20VC Why Financial Planning and Goals Do Not Work, The Decision to Ban Politics in the Workplace and Losing 13 of the Team Overnight & The One Question That Will Drive All DecisionMaking for Leaders with Jason Fried, CEO @ 37Signals

Summary Notes


In this episode of 20 VC, Harry Stebbings interviews Jason Fried, co-founder and CEO of 37signals, discussing the company's journey, philosophy, and future. Fried shares insights on decision-making, prioritizing long-term effects over immediate relief, and the importance of independence in business. He emphasizes the value of bootstrapping, profitability, and enjoying the work over scaling for the sake of growth. Fried also touches on his personal life, revealing his approach to parenting, marriage, and his own future, hinting at a desire for less responsibility post-Basecamp. Throughout the conversation, Fried's commitment to a sustainable, enjoyable, and self-sufficient business model shines through, rejecting the venture capital-driven narrative of rapid expansion.

Summary Notes

Decision Making Process

  • Jason Fried discusses his approach to decision making, emphasizing long-term impact.
  • He thinks about how a decision will feel in a year, rather than making decisions solely for the immediate moment.

"When I make a decision, I typically don't make it. For now, I think about what will that probably feel like in a year?"

  • The quote highlights Jason's forward-thinking strategy, considering the enduring effects of his choices rather than short-term benefits.

Independence in Business

  • Harry Stebbings believes the best guests on his show are those without a boss, which he considers rare.
  • He notes that VCs have LPs as their bosses, and founders have their boards and investors.

"I always believe the best shows are those with guests who do not have a boss."

  • Harry's observation suggests that individuals who operate independently often provide more insightful and candid discussions, as they are not accountable to a higher authority in their professional roles.

Jason Fried's Entrepreneurial Journey

  • Jason Fried shares the origin story of Basecamp, which was born out of a need to manage website design projects and client communication.
  • He and his co-founder David turned Basecamp into a product after realizing its value beyond their own business needs.

"We built this thing, which eventually became Basecamp to manage those projects and network we started using with our clients. And they said, what is this thing? We need this for our own business."

  • This quote explains how Basecamp was created out of necessity and became a valuable tool for others, leading to its commercial success.

Educational Experience

  • Jason Fried reflects on his school experience, citing his interest in subjects as largely dependent on the quality of his teachers.
  • He identifies as an average student, attributing his performance to a lack of interest rather than capability.

"I was a C or B student. I was average, mostly because I just didn't really find a lot of it interesting."

  • Jason's comment on his academic performance indicates that engagement and interest are crucial factors in his learning process and overall educational experience.

Running From and Towards

  • Jason discusses his aversion to structure and being told what to do, which has driven his pursuit of entrepreneurial independence.
  • He is curious about what the future holds beyond his current role and is open to exploring life without the responsibilities of his business.

"My entrepreneurial independence streak is an example of me going in the opposite direction of that, running my own show, not taking money."

  • The quote reveals Jason's motivation for maintaining autonomy in his business endeavors and his desire to control his own work environment.

Future Plans and Sabbatical

  • Jason Fried plans to take a sabbatical to gain clarity on his attachment to his work and to explore life without the constant presence of a computer screen.
  • He expresses a desire to eventually step away from his current role and is interested in seeing what others could do with the business.

"I'm taking my first sabbatical in January and February, about six weeks."

  • Jason's decision to take a sabbatical indicates his need to reassess his relationship with his work and his interest in experiencing life without the daily demands of his business.

Venture Capital and Profitability

  • Jason Fried discusses the risks for heavily funded, unprofitable SaaS companies in a changing macroeconomic environment.
  • He emphasizes the importance of learning the art of profitability and adapting quickly to ensure business survival.

"It's going to be hard. I think there's a lot of risk baked into this that people haven't thought about."

  • The quote underscores Jason's perspective on the challenges that unprofitable companies face when external funding becomes scarce, highlighting the necessity of self-sufficiency.

Competition and Customer Dynamics

  • Jason Fried talks about the fluid nature of customer loyalty and the importance of focusing on one's own business metrics rather than comparing with competitors.
  • He stresses that the goal should be making one's own business work, rather than winning a zero-sum game.

"All that matters is, do we have enough customers to make our own business work? That's all that matters."

  • This quote captures Jason's business philosophy, which prioritizes the internal health and profitability of his company over external benchmarks or competitor performance.

Scaling in SaaS

  • Jason Fried questions the common ideology in SaaS that companies must scale up to big contracts and enterprise clients.
  • He advocates for a focus on profitability and questions the rationale behind scaling for the sake of growth.

"What makes sense to me is how do you operate profitably?"

  • Jason's inquiry into the purpose of scaling reflects his belief that sustainable business practices are more crucial than aggressive expansion, especially if it leads to increased losses.## Business Growth Philosophy

  • Jason Fried emphasizes the importance of growing a business based on personal values rather than external expectations.

  • He rejects the idea of growth at the expense of profitability, customer satisfaction, or the need to take on external funding.

  • The focus should be on what the business needs to survive and be profitable, rather than on industry trends or competitors.

"And it might mean we've left plenty of opportunities on the table. Or we could have been bigger and all these things, but bigger for what reason?"

This quote reflects Jason's belief that growth should not be pursued for its own sake, but should align with the company's values and goals.

"Worry about your own business. What do you need to survive? What do you need to be profitable? Where do you want to go? That's all that matters."

Jason advises focusing on one's own business needs and goals instead of getting distracted by what others are doing.

Measuring Success

  • Profitability is a fundamental measure of success for Jason's business.
  • The enjoyment and willingness to repeat the work experience are equally important.
  • Success includes team morale and the desire to work in a creative and supportive environment.
  • Financial targets and growth percentages are not the primary focus; long-term trajectory and sustainability are key.

"Profitability is important to us fundamentally. The other part of it is simply, would I want to do this again?"

Jason values profitability but places equal importance on the quality of the work experience and team satisfaction.

"If we're flat or even down, it's okay. It's all about the long term trajectory. It's not about this year versus last year."

He expresses a preference for long-term sustainability over short-term financial gains or growth metrics.

Goal-Driven Work

  • Jason is not goal-driven and does not set specific targets for his teams.
  • He believes in intrinsic motivation and doing the best work possible without the pressure of arbitrary goals.
  • The focus is on the quality of work and the daily effort rather than achieving specific numbers.

"My thing is like, do the best job that you can and why wouldn't you just do that?"

Jason questions the value of goals and suggests that intrinsic motivation should drive employees to do their best.

"How about we don't make anything up and just do the best work we can on a daily basis?"

He advocates for a focus on daily efforts and quality work rather than chasing arbitrary targets.

Performance Management

  • Performance reviews at Jason's company do not rely on metrics but on qualitative assessment by peers and managers.
  • The focus is on the individual's work quality, not on their impact on financial numbers or other arbitrary measures.
  • The first year of employment is considered a test period, with the key question being whether the employee would be rehired based on their performance.

"We do performance reviews, but we don't have metrics that we match people up against."

Jason explains that performance reviews are qualitative and not based on quantitative metrics.

"The main question we ask at the end of the first year is, would I hire this person again?"

The rehire question is a comprehensive assessment of an employee's fit and performance after their first year.

Giving Negative Feedback

  • Jason recommends being direct and using specific examples when giving negative feedback.
  • Abstract criticism is less effective than discussing concrete projects and identifying areas for improvement.
  • Hiring practices involve real work assessments, and feedback should similarly focus on actual work output.

"The best thing is to be very direct and show examples."

Jason advises on the importance of specificity when providing negative feedback to help employees understand and improve.

"Let's look at the work itself."

He emphasizes evaluating the actual work produced as the basis for feedback, rather than relying on resumes or educational background.

Leadership and Company Culture

  • Jason recounts the controversial decision to ban political discussions at work, which led to significant employee turnover.
  • He reflects on the communication mistakes made during the announcement and the pressure it put on employees.
  • Despite the challenges, he stands by the decision and believes the company is now in a better place.

"We made this call to say, we're not talking politics in the places where we do the work."

Jason describes the decision to separate politics from the workplace, which was met with backlash.

"If I had to make it again today, I'd make the same decision."

Despite the difficulties, Jason stands by the decision, indicating it aligns with his vision for the company's culture.## Handling Hate and Criticism

  • Dealing with harsh criticism can be painful and requires building thick skin over time.
  • It's crucial not to let others dictate your feelings and to maintain control over your reactions.
  • Taking a break from platforms like Twitter can help avoid exposure to vitriol and hatred.
  • Support may come in less public forms, like emails, rather than public defense on social media.
  • Understanding the difference between passionate disagreement and unnecessary hatred is important.
  • The practice of not letting others affect your emotions is a lifelong endeavor.

"It did hurt. And it still, from time to time, hurts when people say things about you that just are so extreme and so just completely unnecessary at the extremities."

This quote reflects the emotional impact of receiving extreme criticism and the ongoing challenge of coping with it.

"You cannot let other people tell you how to feel. And this is just a lifelong practice to figure out how to go."

This quote underlines the importance of emotional autonomy and the continuous effort required to maintain it.

"Your reaction is the only thing you're in control of."

This quote emphasizes the need to focus on one's own reactions, which are within one's control, rather than external opinions.

Decision-Making Frameworks

  • Decisions should be considered in the context of their long-term impact rather than just immediate relief.
  • It's important to assess whether a decision needs to be made at all and who is the right person to make it.
  • In software development, sometimes the decision to not implement a feature can be more beneficial.
  • The example of Hey.com's email service illustrates the value of not preemptively solving hypothetical problems.
  • Many companies waste time solving problems that may never arise, rather than waiting to see if they become actual issues.

"When I make a decision, I typically don't make it for now, I think about what will that probably feel like in a year?"

This quote highlights the approach of considering the future implications of decisions.

"Why are we even making this decision at all you can find yourself making a lot of decisions that don't need to be made."

This quote questions the necessity of certain decisions and the potential to avoid unnecessary decision-making.

"Let's wait and see if this becomes a problem."

This quote suggests a pragmatic approach to problem-solving by waiting to see if an issue actually arises before addressing it.

Resolving Business Disagreements

  • Disagreements between business partners are resolved through discussion, commitment, and mutual respect.
  • The concept of "disagree and commit" is vital for moving forward, even when partners have differing opinions.
  • Long-term business relationships can involve a give-and-take approach, similar to friends covering each other's meals.
  • Sabotaging a decision one disagrees with is detrimental to the business and must be avoided.

"One of the most important things about this is this idea of disagree and commit, that when a call is eventually made, and if you disagree with the decision, you cannot sabotage it."

This quote explains the importance of supporting a decision for the good of the business, despite personal disagreement.

"You've got to commit to it, because we still want what's best for the business."

This quote reinforces the need for dedication to the company's success, beyond individual preferences.

Maintaining a Successful Business Partnership

  • Successful partnerships benefit from having different skill sets and a shared business perspective.
  • It's important to have strong self-awareness and the ability to not take disagreements personally.
  • Physical distance and independence in decision-making can be beneficial to a partnership.
  • A shared core vision and mutual trust are foundational elements of a successful partnership.
  • Being friends outside of work is not necessary for a successful business relationship.

"We do different things. So David's an engineer. He's more on the technical side, I'm on the design side."

This quote highlights how complementary skills contribute to a successful partnership.

"We see business about the same way. I'd say we have, like, an 85% to 90% overlap on our business point of view."

This quote underscores the importance of having a similar business philosophy between partners.

Lessons in Marriage and Parenthood

  • Giving each other space and understanding individual needs are key to a healthy marriage.
  • Positive surprises and gestures of support can strengthen a marital relationship.
  • Parenting requires recognizing and nurturing each child's unique needs and interests.
  • Following a child's curiosity can be a rewarding experience for both the parent and the child.

"Give each other space is a primary, fundamental thing. Compromise, but also give each other space."

This quote suggests that personal space and compromise are essential for a successful marriage.

"Parenting is as well. Our daughter needs different things than our son and vice versa."

This quote reflects the importance of individualized attention and understanding in parenting.## Resistance to Coercion

  • People inherently resist being forced into actions they don't want to take.
  • This resistance is evident in all areas of life, including parenting, business, and personal relationships.
  • Forcing actions can lead to negative consequences.

"You learn when you have kids, is that you cannot make people do things they don't want to do."

This quote emphasizes the difficulty and often counterproductive nature of trying to force someone to act against their will, a lesson that applies broadly beyond parenting.

Lasting Impacts of Content

  • Experiencing familiar content in new ways can significantly alter one's perspective.
  • Jason Fried had a profound experience listening to Pink Floyd's "Dark Side of the Moon" on mushrooms.
  • This experience underscored the existence of multiple perspectives and nuances in things considered well-understood.

"I recently re listened to Pink Floyd, dark side of the moon on some mushrooms, and that was a really extraordinary experience, actually."

Jason Fried describes a personal experience that led to new insights, highlighting how altering one's state of mind can reveal different layers of understanding about familiar subjects.

Psychedelic Experiences

  • Jason Fried has experimented with mushrooms, both in high and low doses.
  • Psychedelic experiences can provide a different perception of reality by removing cognitive filters.
  • Such experiences have led Jason to appreciate the nuanced complexities of life.

"It's a complete journey trip, which is absolutely profound. I came away from those experiences a different person..."

This quote describes the transformative nature of Jason's high-dose psychedelic experiences, suggesting they have had a lasting impact on his perspective on life and reality.

Startup Ecosystem Narrative

  • There is a misconception that startups need to raise a lot of money and focus on rapid scale.
  • In reality, most companies are self-funded, bootstrapped, and small.
  • Jason Fried advocates for a change in the narrative to reflect the true nature of most businesses.

"What would you most like to change about the world of startups?"

Jason Fried expresses his desire to shift the dominant narrative in the startup ecosystem away from the focus on raising large amounts of capital and scaling quickly.

Founder's Attitude Toward Risk

  • Jason Fried differentiates between taking risks and putting the company at risk.
  • He believes that founders should inject risk into the business to prevent stagnation.
  • Jason is comfortable with risk but prioritizes the long-term well-being of the company.

"The founder's job is to inject risk into the business. Because professional ceos, or when founders leave a business, businesses get very conservative."

Jason Fried outlines the founder's role in fostering innovation and growth by taking calculated risks, contrasting this with the conservative approach often adopted by professional CEOs.

Ideal Board Member Characteristics

  • Jason Fried values having a board member with a radically different and convincing perspective.
  • He seeks insights that challenge his and his partner David's usual way of thinking.
  • Diversity of thought is seen as valuable for pushing the company in new directions.

"I would love to have someone with a radically different perspective that is convincing."

This quote reflects Jason Fried's openness to alternative viewpoints and his belief in the importance of being challenged by others to achieve better outcomes for his company.

Future Plans and Attitude to Responsibility

  • Jason Fried anticipates not being at Basecamp in ten years.
  • He is not interested in starting another company with employees due to the responsibility involved.
  • Future endeavors will likely be solo ventures that allow for creative freedom without added responsibility.

"What I don't want to feel anymore is responsible for anybody else."

Jason Fried expresses a desire to move away from the pressures of being responsible for employees and indicates a preference for solo projects post-Basecamp.

Reflections on the Conversation

  • Jason Fried and Harry Stebbings discuss a wide range of topics including leadership, parenthood, and personal growth.
  • The conversation is appreciated for its spontaneity and depth.

"Jason, I always love our chats. Thank you so much for joining me today."

Harry Stebbings expresses gratitude for the open and insightful conversation with Jason Fried, highlighting the value of their discussions.

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