Man Crush: David Heinemeier Hansson

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About

Notes and thoughts from David’s homepage. Inspirational, he has a great outlook and perspective on business and lifestyle.

Note: Considering consolidating the notes from the three videos in the future (as they overlap quite a bit).

At a glance

  • Created Ruby on Rails
  • Partner at 37signals (known for Basecamp)
  • Author or co-author of REWORK and Getting Real
  • Public speaker
  • Race-car driver (WTF?!)

The Secret To Making Money Online

“Great achievement comes from solving simple problems.”

  • Charge for your product
    • Subscription, pay per use or pay to own are all tried-and-true business models
    • If the product is good enough, people will pay for it
    • Scaling problems are GREAT as it linearly correlates to revenue (unlike YouTube…)
  • Don’t focus on trying to “catch the next wave” (e.g. Facebook, YouTube)
    • Odds of success are microscopic (exception rather than the rule)
    • The jump from nothing to $1m is a lot harder than the jump from $1m to $1b
    • People are too eager to release and take VC money
    • Sensationalised in the media along with plane crashes
  • Try and build an “Italian restaurant” (doesn’t have to be the best Italian food in the world, just convenient and slightly better than local competitors)
    • Most businesses will still fail
    • $1m is a hard but achievable target (e.g. 2,000 customers @ $40/month, with 5% conversion rate need 40,000 customers or 110 a day)
    • Be happy with $1m…it’s a lot of money
    • Only 2,000 customers? Attack a niche!
  • Choose sustainable over viral growth
    • Start small and be patient
  • Target Fortune 5,000,000 companies!
    • No business too small
    • Just want their problem solved at a reasonable price
  • Many small customers over a few large customers
    • No corporate bureaucracy
    • Not reliant on a few customers (bend over backwards, feature coercion)
    • Evenly distributed customers = less fragile
  • Passion over money
    • If you can earn a million a year and do what you enjoy, why give that up for a pay day? What would you do next?
    • After a point (comfortable living, freedom), money provides diminishing returns and even negatives (email, meetings, reputation, more to lose)
  • Work smarter, not harder
    • Only 2/3 really productive hours a day
    • Working less hours a week forces you to focus and not waste time
    • The work ethic (hours, patterns, practices) at the start will never ease off — make sustainable choices

TWiST #46 Interview

Facebook to startups is equivalent to lottery tickets for a wage — it only works for a precious few. Is a lottery a good way to run a business?

  • Rule #1: Just build a profitable business
    • Don’t try and get hits then figure it out later
    • Charging for your product is better than begging for advertising crumbs
    • Social, traffic, hype (e.g. TechCrunch), VCs and acquisitions are a fake game, a bubble
    • Lots of spinning the wheels while going nowhere
  • Startups don’t need VC
    • Nothing easier than spending someone else’s money
    • Too much runway, easy to goof around, no fire up your ass!
    • Besides the top tier, overall VCs have lost money
  • Acquisition (i.e. exit strategy) will likely make your company worse
    • Successful acquisitions are the exception, not the rule
    • Keeps happening because of delusions of grandeur and risk taking (i.e. “this time it will be work”)
  • Profit is king
    • Best feedback mechanism for measuring the success of a idea/company
    • Revenue is irrelevant
    • Strong profit margins is the best position to be in
    • Who cares about market share if profits are strong (see: Apple)? Only matters if it leads to profits.
  • Selling out
    • Work on your best idea right now. Why would you sell to work on your second best idea?
    • It’s possible you won’t have a better idea in the future (e.g. Microsoft’s best ideas of Windows/Office are decades old)
  • Big != Better
    • Overvaluations, going public, massive acquisitions…
    • Loss of control and dealing with bullshit associated with being “big”
    • Reduced quality of life
  • Misc
    • If established and profitable, it’s OK to sell non-controlling shares for a personal payout (i.e. take money ‘off the table’)
    • Urgency is overrated
    • Meetings suck! Make decisions quickly, fail fast and iterate
    • Working harder (i.e. more hours) does not equal success
    • Revenue per employee is a good measure of efficiency (beware the bloat)
    • Web allows for many small businesses — not just Wallmarts

Unlearn Your MBA

“Take the time, at a reasonable sustainable pace, and own your company in the end — or strap the [VC] time bomb on your back and see if that’s going to make you run faster; and see if you’ll be happier in the end.”

  • Planning is harmful guessing
    • Most decisions are temporary (i.e. not building factories)
    • Decisions don’t matter that much, pick and get started
    • Constraints force new ideas in new markets
  • Sustainable and scalable
    • You can’t pay your bills with eyeballs (i.e. page hits)
    • Should be no linear correlation between revenue and the org chart (more revenue doesn’t mean more people)
    • Sustainable businesses built on word of mouth
    • Generally don’t make big splashes in the media (not sexy)
  • Working
    • Being a workaholic is not a requirment or guarantee for success
    • Only 5-10% of effort matters
    • Less execution through a well rested mind (i.e. work smarter)
    • Startups need people who contribute direct value, not ideas or management
    • Entrepeneurs should force themselves to work for a shit company for 6 months to learn from mistakes and get the motivation to be better
  • VC is a time bomb
    • Seems like a good idea, probably the most harmful thing you can do
    • Push for big returns in short timeframes — have no interest in slow, sustained growth
    • No constraints and no urgency…until the the time and money runs out (then you’re fired)
    • Spending your own money is a strong driving force
    • Either have the pain now (struggle with no money) or later (wasted time, pushed out, nothing to show)
    • Wasted time and effort getting the next round of funding (addicted, next hurdle)
    • Accelerated growth is a farce — it takes a long time to get something good
    • Killing industry by crushing ideas/companies and wasting people’s time
  • Big leagues via the small leagues
    • Even small companies can make millions per year
    • Creating a small company is like playing poker: it takes skill and luck, but at least you have a fighting chance. Creating the next YouTube is like the lottery.
    • Very few companies go straight to big, but that’s what VCs are searching for (optionality, low investment for a potential huge payoff)
    • Most ‘overnight successes’ took 10-years
  • Existing business lessons
    • Easiest way to destroy a successful company is to deviate away from what make it successful
    • Idle managers are the worst as they need to make things up (e.g. processes) to justify their job
    • Opportunities exist when times are tough and business shift to more cost-effective alternatives
    • Salesforce has terrible margins (~6% profit)…and they sell software!
    • Bad decisions a product of the environment more than the people (e.g. no accountability, perspective, training, familiarity with business, culture)

Jason Calacanis

TWiST host. The Bill O’Reilly of technology (maybe not that bad…maybe).

Greedy, forceful, egotistical, selfish, devious and arrogant. Don’t care who you think you know, what you did and how much you made.

Derives pleasure through belittling and condescending behaviour. Relentless comparisons to tech giants (e.g. Google, Facebook) in an effort to poke holes in business comfortable where it is. Not every basketball player in the NBA can be (or needs to be) LeBron James.

Afraid (“are you a communist?”) of a person who is perfectly content in the ‘middle’ rather than at the ‘top’. Confused and offended at the very notion that you wouldn’t trade happiness and purpose for a pile of money!

A manifestation of everything that is wrong with capitalism.

References

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