Basecamp offers itself as proof that work can be peaceful, and their recent book It Doesn’t Have to Be Crazy at Work acts as a manual for building a calm company for yourself. Some of arguments Basecamp CEO Jason Fried and CTO David Heinemeier Hansson make in the book have been hotly debated in the Twitter streets of late. A few of the claims that have made VC Twitter so upset, some have taken a break (albeit a short one) from congratulating themselves. Here’s a few of Jason’s and DHH’s claims:
While I didn’t agree with all of their claims, It Doesn’t Have to Be Crazy at Work is well worth reading. I’m not in a position yet to implement all of what I like, but I’m going to be experimenting with some of their methodology with my own company FxSound. I’ll save that exploration for another post. For now, let’s explore this debate between the Basecamp boys and venture capitalists.
This is one of those points that got VC Twitter proper mad. The Basecamp boys think that 40 hours is plenty. During the summer, they go so far as to give their employees Fridays off for a total of 32 hours a week. They make the case that for creative work (and they put design, programming and decision making into this category), more input does not always equal more output. Not only do they believe there are diminishing returns over time, they argue that being overworked will lead to burnout and poor output overall.
From my own anecdotal experience, I’ve found this to be true. Frankly, I made a lot of poor decisions last year, and I believe that burnout and making important decisions when tired were at least partly to blame. If my job was assembling iPhones, I have no doubt that more Chinese man-hours = more iPhones for spoiled whities like me. I’m not sure that this applies to the digital space or really any creative work. The Basecamp boys offer examples of some renowned creatives like Charles Darwin who worked like 4 hours a day. Then again, VC Twitter would have no problem putting together a list of greats who worked in the 80 hour/week territory.
So who’s right? Maybe they both are. Maybe the greats are bound to produce regardless of the hours they put in. Maybe some have the mental and emotional fortitude to crank out 80 hour weeks while others don’t. Maybe those with extreme passion and obsession have no choice but to work 80 hours/week. Maybe my problem was not necessarily that I could never put in extreme hours towards a cause, maybe I just haven’t found the right cause.
Like most things in life, I don’t think this question is so black and white. It’s probably person, company and cause dependent. I think where the Basecamp boys and much of VC Twitter get in trouble is when they make blanket claims. THIS IS THE ONLY WAY TO DO IT AND I WILL LITERALLY HAVE MY ASSISTANT STAB YOU IF YOU THINK OTHERWISE. Sometimes I wonder if people really believe things to be so cut-and-dry or if they simply recognize (consciously or not) that taking the extreme position will net them more yummy likes and RTs. Taking the middle path just isn’t sexy.
Why move slowly with a focus on profit when there’s like a bajillion VCs chomping at the bit to throw more money at you than you know what to do with? Chamath Palihapitiya seems to think that the venture-backed-growth-at-all-cost-until-some-sap-buys-you-out-model is a ponzi-scheme that’s soon to collapse. The Basecamp boys would probably agree. They built Basecamp as a profitable company from inception and implore you to do the same. But is it always this easy?
“Profit means time to think, space to explore. It means being in control of your own destiny and schedule. Without profit, something is always on fire. When companies talk about burn rates, two things are burning: money and people. One you’re burning up, one you’re burning out.”
This all sounds great. And as the CEO of a (marginally) profitable business, being in the black does seem to make for a nice vibe. But it’s hard not to get sucked into the growth hype. Conceivably, you can make more by spending more (so long as you’re spending wisely.) For myself, I’ve been more aggressive with reinvesting our profits than we have been in the past, as I believe there are some growth opportunities that warrant the risk. While we’re not spending so aggressively that we’re in the red, it’s very possible we will be as we make the switch from a pay-up-front license model to a pay-as-you-go subscription model. Is this decision blasphemous in the Basecamp boy’s minds?
And there’s likely some businesses where winner-take-all effects warrant a growth mentality. Nobody wants to use the second best Google, the second best Facebook, or the second best LinkedIn. But most businesses can’t and won’t produce such a wide technological or network-effect advantage over their competitors. A lot of people will use project management software like Basecamp despite it not being the most popular or having the most features.
So again, there’s likely some middle ground here. A business (at some point) should make more money than it spends. And hopefully sooner rather than later. Not only does it make obvious economic sense too, it surely makes life easier for founders and their employees.
Jason is taking some heat right now for his position on equity. While I love most of the words that come out of this boy’s mouth, I’m not sure I’m following him on this one.
“Giving out equity in startups benefits ownership way more than employees. It allows the owners to push employees harder and harder because ‘you’ve got skin in the game now… you’re an owner.’ No you aren’t. Owning less than 1% of anything isn’t ownership.”
As an employee, would owning 1% of Basecamp benefit me less than it would benefit ownership? I’d concede that it can give true ownership a good excuse to push their employees harder. But hasn’t Jason also made the claim that pushing employees too hard doesn’t benefit anyone in the long run?
I think what he’s saying is that giving employees small equity stakes on a vesting schedule gives owners the opportunity to squeeze out as many brutally long hours out of these employees until they’re burnt out, churn out, and ownership can reclaim the equity that hasn’t been vested. While this strategy may not work if the goal is to build a long-term sustainable business, it can definitely work if the goal is growth-at-all-cost-until-some-sap-buys-you-out.
But does giving employees equity necessitate poor working conditions? Why can’t Basecamp offer it’s competitive salary, generous benefits package, healthy working conditions and equity? Well, they can. And to say that employees wouldn’t be stoked to get 1% equity on top of what they’re already getting is silly. Maybe 1% equity isn’t ownership in the sense that you’d be able to significantly impact the direction of the company, but it can sure as shit become a lot of money. Try asking early Facebook employees how they feel about equity as compensation.
And at the early stages, most companies aren’t in a position to offer the compensation, benefits and working conditions that Basecamp offers now. For my own company, creating a package for employees similar to that of Basecamp’s is something I’m aiming towards. But for now, we, and likely many startups, can’t get there without offering equity to employees in the meantime. At least not at a pace that I’m comfortable with. Slowing growth not only limits financial upside, it means customers have to wait for great products and services. Maybe that’s okay for the sake of sustainability, but there must be a balance.
I think incentives probably have some role in the polarizing nature of this discussion. Strong opinions get more attention. There’s also some financial motivation on both sides to see these stances play out.
The Basecamp boys would probably be dishing out a lot of money if they started compensating with equity. VCs and venture-backed startups can benefit from the often unsustainably high output, high churn, and lower overall compensation that can come with equity-heavy packages.
Healthy, sustainable profits are great for the Basecamp boys, but VCs are looking for 100x returns that don’t typically come without an aggressive growth strategy. And why optimize for profits when bigger companies will buy your investments for just their growth potential? Faking growth is a hell-of-a-lot easier than faking profits.
80 hour work weeks suck when you’re the one working them, but for a VC? That’s not my job. And if you’re a startup founder busting your ass because of the insane growth expectations of your VC investors, you probably want your employees to match your effort.
So while work probably doesn’t have to hurt (most of the time), I’d be careful to take either side of the blanket statements offered by the Basecamp boys and venture capitalists. I’m team Basecamp boys, but maybe I’m just salty about not being venture-backed.
I’m going to be writing more about the Basecamp boys and my attempts to implement some of their frameworks and ideas into my own company. Subscribe to my newsletter if you’d like to follow along.
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