David Heinemeier Hansson, DHH, gave one of my favorite talks of all time on Stanford’s ETL podcast. In typical DHH fashion, he gives simple advice that’s actionable, straightforward, and brutally honest when needed. DHH is the creator of Ruby on Rails, the open source software used by many top companies, including Twitter and Airbnb. He’s also a partner at software firm 37 Signals (now called Basecamp), and the co-author of the NY Time’s Bestselling book “Rework.” His successes prove he’s someone worth listening to. Here are some handpicked highlights from DHH’s talk, “Unlearn Your MBA…”

• Improve your writing.

In business school, you’re not taught to write the way customers want you to. Professors ask for long, fluffy papers about abstract management theories. A one page paper would be most simple and refined, but you’d never be encouraged to write only one page in college. Everything you’re taught about how to write, according to DHH, is the opposite of what the customer actually wants. Customers want clear language, they don’t want you to use big words when you don’t have to. DHH says one of 37 Signal’s core competitive advantages is “having good human writing,” allowing them to clearly and comfortably communicate with their customers.

DHH points to former Domino’s Pizza CEO David Brandon, as an example. Brandon had been quoted as saying, “The weakness in our value chain with the customers is really in our core product.” Huh? You mean your pizzas used to taste horrible and you’ll try to make them better? Why not just say it in a way people can actually understand.

• Planning is just guessing and, often times, is just harmful.

While long term planning is needed for established and stable corporations, it can be harmful for startups. What matters most for smaller companies is what’s happening tomorrow and next week. Spending time making 5 Year plans is a complete waste of time because you have no idea what’s going to happen. Such long term planning only distracts you from what you actually should be doing, which is focusing on tomorrow.

Most decisions in a small company are temporary. As DHH says, “It doesn’t matter so much what the decision is as long as there is one, just get going.” If it was the wrong decision, you’ll find out soon enough and can find a way to correct course. The most important thing is act rather than worrying about things that might happen years from now.

• Constraints are the best thing for a business.

According to DHH, “Constraints are the best thing for a business,” and he has several examples to prove it.

While DHH was a student at Copenhagen business school in Denmark, he did programming work on the side. One of his gigs was with 37 Signals based in Chicago. Since DHH was a student too, he only had 10 hours a week to work with 37 Signals. This time constraint actually worked in their favor because it forced DHH to look for ways to be more efficient while they we’re building their product. He didn’t have time to code everything using the typical programming languages, so he started to create his own hacks on the Ruby language. He came up with a much simpler language which significantly decreased his time needed to code. Ruby on Rails was born.

Although DHH was in Denmark and the rest of the team was in Chicago, this location constraint was also a benefit. The team’s communication revolved around their work. They weren’t able to have pointless meetings or waste time chatting with each other at the water cooler. The distance actually improved their efficiency and effectiveness working together.

A lack of money can be a helpful constraint too. There’s no way you’re going to have the resources to outspend a Microsoft or IBM, not having money forces you to think of ways to do things differently from the competition. It forces you to do less, only building the essentials, which leads to ease of use for the customers. Also, when you’re spending your own money and not a Venture Capitalists’, you’re forced to be profitable ASAP. With a VC cushion, you can afford to focus on things like “trying to get eyeballs.” This strategy might have worked for Facebook, but it most likely won’t work for you and can only lead you down several years of a path ultimately destined to fail. Don’t waste your time doing that. “Being forced to get to a point where you need to build a product, price a product, and sell a product the fastest is for the better,” says DHH.

• There’s a tragic misconception that you need to be a workaholic.

Being a workaholic is often seen as a badge of honor, a right of passage. Being a workaholic though is most certainly not a requirement or guarantee of success. Most times, you’re just running around like a headless chicken doing everything without realizing what it is that actually matters. What DHH proposes instead, is to figure out the things that actually count and can move the needle, and to do those. 37 Signal’s flagship product, Basecamp, was built with DHH working only 10 hours a week and still provides the bulk of their revenues.

DHH also warns of the employees who brag about how little sleep they get because they were working so hard. The best ideas and the best execution actually come from a well-rested mind. If you’re bragging about how little you slept, you’re essentially announcing to everyone how many mistakes you’re going to make that day since you’ll be so exhausted. “When you’re not well rested, your mind is not working at performing at peak performance and you’re going to produce shit,” DHH sums it up.

This reminds me of the comments from Derek Sivers, founder of CD Baby, on Tim Ferriss’ podcast, “busy people are just out of control of their lives.”

• Consumers love simple.

The number on feedback DHH gets on Basecamp is that people love how simple it is. They love how easy it is to get started using it, there are no training classes needed or massive manuals to dig through beforehand. They favorite things about the product are all the things that came from DHH doing less and adding fewer features. This is just like the comments from James Freeman of Blue Bottle Coffee; simple beats complex any day of the week.

• You actually have to do stuff. Beware the “idea guys” and the “managers.”

From DHH’s experience, bad things happen when you separate the people who do stuff from those who decide stuff. When people are elevated to a position where all they’re doing is managing others, there’s a tendency to just make up policies for the hell of it. Idle managers need to fill up an 8 hour day, when all they’re doing is managing they need to find things to work on.

Alternatively, DHH recommends that you always be an active producer of value at your company. Whether it’s marketing, coding, programming, etc., whatever your specialty is you need to use it to execute and contribute.

At 37 Signals, they have a flat management structure. When someone has an idea, he’ll propose it to the others and they decide as a team whether or not it’s worth pursuing. They’re the do-ers and the managers.

• When it comes to marketing, you can either out-spend or out-teach.

At 37 Signals, they market by doing everything they can to teach others. With limited resources, that’s the best thing they can do to promote their products and their brand. They share the inner workings of how the company runs, how they’re building their products, what technology they’re using, etc. They’re working to build an audience rather than just create customers they can flip product to. Their audience might not need to buy something from them today, but they might need to next year and, if not, they’re at least likely to refer a friend. As DHH says, “All sustainable businesses are built by word of mouth in the end, and the way to get to great word of mouth…is to try to out-teach.”

For more on this, DHH recommends this blog post from Kathy Sierra

• Revenue means nothing, profits do. Aim to build a smaller company.

In the web 2.0 world, a lot of companies get attention for being huge successes based on revenues and valuations. In reality, revenues mean nothing. Profits do. DHH points to Salesforce as an example, they’re a billion dollar company that only has a 5.9% margin.

Build companies that focus on profits. No matter what, building a business is hard and there are no overnight successes. Why waste your time trying to build something huge with tiny margins when you can build something smaller and potentially make much more. No business is a guaranteed success, but you have a better chance building a $3mm/year company than a $billion one. In DHH’s analogy, successfully building a $3mm business is like being a skilled poker player going to a table while successfully building a $billion one is more like going all in on Red 5.

Also, most big businesses actually started as small businesses. Don’t get blinded by companies like Instagram that actually were overnight successes, these are anomalies. Start a small one and if that becomes successful, it can grow from there. Don’t get into the game swinging for the fences right away. If you don’t need VC cash to fund capital intensive needs, don’t take it.

 

Check out DHH’s “Unlearn Your MBA” in full below.

For more, read this awesome article on the 4HWW blog, it’s an excerpt from the book Smartcuts focusing on DHH.

Also, here’s DHH’s own website featuring more of his work, including his also popular 2008 speech at Startup School.

I recently listed to James Freeman on the Stanford Entrepreneurial Thought Leaders (ETL) podcast. James is the founder and CEO of Blue Bottle Coffee. This talk is full of incredible insights, some handpicked highlights are below.

• Obsess over the quality of your product and “repeat to perfect.”

Before starting Blue Bottle, James was a professional clarinet player with a coffee roasting hobby. As a musician, James used to sit alone for hours on end practicing the clarinet. His goal was to play a little better at the end of the day than he did at the start. Through this process, he developed the discipline of “repeating to perfect,” which became a guiding principle at Blue Bottle. The goal was serving customers delicious coffee and James stripped away every distraction that got in the way. He only had 6 drinks on the menu, with no sizes and no flavors. There were no couches or plastic-wrapped muffins like most other coffee shops had. Every day, James focused solely on making delicious coffee and repeating the process to perfect his craft.

The farmers markets James attended reinforced the notion that quality of product was most important. None of the farmers had marketing budgets or PR firms. If your product was good, people bought it. And they came back next week to buy again. It was that simple. James made sure that things like logos and branding were secondary concerns at Blue Bottle.

• Recognize that the customer experience is part of your product.

James recognized early on that Blue Bottle’s product was coffee + experience. Delicious coffee could be amplified with a positive customer experience or ruined with a negative one. From his prior career as a musician, James honed the ability to “imagine the sensory outcomes” of his audience and he used this same skill to master all the details at Blue Bottle. He analyzed everything from the atmosphere of the café to the sound of the speakers. He even edited the menu knowing that seeing a word you can’t pronounce sparks a small sense of anxiety.

James talks of a formative experience he had at a Japanese café. After he ordered his coffee, the barista spent a minute scanning a hundred of different cups before selecting one. “Just pick one, dude,” James initially thought to himself. He then realized that, in that particular moment, the barista was searching for the perfect cup to enhance James’ experience. The barista was imagining sensory outcomes and acting accordingly. No detail is too small if it can contribute to a positive customer experience.

• Constraints lead to creativity.

When James started Blue Bottle, he lacked both business experience and money. These constraints forced him to be creative though. They allowed him to be unique.

James had never received formalized business training and admits that, at the time, he didn’t even know “P&L” stood for “profit and loss.” Unlike business savvy founders, James didn’t focus on market research or efficient processes. He believes that if he had, Blue Bottle would have been just like all the other traditional coffee shops. Market research would have told him that customers liked options, while James decided to only serve 6 items with no sizes or flavors. He also embraced inefficiencies that led to higher quality coffee. James would grind and brew each coffee to order, despite the long wait times, because that’s when the coffee tasted best.

“In the first 10 years of Blue Bottle,” says James, “we were really built around my own incompetence, my failings, of me being unwilling and unable to make certain compromises, the quirks of my taste, and having a deeply personal control over everything, and not being too devoted to efficiencies. All these eccentricities and missteps became our founding path.”

James’ lack of money was also a constraint that had a positive effect. Blue Bottle’s first location was a small kiosk in a sketchy, dead-end alleyway. With more money available, James would have felt pressured to open a more traditional café in a better location. James believes that the uniqueness of Blue Bottle’s kiosk helped customers be open minded and accepting of a unique experience. The experience at Blue Bottle wouldn’t be like one at other coffee shops, and the location made this clear right away.

• Never sacrifice quality for growth.

Blue Bottle recently made the decision to stop selling their coffee to wholesalers, walking away from 20% of their revenue. As James notes, “There are perils to trusting someone else to care about your product and with wholesale I was feeling more and more out of control of the experience people were having while drinking our coffee.” Blue Bottle couldn’t ensure that each cup was being brewed to taste as good as possible. They couldn’t ensure that every location had full sugar canisters and clean countertops. These might seem like small details, but if you stop caring for just a little bit, you stop caring about something else just a little bit, and these all add up to a negative customer experience.

This decision is rooted in James’ conviction that the quality of his product is most important. It might not seem like a good idea to choose to walk away from business. But it solidifies Blue Bottle’s promise to the customer that they will be served a delicious cup of coffee. It’s true to each word of their mission statement: “Deliciousness. Hospitality. Sustainability.”

Other business-bites from James:

-Avoid distractions and simplify.

-Let your customers relax, don’t beat them over the head with your message or brand.

-Be in service to your product, in service to your guest.

-Don’t just maintain your standards, improve them.

-Moments accrete to form experiences, deliver as many positive moments as possible.

-Sometimes illuminations comes when all seems lost.

To hear James in full, download the podcast or watch the video below. By the way, this ETL podcast is a phenomenal free resource and definitely worth visiting regularly.