SEASON 2 - EPISODE 146 - MARCH 19, 2025

Increasing Capacity

How do you do more without growing your team substantially? In this episode of The REWORK Podcast, 37signals co-founders Jason Fried and David Heinemeier Hansson share how they’re expanding their product lineup while keeping their team lean. They reflect on how their approach to building software has evolved, and how pushing into the unknown makes the work more exciting.

Watch the full video episode on YouTube

Key Takeaways

00:28 - How 37signals’ product lineup has evolved over time
08:00 - Why the company is adding a product designer to the team
15:07 - Finding the “fun” in creating new products
18:50 - Challenging yourself by stepping into the unknown
23:16 - Using real products as a way to do research and development

Links & Resources

Transcript

Kimberly (00:00): Welcome to REWORK, a podcast by 37signals about the better way to work and run your business. I’m Kimberly Rhodes from the 37signals team, joined by Jason Fried and David Heinemeier Hansson. This week we’re talking about increasing capacity and how we’ve managed to do that at 37signals. We’ve started with smaller number of products than we have now. We’ve increased the number of things that we’re doing all at the same time without increasing our staff. So I thought we would talk about that a bit. Jason, David, let’s maybe go back in time to the beginnings of one product versus where are we now on how many things we’re working on at the same time?

Jason (00:38): Well, a few certainly. I mean, way back in the beginning there was one, but we built a new product every year for four years while maintaining the other products for the most part as well. Basecamp kept getting better when we launched Backpack. Backpack kept getting better when we launched Campfire, I think next or Highrise, I forget what the order was now. I think Campfire came next, then Highrise after that. But then at some point we stopped focusing on some of the other tools. And that was not a good thing, utimately, in a sense, for our own pride in the products. They were still as good as they were when they were being worked on, but then they stopped being worked on. Things change. Things get a little bit long in the tooth in some ways. Trends change, all sorts of things. When you leave stuff sitting there, it’s not a good look, sometimes.

(01:23): Sometimes it’s also fine, but it wasn’t for us. And so that’s when we decided to consolidate because we didn’t want to hire a lot more people. Then we consolidated, then we started making more things again, HEY, and we’re making more things now. We grew up quite a bit bigger now. We’ve kind of pulled back a little bit again, even though we’re working on more things simultaneously today than we ever have before. So we found this good balance point. We’re about 60 people or so, and we’re actually working on two brand new products right now, plus Basecamp and HEY, every six weeks, those two products are getting better. We also launched something called Campfire again as a ONCE product and something called Writebook, although those are not getting active development at the moment, but they’re out there and then work on some open source stuff, obviously we’re always doing that and some other things.

(02:06): So there’s a lot going on with a really good team. This is sort of the key is you’ve got to find the right group of people to be able to pull this off. And the new products we’re working on, for example, are teams of two or three. One of ‘em is two, one of ‘em is three right now. There’s also some other backend support in different infrastructure capacities, but for the most part the products being built by two or three people. So we’re able to do a lot with a little, and you got to have the right people for it. You also have to have the right temperament for it, and you also have to have the right discipline so you don’t drive people, grind people down to the place where they can’t do the work anymore. And that is a delicate balance sometimes. Sometimes we might struggle with that in terms of our interest to get things out sooner and faster or whatever. But sometimes the quality suffers, so you got to find the right balance there as well. It’s mostly a big balancing act, but certainly what we found and what’s true I think in almost all circumstances is that you can do a lot with less than you think, and that’s sort of the fundamental premise that we base our hiring on and our team selection on.

David (03:10): And we saw that vividly recently. We were just over 80 people not that long ago, and we went all the way up to 80 because we wanted to be more capable, because we wanted to do more things at the same time. And the curious thing happened that as we grew bigger in some regards, in some ways we started going slower, that the difficulty of managing a larger team can end up producing a less effective organization. And you think how could a team of 80 not be substantially more productive than a team of 60? I mean, it’s 33% bigger, but it’s very easy for that to happen. And I think especially actually around the size where we are and were, there is a tipping point somewhere around the 50, 60, 70, 80 where the normal approach you’ve had to your management processes and your review processes and they start breaking down and now you need additional layers.

(04:16): And those layers kind of sort of don’t pay for themselves yet. You actually need to get even larger before you get over on the other side. So I think what we found that for our company going from 60 to 80 was a step backwards. And it was a step backwards because it was a step right into the awkward size of companies. I don’t actually think that most companies work that well between 80 to probably 110 or 120. You either need to be smaller or you need to be bigger. And the bigger needs to be so much bigger that the sheer force, the sheer quality that is in quantity all by itself makes itself manifest. And that wasn’t happening for us at 80. So now that we’ve backed down to 60, it is really remarkable that we are as productive as we are, even just compared to our own self and our own past.

(05:12): And a big part of that then also gets into who? 60, 80, 70, these are just numbers. They don’t actually determine your capacity, your capability. What determines that far more is who? What 60? In what roles, how experienced, how are they jelling, how are they meshing? And I think what we’ve found, and this is a hard thing that we’ve struggled with and I think continue to struggle with, is that when you hire someone new who, especially if they’re a little more junior, not necessarily straight out of college or anything else like that, but a little more junior, it’s a gamble. It’s a bet. You’re investing into that person because you have a hope and an aspiration that they’re end up on a high productive manager of one level. But until that happens, they can very easily end up being net negative, that you have one person, two people who fall into this category and there’s a whole ring of more senior, more routined individuals around them who are now taking time away from what they’re working on normally dedicating it to bringing this person up, which is totally good and valuable and right and all the things, but when it doesn’t work out, you see the cost.

(06:30): And we are now at a stage where we aren’t adding a ton of new people all the time, especially on the technical side of things. And we see like, oh man, when you just have, even just on the programming side alone, a handful of people, but they’re really good, they’ve been here for a long time, they know each other really well, they’re highly experienced, it is unbelievable how productive and how effective they can be when they’re not getting pulled all the way in different directions. So some of the lessons that we’ve had is that you go faster occasionally when you let people go who are kind of holding up the group. And that’s a difficult thing. And it shouldn’t be just a carte blanche. Oh, you shouldn’t hire any juniors because they all go slow. No, no, no, it’s none of that. I’ve worked with plenty of juniors over my career where you make those investments and then three months later you go like, holy smokes, have you seen how far this person have gotten? That’s just super duper exciting and you see that trajectory. But the difficult thing is it’s not always clear in the first three, six, maybe even nine months. And then for us, we have this idea of the one year mark where we go, hell yeah or no, but that’s sort of the moment of truth. Would we hire this person again? That’s another way of putting the same question. But as the company we are now, a large part of the current productive capacity that we have is that the group is so solid.

Kimberly (08:01): Okay, speaking of people, I know we’re hiring for a product designer currently. That role will close March 24th, I believe. Is that because we want to have even more capacity? Were we falling behind in some places? Tell me a little bit about adding another person to the team at this point.

Jason (08:20): We are a little bit thin on design on the side of things, especially for the fact that we’re now going to have within a few months, four active SaaS products. We also have the two ONCE products, but those are sort of just holding in a holding position at the moment. And we’re at the place where if someone took a sabbatical or someone left or something like that, we would be in a bit of a pickle. And I don’t like that feeling. I would say if we were really just getting going a couple years in, I would live with that feeling more. I feel like we can afford to not have that feeling. It feels a bit irresponsible for us to be on that bubble, on that edge for a role that’s so fundamental. So it is a bit of bolstering our bullpen to a sports metaphor perhaps.

(09:07): And also to have a little bit of ability for someone to take some time off and not have products wait for them. We shouldn’t be in a place where products have to wait because someone’s taking a vacation or a holiday or something like that that doesn’t feel right. And that’s kind of where we would be if we didn’t have another product designer. So also to David’s point about people have to get up to speed, and so when you feel it, that’s good, but you also want to be a little bit ahead of that just so if you are feeling it, this person has some time to get up to speed, can find their way in the company or not. Maybe we find out in a few months they’re not the right fit for whatever reason, but we want to kind of know that by the time, so there’s this merge lane, we’re merging into more products that are coming right now and we want to make sure that our timing is right for that. So that’s kind of why we’re looking for somebody.

David (09:54): And I think that point is actually the main point of pivoting compared to the earlier phase we had at the company where we ran exceptionally lean. As Jason said, we used to release a new product every year, and by the time we had released our fourth product, I think the entire team was seven people.

Jason (10:15): Yeah, eight or something.

Kimberly (10:16): That’s wild.

David (10:17): That’s sort of insane. That’s pretty crazy now. It still worked. So it’s crazy in this revealing way that you can actually run four SaaS products with a team of seven people. Now, do you want to do that forever? Probably not. Do you want to do that when they have as many users and as many customers as we do today? Definitely not. But even so, we stuck with that pride in leanness for many, many years. And even as Basecamp was growing hugely and having tons and tons of customers, we really kept it ultra lean. And I think I certainly changed my position on at some point along the way, not just by Jason, I’m sure, that just having a bit of spare capacity, having a few extras on the bench is a feature. And why do you need to do this to yourself if you have already gotten to a place where you have plenty of margin and you can afford to have a few extra people? A few extra people just makes everything easier.

(11:17): And I think we’ve really ended up there on the programming side of the technical side, on the operations team as well, that all of those teams have enough people that if someone needs to take a sabbatical or they’re out, or even if a couple of people quit, it’s not going to be a catastrophe or it’s not going to be an emergency is what I want to say. And I think that is just, that’s a nice luxurious place to be that makes everything else more calm and yeah, I can certainly understand why Jason wants to add someone on the design side to have a little bit more of that because I feel it now on the technical side that like, oh yeah, actually this is quite nice. I don’t want too much of it. I don’t want to be so cocooned that we just have a bunch of people around where I have to dream up busy work for them. Absolutely not. We’re pursuing things we want to pursue, but do you know what? We didn’t have to do all the interesting technical projects that we’re currently doing at the same time if we didn’t have the people for it, but it’s allowing us to have that thick bench where we’re like, all right, someone needs to tap out, fine, come over here, give it a high five. You’re in.

Jason (12:27): Yeah. It’s like I’ve been talking to a number of people who are like, we’re going to try to double our team next year. I’m like that to me, I don’t, I can’t fathom this idea of that kind of growth that fast, but to have an extra person, one, feels like right. It actually feels wrong not to have that extra person. It feels wrong for everyone who’s on the team who’s going to feel a sense of extra responsibility that they can’t take extra time off or it puts a lot of pressure on individuals when we’re so lean that it actually hurts. The hire when it hurts thing? There’s different levels of pain, right? There’s like root canal pain and there’s a little bit of gum pain. You don’t want root canal pain in this capacity. So a little bit of pain’s, okay, but I think we’re at the root canal level here where on the design team that if someone had to leave or someone quit or someone whatever, it would really feel it. We’d all feel it and it’d feel really bad for a lot of people and that wouldn’t be any good.

David (13:21): But also listen to this discussion we’re having here at the…

Jason (13:24): It took me a year to get to this point, by the way, to hire one person.

David (13:27): One person! And I think this is so funny because I talked to so many entrepreneurs, even ones that are way, way, way earlier in their journey than where we are and they’re like, I’m going to hire five people. I’m going to have 10 people, I’m going to have 15 people. I’m like, geez. I think we had one year where we hired, what did we hire 15 people I think in one year, maybe 17 actually. And I thought, oh my god, this is no, just even 17 people showing up at once in our company over the course of a year to me was like way, way too much. And it did have all sorts of effects. As Jason said, this is totally common in startup land that want to go to the moon fast, that whatever culture they had just gets pulled, if not torn apart as an entire new cohort of just as many people as are already there show up in an incredibly short amount of time.

(14:27): And I’ve seen plenty good companies become something else from that effect alone. And then maybe if they do well and the business has grown, you can digest that and over time it can get better. But holy hell, I would not want to put myself and my company culture through that unless there was no other choice. And most of the time, there absolutely is another choice. You don’t have to do it at that pace. This is why when I say by the fourth product, we had seven people, we had a very slow ramp. If you were to dot the size of 37signals over the past 20 years, it would be a very slow ramp with a couple of step functions is not a parabolica.

Kimberly (15:08): Okay, so we talk about increasing capacity. We’ve obviously added new products. Question for you guys is why? Are we adding new products because you guys just have a good idea. Is there a business need? Do you get bored? Where does this come from adding these new products over time?

Jason (15:26): I would say, to be honest, all the above. Sometimes we just have an itch, we want to make something new. Sometimes we have an idea that we can’t get rid of. Sometimes there’s something we want that we don’t have. We have a luxury position right now given the fact that we’ve been in business for a long time, to have some fun and explore some stuff. And I think business should be fun. Sometimes it’s not and that’s going to be natural, but it better be fun sometimes. And part of that sometimes is kicking off some new idea and seeing where it’s going to go. For example, HEY, originally we were building a new version of Highrise, which was an old CRM tool we built and it turned into hey, which was an email tool. We didn’t know that we wouldn’t have set out to build an email tool initially.

(16:02): Actually we didn’t. I remember the conversation I had with David and I’m like, Hey, David, I want to show you something. I know we’ve been working on Highrise 2, but I think there’s something here with this email thing. And sometimes you just have to set off and see where you go. We’re working on this couple new things right now, and one of them just last week, I just had this feeling like something’s not right with this. Something’s not right with this. I know we can get it right, but something’s not right with this, and so let’s just try something else in the middle while we’re working on it. And now I’m quite happy with what we’re about to share with the rest of the team. It’s the same product, but there’s something that wasn’t right. I actually like being in those positions where there’s something here and it’s not right, and you get to sort of explore some more.

(16:42): So look, there’s business reasons, there’s entertainment reasons, there’s explorer reasons. You go out and explore because you don’t know what you’re going to find, but you have a sense that there’s something out there. There’s all these reasons. Now, again, we are in a place where we can have more of those explorations and go out and see what lands are unconquered in a sense and see what islands we can find, that sort of thing. If you’re brand new, you better know what the hell you’re doing the first time you’re doing it, you better know why. And I would say, you better need that thing desperately. That would be my advice. But as you get into it and you have some room and some cushion, you can play some more. And I think that’s a very important thing. If you want to stay in business for a long time and enjoy being in business for a long time, you’ve got to have some fun as well. And that’s part of it.

Kimberly (17:27): It’s like you have to keep innovating to keep yourself interested in it. At least that’s what I find.

Jason (17:33): Yeah. And the thing is, that’s exciting to me, at least with one of these right now, and the other one soon, but not quite yet, is we’re actively using this tool that we’re building. And I find that to be a big part of the fun as well. It’s not theoretical. We’re building this thing and actually it makes me a little bit more inspired to make it even better and better and better, to make it irresistible in a sense where I want to get to the place where we’re using this, where we feel like, what was it like before that? And that’s sort of where I want to get this to, and it’s not quite there yet, but I know we can get there, and that’s a fun challenge to not know how to do that yet, but to be in the middle of it. But yeah, again, we have some cushion and you should use some of that to have fun and explore things.

Kimberly (18:10): Is it so hard to talk about the products without talking about the new products?

Jason (18:14): It is, and I’m sort of dancing around a bunch of stuff here, but the feeling to me is like sometimes you’ve done well and you can afford to buy something that you maybe don’t need in a sense, but you find that you’re really happy that you did do that, and there should be a sense of that, in my opinion, on the business side of things as well. And sometimes that’s making something you don’t desperately need at the moment, but as you get into it, yeah, actually there’s really something here, here, but I don’t quite know what it is, and we get to squeeze it and find out what it is. You can’t do that if everything is a desperate necessity, but you need to start there to get going, I think.

Kimberly (18:50): David, anything to add?

David (18:51): Yeah, for me, it’s just as much about stretching my talent, encountering novel problems in novel domains that require me to develop skills I did not quite have or at least stretch the skills I already have. If we’re constantly just doing everything that I already know exactly how to do for the oomph time, that just doesn’t get me fired up. That does not get me out of bed in the morning. I need some uncertainty. I need some fuzziness, I need some, I’m not sure how to solve this kind of problem. Now, occasionally in the world of technology that becomes pathological, and this is what leads a lot of clever people to buy some overly complicated, convoluted technical monstrosities when all they needed was the tiny little simple thing. Now, thankfully, for whatever reason, what I’m addicted to is conceptual compression, simplifying ideas, simplifying the complex into something that’s really easy such that I can use it without even thinking about it the next time.

(20:01): But that process requires novel situations. It requires novel problem domains to be able to explore the techniques that we have and improve them in such a way that they really can conceptually compress. So that’s what gets me fired up about these ideas. Some aspects of some of the ideas, you know what? I don’t need to implement say a to-do list for the, I probably implemented 17 different to-do lists over the course of my career. We have other people on the team who could do that, but there are in these products, as there are always isn’t any novel interesting product, there’s facets of it where I go like, ooh, ooh, ooh! There’s something there that’s really interesting. We’re going to push the envelope here. And I think this is what’s also important is that you have to accept that just as much as whatever we’re building needs to have a business idea, it’s not just a hobby here.

(20:54): We’re trying to cover some salaries and we’re trying to turn a profit and we’re trying to stay in business. That pillar absolutely needs to be there. Then there needs to be the pillar of, am I solving a problem I even care about? Do I have any relation to the customers that we’re going to have for this thing that should really be there too? And that was actually the reason why Jason and I ultimately decided not to do Highrise 2, that we did not quite have the connection to the problem domain itself. We weren’t doing enough CRM’ing. We were not doing enough customer relation management, email tracking, all the things. So we had grown further apart from the perspective customer base, even if we sort of knew how to do it. And even if we could find some technically novel ,that part was missing. Then it needs to be fun.

(21:39): As Jason said, it just needs to be entertaining to be part of it. I need to be excited about it. And then for me, and that really is perhaps the pillar that counts more and more as we get older and older, and we’ve been doing this for longer and longer, is I want to feel like when I’m done with this project, I damn well better be better at some stuff. I damn well better know more about some things because otherwise it’s going to feel, there’s going to be a little bit of groundhog day in it. There’s going to be a little bit of, I just did a thing I already knew how to do. I didn’t stretch at all, and now we have to think, great, but am I any better? Am I any better for the journey that we went on? I don’t want to spend another two years of my life not getting better.

(22:20): That to me is the fundamental satisfaction of still being in it, still liking working with the web. I’m not done with the web. The web keeps throwing up new things and making it interesting. We’re not done with the product, but it has to all come together. I’m trying to think what is it now? I’m totally butchering it. There’s this Japanese idea of these overlapping ven circles. It’s got to be useful for society. It’s got to take advantage of your skills. That’s what we’re talking about here. It’s not just about one thing. It’s not just about making the maximum amount of money possible. It’s not just about having a laugh every single day just like, ah, this is so much fun and it’s nothing else. It’s not just about like, ooh, can I come up with the most convoluted thing that stretches my talents in a way that’s totally disproportionate to the problem we’re trying to solve? It’s all the things all at once. That’s where the magic is.

Jason (23:17): Let me add something to that too, which is, because I was thinking about this as you were talking about it. A lot of companies, this is just called R & D.

(23:23): Where they go off and explore new technologies, new ideas, whatever. We do that, but always in the, I shouldn’t say always, but almost always in the context of an actual real product. So our hit rate not hit for success, but whenever we dig into something like this, we’re going to come out the other side with something that we release almost always. That has to be part of it too, because I don’t want to go down 15 dead ends. I’m not interested in that at all. I want to go down a road where I’m going to get somewhere and we’re going to get somewhere with these two products and we are getting somewhere and they’re going to be really, really damn good, and I’m really excited about that. But we’re not, for someone who’s listening to this, I can imagine them going, so you just try a bunch of stuff all the time, just brainstorm new things all the time.

(24:04): We do not do that. No, absolutely do not do that. We set a course occasionally with a new product in mind, and then we discover things along the way. We plow a new path basically with this product. That’s the thing. We’re not just exploring new stuff. I wanted to make that clear. I don’t think it was necessarily clear, especially if you come from a different context where companies are always exploring new stuff all the time, so it’s always in the service of making something that’s real that we can release that has a business model behind it that is always fundamentally there with whatever it’s we choose to do.

David (24:38): And I think this is one of the reasons why big companies sometimes end up in a curse, in a resource curse where they can just spin up a hundred different speculative ideas where it sort of kind of doesn’t matter if it doesn’t pan out, it doesn’t go anywhere. I mean, if you were at Xerox Park when they had developed the Gooey before there was Windows, before there was Mac Os, and you were one of those researchers, and then you just, what? You fiddled with it for years and you never released anything, you never changed. You never even made a dent in the world yourself. It was all left to other people. That is, that’s actually a nightmare to me. It’s an absolute nightmare to think, I have an idea, I work on it, and it just, what? It goes nowhere and then someone else later takes it somewhere.

(25:26): I mean, we don’t have to be wildly successful with everything that we do, but we damn well have to ship. That sensation is something that has to underpin everything that we do. If we’re not shipping, this isn’t meaningful. We’re throwing away. I fucking hate throwing things away. I know of nothing worse than to look back and I just wasted my time. Now I can waste my time if it’s in service of becoming wiser, if it’s in the service of developing a better product. I cannot waste my time just exploring willy-nilly rainbows, and then they go into trash. Absolutely not. I’d get depressed in a heartbeat.

Kimberly (26:06): What is gooey? I never even heard of that.

Jason (26:08): Graphical User Interface.

Kimberly (26:10): Does everyone know that but me?

David (26:13): GUI?

Jason (26:14): Yeah, GUI.

David (26:15): Oh yeah, yeah. Maybe I should have said Graphical Use Interface, whatever you’re going to have a little asterisk.

Kimberly (26:20): An asterisk. Okay, well, we’re going to wrap it up there. Rework is a production of 37signals. You can find show notes and transcripts on our website at 37 signals.com/podcasts, full video episodes, or on YouTube. And if you have a question for Jason or David about a better way to work and run your business, leave us a voicemail or send us a text to 7 0 8 6 2 8 7 8 5 0. You can also email us at rework@37signals.com.