However, there are a few concrete reasons why companies, especially software companies (as opposed to e.g. restaurants), tend towards growth:
1. Some companies will require some amount of growth to be profitable. Not necessarily VC style growth, but you really might need a 100-employee company.
2. If you're not growing, you're not facing new challenges. This might or might not bother you as the founder of the company, but people tend to like dealing with new challenges in their work, whether it be technical challenges or business challenges.
3. Relatedly, if you want to work with smart, ambitious people, you need to have growth to provide them with interesting challenges. A McDonald's can afford to rehire employees every year, but it's harder for software companies.
4. Even if your employees don't care about technical challenges, they probably still care about compensation and their career ladder. It's all well and good that you as the owner are making lots of money, but your employees need a realistic path to making more and having a better job title too, otherwise you can't retain the best employees.
5. Of course, the simplest reason is named in the article - because of zero marginal distribution costs and network effects in software, large players eventually tend to dominate many fields. Even if you build a CRM perfectly fit for a niche industry, there's a good chance many customers will eventually jump to something like salesforce, both because of marketing, and because of features/network effects (more integrations, etc).
Again, not saying DHH is wrong, just that these are structural reasons why software companies (and similar) tend towards growth.
I think your employees will face bigger and more interesting challenges, and learn more from smarter coworkers, and will be retained better, if you keep it a 10 person team for years and years and years. As 37signals proved more than maybe any other company.
Of course, they also proved (5)...
Of course, nowadays I think the average retention at tech companies is like 2 years isn't it? So this is an industry-wide problem. The bigger problem if you're founding a 10 person company is that, assuming you don't want to run this for the rest of your life, you'll eventually want people to replace you, and they will also want bigger challenges, etc.
I once saw a great talk at MicroConf, by the guy who started Balsamiq, which he started with the purpose of being a 1-person company. He soon found he had to grow. The bottom line of his talk is that most companies have a "natural" range of sizes they can be, and you can choose where you want to be in the range, but it's gotta be in there. Very good and interesting talk.
(Hi back! Didn't know you HN'ed)
> you need to have growth to provide them with interesting challenges
I think challenges are more the product of autonomy than growth. A response to growth is often to just increase the headcount and the infrastructure.
While growth typically introduces new challenges it doesn't assume the opposite -- no growth, no challenges. Changing markets, customer preferences, and competitors' actions -- all that can bring enough challenge even when there is no growth. Even more than that -- if you're growing it most probably means that you don't have major problems with product/market fit. In case of no growth it might mean that you're losing the product/market fit and you still don't know how to fix it, which makes it very challenging.
(Incidentally, the theory was first put forward by Herbert A Simon, who received both a Nobel Prize in Economics and the Turing Award.)
I mean, I kinda get it, but honestly $100k is more than enough for me, let alone $150k.
I've seen situations where the company got $950K of a $1.2 million contract simply for negotiating the contract with the client, while the dev who did 6 months of work got the other $250K. $250K for 6 months work is a lot, but $950K for 2 weeks work + occasional maintenance of the business relationship is a lot more.
Of course, I've also seen the flipside: I worked at a company where the CEO was salaried less than me and his share in the company wasn't likely to grow in value such that his compensation vastly outstripped mine. I've been paid more at other places, but nobody complained about compensation there.
It would serve them better if they can treat themselves as product and services providers in a free market. Band together and unite! Don't stab each other in the back for meager bones being thrown at you.
And if your work contributes millions of dollars to the company's bottom line, what justice is there in the company giving 99.9% of the surplus of the surplus you generate to upper management's bonus, or the fund that gets inside info on your next quarterly report?
There are ways to spread that money equitably. It's a classist, self defeating belief that a programmer should let her superiors take home the profits of her work.
Immediately, you start to think about costs, hurdles, and PITA to doing that. Those costs and hurdles represent the value that someone else is adding to allow you to "just code".
Same with CEO salaries, movie star salaries, professional athlete salaries, and VC profits. $100k is more than enough.
We get it. You don't have to raise VC or grow exponentially to have a great company. They have seriously written the same thing hundreds of times in hundreds of different ways, and it's barely even a contrarian view anymore. I hear as many people saying, "I wish more people would talk about how you don't have to raise VC" as I do people talking about raising VC these days.
Yeah, it's usually not hard to predict what DHH's stance on growth vs. sustainability is going to be, and yes, he's prolific, but it's worthwhile to have opinions that go against the prevailing consensus, even if you don't agree with them.
Aren't their articles doing that talking?
If you fully get their point, there's probably not much value in you ready article #801, but their message is one that bears repeating.
Well, for one, nobody forced anyone to read it.
Second, you should at least be even more sick of the 50,000 other sources shouting and blogging the opposite message all the time.
At least DHH brings a tiny balance to this.
There are a lot of people who don't have much voice in this society who are thinking what DHH is thinking from a different perspective.
Personally, I'm tried of competing with greedy, unprofitable VC-funded companies which are saturating the internet with their ads and financially-sponsored "thought leadership" blogs.
In the meantime, for the past 5 years I've been struggling to set up a one-person business around an open source project I created. It's a very hostile environment for a single-person business right now and greed is to blame... It's not leaving any breadcrumbs for the little people.
I've seen that + sneer at "lifestyle businesses" (aka normal businesses that don't aspire to be "unicorns" or lose on every sale but make it up in volume) countless times.
>DHH, on the other hand, keeps on lambasting the VC industry without much helpful advice.
Haven't he and/or Fried written like 2 books with business advice?
No, that's not necessary, because it's already accepted conventional wisdom. You're starting a company? How's your seed round going? Which incubator are you applying to? I know an investor friend who works for <xyz>, want an intro?
The irony is unsatisfaction is rewarded. You can earn millions of dollars with making the world less beautifull, by selling people bad loanes or artificially keeping medicine prices high.
I don't know if people can learn to have enough, or 'the system' must enforce it a little bit.
The equating of money and utility (in the economic sense) happens very quickly in micro economics 101, and then you spend the rest of the class speaking about money. But that is just because utility is very hard to track or reason about.
Plenty of folks living good lives without being flashy about it.
A lack of satisfaction can also materialize in positive ways that do improve the world. This drive is innately human and is what led us to agriculture, medicine, technology, and to wherever else we're going to go.
Anyone knows the word for 'never having enough money, land or power and aquiring it at the cost of others'?
- great line
The beliefs behind your paradigm are important too. If you think one can achieve "growth" only by adding positive value to others, growth is not a bad thing. How is it possible to grow when there is no potential to grow? It would take some "crazies" to try to grow something that everyone else thinks this is it. We know that some people in history beat the prevailing expectations in sports, art and personal wealth.
I understand the conversation here is about when to stop or when should one realize that the idea has reached its potential?
I was at a startup pitching event where a founder was pitching a profitable "presentation software" company. The judge asked "How many billion dollar presentation software companies do you know?".
"Enough" conversation becomes important in software products because if smart people do not understand what is good, better and best they take more risks that only end up ruining the product.
Perhaps a title change? It sounds awfully dramatic as it stands.
— Edward Abbey
Once you are there, these traits don't just turn off. They probably amplify because you have line of sight to bolder ambitions.
> When is business growth "enough"?
You could read the article as sour grapes. Like his business didn't reach unicorn valuation, so well, that wasn't his goal in the first place.
I remember seeing a YouTube interview (I believe it was on TWIST) when he claimed there was no hypothetical amount of money he would take (billions, etc) to sell his business.
The cynical and greedy part of me found it incredulous. Is this guy in denial? Surely you can take the billions, and find some other project to have fun with? Or is Basecamp his only life calling?
The less skeptical side of me envies that mindset. I'm at a point in my life where I clearly have enough. My passive cashflow covers my expenses 3 times over. I'm 31 and If I continue working full-time I'm on par to make $200k next year. But almost every moment of the day I'm obsessed with trying to find my Basecamp. When is it enough? Maybe I should adopt some kids.
I hope that didn't sound like my own version of humblebrag - the fact is, I'm dissatisfied and there's no reason I should be.
There are many reasons you would want to sell too, of course. Just saying it's not clear cut just because of valuations.
His point is moot because a lot of startups will agree with him when they reach the scale of Basecamp. They're not there yet, so they need to think about growth.
Meanwhile, companies who are huge and going after more growth don't give a fuck about what DHH writes. It feels like there's a pretty significant message/audience mismatch.
"Hey guys, don't get too rich please — just look at me and my millionaire lifestyle and enjoy."
But I beg to differ, he just tells people that he believes the prevalent zeitgeist is wrong. I don't see that as particularly brave, cowardly, humble, or arrogant. He just says what he means (without, it should be said, taking cheap shots at anyone), as it should be.
I do agree with them that the "we must be the biggest!!!" attitude of SV/NYC startups is harmful and unrealistic. I'm not sure if Basecamp is the best counter example (though I do like their 4 day summer work weeks), but I wish more tech businesses were just that - simple businesses.
Gates, OK, I may agree with him, due to the amount of charity he's doing, but the rest? Elon Musk is still a big question mark (see Tesla vs tinkering), the others... Why not put Marissa Mayer on the list, she made a lof of money as well.
I'd rather see a list of people like RMS, even though he's quite mad, he actually made the word a better place.
I don't get all starry eyed with tales of people who made billions by doing questionable things and then giving it away as charity later.
Care to offer some counter arguments?
Nokia's anecdotal demise isn't a reason to not seek continuous success. In fact, one could use that same anecdote to argue that having enough leads to failure.
Distance between a founder and the product isn't an argument for not seeking continuous success. Some people prefer that distance and consider separation of labor to be more efficient.
It's clear that DHH has some bias against success. Given articles like this and his public bet that Facebook's share price would fail. It isn't based in logic though, just ideology.
Quite on the contrary I and many others think of him as extremely successful:
Profitable since year 2 IIRC
Have built nice products that you can pay for by money (instead of by privacy)
Well known for a certain web framework that 100 000s of developers use and many love.
I'd even go so far as to say he influenced (not shaped though) our entire industry by showing how web development should be done in a world filled with ugliness like: old enterprise Java, old Spring, old Asp.Net webforms, old PHP etc.
As a happy employee of Basecamp, this line makes me proud.
Feel free to make products in other markets as well - as long as they are profitable.
I want you to stay around :-)
Do you know what "contradict" means? Because that in no way contradicts his point that there are many paths, of which continuous growth is only one.
Nokia's anecdotal demise isn't a reason to not seek continuous success.
He didn't claim it was.
Which is what he said. "Now some people clearly like that."
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