Why we choose profit

Key takeaways

Profitability is a deliberate choice that allows businesses to remain sustainable and in control.
Achieving profit grants freedom to innovate and explore ideas without outside pressure.
A balance between confidence in one’s business and humility about its uncertainties is crucial for founders.
Taking profits off the table is essential for personal financial security and helps manage risks.
Profitable companies can create trust and stability for customers, positioning themselves as reliable long-term partners.

Summary

The Choice of Profit

In this episode, Jason Fried and David Heinemeier Hansson emphasize that being a profitable company is a conscious choice they've made rather than a default outcome. They explain how they prioritize keeping costs low and consistently earning more than they spend. By choosing to be profitable from the onset, they are able to maintain control over their business operations and avoid the pitfalls of relying on external funding. This philosophy has allowed 37signals to remain in business for 25 years and ensures they can weather uncertainties.

Freedom Through Profit

The co-founders express how profitability grants them greater freedom to experiment and make decisions that may not align with investor expectations. They highlight that with profit, they can pursue ideas based on instinct rather than pressure from outside investors. This approach allows them to foster creativity within the team, take measured risks, and acknowledge mistakes without jeopardizing their company's stability.

Balancing Risk and Humility

A notable discussion point is the balance between self-confidence and humility required for entrepreneurs. Jason and David argue that while a founder must have a certain degree of belief in their vision and capabilities, they must also remain aware that success is not guaranteed. The founders stress the importance of pulling risk off the table by taking profits while navigating the unpredictable nature of running a small business.

Investing Wisely in the Business

The conversation shifts to the common misconception that profits should always be reinvested into the business. The founders argue against continually pouring profits back into the company without a clear understanding of the purpose of that investment. Instead, they advocate for taking a portion of profits off the table to create financial security, allowing entrepreneurs to invest in less risky ventures like stocks or savings.

Creating Stability for Customers

Jason and David discuss how profitability not only benefits the company but also creates reliability and stability for customers. A profitable company can commit to maintaining its product offerings and ensure customer trust, which is essential in a marketplace where many startups may not survive long-term. They view the ability to provide a sustained product as a vital aspect of their value proposition to customers.

Show notes

In a world where constant reinvestment is celebrated, 37signals chooses profit. In this episode of The REWORK Podcast, co-founders Jason Fried and David Heinemeier Hansson talk about how profit gives them freedom, clarity, and staying power—not just for the company, but for their customers too. They make the case for building a business that’s solid, simple, and self-funded.

Key Takeaways:

00:27 – How being profitable is actually a choice
08:34 – Why it’s important to take money off the table
11:35 – Striking the right balance between ego and humility
15:00 – Profitability isn’t guaranteed forever
18:27 – Well-managed profits create reliability for customers

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