By Summers, Nick
Newsweek , Vol. 155, No. 15
Byline: Nick Summers
The new rules of management for people who hate rules. And management.
It's the kind of outcome most entrepreneurs only dream of. Last September, the financial-planning startup Mint.com was acquired by Intuit for $170 million--earning its founder a re-ported $20 million. As the kudos poured in, another Web entrepreneur, Jason Fried, assailed Mint in a blog post for selling out to a corporation it could have taken down. "Is that the best [we] can do?" Fried wrote. "Become part of the old generation? How about kicking the s--t out of the old guys?"
The company Fried founded, 37signals, makes Web-based business--efficiency tools--hardly stuff to set the heart racing. But 37signals is about more than software: Fried and cofounder David Heinemeier Hansson use the company as a pulpit for entrepreneurial evangelism. And their message--a sort of minimalist's approach to capitalism--has developed a cult following. The company's blog, Signal vs. Noise, reaches 100,000 readers a day, by offering takes on such topics as the design of -laundry-detergent jugs (Method's new one-handed pump bottle kicks ass) or a satirical attack ad for Karl Rove's book ("Does he really expect taxpayers to carry a book that heavy?"). The company's founders gleefully admit to bias, since their own second book, Rework, was at No. 10 on the Amazon bestseller list in mid-March, only a few slots below Rove's.
Rework is a Webby manifesto for post-recession success. Forget about strategic planning, they advise. And ignore your competition--unless you feel like picking a public fight. Don't waste time on meetings. Stay as small as you possibly can. The 37signals guys scoff at workaholics (masochists who compensate for intellectual laziness with brute force) and traditional ideas about promotion (emulate drug dealers: make your product so addictive that giving a free taste makes customers come back bearing cash). They believe businesses should "under-do" their competitors--do a few things well, rather than many things adequately. Their company is the ultimate hands-off employer: 37signals doesn't care where its 16 employees live or when they do their work.
Perhaps that's because in 2001, when the company was in its first incarnation as a Web-design shop, Heinemeier Hansson was living in Copenhagen. One day he read on Fried's blog (Fried lives in Chicago, where the company is based) that he needed tips on a programming language, and offered to help for free; Fried hired him instead, and for four years, they worked seven time zones apart. By 2004, the duo had developed the company's flagship product, Basecamp. The same year, Heinemeier Hansson released a spin-off, a free Web-applications tool called Ruby on Rails. Little known outside the community of code writers, Rails has become the development backbone of such megasites as Twitter and Hulu. Basecamp is used by startups and Fortune 500 companies alike; Barack Obama's presidential campaign used the project-management tool to plan the development of its sprawling Web site. "The thing that's great about 37signals is they're incredibly disciplined as a design shop," says Michael Slaby, the Obama campaign's CTO, now at a venture fund. "They don't allow themselves to get distracted by the shiny new feature, and because of that you get simple products with a low learning curve."
Their philosophy is appealing, in part, because starting a company is a lonely, risky business. …