The First 100 | How Founders Acquired their First 100 Customers | Product-Market Fit

[Bootstrapped] Ep.32 - The First 100 with David Heinemeier Hansson, the Co-founder and CTO of 37Signals, the company behind Basecamp and Hey | Product-led Growth | Stoicism

January 05, 2023 David Heinemeier Hansson Season 1 Episode 30
The First 100 | How Founders Acquired their First 100 Customers | Product-Market Fit
[Bootstrapped] Ep.32 - The First 100 with David Heinemeier Hansson, the Co-founder and CTO of 37Signals, the company behind Basecamp and Hey | Product-led Growth | Stoicism
Show Notes Transcript

In the episode, I chat with David Heinemeier Hansson, the Co-founder and CTO of 37Signals, the company behind the famous Basecamp and Hey. He is also the creator of the programming language Ruby on Rails, used by companies such as Twitter, Airbnb, Shopify, and Square, to name a few. He is also the best-selling author of the book Remote and Rework, and impressively he is a Le Mans class-winning race driver.

This is a wide-ranging conversation exploring topics such as:

☑️Going from not having a driver's license at 25 to being a Le Mans Champion.

☑️How to reach an Immersed State of Flow.

☑️The framework to compete and beat the best version of yourself.

☑️How he built Basecamp in a non-risky manner.

☑️How HEY is revolutionizing email and competing against the Free Gmail.

☑️His template to unlearn habits that we don't need.

☑️How he uses stoics principles to make decisions.

☑️and so much more.....

So get ready to expand your thinking and learn how to supercharge yourself with David Heinemeier Hansson!

If you like our podcast, please don't forget to subscribe and support us on your favorite podcast players. We also would appreciate your feedback and rating to reach more people.

We recently launched our new newsletter, Principles Friday, where I share one principle that can help you in your life or business, one thought-provoking question, and one call to action toward that principle.

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It is Free and Short (2min).

Let's do it. Broadcasting from around the world. You're listening to the first 100. A podcast on how founders acquired their first 100 paying customers. Here's your host, Hadi Rodwan. Good to have you on the show, David. How are you doing today? Good, thanks for having me on. I'm very excited for this episode because you've been someone who's very outspoken. You're out there. If people don't know about you, I'm gonna give a quick introduction and then we'll dive deeper into your experience. So David, you're the co-founder and CTO of 37Signals, a company famous behind Basecamp and Hey. You're also the creator of the famous programming language, Ruby on Rails, which many companies we know about use like Twitter, Airbnb, Shopify, Square, to name a few. You're also a bestselling author of a book called Remote and Rework. And impressively, you also are a class one, a Le Mans driver. So David, I've been looking forward for this interview for a while, as I'm a big fan of many of your ideas, especially remote. This is how we run our company. for the past three years after COVID hit and made this something mainstream now. And by learning from you without meeting you until now, I've cemented many principles around remote working and also stoic philosophy, which we'll touch a little bit on that. The show is about your first paying a hundred customers, but before we dive deeper, I'm very curious to know what does it take for someone who didn't have a driving license at the age of 25? to win a race at the age of 34. You know, it's 10 years. If you want mastery, people usually takes them from day one. So for our listeners, just to put some context on what the race means, it's one of the oldest active endurance race event where the cars are driven for 24 hours on a track and then the winner is determined, whoever covers the most distance within that 24 hours. So it's a race of endurance, grit and accuracy. Yes, it is. It is the greatest endurance race in the world, in my opinion. And it's just about to celebrate its 100th anniversary. The race was started in 1923. So next year we will have the 100th anniversary of the race. And it became the driving force for me as soon as I got enough into racing to know that I had a modicum of talent for it, a talent that I could develop into some real skill. And I drove that. interest by this goal of first getting to Le Mans, which happened in 2012. So seven years after I got my driver's license and just five years after I first sat in a real race car and then to obviously getting on the podium, winning a class and continuing to do the race. I've just signed my contract for this year, so I'll be doing the race for the 10th time. The first time I sat in a car, the first time I sat in a race car and realized that experience was so unique, yet so similar to something I had discovered and cherished in other domains that I've been involved with. It was this state of total flow. The flow state where you more or less forget time and space, you're singularly focused on the task at hand and the task at hand is just beyond your reach. You're constantly trying to improve. You're constantly trying to stretch. It's not impossible. It's not such that you get discouraged and don't want to pursue it, but it's also outside of your comfort zone. And the combination of a chase after mastery with this sense of being somewhat outside your comfort zone, it's just hugely addictive and it's hugely focusing for the mind. I felt that feeling of flow many times over the years in programming, but it was always... sporadic. It would come, it would go. And I didn't really have a switch to turn it on or turn it off. I just considered myself really lucky if I landed up in a state of flow when I was doing programming or even writing. But with a race car, it literally was a switch. It was actually an ignition. You push the starter button, the engine fires to life, you get on the track and then boom, you're in it. And especially for the first many years. It really was that simple. You turn on the car, you drive out the first corner. You have to have your wits about it. You have to have your complete focus on making that corner and getting on with it. So it almost felt like cheating. It felt like here is this happiness inducing state of mind, the flow state that you have access to on demand. So I really got attracted to that. I really got into becoming good at this. and adopting that beginner's mindset that the way for me to get good at this was to constantly put myself in a situation where I was, if not the worst, then seriously off. So I went through my whole training process for getting to Le Mans, constantly chasing bigger challenges. If I ever felt like I was in an environment, at a track, doing a race series where it was too easy that I was winning too much, I would move up. I'd get some better competition. I didn't have any interest in being the best at some small little local track somewhere. That was not what kept me fired up. What kept me fired up was this dream of getting to Le Mans, which is the greatest endurance race in the world, where the best endurance racers in the world compete and to show up and not make a fool of myself. So having that drive, embracing the beginner's mindset, realizing that basically everyone who I would meet, they'd have something to teach me. So That really just flushes out whatever kind of arrogance you might build up as soon as you learn a little bit. If you keep just putting yourself against better competition, you stay humble by the fact that there are constantly people who are better than you, and in racing, it means that they're faster than you. And that was perhaps the other part, that the racing feedback cycle is so objective. You have this race car. and particularly endurance racing, where you're sharing the car with other drivers. So you're sharing exactly the same equipment. You go around the same track and you get a verdict every minute and a half at most tracks or two minutes, maybe exactly how good you are. And you can compare that number to someone else who's in the car. And they'll be like, how is this person eight tenths of a second faster than me? Which is this fascinating thing in race car driving, the difference between someone like me, who's a dedicated amateur and someone who's a paid been chasing this their entire lives might be as little as two or three tenths of a second. Over the course of a lap that takes a minute and a half to complete, it's just a couple of tenths that separate you. But that's also what is so invigorating about it. You see the mastery ahead of you and then you try to figure out how do I get there. It's an intoxicating process that I feel like... It's just been a real pleasure to be part of and been a real pleasure to be able to discover relatively late in life. Most of the people I go racing with, they've been racing since they were six years old. In go-karts and in all sorts of other stuff, I didn't get my driver's license until I was 25. I didn't sit in a race car until I was 27. So I had a lot of lost ground to make up for it, but I did play a lot of racing video games. So I think that prepared me a little. That's a great way. And by the way, it's very interesting. And I'm curious to know. How would you overcome what is known as the Dunning and Kruger effect, where when you're starting with a skill, you start to learn and you see there's, you're gaining that skill very fast at the beginning, your confidence level goes up and then suddenly it goes down because you figure out that there's very little details that you were not aware of. And that sometimes in many sports and many other activities, it demotivates you. You stop in your tracks and say, probably that's not for me. It's going to take so much time for me to master it. Have you faced that and how did you overcome it? Absolutely a thing you face, because as you say, when you start in a race car, you go out for the first time, you might be 10, 20 seconds off the pace and you do it a couple of weekends and suddenly you're not 10 or 20 seconds off the pace, you're five seconds off the pace. Then you do it for a whole year, maybe you're only three seconds off the pace and you feel that there's immense rush that you're improving at an incredible pace and it feels very addictive, but then it slows down. Now you're three seconds off the pace and it takes a lot of work now to become two seconds off the pace and then it takes even more work to get down to being a second and a half off the pace. It might be years where you could shave off 10 seconds or increase your pace by 10 seconds in two months in the early days. And then it might take you years to shave off half a second later on. But to me, the determining factor there is, do I enjoy the process of learning? Or is this all just instrumental? Is it because I'm chasing extrinsic rewards? Am I doing racing because I want to win a trophy? No, I'm not doing racing because I want to win a trophy. I'm doing racing because I want to beat me. I want to improve against me. And that is a long-term sustainable way to motivate your conquests of skill because you can always improve against yourself, or at least that's where it should be. Perhaps I am getting now to an age where that'll become ever harder. I think most race car drivers actually, the professional ones, they've retired at least from the top tier of the sport by my age of 43. So there are just some physical factors that eventually would mean I'll be traveling on the downhill, but I'm not quite there yet. So the motivation to beat myself and to show up at any given race and put in the very best that I have and then made the chips fall where they fall. just winning. I think once you get into something and you place your motivation in the halls of trophies, that's a very fragile state to be in. There's a million reasons why you may not win a race, even though you drive spectacularly. The race cars break down all the time. There are accidents out of your control. There are things that happen. So if you look upon your effort and go like, That's not about you and just as much the other way sometimes you'll win a race Not because you drove the most perfect race But because your competitors screwed up in spectacular ways and I've won races where I felt like you know what? I wasn't driving my best in fact when I won the 24 hours of Le Mans in 2014 in our class That was not a highlight for me I mean it was because it was great to win the race, but not in terms of my own performance there are other races where including one in 2017 where we ended up on the overall podium and then got disqualified the next day for a technical infringement, I felt like I don't care whether we got disqualified. That race was amazing because I put in the very best I possibly had. And that's where I want to continue to draw my motivation from. So it is hard when you see the rate of progress slow down. if all you're chasing is these other things. But if you actually enjoy the effort itself, if you enjoy the state of flow that comes from, say, driving a race car and being on a racetrack, it's fine. It doesn't have to be that, but you have to be quite mindful about where you draw your source of motivation from and to not put in the nozzle in the wrong tank. Thank you for sharing all of this. As you mentioned, in 2017, you came on the podium. I think in one of your races, you ended up second. You're a person who's very driven, competitive. You're always analyzing what goes through your mind on the next day, your second. Do you go back and say, let me get a break, I did what I do, or you go back to the drawing board, figure out what went wrong and start training again? How does David think about all of this? Well, first of all, I don't pay that much attention to. the end result necessarily. I pay attention to my own performance. So what I constantly measure myself against in endurance racing is how well did I drive compared to my professional teammates in the same car? And it's that split I'm constantly trying to work on. And if that split is really good, that's what makes me the happiest. When I am the closest I could possibly be to some professional who's been racing go-karts since they were six years old, and I'm a couple of tenths off, their time, I go like, you know what? That's about as good as it's going to get. I'm not going to be someone who consistently beats professional race car drivers who've been driving since they were six years old. That is not within the realm of likely outcomes here. And if I put that in front of me as like, that's the gateway to success. I'm just going to be miserable all the time, but I do check it very seriously. How can I learn from this? And a lot of it starts right after the race. Because the wonderful thing about modern race cars is they produce an absolutely enormous amount of data. You can analyze these cars of the Wazoo and you can analyze the driving of the Wazoo, which is this other thing that just fascinates me about this sport. We'll go out on a session, I'll drive, and my professional co-driver will drive, and we'll come in and we'll see this very high resolution chart that within tenths of second can measure how hard we press the brake pedal, how consistently we are... the throttle, the G-forces that are working on the car at the time. And you can pick something up all the time. Every single time, almost, I'm in the car, I feel like there's a little something. There's a little something that you pick up and that in itself is also just revealing and interesting. And I think that's why some of my favorite races are not races that ended up with great results, but races where I learned the most, that I was most prepared for the next one. Because that's the other part of this is at least in terms of my engagement with the sport, it's not a one-off. I'm not doing one race. I'm trying to optimize my personal performance for the next 10 races, for the next 20 races, for the next 50 races, because I know that to win one of the great races, like the 24 Hours of Le Mans, you A, have to be good, but B, you also have to be lucky. You have to have all these factors go in your way, and if you bet it on a single shot, you're likely to be disappointed. There are not a lot of people who can show up just to a single race and then... dominate and then like, all right, thank you. Bye. I've driven over 100 professional races. And I'm interested in sort of the long run rising averages, the rising average of skill and endurance and all the other factors that go into it. And then you just accept that you know what, along the way, there's going to be disappointments, there's going to be all the other stuff. But as long as I get into a race car, shut the door, turn on the car, and feel like all right. We're getting into flow mode here and I'm still progressing. I'm still learning. I still have a shot at being competitive. It's good. I want to keep going. Let's shift gears a little bit then. Basecamp, I believe was your second startup after Daily Rush, it launched in 99, but you joined later in maybe 2003 or early 2004. And it's probably the most successful bootstrap fast company that's still ongoing. And you stuck. I believe to one important ethos, which is simplicity in software. You built and refined a project management tool to millions of ARR today. You're big on first principle thinking. How did that impact your first version of Basecamp and later Hey? It's a great question. So 37signals was founded as a design company consultancy in 1999. And I joined up with Jason. one of those original founders in 2001, we started working together on consulting projects. And then in 2003, we had this experience of a bad interaction where something was dropped because we were organizing our project over email as it inevitably happens, something falls through the cracks and we looked like idiots a bit to a client. And we thought, you know what, this way of working, organizing our projects over email is... Why are we doing that? We know how to build software. Could we not build something that's just a step up from email when people are trying to collaborate long run over several weeks or even several months, particularly if there's more than just two or three people involved, that's often when email breaks down. It feels so easy to get started and you just trade some comps back and forth over email and suddenly they're like, oh, you sent me the wrong version or I don't have the right person involved with the project or how do we get access to that? Oh no, that email. We wanted a solution to this for ourselves. We did not set out to create a product company on day one. We set out to solve our own problem, the things were falling through the cracks with our clients when we were working with them over email. So we set off to do this as a side project. This was the other thing. We didn't stop everything. We didn't accept this immense risk that's involved with pursuing a new idea with all of your efforts and all your resources from the get-go. We thought like, you know what, we're going to treat this as the third or the fourth or maybe even the fifth client. So in my accounting, that added up to being 10 hours a week. I was in school at the time. We were also working on these client projects. So I had 10 hours per week, not per day, per week to work on Basecamp. First in the form of a solution for ourselves. And then about halfway through the process of building Basecamp, we started to realize, you know what, there might be something here. So we showed it to a couple of. friends in the industry who also worked on client projects. And they were all like, take my credit card, take my money. Can I buy this from you? And we were like, oh yeah, we should turn this into a product. So about halfway through, we decide, you know what? There's enough here. First of all, the bits we've built halfway through are already massively improving the way we're working with Alliance. Because that's the other thing. We started building this for ourselves and we started using it the second week or the third week of this construction process. because there was just already a couple of features we had essentially the message board that people who've used Basecamp today will recognize. Like that feature was built in like two weeks. And that was already a dramatic improvement over email. Now you had a single thread where all discussions about this one topic were encapsulated. You could refer back to it later. Someone could join the project two weeks from now and could catch up on what had been discussed and what had been approved and so forth. So we're already at this stage that we built something that works. And... We then simply just kept building the stuff that we felt we needed until there was enough of a thing here that we would have gone, do you know what, if someone else would have built this, we would have bought it. Now it was really the threshold for us, not just in terms of when are we ready to launch, but also in terms of what should we charge. This introspection of treating ourselves as the first customer, first of all, building something that we would buy if someone else would have built it first. And second of all, charging an amount of money that seemed reasonable if we had to pay it to someone else. So those two factors really helped focus the drive. But then the other thing was this risk management. That we took on no risk. So many startup stories are about all this risk that they took on. And yeah, and then I was on my third maxed out credit card and I had double mortgage, the house. And then like on the last day before we went bankrupt, we got the money and then we... We don't have that story. I'm sorry. Our story is terribly boring in comparison. No one maxed out their credit cards. No one took a second lease of mortgage on their house. We simply treated this as a side project while we had paying clients who could comfortably cover the salaries that we have. And the other thing there is we're a tiny team. When I say I had 10 hours a week to work on this, that was me as a sole technical person doing everything technical on the creation of Basecamp. And then we had two designers, Jason and a guy named Ryan Singer. I had a writer and part-time designer, Matt Linderman. That was the company. It was four people who got Basecamp off the ground, started to build it in 2003, launched it in February of 2004. And together with those modest beginnings were very modest expectations. So our expectations for the business out the gate was that, you know what? If in a year for now, we'll be making $4,000 a month. That's nice. That would be a nice supplement to the consulting business. It would feel like it is one of those permanent long-term clients. It would bring some stability. Anyone who's run a consultancy knows there's a bit of feast and famine syndrome going on. If we just have this nice side project, it creates this baseline, right? Well, three weeks into the launch, we already blasted through the $4,000 a month revenue figure. And we thought like, wow, this is amazing. And yet still, even with that early validation, early comfort that our year out projections are being fulfilled within three weeks, we still went like, all right, cool. Let's see where this goes. Let's get back to the client projects. And for over a year, it was well into 2005 before we made the full transition to stop being a design consultancy and start becoming the new 37 signals, the. software company, 37signals, and going all in on Basecamp in 2005. And even then, again, so we go all in. We go all in with what? With four people being paid quite modest salaries. We also don't take any outside funding to make it happen. We have the consultancy business to bootstrap this. And then we just took it incredibly slow from there. This is the thing that's always funny to me when people talk about Basecamp in. today and you're like, okay, yeah, millions of people have used it and it's quite the large business. But it took a long time to get there. It took a long time to ramp up. I think we had been working on Basecamp and Basecamp was already a very profitable business. Three years into it, we were seven people, maybe? Maybe we were in four years into it and still just seven people. So it just gives you this sense of this wasn't like a hockey stick. VC type adventure where in 18 months, we're just blowing it all out and whatever. We grew within the comfort and confines of what the growth of the business itself could support. We never got out over us. We never anticipated that this is going to be a unicorn. Therefore, we should take on a bunch of money. We should hire a ton of people. We should go deeply into debt. We should be running this company at a huge loss. This company... Both the software version of the company and the design version of the company has been profitable for 23 years straight. Never had a loss making year, always lived within our means. And that experience was quite peculiar. I mean, we've been very outspoken about it because I feel like it's important to provide an alternative to the venture capital backed unicorn chasing nonsense that is the main message that's being pumped out. But. At the same time, this was the slow one to watch, but it also meant that we're still here. 20, whatever, 22 years later. That's not that common in our world and in our kind of business. And that's something I'm incredibly proud of. Not just that we've been profitable, but we've been able to stick around and that Basecamp has been able to stick around. Right? If you look at whatever, a bunch of other things that were launched in 2004, how much of it is still up and running? Not that much. Absolutely. I mean, what you're sharing is very important because it's like a muscle. When you're training your muscle, if you train slowly and surely, you break these fibers, they build up and then you have a much stronger muscle versus when you go out, you get these steroids, you have a big sized muscle. And then when you stop, it dies. And this is a challenge with a lot of founders, right? They need money. They go out, they get it from a VC or a private equity. the requirements are suddenly, hey, you have to grow at any cost. So they grow, they break a lot of things, but because they have so much funds, they can hide those breakages. But eventually when it dries out, what happens here? Everything shows up. Valuations are growing much faster than actually the core of the business. And this is where it gets exposed. You see now the layoffs, right? The layoffs are huge across many industries because of this. We've seen it in insurance. I think it's a lot of e-commerce or software management tools. To your point, I mean, yes, you should be proud because growing slowly is very hard, especially with all of these external forces. And I think also the ambitions are hard to rejig. If you are an entrepreneur who's been drinking at the firehose of VC funded, quote unquote, success stories to simply tell yourself, your team, get on the mission. Do you know what? I want to get rich slowly. Do you want to get rich slowly with me? Like that doesn't have the same ring as like in 18 months, we're going to be worth a $200 million and then we're going to rate. It just doesn't, right? But it comes back to our first discussion about how do you sustain being interested in learning something like driving a race car? Do you know what? If the motions themselves, if the motions of business, if the motion of making software aren't enjoyable to you, going slowly is not a problem. In fact, it's a treat. It's a pleasure. I love writing software. I love making software. I love writing pros in general. If these are the things that fill my day as an entrepreneur at a software company, haven't I already won? Like, what am I in such a hurry to get to? We don't have a bunch of investors who are breathing down our neck to get us to these fantastical numbers and we have to pay them back. So we don't have that. We have to, the calm and the separation from the pressures of the money. So we get to focus on just like. doing mostly our favorite things most of the time. And I think the products really show that Basecamp is a very different product from a lot of the competition because of the way it was made, because of the slow cooking, the slow food movement, this idea that not everything has to be fast food and be ready in five minutes. That's totally sort of our approach to it, that it could take a lot longer. Not that actually, I mean, the irony here being that we're actually quite fast at shipping things. We work with very small teams, even though we have a company of about 80 people now, our normal feature team making the biggest features, even something we just launched a new feature called the cart table in Basecamp 4, which is our take on, on Kanban. It's basically a whole product inside the product. It was built by two people in the first version that we started using internally, a single cycle of six weeks. Now that's not. the proportions that most of our competition works with. They work with far larger teams, or if they're building a feature of the magnitude of something like the card table, they take a lot longer to do it. So there is at once this impatience with building something real, while there is an enormously long-term perspective on reaping the rewards of building a sustainable business. I am incredibly patient about the growth of the business in terms of revenue or customers or whatever. And then I'm often incredibly impatient about our shipping improvements and doing it in a way that feels like it returns well on the effort we put in. Those are the factors. So I think we ended up with a unique company, but I'm actually kind of disappointed in that we shouldn't be unique. This should be the model that works for plenty of people. The fact that you don't need to convince investors to give you millions of dollars to get going, that should lower the barriers of entry. This idea that you can work on things like a side project should be far more accessible to far more entrepreneurs who don't see themselves in this extreme risk environment. They don't feel like, well, I'm not the kind of person who's going to jump off a cliff without a parachute well packed. I need these other things. I think you end up with different kinds of businesses if you appeal to founders like Not that they don't also benefit at times from having some risk instinct and making good calls and all these. Of course, that's all true. But if anything, our career and our history, 20 years of building software like this, should provide an alternative, a counter melody, as something to at least give people an opportunity to reflect on how they want to build a company. Because there is not just this one, get all the money real quick, pump into steroids, get huge. in 18 months model of doing it, there's a lot of models of doing it. And our model isn't the only one, but we're outspoken about it as at least having one alternative, right? Like it's basically this idea of as it is in programming. You can either make a feature that works if you have one of something, like a singularity of something, or you can consider it if you have two or more. Those are very different modes of thinking. If you're stuck on like, there's just that one way. Hey, you're really blinded. If you can just see the second way, you're already open to the many. Fast forward to 2020, you built Hey, which is an alternative to Outlook and Gmail. Can you share with us what learnings have you brought with you from Basecamp specifically on acquisition of users and what learnings you said, okay, this is things we broke there, it won't work now. And you avoided it. That's a great question. First of all, when we started working on Hey, we were aware in a different way than we were with Basecamp that this was going to be difficult. Because we were going into not a blue ocean strategy here, not something where there were no other competition like it happened to be when we introduced Basecamp. When Basecamp hit in 2004, there was nothing directly comparable. There are other systems that people could use, email. remained our largest competitor, and in some ways still is, for many, many years. These days it's different, and there is a lot of direct competition. But with Hey, we knew that from day one, we would not only be competing against some very entrenched, established players, but we would be competing against free. Gmail had taught everyone for 16 years that email was free. So we'd be competing against already quite a good product in Gmail, and we'd be competing against free. So we knew from the get-go. we have to approach this in a quite different manner. One of the things we decided very early on was that the onboarding process had to be far better. So when you signed up for Basecamp for many years, let me, we had an onboarding process and you got a few drippy mounts and you got maybe a little wizard and stuff like that. But for Hey, we knew we had a much shorter attention span to convince someone that we were worth giving a second look. It's so easy. Otherwise you're going, eh, do you know what? Email is already a solved problem for me. We have to sell you on, convince you on that, Hey, is not just better email. It's radically better email. It's radically different. So we invested a lot in that process, the onboarding flow and demonstrating some of the key features really early on. For example, one of the key features of Hey is this notion of the screener. That no one has access to your inbox. on their terms just because they get hold of your email address. This was one of those key insights that for years just bugged me in part because my email is out there and I would get these emails from everyone from salespeople to recruiters to friends to marketing outreach and it would all end up in my sphere of attention on their timetable. Someone would send like a salesperson would send me an email at 1230 and like instantly that's inside my brain. And for a lot of people, it's literally buzzing their pocket. If you had told someone 20 years ago that like, hey, do you know what? We're gonna build this system where your pocket would buzz if someone gets a hold of your email address and there's really nothing you can do about it. That's just how we communicate now. You'd go like, that sounds insane. Why would you do that? Why would you end up in this mode where you have to be super protective about your email address? Which is where we ended up for many years, people were like, oh. Do I even dare put in my email address here? What if they abuse my email address? What if they sign it up for a bunch of spam? So, Pay addresses that just in a totally different way. It has this screener feature, which is essentially a quarantine area for anyone who writes you for the first time. And when they write you for the first time, you get this opportunity at your leisure, not exactly on their timetable, to go like, do you know what, let me look at the first time centers that I have in my screener. And I can either say thumbs up or thumbs down. If I say thumbs down, I will never hear from that person again, which is just such an amazingly simple trick, if you will, but it's profound in the way it restates your relationship with email. I used to have this obsession with inbox zero. I don't know if you've heard of this approach where you essentially try to deal with the onslaught that most people face when they have an email address by manically getting it down to zero by any means necessary. And a lot of that happens with you will process things as soon as they hit the inbox, right? Now, what I would happen is for example, a recruiter or salesperson who I wasn't interested in pursuing an engagement with would write me and I'd write back because I felt like I need to get to inbox zero. I'm not just going to delete it. Seems not right. So I'd write the person back and then I go out of my inbox. Great. and then the person would reply again. And I'd be like, shit, do I now owe the person a reply? Like we have a rapport here, what's going on? And it preyed on those human dynamics, those human dynamics that we feel like we owe someone a response. Even though you didn't know this person, you didn't ask to be contacted, they're abusing the standard use of email when someone uses something like Gmail and they're operating with an inbox, a zero approach. We totally flipped it. Now I can say thumbs down. To anyone who I've not asked to be contacted by and who I'm not interested in hearing from and won't establish a relationship with, I'll never hear from them again. I will never see their follow-up emails. It will never buzz my pocket. It will never enter my sphere of attention. That's the first thing we teach you. And we teach you when you sign up for Hey by you having screen in us. Hey, would you like to know more about how this system works? So you go up, you see the screener, you have to do the thumbs up and thumbs down thing. And... That's something where we sell one of the key selling points of the product very early in the process and we convince someone that they're on the right track. And the rest of that too, because part of what's weird about selling an email tool like Hey That Is So Different is that almost every customer that shows up, they already have very ingrained habits about how to use email. Many of them have been using email for decades. That's not quite true always with something like Basecamp. With Basecamp, very often, we get to have the blank slate. Oh, let me teach you about project management. Here's where you put your messages. Here's where you have your to-dos. Here's where you have your files and all this stuff. Because about half of our customers still come not from a competitor. They come from leveling up from email, for example, or not using a system. We're using pen and paper, using a calendar, using any of these other non-competitive tools. So we have the blank slate effect. We never get the blank slate with Hey. No one shows up to buy hay who have not used email. So we're not just fighting with having to teach someone something new, we're having to fight with trying for them to unlearn a bunch of bad patterns that the standard ways of doing email over decades have forced them into because basically anyone who gets a large number of emails today, they build their own workflows. They've hacked their own workflows. Oh, I marked this thing as unread and it'll sit in the inbox. Even though it's not unread, I read it, but I need to get back to it later. And like they have all these processes. And we come in with like, do you know what? Jason and I have thought a lot about this. We've both used emails for 25 years plus. Here's a workflow that works. Here's a workflow where the software itself is aware of the workflow. It's split up in this workflow. We have this notion of the inbox with the screener on top. We have the feed where you get all your email newsletters that's designed to be read long form. We have the paper trail to put things in. All the systems are there. But if someone shows up and like, oh yeah, but I already had this thing and I had all these labels and I had all these mail rules and I had all these things. We have to unlearn that for them, right? For them to be able to adopt. Hey, so that was very different, but I think it was also just that much more gratifying. When you then win that customer, you actually teach them something that... They didn't even realize that they needed it. Because again, so many customers, they show up for, hey, maybe they heard about it for a friend. They're not quite sure. There are very few people who are knowingly in the market for a new email product. Because they all have like say Gmail, right? And they're like, oh, it's Gmail. Everyone uses Gmail. This has got to be fine. So we also had to cultivate the like, you have a need, which again was very different for Basecamp. Most people show up at Basecamp store when something went wrong, when they have growing pains. They drop something on the floor. The client is unhappy. They're growing internally. Their processes can't scale anymore. They need a system. They're very receptive to it. With Hey again, they show up, maybe they heard about it, or maybe they heard about Screener or something, a discussion like we're having now, and they're like, they're skeptical. They have to be sold on the idea that they even have a need for paid email. So very different products, which is why it was so satisfying to flex our muscles with Hey and why it felt like we could not have made Hey as our first product. No way. Too hard. too hard a domain, too hard competition. It's also just technically difficult. Running an email service, not an email client, is technically very challenging. There's a reason why so few of them have come out. It's basically, by the time we launched Hey, it had been 10 plus years since Fast Mail, Proton, or any of the other ones that also run services, not just products that had run. And then it had been a very long time since Gmail. It was dead. There had been very little innovation in the email hosting space. because it is quite difficult. So that all felt like, do you know what? This is the kind of challenge we now should be ready to face after, what, at that point, 18 years as a software company? OK, now we're ready. We're 18. We're ready to sign up for this mission to storm the beaches of Gmail land. Thank you for sharing this detailed comparison. And I want to double click on the unlearning part. Recently, I've read, I think again, by Adam Grant, which is an org. organization of psychologists. And he was mentioning that you need to unlearn, you need to create time to unlearn things. And there's templates for learning things, right? If you want to learn how to drive, you can go to YouTube, you can have a mentor, you'll find a way to learn. Unlearning doesn't have a template, right? It's very hard to think thoroughly and say, okay, I'm doing this wrong. How can I change that habit? And I think this is critical because when it comes to, hey, There's two things you're unlearning here. You're unlearning the mentality of free, because I wanna pay $100 or I stay with free. And that creates a challenge for you to go mass market, right? So I'd like to hear your thoughts on, do you have any templates or frameworks on things to unlearn? Yes, it's a great question. And it's one that becomes harder and harder over the years. In fact, because we've been in the industry now for 20 years, it's something I'm keenly aware that There's this great book or at least great concept. I didn't necessarily love the book, but it's called the Half-Life of Facts. That most of the things we take as for granted as knowledge that's been verified and like that's just gonna be true is absolutely not so. Things totally change, our understanding of them change, and you're at a great liability if you've been around for a long time to miss the fact that things you took for granted as quote unquote, truth. They've expired. That truth is no longer true. And if you don't unlearn that true, you fall into this great pitfall of, it's not the things we don't know that's the problem, it's all the things we know that aren't so. And when you've been in a business for quite a while, you just end up with a large inventory of things you think you know that aren't so, or aren't so anymore. Again, they might've been true at one point, they're no longer true. So, It's something I work with very consciously, trying to provoke my own understanding of the world, of technology, and embracing being wrong. I love being wrong. Being wrong means that something I thought was a certain way wasn't so. Wow, thank you, thank you. That's incredible. I wish to have more experiences where I can be wrong and update my understanding such that it more closely matches reality. And I think this is very hard. Humans are, it's not just that they don't know, it's that even if they know, it's difficult. It's almost like this Kahneman talks about the loss aversion principle, where the difference between winning $100 and losing $100 is not psychologically the same. It feels twice as bad to lose the $100 as it does to win the $100, right? And I think that same thing is true of our positions about how we think we know things. twice as bad to recognize that we were wrong as it does to adopt a new principle or outlook for the first time. So we have to recognize that upfront that this is going to be difficult. And we've seen this in many ways. One of the ways, for example, is that a lot of companies are keen to hire senior people, especially senior people who have existing experience from larger companies or elsewhere and so on. And we found that, you know what, there's absolutely benefits to that, getting someone senior, they have more skills and so on. but they also have a more difficult task at times of unlearning things, of transferring what worked in one organization to, oh, the same things don't work in this organization. I actually have to approach things in a different way. So it is deeply fascinating. It's much harder, which is what to me just makes it all the more interesting, right? As you say, plenty of people realize that if they wanna learn something for the first time, there's a method that they can choose to follow, but how to get rid of all the bad knowledge that they've accumulated. Oh man, difficult, difficult. And I think we're facing that on all sorts of levels, both on the individual level, on societal levels, on global levels, of trying to unlearn things that we thought were so, especially if we've invested not just our intellect, but our emotional ego into it. That's where things really, where the wheels really come off, right? So I try to keep that distance, fully emotionally invested into very little, such that I can embrace with vigor the opportunity to be wrong. For a long time, there's this still there, the saying that you should have strong positions loosely held. So believe in things. This is not a plea not to believe in anything or declare everything relative, or we can't make any value judgments. I make value judgments all the time. They're made on a... an architecture on a foundation of principles and values, but each of those principles and each of those values, they're open for reconsideration. And when new data arrives, I'll reconsider those things. I think there was another great quote about some politician getting accused of changing their mind on something, who simply said, yes, new data arrived and I learned new things. What do you do with new data? Do you hold on to the positions that you've had even after they've been refuted? I think this was one of the things, for example, that we saw with this whole COVID thing, right? A bunch of people, even very smart people, professionals in the field can fall into the trap of believing their first hypothesis rather than thinking of the scientific process as a process, that it's a process of refining. Sometimes it leads us down blind alleys, something we thought was true. Oh, we got to backtrack. We got to go in the other direction. And that the overall goal here is to get closer to knowledge, verified knowledge, get closer to reality. So if you can fall in love with that instead, the process, not the outcomes, I think you're gonna be so much better off. Fall in love with the process of learning rather than a set of current, whatever, nuggets of knowledge, because the half-life effect almost everything. Even the things we take like the laws of physics, like the laws of physics, they can't, they get restated with some regularity. Not all the time, they're far more. cemented that say the studies in psychology which are going through this replication crisis. But still it's the same principle, fall in love with the scientific process, not the scientific outcomes. 100%. You've been big on stoic philosophy. One of the things they teach us is focus on things you can control. What recent failures can you attribute to things you can control, you can control or control? That I can't control or can control. that you can control or you controlled it happened to you because you could control, but it was a failure maybe because of a decision you took or you miscalculated something. Yeah, I think that happens all the time in small ways when we're developing software. So we will make a certain call on which way a feature should go. And then we'll realize once we get down that alley that, hey, do you know what? This just doesn't work in reality. And I face this all the time as someone who tries to chart our path on architecture, which is sort of the general structure of how the software should be built. And I constantly have these ideas in my head of how something should be built. And then once we start working with the materials, that's initial ideas, just getting refuted by the materials. And once you dive down into the materials, you go like, yep, yeah, that was just wrong. That was not a good way of building it, which is one of the reasons why the whole agile software movement came to be. the refutation of the big upfront design. This idea that you can design software of any complexity by just thinking it in your head, out of pure reason, we will arrive at a design that then someone just have to implement, and then we will get great software out of that. The agile software movement sprung up to disprove that fallacy, that the only way to know what to build is to start building it. which is a really difficult thing, I think, for a lot of people to understand, particularly people who think of software development as engineering. That this is like, we lay out the schematics, they can be blueprints, and then someone just like, I don't know, solders the stuff in and it works. No, software development exists in far more of the middle realm between science and art, which is why I like to think about software development more as like software writing. When I sit down to write a good argument about something I want to advocate for, I often discover half the argument as I'm writing it, that it doesn't just spring out of pure reason, that as we work with the materials that we're in, whether that is code or prose, we discover what we really want and that this is not a failure mode, this is a success mode. So one of those lessons I keep having to, I don't know if I relearn it, but where I continuously make the- mistakes, if you will, that we set out a path, we realized that doesn't work, and then we backtrack. There are other factors where, for example, on cultural parts or organizational designs, I mean, we had quite some difficulty almost two years ago now internally in the company where we rejigged how we wanted the company culture to be. We didn't want it to be consumed with discussions of politics internally. And whenever you're dealing with kind of hot wire, issues that involve other humans, you are repeatedly humbled by the fact that it is difficult to predict exactly how things land, how they fall, how they play out. But this is also one of the reasons why what I actually wanted to do when you asked the question was I wanted to refuse it and refuse it in the stoic sense of amorphati. I don't wish for almost anything to have been different. We are where we are today exactly because we made mistakes and that we moved through those. So I don't look back on the vast majority of mistakes that we've made as a company, either be they technical, organizationally or culturally, with regret per se, that life would be incredibly boring if you had all the answers upfront. And if all you were doing was simply the implementation, if someone could give you the full blueprint on how to create a successful business with no difficulty or no pain. I don't believe that's where meaning is found at all. I think much of the meaning that comes from building a company happens in a space that involves some hardship, it involves some pain, at least the psychological pain of realizing that you were wrong and then you move on and so on. And I wouldn't want it to be any different. So in that regard, I'm embracing the fact that like what others might look back upon and ruminate over and like, oh, the regrets, what if I had said this instead? What if I'd said that instead? It's not something I try to spend my time on. The other story principle that connects to this is to live in the present. You can't control the past. You can't predict the future, but you can absolutely determine how you let your mind operate on the present. And if you fill your mind with. ruminations about the past. Again, not that you shouldn't learn from your mistakes. I hate doing the same mistake twice, whether that be in a race car or with a company or when programming or whatever. But I don't look back upon those with sort of this regret. Oh, I wish I'd done it different. No, I wish I did it exactly like I did it. I love following the path of faith. I want it with all its nuts and hardships and hurdles. And don't give me the straight path. Don't give me the paved path. We have to find our own path. And in finding that path and in carving that path is where we find meaning. Amazing, that's very insightful. Let's shift gears to David the person. I'll have some short questions to get to know you more. What food or dish, if it no longer existed, you'd be really sad? Oh, I would either... Probably same the Danish dish of open sandwiches, smørrebrod, or I would say tacos. That's very interesting. I'll Google the Danish one because I don't know what it is, but that's very interesting to share. If you could be remembered for one thing, what would it be? This gets us into this category of legacy building, which I try immensely hard to evade. I try to... not look at the actions that I take as instrumental to building a legacy. But let's just indulge for a moment and connect it to the conversation that we just had that someone who fiercely fought to discover truth from first principles and was willing to change their mind when presented with new data. That's great and as well very short and concise. The top is almost If there was one question you genuinely want your employees to ask you, what would that be? Oh, first, let me accept the premise that it is lonely on the top. And I think it can be no other way. And I think in fact, much of the unnecessary hardship that has been involved in the tech industry has come from pretending that there isn't a distinction, that we are all actually just the same. No, there are some distinctions. And. We do exist in different environments. Now, for me, it's not as much of a problem because I'm a big introvert. I lose energy when I engage with people. That doesn't mean it's not worth it, but I'm not an extrovert who gain energy from being around other people. So it's a little more easy for me to sit lonely up on the top, whatever that peak is. But in terms of asking me a question, yeah. I don't know, because I don't know if this is one of those things where even if you think you sit insight into a certain situation, you can also recognize that insight is not transferable. What I found, for example, when I became a millionaire, I wrote a blog post about this in 2015 called The Day I Became a Millionaire, was that it included this transition where I said many of the same things that I had heard other millionaires say before I became rich myself and I dismissed out of hand because that's easy for you to say. And now I sat in the same situation and I realized that they were right. And then I thought, do you know what? This is one of those truths that simply cannot be handed over. It is a personal truth that you must discover on your own. And I find those truths fascinating, right? So much of our civilization is built on the ability to transfer knowledge and wisdom and principles and values. But there are some core personal truths that simply can't be transferable, that you have to learn by yourself. Maybe that's the answer that this embrace of personal truth and accepting that there are certain things I can't convince you of, no matter how much I believe that to be true, and accepting that limitation and being at peace with it. That's not really an answer, but that's what I got. It is still insightful and helpful as well. What sort of insecurities as a leader do you have today? I think the foundation as we talked about that There are all sorts of things that I could currently believe to be true that aren't so, and that some of those things are keeping me from being better or more empathetic or more effective or any of the other positive virtues and qualities we'd like to see in leadership. But at the same time, if I knew exactly what it was, I would try to fix it. I would work on it as I would if I discovered a bad habit in my driving and I could see it on the data and you go, oh, I'm dragging my foot a little bit and turn five on the brake. If I just come off earlier, I can go quicker. Let's fix it. Right? I don't sit with a lot of things that I believe to be counterproductive in ways that I'm interested in fixing and then just feeling bad about that. That's not a state of being that I... resonate with. I try to think like, do you know what? I am a malleable person. I hope I'm not the same person in 10 years as I am today. I know I'm not the same person today as I was 10 years ago. This is a process. I'm in love with the process of seeing fate unfold, and my ability to respond to those events in a wonderful, hopefully stoic manner. But I don't sit in the present moment, feeling insecure or bad about certain things. Thank you for sharing all of this. Richard Feynman, the extraordinary physicist, has a famous saying, the first principle is that you must not fool yourself and you're the easiest person to fool. Have you ever fooled yourself, David? I'm sure, but as he accounts, it is very difficult to see in the present moment in which ways you fooled yourself, but it's easier to do so when you look sort of who you were a year ago, three years ago, five years ago, 10 years ago, and so say, do you know what? Oh man, I had myself fooled. And I think actually that is one of these very interesting phases. If anything right now, having lived through the last, let's say two to three years, particularly through the pandemic, I've absolutely changed my perspective on some fundamentals that I thought weren't necessarily up for renegotiation, but new data. simply arrived in a conclusive fashion where I was like, you know what, either you hold on to the ways you were fooling yourself now that the data have revealed that to be true, or you change your mind in accordance with the new data as you interpret it. So it kind of goes to the same idea of loving to be wrong. Sometimes you're just wrong about factual things. Sometimes you're wrong about ethical things or principles or values. But absolutely, I fooled myself. And the further back it is, the easier it is to see that. For example, when I started with evangelizing Ruby on Rails, I did have the foolish notion that we had discovered something universal, that every programmer working with web applications would be better off if they just learned the secrets that we had uncovered with Ruby on Rails. And that was absolutely a self-delusion. to think that firstly our discoveries were that profound, but also that everyone else would respond to those discoveries in the same ways that the people who were in the community or myself were doing. I've taken over the years a far more broad perspective to it and realizing, do you know what? For some people, the paradigm of objective oriented programming which is the main paradigm that we run RubinRails on, fits their brain perfectly. It just clicks. For other people, functional programming is the thing that fits their brain just right and it clicks. Trying to convince a brain that clicks with functional programming, that they should use Ruby, do you know what, that's a futile thing. And good, good that it is. The world would be so boring if we all responded in the same way to all stimuli. We would just be. identical clones, where would all the diversity of thought come from if that was true? And that was the thing I was more deluded about, I'd say, particularly in the technical realm some 15 years ago. And then I've mellowed on over the years and realized, you know what, I've found a personal truth in Ruby, in object-oriented programming. This is why I'm still developing Ruby on Rails 20 years on. It just really fits me. And you know what? There are other people who feel exactly the same way. if you will, the opposite set of conclusions. And you know what? Isn't that great? Isn't it wonderful that we can have this? And then I can then sit down with a person like that whose brain clicks at a different frequency and we can exchange our appreciation for programming at large, even though we can be wildly indifferent on the specific tactics. This is one of the reasons why I kind of regret many of the effects of globalism. Much of the... traveling that I used to do in the early 2000s or even the 90s was so much more interesting. I remember traveling to Japan in, what was the first time I was there, maybe 2003 or something like that. And they had different technology. Their mobile phones were not the same mobile phones. In Europe, we had Nokia and they all sort of looked and worked like that. And then you come to Japan and they have all these flip phone, Docomo systems, and they're like, wow. This is exciting, this is novel, this is different. And I think we lose a lot of that sparkle of life, that color when then we all run the same two operating system. Oh yeah, around the entire world, we're all running either Android or iOS. And you're like, yeah, man, I wish I could travel to a place like Japan in the early 2000s where I could see foreign technology that I was not already intimately familiar with and be amazed. Now, of course, Some of these things are still true. It's not like the whole world has become uniform, but it has become far more uniform. And it's not just in the technical realm. It's also in the intellectual realm. Ideas today spread with much less friction than they used to do. And we usually look upon that with pleasure. Oh, isn't it great that all these ideas can spread around the world in zero time at all. I'm like, no. Wait a second. Don't be so quick to declare that an unqualified success. In fact, having some rigidity, some friction for ideas to transmit from America to Denmark, say, or from Denmark to Spain or whatever, is helpful. It's helpful to protect a sort of different ecosystems of thought that don't just all become monocultures. We have such a monocultural approach to so many topics today. This is what that whole meme of the current thing is about. The current thing is not just an American. thing, if not just a Danish thing. It's a universal thing, which is to me a declaration of failure in many ways and one that I'm not too keen of. And now I've really forgotten the question I'm answering. You answered it perfectly. Thank you for your time, David. What's next for David? So this is also one of those questions. I feel like I have to restate the premise every time I get a question here. But I don't think of my... being as a set of progressions between different boxes of achievements. In fact, my main achievement of anything is having arrived at a state of being where I'm content, where I work on things that I truly find meaning in, I find pleasure in the mechanics of doing the work. I love writing Ruby code. I love writing prose. I love being part of a small company that's fiercely independent, doing all the things no one would ever give us permission to do. And that's been true for a long time. And if you were to ask me like 10 years ago, what's next? Like I would say, I hope more of the same. Now again, the particulars always change because our environment changed and our responses to it changed and the half-life of facts is a factor and all these other things. But by and large, I'm not looking like what, how's the grass greener over the next hill? Like The grass is pretty green where I am right now. I like this space. I don't need to go somewhere else to complete myself. I could be perfectly content thinking, do you know what? Basecamp is the best commercial idea I've ever had. Rubian Rails is the best technical idea I've ever had. My capacity to drive a race car is perhaps diminishing in a few short years. This is the circle of life I embrace in its fullest form. I don't wish to live. forever? I wish to wake up on the last day thinking, you know what? This was good. This was long enough. This is a great way to end it in a stoic way. So thank you for your time, David. We wish you the best of luck in your ventures and in your books and in your driving career. Thank you so much. And if anyone is interested in learning anything more about the books of the driving or the software, has links to everything. Thank you so much for listening to the first 100. We hope it inspired you in your journey. If you're enjoying the podcast, please subscribe to our podcast on Apple iTunes, Stitcher, Google Play, or Spotify, and share it with a friend starting their entrepreneurship journey. Leave us a five-star review. Your support will help spread our podcast to more viewers.