How does an entrepreneur change the video game industry and become one of the world’s first space tourists?
Along the way, he coined the term “Massively Multiplayer Online Role-Playing Game.” He recently founded a third company, which you’re going to hear about.
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Here’s the program.
Hi everyone. My name is Andrew Warner. I am the founder of Mixergy.com, home of the ambitious upstart. How does an entrepreneur change the video game industry and become one of the world’s first space tourists? Richard Garriott started out by making his own games and selling them in Ziploc plastic bags. He went on to launch two game companies and recently a third, which we’ll find out about. The first was Origin Systems, which he sold to Electronic Arts in 1992. After that came Destination Games, which he soon after sold to NCsoft. Along the way he coined the term “massively multiplayer online role playing game.” Richard, welcome.
Richard: Hey, it’s great to be here. Thank you so much.
Andrew: Hey, I’ve got to ask you about outer space in a second, but first, the most recent company is what? That’s where you’re calling me from, right?
Richard: That’s right. I believe there have been three grand eras of games–solo player games, massively multiplayer games you just mentioned, and now social and mobile games, which is the third era. So my third company for the third era, is called Portalarium. So we build portals to new worlds, so we are the Portalarium.
Richard: You got it.
Andrew: OK. I’ll come back and ask you about that. First, did you spend $28 million to be one of the first people out in outer space?
Richard: Absolutely. So, yeah, it’s also important to note, though, that I helped found the company, Space Ventures, that has put all seven private citizens who have ever flown in space, including myself, have flown with my company. I was the sixth of seven people over eight flights that have gone.
Andrew: So, what was it like?
Richard: Travel in space, as you might imagine, is a pretty phenomenal life-changing event, but in ways that you wouldn’t expect. For example, the launch of a spacecraft, which you might think of as very noisy and violent and potentially scary, it’s actually very, almost silent. It’s very smooth. It’s very cerebral. It’s like a confident ballet move lifting you ever higher into the sky. The same thing’s true for reentry, where, outside the window, there’s the plasma that is hotter than the surface of the sun and the vehicle is melting away around you, but inside it’s very calm and quiet and comfortable. Then, of course, the most important and impressive part about space travel is the fact that, you’re not only floating around like Superman 24 hours a day, but looking back at the earth and the amazing views you have are truly a life changing event.
Andrew: Do you get disgusted by more people now that you’re back on Earth? I mean, do you say, “I put men up in space and Andrew can’t get video Skype to work clearly? What’s going on in this world? I put a man in space and the coffee here stinks, they can’t even get that right? Do you feel that way?
Richard: No, not at all. No, not at all. You know, in fact, as cool as space flight is, actually when you mention the coffee it makes me think of eating meals up in space. You know, there’s lots of great reasons to live and work and play in space but food is not one of them. The food that they generally provide has to be food that can be stored for long periods of time at room temperature. So it tends to be military rations.
Andrew: I see.
Richard: Lots of great reasons to go. Food’s not one.
Andrew: On a more serious level, you’re up in space and one of the reasons I do these interviews, is I want to learn from the people I admire. You’re someone who got to do something that for most of us would be a dream.
It’s not just about the physical act of putting yourself and other people in space, it’s about the idea that you had a vision for the way the world should be, for how you would want to be a part of it–and there it is. It’s happening beyond the reaches of most people’s imaginations when you first thought of it. Tell me about that feeling.
Richard: Yeah, actually by the way is an outstanding question and the first time anybody has ever posed the question in that way to me. I agree with it and I like it because I think that’s a really important message to people, is how much I believe… Of course, I believe I was very lucky, there’s lots of luck along the way that allowed this to take place. However, to a large degree, I think people make their own luck through passionate and steadfast and thoughtful pursuit…
Whether it’s my computer game industry or the leadership I’ve had the opportunity to have in the gaming industry or whether it’s the leadership in bringing into existences a civilian space flight capability, they really came from the same general perspective and I have the same feeling about it afterwards. Which is, when I was at a very young age, I was told I wouldn’t get the chance to fly in space because I had bad eyesight and therefore I would be ineligible to be a NASA astronaut. At a young age I thought, ‘who is that doctor to be the gatekeeper of access to space?’ I said, you know, if the government space program won’t have me, I’ll form my own space program. Of course, at the age of 13, you don’t realize how fundamentally, incredibly difficult that problem is going to be but I made many runs at it.
When I was younger I began to try to convince NASA to take civilians, I invested with astronauts who thought they were going to build these cargo bays to take civilians and after a while, I learned NASA and the government and all these astronauts they’re not entrepreneurs, NASA is not built for that and there’s no real way to convert them and so then I said, I’ll have to do the even harder and more costly way–invoke private industry to take over. We began to build things like the XPrize and Space Adventures which eventually did fly people into space. But it was a regular re-evaluation, learning from the mistakes, finding the right partners, bringing the right skills and money to bear over and over again, until finally it worked.
In another interesting twist on the story, I was originally scheduled to be the first private citizen to fly into space and that’s when the first internet stock market crashed and I was funding all this out of my internet stock market proceeds because I’m a computer game guy. And so, I actually had to sell that first seat to Dennis Tito, who became the first civilian to fly and I had to go rebuild my assets to finally fly in 2008. So when I finally did fly it was both relief that I finally made it through this extraordinarily protracted journey with huge ups and downs, the decadal ups and decadal downs, but then also, of course, a great joy to have finally accomplished it.
Andrew: So my goal for this interview is to find out how you got there because if all I do is leave people with this idea that you got there and you’re someone who sticks with things, we’re going feel very inadequate and much unguided. I want to learn how you started and how you built up and how you rebuilt to get there. First, there’s something that I’ve got to ask you. A moment ago you used the word, you said, ‘thoughtful pursuit of…’ and then we cut out on Skype, what was the word?
Richard: ‘…even lofty goals.’
Andrew: Even lofty goals. OK. So let’s go back to when you started out, from what I read online, it seemed a lot like you were a creative person who created this game and others pushed you to start selling it. Am I right or am I misreading it?
Richard: No, that’s correct. I was creating games for four or five years before my first one was released. But it’s important to note that this was really before there was a computer game industry. In fact, I wrote many of those games on teletype when there literally was exactly no industry. There were no games sold for any machines for any purpose.
Andrew: What year are we talking about and what age were you, roughly?
Richard: Started doing this in 1974.
Richard: At the age of 13.
Richard: My first game was released for profit, at the age of 19, in 1980.
Andrew: This is the one, I’m sorry, you tell the story.
Richard: Yeah. So this is the one [??] in the Ziploc bag that you mentioned in the introduction. It was the owner of the Computerland store where I was working for my summer job, that saw my game that I was creating over here in the back room, the employee lounge, one summer. He said, ‘Richard, you know, this game you just created much better than anything we have on the wall in the store,’ and state of the art packaging back then was a Ziploc bag and Xerox cover sheets, that’s what all the few games that existed were packaged like.
He convinced me to go out and spend my life’s savings, which was $200. I bought Ziploc bags and Xerox cover sheets. I hand copied some discs on my [??], it’s still right here in my office in the other room, hand copied the discs. Put them in a Ziploc bag, hung them on the tech board in the store and one of those — I sold a few in the first couple of days, but one of those few found it’s way to a California distributor who called me on the phone and said, ‘We would like to distribute your game nationally, would you let us?’ We signed contracts . . .
Andrew: Let me pause the story there, if you don’t mind, and just fill in some understanding up until this, and then we’ll continue with the narrative. What I want to understand about you is are you the kind of person who, were you setting lots of goals up until that age, lofty goals and hitting them and feeling like you could do anything? Or were you someone who was just playing with whatever toys you loved, at the time it happened to be video games and computers and something happened to come of it that became bigger and bigger? How does what you did, fit in with the mind set that you had?
Richard: More the later. A bit of a mix in the sense of, I was passionate about the art. I was absolutely a creator. I absolutely was pursuing it as a business and nor by the way, when I was in school, did I have lofty ideas for setting five or ten year projections as a person. Even when I got that space idea it wasn’t in five years I’m going to space and here are my ten steps that I’m going to take to get there. With either the computer games or space, it was always here’s what I want to create or here’s what I want to do and I’m just going to and nothings going to stop me.
I would literally just sit down, in the case of games, I would sit down and say look I want to, I was an avid fan of Lord of the Rings and the game Dungeon and Dragons, and I said, ‘I want to create my own world right here on this computer,’ because no one had ever made these virtual world in a computer. I believe I can do it. There was no way to learn how to program. Them there was no art, no art tools. I just decided I’m going to do it and learned by doing it. Taught myself how to do program. Taught myself how to do create art. Taught myself how to do [??] design and started [??] over, and over, and over again on these games until they got better, and better, and better over time.
Andrew: It’s interesting that you say that you had this artistic side. We tend to think that if you have the artistic side you’re never going to know how to commercialize it and you’re doomed to being somebody else’s slave essentially, to the person who knows how to market. Or you have to be on the other side, which is really a business person, but you can’t have any creativity in you because that’s just for others, other people. I’m seeing more of the mix. I’m seeing less of this black and white world that we read about in the self help books and that we expect to see in the world. I’m seeing more of that in here.
OK. So happen stance, somebody comes in and buys one of your games. I say happen stance, but really you were putting good stuff out, is it OK to say, is it right to say do you think that it was inevitable that someone was going to discover you with that kind of talent, at a time when you were building games that were just like the professionals?
Richard: Now that probably the case. I haven’t reflected on that either, another great question, but I think even if [??] had not seen my game or one of the other start-ups, about that same point in time, probably would have because it is true that the game that I was creating there, in my spare time, really was as good or better than any other products that were available at that moment in history. They would have picked up — and even if somebody had missed that one, I had already written 20 or 30 of these games. I was going to wrap 20 or 30 more and they were all getting better, and better, and better. Even if somehow the first one was missed, the second or third or fourth would of been picked up.
Andrew: OK. You get picked up at that age, which were talking roughly about 19 or 20 years old at that point, right?
Andrew: What happens next?
Richard: It’s a very interesting issue because that’s also my transition from high school to college. My father’s an astronaut, my eldest brother has two master degrees and is an engineer. Here I am entering college, having already sold my first game, first game sold 30,000 units and my royalties was $5 per unit. You do that math, it’s $150,000 for a high school senior, for some work that took me maybe six weeks out of my evenings after school time. Immediately my perspective on frugality was warped in some ways which are beneficial and some ways which were not.
Because if [??] school very difficult thing to remain focused on because frankly, even though I clearly could have been interested in some space engineering or computer related things at school, I was already much more advanced in school on that subject and all the other stuff [??] wasted my time. The subject I would be interested in didn’t help me. The subjects weren’t interesting. As my income level went up, my grade point average went down. After my sophomore year in college, it became clear that I really couldn’t do both and the games continued to grow so quickly, it was obviously the right choice. I actually dropped out of college in order to start my first game company, along with my brother as a business partner and that’s what started Origin.
Andrew: You mentioned that there was some bad things that happened along the way, as you were making this money, tell me about that. Dropping out of school really in retrospect, doesn’t seem so bad, and at the time couldn’t of felt that bad either, what else was there that you were doing as a result of earning $150,000 at that age for such little time?
Richard: The bad part is you lose your, I went from living at home where you really have no bills so, you really don’t understand the value of [working]. My first months of living alone were so well funded that you also don’t learn the value of money. I would actually say that’s the best and the downside. The downside is the industry has grown and matured, the return on that investment was infinite. When you paid yourself zero dollars to begin with and make $150,000 that’s an infinite return on an investment and it’s been downhill ever since.
Andrew: I see.
Richard: The seriousness with which you have to take the holding on to every dollar, was largely absent in the early days, and has become more and more important in the later days. I suppose that’s worked out OK because it gave me time, you might say, to learn the business side of the business, which in the beginning I really wasn’t interested in or paid much attention too.
Andrew: I think you said in a recent interview — I have to shut down my browser because I thought that was maybe interrupting our connection, but you said that you got married and you’re expecting a baby I think, and you were, as a result of it, scaling back your expenses. But you’re saying you needed to be more conservative so, it seems like something you have to work on for much of your life. At that time, what were you spending your money on? How did this lack of frugality express itself at the time?
Richard: Well, interestingly I actually think that all told, I wouldn’t spend my money any differently, reflecting on it than I think I did.
Andrew: Yeah. It doesn’t seem like it. You don’t seem like you’re having these big cocaine parties and people were smashing cars into trees.
Richard: No. No. Fortunately I missed the truly, what I’ll call the non-enriching ways to . . .
Andrew: That’s why I ask. Were you spending money on telescopes?
Richard: Yeah. Actually and observatories and things like that, that’s one. But also on trips to Antarctica, down to the Titanic, down to the Amazon, throughout Africa, these investment in space activities, these are all these sorts of things but interestingly the one part that was never in there was what I call ‘family.’ And so, now that I’m becoming somewhat domesticated, you might say, although I’m not sure I like that particular term, but the conception, the fact that I’m now running multiple, more serious businesses, as well as a homestead, you know, there’s a different blend of the financial planning.
Andrew: I see. OK. All right. So, I understand where you were. I understand then that you got into business with your brother. Help me learn why your brother? Why did you take this great talent and proven track record that you had and say, I need my brother to help me out here?
Richard: Oh, very good. It’s interesting that the first company, California Pacific, they published my first game [??]; my second game which was the first Ultima. Interestingly, this was in the beginning of the 1980s, most all these publishers were in California, and speaking of cocaine binges, this was the era of the first wave of drugs through the California lifestyle. And so, that first publisher basically quit paying me. They had sold a bunch of my Ultima games, but stopped paying me. Suddenly I was like, what do I do now? So, I actually called my older brother and said, ‘Robert, Robert, come help me collect on this bum that quit paying me,’ unsuccessfully.
But then I went to a second publisher, and in this case the company was called Sierra Nevada, which eventually became called Sierra Online, excuse me, Sierra Online, which eventually became called Sierra. And Sierra, after they published Ultima II, they quit paying me. And so, I called my brother again and said, ‘Robert, Robert. Help me collect from these bums. These guys aren’t paying me either.’ And we tried, and unsuccessfully, and then my brother came to me and said, ‘Richard, look I’ve been used as a venture capitalist at the time, studying investments in a software companies.’ And so he said, ‘Richard, why don’t you and I go into business together, because at the very least I’d know that when I get paid by a store the first person I will send a check to is you. We can always afford not to pay anything else except the goose that lays the golden egg. I know that if you don’t pay the person who makes the game, you have no company.’ I said, that sounds good me to. We’re in business together. And that’s how we started.
Andrew: I see. OK. That makes a lot of sense. So that was Origin Systems, and now you two are creating a business together. What’s the first thing that you do with this new business?
Richard: Each of the businesses that we started was for very specific era of games. We first started Origin, and in fact, the reason it’s called Origin, we weren’t sure it would be games only. We were actually going to have a general name to be fountain of creation–the Origin. It became, really, a games-only company. The last game we did with Origin, and electronic arts, was the first Vastly Multiplayer game. However, E.A. at that time was not interested in pursuing more Vastly Multiplayer games. And so we actually said, ‘Well, you know, we believe it’s a new wave of games. So we left EA, started our next company Destination Games, started the iteration, started the Origin, then go to the Destination. And so, Destination Games became the company we built around Massively Multiplayer Games.
Andrew: Forgive me. Let me pause the story right there. I want to stay a little bit longer with Origin systems and understand how that evolved, and then go to Destination. Richard, I would spend two five hours, as many hours as you could give me diving into just a single slice of your life. I don’t want to breeze past any of it. I know I don’t have that much time, here, but if I’ve got about an hour together, I want to spend more time on this big, important part of your life. Origin Systems, you and your brother get it together. It’s time for you to look to create a brand new game, as I understand it, right? And that game is?
Richard: With Origin, it’s still an Ultima, because when we first went into business I took Ultima back.
Andrew: Got it.
Richard: So, Ultima became my own property again. Calabet and Ultima I was through California Pacific. Ultima II was through Sierra. Ultima III, IV, V, VI, VII, VIII, IX, and Ultima Online were through Origin.
Andrew: OK. I see. And you have to actually at that point, are you distributing, too, or are you working with distributors?
Richard: No, Origin was a developer and a publisher, so we developed my games. We published my games. And then we also published a series called, Wing Commander, which was developed by a friend of mine, Chris Roberts. We published a number of other games made by other people, too, but Chris and I were the what I would call the bankable assets. We created the regular hits that the company used, of course, as its primary revenue.
Andrew: And how did you get the games into stores?
Richard: You know, it started as a pretty brute force method. You know, back in the early days, we literally had a warehouse, usually in our building, where we actually in the Apple II days would literally have employees sitting there, pulling discs in and out of the disc drive like any user would, and using a copy tool that any user would have on their desk. In the intervening years, people developed machines, so you could take a stack of 50 discs and, you know, like a hopper, copy those discs. And the machines got bigger and bigger over time. But then we would, regardless of how the discs were copied, we would literally have a print shop that would send us the manuals that we had developed, all the things to insert into the boxes. And even the boxes would be shipped to us flat from a printer, and we’d have to hand fold up the boxes into their shape, put all the contents in it, shrink wrap it. I can’t tell you how many boxes I’ve folded, stuffed, and shrink wrapped. It must be thousands and thousands. Then, we’d put those in packing boxes and call UPS and off they’d go, directly to the stores.
We literally did everything, from the concept of the game, development of the game, to the physical manufacturing of the game to the shipping of the game, through most of the Origin era. As we got bigger and bigger, of course, it became less and less practical, and that really became an industry of its own. So, we began to use what are called fulfillment [houses], a company that specializes in nothing but having various people who assemble stuff for you. And in the retail segment, that’s how it’s done today– fulfillment houses.
Andrew: And who got the store to buy the discs?
Richard: At first, it was my brother, it was my brother who literally called every Computer Land store in Houston, and every Best Buy, or whatever, but I guess it didn’t even exist. To all those early folks we’d make direct calls, starting with my brother. Then we eventually had a sales staff, and employees, and then [??] as well. We literally grew this from no industry of any kind all the way through to where now it’s a very mature industry. but still, rapidly evolving, because, for example, I mentioned I specifically said when you’re retailing a segment of the industry you still use fulfillment houses to ship stuff to the stores. But I think that’s the past. Whether you can still go to Best Buy and find the big game section, many if not most of new games are now developed in the downloadable era. Since everybody has broadband on their computer, it’s really not nearly the motivational need to put it in a box, ship it to a store, and make you drive to the store and pick it up. It’s a lot easier for me to just send you a link, and we’re done. So, even boxes are becoming a thing of the past.
Andrew: So, what happened with the forays outside of gaming at Origin?
Richard: At Origin when we first started we had put up a lot of big ideas in a variety of areas. The Apple II was capable of having a dual joystick, although no one ever made one. So we actually bought all the parts and components and went through that process to make a dual joystick, so you could do, like, crazy climber on an Apple II. But the cost to manufacture a plastic object really was in those early days prohibitive. We even built a big gyroscopic ride that you could build. We built it out of 4X4s, and lag bolts, and steel webbing, to where you could sit in the middle of this thing that could free tumble in three dimensions. And our plans were to monitor it [??] so you could fly it, three dimensional space dog fights simulator while some [??] heels, which other [??] make. But, after we built our prototype we decided it was far too dangerous, and we didn’t really want to get into that business. Physically dangerous, it was big and heavy, and scary, but I still have pictures of it on the wall over here. It was such a fun period of time. But, very quickly, Origin focused on games online.
Andrew: Richard, you’ve both in your life had a vision and focused on it until you got to it, including taking lots of different approaches. And you’ve given up on some ideas. How do you know which ones are flying a man to the moon and seem impossible, but you’re going to get there, whether through NASA or through your own means, and which are tumbler games that should be easy to do but you should probably give up on? How do you know which one is which?
Richard: Well, first of all, I’ve never given up on one because I thought it would be too hard for [inaudible] or that I would meet with too much political resistance. That doesn’t mean you don’t back burner it a little bit. I mean, the for example has gone pure [??] back burner for a few years, when you get defeated in one particular run at it. You know, you leave it alone for a while and you reflect on why that didn’t happen. But then what happens is if upon reflection you go, I now know why it didn’t work, and I can make another run at it that I think has a better probability than last time of being successful. I can afford it, and I’m inspired to do it. Then, make the run. And so, that’s really the way it works. I can give you a contemporary example of having [??].
I’m very interested in something called Personal Rapid Transit, [??] in London. They’ve got a personal rapid transit installation, the first in the world. And I think it’s brilliant. I think it’s a great idea for the future of transportation. I’ve paid for a study to see if might be implemented in my home town in Austin, Texas. [??] point of politics, where you convince not only the city council, the state, the investors, and all the other people who are arguing about trains or subways or other things, and suddenly it’s a huge quagmire. So, I made one run at it. It didn’t get immediately adopted, so now I’m in the step back mode and figuring out how I best tune my strategy and make the second run at it. I believe I will. I believe if you ask me today, that one will succeed. But if you asked me if it’s going to be tomorrow, maybe not tomorrow. Six months ago I thought it would be tomorrow. But now I think it’s the day after tomorrow. But it’s still something that’s on the front burner as I’m re-strategizing how to get it done.
Andrew: This is really important to me, this discussion. I want to make sure that I understand what you’re saying. You’re saying you have an impossible sounding dream. You decide, do I have a way of getting at it? I have a way I think will work. I’m going to make a run for it in that direction, meaning you’ll go and lobby the people you think you need to. That doesn’t work? Instead of pursuing with them, or immediately looking for an alternative, you’ll take a step back. You’ll think, do I have another approach? I do. And then you make a run for it in that approach. That doesn’t work, you take another step back and you continue. We’re not talking about pivoting. We’re not talking about immediately speeding up in a different direction. Take a step back, another thoughtful process comes to you and that’s when you pursue it.
Richard: You are exactly correct.
Richard: And I’ll give you another contemporary example. I would love to go live on Mars. Now my wife doesn’t think it’s such a great idea, but I do. And, you know, if you asked me this question 30 years ago, I would have predicted we’d be on Mars by now. Of course, if you asked most people now, will we get to Mars, or will you as an individual? Or will any individual you could name get the chance to be on Mars, probably not. So for me, I go OK, well, I agree that odds are against you or I pulling this off, but they’re not zero. But the thing that will increase the probability is if people are pursuing a plan that is practical and might actually achieve it for anybody, much less you. Right now there’s no plan that anybody will be there any time soon. And so, it’s because of my disposition to want to do everything there is to do in the Universe, much less space, you know, I often noodle on that, too. For example, some of my takeaways on that are things like, you know, I’ve been on the sidelines of the space business long enough now to notice things like, an opinion I have is no 30-year plan to go anywhere, like Mars, will also require an increase in the budget for that same 30 years, has any chance of being started or sustained even if it was started. So, take it off the table. There’s no reason to pursue it. No amount of foot stomping or wishful thinking will make that happen I now believe. I believe the maximum political lifetime of any big, bold vision is about ten years. If you want to get to Mars, and you can’t do it in ten years, you got to pick something else to do first. So, I believe you just try to short cut it. I have a longer description, but I basically believe in the first ten years, we should go to asteroids, and the second ten years we should go to low-gravity moons near where our planetary target is. And in the final ten years you go to some place like Mars. And only by setting up decadal goals that are clear and financeable within the current budget constraints do I think you have any hope of kind of taking it a step at a time. So, that’s my current role, the current plan that I advise. So, I’m on the NASA advisory council now, and that’s what I advise every time I go there. It is because I believe that by breaking it down to ten year bite size chunks you can afford is the only way, in 30 years, we’re actually going to get there.
Andrew: I see. I want to continue with the narrative, it feels kind of odd by the way, to go, to take a man who was just talking about landing on asteroids, who clearly has the means to put those kinds of plans into action, come back and say why did you sell to Electronic Arts?
Richard: Yeah. That’s right.
Andrew: Come back down to earth with me, let’s talk about stuff that will fit in the Wall Street Journal.
Richard: These are the same story to me, they really are. The sale of Electronic Arts was very practical and real. Origins we funded off the money that I made from the first couple of games. We always funded the next game with the profits of the previous game. We grew very nicely, very organically, but we were always in the top ten of games but usually number ten of the game publishers, developers and publishers. We were in the top ten, but usually in the bottom.
As any industry matures, the store chains like Sears, or K Mart, or Best Buy don’t want to talk to ten different game distributors to buy what they’re going to put on their shelves. They want to talk to one, two, or at the most three distributors or ways to buy all the games they put on the shelves. We began to discover that being ten is not big enough. We saw the pressure coming to where we have to acquire other people to become number ten, or we have to merge with some people to become number ten, or have to sell to somebody who is in the top three. We have to become one of the top three.
We did our research and we concluded that Electronic Arts was the, well they were already number one, we distributed through them a few times in the past. Partnered with them on a few other items in the past. Felt they were the best opportunity for us to ensure that we would be, retain the ability to make the games we wanted to make. Again, that’s my motivation. My number one motivation was the art, it wasn’t art in space, it was the experience. My number two motivation, a distant number two motivation was always can I make a living at it?
Andrew: Actually the history proves that out. You didn’t sell and then disappear. You stayed with the company for years but have to ask, what did you sell for?
Richard: Well, it’s a public number so, I don’t mind saying, so we sold Origin to Electronic Arts for somewhere in the neighborhood, if my memory serves, about $25 million.
Andrew: $25 million, by the way if you hadn’t said it’s a public number, people would of felt like I got the information out of you, they’re not going to go and do the research.
Richard: Yeah. I know, but I had to qualify that because if you had asked me the and it wasn’t public, I won’t say because it’s not public.
Andrew: That’s fine. A lot of times I ask people for information that is clearly public, the guest doesn’t say it’s clearly public and they say, ‘I sold for $25 million,’ and the audience goes, that Andrew, first question he gets it right out of them he’s so good. Our research sometimes helps, sometimes I get lucky and I am that good where I ask a question and I get information that I otherwise wouldn’t. So, $25 million, life is good, how does it change at that point?
Richard: Well, actually interestingly, not that much at that moment because you also have to understand that just before that moment, Origin while we’re still doing well enough, was caught in the transition between the Apple 2 going away and the IBM PC coming into existence. That transition caused us, from a cash flow standpoint, to not only go to zero but go a couple million dollars below zero. Where Robert and I took out personal loans to the tune of a $1 million a piece, and I had my house fully mortgaged to just survive the transition.
So, when we sold the company, it wasn’t like woo-hoo, big score, we’re out of here. It was wow, that was the biggest wake up call I’ve ever seen. To come so close to not only going out of business, but being in a lifetime of indebtedness. Managing to pull it out and be fairly compensated for the already decade of work that I’ve put into this industry. That was more of a sigh of relief that I can continue. Not a let’s go spend a bunch of money.
Andrew: OK. It’s kind of like a video game where you jump over a moat or some body of water and you feel like you’re supposed to be there, but ah, I did it, and you can take a breath for a second.
Richard: Yeah. Exactly right.
Andrew: So, you sell, you’re there, you’re telling me that there was a downward period, can you talk about that?
Richard: Yeah. Well, the downward period which came really before the sale, just before the sale to Electronic Arts so that was really when the IBM PC first came out the first version of it was slow. The usability of the DOS operating system was not particularly good. The keyboard on the first IBM branded PC was kind of a chic-let kind of style keyboard. It was hard to use. The Apple II, you know, physical form and stuff I thought was better. So I thought, surely the consumers are as smart as I am. And this IBM thing will go away, this piece of junk, this pretender to the throne of Apple’s superiority, will go away. Of course, I was completely wrong. That was the first of many gigantic mistakes that I made, where the [??] was, boy, you cannot predict the public. Even having learned that upon reflection I go, of course it did, because it was IBM and the Apple was seen as a toy, and IBM was seen as a machine. And so, it really took off, for a variety of reasons. There were other factors, too, like it was a copy of a licensed and plagiarized platform, whereas the Apple was relatively contained, as they still are to this day. You know, there were a variety of factors, but at that moment I didn’t recognize them, and nearly put our company out of business, based upon my passion for a particular platform.
Andrew: 1999, EA cancels all of [Origins'] new development projects, including privateer on line, and Harry Potter online. At that point you resign, and the following year I think you founded Destination Gains, the second company I brought up in the intro. What was the vision behind that? You were starting to tell me earlier. I interrupted you earlier, so I thought I’d give you a shot to actually talk without me jumping in.
Richard: It’s interesting that when we shipped Ultima Online, during it’s development no one at E.A. believed in it. Everyone thought that to create a game that required you to be online at the same time to play with other people would be a disaster, because there had been online games before, and no online game had ever had more than 5,000 or 10,000 people in it. And so, the sales projections for Ultima Online were miniscule, in fact, not enough to justify investing in a game at all. And so, E.A. did not want me to develop it. When it shipped, it instantaneously became the fastest selling PC game in Origin’s and EA’s history. And within a year or so, the revenue it generated was ten times more than all of the previous Ultima’s combined.
Richard: Yet, in spite of that, E.A. thought that happened because it was Ultima that had this ten year history of players, not because Vastly Multiplayer games are a good idea in general. And so, while we wanted to go and make a wing commander online, and a name-your-property online, E.A. didn’t want to do it. And so, that’s why we all left. And shortly after a big chunk of us left, E.A. cancelled the rest of all the things going on with Origin, ‘cuz so many of us had left.
Richard: And we formed Destination Games to specifically focus on what we thought was the biggest market opportunity we’d ever seen, which was Vastly Multiplayer Games. And what’s interesting is as soon as we all left and announced our existence, all the previous, you know, EA cancelled all the Origin stuff, so everyone at Origin left, though most of them were fired, laid off. And so, suddenly, we had the company back. So, we sold the company a few years ago to EA for $25 million, and they gave it back to us for free. Now we found ourselves in a bad position, which is now we had an entire company, but we didn’t have any want to fund it. We had the Sales Department, the Marketing Department, the Customer Service Department, all the developers.
Andrew: ‘Cuz they all left.
Richard: And so, suddenly we had an entire company, but we didn’t have it funded. So my brother and I put up a couple of million, but that wouldn’t carry us very far, with as much as a hundred people. As soon as we announced that we existed to the company, within 72 hours we got a call from NCsoft in Korea, which is the only other company in the world at that time that was devoted specifically to Vastly Multiplayer Games. And in fact, their’ game lineage, which at the time was the largest online game in the world at the time that they called us on the phone, their game was inspired by Ultima Online. So, when they heard that the entire Ultima team was back together, including all the U.S. development and publishing and everything else, it was a complete no brainer. They said, look, you guys have the whole company back. You can’t afford to fund it on your own, you need a big strategic partner, hey, we’re big in Korea; you’re big in the U.S. Let’s put it together. And so, literally, the day they flew to Texas, that night we had the basis of a deal, and we signed it at the lawyers after another five weeks noodling on it. But, we basically decided the night we met.
Andrew: Why did you know that Massively Multiplayer Online role-playing games would work? EA had clear logic for the way that they were thinking. They were saying, yeah, you have this built-in audience over ten years was playing your games. So they would try just about anything. It makes sense. The world at the time was not as wired as it is today. Today I expect every time I flip the lid open on my computer that the Internet will be there–same thing on my phone. It wasn’t like that. How did you know that this was going to be big, considering all the reasons against it?
Richard: Yeah, so, what’s interesting is you had to understand the mind of role-playing gamers and role-playing traders at the time. I was inspired by Lord of the Rings, and Dungeons and Dragons. Dungeons and Dragons was a social, around the table game. Computer fantasy role-playing games were always simulating this social experience, even so far as, if you look at Ultimo’s, starting at three, every Ultima starting with three, so from 1985 up through Ultima Online, every Ultima that I made simulated a group of friends to be with you. They were computer-controlled characters who became your friends to travel with you on these adventures, because sharing adventures is a lot more fun than going alone.
Andrew: I see.
Richard: We already knew the power. AOL already had some of these dial-up games, and there was already a hardcore following of just these few tens of thousands of people playing these hardcore dial-up games. And so we already knew what it was like to play style over there, but none of those people were well funded, so none of them could do games with graphics, or quality user interface. But you could see the power of playing with each other, which had been around as long as people have had computers and hooked them up, ever. And what was happening in the late 1990s was the beginning of the Internet. And it was obvious the Internet was going to be big. And just as it was obvious the Internet was going to be big, it was obvious that the power of playing together was very important and we knew how to make great high-quality good user face, highly graphic role-playing games, we said, ‘That will work.’ We knew it. There was no question in our minds that that was the future. But no one would have it. Regularly, including all [??] proposed to the president, he was like, ‘Richard, I hear you. I just don’t believe it. You know, I lean on my sales–Nancy Smith, she’s done the projected analysis. Your lifetime sales will be less than 30,000 units–less than [??] your first game. No way we’re funding this $5 million.’
Andrew: I see. Yeah, I could imagine if all I’m doing is playing games that are designed to simulate something and that something happens, I’m not going to go back to the simulation. I’m going to want that thing, that reality.
Andrew: Got it. OK. So, you then have a deal with NC Software. What’s the deal? Is it a sale directly to them?
Richard: Yeah, we merged, quote/unquote, and we sold the company. We took our fledgling stock, our two-week old stock and we traded in for one-year-old NC Software stock.
Andrew: Got it. And this was 2001, when you made that deal. You start developing the company. Tell me about between then and about 2008. You were working on projects, there, working on games. How did that develop? How did the games develop, I mean?
Richard: Well, my passion is always making games, and you know, in fact, when we get off the phone here I have to do a pitch–a product pitch, actually. My real motivation is literally to make the games. One of the lessons, however, compared to Origin, Origin we grew organically. With the revenue we made off of one game we started another. And the only time the company grew rapidly is when we accidentally found another really great producer. In this case at Origin, Chris Roberts, who did the Wing Commander series? What we learned is that to grow people inside the company to become great producers is very tricky and more myth than hits.
There are really very few people in the industry, just like there are very few great movie directors, and also very few great game directors. And when you see one, or you see somebody emerging as one in the industry, you really better go acquire them. And so, one of the things we did as part of NC Software was in addition to making my own games, we looked around through the industry for the first few great people that began to transition into making great Massive Multiplayer games, and we found a way to pull them into the company. So, that’s how we got City of Heroes and Guild Wars most notably. Those two projects and teams we ultimately acquired as part of NCsoft.
Andrew: Alright, before I wrap up this part of your life, we should talk about the way that things ended. What can you say about the way things ended with NCsoft in the late 2000’s.
Richard: Well, so it’s a complex story, but there’s kind of two parts of it. There’s my personal story and then us as a professional team. My personal story is pretty simple. When I disappeared to go fly into space for a year, NCsoft became unhappy enough with me personally that they said, “Feel free to stay gone.” More importantly, from what I’ll call a professional evolution standpoint, even before my trip to space, we had been lobbying NCsoft to develop a free-to-play web portal service. Because we felt that the free-to-play virally-spread era was ultimately going to defeat retail products. You can still make great games, but this new distribution method was going to ultimately dominate. We had put about two years into that. We had two products out and two products about to launch, when NCsoft said, “You know, we’re making so much money on our massively multiplayer games, we just don’t really believe this is a good idea.” They killed the whole thing. So again, the whole team left and now here we are all again as Portalarium. So we put the band together for round number three. We just keep shaking our heads going, “How is it that the people are giving us our companies back for free after we sell them to them for very large amounts of money?” It allows us to rebuild an office and a team and a business of great value quickly.
Andrew: How many people did you take with you to start the new business? To start Portalarium?
Richard: So a lot of the old guards. Dallas Snell who is one of the original developers and producers at Origin came with us to NCsoft and came with us here. Fred Schmidt, who came in at marketing at Origin, eventually was the general manager of Origin, went over to NCsoft is now here. A lot of my programming team, a few of my artists, a handful of designers are already here. As we grow, I’m just bringing them all back on board.
Andrew: Recruiters must hate you. What were you saying about Andy Grove?
Andrew: I was saying recruiters must hate you, but what were you saying about Andy Grove?
Richard: No, Andy Grove was not in my list.
Richard: We use recruiters occasionally to fill out a few needs now and then, but you’re right, everyone in this town, we’ve already worked with them. Literally we were the first game developer of any kind and historically the largest game developer’s here too, so pretty much everybody in town has worked for us already. We have very few enemies, I’d say. We’ve always had a very stable work environment and treated people right, so it’s pretty easy for us to bring them back across as we need them.
Andrew: I want to talk about outer space flights, but first I’ve got to correct something. My researchers’ notes here are saying that it’s $30 million to take the private space flight in 2010, and $28 million, the number that I gave at the beginning of this interview, that’s how much you won from a lawsuit against NCsoft. The lawsuit found that NCsoft did not appropriately handle your departure in 2008. So there, now I’ve got that. So you decide you’re going to form a company around space travel, tell me about the origin of the business. Why start a business? You started saying it earlier, but tell me that story.
Richard: Really, for me, if I’m going to fly myself to space, the only way that that’s possible is if there’s a company that flies people to space. You can’t just individually go build a rocket and climb inside of it and take yourself to space. You have to either partner with people who already have rockets or partner with people who are going to build rockets. It’s a complicated problem to tackle. So after the initial forays of investing in some start-ups that were started generally by scientist astronauts, which I quickly learned that astronauts are hired because they are great scientists, not because they are great entrepreneurs. Some of those were not the best strategies, but then over time, I kind of discovered a like-minded group of entrepreneurs. Peter Diamandis, Eric Anderson, Mike McDowell, myself, and a few others set off to do ZERO-G Corp and the X PRIZE and Space Adventures, which ultimately flew seven of us, including myself, to space.
Andrew: I want to thank someone in the audience, then I’ve got one final question for you. The thing that I want to do is, usually at this point I say, “People, go to mixergy.com/premium and become premium members,” but now I want to thank someone who did that and did something else. Richard, this Michael Smith, he sent me a copy of all the interviews I’ve ever done that are available on video. He downloaded them. He got them for me, including the ones in Argentina in those days when I was unsure of whether I could continue doing interviews because I wasn’t sure if I’d be a good interviewer. Little did I know I’d be here with you doing this interview.
I looked at that. Man, it was so touching to go back and look at those videos and, of course, from a professional point of view I’ve got backups of these videos which I’ll find ways to put online for everyone. Michael, from both me and Richard, thank you for doing this, for getting me this hard drive and doing all the work that went into downloading those videos and making them available.
And Richard, here’s my final question.
Andrew: Looking at photos of you, you’ve got hair, like right, there it is. How long has that been growing?
Richard: That’s been growing a long time. I grew that in the early to mid 1980s, and it was before anybody else had rat tails, before rat tails were popular the first time, but I’ve kept it ever since. After I did it, rat tails became popular for a while, and then they became unpopular, but I kept mine. But then it became popular again when the latest Star Wars came out. People kept saying, “Oh, you’re doing that because of Star Wars.” No, I had it long before that. They’re now no longer popular again.
I just do things permanently. I have very long-term habits. It’s sort of become a personal indicator. When I go to trade shows now, I actually have fans that might walk up to me and it might be tucked in my shirt. Everyone wants to see them. They go, “Oh, you cut them off?” And I’m going, “No, no, no. Don’t worry. They’re still here.” So, it’s kind of part of my identity now in a weird way.
Andrew: I’m now living in Washington, D.C. where people complain sometimes that they have to wear a certain kind of tie, or else they’ll feel out of place in the office. That’s the way you have to be in much of the world. One of the things I admire about you and specifically in entrepreneurs in general but more you, a sense of individuality that you are who you are, and it comes through what you do, and it comes through what you create in the world.
Thank you for doing this interview and sharing that with us.
Richard: My pleasure, absolutely. It was truly a fantastic interview. I loved the questions.
Andrew: Thank you.
Richard: Very neat, insightful questions. I know I enjoyed this. I hope your listeners get a chance to enjoy it as well.
Andrew: I do, too and thanks for doing this interview. Thanks for saying that, too.
Richard: My pleasure. See you.