Welcome to REWORK, a podcast by 37signals about the better way to work and run your business. I'm your host Kimberly Rose, and this week we're talking about business partnerships. And the saying goes that if you've been in a business partnership, it's kind of like being in a marriage. And I'm joined today by Jason Fried and David Heinmeyer-Hanson, co-founders of 37signals who have been in that business relationship marriage for more than 20 years.
A lot of people stay actually married, so I'm sure there's some secrets to your success that we can share with our audience. Before we get started, Jason, I think maybe if you'll pick us off and kind of tell us the origin story of the two of you guys getting together, I know we've heard, if you've listened to the podcast for any period of time, we've started by saying like, David only worked 10 hours a week to start, but clearly that has progressed. So kind of tell us how did this all get started?
There's 11 hours a week now, I think it's about it. On every other week. 10% me every other week. Well, I've been building, I'm going to use air quotes for this software for a few years prior to meeting David on using FileMakerPro, which is this database thing where you can make your own databases, and I would design the interfaces. This is how I got an interface design. And then I wanted to bring one of these products to the web.
I wanted to do something that wasn't FileMakerBase because you had to download FileMakerPro and the whole thing. So can I make a SaaS tool? Essentially, this is way before SaaS even had a name, but so I had this idea to make my book thing, I had to call it single file, and I was going to bring this book database online, where you can track your book collection to see what you have, and enter the ISBN number, and look up the data online, pull it down the whole thing.
So I started using PHP to write this, primarily because a book I found on, I was looking for books, programming books, and one of the books was a PHP book, and the example was a book database. So I'm like, I should probably, this is great. I should just copy this basically. So I kind of got fairly far, you know, and then I got stuck. And then I posted something online. I said, I'm stuck here with pagination was the specific thing I was stuck on.
How do I show 50 records and then 50 more and 50 more and 50 more and show how many total pages there were to bottom as links, whatever, you know, 1, 2, 3, 4, 5, 6, 7, whatever. And I didn't know how to do it. I posted something online and David responded. Now I didn't know David, David had been reading our blog and sort of was aware of our company. And his response was very thorough, very fair, very kind.
It was not like a flippant response. It was like a detailed thoughtful response. I'm like, this is great. Thank you so much. And we started kind of going back and forth. And eventually is like, can I, can I see, you know, the whole thing that you made, I'm like sure, and he looked at, he's like, this is absolute shit. Let me redo this. I'm like, okay, fine. So, so he redid it in PHP. This is our first thing we ever built together. And we long to think, called single file.
And then that's sort of, so I'll stop there. And what year are we talking about? What year is this that this all happened? 2001. Yeah, 2000, 2001, 2001. Yeah. And so I'll stop there with like the, because we did other things after that. But that's essentially how we hooked up and we found that we could work together. And that relationship started, I mean, across continents, I was in Copenhagen, Denmark, Jason was in Chicago. We had the seven time zones between us.
And in the beginning, which was interesting, we actually didn't even talk on the phone until I think like six months into it. So it was really a full on remote working relationship.
It was email. It was aim. I think the messenger we were using at the time was called, and it was good enough. I think this is one of those foundational experiences for both of us that if we could build something real, get it to market on 2001 collaboration tools and techniques with the scarce amount of time we had together with the computing power that we have.
I always use that as a reference whenever I measure the hardship of anything we're doing today. Like, you know what, if we could do it like in 2001 using these tools primitive tools. And we're essentially still trying to do the same thing. I mean, this is the irony of the web like 95% of every web application, certainly every SaaS application and absolutely every B2B SaaS application is essentially single file.
It's a web UI in front of a database that allows you to enter stop and retrieve it. That's all it is. But I think a lot of folks have perhaps a difficult time dealing with the reality of the mundaneness of their existence. And I don't, I don't think we do generally speaking when it comes to work. You're like, yeah, we make web interfaces on top of databases. We've been doing it for 20 years. And there's a lot of value in that.
There's a lot of businesses that's just all the neat databases are amazing. They were invented a long time ago. We barely changed them. And it's still good. Anyway, that's a tangent. I think the sort of constraints, though, I think is the point to take away that we had quite severe constraints on our way of collaboration on our overlap on our time, our resources, all the things to get things going.
It just wasn't a big deal. You could still make stuff and you could make great stuff. And I still fondly remember single file. I remember scraping Amazon.com when someone would enter that ISBN number for the book. I would look up like and just take the image that Amazon had at the time to put it into our data.
It was just a lot of good stuff around it, but it was real. And there were real people who liked it. But also it wasn't a big success. Like by modern standards, it wasn't a success at all by present day standards 2001. I mean, it was nice. What did we get Jason? Like a few thousand people to use it most. I think it peak.
But wonderful, great learning experience. Great thing to get going. The first time you hit the ball doesn't mean you're going to make a home run. I mean, it actually took us working on quite a few projects together before base camp became what it was. And is.
Okay, so I'm imagining that these early days, David was kind of working as a contractor, like you're just doing work as a contractor for a few hours a week. But I think there's a big difference between like I'm just having this guy do some work for me to like we're now in business together. So kind of talk me through that transition.
It was even shadier than that. I don't think I was paying him in cash. I was paying him computers. So when he, like using Denmark, he couldn't get the latest Apple stuff. Just they didn't distribute that way back then. And so whenever we come to the US, I'd like give him like a box of computer equipment. Basically, I think is what it was.
So it's like, yeah, I think you've earned two laptops or whatever. I mean, he would track his hours and we sort of added up. And here you go. So that's how that worked. Well, so we've been working together for a while for clients now. So we're doing work for the first client I think we ever worked for was this company called Summit Credit Union, which was this company in Madison, Wisconsin. They needed an intranet.
Now, prior David joining up or he wasn't actually joined up, but prior to David being available, let's say, my company 37 signals was just doing website design. So just the front end of things. And these guys came to us and said, can you like build a whole internet for us.
That concludes the back end. The internet, I'll a Stone Age term, old school thing, people don't really happen so much anymore, but they're fantastic. It goes like, who works here? What are all the files everybody needs? And like a wiki like document center. Like that was kind of literally like ran the company, which is what again, most companies still need, frankly, and is way too complicated.
But they asked us to build one or they had one, I think we're remaking it or something like that. Anyway, I needed someone to do the back end like David, why don't we do this. So we did that together. And that was the first project we worked on together. And then we did a few more for fellow named Richard bird. And I think we did maybe another one, I'm not quite sure.
And then had this idea to make base camp. And so I'll kind of again, maybe stop there. But that's sort of the transition was sort of, hey, help me with this homegrown thing to like, let's do some real client work together. Now we've got some work under our belt like we've done some things together. It's been a couple of years now, basically, like, there's something here we enjoy working together. We see things the same way or really frustrated by complicated things. And there's something here.
Now, I don't remember except maybe David has about a memory than I do on this. I don't remember exactly when like partnership discussions happened. But maybe you remember, I don't remember exactly when that started. Yeah, it came up after we launched base camp. And we had launched base camp and Ruby and Ralph had been released. And I was looking at the end of my studies.
I graduated in 2005. And I knew sort of, all right, what am I going to do after that graduation? Either there's an opportunity here to continue to work in this base camp thing or this Ruby on Ralph's thing is taking off. Where should I direct my efforts? And I think part of the magic of this was exactly as Jason said, by that time, this is now, I think early 2005 was when we finalized things.
We've been working together for almost four years. And this is, I often hear this about people picking business partners and it sounds like essentially an arranged marriage. Like that there was no time before that there was just like, Hey, I need a business partner. You seem to be available. Should we go into business together? That to me sounds nuts.
I've worked with a lot of people. Very few of them. What I want to go into business with sort of on an ongoing multi decade basis. But with Jason, it was so much easier to go. This makes sense. Because I know him. I know how we work together. I know how we view the world because we've literally been working on things together for several years in advance. So by the time my decision point came up after graduation that I needed to figure out what to do.
It felt just natural to say, you know what, if we're going to continue to work together, then I want to be a partner in this. And I think what's also interesting about that is it happened like a year after the release of base camp and things just always get difficult when you're trying to divvy up something that's worth something.
Thankfully, base camp wasn't really worth a lot at that point. So it was much easier for me to approach Jason and say like, Hey, if we're going to work together going forward, you got to make me a partner this thing. But I think it was just made so much easier by the fact that I think, well, Jason can answer for himself, but it didn't seem like to me at least that it was a big risk that I was going to gamble on a person and a personality that I didn't have full insight into.
That might turn out to be someone totally different. I mean, one of the key reasons I think maybe it was Paul Graham who mentioned that the number one reason why businesses startups fail in your early phase is that the founders fall out that they don't want the same thing.
They just view the world in a different way that it's actually quite difficult to find someone that you're compatible enough with to not only just go the distance, but also go the stress, go to the attention, go all these other metrics that you're going to be measured on when you're trying to build something together.
So I think it was just a continuation of everything we've ever done in the sense that like there was no risk just like with base camp, there was no risk with base camp startup mythology is full of people bragging about how much risk they took. And sometimes you need to take some risk and that's great for some kinds of businesses.
But there's also this huge swath of domains we don't need risk at all that days now I could start working together just on a contract basis, then we could elevate that to working on a project together, then we could see how that project even went before we went further.
So we didn't waste a lot of time like, oh, how much do you own of this or that before there's even anything I think that those foundations made it easier for us to just sail through without a whole lot of drama in the arrangement.
The other thing was is that, and you know, this just goes to show you don't really that things just sort of happen in situations present themselves like I originally started the business with two other founders co founders Carlos and Ernest and subsequently a few years in one of them left another one left a year's after that. So I was solo at this time, which made it a lot easier.
So I'd run the business by myself for a bit to partners by myself and made a lot easier to bring David and had there been two other partners also in this day would have been a fourth like it probably wouldn't happen. I mean, frankly, like it's complicated. It's got to do be things up people on different things. It's a total mess. And at that time, I think base camp. I don't even know if we had a million bucks in revenue at that point, probably close to it. Maybe I don't know total.
I don't remember what it was. By 2006, I think actually when we talked to to Bezos, it was like a million bucks. I mean, I think it was even less quite a bit less than that. It was definitely less than a million bucks. Yeah, 2005. It was less than that. So, you know, there wasn't there was some there was some equity that I built by building the business by being around the business for five years more. There's some of that, but we were basically starting essentially kind of from scratch here.
Prior to this, we were a web design company. We're no longer at this point. I don't think we've totally made the transition, but we're not doing web design anymore. So it felt like a new business, a new opportunity yet we worked together for, you know, a handful of years. So it's just sort of as David said, the risk was low, but it's not even just that's a big part of it. But the risk can be low and the partnership can be bad. It felt like it was a good partnership and the risk was low.
So like, let's go for it. This is like a new frontier. Why not? You know, that's kind of how it felt. So I think we had like a few rounds of negotiation. Initially, David had this one piece and then I think he earned some more if you get exactly how that went. But I think there was two steps. And then it was, you know, straight forward agreements, arrangements, whatever. And that's how it all came together. Ultimately.
In fact, that, that agreement, the operating agreement, as it's called for an LLC, is essentially kind of the, it's changed a little bit, but that document is almost untouched from 20 years on. We had an original operating agreement drawn up and it's just fascinating to think of contracts being that long lived. I mean, I know in the grand scheme of things, there's probably a Japanese restaurant that can trace it's a landlord contract back to the 11th century or something.
But it can't even modern times in technology times. This idea that there's still this piece of paper. I think I might actually have the original piece of paper with actual wet signatures on it from 2005 or whenever when, when I joined the company that was sort of drawn up, it's just kind of fascinating that things can have that kind of longevity. I mean, I looked it up and like the average in the US, the average marriage is like eight years. So you guys have like a long lasted.
Most people who are getting married, which is kind of crazy. So tell me what some of those secrets to success are because, as you said, you know, sometimes businesses don't work because the founders have a fallout. They've gone gone the distance. What are some of those secrets to making it work? Well, I would say, well, these are the reasons I don't know, but these feel like maybe the reasons for us all, David's on the technical side and more on the design side.
So we have very different domains that we sort of look after. But we have this central core shared vision on the business. And then we stay out of each other's hair for the most part, otherwise David's a little bit more in my hair on the design side because it's easier to comment on design. I can't really comment much on tech. So, but for the most part, we respect each other's domains.
We stay out of each other's domains, but then we make various, we have very similar looks in business in the middle. And I think that's a really core important part of this, a really important part. I think if you're both designers or both programmers, it's just so much easier to buy heads and actually like think about all the collisions that happen in a business.
And if you're around for five, six, seven, eight years, ten years, whatever, and you're doing the same thing every day, you're going to see enough stuff differently that you're going to buy heads too many times. And I think that's what ends up happening quite quite a few times. Or someone wants a lot more like, I want to go big and huge and someone else wants to stay small. That's hard too. But I think we kind of see all that about the same.
And then like I just mean personally, like I just have great admiration, respect for his skills and abilities and talents. And I'm always in awe of what he's able to pull off and do. And I think that in any relationship, you need to it really admire the other person. I won't speak for him towards me, but like, I think that's an important part of it. Because otherwise you build up resentment. And that's just not a good recipe for anything. Period. Flat out.
So I don't know. I think it's pretty simple. And I think also we have a very low tolerance for bullshit. A very low tolerance for complexity for things that don't make sense for waste. We don't we don't like those things. And those are also important things not to like together. I think if you have very opposite viewpoints on those core fundamentals, you're just going to get it going to end up budding heads too often.
And at some point, like the brew starts to bleed. And then you're like this sucks. I don't want to do this anymore. This doesn't heal anymore. It's like one thing that like we've we've budded heads before, but, but then you heal because we don't keep budding heads. So you're going to bud head sometimes. If you keep budding heads, you have a wound that doesn't heal. And then you're in trouble. That's why I think things to fall apart.
The other actually one more thing I would add actually not thinking about it. We don't have external pressure bearing down on us from someone else. That compression, I think, pushes people up together in a part in bad ways when someone else, when you're doing this for actually ultimately for someone else higher up.
We don't have that, which is which is a decision we may we didn't take outside money from anyone to run the business. So we don't have that pressure, which I think really, really helps. I've just heard so many stories about founders who get along and are great and whatever, but someone else is just forcing them into a position they don't want to be in and they have no choice but to bear it and endure it. And then ultimately just they don't want to do it anymore.
Yeah, I think a key moment or key aspect of this as I see it is this notion of the power sharing agreement. And power sharing is so much easier. Jason says when you have distinct domains that you get to have it quote unquote your way within the field that you're the expert on. And that can happen if Jason and I were both designers, we were both programmers, we were going to have opinions and power struggles about the same domain and we were going to have it all the time.
It's so much easier when you have this distinction that most of the time we work on. I work on programming and Jason work on the design side and it's natural that if there is a tension or conflict about some of those things you defer you go like do you know what hey on product vision.
Jason's ultimately going to make the call I'm going to make a plea I'm going to make my opinions known, but I know going into that discussion that we're not arm wrestling that like the point is not for me to beat him. Because we've already set up an established power sharing agreement where when it comes to this like that's his decision. And the same way the other way like if for whatever reason Jason was incredibly fond of the cloud and thought that we should never have laughter or whatever.
That would have brought a lot of tension into it and it just doesn't happen and then in that shared space in the middle on the business side. I think it does help that we are so aligned like this is how we've been able to write so many books together and I think it's not always obvious to the reader which chapters written by who and so on we can blend our styles and we can speak each other's talking points in a way that feels sort of authentic and natural.
But it is I think this notion that the power sharing has to be fairly explicit that is actually better when it is and this is also one of those things you can trace all the way back to the founding. Jason owns more of the company that I do he brought more of it into it there was brand equity and there was whatever some startup things that he brought into it and you know what that's a recognition that's been there since the beginning and it helps the fuse a lot of the conflict.
I think when you can go do you know what on this one area we both agree that if there's a disagreement I'm going to take the lead and in this area I agree that you're going to take the lead and then for the rest of it where it's a little murky in the middle you know what we'll just trade. There's almost nothing we've made decisions about even large decisions where I wouldn't go do you know what if Jason really cares about this point.
All right let's see where goes and it goes back to this risk factor to we don't have someone else breathing down on neck like if we miss a quarter what's that mean it doesn't mean very much it just means that like all right maybe profits are slightly lower and we share that cake.
It's a slightly smaller cake but even it's cut the same way this is the other thing right like if I go like all right Jason you want to try a crazy business experiment that I think is not going to pan out what's the worst that's going to happen you're going to feel as much pain on the profit side as I am there's stake on their skin in the game on both sides in a way that really makes it easier to go like I'll just trust you on this one and you can trust me on the next one and enough history to go.
Even if you're really wrong you get to be wrong like a lot like you can be wrong five times in a row and you know what the business is still going to be here I for wrong all the time forever you eventually do go out of business but I think it's just really loosens things up loosens things up that any individual decision I can't think of a single one there was so crucial that I thought shit if Jason is wrong on this we're done.
So when you don't have those kinds of criticalities I think it just lowers the temperature in most of the decision making rooms notwithstanding that I think also we've had have had some aggressive disagreements of time usually over product decisions but that has also just when you work together for long enough you see you know what sometimes I'm right sometimes he's right it's going to even out it's going to be fine.
Okay so you guys are very similar in a lot of ways about your business philosophies I mean you're writing the books together how are you guys different other than just design side and text like how are you guys different from each other either personality wise or things that the other person does that you've learned from you've incorporated into your own life since this 20 year partnership.
I'm guessing that people would probably say that I'm more patient but that's not a good thing necessarily so it's just probably like I may be willing to give things one more try when David's like no this is not going to work and he's you know often right that's the case. My instinct is to you know depending on what it is it's not super critical let's try another time or trying a different way whatever I think that's maybe one of the things.
David do you agree with that yes and I sort of describe it in a slightly different way to I think Jason as I see you like to expand expand horizons expand options expand experiments and I provide the opposite function I narrow so when when we've tried a lot of things I'm like all right now it's time to narrow this down not to narrow down to a decision.
And I think this is part of the magic is that there is a yin and yang to it that you need both sides of it you need times of expansion and you need times of narrowing and if you only have expansion.
Do you know what that's probably not going to be great and if you only have narrowing that's not going to be great either so I think it's almost like a decision making flip side of the fact that we have different domains when it comes to programming versus design that we have different dispositions when it comes to
idea generation experimentation all these other things and oftentimes like we're not even that far apart we're just a part on the timeline so I'll be after three months for example all right time to narrow and Jason will be like yeah I'd like to give another three months on the expansion but eventually usually we converge on the fact that all right now we have given this experiment or this idea long enough and
it's rare I'd say that once the facts are in or once the sentiment it in a divide isn't that we actually see things that differently it's mostly in negotiating the timeline and the duration of how long we're willing to let something run I'm willing to let
things run far shorter than Jason is and I think you need a little bit of that push and pull this is the other thing of where even when I think about back to the most ferocious discussions we've had they usually all were about product like which how the
feature should be something new thing we're working on base camp that pressing function when it's not about the sort of power struggle it's not about like who gets to have control is about how do we squeeze the best idea out of these opposing forces that's actually positive and I've seen a lot of businesses to where the founders are not willing to engage fully on that not willing to pull the lever back and forth and you go like you know what you're not getting to to the best
idea here you're not getting to to the best examination of what we're trying to go because you're not willing to subject it to that amount of force and I think having the knowledge and faith in the fact that even when we do push relatively hard we can walk out of that room and go like alright what should we what should we have for lunch okay well thanks for sharing all that I know people listening just don't really know the backstory and how it all works together so thank you for sharing that
rework is a production thirty seven signals you can find show notes and transcript on our website at thirty seven symbols dot com slash podcast full video episodes are on YouTube and Twitter and if you have a question for Jason or David about a better way to work and run your business or working with a business partner send us a text or leave us a voice mail at seven zero eight six two eight seven eight five zero and we just might answer it on an upcoming show.