No Investors, 24 Profitable Years: Jason Fried on Staying Small, Trusting Your Gut and Making Money First

Fried says 37signals has been profitable every year for 24 years, with double-digit million-dollar profits annually over the past decade. It has more than 100,000 paying customers and roughly 75 employees, and next year it will mark 25 years in business. He deliberately ignores revenue, because "you can go broke generating a lot of money", and focuses on making more than the company spends with healthy margins that leave room to experiment.

On when to raise money, Fried says capital is necessary if you are building cars, opening a restaurant or need a factory, and it can come from savings, family, a bank or investors. Software is different: a couple of laptops and a couple of people are enough, and margins should be 80 or 90 percent. He finds it remarkable that Silicon Valley has made the most profitable style of business the least profitable, mostly through too many people and heavy customer-acquisition spending.

He thinks taking venture money actively hurts a company that doesn't need it, because venture-backed companies have only one acceptable outcome: go huge. All the space between a small business and a unicorn, where a company could find its own slot, gets skipped, and a company that doesn't blow past it "withers on the vine".

Lenny compares 37signals' roughly 70 employees with competitors such as Asana (1,600), Slack (2,500) and Smartsheet (3,000), which have similar customer counts. Fried says his company is focused on efficiency while theirs are focused on growth. 37signals has no salespeople, no enterprise tier and no heavy support infrastructure for customers paying $300,000 a year.

The company effectively has one product and one code base. Basecamp costs at most $299 no matter how large the customer is, with unlimited users, which lets the team keep the product tight and simple. Features are built by two people, one programmer and one designer, with a maximum of six weeks, so projects avoid 18-person meetings and slow decision-making.

Fried adds that 37signals could afford to hire hundreds of people but intentionally doesn't want to spend money on things it doesn't need. If given 500 or 1,000 people, he says he wouldn't know what to do with them and the company would fall apart. He sees constraints, simplicity and small teams as what keep the company honest.

Fried's root-level definition of success is whether he would want to do it again. The business must be profitable in total, but he doesn't keep separate P&Ls for each product and has no OKRs, KPIs, revenue targets or customer-growth targets. At year end, the only question is whether the company made more than it spent. He argues that many good things, like saying thank you, can't be justified by data and are still the right thing to do.

Lenny brings up the book *Finite and Infinite Games*, and Fried says he has always seen his career as one long continuum. At 15 he had a reseller's license and sold electronics to friends, and today he builds things he likes and sells them to like-minded people. He says being an entrepreneur is a job he wants to keep doing as long as he's good at it, so a deal that forces him out in five years has no appeal. Independence means nobody can tell the company no.

He prefers the idea of a "stay up" over a startup, because starting is easy and staying is hard. Most newsletters, podcasts and businesses hit a plateau after early growth, and to endure it you have to actually like the thing. 37signals has been profitable every year but with wavy profits, and Fried says comparing yourself to last year can demoralize you.

After almost 25 years, Fried says he has recently wondered how long to keep going, but is currently more excited than in many years, thanks to strong product work, the new ONCE line and an idea for another book. He tries to stay conscious of whether the business gives him energy or saps it. He admits he is curious what someone else would do with the company, guessing they would chase growth, make many more products, spend heavily on advertising and drive the margin down.

Fried says he is glad some people take big venture bets, and some businesses wouldn't exist otherwise, but they are extreme outliers. Most businesses on the planet are bootstrapped and must make more than they spend, so 37signals is in fact mainstream. He stresses he isn't telling everyone to be like him, only that this is an alternative to "go big or go home".

His interest is optionality: if a company could land in 135 positions and still be sustainable, that is better than having only one path to success. Asked what makes an idea venture scale, he says it is more a mindset, and that Basecamp and Monday could have swapped approaches. Physical-network businesses such as Airbnb and Uber need rapid expansion to be trustworthy, while software tools are instantly available everywhere, so he doesn't know what they need money for other than marketing.

37signals builds with Shape Up, a methodology described in a free book at basecamp.com/shapeup. Its core is the six-week cycle: each project gets an *appetite*, not an estimate. Fried says people are terrible estimators and "work expands to fill the time available", so a one-week appetite means a one-week budget, and the team must find the simplest effective version that fits.

The work is shaped ahead of time, then handed to the team with a lot of latitude. There are no specs, tickets or task lists, and the team defines the work needed. If something unexpected appears, the team and the shapers hold a conversation about trading concessions and trade-offs. If the work isn't done at the end of the cycle, it should usually die rather than run to seven or ten weeks.

Basecamp's hill charts show work as a hill: the uphill side is still working out how to do it, and the downhill side is pure execution. Two more days of downhill work is fine, but work still on the uphill side at the time limit almost certainly dies. Fried says this prevents endless projects, which he calls the most demoralizing kind, and notes that people stuck on a few of them want to leave their jobs.

Fried says promises are the downfall of every business: whenever 37signals promised something by a date, it seemed to miss it. He warns especially about promising anything "by the end of the year", because it's the easiest promise to make. Teams can share what they're working on, but he says they've learned to promise nothing.

Because companies form roots, he says changing the way they work is hard, and he advises trying Shape Up on a low-criticality project first. If you try something new on something critical and it fails, nobody will try it again. He has seen people adopt it, come back after six weeks saying it sucks, and in his view it failed because they changed too much too fast. Most adopters are small teams inside bigger companies, and they often take only part of it, like six-week cycles.

He dislikes the word sprint, since you can't sprint back to back. A coach once made his track team run twenty 200-metre repeats, and he threw up after the fifth. 37signals uses six-week *cycles* followed by a two-week cool down in which people tidy up and fix bugs while a few people shape the next cycle's projects.

Fried says he has only ever known how to decide by intuition, and thinks everyone does. Unless a machine makes a purely rational decision, a person brings thousands of known and unknown influences to it. Companies hire executives for judgment and experience rather than spreadsheet skills, and data is just one input. He is fascinated by decision-making and says to give your gut credit, because it has absorbed everything.

He acknowledges it's easy for him as the owner, but says showing the behavior opens space for others. The team asks "what do you think?" and "how does this feel?" more than almost anything, about screens, flows, words and colors, because humans are primarily feeling creatures. He avoids asking for certainty or for people to justify a view.

In hiring designers and product people, Fried asks about their tastes and which products they admire. Finalists do a paid week-long project, and he then asks what they would do with a couple more days, to see where their gut goes on the spot. He wants a good, clear piece of work plus the ability to riff, and looks for a synchronicity in the conversation. He says he wants neither scatterbrained idea machines nor an academic approach, but people who play with the product.

Answering a question from Matt Mullenweg about spectacular failures of people following his advice, Fried says the usual cause is trying to make a 180-degree change fast. Momentum matters, and the more massive an object, the more energy it takes to turn it. He also isn't fond of post-mortems, because teams usually settle on whatever explanation they can agree on so they can move on, and he doesn't think they know what really went wrong.

Asked what he has changed his mind about, Fried points to products. 37signals wound down its other products and renamed itself Basecamp, because he thought he'd be satisfied working on one "sculpture" for his career. A few years ago he and David Heinemeier Hansson decided they are makers who want to make more things again, which led to HEY and now ONCE.

Fried says he has no multi-year plan, not even a quarterly one, and the company rethinks what to do every six weeks. He thinks the further out you plan, the less you know, and obligations in the future can send people down a path of unhappiness. Independence is the root of what 37signals can do, and the company has no expectations for launches, just a hope to be proud of the work and find enough people to make it sustainable.

One of the principles on 37signals.com is that work isn't war. Fried objects to business vocabulary like conquering markets, targeting customers and destroying the competition, and to constantly looking to Navy SEALs for lessons when the company is making B2B accounting software. He prefers words about making something great and offering an alternative, and says pride and a spirit of creation beat destruction.

For aspiring bootstrappers, his advice is to stay as small as you can for as long as you can, since costs are the only thing you control. Do as much work as possible alone before hiring a second person, and skip branding spend, offices and web designers beyond a good laptop, an internet connection and a cheap site builder. He adds that things are simple until you make them complicated.

He recommends the Stoic practice of negative visualization, which David taught him: ask what the worst that can happen is and be at peace with it. For ONCE, the worst case is that six months of enjoyable work flop, and the margins mean the company can afford it. He doesn't suggest taking such a bet if you can't afford it.

Asked whether venture-funded companies can work this way, Fried says too much money doesn't prevent efficiency but creates sloppiness because you don't have to be efficient. Investors expect the money to be spent, mostly on people and marketing. He argues that constraints are what matter, and that having to make payroll next month forces you to figure things out.

His guitar analogy: no one can walk on stage and play well without practice, so why would a company pumped full of other people's money suddenly turn on profit? Bootstrapped entrepreneurs get more practice at making money, the fundamental skill of a business, while others practice spending it. He recounts RXBAR founder Peter Rahal's father telling him to go sell a thousand bars, and says scrappiness doesn't come from having large sums.

Fried says today's cuts and layoffs are what economic cycles do, and many companies are confused because they have never had to operate without plenty. Asked for his business strategy in a nutshell, he adds one word to the list of making great things, keeping costs in check and charging fair prices: enjoy it. The best advice he got from his father is that "no one ever went broke making a profit".

Fried and Hansson think a pendulum swing away from subscriptions is coming. ONCE will be a line of non-SaaS products that customers download, pay for once and install on their own server or cloud, with no recurring fees. The team looks for commodity software categories that still charge luxury prices and builds tight, high-quality generics that get the 80/20 right, each in about three months with two people and almost no maintenance or hosting cost.

The first product is a relaunch of Campfire, the group chat tool 37signals released in 2006 that was crushed when Slack arrived. Fried says it can run alongside Slack as a backup or as an air-gapped chat for executives, and buyers get the code, which they can modify but not resell. He wants the product to need as few words as possible, so it works universally, and to show translations of key terms in several languages.

Version 1.x updates would be free, with a discounted upgrade if a radically new version 2.0 ever appears. The price will be under $1,000, with no sales team, and Fried calls it a possible Trojan horse for companies looking at huge Slack bills. He says the company said by end of 2023 it would start rolling out to a first batch of customers, and joked that he was breaking his own rule.

Fried's closing message is that humans complicate things and that you can make progress with two people, profit and customers, figuring things out as you go. Raising money comes with strings attached, expectations and lost scrappiness. In his view the idea that money simplifies things is wrong, because you lose your full range of motion.

In the lightning round he recommends *Several Short Sentences About Writing*, Derek Sivers' *Hell Yeah or No*, and a book of homemade Russian folk artifacts that celebrates ingenuity. He says an old car with a stick shift made him fall back in love with analog driving, and compares 37signals to a stick-shift business with few layers of abstraction. His life motto is worry less, since most of what you worry about never happens.

Fried is thinking about a book on gut and intuition in business decisions. He recalls a Zoom call with Charlie Munger where he asked about doing something well that you know nothing about, and Munger told him in effect to trust his instinct. That gave Fried confidence to keep following his gut, and he asks listeners who like what the company does to spread the word, since growth has been mostly word of mouth.