The Cashflow King: “Here’s How I Do It”, Negotiating w/ Jeff Bezos, Elon’s Cracked Rocket - Jason Fried

I got 4 words for you: self-funded cash cow. That is what today's guest Jason Fried has built. He's got this company 37signals. It's been around for, I don't know, 25 years, and they're very hush-hush about their numbers, but the only thing he's ever said is that they make tens of millions of profit a year and have been doing that for a long time. In fact, the investor Jason Lemkin once said that the 2 greatest self-funded cash cow companies he's ever seen are Craigslist and 37signals. And even better, they do this without setting any goals. They work only 4 days a week during the summers, and they spend next to nothing on marketing. And so I was dying to ask Jason 3 questions, and that's what we did in this episode. I said, how did you build this low stress lifestyle company that has no goals and no long-term plans? How do you do that as a CEO? The second thing I asked him was, what was it like being face to face with Jeff Bezos when he was negotiating his deal with him? And lastly, I want to know the step-by-step process. How does he generate massive interest in his products pre-launch? He's done this over and over again. He has this strategy where he uses a founder letter pre-launch and he uses that to generate a lot of interest. I wanted to understand how he does it. What is the strategy behind that? So no more teasing. Let's do it. Here's the episode with Jason Fried.

I feel like I could rule the world. I know I could be what I want to. I put my all in it like no days off. On the road.

We were doing research before this podcast. Invest, and I've looked into a bunch. I'm inspired by you. Is it weird that we know that you spent something like $30 million on homes in the past, like, 2 years? Yeah, you started like a tech company not looking to get into this, and now like your home purchases are on the blogs.

It's fucking embarrassing. And frankly, I, I tried to hide them. You try to do all the things like double LLC and the whole thing. I like architecture. I like houses. I like land. It's just, that's like really the thing I really found myself liking a lot. And unfortunately it's very hard to just—

How do they find it? How do they know? Because they're like, Jason Fried bought this house and me and Sam, we're supposed to be prepping for this pod. And we spent like 20 minutes clicking through these photos, being like, this house is sick. How do they actually find it?

I don't know. My guess is, so like technically it's hidden in a sense, but I think that all you gotta do is probably ask like, you know, a real estate agent. And you know, you, you kind of have NDAs, but you know, someone knows some, or like the electrician or the cable company, someone hangs out and finds out, or they look in the mailbox and see that, you know, there's a million ways, unfortunately.

Well, what's cool about you and what I honestly admire, we started off talking about how big the business is, but the reality is what I admire is some guys are into beautiful eyes. Some guys are into butts. Me and Sam on this podcast, we're, we are into people who play their, who define their own game and then play it. And that's the one thing I think you do really, really well. And you've gone viral many times by putting out there some of your philosophies on how you approach business. What I wanna do is I wanna kind of read you a quote and I want you to react to it. I want you to explain and unpack a little bit for each one of these, and we can go fast. So the first one is you're anti-long-term planning. You don't, you don't do long-term plans. And here's the quote I liked. You go, long-term planning is a fantasy. I don't plan long-term because I wanna do what I think, not what I thought. That's right. Um, explain that one.

Yeah, long-term planning is what you thought and like doing, figuring out as you go is what you think. And I don't like the idea of having a thought 6 months ago or 8 months ago or 12 months ago and feeling like I have to follow that whim because I happen to have it and happen to write it or wrote it down. I don't get that. I know a lot of people think there's a lot of certainty or comfort in like setting out a plan and like, you know, but really it's that plan is then just based on a moment in time. And then people are like, well, you can adjust. Well, if you're going to adjust, just adjust. Just don't even do the first plan. So my feeling is just make it up as you go. Frankly, we think about things 6 months or sorry, 6 weeks at a time and go from there and adjust all the time. And that's fine. We've always done it that way. And I feel most comfortable, frankly, just paying attention to reality in the moment and making calls along the way.

You also wrote that you've never had a goal. So you You said you had this whole blog post that you don't like goals. I think you might've been— you maybe were quoting another person, but you said the reason why most of us aren't happy, or the reason that most of us aren't happy most of the time is that we set goals not for the person we're going to be when we reach them, but we set our goals for the person we are when we set them. And I don't think you explicitly said that the company doesn't set goals, but you sort of implied it. Is that the case?

So I, like, I want to agree with you because I prefer, I think I would be happier if that were the case, but there is like some logistical pushback of like, well, you guys launched hey.com a few years ago and you, um, you have to plan, uh, like how much to allocate towards that project. Otherwise, potentially you could be unprofitable. So how do you justify like looking at like, well, this needs to, this needs to hit this metric or let's ask the question slightly differently.

I come to work, you're the CEO, you're like, no plans, no goals. I'm like, all right, so then what are we doing here? How do we do it? What is the answer?

Well, this is going to sound strange, but we don't think that way. We look at the big pile and go like, at the end of the year, do we have more money than we spent? And is it because of this product or that product or this endeavor or that endeavor or this cost savings or that expense? Like, I don't really care, frankly. Like, to me, it's just one big pile. It's a range, it's a feeling. Like we feel, we actually, it's more of an aesthetic for us. David and I talk about the aesthetic of running a high margin business. It feels right to do it that way. I don't want to run a business where I'm nervous all the time. And you're nervous when you're looking at 1 or 2 points here and there and you're like, shit, we're barely breaking even. Like, I don't want to be in that kind of company.

Right.

And so this approach where you're like, we, Let me give you what I see from the outside. You tell me which parts of this are me fantasizing versus reality. So the way I view you guys is you kind of think about what needs to exist in the world. So for example, you're like, there needs to be email that doesn't stress you out, or software that you pay for once and not every single month for the rest of your life, and every additional employee you have, it costs more and more and more, right? It's sort of like first there's a point of view on what needs to change in the world or the way you want things to be or what What you wish existed. Then you're like, probably some second check, which is like, can we build it? Are we the right team to build this? Do we have, uh, uh, uh, an approach that we think might work? And then you budget this like 6-week sprint where you're like, let's try to make a version of that that we like, and then we'll iterate from there. And we're willing to tolerate like 6 weeks of an attempt at this to get to the next milestone of belief. Like we'll give it, you know, a leap of faith to 6 weeks. And then after that we reevaluate and and decide what to do from there. Is that correct? What parts of that are incorrect?

Partially. So we will spend a lot more time than 6 weeks on exploring an initial idea. So for example, when we're going to make a brand new product, we might spend 6 months wandering around an idea and seeing where it ends up. And then at some point where, again, I don't know, it's just a feeling, like we spent enough time on this, we're feeling good about this. This is feeling better and better and better as we go. Let's do this. And then you commit to doing it and then you do it 6 weeks at a time. Or you get into something and you wander for a while and you go, "Eh, I'm just bored," or, "I don't know where else to go," or, "This doesn't seem interesting." And you stop and you just give up, frankly. You just give up, which is something I think more people ought to do.

Sam, do you do this wandering thing too? I've seen your process. I feel like it's kind of similar.

Yeah, I, it's, you know, I don't want to sound, uh, like I'm sniffing my own farts, but it's a little bit of an art where like, it's, I feel like an artist a little bit where I'm exploring a concept and then I, it takes 6 months for some inspiration. Like I feel inspiration and then I have to wander to like, like kind of hone in on the painting and the concept a little bit. And it's sort of like one of those things where you take a lot of showers and like you get different ideas or you go for a walk and you get a different idea for like 6 months until it's like, all right, I think I've honed in this concept. Let's move forward. Is that what you do?

Yeah. Yeah. That's, that's really a big part of it. It does feel like an art and not to, again, not to get stuffy about it. Like I'm not an artist, but like we just, we, we, we explore and we leave room to explore and the margins allow us to explore and being profitable allows us to explore. Not having investors allows us to explore. Not having a board allows us to like all these things allow us, this independence allows us to do the things we want to do the way we want to do them. But at some point, you also don't want to be reckless with money and time and people. At some point you go, this just isn't going anywhere. Let's stop. So we really do take our internal sort of motivation temperature. A lot of it is wrapped around motivation. Are we pumped about this? Does this feel good? If so, let's keep doing this. And then you finally kind of come into something. So for example, with Hey briefly, Hey didn't start out as an email service. It started out actually as a rethink of Highrise, which is our CRM product, which we stopped developing years ago. We still offer to existing customers, but we don't sell it anymore. But we had this thought like, what if we explore that again? So we began to explore that and through that exploration we realized what we were doing was building this sort of email system that we wanted for all of our emails, not just like Business communication emails, but all of them. And so we go, "Ah, that's interesting. This is actually an email thing." I remember bringing this idea to David. I had been exploring with one of my designers for a while and he's like, "Yeah, that is interesting. Let's see where this goes." And so we started kind of hooking it up. So we did the UI first. This is what we always do and showed him a bunch of UI and then we started making it work and there's something here and you feel this pull of something here. There's a certain gravity to these ideas and it pulls you towards it and you keep going for a while. And then at some point though, you've got to get serious and that's when you begin to break this into 6-week chunks essentially of work or monthly chunks depending on it. But you got to have some end to these things so you can get onto the next feature and the next feature and the next feature. Otherwise you'll spend too much time trying to perfect just one thing, yet a product has to do a lot more than just that.. So you kind of have to, you gotta time box these things in a sense.

Well, uh, you said two things that I liked. One, you said one of your superpowers is focus. Uh, sorry, I was saying this about you. Um, and what, what you said was, no is just saying no to one thing. Yes is saying no to a lot of things. And so I really love that. No is just saying no to one thing, but yes is saying no to like kind of the, the whole future set of things cuz you've now taken up your mindshare and your talent and your hands with the thing you said yes to.

So you mentioned the job board. There's an interesting story here. So Andrew Wilkinson bought the job board. You guys created WeWork Remotely cuz you guys were really far ahead of trend on remote work. And so you had WeWork Remotely as a remote work job board. You sold it to Andrew Wilkinson, friend of the pod. He's probably the most frequented guest on our podcast. And that, I wanna ask you about this because for him it's like he loves this story 'cause it's a great buy. He bought it for really cheap and then now I don't know what that thing does, but let's, I think it's something like $5 million a year of profit comes off the job board.

I think it's $4 million. It's in his annual report. You can kind of dial it down.

Okay. So let's say $4 million a year profit. And I wanted to ask you, like for you guys, is that a, is it, ah, we wish we had kept it, bad sale, 'cause it's now a lot more profitable? Or is it, no, that was the right thing to do 'cause it cleared us up to do other things? How do you think about that transaction?

We still work remotely.com.

We still work remotely. I think we'd do something different. I have some ideas on that. We might do something like that at some point. I don't really know, but I would say it was a very good buy. But now I'm an investor in his company, so I own a little tiny piece of that anyway. I'm not on the other side.

You, uh, Jason, what I think is cool is, if I remember correctly, you guys, I think you started almost as an agency and then kind of like became a software company because you saw recurring problems and you built that. And I think it's been something like 25 years and you've, I don't think that there's any, uh, great resource out there that says your guys' revenue, but it, we, it's definitely tens of millions. Who knows if it's even north of $100 million, but it's a very big business. You do marketing in the sense of you have these really cool books. Rework is awesome and you're a public figure and you blog a lot. But if I'm listening to this from the outside, I would think, well, it works because Jason and David were early and they kept at it for 25 years. And that's the reasons why they have such fat margins, not just because they're smart, but it's because they were early in the game. What would you say to that?

I think you're right. By the way, as far as numbers, we've— the only thing we've ever shared is that we generate tens of millions in annual profits because I don't really care about revenue numbers. You can go broke generating as much revenue as you can imagine.

Do you measure profit on a GAAP basis or do you do like a non-GAAP where you just look at cash flow?

No, it's GAAP. Okay. Like net profit, legit after everything. Right. So we're proud of that. You know, we're really proud of that and we work hard at that. But I do think timing and luck have a lot to do with it and market conditions. Could we launch this again today? No, we couldn't. That's fine too. Who cares? It doesn't really matter, right? People ask that all the time. Could you do it again? No, probably not. Who cares? Why would I need to?

I don't have to.

By the way, that was my big fear. So I sold my company and I had a guy sit down and talk to me and he said, how many people do you know who have started two successful businesses? And in my head I was like, fuck you, man. Like, I'm going to do it. You know, like I was angry, right? Right. Yeah, I was angry and I was angry because I was afraid in reality. And after I sold, I dabbled in real estate and I fucking failed. And I was like, shit, I'm human. I'm not like, I'm not the man. I did get, you know, there was some skill. There was also a whole lot of luck involved in my exit. And I also had that fear. And then after about 6 months, I was like, I gotta do something. I can't just do nothing. I feel like a bum. But it was a lot of starting things was rooted in fear and rooted in, I don't want to be lonely. So I need to create something where I can hire people and be around them.

I hear that. I also think I'm turning 50 in a few weeks. I don't have the stamina to start another business and wait 20 years. I just don't have that. When I was 25, I could do it. 35, I could do it. I don't want to do it anymore. I want to keep this thing going until I don't. All in, I think that we really like doing this. We've got some new ideas. The ONE stuff has really kind of injected us with some new ideas. We're about to start on another product. Which will be a SaaS product. So we're going to do SaaS and non-SaaS products again. Um, and we'll see what happens again. We'll see what happens. And it could be, this is the thing, like it could be a year from now where I change my mind. I don't know. We really don't know. But I think David and I both, like, I think if we, one of us decided to go, uh, we would have to sell the business because I don't think that, uh, what either one of us would stick around.

One of my favorite stories is the story where, um, Mark Zuckerberg early on, I think he's like 21 years old or something, and he gets an offer to sell Facebook for $1 billion. And the story goes, he goes into the board meeting and he's like, yeah, we technically have to discuss this. Got an offer from, I think, Yahoo to sell for $1 billion. Obviously we're not going to take it. On to the next matter. And then Peter Thiel and others were like, hey, hey, Mark.

Whoa.

Hey, yo, you're going to have like whatever, $500 million if you did that. Maybe we should just chat about this for a second. And they were like, well, let's talk it through. And one of the things he said was like, he's like, I, but I like this business. He's like, if I had the money, what would I go do? I would just wanna build a social network. Uh, I think that's the coolest thing I could do right now. And I like the one I've got. Why would I wanna go start over and try to build a new one?

Totally.

And I loved that. I don't know how much of that story's true, cuz you know, there's a lot of like lore, but that's okay. Uh, still cool story. Have you guys, did you guys ever have a moment where, somebody comes to you and it's an offer you have to discuss and like what went down in that conversation?

What does that mean? You were more harsh or more what?

I was a young punk.

We'll call it punk rock. You were more punk rock.

More punk rock.

I love that the answer to this question is kind of actually that Jeff was a fan. Jeff was a fan, so he reached out.

That's how it was. I mean, Jeff was a fan. Let's just Anyway, he's a fan of people think differently about how to run a business as he thinks differently about how to run a business. So we just kind of chatted. We went out to Seattle, met him. I knew this was like an investment opportunity for him because he wouldn't just come and he wouldn't say like, come on and say hello. But I didn't go into it wanting to do that. But after a couple meetings, we really liked him. He's very likable. And we had a lot of admiration for him, obviously, for what he's done and what he built at the time and who he was and how he did it and his whole story and the whole thing, obviously. I mean, Bezos, Amazon, amazing thing, right? So eventually we worked out some deal, which was ridiculous. It was a ridiculous, ridiculous deal. And I can't go into the specifics, but we barely had any revenue at the time. The valuation was stupid. He knew it was stupid. He's like, put together something. I need— or like, we don't know. He's like, put together something. I need something. So we put together something. We shared with them and we all had a laugh about it because it was ridiculous, but it had to be something where we could make something happen. And we're like, look, we don't want you to have any control. We don't want a board of directors. They had one provision which said something like in 5 or 7 years they had some right to do something like encourage us to do something that we might not have wanted to do, like sell or go public or something, but they didn't have the power to, I think, push it through.

Anyway, it was just a suggestions clause.

Maybe that's what they call it. I don't know. It was very weak though. It was a week. He didn't want, like, he's like, I want you guys to do what you want to do. He's like, I like long-term thinkers. I'm like, we're in this forever. We're not in this to sell the business, the whole thing. He liked that.

So what was he like? You go there to Seattle, take us into the meeting where none of us will ever get to do that, right? Especially Bezos back then.

By the way, have you guys heard this story really quick? Uh, it was the founder of Root, uh, or it's W-O-O-T. There's this famous article, Sean.

Oh, Woo.

Yes. Where they go out to eat. Uh, Jeff Bezos wants to buy this guy's company. And they go out to eat and Jeff Bezos is sitting there, right? They go to breakfast and Jeff Bezos orders potatoes with bacon and octopus. And he, and the guy's like, why'd you order that? That's like a weird breakfast order. And he goes, you're the octopus that I'm having for breakfast. Bezos said, when I look at the menu, you're the thing I don't understand, the thing I've never had. And I must have breakfast octopus. Uh, and it was like the article tries to paint him as a weirdo, but it doesn't exactly give full context. And so at least now we have someone here who's also been in that situation.

That seems very Jeff. Jeff is probably the most optimistic person I've ever met, and that was very clear from the start. And I'd never been around someone who had that much optimism. That was clearly intelligent, very intelligent, but that made it with optimism is really powerful.

Optimism about what? About you, about the world, about his company? What do you remember?

He just comes in, it's an aura of can-do, this just positivity. You've seen him, he smiles a lot, he laughs big. He has an enthusiasm about him that is, I would say, formed into an optimism that is unshakable and unbreakable.

Is it like a, like, why not? Like, for example, I've met people, I think what you're describing, and I went around them, they like explain their new idea and they're like, it's going to be this, this, and this. And a lot of people default to like, well, you can't do that. But all these people default to, well, why not? This all makes sense. Like, I'm going to do this. And then I think this will happen and this, why won't that happen?

I think if you post something really unusual to Jeff, he would just start laughing in a way like, wow, that is interesting. It's all interesting to him. That was my take. And I remember we were showing him Campfire, which is our first group chat tool. This is way, way back before Slack and there wasn't really something out there like this. There was IRC, but there was nothing really simple. And we put it up on the screen and I started talking to him about it because it wasn't out yet. And 15 seconds in, he just got the whole damn thing. He just got it. He got it in a way where he got it more than we got it. And he, for people are always curious like, well, okay, well you're not going to sell the business. How does he make any money on the investment? Well, we're an LLC, so he's a member, he has units and every year he gets distributions and he's made his money back many times over and he still owns, you know, his shares and we haven't had to sell the business. It's been a great investment for him. Not a, like a massive exit, but like it pays for a lot of things. I'm sure it's real cash.

Jeff, good news. Your net worth has gone up by 0.0001% this year. You can thank us for that.

What's cool is like we don't matter, but when you talk to him, it's not that way. Yeah, of course. He, he is genuinely curious and interested in what you have to say. And I, I've always respected that about him.

I love that description. And by the way, I've heard almost the same verbatim thing cuz Amazon bought Twitch and I've asked, uh, Emmett, you know, the CEO of Twitch. I was like, what's Jeff like? Cuz that was his, for a while it was Andy Jassy and then it was, he would go meet with Jeff once a year when they would present the plan. And he said the same things. He was like, when you're in the room with him, it's like there's nothing else that exists in the world. Like he's fully engaged, fully, paying attention, fully present. And he's like, uh, he's having a good time. He's not like super, super serious about everything. He's laughing and he's curious and he asks questions and he mostly listens. But then when he asks a question, he almost always like has struck the heart of the issue. And you're like, how did you? He's like, dude, I've worked on the, I run this business. Emmett's like, I founded this business 15 years ago. I run it every single day. You think about this for like 1 hour a year., but in that hour you kind of put your finger on the right thing that fast. That is impressive.

Sean, I want to ask him, you have on here about this, this Elon quote. So you talked about reading Bezos' book, uh, Bezos' book. You actually had an interesting take on reading Elon's biography that I thought was intriguing. I, I, I just think it's, I admire you, Jason, so it's cool to see like who you admire and what your opinion is on different people who I may or may not admire.

And by the way, I think it's not like this person, but maybe an aspect of that person or a one way that that person does something. Not like this person's good and other people are bad and all things they do are good or whatever.

Right. We're all a lot of different things. Yeah. We are all a lot of different things.

Yeah. Can I read you the quote? You had tweeted this out. I thought this was pretty fascinating. You said, I'm inspired by the business side of Elon's biography. There is one word that's overused and I think inaccurate in the book, reckless. What, what seems like risky actually to me strikes me as risk reduction.. And then he said the following, he said, compared to traditional corporate America, corporate America takes the riskier route. It's fear, marginal decision-making, complexity. And I love this line, you go, mediocrity slathered in marketing. And then he said, uh, mistakes come in all shapes and sizes, but the ones that, but the ones that come from slow decisions, committees that dilute responsibility, sloppy cost controls, and requiring pseudo-certainty before making a move, those are the worst ones. And Elon doesn't make those., but his critics often do. His mistakes are real and he, and they have consequences, but they're rooted in forward motion. I'm glad there's someone who is out there unafraid of making those kinds of mistakes and showing us all what hap— what is possible when you pierce the membrane that holds most things back. That's, that's pretty good. Uh, what made you feel that way?

So I know that you guys are on your website, you have a landing page for this product that I believe you described. I forget how you described it, but it's something like it's a non-recurring software product because it's like you want to take back— users need to take back control of like their, their wallets and not pay a company every single month. They just could pay one time. So that seems like that excites you and I want to hear more about that. And you also alluded to you have like a few more products you want to launch. What ideas and businesses are exciting to you at the moment?

Absolutely. I spend that.

It's obscene. You're— okay, you get it, right? It's a lot of money. It's a lot of money for basically chatting with your coworkers for the most part. And it's just like there should be a generic option, essentially. This is what happens in all industries when there's a commodity or when there's a lot of product commodities, something becomes a commodity, there becomes a generic at a much lower price. We're doing something at a high quality and a low price and changing the model around. So anyway, Campfire's the first one. We're working on a second one right now, which I can't talk about yet, but it's related to writing. And, uh, maybe we'll do another one or two and then see how the model looks in a year from now. Like, are we early? How's it working? So far it's been working really, really well with Campfire. We've sold hundreds of thousands of dollars worth of Campfire in a few months. Um, so we're very happy with the start, but we have to see if it sustains and how it goes. And we're going to add some more products to that category and see how that goes.

Can we talk about this strategy you have where before you launch something, you put up a page, a big blue page with a founder letter. Yes. And the founder letter is basically saying kind of what you just did, which is, uh, things used to be a certain way. They've changed. It's kind of obscene. You know, I get why they changed, but now it's gotten a little ridiculous, don't you think? We're gonna change that. We're gonna bring it back. We think it, we think life should be this way. Common sense logic, don't you agree? And, uh, yeah, we're gonna do it. If you wanna see, if you wanna be a part of that, do this. And actually this morning I saw something on Twitter that was kind of interesting. Some guy announced his venture round. It was like, we raised $16 million. I'm like, oh, that's interesting. What is this? And it's something called Quilt. And I go click this thing, Quilt, and I'm like, go to the website. And it says some like blah, blah, blah AI jargon with an email sign, with a signup form. No, just no, no, tell me, don't tell me what it is. Don't tell me why I should want it. Don't tell me what it could do for me. Don't tell me why you built this and what was your motivation. Just, we raised a bunch of money, give us your email and you're on the list and we need to grow this list basically. And I thought, I can't believe more people don't copy what you do.

It's so like this is, that's how, that's how this podcast came to be, Sean, by the way. We were talking about copywriting and we're like, man, Jason's the best at this.

It's the point of view. So this is my favorite thing to do in the business, period. And unfortunately I don't get to do it that often because we don't launch new things, but I love writing a brief letter. Um, and I, I sweat every word and I just love it. This is my like Bezos moment where I just smile and laugh while I'm, while I'm doing this thing. I just love finding the right rhythm and the right rhyme and the right pattern and the right message and the right way to say it. It's super fun. I don't know why more people don't do it, but to your point, I think there is something about like, you have to have a point of view first of all. And the thing is, is that you can do with any product, like any, a novel product, a commodity product. You just have to like understand the angle that you're taking. Although I don't even, I don't like the term angles because it seems like it's almost manipulative, but what Shtick.

You need a shtick.

Yeah, yeah, you don't like that?

I don't know, you need some flavor.

What do you want to call it?

I'm not gonna like sticks.

I understand, I appreciate— you're right, like, that's the category. Shtick also has these like negative connotations, like it's sort of like this game and manipulative thing. You're— maybe you don't mean it that way, and you probably don't.

Just like a flavor, you just need some style. I like the style.

And I'm still spending." The metaphor that the SaaS companies used initially was like, Just pay a couple bucks a month, no big deal, right? Pay as you go, only pay for what you need. But the problem is it's, it's the renter pro— and you reframed it as renter, right? Oh yes, but you can get evicted. Yes, but you don't even own this thing. Yes, but they can raise the— hike up the rents anytime they want, right? And so reframing it as, cool, yeah, but you're, you're a renter and they're the landlord, and all your data is owned by them, not you, right?

He calls it the church, the church of recurring revenue.

The simple test, by the way, is let's say you did buy Slack or whatever, insert what your favorite product. Sure. For one year. And then they did all these over-the-air updates and they, they, you know, they added this, they added that, they tweaked this, they fixed this bug. If they had just charged you for it one year and then you could buy V2, you know, Slack 2.0 or the, the 2024 version, would you buy the upgrade? Like, you know, we used to buy Windows 95 and then you would, you would hear, you're like, oh man, I heard whatever the next one, Vista or whatever it is, it's got all this new stuff. Okay, maybe it's worth upgrading. Uh, but like the reality is almost none of us would buy those up, buy the next edition because the upgrades are so marginal, right? They're not like, uh, game-changing, but you're charged for it as you go as if those are such game-changing updates.

Yeah. And look, again, some products, like we have a few products like this, HEY is like a SaaS tool, Basecamp's a SaaS tool. So we're in that world too. I totally get it. That said, we don't charge any of our customers more than $299 a month, period, flat. So with Basecamp, you can have 6,000 users, it's just $299 flat, unlimited users at that point. So we don't offer the same thing where people could be spending 50, 60 grand or 10 grand or 5 grand or 3 grand a month with us. Like you can only spend $299 a month max with Basecamp. So I don't feel as guilty, frankly, selling something like that., you know, compared to company asking companies to spend tens of thousands. I get it's good for revenue. I get all that. But man, I wouldn't feel comfortable or confident. I would feel like I'm ripping people off, frankly.

So how do you deal with the counterargument, which is you guys were first with Campfire before Slack. Slack comes out, kicks your butt, becomes a $20-something billion company, exits, and blah, blah, blah. Sure. How do you deal with that?

Well, first off, Slack was an excellent product. It still is an excellent product, but at the time it was way better than Campfire. So we sort of let Campfire kind of wither. We kind of didn't pioneer the idea. IRC was before us and there was chat thing, but we kind of pioneered this version of it to some degree and we sort of let it sit and didn't really make it much better. Slack came around and made a much better version of that idea. So full credit to them for that. I think another problem we had was that we were really early with Campfire. I remember when we launched Campfire in 2006, I don't know when Slack launched. I think it was like 6 years later or something like that. I couldn't get anyone to buy Campfire. People were like, "Why in the fuck would you use a chat tool? What? We're all in the same office. Just talk to people or whatever.

I don't even get it." Well, we used to use Gmail chat and then for a while, HipChat, which I hate.

HipChat. Yeah, that was another one.

Yep. Yeah. But if it was, it was Gmail.

You were on the edge though, because a lot of people didn't even— like chat was like, now everyone can't imagine working without it, but it was not a thing that companies used. Individuals used it a lot, but companies, it's just this persistent chat room was just not a thing. So because we were early on it, we kind of didn't think there was a future in it because it was selling okay, but not that well. And so we just didn't pour more energy into it. Then along came Slack. I remember actually, it was interesting, Stewart Butterfield, sent me an email before they launched Slack. We were friends and he said, hey, just want to let you know we're launching this thing. It's competitive with Campfire to some degree. We're buddies. I just want to let you know. That's cool. I remember looking at it the first time and my stomach dropped. I'm like, oh shit, we're dead. Or this thing is dead because it's fucking good. And the thing that impressed me the most about it was the onboarding experience. I think that, in my opinion, there's two things, of course, the bot integration stuff was really innovative, but the onboarding experience was so good where you basically talk to the chat and create your user account and stuff. It just took, in my opinion, those two things. The chat itself isn't better or worse. Chat is chat, essentially. Onboarding and bots were the thing, and we didn't have them, and they crushed us. So Yeah, that's how I'd answer that question.

Dude, you're cool to me because you're like, all right, so for the listener, go to basecamp.com, go to hey.com and once.com. Your landing pages, like we're internet dorks, all three of us. Like we're talking about like CRM shit. Like we're talking about like something that's not inherently like a punk rock thing, but you have like a punk rock vibe about you. Like if you look at your landing pages, they're all like kind of cool and they're fun to read and you make, non-cool things kind of cool.

Yeah, for me, there's a degree of mining for novelty and recognizing what's interesting and what isn't. How people can look at something and go, oh man, I never thought of that. But of course, that's what I'm always looking for. I wrote this post recently about towel bars and hooks. I don't know if either of you saw it, but—

Riveting. Riveting concept.

You ready for this?

Okay.

I've not read it, but I'm sure it's great. What is it?

So we're doing a bathroom renovation and the designer, the architect's like, do you guys want hooks in your bathroom or towel bars? And for me, the choice was like, it was so obvious. It was like hooks. Hooks all the way. Of course hooks.

I'm team hooks too in my house.

That's amazing. Um, by the way, what do you do? You guys pull out, uh, profits every year out of the LLC. I like that you don't reinvest it. You basically get the benefit. Are you like a boring kind of like index funds and bonds guy? Like Sam is more on the conservative kind of, uh, side.

I'm more like that 80/20 index bonds life, baby.

Yeah. My, I'm like the two sexiest words in the English language are like exotic instrument. It's like, oh, we got an exotic instrument for you. I'm like, tell me more. And then I regret it later. What do you—

what do you— what's that, a sexy trombone?

What the hell?

What's an exotic—

what's an exotic instrument?

It's the thing that you're, uh, you know, you're gonna lose money on. Your shitty wealth advisor gives you to lose money. It's called an exotic instrument.

It's code. I mean, our exotic instrument is our own business. That's where most of our risk is tied up. So, so I'm more on, on Sam's tip here, which is to be very conservative with, with, um, investments outside my business. So primarily index funds. I do invest in a few individual companies. That I really know and really like and have liked for a long time. I might even know the CEO. I might have a good sense of who this company is and what they do. I'm not jumping on the meme stocks, that kind of thing, right? I have an advisor. I've done some like other kinds of investing around like some PE deals and some stuff like that. But primarily I'm pretty much straightforward index funds, like play the US economy long-term essentially, and some maybe some other companies or countries' economies, but primarily US. That's my main thing. I also like, so I do that. And then I also like to spend money on things that I enjoy and that my family enjoys. Um, and, but I'm not a, I'm not a, um, I don't, what I don't like to do is ever put myself at risk. I don't like to put my business at risk. I'll take risks, but I don't take risks that put me at risk. That is not an interesting risk for me.

It seems like you value being able to sleep well at night. It's like, I just want to be able to sleep easy and not do anything that's going to jeopardize that.

Sean and I are in similar positions, uh, where we have profitable businesses. And a question that I'm trying to figure out is what percentage of the profit— profits to pull out, um, versus reinvest. Do you have a framework for deciding like that percentage?

Especially earlier on, right? Maybe in year 27, the answer is different than in year 3 or 2.

Yeah, so I can only tell you what we've done, which is again a little bit unusual. We pull out everything at the end of the year. Now, first of all, we're an LLC, so we're taxed on everything at a personal level. So if I leave money in the business, I'm still paying personal income tax on that money. It doesn't really make sense to do that. So we have a recurring revenue model. We have very predictable revenue. So we basically have a little bit of overlap. We take some money out in quarterly distributions and there's some money left over in January and we kind of wait till April to take it all out. So there's some overlap and there's enough operating cash, right? When I first started the business in 1999, we were an agency and our first client, it was 4 of us, 3 partners, 1 sort of employee. We each put $10,000 in. So we had $30,000 to start the business. And then our first customer was HP. HP was giving everyone business way back then. HP was the hot company to get a gig with because they paid a lot. And I think the gig was a few hundred grand to do some website design for them. This is '99 where people are paying numbers like that. And from that point on, we were profitable because we only had a few people. We didn't take big salaries, and that was that. We were able to pull out all the money every year because actually we started out as a C corp for a couple years and then we switched to an LLC. But regardless, we pulled out all the money at the end of the year, essentially. And because we had ongoing client work that would sort of span the gap of the calendar year. So we just always had money coming in and our costs were so low that we weren't ever starving. You know, so it just, it just was a situation where we always had high margins and that's how I've always run the business. So I, I know it's an unusual setup, but I do think it doesn't have to be quite as unusual. I think what ends up happening is companies hire too many people, their payrolls are, they have too many people on payroll. They spend too much money on customer acquisition and their costs are really high, so their margins are very low if there's margins at all. And then it's very hard. It's much— it just becomes a much harder business to run. Now, again, like there's a lot of luck involved with this. We happen to find a way somehow to have very, very healthy margins over two decades. Part of that though is again, the cost side of it, which is just not considered enough.

Do you run any paid ads?

Dude, you're the man. I think that if I had to make like a Mount Rushmore of this podcast, like, you know, I think Sean opened it up by saying we love people who carve their own path. And I don't care if that person is an entrepreneur or an artist or a mother, like just someone who like just says, this is the way I want the world to be and I'm going to live that way. I admire that greatly. And the way that you write, the way that you think, you're kind of on my Mount Rushmore. I really admire you and I'm incredibly, I know we both are incredibly thankful that you spent some time with us. You're the man.

That's very kind. I love the show, by the way. I listen to it. It's great. And I really appreciate being here. Thanks for the time and the questions. Happy to do it again anytime. I could go for hours with you guys if you ever want to.

You have a— you have an open invitation whenever you want to.

Whenever you want. Well, I'm not going to invite myself on. I did this time, actually, kind of, sort of. So I will not do that again. If you ever want to talk again, I'm available. Let me know.

Thanks for doing it, Jason.

We appreciate you. That's the pod.

Thank you. I feel like I can rule the world. I know I could be what I want to. I put my all in it like no days off on the road. Let's travel. Never looking back.