity for him because he wouldn't just come out and say hello. But I didn't go into it wanting to do that. After a couple of meetings, we really liked him. He's very likable, and we had a lot of admiration for him, obviously, for what he's done, what he built at the time, who he was, how he did it, and his whole story. The whole thing, obviously, I mean, Bezos and Amazon—amazing, right?
So eventually, we worked out some deal, which was ridiculous. It was a ridiculous, ridiculous deal, and I can't go into the specifics, but we barely had any revenue at the time. The valuation was stupid. He knew it was stupid. He was like, "Put together something I need," or like, "We don't know." He was like, "Put together something I need."
So we put together something, we shared it with him, and we all had a laugh about it because it was ridiculous. But it had to be something where we could make something happen. We were like, "Look, we don't want you to have any control. We don't want a board of directors."
They had one provision which said something like, in 5 or 7 years, they had some right to do something, like encourage us to do something that we might not have wanted to do, like sell or go public or something. But they didn't have the power to push it through. Anyway, it was just a suggestions clause. Maybe that's what they call it. I don't know. It was very weak, though. It was weak. He didn't want... He was like, "I want you guys to do what you want to do. I like long-term thinkers." I was like, "We're in this forever. We're not in this to sell the business." The whole thing, he liked that.
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Shaan Puri | So, what’s he like? You go there to Seattle. Take us into the meeting where none of us will ever get to do that, right? Especially Bezos back then.
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Sam Parr | By the way, have you guys heard this story? Really quick, it was the founder of Woot, or it's W-O-O-T. There's this famous article, Sean...
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Jason Fried | Oh, woo! Yes!
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Sam Parr | Where they go out to eat, Jeff Bezos wants to buy this guy's company. They go out to eat, and Jeff Bezos is sitting.
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Shaan Puri | There, right?
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Sam Parr | They go to breakfast, and Jeff Bezos orders potatoes with bacon and octopus. The guy's like, "Why'd you order that? That's like a weird breakfast order."
He goes, "You're the octopus that I'm having for breakfast." Bezos said, "When I look at the menu, you're the thing I don't understand, the thing I've never had, and I must have breakfast octopus."
It was like the article tries to paint him as a weirdo, but it doesn't exactly give full context. So at least now we have someone here who's also been in that situation.
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Jason Fried |
That seems very Jeff. Jeff is probably the most optimistic person I've ever met, and that was very clear from the start. I'd never been around someone who had that much optimism. He was clearly intelligent, very intelligent, but... that combined with optimism is really powerful.
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Shaan Puri | Optimism about what? About you? About the world? About his company? What was the optimism? What do you think?
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Jason Fried |
You remember, he comes in with an aura of "can-do" positivity. You know, you've seen him - he smiles a lot, he laughs big. He has an enthusiasm about him that is, I would say, formed into an optimism that is unshakable and unbreakable.
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Sam Parr |
Is it like... why not? For example, I've met people I think you're describing, and when I went around them, they explained their new idea. They're like, "It's gonna be this, this, and this." A lot of people default to "Well, you can't do that," but these people default to "Well, why not?" This all makes sense like:
"I'm gonna do this, and then I think this will happen, and this... Why won't that happen?"
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Jason Fried | I think if you post something really unusual to Jeff, he would just start laughing in a way like, "Wow, that is interesting." It's all interesting to him; that was my take.
I remember we were showing him Campfire, which is our first chat group tool. This was way back, you know, before Slack. There wasn't really anything out there like this. There was IRC, but nothing really simple.
We put it up on the screen, and I started talking to him about it because it wasn't out yet. Like 15 seconds in, he just got the whole damn thing. He understood it in a way where he got it more than we got it.
People are always curious, like, "Well, okay, you're not going to sell the business. How does he make any money on the investment?" Well, we're an LLC, so he's a member. He has units, and every year he gets distributions. He's made his money back many times over, and he still owns his shares. We haven't had to sell the business; it's been a great investment for him. Not like a massive exit, but it pays for a lot of things. I'm sure it's real cash. | |
Shaan Puri | Jeff, good news! Your net worth has gone up by **0.0001%** this year. You can thank us for that.
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Jason Fried | What's cool is, like, we don't matter. But when you talk to him, it's not that way.
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Shaan Puri | Yeah, of. | |
Jason Fried | Of course, he is genuinely curious and interested in what you have to say. I always respected that about him. | |
Shaan Puri | I love that description. By the way, I've heard almost the same verbatim thing because Amazon bought Twitch. I asked Emmett, you know, the CEO of Twitch, "What's Jeff like?"
That was his for a while. It was Andy Jassy, and then he would go meet with Jeff once a year when they would present the plan. He said the same things. He was like, "When you're in the room with him, it's like there's nothing else that exists in the world."
He's fully engaged, fully paying attention, fully present. He's having a good time; he's not super serious about everything. He's laughing, he's curious, and he asks questions. He mostly listens, but then when he asks a question, he almost always strikes at the heart of the issue.
You're like, "How did you...?" He's like, "Dude, I've worked on this. I run this business." Emmett's like, "I founded this business 15 years ago. I run it every single day. You think about this for like 1 hour a year, but in that hour, you kind of put your finger on the right thing that fast. That is impressive."
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Sam Parr |
Sean, I want to ask you about this Elon quote. You talked about reading Bezos' book... You actually had an interesting take on reading Elon's biography that I thought was intriguing. I just think it's... I admire you, Jason, so it's cool to see who you admire and what your opinion is on different people who I may or may not admire.
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Shaan Puri |
The way I think it's not like "this person," but maybe an aspect of that person or one way that person does something. Not like this person's good and other people are bad, and all things they do are good or whatever, right? We're all...
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Jason Fried | A lot of different things. We are all a lot of different things. Can I...? | |
Shaan Puri | Read you the quote you had tweeted out. I thought this was pretty fascinating. You said, "I'm inspired by the business side of Elon's biography. There is one word that's overused and I think inaccurate in the book: reckless. Well, it seems like risky actually to me. It strikes me as risk reduction."
Then he said the following: "Compared to traditional corporate America, corporate America takes the riskier route. It's fear, marginal decision making, complexity."
And I love this line: "Mediocrity slathered in marketing."
Then he said, "Mistakes come in all shapes and sizes, but the ones that come from slow decisions, committees that dilute responsibility, sloppy cost controls, and requiring pseudo certainty before making a move, those are the worst ones."
And Elon doesn't make those, but his critics often do. His mistakes are real, and they have consequences, but they're rooted in forward motion.
I'm glad there's someone who is out there unafraid of making those kinds of mistakes and showing us all what is possible when you pierce the membrane that holds most things back. That's pretty good. What made you feel that way?
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Jason Fried | I would say reading the book made me feel that way. Now, of course, it's a story—well, it's a biography—but like any story, there's a perspective on it. A lot of the examples in the book are about simplifying, cutting out waste, getting to the root of things, and figuring out what really matters. It's about not getting caught up in what other people think it should be and also not being caught up in things you can't do.
There are a multitude of examples, and one of my favorite examples—I might be misquoting this slightly—relates to a SpaceX rocket ready to launch. They find a crack in the skirt that surrounds one of the engines. I think, again, I'm going to get some of the details wrong, but if NASA had found that, the launch would be scrapped with a multi-month delay to rebuild the whole engine.
So, there's a crack in the skirt, and Elon hears about it. They stop the launch, and he asks, "What's the problem?" They say, "There's a crack in the skirt." He responds, "Let's get rid of the crack. Could we get rid of the crack?" They explain that if they get rid of the crack, they might lose some propulsion. He asks, "Okay, how much propulsion are we going to lose?" They say, "This much." He replies, "We can lose that. There's enough margin here, so let's cut the crack out and go." And that's what they did. The launch was successful.
It's the kind of question that nobody else would even think to ask: "What is the problem? It's a crack; it's not the engine. Let's get rid of the crack." They confirm they can do it this way, and he says, "Okay, sure, let's do it."
That might seem reckless, and I think it was positioned or pitched almost as reckless in the book. To me, that's like common sense, fundamental smart problem-solving. You think about all the other risks it saves, all the other things it prevents, and the time that goes by. All the other things that can happen during that time that can go wrong—I just see that as brilliance, not as recklessness. So, that's my take on it.
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Sam Parr | So, I know that you guys have a landing page for this product on your website. I believe you described it as a nonrecurring software product. It's like you want users to take back control of their wallets and not pay a company every single month; they can just pay one time. That seems to excite you, and I want to hear more about that.
You also alluded to having a few more products you want to launch. What ideas and businesses are exciting to you at the moment?
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Jason Fried | Sure, so what you're talking about is this thing called **Once**, which is more of an umbrella brand. So, **once.com** (O-N-C-E dot com) is a one-pager where people can read about it.
The fundamental idea behind **Once** is that we think people should be able to buy products again. Right now, pretty much all software is a service; it's a rental. You're renting software in perpetuity, and if you stop paying, you lose it all.
Okay, some services make sense as services, but there's also a large collection of old-school products that you would buy, own, and not have to keep paying for. We want to bring that back. That's how it used to be, and we think there are real advantages to that in certain areas and product categories.
We believe companies should have the option to spend money once—just a few hundred dollars—and own the product. Not only own it, but also get the code so you can modify it and play around with it as much as you want. This is not something that has been happening for many, many years, and we think it's time to bring it back.
So, we will launch the first part, which is **Campfire**, bringing back our old chat tool that sort of died on the vine to some degree, although there are still some customers using the original version. We don't sell it anymore, and **Campfire** is installable software.
We built a whole new tech stack around this to allow people to buy it on a Shopify store for $299. When you buy it, we send you an email with a single line that you paste into a terminal of a server. There's a little bit of technical knowledge required, but like barely any. I'm not technical, and I can do it. I've done it on DigitalOcean; I bought a shared server and ran this one command. Now you have a chat server running that you own for $299 with unlimited users.
It's basically 90% of what Slack would do. It has the core features: chatting, direct messages, mentions, and file sharing. It doesn't have threads or video chat, but it has the fundamentals of this idea.
The principle around this is that in any industry, generics eventually come in. For example, there are a lot of chat tools that exist in the software industry today, so they're basically commodities, but they're still priced like luxuries. Companies are spending tens of thousands of dollars a month on Slack or Teams. It's obscene, absolutely.
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Sam Parr | I spent... I spent that.
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Jason Fried | It's obscene. Yeah, you're okay. You get it, right? It's a lot of money.
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Sam Parr | It's a lot of... | |
Jason Fried | Money for basically chatting with your coworkers for the most part, right? It’s just like there should be a generic option. Essentially, this is what happens in all industries when there's a commodity or when there's a lot of product commodities. If something becomes a commodity, then it becomes generic at a much lower price.
We're doing something at a high quality and a low price, and changing the model around. So anyway, Campfire is the first one. I'm working on a second one right now, which I can't talk about yet, but it's related to writing. Maybe we'll do another one or two and then see how the model looks in a year from now.
Like, are we early? How's it working so far? It's still working really, really well with Campfire. We've sold $100,000 worth of Campfire in a few months, so we're very happy with the start. But we have to see if it sustains and how it goes. We're going to add some more products to that category and see how that goes.
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Shaan Puri | Can we talk about this strategy you have? Where before you launch something, you put up a page—a big blue page—with a founder letter?
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Jason Fried | Yes.
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Shaan Puri | And the founder letter is basically saying kind of what you just did, which is: things used to be a certain way, they've changed, and it's kind of obscene. You know, I get why they changed, but now it's gotten a little ridiculous, don't you think?
We're going to change that. We're going to bring it back. We think life should be this way—common sense, logic. Don't you agree?
And yeah, we're going to do it. If you want to see, if you want to be a part of that, do this.
Actually, this morning I saw something on Twitter that was kind of interesting. Some guy announced his venture round; it was like, "We raised $16,000,000." I'm like, "Oh, that's interesting. What is this?"
And it's something called Quilt. I go click this thing, Quilt, and I go to the website. It says something like, blah blah blah, AI jargon with an email sign-up form.
No, just no. Don't tell me what it is. Don't tell me why I should want it. Don't tell me what it could do for me. Don't tell me why you built this and what was your motivation. Just, "We raised a bunch of money. Give us your email and you're on the list."
We need to grow this list, basically. And I thought, I can't believe more people don't copy what you do. It's so like this.
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Sam Parr | That's how this podcast came to be, Sean. By the way, we were talking about copywriting and we're like, "Man, Jason's the best at this."
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Shaan Puri | Yeah, and you did this for... Hey, I used to teach this thing called **Power Writing**. I would teach them that one of the landing page variants that nobody's testing, nobody's doing, is the **founder letter**.
There's actually a company called **Runway** that did an amazing job of this. I don't know if you ever saw runway.com, but this guy **Ceki**, who's a serial founder, had a landing page that was a long scrolling thing. It was basically just a dialogue.
He said, "Being a CEO is hard for a bunch of different reasons, but one of the annoying reasons that feels like it shouldn't have been hard was that I kind of had no grasp of the numbers of my business. That made me feel stupid and insecure about that. It was important, but I just frankly didn't know how to do it. I didn't know how to use these tools. I wasn't really ever taught it. Why don't I know how many weeks of runway I have left? Why don't I know this? Why don't I know that?"
So, I decided, "I'm going to build a tool that's a finance tool, but it's for founders." He did it as a letter, and it was awesome. He got a bunch of people to sign up for it. I think more people should be using this tactic. The reason why I think they don't, to be honest, is because there is no reason to be building their product. There is no intrinsic "why." There is no strong...
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Shaan Puri |
...of view that would get people behind it. Their product is either derivative or sort of mediocre or just trend-following, and so if they tried to write the letter, there wouldn't be much to say. It's not the writing that's the hard part; it's having a [point] of view that resonates with people. That's the hard part.
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Jason Fried | It's the point of view. This is my favorite thing to do in the business. Unfortunately, I don't get to do it that often because we don't launch new things.
But I love writing a brief letter. I sweat every word, and I just love it. This is my like Bezos moment where I just smile and laugh while I'm doing this thing. I love finding the right rhythm, the right rhyme, the right pattern, the right message, and the right way to say it. It's super fun! I don't know why more people don't do it.
To your point, I think there is something about having a point of view, first of all. The thing is, you can do it with any product—any novel product, a commodity product. You just have to understand the angle that you're taking. Although, I don't even like the term "angles" because it seems almost manipulative. But what shtick... | |
Sam Parr | You need a shtick.
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Jason Fried | Yeah, even worse.
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Sam Parr | You don't like that? I don't know. You need some flavor. You're gonna like what? What?
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Shaan Puri | Do you want to call it "not gonna like" shtick?
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Jason Fried |
It's like... I understand. You're right, that's the category. "Shtick" also has these negative connotations. It's sort of like this game and manipulative thing. Maybe you don't mean it that way, and you probably don't.
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Sam Parr | Just like a flavor, you just speak style. You like the flavor.
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Jason Fried | I like flavor. I like style about it. I like the point of view. To me, it has an edge—that's the kind of thing.
First of all, it's very hard to do this well. I'm not giving myself credit like I could do a hard thing, but it is hard to do this well. I've always been inspired by people like, you know, Buffett and Bezos, who write these amazing shareholder letters. They are able to communicate very clearly and can do it in long-form writing.
Now, this isn't that long-form; it's a page. But I want to get excited about that. I want to read something and be pulled through it. By the end, I want to feel like it wasn't too long and that it said exactly what I needed to say, leaving me with some mystery.
One of the things I like to do is you'll see the first sentence often starts with something like, "Something happened to business software." That plants a question in people's heads. But it's not a question; I'm not asking a question. I'm making a statement, and now they're like, "What do you mean?" Now they're bought in because they asked themselves the question, "Oh yeah, what do you mean something happened?" Now they want to find out what happened.
As I go through it, I'm thinking about how to find resonance. How are they nodding their heads when I'm nodding my head while writing this? How do we get to that place where it's like, "Yeah, yeah, yeah"? You build up this feeling of, "Of course, yeah, you're right."
Then you're like, "Yo, why am I spending this much money on this thing? I should own this by now." I think there's a line like, "You should own this by now." Like, "Bet, Sam, you've spent—I don't know how much you've spent on this—you should own it by now, come on."
And it's nothing against you, right? It's like everyone who does this is like, "Wow, I mean, how much money have I spent on this thing?" And I'm still spending... | |
Shaan Puri |
The old metaphor that the SaaS companies used initially was like, "Just pay a couple bucks a month, no big deal. Pay as you go, only pay for what you need." But the problem is... it's the renter. And you reframed it as...
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Jason Fried | Renter, right? | |
Shaan Puri |
Oh yes, but you can get evicted. Yes, but you don't even own this thing. Yes, but they can raise the rent anytime they want, right? And so, reframing it as:
"Cool, yeah, but you're a renter and they're the landlord. All your data is owned by them, not you."
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Sam Parr | He calls it "the church of recurring revenue."
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Jason Fried | The Church of Recurring Revenue has done very well for a lot of followers and people who attend. The thing is, some things make sense, like a magazine or newspaper. This is kind of old school, right? You pay a subscription, but you get something new literally every week, day, or month.
With software, I know it's improving, but it's improving around the marginal edges. You already have 90% of it on day one when you bought the damn thing. So, you're paying over and over and over for essentially the same thing. At some point, if you're paying a lot, you should be like, "Wow, I should own this by now. This is crazy."
Tony, I wanted to kind of make that point and get people excited while leaving them with some mystery. It's not like the stealth thing where we're doing an AI thing, and you enter your emails. It's like, "Here's a story." It's all legit, but I'm still not going to tell you exactly what it is. Then we kind of, you know, eventually deliver the product.
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Shaan Puri | The simple test, by the way, is: let's say you did buy Slack or whatever, insert one of your favorite products, for one year. Then they did all these over-the-air updates. They added this, they added that, they tweaked this, they fixed this bug.
If they had just charged you for it for one year and then you could buy version 2, you know, Slack 2.0 or the 2024 version, would you buy the upgrade?
You know, we used to buy Windows 95 and then you would hear, "Oh man, I heard whatever the next one is, Vista or whatever, it's got all this new stuff." Okay, maybe it's worth upgrading.
But like the reality is, almost none of us would buy the next edition because the upgrades are so marginal. They're not like game-changing, but you're charged for it as if those are such game-changing updates.
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Jason Fried | Yeah, and look, again, some products—like we have a few products like this—hey, it's a SaaS tool. Basecamp's a SaaS tool, so we're in that world too. I totally get it.
That said, we don't charge any of our customers more than **$299** a month. Flat. With Basecamp, you can have **6,000** users at just **$2.99** flat. Unlimited users at that.
So we don't offer the same thing where people could be spending **$50**, **$60**, or **$10**, or **$5**, or **$3** a month with us. You can only spend **$2.99** a month max with Basecamp.
So, I don't feel as guilty, frankly, selling something like that, you know, compared to a company asking other companies to spend tens of thousands. I get it; it's good for revenue, I get all that. But man, I wouldn't feel comfortable or confident. I would feel like I'm ripping people off, frankly.
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Shaan Puri |
So, how do you deal with the counterargument which is: You guys were first with Campfire before Slack. Slack comes out, kicks your butt, becomes a $20+ billion company, exits, and blah blah blah. How do you deal with that?
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Jason Fried | Well, first off, Slack is an excellent product. It still is an excellent product, but at the time, it was way better than Campfire. So we sort of let Campfire kind of wither. We didn't really pioneer the idea; IRC was before us, and there was ChatThing, but we kind of pioneered this version of it to some degree. We sort of let it sit and didn't really make it much better. Slack came around and made a much better version of that idea, so full credit to them for that.
I think another problem we had was that we were really early with Campfire. I remember when we launched Campfire in 2006. I don't know when Slack launched; I think it was like six years later or something like that. I couldn't get anyone to buy Campfire. People were like, "Why in the world would you use a chat tool? We're all in the same office; just talk to people or whatever. I don't even get it."
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Sam Parr | Well, we used to use Gmail Chat and then for a while, HipChat, which I hate.
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Jason Fried | Hip chat. Yeah, that was another one. Yep. | |
Sam Parr | Yeah, but for a while, it's just Gmail.
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Jason Fried | You were on the edge, though, because a lot of people didn't even like chat. It was like, now everyone can't imagine working without it. But it was not a thing that companies used; individuals used it a lot, but companies... this persistent chat room was just not a thing.
So, because we were early on it, we kind of didn't think there was a future in it. It was selling okay, but not that well, and so we just didn't pour more energy into it. Then along came Slack.
I remember, actually, it was interesting. Stewart Butterfield sent me an email before they launched Slack. We were friends, and he said, "Hey, just wanted to let you know we're launching this thing. It's competitive with Campfire to some degree. We're buddies, I just want to let you know."
You know, like, that's cool. I remember looking at it the first time and my stomach dropped. I thought, "Oh shit, we're dead," or "this thing is dead," because it's really good.
The thing that impressed me the most about it was the onboarding experience. I think that, in my opinion, there are two things. Of course, the bot integration stuff was really innovative, but the onboarding experience was so good. You basically talk to the chat and create your user account and stuff.
In my opinion, those two things... the chat itself isn't better or worse; chat is chat, essentially. Onboarding and bots were the thing, and we didn't have them, and they crushed us. So, yeah, that's how I'd answer that question. | |
Sam Parr |
Dude, you're cool to me because you're like, "Alright, so for the listener, go to basecamp.com, go to hey.com, and once.com." Your landing pages... like, we're internet dorks, all three of us. We're talking about CRM shit, we're talking about something that's not inherently like a punk rock thing, but you have like a punk rock vibe about you.
If you look at your landing pages, they're all kind of cool and they're fun to read. You make non-cool things kind of cool.
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Jason Fried |
It's... yeah, for me there's a degree of mining for novelty and recognizing what's interesting and what isn't. How people can look at something and go, "Oh man, I never thought of that!" But of course, that's what I'm always looking for.
I wrote this post recently about towel bars and hooks. I don't know if either of you saw it, but... *riveting*.
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Sam Parr | **Riveting concept.**
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Jason Fried | You ready for this? Okay, I've not read it, but I'm sure it's great. What is it?
So, we're doing a bathroom renovation, and the designer, the architect, is like, "Do you guys want hooks in your bathroom or towel bars?" For me, the choice was so obvious—it's like hooks.
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Sam Parr | Hooks on where I've put hooks in my house.
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Jason Fried | Right, and it's like, why? Well, I'll give you a bunch of reasons.
First of all, you can't screw up a hook. You can't mount it wrong. You can't use it wrong. You can put other things besides towels on it. It doesn't take up any space. If you need to add a second one, there's room for that. Sometimes, it's nice to have like two hooks a few inches apart so you can kind of spread a towel and let it dry a little bit better.
There are just all these reasons. For me, I'm always looking for the hooks in product design. What are the little things that are so simple and straightforward that everyone knows how to use them? You can't get it wrong, and you can actually use them in a bunch of different ways that weren't intended, and it still works.
Compared to a towel bar, the only thing you can use a towel bar for is to hang a towel, or your nine-year-old will do a pull-up on it and tear it off the wall. That's the other thing you can do with a towel bar. It takes up a lot of space, and if you don't put the towel on just right, it slides off. You can use it wrong so easily; it's easier to use it wrong than it is to use it right.
So that's why I like hooks. I'm always looking for these analogs in other areas. I don't look at other software; software doesn't really inspire me like a hook will inspire me. A piece of architecture, a space, land, a tree, furniture design, print design, I don't know, objects—those are the kinds of things that I look for motivation and inspiration in. I think there are a lot of really good ideas in there.
So that's where this stuff comes from. I'm like, "Oh, this is a hook, and this is a hook, and this is a hook." Anyway, that's kind of how I think about it.
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Shaan Puri | One of my favorite things I did in my research for this is that I'm always looking for the big ideas. What are the important ideas that are not necessarily new to me? And then, what are the new ideas?
I thought the new ideas you put out there were really great. Super nerdy, but that's where we are right now—in the nerd zone, which is really the place we should be all the time.
You said, "When prototyping, always try the wackier, quirkier stuff first." The deeper you go into a project, the more conservative it tends to get. Stranger ideas are more at home earlier in the process. I love this! This is so true. I've never heard anybody say this before.
If you embrace it, you can actually... Sam's old company, I think their only company culture thing was "Let your freak flag fly." Yeah, it's like that's what you want to do in product design.
There's also kind of good life advice too, which is that the weirder, quirkier things are actually easier to get away with when you're in your early twenties versus when you're 37. Right? You tend to get more conservative.
It's product development; it's life advice. I thought that was brilliant.
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Jason Fried | Thank you. We really take this to heart. The reason why is, for example, I'll take the calendar example again. If you're building a calendar and you think that there are all these table stakes features that you need to be on par with Google Calendar, like if you're the only people who are going to buy this, then if they're going to use Google Calendar, they're going to expect Google Calendar fidelity and functionality.
Then maybe we add a couple of other things. No one's going to buy your product because Google Calendar is Google Calendar. Why just make that other thing with a couple of additional features?
So we always start with the novelties, the things that don't exist anywhere else. That's what makes your product differentiated. That's what makes it worth considering. To say, "We made Google Calendar a little bit better" is not worth it. But if we made something totally different that is not just different for the sake of being different, but we actually think there are some novelties here that matter and that make sense, that are radically different in good ways, that's what we pile on early.
To the other part of that quote, if you just wait until the end to try to add those novelties, you'll never have enough time. You're always running out of time at the end, and you're never going to try new things. You're not going to have the tolerance or the patience to wander. So then you end up leaving those things out, and you never get around to them.
Once you launch to the public, the public then demands even more normal stuff. The public doesn't demand unusual things; they demand normal stuff. It's on you to find the unusual things, the things they didn't consider. But once they see them, they go, "Of course! Where has this been my whole life?"
That's the kind of stuff Basecamp is packed with, and Hey is packed with, and HeyCounter is packed with. Those who use those tools understand that, while those who don't don't know. But they are packed with things that make you say, "Oh my God, where has this been my whole life?"
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Shaan Puri |
That's amazing. By the way, what do you guys do? Do you pull out profits from your LLC? I like that you don't reinvest it. You basically get the benefit. Are you like a boring kind of index funds and bonds guy? Like Sam is more on the conservative side, I'm more like...
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Sam Parr | That 80/20 index bonds life, baby.
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Shaan Puri | Yeah, my... I'm like, the two sexist words in the English language are "exotic" and "instruments."
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Jason Fried | It's like, oh...
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Shaan Puri | We got an exotic instrument for you. I'm like, "Tell me more," and then I regret it later. What do you... what do?
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Sam Parr | You think, "What's that sexy trombone? What the hell? What's an exotic issue?" | |
Shaan Puri | It's the thing that you're, you know, you lose money on. It gives you to lose money. It's called an exotic instrument. It's code.
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Jason Fried | I mean, our exotic instrument is our own business. That's where most of our risk is tied up. So, I'm more on Sam's tip here, which is to be very conservative with investments outside my business.
Primarily, I invest in index funds. I do invest in a few individual companies that I really know and really like, and have liked for a long time. I might even know the CEO; I might have a good sense of who this company is and what they do. I'm not jumping on the meme stocks or that kind of thing.
I have an adviser, and I've done some other kinds of investing, like some private equity deals and stuff like that. But primarily, I'm pretty much straightforward with index funds. I like to play the U.S. economy long term, essentially, and maybe some other companies or countries' economies, but primarily the U.S. That's my main thing.
I also like to spend money on things that I enjoy and that my family enjoys. However, I'm not a risk-taker in the sense that I don't like to put myself at risk. I will take risks, but I don't take risks that put my business at risk. That is not an interesting risk for me.
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Shaan Puri | It seems like you value being able to sleep well at night. It's like, "I just want to be able to sleep easy and not do anything that's going to jeopardize that."
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Jason Fried | Right, like people ask in business, "What keeps you up at night?" Typically, the answer for most people is something about the competition or, "Am I going to be able to make payroll?"
For me, what keeps me up at night when I am working is excitement. I can't wait to start working tomorrow on this thing that we're working on. It's not because our margins are razor thin or that I might not be able to make payroll. I'm not hyper-focused on the competition. If they launch something new, I don't panic.
That one slack moment I did have was years ago. I just want to sleep well. I stop work at 5 PM and I don't talk about work with my family at all. We just don't. It's a separate thing that I do during the day, and I get excited about it sometimes at night because I'm just excited about ideas.
But it's also recognition. David and I both practice this idea of negative visualization. Basically, we look at it this way: We've been at this for 25 years. We've done exceptionally well and we've been incredibly fortunate. If this thing all flames out in two years because of something we did wrong, a major market shift, competitive shift, whatever it is, you know what? That's okay too.
It will be painful to some degree, but like, if we have a 27-year run, jeez, what more can you ask for? Now, people lose their jobs and it would suck. I'm very certain that almost everyone who works here can get another job somewhere else very quickly. We would help people with all those things.
I mean, I don't want this to happen, but if it did, we'd be okay. This is not my identity. This is not my life. This is not something that needs to exist forever. I don't want to feel that level of obligation to it, as much as I have a lot of responsibility and feel obligated to our customers, our employees, and the ideas that we have. It's not the whole world. That's just an important thing for me.
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Sam Parr |
Sean and I are in similar positions where we have profitable businesses. A question that I'm trying to figure out is: what percentage of the profits should we pull out versus reinvest? Do you have a framework for deciding that percentage?
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Shaan Puri | Especially earlier on, right? Maybe in year 27, the answer is different than in year 3 or 2.
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Jason Fried | Yeah, so I can only tell you what we've done, which is again a little bit unusual. We pull out everything at the end of the year.
Now, first of all, we're an LLC, so we're taxed on everything at a personal level. If I leave money in the business, I'm still paying personal income tax on that money. It doesn't really make sense to do that.
We have a recurring revenue model and very predictable revenue. So, we basically have a little bit of overlap. We take some money out in quarterly distributions, and there's some money left over in January. We kind of wait until April to take it all out. So, there's some overlap, and there's a bit of operating cash.
When I first started the business in 1999, we were an agency. Our first client was HP. There were four of us: three partners and one sort of employee. We each put in $10,000, so we had $30,000 to start the business.
Our first customer was HP. HP was like giving everyone business way back then. HP was the hot company to get a gig with because they paid a lot. I think the gig was a few hundred grand to do some website design for them. This was in '99, when people were paying numbers like that.
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Jason Fried | On we were profitable because we only had a few people. We didn't take big salaries, and that was that. We were able to pull out all the money every year because actually we started out as a C Corporation for a couple of years and then we switched to an LLC.
Regardless, we pulled out all the money at the end of the year essentially. Because we had ongoing client work that would sort of span the gap of the calendar year, we just always had money coming in. Our costs were so low that we weren't ever starving, you know?
So it just was a situation where we always had high margins, and that's how I've always run the business. I know it's an unusual setup, but I do think it doesn't have to be quite as unusual.
I think what ends up happening is companies hire too many people. Their payrolls are too high, they spend too much money on customer acquisition, and their costs are really high. So their margins are very low, if there are margins at all. Then it's very hard; it just becomes a much harder business to run.
Now again, there's a lot of luck involved with this. We happened to find a way somehow to have very, very healthy margins over two decades. Part of that, though, is again the cost side of it, which is just not considered enough. | |
Shaan Puri | Do you run any paid ads?
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Jason Fried | No, not right now. We have explored that; we've played with it.
Here's the thing: last year, we said, "We're going to spend $5,000,000 for the first time ever on ads." We started getting into it for a few months, spent a bunch of money, and realized it was just vanity money because it wasn't doing anything for us.
Now, someone might say who's listening, "You gotta give it more than 3 months, 6 months, or 8 months. You gotta do this for 5 years before you show returns, and you gotta try a bunch of campaigns." We just don't have the tolerance to spend that kind of money on something that isn't very clearly going to return for us.
Also, our price points are so low. Our customer acquisition costs are tricky because a lot of our competitors are selling things for $1,000 and $1,000 a month. We're selling things for Basecamp at $15 per user per month or $2.99 unlimited. There's not a lot of play here to really invest a lot and spend a lot to acquire customers, so it just doesn't work for us.
We don't do anything—not even branded keywords. We occasionally do that if someone's using our brand and we kind of want to knock them out. But essentially, we just don't. It's all through our own channels that we've developed over the years.
There's no question in my mind that there is a formula that we don't know, but we could figure it out at some point. | |
Jason Fried | Perhaps to grow the company in a big way, somehow through marketing, advertising, or targeting... we just don't have the tolerance for it, frankly. I just don't think that we're interested enough in that kind of growth.
The answer is always, "Why grow that much?" If you're trying to sell the company at some point, growth rates really matter. But for us, sustainability matters, profits matter, and margins matter. I don't want to eat into those for some future whatever.
It doesn't really matter. Again, if we were to sell the business in a couple of years and we got a 10x multiple or a 5x multiple, but could have had a 15x, I still... it doesn't matter to me.
It doesn't matter to me to spend all that money trying to search for that. I'd rather just take the money out and put it into investments that I can basically not guarantee, but have a really good sense of return on, and just do our thing our own way.
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Sam Parr | Dude, you're the man! I think that if I had to make a Mount Rushmore of this podcast, you would definitely be on it.
You know, I think Sean opened it up by saying, "We love people who carve their own path." I don't care if that person is an entrepreneur, an artist, or a mother—just someone who says, "This is the way I want the world to be, and I'm going to live that way." I admire that greatly.
The way that you write and the way that you think, you're kind of on my Mount Rushmore. I really admire you, and I know we both are incredibly thankful that you spent some time with us. You're the man!
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Jason Fried |
That's very kind. I love the show, by the way. I listen to it, it's great. I really appreciate being here. Thanks for the time and the questions, and happy to do it again anytime. I could go for hours with you guys if you ever want to.
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Sam Parr | So, you have an open invitation whenever you want to.
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Jason Fried | Whenever you want. Well, I'm not going to invite myself on. I did this time, actually, kind of sort of. So I will not do that again. If you ever want to talk again, I'm available. Let me know.
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Shaan Puri | Thanks for doing it, Jason.
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Sam Parr | We appreciate you. That's the part. Thank you.
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