This is typical of what drives me crazy about 37signals. They say several things that are true but then claim that there's a causal relationship between them.<p>Take this post.<p>Premise: Profits = Freedom.<p>Results:<p>Company runs without debt: unrelated to profits. Profitable companies can use debt as a tool, and they cite their lack of credit history as causing a problem! Debt free is not the same as profitable.<p>We trust our employees: this has everything to do with hiring and nothing to do with profitability. They can offer the benefits they list <i>because they're profitable</i>, but profit doesn't make them trust their employees.<p>We speak our minds: this is because they have controlling interest in the company, not because they don't have debt. Again, no relation.<p>This would be confusing as hell for someone that tried to build their business based on the advice in this post.
I found it amusing that the <title> of the page is:<p><pre><code> Profits = Freedom - (37signals)
</code></pre>
Which is the same as saying:<p><pre><code> Profits + 37signals = Freedom
</code></pre>
Doesn't sound very helpful to us who don't have 37signals.
Rather fluffy article but one point I'd like to raise is that it is odd for a consistently profitable company to avoid debt.<p>Debt can be a good thing, it can help finance growth or reduce monthly costs to increase cash flow. For the same reasons there could be justifiably good financial reason to get a mortgage even though you could pay for the house in cash, relating to tax benefits and other incentives.<p>Once you are consistently profitable, or have a high paying job that affords significant personal cash flow, you might be inclined to forgo all debt entirely, but on the other hand once you are in this scenario you are the least likely to default on a debt and have the capacity to take bigger risks by borrowing without ruining either your credit or causing an immense about of stress.<p>It's great I guess that they don't take the debt approach, but it's not necessarily a positive thing, and I bet I could look at their financial statements and see tons of opportunity to leverage debt that would free up cash flow so they could be making better use of their capital.
I think the main issues here are ones of capital scale and efficiency. I believe 37Signals' tenets work well for low headcount, extremely capital-efficient businesses such as software development, hedge fund management, or specialty insurance.<p>Unfortunately, there are many enterprises (drug research, agriculture, smelting, office construction, theme parks, waste processing, private space exploration, etc.) which are fundamentally dependent on large amounts of capital both during the start-up phase as well as to ensure daily continuity of operations.<p>Most of these capital intensive business also demand a reasonably large staff to support these daily workflows.<p>With a larger staff comes the increasing probability that one bad apple will be hired. Just one bad apple can bring an entire enterprise down without a reasonable set of security and trust-limiting thresholds on capital expenditures and workflow control. The Union Carbide chemical spill in Bhopal and the Barings bank collapse come immediately to mind.<p>A prominent COO once told me that for every 100 hires, he expected to pick-up 1 bad apple every 2 years. In his context a "bad apple" was someone whom, over time, would repeatedly and deliberately attempt to criminally defraud, sabotage, or publicly discredit the company.<p>With those odds, basic human nature, and capital-intensive business economics, it's not hard to see why these enterprise's mores on debt and individual trust run counter to 37Signals' philosophy.
I read this as - "If you want real freedom, you don't just want to run a company, you want to run a PROFITABLE company"<p>The point being that running Twitter isn't freedom until Twitter doesn't need to constantly ask others to pay the bills.
Only on the web is completely stone sober run of the mill stock business advice considered revolutionary and "out there". 37signals' advice is pretty straightforward: build something worthwhile, charge money for it, make a profit, grow based on your profit not on some hypothetical ideal, etc. Mundane business advice in any other industry.
Right on. Surprised to hear the criticisms in these comments since this seems like such basic advice: don't have debt, work in a context of trust, and the desire to have everyone do good work.<p>Not having debt is fundamental for real freedom. Not having debt is worth giving up some material crap for.<p>Trust people. Make adjustments on an individual basis if it is ever necessary.<p>We all want to do good work that has a positive effect on the world and make money to support people we love. Try to set up an environment so people can do their best work.
From <a href="http://news.ycombinator.com/item?id=171567" rel="nofollow">http://news.ycombinator.com/item?id=171567</a> by redorb in response an earlier 37signals post at <a href="http://37signals.com/svn/posts/979-quit-your-job" rel="nofollow">http://37signals.com/svn/posts/979-quit-your-job</a><p><pre><code> "Life is too short to work at a job you hate,
but everyone has to do something someone else is willing to pay
them for." Sid Emmert</code></pre>
i'm curious no-one here (or in the article) name checks amartya sen - <a href="http://en.wikipedia.org/wiki/Amartya_Sen" rel="nofollow">http://en.wikipedia.org/wiki/Amartya_Sen</a><p>the concept of "feedom" (and the idea that being able to maximise it is a good thing) is very similar to his "capabilities" - <a href="http://en.wikipedia.org/wiki/Capability_approach" rel="nofollow">http://en.wikipedia.org/wiki/Capability_approach</a>
Lack of debt might be good, but lack of credit history is bad.<p>As an individual, even if you don't ever want to get into debt and pay for all your purchases up-front, you have to make an effort to build your credit history. If you don't have a good one a lot of things completely unrelated to debt become a lot harder in our society.<p>Same thing applies to companies. Possibly even more.
Perhaps one assumption in this business philosophy is that you have to be really clear to everyone about why they're being given certain liberties and why it's important.<p>The only way I could see people not 'acting like adults' is if they think that by extension certain other things are allowed, which aren't -- by virtue of not being mutually beneficial. DHH and Jason Fried are pretty forceful personalities. It's hard to imagine them not being clear about why they're managing the way they do.<p>Would it ever backfire without clear, forceful personalities guiding it?<p>Refreshing to hear about anyway. Investment in the confidence of employees via trusting them seems like always a good investment.<p>And ditto what other people have said here about the advice being somewhat basic. But on the other hand, the investment strategies of say Warren Buffett are incredibly basic as well. Basic != overvalue
I enjoyed this article and because I know David reads this I wanted to suggest the book "Human Action" by Ludwig von Mises. It seems like his discussion of profits in that book might be pretty interesting with your line of thought.<p>I saw in an interview that John Mackey of Whole Foods got a lot out of reading it for what's that worth.<p><a href="http://en.wikipedia.org/wiki/Human_Action" rel="nofollow">http://en.wikipedia.org/wiki/Human_Action</a>
This is so obvious as to be trite.<p><i>It’s these supposedly crazy things that make me not want to give up 37signals for anything.</i><p>I'm guessing a sufficiently large buyout offer will change your mind on that right quick.
I love this snippet from the comments, referring to the fact that 37signals is beholden to their customers.<p>"Everyone has a boss. There is no escape."