Make losses affordable

People do crazy things when they can’t afford to lose. Being dealt a bad hand, which invariably happens at some point, becomes an existential threat, the brain shuts off rational analysis, the primal mode of survival kicks in. It’s when morals and spines are broken.

Let’s say your business is reliant on just a few big customers. Now any one of them has the power to make you sweat, or worse, by threatening to pull the plug. If you absolutely need their business, you will absolutely do what they say — even when it’s the wrong answer or direction to the overall mission. When your business has been over-tuned for these few edge cases, your dependency deepens, leaving you less open to new customers (and profits).

This is why acting on customers’ requests, rather than on their behalf, is generally a bad idea. Customers know what’s right for them, in singular. It’s your job to listen but then act on the aggregate sense of what most customers would want most of the time. That’s very hard to do if you can’t afford to say no to a single customer.

The same is true with vendors. If you’re relying on a service so much that they can dictate your existence, well, then they can dictate your existence! That’s the recurrent threat and theme of building on other people’s platforms. Or relying on a particular algorithm for search results in, say, Google. Companies make choices based on what’s right for them, not what’s right for you.

Finally, the hardest part is when this is true of employees. If your magic wizard of server mountain is a complete asshole, but only they hold the knowledge of how to keep your business in the air, whatcha gonna do? You’re going to eat their bullshit, that’s what. And that bullshit is going to seep through the whole organization until it has stained it completely.

The easiest way to get yourself out of a bad situation is to avoid it in the first place. Harder said than done, but not impossible if you maintain a healthy dose of skepticism when Golden Opportunities present themselves.

Like when that big prospective client is dangling a huge check that could grow your business by 20%, but the alarm bells are already ringing red on their list of “requests” to make that happen. Is growing by 20% in one jump worth it if it’s off the ledge?

When the vendor offers you a too-good-to-be-true deal if you’d just climb inside their fortress with towering barriers of exit, well, then maybe the power of that social graph should get another thought.

Or when that impressive candidate who’s willing to take a below-market salary radiates contempt for anyone beneath their ninja chops. Is having one superhero on the team worth a toxic environment for everyone else?

Don’t make any of your dependencies too big to fail. Whatever advantage you gain in the short term by saying yes is dread and misery later when you can’t say no.

We designed Basecamp from the beginning to capable of taking individual losses. Most customers only pay us around $50/month. We built an audience and technology base that wasn’t beholden to any existing corporate platform or vendor. Those choices are part of the reason we’re still around after 12 years.