20VC Basecamp Founder David Heinemeier Hansson on Why It Is The Biggest BS To Chase Being A Unicorn, His Relationship to Wealth and Status and Why Now More Than Ever It Is A Myth Entrepreneurs Have To Raise VC



In a candid conversation on "20 minutes VC," host Harry Stebbings interviews David Heinemeier Hansson, creator of Ruby on Rails, founder and CTO at Basecamp, and best-selling co-author of "Rework" and "Remote: Office Not Required." They discuss the transformative power and future of remote work, emphasizing the importance of meaningful human connections over the pursuit of wealth and the detrimental chase for unicorn status in tech startups. David shares insights on fostering a culture of autonomy, accountability without micromanagement, and the significance of building a company that prioritizes employee and customer well-being over exponential growth. He also critiques the venture capital model and the narrow focus on financial success, advocating for a broader, more fulfilling approach to entrepreneurship and life.

Summary Notes

Introduction to the Podcast Episode

  • Harry Stebbings introduces the episode as one of the best founder episodes of the 20 minutes VC.
  • He mentions his excitement about having David Heinemeier Hansson on the show.
  • David Heinemeier Hansson is recognized for his multiple roles: creator of Ruby on Rails, founder and CTO at Base Camp, and bestselling co-author.
  • An interesting fact about David is his transition from not having a driver's license at 25 to winning the 24 hours of Le Mans race at 34.

"Now I'm gonna put myself out there with this one and say this is the best found episode we have ever done."

The quote highlights Harry Stebbings's confidence in the quality and significance of the episode featuring David Heinemeier Hansson.

Sponsorship and Support

  • Hello Sign is introduced as a company that emphasizes user experience in their esignature solution.
  • Hello Sign's acquisition by Dropbox for $230 million is mentioned.
  • Cooley, a global law firm specializing in startups and venture capital, is also mentioned for its extensive experience in forming venture capital funds and managing legal issues for VC-backed companies.

"Hello Sign is an effortless esignature solution used by millions to securely send and request legally valid digital signatures and agreements."

This quote explains the core service provided by Hello Sign, emphasizing its ease of use and legal validity.

David Heinemeier Hansson's Journey into Tech

  • David recalls his early days in the tech industry, starting with gaming journalism and learning about the internet.
  • He shares the story of how he was hired by Jason Fried after responding to a blog post on Signal v. Noise.
  • David outlines the timeline of working with Jason, the development of Base Camp, and the release of Ruby on Rails.

"In 2001 I had learned just enough PHP, HTML and whatever else to be dangerous or overconfident enough to write JSON when he posted a blog posting on the company website Signal Vnoise in 2001 asking for some help."

David's quote reflects his self-taught beginnings in web development and the opportunity that led to his collaboration with Jason Fried.

Remote Work and Its Evolution

  • David discusses the book he co-authored with Jason Fried, "Remote: Office Not Required," and their early adoption of remote work.
  • He addresses the common misconceptions and skepticism about remote work he encountered from other entrepreneurs.
  • David emphasizes the importance of adapting to remote work, especially in light of the COVID-19 pandemic.
  • The conversation turns to the mistakes companies make when shifting to remote work, such as trying to replicate office routines.

"We wrote a book, Jason and I called Remote Office not required back in 2013. And when we wrote that book, I thought I was already stating the obvious."

The quote summarizes David's perspective on remote work as an obvious and inevitable shift in the work environment, even before the pandemic.

Meetings in a Remote Work Setting

  • David offers a framework for determining which meetings are necessary and which are not.
  • He argues that meetings should be reserved for vigorous debate among informed individuals who need to reach a consensus.
  • David advises against using meetings for one-way information delivery and suggests written communication as an alternative.

"What are meetings good for? In my opinion, meetings are great. When you have two or three or four, that's probably the limit."

This quote captures David's view on the optimal use of meetings, emphasizing small group discussions aimed at resolving differences.

Addressing Mental Health and Isolation in Remote Work

  • David acknowledges the reality of mental health challenges and feelings of isolation that can accompany remote work.
  • He details the practices at Base Camp to foster social connections, such as scheduled game time and group discussions unrelated to work.
  • David highlights the use of Base Camp for asynchronous communication and connection among coworkers.

"It's really tough and it's real. And the first thing you have to accept that this is real and this is something people do struggle with."

David's quote recognizes the importance of addressing mental health and the sense of isolation that can arise when working remotely.

Social Dynamics in Remote Work Environments

  • The nature of forming social bonds in remote work environments is different from traditional office settings.
  • Remote work allows for cross-departmental relationships as employees engage more broadly across teams.
  • Employees at Basecamp feel they know their colleagues better than at past jobs due to this inclusive interaction.

"We've had several employees join Basecamp who said after they've been here for a while, they know their coworkers at Basecamp much better than they knew their coworkers at their past job where they were working together in an office..."

This quote highlights the contrast between the depth of workplace relationships in remote settings versus in-person office environments. It suggests that remote work at Basecamp facilitates better understanding and closer connections among employees.

Organizational Complexity and Growth

  • The complexity of an organization increases exponentially with each new addition to the team.
  • Basecamp aims to keep the team small to maintain simplicity and allow executives to engage in hands-on work.
  • David Heinemeier Hansson emphasizes the importance of personal involvement in work and the avoidance of unnecessary meetings.

"The complexity curve is not linear when adding new people... the amount of coordination overhead that it requires when you double your headcount is, again, not double. It is far more than that."

This quote explains the non-linear relationship between team size and organizational complexity, suggesting that small teams can be more efficient and allow for more hands-on involvement from all members.

Management Philosophy at Basecamp

  • Basecamp endorses the concept of "managers of one," where employees are self-directed and require minimal oversight.
  • The company culture discourages micromanagement and instead focuses on broad guidance and autonomy.
  • Management at Basecamp involves less frequent, more meaningful interactions and relies on asynchronous communication.

"I think the easiest balance is I try to do the work myself... one of the big principles we have at Basecamp is this notion of managers of one..."

This quote reflects the management style at Basecamp, where self-reliance is valued, and the role of managers is to contribute rather than constantly direct others.

Accountability and Failure

  • Basecamp fosters a culture where it's acceptable to fail, and employees are not punished for mistakes.
  • The company operates on six-week cycles, allowing for reflection and planning without excessive oversight.
  • Actions, rather than words, define the company culture and contribute to a safe working environment.

"By not being an asshole, that's a good start... those things are created through actions, what you do and what you don't do."

David Heinemeier Hansson emphasizes that the treatment of employees following mistakes is crucial to creating a supportive culture. He suggests that leadership actions speak louder than mission statements or policies.

Mission Statements and Organizational Direction

  • Effective mission statements should guide decision-making and trade-offs, not just express generic aspirations.
  • Basecamp is critical of bland and non-specific mission statements that fail to provide real direction or distinction.
  • The purpose of a mission statement is to clarify choices and priorities for an organization.

"The mission statement, if it is to have any effect at all, is a way of weighing trade offs between two things that you want both, and then deciding which of the two you want more."

David Heinemeier Hansson argues that mission statements should have practical implications for organizational decisions and help resolve conflicts between competing goals.

Company Culture and Principles

  • Focus on fundamental virtues and ethics rather than creating a fantasy of what the company should be.
  • Importance of being straightforward with employees and customers.
  • Emphasize the need to do what you promise and to act with kindness and fairness.
  • Acknowledges that these principles are challenging to maintain due to commercial pressures.

"Focus on sort of more fundamental basics of virtues and ethics here. Focus on telling things straight up, both to your employees and to your customers."

This quote highlights the speaker's belief in prioritizing basic virtues and ethics in company culture, and the importance of honesty in internal and external communications.

Venture Capital and Fundraising

  • Skepticism about the necessity of venture capital for starting a software company.
  • The ease of starting a software company today without significant capital.
  • Critique of the pursuit of becoming a "unicorn" and the moral issues in some of these highly valued companies.
  • Advocacy for alternative paths to entrepreneurship that avoid high-risk ventures.

"This idea that you need venture capital, you need outside money is complete bunk and bust."

The speaker expresses a strong opinion that venture capital is not a requirement for starting a successful software company, challenging a common belief in the tech industry.

Entrepreneurship and Risk

  • Entrepreneurship does not have to be synonymous with taking on significant risk.
  • Possibility of starting a company with minimal risk by ensuring a stable financial foundation before committing full-time.
  • Critique of the myth that entrepreneurship is solely about defying odds and taking huge risks.

"By the time we moved full time, there was zero risk."

This quote emphasizes that the transition to full-time work on their startup was made without risk because the business was already profitable, challenging the common narrative that entrepreneurship is inherently risky.

Personal Relationship with Money

  • Influence of growing up in Denmark on the speaker's perspective on money.
  • Realization that becoming a millionaire did not drastically change the speaker's happiness or life satisfaction.
  • Emphasis on the importance of how one spends their time and the activities they enjoy over accumulating wealth.

"I realized, oh, shit, where's the magic? It wasn't actually that magical, right?"

The speaker shares a personal realization that achieving wealth did not bring the expected transformation in their life, suggesting that money is not the key to happiness.

Happiness and Wealth

  • The fallacy of equating more money with increased happiness.
  • Encourages exploring philosophical wisdom on the subject of happiness and life's purpose beyond material wealth.
  • Recommends authors like Eric Fromm and philosophies like existentialism to gain perspective on what is truly important in life.

"There is no point where you suddenly wake up once you're on that treadmill and think, oh, that was it?"

This quote reflects the speaker's belief that the pursuit of wealth does not lead to a definitive point of happiness, and that one's worldview needs to shift away from materialism to find true contentment.

Legacy and Purpose

  • Questioning whether the desire for a legacy is a valid motivation.
  • Suggests that finding satisfaction in dimensions beyond wealth and legacy is more fulfilling and meaningful.

"Why are we doing it? Why are you on the chase? Why do you want more?"

The speaker challenges the listener to reflect on their motivations for pursuing wealth and to consider whether there are more meaningful pursuits in life.

Legacy as a Core Driver

  • Legacy can be a motivator, but it should not overshadow other aspects of life.
  • The pursuit of legacy can lead to alienation from loved ones if it becomes an obsession.
  • A fulfilling life is often not measured by monetary success but by human connections and happiness.

"The number of 70 year old miserable fucks who don't have their grandchildren running around them, but have them alienated and estranged because they were always chasing more and they never had enough."

This quote emphasizes the potential negative consequences of prioritizing legacy and wealth over relationships and personal fulfillment.

Human Happiness and Success

  • Harvard's longitudinal study on human happiness found that money is not a key factor in living a good life.
  • Strong, loving human connections are the most significant contributors to happiness and a life with fewer regrets.

"The people who had the greatest, strongest, most loving human connections were the happiest people, and those were the ones with the least regret."

This quote summarizes the findings of Harvard's study, highlighting the importance of human connections over financial success in determining happiness.

Personal Growth and Perspective

  • Personal growth is a gradual process influenced by one's background and the wisdom available through learning.
  • Reflecting on past beliefs and experiences can lead to a broader understanding and a more fulfilling approach to life.

"It was a slow boiling until to the point where you can recognize it over time."

David Heinemeier Hansson describes his personal growth as a gradual process rather than a sudden revelation, emphasizing the ongoing nature of gaining insight.

Recommendations for the Audience

  • Eric Fromm's works, especially "To Have or To Be?" and "Escape from Freedom," are recommended for their insights into human behavior and society.
  • The importance of considering others' perspectives and having a centered worldview is highlighted.

"I think of myself as working for someone else. Whatever decision that I make or help influence at base camp, at the executive level, I always try to think of myself on the other side."

David Heinemeier Hansson stresses the importance of empathy and perspective-taking in decision-making, particularly in a leadership role.

Self-Reflection on Weaknesses

  • Acknowledging one's weaknesses, such as a lack of discipline, is important for personal and professional development.
  • Being self-aware can lead to a desire for improvement and better habits.

"I'm not very disciplined."

David Heinemeier Hansson openly shares his weakness, which demonstrates self-awareness and the potential for personal growth.

Changing the Narrative in Tech and Startups

  • The current focus on financial success and becoming a unicorn is seen as a damaging mindset in the tech and startup industry.
  • Encouraging founders to prioritize meaningful work and positive contributions over disruption is recommended.

"The narrative around money and the importance of big, the importance of the unicorn chase, I think that is probably one of the most damaging strains of mimetic viruses floating around."

This quote criticizes the prevailing focus on financial success in the tech industry and suggests a shift towards more value-driven entrepreneurship.

Critique of Zoom

  • Disapproval of companies that mislead customers or prioritize minor improvements over security and ethics.
  • The importance of broad perspective over narrow focus in business decisions.

"I don't like people who lie."

David Heinemeier Hansson expresses his disdain for dishonesty and unethical practices in business, using Zoom as an example.

Future Outlook for Basecamp

  • Emphasis on contentment with the present rather than fixating on future plans.
  • The hope is to continue enjoying current work and maintain a good life-work balance.

"I'm a quite content person, even though it may not appear so on Twitter, because Twitter is sort of my spleen, my outlet for sort of all the gall that otherwise would build up in the system."

David Heinemeier Hansson reflects on his personal contentment and outlook on life, indicating a balance between his online persona and his real-life sentiments.

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