Founder's Guide

DHH on The Basecamp Way: Competition, Growth Targets, and How to Incentivize Employees

Share this article!
TwitterLinkedInFacebookPocketBufferEmail

David Heinemeier Hansson, better known as DHH, needs no introduction. He is the creator of Ruby on Rails, founder and CTO at Basecamp, and the author of two NYT bestselling books (to name just a few of his accomplishments).

He’s also an outspoken critic of many Silicon Valley norms, which he discusses in his upcoming book with Basecamp cofounder Jason Fried – It Doesn’t Have to Be Crazy at Work.

We recently chatted with DHH about several aspects of startup life, including:

  • Why startups shouldn’t be focused on the competition
  • The problem with growth targets
  • How he’s improved productivity at Basecamp by reducing meetings

Q: You recently tweeted that startups shouldn’t be so focused on the competition, which runs counter to a lot of standard thinking. Can you expand on that?

[For reference – Twitter]

DHH: I think the problem with competition as the be-all, end-all is that you outsource your sense of satisfaction to your competitors. If they’re doing something different than you and they end up having better traction, does that mean that what you’ve done is bad or terrible? No, of course not.

Competition and the marketplace is not a fixed pie. We can simultaneously grow it in all sorts of different directions. For Basecamp to do well, I don’t need someone else to do poorly, and if someone else is doing well that doesn’t mean that Basecamp is doing poorly.

We have this tendency to cast competition and the marketplace in these gladiatorial terms, these award terms, that I think are entirely unhelpful for actually thinking about business in a healthy way. And I think it flows directly to your sense of satisfaction with the work.

If I’m going around feeling miserable about my work because Basecamp is perceived by me and our company as somehow losing out because someone else is doing well, why am I doing that? Who benefits from that?

Not every product, by definition, can be the biggest in its market. And who even cares? At least for me, that’s been the conclusion: all I care about is making a great product that finds happy customers, at a reasonable price, so we can have a profitable business that can pay and treat its employees well for a very long time. That mission statement is in no way dependent on us crushing the competition.

Q: Do you think there are industries that are more of a zero-sum game or is that a narrative that’s been spun up by the startup community?

DHH: I think if you sell commodities, yes. If you’re selling sugar or soybeans, your price is going to be set by the competition and the lowest bidder. And maybe there are a few of those aspects in technology, but I generally find that it’s less than people would like to believe.

Most technology products are differentiated enough that they find their audiences within niches that are not directly overlapping. We have lots of customers at Basecamp, for example, who choose us because of our configuration of the product and what we include.

Even though there’s tons of software in the project management and project collaboration space, we all have something unique to offer. And even if it is sort of more of a direct competition where you really are competing just on features or more commoditized products, well then you have all the opportunity to do the traditional marketing thing and position your brand in such a way that you have an edge.

It’s funny, Nike, for example, is wading into some controversy with their appointment of Kaepernick to this marketing campaign. They’re obviously positioning their brand where some customers will go, “Oh no, I don’t support that. I’m going to buy products from another brand.” And then there are other customers who go, “Oh my god, this is awesome!”, as we just did and bought more of their products.

Not all brands and companies are going to make the same choices, so we’re going to have this differentiated marketplace where someone can pick something that works well for them. And I think technology, of all places, should be the place where that is commonly the case.

We’re not making bath mats here. And even if you are making bath mats, there’s still tons of room for differentiation and positioning and branding and all the other things that you can use to set yourself aside from being just a commodity.

There are actually not that many true, true commodity marketplaces. At least when it comes to sort of designed products, and not kind of just raw materials and whatever else have you.

Q: You’re a critic of long working hours and work/life imbalance. How do you see a way to change that culture, and how would you combat the notion that to get a startup off the ground, you have to work a lot?

DHH: The first step is to start from first principles, right? If you say, “All swans are white” and I then show you a black swan, your statement is no longer true.

I think that is the case with a lot of Silicon Valley startup lore. People think that “Oh, this is how it is” because they simply didn’t look outside their little bubble and see the fact there were tons of swans in different colors outside of their little locale.

At Basecamp we’re trying to provide an alternative role model – or at least an alternative narrative: Here’s a company who didn’t do any of those things that you say are required to become a successful startup.

Basecamp was an incredibly successful startup. We’ve now been around for 15 years, and we’ve made gobs of money selling software while working 40 hours a week, while having happy employees who have lives outside of work. So, here’s at least one counter-example.

We are by no means alone here. We’re trying to shine a light on the fact that there are tons of other companies outside this insular bubble of tech startups that look like Basecamp. Companies where people have other life pursuits outside of work, and in fact look at the sort of role models of Silicon Valley with incredulity. The notion that you need to work 120 hours a week to get things off the ground is just complete nonsense because other companies have lived an alternative that did not require that at all.

Q: You’ve talked about ways that long work hours are often consumed by “bullshit”. What’s an example that stands out?

DHH: We’ve long held the belief that meetings are toxic, in their most basic form. Meetings should be the tool of last resort for coordination or debate, but at most places, it’s the tool of first (or only) resort for coordinating or disseminating information. And that ends up just chopping up employees’ days into tiny, little work moments.

Anyone is able to book a meeting at any time, so you have this game of calendar Tetris where anyone goes in and says “Oh, let’s look up David and let’s just schedule an hour and a half at two o’clock because he’s open.” What are you talking about? I’m not open, I’m working!

That should be the default assumption of everyone, with the aim of increasing productivity by producing long stretches of uninterrupted time to work. So we cut out the vast, vast majority of meetings. Instead, we favor things like writing something up that anyone can read at their own leisure.

Another example that we have is just something that’s mundane: we have an expense policy that is largely summed up as ‘spend-it-wisely’. You get a company credit card and you just forward receipts to an email address and that’s the end of it. No other justification is needed.

So, we don’t waste a bunch of time trying to justify “Oh, I need $200 to buy XYZ.” Just do it! I mean, the reason we hired you as an employee at Basecamp is presumably because we trust you to make good decisions, and if you can’t be trusted to make a decision about $200 or $500 or $1,000, why are we paying you good wages to have access to your capacity of judgment?

Q: Can the ‘Basecamp way’ of fewer working hours and a focus on out-of-work time become the rule, and not the exception, for startups?

DHH: I don’t think so, for the simple reason that what’s enabling the Silicon Valley style of startups is a money flow that stems from people who have a vested interest in trying to work their founders and companies beneath those founders to death in order to reach some growth targets that they need to make their numbers work.

I wrote about this at length in an article called ‘Reconsider’. That really goes into the dynamics of the funding pressures and why it is that we end up with such perverted, twisted value systems because of the way the money is involved, in this case.

So, I don’t think that there’s any incentive on the venture capital funding systems part, to reconfigure and reshape the expectations of work around this. It has to come from the ground up.

Unless we enter a new era where startups mostly don’t go to Silicon Valley money-men to get their funding, then no, I don’t have high hopes. But I also really don’t care. I’m far more interested in influencing the kind of people who are not already tangled up in that web. And perhaps caution some people who might be tempted by that web, to avoid it.

Q: You talk about growth targets being a problem. What causes this?

DHH: One contributing factor is the ego of the founders. If their sense of worth is tied up in becoming a unicorn, there’s a certain path and set of goals that you have to pursue.  Each goal is bigger than the next, and it’s kind of hard to get off that train once you’re on it.

And then I also think there’s a larger societal pressure around growth. That growth is always good, and more growth is better than less growth, which certainly works to reinforce these perceptions, over and over again. And one of the arguments that we’re making, and we’re making even more forcefully in our new book ‘It Doesn’t Have to be Crazy to Work’, is the fact that you can get to a point where you have enough.

And maybe enough is different for different people, and maybe you don’t quite know what it is but if it’s never enough, you know you’re down a dark alley.

Q: Basecamp has “perks” that are different from other startups, such as fresh produce delivered to the home. What else do you offer, and what’s the goal there?

DHH: So first, the overall idea we have about benefits at Basecamp is they should be about letting people live better lives — not about keeping them at the office.

A lot of employee benefits, especially the tech industry, are all about keeping people at the office. Either by offering them free dinners so they’ll work late, or by doing chores for them so that they’ll work late, or by offering workout rooms or game rooms or whatever perks so they work late. These incentives, if not outright hooks, are intended to keep people at the office.

That’s the opposite of what we’re trying to do. We’re trying to keep people out of the office, in fact. We’re trying to allow people to live great lives away from work such that they can return to work fully recharged as complete, happy individuals who have not tied everything they are into work.

We do a one-month sabbatical every three years that we pay for. We pay for vacations — not just the vacation time off, but the actual vacation, up to $5,000 per person or family every year.

We have a generous paid parental leave. We have a $1,000 continued education fund that employees can use to learn any kind of skills. It can be used for learning a new musical instrument, or how to do photography or something else — anything outside of work itself. And then we focus on leveling up your own personal home office.

We are big proponents of remote work at Basecamp, so we’re trying to tempt people with having some sort of lavish space that they have to come up with. We want to make it such that they want to choose to work at home.

Those are just some of the things that we focus on as ways to keep employees happy and the feedback that we get is, “Yes, that works. Those things are good. And I like not being lured into the office by these supposed benefits that have a tendency of benefiting the company more than they benefit the employee.”

For more from DHH and Jason Fried on how startups can improve work/life balance, pre-order a copy of It Doesn’t Have to be Crazy at Work, available October 2, 2018.

Share this article!
TwitterLinkedInFacebookPocketBufferEmail
mm

Atrium is a full-service corporate law firm that uses modern technology to give startups a legal experience that is fast, transparent, and price-predictable. The Atrium blog features content from top founders and investors on how to fundraise, navigate startup challenges, and more.

Published In

Founder's Guide

The most important topics for startup leaders — by founders, for founders.

Browse all 19 Articles

Up Next