Thoughts on Entrepreneurship with Jason Fried

November 8, 2012 / Business

Last night I had the opportunity to hear Jason Fried, founder of 37signals, voice his thoughts on entrepreneurship.

Questions were asked by Starter League students, and the discussion was moderated by Neal Sales-Griffin. Below is a paraphrased collection of Jason’s answers.

What is your perspective on being a student?

Learning Rails has taught me how to be a better communicator with people. It’s humbling trying to tell a computer to do something, because computers don’t know anything, and you have to tell them absolutely everything.

Programming has you break real world ideas into small pieces, and try and reassemble them into something that works. This carries over into marketing. You assume that people know what your product is, and what it does, and what problem it is trying to solve, when oftentimes they don’t. So, you do the same thing, break it down, and put it back together in a language they can understand.

What was the process like going from a web agency to building a product?

37signals used to be a web design firm, until the launch of Basecamp in 2004.

We were fortunate enough to have plenty of client work, but needed a better way to manage our projects. After looking around for software to solve our problem, we decided to set aside some time to built an internal tool. That tool eventually became Basecamp.

We allowed our consulting business to fund our software development. At some point in time it started making more money than our consulting. When it did we stopped doing consulting.

The lesson in that is if you have an idea start it on the side and see where it goes. There is a lot of talk about entrepreneurs taking big risks. I’m actually pretty risk averse, I don’t think that you need to take a lot of risk to be an entrepreneur. Don’t quit your day job, start something on the side and see where it goes.

What are your thoughts on a flat management structure, and how it has served you at 37signals?

I think we have a flat structure at 37signals. There are only four people considered managers.

The main reason why, is that I hate management. I hate the structure that it imposes. I feel that if a small company exists with a lot of management that means they distrust their employees. It is one thing to have a company with hundreds, or thousands of people, but if you have six or seven people and three of them are managers, something is wrong.

By default we trust everybody to do the right thing, if they don’t do the right thing then we talk about it. Having a bunch of structure and policies in place first, assumes people are going to do the wrong thing.

Our biggest team in the company is our customer support team, and they don’t have a manager at all, they are completely self managed. Every month they rotate their team leadership position.

What is your employee retention like?

Very good. We’ve had five or six people leave in 12 years.

When you are with strangers you can’t ask tough questions. You can’t push back very hard, because you are afraid of offending somebody, or hurting their ego. I think companies that have a lot of turnover have an issue where they can’t push each other. You need to be able to push the people you work with in order to build a really great product.

I think teams that have been together a long time tend to build better products, you have to be careful about old blood though. You need to have new ideas and new people.

What should be next after Starter League? Should I try and get a job, or should I double down on my project idea?

I think you need to have a very clear idea before committing to building something. You’re better off getting experience from people that do have an idea.

You can get very discouraged if you like the idea of starting a company more than the idea of what you are trying build.

Jason Fried, Do you have any tips for trying to keep a close relationship remotely?

The most important thing I’ve found it not to have separate cultures. There are always going to be slightly separate cultures.

We have people working in 20 separate cities around the world. So, everyone outside of Chicago is isolated to some degree, but we built a product called Campfire. Campfire is a real-time chat room, and that is where the culture of 37signals lives.

Obviously it is hard to replace person-to-person conversation, but if you are a designer in Oklahoma City, or Moscow it helps to know that you are speaking in the same place everyone else is speaking.

If you do have decentralized people, I would encourage you to have a centralized place of communication. I don’t know how we would work, as a company, without campfire.

In Rework there is a chapter about being a workaholic. What is the line between being inspired and being a workaholic?

Inspiration and productivity come in waves. There are times when I’ll put in a long week, because I’m inspired.

You shouldn’t be one of those people that put in an 80-hour week just to say you are working. Your brain isn’t going to work well when your tired.

You can convince your self that it is, but there are alcoholics that convince themselves that they don’t have a problem either. You need to sleep. Does anybody come up with their best ideas when you’re exhausted?

You need to be really self-aware about how you are spending your time.

Jason, What are your thoughts on design communication?

Clarity is the most important thing. You should write the way you want to be read, not write in the way that you want to write.

Clarity is a process of getting to a point. If you can cut something down without leaving any meaning out, it becomes clearer.

You just have to keep asking yourself what you are trying to say. It’s easy to write words, and take up space. I think one of problem of web design is words come last. The words are what people are there for so words should come first.

Design is about writing, so thats what we start with.

There are a lot of books over at 37signals. Can you talk about them?

The Elements of Style, which I think is less important these days, and On Writing Well.

There is also another one called Revising Prose. The book is all about editing, and revising ideas down. It is all about writing sentences. It’s not about writing novels, or pages, or paragraphs – just sentences.

What are your thoughts on selling?

Everything is sales. We don’t have any sales people at 37signals, but everything we are doing is sales.

Sales isn’t so much gimmicky pricing ending in 9′s or copy writing, or ad placement – It is about communicating the value of your product.

I used to sell shoes, and we had reps come in and teach us about shoes. A rep would come in and talk about ethyl vinyl acetate, which is a foam that goes into shoes to help absorb shock. He’d be all pumped about EVA, and this technology, as if it really mattered. When customers come in they look at some shoes. They pick it up and flip it around a bit. Then you ask to try on a pair. People are looking for design, comfort and affordability. Nobody cares about EVA foam.

You have to understand in your product that you need to talk about what matters to the customer, because they don’t care about the tech.

How do you determine pricing on something like a web app?

The main question to ask is if you would we be willing to pay this number? We figured that we could always change prices down the road, and grandfather in the people who have already paid.

The most important thing is that you have prices. If you don’t have a price you can’t sell anything. Price forces you to be good. If you give something away for free it force you to do anything.

We recently switched to even numbers. My theory is that this pricing says that this is an honest company and these guys aren’t screwing around. I figure if you’re not going to buy it for $20, then you’re not going to buy it for $19 either. Conversions actually slightly improved.

How do you deal with other players in the market?

You have to understand who is your actual competition. I can’t look at project management software as Basecamp’s competitor. More people use email to manage products than anything in the world.

Why are you learning Rails?

There are a few reasons. I want to be less of a burden on the people I work with. I want to speak another language, one that my coworkers speak. If I speak their language we can communicate better. I want to learn another way to think. Programming teaches you a whole new way to thing about things.

What are some things that you’ve learned in class at The Starter League these last few weeks?

Computers don’t know anything, they are dumb. We have these immensely powerful machines that can’t do anything unless you tell them exactly what to do.

If you liked this interview format with Jason Fried, check out Signal Tower. It has dozens of interviews with entrepreneurs.