Jason Fried of 37Signals on Business, Focus, and Avoiding Interruption

By Timothy M. O'Brien
October 13, 2008 | Comments: 12


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Jason Fried is something of a contrarian, his tiny, Chicago-based company 37signals has been a major force in the tech industry over the past few years. Sure, it doesn't have the market cap of a Google or a Sun Microsystem, but it also doesn't have the overhead, and a company like Sun would have gladly paid a few hundred million for the sort of reputation Fried's 37signals has developed from nothing. (For those of you who don't know, 37signals is the creator of Basecamp.)

I briefly spoke with Jason Fried about the day to day experience of working at 37signals and some of the things that differentiate 37signals from other companies. During this interview Jason Fried consistently comes back to a stoic focus on improving the product, and you get the sense that 37signals is a company not easily distracted by the bells and whistles of new fangled toys and technologies.

At times, I felt like I was talking to an old curmudgeon from the depression-era chiding the industry for its inability to focus on the bottom line and bemoaning the Arrington-driven hype festival that defines the day to day conversation in technology. 37signals was forged during the last recession and you get the sense that this company focused on profit and product is well positioned to survive the coming financial storm. Fried's dedication to the core product isn't surprising as I'm sure he's had ample opportunities to cash out and retire on a multimillion dollar cushion. But, at this point, you can assume that Fried is in it because he enjoys it. He's created the kind of no bullshit workplace that he wants to work in, and this is what I focus on during the interview - how does your company *really* work? No meetings? Really? And, what, if any, thoughts to do have on the current approach to technology business?

Some of my questions toward the end of the interview were designed to goad Jason into discussing some of the recent "fads" in application design (mobile social networking ring tone "crapplications"). He didn't take the bait, and I came away from interview convinced that this really is a company that doesn't just preach simplicity, it believes it. If you enjoy this interview, you may also want to read Fried's 37signals blog.

BEGIN TRANSCRIPT

Tim O'Brien: All right. So we're sitting here with Jason Fried

Jason Fried: Jason Fried, right.

TO: ...of 37signals.

JF: Right.

TO: So can you tell us a little bit about what your company
does?

JF: Sure. So 37signals; we do a few different things. But
primarily we design web-based applications for collaboration for small
business. So you can share to-do lists. You can share ideas. You
can share calendars and files and things like that with clients, or
just internally online. Basecamp, Highrise, Backpack, Campfire; those
are our main products. We've also written a couple of books. And we
do a lot of speaking around the country about our ideas about business
and entrepreneurship and things like that.

TO: Okay. So you speak at the Web 2.0 Expo in New York, the
second week in September. What are you gonna talk about?

JF: Well, I actually have two speaking slots there apparently.
So I'm speaking one on the ten things we've learned at 37 signals ‚
probably even a little bit more than ten. But the things that we've
learned at 37signals over the past few years about design,
entrepreneurship, running a business, customers, things like that.
And then I also am doing a small ‚ a 15 minute talk, one of the
keynotes. And I don't really know what I'm gonna talk about yet. I
have a few ideas, but they asked me to do it yesterday to fill in for
someone who can't make it. So I have to kind of come up with a new
idea for a small talk.

TO: So in terms of the ten things that you've learned, which it
might be ten more or less ‚

JF: Right.

TO: ‚ could you give us some hints, maybe give us two.

JF: Sure. So one of the things we've learned is that
interruption is a really dangerous idea. The idea that most offices
are set up to ‚ for interruption ‚ they promote interruption by having
everybody together all the time. And you can't actually get work done
when you're interrupted or you're being interrupted, so that's one
thing I'm gonna talk about.

And then I wanna talk about generally small teams doing things the
easy way. You know, if there's a bunch of different ways to do
something, do it the easy way instead of the hard way first to see
what happens. Talk about the four-day work week. We only work four
days here. So a variety of like sort of the ideas that we've come up
with over the past few years. They're not all unique ideas, but
they're kind of a collection of ideas that we think work really well
for building a small company.

TO: So you've got a bunch of employees gatherer throughout the
world. It's all about telepresence. You only work four days a week.
Talk to me a little bit about how the company works. What do you do
on a given day? Do you have a conference call? Do you collaborate on
Campfire or do you use something like Skype?

JF: Sure. So we have currently ten people. We're about to go
up to 12, but we have 10 right now. Five are here in Chicago, and
five are in five other cities around the country. Actually, one guy's
in Toronto. So around North America, we'll say. And even the people
in Chicago don't see each other very often, maybe once a week max, if
that. So we're very virtual, and we use the tools that we've built to
collaborate.

Primarily, we Campfire all day long, which is our group chat tool
where we're able to have conversations all day long in a persistent
chat room and be able to scroll back and get transcripts and share
files and share code in real time, pictures, things like that. So we
use that primarily, but we also use instant messaging a lot for quick
one-on-one chats. Campfire's great for the group chat, but if you
wanna talk to someone really quickly one-on-one, we use iChat for
that.

We also use iChat screen sharing. We're all on Macs so we can screen
share every once in a while. If I wanna show Ryan something, I can
just have him share my screen or vice versa. Things like that. And
we use iChat audio as well sometimes just for quick audio
conferences. But primarily we're text-based, and we think that helps
everyone focus on really what they wanna say, 'cause when you're on
the phone or something, you can just keep talking and talking, but
typing's hard. Typing takes time and effort in a way that generally
encourages people to be brief, and that's how we like, you know,
through an email or text.

TO: So you don't have meetings?

JF: We don't the typical meeting which is like, "Let's have a
meeting at 1:00. Everyone gather into a room." But we're actually
constantly collaborating and discussing things, but in a passive way.
And it's going on, on the web in Campfire or Basecamp or wherever.
But I don't wanna pay attention to it right now, I don't have to,
unlike a traditional meeting where I have to go in a conference room.
I have to stop what I was doing. I have to listen to someone else for
an hour. We don't think that, that's really an effective way of doing
things. Sometimes there are things that you need to discuss right
now, but for the most part, you just need to talk about stuff when you
need to talk about it. So I someone has a question for me and it's
not urgent, I'll get to it when I'm free, not right now when they
think they need an answer. So we definitely encourage passive
meetings and passive collaboration, but we're really not fans of the
traditional meeting scenario.

TO: Where did you get these ideas from, or do you think you've
been somewhat of a source for the industry?

JF: These ideas have just kind of bubbled up for us. They're
not ‚ we didn't sit down and decide that we're never gonna have
meeting, or that, you know, we're not gonna do functional
specifications documents, or the tings that we don't do that a lot of
people in the industry do. They're just things that we realized.

We started out ‚ you know, 1999 we started the company, and we did
more a traditional design work and we did this long drawn out
process, and delivered all these documents along the way and
deliverables. And we realized eventually that they don't really
matter. They're just things you deliver 'cause you think you're
supposed to. You think you have to. And we started doing less and
less of those things; less wire frames, less documentation, less
functional spec sort of stuff. And we realized that by sort of
winging it, we're actually able to come up with a better solution,
because we can make decisions while we're doing the things instead of
before.

And so just ‚ it's just been a series of things we've been trying
over the years and we've realized that whenever we have a meeting,
it's generally a waste of time. So let's collaborate sort of
eternally, but passively and things get done better that way
actually. It off-loads the group think and actually encouraged
people to make decisions, which is a really valuable thing. So these
‚ but these ideas aren't unique to us. I think that, you know, a lot
of these ideas have been used by other companies in some way or
another, but we're are kind of trying to pull a bunch of these ideas
together so it's more of a cohesive vision and not just this one idea
we have, but, you know, less meetings, more passive stuff. Let's
stay away from each other. Let's interrupt each other less. All
these things together have kind of formed our philosophy.

TO: In the same way someone might say, "Look, we can do our
application in Rails, because look at 37signals. They have a highly
scalable, large number of users hitting a system. It works. It's
simple. It's scaleable." They might say, "Look, 37signals has a
four-day work week. 37signals doesn't have meetings. 37signals
allows their workers to work at home." I speak to the people who are
stuck at that job, working for a boss who likes to hear himself talk
in the daily meeting for two hours.

JF: Right.

TO: How can people sort of get to a point where they're not
being interrupted by the mechanics of the corporation?

JF: Well, the first thing I would say is you shouldn't just try
to be like us, 'cause that's how we are. You know, you should really
do what works best for you. And that might be what we do, or it might
be 20 percent of what we do and 20 percent of what someone else does.
So you should really come up with your own ideas about what's
important. What works for us isn't necessarily gonna work for
everybody, nor should it. However, if you do wanna find yourself in
meetings less and not worrying about that office politic stuff as
much, you may have to get another job, to be honest with you. I mean,
some of these you can't change if you're just one person in an
organization that is built to be more traditional.

It's really hard to change that organization if you don't have the
power to change it. What you can do, though, is ‚ like for example,
you don't wanna go in there and like say, "We're gonna change
tomorrow." You might wanna pick a small project that everybody's
working on that's coming up and try some new ideas just around that
one specific small project. See how that works out. And then maybe
you can get some traction.

When people say, "Wow. We actually got something in three weeks.
Usually it takes three months." "Okay. What did we do?" "Well, we
didn't meet a lot. We actually just did the damn work, and that's
what happened. It turns out to work." So that's a good way to sort
of get some traction, I think, is to prove that these ideas work on a
small scale, and then you can slowly sort of infect everybody else
with these sort of ideas. So I think at the end of the day, progress
and, you know, results are really what drive people to make changes.
Not just these ideas, but actually showing that they work.

TO: I saw recently that you're gonna speak to a group of
corporate leaders at Chicago, I think, at the Tech Nexis ‚

JF: Oh, yeah. Yeah.

TO: Has the corporate culture of Chicago sought you out?

JF: No. We haven't really been sought out by the traditional
business industry, or whatever you'd call it, in Chicago. Chicago's
been sort of strange in that way that we've gotten a lot of press, but
it hasn't really been in the city. We're starting to get more of it,
but, you know, people in New York pay more attention to us in terms of
‚ pay more attention to us than the media does in Chicago, which is
fine, because Chicago's just a different place. It's not as focused
on technology businesses, but things are starting to turn around which
is nice. There's some interesting technology companies in Chicago, so
people are starting to pay more attention.

But we haven't really been sought out by, you know, the head of
Boeing, or, you know ‚ I don't even know if Sears is here anymore. I
don't think they are. But ‚ or Abbot Labs or anybody here, or
NAVTEQ. They don't seem to be either ‚ we don't seem to ‚ I should
say, we don't seem to be on their radar or they don't need to hear
from us, which is totally fine, too. I don't think we have all the
answers at all. But I do enjoy speaking to people who are coming
from a completely different point of view. It's more interesting to
me. I get to learn something, too. And it's just more fun, I think
than to even go to an event where everyone kinds of agrees with you.
So I hope to do more of that sort of ‚ I hope to inject myself more
into that traditional corporate culture and see if I can encourage
people to try something new.

TO: What's your role in the company? What would you call
yourself if you had to choose a word?

JF: We don't really have titles, so I don't know. I mean,
technically, I guess ‚ well, technically I'm a managing member, 'cause
we're an LLC. But, like, President, I guess, is a word that would be
used. I mean, I kind of come up with the ideas for the products. I
kind of oversee everything. Not so much from a technical point of
view, that's what David's role is, 'cause I'm not a technical person.
But I come up with the general ideas for interface design and then ‚
not always, but I kind of have the broad taste suggestions as to where
we should go on the interface design level. I do most of the whatever
PR we do. Whatever marketing we do are generally my ideas. And I
write a lot of the blog, but I kind of do everything. I'm very
multi-purposed, but I'm definite technical.

TO: Now, you don't have a PR firm ‚

JF: We don't.

TO: ‚ unlike a lot of start-ups, unlike a lot of companies.

JF: Right.

TO: And that's something that you've said, "Don't hire a PR firm."

JF: Right.

TO: Could you tell me, you know, in hindsight, what were the
pros and cons of this?

JF: Sure. Just to come clean about that, we did work with a PR
firm once for three months. So I just wanna make sure that I'm not
burying that. That was more of an experiment. It worked out pretty
well, but it wasn't really something we wanted to continue to do.
We've always chosen to teach to get the word out. So we think that,
you know, you can spend a lot on PR firms. Good ones are $10,000.00,
$20,000.00 a months, which just seems like a lot of cash to spend on
something that isn't really guarantying a whole lot. So we've just
chosen to teach and to tell a story about who we are and what we
believe in. And I think when you teach people, you get a lot of
attention. And when you share things a lot of companies would share,
you get a lot of attention, and the media seems to have liked that a
lot.

We've been in a lot of publications talking about our point of view.
We didn't have to pitch them. They actually came to us. So I don't
know if we've ever actually pitched a journalist or not. We may have
like sent them a link about something we did here and there, but we
haven't really made an aggressive pitch. They've generally come to
us, and I think it's because they think our story's interesting and
they think the way that we pitch ourselves in not a formal pitch, but
in a generally like, "here's what we believe" point of view, I think
they find that pretty interesting.

So I think that would encourage people to teach everything they
possibly can, share as many of the experiences that they can. You
know, tell people the things that work for them, and make sure that
they let everyone know this isn't the only way to do something. This
is who we do it. And I think by doing that, you can really have a
pretty good press ‚ sort of press impact without actually have to
play the typical PR pitch the big-time guys needs.

TO: So staying on this topic, you said that the way to succeed
without a PR firm is to teach. You could say that some people ‚ if
you said, "What does 37signals do?" Some people might say, "Oh, yeah.
They're the Rails consultants," or, "Aren't they a management
consulting company?" It seems like by being transparent ‚

JF: Yeah.

TO: ‚ if you read your blog, you get the sense that you're
trying to sell services, or you're trying to sell this sort of
philosophy of work. Do you find it to be a frequent thing where
someone doesn't know that you actually sell Backpack and Basecamp and
Highrise?

JF: I think there's definitely some people ‚ well, yes. In
some cases, yes. Some people know us for sort of the entrepreneurship
guidance that we give and not necessarily the products. But that's,
to us, a good thing in some ways, because eventually, you know, the
products will seep into their mind. And that's kind of one of the
ideas is to not just be a company that sells products like everyone
sells products, but to stand for something greater than that, and to
believe in something greater than that. And then eventually, maybe
the products will rub off on somebody and if don't, that's completely
fine as well.

But I think that in some ways, there is a challenge trying to get the
word out about what we do and who we are, and have a constant clear
message, because we do, do a few different things. You know, we talk
about entrepreneurship and design. We have a strong design presence.
We do this web-based software. We've done rails. So there's a lot
of different things going on. We're actually trying to figure out
the best way to explain 37 signals to people. We haven't quite
figured it out yet, so it's something we're struggling with
ourselves.

TO: One thing that people have noted that differentiates your
products from other products is this simple design. I know that you
sublet office space from Coudal Partners, which is a pretty successful
design firm based in Chicago. Tell me about how you made that
connection; if that is a connection that has been involved in the way
that your products look.

JF: Sure. The way they look doesn't really have anything to do
with the office space that we share, but I met Jim Coudal, gosh I
don't know, eight years ago or something like that. I forget exactly
how we met. I think we met through a mutual friend. And Jim and I
share a similar point of view on design and entrepreneurship in that
design firms should take control of their own skills and creativity
and do something with it. And not just always to sell it to clients,
but to actually come up with an idea ‚ a product, and then you can
sell the product, and so we kind of share a very similar outlook on
that.

But as far as the aesthetic goes, I think we have different
aesthetics, different looks and feels that we feel comfortable with,
but in general, I think we're all just ‚ both of us are about clarity
and getting the message out. And we're really both ‚ we think
writing is really important. You have to be good writers, have to
write a lot. You have to be clear. And that words, ultimately, are
more important than the visuals, and that, you know, if you had to
take one thing, words or visuals, I would take words everyday over
visuals. So I think that Jim's sort of on the same boat there.

TO: Back to the sublet, I went to Google's headquarters three
weeks ago, and you could say you're in the same industry. You both
sell web apps. But, Google's headquarters looks like a spaceport. It looks
like a rocket ship is about to be launched from an underground
cave‚ full of a clone army. You walk up to your office, I don't even think I saw the
name 37signals anywhere.

JF: Yeah.

TO: Tell me about the importance, or the lack of importance, or
the lack of emphasis placed on physical space. Do you just don't
think it's important to have any sort of physical space?

JF: Well, so we do share space. We have an office space here,
but we don't have our name on the door and there's no name on the
buzzer, and there's no indication that we're here. I think the space
part is interesting ‚ or is important just when you do need to get
together with people. I think it's nice to have a place to go. But,
in general, we think that physical space encourages interruption a
little bit too much, unless everyone had their own unique office with
closed doors, like the old way of kind of having an office set up. I
actually think that way is more effective than the big open space
where everyone can talk to one another all the time, because whenever
we're all together in the same space like working, we don't get a
whole lot of work done. We might get a lot of like BS-ing done, but
we don't get a whole lot of work done.

So I think by not having this like‚ this unique 37signals space, we
in some ways don't encourage people to come here. We actually just
encourage people to get their work done wherever they feel most
comfortable. I think when you work for a company that puts a lot of
money into their space, they want everyone to who up everyday. And
there's definitely value in that, especially if you're a larger
company. I think there's probably value in that, but for us it's
just never been something we felt like was important, and we don't
wanna spend the money on it to be honest with you. I mean, I think
there is something cool about having a space that is definitely your
own and interesting, and people get excited about that and they wanna
kind of come to work. But in some ways we're saying, we don't
actually want everyone to come together. We want people to stay away
from each other and actually get the work done.

TO: How do manage roles? It sounds like you have a very
informal space, a very informal company. You don't have a total.
David doesn't have a title. Ryan doesn't have a title.

JF: Right.

TO: But are there ever points at which it becomes necessary to
say, "The decision to do X rests with him or her."

JF: Sure.

TO: How do manage conflict in a organization has little
structure?

JF: Sure. I don't think that titles inform decisions. I don't
think that because this has person has this title and they made this
decision, it's the right decision. So we're more interested in the
right person making the right decision. If that happens to be Ryan,
then Ryan can make that decision. If that happens to be Jamis, then
Jamis can make the decision. The person who is closest to the work
that's being done usually makes the decisions. In some cases, that
decision ultimately will rise to the top and‚ where a call has to be
made, but it's pretty rare. We encourage people to make their own
decisions and if they're wrong, we fix them.

But we would rather encourage people to make their own decisions and
kind of be independent in that way than to constantly have to have
someone approve every decision that's made, because I think then
people don't feel any ownership. They don't feel like they're
trusted and they don't feel like I would rely on them to be smart
enough to make a decision. I'd rather have them make those decisions
and if they're wrong, we can fix them. But I'd rather default on the
side that they're gonna be right, 'cause we trust the people.

TO: So in terms of relating this to like and Open Source idea,
that's the idea of lazy consensus.

JF: Somewhat, but I think you kind of have to have a culture ‚
that's kind of the problem, I think with a lot of Open Source project.
I don't know ‚ I might like get over my head on this, but...

JF: Okay. I think a lot of Open Source projects, that the
problem is there isn't a leader. There isn't a culture necessarily,
who's making decisions based on taste and, you know, what needs to
come in and what needs to go out, or what should stay out. Things
like that. So at our company, there's definitely a culture. We all
share the same point of view on terms of what's important and what
isn't. So that's why I feel more comfortable having people make
decisions inside 37signals that aren't my own decisions. In an Open
Source environment, when everyone has completely different points of
view‚ well, that's not always true, but there's not that ‚

TO: Well, what ‚

JF: ‚ shared sense of like purpose in some ways. I think it's
harder to make really good decisions, especially when it comes to the
user experience. On a infrastructure, it's a little bit different,
but on like public products, like Open Source products, I think it's
harder for people to come to consensus about a good user experience
decision, because there really is no one to make that final call and
there's no one from the top down saying, "These are the types of
values that we all hold dear." So that's kind of the different, I
think.

TO: And you've clearly emphasized that having an opinion
matters, both ‚

JF: Yeah.

TO: ‚ technically and from a product‚

JF: It does.

TO: ‚ perspective. You've received a little bit of criticism
for being somewhat inflexible when someone on our user list says, "I
would like to do XYZ with the product."

JF: Sure.

TO: And the response is, "No." It's not dissimilar from the
way that, you know, one would view an Apple saying, "We're not gonna
add another mouse button."

JF: Right.

TO: Even though you really want it ‚

JF: Right, sure.

TO: Could you talk‚ a little bit about the value of being inflexible to the
customer?

JF: Well, I think it's‚

TO: And that's probably not the right word.

JF: Yeah, I mean, like it's sort of like dangerous territory to
talk about this sometimes, because people can take it the wrong way.
We're very open to what people have to say to us. Very‚ we're‚ we
listen to everybody. We have comments on our blog. We don't censor
them. Like, people can scream and yell at us all they want and people
can be nice and polite if they want. It's up to them. We listen to
everything that people say, but at the end of the day, you have to be
an editor. You know, you have to decide‚ you have to be a museum
curator. Some things stay and some things aren't gonna make it in the
museum. That's just the way it's gonna be, and so we're just honest
about that.

I think a lot of companies‚ I don't really have to say that. I think a lot
people, 'cause that's not fair. But some
companies are just out to make everybody happy by including
everything, and I think you can tell when you use their products that
they're usually pretty bad, because they're overloaded with
compromises. And we try and say that we recognize that not
everyone's gonna be happy with our products, and what's most
important is that we make the people who are really happy with our
products really happy. And so the people who are on the edge that
aren't sure about our stuff, we're not really that interested in
making them happy.

We're more interested in making the people who are really into what
we're doing very, very happy. And those people are always looking
for simple things; things that just work; things that don't have a
lot of stuff. That's why they come to us, 'cause everything else is‚ not
everything, but a lot of things are bloated and hard to use and
complex. So we see ourselves as editors and museum curators, where
we look at all the art. We look at all the ideas. We look at all
the words, but ultimately we have to pair those down to see what's in
the best interest of the product. And sometimes that upsets people,
because we're not gonna add things that they want.

But I think at the end of the day, what's tough for people to
understand, and it was tough for me to understand till I got in this
business, was that there's a million people just like me out there.
We all have our own ideas about what needs to go into this thing.
And if they saw the universe of suggestions, they would understand
that most of them conflict. This person wants this thing. This
other person wants something else. They're totally conflicting
ideas. So we can't add everything. We have to make decisions about
what's best for the vast majority of our customers, so‚

TO: Well, if you accepted everything Basecamp would look like Microsoft Project

JF: Or worse, yeah. And that's the trick, and we recognize
that Basecamp can't be everything for everybody, nor should it. So we
have to make those decisions about what makes it, what doesn't. But
the majority of the stuff that we add to our products, starts out as
customer requests, say about 90 percent. I don't know exactly,
but it's almost all of the ideas that we add to our products start off
as customer request. That's not to say that we implement them exactly
as a specific customers wants, but the idea is important. And when
you think about how to best implement that idea and solve the problem
that someone has and then add that feature to the product potentially.

TO: Do you do any opposition research?

JF: No. I mean, we're aware of who the competition is, but we don't
pay much attention to them at all. I don't think that you really
should. I think that you can't control the competition. The
competition is ever-changing. If you can't control it and you can't
really put your finger on it, then there's really no point worrying
about it. You need to deliver the product that you think is good,
that your customers want, not what their customers want. So‚ and I
think there's lots of room these days for 100 successful companies in
our space. There's plenty of people out there, plenty of room to have
a lot of people be successful. So we've never thought much about the
competition.

TO: What's the central problem? Why is it a bad idea to take "venture capital"?

JF: Our fundamental problem with outside funding is mainly
around the idea of initial funding. When you have‚ we're starting up
a company, you know, usually you need to get funding traditional for
capital expenditures like you need to build something, you need to
start a factory. You need to get widgets. You need to buy materials.
Those things are kind of gone today, at least in our industry. I'm not
talking about all business. I'm talking about software business,
fundamentally. The only real cost today is people. The servers are
dead sheep. I mean, Basecamp ran on one server for a year. It was
like 150 bucks a month. You can scrape that up. Software
infrastructure, software's free Open Source for the most part. So
your costs are pretty much related to human capital, a few employees
perhaps.

It seems wrong‚ first of all‚ it seems wrong to me to have a big
team to start to begin with. I think you could start a company with
one or two or three people. And those people might have to sacrifice
a little bit initially, but I think you can do that. And I would
encourage people to try that. So the VCs come to you and they wanna
give you a bunch of money and there's two ‚ generally two things
you're gonna spend it on: people, you're gonna hire a bunch of
people, or you're gonna spend a lot of money on marketing and
advertising. And I think that those are the things you shouldn't be
worrying about initially. You shouldn't be hiring a lot of people
and marketing and advertising's a terrible idea to start a company, I
think. I think it's better for you to be a bit obscure for a while
to sort of learn and fail in obscurity before you shine the spotlight
on you by spending a ton of money in the press and getting a whole
bunch of news about what you're doing.

So then I don't see much of a role for venture capital up front. I
think it's also 'cause you don't need that money to start the
business. I think you can do something on your own for a year and
see what happens. And then if you have something there ______ two
years and you have something there, maybe then you wanna take it to
the next level, maybe you do need to hire someone. I don't know.
Maybe you do need outside investment. I would still say that you
should really grow within your means, and if you can't grow within
your means, maybe you're not charging enough, you don't have enough
customers yet. But at that point, maybe advertising might help, but
I just think initially it's a bid ideas. It's also a bad idea ‚ it's
a bad financial transaction, because when you start a company, you
have no leverage. You have no nothing, and you're basically giving
up a huge chunk of your business, as someone who knows a whole lot
more about funding and finances than you do.

And so it just seems like the wrong time to enter into such a
critical financial arrangement when you have no leverage. You have
really nothing to offer, and this other company's gonna take a big
chunk of your business. So I just don't like that. I'm not opposed
to the idea of investment down the road if you think something's
working, for example. Threadless, a t-shirt company based here in
Chicago. They've been very, very successful. They talk about this
publically. They've‚ you know, tens of millions of dollars worth of
revenues, I believe. And they finally got funding last year. They
didn't really technically need funding to run the business, but they
have some expansion plans that they wanna do and that's like such a
big capital investment that they needed help on the outside and they
wanted some advice on like running retail and shops and things like
that, things that they haven't done before.

To me that makes more sense. They have a proven business model.
They have something to offer the VCs. The VCs have something to
offer them and that makes sense. But initially I don't think you
have much to offer the VCs, so they're gonna take a big chunk of your
company. And then the type of money they're gonna give you is gonna
go in the wrong places initially, and I think that's just kind of a
recipe for disaster.

TO: So an established company like, let's say, 37signals wanted
to get in the business of launching communication satellites into
space and you had a really proven business model, a great price, and a
bunch of customers lined up. You just needed, you know, somebody to
fund the rockets.

JF: Sure.

TO: That makes sense.

JF: I think so.

TO: But someone coming out of school with a business plan and
bunch of magic and story, that's not,

JF: I think you can do it on your own. I don't think you need
their help. I don't think you need the VCs help, because really what
they're gonna help you with is money and you really don't need that
much money to get going these days. Like I was saying earlier, don't
need hardware. Don't need software. You just need people, and you
don't need that many either. So the money, I think, just kind of goes
to your head and you start ‚ you know, look, when you have money, you
spend it. That's what people do. And especially VCs encourage you to
spend it, 'cause they wanna fund more.

Like VCs ‚ I don't know many people who just take one round. You
take one round and you run out, and you take another round, and you
take another round. And then you've just lost control of the whole
thing. So I just think it's better to start from sort of more of a
position of frugality, I guess, is the right word rather than like
having all these resources. Those constraints, not having the money
will encourage you to come up with creative solutions and solve
problems simply. When you have all this money, you can a whole bunch
of stuff and spend money in the wrong places, and advertise things
that aren't really quite for prime time. And I think then you're
just asking for it. So I would stay away from that in the early
stages.

TO: That would be like a guerilla start-up, I guess.

JF: Yeah, I mean, I think, yeah, I guess you can call it that.
I don't know. I just don't think that you want that kind of attention
starting out. I really think you should just do it yourself. See
what happens. Build something. Hopefully, you won't need any money
at all. But if you do down the road and you have proven business and
customers, then it might make sense.

TO: Okay. So you're gonna be at Web 2.0 Expo. Maybe you might
actually be speaking to people at the conference right now.

JF: Right.

TO: There are a bunch of people in the audience who are trying
to see what's the next thing.

JF: Yeah.

TO: And maybe that's social networking plus bling-tones for the
tweens.

JF: Bling-tones. Actually, is that a real thing, 'cause...

TO: I don't know.

JF: ...you should trademark that if you haven't. Bling-tones;
that totally works. Yeah.

TO: I'm not gonna get in that business.

JF: Okay.

TO: So, if anyone if listening, they should feel free to run with that idea.

JF: Free to go for it, okay.

TO: ...business. What's next? What's the big thing in your
mind?

JF: I don't think about that sort of stuff, so I don't really
care about the next big thing. What's the difference? You know, like
to me, the big thing always is building great product. Taking care of
your customers. Building something that you believe in, and staying
true to what you believe in. I think that's really the big thing
that's always the big thing.

TO: So it's a very stoic take on technology. You're just
saying, you know, "We're making money: Basecamp, Highrise, Backpack,"

JF: Campfire.

TO: "Campfire."

JF: Right. Getting real.

TO: "We're focusing on details. We're not thinking about how
to make this a, you know, holographic interface through Basecamp,"

JF: Right.

TO: ..."with, you know, VoIP."

JF: Well, I mean, there's some things down the road we might
wanna explore, but I don't really think that they're gonna be
game-changers. You know, like if we added VoIP to Highrise or
something like, "Okay. That's an interesting thing to add, but does
it really change the game? I don't know so, so much." So we don't
really think about that next big technology thing ‚ technological
thing.

And I think that's generally the problem with technology companies is
they're too focused on the next big thing. The best advice I've ever
gotten in business is actually Jeff Besos who is one of our ‚ I our
only investor in our company. He said, you should focus on the
things that don't change in your business, which I think is a really
interesting way of looking at it. Think about the things that people
are going to want today and ten years from now. That's what you
should be investing in.

So in Amazon's case it would be like, you know, fast shipping or free
shipping, great selection, good return policies, good prices. Those
are the things people are gonna want today and ten years from now.
In our business it's things like speed and simplicity. I don't think
people are going to wake up in 2018 and say, "God, I wish software
was harder to use". You know, o "I wish this was slower." So speed,
simplicity, ease of use, clarity, you know thing like that are the
things we can invest in. That stuff's going to kind of be timeless
in a way.

So that's what's interesting to us. It's not the next big thing that
may or may not happen, because that thing that's big will fade out
maybe and something else will happen. But just staying true to these
basic principles of good product, good service, focusing on the
things that are gonna matter today and ten years from now. Those are
the things that we're interested in doing.

TO: So, there's going to be a lot of people focused on
something that works.

JF: Right.

TO: And they're going to look at what you do and say, "You're
sitting on a gold mine. How come you didn't turn that 2 trillion user
base into some sort of socially aware, socially connected "network"?"

JF: In what way?

TO: Is that a conversation that you've had internally like,
"Hey, you know, we could invite people to your Basecamp instead
_________."

JF: Well you can. I mean you can do that. So you can add
people to your Basecamp projects or invite people to your Backpack
account. So you have that but there aren't the typical social
networking things where you're friends with this person who you're
working on a Basecamp project with. It's more about what you need to
get done. Do you need to invite this personal project because they're
a part of the project? Then you invite them, but not just like to
hang out. You don't hang out in Basecamp or Backpack. So I think
that the social aspects of our tools are more realistic in terms of
like what would you really do? If you have a project, somebody needs
to get involved, you invite them into the project. But it's not
somebody who is just here to observe the project.

But, you know, there are other things we could do, community stuff
that we could do. We have forums and whatnot for our products but
there's other things we can do and we've thought about some of those
things, but I'm not in any rush to build out whatever true social
networking features, whatever that really mean, we're not in a rush
to do that. And I haven't seen anyone who's actually ‚ I mean
MySpace is one example of a company that's been ‚ well I don't even
know if they've been technically successful. I mean they got bought
out for a lot of money but I'm not sure the social stuff is actually
paying off for anybody yet. I mean Facebook has a big valuation. A
lot of people use it, but what does that really mean?

TO: I'm asking my question because you see an app like Basecamp
and you think to yourself, "Well what is the Facebook integration for
that?"

TO: How could I add that as a widget in my Google main page?
Is this just not something you're focused on?

JF: Well I can tell you that somebody actually has built
something call Periscope which is a Basecamp interface to like iGoogle
or whatever that is, like you can put the widget of your Google
homepage or whatever.

TO: I've used it twice.

JF: So, right ‚I use My Yahoo, I'm a My Yahoo guy, but anyway,
someone has built that. So we have APIs where people can do those
sorts of things and they can build these sorts of tools. It's not our
focus, widgets and Facebook apps. No, our focus are our products as
they stand. And then we have APIs on all of our products except
Campfire. There's an unofficial one, but anyway, where people can
build these things and there's I think 30 or 40 different products now
that integrate with Basecamp; billing apps, invoicing apps, time
tracking, accounting things. You know, that's not our specialty so we
let other people do that. There's Mac OS X dashboard widgets that
work with _______ and Backpack and stuff like that. So we let other
people do that stuff. It's not really the thing that we're focused
on.

TO: When you talk about focus I think the message I get from
you is, "We're focused on the basics of our product." Why? You've
got a lot attention. You've probably had a lot of opportunity to
bring some new products. Do you find it tough not to get distracted
by some of the possibilities of the technology?

JF: No, because we're generally lazy, truthfully. I mean I
think laziness is a good thing in this sense. In that we don't really
want to solve hard problems and do really hard work. We want to find
out what the simple problems are and solve those, because I think most
people's problems are pretty simple. So all this detailed integration
work with other products and third-party stuff and Facebook and all
this other stuff, that's actually kind of a hard thing to do. For us
at least, because that's not really what we're focused on doing. So
we don't get carried away by that. We do have a lot of ideas, things
that we could do. We have a lot of, "Oh wouldn't it be cool if,"
conversations. If you can do this in Basecamp or Backpack and
Basecamp could work better together.

We're going to work on some of those integration between our
products. So there's a lot of ideas that we can pursue, but we're
also very aware of the work involved and also what's the payoff. A
lot of times I think companies confuse enthusiasm with priority quite
a bit, especially when it comes to new technologies. They're really
enthused about them so they do them but they're not really high
priority. When you're doing that when you're a small company, you
can't do other things. So we're very focused on the things that are
actually valuable for us and our customers and not so much valuable
for the tech crunch crowd who wants the latest widget thing or
Facebook integration.

TO: Or the latest bling tone.

JF: Or the latest bling tone, right.

TO: I will have to disagree with one thing you said previously.

JF: Sure.

TO: You said, "It's tough to hang out at Basecamp." I have an
instance of my own.

JF: Okay.

TO: I'm always hanging out at my Basecamp, it's a pretty cool
place to hang out.

JF: Is it cool? What's going on in there?

TO: Nothing, just sitting.

JF: Okay, cool if you're into that loner thing, totally cool.
Just hand out in your own account.

TO: It's just me. I've got a few white boards.

JF: Perfect, whatever it works. And you're allowed to do that.
There's no rules against that.

TO: It's free.

JF: Right. It's free

TO: All right, well thank you for talking to us today or
talking to me.

JF: Sure, my pleasure. Thanks for interviewing me. I hope
this stuff was valuable.

TO: Is there anything I forgot to ask?

JF: Well it depends what you want to know. I'm here to answer
any question you have.

TO: Tell me a secret.

JF: Tell you a secret. I can't do that on video. But if you
have another questions, I'm happy to answer them, ________ or
anything.

TO: You know what, I've run out of questions.

JF: You're out. Okay, good deal. Well, thank you.

END TRANSCRIPT


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12 Comments

The voice-transcription program works well, but shouldn't a human look over the text before you post it to the web?

:-) it was human transcribed. We'll give it another once over later on today, but I thought it was accurate. (My sound was very crappy, apologies)

It’s great to learn about the unique culture of 37singals. This was a very powerful interview that had me (a domain-specific B2B WebApp provider) questioning established norms. I like the way Jason thinks critically about the old business model, and I’m glad to see 37signals succeed and validate this model.

Jason sounds so full of shit. He reminds me of a lot of fly-by-night managers I've met who really shouldn't be in business. His style seems to resemble some sort of extreme Agile to the point of cowboy XP approach. It might be fine when you're building your own chat tool, but I doubt any government clients would put up with his recklessness. Lucky for Sun they didn't buy in.

Good interview. Pragmatic advice for the daring. More valuable because you followed this path already.

Thank you Timothy and Jason.

@anon - I'm skeptical of agile shops like Thoughtworks as I tend to believe that they encourage an almost religious devotion to XP that encourages things like manadatory pair programming and prohibition of code level documentation. I've worked with that manager you described in your comment, and I'll have to say that I did not get the same energy from Jason.

I walked away from that interview with the sense that, while 37signals might trumpet support for a certain brand of "Agile", Fried's general idea toward running the company is one of pragmatic non-interference. I've worked for those "cowboy XP" managers, and I don't get the sense that Fried is one of them.

"Lucky for Sun they didn't by in", are you serious? Sun has been trying to ride the Rails bandwagon for some time, and they've succeeded to some extent by hiring brilliant engineers like Charles Nutter. Given the recent economic turmoil, I'm sure Sun would've appreciated any business that generated cash.

Thanks Tim for this great interview.

Jason, I'm a strong advocate for 37 Signals in this part of the world. It was great to hear your views on business strategy and how a focused small team can work together to create a remarkable organization.

I also took some inspiration from your idea of the educational communications approach rather than the traditional PR and promotional way of spreading the word about what value you can contribute to the world.

Thanks again for having the vision and courage to build a great team that breaks the traditional thinking and being an inspiration to thousands of software entrepreneurs around the world.

Nice interview. It's funny that where I work, we work in almost the same way. No formalized meetings, work virtually through email and IRC, no documentation when you don't need it, etc. No 4 days a week, but flexible hours. Works really well.

I'll ditto that. The 37Signals and the Wicket ways of working sound quite similar. At a recent startup, we tried 6 hours x 5 days a week and that also works better than a "normal" schedule for productivity. In fact, I think it might work better than 4 day work week.

I'll ditto that. The 37Signals and the Wicket ways of working sound quite similar. At a recent startup, we tried 6 hours x 5 days a week and that also works better than a "normal" schedule for productivity. In fact, I think it might work better than 4 day work week.

The values and culture of an organization is very much affected by what the company produces and for whom. 37Signals products and market niche allow for the type of distributed, uninterrupted work flow. Not all companies and products would fare as well. For instance, I work in an agile shop where we have urgently needed deliverables that are non-negotiable for customers bringing their business to us (yes, I'm being intentionally vague about who and where I work). A new feature or enhancement often must be done by a certain date for a particular customer and so co-location, lots of discussion, rapidly changing dependencies and requirements are all routine. We couldn't meet our customers' needs if we were "uninterruptable".

I concede that if I were king I would try to change the culture of how we take on new work to be more 37Signals like but I'm not sure that it can be done because our software service exists to support a very time line driven industry.

Thanks guys, This was a great insight to how 37 Signals does business, I always love taking away some good advice from a successful company and apply it to my own and potential startups, One day soon, I hope to meet both of you. Really good advice for fledgling companies.

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