DHH and Basecamp's Guide to No-Bullshit Digital Marketing

From Denmark to Silicon Valley: How Safety Nets Shape Entrepreneurship

Louis: No problem at all. So 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?

David Heinemeier Hansson: I would say that’s a pretty broad question, but I think it’s almost impossible that it wouldn’t be a level up from where we actually are 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 that 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? And that goes from everything from business in general to marketing in particular. And the problem is when you try to learn from what works at mega scale to what works at tiny scale, it’s frequently the complete opposite. And 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’s 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 just, they don’t work. They’re not suitable for the task at hand. And actually, I’d 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 100 or a few hundred thousand customers. And 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. I think 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 can do things at 50 people that Apple can’t do, Microsoft can’t do. Even the hundreds of people working for preeminent Silk Silicon Valley startups can’t do anymore. Right? You can just, 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 when we could talk directly to them. That’s just impossible to replicate, right? Like a large company is never going to function that way. You’re never going to have Tim Cook trying to run sort of the social media accounts of Apple, right? Like, it just doesn’t fit that image. So I think that you should stay within your sphere of competency and your sphere of fit for your techniques. And running a government, I think, is not a sphere that overlaps very well with what we 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 Basecamp principle for each so very micromanaging.

David Heinemeier Hansson: And the funny thing is that that is Actually, in many ways, of course, how both the United States and most countries are divided. Right. Like, you have the federal government, but then you have the states, and then you have the municipalities, and then you have cities, and then you have the towns. I think the techniques that we’re using, perhaps they’d be much better for, like, let’s say, a town of 50,000 people right there. You can have the mayor running things in perhaps more similar ways that we’re running our business. So on that scale, you can see some of the techniques totally do cross Boundari. And whether you’re running a tech company or you’re running a shoe store or you’re running a small town, oftentimes these will have more in common because they have a similar size and scale than, say, one tech company that’s tiny compared to a tech company that’s enormous.

Louis: So you mentioned a few principles. We are 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 be applied to a small group of people?

David Heinemeier Hansson: Sure. So 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. And I mean, it’s funny that you started off with a political question, because that is absolutely something that Donald Trump has mastered, Right. He has mastered the language to speak to a certain slice of the population directly. He doesn’t put out press releases. He just goes on Twitter and starts ranting about shit. Right. Which works very well for sort of that catered group. 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. Right. To sort of 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. Right. And I think that that technique of speaking directly to your audience when you have a certain size of audience and you have a certain size of group, is extremely powerful because it allows you to come off as far more personable. It allows you to come. Come off as relatable, as friendly in a different way than, like, if you’re, hey, my name is whatever, I’m a representative of blah, blah, blah, then most people have already tuned out. Right. People don’t connect. I think on the small scale to faceless businesses. They connect to people. And if you can be sort of 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. Right. I get to two edged sword. Obviously. We have our sort of 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. Right? Perhaps that’s, that’s one of those differences against to the president of the United States. He kind of does have to appeal to everyone, right? Like you should be the president for 300 million people, not just the tiny slice that, that ended up voting for you. But when you run a small company, you can be far more sort of targeted at saying like, hey, we don’t need to sell to everyone, don’t need to appeal to everyone. We will appeal to a small group who really gets us, who can, we can have a very direct and intimate connection with. And when we get that, we have something that no big company can ever offer. The best that they can offer is quote, unquote brand. But I think that personal connections be brand every day of the week. I think it’s a similar topic that Gary Vee is talking about and his frenetic style of basically replying to, I don’t know, what is he saying, like 2000 emails a day or something. He’s creating on a mass scale personal connections, which 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 sort of, as Gary Vee calls it, small town economics and small town relationships. That we can have these personal relationships 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. It does.

Louis: After 19 years. I think you kind of know what you’re talking about now. So 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’s one of the best marketers out there, even if he doesn’t call himself a marketer. And 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 and not necessarily having the same ideas as everybody else. And I kind of like talking about those stuff as well. So I think it’s going to be a good conversation we’re going to have right now. But 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. So just out of curiosity, what did your parents do? What was your childhood like in Denmark?

David Heinemeier Hansson: Sure. It’s an interesting comparison and one I’ve drawn on more recently as I moved to the US about, let’s see, 12 years ago. And when I moved to the US I had sort of a certain perspective of what Denmark was and wasn’t and so on and so forth. And 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, right, 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 completely the opposite direction with some of the best social safety nets in the world and some of the most cohesive cultural units and so forth. And I came to realize that even though I went to the US to sort of do business and do base camp and so forth, what got me to the point where I could do that was the Danish system, was the fact that I grew up. If that had been in the U.S. our economic standard in the U.S. it would have been called poor. Absolutely, it would have been called poor. And the opportunities that I would have had growing up poor in the US would have been so much worse than they were growing up, quote, unquote, 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 of these 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, paid to do that, right? Like, I tell that story to Americans and they go like, wait, wait, what are you talking about? Like your college didn’t cost you $50,000 a year. You actually got paid by the government to take your education. And I go, yeah, yeah, that’s kind of how it was. So I came out of sort of this environment, and it left an imprint that wasn’t immediately apparent, and one I haven’t really been discovering so much until I’ve seen more aspects of the world. Now I’ve lived in, in Spain for about five years as well, part time. And you really get sort of a very interesting view of all of this. But to get back to your question, I think 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 in 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 sort of had his own gift shaft, his own business repairing TVs. That was very, let’s say, just fluctuating in how well that provided for the family. Right. And yet I had a great childhood, yet I had a very stable sort of 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 education. I probably would have been lacking in all sorts of these just basic areas, right? So that now sort of have 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 or something else, those big numbers, to some extent just. They weren’t that appealing because I kept thinking about, like, well, what’s my day gonna look like? How is my life going to change if I get some. A lot of zeros on my bank account? And I knew from the outset, like, 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 encapsulated in running your own business and not having bosses above you, what they gave me. So we’ve really embraced these things. And I’ve embraced these things coming from Denmark, coming from this experience that, like, hey, money is nice, but it’s far down the list compared to giving these other essentials. As growing up, those essentials were just the Basics of proper health care and proper education and so on. And now in business, those basics are things like independence and the ability to work on what I want to work on at our own pace, grow at our own sort of 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 sort of standards of economic success.

The Danish Advantage: Building Without Fear

Louis: And as soon as you told me about the difference between Denmark and the U.S. i kind of 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. And what I’m questioning in your personality is that you seem to be a very driven guy. Right. You know what you’re doing. You seem to be very driven. You’re here to go the distance, you have a big drive. But yet to me, it sounds like it kind of contradicts the way you were living when you were a kid in Denmark. Right? 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 Heinemeier Hansson: Yeah, I think that’s an interesting thing to dig into. In the us, People often call 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 sort of 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, like, then they. They just won’t have the seal, the fire in their stomach to do it. Right. And I think that that’s just a fundamental misunderstanding of human nature. And I think that that misunderstanding, that we are only driven to do great things if we have to by necessity, just is ignorant of human nature. And the reason why people do the things that 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. Right. Of course, there’s some sort of baseline you have to establish that you sort of, I’m interested in providing for my family, I’m interested in leading a well and secure life and so 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 bases 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. Like going to work every day with that level of fear, fear and stress in your system, I don’t think it’s conductive to being a wise, creative entrepreneur. I think quite the contrary. Right, again, might spur some people. 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’s 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 sort of 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. Right. And I found that the people I meet that are most interesting, 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 could build a company that I can sell for X amount of dollars. Right?

Louis: Yeah. And 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 were born in the us Maybe not.

David Heinemeier Hansson: I think that the American system cultivates a certain ethos around entrepreneurship that isn’t drawn from these bases we’re just talking about. They are totally drawn from rags to ridges, staying hungry. This sort of pursuit of success as defined in these material terms. And I mean, 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’s a different set of motivations that you can choose as an individual to adopt that I think are far more healthy, they’re far more sustainable, they’re 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 at 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 sort of fixed cake mentality, right? Like 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’s a very militaristic and imperialistic vocabulary even around entrepreneurship in the US that I just find wholly unnecessary. Right. And 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 lots 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, let’s say, 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. Like, again, just because I put out an alternative, it’s not like everyone is going to go like, oh, yeah, like we’re all going to do that. No, absolutely not. I’m very realistic in sort of 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’s holes in this. I don’t think that’s sort of the right way for everything 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 talks and from our books, Rework and Remote is we get this feedback from people who said, oh, I already had this inside me, I already knew this, but I thought I was the only one. Everyone else, we were talking these other terms and I was sort of afraid to stand for what I actually believed. But now that I know that others think like me and others have similar goals that 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. Oh, there is a different way to do a startup. There is a different way to start a technology company and promote it and build it slowly and sustainable and so on. Not everything has to be these moonshots where either we turn into a Unicorn or we’re a failure. That’s been extremely rewarding in just putting out the things that we put out. That when you hear that back, you hear that back, that someone already sat with those emotions and those ambitions and we just nudged 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. But from my understanding, I’ve been reading your posts 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 think 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 of things that now seems like a lot of people are talking about, but you are kind of one of the first to talk about it. So do you have a method or set of rules to predict stuff, or is this just your way of thinking that turns out to be true in the long term?

Predicting Trends by Looking Backward

The Language of Bullshit vs Simple Business

David Heinemeier Hansson: Well, I think the funny thing is that I don’t think we actually predict things as much as we just look past the current cycle and we look to previous cycles and see how things turn out. So 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’ve said all of these things. That nothing that Jason and I say in the broad sense of the term is original. Like, it’s all repackaging of ways of living. For from my personal philosophy of life, I found resonance in the Stoics. 2,500 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, I think, 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 like last month. Or it just so happened to be that it was 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. So there’s that on the sort of 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 had, right. 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 texts. And it’s a really simple book and it just includes just so much wisdom about the basics of business. And these are the things that Jason and I harp on over and over again, right? The basics of business have a good product, sell it at a fair price. End of story. It doesn’t have to get more complicated than that. Right? But now we are at a time where we have to invent new words to describe something so simple or we have to monetize. Right? 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. Right? Like what are we monetizing? We’re monetizing eyeballs, we’re monetizing privacy. We’re monetizing all 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 business that we’ve had for hundreds of years is probably 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. Right. If you just go back to those basics, life becomes simpler. It really does. It might not become ultimately 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. So briefly, I’d be interested to hear if you could tell us something that you’ve never told anyone about Basecamp before.

David Heinemeier Hansson: Hmm, good question. Well, 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, Right. 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 discussed in the public space, there is this mystique about that. Perhaps in some ways it’s a contradiction because as we just 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 slight. I think 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 sort of the unknown is perfectly appropriate for business as well.

Louis: So are you not sharing this because you’re scared of sharing it, or something happen if you share it, or just for the suspense?

David Heinemeier Hansson: I don’t think scared is the right word. I think there’s all sorts of things in my life I don’t share. Like, privacy is not about fear. Well, not necessarily. It’s simply about, like, it’s none of your business. Right? Like, 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? Like. Like, what’s your. What’s your salary? Oh, so what do you have left after you paid your mortgage? Right. Like, it’s. In many ways, it is an intimate conversation, and 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, right? Like, that is one of the trade offs that you have to make when you want to court public investors, and one of the trade offs you don’t have to make when you don’t do that, right? So you get to sort of the benefits of not tapping into that pool of money is that you. 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. Well, 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 have blown up the business in five to seven years on the traditional payback scale of a venture capitalist and so forth. We took on that small stake by selling a minority stake directly to Bezos, and we got to pad our own bank accounts a bit on the scale of. Let me put that another way. One of the things that we thought about, and I think when you think about hunker for starting a new business is you want to get from the point of like having $0 in your bank account to, let’s say you just have a million dollars just sitting in your bank account, right? The difference between those two numbers is actually quite substantial in terms of impact on your daily life. When you don’t have to look at the restaurant check for how much a meal costs, or you don’t have to worry about daily expenses, things do get measurably easier, right? But the difference from having that $1 million on your bank account and having 5 or 10 or even 100 is so much smaller, right? It’s that initial hurdle to clear that really brings the. The big benefits in terms of quality of life and so forth. So we said, hey, let’s just do that. Let’s just get over that tiny little hurdle. No, 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 healthcare and education. Once you have those basics taken care of, to me, that’s a liberating feeling, right? Like that liberates you from fear and anxiety and so forth. So that’s pretty far away from your original question.

Basecamp by the Numbers: A Million Monthly Visitors

Louis: It’s okay, I’m going to find it back. So you don’t want to share revenue and profits. You have your own reasons. That’s perfectly fine. What I’d like to do now is just share with you a metric. So, for example, I would say number of visitors on your website and then you can share whether you can share the number or just say, no, I don’t want to share that. Just take two minutes. So as of February 2017, how many visitors a day do you get on basecamp.com?

David Heinemeier Hansson: we actually look at it in terms of per month. We don’t look at it on a daily basis, which I think is, by the way, an interesting sort of offshoot and conversation itself. 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. Right. And that is usually a terrible interval to look at things and make decisions about. You get addicted in sort of this rat fashion to getting the latest information when the latest information might very well just be a bleep, might very well just be seasonality. It might very well just be aberrations. 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 want just want to go like, oh yeah, I got so and so many customers today. Well, if you don’t get them tomorrow, it’s not going to pan out anyway on a monthly basis. What we generally look at is I think we get about a million people coming to basecamp.com okay, how many of

Louis: those visitors turn into new trials?

David Heinemeier Hansson: Yeah, so those get into the numbers that we don’t really dive into. I think that there’s like, what is the effectiveness of your pitch? Right. What is your conversion rate? What we look at, I’ll tell you our framework and I won’t share the numbers, but I’ll tell you the framework we, as you say, we look at. 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. So we call that just visitor to sign ups conversion. And then we look at finally the sign ups to customer conversion. And 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 a trial and the far majority of people who sign up for a trial do not become paid customers. So 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, much larger set of visitors. Right? So that’s where we try as to everyone, to focus on sort of all these aspects of it. If you want to improve your ratio from signups 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, well, then you pitch proper reason, right? But I’ve also looked at other businesses that we have. For example Highrise. Highrise 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. And there we actually have, we have great numbers in terms of visitor to signups. We have good numbers from signups to customers, but what we don’t have is enough visitors. So 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’ve been exposed to that. Right. I think that’s one of the, 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.

Out-Teaching the Competition: Content as Your Moat

Louis: How do you make noises? How do you make noise? So you write books, you’re very vocal.

David Heinemeier Hansson: 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 competition as such to build an audience of people who trust what it is that we say, such that they hopefully will also trust what it is that we sell. And that’s where I find that a lot of people have both too short of a time span on it and they’re 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, right? You get to see that specific person that I just paid $3.42 to click that link. They ended up on the page. How many of those turned into. 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. And one of the things that we’ve come to realize in part through experiments that we did last year where we tried more of these traditional channels and found them wanting, was that a lot of it is hard to explain. Right. Even though we’re 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 that Ogilvy of, like, half your marketing dollars are wasted. You just don’t know which half. That becomes less true when you look at like, oh, I might buy a Facebook ad. I’m not buying a Facebook ad on just that one channel. Right? 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 worth a 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 try. You can’t just spend three months trying to build an audience and then go like, well, I invested, let’s say, $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 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 they’re only faulty when you look at way too short of a time span for them. Right. 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. I mean, I hate that term, but called content marketing, right? That we try to teach people things and. And share things that we know. And that in terms, gives us authority, it gives us friends who will then, even if they don’t go to buy themselves, will recommend to others when. 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, 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: And I think all the points you’re making are very good for most people in marketing because companies nowadays think. Think about quarterly targets. So they have quarterly targets they have to reach, and 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 comes from, let’s say, a Facebook ad, that it’s actually the Facebook ad that convinced him or her to purchase from you. Maybe it’s the 14 years of work that you’ve done in the past and all the books that they’ve written about you that finally made them decide that, yeah, I need to go about buying.

Why Precise Marketing Metrics Are Often Bullshit

David Heinemeier Hansson: Yes. And I think that, I mean, this is even. So we spent a lot of time last year looking into these traditional channels and trying a bunch of things. And what I found was, even though they, on the surface, looks like they’re so objective and they’re so precise and they’re so tracked, they’re full of bullshit, too. Like when you take, for example, 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, right? But when you compare the retargeting against, like, would these people actually have bought even though they didn’t click the retargeting link, all of a sudden they’re not amazing at all. Like, 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, right? So we tried, for example, we buy a Basecamp such that we can scare off competitors and so on. You get some scale economies when you buy your own keywords and so forth, right? So that looks, in isolation, very attractive. Oh, lots of people clicking 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 have gotten anyway. So 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. And 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’re all interested in showing you the best case scenario numbers, right? And because those numbers, they come with like 2 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? And it’s just really misleading actually to have that level of precision because the level precision is totally unwarranted when you consider it in the end of the day goal, which is to get more incremental customers.

Louis: And about retargeting, I find that very interesting. It’s basically this technology allows you to reap the rewards of all the stuff you’ve done in the past, right? So it’s really easy to make this technology look really successful, as you said. While in fact, maybe we can take the stand of saying if you have those type of technology, sharing the numbers to the double digits, this level of detail, then it’s more likely that it’s bullshit than stuff that are a bit more vague. Because it’s actually, as you said, also very difficult to measure. Thought leadership is incredibly difficult to measure. It’s impossible to say that you got X customer and each Customer is worth $8.08 thanks to Thought leadership.

David Heinemeier Hansson: Yes, I think that that’s. I mean, you have that trouble in all layers of the cake, right? Both in terms of acquisition of new customers, but also in things like lifetime value. So to figure out how to. How much can I pay for a lead? Well, I’ll 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, right? There’s 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 points from that. And like that these customers perhaps were of low quality, they weren’t the right fit. They may have signed up, but they never realize the full potential of their lifetime value. And the same thing on the flip side, right? Like that some campaigns, they can do kind of 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 what the lifetime value of a customer that sticks around for 13 years is? It’s Astronomical, right? Like 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. So 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. And a lot of it is fussy and a lot of it you’ll never truly know. And a lot of things that are worth doing might not appear that they are in the moment.

Louis: And you won’t know that until you go the distance, until you’ve been in the game for at least two or three years, or even five or ten years. I suppose to go back to something I’m very interested about and before I did in, I was planning to interview you, I asked a few people about stuff they’d like to know about you guys. And one theme that kept coming up was so you strive on simplicity. I mean, we are using Basecamp 3 every day. We use it for almost everything in the business. And 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 shouldn’t be there. And I think this balance is very tough to find. So do you have a methodology behind that? Is there an actual way for you guys to select the right features or select the right channels for marketing?

David Heinemeier Hansson: Absolutely. And for us, the answer is use it yourself, eat your own dog food. We built Basecamp by using Basecamp. We are some of the biggest Basecamp users. We use Basecamp for everything. Right. And I think 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 don’t, if they only solve 10% of the problem you’re trying to solve, well, their simplicity has to be compounded by the 10 other tools you need to get to 100%. And all of a sudden that solution might not be simple at all. So for example, if you compare Basecamp and its features, number of screens to some of the other, like Slack or Trello or an Asana or any of these other tools that people use in this space. You might at times say, like, oh, 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. Right. And that. 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 were simple. So I’m a huge believer in both in 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 sort of accountability, and you have to have ways to communicate and, like, these are all facets somewhat of the same problem. And lots of people are trying to solve, like, one or two of those pieces. Basecamp is trying to, to some ways, a pretty audacious task, which is to solve all of it, that you can install Basecamp and get by with basically just that. So, yeah. But 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: So 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?

Eating Your Own Dog Food in Marketing

David Heinemeier Hansson: 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? Well, 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 gotta look what value? Like, $99. Like, that’s a Sizable investment for a lot of companies. So the value that they get back has to be pretty material. It can’t just be a tool that they use once every two weeks. Right. Like, it has to be more sort of ingrained than that. So we’ve used that sort of, what would we do? What would we pay? All through the company history, and we’ve shot down products and pricing approaches in the past when we felt like, eh, that’s just not credible. I wouldn’t get my credit card out for that. And if I personally wouldn’t get my credit card out, I can’t trust that anyone else would either. Right? And the same goes through 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? So 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 a 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? I know it’s a trite comparison, but when you heard Steve Jobs introduce the first iPhone, and what was he talking about? Was he talking about like all the focus groups that they had done? No, he was talking about how the teams themselves hated their mobile phones, right? That they had these Motorola phones or they had whatever brand of phone that they had and they really didn’t like them. They wanted to build something for themselves. The same was true for the introduction of the ipod and so on. Right? Like, they love music, they want to listen to music. How do we do it? How do we figure it out? That I think building for yourself, talking to yourself, marketing to yourself, you is exceptionally effective technique at figuring what is good quality. Right? Again, you may not be like, it may turn out that you’re not a good archetype, right? It may turn out that they’re just, 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. Right? 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 wanted to hear it. And it’ll resonate with A lot of people.

Louis: And for most companies that are starting out, their objective should only be to get their first 100 customers that think like them. It sounds like a lot when you think about 100 people, but if you 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. So, yeah, I like these concepts, and I tend sometimes to forget that. I tend to forget I should read what I’m writing as if it’s somebody else who’s writing it, because I do come up with a lot of shit sometimes. So 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’re writing and does it sound false?

David Heinemeier Hansson: That’s exactly it. Right. I think a lot of times when we come off as unauthentic 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 that whole concept, trying to get into the head of customers and like, how would they like to hear this? Screw that. Talk to yourself. And the bullshit falls away. Because nobody’s interested in hearing bullshit. Well, I haven’t met anyone who, like, oh, yeah, I’d like to read some bullshit today. Right. But lots of people, they say, 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, right? But you guys are not the best in the world at everything you do, but you’re the best DJ mix. So what will be your DJ mix of the best resources for marketers out there? The best books or the best podcast or anything that help you?

David Heinemeier Hansson: Yep. It’s funny. I was just talking to the high Rise team. We had a board meeting two days ago 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 of human appeal or something that just goes through the basic. Of what are things like social proof, how do these basic building blocks of marketing work and psychology work. So I think that’s a really solid foundation to have. Then a framework that we’ve gotten a lot of mileage out over the years is called Jobs to be Done. Clayton Christensen and Bob Moistur and Others have been pioneering work on customer research and looking at sort of the switching language, the pushes and the pulls. So the jobs to be done framework is incredible. And I also really like Blue Ocean strategy. Blue Ocean Strategy is a book for again, figuring 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 years, 50 years? Yeah.

The Golden Rule of Marketing

David Heinemeier Hansson: I mean, I think the large answer to that is read those three books and internalize them and try to live them. I think more personally what I would like for marketers 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 email marketing lists? Would you like to be sleazily cold called? Would you like to be tracked in the Internet all the time? Would you like to have annoying pop out overlay video auto plays on top of articles? How would you like to be treated? Right? 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 sort of just go by that basic rule, I think there’s a lot of the nasty techniques that gives marketers a bad reputation that simply wouldn’t seem that appealing. Right? Because we wouldn’t do it to ourselves. We wouldn’t subject our own attention and our own dignity to those techniques if others were doing them to us. And I think that the best way to sort of 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. Right? And 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 agents and so on, and we all have bad interactions with them. It seems like a law of nature, right? Every single bad interaction is an opportunity for you to go like, oh shit, I’m not going to do that to my customers. Just draw some lines in the sand.

Louis: So 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 Heinemeier Hansson: Well, 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’ve only just started writing it, so we’ve kind of just preempted things a little bit and just announced, hey, we’re going to release it this year. We’ll see what that actually happens or not. But it was just as much to light a fire under our own asses and get writing and then we’ll see if we make it or not. But yeah, I’m really excited about it. I think there’s a 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 lots 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. There’s a lot of things that I know to be true that I kind of forgot from what you said. So that was really insightful. So where can listeners follow you and hear more from you?

David Heinemeier Hansson: I’m on Twitter, hhh. I will warn people that right now that feed is full of Trump outrage and so on. So maybe in like a month’s 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. For new ideas. And then what else? I’m on Instagram HH79, which is mostly just pictures of pretty sunsets, cars and family and. Yeah, 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. So if you can stomach the onslaught right now of Trump tweets, then Twitter is the thing to follow.

Louis: That’s great. Yeah, there’s nothing much to say after that, especially after what happened in the U.S. election. Right. David, you’ve been really great. Thank you so much for your time. I will share the notes of all the stuff we mentioned and all the resources that David mentioned in the podcast notes. And David, thank you so much once again.

David Heinemeier Hansson: Thank you. My pleasure.

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