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Walton College

The Sam M. Walton College of Business

Episode 83: Jason Fried Discusses His Software Company, “Basecamp”, and the Importance of a Healthy Work Culture

August 05, 2020  |  By Matt Waller

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Jason Fried is the Co-Founder and CEO of Basecamp, a software company out of Chicago. Fried has authored several books, most recently, “It Doesn't Have to Be Crazy at Work.”

Purchase “It Doesn't Have to Be Crazy at Work” today.

Episode Transcript

[music]

00:07 Matt Waller: Hi, I'm Matt Waller, Dean of the Sam M. Walton College of Business. Welcome to Be EPIC, the podcast where we explore excellence, professionalism, innovation, and collegiality, and what those values mean in business, education, and your life today.

00:28 Matt Waller: I have with me today Jason Fried, who is co-founder and CEO of Basecamp, a software company. And he wrote a book called It Doesn't Have to Be Crazy at Work. Many of you know I would read lots of books. And I ordered this book, because I noticed it had a lot of sort of ideas in it that go against traditional wisdom. And so I started reading it one night before I went to bed, and I wound up reading three quarters of the book. I stayed up way too late. But that's always a good sign, 'cause I don't usually do that. So we're gonna talk about Basecamp, and Jason, and the book. So, Jason, thank you so much for taking the time to visit with me, I really appreciate it.

01:17 Jason Fried: Oh, it's my pleasure. Thanks for having me on.

01:19 Matt Waller: Jason, you have accomplished a great deal for your age. I say that because I figured out about how old you are based on when you graduated from college, [chuckle] but you're a co-founder and CEO of a software company. And the software business is tricky. It's a very difficult business to succeed in. It's got a lot of opportunities, but it's difficult. And one of the things that caught my attention early in reading your book or reading about you was that you didn't go the traditional route of going for venture capital and stuff like that. You didn't go the traditional route of getting your programmers to work 90-hour weeks. From what I can tell from reading your book, you're a very compassionate and caring person, and yet you still want to make a profit. So it seems to me that you've got a real balanced perspective on business. Would you mind telling me a little bit about how did you develop that? Where did that come from?

02:24 Jason Fried: I'm not entirely sure where it came from, other than probably being raised by good parents. And then also early on, when I got my first job, I was like 14, I had a handful of small part-time jobs as kids tend to do. And I didn't know it at the time, but I was building up a matrix basically of the kinds of people I'd wanna work for. I had some great bosses, some great managers, some terrible bosses, some terrible managers. And I figured that being an entrepreneur, everyone likes to talk about they're starting a business, but really what you're doing is you're starting a job. And I wanted to create a great job for me, and that meant that I need to create great jobs for other people, 'cause if I'm gonna be working with other people, they need to be feeling like it's a great job too. So I'm simply just creating the kind of company that I wanna work at. And so I do think some of my early experiences with certain people and certain jobs were really good training moments, even though of course, when you're 13, or 14, or 15, you don't know that that's how you're gonna use those moments, but they do pop into my head from time to time, so I think that's probably where it came from.

03:34 Jason Fried: I also think as far as just reasonable hours, like 40-hour work weeks and whatnot, that's enough time. It's enough time to do great work. The notion that you need to find 90 hours in a week, that the great work's gonna be the extra 50 hours you put in every week and not the first 40, I just don't buy that. We've always felt like we wanna be reasonable to people at every level, and that includes working hours. And I don't feel like I'm entitled to anybody's time after 5:00 or 6:00 or whatever, depending on when they start, that kind of thing. So that's basically our fundamental feeling.

04:04 Matt Waller: Well, and first of all, I've never liked the war metaphor of business.

04:10 Jason Fried: Yeah.

04:11 Matt Waller: Obviously, I saw that clearly in your book, because I always thought business is about helping people be better off. And if you succeed, you make a profit. And in fact, the more you succeed, the more profit you make, unless you're using coercion, or government intervention, or something.

04:28 Jason Fried: Sure.

04:29 Matt Waller: So let me just read a couple of quotes here in one of your chapters. It says, "Like they say, all is fair in love and war except this isn't love and it isn't war. It's business. What's our market share? Don't know, don't care. It's irrelevant. Do we have enough customers paying us enough money to cover our costs and generate a profit? Yes. Is that number increasing every year? Yes. That's good enough for us. It doesn't matter if we're 2% of the market, or 4%, or 75%. What matters is that we have a healthy business with sound economics that work for us. Costs under control, profitable sales." I love that.

[chuckle]

05:20 Jason Fried: It's business 101. It is the most basic boring business 101. And it's funny how the notion of businesses, I think has become very perverted over the past, I don't know, 20 years, primarily because of the tech world. Because look, let's face it, we run our business like 99% of businesses, like the pizza shop on the corner, they have to make more money than they spend. The dry cleaners, they have to make more money than they spend. That's what a business really is. So the fact that we have to reiterate that is sort of embarrassing, I think in a sense, but it's true, and we wanted to make a point of it because for some reason, people think today in modern businesses, especially in technical businesses or software businesses, you need to play by all sorts of new rules with fancy math and you need to raise a bunch of money and lose a bunch of money for a long time, and build a huge market share, so eventually you can make some money down the road. I don't see that panning out most of the time.

06:15 Jason Fried: I think one of the problems with business today is that there's an obsession with endless growth at all costs. And when you're there, if that's your aim, like... It's very hard to build a sustainable business where people feel like they're having a good day's work and they get to go home for reasonable hours and spend time with their family and have their weekends to themselves, it's very hard to do that when it's all about growth, so we are not about growth or about sustainability within reason, is kind of our approach.

06:44 Matt Waller: Well, there's two other factors that really stand out to me. One, market share is not a good metric, there's some extensive research in the marketing literature that shows like for, even for established consumer packaged goods industries, soda and snacks, etcetera, etcetera, but extensively, even automobiles. It turns out that a lot of people will say, Oh, we've got 40% of the market, so if we could get 50%, this is how much money it would translate into. But in reality, people that buy brand A in a category, also buy brand B in a category. It's not like they're in love with this brand, people think they are, but in reality, they don't invest much time into thinking through it. They like Coke, but they might also like to drink Dr. Pepper periodically.

07:40 Jason Fried: Yeah, well, I think another version of that, though, is market share. So Uber and Lyft probably have 90%, I'm guessing, 90% of the ride hailing outside of taxi cabs, ride hailing market. And they're losing billions of dollars every year, so who cares if you have a huge market share of an unprofitable market? There's been a substitution in a sense of numbers where it used to be, "Are you making more money than you spend?" That's fundamental basic business stuff. So profit was important. Right now it's, over the past 20 years, it's been things like eye balls, was it, people are calling... Counting, how many eyeballs do we have? What's our market share? How many users, how many daily active users like none of this stuff matters if those daily active users lose you money. It's so easy to get to lose sight of what really matters here, and there's other things that matter besides money, of course, but as far as... If you wanna keep your business in business, you've gotta just focus on the basics here, and that's profit, making more money than you spend.

08:49 Matt Waller: Well, and the other... This ties into another part of your book I'll get to later, where you talk about long-term planning versus short-term planning, and one thing that really caught my attention that I think will help your business in the long run even, is that you're focused on shorter range plans so that you can pivot in ways that make the customer better off and your company better off. And as you deliver more value, you're gonna get more profit. That follows almost every time.

09:25 Jason Fried: Yeah, basically we work in six, what we call six-week cycles, so we literally only plan six weeks at a time. I've got some ideas for where I want the company to go directionally, but as far as the actual work we do, six weeks at a time. And that allows us to make decisions more frequently about what matters right now. And nobody knows what's gonna happen, far more things are out of our control than are in our control, and when you're just honest about making it up as you go, which is essentially what we do, clearly, you can adapt faster and you can make more sense of the moment. Granted, if you're Boeing and you're building airplanes, different story. You've got suppliers and supply chain, but fundamentally the principles still apply, which is, I think the shorter term, you think actually, I think ultimately, the better decisions you're going to make as long as you still have a long-term directional vision. What I don't think is good is thinking quarter by quarter, because that's what Wall Street wants you to think. I'm talking about short-term decision-making based on the reality on the ground, not meeting someone else's expectations.

10:39 Matt Waller: One other thing about focusing on certain metrics as goals, and so you're saying, "We're gonna hit this goal at all costs," meaning we're willing to sacrifice our sleep as you talk about in the book, and sacrifice time with our families and these kinds of things, which is not healthy and will not help... People are not designed to function that way, we need sleep. You point out that it hurts your ability to be creative. It hurts your ability to think clearly, but the world tells us this so much.

11:15 Jason Fried: There's an obsession with this like... It's like the badge of honor. I worked all night. Is that a good thing? Doesn't sound like it, really. And by the way, for those who are really curious about the value of sleep, there's a wonderful book I highly recommend called Why We Sleep.

11:30 Matt Waller: Say that again.

11:32 Jason Fried: It's called Why We Sleep by Matthew Walker, who's a PhD, I think he's out in California and studies Sleep Science. And it's absolutely both fascinating and horrifying to realize how important sleep is and how it affects everything you do, and even losing a little bit has significant implications for your cognitive abilities and I feel it. I've got two young kids. When they wake up earlier, you don't get a good... I'm toast, I'm ruined. I'm ruined for that day. And a lot of people go through life in that perpetual state of ruin, they don't realize it, 'cause they think that that's their stasis, they're used to that, but everyone else around them knows like, I don't wanna work with this person, this person's rude, this person's impatient. They're really snippy today, it's 'cause they haven't been sleeping.

12:23 Matt Waller: This idea of hitting certain goals at all costs, no wonder there are these unbelievable ethical lapses in industry. People always look back and say, "What were they thinking? Did they not know they would be caught?" Well, they probably hadn't been sleeping enough and they'd been so dogmatically focused on some numerical goal that they weren't thinking straight.

12:52 Jason Fried: Many of these ethical lapses can be tied back to basic simple things, again, getting back to this idea of business 101, it's also just human 101. We can't function on lack of sleep and you can't will it away, because you're young or because you think that you're special.

13:06 Matt Waller: Well, one of your chapters is called Don't Change The World. And I like your names of your chapters, it's always, it's almost a little provocative. It says, "The business world is suffering from ambition hyper-inflation. It's no longer about simply making a great product or providing a great service. Now, it's all about this brand new thing changes everything. A thousand revolutions promised all at once. Come on." And then the last paragraph in that chapter says, "Set out to do good work, set out to be fair in your dealings with customers, employees and reality. Leave a lasting impression with people you touch and worry less or not at all about changing the world. Chances are you won't. And if you do, it's not going to be because you said you would."

[laughter]

14:02 Matt Waller: I think that's so true. So when did you come to that idea?

14:09 Jason Fried: I think the idea was brought to us moreso, because if you just pay attention to the industry that we're in, again, most of my lens is based on tech software, so that's what I'm steeped in. And all you hear in this industry is everyone's out to change the world and everything's a revolution. And then you look at their business and it's like they're offering pet insurance. I'm not against pet insurance, but it's not gonna change the world. And when that title was slapped on everything, it becomes comical, and ridiculous, and absurd, and that's when you begin to go, "Wait a second, why is everyone focused on that?" And I think the main reason why is because some of our collective idols and heroes in the business world talk about changing the world, and some of them have, it does happen. And people wanna live up to that expectation. So they adopt that mantra and they then begin to believe too much in themselves that they are the next. And no one's gut checking each other. And the industry, especially the San Francisco, like Silicon Valley style businesses, they're just reinforcing this with one another.

15:11 Jason Fried: They go to the same parties and everyone there's changing the world, so I better change the world too, 'cause if I don't, then I'm not living up to the rest of the people around the table. I do think the fact that we are not backed by venture capital intentionally, and we're based in Chicago outside of Silicon Valley, and we're a fully remote company ultimately, it's helped us stay out of the fray and outside of that world. And so it helps us, it's easier for us to look in on that world and observe the ridiculousness of statements like changing the world. Not that it can't happen, but that it almost never does, and it's always typically something you look back on and realize that it happens, you don't set out to do it.

15:53 Matt Waller: Boy, that's so true. I've studied Sam Walton quite a bit, 'cause he really was a tremendous entrepreneur. But he really focused on getting high quality products at the lowest possible cost to people that it was out of reach of, because even he focused on rural areas. And he invented a logistic system that included distribution centers to make it work. It wasn't to make the biggest company on Earth, which he did create that, but that was not his goal. And I've seen this in a lot of cases, really in my own backyard, Tyson Foods, which is the largest protein producer in the world, or JB Hunt Transport. They have some really creative things they do as a carrier, but they were really just trying to deliver value. And I think that kind of focus is just, it works in any business.

17:00 Jason Fried: It's easy to look at businesses like the ones you mentioned now and assume that that was the plan, or that being everywhere, was the goal. Like I don't know JB Hunt's history, but he'd probably start out with a truck or two, [chuckle] like Sam Walton started out with a store. Starbucks, one store, and McDonalds out here in the Chicago area, one store based on milkshake sales, or whatever the history is. It was like that's where these things start. It's very rare that anyone really who sets out to be huge becomes huge. It's just not really a thing. It's 'cause business is hard. You're just trying to survive. Make one thing work and then you can maybe replicate the thing. Point is, is most things start really small with an idea that you're just simply trying to get off the ground. It's hard enough to get there. And it's much easier to actually make a small thing work than a big thing work. So, a thread that runs through our business and our thinking is just try to tilt the odds in your favor as best as you can with as many decisions as you can.

18:04 Matt Waller: I'm gonna read a couple more quotes, this is out of your chapter called Protectionism, and I'll just read a couple of paragraphs, not contiguous. So it says, "They guard so many things, but all too often they fail," this is talking about companies, "They fail to protect what's both most vulnerable and most precious, their employees' time and attention. We ask people to write updates daily or weekly on Basecamp for others to read when they have a free moment. This saves dozens of hours a week and affords people larger blocks of uninterrupted time. Meetings tend to break time into before and after. Get rid of those meetings and people suddenly have a good stretch of time to immerse themselves in their work. I have to be reminded of this about every six months."

19:01 Jason Fried: Me too.

19:02 Matt Waller: "It's a constant battle."

19:05 Jason Fried: It is. And while the book is all true, it's also in some ways aspirational for us too, because it's easy to forget these things. We've really grown into a anti-meeting culture for the most part, because meetings are really inefficient most of the time. People think they're very efficient, because well, we can gather six people and make a decision together. It's like that one hour decision was actually six hours, because it was six people's hour, and there's the before and after, which you alluded to in that passage. And I think people are able to be more creative, and be more thoughtful, and be more deliberate when they have more time to themselves in uninterrupted structures of time. In another part of the book, we talk about the quality of an hour is a very important thing to think about. Yeah, an hour is 60 minutes, but there's many versions of those 60 minutes. You can have a 60-minute block, which is a super high quality hour, but you can also have an hour made up of four 15-minute blocks. That's not such a good quality hour. And so it's not just about the time, it's about the contiguous blocks of time, uninterrupted structures of time, where the real, I think the real wonderful work happens.

20:14 Jason Fried: So we're very conscious of that and trying to be very careful about that. We're big fans of asynchronous slow communication. It gives people control over their own time and when they wanna give back to someone else versus the expectation of immediate response, which is what happens in most companies that if someone asks you something, you're expected to get back to them immediately. That just breaks your day into a million little small pieces, and it's really hard to function, I think, in that environment.

20:38 Matt Waller: So, Jason, what advice do you have to students, business school students in the United States who are graduating? What do you think they should be thinking about and doing?

20:50 Jason Fried: I'm actually the wrong person to give advice, because, but I will still give advice, but because my feeling is that advice has a shelf life. And I graduated college in '96, which is over 24 years ago, basically. I don't remember. I don't remember what it's really like. So what I would tell people is a bit artificial and manufactured, because I don't remember really that clearly what I thought was important to me. It's easy to look back and go, "Hey, kids, you should do this." That being said, what I've seen from my career so far is that really the most important thing is to find a place where you enjoy the people that you're working with. Work is work. And in any industry, no matter how exciting it is, it's boring also. Like most work is not coming up with the biggest new idea, most work is not the breakthrough concepts. Most work, it's the boring monotonous maintenance and dealing with stuff that's not exciting. So the way to, I think, in a sense, cope with that is to make sure you're working with people that challenge you, that are inspiring, that are friendly, they're kind, they're fair, and find cultures like that. But I think that is the most important thing I've noticed over my career and in other people's careers that I've helped mentor and seeing what's important at work are the people you work with.

22:17 Matt Waller: I think that's wise advice. And my, as a leader of a large business school, I want my direct reports to be people I want to work with. They need to be skilled, they need to be competent and... But if you don't enjoy working with certain people, it will drag everyone down. It only takes one person to change the chemistry too.

22:44 Jason Fried: You're so right, 'cause in some businesses, especially in the tech world, companies tend to hire people who, there's always just this like everyone's out to hire the best person, and the best person is not the most skilled person. The best person is the person who has the skills, obviously you need to have the basic skills to do the work, but who is friendly, kind, fair, who helps others get better, who is patient, who is thoughtful, who cares. That, in my opinion, is really what makes the best person. It's not just about what's their resume and where have they been. That doesn't mean a whole lot.

23:20 Matt Waller: A lot of companies nowadays are into building an inclusive environment.

23:25 Jason Fried: Yes.

23:25 Matt Waller: But if you've got people that are rude and disrespectful, you're never gonna build an inclusive environment. It's just not gonna be possible.

23:35 Jason Fried: Totally.

23:35 Matt Waller: Because they're gonna be pushing the opposite out there.

23:40 Jason Fried: True. It's kind of like how would you pick friends? Like in your professional life, you can really consider a bunch of different companies and in a bunch of different places, and you can think about the people that are there, and you can say, "Would I wanna spend my days with these people?" 'Cause that's what you're doing. Yeah, you're going to work, but you're spending your days, at least eight hours, maybe more in some cases with people. Who are they? Do you want to do that with them? That is the question, I think, that should be on every student's mind. And I know by the way, given was going on today and the job market in general, it's challenging just to even get a good job. So, I wanna also just be clear that in some cases, you gotta take what you can get perhaps. But if you have the choice, and you have a few options, and you're deciding between A and B, I would go with the place that has the better people. That's ultimately, I think the long-term better opportunity for you.

[music]

24:34 Matt Waller: Thanks for listening to today's episode of the Be EPIC Podcast from the Walton College. You can find us on Google, SoundCloud, iTunes, or look for us wherever you find your podcasts. Be sure to subscribe and rate us. You can find current and past episodes by searching BeEPICPodcast, one word. That's B-E-E-P-I-C Podcast. And now, be epic!

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Matt WallerMatthew A. Waller is the dean of the Sam M. Walton College of Business, Sam M. Walton Leadership Chair and professor of supply chain management. He is also the host for the Be EPIC Podcast for Walton College.

 

Walton College's EPIC values -- Excellence, Professionalism, Innovation and Collegiality -- are the heart of Dean Waller’s podcast. Since the beginning of the series, Waller has interviewed business professionals, industry experts, CEOs and Walton College students to bring listeners first-hand accounts directly from the entrepreneurial world.

 

Waller is an SEC Academic Leadership Fellow and coauthor of “The Definitive Guide to Inventory Management: Principles and Strategies for the Efficient Flow of Inventory across the Supply Chain,” published by Pearson Education. He is the former co-editor-in-chief of Journal of Business Logistics. His opinion pieces have appeared in Wall Street Journal Asia and Financial Times.

 

Waller received an M.S. and Ph.D. from Pennsylvania State University and a B.S.B.A., summa cum laude, from the University of Missouri.





Walton College

Walton College of Business

Since its founding at the University of Arkansas in 1926, the Sam M. Walton College of Business has grown to become the state's premier college of business – as well as a nationally competitive business school. Learn more...

Be Epic Podcast

We're sitting down with innovators and business mavericks to discuss strategy, leadership and entrepreneurship. The Be EPIC Podcast is hosted by Matthew Waller, dean of the Sam M. Walton College of Business at the University of Arkansas. Learn more...

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