7 ms·

I'm normally a fan of Paul's essays, but this one felt a little forced. Maybe not enough "essayer", too much agenda?

by chris_l 18y ago

pchristensen 18y ago
I can't wait for DHH's re-rebuttal on SvN on Friday. :) If 37s has doubled revenue for the last 4 or 5 years while hiring 2-3 extra people, I'm pretty sure they're not far from walking away whenever they want. Or they could just work 4 days a week and have the company pay for their cooking and Tai Chi classes while still retaining full control. That still sounds like a better deal to me.
- jkent 18y ago
  I don't understand why expansion equals freedom - can you explain your logic? If they can walk away that easily (i.e. they are replacable), do the founders add value anyway?
  - pchristensen 18y ago
    This is for swombat too - if revenue has grown 15-30 times since '04 as DHH said at Startup School, and headcount went up by 30%, then that's still 10-20x the revenue per employee. Costs: Can't be too much more, certainly not nearly matching the revenue growth. They do their own advertising and marketing so that's free. Infrastructure costs are higher because of more accounts, so let's count that as the cost of 7 employees, giving them double the costs. And with extra benefits for employees, put it up to 2.5x of 2004 expenses. total. The profit picture gets even more ridiculous. If they had 5% margins in 2004, their costs go up by 2.5 and revenues go up by 15, then their profit is over 250x over 2004. Divide that by 3(?) founders/principals and you get a lot per year. Heck, it's still a lot if you divide it by all 12 employees. 37s is probably making more profit annually than most startup founders will ever sell a company for. If they pocket a part of that a year, then they have the equivalent cash to a liquidity event plus they still have the company. Granted, they're exceptionally successful, but hopefully these numbers will open some eyes for people that look down on lifestyle businesses.
    - tonystubblebine 18y ago
      I totally agree with this analysis--it looks like they have a ton of money. But that just makes the investment they took from Bezos look even more strange. Any ideas on that?
      - easyrider 18y ago
        I think the answer to that is - they didn't take the invenstement from Bezos for the money alone - they did it for the business advice and contacts they could get from him through the investment relationship. IIRC, this was stated, possibly by Jason Fried, on another somewhat recent 37Signals blog post.
        easyrider 18y ago
        A typo - I meant "investment".
- run4yourlives 18y ago
  None of them are walk-awayable. (At least from the original core) They're fully aware of this, and they've mitigated that fact by not expanding, so that as they bring in more money, they're able to continue to divvy it up between the same core group (or thereabouts). Their reward is making the company fit the lifestyle they choose to have as much as possible, instead of selling out. I agree that this is very appealing.
  - swombat 18y ago
    Why do you think they couldn't walk away? Sure, if Basecamp doesn't get an update for years, it will go down. But that will take some time. Imagine Basecamp is making $1m a year of revenues, and they stop maintaining it and marketing it. It's still a useful product, until someone build something better and cheaper. Even then, people are usually slow to switch. They could easiy make $800k in the year after they stop maintaining it. Then $500k the following. Then $200k the following. Probably some people would keep on paying for several years because they're used to it. That's not bad for not putting any work in it.
    - run4yourlives 18y ago
      I evaluate being able to "walk away" as being able to maintain the status quo indefinitely. The slow revenue reduction that you are describing is applicable to any business model with a recurring revenue set up. Sure it's not bad, but the company begins to die the moment they leave.
      - swombat 18y ago
        You can't walk away from investments either by that definition. There's an old Romanian saying: The cow grows fat under the eye of the farmer. Investments are just another business model with recurring revenues. It begins to die the moment you stop managing it. You can get a professional manager for that too - but they too require attention.
        run4yourlives 18y ago
- jasonfried 18y ago
  Here it is: http://www.37signals.com/svn/posts/1159-you-dont-have-to-sell-your-company-to-have-financial-security-and-the-freedom-to-do-what-you-want http://www.37signals.com/svn/posts/1159-you-dont-have-to-sel...
  - h3h 18y ago
    Excellent response. It perfectly distills the difference between Paul's claims and DHH's (and my) perspective.
swombat 18y ago
Absolutely. Particularly strained bits: Sounds like a good plan. Let's think about the optimal way to do this. Disagreeing by agreeing is a powerful technique. But it's pretty obvious in this case. I prefer disagreeing head on, if I have a solid argument. They want enough money that (a) they don't have to worry about running out of money and (b) they can spend their time how they want. Running your own business offers neither. I have a friend who "ran his own business" for 4 years while doing his medical degree, and accumulated over a million dollars in the process. That's not enough to change your lifestyle to be like the mega-rich, but it's certainly enough to gain the freedom to spend your time the way you want it. Think of it this way: $1m gives you at least enough money to spend 10 comfortable years doing other stuff and figuring out what else you really want to do. And as anyone who runs their own business can tell you, that requires your complete attention. That's not true for all businesses. I have a business that I haven't paid attention to for over 9 months and it's still generating revenues (couple of thousand dollars a month). Sure, revenues go down, but even with minimal maintenance you can keep them dropping reasonably slowly. There will of course be some founders who wouldn't like that idea: the ones who like running their company so much that there's nothing else they'd rather do. _But this group must be small_. Why must it be small? Maybe this group is much larger than the other. Where's the evidence, or even argument, that it must be small? It seems to me there are far more people running IT businesses than people starting up in the valley. I would think actually the number of people who enjoy running an online business must be large. I could go on, but this comment will turn into a rant. I'm quite disappointed in this one. When DHH gave his presentation I thought it was quite interesting that Startup School was hosting a talk that went directly against their principles ("make something ppl want and don't worry about the money", for example), and I was curious what pg's answer would be. I'm not convinced by this answer. It seems weak and somewhat dishonest.
- deleted 18y ago
  [deleted]
- 13ren 18y ago
  When DHH gave his presentation I thought it was quite interesting that Startup School was hosting a talk that went directly against their principles I get "This video is not available" for DHH's presentation: http://omnisio.com/startupschool08/david-heinemeier-hansson-at-startup-school-08 http://omnisio.com/startupschool08/david-heinemeier-hansson-...
DaniFong 18y ago
While it might be more of a derivation than an essay, it was still surprising, and that's one of the best parts of PG's essays.

I'm normally a fan of Paul's essays, but this one felt a little forced. Maybe not enough "essayer", too much agenda?

by chris_l 18y ago

I'm normally a fan of Paul's essays, but this one felt a little forced. Maybe not enough "essayer", too much agenda?

I can't wait for DHH's re-rebuttal on SvN on Friday. :) If 37s has doubled revenue for the last 4 or 5 years while hiring 2-3 extra people, I'm pretty sure they're not far from walking away whenever they want. Or they could just work 4 days a week and have the company pay for their cooking and Tai Chi classes while still retaining full control. That still sounds like a better deal to me.

jkent 18y ago
I don't understand why expansion equals freedom - can you explain your logic? If they can walk away that easily (i.e. they are replacable), do the founders add value anyway?
- pchristensen 18y ago
  This is for swombat too - if revenue has grown 15-30 times since '04 as DHH said at Startup School, and headcount went up by 30%, then that's still 10-20x the revenue per employee. Costs: Can't be too much more, certainly not nearly matching the revenue growth. They do their own advertising and marketing so that's free. Infrastructure costs are higher because of more accounts, so let's count that as the cost of 7 employees, giving them double the costs. And with extra benefits for employees, put it up to 2.5x of 2004 expenses. total. The profit picture gets even more ridiculous. If they had 5% margins in 2004, their costs go up by 2.5 and revenues go up by 15, then their profit is over 250x over 2004. Divide that by 3(?) founders/principals and you get a lot per year. Heck, it's still a lot if you divide it by all 12 employees. 37s is probably making more profit annually than most startup founders will ever sell a company for. If they pocket a part of that a year, then they have the equivalent cash to a liquidity event plus they still have the company. Granted, they're exceptionally successful, but hopefully these numbers will open some eyes for people that look down on lifestyle businesses.
  - tonystubblebine 18y ago
    I totally agree with this analysis--it looks like they have a ton of money. But that just makes the investment they took from Bezos look even more strange. Any ideas on that?
    - easyrider 18y ago
      I think the answer to that is - they didn't take the invenstement from Bezos for the money alone - they did it for the business advice and contacts they could get from him through the investment relationship. IIRC, this was stated, possibly by Jason Fried, on another somewhat recent 37Signals blog post.
      - easyrider 18y ago
        A typo - I meant "investment".
run4yourlives 18y ago
None of them are walk-awayable. (At least from the original core) They're fully aware of this, and they've mitigated that fact by not expanding, so that as they bring in more money, they're able to continue to divvy it up between the same core group (or thereabouts). Their reward is making the company fit the lifestyle they choose to have as much as possible, instead of selling out. I agree that this is very appealing.
- swombat 18y ago
  Why do you think they couldn't walk away? Sure, if Basecamp doesn't get an update for years, it will go down. But that will take some time. Imagine Basecamp is making $1m a year of revenues, and they stop maintaining it and marketing it. It's still a useful product, until someone build something better and cheaper. Even then, people are usually slow to switch. They could easiy make $800k in the year after they stop maintaining it. Then $500k the following. Then $200k the following. Probably some people would keep on paying for several years because they're used to it. That's not bad for not putting any work in it.
  - run4yourlives 18y ago
    I evaluate being able to "walk away" as being able to maintain the status quo indefinitely. The slow revenue reduction that you are describing is applicable to any business model with a recurring revenue set up. Sure it's not bad, but the company begins to die the moment they leave.
    - swombat 18y ago
      You can't walk away from investments either by that definition. There's an old Romanian saying: The cow grows fat under the eye of the farmer. Investments are just another business model with recurring revenues. It begins to die the moment you stop managing it. You can get a professional manager for that too - but they too require attention.
      - run4yourlives 18y ago
jasonfried 18y ago
Here it is: http://www.37signals.com/svn/posts/1159-you-dont-have-to-sell-your-company-to-have-financial-security-and-the-freedom-to-do-what-you-want http://www.37signals.com/svn/posts/1159-you-dont-have-to-sel...
- h3h 18y ago
  Excellent response. It perfectly distills the difference between Paul's claims and DHH's (and my) perspective.

swombat 18y ago

Absolutely. Particularly strained bits: Sounds like a good plan. Let's think about the optimal way to do this. Disagreeing by agreeing is a powerful technique. But it's pretty obvious in this case. I prefer disagreeing head on, if I have a solid argument. They want enough money that (a) they don't have to worry about running out of money and (b) they can spend their time how they want. Running your own business offers neither. I have a friend who "ran his own business" for 4 years while doing his medical degree, and accumulated over a million dollars in the process. That's not enough to change your lifestyle to be like the mega-rich, but it's certainly enough to gain the freedom to spend your time the way you want it. Think of it this way: $1m gives you at least enough money to spend 10 comfortable years doing other stuff and figuring out what else you really want to do. And as anyone who runs their own business can tell you, that requires your complete attention. That's not true for all businesses. I have a business that I haven't paid attention to for over 9 months and it's still generating revenues (couple of thousand dollars a month). Sure, revenues go down, but even with minimal maintenance you can keep them dropping reasonably slowly. There will of course be some founders who wouldn't like that idea: the ones who like running their company so much that there's nothing else they'd rather do. _But this group must be small_. Why must it be small? Maybe this group is much larger than the other. Where's the evidence, or even argument, that it must be small? It seems to me there are far more people running IT businesses than people starting up in the valley. I would think actually the number of people who enjoy running an online business must be large. I could go on, but this comment will turn into a rant. I'm quite disappointed in this one. When DHH gave his presentation I thought it was quite interesting that Startup School was hosting a talk that went directly against their principles ("make something ppl want and don't worry about the money", for example), and I was curious what pg's answer would be. I'm not convinced by this answer. It seems weak and somewhat dishonest.

deleted 18y ago
[deleted]
13ren 18y ago
When DHH gave his presentation I thought it was quite interesting that Startup School was hosting a talk that went directly against their principles I get "This video is not available" for DHH's presentation: http://omnisio.com/startupschool08/david-heinemeier-hansson-at-startup-school-08 http://omnisio.com/startupschool08/david-heinemeier-hansson-...

DaniFong 18y ago

While it might be more of a derivation than an essay, it was still surprising, and that's one of the best parts of PG's essays.