On today’s episode I’m talking to David Heinemeier Hansson, co-founder of Basecamp project management software and creator of Ruby on Rails. He is well-known as a talented developer, but I also think he is one of the best no-bullshit digital marketing persons out there today.
He is a Denmark native and has learned from business practices in both Denmark and the US.
Join us as David shares his path in business and his insights into the world of marketing.
Listen to this Episode:
Topics Discussed in this Episode:
- David’s background growing up in Denmark and business differences with the US
- His sources of marketing and business inspiration
- Basecamp as a case study (numbers such as the amount of website visitors a month)
- Metrics overload versus hard-to-track marketing
- David’s main principles in marketing
- Best marketing books and concepts he’s come across
- Insights into the future of marketing
I appeared on the "Everyone Hates Marketers" to talk about the language of bullshit, https://t.co/vUYdlNlRXC
— DHH (@dhh) April 4, 2017
- David Heinemeier Hansson
- Meditations by Marcus Aurelius
- About Seneca, a Roman Stoic Philosopher
- The Intelligent Investor by Benjamin Graham
- Influence: The Psychology of Persuasion by Robert B. Cialdini
- Jobs-To-Be-Done Framework
- Blue Ocean Strategy by W. Chan Kim
- Signal v. Noise
- David’s Twitter – @DHH
- David’s Instagram – @dhh79
Louis: Bonjour, bonjour and welcome to everyonehatesmarketers.com. I’m your host, Louis Grenier. everyonehatesmarketers.com is a podcast for digital marketers who are sick of shady, aggressive marketing. I interview no nonsense marketers who are not afraid to cut through the bullshit and say things as they are. During this show, we learn how to get more visitors, more leads, more customers, more long term profit by using good marketing, by treating people the way we’d like to be treated.
Before I start giving you more information about the podcast, please head over to everyonehatesmarketers.com and subscribe to the email list. You’d be notified before anybody else of my future guests. We can come up together with great questions for those guests, you will have access to my number, also the number of listens we get, the number of downloads and quite simply we can have great one to one conversations if you need any help or if you want to give us feedback. Please head over to everyonehatesmarketers.com.
Because it’s the first episode, I want to give you more details about why I started this podcast. If you’re a marketer or did some marketing in the past, you probably had to use some bad marketing tactics to get your boss off your back, to reach your product target or simply because you felt that everybody else was doing it.
Here is what I mean by shady, aggressive, bad marketing. It’s for example writing about 300 word articles just to rank on Google with no consideration for your readers. It’s using bots to automatically engage with people on Instagram or sending automatic direct messages on Twitter, it’s using buzzwords that don’t make any sense and have no meaning, such as best in class or client focused. It’s using cheap stock photos that everybody has seen at least 50 times in their lifetime. It’s following competitor’s every move instead of focusing on our customer. It’s using the latest hack to take advantage of a loophole that will be fixed in a week anyway. It’s interrupting people with huge pop-ups and ads all over the place. It’s sending emails to a list that frankly don’t give a shit about you and never really had. It’s inviting people on LinkedIn just to spam them 10 minutes later. You get what I mean by bad marketing.
I’m sorry because we don’t like to be treated this way by others but yet we do it ourselves. For the record, I do not blame you and I don’t blame anybody doing it. I used to use all of those tactics. Most of us are under pressure to deliver short term results, to please our boss. I get that. The internet also puts a huge distance between us and the people we talk to. We tend to see them as numbers in Google Analytics instead of talking to them face to face, that means we lack empathy.
I know that deep down you don’t like using bad marketing and you’re not the only one. Trust me. I talk to a lot of people who said the same thing. From now on, let’s say enough is enough. There is a better way to do marketing. We can treat people the way we like to be treated and generate more leads. We can help them to solve their biggest problems without being spammy. We can understand people and respect their privacy at the same time. We can sell and be honest at the same time. This is and this will be our competitive advantage. While a lot of people are busy doing bad marketing that will last for a week, we are here to invest in a long term and do good marketing.
In this podcast, I interview marketers so they can teach us how to trade shady, aggressive marketing with good marketing. Together, let’s give marketing a better name and make internet a better place.
For this first episode, I talked to the co-founder of Basecamp which is a project management software DHH. It stands for David Heinemeier Hansson. He’s Danish, living in the US for quite a while now. He’s also the creator of Ruby on Rails which is a very popular framework to build web application.
A lot of people will know him as a very well-known developer but I also think that he’s one of the best no-bullshit digital marketing person out there. He really says things as they are. He is not afraid to speak his mind. He’s not afraid to cut with a bullshit and this is why I love this guy. He wrote a lot of books with his co-founder Jason, that I really recommend for you to read. They really changed the way I’m running my business and the way I do marketing day to day.
Here is what we learned in this episode. You learned what growing up in Denmark taught him of a business. He learned the main difference between Denmark and the US in business. You’ll learn that why thinking that it’s a doggy dog world out there is plain wrong. Why advancing new worlds is the language of bullshit and what you should do instead. He was also kind enough to share a few numbers off of Basecamp such as the number of visitors they get every month and he’ll explain how he and his co-founder out-teach and out-share their competition and how you can do the exact same thing.
He’ll explain to us why some of the best marketing channels out there are hard to track and why and how you should eat your own dog food in marketing. And finally, he’s sharing with us the best marketing books he ever read and the best concepts he ever came across in terms of marketing. Have a listen and let me know what you think.
Hi David, welcome to the show. Thank you so much for your time.
David: Thanks for having me.
Louis: No problem at all. I have a first question for you and it’s February 2017, let’s say you are appointed president of the United States right now, today. How does the country look like under the Basecamp principles? What do you envision the country to be under your rules, I would say?
David: That’s a pretty broad question. I think it’s almost impossible that it wouldn’t be a level up from where we are actually today, I’ll say that first and foremost. It’s interesting. I talk often about picking a set of tools and techniques that work for your size. Usually, it actually is talking about this in the reverse, but a lot of people look up to companies that are huge companies, they look up to what does Apple do? What does Google do? What do these giants do? What are their techniques and what are their approaches?
That goes from everything from business in general to marketing in particular. The problem is when you try to learn from what works at a mega scale to what works at tiny scale, it’s frequently the complete opposite. I think that that’s actually quite similar to perhaps the predicament we’re finding ourselves in with the current US government is that there is a group of people who’ve successfully employed a set of techniques to get to where they are but now where they are, those techniques, they don’t work. They’re not suitable for the task at hand.
Actually, I would say the same would probably be true for most of the techniques that we employ at Basecamp on all levels. They don’t work at running 300 million people. They work at running a company of 50 and dealing with a few hundred thousand customers. I think it’s important to know your scope and your scale of the approach that you have and the systems that you have and operate within that. I think it’s very easy to fall into the trap to think that the concepts that you have are universally applicable.
There are extremely few concepts that are universally applicable and that’s awesome. That is exactly why I continue to be excited about marketing at Basecamp and how we position the product and the company is because we could do things at 50 people that Apple can’t do, Microsoft can’t do, even the hundreds of people working for preeminent Silicon Valley startups can’t do anymore, right? You can operate at a different scale when you have sort of a direct access in the way that Jason and I do to our audience. We can talk directly to them. That’s just impossible to replicate.
Large companies are never going to function that way. You’re never going to have typical try and do run the social media accounts of Apple. It just doesn’t fit that image. I think that you should stay within your sphere of competency and your sphere of fit for your techniques and running a government is not a sphere that overlaps very well with what do best at Basecamp.
Louis: So the answer would be to divide the United States and the world into chunks of 100 people and use the best principle for each. Very micromanaging.
David: The funny thing is that that is actually in many ways, how both the United States and most countries are divided. You have the federal government but then you have the states and then you have the municipalities and then you have the cities and then you have the towns. I think the techniques that we’re using, perhaps they’d be much better for a town of 50,000 people. There you can have the mayor running things in perhaps more similar ways than we’re running our business.
On that scale you can see some of the techniques totally do cross boundaries and whether you’re running a tech company, you’re running a shoe store or you’re running a small town. Often times these have more in common because they have a similar size and scale than one tech company that’s tiny compared to a tech company that’s enormous.
Louis: You mentioned a few principles, we’re going to talk about those during the interview, but I guess could you maybe mention one principle that really summarizes your way of thinking and how it could have be applied to small groups of people?
David: Sure. One of the principles that we hold dear at Basecamp and we use a lot in our marketing is just the directness of having the chief principles speak directly to the audience. It’s funny that you started off with the political question because that is absolutely something that Donald Trump has mastered. He has mastered the language to speak to a certain slice of the population directly.
He didn’t put out press release. He just goes on Twitter and starts ranting about shit, which works very well for that catered group but again it’s a technique, I don’t think is very suitable for running a country but it is actually in many ways a similar technique that Jason and I are using to drum up interest and stake out our positions for Basecamp.
Jason and I write directly to Medium. We both maintain prominent Twitter accounts. We talk directly to our audience. The message is not filtered through several layers of intermediaries to get to the final recipient. I think that that technique of speaking directly to your audience when you have a certain size of audience and you have certain size of group is extremely powerful because it allows you to come off as far more personable, it allows you to come off as relatable, as friendly in a different way than if you are, hey my name is whatever, I’m a representative of blah, blah, blah.
Most people are already tuned out. People don’t connect on the small scale to faceless businesses. They connect to people. If you can be a visible part of that, if people can equate doing business with Basecamp as doing business with David and Jason, I think we stand to win. I get to two edge sword obviously. We have our fans and people who are sympathetic to our viewpoints and then we also have plenty of people who are not sympathetic at all and perhaps you’d call haters or whatever, right?
But when you run a small company like we do, we don’t need to sell to everyone. Perhaps that’s one of those differences against the president of the United States. He does have to appeal to everyone. You should be the president to 300 million people, not just the tiny slice that ended up voting for you. When you run a small company, you can be far more targeted. Let’s say, we don’t need to sell to everyone, we don’t need to appeal to everyone. We will appeal to a small group who really gets us, who we have a very direct and intimate connection with. When we get that, we have something that no big company can ever offer.
The best that they can offer is “brand” but I think that personal connections beat brand every day of the week. I think it’s a similar topic that Gary V is talking about in his Phonetic Style of basically replying to 2,000 emails a day or something. He’s creating, on a mass scale, personal connections. It sounds like an oxymoron but I think it’s more doable than it ever was through these new channels that we have through Twitter, through Medium, through all these publishing channels that we have.
We can run, as Gary V calls it, small town economics and small town relationships. Then we can have this personal relationship with tons and tons of customers and they in turn, they turn into fans, they turn into advocates, they turn into evangelists for your company and that turns out to work pretty well.
Louis: It does. After 19 years, I think you kind of know what you’re talking about now.
For the listeners out there who know David to be a very well-known developer who came up with the Ruby on Rails framework and one of the key mind behind Basecamp, the reason why I’m interviewing David right now is because I think he is one of the best marketers out there, even if he doesn’t call himself a marketer. This is why I wanted to have his take on marketing and especially David, you are known to be quite a contrarian. You do enjoy having people debating with you, not necessarily having the same ideas with everybody else. I like talking about those stuff as well. I think it’s going to be a good conversation we’re going to have right now.
Before talking about marketing, I want to dig a little bit more about you and why you are the way you are and why you think the way you think. Just out of curiosity, what did your parents do? What was your childhood like in Denmark?
David: It’s an interesting comparison and one I’ve drawn on more recently is I moved to the US about 12 years ago. When I moved to the US, I had a certain perspective of what Denmark was and wasn’t and so on and so forth. I’ve really come to embrace the notion that you don’t know your country until you’ve lived in another. You can’t really appreciate what it is that’s good about it and what’s bad about it until you’ve seen it from the outside.
Now, I’ve gotten to see Denmark from the outside from almost the opposite end of the spectrum if you compare these two societies on a scale of Western countries. The US is extremely extreme as it comes to individualism, as it comes to lack of safety nets and so on and Denmark is in a completely opposite direction with some of the best social safety nets in the world and some of the most cohesive culture units and so forth.
I came to realize that even though I went to the US to do business and do Basecamp and so forth, what got me to the point where I could do that was the Danish system. If that had been in the US, our economic standard in the US, it would have been called poor. Absolutely it would’ve been called poor. The opportunities that I would’ve had growing up poor in the US would’ve been so much worse than they were growing up “poor” in Denmark because poor in Denmark is a very relative term and I think it equates in many ways much more to middle class in the US on many levels in terms on the social safety nets and the access to education and so on.
I went on to take a degree from the Copenhagen Business School, joint degree in Computer Science and Business Administration, and I was paid to do that. I tell that story to Americans and they go like, “Wait, wait, what are you talking about? Your college didn’t cost you $50,000 a year? You actually got paid by the government to take your education?” I go, “Yeah, yeah, that’s kinda how it was.”
I came out of this environment and it left an imprint that wasn’t immediately apparent and one I have been really discovering so much until I’ve seen more aspects of the world. Now I’ve lived in Spain for about five years as well part time and really get a very interesting view of all of this.
To get back to your question, as I was growing up, what I got was first an imprint that money just doesn’t matter that much. It matters in the terms of some safety nets on certain societies but in Danish society, it just didn’t matter that much. We were clearly poorer than just about all the friends that I had. My mom worked part time and my dad had his own business repairing TVs that was very fluctuating in how well that provided the family, right? And yet I have a great childhood, yet I had a very stable connection to the community, to schools, to the education system.
I wasn’t lacking in any of these fundamentals that when I think back on my experience now, if I had been planted in the US, I probably would have been lacking in healthcare, I probably would have been lacking in the education, I probably would’ve been lacking in all sorts of these basic areas. That, now, has left me and I think informed how we ran the business at Basecamp. That when we first got presented with the offer to sell the company to venture capitalists and do something else, those big numbers to some extent just weren’t that appealing because I kept thinking about what’s my day going to look like? How is my life going to change if I get a lot of zeroes in my bank account?
I knew from the outside it wouldn’t change nearly as much as the loss of autonomy, the loss of independence, the loss of being able to call my own shots and say whatever I want to say whenever I want to say it. All these freedoms encapsulate in running your own business and not having bosses above you, what they gave me.
We’ve really embraced these things and I’ve embraced these things coming from Denmark, coming from this experience that hey, money is nice but it’s far down the list compared to given these other essentials. As growing up, those essentials were just the basics of proper health care and proper education and so on.
Now in business, those basics are things like independence and the ability to work on what I want to work on at our pace, grow at our own velocity and not feel pressured to blow things out, to growth hack everything, to bend morals and ethics in all sorts of ways, to appease these standards of economic success.
Louis: As soon as you told me about the difference between Denmark and the US, I cannot relate to that because I’m French, as you probably heard already from my accent. But what I’m thinking straight away when you said that, is that okay you had all of those safety nets in the Danish economy.
What I’m questioning in your personality is that you seem to be a very driven guy. You know what you’re doing. You seem to be very driven. You are here to go the distance. You have a big drive. But yet, to me, it sounds like it contradicts the way you were living when you were a kid in Denmark. The fact that you don’t necessarily have to be very driven in order to survive because the safety nets are there, so why do you think you’re so driven?
David: I think that’s an interesting thing to dig in to. In the US, people often called that staying hungry. Entrepreneurs have to be hungry. That there is this assumption that if you don’t have an existential need to thrive and to pursue and so on, you won’t do it. It’s ingrained in a lot of the funding models as well. Venture capitalists talk about like, oh let’s make sure the entrepreneurs don’t take money off the table because then they just won’t have the seal, the fire in their stomach to do it.
I think that that’s a just a fundamental misunderstanding of human nature. I think that that misunderstanding that we are only driven to do great things if we have to by necessity is ignorant of human nature and the reason why people do the things they do. I don’t go to work every day now 15 years into it because I get a paycheck and I didn’t do it 15 years ago either, of course.
There’s some sort of baseline we have to establish. I’m interested in providing for my family, I’m interested in leading a well and secure life and so on and so forth. But once those things are covered, it’s not like you lose your drive to be creative. In fact for me, it’s the opposite. When I have these basics taken care of, it means that my mind is not filled with anxiety and stress about trying to like, oh shit, what’s going to happen if we don’t make the next thing, we’re going to go out of business. If we go out of business, I’m going to lose my health care. My kids can’t go to college. Going to work every day with that level of fear and stress in your system, I don’t think it’s conductive to being a wise, creative entrepreneur. I think quite the contrary.
Again, it might spur some people. If that’s their jig for motivation, it’s never been mine. Mine has always been the pursuit of betterment, making things more efficient, building cool stuff, working with amazing people. There are all these other reasons and motivations for why we build and why we start things that aren’t tied to the economic and that aren’t tied to our material goals at all. They’re tied to a much deeper sense of intrinsic motivation of simply it’s fun to create cool stuff.
I found that the people I connect to the most are people who have that drive. That they go to work and they build things because they have an intrinsic motivation to do so, not because they think, oh if I do this thing, then I can build a company that I can sell for x amount of dollars.
Louis: Yeah. I think the gift that you have as a person and the fact that you’re thinking this way comes a little bit from where you are brought up. Do you think you’d be thinking this way if you are born in the US? Maybe not.
David: I think that the American system cultivates a certain ethos around entrepreneurship that isn’t drawn from this basis we’re just talking about. They are totally drawn from rags to riches, staying hungry, this pursuit of success as defined in these material terms. That’s not to say that that model has not produced great things for the world, clearly it has.
What I’m trying to put out is to say there is a different set of motivations that you could choose as an individual to adopt that I think are far more healthy, they are far more sustainable. They are far more likely to lead to ethical, wise choices not just for you and your company but for your industry and for the world at large.
I think a lot of the failures we’ve seen in the American system both in the economy of large and in Silicon Valley in particular, the failure of empathy and ethics come from the fact that it’s pitted as this dog eat dog world. It’s a very fixed cake mentality. We have to conquer everything, we have to seize all the customers, we have to capture them, we have to develop monopolies, we have to have moats. There is a very militaristic and imperialistic vocabulary even around entrepreneurship in the US that I just find wholly unnecessary.
That is what I’m trying to, through example, put out there and say like, hey, it doesn’t have to be this way. Basecamp makes a product, just to take my own example, that has lot of competitors, that does not need to capture an entire market to be successful, that has made a wonderful business over the past 14 years or so based on just serving 100,000 or 200,000 customers, didn’t have to have millions, didn’t have to spend millions to get there.
Here’s an alternative, again, just because I put out on terms, not everyone is going to go like, “Oh yeah, we’re all going to do that.” No, absolutely not. I’m very realistic in assessing what’s going to happen but what I hope to put out is people who’ve already looked at that traditional American entrepreneurship ethos and went something’s missing. That doesn’t fit me. I think there are holes in this. I don’t think that’s the right way to go. I would like to try something different.
That they get a role model, they get a vocabulary, they get some beacons that can take them on this path because I’ve talked to a lot of people and this is the number one feedback actually that Jason and I both get from our conference talk and from our books Rework and Remote, is we get these feedback from people who says, “Oh, I already have this inside me. I already knew this but I thought I was the only one. Everyone else were talking these other terms and I was afraid to stand for what I actually believed. But now that I know that others think like me and others have similar goals that are aren’t wrapped up in these material pursuits and in that language, that imperial conquest mode, I feel liberated to actually go with the things that I knew to be true for myself.”
Like, oh, there is a different way to do a startup, there is a different to start a technology company and promote it and build it slowly and sustainable and so on. Not everything has to be these moon shots where either we turn into a unicorn or we’re a failure. That has been extremely rewarding in just putting out the things we put out, that when you hear that back, that someone already sat with those emotions and those ambitions and we just nudge them to realize that it’s okay to pursue those, it’s okay to say I’m not going to go down this other path.
Louis: You seem to be able to foresee stuff. You guys wrote three books, you’re going to publish another one soon. We’re going to talk about that in the next few minutes. For my understanding, I’ve been reading your post for quite a while, I’ve read your books, I’m using your products, so I feel I know you quite well even though it might not be the case but at least I know you quite well and you seem to be able to foresee stuff or predict stuff before others.
You took a lot of stand against a lot things that now seems like a lot of people are talking about but you are the first one of the first to talk about it. Do you have a method or a set of rules to predict stuff or it is just your way of thinking that turns out to be true in the long term?
David: I think the funny thing is that I don’t think we actually predict things as much as we look past the current cycle and we look to previous cycles and see how things turn out. A lot of the inspiration that I’ve had on the business side is to look at great thinkers that have gone before me, who have said all of these things, nothing that Jason and I say in the broad sense of the term is original. It’s all repackaging of ways in living from my personal philosophy of life.
I found resonance in the stoics. 2500 years ago, Marcus Aurelius and Seneca had incredibly timely insights to modern life. I was just talking to Jason about this a couple of days ago. He had just picked up one of Seneca’s books and he was like, “I read some of these chapters and I go like this could have been a column in the New Yorker from last month.” Or it just so happened to be there written 2500 years ago. I think a lot of these deep fundamental truths have been with us for a very long time but we keep forgetting them because they are hard and because they feel like they’re old, they feel like they’re outdated but they’re really just universal and completely timeless.
There is that and the pursuit of happiness, and contentment, and tranquility in how do you set your goals and how do you aim your life that the stoics just happened to write 2500 years ago. I’m still trying to interpret those and regurgitate them basically in more modern terms.
Then on the business side of things, one of my favorite books on business is the Intelligent Investor by Benjamin Graham that was written in 1953 or something like that on securities analysis, on how do you analyze good businesses and what makes a good business, what makes an investable business and so forth.
This is one of the books that The Oracle of Omaha often brings up as one of the fundamental text. It’s a really simple book and it just includes so much wisdom about the basics of business and these are the things that Jason and I harp on over and over again, the basics of business. Have a good product, sell it at a fair price, end of story. You don’t have to get more complicated than that.
But now we are at time where we have to invent new words to describe something so simple or we have to monetize. I’m ranting about that a few weeks ago. I just hate that word. Monetization encapsulates everything that is rotten about this new technology driven approach to business because it pretends to make something that is so simple seem so complicated and of course it’s only complicated because people have something to hide, that they have something that’s not quite above board in many cases.
What are we monetizing? We are monetizing eyeballs, we are monetizing privacy, we are monetizing all of these things that if you just told people, what do you do for a living? “Oh yeah, I sell people’s privacy to the highest bidder in a bidding system.” That wouldn’t sound very nice. It sounds much better to say, “Oh I am monetizing social communication and connecting people.”
This is the language of bullshit that we need to describe the unsavory. When you have something that is just simple and savory that you’re selling a good product that helps people directly and you sell it for a fair price, you just don’t need that vocabulary. The vocabulary of business that we’ve had for hundreds of years is perfectly adequate. The fundamentals of making black numbers at the end of the day, having more revenue than you have expenses, even if you count all of the expenses including stock compensation and interest and amortization and taxes and all the other things that people love to deduct from their revenues to prove that they have a profit.
If you just go back to those basics, life becomes simpler. It really does. It might not become ultimately and so peak profitable in the sense of selling of equity and selling of potential and dreams to other people but that’s very fine with me.
Louis: You guys are very public about Basecamp, you’re sharing the number of customers you have and a lot of things around the way you do things internally, you organize workshops in your offices and stuff. Briefly, I’d be interested to hear if you could tell us something that you’ve never told anyone about Basecamp before.
David: Hmm, good question. I’ll tell you something that I won’t tell you and I’ll tell you a story about that. One of the things we don’t share for example is our ultimate revenue and profit numbers. I think that is one of the glorious benefits of being a private company that doesn’t have public investors to be beholden to, that we don’t need that level of attention.
Basecamp has been doing exceptionally well for a very long time and I really like the fact, actually, that when we’re discussing the public space, there is this mystique about that. Perhaps in some ways it’s a contradiction because as we say we are so transparent about so many other things but how well this is working, I like to keep that a little bit of a suspense. A lot of things are wonderful as just fully open and transparent things and then I think a little bit of mystique and a little bit of suspense and a little bit of the unknown is perfectly appropriate for business as well.
Louis: You’re not sharing this because you’re scared of sharing it of something that will happen if you will share it? Or just for the suspense?
David: I don’t think scared is the right word. There are all sorts of things in my life I don’t share. Privacy is not about fear, not necessarily. It’s simply about it’s none of your business. If you walked up to someone on the street, would your first word to them be like, oh yeah, so how much do you make? What’s your salary? What do you have left after you pay the mortgage?
In many ways, it is an intimate conversation. That conversation does change at some point when you do have things like public investors and I’m a huge believer in financial transparency when it comes to businesses that are owned by the public. That’s a completely different ball game. That is one of the trade-offs that you have to make when you want to court, public investors and one of the tradeoffs you don’t have to make when you don’t do that.
You get the benefits of not tapping into that pool of money, you get to keep more of your privacy, you get to keep more of your autonomy because the business is owned by the people who operate it, that’s at least true for Basecamp. Jason and I own and operate the business. Jeff Bezos bought a minority stake in 2006 simply to give Jason and I the confidence to continue without taking VC money, without taking time bomb money that would’ve blown up the business in 5 to 7 years on the traditional payback scale of a venture capitalist and so forth.
One of the things that we thought about and when we think about hunger for starting in your business is you want to get from the point of having $0 in your bank account to let’s say you just have $1 million just sitting in your bank account.
The difference between those two numbers is actually quite substantial in terms of impact in your daily life. You don’t have to look at the restaurant check for how much a meal costs. You don’t have to worry about daily expenses. Things do get measurably easier. But the difference from having that $1 million in your bank account and having $5 or $10 or even $100 is so much smaller. It’s that initial hurdle to clear that really brings the big benefits in terms of quality of life and so forth.
We said, let’s just do that. Let’s just get over that tiny little hurdle, it won’t write any fancy press releases. We can’t brag about being hundred millionaires or whatever, right? But just for us personally, it’ll give us the confidence that we’ll go the distance. We will no longer be tempted to take whatever VC company check is being offered to us because we just have the basics taken care of.
As we talked about earlier about the basics of as we had it in Denmark with health care and education, once you have those basics taken care of, to me, that’s a liberating feeling. That liberates you from fear and anxiety and so forth. That’s pretty far away from your original question.
Louis: It’s okay. I’m going to find it back. You don’t want to share revenue and profits. You have your own reasons. That’s perfectly fine. What I like to do now is just give you a metric, so for example I would say number of visitors on your website, and then you can share the number or just say no, I don’t want to share that.
Louis: It’s going to take two minutes. As of February 2017, how many visitors a day do you get on basecamp.com?
David: We actually look at it in terms of per month. We don’t look at it on a daily basis, which I think by the way is an interesting off shooting conversation in itself some. I find that a lot of people who look at these numbers, they look at them at too short of a time interval to make reasonable judgments about where the business is going.
A lot of people are addicted to dashboards and dashboards often reflect current reality, as of right now, as of five minutes ago. That is usually a terrible interval to look at things and make decisions about. You get addicted in this rat fashion to getting the latest information when the latest information might very well just be a blip, might very well just be seasonality, might very well just be operations.
You need to look at longer time intervals, to smooth things out and make sense of them because what you really want is to make sense of the numbers, right? You don’t just want to go like, oh yeah, I got so many customers today. If you don’t get them tomorrow, it’s not going to pan out. On a monthly basis, what we generally look at is, I think we get about a million people coming to basecamp.com.
Louis: Okay. How many of those visitors turn into new trials?
David: Those get into the numbers that we don’t really dive into. What is the effectiveness of your pitch? What is your conversion rate? I’ll tell you our framework. I won’t share you the numbers but I’ll tell you the framework. As you say, the first number is the number of visitors to the website, that’s our leads. That’s the people who can convert. Then we look at the number of people who sign up for trial, we call that visitor to sign ups conversion. And then we look at finally the sign ups to customer conversion.
Of course, at every step of that funnel, you have huge drop off. The vast majority of people who visit basecamp.com do not sign up for trial and the far majority of people who sign up for trial do not become paying customers. That’s where to some extent marketing is a numbers game that if you want in the end to end up with customers, you have to have a much, much larger set of visitors. That’s where we try everyone to focus on all these aspects of it.
If you want to improve your ratio from sign ups to customers, well, you better damn well have a great onboarding experience, you damn well better be able to get people to actually try the application and see whether it’s right for them or not. If you’re having trouble just getting people to sign up, then your pitch probably isn’t right.
But I’ve also looked at other businesses that we have for example, High Rise. High Rise is another company that we spun off a couple of years ago from the main Basecamp business, a simple CRM to help you follow up with leads and so forth for salespeople. There, we actually have great numbers in terms of visitors to sign ups. We have good numbers from sign ups to customers but what we don’t have is enough visitors. Sometimes your problem isn’t that your pitch isn’t good or that your product isn’t good, but simply just that there aren’t enough people who have been exposed to that. That exposure level is one of the key things that Jason and I focus on. That to get to that million visitors a month, we have to make a lot of noise.
Louis: How do you make noise? You write books, you are very vocal.
David: We write books. We write medium posts. We maintain prolific social media accounts. We go on podcasts like this. We basically just try to out share and out teach our competition as such to build an audience and people who trust what it is that we say such that they hopefully will also to trust what it is that we sell. That’s where I find a lot of people have both too short of a time span on it and they are too aggressive in how they look at things.
It’s very easy in this day and age to think of things as performance marketing, that everything is performance marketing because when you put up a Facebook ad or you put up a Google ad, you get to see every level of the funnel. You get to see that specific person that I just paid $3.42 to click that link, they ended up on the page. It gets very metrics driven in such a way that if that’s how you’re bred, you will look at everything in that way.
One of the things that we have come to realize in part to the experiments that we did last year when we tried more of these traditional channels and found them, one thing was that a lot of it is hard to explain. Even though we are so sophisticated now and even though we have this incredible tracking technology, a lot of it is still a mystery and I think it’s a mystery in much of the same way as that old saying is, “Half your marketing dollars are wasted, you just don’t know which half.”
That becomes less true when you look at like oh, am I buying the Facebook ad or not buying Facebook ad on just that one channel. But that doesn’t mean that that’s that effective. For us, it wasn’t that effective. The investments that we made last year to try out these channels, they just paled in comparison to the effectiveness that we had spent 14 years building up in terms of cultivating an audience and cultivating evangelists and word of mouth and all these other channels which are very hard to track and that’s the problem why a lot of people I think perhaps get turned off by it.
You can’t just spend three months trying to build an audience and go like, “I invested $30,000. I can only attribute 500 customers to this, thus it is not profitable, thus it’s a failure, thus I shouldn’t do it.” I think that it is really the danger that we have when we have these channels that are so trackable, is that they make all the untrackable channels look faulty. But when they’re only faulty when you look at way too short of a time span for it.
For Basecamp and for our business, it’s absolutely clear that what sustains the business today and what got us to this level was 14 years of, which today, I hate that term, called content marketing, right? That we try to teach people things and share things that we know and then that in turns gives us authority, it gives us friends, even if they don’t go to buy themselves will recommend to others when they’re looking for a product in this space. How do you track that? All this stuff is very hard to track, there are all sorts of techniques. Net promoter scores and brand surveys, there are sampling techniques for us but none of them have the fidelity of modern internet marketing which makes them seem lacking in comparison even though they’re not.
Louis: I think all the points are making very good for most people in marketing because companies nowadays think about quarterly targets, so they have quarterly targets they have to reach. It’s always the urgency to reach those targets at the end of every month and by definition, exactly as you said, a lot of channels that you would try to use in marketing would be never used because as you said, it’s difficult to track the exact result.
It’s not because a customer come from a Facebook ad, that it’s actually the Facebook ad that convinced him or her to purchase for you. Maybe it’s the 14 years of work that you done in the past and all their books that they’ve written about you that finally made them decide that yeah, I need to go about buying.
David: Exactly. We spent a lot of time last year looking into these traditional channels and trying a bunch of things. What I found was even though the under surface looks like they’re so objective and they’re so precise and they’re so tracked, they’re full of bullshit too. When you take retargeting, when you just take the standard numbers that come off a retargeting campaign, the retargeting campaigns look amazing. They look like they’re super successful. But when you compare a retargeting against what these people actually have bought even though they didn’t click the retargeting link, all of a sudden, they’re not amazing at all.
When you compare things on do they actually add incremental customers to the mix, a lot of techniques that on paper look very good, start looking really rotten. Not just retargeting, another common technique is to buy your own keyword on Google. We buy at Basecamp, so we can scare off competitors and so on. You get some scale economies when you buy your own keyword and so forth. That looks, in isolation very attractive, oh lots of people click in this link. But are they incremental? If they’re not incremental, then what the hell are you doing, you’re just paying Google for traffic you would’ve gotten anyway.
A lot of these campaigns, when analyzed too narrowly, and without the proper rigor, come off as being way, way better than they really are and fundamentally don’t add nearly as much incrementality to your business as they purport to do. The problem there is of course that everyone who’s involved in the cycle, everyone from Google to if you have a firm doing this stuff for you, they are all interested in showing you the best case scenario numbers.
Because those numbers, they come with two decimals. Hey, this customer cost you $73.54. It looks like it’s true, right? Like why else would you have that level of precision? It’s just really misleading actually to have that level of precision because the level of precision is totally unwarranted when you consider it in the end of the day goal which is to get more incremental customers.
Louis: About the retargeting, I find that very interesting. It’s basically this technology that allows you to reap the rewards of all of the stuff you’ve done in the past, right? It’s really easy to make this technology looks really successful, as you said when in fact maybe we can take this time of saying if you have those types of technology showing the numbers to the double digits, this level of detail then it’s more likely it’s bullshit stuff that are already more fake because it’s, actually as you said also, very difficult to measure. That should be incredibly difficult to measure. It’s impossible to say that you got x customer, and each customer is worth $8.08.
David: Yes. You have that trouble on all layers of the cake. Both in terms of acquisition of new customers but also some things like lifetime value. To figure out how much can I pay for a lead? I will pay x for a lead because that turns into customers at this average rate which then turns into this average lifetime value of a customer.
There is a lot of subtlety in that whole shebang and a lot of campaigns that look very promising. Perhaps they’re not so promising once you look at the individual data point from that and that these customers perhaps were low quality, they weren’t the right fit, they may have signed up but they never realized the full potential of their lifetime value and the same thing on the flip side. Some campaigns, they can do crappy but if they yield, super targeted customers will stick around for you. We’ve had customers who’ve stuck around with Basecamp for 13 years. You know the lifetime value of a customer that sticks around for 13 years is? It’s astronomical. A customer that sticks around for 13 years is worth so much more not just on their own revenue but of the number of people that they recommend in that time frame.
That is just to say not that the rigor and the tracking isn’t important and viable, it’s just that it’s so easy to get wrapped up in some fake multi digit numbers and think that that’s truth. And unfortunately, truth is quite hard to come by when it comes to marketing. A lot of it is fussy and a lot of it, you’ll never truly know. A lot of things that are worth doing might not appear that they are in the moment.
Louis: You won’t know that until you go the distance, until you’ve been in the game for at least 2 or 3 years or even 5 or 10 years, I suppose. To go back to something I’m very interested about before I was planning to interview you, I asked a few people about stuff they like to know about you guys and one thing that kept coming up was, you strive on simplicity.
We are using Basecamp 3 every day. We use it for almost everything in the business. I love it because of the simplicity, it’s like this balance between we do need all of the stuff but yet there doesn’t seem to be one single thing that is there and it shouldn’t be there. I think this balance is very tough to find. Do you have a methodology behind that? Is there an actual way for you guys to select the right feature or select the right channels for marketing?
David: Absolutely and for us the answer is use it yourself. Eat your own dog food. We build Basecamp by using Basecamp. We are some of the biggest Basecamp users. We use Basecamp for everything. It’s extremely hard when you’re trying to make software on behalf of other people to hit that ratio just right. When you’re making software mainly for yourself and then hoping that there are other people like you, much, much easier to hit and strike that right balance.
I think you bring up a good point too, about simplicity. A lot of tools are proclaiming to be very simple and they may be very simple if you look at them in isolation but if they only solve 10% of problem you’re trying to solve, their simplicity has to be compounded by the 10 other tools you need to get to 100% and all of a sudden, that solution may not be simple at all.
For example if you compare Basecamp and it’s features to some of the others like Slack, or Trello, or Asana, or any of these other tools that people use in this space, you might at times say this tool is simpler, like the Basecamp for this thing. Yeah, that’s true. If you can get by truly with just that one tool, it may very well be simpler. What we keep hearing from our customers over and over again is that people are fleeing the patchwork, that they’re fleeing having to stitch together 17 tools of their own to come up with some sort of system and that’s not simple at all.
It’s not simple for their employees, it’s not simple for themselves, it’s not simple for billing, it’s not simple for anything. Even though the individual parts are simple. I’m a huge believer in both the technology and in business in sort of this integrated solutions and integrated propositions that we’re trying to solve an entire problem. With Basecamp, we’re trying to solve how do you run a company in an effective, calm, and efficient manner.
To run a whole company, you have to know what people are working on. You have to have ways of following up. You have ways to have accountability and you have to have ways to communicate. These are all facets somewhat of the same problem and lots of people are trying to solve one or two of those pieces. Basecamp is trying, to some ways, that’s a pretty audacious task which is to solve all of it, that you can install Basecamp and get by with basically just that.
For your question, the method to arrive at that right balance is to keep using it ourselves over and over and over again and be brutal in removing the things that just for ourselves do not pan out to work.
Louis: I completely understand the concept in products. Using your own products sounds like something quite simple to do once you build a product. Now, what I’m interested in is the marketing side. How do you eat your own marketing dog food? Because that’s a completely different thing, isn’t it?
David: It’s actually quite similar because one of the golden rules we’ve always had, people have asked us for a long time, how do you price your products? How do you know what the right price is? For the majority case, the right price is what would I pay? If I had to get my own credit card out and I had to pay for this product, would I pay $99 for Basecamp? Hmm. I got to look that value. $99, that’s a sizeable investment for a lot of companies. The value that they give back has to be pretty material. It can’t just be a tool that they use once every two weeks. It has to be more ingrained than that.
We’ve used that sort of what would we do, what would we pay all through the company history and we’ve shut down products and pricing approaches in the past when we felt like that’s not just credible. I wouldn’t get my credit card out for that. If I personally wouldn’t get my credit card out, I can’t trust that anyone else would either.
The same goes true on the marketing side. I write for myself. Number one audience for everything that I do is myself. Would I want to hear what I’m currently saying if someone else was saying it? That’s the only way I really know how, I don’t try so much to tailor my message or my approach to what some imagined audience would be.
I know that that’s the problem like oh, let’s figure out what the customer really wants. Bullshit. We just hold up a mirror and say what do we want? What do we want to hear? In know it’s a trite comparison but when you heard Steve Jobs introduce the first iPhone, what was he talking about? Was he talking about all the focus groups that they have done? No he was talking about how the teams themselves hated their mobile phones. That they had these Motorola phones or they had whatever brand of phone that they had and they really didn’t like them.
They want to build something for themselves, the same was true with the introduction of the iPod and so on. They love music. They want to listen to music, how do we do it? How do we figure it out? I think building for yourself, talking to yourself, marketing to yourself is exceptionally effective technique at figuring out what is good quality.
Again, it may turn out that you’re not a good archetype, you are building for yourself and you’re pricing to yourself and you talk to yourself but there just aren’t a lot of people like you. That would suck. What we found is that there are plenty of people who are exactly like us. In fact, there are millions of people that are like us, that have similar tendencies and values and so on so we can speak to those tendencies and those values. In our language and in our turn is how we would have want to hear it and it will resonate with a lot of people.
Louis: For most companies that are starting out, the objective should only be to get their first 100 customers that think like them. It sounds like a lot when you think 100 people but you should take the entire world and the 7 billion or nearly 8 billion people living on Earth at the minute, doesn’t sound like a lot of people. I like these concepts and I tend to forget I should read what I’m writing as if it’s somebody else writing it because I do come up with a lot of shit sometimes. I need to do that every day and I think the marketers listening should do that every day, does it actually make sense what they are writing, does it sound false?
David: That’s exactly it. I think a lot of times when we come off as inauthentic and when we come off as plastic or fake, it’s because we’re trying to write what we think other people would like to hear. When we forget the whole concept, trying to get into the head of customers and how would they like to hear this? Screw that! Talk to yourself and the bullshit falls away because nobody’s interested in hearing bullshit. I haven’t met anyone who’s like, “Oh yeah, I’d like to read some bullshit today.” Lots of people, they spew out bullshit because that’s somehow their misguided notion of what they think that other people want to hear.
Louis: You said in an interview with Tim Ferriss recently, you’re saying that Basecamp is basically a DJ mix of the best hits. You guys are not the best in the world at exactly everything you do but you are the best DJ mix. What would be your DJ mix of the best resources for marketers, what are the best books or the best podcasts or anything that helped you?
David: Yup. It’s funny. I was just talking to the High Rise team. We had a board meeting two days ago. We’re talking about this like how to figure out what are you selling and who are you selling to. For marketing, one of my go-to books is the book called Influence. I think it’s called Influence, like the six forces of whatever, human appeal or something. But just go through the basic of what are things like social proof? How do these basic building blocks of marketing psychology work? I think that’s a really solid foundation to have.
Then a framework that we’ve gotten a lot of mileage over the years is called Jobs to be Done, Clayton Christensen and Bob Moesta and others have been pioneering work on customer research and looking at the switching language, the pushes and the pulls of the Jobs to be Done framework is incredible and I also like Blue Ocean Strategy. Blue Ocean Strategy, it can figure out what are you selling. How do you position it? How is it different than the competition? Those three resources, I think those are really the cornerstones of how we try to think of marketing at Basecamp. Influence, Jobs to be Done, and Blue Ocean Strategy.
Louis: Last question before I let you go. What do you think marketers should learn today that will help them in the next 10 years, 20 year, 50 years?
David: I think the large answer to that is read those three books and internalize them and try to live them. More personally, what I would like for marketers to do is just to embrace the golden rule. How would you like to be treated? Would you like to have your privacy sold? Would you like to show up on an email marketing list? Would you like to be sleazily cold called? Would you like to be tracked on the internet all the time? Would you like to have annoying pop out, overlaid video, auto-plays on top of articles? How would like to be treated?
Not how can you make a buck. Not how can we squeeze things in certain ways that are profitable. How would you like to be treated? If you just go by that basic rule, I think there are a lot of nasty techniques that gives marketers a bad reputation that simply wouldn’t seem that appealing because we wouldn’t do it to ourselves, we wouldn’t subject our attention and our own dignity to those techniques if others were doing them to us.
The best way to reflect on this is every single time I get pissed at a customer interaction or marketing or something else, I instantly think, how am I being like this asshole? Because in some ways, there’s a mirror here and I can reflect certain parts of my own behavior in what I see that I don’t like. Often that’s very instructive. Especially on customer support and how you talk to customers and how you deal with them. We all deal with other companies, we all have interactions with customer service and so on, and we all have bad interactions with them it. It seems like a law of nature. Every single bad interaction is an opportunity for you to go like shit, I’m not going to do that to my customers. Just draw some lines in the sand.
Louis: You guys published three books and you’re going to publish the new one called The Calm Company soon. Do you know when you’re going to publish it?
David: We’re hoping to publish it late this year, probably in the fall. We just started writing it in earnest, we have basically a good outline of what we want the book to be about but we only just started writing it. We just preempted things a little bit. We will release it this year. We’ll see whether that actually happens or not but it was just as much to light a fire on their own asses and get writing and then we’ll see if we make it or not.
I’m really excited about it. I think there is an epidemic right now where technology is making people’s lives more stressful, more anxiety filled when they should be doing the opposite. We live in the golden age of computing power and capability. Things should be getting easier. They should be getting calmer and they should be getting just more pleasant to live and in a lot of companies they aren’t.
Louis: David, you’ve been really good, really great and I think it’s putting a lot of fire under my own ass and there’s a lot of things that I know to be true that I kind of forget from what you said so that was really insightful. Where can listeners follow you and hear more from you?
David: I’m on Twitter @dhh. I will warn people that right now that feed is full of Trump outrage and so on so maybe in a month time, that’s a better time to start following me if you don’t care about politics and American politics in particular.
I’m on Medium, we have a publication there called Signal Versus Noise which is our main outlet for new ideas. I’m on Instagram @dhh79 which is mostly just pictures of pretty sunsets, cars and family. I think that’s it. Twitter is really the thing that I’m most addicted to when it comes to these social medias and everything I post and I publish, I will put links on Twitter. If you can stomach the onslaught right now of Trump tweets then Twitter is the thing to follow.
Louis: That’s great. There’s nothing much to say after that especially after what happened in the US election. Right David, you’ve been really great. Thank you so much for your time.
We will share the notes of all the stuff you mentioned and all the resources that David mentioned in the podcast notes. David, thank you so much once again.
David: Thank you, my pleasure.
Louis: That’s it for another episode of everyonehatesmarketers.com and this is the moment where I tell you to subscribe to our email list. Before you leave and go to another podcast, or listen to another episode, I don’t treat email lists the way people usually treat their email list. I really treat that as a one to one conversation, so I’m going to send you very short personal emails every two weeks, I would say. We will inform you of a guest in advance, I’ll share with you my numbers and how many listens we get and I’ll also ask you for your feedback in terms of the questions we can ask our future guest and perhaps we can also have you on the show someday. Don’t be afraid to subscribe, I’m not going to spam you and you can always unsubscribe for sure if you wish.
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