Helloooooo team! Great to be back with another book review on Rework.
Before opening this book, I’d already done a lot of homework on the story of Basecamp, Jason Fried and David Heinemeier Hansson. We share a lot of views on how business should be done. My goal with this book was to gather more evidence on our philosophies, and dig for more unorthodox methods.
After finishing the book, I’d say it’s more a collection of opinions than an evidence-based study of startups. That being said, if you already believe in remote work, complete autonomy, and admire Basecamp – it’s fun to get inside the founder’s minds.
Let’s dive into a few principles that fly in the face of conventional wisdom:
#1: Maintain Control AKA Don’t Raise Capital
So many smart people get this one wrong. At first glance, it’s “duhh, stay in control.” How do they screw it up? Raising capital. 99.9% of the time a startup raises a seed fund, they do it out of sheer laziness. Great resumes and fancy acronyms do not a startup make. But a seed round, def.
We should celebrate businesses that find traction, and use raising money as a proxy for product-market fit, if we can prove it. Raising money by itself is not a victory. It’s simply a ratcheting up of expectations. Whatever previous goals the business had, 5-10x them. Your investors demand returns, and you owe it to them to provide one.
Capital also suspends the need for a bottom line. If you don’t have to be profitable, why would you be? If you can pay yourself a 100k salary in NYC in your seed-stage startup, why wouldn’t you? It’s a shortcut to doing the real work – finding product/market fit, getting paying customers, and turning a profit. This should all be done before going all-in on a business. Until the business can pay you, it isn’t worth 100% of your time and effort.
When you’re able to do the hard work upfront, you’re in control of your destiny. I’m not in the startup game to answer to anyone but myself, my employees and my customers. Maintain control so you can be nimble, set your own expectations, and do the hard work first.
#2: Underdo your competition
Does this sound like shooting yourself in the foot? Think again. Underdoing means building as few features as possible. When you pick fewer things to do, you will do them better.
Big tech is ripe with “one-stop shops” for your marketing, sales or HR needs. Rarely does any solution serve all aspects of a department. If you work in a startup already, you know this – we all use multiple tools: gmail, slack, threads, asana and so forth.
You won’t serve everyone, on purpose. Some of your customers will churn as they get too big, or feature hungry. That’s ok. If you do something really well, and that thing is in demand, you will be ok. Niching down while maintaining control also means you can go into spaces that VC tech won’t tough. To them, a 250k/year business is nothing. To me, that’s not too shabby.
#3: Listen, but don’t write it down
Listen to your customers, but don’t take their word as bond. FYI – they’re wrong all the time. You’ve got to have a vision, validate that vision, and execute on it. Steve Jobs pissed a lot of people off executing his vision. Hard to say he was wrong though – Apple being, at one time, the most valuable company on earth.
The worst founders I’ve met try too hard to please their customers. Building to a customer’s specifications means they’re running the show. You should listen, absorb, observe what you think the market needs. But don’t bend your company to any 1 customer. If they leave, you’re screwed. Build what the broad market needs.
Eventually, if the market really really wants something, you won’t be able to avoid it. Otherwise, stick to your guns.
#4: Building to flip, is building to flop (don’t think about exiting to exit)
If you’re seeking an exit, you’re going to optimize for the wrong factors. To get a great exit, build your business as if you never plan to exit it at all.
I admit I’ve dreamed of building a business then selling it to a corporate jabroni at a juicy valuation – pocketing the cash and letting them figure out how to make their ROI. Seems like an easier route than running a business for 25 years myself, and continually growing profits.
After this section of the book though, I’m changing my tune. No matter what outcome actually comes my way, I shouldn’t focus on exiting, i.e. what investors want. Instead, I should only care about what 1) the market wants and 2) what my customers need. That’s how you build a business people will salivate over.
Imagine you do exit. Would it be possible to have a work environment better than the one you built in your vision? Probably not. I think it’s better to think of a purchase as a partnership, not an exit. Make the business one you’d still want to be part of, fully owned or not.
Another problem I see here is allowing trends to dictate your business direction. Trends are great in short spurts to make a startup the talk of the town – like Crypto in 2018. You see all the $$$ others are making and think you could squeeze in and out and make a quick buck. Before you know it, the trend cools off – like Crypto in 2019. Do you still want to be in the space? If not, you’re shit out of luck.
#5: Delegators are dead weight
Beautifully said. If you can’t do anything, then you have no value. This is also why I think MBAs are next to useless, since they come with no tangible attached skills. If an MBA means someone understands business, marketing, sales, and finance, then it means nothing. No job description asks for excellence in all those areas 😆.
Look for stratecuters. Someone with a strategic understanding of their role, in your company’s position, and the ability to execute tasks to advance that position. They should thrive as an army of 1, and then you can start layering on resources to make them even more effective. The first of those resources should probably be a VA so any kind of data entry or mechanical work can be abstracted away. Quality people should only be doing challenging work, when possible.
This principle also means you should be really wary of anyone with too much corporate experience. They often grow accustomed to having teams for x and teams for y, and will get stuck when asked to go outside of their comfort zone. When pushed to learn a new skill that’s valuable for the company, excitement should follow. Not an allergic reaction. “I don’t think I’m the right person for this, have the intern do it” hahaha! I’ve heard that one before.
Thanks for reading my take on these 5 business principles. Like the Basecamp founders, I think tons of companies get it wrong. I won’t argue with success, but I don’t believe that a company’s success overshadows their employee’s misery. Goldman Sachs for example, the biggest and most profitable company I’ve ever worked for, has by far the most miserable people.
I refuse to settle on a balance between those two. I want exceptionally happy employees, at an exceptionally profitable business.
Back again soon!