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Mojito island is a mirage (37signals.com)
59 points by craigbellot 2982 days ago | hide | past | web | 61 comments | favorite

In short, the bliss of selling and giving up your business is overrated. It’s a long life and it’s often best spent enduring the ups and downs of pursuing something of significance. Don’t be so eager to give it up.

Hmm. Recent posts seem to be 37Signals attempting to rationalize their business model vs. recent sell outs for large amounts of money.

I'll stand up and say I'd happily take a $40m pay out so that I could be completely financially secure and get to do what I want. I have a short list of things that I would be very happy doing other than working for money.

To quote Einstein: "We act as though comfort and luxury were the chief requirements of life, when all that we need to make us happy is something to be enthusiastic about."

But I'll take the comfort of knowing that I don't have to work, and get on with the cool stuff.

"I'll stand up and say I'd happily take a $40m pay out so that I could be completely financially secure and get to do what I want."

I agree. Just because you cash out doesn't mean you have to retire.

Just because you cash out doesn't mean you have to retire.

Exactly. You put it perfectly succinctly. A big exit should be a beginning, not an end.

Are people sure that the principals at 37s haven't just taken $40M out of earnings? Selling your company isn't the only way to get paid.

Does 37signals even make $40M in revenue?

Maybe. How many paying customers do you think they have? 1k? 10k? 100k?

I think $40M/year for them would require somewhere between 30k and 50k paying customers.

I suppose we're all just guessing, but when I run the numbers on their business I think that the founders are already millionaires, are on their way to being 100-millionaires, and, when you take into account that when you don't gamble your money away it has a tendency to accumulate and compound, that their model could produce a billionaire over a 20 or 30 year period.

I don't ever read their writing and think that they're jealous of other people's exits. I think they're already filthy rich and they look down on the venture industry in the same way that Warren Buffett looks down on Wall Street.

Reminds me of a great Alain de Botton quote: http://twitter.com/alaindebotton/status/2781110491

I'm not sure I totally agree with you on the 37Signals comment. I think it's actually refreshing to see that they are posting a counter point to the cash-out posts we've been seeing lately on other blogs. I doubt that some of the crew over at 37s would even have to work anymore and this could be their way of saying so. I could be way off base there, though.

With all that said, I'd also be happy to take a huge pay out and put these ideas to the test.

It'd be refreshing if they were well-argued counterpoints.

In this thread


Jason from 37signals said they'd have a post that FU money is a myth. I hope this isn't it.

The point of FU money isn't that you'd actually quit everything and walk away. Its about the ABILITY to do so. Once you reach this point everything else is about being able to make your own choices, not being backed into a corner because you have bills to pay.

"Once you reach this point everything else is about being able to make your own choices, not being backed into a corner because you have bills to pay."

You're an individual. You can already make your own choices.

My big problem with this whole "FU" money concept, and your thought I quoted above, is that people seem to think they need to get this opportunity from someone else. That someone else gives them the opportunity to do what they want to do. That someone else is the one who gives them the money. If you continue to think like this then that's exactly what'll happen - you'll be unable to make your own choices because you are waiting for someone else to make them for you.

I do hope to post more on this shortly.

You can already make your own choices.

Except of course, that the amount of money in your bank account directly influences the effects of those choices. The more you have, the more "free" your choice is.

It's one thing to recognize that you are a man that can make your own choices, it's another to tell your kid he can't eat today because you didn't like what your boss was telling you to do.

Yeah, but I think his point is that the amount of money in your bank account is a direct result of your own choices and actions. And the fact that you have a kid is a result of your choices.

If you have a kid to feed and that’s constraining your ability to focus on a startup as you would like, maybe you shouldn’t have chosen to have a kid.

All fair points.

That being said though, your future choices are sometimes dictated by the results of your past choices. (i.e., the kid is always going to be more important that your startup dreams if you are a responsible adult)

My big problem with this whole "FU" money concept, and your thought I quoted above, is that people seem to think they need to get this opportunity from someone else.

That makes no sense. Of course you need to get that opportunity from someone else: your customers, your family, your investors, or your buyer, whoever is handing you the money you need to meet your needs. At the end of the day, if someone else hasn't given it to you, you aren't getting it.

While in the literal sense, you get opportunity from others, I think people get stuck in a mode of thinking that they need to get lots of money to pursue some vision or objective that they want. It becomes a mental barrier where they say, "I can't do this because I don't have a million dollars" Where in truth, there's more than one way to skin a cat.

Just because something takes a million dollars to do, doesn't mean that it has to be your million dollars.

I think Jason Fried's just saying "Be relentlessly resourceful" in a different way. You don't need anything like lack of personal money to stop you from doing what you want to do.

It's odd to me how many on HN readily accepted pg's "Be relentlessly resourceful" idea, but when it comes to the idea in a different form, how many rally against it.

"Be relentlessly resourceful" applies to things beyond startups, from paying your kids' tuitions, getting to drink mojitos on an island, and pursuing your economically unviable project.

That's not what they're saying, though, at least not since they started posting these essays after the Mint sale. They've been talking as though taking a giant payday is somehow morally wrong, that it's backing down and giving up some kind of good fight. That's a much stronger stance than "Don't wait for a rich man to come along and give you permission to chase your dreams, just chase them anyways." - it's actually editorializing on what the content of those dreams should be.

I was alluding to a big external event (investment, sale, IPO, liquidation), not to the day-to-day exchanges that are part of your business (selling product, offering services, etc). You can do anything you want on your own without the blessing of someone with a lot more money than you.

I know what you're alluding to, I'm just saying it's an arbitrary distinction. There's absolutely no reason taking a giant payday from a single source is somehow inferior to taking money from thousands of customers in terms of your personal freedom.

In that sense, all money is fuck you money.

Unless you're the government and can just print as much as you want. :-)

I think the 37signal's viewpoint is interesting, and the point they're trying to make is this, you can chose to do interesting stuff that will make you money while you work for the man.

It is _not_ easy. You have to come back from a long day of "meetings, politics, and code" and shut everything out and just create. Sometimes it'll be fun, sometimes it'll be downright boring and impossible seeming, but you own that time, and you can choose how to spend it. If you spend it watching TV then that is your choice. But, there are plenty of ways to make people pay you for stuff that you want to do if you just take the opportunity.

(Sorry if that sounds too guru-ish or self-helpy but thinking that way has made it much easier to rationalize working evenings and weekends for me.)

Unless you're the government and can just print as much as you want.

Yeah, ask Zimbabwe how that's working out.

you can chose to do interesting stuff that will make you money while you work for the man.

I don't think that's the point they're making at all. They're saying don't work for the man, and don't look for an opportunity to sell your work to the man for a giant payday - "do your own thing" and keep doing it.

Yeah, ask Zimbabwe how that's working out.

Hey, if anyone has Fuck You money it's Robert Mugabe. (He also has a Fuck You army though, which I guess helps).

If you're trying to say -- as a sub-post said -- "don't wait for a rich man to come and give you permission to pursue your dreams," then you're not looking at the whole picture. 'FU money' doesn't mean that you go down to 'Mojito Island' and sip drinks on the beach for the rest of your life. 'FU money' is money that says, "I'm set for life."

After you have 'FU money' you don't have to worry about making tough choices to try and make ends meet. At that point, you can create another start-up or whatever it is you want to do, without needing to worry about becoming homeless at some point (or going into major debt).

I posit this example:

  I like programming and working on web apps/etc. So I create
  a startup to use my passion to develop a cool and marketable
  idea. The idea takes off and someone wants my to cash out
  to the tune of $40M.
  Yes, I won't have my startup (i.e. baby) anymore, but I will 
  also have the freedom to create another startup, or just to
  do development on whatever I like (without regard to whether
  or not it is marketable). In this case, I've given up my
  startup for the chance to free myself from having to say
  things like, "I better stop working on this cool idea
  because I have a family to feed." Or, "I really want to
  work on this idea, but my mom has cancer, needs constant care,
  and we can't afford to have someone looking after her."

>> "My big problem with this whole "FU" money concept, and your thought I quoted above, is that people seem to think they need to get this opportunity from someone else."

What???? It's exactly the same as selling your product to customers. Only difference is there's one sale, and it's a big one.

> Jason from 37signals said they'd have a post that FU money is a myth.

I can think of one example. Nico Mak from Nico Mak computing wrote the original WinZip. About 10 years ago, he was making about $1m/month in corporate license fees. I can almost guarantee he is on his own private island somewhere, living the anonymous rich life.

I completely agree. FU money means that you have the freedom to work on what you want to work on. You can start any venture you want, launch whatever idea you want, and are free to take risks.

FU money simply means you have a guaranteed salary, no matter what. It has nothing to do with retiring. And I think it's a completely valid dream to have.

This makes no sense. I don't understand why the 37signals folks seem to willfully ignore that the amount of money that a successful acquisition gives a founder means you can do whatever you want for the rest of your life, including solving interesting problems. You can even solve interesting problems that aren't profitable to solve. Unless the company is almost guaranteed to be valuable enough for the foreseeable future that a sale (or other exit) will make you financially independent (e.g. Facebook), there comes a point where it is clearly better to sell the company.

Since the Mint acquisition seems to have inspired this series of posts, let's take a look at it. Mint is successful because banks have crappy online products. Banks are perfectly positioned to end Mint's customer growth, and there are several other competitors in the industry as well. There is not a particularly high chance that Mint will still be successful in 5-10 years. If it is successful, the marginal utility of the increased worth for the founders declines pretty rapidly. Selling now seems like it was clearly the best idea, and disproving that is going to take more than the false dichotomy this post presents.

This post seems to make two separate arguments:

1) A driven individual won't be content to idle if they get a big exit, they will likely jump right back in. If you think what you want is an eternal vacation, you're probably wrong.

2) Therefore, a driven individual shouldn't pursue a big exit, if they already enjoy what they're doing, because they'll just jump back in.

I agree with 1), but not with 2). I enjoy what I'm doing, but the list of things I want to do is growing at a faster pace than my ability to work on them. I'm just not built for the "one true lifelong obsession" model.

Edit: the more I think about it, the more I realize why this post bothers me.

I'm really starting to think that 37s and HN are preaching to completely different choirs - which is strange, given how well 37s posts do here.

Some people thrive on routine and order. They love to get up in the morning and know what they'll do that day. To have a successful system figured out, and to follow it. And yes, there are always new challenges, and yes, the system is continuously improved - but to some extent, it's routine.

Others thrive on tackling the unknown. That initial rush of carving out an answer, starting with a blank slate. The uncertainty of not knowing what you're doing, the high chance of failure, but also the joy of not being constrained by what came before you.

In programming terms, it's the difference between maintaining code and starting a new project. Some people obviously enjoy one more than the other.

Seems to me like 37signals is preaching code maintenance over starting new projects. Sure, in many cases that makes a lot of sense, but which one's more FUN?

The bliss of knowing that your kids college tuition is fully paid for, no matter where they get accepted, is not overrated. Thinking like DHH indulges in this post is a luxury.


DHH is confusing a life of relaxation with the security that comes with a big payday. It's less about sipping mojitos and more the ability to pay for college, mortgage, retirement, and relieving the stress all those things bring.

The tradeoff he proposes is a straw man: "Pull a few million from revenue each year or take a lump sum". Is this realistic in most cases? If Mint turned down Intuit, they could have bought Wesabe and reduced the value of Mint significantly. Given Mint's light revenue, how long would it have taken to achieve the same financial outcome? Would a VC ok salaries of millions per year in the near future?

I know the 37 Signals guys are anti-VC, but it is a real, lucrative, and demonstrable way to create wealth. I get that they dislike it, but I don't see the boot strapped software business being a real competitor. They do it, Craigslist does it, but not sure if there is the same portfolio of success in that system as in the VC system.

> I know the 37 Signals guys are anti-VC, but it is a real, lucrative, and demonstrable way to create wealth.

I think their point is exactly that it isn't. DHH gave a talk at Startup School 08 (http://www.omnisio.com/startupschool08/david-heinemeier-hans...) wherein he likened that kind of big exit to winning the lottery.

I think this is the point they're trying to make: you're much better off trying to build a business than to try to win the lottery.

By demonstrable I mean we can point to 100-200 companies in a ten year period that took VC and had respectable exits. There are probably more than that, but there is a good sample size.

I agree that it is improbable, but still better than the lottery. My point was that there are lots of well known examples from the VC route, but fewer success stories in the 37 Signals mold. It also might just be that they are lesser known, but instead of berating the VC industry maybe they could turn their spotlight on exemplars in their model? 37S, Craigslist, Plenty of Fish, are there a couple hundred bootstraped web startups that they could point to?

100-200 companies in ten years doesn't sound like a lot. How many people won the lottery during the same timeframe?

I think DHH has a point. While hoping for the big exit isn't exactly like hoping to win the lottery, I'd say he's right that you stand a much better chance of being able to build a profitable business.

I think there's probably a lot more than 100-200 web companies that have built a profitable business that they're earning a very nice living from.

> The tradeoff he proposes is a straw man: "Pull a few million from revenue each year or take a lump sum".

I agree. It's probably more like "pizza+beer+nice car+nice summer holiday"-profitable vs. a $2m-$5m payday -- i.e. the "we can do better, let's do this for a year or two more and see who has the last laugh"-passion.

Will college tuitions be more than a million or two? Perhaps if the education bubble never bursts. Or if you have more than five kids.

Regardless, his article compares owning your own business with a million or two trickling in instead of $40 million (or more) all at once. The comparison isn't at all about the starving artist or inventor doing what he loves vs a big pay out.

If you're doing what you like and you're earning a mil or two a year (or well on your way), why sell out all at once for $40 mil? If your reason is other than getting to mojito island, he makes no claims.

But if your reason is because you want to get to mojito island, then Jason Fried is warning that it's probably not all it's cracked up to be.

> If you're doing what you like and you're earning a mil or two a year (or well on your way), why sell out all at once for $40 mil?

Let's say $2m/year - a sellout now at $40m is 20 years (if we (unrealistically) discount inflation and interest etc.).

You love what you're doing, but who knows what everything's gonna look like in 2-3-4 years, much less 20? Google might decide that DHH is a punk and make improved clones of the entire 37s portfolio and release them for free. 37s may have a breakdown and find out that their backups for the past month are corrupted, and never regain customer confidence. The concept of SAAS/cloud might be compromised by Patriot Acts III-VI. All those are worst-case scenarios, but there are a million other events that could at least compromise the $40m price-point -- so waiting and taking the money later isn't a backup-plan.

If you take your $40m now, you're insured against all that, and also against growing bored with the project and conflicts with co-founders or key employees -- and the buyer just might let you work, even on salary, on the project.

Passion now != passion in 20 years. Actually, I'd venture as far as saying that if you're sure your current passion is going to last, it's not real passion.

I know MBA's aren't the most popular people around these parts, but they do get Net Present Value. Basically, you need to discount the value of future earnings relative to current cash flow.


Yub, took that course :)

MBA or not, NPV (and the derived methods) are incredible useful tools in financial planning and decision-making for any business.

I could by your comment that you got it, but it gets a little lost in the rest of the thread debating the philosophical aspects of selling out vs. plowing through.

"If you're doing what you like and you're earning a mil or two a year (or well on your way), why sell out all at once for $40 mil?"

Liquidity. Future success is not guaranteed.

I don't think anyone sells their business so they never have to use their brain again, which is the premise of "mojito island."

I don’t think that person exists as often as the idea of the artist-beneath-the-suit would romance us to believe.

That's a huge assumption to write off the entire reason people would want to sell their company–to pursue things other than money.

My desire to grow a successful company and cash out is not because I want to sit on some island - it's so I have more freedom and can get back in the game again, the next time around with more experience.

I love my current company, I'm extremely passionate about it and what I do, but I also know that it's not the last thing I'm going to do.

And I seriously doubt that I'm alone in this.

Whatever community they're trying to appeal to with this post, I don't think it's this one.

I want to work on interesting stuff. But...

Here's the fallacy. I don't believe that what our startup is doing is the only interesting stuff I could be working on. Some of the interesting things I'd like to do have no obvious, direct economic benefit. For example, there's a bunch of important work which needs doing in emergency technologies which isn't the kind of thing you can build into a scalable, VC-type business.

If I had the freedom from economic uncertainty to work on those problems, you bet I'd consider it.

“So after a much-needed vacation, the retirement is canceled and they’re back to start a new company. (Not always with as much passion as the first time around, but that’s another story).”

But sometimes with twice the passion as the first time around. You should only "rush to get out" if you've got something that you're really passionate about to look forward to. I don't know virtually ANY entrepreneurs who envision a life of pure leisure if/when they cash out. I personally have 2 or 3 companies/non-profits I'd LOVE to start and there are probably a few (generally young) that I'd even take a job at, assuming that I'd have enough autonomy to do cool stuff.

Citing sports stars who came back from retirement in the context of this argument is idiotic. In most professional sports, there is a point at which your abilities start to decline due to age. The tension is between going out at the absolute top of your game, vs. enjoying a few more years of something you are supremely good at, and will never get to do again.

This whole premise for an essay is silly - if you are one of the tiny number of people in a position to make this kind of choice, are you really going to turn to some dude's blog post to make up your mind? But the sports comparison puts it over the top.

Mojito Island is also a strawman, apparently.

Erm, this certainly isn't one of my favourite 37S posts.

I actually agree with them. I think building a "company" whose sole purpose is to be sold, profitable or not is not as fulfilling as building a company that is a company. I think most of us should be striving to build for long term success.

That being said, even 37S needs to realize that building a company is a lot more fun with $XX million in the bank than it is with $XX thousand. It's certainly a lot more fun to do everything else in your life that way, like raising a family, exploring the world doing whatever else it is that your heart desires.

This is a rather weak post with a weak argument.

Contrary to some people here, I don't think DHH is arguing that taking a 40m pay ouy is a bad thing by itself. He argues that it shouldn't be your primary goal.

A big exit gives you freedom from everything. Want to start a new venture? Do it. Want to sail around the world? Go to town. Having to work every year, albeit for 2 million a year, still means having to work.

I think this is a good post. I also think the dialog is good for the community.

With this and the related posts here, there seems to be a preoccupation with not working for the man (whoever that is) and not having to work for money. I think it's baloney and I've yet to hear a reasonable argument for this stance.

If you have a startup, you're already not working for the man. If you took VC and you feel they are the man, well ... sorry, no one forced you to do it.

I wonder how many of the critics of this POV have had a growing, profitable startup for more than a year.

I think the title is more clever than the article. Traditionally, a mirage is a false vision of safety in a dangerous place. If the idea of Mojito Island drives you to keep going in a hostile environment: great. I don't see the suggestion that taking the payoff was the wrong thing, just that reality on the other side did not meet expectations. Sure, it may not be what you wanted, but if you walked that extra distance to get there, rather than giving up and dying, where's the trouble?

I always thought "mojito island" was a metaphor. It represents the freedom to do what you want, where you want, and when you want.

That freedom often times is the same place you just came from, which shouldn't be that surprising. The term "serial entrepreneur" exists because there are enough of them. The thing that drove them the first time isn't likely to go away. Although I'd imagine most of the end up with a better work/life balance than they did during their first successful endeavor.

Couldnt agree more.

We all find meaning in our work - entrepreneurs almost doubly so - and that 'meaning' is one of the biggest components of our individual happiness. When you 'exit' your startup you also exit that 'meaning' - and then there is no choice rather than to go back find it all over again.

* It’s a long life and it’s often best spent enduring the ups and downs of pursuing something of significance. Don’t be so eager to give it up.*

I don't want to give it up, I want to give up having to do it.

Unfortunately, doing is more intimately tied to having to do than many people realize. My login on Reddit is "want_to_want".

Look: if you love what you do (they seem to), and you make enough money at it to be secure (they seem to), why would you "sell out"? Yeah, you could sell out--but why?

You might have other things you love to do but which are much less likely to yield up the financial security you want (or need, if you have a family). Suppose you want to dedicate yourself to, I don't know, singing opera. Maybe you know you'll never make it big professionally but you'd like to run an amateur opera company and perform moderately well for free. Or you want to run a charity of some sort. Or paint. Or...

Yes, I get this. And if this applies, sure--take the money. I guess you weren't doing what you wanted before. But what if you were already doing what you wanted? If you're lucky enough to wake up and do something you'd pay to do--and get paid handsomely for it--why the heck would you want to stop for more money?

Again--already making good money, already doing what you love: why stop?

Am I the only person who has several things I want to do? Even if I was making $1million a year in my dream programming job I can totally see myself taking the $40million, quitting that job and trying out starting up something with one of the other things I want to do. Who knows I might even enjoy that more.

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