David Heinemeier Hansson's Speech about Making Money at SS2008

http://docs.google.com/View?docid=dd8936t8_66g2ngbchb

by vlad • 18 years ago

74 48 18 years ago

docs.google.com

dcurtis2• 18 years ago

Wow, this typed version destroyed the power of his talk. Please wait until you can see the video (on justin.tv?); his presence is huge.

It has been the best talk by far.

vlad3• 18 years ago

These are just my notes I chose to share as the speech came to an end. I apologize if I offended you in any way.

dcurtis2• 18 years ago

Oh, I'm not offended in any way. Sorry if it came off that way. I just think the power of his speech was lost in translation.

The notes are really good, actually.

tptacek4• 18 years ago

Don't be a dick. Those notes were awesome. None of my partners are going to sit through a DHH talk; I was able to cut-paste from this to start a conversation.

Xichekolas2• 18 years ago

He wasn't being a dick. I was also sitting there and I can attest that it's not near as powerful to read out of context as it was to see it.

A lot of that comes from the fact that he came on right after Greg McAdoo (Sequoia Partner) and just unloaded a totally contrasting view, and the delivery was excellent. Reading it in bullet point form just doesn't convey that (although the notes were great otherwise).

Everyone had great things to say, and Greg McAdoo really impressed me as well, but in the context of the whole day, DHH was pretty refreshing.

jamiequint2• 18 years ago

so its not worth watching for 25 minutes, but you're going to have a dialog based on the transcript? (Which doesn't really fully capture what he was talking about) That makes no sense.

1gor• 18 years ago

The credo of a tycoon of old (think JPMorgan or Vanderbilt) was to build an empire. His own empire, in his lifetime.

Tycoons of today have build their own empires (Microsoft, Google, Apple, Oracle etc.), same principle, same philosophy.

When and why did it happen that flippers took over this market's mindshare? A young entrepreneur today dreams of selling out to Yahoo/Google/Microsoft as soon as possible. Quite often even before his business is profitable.

Hey, if you have a growing business that is profitable, you should keep it for yourself. Many people with money I know (so-called 'professional investors') dream of having such a business in their possession. Such business is not listed, so you cannot buy it on the market. What you can buy on the market (what is listed) normally grows slower and is over-researched and over-valued.

But of course, if you focus on building the cash flow for yourself, and keeping the option of striking it very big at some time in the future for yourself, then the whole industry of undervalued option-buyers (VCs, angels etc.) will be left without work. So the propaganda is put to work... When is my next funding round?.. A round of what? When is your next client subscribing to your app - that should be the question.

DHH thrives on being controversial, but the point he makes here is simply a well forgotten truth about entrepreneurship. Building your business slow and taking full credit for it for yourself used to be the norm before the flipper ethics kicked-in.

dissenter• 18 years ago

Times change, and America is much more corporate than it used to be. When a market becomes saturated innovative people will look elsewhere to make their mark.

I don't want to spend my life managing a business. I want to make some money and do something else. I have no doubt that I would make a fitting CEO. But the hours are long and the work is unappealing. There aren't any CEOs I want to be like. Apple's CEO, maybe, but what price does he pay to do what he does?

I really get the feeling that anyone ('anyone') could be a CEO these days. I feel like the CEO is a reward that keeps everyone else on the corporate pyramid. Maybe I'm wrong. I could be. But I haven't seen the argument that debunks that idea. (And I have seen a lot of instances of CEOs who didn't deserve what they received.)

The money is a silly motivation. What am I going to do with $6 billion that I couldn't do with $6 million? Spend conspicuously? Raise a family of layabouts?

I would much rather become financially independent and begin doing the work I want to, when and where I want to. I like to make things, and I like to talk to creative people. I like to do small things really, really well. And I don't like to spend my time dealing with red tape. I feel like I have an obligation to society, but that I don't have to fulfill it by spending my time managing a large corporation. There a lots of other less flashy positions desperate for someone to do a really great job. I want to do something small perfectly, not something huge good enough. Does that make sense?

yters2• 18 years ago

Are there simpler and more dependable ways of doing this than creating a startup?

inovica2• 18 years ago

I have created a good growing company that leaves me financially independent anyway - on a monthly basis at least - and I can continue to do other things also. I think this attitude of short-term gain misses out that success is a journey and not a destination. Your motivation still IS money - most of the successful people I know achieved the money because they loved what they are doing and the by-product was a financial reward

ntoshev• 18 years ago

Sure, it does make a lot of sense. If you can do bigger things perfectly, this is likely to be very well rewarded, too.

comatose_kid2• 18 years ago

But could any random person be a good CEO? I don't think so. It's tough to judge the difficulty of a position without actually holding the title.

jmzachary• 18 years ago

This is a good discussion. The flipper mindset is probably localized to software tech, and maybe that mindset is required. The reason is the constant change of technology, the shifting attention span of web users, and the maturity of the field make it harder to build a "normal" sustainable business. So, most people take the path with less friction: build something that gets enough attention to sell, profits optional. Lack of technical depth and, hence, barriers to competition are factors, too.

Xichekolas2• 18 years ago

I don't think the flipper mindset is unique to software. Day traders flip stocks, sometimes in seconds, and a lot of people in Miami (and elsewhere) just took a bath trying to flip condos (buying them in big blocks and then trying to unload them on out-of-towners for ridiculous prices). The general get-rich-quick scheme exists in every business.

I think the best software is built by people who are not looking to flip. Linus has been with his baby for over a decade. Richard Stallman even longer. Bill Gates had a lot of trouble giving up his software products, and Marc Andreessen said yesterday that his favorite part was building out the company... being a startup was just how he got to build companies. I think people looking to pump and dump will just do the minimum it takes to get by, and it shows.

asdflkj• 18 years ago

"Flipper ethics"? Yikes. There is a special flavor of bile that comes from bootstrapping types. I wonder if it's caused by dread of their own lack of connections to investors, or of their lack of expertise in this area, or what.

There are actually very good reasons for why "flipping" is good for everyone. It's obviously good for the founders (notwithstanding DHH's puzzling story of a guy who was forced to switch from a mac to a PC after his startup was acquired). And the acquirers take a rational risk by purchasing a startup. At the point of acquisition, a startup may only have a 1/100 chance of being the next Facebook, but it will be acquired for 1/1000th the price of Facebook. 100 of those acquisitions, if you're Google, and what you have is a Facebook for tenth of the price (and a whole pile of other good stuff).

In fact, if you don't want to take too much risk, going for acquisition is better than going for revenue on the scale of 37signals. It even seems dishonest that he compares the 37signals way and the IPO way in terms of risk, completely ignoring the acquisition way.

Also, I don't think the average hacker wants to be a "tycoon". He probably just wants to solve the money problem once and for all.

kyro2• 18 years ago

I don't think his speech was that great. Loud and arrogant doesn't make for a great speech. He kept stressing the ease of settling for the middle and just asking people to pay for your services. He used the analogy of us paying for cars but I think there's one huge difference. There is a huge barrier of entry into the car business which ultimately results in us having to pay what we pay, but I'm the web world, your product can be copied on the fly, look begged and be free, and that's why people want to horde the masses, something he criticized, so they can offer a free service and yet monetize using advertisements.

It happened with his product, the launch of huddlechat, but that as you know was taken down.

tptacek4• 18 years ago

"His product" is Basecamp, not Campfire; a tiny fraction of their revenue comes from Campfire.

Most people would take good odds of running a multi-million dollar business over infinitessimally small odds of flipping and retiring. And he's obviously right about the odds: what percentage of YC companies have flipped?

davidw• 18 years ago

Ok, but the point that the economics of information goods are often quite different from physical products is a valid one. That said, the idea that you should look for markets that aren't winner take all, where you could have a sustainable, mid-sized business, is a good one.

gnaritas• 18 years ago

It's not a zero sum game, you can make money selling stuff that also given away for free elsewhere. Putting out a free version of Basecamp won't kill Basecamp, the market is big enough for everyone to live. As far as most businesses are concerned, $25 a month is free, it's pocket change. If your app solves one of their problems for that price, they'll pay it gladly rather than deal with hosting or maintaining their own free version, or using someone else's free version because most real business folk don't trust free.

mwmanning• 18 years ago

"It happened with his product, the launch of huddlechat, but that as you know was taken down."

DHH != 37signals

condor• 18 years ago

I think you've missed the point. The point is not to settle for the middle, the point is that there are real everyday problems that need solving, and there's real success that can naturally come from solving those problems, overtime. You can't force success or simply will it.

I appreciated how he positioned "startups" in the same realm as other "regular" businesses; that's a very honest view because at the end of the day every business (tech startup or Italian restaurant) is judged by the profits they generate by creating value for their customers. Thats what a business does, 1 + 1 = 3, adding valuing. As a business owner you can't escape that law of commerce and expect to survive. Tech startups aren't a special class of business in and of themselves that deserve to be valued higher than other businesses, they're only special if they can grow more efficiently and operate at a higher margin than other businesses.

comatose_kid2• 18 years ago

Loud and arrogant? It might come off that way, but that's pretty subjective, and I happen to disagree.

In any case, if you look past the delivery style, his speech contained many good observations.

I met him in Palo Alto on Saturday evening. He was honest, patient in answering people's questions, and very friendly.

kyro2• 18 years ago

in* and better*, last time I post with a drained iphone.

petercooper• 18 years ago

There's been an open source "copy" of Basecamp for quite a while now, but I don't see 37signals going out of business. Turns out companies are quite happy to pay a real company real money for a real service, rather than mess around playing with free alternatives that may or may not deliver.

zkinion• 18 years ago

Yes, it was a very nice presentation.

There's too many kool-aid drinkers in the web 2.0 world these days, and its a true breath of fresh air to see somebody with some real business fundamentals talking. I hope his talk makes more people wake up and realize that by trying to build a solid business over time, you have a much much MUCH greater chance at success than people flipping dodgy startups.

I don't think his message was controversial at all. Instead, its a shot of common sense in a world of disinformation.

wallflower• 18 years ago

I liked his comment about scalability. When you have paid subscribers, you like scaling issues. Scaling issues (server capacity being utilized) means your business is doing well. With your subscription fees producing a healthy profit, you can buy another server (a kick-ass one).

anewaccountname• 18 years ago

>Try solving your own problems. Your own company is not unique, there are probably two hundred others who have the same problems.

But if someone solves the same problem as you, whine about it and have a quasi book-burning ordeal where you get it permanently removed from the internet. (Campfire)

iamelgringo• 18 years ago

Really, as soon as Justin TV gets the video online, people should see it. DHH's presentation really was the best of the bunch in my opinion, followed by San Altman's.

He really made a lot of sense. There is so much talk and buzz about getting funded that it was really refreshing to hear some one talk about just plain starting a business. The profit margins in the software business are very, very high. If you can offer a decent product and get people to pay for it, you can make a rather nice living for yourself without having to play the funding game.

attack3• 18 years ago

HUGE if's.

rantfoil• 18 years ago

Thanks for these notes. Very detailed and captured the meaning perfectly. But you just had to be there to see the frenetic energy with which he boils on stage.

chaostheory• 18 years ago

video courtesy of justin.tv: http://www.justin.tv/hackertv/97862/DHH_Talk__Startup_School...

vlad3• 18 years ago

Great! Turns out this speech was in fact recorded successfully and completely by Justin.tv, but apparently some others like Arrington's were not due to technical difficulties (like I remembered last year.) I was actually very nervous because I made a decision to publish these notes to the public asap, but I was missing out on the first part of Paul Buchheit's speech to do so. Why was I nervous, when surely there would be perfect, uninterrupted video recordings , with full and clear audio after the event? Well...

axod• 18 years ago

For new technology, it seems to me to be a land-grab. Grab the users who want X, then either figure out how to make money off them (As google did), or sell to someone who sees the value of your audience share.

So... is it:

1. Find a problem - something's broken 2. Find a solution - make what people want 3. Price it 4. Get users

3. Get users 4. Work out how to monetize them

I think either can work, and both have disadvantages. Charging up front sort of goes against what PG said in his talk (Great talk I thought) - about being nice and helpful and giving users stuff they need. Waiting until you have the userbase before you start monetizing means you don't have cashflow, and may need funding.

edw519• 18 years ago

Great presentation! I'm already building a startup predicated upon the subscription model and I'm already familiar 37 Signals, DHH, and Getting Real. I just needed this talk to give my a little extra kick in the butt. New business plan in the works today.

mhidalgo• 18 years ago

It all goes back to the mentality of loving what you do...if that results in you being the next google so be it. The problem is people set their minds on being the next big thing instead of worrying about what they are doing in the present. DHH is speaking to living in the present and not compromising your ideals.

attack3• 18 years ago

Well, anecdote != data:)

David Heinemeier Hansson's Speech about Making Money at SS2008

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