On Business
02-28-2025 • Ryan Prendergast
Never have I ever run a business, but that is changing with Zenobia Pay. Since I'm just getting started, I thought I'd write out my philosophy of business and how to make a successful one. 5 years from now, we'll look back and falsify my predictions: are they good intuitions, naiveties, or dangerously wrong pieces of advice? Here we go:
Become feature complete as quickly as possible.
Do not do "redesigns". Craigslist is the example here. They have an extremely high valuation / employee count. What you want is a businesses too small to be a public utility. It should self sufficient and stable and should have as few employees as highly paid as possible who are basically permanent on call maintainers. These people get paid at least $200k, work 10hrs most weeks, except an emergency where they grind.
Compete on price.
There's a tremendous opportunity to outcompete venture backed, private equity owned, and publicly traded companies by building a minimal feature set with an extremely small number of employees, refusing to grow headcount or that feature set.
Companies trap themselves into revenue growth and fee maximization by dark patterns. The dark patterns can be "becoming an UMC factory" (over hiring office workers, who inevitably demand that you hire more), and the combo of "trend chasing" and "growth". The board has a fiduciary duty (aka a legal obligation) to do whatever is the currently most convincing argument (aka the latest trend) for growing their revenue. Trend chasing sacrifices long term value for short term profit. Many understand this. But few people acknowledge that any decision decided by argument and verbal justification BY DEFINITION is a trend chasing decision. If you want to be long term profitable you MUST be obviously wrong according to the well spoken crowds, be that twitter or cocktail parties in Manhattan or the contrarian Thiel-ian view or whatever is fashionable in your date and time (even if they're fashionable by being un-fashionable!).
The end result of the company-trap is a fee trapping model where revenue is squeezed. Find a place where there's price inefficiency, switch from changing what something is worth to charging what people will pay to not have it taken away. See ski passes and concerts. Any business school graduate is rolling their eyes now, because they know to price on value, not on cost. I'm not advocating to price on cost! Plumbers shouldn't cost $15 because it takes them 15 minutes to fix your pipes. The Vail Ski resorts and venture backed playbook is subtly different from price-on-value: it is to price based on the value of non-exclusion. Get people hostage and then you can price-on-value with the negotiating power of a hostage keeper.
This one is controversial! YCombinator famously advises the exact opposite: DO NOT compete on price.
Make sacred objects.
Sacred objects are purchases and associations that consumers make irrationally. Luxury is the king of sacred objects (spending $4000 on a bag), but it can come in surprising places, like Norway persuading Japan that Atlantic Salmon in sushi is a core part of the Japanese national identity. How many people have bought a Fender because of a rock band, or a Harley because of the lifestyle? There's an association between a purchase and an implied behavior or character trait, and objects which take on powerful associations become sacred objects.
Sacred objects emerge organically in culture (like blue jeans), but there are things a company can do can to increase their luck surface-area. The most important thing is: continue operating in the black or at a loss when the object becomes outdated or uncool, rather than retool your factory for a newer thing. This gives a chance for the contrarians to adopt your object as their symbol. The example here is by contradiction: American Car Manufacturers, who notably do the opposite. They keep noticing consumer trends, then retool for it because the projections are great. Then they surprise_pikachu when the trend shifts the opposite direction. Gas guzzling big cars were what everyone wanted, until they didn't, and they were outcompeted by small fuel efficient Japanese cars. Now we see the same with the commitment to pickup trucks: neither Ford nor GM makes cars anymore in 2025, only trucks and SUVs. Their margins are higher and trends indicate that the consumer will only buy trucks by 203X. blah blah blah. What happens when that trend reverses?
Another way to become sacred is to survive at low margins until "the mortgage is paid off" (large upfront costs have been paid off) and aim to outcompete on price after that has been written off. This becomes sacred for being "honest" and a time portal for nostalgia. Example: bars with $3 beers that have been around since the 70s and have had the same furniture for 25 years.
Hire slowly.
The first thing that bloated employees will do is grow employee count. Head count growth demands new features, new redesigns, etc. Headcount growth demands new headcount growth.
Avoid water treading businesses.
This is likely controversial. Bubble is a water treading business. It's a platform for people to create web apps, so we are constantly treading water on keeping feature parity with every published web app. And of course, a no code utility is the first thing to break when dependencies have breaking changes, deprecations, etc. Water treading businesses can be unicorns, but they will never be sacred objects, and they will never be feature complete. Hence, they do not fit into my philosophy of business.
Water treading requires all of your time and lots of outside funding. You will lose control. It will become board run. It will become shareholder run. It will be managed according to the projections of MBAs. It will either fail, or it will become a utility.