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Andrew: Hey, everyone, it’s Andrew Warner. I’m the founder of mixergy.com, home of the ambitious upstart. David Hayden is today’s guest. He is a pioneering internet entrepreneur. He cofounded Magellan in the mid-90’s, one of the Internet’s first search engines. He also founded Critical Path, the outsource email company that temporarily skyrocketed his net worth to over two hundred million dollars. But he also had some setbacks: Magellan missed its IPO window and eventually sold to Excited; and when Critical Path stock tanked, his bankers sued him for tens of millions in loans. I’m gonna ask him about all that, and all his adventures in capitalism, and about his latest start-up Panama. David, first of all, welcome to Mixergy.
David: Thank you. It’s a pleasure to be here.
Andrew: Second, I’m actually reading from my intro here, because I wanted to make sure to get this right, but as I’m going through this intro I feel really awkward being this open about your business experience and lawsuits and anything and everything else that’s gone on. I can’t imagine what it must feel like for you to have that New York Times article that talked about this, and just have so many people know about it. So, what’s it like?
David: What’s it like having a public life?
Andrew: Yes, having so many people know about your business, know about your wife and whose daughter she was, know about who’s suing you, where you lived …
David: You know, I honestly – it’s a great question, what’s it like. It’s become so much a part of me and my life experience that it doesn’t, it’s only made me I guess stronger in the sense that what doesn’t kill you makes you stronger. It’s more [incomprehensible].
Andrew: It’s more what, I’m sorry?
David: It’s made me more gentle and more compassionate toward people, to have so much of my life exposed. And obviously, there’s a period where you really feel exposed in the press and you can see what is so misinterpreted or misdirected. You go through a period of just, my god, and I went through that. I needed to correct a lot of misconceptions. I don’t feel that at all anymore. Just, whatever they said is fine, it’s made me a happier person.
Andrew: You know what, I know what you mean. I’d like to hear what your version is. But I know what you mean, how when you suffer a setback it makes you much more open and much more considerate of other people. I’ll give you just a small example. Before this interview I had just a little bit of trouble with my website. Going through the trouble with the site, it’s not the hugest thing but still I am struggling with a couple of technical issues. It makes me a little more sensitive when I do an interview with an entrepreneur who’s having some trouble with his business. I realize, hey, you know what? It’s just part of the process. I can’t come across as someone who’s arrogant, who knows everything, if I’ve got my own issues.
David: [laughter] Nobody knows everything.
Andrew: How did you – what’s that like for you, how did you come to that realization?
David: Oh, my god. I think I came to a full realization that no one knows everything and we’re all in this together sometime in the last three or four years.
Interviewee: in the last 3 or 4 years.
Andrew: What happened? What brought you to realization?
Interviewee: I [xx] just was old enough to understand all that to be honest.
Andrew: But were there any experiences that brought you to that understanding did anything happened that you can talk about?
Interviewee: Well sure. I have always have had an extremely strong interest in metaphysical things. It was just as I read throughout my life about different thought systems and belief systems I began to learn what mind really is and I am not religious in the sense of being religious but I am very aware spiritually and that is interesting to me and that is how the realization came probably about in the last 5 years ago where I finally [xx] point of life where little things and big things didn’t bother me. I became very accepting of what it is.
Andrew: Okay lets go through this biography and find out how you got here and as I said earlier find out of what your latest thought of Panama is all about. So you were building contractor for 15 years who was drawn to the internet in the mid 90s. What was about the internet that pulled you in?
Interviewee: I learnt carpentry in an early age like about 12 and I [xx] carpentry skills [xx] institutions in Stanford. When I got out I didn’t want to go to work for anyone so I started a construction business from scratch and did that for the past 15 years and grew that into a fairly large business. I enjoyed that in the beginning because I loved the [xx] of architecture and building. What happened was that my sister-in-law at that time came into my office just screaming about something so interesting to her in late 90 or early 92 and I was just [xx] she was showing me [xx] about 30,000 websites on the planet and I said this is just unbelievably interesting. At that time also in my wife’s experience her father had died his tragic death and their family fortunes had tumbled. So let’s do something together…my then wife and we start a business and we will go and figure out what it is. So it is very easy. So I told my business partners in the construction business that I had to do this and it was just literally in one afternoon my life changed. I just saw the potential of …you know that was still early…92-93 was early for internet.
Andrew: It was. I remember seeing those [xx] sites and I was excited too but I don’t even know why I was excited looking back. [xx] was just light text on a black background or whatever colors your computer happened to have and you had to go from folder to folder to folder to find what you were looking for. It felt like something to me. Would you describe what it felt like to you because I don’t know why it felt like a revolution to me looking at that?
Interviewee: It felt like…I just want to say and I don’t say this anymore but it felt like the closest thing to telepathic communication that we could get to. It felt like I could actually hear what people were thinking. That is how it felt to me and that is what got me so excited. I mean to be able to communicate with people. Obviously it has evolved so much now that we have forgotten about that but it felt like a real connection with everyone on the planet.
Andrew: You know what actually now that I think of it, going back before this was available all you had access to was what happened on your computer and what you got on your computer either because it came with it or you got it added on because of the floppy disk and suddenly even it was [xx] around you had access to other people’s ideas. So you started McKinley Group and launched Magellan what was the initial vision for Magellan?
Interviewee: It was to organize with both technology and human editors this thing called web. We treated it as a publishing exercise. It was the information that needed cultivating and culturing and curetting and that is what we did. Magellan really was the strongest of the first 5 search engines in my opinion as I look back on it. We had 60 editors who were reviewing and rating sites [xx] and reviews into the [xx] search results that we created. We wrote our own [xx] searching index and all of them followed our path. [xx] site all followed our pattern for a while that was really [xx] much later but it was not only one of the first group search engines but the first way of looking and identifying information and then using people to help guide obviously that model doesn’t scale [xx] that was our initial approach.
Andrew: Well there are a few people who still believe in it might scale. I know [xx] is trying to come up with version of that today and they are trying to their own vision for it but we have discovered other ways. in fact what I call the search engine was really more of a directory. A human…
Andrew: discovered other, other ways. So, what in fact what I call the “search engine” was really more of a directory. A Human curated directory is what Magellan was at the time.
Interviewee: It was and, and, we did, none of us, none of the first five claimed. We only became prominent because we all convinced Netscape to put us on their, on the browser. And, and that was the time like, Ninety-Three, Ninety-Four, when you know, the conventional wisdom of that smaller, was that the browser was gonna rule. And, and all of us in the Search business thought none of us was gonna be missing the point for the globe to searched. How, how do you search and access information? It’s far more important than the vessel that carries you there.
Andrew: All right. And that’s when the world all loved you. They seemed to either love you or hate you. And you were really on a golden path at that point. Could you describe what that was like?
Interviewee: Oh, I don’t think the world loved me at that time. I mean, I was, I was from the construction business, are you kidding me? In technology, with no technology experience. I had a lot of people who didn’t like me. They, they were offended that I was invading their space and what gave me the right to do that? That I’ve always been of the mind, it’s like, “ Oh I can do anything” that I set my mind to do that. And I like doing that. And I like challenges, so, why not? So no, not everyone loved me at that time but you know people loved me to, you know make life comfortable.
Andrew: [Laughs.] Interesting because then I’ve gone back and I’ve looked at old articles and maybe I didn’t go and look back at contemporary articles because the ones that I saw from the late nineties or from just a few years ago all seem to say that, that was, you’re the man back then. That you were one of the leaders in Search. You were the person who was, who was one of the visionaries.
Interviewee: There’s, some, some, yeah, that so. Obviously, what we, what we wanna do here is, is clearly really weave these things together, which I’ll be delighted to do. [Laughs.] The, you, when we, let me think about a couple of things I’ll roust with you. First of all, the Magellan didn’t just miss the IPO window. It was backstabbed by the investment community. It was going to be the first search engine to go public. It, it was a day away from filing it’s S1 and abruptly the bankers that we thought were taking us public said, “well we’re” I mean, for no good reason because one, we had the best technology. We actually had a business model. We were, we were the search engine of choice for AT and T’s Worldnet. We were way ahead of everyone. And we had the bankers most excited about us but then all of sudden, out of the blue they’re not taking us public. And what, what do they do instead? They had AT and T wanted to accept the public step. And in record time, they filed three weeks after we were told that we wouldn’t go public. So, that was an interesting thing to go through. That was like absolutely running into, you’re going ninety miles an hour and then wow, and what do you do? And so that was the first major adversity that I, that I had to face in technology. And what I did was go back to the company the next day, talk to all of the employees and said, “do not worry, we will, we will find a new banker. This, this has happened. Here’s what I think it happened. It has nothing to do with us. It has everything to do with what happens in business and competition. And don’t worry.” And so we went out and, and we got another fifteen investment banks to all lend us and we fixed together there. That again then launched the new, you have to go through this organizational process, which takes about forty-six weeks to whatever it went. We had, we had to do that again with a new set of bankers. At that point, three, four of the search engines had gone public and then yes the window closed. Because the window closed not over the search engines but over why you’re trying to go public with a four hundred million company during a public election. You know, its, so, nobody can swallow that. So, everyone’s interest in excitement in tech startups going public went away. Again, it went away for about nine months after that. So yes at that point we were running out of money. I had, they were fishes in the company that, that obviously at the highest level. My ex-sister in law and ex-brothers in law wanted to do one thing to the company and I felt a fiduciary responsibility to do something different which was to sell it to Excite. So, that’s, there’s more detail behind that obviously, but that’s what really happened with Magellan. And then at that point, I’m out. I’m, I’m not gonna go work for Excite because I don’t fit that model. And, then I, I made a play where nobody loves me and what am I gonna do next? So, that’s where I came up with the idea of Critical Path and started all over again.
Andrew: Ok. And if you would’ve gone public with that investment company you would’ve beaten Yahoo to the public market cuz Excite beat Yahoo by a little bit from what I remember.
Interviewee: That’s correct. We would’ve been first. We would have absolutely been first by at least three weeks.
Andrew: Ok. So, lets say there, lets imagine you could talk to your earlier self with twenty, twenty hindsight and say, “this is coming up. These bankers are going to pull away from you. How do you avoid that? What could you do differently? What could you tell your younger self to do differently? Or what could we tell someone in my audience who might find themselves in this position?”
Andrew: Who might find themselves in this position?
Interviewee: You know you can’t, it’s a great question. Andrew, that’s a great question. What I told my younger self then was, well. Magellan [?] didn’t take any VC money. It took money from Nepcar,[?] the first ISB. And that was strategic. So, I thought, if I ever do this again, I want to have Venture Capital money. So that Venture Capital acts as a protector for me.
So, I went through that period. Which all entrepreneurs do. All entrepreneurs, all of them, all of us fall in love with the idea of Venture Capital money. My warning there is be careful what you ask for because Venture Capital money comes with all kinds of risk and absence of assurances. It’s part of the game. You have to learn how to play with Venture Capitalist and their money. But, there’s no way to assure disaster from not happening.
Andrew: There’s no way to lock in the investment bankers and say you can’t go chase somebody else. You can’t give us some line?
Interviewee: No. No. There’s no way to do that. Not at that point. They have a right to pull out of any deal at any time. Even when you’re on the [xx]. There just aren’t any guarantees. Well, you have to learn it . . .What I would say to anyone in the audience is just learn to stay calm when the shit hits the fan. You have to just be able to stay calm.
Andrew: Because it’s gonna hit it and it doesn’t hit it once. I hits it over and over and over. You just have to know how to grab that umbrella and keep on moving.
Interviewee: Yeah.
Andrew: Let’s see, let’s see, let’s see, the, one of the reasons that you were saying that you wanted the backing of a Venture firm is from an old story I read about you. You believe that Excites investors are the reason that your banker pulled away from you and fell in love with Excites. That they had backing that you didn’t have. True?
Interviewee: There was a relationship between Excites, Venture Investors and the bank that we had chosen. And that relationship [xx] us. That’s all.
Andrew: Okay.
Interviewee: So, I mean it happens. That happens all the time. You always see, you know, you’re in the business where you see some large company with lots of power exercising that power in various ways. And that’s all that happened. And there wasn’t anything we could do to protect ourselves. And we had a major capital venture firm on our board and on our team it probably wouldn’t have happened.
Andrew: Yeah, at that point, probably wouldn’t have happened. Four hundred million evaluations is what it would have been if you guys would have gone public. You ended up selling to Excite for a little over 10 million dollars. True?
Interviewee: I think it was about 23, but I, you know what, it’s been so long. It wasn’t nearly what we could have had; however, what was great is that a year later that Excite stuff became very valuable. So, as long as everyone . . . most of our investors in Magellan held on to their stock, like inside capital. Inside capitalist, Jerry Murdock, the company that just put 50 million dollars in Venture about four months ago. We were one of the first technology investors and they used their investment success in Magellan to really watch their firm.
Andrew: What was your personal exit from that?
Interviewee: You mean what kind of money did I have?
Andrew: Yeah. What was the value of that.
Interviewee: I think when I exit it was only worth a couple million dollars which is not a lot. It grew a little bit, but I used all of that money to fund Critical Path. [Tape damage] None of the Venture guys got the idea. It took us a year to get it to the point where everyone . . . so, nobody [xx] me in 1997 and I funded it out of my pocket the entire development of Critical Path. [xx] Because I believed in it, I spent, I spent everything that I had made off of Excite, I spent.[xx]
Andrew: Okay. So, before we go to Critical Path I want to address this sister-in-law and wife thing. The father that I was alluding to earlier was Robert Maxwell, the publishing Barron, the guy who use to go up against Hooper Murdock for a long time. One of the big name in business at his time. You said that your sister-in-law had a different ideal for the direction of the business, you had your own idea which was to sell. What was the disagreement?
Interviewee: The disagreement was the control of the company really. There was a movement that she was a part of to get European investors in the company and move the company to Europe and go forward in that way. She had a justifiable dislike . . .
Interviewee: A client of [xx] one of the venture capitals [xx] previous family investment in the company that they did something with which I didn’t have the emotional issue that she did but I would say that you know she was very justified in feeling that way. She deeply did not like the idea of selling to the company back by the [xx] from that is essentially done in the sense. So however I didn’t think from an investment point of view that there was any hope that the company would do well and that was pulled out of United States and into Europe so I said no. There was a big board fight over but at that time [xx] otherwise I don’t think anyone would have received or would have any return on their investment at all but that is just my opinion.
Andrew: Hey the connection is starting to get a little bit weaker. Is there anything running in the background maybe another app or two that you can turn off.
Interviewee: There is no app. Let me see I don’t have any app running. There is a fan running but [xx] computer connection. Let me see.
Andrew: Okay.
Interviewee: How is that is it better?
Andrew: No it is pretty much the same. We will go with it as it is then.
Interviewee: I can turn off the mail. Maybe that is…
Andrew: Yeah that is a big one especially Outlook or iTunes anything that fetches information from the internet. Oh now it is looking better.
Interviewee: Good.
Andrew: You were saying that you funded critical path on your own because others didn’t get it. What was the original idea for critical path?
Interviewee: It was to host world’s emails. The idea was born out of…everything that I had done seems to have some reflection of ordinary human behavior or ordinary function but in the internet space. So critical path was around the idea that postal services have been really the strongest niche of civilization and even stronger than monarchies or democracies. Postal services have existed for over 10,000 years and I used to just very simple reached a very quick logical conclusion that there will be a postal service like entity on the internet and how would that be happens and in thinking [xx] in order to touch a large group and manage a large percentage of the world’s email I needed a service that was invisible to the constituency and they would essentially come right underneath the [xx] and post all their domains and number of mailboxes on the domains. So even in very early days when we were like 5 or 6 people our motto was to host the world’s emails. That I did from the beginning and it was definitely a bold idea. Don’t forget that [xx] I would segue into what Panama is all about because there is a real connection there.
Andrew: You know what tell you what, you have really been fair with information on path. Lets talk about Panama and we will pick up this story where we left off so that we spend a little bit of time on Panama. What is the connection to Panama?
Interviewee: So Panama recognized in an early stage that both synchronous and asynchronous voice can have a completely different way of being distributed in a [xx] in the world because it is not just of the [xx] and technology around smart phone platforms but because of the expanse of the infrastructure for voice technology is [xx] world. So we are essentially reinventing the way voice services now work. Voice over IP like [xx] this but asynchronous voice services. There has been no invention in voice since 1973. There have been two inventions in the history of voice communication other than just talking. One was the invention of telephone and two is the invention of voicemail. Voicemail is just asynchronous communication. It is a really important concept. So the advent [xx] is just multiple forms of asynchronous communication but there are all text based. So with [xx] so the internet has been constructed entirely without emotion and it is not negative it is just an observation that we made a year ago that just like services in [xx] asynchronous voice will be a part of our experiments in the internet and by internet I mean web or mobile everything…social everything. So Panama’s ambition is to host world’s conversations. It is not just about voice it is about conversation. So what we paved is a very simple act of communicate back and forth with anyone more easily than text messaging and more powerfully because my voice is in it and not the exclusion of text so we included voice and text. Not just transcription but I can text you if I want or I can just —
Interviewee: … if I want but I can simply file and send another visual if I can see it and I can…
Andrew: Let me see, let me see if I understood this if I work like this. Right now if I want to tell my wife that we should get to dinner – if I want to call her before this interview and see if we should go out to dinner tonight. I might hesitate because it will be a five minute conversation about where we should go to the dinner and whether we should go to the dinner and I gotta to prepare for my interview with David. Using Panama what I would do is just, pretty much like an easing synchronization walkie talkie that “we should do something for dinner, I will interview David, let’s talk afterward.” And that, that audio file would go to her phone and she will just listen to it whenever she has time to do it. That’s the basic idea.
Interviewee: There it is, just like that, that’s on my phone, and I would just touch that little red button – touch that little red button, like that and I’m recording and I’m saying: “let’s go ahead and have dinner soon, I finish this interview, that would be great!” Done, done. I said it. And you could show the audience anything, anything that sounds you can share on that web. So what we’re saying is that we got the public and private aspects to it: there’s my private conversations that I get on with many, or the public conversation that I would just join in the world conversations that are completely in open form. Little bit like twittering but not getting criticism, pretty much like a conversation. It’s quite unique and people are talking about things, and meeting strangers, which again goes back to theory one. Which is that is to reflect the ordinary behavior, and ordinary behavior is just to meet new people, and talk with them, like them or not, and continue the conversation, or not. And that’s where we were basically, surfacing the behavior, you know, in this environment.
Andrew: And I read that you got developing team of six people here in Argentina where I’m gonna meet further in a couple of months?
Interviewee: We do and it’s awesome. Where are they, on the cirrus?
Andrew: On the cirus, not too far for me.
Interviewee: Not too far, no.
Andrew: All right, Let’s come back to this , let’s come back to Parama. But in fact, before we do leave, before we do leave the Parama, Parama, I want to be clear that’s P-A-N-A dot M-A, not Panama dot come, or dot info but P-A-N-A dot M-A.
Fading sounds…
Interviewee: Yes, we thought M-A from Moraco, Moraco T L D(fading sound)
Andrew: Okay, back to critical path, we had this idea: you’re gonna host the world’s email, you take it out to the investors. They weren’t paying attention to it; you started building it on your own. How much of it that you built on your own before you got funded?
Interviewee: It’s all actually all of it. We, we built the entire infrastructure and the, well … We were the first companies that basically created a fault tolerant at a rate that the computers can host these domains, and that is essentially an A S P M infrastructure, but we were also credited with inventing the ASP in this group. But we built all of that from, in sections in February of 1996 to, I’m sorry 1997 to… we took adventure the whole year to develop.
Andrew: So whole year development, no venture funding but you were able to get this all up and running fully working about a year and if you ploud in the money from, from McGelan, that means a couple of million bucks to build this out?
Interviewee: Correct!
Andrew: That is pretty impressive, especially for the time when developers weren’t cheap when you didn’t have the infrastructure that you have today, when you couldn’t hold still on somebody else, somebody else’s server, you have to run the whole thing yourself. What happened after you got funding?
Interviewee: So at the point of funding, one of my agreements was that I was not… stuck out as a CEO at some point and, that’s fine… and because that particular venture people did not think that, because my first time or just my craziness, I’m not the right model for a CEO, and I say that’s fine. I mean I thought about it a lot and I was concerned that… One of my deepest beliefs is that the heart of a company is that I’ll put on a DNA to begin with and you cannot lose it, that I think it’s fatal for the company, and that was my concern. I wasn’t concerned about the title or the role of a CEO though I find that … I certainly wish I stayed in that role… ended up in a disaster, happening to everyone. And obviously coming personally, and I ended up coming back running the company for a year and a half in the public as a CEO but that’s part of a learning experience. So what happened was more money and then, you know with money comes, it’s control issue. We created another round on the funding in the fall of 1998. In 1998 alone we had about four million dollars before…
Interviewee: …before we went public and and then company had grown I mean it doubled in size the new CEO came in at the end of the year and and low and behold we’re ya’ know we’re looking at going public again we’re looking at going public, so 1998 was a very busy year. That year, then set up the 1999 year which was when all that stuff was written about me that was very positive we went from nobody caring about me in ’97 to maybe people like me in 1998 into world lezbien then at the end of 2000.
Andrew: Be let’s see if the video comes back there it is. When you guys had AOL and Yahoo as customers which is which is huge. Let’s see what else I’ve got here in my notes about the company… well then there ended up being accounting regularities. Irregularities. Accounting regularities would have been good.
Interviewee: How about just fraud.
Andrew: Fraud.
Interviewee: Out and out Fraud well not fraud but out and out misrepresentation of the sale. There was a group who the company this is at a point when the company not involved at all. But that was the 4th quarter of 2000. So the company was the entire company was a darling i don’t know if you remember the magazine On Line Wrap but critical path was voted the hottest startup on the planet in 2000 so a lot of good was happening and it had aquired a whold bunch of companies it had grown from a hundred people to over a thousand people in offices around the world doing business with all the characters all the i mean just major major business and it had pressure from wall street to become profitable before the end of 2000. So at that point then a group people decided that since they weren’t making the numbers naturally or organically they were going to invent them and that came out in January of 2001 and that’s when I got a call from the board asking me to come to a board meeting and I wasn’t involved and I said “why” and they said you’ll see when you come. So then I went to that board meeting at the end of January of 2001 and then I learned first hand what had been going on and it was a disaster and they kind of looked at me and said so what should we do and I said well you have to fire X Y and Z and yea I’ll come back and I’ll run the company but there are rules about how we’re going to run this so I did run it for a year and a half. So then we had all these law suites when you have that kind of accounting irregularity you get all these class action lawsuits so we did something that was quite extraordinary so everyone essentially had written the company off at that point the stock had gone from 25 dollars down to 2 dollars. And this was before the internet bubble burst so bear in mind this is just February. So you know it was like classic I went back into the company I rallied the troops I said “don’t worry, you know, don’t give up, we will get thru this” I don’t know how yet but I promiss I will not leave and we’ll go do it. So we did we went thru you know this was the year of 9-11 and technology stocks took a terrible beating in 2001 across the board everyone huge huge haircuts. And then 9-11 was a disaster so everything went south in 9-11 for all companies so critical stock trajectory so I’m back in the company. We have enough cash so that I can turn it around. I cut the company in half from a thousand people down to about five hundred people. I fired a bunch of people that just weren’t working very hard. I bought up a new management team and my intention at that point in time was to get the company back to what it was doing which was basically a service we were doing for sales…
Andrew: basically what? I’m sorry the connections been a bit funky here you said you got it back to what it was which was basically what?
Interviewee: I want my intention to get the company back to making more revenue on the listing service this email listing service than simply on the pure enterprise sales business so that’s what we moved toward and we doubled the lawsuites we actually settled all 50 class action lawsuits against the company for less than our insurance policy so it didn’t cost the company anything and that’s almost unheard of that you can do that. So we did that we did a private investment in a public entity called a pipe deal. Lead by General Atlantic and Chung the Hong Kong Investment company I can’t think of the name of it it’s named after the river, it’s the only river that Chung I can’t think of it. Anyway, I have to look it up. So we did that all this after 9-11 after 9-11 the stock was down to 28 cents. That was its lowest point and by the end of the year it was up to 3 dollars and 98 cents so between 9-11 and 12-30, 2001 we were…
35 – 40
Interviewee: At that point I put in, and that was I was going to bring in a new management team, let them run the company, let me be the chairman, I do what I like to doing, and go do something else, which is what I did in June 2002 when I left it to them. Having spent a year and a half of really hard work doing a turn around left it to the management team that I put in place.
Andrew: Let’s talk about the good times there. that’s when you bought these great houses, that’s when I think I read that you got a yacht, can you describe what some of that was like?
Interviewee: It is just fun. It was ridiculous, I acted ridiculously, [35:43] I bought a very nice house and I put a lot of money into that very nice house making it even nice. I bought a fast car. I did all those dumb things, in hindsight it was like a kind in a candy shop. Too much money, never had it before, didn’t know how to act properly. I am not saying I was negligent because I gave enormous amount of money away, I invested personally nearly $20 million in entrepreneurs like myself who were looking for funding, we gave a lot away to charity and my [36:16], we did all kinds of good things with it. It wasn’t just about hedonism and gratifying ourselves but it is very fun to go buy a fast car and it is very fun to buy ourselves, but I have always been very sharing people. We had lots of functions at our house where we did good things with that. There was I would call it heady, heady being invited into the White House and sitting down with the President of the United States in basically a one-on-one meeting, that’s just heady. I don’t know what to do, I don’t know if I was even ready for that, but it certainly matured me. I matured a lot during that period of time.
Andrew: I kind of feel like that self-confidence that it takes to get to that point is the same self-confidence that makes us think that we are never going to lose it. I remember being in a similar situation. I suddenly got to where I was making tons of cash and I believed of course I am making tons of cash, I was the person destined to be here, and the same feeling made me think I am never going to lose it, I am not going to be the kind of person who is going to take his eye off the ball or make mistakes or, I don’t know…Is that true, do you feel that?
Interviewee: Yes, I call that hubris and point at myself. That feeling, that confidence is a good thing, the bad side or the downside of it is that hubris, you think no, it won’t happen to me, well it does, the world teaches us that it does indeed happen to us and that’s a good lesson, not a bad lesson, but what it shouldn’t do to people, that’s unfortunate sometimes, is that it makes them afraid to try again. I still have that confidence, hopefully without the hubris this time around. I have always been a very confident person but I lived through, I know what happened to me, all kinds of disaster thing that’s happened to me, and that has only made me, as I was saying in the beginning of the interview, it has made me, I would venture to say a better person, not just a stronger person, but a better person, more compassionate, more empathetic.
Andrew: So you are saying it’s not the same confidence instead what I was thinking was that the same level of confidence, the same type of confidence that makes you say I can do anything, I am meant for greatness, I can build incredible companies, that’s the same kind of confidence that when everything comes together lets you get to the top and when things fall apart, takes you down, are you saying it’s different.
Interviewee: The confidence in self, the belief in self it is one that is honest. It is an incredibly powerful thing. That’s the ability where you know that you can indeed do anything that you want. I have always believed that of myself, that I could do anything. I was taught that by my parents and I believe in that. The emotion or the mental attitude that thinks I am destined for success, bad things won’t happen to me, I think that’s arrogance, not confidence. So I think they are two quite different things. I am not saying that, we are all a little guilty of being arrogant at various times, all of us are, but arrogance should not be confused with confidence, the belief in self that you will be able to go [39:38]
Andrew: How do you keep going after you have had this greatness, and then the greatness was taken away, how do you keep going after multiple setbacks when most people can’t go back in the game after one setback, most people would have just given up a long time ago, gone back in the construction business or gone and gotten a job somewhere. How do you keep yourself going?
Hello Andrew
Andrew: A long time ago gone back into construction business or gone and gotten a job somewhere, how do you keep yourself going?
Interviewee: it is really easy. I don’t even know how I am going to answer that question. It is a great question. I don’t want to sound simplistic but I am probably going to be anyway. I love [xx]. I am a very happy person. I obviously confident of myself not [xx] I love what I do. I love working with people and I am absolutely crazily passionate about new and disruptive ideas. I would like to do things that nobody has done. I live for that. So that is what keeps me going. I have never worked for anyone in my life and I don’t intend to do that. So now I couldn’t go back to construction although I have probably thought about that…no I like this. I love technology and I love doing…my personal mission in life is to make technology more human. To use all this incredible technology that connects us but keeps the human part alive. I don’t think Google does that at all. I don’t think they do that at all. They are all about [xx] and the nonhuman side of what technology is doing but I would say I am on this side of the spectrum. I want to make sure people have conversations with each other. I know it started as emails with critical path but it is the same kind of thing. Email at that time was the [xx] and now email is a broken application that works for people. You know there is a better, faster, and easier way to convey the emotion of what we feel and not just I mean this interview that you are doing and the ones that you do are fantastic. People can see it and they can think about it and the only thing that I would then like to add is if someone want to actually have an interactive conversation with us they could do that by using our technology or similar kinds of technology although there aren’t any similar ones. We are the first to do it.
Andrew: To have them instead of just typing here into me and have them talk is what you are talking about.
Interviewee: Right well the funny thing about typing is that we have [xx] this many times believe it or not it is faster to talk and listen than it is to type and read. It takes longer to type. So whether you are just typing a tweet that is going…if you type a tweet and then read a tweet that amount of time would take you to create it and read it combined compared to what it takes to say it and hear it. It takes half the time to say and hear it. So there is just a convenience and ease of use to this new mode of communication called conversation.
Andrew: I hear what you are saying and I want to come back to it…actually let me say it [xx] in the audience that his phone I think it is an Android phone allows him to just press a button, dictate what text message he wants to send out, let it go, and the text message goes to his friend.
Interviewee: Absolutely.
Andrew: How is Panama…?
Interviewee: Google invented technology so that emotion of that person wouldn’t ever be compared to [xx] just a text and that text translation isn’t perfect. It is at best 80% accurate so two out of every 10 words is going to be misunderstood by the technology. It will never be 100% perfect. It will be good at some places. You know we are doing that and we do that on the back hand of Panama. We wouldn’t offer this for another 3 or 4 months but we will offer you the ability to read what was spoken if you want and that is an additional feature but Google is making that a primary feature. So to us it is missing the point. I mean intelligent people can disagree about this point but I think the point here is that I want to hear your voice. Not only it is easier for me to [xx] want to hear.
Andrew: Got you. So you are saying it is not just to say my wife I love you and have her read it as it is to have her hear me say that. That is much more meaningful.
Interviewee: Absolutely or if you have children it is even more powerful. Our love for our children is more different from our love to our spouse or our significant others. When you hear your child say I love you versus the child write it and you read it as a text. It is a different universe. So I don’t want that to go away. I am not saying we should not text I think that is fine. I mean I still text a little bit but not nearly as much. I was power texter and I was doing 1500 text messages a month. I am almost like a teenager. I am doing 30 a month now. So from 1500 down to 30 because I am talking more. My asynchronous voice talking on the telephone. It is a quarter of that it was since Panama. So actually I talk more and it is more convenient for me to talk. I like it…I mean enough about Panama.
Andrew: We are going to come back to Panama. Let’s keep going with this story. How about this that you borrowed money against the stock. When the stock crashed the investment bank lent you the money came after you. I read the story in the New York Times that came about three years ago —
Andrew: Left us hanging…what was the conclusion to that?
Interviewee: I did what is called the [xx]. I was told not to sell the stock because I was the largest shareholder of the stock and so they said don’t worry we will just give you…just borrow against your stock and pay off in every quarter. We did that and that worked just fine as long as everything was good and there was that you know I never imagined that the critical path would run into a couple of….how could this company that I created could ever fail and that was the huge risk that I was talking about. So then of course disaster did happen. I was completely unprepared and unpredictable and there weren’t any protective mechanisms in place to protect the loan which in hindsight would have been awkward to me and my wife. We should have told them and in fact it was the basis of our lawsuit. We shouldn’t have been told…of course we would hedge some of your stock or as much as you want so that in the case of a downside scenario you are protected. It would have been extremely easy to do, wouldn’t have hurt the value of the stock in the market but nobody told us to do that. That was the basis of our suit which was we didn’t know that…we are not experts in that area. You, the banker, are the experts and you should have told us that.
Andrew: And the banker said that he did tell you and what was the result of the lawsuit/
Interviewee: I don’t think the bankers have ever said that they did tell us. The result of the lawsuit was that we lost. We lost in arbitration.
Andrew: So the end of the New York Times article said that if you lose this suit and I don’t know if they are referring to that suit that you would go bankrupt, I did a little research and all I came up with was SEC document that was read online that said that is what happened…that bankruptcy is what happened. What did happen?
Interviewee: I was completely wiped out. Then I had no my choice. I filed personal bankruptcy in 1997. I was discharged in late 1997. It was the only option. My only creditor was the bank and I owed the bank 48 million dollars at that point. That is truly starting over from scratch. No outside stock to fund anything…that is starting over from scratch.
Andrew: Alright then you launched Panama. Three million dollars…is what I heard you raised for the company from where? I wasn’t able to find anything.
Interviewee: It was all private. Private investors…we don’t disclose that information.
Andrew: Okay with the vision to allow people to communicate the way we do text but using our voice.
Interviewee: Correct.
Andrew: And when did you guys launch?
Interviewee: Late January…January 18th I think. Just on the IPhone and we launched on the Blackberry and Android two weeks ago and we will have a fully interact version on the web in about 2 weeks.
Andrew: You have got visions beyond this. You said that you have visions beyond messaging on the phone what do you have in mind? Where do you see this ultimately going?
Interviewee: I see this as a major voice network. I see it not only as a social voice network but as a product that can ultimately be used by the existing carriers particularly as they begin to switch out of [xx] infrastructure which isn’t going to happen in my lifetime but they will have to at some point learn to cannibalize their current services because data services and LTE services are much faster and cheaper and offer more flexibility for the users. So the ability for me to..I mean part of the [xx] of Panama is how much it costs us to host you for a year on our services…it is a couple of dollars cost and that is where all the asynchronous messaging, text and voice messaging that you want to do. It costs more as we add photos and videos into it which will do so it is a complete sharing social platform but we are still talking about in an order of magnitude less interest or maybe two orders of magnitude less interest cost in this kind of hosting service or platform. When you see that kind of technology, you know that it is going to happen. If it can happen it will and that is my maximum that if it can happen then it will happen. This can happen and we are proving that it can happen. So this we actually have the opportunity to be very big host of conversations and not the carriers. The carriers…all those telephone conversations that you have they evaporate in the ether. If you do a voice over IP conversation that can be recorded and saved for you and certainly…
50 – 55
Interviewee: And certainly your voice messages that you use on voice messaging system, those can be saved for 30 days, we can save all of your voice indefinitely. That’s really interesting because then we start to search that information, we start to do interesting things with it, again curate the information, some of the public information, you might end up doing some of your broadcast just because you can reach a very large audience there and people like the interactiveness of it. So I think we are creating a very powerful interactive social voice network.
Andrew: How many users you guys are up to?
Interviewee: We have about somewhere north of 30,000. It is still small and quite honestly we are still experimenting with what makes it work, what makes it really delightful to use, on the public side and how do we make it more utilitarian on the personal side. So we’ll continue to shift and add features to it forever but certainly for next few months we are going to similarly in put design changes right now.
Andrew: That’s fine.
Interviewee: I have a fantastic team, I would say the one thing about every company that I have been in, it has always been the people. That’s how it is easy to keep going. It is really fun to do this, and it is really fun to work with people. I like that.
Andrew: Who was that who reached out to me, Marie Domingo, she works with you?
Interviewee: Yes, she does. So is awesome. She is sitting right here. She is hearing you.
Andrew: You are incredible. Thank you for making this happen.
Marie: You are welcome.
Andrew: So, the teacher Marva Collins I think it was, used to take her students to kids with poor background, she used to take them to these great restaurants to show them what life could be like and to get them back into school feeling like they had a sense of purpose. You aren’t just breezing through the restaurant, you lived the great life. How does that impact you now? I would imagine it would fire you up everyday to say no I saw what’s out there, I saw what the finish line looks like, I saw what’s possible, I got to get there again. Does that happen?
Interviewee: No, I learned that lesson. I don’t think that’s the right reason to do anything. This is me personally speaking and I just see you are asking my personal opinion.
Andrew: Yeah
Interviewee: My experience was one of humility, a lesson in humility in the getting rid of my own personal hubris and ego issues. So losing everything is really a great experience. It teaches you what matters, what are friendships all about, whose there when you are down, where are you when you are down, all of that is a good thing, and it isn’t that I don’t care about those things, I don’t care about them in the same way that I perhaps did in the past. So if I am never owning the other pilot airplane, if I never own another thing I am happy. So I am lucky in that you get through all this without feeling like oh I got to get it all back, I don’t feel that at all. It really teaches you what matters, and that’s what I [53:16] is what matters and I said this in the New York Times [], things don’t matter, they really don’t.
Andrew: Who are the people who did stick with you?
Interviewee: Well, family of course first and foremost. There is a really dear friend and my initial investor in [53:38] and he and I have made and lost lots of money over the last 15 years. He absolutely stuck with me. Just a great human being. People like that. So my old friends, very few of my internet era friends stuck with me, but they were the few exceptions and those are incredible people. I owe them everything for standing by me and helping me when I went down.
Andrew: You said you also know where you are when you are down? Where are you? How do you maintain who you are when you are down? I don’t mean now where are you? When you are down should have a small setback, I want to just set the world on fire because I am so pissed, and I really can’t getting myself to just relax and understand that I will work it out, how do you maintain that, how do you maintain equilibrium?
Interviewee: Well, I meditate everyday.
Andrew: Do you
Interviewee: Yeah, that’s an important part of my life, and it can just be as a [54:47] for me as just sitting and being really quite and letting everything flare up or getting to a quiet place inside. That’s the only way I can really experience who I am as when I get really, really quiet. If I wasn’t able to do that I would have gone crazy long time ago.
Interviewee: If I wasn’t able to do that I would have gone crazy a long time ago.
Andrew: So you’re able to just stay quiet and meditate. That’s, is that one of the things you learned along the way? Is that one of the things you learned after critical path?
Interviewee: It, before and after, but I began to do it, I began to realize I needed it, I needed it more in my life than had been before critical path.
Andrew: So I went and I sold my company and I went to tried to learn meditation, and I’d get into it, I could sit down for three hours in L.A. and one of these places where somebody’s banging the drums for three hours, and it’s great.I took a retreat, but you’re supposed to focus on just one thing, or not that nothing, your breath, I guess for a while. And I’m not trying, what I’m trying to say is how do you bring that back into the real life, how do you, how does that help you in everyday life? I could barely get to calm enough to just concentrate on my breath for half an hour, let alone to, to bring back some of the benefits of it to everyday.
Interviewee: Well, the, the only benefit that you bring back is, is that calm that comes with connecting more deeply with yourself. I can’t do those kinds of meditations where you have to focus on the breath or whatever. I guess mine is, you know, essentially, personally, developed where it has to be really simple for me or I won’t do it.
I just literally just sit quietly and just imagine everything draining out of me. And then, and then I can hear, then I can hear, the,what I’ll call just the rhythm of myself, and that’s, that’s a feeling, and that feeling stays with you. The more you practice and feel what I’ll just call feeling yourself, the more that that stays with you, then you’re kind of like everywhere you go, there you are.
Andrew: Alright, I see we’re at the top of the hour. Any final words for people who are out there?
Interviewee: Keep pedaling, no matter what, don’t quit. My hero is Winston Churchill. Never, ever, ever ever give up.
Andrew: Great place to leave it. Guys, if you want to find out more about David’s new company, go to pana.ma, pana.ma. Are you on Twitter, can they say hi to you there too?
Interviewee: I’m David Hayden on Twitter
Andrew: David Hayden on Twitter. It’s great to meet you and I hope I get to meet you in person sometime. Thanks for doing the interview.
Interviewee: Likewise, pleasure, thank you.
Andrew: Bye everyone, thanks for watching.
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