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It's ok to be small and lean. It's ok to be enormous. Just know WHY you're growing to the size you want.
A podcast by 37signals about the better way to work and run your business. Hosted by Kimberly Rhodes, the Rework podcast features the co-founders of 37signals (the makers of Basecamp and Hey), Jason Fried and David Heinemeier Hansson sharing their unique perspective on business and entrepreneurship.
[00:00:00] Broken By Design by Clipart plays.
Shaun: [00:00:02] Welcome to Rework, a podcast by Basecamp about the better way to work and run your business. I'm your host, Shaun Hildner. We're continuing our Rework book club this week with a look at the chapter, “Why Grow?”
[00:00:13] You know, since its inception, Basecamp has been a relatively small, lean company. At the time Rework was written, there were only 16 employees and it's always been a point of pride around here that we've been able to accomplish so much with such a small team.
[00:00:27] But now the company finds itself on the verge of trying something completely different. Basecamp is looking to grow. And here discuss all this, as always, I'm joined by Basecamp co-founders and the authors of Rework.
[00:00:39] Jason Fried, how are you?
Jason: [00:00:40] Good How you doing, Shaun?
Shaun: [00:00:40] Wonderful. And David Heinemeier Hansson, how are you?
David: [00:00:43] Hey, hey, pretty good.
Shaun: [00:00:45] I guess to start off, put your mind back 10, 11 years ago, how big was the company around that time? I believe you said 16 people in the book, something like that?
Jason: [00:00:55] Sounds about, yeah, I was gonna say around close to 20 or something, but probably a little bit less.
Shaun: [00:00:58] And can you just lay out your philosophy on staying small?
Jason: [00:01:01] Yeah, it's always been, like, the idea of hire when it hurts. Don't just hire a bunch of people you don't need. Stay scrappy. Stay frugal to a certain degree and force yourself to do a lot with a little and stay as simple as you can.
[00:01:17] I think having fewer people around historically has been a great way to figure out what you really need to do and what you really don't need to do. And so that's sort of the premise. It's also easier to manage a smaller group and all those things, but really it’s just like, look, let's get by with just what we need. Let's stay really efficient. And let’s see what we can do with a small team.
David: [00:01:36] For me, it's a lot about simply the choice of what is the size you want to be? And why? If you are so fortunate to have that choice, right? In some cases, the choice isn't yours, you'd like to be the biggest company in the world, but you’re two people in a garage. Okay. You're not quite close. But it might very well also be that you’re 10 people, you’re 12 people or whenever we wrote the book, we were 16, 20, something. And you're like this is a good size. There shouldn't be this assumption in business that that's not okay. Right? You can't be this size, like, what are you doing? Why aren't you growing larger?
[00:02:11] Now, if what you really want to do is grow larger, hey, that's a clearly a thing. That’s clearly a path you can choose. But this idea that, I think another essay we have in there that's related, is “Small is Not a Stepping Stone. That small can be a perfectly fine destination.
[00:02:30] And if you look at Basecamp over the 20-odd years that we've been around, the company compared to it’s peers have been tiny. The company compared to what we've done has been tiny. At our largest, we were just under 60 people. That's a very small company compared to most other companies, even in our business or doing the kind of business we're doing, having the number of customers we're having.
[00:02:55] And for a very long time, we decided, you know what, this was fine. This was an okay size to be. In fact, just a few years after we published the book, when we published the book, I think we had four products.
Shaun: [00:03:05] Right.
David: [00:03:05] So we had Basecamp, we had Highrise, we had Campfire, we had Backpack, and then a few years later Basecamp itself had grown, which was sort of one of those things you don't perhaps choose as much that's just like, where does the business go? How many people sign up? A lot more people had signed up. And we were at an inflection point where we said, you know, do you know what? We can't do the quality we want to do with the number of people we have across four products. So what should we do? Should we either grow with the demand or should we somehow change the demand? And in that instance, we chose to change the demand. We chose to shut down three, successful, not as successful as Basecamp, but successful products that most companies unquestionably would just have decided to hire for and invest in. And then we rode that decision all the way up until essentially now, when we are looking at, hey, do you know what? We can also make different choices. You can have different perceptions of where you want to be, just because we've been a certain size for a long, long time, doesn't mean that has to be the size forever and always.
[00:04:10] And I think that that's what's sort of interesting about that topic, right at this moment, right at this juncture for our company, is that why grow? Should be a question. You should answer it, what is it? What are you trying to do? Why do you want to grow? And now we're coming to this junction where we might answer differently than we would have two years ago.
Shaun: [00:04:31] Yeah, let's get into that because there's a couple things I noted down that you took a very strong stance on. Find the right size, and stay there as well as avoid huge growth spurts. So let's address what the current plan is for Basecamp in the next year or so.
David: [00:04:50] So we have this idea, internal notion that we put out called double vision, which is essentially that just like in ‘14, we had four products, and we could not do them justice with the people we had. And we decided, you know what, in that instance, we're just going to remove three quarters of those products and focus on one of them. And that then fits the company size that we had.
[00:05:14] Now we're in a similar situation where we have two major products, HEY and Basecamp. And we look at both of them and go, I don't want to give any of those up. Do you want to give any of those up? Nah. So what do we do now that we have two major products that we want to continue to develop and improve at a high basis, continuously? At the same time? Well, we can't do that with the same number of people it took to run one product really lean, and really sort of scrappily, right?
Shaun: [00:05:44] Yeah.
David: [00:05:45] If you're trying to do that with two products at the same time, something's gonna break and that's gonna be people. Why would you break people? Well, let's just revisit some of these assumptions here. Before, we were a one product company, and we had a certain size that worked for that. Now we're two product company, and the same size doesn't work. So we're looking at that and going, we should be a bigger company to handle both of those products at the same time at a high level of execution. So let's grow.
[00:06:13] So double vision is essentially that. Double the products, double the people, that's essentially the internal chart here. Setting that out that if we want to do both of them at the same time, we should be a substantially larger company, far larger actually, than we've ever been before. Because we're dealing with two products that are far larger than we've ever had before.
[00:06:34] HEY launched with the most explosive launch we've ever had for any product ever.
Shaun: [00:06:40] Right.
David: [00:06:40] In the first, I think, less than two months, we had signed up 30,000 paying customers for a brand new product. That's never happened in the history of this company. And that instantly put it into be a major product on a major trajectory. And that requires, not only does the space we're in with HEY, right, like email, email is difficult. There's a reason why you don't see new email services launched every five minutes in the same way you see, I don't know, Twitter clients, once upon a time was the joke.
Shaun: [00:07:13] Sure.
David: [00:07:13] One launched every five minutes. Now, whatever it is, there's so many SaaS categories that have new entrants all the time, new email services, yeah, they come about, it appears once a decade. And the reason for that is it's very difficult to do well. And it's very high criticality, if you miss people's emails, whatever. It's high criticality.
[00:07:33] So you need a lot of people just to make the basics of it work. And then when you have 30,000 people sign up to be paying customers of that product right away, you need even more people to deal with that. So we went from like, oh, let's just launch this with the team we have to holy shit, now we essentially bootstrapped another company that requires dozens of people to run.
Shaun: [00:07:55] Right.
Jason: [00:07:54] I think the other thing is, on the challenging assumptions front. Challenge the assumption that efficiency is the most important thing. Not that it was ever the most important thing, but it was an important thing for us. Which is that we want to do a lot with a small team. And everybody here who's working on stuff is working on stuff that's assigned. And this is the work that we do.
[00:08:19] And what we're trying to do moving forward is have a lot more slack in the system. Which is having work that's assigned that we know we need to do. And also people who are roaming around in a sense, available to do other things as they come up. We don't really have a culture where people are around to do things as they come up.
Shaun: [00:08:36] Sure.
Jason: [00:08:36] We're very sort of methodical in terms of scheduling the work that needs to get done over a certain cycle. And that's sort of all that happens unless there's an emergency. But we want to have some more room to do some other things that pop up. And so having that means we need more capacity.
[00:08:50] A big part of this is, to David's point about building HEY and Basecamp simultaneously at a high clip, at a high quality level. But there's also this just deeper notion of let's become a more capable company and increase our capacity to do other things that come up as we go. So we don't have to wait on small, interesting little projects for months and months and months, we can actually just get in there and do something with some extra people that are at the ready, essentially.
[00:09:15] That's the theory, at least. One of the tricks is is that when you have people quote “sitting around”, which is of course not really what they're doing, right. But you do tend to want to occupy them. So I think the discipline here is to be like, let's not occupy people with everything all the time, and see what we can do with some additional capacity and see what happens.
Shaun: [00:09:32] Some breathing room. Sure.
Jason: [00:09:34] Yep.
David: [00:09:34] One of the concepts around that that really clicked for me is Tom DeMarco has a new book out called Slack: Getting Past Burnout, Busywork, and the Myth of Total Efficiency. And he gives the example in that book of an executive who has an assistant and the company gets a business analyst to come in and review how efficient they are and can they prove this slack of the system or so forth. And sees that this assistant is only essentially booked up 40% of the time. 60% of time the assistant is essentially sitting around just being ready. The analysts go like, well, that's a total waste. There's 60% waste there. We could really get rid of that waste if we assign perhaps two and a half executives to this assistant. Now, you'd get to 100, 110%. You go like, wow, you put that in place, and it works. Wonderful.
[00:10:26] So the first executive suddenly has a rush need for something, goes to the assistant, can you help me with this? No, sorry, I'm busy. The flip side of efficiency is availability. If you're 100%, efficient, you're 0% available. And that availability, I think, as a standard cause has been something we and perhaps even more so, I, have vastly undervalued historically. And I think a lot of it comes from a standard business analysis perspective, that under utilization is a bad thing, that this is something you should squeeze out of the system.
[00:11:08] If you look at it even broader, a lot of the ways larger corporations have done timetables for timed workers have been about squeezing that out, getting to that level of 100% efficiency, 0% fat in the system. And as you squeeze that out, you squeeze out all the flexibility, you squeeze out all the availability, you squeeze out a lot of your resiliency. If you're 100% occupied with something, and something else urgently comes up, what's going to happen with that? Who's going to take that on? Now that's a hot potato, we actually just have to get out of there rather than realize that, as we call it, when we do planning, reactive work, work that simply comes up in the course of business, is not only normal, good, it's, you should be aware that that's the thing that comes up.
[00:12:00] So I think we had been too much in that other camp. How can we make sure that everyone is scheduled, particularly on the product development side, to deliver the kind of things we wanted within a cycle? Oh, we would count up the weeks, what would our budgets be for these things? And then the whole thing should add up to six weeks. Rather than think, do you know what we need to have? We need to have some slack, some availability, some resilience in the system, and that has value in and of itself.
Shaun: [00:12:29] One of the things you mentioned is that it's very hard to shrink. Is there any fear around this growth spurt, that if something doesn't work out, I mean, the only way to shrink is to fire people, right?
Jason: [00:12:39] I mean, I guess. That’s not really fear. I'm not worried about that because there's a lot of work to do. We have a lot of ideas far more than we can ever do. Every company does. My biggest frustration is that we just don't have enough people to do even half of the ideas that we want to do. And we don't have enough people to explore some more exploratory ideas, things that aren't totally fleshed out yet but we need to put a little bit of time in to see if there's anything there.
[00:13:07] I think that's the other thing that historically, we've pretty much taken on work that we've decided we knew we could do. And then there's occasionally we do a new product like every, you know, whatever, five, six, seven, eight years or something. Or you do some exploration, but I'd like to have a little bit more time to play with some things, to see how far we can get them before deciding whether or not they're worth doing.
[00:13:27] I'll give you a quick example. Hill charts in Basecamp. So Basecamp has this feature called Hill charts, which you can turn on for individual to do lists. This is actually something we carved out time to explore a few cycles ahead of actually doing the work. And we did it in a really scrappy manner. I think we used a spreadsheet for a while, we kind of did it by hand, made this fake chart and moved dots by hand. And it was an idea that we had. And in order to see if it was worth doing, we had to kind of use it before we built it. And I think it turned out really, really well because we put the time in to think it through and to make something that actually worked.
[00:14:03] Had we just decided that we were going to do that in six weeks, and we hadn't really prototyped it before, I don't think we would have gotten as far as we could have. So that's an example of doing little R&D ahead of time. And we had some slack in the system to do that, actually. One person lead that. Ryan lead that. But we didn't have any. We don't really have that normally.
Shaun: [00:14:25] Right.
Jason: [00:14:25] So I'd like to see a little bit more of that. So we can play with some of the more sort of left field ideas or whatever right field I don't know what field, far field. Either one.
Shaun: [00:14:33] You're not asking a baseball guy here.
Jason: [00:14:36] Yeah. Far afield ideas where we can really play with some stuff and see what happens. And also after a few weeks, go, it’s not working, it's just there's nothing here, that's fine and not feel bad about it.
Shaun: [00:14:45] Right.
David: [00:14:47] I think the other answer here that's crucially important is are we putting ourselves at risk pursuing this new setup? If we double the number of people we have, do we now have to really hit some sales target numbers, or otherwise, we're going to be in dire straits and then layoffs are not a choice but something that's forced upon us. Absolutely not. Basecamp has been run extremely, and perhaps at this point, excessively lean and conservative for 20 years, to the point where the business and the customers we have easily can support this expansion such that we're not sort of getting ahead of ourselves. In some ways, I think the leanness is about catching up. That we were running at like Jason's metaphor of the body fat, we were running at 0% body fat. And you're like, we proved the point that you can, it's amazing, that Basecamp has been able to operate the way it has and reach the number of customers it has, with the size of the team we've had. But also, you can prove that in that just go like, okay, that's great. It's nice to know, I could do it, that we could do it. And then go like, I don't want to do that anymore. I don't want to do that anymore.
[00:16:06] There’s also just another way of living, where you just come to the realization, we don't have to do that. In the beginning, absolutely. Absolutely we had to. When Basecamp was first put into the world, there were four people making it work. And it took over a year actually, before we were confident that Basecamp alone could pay the bills. And it wasn't until we were confident that that was true that we switched to full time. And then we grew very slowly to make sure we grew within our means. So this expansion we're talking about now, this double vision is completely within our means.
Shaun: [00:16:45] Right.
David: [00:16:45] And I think that that's important to impart that lesson, that none of the advice that we've given in “Why Grow?” has essentially changed in that regard. That if you are kind of growing ahead of yourself, you're running a totally different kind of risk where sudden layoffs, when your best laid plans don't work out, are the likely outcome. Where if our best laid plans don't work out, let's say that we don't double the business, you think like double the headcount, double the business, know what, okay, fine. I mean, it'd be disappointing if we were unable to move the needle at all on the business, after doubling the number of people we have and working on two products at the same time. That'd be both weird and disappointing. But it also wouldn't be the kind of catastrophe that would lead us to, okay, now we got to run down the list of employees and pick who to fire. I would not want to take a gamble like that, that seems ill advised. That's the kind of risk the business move, putting the business at risk move that we've never been interested in. And this isn't about that.
Shaun: [00:17:46] Reminds me a little of that fantastic scene from Citizen Kane, where his financial adviser, whoever, business manager comes to him and says, “You lost a million dollars this year.” And he said, “I plan to lose a million dollars next year. And the year that. You know what, I'll have to close this newspaper in 30 years.” There’s no risk there. It doesn't really matter if he could kind of do what he wants.
Jason: [00:18:05] I think the big thing is, it's like, the chapter isn’t titled, “Don't Grow.” It's “Why Grow?” Just make sure that you know. You know why.
Shaun: [00:18:14] You’re not growing for the sake of growth.
Jason: [00:18:14] Yeah, I mean, there's this sense, especially in Silicon Valley that go big, or go home or grow, grow, grow, and just get as big as you can as fast as you can. And that does work for some companies. But and for those, I think David made this point earlier, so maybe I'm repeating it, but like, if you know that's really what you want to do, and you know why that's what you want to do. And it's not purely for ego or whatever, then do it, maybe you do want to become the next big whatever. I guess a lot of people want to become the next big whatever, but—
Shaun: [00:18:41] And that's just part of the playbook is you know, get money, and then hire as quickly as possible?
Jason: [00:18:47] Yeah. If that's what you want to do. If you really know that that's what you want to do. I think the thing is, is just ask. The whole point is just, why?
Shaun: [00:18:53] Yeah.
Jason: [00:18:54] Why are you really doing this? Or why are you not doing it. Just know, get to know your decisions. Every company is just a collection of decisions. And some, I think, don't really make the conscious decision. They just go with what others are doing. They're not really thinking about themselves, or why they want to do what they want to do. So that's the bigger thing. Just know why.
David: [00:19:18] I take that exact point, too. Go with what others are doing is one of the reasons I felt almost an obligation for us to run extra lean. To give one example of do you know what, here's a company that's doing very well, highly successful with customers, doing all the traditional metrics really well, without being on this explosive growth chart. To simply show, do you know what? This is very possible. And not only is it possible, it can be highly enjoyable. It could be a great place to be. And to essentially extend the permission for someone to pose the question to themselves, why grow? Come up with the answer, actually, I don't want to 20 is great. And not feel as though they're doing something wrong, as though they're squandering something that they didn't want anyway. Again, if you want it, if you're on the path, and you've really gone through it, fine. But there are clearly lots of companies out there that can live perfectly happy, fine existences being a certain given size, and that's their natural place to be. And maybe they're like that for 10, 20 years, and then they could change their mind, too.
[00:20:31] Right? The whole thing, “why?” is a question.
Shaun: [00:20:33] If you were going to write this essay again, would you add something along the lines of oh, it's also fine if you want to change your mind. If you’ve, whatever circumstances, not forces you, but you have to ask that question again. Why grow?
David: [00:20:47] I think that's a fair point, that you should revisit that question, right. By the time we wrote this book, we had been in business for 10 years, and Basecamp was only six years old. So we hadn't had as much time to essentially just decide that whatever, those decisions were up for renegotiation. I think that that is a general theme throughout much of the book is you stick around for as long as we have, for 20 years, you damn well better go back and revisit some of your assumptions. Otherwise, you're a fossil.
Shaun: [00:21:16] Right. Right.
Jason: [00:21:18] Yeah. I mean, if you're not changing your mind 20 years later, on anything. Think about what you were thinking 20 years ago, yourself. Whatever age you're at 20 years ago, you're a different person now.
Shaun: [00:21:29] No way.
Jason: [00:21:30] Company should be a different company now.
David: [00:21:33] What I find interesting, though, rereading the chapter before we jumped on the call was, I nodded along to the whole thing. And I went, do you know what, I would still say all those things, even given the fact that we are on the precipice of doing a large expansion of the company. All those concerns we raised were the ones we went through in our discussion and deliberation as to the why. We really posed a question and why is now a good time? Okay, two products. Is there something else? Yeah, we'd like to have some more slack in the system. These are the things we've tried up until this point, and we've come to recognize that with what we have, we don't quite have enough to do the things we want to do.
[00:22:14] Hey, that's is reasonable. That is a reasoned series of arguments for coming to a different conclusion on the question, in terms of its sheer size, what is the right size for Basecamp? While there was one right size in 2014, when we decided to just do one product, and then there's a different size that's the right one in 2021, when we have two major successful products, and we don't want to give up either of them up.
Shaun: [00:22:37] You sort of end in we're gonna end this here, because I know you both have to leave. You end this essay, by talking about the importance of having pride in the size of your business. Can you just address, I mean, I kind of heard it from David that he said he got a lot of pride out of how lean and how efficient Basecamp used to be. How do you contrast that with having pride in this larger company? What are your sort of thoughts on that?
Jason: [00:23:01] Well, I think the pride, I don't know, if I was rewriting that chapter, if I would use that word. Just feel comfortable and confident about what size you're at. There's a lot of entrepreneurs who feel, have this inferiority situation, right, when they're smaller, because they're not as big as they could be. And so they kind of mask it and hide it, or they feel ashamed about the fact that they haven't gotten to X, Y, Z level or whatever. That's kind of what that, I think, is about. So, just own it. We're small. We're big. We're medium. We’re 100, we’re 20, we're eight, we're whatever. It's fine. That's who you are, that's what you are, don't be ashamed of that at all. I think that's what we're probably trying to get at with that sentence that we wrote a long time ago. That’s my current feeling.
Shaun: [00:23:47] Yeah.
Jason: [00:23:46] So yeah, I'll be proud, when we get to, if, when, I mean, we're not like, we don't have an exact path here that 92 days from now, we’ll have 101 people. When we get there, we should be proud of where we're at. And by the way, you need to be proud of where you're at as you get there, too. So when we're 84, we should be proud of that. When we're at 96, we should be proud of that. It's not like we hate it from 60 to 104, and then 105 we’re happy again. You gotta like where you're at as you're getting there, and recognize that you may not be where you want to be yet, but that's where you are. And that's a good place to be, too. So as long as it's all working out.
David: [00:24:23] I think that's one of the major, deceits of the idea of not why grow, but grow, grow, grow. Is that, things are magically going to be better, that if you don't like where you're at right now with the business and work, all you have to do is grow, then all your troubles will fade away. Absolutely not, you'll get a whole new sense of trouble. And that doesn't mean it's not you want to get to that place because there's something in it. But I'm deeply skeptical of this idea that growth is going to solve everything in terms of if you have an underlying deep discontent with the business or the kind of work that you're doing.
[00:25:03] Jason makes this point often that it only gets harder. A bigger company is not an easier company. In many cases, it just gets harder. And that running a company of a four or 10, or 12, is oftentimes easier in many ways than it is to run one, that's three, four, or 100 times as big.
[00:25:25] So just don't think that like you're chasing this rainbow and then on the other side, there's going to be this pot of gold contentment. And it's going to cure all your insecurities about the business and all your dissatisfaction. No, you're probably just going to trade in for a different set of issues and problems.
Jason: [00:25:41] Yeah, and also, typically your ambition grows, too. So for example, when we get to 100, 120, we're still gonna be frustrated. We’ll still be frustrated that we can't do everything we want to do. We still don't have enough people do everything we want to do. We don't have enough time to do everything we want to do. This is true of every company. Companies like Apple, $2 trillion company, they can't do everything they want to do. That's just what it is. And so you have to be comfortable with that as well and realize that there is no place where all of a sudden, you can do everything that you want to do. You still have to make decisions, you still have to say no to things, you still have to make tradeoffs. But hopefully you can make the kind of tradeoffs you prefer to make versus the ones you're forced to make.
[00:26:21] We're unable right now to do things that we know we need to do. I think we'll be more able to do things at 100 people that we can do. We still won't be able to everything, but we'll be more able to do and more capable of doing the things that we know we need to get done in the way we want to do that. So I think that's the idea.
Shaun: [00:26:36] Well, fantastic. Thank you both for joining me once again. Next week, we're talking about workaholism, which I’m sure is a word you made up and it's hard to say and I hate you for it. So that's perfect.
Jason: [00:26:51] Thanks, Shaun.
Shaun: [00:26:50] Jason Fried, thanks for joining me.
Jason: [00:26:52] Yep, see you around.
Shaun: [00:26:54] And David Heinemeier Hansson, thank you.
David: [00:26:56] All right next time.
[00:26:58] Broken By Design by Clipart plays.
Shaun: [00:27:04] Rework is a production of Basecamp. Our theme music is by Clipart. You can find all of our past episodes at rework.fm. We are on Twitter at @reworkpodcast. If you're following along with Rework the book, next week, we'll be discussing the chapter titled Workaholism.
Citizen Kane Clip: [00:27:30] Now tell me honestly, my boy. Don't you think it's rather unwise to continue this philanthropic enterprise? This empire that's costing you a million dollars a year?
[00:27:39] You're right Mr. Thatcher. I did lose a million dollars last year. I expect to lose a million dollars this year. I expect to lose a million dollars next year. You know, Mr. Thatcher, at the rate of a million dollars a year, I'll have to close this place in 60 years.