SEASON 2 - EPISODE 0104 - APRIL 10, 2024

Strangers at a Cocktail Party

Jason Fried and David Heinemeier Hansson, the co-founders of 37signals, dive into their book REWORK and discuss the essay “Strangers at a Cocktail Party” with REWORK host, Kimberly Rhodes. From their experience, hiring too many people at once can throw off the balance and continuity of a company’s culture. They talk about the importance of gradual assimilation and how culture is implicit, not always written down. They share insights on the value of fresh perspectives and the excitement of facing challenges head-on.

Watch the full video episode on YouTube

Key Takeaways

00:30 - Gradually integrating new hires is important for upholding an organization’s established norms and values.
02:30 - Company culture is nurtured through the daily interactions and collective experiences shared within an organization.
05:34 - New hires inject new perspectives and innovative ideas into the mix.
07:14 - Embracing crises and novel challenges is part of the excitement of running a business.
12:19 - Reflecting on the hiring patterns at 37signals.
14:23 - While change is essential for adjusting the company’s culture and strategy, it’s vital to implement it carefully and minimize disruptions.

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 and I’m joined by the co-founders of 37signals and the authors of REWORK, Jason Fried and David Heienemeier Hansson. In their book REWORK, there is an essay called “Strangers at a Cocktail Party,” and Jason and David write “Hire a ton of people rapidly and strangers at a cocktail party problem is exactly what you’ll end up with.” Jason, do you want to explain, what does this even mean?

Jason (00:29): Well, I got to admit, we don’t have a lot of experience with this really. I mean, over the past few years we did hire a lot of people, way more than we’ve ever hired before, but we’ve never hired, let’s say, a hundred people in a month like some companies or 500 or a thousand in a year. So some different scales here. But in general, I think what happens is when you hire too many people at once, there’s a balance thing that you lose. You begin to find this imbalance where you have this set of people who understand the norms, the values of the company, the society of the company, and then if the scale tips too much, you can actually lose the continuity of what you’re all about. And it’s not that maybe it’s time, maybe things should change at a company, but I think there’s a lot of value in the continuity of an approach in general.

(01:20): So a lot of this has to also do with individual projects. If you put too many new people on something that’s important and don’t have a veteran presence on that, they’re not going to, again, going to be able to continue the sensibilities, the ideas, the degree of quality, the feel of something that already existed in the past. And you do want to have something that’s continuous, I think. So that’s kind of one of the really in my mind, the biggest issue with bringing on too many people too quickly is that you actually have an assimilation issue is kind of really what it is. And that can be good. It’s usually not so good though, I think, and it creates a lot of turmoil and then the company doesn’t really know who they are anymore and where to go next, and people don’t know who to lean on and what value is important and what isn’t. So I think that’s the thing you got to keep in mind here is that assimilation is important in an organization, in a society, and too much at once creates a major imbalance and a very difficult situation for continuity to exist.

David (02:20): And that comes because culture is implicit. Culture’s not written down to the largest degree. We write a lot down, we share more about our culture in terms of how we view the world and who’s in it and what’s important than almost anyone. And yet still to really get what it’s like working at 37signals and making the decisions in the spirit of what we’re doing, the continuity, you have to work with someone who’s already been here. You have to work with others who’ve absorbed all of that in all its implicit forms because it’s not all written down. You can’t just read one book and then understand at sort of a deep core, internalized level what it actually means to make the decisions this kind of way. And I think the recognition that culture is implicit is difficult and perhaps frustrating even for a lot of people to understand because why can’t we just write it down?

(03:15): If we could just write it down, wouldn’t it be much easier if you could write it down, wouldn’t explicit be better? I’ve come to appreciate, I mean, again, write a lot down. We do believe in explicitness, we do believe in recording these sorts of things, but it’s not the full picture and it shouldn’t be. It misses a lot of the texture, a lot of the humanity of, oh, what is this culture? What is going on here? It’s actually about the people. If you look at the technical organization at 37signals, the culture that we have is a lot about what would Jeff do in this situation? If we’re changing Queen Bee this way, what are the sort of steps that he would make sure that we make something that’s right, that it goes out and billing doesn’t stop? Oh, we have a really tricky issue where we got to dive into the database.

(04:04): What would Jeremy do in this case? Oh, these kind of things. It becomes not just becomes, it is culture is, very personality focused and it is very much an apprenticeship. You’re learning the culture by learning from the people who are in it and from specific individuals, and you’re not going to write that down in that style. So I do think that making sure the dilution factor is gradual and over time is the best way to ensure that. Now at the same time, Jason already hinted to it, sometimes you might need to make a big cultural change. We’ve done one of those within the last few years, and that did require a massive dilution because you were actually trying to not just reset, but reject some of the stuff that had gotten into the culture. And that’s not easy to do, and sometimes that does require an influx, but what you have is working and sometimes that’s on like, oh, it’s working on this one parameter. It’s not working on the other parameter. On the parameter where it is working, don’t dilute it too much too fast. On the stuff that’s not working, you might very well want to go like, all right, we should actually pour it all out and then we can pour it back in and we can start fresh. But it’s really about are you looking to change it or not?

Jason (05:26): Yeah, actually, can I add something to that?

David (05:28): Yes.

Jason (05:28): You’ll often hear the statement, we need some new blood around here. That is a symptom of we’re stuck. We’re stuck in our ways. We’re maybe slowing down. We’re not really pushing anything anymore. We need some new blood, some fresh blood, some youth, but not necessarily even age, just like new, you need new. And so that’s a case where you actually want to upset the apple cart and you want to flush in a lot of new things and to flush out some of the old approaches or to challenge them or to push them off balance at least, and then see where the new thing settles out. So there are times when that’s super important, critical in fact. I mean, I think our company, I don’t think we would’ve survived frankly had we not had the big shake up a few years ago or we would’ve turned into something that basically David and I would’ve probably moved on, and who knows where it would’ve gone from there.

(06:25): Not that we’re the only ones that matter here, but we led the place for a long time. We wouldn’t have wanted to stay here. And at that point, who knows what happens. So there’s a good chance that things would’ve been incredibly different, not for the better. We had to, some people chose to leave, others were, there’s an opportunity to leave and they want to leave for other reasons. And so it was just a good moment to open the doors wide and then open the doors wide again and have a new group come in and sort of reset the culture for us and reset our direction. That shouldn’t of course be happening every year. I mean, that’s the problem. You can’t have that happening or every month, but yeah, once in the course of 20 years or a decade or 10 or five years or whatever, maybe. Maybe that’s pretty valuable, but it shouldn’t be the steady state.

David (07:12): Which is the gift of crisis that that’s an opportunity where you can make large changes that you would not make when everything is just going, I was going to say hunky dory, but just sideways. It’s sort of fine. It’s actually quite difficult to change a culture. And a lot of companies, when you look at them from the outside, it is obvious that something needed to change, but the catalyst that allowed that change to actually happen is usually a crisis. And if you look at some of the famous downfalls of major companies like I don’t know, Kodak or Blackberry or Nokia or any of these other companies, you can zoom out and go like, yeah, do you know what? It was pretty obvious a while back that things needed to fundamentally change, but it was actually impossible for that change to happen because the crisis didn’t show up soon enough.

(08:05): If they had only been so blessed as to have a crisis earlier in the transgression here of history, they could have done something about it. It’s very difficult to change a culture fundamentally without a crisis. But I’ll also say that we used to put a higher, I was about to say status that’s not right, a higher value on longevity and seniority and tenure at this company to a degree that I think actually looking back tipped over. And that’s not even talking about crisis. It’s not even talking about resetting the culture in the big way that we did a few years back. It’s talking about the challenging of existing ideas and paradigms and approaches that you get when someone enters the organization with fresh eyes. And if you both want a company that’s not growing crazy and is trying not to become huge, does not treat small like a stepping stone, and you value someone who’s been at the company for a very long time, you can end up a little stuffy.

(09:08): And I think ideologically speaking or approach speaking, I think we did end up a little stuffy in that regard where you just look solely, oh, it’s wonderful that someone’s been here for 10 years. Of course it is, that’s a major achievement. But if literally everyone has been here for 10 years, there’s also a blind spot and there’s also a real, I mean, it’s a little bit of a macabre thing, but the new blood thing I think is actually accurate. You need actually some new antibodies, you need some new flow, you need some new different things, not necessarily to overwhelm, but just as a continuous refreshment. I think of sometimes this concept like donating blood. What happens when you donate blood? You go in and you give, I don’t even know what the quantity is, like a pint. And then your body will develop a new pint to go with that, and you’re like, I have no idea how medically accurate any of that stuff is.

(10:02): But I like the metaphor of this idea that, do you know what? Occasionally I get rid of a pint and then a new one is it generated and that’s healthy enough itself? And then I think there’s a specific tactic to do this. And historically we didn’t do that well, I don’t know. That was the circumstance. We would hire one person. Oh, let’s just find one individual and we’re going to plop in. It’s actually harder in a lot of ways to hire one person than it is to hire two. When you hire two people, first of all, they’re starting with a buddy, someone else who’s in their boat and situation and level of experience with the organization. And that’s really helpful for their, finding their way in the organization. I mean, Kimberly, you started at the same time as Chad, and I think there’s been a lot of positives about that.

Kimberly (10:49): Yeah, my day one buddy.

(10:50): And then I also think actually when you’re doing it in a certain group, let’s say you hire three programmers, it makes the evaluation of progress much easier because when you have three individuals who start at the same, with the same premise, you can actually compare. That’s not that you have to stack rank people, but if someone is dropped in and they pick things up and they get on with it, well, they show all the promise and all the things are good, it becomes harder to excuse the person who after six months still sort of haven’t gotten it. If you just only have that individual and after six months they kind of sort of still haven’t gotten it, there’s a million excuses you can keep going, oh, we should have done more mentoring. We should have done this. If we had just written more of it down, if we’d done this, if we’d done that, it would’ve been different. Hog. Here’s another counter example to that. Someone else walked in with the same premise, they were able to make it work. So I think on both sides of the equation, it’s better for the person starting to have someone to start with, and it’s better for the organization to be able to look at multiple people who’ve started in the same role.

Kimberly (11:55): So this essay is talking about not hiring too quickly. So I’m curious about the timeline that 37signals has had in terms of its size starting out to where we are 25 years later. Was that two employees at a time over the course of time? Was there a peak of a number of employees to where we are now? Kind of talk me through that.

Jason (12:17): We usually just hire, we historically hired one at a time, this idea of hire when it hurts, so there might be a deficiency somewhere in one group and we needed one more person, something like that. So it was very slow, very, very slow to start. I think we hovered around eight for a number of years, maybe 10, 12 for a number of years. Then we had these sort of explosions, these Cambrian explosions perhaps where we had, we hired 10, I forget what year it was, but when we hired, I think Jeff and there’s a bunch of people.

David (12:43): 2012.

Jason (12:43): 10 people came on, was it 2012? We hired Iike 10 people, something like that. It’s a big year. Why? I don’t really know. I don’t remember exactly. I mean, 2012 was around BC two actually. BC, yeah. Yes.

(13:01): Yeah, BC two because it was eight years after classic really launched basically. But I don’t know. There’s times when that happens, but the steady state for us is one to a few, and right now we’re looking for one programmer right now. I don’t know, I couldn’t say this confidently, but if we found two outstanding programmers, maybe we would hire both. I don’t know. We’re probably going to look for another designer soon, sometime at this point this year. And if there was two outstanding designers perhaps, but right now we’re just kind of growing again, back to maybe one at a time depending on what department we’re hiring for. I think for customer service, we’ve hired multiple people at once in the past. Sometimes it’s because we’re trying to cover multiple time zones. There’s a bunch of different circumstances at play here, but we’ve sort of gone in this sort of step function sort of thing, and sometimes big jumps, oftentimes pretty plateau small and then big jumps, that sort of thing. And then again, a few years ago we hired, gosh, I don’t even know, we had 30 people in, what, two years?

David (14:05): We hired, I think actually almost 40 people from 2021 to early 23 or something. Over a course of a year plus it was like 30, 40 people. That was a lot. And it sort of, kind of, some of it didn’t work. I think that’s fair to say, as in when you hire that many, the odds the stats just are that some of it is not going to work out. And we had also, it wasn’t just like we’re going to hire to replace people who are no longer here. It was also we’re going to try a bunch of new things, and we literally just tried all of it at once. Oh, maybe we should have an inside in-house counsel. Maybe we should have our own full-time lawyer. Maybe that’s important to this extent, or maybe we should have this person. Maybe we should have that person. And we realized in some cases, it wasn’t about whether the individual was right or not, it was that the role wasn’t right.

(14:58): So we kind of piled a lot of things on top of each other, both sort of, alright, we need this people. And then also like, oh, I wonder what that would look like. It was really a period of experimentation on that dimension that we’d actually never done before at that scale. And I think not all of it was successful, of course it wasn’t. I mean, it’d be amazing if everything we tried just out the gate was successful, not all of it was successful. And then being able to unwind is actually the thing I’m most pleased about. That for the things that did not work, we were able to say, do you know what? We’re not going to do this forever. It did not, this particular thing, let’s just take the in-house legal counsel. We just didn’t need that. We didn’t have 40 hours a week of legal matters to be addressed.

(15:46): And as we’ve talked about in the past, one of the very dangerous things is to hire someone full-time when the job isn’t. If there’s 10 hours of work, actual work that needed to be done, but you can only hire in 40 hour bulks , you’re going to end up with 30 hours of spare capacity, which very quickly turns into negative, right? You will do more work than what is not just required, but is good, and you will start detracting from it. And I think that’s something to be on the lookout for. But yeah, that was a wild experiment and it was a wild experiment that happened on the back of a crisis that allowed us to do something as dramatic as that. We would never have done anything at that scale in that way if it had not been because we had to for starters. So I really liked that experience actually in terms of its overall ability to challenge our premise and our preconceptions about how the business should run.

(16:45): I think one of the books where just even the title made a huge influence of me was the book, the Half-Life of Truths. This idea that there are all these scientific truths that essentially expire, that they expire because we develop better knowledge, better insight, better truths, and then the thing you knew from 10 years ago is no longer true. And I think if you’ve been in business, we have for over 20 years, undoubtedly we will have taken all these positions about like, oh, you shouldn’t do this or you should totally do that, and they’re no longer true. They were true in 2006. They were true in 2012, not true in 2024. How are you going to find out unless you try? How are you going to find out unless you push it? I mean, I actually think of sometimes if you see that video with the Atlas robot from Boston Dynamics where they try to push the robot over, they even use a stick to do it.

(17:43): Think of the organization as that Atlas robot. Try to push the organization sometimes. It should, not all the time, but occasionally you got to push at it. Is it good? Is it resilient? Can it take a step back? Can it take a step forward? What can it do if you put it under a little bit of pressure? And then again, sometimes you’re granted this pressure for free because crises have a way of showing up at your doorstep uninvited. But when they do great, everything’s great. Invite in a crisis, awesome. Total success, awesome. Flat line for a while. Awesome. All of the outcomes are awesome if you choose to make them so.

Kimberly (18:23): Okay, I know you guys hate these kinds of questions, but I’m going to ask you anyway. 40 employees in this two year period seems like a lot for the size the company is now, if you had to do it again now, would you have hired 40 employees?

Jason (18:39): My answer is, you would’ve done the exact same thing.

Kimberly (18:43): I knew you were going to say that.

Jason (18:46): All the atoms in the universe are arranged in a certain way at that moment. You’re going to do the same kind of thing that you would’ve done because we had an idea at that point to become a more capable company. This was not just about can we hire more people? We had an idea that surrounded it and we were filling in that idea, and we had this idea that we needed in-house counsel for X, Y, and Z reasons, all the reasons were there. So we would’ve done the same thing. But here we are today, we’ve backed off of that. We’re smaller today than we were a year ago, but I don’t think we did the wrong thing back then. I think we did the right thing back then doing what we needed to do at the time. And then I think we did the right thing again by saying, you know what? Some of these positions don’t make sense or some of these people haven’t worked out for whatever reason and we made some changes. So that’s my answer. I just don’t think you can redo any of these things. I mean, not that I don’t think you cannot redo them. I just think you end up in the same situation again, is that the situation was what it was. The idea that you had was what it was and you were going to fill in to make it work. So that’s my, it’s not really fatalism. It’s just like truth.

David (19:55): And even more fundamentally, I don’t want a smooth road. I don’t want to know all the things. I don’t want to avoid all the mistakes. Half the excitement and joy of running a company is to encounter novel situations or even crises and having to fix 'em without knowing what the right answer is. This is where all the novel, like all right, now I got to figure something out and I don’t know what the right answer is. I would absolutely hate to be robbed of those opportunities, not have any crisis or have all the foresight. This is probably one of the reasons why, I mean, you should never say never, but I don’t think I have another company in me in terms of a company like this because I don’t want to go back into the early days and knowing everything that I know. That sounds awful to me to know everything about everything I needed to avoid.

(20:50): No, I like the novelty of experiencing the world for the first time, experiencing all the challenges for the first time. Now, there’s some irony in this is like isn’t the definition of wisdom and experiences that you’ve seen things and you’re able to preempt it? Yes, it is, but there’s also just a youthful exuberance and excitement in seeing problems for the first time. This is one of the reasons, whenever I talk to young entrepreneurs, and they’re always, or not always, some of them are anxious about all the things they don’t know. Oh, should we have a board? What if there’s a bunch of wise people who can come in and tell us what we’re supposed to do? I’m like, no, you don’t want that. You want the adventure. The adventure is the payoff for doing all this hard work, the adventure, the uncertainty, the fresh novel challenge that you have to figure out from first principles, and you can’t just look up the answer at the back of a book.

(21:48): That’s the good thing. That’s literally the essence of it. That’s what’s going to be left. When you’re done with the whole thing and you sit in your rocking chair with your little blanket and a cap or something looking at the sunset, you’re going to think back upon that. That’s going to be the treasure that’s left over. Remember when we didn’t know the things and we did them anyway and what happened? No one is going to look back and think like, oh, remember the time where we knew everything exactly what we’re supposed to do, and we did it and it worked out. There’s literally not a memory in that account. Your brain will not just successfully but happily erase all of that. It’ll just flush it out. There will be nothing left and it’ll just be a blank slate. Everything that fills up those core memories, everything that you’re going to retain for your rocking chair days is going to be in the quote, unquote hardship, and I don’t actually mean hardship in terms of the hero myth of entrepreneurship, but just in the difficult decisions you had to face and had to overcome, and then the prize afterwards is the memory.

(22:52): Don’t take that away. Don’t even get into the frame that it’s valuable to take that away. Embrace the opposite, embrace amor fati. You’re going to love your faith. You’re going to love the path exactly how it is, and you will want nothing to be different. You want all the hardship, heartbreak, difficulty, exactly as it appeared.

Kimberly (23:11): Last question before we wrap up. David, do you have a rocking chair or a cat? I’m just kidding.

David (23:17): I actually have two cats now and I don’t have a rocking chair, but I have a sun recliner that I now sit on for 20 minutes at least in the morning and just go like, oh, feel the sun, and that’s where I know I’m getting old because that concept that I was just going to sit on a thing and be appreciative of the sun, that was not a concept I had in my twenties, I’ll tell you that.

Kimberly (23:41): Excellent.

Jason (23:41): The way if you’re getting old is when you get out of the chair, do you go, Ooh, that’s how you know. If it feels harder to get out of the chair than you thought it should, that’s how you’re doing.

Kimberly (23:50): Yes. Excellent. Well, with that, we’re going to wrap it up. REWORK is a production of 37signals. You can find show notes and transcripts on our website at 37signals.com/podcast. Show notes and Oh, just kidding. Full video episodes are on Twitter and YouTube, and if you have a specific question for Jason or David about a better way to work, leave us a voicemail at 708-628-7850. You can also send us an email at rework@37signals.com. How many times have I done that outro and I still mess it up?

Strangers at a Cocktail Party

Key Takeaways

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