Loading...
March 20, 2024 • 1hr 7min
The Cashflow King: “Here’s How I Do It”, Negotiating w/ Jeff Bezos, Elon’s Cracked Rocket - Jason Fried
My First Million
Jason Fried is the founder and CEO of 37signals, a highly profitable tech company that has been self-funded for 25 years. In this episode, Jason shares his unconventional approach to business, including not setting long-term plans, taking 6 months to explore ideas before building, and staying laser-focused on profit margins.
The Cashflow King: “Here’s How I Do It”, Negotiating w/ Jeff Bezos, Elon’s Cracked Rocket - Jason Fried
0:00
-0:00
Key Takeaways
- 37signals has been a profitable self-funded business for 25 years, generating tens of millions in annual profits (17:49)
- The company doesn't set long-term plans or goals beyond being profitable each year, allowing them to stay nimble and adjust as needed (6:41)
- "Long term planning is a fantasy. I don't plan long term because I wanna do what I think, not what I thought." - Jason Fried (3:17)
- When exploring a new product idea, 37signals spends significant time (up to 6 months) "wandering" and iterating on concepts before committing to building (10:03)
- Successful product design involves focusing on "hooks" - simple, straightforward elements that are versatile and hard to use incorrectly (like hooks vs. towel bars in a bathroom) (49:56)
- When prototyping, always try the wackier, quirkier stuff first - "The deeper you go into a project, the more conservative it tends to get. Stranger ideas are more at home earlier in the process." (52:52)
- 37signals doesn't do paid advertising because their low price points make customer acquisition costs challenging; they rely on content marketing and word-of-mouth (1:01:01)
Introduction
Jason Fried is the founder and CEO of 37signals, a highly profitable tech company that has been self-funded for 25 years. In this episode, Jason shares his unconventional approach to business, including not setting long-term plans, taking 6 months to explore ideas before building, and staying laser-focused on profit margins.
Hosts: Sam Parr & Shaan Puri
Topics Discussed
Long-Term Planning & Goal Setting (3:17)
Jason believes long-term planning is a "fantasy" and prefers to adjust course as needed rather than sticking to outdated plans.
- 37signals only goal each year is to be profitable, which they've achieved for 25 straight years
- The company doesn't set other specific goals because Jason feels you should always be doing your best work regardless
- "Long term planning is what you thought and like, figuring out as you go is what you think. And I don't like the idea of having a thought 6-12 months ago and feel like I have to follow that whim because I happen to have it and wrote it down." - Jason Fried
Exploring New Product Ideas (10:03)
When considering a new product, 37signals gives themselves ample time (up to 6 months) to "wander" and explore the concept before diving in to actually build it.
- The long exploratory phase allows bad ideas to peter out and good ones to develop "gravity" that pulls the team
- If excitement and motivation remain high after the wandering period, they'll commit to building in 6-week sprints
- It's important to timebox to ensure steady progress and not get hung up perfecting one thing
Jeff Bezos Investment in 37signals (24:02)
In 2006, Jeff Bezos personally invested in 37signals after seeing Jason speak at a conference and using their product at his companies.
- 37signals founders took some secondary capital from Bezos to de-risk, since Basecamp was only 2 years old at the time
- The investment gave them confidence to go all-in on the business
- Bezos was drawn to 37signals' unique approach and long-term mindset; he wanted them to keep operating independently
- "Jeff is probably the most optimistic person I've ever met...It's an aura of, like, can-do-ness. Just positivity...He has an enthusiasm about him that is unshakable and unbreakable optimism." - Jason Fried on meeting with Bezos
Simple, Straightforward Product Design (49:56)
Jason is always looking for "hooks" in product design - simple, straightforward elements that are versatile and hard to use wrong (using the analogy of hooks vs towel bars in bathrooms).
- You can't really mess up using a hook, but can easily use a towel bar incorrectly
- Hooks provide more flexibility - they take up less space, you can add more as needed, use them for more than just towels, etc.
- 37signals tries to "mine for novelty" and build products packed with these types of simple, useful hooks
- "I'm always looking for the hooks in product design. Like, what are the little things that just are so simple and straightforward and everyone knows how to use them, and you can't get it wrong, you can't use them wrong." - Jason Fried
Tackling the Wacky Ideas First in Product Development (52:52)
When prototyping a new product, Jason recommends tackling the wackier, more novel ideas first before the project moves in a more conservative direction.
- If you just aim to match competitors' "table stakes" features, your product won't be differentiated enough
- Quirky, different features make a product worth considering - not just being marginally better than the default option
- Leave time to wander and experiment with unusual ideas early on; there won't be time or patience for it later
- The public demands normal features after launch, so it's on you to devise the more creative ones they didn't know they needed
Profit & Margins Trump Growth (58:22)
37signals focuses far more on healthy profit margins than chasing fast growth. They keep costs low and don't reinvest profits, instead distributing money to owners each year.
- As an LLC, profits flow through to owners' personal taxes anyway, so no major benefit to keeping excess cash in the business
- Predictable recurring revenue model enables them to pull profits out while maintaining sufficient operating cash
- Many companies struggle because they have too many employees and high customer acquisition costs, leaving thin margins
- "I don't want to run a business where I'm nervous all the time. And you're nervous when you're looking at one or two points here and there, and you're like, s**t, we're barely breaking even. I don't want to be in that kind of company." - Jason Fried
No Paid Advertising or Heavy Marketing Spend (1:01:01)
37signals does essentially no paid advertising or heavy marketing spend to acquire customers, instead relying on content, word-of-mouth, and their established channels.
- Low price points (like $15/user/month for Basecamp) make paid acquisition costs hard to recoup
- Explored spending $5M on ads for first time last year, but quickly realized it was just "vanity" and didn't move the needle
- Lack of tolerance to just spend money without very clear returns
- Focused on profits and sustainability vs growth at all costs; okay with a lower valuation multiple if/when they sell
- "It just doesn't work for us. So we don't do anything. Not even brand keywords really...It's all through our own channels that we've developed over the years." - Jason Fried
Conclusion
Jason Fried and 37signals have built an incredibly successful business by zigging where most companies zag. They don't set long-term plans, chase growth at the expense of profits, or spend heavily on marketing. Instead, they move slowly to deeply explore ideas, aim for creativity and simplicity in product design, and focus on sustainable recurring profits.
While Jason acknowledges that luck and timing have played a role in their success, 37signals' unique approaches to goal-setting, product development, and finance are a big part of what has enabled them to thrive as an independent company for 25 years. Aspiring entrepreneurs can learn a lot from how Jason and team have steadfastly carved their own path.
