14 ms·

Is revenue model more important than culture?

238 points by Ozzie_osman 6y ago

kaiju0 6y ago
You can't have culture if you can pay the bills. Also the culture should support the revenue model.
- falcolas 6y ago
  Or, the revenue model can support the culture. For example, offering a paid product to explicitly avoid the monetization creep found in free products.
msy 6y ago
The purpose of a system is what it does - Stafford Beer
- tines 6y ago
  What it's doing right now, or what it does habitually, or what it can do, or something else? Is the purpose of my toaster to sit there broken, because it's broken right now? This isn't very useful by itself imo.
  - tlholaday 6y ago
    > Is the purpose of my toaster to sit there broken, because it's broken right now? This is proof by demonstration that for you, the highest value the toaster can provide, net of costs, is to be a room ornament. I hope you are keeping its exterior clean. Edit: Perhaps its purpose is to be a 21st century memento mori?
dontchooseanick 6y ago
That doesn't fit Wikipedia
- SQueeeeeL 6y ago
  True, but it's run by a massive network of volunteers; they are very carefully curated towards one specific goal and definitely aren't a general framework for a business
- falcolas 6y ago
  Wikipedia is a game. It's a MMO kingdom builder. https://en.wikipedia.org/wiki/Wikipedia_talk:Wikipedia_is_an_MMORPG https://en.wikipedia.org/wiki/Wikipedia_talk:Wikipedia_is_an...
- rossdavidh 6y ago
  Actually, I think it does. Their revenue model is "get people to voluntarily donate". So, that means they have to make a product that is easy to use (low barrier to entry for new user), and valuable to the user (so after using it for the 10th, 100th, 1000th time, you eventually think, "I should give them some $ every month). Like public radio, they have a business model that does not involve ads or fees. But it definitely drives what they do and how they do it.
naringas 6y ago
this breaks https://en.wikipedia.org/wiki/Betteridge%27s_law_of_headlines https://en.wikipedia.org/wiki/Betteridge%27s_law_of_headline...
- phkahler 6y ago
  Revenue model IS culture. Or at least it drives the culture, so maybe the answer to the headline question is "no".
- tome 6y ago
  Ah, tome's law. "In any discussion about an article whose title is a question, Betteridge's law is mentioned with probability 1." https://news.ycombinator.com/item?id=18056219 https://news.ycombinator.com/item?id=18056219
  - Rexxar 6y ago
    And surprisingly, it's always downvoted but people are still doing it.
- lazugod 6y ago
  A better law is that questions in news headlines have boring answers.
HugoDaniel 6y ago
This is a trick question, author seems to be vouching for blending the culture into the business model ("...the better a product is, the better off the company is and its users are"). I do wonder how well can it fit the Betteridge Law of Headlines ? https://en.wikipedia.org/wiki/Betteridge%27s_Law_of_Headlines https://en.wikipedia.org/wiki/Betteridge%27s_Law_of_Headline...
- Ozzie_osman 6y ago
  (Author) ha! I didn't know about that law. I guess this doesn't really fit the law because my answer would be yes, revenue model IS more important than culture. With a lot of caveats I cover in the article.
aj7 6y ago
“I think that over time, the revenue model is the dominant term.” Nah. The profit model. This has consequences for both the users and employees. The stockholders have shoved their way to the front, and their mercenaries are armed.
zpeti 6y ago
I think this is almost the inevitable path of public companies. Even worse if its not founder run, but manager run. In that case the incentive structure is inevitably going to be about share prices. And share price incentives will slowly erode any culture into driving revenue higher and higher. Of course there is always the possibility of staying private, but it seems unlikely if you've taken VC money, or have to fund expansion to get to profitability, which most tech companies do.
tboyd47 6y ago
This is why I always gravitate towards software projects that are centered around making money (within ethical bounds, of course). The closer to the bottom line my code is, the larger the sales and support team is around my code, and the more customers there are (real paying customers, not internal employees who like to be called customers) using my code, the better. It may sound overly hard-nosed and cynical to some people, but I find it's just the opposite. The drive to make more money is the only thing that trumps every other petty motivation people follow at work. It trumps favoritism, empire building, and intra-office rivalries. It trumps good ol' boys networks and tech bro networks. Money brings people into the same room who would never normally be in a room together, and they do it willingly. It forces people in power to listen to small fries. While money corrupts on an individual level, it purifies on an institutional level. Its universally accepted value allows a variety of individual motives to flourish. This seems to change once a company goes public and hits a certain size, as the flow of money becomes less and less tied to actual sales and consumer behavior and more and more based on financial engineering and stock price.
- nullspace 6y ago
  I have become exactly like this. My experience with free (as in beer) software and services is that it's usually offered as a "strategic offering", maybe as an attempt to commoditize your complement(?) but I'm speculating here. The downside is that the wider business does not care that much about your software. It needs to work, but just enough that customers don't use your complement. And critically, when it comes to prioritization of resources (especially the most senior people who could mentor you), they would rather put their best people in other parts of the business. I've become of the mindset that if you want to build best-in-class software with a best-in-class team, you should see if you can draw a direct line from the product to the revenue, or at least the core mission of the business.
  - heimatau 6y ago
    Preface: Might be easier to read my comment withOUT the parenthesis. Then go back and read with them. I fully agree with you guys on a macro-scale. I didn't have this position years ago but now it's a firm position. But my observation is that no one (read: a significant majority) is financially sovereign (FS), therefore they mis-calculate the time/labor costs and it's economic value/costs. To think of this another way, if your (financial/material/etc) lives depended the Amish's* jam or chairs (or anything else they make). You can depend on their work, up to a certain scale. But even most software projects don't have this dependability because software is generally repackaged to fit a narrow use-case. Iff (if and only if) the Amish were to embrace the automation technology, then you could depend on the Amish scaling for whatever you need. Financial sovereignty is very powerful but the drawbacks are that the team, to do all the needed work, might not be FS. (Hence why I mention the Amish) This FS doesn't scale (this could with the Amish; if they wanted to provide jam to everyone, etc) with the complexity of the problem nor the robustness of the problem being solved. Another important drawback is that those that are FS tend to be myopic to those that aren't (i.e. their market/customers). This problem is pretty big as well. To find a product/service that solves all these criteria is immense and dare I say, improbable, hence my agreement to the two comments above. The simple solution is to try and align with the better alternative that have a positive feedback loop (i.e. monetary gain to improve the work). * Note: I do understand that Amish charge money for jam/chairs/etc but the cost is tends to be nominal/small.
ponker 6y ago
Perhaps this is why, to everyone’s astonishment, Google and Facebook have moved well ahead of Microsoft in the generally accepted “evil” rankings.
motohagiography 6y ago
A director once pontificated in a meeting that, "culture eats strategy for breakfast!" I said, "so without strategy, culture starves?" So enlightened, they then set to managing me out.
- felipemnoa 6y ago
  >>culture eats strategy for breakfast! I'm sure you know this but this phrase simply means that it is better to have a good culture than a good strategy, broadly speaking. Mind you, I'm not saying this is true or not. Your phrase: >>so without strategy, culture starves? Seems to be argumentative for argument's sake without taking into account the intended meaning of the original phrase. Not surprised you pissed them off.
  - motohagiography 6y ago
    I would agree, but the company failed.
    - deleted 6y ago
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  - hitekker 6y ago
    > I'm sure you know this but... > Not surprised you pissed them off. > Your comment seems to be argumentative for argument's sake Pot meet kettle.
- jakeva 6y ago
  sounds like a healthy culture /s
  - spaetzleesser 6y ago
    A general rule for me is that the more somebody talks about culture the worse the culture is.
deleted 6y ago
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jakevoytko 6y ago
This is borne out in my experience with a company that had moderate layoffs + completely replaced the executive team. Despite the gut renovation, the company didn't change much in practice because our core business model was the only thing that couldn't change. We just became more effective. I worked at Google from 2010-2015. When I looked for another job, I wanted to avoid the thing that bothered me about working at a FAANG. I didn't have a clear understanding of how my contributions affected the bottom line. In fact, when I left, I asked a bunch of current employees the same question: "Did Google make money on my employment?" I got every answer you can imagine. "Of course they did, you helped grow an ecosystem with network effects, so the value you added was intangible but incalculably large." "Of course they didn't. You grew the output of a product that people can use for free, so your work was mostly a loss leader." Anyways, when I looked for a new job, I had a simple requirement. I wanted to work for a business model that I wanted to improve. Etsy fit the bill. A marketplace for small businesses to sell unique goods. I could feel good about improving this business model: improving our top line meant that more small businesses got sales. I can live with that. Flash forward a year, and Etsy was in serious trouble. Growth was decelerating. Our core product was neglected in favor of newer offerings that had a long way to go to get traction. So we had some major gut renovation: new CEO. New CTO. New CFO. Two rounds of layoffs. A bunch of people left because the culture was gone. You think to yourself, "OK, that's it, the foxes are in the henhouse. What's going to change?" And it turns out that you can't change that much! Our core business was to connect small businesses making special items to a global audience. So that's what the foxes had to work with: A two-sided marketplace where they needed to please both the existing sellers (so that they didn't just shut down their shop in favor of all of the other marketplaces they were using) and improve the site for our buyers. So they brushed the dust off of the core marketplace, assigned a bunch of people to focus on improving sales, and the results speak for themselves. Even ignoring Covid-related effects, our marketplace was healthier, growth was accelerating, and morale was up. And some of the people that left because it wasn't the same anymore? They came back. We have a lot of "boomerangs" from that era. I like point of incentives that OP brought up, you can also see that in some things that Etsy sellers hate. For example, the people who made Etsy set the fees way too low. It's hard to walk that back. So you can see the executives try to find ways to bring the fees more in line with what Ebay or Amazon might get. The best they've come up with is improving an offering and restructuring the fees at the same time. "New: off-site ads are new and improved, and if you get a sale, we charge %12" type stuff. If you're a seller that's mad at Etsy, that's the kind of thing that you're going to complain about - us following our own incentives.
tempsy 6y ago
Sometimes I look at Adobe's stock history in awe and then realize the only thing that has really changed over the years is that they moved from a license model to a SaaS model...so instead of paying a few hundred dollars for a Photoshop license you can use for life you get to pay $50/mo for a bundle forever.
- biztos 6y ago
  Or you pay $10/mo for Photoshop + the twelve current versions of Lightroom. I don't get much use out of them but I still think it's an OK deal. At least as good a deal as a lot of the other SaaS stuff I'm paying for and barely using. If I were using any of their stuff professionally I would find it an awesome deal, not least because it's all a clean expense. [Edit: Clarity]
- greggman3 6y ago
  I hate it but you arguably couldn't use them for life unless you wanted to run some old version of the OS they came out on in a VM. OSes change, the deprecate and remove old features. You can't run Photoshop CS6 (the last non SaaS version) on Catalina. In the past I got by on 1 upgrade every 4 years or about $50 a year. Now it's $120 a year. Before the incentives were aligned. Add new amazing features or I'm not upgrading. Now the incentives are not aligned. The more money they spend on dev the less money they make. The are 100s of features I see on cheap or free iOS image editing apps I'd have expected to see long ago in Photoshop or Lightroom but Adobe no longer has any incentive to add features. As just one example, the features of the Focos app. Being able to create an AI generated depth mask would be extremely useful in Photoshop. I'm sure you can make excuses why this isn't a valid data point but look at Wikipedia's Photoshop feature list by version. Notice how before SaaS each version shows about 4-5 paragraphs of new features, after SaaS each version is just a single paragraph of mostly minor re-workings of existing features https://en.wikipedia.org/wiki/Adobe_Photoshop#Version_history https://en.wikipedia.org/wiki/Adobe_Photoshop#Version_histor...
  - CincinnatiMan 6y ago
    I'm still using Photoshop 7 on my Windows machine. Google tells me that was released in 2002 haha!
dsr_ 6y ago
For a business, culture is made up of the behaviors that management reward. Most of the reward is money, immediate or deferred, and some of it is in accolades, social respect, and other forms of promotion. The revenue model drives the behavior of the salespeople. If you sell small subscriptions, no individual customer is important but marketing is. If you sell multi-year service contracts that take six months to sign, your individual customers are important and the salespeople bringing them in are important. If the company perceives that it is selling a high-value service, the development teams are important. When the company is selling a low-margin commodity, the people who can improve the cost structure are the heroes.
- agumonkey 6y ago
  turns out interpersonal relationships are too random while money is stabler (albeit poorer replacement)
mathattack 6y ago
Revenue model sometimes defines culture. How Oracle makes money drives their culture. Same with MSFT. And Google too.
indymike 6y ago
There is no culture without revenue.
- manesioz 6y ago
  VC-backed startups have entered the chat
- spaetzleesser 6y ago
  Normally not but with current investment levels they can pretend for a very long time.
calinet6 6y ago
A company is an interconnected system. Culture begets revenue model, revenue model begets culture. You can't have a revenue model that works without a culture that executes it, nor vice versa.
skrebbel 6y ago
As a long time Microsoft customer, this is why I'm not loving the Nadella age. Sure, free VS Code is nice, but Ballmer was trying to sell me Windows licenses. That's simple, it's clear. Nadella, instead, said some blarb about could and mobile, made Windows free, and added bucketloads of telemetry. Currently I still have the idea that Windows exists to sell me office and azure licenses, which is less bad than why Android exists, but sooner or later they'll have finalised whatever shady revenue model 180 they're in the middle of and I'll have to consider alternatives.
- pydry 6y ago
  VS code will remain free, open source and be improved for as long as it has competition. If other IDEs (e.g. pycharm) go out of business they'll probably slowly de-open source and start to charge. Right now it's the only way they have to get a lot of people using open source into the Microsoft ecosystem. Still in embrace stage.
  - jrochkind1 6y ago
    So quite traditional embrace extend extinguish, not actually much of a shift?
iskander 6y ago
I did a summer internship at Google in 2009. The "don't be evil" ethos was clearly on the decline as it stood in the way of several major business directions.
cbhl 6y ago
I wonder what models can create incentive alignment when the output should be free - things like kids' games, education, research, food for the needy.
- boulos 6y ago
  Public funding. If it’s a collective good, “we” should all be willing to contribute towards it.
  - mkolodny 6y ago
    I agree that public funding is a great way to fund free products and services. The issue is that getting public funding is a major pain right now. It can take months of paperwork. And it's not really "we" who decide what to fund - it's one or more government employees. I'd love to see Participatory Budgeting take off. It would be awesome if we could all vote on which products and services deserve public funding. And it would be even better if we could use technology to decide what to fund much faster than we do today.
deleted 6y ago
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mikece 6y ago
While "Culture Eats Strategy for Breakfast" -- https://culturematters.com/culture-eats-strategy-for-breakfast/ https://culturematters.com/culture-eats-strategy-for-breakfa... -- it's possible to have an awesome culture and an unprofitable business. As long as you make enough to be a going concern then culture trumps anything that would lead to a short-term gain in revenue which jeopardizes the culture of the organization.
- BSG-Actual 6y ago
  My last role was for an awesome team building a product that ended up making no money , which lead to most of us getting the sack once Covid came along (that and half the board defrauding the company to the tune of billions). We all knew that the product would flop, but no one at a level to change the strategy wanted to hear it. Perhaps that was a cultural problem, but I'd say that culture and strategy are inherently interconnected.
switch11 6y ago
First: Product Market Fit Second: Monetization Third: Growth Culture isn't even in the Top 3 and might not even be in the Top 5 * One very important Caveat In today's zero interest rate, Fed printing press environment where money is DESPERATE for any kind of return Growth will sometimes trump Monetization and even Product Market Fit VCs will focus on Growth above all else because with Growth you can raise enough money to 'brute force' Product Market Fit Culture, as opposed to what all the 'gurus' and 'politically correct people' say and pretend is not as important as any of the above You can see a lot of successful companies that don't necessarily have very good culture Culture is something that will matter 10 to 20 years down the line once you're a big or very big company If you don't have Product Market Fit, you won't survive If you don't have good monetization/profitability you won't last very long (unless Product Market Fit and/or growth is massive) If you don't have Growth, then you will always remain small/much smaller than you could be One thing a lot of people in US/UK/Canada (have lived in all 3 countries) believe VERY STRONGLY IN and which people from China/India/Africa (worked with all; non work friends from all places) don't believe in AT ALL is this Western Dream State of a company also being focused on saving pandas and bald eagles and world peace It's almost as if in the West it's not enough to be successful you also have to A) Pretend you never intended to be successful. It was a happy byproduct of wanting to make the world a better place B) Start talking non stop about how much you will donate to charity C) Start saying 'it was all luck' and 'not the better people won' etc * This is also reflected in a different way In the West people are super likely to be made a fool of by a company pretending to be virtuous Google and Facebook are good examples They work so hard to pretend all their unethical steps are 'mistakes' or 'one off instances' people in the West just buy it hook, line and sinker things like: Even after we turned off the setting to track location, Google was still tracking it things like: Instagram had camera on all the time, it was just a bug and had nothing to do with ad targeting and spying * For all the talk of China and INdia and South East Asia and Africa being corrupt companies like this are very quickly identified to be scum and taken down, sometimes even by the Government Basically, the people who control Europe and US are very, very good at making it seem all magical fantasy land Snowden is a good example. He's basically being treated as if HE was the one doing all the spying and illegal surveillance
frausto 6y ago
"Revenue is the Dominant Term." This really speaks to me and is one of the driving philosophies when we created our pricing model for Warmintro, which ironically has a mission very close to the author's example: "to give people the power to build community and bring the world closer together." We make it easy for private groups to create their own online community portals, and it would be very hard to stay true to community-focused ideals, if our revenue didn't match the mission. For this very reason, a sizeable chunk of our customers migrate to us from Facebook groups due to privacy concerns. Facebook makes money on your data and by serving you ads, that is the direction that everything they do leans. The groups that they host suffer from that fact. We made Warmintro paid from the very beginning. It made things harder for us in many ways since we acquire initial customers more slowly, but it also guarantees the direction of our priorities. Because at the end of the day, how you make money determines the ultimate direction of any for-profit company.
microtherion 6y ago
As an aside, I was intrigued by this quote: > FedEx needed to move/sort their packages more quickly, so instead of paying employees per hour, they paid them per shift. productivity increased dramatically (employees now had less incentive to take longer hours to do the same amount of work). That's the way incentives work iff the employees had control over the hours worked. If instead their managers had this control, the incentive would be to make your employees work longer hours, because you don't have to pay them more.
mrkramer 6y ago
Revenue model is culture and vice versa. The way you make money is your culture. For example capitalism vs socialism.
hisnameismanuel 6y ago
Better said - the revenue model is the ultimate reflection of your culture. I'm working on a startup right now that has this understanding at the core. We are building a revenue model with a fixed margin of profit. In our company, no matter how many costs the teams cut, they'll always end up with the same short-term profit. So - it's pointless to screw the customer to try and get some kind of short term win. Their job won't be to manage the P&L, their job will be to reinvest all the remaining margin into the customer experience. We got this idea from Costco, who do something a bit similar. In terms of Google, I don't have an easy solution, but it's clear that Google's internal incentives (actual culture) are overriding whatever barrier is in place (that thing is called culture).
- Ozzie_osman 6y ago
  I'd love to hear more about how this works. How do you avoid having too much (or too little) profit?
  - hisnameismanuel 6y ago
    (We're not a software startup.) We're setting a fixed margin. 14% (exact number TBD) of all revenue will go into a profit account. And that will be the profit, it can be reinvested into the business only as capital spend. 86% of revenue is what the rest of the team will need to work with. They will be required to spend that 86%, all of it, on team and customer satisfaction (improving the product, improving the service, reducing the price). They'll primarily be measured on customer satisfaction. All promotions (unless you're in a role that is directly tied to say, online conversion rate), hiring, firing, and ongoing management will be based on metrics around how happy our customers are. Our profits will increase with volume, because we'll have happy customers. Note, an analog to this model is very common in the franchising industry. Many franchises take a fixed percentage of revenue as their 'take', but in our case the business 'take' will simply go to a profit account. We won't do 14% on day one, it will take a little while to get there, but that model will be our overall guidepost.
- lukifer 6y ago
  > Their job won't be to manage the P&L, their job will be to reinvest all the remaining margin into the customer experience. Just listened to this 2013 talk [0] by Thom Hartmann, who made a quite cogent case that a high marginal tax rate (90% under Eisenhower, 74% under LBJ) was good for business and workers alike: business owners were incentivized to expense and reinvest as much as possible, including into hiring, wages, and benefits. That reinvestment came to benefit the owner when they sold the business, at the drastically lower capital gains rate. Curious that in the absence of a more stern tax incentive, there seems to be a strategy of implementing a self-imposed profit cap. (I'll have to research the Costco case further, I didn't know that.) [0] https://www.youtube.com/watch?v=039Zh9KBCqY https://www.youtube.com/watch?v=039Zh9KBCqY
ckemere 6y ago
What about competition? This factor seems to be missing from the analysis. If you have many companies competing for ad revenue (a la old school TV and radio), are things maybe a little better? (I anticipate pushback re: NPR, PBS, or subscription supported cable. But surely it's worth considering?)
- Ozzie_osman 6y ago
  (author) Good point. I'm not sure how competition would net out. If you're the only game in town, you can set the rules. On one hand, you can get away with bad things if you want to. On the other hand, you're less susceptible to competitive pressures so if you want to keep things clean, it might be easier.
deleted 6y ago
[deleted]

238 points by Ozzie_osman 6y ago

kaiju0 6y ago

You can't have culture if you can pay the bills. Also the culture should support the revenue model.

falcolas 6y ago
Or, the revenue model can support the culture. For example, offering a paid product to explicitly avoid the monetization creep found in free products.

msy 6y ago

The purpose of a system is what it does - Stafford Beer

tines 6y ago
What it's doing right now, or what it does habitually, or what it can do, or something else? Is the purpose of my toaster to sit there broken, because it's broken right now? This isn't very useful by itself imo.
- tlholaday 6y ago
  > Is the purpose of my toaster to sit there broken, because it's broken right now? This is proof by demonstration that for you, the highest value the toaster can provide, net of costs, is to be a room ornament. I hope you are keeping its exterior clean. Edit: Perhaps its purpose is to be a 21st century memento mori?

dontchooseanick 6y ago

That doesn't fit Wikipedia

SQueeeeeL 6y ago
True, but it's run by a massive network of volunteers; they are very carefully curated towards one specific goal and definitely aren't a general framework for a business
falcolas 6y ago
Wikipedia is a game. It's a MMO kingdom builder. https://en.wikipedia.org/wiki/Wikipedia_talk:Wikipedia_is_an_MMORPG https://en.wikipedia.org/wiki/Wikipedia_talk:Wikipedia_is_an...
rossdavidh 6y ago
Actually, I think it does. Their revenue model is "get people to voluntarily donate". So, that means they have to make a product that is easy to use (low barrier to entry for new user), and valuable to the user (so after using it for the 10th, 100th, 1000th time, you eventually think, "I should give them some $ every month). Like public radio, they have a business model that does not involve ads or fees. But it definitely drives what they do and how they do it.

naringas 6y ago

this breaks https://en.wikipedia.org/wiki/Betteridge%27s_law_of_headlines https://en.wikipedia.org/wiki/Betteridge%27s_law_of_headline...

phkahler 6y ago
Revenue model IS culture. Or at least it drives the culture, so maybe the answer to the headline question is "no".
tome 6y ago
Ah, tome's law. "In any discussion about an article whose title is a question, Betteridge's law is mentioned with probability 1." https://news.ycombinator.com/item?id=18056219 https://news.ycombinator.com/item?id=18056219
- Rexxar 6y ago
  And surprisingly, it's always downvoted but people are still doing it.
lazugod 6y ago
A better law is that questions in news headlines have boring answers.

HugoDaniel 6y ago

This is a trick question, author seems to be vouching for blending the culture into the business model ("...the better a product is, the better off the company is and its users are"). I do wonder how well can it fit the Betteridge Law of Headlines ? https://en.wikipedia.org/wiki/Betteridge%27s_Law_of_Headlines https://en.wikipedia.org/wiki/Betteridge%27s_Law_of_Headline...

Ozzie_osman 6y ago
(Author) ha! I didn't know about that law. I guess this doesn't really fit the law because my answer would be yes, revenue model IS more important than culture. With a lot of caveats I cover in the article.

aj7 6y ago

“I think that over time, the revenue model is the dominant term.” Nah. The profit model. This has consequences for both the users and employees. The stockholders have shoved their way to the front, and their mercenaries are armed.

zpeti 6y ago

I think this is almost the inevitable path of public companies. Even worse if its not founder run, but manager run. In that case the incentive structure is inevitably going to be about share prices. And share price incentives will slowly erode any culture into driving revenue higher and higher. Of course there is always the possibility of staying private, but it seems unlikely if you've taken VC money, or have to fund expansion to get to profitability, which most tech companies do.

tboyd47 6y ago

This is why I always gravitate towards software projects that are centered around making money (within ethical bounds, of course). The closer to the bottom line my code is, the larger the sales and support team is around my code, and the more customers there are (real paying customers, not internal employees who like to be called customers) using my code, the better. It may sound overly hard-nosed and cynical to some people, but I find it's just the opposite. The drive to make more money is the only thing that trumps every other petty motivation people follow at work. It trumps favoritism, empire building, and intra-office rivalries. It trumps good ol' boys networks and tech bro networks. Money brings people into the same room who would never normally be in a room together, and they do it willingly. It forces people in power to listen to small fries. While money corrupts on an individual level, it purifies on an institutional level. Its universally accepted value allows a variety of individual motives to flourish. This seems to change once a company goes public and hits a certain size, as the flow of money becomes less and less tied to actual sales and consumer behavior and more and more based on financial engineering and stock price.

nullspace 6y ago
I have become exactly like this. My experience with free (as in beer) software and services is that it's usually offered as a "strategic offering", maybe as an attempt to commoditize your complement(?) but I'm speculating here. The downside is that the wider business does not care that much about your software. It needs to work, but just enough that customers don't use your complement. And critically, when it comes to prioritization of resources (especially the most senior people who could mentor you), they would rather put their best people in other parts of the business. I've become of the mindset that if you want to build best-in-class software with a best-in-class team, you should see if you can draw a direct line from the product to the revenue, or at least the core mission of the business.
- heimatau 6y ago
  Preface: Might be easier to read my comment withOUT the parenthesis. Then go back and read with them. I fully agree with you guys on a macro-scale. I didn't have this position years ago but now it's a firm position. But my observation is that no one (read: a significant majority) is financially sovereign (FS), therefore they mis-calculate the time/labor costs and it's economic value/costs. To think of this another way, if your (financial/material/etc) lives depended the Amish's* jam or chairs (or anything else they make). You can depend on their work, up to a certain scale. But even most software projects don't have this dependability because software is generally repackaged to fit a narrow use-case. Iff (if and only if) the Amish were to embrace the automation technology, then you could depend on the Amish scaling for whatever you need. Financial sovereignty is very powerful but the drawbacks are that the team, to do all the needed work, might not be FS. (Hence why I mention the Amish) This FS doesn't scale (this could with the Amish; if they wanted to provide jam to everyone, etc) with the complexity of the problem nor the robustness of the problem being solved. Another important drawback is that those that are FS tend to be myopic to those that aren't (i.e. their market/customers). This problem is pretty big as well. To find a product/service that solves all these criteria is immense and dare I say, improbable, hence my agreement to the two comments above. The simple solution is to try and align with the better alternative that have a positive feedback loop (i.e. monetary gain to improve the work). * Note: I do understand that Amish charge money for jam/chairs/etc but the cost is tends to be nominal/small.

ponker 6y ago

Perhaps this is why, to everyone’s astonishment, Google and Facebook have moved well ahead of Microsoft in the generally accepted “evil” rankings.

motohagiography 6y ago

A director once pontificated in a meeting that, "culture eats strategy for breakfast!" I said, "so without strategy, culture starves?" So enlightened, they then set to managing me out.

felipemnoa 6y ago
>>culture eats strategy for breakfast! I'm sure you know this but this phrase simply means that it is better to have a good culture than a good strategy, broadly speaking. Mind you, I'm not saying this is true or not. Your phrase: >>so without strategy, culture starves? Seems to be argumentative for argument's sake without taking into account the intended meaning of the original phrase. Not surprised you pissed them off.
- motohagiography 6y ago
  I would agree, but the company failed.
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- hitekker 6y ago
  > I'm sure you know this but... > Not surprised you pissed them off. > Your comment seems to be argumentative for argument's sake Pot meet kettle.
jakeva 6y ago
sounds like a healthy culture /s
- spaetzleesser 6y ago
  A general rule for me is that the more somebody talks about culture the worse the culture is.

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jakevoytko 6y ago

This is borne out in my experience with a company that had moderate layoffs + completely replaced the executive team. Despite the gut renovation, the company didn't change much in practice because our core business model was the only thing that couldn't change. We just became more effective. I worked at Google from 2010-2015. When I looked for another job, I wanted to avoid the thing that bothered me about working at a FAANG. I didn't have a clear understanding of how my contributions affected the bottom line. In fact, when I left, I asked a bunch of current employees the same question: "Did Google make money on my employment?" I got every answer you can imagine. "Of course they did, you helped grow an ecosystem with network effects, so the value you added was intangible but incalculably large." "Of course they didn't. You grew the output of a product that people can use for free, so your work was mostly a loss leader." Anyways, when I looked for a new job, I had a simple requirement. I wanted to work for a business model that I wanted to improve. Etsy fit the bill. A marketplace for small businesses to sell unique goods. I could feel good about improving this business model: improving our top line meant that more small businesses got sales. I can live with that. Flash forward a year, and Etsy was in serious trouble. Growth was decelerating. Our core product was neglected in favor of newer offerings that had a long way to go to get traction. So we had some major gut renovation: new CEO. New CTO. New CFO. Two rounds of layoffs. A bunch of people left because the culture was gone. You think to yourself, "OK, that's it, the foxes are in the henhouse. What's going to change?" And it turns out that you can't change that much! Our core business was to connect small businesses making special items to a global audience. So that's what the foxes had to work with: A two-sided marketplace where they needed to please both the existing sellers (so that they didn't just shut down their shop in favor of all of the other marketplaces they were using) and improve the site for our buyers. So they brushed the dust off of the core marketplace, assigned a bunch of people to focus on improving sales, and the results speak for themselves. Even ignoring Covid-related effects, our marketplace was healthier, growth was accelerating, and morale was up. And some of the people that left because it wasn't the same anymore? They came back. We have a lot of "boomerangs" from that era. I like point of incentives that OP brought up, you can also see that in some things that Etsy sellers hate. For example, the people who made Etsy set the fees way too low. It's hard to walk that back. So you can see the executives try to find ways to bring the fees more in line with what Ebay or Amazon might get. The best they've come up with is improving an offering and restructuring the fees at the same time. "New: off-site ads are new and improved, and if you get a sale, we charge %12" type stuff. If you're a seller that's mad at Etsy, that's the kind of thing that you're going to complain about - us following our own incentives.

tempsy 6y ago

Sometimes I look at Adobe's stock history in awe and then realize the only thing that has really changed over the years is that they moved from a license model to a SaaS model...so instead of paying a few hundred dollars for a Photoshop license you can use for life you get to pay $50/mo for a bundle forever.

biztos 6y ago
Or you pay $10/mo for Photoshop + the twelve current versions of Lightroom. I don't get much use out of them but I still think it's an OK deal. At least as good a deal as a lot of the other SaaS stuff I'm paying for and barely using. If I were using any of their stuff professionally I would find it an awesome deal, not least because it's all a clean expense. [Edit: Clarity]
greggman3 6y ago
I hate it but you arguably couldn't use them for life unless you wanted to run some old version of the OS they came out on in a VM. OSes change, the deprecate and remove old features. You can't run Photoshop CS6 (the last non SaaS version) on Catalina. In the past I got by on 1 upgrade every 4 years or about $50 a year. Now it's $120 a year. Before the incentives were aligned. Add new amazing features or I'm not upgrading. Now the incentives are not aligned. The more money they spend on dev the less money they make. The are 100s of features I see on cheap or free iOS image editing apps I'd have expected to see long ago in Photoshop or Lightroom but Adobe no longer has any incentive to add features. As just one example, the features of the Focos app. Being able to create an AI generated depth mask would be extremely useful in Photoshop. I'm sure you can make excuses why this isn't a valid data point but look at Wikipedia's Photoshop feature list by version. Notice how before SaaS each version shows about 4-5 paragraphs of new features, after SaaS each version is just a single paragraph of mostly minor re-workings of existing features https://en.wikipedia.org/wiki/Adobe_Photoshop#Version_history https://en.wikipedia.org/wiki/Adobe_Photoshop#Version_histor...
- CincinnatiMan 6y ago
  I'm still using Photoshop 7 on my Windows machine. Google tells me that was released in 2002 haha!

dsr_ 6y ago

For a business, culture is made up of the behaviors that management reward. Most of the reward is money, immediate or deferred, and some of it is in accolades, social respect, and other forms of promotion. The revenue model drives the behavior of the salespeople. If you sell small subscriptions, no individual customer is important but marketing is. If you sell multi-year service contracts that take six months to sign, your individual customers are important and the salespeople bringing them in are important. If the company perceives that it is selling a high-value service, the development teams are important. When the company is selling a low-margin commodity, the people who can improve the cost structure are the heroes.

agumonkey 6y ago
turns out interpersonal relationships are too random while money is stabler (albeit poorer replacement)

mathattack 6y ago

Revenue model sometimes defines culture. How Oracle makes money drives their culture. Same with MSFT. And Google too.

indymike 6y ago

There is no culture without revenue.

manesioz 6y ago
VC-backed startups have entered the chat
spaetzleesser 6y ago
Normally not but with current investment levels they can pretend for a very long time.

calinet6 6y ago

A company is an interconnected system. Culture begets revenue model, revenue model begets culture. You can't have a revenue model that works without a culture that executes it, nor vice versa.

skrebbel 6y ago

As a long time Microsoft customer, this is why I'm not loving the Nadella age. Sure, free VS Code is nice, but Ballmer was trying to sell me Windows licenses. That's simple, it's clear. Nadella, instead, said some blarb about could and mobile, made Windows free, and added bucketloads of telemetry. Currently I still have the idea that Windows exists to sell me office and azure licenses, which is less bad than why Android exists, but sooner or later they'll have finalised whatever shady revenue model 180 they're in the middle of and I'll have to consider alternatives.

pydry 6y ago
VS code will remain free, open source and be improved for as long as it has competition. If other IDEs (e.g. pycharm) go out of business they'll probably slowly de-open source and start to charge. Right now it's the only way they have to get a lot of people using open source into the Microsoft ecosystem. Still in embrace stage.
- jrochkind1 6y ago
  So quite traditional embrace extend extinguish, not actually much of a shift?

iskander 6y ago

I did a summer internship at Google in 2009. The "don't be evil" ethos was clearly on the decline as it stood in the way of several major business directions.

cbhl 6y ago

I wonder what models can create incentive alignment when the output should be free - things like kids' games, education, research, food for the needy.

boulos 6y ago
Public funding. If it’s a collective good, “we” should all be willing to contribute towards it.
- mkolodny 6y ago
  I agree that public funding is a great way to fund free products and services. The issue is that getting public funding is a major pain right now. It can take months of paperwork. And it's not really "we" who decide what to fund - it's one or more government employees. I'd love to see Participatory Budgeting take off. It would be awesome if we could all vote on which products and services deserve public funding. And it would be even better if we could use technology to decide what to fund much faster than we do today.

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mikece 6y ago

While "Culture Eats Strategy for Breakfast" -- https://culturematters.com/culture-eats-strategy-for-breakfast/ https://culturematters.com/culture-eats-strategy-for-breakfa... -- it's possible to have an awesome culture and an unprofitable business. As long as you make enough to be a going concern then culture trumps anything that would lead to a short-term gain in revenue which jeopardizes the culture of the organization.

BSG-Actual 6y ago
My last role was for an awesome team building a product that ended up making no money , which lead to most of us getting the sack once Covid came along (that and half the board defrauding the company to the tune of billions). We all knew that the product would flop, but no one at a level to change the strategy wanted to hear it. Perhaps that was a cultural problem, but I'd say that culture and strategy are inherently interconnected.

switch11 6y ago

First: Product Market Fit Second: Monetization Third: Growth Culture isn't even in the Top 3 and might not even be in the Top 5 * One very important Caveat In today's zero interest rate, Fed printing press environment where money is DESPERATE for any kind of return Growth will sometimes trump Monetization and even Product Market Fit VCs will focus on Growth above all else because with Growth you can raise enough money to 'brute force' Product Market Fit Culture, as opposed to what all the 'gurus' and 'politically correct people' say and pretend is not as important as any of the above You can see a lot of successful companies that don't necessarily have very good culture Culture is something that will matter 10 to 20 years down the line once you're a big or very big company If you don't have Product Market Fit, you won't survive If you don't have good monetization/profitability you won't last very long (unless Product Market Fit and/or growth is massive) If you don't have Growth, then you will always remain small/much smaller than you could be One thing a lot of people in US/UK/Canada (have lived in all 3 countries) believe VERY STRONGLY IN and which people from China/India/Africa (worked with all; non work friends from all places) don't believe in AT ALL is this Western Dream State of a company also being focused on saving pandas and bald eagles and world peace It's almost as if in the West it's not enough to be successful you also have to A) Pretend you never intended to be successful. It was a happy byproduct of wanting to make the world a better place B) Start talking non stop about how much you will donate to charity C) Start saying 'it was all luck' and 'not the better people won' etc * This is also reflected in a different way In the West people are super likely to be made a fool of by a company pretending to be virtuous Google and Facebook are good examples They work so hard to pretend all their unethical steps are 'mistakes' or 'one off instances' people in the West just buy it hook, line and sinker things like: Even after we turned off the setting to track location, Google was still tracking it things like: Instagram had camera on all the time, it was just a bug and had nothing to do with ad targeting and spying * For all the talk of China and INdia and South East Asia and Africa being corrupt companies like this are very quickly identified to be scum and taken down, sometimes even by the Government Basically, the people who control Europe and US are very, very good at making it seem all magical fantasy land Snowden is a good example. He's basically being treated as if HE was the one doing all the spying and illegal surveillance

frausto 6y ago

"Revenue is the Dominant Term." This really speaks to me and is one of the driving philosophies when we created our pricing model for Warmintro, which ironically has a mission very close to the author's example: "to give people the power to build community and bring the world closer together." We make it easy for private groups to create their own online community portals, and it would be very hard to stay true to community-focused ideals, if our revenue didn't match the mission. For this very reason, a sizeable chunk of our customers migrate to us from Facebook groups due to privacy concerns. Facebook makes money on your data and by serving you ads, that is the direction that everything they do leans. The groups that they host suffer from that fact. We made Warmintro paid from the very beginning. It made things harder for us in many ways since we acquire initial customers more slowly, but it also guarantees the direction of our priorities. Because at the end of the day, how you make money determines the ultimate direction of any for-profit company.

microtherion 6y ago

As an aside, I was intrigued by this quote: > FedEx needed to move/sort their packages more quickly, so instead of paying employees per hour, they paid them per shift. productivity increased dramatically (employees now had less incentive to take longer hours to do the same amount of work). That's the way incentives work iff the employees had control over the hours worked. If instead their managers had this control, the incentive would be to make your employees work longer hours, because you don't have to pay them more.

mrkramer 6y ago

Revenue model is culture and vice versa. The way you make money is your culture. For example capitalism vs socialism.

hisnameismanuel 6y ago

Better said - the revenue model is the ultimate reflection of your culture. I'm working on a startup right now that has this understanding at the core. We are building a revenue model with a fixed margin of profit. In our company, no matter how many costs the teams cut, they'll always end up with the same short-term profit. So - it's pointless to screw the customer to try and get some kind of short term win. Their job won't be to manage the P&L, their job will be to reinvest all the remaining margin into the customer experience. We got this idea from Costco, who do something a bit similar. In terms of Google, I don't have an easy solution, but it's clear that Google's internal incentives (actual culture) are overriding whatever barrier is in place (that thing is called culture).

Ozzie_osman 6y ago
I'd love to hear more about how this works. How do you avoid having too much (or too little) profit?
- hisnameismanuel 6y ago
  (We're not a software startup.) We're setting a fixed margin. 14% (exact number TBD) of all revenue will go into a profit account. And that will be the profit, it can be reinvested into the business only as capital spend. 86% of revenue is what the rest of the team will need to work with. They will be required to spend that 86%, all of it, on team and customer satisfaction (improving the product, improving the service, reducing the price). They'll primarily be measured on customer satisfaction. All promotions (unless you're in a role that is directly tied to say, online conversion rate), hiring, firing, and ongoing management will be based on metrics around how happy our customers are. Our profits will increase with volume, because we'll have happy customers. Note, an analog to this model is very common in the franchising industry. Many franchises take a fixed percentage of revenue as their 'take', but in our case the business 'take' will simply go to a profit account. We won't do 14% on day one, it will take a little while to get there, but that model will be our overall guidepost.
lukifer 6y ago
> Their job won't be to manage the P&L, their job will be to reinvest all the remaining margin into the customer experience. Just listened to this 2013 talk [0] by Thom Hartmann, who made a quite cogent case that a high marginal tax rate (90% under Eisenhower, 74% under LBJ) was good for business and workers alike: business owners were incentivized to expense and reinvest as much as possible, including into hiring, wages, and benefits. That reinvestment came to benefit the owner when they sold the business, at the drastically lower capital gains rate. Curious that in the absence of a more stern tax incentive, there seems to be a strategy of implementing a self-imposed profit cap. (I'll have to research the Costco case further, I didn't know that.) [0] https://www.youtube.com/watch?v=039Zh9KBCqY https://www.youtube.com/watch?v=039Zh9KBCqY

ckemere 6y ago

What about competition? This factor seems to be missing from the analysis. If you have many companies competing for ad revenue (a la old school TV and radio), are things maybe a little better? (I anticipate pushback re: NPR, PBS, or subscription supported cable. But surely it's worth considering?)

Ozzie_osman 6y ago
(author) Good point. I'm not sure how competition would net out. If you're the only game in town, you can set the rules. On one hand, you can get away with bad things if you want to. On the other hand, you're less susceptible to competitive pressures so if you want to keep things clean, it might be easier.

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