BlogmyQuery – BMQ

In a few weeks time, iOS 9 will launch with Safari Content Blocker. This technology allows the general public to use content blockers (better known as ad-blockers) on their iPhones. It’s kind of a big deal. Ad-blockers allow users to remove annoying advertisements from web pages in real time. It’s as if the ads don’t exist. A lot of publishers think this spells the end of online content, as publishers will no longer be able to earn enough revenue to support their staff.

I think they’re probably mostly right. Online advertising won’t be a viable business model for long. Many existing publishers will go out of business. It will be a difficult time for many in the industry. But I don’t think the web is going to suffer with a little less content. We’ll do just fine. Online advertising is on its way out as a viable business plan.

But there’s a twist in this story. It’s ad-supported publishers that created the market for the ad-blockers which are spelling their doom. It’s kind of poetic if you think about it.

Loglo

I remember the first time I read Snow Crash and came upon the idea of loglo:

As the sun sets, its red light is supplanted by the light of many neon logos emanating from the franchise ghetto that constitutes this U-Stor-It’s natural habitat. This light, known as loglo, fills in the shadowy corners of the unit with seedy, oversaturated colors.

That passage gave me chills. This wasn’t so much fiction as much as an amplified view of what is already happening. Today, many American freeways are lined with bright, colorful LED advertisements that give the landscape a supernatural coloring. I remember my city once had to issue regulations for brightness after several accidents were caused near a particularly bright ad.

A similar story has been playing out online. The only touch of color and animation on most publisher’s websites are advertisements. The ads are bright, loud, and everything the content is not. They have become so egregious that they often overwhelm articles, creating an environment where content fades into an infinite sea of ads.

Loglo lights the streets of Snow Crash. Content floats upon an ad-sea online.

Annoying

Newspapers have had ads for a long time. They’re usually in black & white (unless the whole page is color) and they sit in their little boxes next to the content. There exist many situations where ads are fine. But online, it’s a different story. Ads expand, pushing your content out of the way, automatically playing video & sound, forcing you to interact with them to continue. All in all, ads have been as annoying as technically possible, and there’s a lot that’s technically possible now. With this technical race comes a severe performance handicap on our computers. Much of our processing power and battery life today is spent rendering ads, not doing the work we set out to do.

Under the surface, they have intruded deep into our personal lives, robbing us of our privacy. Ad networks have built complicated mechanisms to track us and store information about our personal lives. How old are you? Do you own a home? What’s your income? Ad networks collect this type of information and share it — with a fee — to other companies without our consent.

The saddest part is how deceiving ads have become. They deceive in message, claiming the improbable/impossible (one weird trick…), and they deceive in appearance, pretending not to be an ad. There is little quality control in advertisements, and deception is the name of the game in majority. Ads are downright predatory to anyone who isn’t tech-savvy (and even then…).

Publishers play their part too. They constantly seek new ways to inject advertising in & around their content — whether it be turning the entire background into an ad, or disguising advertisements as journalism via native advertising. When users stop paying attention to the low-quality ads, publishers blame the users for “forcing” them to implement more invasive ads. Publishers have complete control over these decisions, and they have decided again and again to turn their environment into a user-hostile one.

FALSE DICHOTOMY

Much of the discussion around ads from publishers has been something along the lines of: we don’t like ads, but we gotta pay the bills and only the annoying ones do that. You will suffer ads, or you will not have content. They call this a compromise, but it is one made for the users without their agreement.

Life finds a way.

Users have been complaining about online ads for decades and publishers have refused to listen. So users fixed the problem themselves. First came pop-up blockers, and now come content-blockers. If you won’t give us a decision, we won’t give you one. You can put ads in your content, we’ll just filter your content.

Publishers forced this hand. Ad-blockers would not be popular today had ads not gotten so bad. Users are so frustrated they will do anything to get rid of them. That is not how your customers should feel about your primary revenue stream.

The customer is always right

I don’t think we’re done with this discussion. Publishers will continue to force a hostile environment on their customers and customers will find a way to get around it. Ad-blockers might be the talking point of today, but I wouldn’t be surprised to see paywalls be the talking point of tomorrow. Hint: we’ve already seen this play out with music & video. I don’t think it’s going to end in publisher’s favor.

And this is kind of the thing: customers always win. Businesses serve at the pleasure of their customers. It is easy to fall into the idea that customers need you as a business owner, but history has proven otherwise. You need your customers, and if you don’t respect that dynamic, you will lose them.

Publishers that listen to their customers will continue to thrive.

This sucks for publishers

I have to sympathize with the publishers. I’m sure a lot of them feel like they’re forced into a corner. There aren’t many good examples of publishers succeeding without annoying ads. It’s easy to come up with an idea for compelling content, much harder to come up with a revenue plan to afford it. Many have been struggling to find a way to pay their employees as piracy, ad-blockers, and crashing ad engagement rates have destroyed their revenue streams. It’s hard to be a publisher today.

But times change. Sometimes your business model becomes invalid as the world changes. This is the nature of The Innovator’s Dilemma — any business who wants to survive must be willing to cannibalize their dying products as the world changes. Preventing death is a losing battle. This sucks for business owners. It means a lot of hard work and often means the end of their business (and the beginning of new ones).

I sympathize with publishers, but I do not feel bad for them. Publishers accelerated the death of their business model by repeatedly refusing to listen to their customers. They will die, and they will have deserved it.

A couple of weeks ago I caved. For the first time in two decades of browsing online, I installed an ad-blocker. The web is a lot more pleasant. I find myself enjoying a lot more articles. My computer feels faster. Battery life seems infinite. My only regret was that I didn’t join in on the ad-blocking bandwagon earlier. For the first time in a long time, I’m able to soak up & appreciate the web. And wasn’t that kind of the point of being a publisher?

Dustin Curtis recently wrote about Fixing Twitter — most of which I can’t say I agree with — but he did touch on an idea I like to call being Lost in your Vision. This affliction affects employees and non-employees alike, and boils down to two major symptoms:

• The belief that good performing products are nearing certain death
• The belief that companies are emotionless machines directed by a singular Visionary

I call this Lost in your Vision because you become obsessed with the idea that if the product only had “Vision” everything would be perfect. Markets will open up, customers will cry with joy, and champagne will rain down from the heavens. And the person to deliver the Vision is clearly a Visionary. If only the company had a true Visionary, it would be saved from certain death.

I know this feeling. I was this person, and let’s be honest — I still am this person often. It’s an easy mindset to fall into.

I think Twitter badly needs to do at least five things to address imminent existential threats–things which its current team has tried and spectacularly failed to accomplish.
— Dustin Curtis

Unfortunately, this is tunnel vision and serves only to blind you from seeing the most lucrative territory: small gradual improvements to existing features and cranking out good-enough ideas. Also known as boring work.

Microsoft vs. Apple

Microsoft is an example of a company that’s been focused on Big Ideas for the past decade or so. They look at existing markets and try to jump ahead as far as they can see. The Microsoft Surface was a peek into the future of tablets, much like the HoloLens is a peek into the future of VR. Microsoft is not doing well.

Apple on the other hand is an example of a company that’s been focused on small ideas for the past decade or so. Every year, iPhones have gotten a little better. Their laptops get a little better. iPads get a little better. And every few years, the Apple TV gets a little better. Today, Apple announced three new products:

• iPhone 6S. It’s like the iPhone 6, but everything is a little better.
• iPad Pro. It’s like the iPad, but everything is a little better.
• Apple TV. It’s like the old Apple TV, but everything is a little better.

These aren’t revolutionary ideas. The iPad Pro is almost exactly the same idea as the Microsoft Surface, but 3 years late. I don’t think they’re worried about it. Apple is doing extremely well.

Big companies thrive on small ideas.

The soul of a product

I once gave a presentation at GitHub titled Good Product in which I tried to distill what a good product meant. My intro was focused on the idea that Product as an idea was a connection: People ⨯ GitHub.com. The product of the two was our Product (get it, the product?). It wasn’t just the software we delivered, it was how our customers used the software that mattered.

In order to deliver impact, you can increase the number of customers, or you can increase the usefulness of the software to existing customers.

In large customer bases, customer growth is almost entirely fueled by network effects — existing customers getting new people hooked. It is not fueled by new features or new functionality. Changing your product in dramatic ways has a higher chance of distancing existing customers than opening it up to new markets.

This means it’s almost always a better idea to focus on small improvements to existing workflows in large companies. How can you make your core feature smoother? How can you make it easier to get started for new customers? These aren’t sexy ideas, but they’re impactful.

Big companies thrive on small ideas.

Software is made by people

Twitter has over 4,000 employees. That’s a lot of people no matter how you slice it. The flow of ideas through large companies is a phenomenon we don’t entirely understand. If you haven’t ever been in the shit, you might assume that ideas flow from the Visionary (CEO) down. But much like rivers, they twist, turn, get added to, diverted, and dammed up along the way to their outlet. The more people, the harder it is to maintain the original direction.

Software is made by people, and people have opinions and emotions.

There is an art to selling an idea in a large company, and it has little to do with the merit of the idea itself. Big ideas are hard to realize. They have too many variables. Too many opportunities to change direction. Too fuzzy an outcome. Small ideas are easier to realize. They don’t require company-wide changes and can be pitched to a smaller group. They can be delegated and presented with grace. Big ideas need to be forced.

This is really important. The number of employees you have makes a huge impact on the types of ideas you can tackle.

Big companies thrive on small ideas.

I don’t mean to be too harsh on Dustin, because hidden inside his article are some really good small ideas.

When I add a link to a YouTube video, Twitter should obviously expand the video in place and let me add some commentary to it. It has only recently started to automatically expand things like this, but it does so inconsistently–sometimes and on some platforms it’s just a link and other times it’s an awesome, fully interactive module. It is unpredictable and I can’t preview it until after I publish the Tweet, which makes me wary of posting external content.

If I were to impart one piece of advice on Twitter’s product team, I’d focus on this singular aspect: make it obvious what your tweet will look like before you post it. In other words, focus all of your effort on the compose tweet flow. Twitter is made of tweets. Give your customers the opportunity to post better tweets, and Twitter will get better.

And I think they’re on their way there. The new retweet flow is phenomenal. It’s a perfect example of those small improvements. Retweets used to create anxiety — what does it do if I click this? The new flow solves that problem entirely and adds a native way to add comments to a Retweet — something people were already doing.

I think the most successful version of Twitter will look very similar to the Twitter we have today, but every interaction will be smooth, obvious, and pleasant to use. It won’t be a big idea that fuels Twitter’s growth. It’ll be the small ones.

Dustin Curtis recently wrote about Fixing Twitter — most of which I can’t say I agree with — but he did touch on an idea I like to call being Lost in your Vision. This affliction affects employees and non-employees alike, and boils down to two major symptoms:

• The belief that good performing products are nearing certain death
• The belief that companies are emotionless machines directed by a singular Visionary

I call this Lost in your Vision because you become obsessed with the idea that if the product only had “Vision” everything would be perfect. Markets will open up, customers will cry with joy, and champagne will rain down from the heavens. And the person to deliver the Vision is clearly a Visionary. If only the company had a true Visionary, it would be saved from certain death.

I know this feeling. I was this person, and let’s be honest — I still am this person often. It’s an easy mindset to fall into.

I think Twitter badly needs to do at least five things to address imminent existential threats–things which its current team has tried and spectacularly failed to accomplish.
— Dustin Curtis

Unfortunately, this is tunnel vision and serves only to blind you from seeing the most lucrative territory: small gradual improvements to existing features and cranking out good-enough ideas. Also known as boring work.

Microsoft vs. Apple

Microsoft is an example of a company that’s been focused on Big Ideas for the past decade or so. They look at existing markets and try to jump ahead as far as they can see. The Microsoft Surface was a peek into the future of tablets, much like the HoloLens is a peek into the future of VR. Microsoft is not doing well.

Apple on the other hand is an example of a company that’s been focused on small ideas for the past decade or so. Every year, iPhones have gotten a little better. Their laptops get a little better. iPads get a little better. And every few years, the Apple TV gets a little better. Today, Apple announced three new products:

• iPhone 6S. It’s like the iPhone 6, but everything is a little better.
• iPad Pro. It’s like the iPad, but everything is a little better.
• Apple TV. It’s like the old Apple TV, but everything is a little better.

These aren’t revolutionary ideas. The iPad Pro is almost exactly the same idea as the Microsoft Surface, but 3 years late. I don’t think they’re worried about it. Apple is doing extremely well.

Big companies thrive on small ideas.

The soul of a product

I once gave a presentation at GitHub titled Good Product in which I tried to distill what a good product meant. My intro was focused on the idea that Product as an idea was a connection: People ⨯ GitHub.com. The product of the two was our Product (get it, the product?). It wasn’t just the software we delivered, it was how our customers used the software that mattered.

In order to deliver impact, you can increase the number of customers, or you can increase the usefulness of the software to existing customers.

In large customer bases, customer growth is almost entirely fueled by network effects — existing customers getting new people hooked. It is not fueled by new features or new functionality. Changing your product in dramatic ways has a higher chance of distancing existing customers than opening it up to new markets.

This means it’s almost always a better idea to focus on small improvements to existing workflows in large companies. How can you make your core feature smoother? How can you make it easier to get started for new customers? These aren’t sexy ideas, but they’re impactful.

Big companies thrive on small ideas.

Software is made by people

Twitter has over 4,000 employees. That’s a lot of people no matter how you slice it. The flow of ideas through large companies is a phenomenon we don’t entirely understand. If you haven’t ever been in the shit, you might assume that ideas flow from the Visionary (CEO) down. But much like rivers, they twist, turn, get added to, diverted, and dammed up along the way to their outlet. The more people, the harder it is to maintain the original direction.

Software is made by people, and people have opinions and emotions.

There is an art to selling an idea in a large company, and it has little to do with the merit of the idea itself. Big ideas are hard to realize. They have too many variables. Too many opportunities to change direction. Too fuzzy an outcome. Small ideas are easier to realize. They don’t require company-wide changes and can be pitched to a smaller group. They can be delegated and presented with grace. Big ideas need to be forced.

This is really important. The number of employees you have makes a huge impact on the types of ideas you can tackle.

Big companies thrive on small ideas.

I don’t mean to be too harsh on Dustin, because hidden inside his article are some really good small ideas.

When I add a link to a YouTube video, Twitter should obviously expand the video in place and let me add some commentary to it. It has only recently started to automatically expand things like this, but it does so inconsistently–sometimes and on some platforms it’s just a link and other times it’s an awesome, fully interactive module. It is unpredictable and I can’t preview it until after I publish the Tweet, which makes me wary of posting external content.

If I were to impart one piece of advice on Twitter’s product team, I’d focus on this singular aspect: make it obvious what your tweet will look like before you post it. In other words, focus all of your effort on the compose tweet flow. Twitter is made of tweets. Give your customers the opportunity to post better tweets, and Twitter will get better.

And I think they’re on their way there. The new retweet flow is phenomenal. It’s a perfect example of those small improvements. Retweets used to create anxiety — what does it do if I click this? The new flow solves that problem entirely and adds a native way to add comments to a Retweet — something people were already doing.

I think the most successful version of Twitter will look very similar to the Twitter we have today, but every interaction will be smooth, obvious, and pleasant to use. It won’t be a big idea that fuels Twitter’s growth. It’ll be the small ones.

The mid 2000s were a crazy exciting time to be a hobby programmer. We’d suffered through a decade or so of trials to test our merit — The ASP/PHP Wars, The Trouble of Tables, DHTML, WAC-FR & sIFR, and of course — IE 5.5 for Mac. But things were finally looking up. We had a free database that was easy to administer, hosting was becoming affordable, broadband was becoming the norm in middle-class households, browsers could render CSS half-competently, web frameworks were becoming accessible to novices, and best of all, we could finally use transparent PNGs. The web was coming of age, and the barrier to entry was falling fast. If you had a computer, internet, and some free time — you could help build it.

As for myself, it felt like I had accidentally accrued the skills to turn dirt into gold. The blogs I followed trended toward product launches, and it felt like everyone around me was succeeding. The formula for success seemed simple:

1. Pick a task that people already use software for (communicate, organize, write, etc).
2. Build a better piece of software to accomplish the task.
3. Iterate on it with customer feedback.
4. Build up enough revenue to quit your job and work on it full time.

I can’t help but feel our industry doesn’t think this way anymore. It feels like the hobby programmers of today are only interested in building Unicorns — a really stupid name for companies valued at a billion dollars or more. People don’t start hacking on projects anymore, they become CEOs and start looking for funding. If it doesn’t capture the entire market, what’s the point of showing up?

This shift in mindset has made Silicon Valley feel like some kind of Wall Street 2.0 Incubator. We’ve attracted the worst kinds of people to our industry, grown our companies recklessly fast, insulted our customers with security breaches & poor quality, exploited our employees, and signed away most of our winnings to professional executives and venture capitalists. We stopped building products that allow people to do more. Now we build products that make people use more.

Working in software isn’t as exciting as it used to be. Reasons to be excited are drowned out by assholes announcing how busy they’ve been fucking people over to make themselves rich. It’s embarrassing.

I don’t think Unicorns are good for our industry.

I’ve grown to love the concept of a family business over the past few years. Operationally speaking, they’re the same as any other business. But philosophically, they’ve made decisions about how to run the business such that it benefits & reflects the values of the family running it. I like these businesses because they tend to treat their customers much better than traditional growth-focused businesses.

We don’t really have a concept of family owned software businesses yet, but I do think we can try to emulate the best parts of them. What would that look like?

Treat People Well + Make Money + Build Rad Shit

In most software businesses, revenue is looked at as a metric of unlimited potential. With unlimited potential comes unlimited opportunity costs. Almost every decision feels like it weighs against future maximum revenue. But what if you purposefully put a target on the amount of money you want to make to one million dollars a year? Instead of worrying about opportunity costs at every turn – taking funding, hiring that sketchy VP of Sales, partnering with that company you hate — you can focus your effort elsewhere: employees, customers, and product.

Employees

You don’t need a lot of employees to run a million dollar product. I’d say you can do it pretty well with about five¹:

• 1 person focused on the business/company
• 1 person focused on customer support
• 3 people focused on product development

Five people is a small enough number to treat very well as a company. You don’t have to worry about getting tangled in communication struggles, management strategies, political battles, and satisfying hundreds of people with every decision. You can get to know five people really well. Everyone can build a strong connection to each other.

Since you’re not focused on growing your valuation, you can ignore the employee-hostile game of Stock Options. Instead, you can choose employee-friendly equity strategies like performance bonuses, profit-sharing, and granting actual equity (shares) & issuing dividends. Everyone involved can make a lot of money and have a real incentive to invest themselves into the business.

Since you’re not playing the Stock Option game, people can leave when the time is right without ruining their financial future. Employees can leave or stay because of the work and the company, not tax law. Nothing is more poisonous to your company’s work ethic than having a bitter employee stick around when they’re no longer invested.

Five people is a small enough number to manage well. Common practice says 5-7 people is about the right number. You don’t have to implement any complicated management strategies. You’ll probably be managing them without any explicit effort because you’ll have a relationship with every employee.

My point here is that sticking to a small number of employees avoids the vast majority of difficult problems in running a company. And as every engineer knows, the best way to solve a problem is to not have it in the first place.

Customers

If you want to make a million dollars a year, you don’t need millions (or hundreds of millions) of customers. 12,000 paying customers at $7 per month can do it. That’s not an insurmountable amount of people.

You don’t have to cross cultural boundaries to get 12,000 customers, which means you aren’t trying to force one design pattern for everyone in the world. You don’t have to worry about internationalization, localization, or learning how business is done in Japan. You can stick to what you know, and do it really well.

12,000 is a small enough number to make sense of your customer metrics. You can build an intuitive understanding of the flow of signups, upgrades, downgrades, and cancellations. You can reach out to people who enjoy your product and those who don’t. Ask them why. Get to understand your customer’s motivations.

This all makes for a better relationship between the company and its customers.

Product

Product teams are fueled by context. With a small team and a small customer base, every member of the product team can build a solid understanding of your customers and the business. This makes for better product decisions, which means more revenue and higher customer satisfaction.

The most common poison for a product team is communication overhead. In order to put up the best solution for the problem, you need to be able to get lost in it. You need long stretches of uninterrupted time² to do your job best. Most businesses don’t admit how costly things like company wide announcements, project management, interviewing, internal politics, and large scale collaboration are on productivity. They all work against flow, and should be considered a handicap on product teams. Small teams substitute process with trust, eliminating overhead.

It’s an order of magnitude easier to change direction with a small company. Big companies are like cargo ships — they can turn, but it’s going to take quite a while. Being able to change direction quickly makes it cheaper to throw away an idea that isn’t panning out well. You don’t have to force bad ideas. Bad ideas can fail and be replaced by good ideas. This is how you build a good product.

Make Money

Ignoring the valuation game makes the whole process of making money extremely straight forward. The more money you bring in, the less money you spend, the more money you take home.

Software is an extremely high margin business. We have all kinds of financial freedom that other businesses never experience. Once you get to the point where you can make payroll, money starts to add up fast. Other businesses require additional storefronts, employees, or raw materials to grow. But software doesn’t work that way. A 3 person product team can grow a product indefinitely.

And that’s kind of the thing about million dollar products. They rarely stay million dollar products. It might grow to a twenty million dollar business. But so long as you’ve built your values around the idea of a million dollars, you will grow in a high-margin, high-quality way.

You can make a lot of money building Unicorns. I’ll (eventually) do very well off my last gig because of it. It’s a fine way to run a software business. It’s a very fast, very intense way to operate. The whole world pays attention.

But this tunnel-vision our industry has settled into is silly. It’s skewed our motivations and confused our priorities. Not every product needs to be a Unicorn.

There’s a million other ways to run a business. People don’t start pizza shops to compete with Dominos. They start them because they love pizza.

And everyone knows the local pies are better.

1: This is far from a rule — it’s an example. Don’t take it too literally.

2: A 5 minute interruption may only take five minutes, but it can cost hours.

The mid 2000s were a crazy exciting time to be a hobby programmer. We’d suffered through a decade or so of trials to test our merit — The ASP/PHP Wars, The Trouble of Tables, DHTML, WAC-FR & sIFR, and of course — IE 5.5 for Mac. But things were finally looking up. We had a free database that was easy to administer, hosting was becoming affordable, broadband was becoming the norm in middle-class households, browsers could render CSS half-competently, web frameworks were becoming accessible to novices, and best of all, we could finally use transparent PNGs. The web was coming of age, and the barrier to entry was falling fast. If you had a computer, internet, and some free time — you could help build it.

As for myself, it felt like I had accidentally accrued the skills to turn dirt into gold. The blogs I followed trended toward product launches, and it felt like everyone around me was succeeding. The formula for success seemed simple:

1. Pick a task that people already use software for (communicate, organize, write, etc).
2. Build a better piece of software to accomplish the task.
3. Iterate on it with customer feedback.
4. Build up enough revenue to quit your job and work on it full time.

I can’t help but feel our industry doesn’t think this way anymore. It feels like the hobby programmers of today are only interested in building Unicorns — a really stupid name for companies valued at a billion dollars or more. People don’t start hacking on projects anymore, they become CEOs and start looking for funding. If it doesn’t capture the entire market, what’s the point of showing up?

This shift in mindset has made Silicon Valley feel like some kind of Wall Street 2.0 Incubator. We’ve attracted the worst kinds of people to our industry, grown our companies recklessly fast, insulted our customers with security breaches & poor quality, exploited our employees, and signed away most of our winnings to professional executives and venture capitalists. We stopped building products that allow people to do more. Now we build products that make people use more.

Working in software isn’t as exciting as it used to be. Reasons to be excited are drowned out by assholes announcing how busy they’ve been fucking people over to make themselves rich. It’s embarrassing.

I don’t think Unicorns are good for our industry.

I’ve grown to love the concept of a family business over the past few years. Operationally speaking, they’re the same as any other business. But philosophically, they’ve made decisions about how to run the business such that it benefits & reflects the values of the family running it. I like these businesses because they tend to treat their customers much better than traditional growth-focused businesses.

We don’t really have a concept of family owned software businesses yet, but I do think we can try to emulate the best parts of them. What would that look like?

Treat People Well + Make Money + Build Rad Shit

In most software businesses, revenue is looked at as a metric of unlimited potential. With unlimited potential comes unlimited opportunity costs. Almost every decision feels like it weighs against future maximum revenue. But what if you purposefully put a target on the amount of money you want to make to one million dollars a year? Instead of worrying about opportunity costs at every turn – taking funding, hiring that sketchy VP of Sales, partnering with that company you hate — you can focus your effort elsewhere: employees, customers, and product.

Employees

You don’t need a lot of employees to run a million dollar product. I’d say you can do it pretty well with about five¹:

• 1 person focused on the business/company
• 1 person focused on customer support
• 3 people focused on product development

Five people is a small enough number to treat very well as a company. You don’t have to worry about getting tangled in communication struggles, management strategies, political battles, and satisfying hundreds of people with every decision. You can get to know five people really well. Everyone can build a strong connection to each other.

Since you’re not focused on growing your valuation, you can ignore the employee-hostile game of Stock Options. Instead, you can choose employee-friendly equity strategies like performance bonuses, profit-sharing, and granting actual equity (shares) & issuing dividends. Everyone involved can make a lot of money and have a real incentive to invest themselves into the business.

Since you’re not playing the Stock Option game, people can leave when the time is right without ruining their financial future. Employees can leave or stay because of the work and the company, not tax law. Nothing is more poisonous to your company’s work ethic than having a bitter employee stick around when they’re no longer invested.

Five people is a small enough number to manage well. Common practice says 5-7 people is about the right number. You don’t have to implement any complicated management strategies. You’ll probably be managing them without any explicit effort because you’ll have a relationship with every employee.

My point here is that sticking to a small number of employees avoids the vast majority of difficult problems in running a company. And as every engineer knows, the best way to solve a problem is to not have it in the first place.

Customers

If you want to make a million dollars a year, you don’t need millions (or hundreds of millions) of customers. 12,000 paying customers at $7 per month can do it. That’s not an insurmountable amount of people.

You don’t have to cross cultural boundaries to get 12,000 customers, which means you aren’t trying to force one design pattern for everyone in the world. You don’t have to worry about internationalization, localization, or learning how business is done in Japan. You can stick to what you know, and do it really well.

12,000 is a small enough number to make sense of your customer metrics. You can build an intuitive understanding of the flow of signups, upgrades, downgrades, and cancellations. You can reach out to people who enjoy your product and those who don’t. Ask them why. Get to understand your customer’s motivations.

This all makes for a better relationship between the company and its customers.

Product

Product teams are fueled by context. With a small team and a small customer base, every member of the product team can build a solid understanding of your customers and the business. This makes for better product decisions, which means more revenue and higher customer satisfaction.

The most common poison for a product team is communication overhead. In order to put up the best solution for the problem, you need to be able to get lost in it. You need long stretches of uninterrupted time² to do your job best. Most businesses don’t admit how costly things like company wide announcements, project management, interviewing, internal politics, and large scale collaboration are on productivity. They all work against flow, and should be considered a handicap on product teams. Small teams substitute process with trust, eliminating overhead.

It’s an order of magnitude easier to change direction with a small company. Big companies are like cargo ships — they can turn, but it’s going to take quite a while. Being able to change direction quickly makes it cheaper to throw away an idea that isn’t panning out well. You don’t have to force bad ideas. Bad ideas can fail and be replaced by good ideas. This is how you build a good product.

Make Money

Ignoring the valuation game makes the whole process of making money extremely straight forward. The more money you bring in, the less money you spend, the more money you take home.

Software is an extremely high margin business. We have all kinds of financial freedom that other businesses never experience. Once you get to the point where you can make payroll, money starts to add up fast. Other businesses require additional storefronts, employees, or raw materials to grow. But software doesn’t work that way. A 3 person product team can grow a product indefinitely.

And that’s kind of the thing about million dollar products. They rarely stay million dollar products. It might grow to a twenty million dollar business. But so long as you’ve built your values around the idea of a million dollars, you will grow in a high-margin, high-quality way.

You can make a lot of money building Unicorns. I’ll (eventually) do very well off my last gig because of it. It’s a fine way to run a software business. It’s a very fast, very intense way to operate. The whole world pays attention.

But this tunnel-vision our industry has settled into is silly. It’s skewed our motivations and confused our priorities. Not every product needs to be a Unicorn.

There’s a million other ways to run a business. People don’t start pizza shops to compete with Dominos. They start them because they love pizza.

And everyone knows the local pies are better.

1: This is far from a rule — it’s an example. Don’t take it too literally.

2: A 5 minute interruption may only take five minutes, but it can cost hours.