Andrew (perspectivism) wrote,

Wonderfully written founders' story of ArsDigita! This is better than any case study I ever saw in business school. It illustrates a ton about medium-scale technical and financial success.

A couple immediately favorite passages:

At this point you might ask "Hey, weren't you still on the Board?" Sure. But for most of this year Chip, Peter, and Allen didn't want to listen to me. They even developed a theory for why they didn't have to listen to me: I'd hurt their feelings by criticizing their performance and capabilities; self-esteem was the most important thing in running a business; ergo, because I was injuring their self-esteem it was better if they just turned a deaf ear. I'm not sure how much time these three guys had ever spent with engineers. Chuck Vest, the president of MIT, in a private communication to some faculty, once described MIT as "a no-praise zone". My first week as an electrical engineering and computer science graduate student I asked a professor for help with a problem. He talked to me for a bit and then said "You're having trouble with this problem because you don't know anything and you're not working very hard."

Companies don't like to rely on enterprise software from small companies. There is too much risk that the vendor will go bankrupt. Open source ameliorates this risk to some extent but the tendency to stick to IBM, Microsoft, and Oracle is strong. We tried to present a face of financial invincibility to the world. We bought a Ferrari to give away to any employee who recruited 10 friends. In reality the car only cost $2,000 per month, the person who won it only got to drive it for as long as he or she was employed, and the cost of a Ferrari is much lower than 10 headhunter commissions. But sitting in the parking lot it gave us the appearance of extravagance while inside the building we were living the frugal life--in a world starved for software development talent, it would have been hard to lose money paying MIT-educated programmers $50-85,000 base salaries plus an end-of-year bonus based on accomplishment and the firm's performance. We had a couple of other Ferrari-like schemes up our sleeves. One was a beach house on Cape Cod where teams of programmers would go to work and write. Another was ArsDigita University, a tuition-free post-baccalaureate one-year computer science program. These things sounded outrageous, gave people a way to remember who we were, gave journalists a reason to write about us (and they did), all while costing no more in total than our 1999 profit (i.e., practically nothing if our revenue had continued to grow).

Tying into my journalism thoughts of a few days back, Davenet puts Philip's story in the provoking context of his own professional vs. amateur thread.
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