Korva is a scroll of the internet’s best ideas.
Costs are the lever you control
Carnegie's mantra
Andrew Carnegie's mantra held that profits and prices are cyclical, subject to transient forces in the marketplace, while costs can be strictly controlled and any savings in the cost of goods are permanent. For a business that already runs well, massive growth is very difficult, because convincing customers to part with their money is largely outside the owner's control.
What can be controlled
What can be controlled is the product, the sharing, and the spending. Owning hardware instead of paying for needless cloud services is one such decision. DHH takes real satisfaction in striking a $2,000-a-month recurring expense and replacing it with something free or slightly cheaper, even though the amount no longer matters to him.
Why cutting helps
Cutting what shouldn't be there does more than save money. The whole business gels better, and a smaller team of more capable people is more fun to work with. Profit also changes behavior: once a company keeps what is left after expenses, it becomes interested in raising it, and that makes it more efficient. Hiring three times as many people as needed also pulls them away from other productive work.
How did Carnegie drive down steel costs?
Andrew Carnegie opened the Edgar Thomson Works near Pittsburgh in 1875, built around the Bessemer process, which turned iron into steel far faster than earlier methods. He pushed managers to track the cost of each input at every stage, ton by ton. Cheaper production let his firm lower prices and still earn a margin. Carnegie Steel grew into the largest steelmaker in the world by 1900.
How do cloud bills grow so quietly?
Amazon Web Services launched its S3 storage service in March 2006 and its rentable servers, called EC2, later that year. Customers pay by the hour or the gigabyte instead of buying machines up front. This turns one purchase into a monthly bill that rises with usage. Each added service charges its own small amount, and the total grows as services are added.
What did Parkinson's law say about staffing?
In a 1955 essay in The Economist, historian C. Northcote Parkinson observed that the number of officials in the British Admiralty rose even as the fleet shrank. He argued that work expands to fill the time available, and that officials multiply because they create work for each other. The essay was meant as satire, and it was expanded into a book in 1957. Parkinson's law is now used as a name for the way tasks and staff swell to match available resources.
More from David Senra
