The Cashflow King: “Here’s How I Do It”, Negotiating w/ Jeff Bezos, Elon’s Cracked Rocket

Intro (00:00:00)

• Jason Fried, the guest, has built a successful self-funded cash cow company called 37 signals.
• The company has been profitable for 25 years, making tens of millions of dollars annually.
• 37 signals challenges traditional business practices by setting no goals, working four days a week in the summers, and spending minimally on marketing.
• How did Jason build a low-stress cash flow company?
• What was it like negotiating a deal with Jeff Bezos?
• How does Jason generate massive interest in his products pre-launch using founder letters?
• Jason Fried has spent around $30 million on homes in the past two years.
• He tries to keep his purchases private but information often gets leaked through real estate agents or other sources.
• Jason's interest in architecture and houses led to these significant real estate investments.
• Jason Fried is admired for defining and playing his own game in business.
• He has gained viral attention by sharing his unique business philosophies.

Long term planning is a fantasy (00:03:15)

• The company focuses on short-term profitability and adjusts its plans based on changing circumstances rather than setting long-term goals.
• Instead of setting specific goals, the company focuses on doing its best work and letting the results speak for themselves.
• The company prioritizes running a high-margin business with a large customer base and a diverse customer base of over 100,000 monthly paying customers.
• The speaker and his business partner, David, aim to avoid feeling nervous about breaking even and prefer to keep costs low while maintaining a diverse customer base.

The 6-Week Sprint Playbook (00:08:13)

• The speaker stresses the significance of identifying a need and having the right team and approach to build a solution. They allocate a six-week sprint to create and iterate on a solution, followed by a longer exploration and refinement phase of up to six months before committing to development.
• An example from their company, Hampton, illustrates how they created surveys using HubSpot's landing page templates, customized them, and shared them on social media, resulting in thousands of views and valuable information submissions. This allowed them to track revenue sources and optimize marketing efforts.
• Sam, another speaker, likens their process to an artist's, taking time to explore and refine concepts before committing to development. They emphasize the importance of exploration and independence in their creative process, facilitated by profitability and the absence of investors or a board.
• The speaker describes how Hey, an email service, evolved from an exploration of their CRM product, Highrise, and how they recognized its potential as a standalone product.
• They prioritize user interface (UI) development and use a six-week or monthly chunking approach to manage feature development, avoiding excessive time spent perfecting individual features.

Using 'no' as a precision instrument (00:14:12)

• No is a precise tool that allows you to evaluate and reject an opportunity while keeping the entire spectrum of other possibilities open.
• Yes, on the other hand, is a blunt force instrument that damages many opportunities because it requires you to commit to one thing and say no to many others.
• The longer you spend on a particular yes, the more opportunities you miss out on without realizing it.
• It's important to figure out what you're doing, why you're doing it, commit to it, and get it done quickly to find out if it's successful.
• Basecamp's product releases have slowed down over the years, from a new product every year to once every few years, as they focus on getting things right rather than saying yes to everything.

Does Jason regret selling We Work Remotely? (00:16:02)

• Basecamp sold We Work Remotely, a remote work job board, to Andrew Wilkinson, who has since grown it into a profitable venture.
• Jason acknowledges that it was an easy source of money as it required minimal effort to maintain and generated significant revenue.
• Despite the regret of letting go of such a lucrative opportunity, Jason believes it was the right decision at the time as it allowed Basecamp to consolidate and focus on its core product.
• Basecamp is considering launching another remote work job board in the future, leveraging their expertise in remote work.

Cash flow king (00:18:04)

• Jason Fried, co-founder of Basecamp, attributes the company's success to focusing on net profit rather than just revenue, generating tens of millions in annual profits.
• Despite acknowledging the role of timing, luck, and market conditions in Basecamp's early success, Fried expresses reservations about selling the company due to emotional attachment and the fear of losing a fulfilling pursuit.
• Fried emphasizes the importance of overcoming fear and taking action, reflecting on his own journey, including a failed attempt at real estate after selling his previous company.
• Basecamp plans to introduce a new Software as a Service (SaaS) product alongside its existing non-SaaS offerings.
• Fried shares an anecdote about Mark Zuckerberg's early days at Facebook, where he rejected a billion-dollar offer to sell the company because he enjoyed building the social network and didn't see the appeal in starting over.

Taking money from Jeff Bezos (00:23:48)

• Jeff Bezos invested in Basecamp in 2006 through a secondary purchase of shares from the founders, Jason Fried and David Heinemeier Hansson.
• The investment was favorable to Basecamp, with a high valuation despite its limited revenue at the time.
• Bezos admired Basecamp's long-term thinking and commitment to not selling the business.
• Bezos is known for his unique breakfast choices, curiosity, unwavering optimism, and infectious enthusiasm.
• He is highly receptive, quickly grasps complex concepts, and makes others feel valued and respected.
• His annual meetings with Amazon executives demonstrate his ability to focus and ask insightful questions.

Who does Jason admire? (00:31:16)

• Jason admires Elon Musk for his business acumen and risk-taking abilities.
• He believes that Musk's approach to problem-solving is rooted in common sense and fundamental smart thinking.
• Jason appreciates Musk's ability to simplify, cut out waste, and get to the root of things.
• He also admires Musk's willingness to take risks and make mistakes in order to achieve progress.
• SpaceX encountered a problem with a crack in the skirt of one of their rockets.
• NASA would have scrapped the launch and rebuilt the engine, causing a multi-month delay.
• Elon Musk, upon hearing about the issue, asked if they could simply cut out the crack.
• Despite losing some propulsion, Musk decided to proceed with the launch as there was enough margin for error.
• The launch was successful, demonstrating Musk's ability to find creative solutions to problems.

Non-recurring revenue is back (00:35:00)

• The speaker introduces "Once", an umbrella brand focused on bringing back non-recurring software products.
• "Once" aims to provide users with the option to purchase software products once and own them, including the source code, for a few hundred dollars.
• The first product launched under "Once" is "Campfire", a chat tool that offers core features like chatting, DMs, mentions, and file sharing.
• "Campfire" is priced at $299 with unlimited users and is designed to be easily installable on a server.
• The speaker highlights the potential cost savings for companies that switch from expensive chat services like Slack to "Campfire".
• The speaker explains the concept of generics in industries, where commodities become available at lower prices.
• "Once" aims to offer high-quality generic software products at a low price, disrupting the current pricing model in the software industry.
• The success of "Campfire" is discussed, with hundreds of thousands of dollars in sales within a few months.
• The speaker plans to launch more products under the "Once" brand and assess the sustainability and effectiveness of the model in the long term.

The Founder Letter Launch strategy (00:38:51)

• The speaker introduces the concept of using a "founder letter" to communicate a product's unique perspective and value proposition before its launch.
• The speaker criticizes companies like Quilt for prioritizing email collection over providing meaningful information about their products.
• Writing an effective founder letter requires a strong point of view, careful crafting of the message, and finding the right rhythm and style to resonate with the audience.
• The author emphasizes the significance of having a unique angle and point of view for any product, regardless of its novelty or commodity status.
• The author admires individuals like Warren Buffett and Jeff Bezos for their ability to write compelling and concise shareholder letters.
• The author's writing style aims to captivate readers, create intrigue, and leave them wanting more information.
• The author critiques the "Church of Recurring Revenue" model, advocating for software companies to offer ownership and data control to customers instead of perpetual rental.
• The author suggests reframing pricing models to emphasize ownership and data control, creating a sense of mystery and excitement in marketing materials.

Campfire v. Slack (00:45:45)

• Basecamp charges a flat fee of $299 per month for unlimited users.
• Basecamp did not invest more energy into Campfire, an early chat tool, because it was not selling well at the time.
• Slack impressed the speaker with its onboarding experience and bot integration.
• The speaker finds inspiration in unexpected places and transforms non-cool things into cool ones, as demonstrated in his recent post about the advantages of hooks over towel bars.
• He believes in simplicity and straightforwardness in product design, drawing inspiration from various sources such as architecture, space, trees, furniture design, and print design, rather than from other software.

Pile on the wackier stuff early (in life and business) (00:52:28)

• When prototyping, try the wackier, quirkier stuff first.
• Embrace this approach in product design and life advice.
• Weirder, quirkier things are easier to get away with in your early 20s.
• Start with novelties that don't exist anywhere else to differentiate your product.
• Don't wait until the end to add novelties, as you'll run out of time and patience.
• The public demands normal stuff, so it's up to you to find the unusual things they didn't consider.

Taking financial risks that don't put you at risk (00:55:13)

• Invests primarily in index funds and some individual companies he knows well.
• Avoids meme stocks and risky investments.
• Has done some private equity deals and other investments.
• Prefers to spend money on things he and his family enjoy.
• Doesn't take risks that put him or his business at risk.
• Values being able to sleep well at night and not jeopardizing his peace of mind.
• Stops work at five and doesn't discuss work with his family.
• Practices negative visualization to prepare for potential business failures.
• Believes that even if the business fails after a successful run, it would be okay and he would help his employees find new jobs.
• Doesn't want to feel an excessive level of obligation to the business, but recognizes his responsibilities to customers, employees, and ideas.

Where does Jason spend his profits? (00:58:58)

• The speaker and Sean, both successful entrepreneurs, discuss how to determine the optimal balance between reinvesting and withdrawing profits from their businesses.
• The speaker's company operates on a recurring revenue model with predictable income, allowing for the withdrawal of all profits at the end of each year, regardless of the business structure (C Corp or LLC).
• Emphasizing the significance of cost management and maintaining high margins, the speaker highlights the detrimental impact of excessive payroll and customer acquisition costs on profitability.
• Unlike competitors who incur higher customer acquisition costs, the speaker's company currently refrains from running paid ads due to their low customer acquisition costs.
• While acknowledging the potential for growth through targeted marketing and advertising, the speaker lacks the tolerance and interest in pursuing such strategies.
• Prioritizing sustainability and profits over aggressive growth, the speaker believes growth rates only matter when selling a company.
• The speaker values margins and sees no point in spending money to seek a higher multiple when selling a business.
• Expressing admiration for individuals who forge their own paths and live life on their own terms, the speaker extends gratitude for being on the podcast and expresses enjoyment in listening to it.
• The speaker concludes by extending an open invitation for future conversations.