Business Lessons from David Heinemeier Hansson

David Heinemeier Hansson is the creator of Ruby on Rails (a programming framework) and a partner in 37signals (creators of Basecamp and other popular web applications).  In 2008 he gave a talk which was sent to me recently.  There were a few good ideas in it that I want to pass onto you now:

  1. He feels confident in setting a price for a good application as they do with the 37signals products.  He also believes in releasing some things for free.  He released Ruby on Rails to the world for free.
  2. In our world we are conditioned to think that the ultimate success is the big hit.  We dream of being the next Facebook, U2, Michael Jordan, Pixar, or Apple.  The odds of becoming that next thing are very small yet the irrational hype drives us to desire it.
  3. Combining the above 2 points, what if you charge $40/month for a subscription to your business (as they do).  Then you only need 2000 customers to be a $1M business.  Not bad.  His point is that having a business of this size is good and he doesn’t need to have the next Facebook if he has a business that is profitable and he feels good about.
  4. They found that making products for businesses rather than end consumers was better business.  The businesses showed less turnover and were willing to pay a higher rate.  In other words, they found their ideal client.
  5. At a certain point, having a “lifestyle business” – one that can sustain itself and makes good money – is more rewarding than the idea of making the company bigger.  Calling your own shots, being your own boss, not being in meetings all day, setting your own pace – this is a definition of wealth and a way to enjoy your own life.  Bringing in outside money to make a bigger company would take away many of these benefits.
  6. Most start-ups are narrowly focused on growing a business then selling it off.  The idea is to work real hard, then sell it, make a lot of money, and live the good life.  Is that really the good life though?  What about the idea of finding something that you believe in, and working toward that?  A quote from Craig Newmark who started craigslist says “Finding a good cause is incredibly hard and time consuming.”  We all want to believe in something bigger than us.
  7. There is plenty of space for loads of businesses.  There are thousands of nice Italian restaurants around the country.  It’s not like there has to be just one winner in business.  You can solve a niche and have a good business.  You can build a business that does the same old thing but better than the other guy (look at Zappos and selling shoes – people have been selling shoes for a long time but these guys just do it better).
  8. Don’t be in a hurry.  Most great companies are not built over night.  Starting up businesses takes time.  Also, take it easy.  There will never be less work.  Set up your practices to have a good life.  37 signals recently reduced their work week to 4 days, about 8 hours of work per day.  Employees can work from anywhere.

These are excellent ideas for our 2.0 World.  There are more ways to measure wealth than just money.  David mentions several of those measurements above: working for yourself, “working” less, working for a cause, working in a comfortable environment with a flexible schedule.  And mostly just being mindful of your desires and ambitions.  A great life can be had by living simply.

Thanks David!  You can watch the presentation here.

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