$100M+ Advice That'll Piss Off Every Business Guru (ft. DHH)

Operating as a private company allows 37signals to avoid disclosing full revenues and profits, providing a competitive advantage by keeping rivals unaware of their success. This privacy also frees them from external pressures, enabling a focus on long-term vision and internal values.

DHH states, 'That's one of the great privileges of being a private company. It certainly served us well for many, many years when we had the entire project management space in SAS to ourselves. And we were laughing all the way to the bank because clearly someone else must have realized this was a highly profitable not even niche but category of software and it just took a decade until anyone else woke up to the idea that this could be a good business and then we had competition.'

Without VC funding, 37signals couldn't outspend competitors on marketing. Instead, they focused on generating awareness by being 'interesting' and 'ruthlessly honest' through their philosophy and observations, which naturally attracted an audience and earned attention.

DHH explains, 'If you don't have a bunch of money to buy ads and awareness that way, you have to earn it and the way to earn it is simply to be interesting. Now I don't set out to be interesting as an objective. I try to be ruthlessly honest and very forthright in everything that I learn. And that in turn turns out to be interesting to some people some of the time.'

DHH argues that a lack of prior knowledge and an 'irreverent personality' in youth can be a significant benefit, allowing individuals to challenge established paradigms and create novel solutions without being constrained by 'how things are supposed to be done.'

DHH states, 'Ignorance is a benefit for a huge class of problems that you are cursed when you've been through the loop once. When you know too much, you cannot unseed. In the same way you will be locked into paradigms and thought patterns and if you want to break those paradigms if you want to break those thought patterns you kind of got to start from a clean slate.'

The financial and resource constraints faced by 37signals during the dot-com bust forced them to be scrappy, productive, and rely on open-source tools. This environment directly led to the creation of Ruby on Rails, a technology born out of necessity for radical efficiency.

DHH recounts, 'All of those constraints apply themselves to our situation and then just produces an explosion of creativity because that's what very often happens. When you are deprived in all the right ways, you will find out, oh, there's a better way to do this.' He adds, 'I mean this in my case on the technical side was the birth of Ruby on Rails.'

DHH observes that even at the highest levels of successful companies like Shopify, the precise reasons for significant growth or success are often unknown. This highlights the limitations of data and theories in fully explaining complex business outcomes, suggesting that intuition and long-term commitment play a larger role than often admitted.

DHH notes, 'Even Toby, we don't really know like why did it take Shopify, what is it gonna be, 22 years to get to this moment where it just had its best year since the craziest of the peak co years. Isn't that fascinating?' He concludes, 'The amount of stuff that people don't know is amazing. I mean, I wrote a blog post a while back basically putting that to the point of nobody knows anything.'

DHH initially appreciated AI but found early LLMs (like autocomplete) disruptive to his workflow due to aesthetic and 'wrong' suggestions. However, the advanced models released in late 2023 dramatically shifted his perspective, leading him to embrace AI as a powerful tool that amplifies individual productivity, likening it to gaining '18 arms and seven more brains.'

DHH describes his shift: 'The models that dropped in late November... That class of intelligence suddenly switched from I don't like what it's making to holy [expletive] what how okay I'm going to merge.' He adds, 'It is more like I've grown 18 arms and seven more brains and I'm operating 22 screens.'

DHH observes that the traditional strategy of building an audience by consistently providing value ('jabs') and occasionally asking for a sale ('right hook') is less effective today. Social media algorithms, particularly on platforms like X, suppress promotional content, making it harder for 'right hooks' to reach an audience, even with many followers.

DHH states, 'What I've seen... is that the right hook doesn't travel anymore because all the main media outlets... the algorithm is just never going to show your stuff.' He concludes, 'I don't think it converts or works as well as it once did.'

The primary objective for 37signals' longevity is ensuring it remains a place where DHH and Jason Fried genuinely want to work. This commitment to personal satisfaction and avoiding 'grinding' prevents founders from becoming trapped in a business they dislike, fostering a more sustainable and enjoyable long-term venture.

DHH explains, 'The number one objective both Jason and I is to ensure that 37 signals is still a place we want to work. Not just want to work, but like to work is our favorite place to work.' He contrasts this with entrepreneurs who 'managed to build a company they don't like and they would love to get out of it.'

DHH's career is built on the internet and open-source, both 'no-permission' platforms. He fiercely opposes the gatekeeping tendencies of companies like Apple, exemplified by 37signals' public battle over App Store fees for their HEY email service. This stance reflects a deep-seated belief in open access and user freedom.

DHH asserts, 'This entire business, my entire career is premised on two main things. The internet open source and what those two share is that there's no one to ask for permission.' He describes the Apple conflict as 'completely incompatible with what I wanted to see in the world.'