I believe that this also applies, to a very long extend, to open source projects. Both the ones having companies with financial interests and even the ones without such a direct profitability interest. So, once a given OSS starts to be popular, suddenly, all the use cases must be covered, despite the fact that there are, often, obvious design tensions. What happens is: complexity, lack of focus, and ultimately even the risk of becoming irrelevant, since the original use case that made a given software successful is no longer the main target, so newer softwares just specializing on that use case will eventually win the favor of users.
best modern example of this realization is krita. it was a so-so graphics editor. they focused on digital painting and it is leaps and bounds better because of the focus.
Of course everyone is free to choose what they want to do with their own business. And I have personally also chosen non-standard paths of smaller growth (e.g., I started a software consultancy instead of a VC-backed company).
However, there are a few concrete reasons why companies, especially software companies (as opposed to e.g. restaurants), tend towards growth:
1. Some companies will require some amount of growth to be profitable. Not necessarily VC style growth, but you really might need a 100-employee company.
2. If you're not growing, you're not facing new challenges. This might or might not bother you as the founder of the company, but people tend to like dealing with new challenges in their work, whether it be technical challenges or business challenges.
3. Relatedly, if you want to work with smart, ambitious people, you need to have growth to provide them with interesting challenges. A McDonald's can afford to rehire employees every year, but it's harder for software companies.
4. Even if your employees don't care about technical challenges, they probably still care about compensation and their career ladder. It's all well and good that you as the owner are making lots of money, but your employees need a realistic path to making more and having a better job title too, otherwise you can't retain the best employees.
5. Of course, the simplest reason is named in the article - because of zero marginal distribution costs and network effects in software, large players eventually tend to dominate many fields. Even if you build a CRM perfectly fit for a niche industry, there's a good chance many customers will eventually jump to something like salesforce, both because of marketing, and because of features/network effects (more integrations, etc).
Again, not saying DHH is wrong, just that these are structural reasons why software companies (and similar) tend towards growth.
Not sure how true (2) and (3) are: you can face new challenges every day in the tiniest consultancy ever, and have all sorts of fun learning about new niches to organically expand into that would make no sense for a VC backed company to waste their time dominating. Sure, it's not going to mollify the CTO who's not satisfied if he's not scaling a service to a million concurrent users or the VP Sales who feels underemployed if he's not running an army of junior salespeople, but if your goal was an organically-grown medium-sized business you probably didn't need their skillset anyway. And some of the roles that scaling up creates requirements for are repetitive drudge work...
Tesla has to grow fast or go home (as do Amazon, Uber, etc'). But as you said, you can choose which company to start, you don't have to start Tesla or Amazon.
I think your employees will face bigger and more interesting challenges, and learn more from smarter coworkers, and will be retained better, if you keep it a 10 person team for years and years and years. As 37signals proved more than maybe any other company.
From experience, a 10 person team will keep some employees happy, sure, but the best probably not. Their pay will be too low, and even if not, most good employees eventually want to do more - manage people, work on new technologies, work on bigger scale, etc.
Of course, nowadays I think the average retention at tech companies is like 2 years isn't it? So this is an industry-wide problem. The bigger problem if you're founding a 10 person company is that, assuming you don't want to run this for the rest of your life, you'll eventually want people to replace you, and they will also want bigger challenges, etc.
I once saw a great talk at MicroConf, by the guy who started Balsamiq, which he started with the purpose of being a 1-person company. He soon found he had to grow. The bottom line of his talk is that most companies have a "natural" range of sizes they can be, and you can choose where you want to be in the range, but it's gotta be in there. Very good and interesting talk.
>If you're not growing, you're not facing new challenges.
While growth typically introduces new challenges it doesn't assume the opposite -- no growth, no challenges. Changing markets, customer preferences, and competitors' actions -- all that can bring enough challenge even when there is no growth. Even more than that -- if you're growing it most probably means that you don't have major problems with product/market fit. In case of no growth it might mean that you're losing the product/market fit and you still don't know how to fix it, which makes it very challenging.
Challenge is not about challenge itself, but about the combination of challenge-reward. If you are fighting for something with a marginal return there's less incentive for that.
This mindset applies to many things besides growth. For example, how much money (as an annual income) is enough for you? Have you ever sat down and reasoned it out? I see many people stuck chasing larger and larger payouts, to the extent it makes them unhappy or even unwell, who never stopped to consider how much money was enough.
According to one theory, people can generally be classified either in people who are satisfied when something is good enough (satisficiers), or people who are driven to maximize every result (maximizers).
Money and income are more complex than that. It is related to ones sense of self-worth, fairness, etc. Ideally, one should try to detach money & income from these senses, as it is a pretty much lose-lose situation. But it's not easy and I think recognizing that it is the case, that it does have impact, can go a fairly long way.
I believe that to be not just about earning more money but also more appreciation. People might not be looking for just more money, but as they see their managers making double their salaries while taking credit for people's work, they want more money to feel more appreciated.
Agreed. It's about fairness to some extent. Software developers are often in the position of providing most of the value of a company while the business people writing the paychecks pay themselves most of the profit.
I've seen situations where the company got $950K of a $1.2 million contract simply for negotiating the contract with the client, while the dev who did 6 months of work got the other $250K. $250K for 6 months work is a lot, but $950K for 2 weeks work + occasional maintenance of the business relationship is a lot more.
Of course, I've also seen the flipside: I worked at a company where the CEO was salaried less than me and his share in the company wasn't likely to grow in value such that his compensation vastly outstripped mine. I've been paid more at other places, but nobody complained about compensation there.
I think some people probably conflate the two without realising. You think your work is just as valuable to the company, if not more valuable than your manager's, and you could very well be right. However, value of your work is only one factor that determines your salary, there are other market forces in play, and it's hard to rationalise about such things.
But developers and engineers should take the matter into their own hands and don't just bury their head in the sand and let the 'business' people decides their benefits and compensations.
It would serve them better if they can treat themselves as product and services providers in a free market. Band together and unite! Don't stab each other in the back for meager bones being thrown at you.
100k is enough to live on, but when you get more than that you start to see the potential of civic engagement, of funding causes you believe in.
And if your work contributes millions of dollars to the company's bottom line, what justice is there in the company giving 99.9% of the surplus of the surplus you generate to upper management's bonus, or the fund that gets inside info on your next quarterly report?
There are ways to spread that money equitably. It's a classist, self defeating belief that a programmer should let her superiors take home the profits of her work.
I like this argument a lot more than "I want more money". In my experience, programmers sadly do let their superiors walk all over them with regards to salary and work hours.
My feeling is that I may be able to take my talents elsewhere (even to my own company) and make a competing (or even completely different) product and take home a bigger slice, so you better make it worthwhile for me to stay at your company if you want those talents. I happen to work for a company that pays significantly higher that $150k, so it's not an issue at the moment, but it's always in the back of my mind.
It's a scaling issue. If I'm being paid $100k to generate $200k worth of value, fair enough. If I'm being paid $120k to generate $2 million worth of value, that starts to seem unfair.
It's only unfair if someone else is willing to pay you more in order to generate that 2 million OR if no one else is willing to generate that 2 million for 120k. In that case, switch jobs. I find that programmers often overestimate their value.
To take a slightly different angle on it: if someone is taking an unfair percentage of the value you create, consider breaking out on your own and keeping 100% of the value you create.
Immediately, you start to think about costs, hurdles, and PITA to doing that. Those costs and hurdles represent the value that someone else is adding to allow you to "just code".
Am I the only person sick of DHH and the 37 Signals people writing the same article 800 times?
We get it. You don't have to raise VC or grow exponentially to have a great company. They have seriously written the same thing hundreds of times in hundreds of different ways, and it's barely even a contrarian view anymore. I hear as many people saying, "I wish more people would talk about how you don't have to raise VC" as I do people talking about raising VC these days.
I mean, how many others are there? I think there was a pretty strong undercurrent, even to the point of it being the dominant narrative back when Basecamp was getting started in the mid 2000's, but since 2010 or so, most of the startup world has focused on the venture-backed "rocketship" approach.
Yeah, it's usually not hard to predict what DHH's stance on growth vs. sustainability is going to be, and yes, he's prolific, but it's worthwhile to have opinions that go against the prevailing consensus, even if you don't agree with them.
Since DHH started writing, there have been 800 generations of starry-eyed startup people with unexamined motivations. He can do his thing and there's more than enough regard for the value of it.
There are a million articles also promoting the opposite. Are you sick of that too? What do you read these days ? Hn has already 50 stories of funding every day.
I find that when I repeat the same argument, I'm actually trying to convince myself. He is intellectually convinced he is doing the right thing, but the emotional pull of peer pressure is strong.
It's actually very nice to see successful people being contrarians. What I'm sick of is elitist consensus.
There are a lot of people who don't have much voice in this society who are thinking what DHH is thinking from a different perspective.
Personally, I'm tried of competing with greedy, unprofitable VC-funded companies which are saturating the internet with their ads and financially-sponsored "thought leadership" blogs.
In the meantime, for the past 5 years I've been struggling to set up a one-person business around an open source project I created. It's a very hostile environment for a single-person business right now and greed is to blame... It's not leaving any breadcrumbs for the little people.
VC talk can be overbearing at times but I haven't seen anyone harping on how raising money is superior to bootstrapping. DHH, on the other hand, keeps on lambasting the VC industry without much helpful advice. It's not the contrarian view that is exasperating, it's his parochial attitude that venture capital hasn't done any good. He strikes as a person who would use Uber everyday without acknowledging that without VC capital the company couldn't have existed.
>VC talk can be overbearing at times but I haven't seen anyone harping on how raising money is superior to bootstrapping.
I've seen that + sneer at "lifestyle businesses" (aka normal businesses that don't aspire to be "unicorns" or lose on every sale but make it up in volume) countless times.
>DHH, on the other hand, keeps on lambasting the VC industry without much helpful advice.
Haven't he and/or Fried written like 2 books with business advice?
> I haven't seen anyone harping on how raising money is superior to bootstrapping
No, that's not necessary, because it's already accepted conventional wisdom. You're starting a company? How's your seed round going? Which incubator are you applying to? I know an investor friend who works for <xyz>, want an intro?
The whole piece is a bit verbose, but the writer has a point. A lot of people are never satisfied, and that doesn't make the world a better place.
The irony is unsatisfaction is rewarded. You can earn millions of dollars with making the world less beautifull, by selling people bad loanes or artificially keeping medicine prices high.
I don't know if people can learn to have enough, or 'the system' must enforce it a little bit.
"rewarded" by the market. Let's not confuse extrinsic reward ($$$) within intrinsic reward, which is living the life you want to live.
The equating of money and utility (in the economic sense) happens very quickly in micro economics 101, and then you spend the rest of the class speaking about money. But that is just because utility is very hard to track or reason about.
Plenty of folks living good lives without being flashy about it.
A lot of people are never satisfied, and that doesn't make the world a better place.
A lack of satisfaction can also materialize in positive ways that do improve the world. This drive is innately human and is what led us to agriculture, medicine, technology, and to wherever else we're going to go.
Satisfaction or non-satisfaction is totally orthogonal to whether the world is a "better" place or not. Lots of examples of people who were never satisfied who made the world a better place, e.g. Steve Jobs.
How would you talk to a teenager who thinks "C" grade is good enough? It's all relative. As an adult you can see the flaw in that teenager's mindset.
The beliefs behind your paradigm are important too. If you think one can achieve "growth" only by adding positive value to others, growth is not a bad thing. How is it possible to grow when there is no potential to grow? It would take some "crazies" to try to grow something that everyone else thinks this is it. We know that some people in history beat the prevailing expectations in sports, art and personal wealth.
I understand the conversation here is about when to stop or when should one realize that the idea has reached its potential?
I was at a startup pitching event where a founder was pitching a profitable "presentation software" company. The judge asked "How many billion dollar presentation software companies do you know?".
"Enough" conversation becomes important in software products because if smart people do not understand what is good, better and best they take more risks that only end up ruining the product.
This is especially true for Chinese businesses, but for an entirely different reason. Once a business reaches a certain size, it doesn't belong to the founder anymore, it's becoming state-owned. The founder either ends up in prison or have to escape from the country. Business owners talk about "keeping it small and low-profile" all the time.
You could read the article as sour grapes. Like his business didn't reach unicorn valuation, so well, that wasn't his goal in the first place.
I remember seeing a YouTube interview (I believe it was on TWIST) when he claimed there was no hypothetical amount of money he would take (billions, etc) to sell his business.
The cynical and greedy part of me found it incredulous. Is this guy in denial? Surely you can take the billions, and find some other project to have fun with? Or is Basecamp his only life calling?
The less skeptical side of me envies that mindset. I'm at a point in my life where I clearly have enough. My passive cashflow covers my expenses 3 times over. I'm 31 and If I continue working full-time I'm on par to make $200k next year. But almost every moment of the day I'm obsessed with trying to find my Basecamp. When is it enough? Maybe I should adopt some kids.
I hope that didn't sound like my own version of humblebrag - the fact is, I'm dissatisfied and there's no reason I should be.
Actually there are many reasons not to sell. If someone is offering billions and you think it's worth millions, then either you're right and the buyer is wrong, or the buyer is right and you're wrong. Or the buyer wants to make a risky play on the business you don't think is right. Maybe the buyer is offering illiquid stock or something. In any case, if you enjoy the business you have, and feel it is making enough money, then why would you sell it? It's risky to sell, it could be a mistake for various reasons, seen and unforseen. You're putting your baby in someone else's hands and you will have to find a new job. So that's a big change already.
There are many reasons you would want to sell too, of course. Just saying it's not clear cut just because of valuations.
Doesn't this make his point stronger? Even with a company that does not want to grow indefinitely, he can still afford super cars. Reality is that unicorns only benefit VCs. Most founders should not take any VC money and try to bootstrap and get, like, N million dollars businesses, not to try to achieve billion dollar businesses. The former is 1000x times simpler.
It doesn't make his point stronger because his company is already comparatively huge if you look at most startups who supposedly fall prey to the "growth at all costs" mentality.
His point is moot because a lot of startups will agree with him when they reach the scale of Basecamp. They're not there yet, so they need to think about growth.
Meanwhile, companies who are huge and going after more growth don't give a fuck about what DHH writes. It feels like there's a pretty significant message/audience mismatch.
To you, the Dalai Lama must be the biggest asshole ever.
But I beg to differ, he just tells people that he believes the prevalent zeitgeist is wrong. I don't see that as particularly brave, cowardly, humble, or arrogant. He just says what he means (without, it should be said, taking cheap shots at anyone), as it should be.
IDK about DHH but Jason Fried, also a writer in this blog (and co-founder, I think) makes similar points about growth, startups, etc.
I do agree with them that the "we must be the biggest!!!" attitude of SV/NYC startups is harmful and unrealistic. I'm not sure if Basecamp is the best counter example (though I do like their 4 day summer work weeks), but I wish more tech businesses were just that - simple businesses.
Gates, OK, I may agree with him, due to the amount of charity he's doing, but the rest? Elon Musk is still a big question mark (see Tesla vs tinkering), the others... Why not put Marissa Mayer on the list, she made a lof of money as well.
I'd rather see a list of people like RMS, even though he's quite mad, he actually made the word a better place.
His initial argument is that it's okay to be mediocre because continuous success is just a "paradigm." That much was already clear. His argument falls apart when he tries to justify having enough, since that contradicts his initial argument. If continuous success isn't written in stone, then neither is having enough.
Nokia's anecdotal demise isn't a reason to not seek continuous success. In fact, one could use that same anecdote to argue that having enough leads to failure.
Distance between a founder and the product isn't an argument for not seeking continuous success. Some people prefer that distance and consider separation of labor to be more efficient.
It's clear that DHH has some bias against success. Given articles like this and his public bet that Facebook's share price would fail. It isn't based in logic though, just ideology.
It's clear that DHH has some bias against success.
Quite on the contrary I and many others think of him as extremely successful:
Profitable since year 2 IIRC
Have built nice products that you can pay for by money (instead of by privacy)
Well known for a certain web framework that 100 000s of developers use and many love.
I'd even go so far as to say he influenced (not shaped though) our entire industry by showing how web development should be done in a world filled with ugliness like: old enterprise Java, old Spring, old Asp.Net webforms, old PHP etc.
If continuous success isn't written in stone, then neither is having enough.
Do you know what "contradict" means? Because that in no way contradicts his point that there are many paths, of which continuous growth is only one.
Nokia's anecdotal demise isn't a reason to not seek continuous success.
He didn't claim it was.
Distance between a founder and the product isn't an argument for not seeking continuous success. Some people prefer that distance and consider separation of labor to be more efficient.
Which is what he said. "Now some people clearly like that."
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