The bliss of knowing that your kids college tuition is fully paid for, no matter where they get accepted, is not overrated. Thinking like DHH indulges in this post is a luxury.
DHH is confusing a life of relaxation with the security that comes with a big payday. It's less about sipping mojitos and more the ability to pay for college, mortgage, retirement, and relieving the stress all those things bring.
The tradeoff he proposes is a straw man: "Pull a few million from revenue each year or take a lump sum". Is this realistic in most cases? If Mint turned down Intuit, they could have bought Wesabe and reduced the value of Mint significantly. Given Mint's light revenue, how long would it have taken to achieve the same financial outcome? Would a VC ok salaries of millions per year in the near future?
I know the 37 Signals guys are anti-VC, but it is a real, lucrative, and demonstrable way to create wealth. I get that they dislike it, but I don't see the boot strapped software business being a real competitor. They do it, Craigslist does it, but not sure if there is the same portfolio of success in that system as in the VC system.
By demonstrable I mean we can point to 100-200 companies in a ten year period that took VC and had respectable exits. There are probably more than that, but there is a good sample size.
I agree that it is improbable, but still better than the lottery. My point was that there are lots of well known examples from the VC route, but fewer success stories in the 37 Signals mold. It also might just be that they are lesser known, but instead of berating the VC industry maybe they could turn their spotlight on exemplars in their model? 37S, Craigslist, Plenty of Fish, are there a couple hundred bootstraped web startups that they could point to?
100-200 companies in ten years doesn't sound like a lot. How many people won the lottery during the same timeframe?
I think DHH has a point. While hoping for the big exit isn't exactly like hoping to win the lottery, I'd say he's right that you stand a much better chance of being able to build a profitable business.
I think there's probably a lot more than 100-200 web companies that have built a profitable business that they're earning a very nice living from.
> The tradeoff he proposes is a straw man: "Pull a few million from revenue each year or take a lump sum".
I agree. It's probably more like "pizza+beer+nice car+nice summer holiday"-profitable vs. a $2m-$5m payday -- i.e. the "we can do better, let's do this for a year or two more and see who has the last laugh"-passion.
Will college tuitions be more than a million or two? Perhaps if the education bubble never bursts. Or if you have more than five kids.
Regardless, his article compares owning your own business with a million or two trickling in instead of $40 million (or more) all at once. The comparison isn't at all about the starving artist or inventor doing what he loves vs a big pay out.
If you're doing what you like and you're earning a mil or two a year (or well on your way), why sell out all at once for $40 mil? If your reason is other than getting to mojito island, he makes no claims.
But if your reason is because you want to get to mojito island, then Jason Fried is warning that it's probably not all it's cracked up to be.
> If you're doing what you like and you're earning a mil or two a year (or well on your way), why sell out all at once for $40 mil?
Let's say $2m/year - a sellout now at $40m is 20 years (if we (unrealistically) discount inflation and interest etc.).
You love what you're doing, but who knows what everything's gonna look like in 2-3-4 years, much less 20? Google might decide that DHH is a punk and make improved clones of the entire 37s portfolio and release them for free. 37s may have a breakdown and find out that their backups for the past month are corrupted, and never regain customer confidence. The concept of SAAS/cloud might be compromised by Patriot Acts III-VI. All those are worst-case scenarios, but there are a million other events that could at least compromise the $40m price-point -- so waiting and taking the money later isn't a backup-plan.
If you take your $40m now, you're insured against all that, and also against growing bored with the project and conflicts with co-founders or key employees -- and the buyer just might let you work, even on salary, on the project.
Passion now != passion in 20 years. Actually, I'd venture as far as saying that if you're sure your current passion is going to last, it's not real passion.
I know MBA's aren't the most popular people around these parts, but they do get Net Present Value. Basically, you need to discount the value of future earnings relative to current cash flow.
I could by your comment that you got it, but it gets a little lost in the rest of the thread debating the philosophical aspects of selling out vs. plowing through.
DHH is confusing a life of relaxation with the security that comes with a big payday. It's less about sipping mojitos and more the ability to pay for college, mortgage, retirement, and relieving the stress all those things bring.
The tradeoff he proposes is a straw man: "Pull a few million from revenue each year or take a lump sum". Is this realistic in most cases? If Mint turned down Intuit, they could have bought Wesabe and reduced the value of Mint significantly. Given Mint's light revenue, how long would it have taken to achieve the same financial outcome? Would a VC ok salaries of millions per year in the near future?
I know the 37 Signals guys are anti-VC, but it is a real, lucrative, and demonstrable way to create wealth. I get that they dislike it, but I don't see the boot strapped software business being a real competitor. They do it, Craigslist does it, but not sure if there is the same portfolio of success in that system as in the VC system.