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Andrew: Hey, everyone. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. The site where entrepreneurs come to talk about their businesses so that you can learn from their experiences.
Joining me is a tech entrepreneur, who says that the tech we love and use to grow our businesses and that’s globalizing us, he says it can be used against us. John Robb, founded Gomez, a tech research company that tried to go public twice and ended up being acquired. We’ll talk to him a little bit about that.
He went on to launch Hubcast, the global distributed printing company. We’ll talk to him a little bit about that. Most recently, he wrote a book called, ‘Brave New World,’ about the future of global security, and, of course, we’ll talk about that, too.
John, how did I do, by the way, with the intro? I’m seeing a look on your face of like, did he just screw up my background?
John: The book is ‘Brave New War.’
Andrew: Oh, I wrote ‘Brave New World.’ No wonder there was shock. Of course, you didn’t write ‘Brave New World.’ ‘Brave New War.’ How did I copy and paste that wrong?
John: I’m so glad that I brought that up because I could have just let that go and left that inaccuracy in the intro.
Andrew: Good. John, I’m looking at your bio. I want to find out about the history and I want to find out about the businesses. That’s what we’re here for, but you were in Special Ops. What does that mean? Do I sound like a real idiot for first of all screwing up ‘Brave New World’ and then saying I don’t know what Special Ops mean?
John: Well, you know the group of SEAL team guys that took out Osama?
Andrew: Seal Team 6.
John: Seal Team 6 is a Tier One Special Ops team. That means they’re the elite of the elite of even Special Ops. They’re focused on doing that very difficult counter terrorist missions. I was in that group. I wasn’t in Seal team but I was part of the Tier One forces.
Andrew: Now that it’s been so long, can you talk about it?
John: Not really.
Andrew: None of the missions?
John: I was the pilot that would get them into places, so a lot of landing on roads at 3 a.m. with no lights and night vision goggles.
Andrew: Can you give me an example? What country did you go into in the middle of the night like that?
John: Well, I was all over Central America, South America, Africa and the Middle East.
Andrew: Right now, I’m looking at you and you look like a professor. We’ve had a conversation. You seem like a professor. Like a researcher. I can’t imagine you were flying into a road and flying people in there to complete a mission.
John: I guess it’s a lot of hard living. [laughter]
Andrew: Can you go from that, by the way, to entrepreneurship? I feel like after that, I would just be like, I want so much action, I couldn’t just have a conversation with someone. I couldn’t mentor an entrepreneur. I’d feel like, ‘Come on, let’s go in there and fight,’ and be a little over the top.
John: I was in a couple of airplane crashes.
John: And not my fault, but just the way it worked out. It was a high stress kind of environment. I was on the road 220 days a year. I got married and had kids, and I was seeing my kids in snapshots as they grew up. So I figured, “OK. I’m going to change everything.” So I didn’t go into the airlines. I decided to reboot completely and went and got an MBA at Yale just to fill in the blanks, things I didn’t know about business, and instantly gravitated towards doing start-ups. It probably came out of my special ops background because I was in the area in the military, probably the only area in the military that gave me a plane and a bunch of cash and said, “Go smuggle for three weeks. You’re on your own.” In the rest of the military they’ll tell you what to do and how to do it, and they’ll check in with you three times during the flight. I like that kind of independence, and I wouldn’t get that in a big company.
Andrew: They would just basically say, “Here’s some arms. Here’s a country and people that need it in that country. Go figure out a way to put it in their hands and come back.”
John: Well, not arms running necessarily. I wouldn’t admit to that.
Andrew: Well, you did use the word smuggling on your site, and you used it right here in conversation. What were you smuggling?
John: Yeah. Well, that’s probably the only commercial activity I was trained for.
Andrew: Smuggling, that’s what you were trained for?
Andrew: OK. But can you say what you were smuggling if not arms?
John: Well, I’d fly around the shooters like Delta or [??].
Andrew: OK. But you weren’t smuggling any…
John: I wouldn’t admit to that.
Andrew: I see. OK. All right. I see now where the resistance comes from. You understand that people who know you want me to ask you questions like this. They are dying for those old stories, and I’m trying to find an angle to figure out how to ask those stories to get it from you.
Andrew: But we can go straight to business. I’m sorry, guys. I’ll go to my personal passion, which is business, and we’ll find out about, how did you end up with Gomez? You were working at Forester for a while, right?
John: Yeah, I was their first Internet analyst. Virtually every single start-up that started up between ’95 and ’97 came through my office. I interviewed them, ripped apart their business plans, and it was looking more interesting on the other side of the table than doing what I was doing.
Andrew: I told you that when I researched you I kept coming up with quotes in the New York Times about what you thought of different companies and about the economy and about technology in general because Forester’s job is to do research, to analyze companies environments and industries. Why? What’s the goal for Forester?
John: Forester’s goal is a little different than like at Gartner. We always said that Gartner guys were writing research for the beeper folks, the guys on beepers, and that we were writing it for the CEO or the CTO and talking about the bigger trends. For the most part, those folks want to stay in their comfort zone. They want to get a new technology deployed early enough so it’s a competitive advantage, but they don’t want to make bad decisions and sink their company through the suction of a bad tech.
Andrew: I see.
John: So we’d look at the industry and figure out what was coming and gauge the buy-in and write a report on that and say, “OK. This is a safe tech to jump in in the next two years.”
Andrew: I see. So the way that I might read blogs and my audience might read blogs to know what’s coming up next, to figure out what they should write for iOS or write for Android, these companies are looking to you to do that research and to do more in depth.
John: Right, and we’d do that, the boots on the ground. We’d go out and talk to companies, talk to the leading CTOs who are buying technology and find out what they were thinking about. Usually, you’d find a couple people that were really, really smart about a specific tech. Then we’d tap them, and they would help shape the report.
But it was kind of different on the Internet because when I was talking to Tim Koogle back before Yahoo was public, there really wasn’t any traditional tech buyer. This was completely new. So writing a report about, I called them navigation hubs in early ’96, in rank, the big portals, it was something totally out there. I guess I was probably the only guy able to do that because I didn’t have the deep background in the industry, and I was willing to take the risk.
Andrew: Just as I saw the look of horror in your face when I made that goof in the intro and said ‘Brave New World’, I also saw a different look in your face, it was just as strong, when I talked about articles that I’d read that mentioned you. Talk to me about, tell me a little but about the excitement of being in print, of being in the Wall Street Journal, of being the guy that the New York Times says illuminate the industry for out audience, because you’re the guy.
John: It was a really unusual time. I mean ’95 through ’97 of the tech industry, of the internet, it was wild. We went from the trade journals, to the business press and the normal press almost overnight. There was a lot of pressure to get it right. For me, because I was an aeronautical engineer and a pilot, I didn’t have a lot of background in the industry so I had to work three times as hard as the other analysts did in order to stay ahead and make sure I didn’t sound like a fool. So the learning curve was pretty steep and I found that I spent a lot of time on the phone mostly getting reporters up to speed.
Andrew: Just giving them information that they wouldn’t necessarily quote you on, or talk about you, they just want someone to teach them the space?
John: Yes, structure their thinking about it, that’s what I did mostly when I was writing research, I provided a structure for people to view the landscape, to view the technology landscape. Whether it was right or wrong, at least it was a cohesive structure that got them thinking in the right direction. I had to do that for reporters too. It was cool, it was nice to get that kind of quotage [sp] in the newspaper. But at the end of the day, after a couple of years of doing that, I going well I’m not any richer from it.
Andrew: Before we move on with the story, I’m curious about… The quotes that I read about you were just so clear, it was easy to understand what you were thinking, it was short, it was concise and that’s why it was powerful. It’s was concise and insightful, and that’s why it was powerful. How did you get to that? Did you sit down before hand and say, I know he is going to need a sentence about where search is going, I’m going to plot out the way to write the sentence first on paper and then I’m going to say it on the phone like it just came out of my mouth?
John: No, it’s usually after about an hour of conversation with the reporter.
Andrew: And they find that one sentence? You weren’t writing sound bites?
John: Right, exactly, and they’d pull the one sentence that really made their day.
Andrew: So what did you do to get in the press more than someone else who might have been in your shoes?
John: I knew the space and I knew everybody and what they were doing. It made sense to me and I was able to structure it and give it some kind of meaning, probably more than most of the other folks who were partly doing the internet, but they are doing their core software business and they have their vendors that they were focused on. I was exclusively focused on the internet and the new tech that was coming.
Andrew: So you are the guy that’s knowledgeable about the space and you have connections and you know the people in the space. When reporters need to know about it, they turn to you because you have got the information that at the time wasn’t widely distributed.
John: That’s correct. Three years later, in ’99 or 2002, the whole space was flooded with people. It’s the same thing with blogging, when I was one of the top fifty bloggers and when all the really good writers came in, they just crowed me out. It’s a natural process, you know?
Andrew: Right. So then you are saying, I’m not getting any richer, I’m getting a lot of press, I’m learning a lot from the job, but I’m seeing all of these punks who are doing incredibly well… Tell me more about the motivation to start your own business.
John: I’d been getting job offers from different start-ups and some of the start-ups that were offering me jobs, I just didn’t see any future in what they were doing, and another guy at Forbster [SP], Julio Gunas [SP], he was in the finance sector, decided that he wanted to start a company and we left Forbster and bolted to doing something in the finance sector. It was just in ’97 that the finance space was starting to get internetized [SP], everyone was glued to the screen watching the first stock quotes pop up, it was the new hot thing. So it was a great place to do a start-up and we came in pretty much over a two year period dominated the industry, in terms of research, in terms of being the go to people for insight into the space.
Andrew: I’d like to spend a lot of time on those two years to figure out how you go from nothing to building a company that others are quoting and turning to for an understanding of the space. What’s the first thing that you did when you guys launched Gomez?
John: Well the first thing we did was built a scorecard. A scorecard ranking the online brokers, there were a lot of brokers that were launching sites saw their transactions go from 0% off line to 50% online in a year, so it was a pretty dramatic shift, it’s mostly discount brokers.
Andrew: Were talking about the TD Waterhouse’s at the time, I think it wasn’t even TD Waterhouse it was Waterhouse.
John: Waterhouse, and Ameritrade, and E-Trade, and that whole crowd.
Andrew: So you were just ranking them, and that was the first thing that you said you were going to put out there?
John: Right. We analyzed all of the different factors that go into high quality online brokerage website. And then we folded that into a scorecard to make it easy. In order to get everybody’s attention we wanted to get in between the customers and the brokers. And just like Forrester gets in between the venders and Gartner too, venders and their customers, that’s a really great place to be is right in between.
Andrew: You’re saying that when a customer’s thinking where do, which of these online services do I go, they’re going to turn to you first and then through you pick the right company. How long does it take you to do that kind of research?
John: Um, well, I built the first scorecard, Julio was working with me and we built it right on his kitchen table. So using a spreadsheet, and we started off with a limited number of factors, probably like 20 or 30. Which eventually grew to about 150 different factors that were mentioned. It took us probably like a week and a half, for the initial crowd. And there weren’t that many on line brokers. And Julio went and did a speech at an Online Brokerage Conference. That got us on the map and started getting us press immediately.
Andrew: So just by doing this week and a half of research, where you’re trying to help people under what’s better, and I can do that for search engine, maybe not today for search engine. We’re all capable of doing it if we know our space. You said, by putting that out there, I’m going to put my mark on the world. I’m going to let people know that I’m the guy who’s now the rater, I’m the score keeper in this game. I understand that you’re the in between, but there’s something about ratings. There’s something about putting charts out there like that gets attention. I know that Jason Calacanis of Silicon Alley said that he was publishing that magazine around the same time that we’re now discussing. Until he started ranking the entrepreneurs in Silicon Alley it was kind of sleepy. As soon as he ranked them, everyone wanted to pay attention it.
John: That’s exactly true, and early on in a market segment that’s growing very rapidly. There are lots and lots of competition and everyone is jockeying for that little advantage over everyone else. And there’s lots of press attention and you just have to hit that right at the right moment to really get the smash hit you got. We also had to have credibility in the industry. Julio brought that for finance, I brought that for the Tech. We got some push back from some people who said, who are they?
Andrew: Who are they to say what’s the best broker and rank us.
John: Right, and we said we’re doing this for customers, and it worked. The customers loved it, we put it up in a public place. At the time since there wasn’t any database driven content management systems out at the time, when we first did our scorecard, it was all hand coding. We ended up hand coding the scorecards, put them up, and consumers just loved them. People were looking for an online broker, they were gravitating to the site word of mouth was fantastic.
Andrew: Where did your first revenue come from?
John: The first revenue was just standard consulting, so it was mostly from big brokers that were sitting on the sidelines trying to decide how to build their new online trading sites.
Andrew: These are the guys who are rating everyone else, they know what’s good and what’s not, let’s have them come in.
Andrew: I see.
John: I mean, they didn’t really know anything about how to handle customers on-line, how to design sites. There are a lot of big firms in there trying to-, or soon to be big firms, coming in and pitching their expertise. You don’t want to end up with a site that nobody could use. You’d look awful and drive away all your customers. So, a lot of money riding on it and it was pretty slow at first, but enough to put food on the table.
Andrew: What was the next step then?
John: The next step was trying to raise some money so we could do something more . . .
John: . . . ambitious. So we looked around and we took in our first $1 million, I think it was late ’97, so we could pay ourselves a steady income rather than just relying on consulting, which just tends to be up-and-down, up-and-down, up-and-down. We had a little bit of a staff and started to expand the scorecard, spent other areas of Internet finance. One of the things we added in like ’98 was an Internet monitor. We borrowed some software from a small company, Freshwater Software out of Colorado, Boulder, that had some Internet monitoring capability and we started running it against the brokerage sites, and this is an example, probably a good example for folks who are in the limelight like we were, is that we started running the software and it produced data on who was up and who was down because a lot of these sites . . .
Andrew: Got you. And now you can say, “This is their up-time.”
John: Right. CNBC picked it up. So they’re running the-, every morning they had three times they would run the on-line brokerage weather report, who’s up, who’s down, who’s having problems, that kind of thing. The storm that it created after the first couple weeks and people wanting to know, “What kind of background do you have in that?” Their CTO’s were all calling us constantly saying, “What software are you using? How are you using it?” So we were a little blown away. So, rather than persisting, we pulled that off.
John: Well, we didn’t think that we had-, you know to maintain our credibility in the space, we wanted to make sure that we had a really deep knowledge of how that software worked.
Andrew: I see. You weren’t sure if it was accurately reporting when a site was up or down.
John: That’s correct.
Andrew: Got it. OK.
John: Yep. We were running through their transaction systems and stuff, so whether it was working 100% was a . . .
Andrew: I see.
John: . . . a big factor to us withdrawing it. The good thing for Freshwater is that they ended up getting all of the Merrill Lynch business and everything as a result of that.
Andrew: I see. They wanted the same software that you were using to monitor them, they wanted to monitor themselves.
John: Yeah, that launched them into the big time. I think they sold for a couple hundred million as a result of all the finance business we got them.
Andrew: Wow. I can imagine.
John: Yeah, it was good.
Andrew: Those were the days when websites couldn’t be counted to stay up.
John: Yeah, especially transactional-oriented websites, right?
Andrew: Yeah. So what was the business model going to be back then when you raise money, did you have to say, “We’re going to bring in revenue from any specific place?”
John: Not initially. We raised a little bit more money after that and by early ’99 we were going to go public. We were making money, mostly from consulting, and somewhere along the line in ’98, I had figured out a methodology of raising money from customers, consumers on the site. This is a funny process and it’s kind of really eliminates-, start-ups don’t really go in directions that you think they do and you just have to follow your nose. We had all this traffic. We had about 30,000 people a day on the site, which isn’t really that big compared to Yahoo, but in terms of the focus, it was phenomenal. These were the 30,000 people looking at opening up an on-line brokerage and all of these brokerages would have loved to borrow these customers for $300-400, maybe $500 a head, as a targeted customer-acquisition price and they were doing badly on the search engines. They were paying upwards of $5,000 per customer. That’s one of the reasons why Yahoo and all of these other search engines failed, was because they killed their customers by charging them too much per customer.
Andrew: I see. Right.
John: Yeah, so I offered a service to people who were using the site. If you wanted them to get the paperwork associated with opening a brokerage, which is still you had a bunch of contracts that you had to get and sign . . .
Andrew: This is before you could sign on-line.
John: Yeah. I gathered these names for each broker, say people wanted it from Waterhouse or E*TRADE or Ameritrade or whoever, and then I would take the names and I’d give them to the brokers and decided to charge for that $10 per . . .
Andrew: . . . lead.
John:: . . . name. Yeah, for leads. It’s more than leads though, it’s a hot lead because this person wants to pay for it. The feedback we got after the first month-and-a-half or so was that these weren’t your standard customers. These were the best customers that you were getting and one in three were converting. So, not only were we getting 30% conversion rates, we were also getting the best customers who were least likely-, they put more money in it, they were happier with the service because they knew exactly what they were getting and they were the kind of customers that they always wanted but were never able to get using standard advertising. Then we decided, “OK. Let’s turn that up.” I was making, I don’t know, at that time, like $30,000 a month from that.
John: And we decided to cut a deal with the brokers if they would pay us their targeted customer acquisition fee, which was usually about $150. So we took the low end with them and the revenues on that thing went up about to $1.8 million a month.
Andrew: Wow. The lead business is huge! I didn’t realize how big it could be in finance.
John: Yeah, it was huge. It was massive and, when you look at all the advertising, mostly from finance out there, good customers are worth a lot of money to these finance folks. So just by changing it, following where the money was coming and going very slow we were able to get it to just about anybody, including credit card companies and stuff when we started ranking their credit cards and on-line banks and everything. So it was a good business. So that was one of our main things that took off. The other thing that we did was to do the Internet monitoring, in a serious way. Trying to get those leverageable businesses, leverageable revenue streams that didn’t require a lot of people that required a relatively small fixed investment that could generate a lot and monitoring the transaction systems of brokerages and banks seemed like a natural. So over the course of ’99, we ended up building a global Internet, I was running a tech at the time, a global Internet monitoring system in 54 cities around the world, six continents. It measured all the on-line transaction systems of JP Morgan and Merrill Lynch and Fidelity. Fidelity helped finance the build-out because they wanted a really good system, a better system. We did it all real time and, at the time, there was a company called Keynote, who was relatively large but their system was very slow. It took 20 minutes to get results back. We did it so with real-time database replication, so we got it in real-time from all these cities.
Andrew: I see. So you could respond to it.
John: Yeah and the way that we architected it was probably a quarter of the cost of what Keynote system cost to operate. We were pulling in like 28 million data points a day by the end of 2000 and it was zooming. So that was, kind of like, on the [??] for the initial offer. So we had two different lines of business. We had the consumer side and the company went from $0 in ’97 up to, I think we’re close to $50 million/year run rate right about . . .
John: . . . by 2000.
Andrew: Here you are a guy who started out as a researcher, who was getting a lot of press but not a lot of money and suddenly you’re getting both press and money and you’ve got a successful business. How does your personal life change at that point?
John: Oh, it’s incredibly stressful.
Andrew: Is it?
Andrew: Why? You know, a lot of entrepreneurs have really stressful beginnings and they think that, when they get to the point that you are in your story, that life is good and they can finally enjoy themselves, and but it’s not.
John: It’s a curse.
John: Early entrepreneur-, you know, starting a business in the early stages is actually fun. It’s a lot of creativity and trying new things and it’s a collegial environment, just a few people. As you get bigger and you start hiring people, and there’s expectations and in-fighting and jockeying, it just gets more difficult as you get bigger. And the pressure gets more severe as you get close to an IPO.
Andrew: I see. I see.
John: You know, you spend time with lawyers and you spend more time talking about the Board with investors and . . .
Andrew: . . . and we know the danger, we know one of the dangers because it happened to you. You tried to go public. It didn’t work the first time. Am I picking this up right?
Andrew: The press was all over it because you don’t go public, privately without anyone realizing what you’re trying to do.
Andrew: And, tell me about that. How does that feel?
John: Oh, you know, that first attempt at a public offering was like a . . . we were doing it mid-1999, and we had a great story. We knew all the financial firms; everybody was going to buy our stuff. [dog barks]. Sorry about that. My daughter’s coming home.
Andrew: I actually kind of like that we do these interviews where ever the person is, so I get to see your home, or I get to see someone’s office. I think one person, it was the founder of Tetras, took me out to show me his estate in Hawaii. You just never know where you are. It’s kind of cool.
John: Yeah, this is my bunker. So, we were going to get out in plenty of time. I owned about 10% of the company going into the IPO. We had Robertson Stevens, back when they were a functional unit, as our investment banker. And Ernst and Young is our accountant. I think we were going to go out in July, and it would have been time to get out of lockups. In fact, I think Ernst & Young had a whole thing where they would take my restricted stock, I take a 25% haircut, and I was going to get $75 million in Microsoft stock.
Andrew: I see. And how did that work?
John: Well, Ernst and Young were pushing the boundaries. But I never got to that point, because after we went to the printers, printed up the [S-one], it was all done. We’re going to go the next day and file with the SEC. And the accountants came in and said we have to drop you. We’re going, ‘What?’ And they wouldn’t tell us, and then of course, the investment bank has to drop you, and the whole thing. And we found out that the reviewer of the Boston Office of Ernst and Young had put the ax to the whole IPO. And they said it was because one of our early investors, who just put the first million in, had some kind of track record with the SEC, or was some kind of personal beef.
Andrew: I see.
John: Or, maybe it was somebody else who wanted to stop us from getting out and worked with this guy to block it. But it doesn’t really matter. It was like a bolt out of the blue. You go from looking at a couple hundred million . . .
Andrew: And you’re practically on the island.
Andrew: A drink in your hand, right?
John: Exactly. And so, we had to scramble, ‘cuz we had a company, and were expecting the money. That was just an amazing blow. The stress levels went off the charts. But we had to raise the money, or we’d have to finance it out of pocket. And there were a lot of people we had to pay. So, we went out and tried to find investors, and were working every investor that was out there; take the old investor out and restructure it and get out again. And that was a wild process. It came down to not being able to find the lead investor. And I gave a presentation on this, the performance system, to Soft Bank Japan, and it was like a 25 minute spiel . . .
Andrew: One of the primaries.
John: Yeah. And they said, ‘That’s interesting. Come out to Tokyo and meet the founder of Soft Bank, and we’ll make a decision.’ So we flew out to Tokyo, shook hands, and fifteen minutes later we had our first $5 million and the rest of the investors came in. We were able to keep the company going. We got Merrill Lynch as our investment bank, and Anderson as our accountants. And we went out, trying to go again, but it was in March, 2001, IPO. So by the time we got to February, it was like, can we push it off a month? Can we push it off another month, you know, ‘cuz the market was softening. And we never got out. So, stress levels, you know, to reconfigure the company for the long haul on the money we had, and that meant firing people, and I had my number four on the way, a baby.
Andrew: Oh, wow!
John: That year we moved into a new house, and had all sorts of stresses in 2000. I was just like, that was it. I had to get out of there.
Andrew: So, that’s why you left.
John: It was just too much. I was totally burned out. And so, the rest of the story would go as happens, you know, even though I was the guy who built the Performance System, they shrunk the company down so [??], the only thing left was the Performance System that we built. By the time they went and sold the company for $300 million, or whatever it was . . .
Andrew: At $295 million in 2009.
John: I got $5,000.
Andrew: Get out!
John: That’s all I got. The standard finance thing and the new people that came in they took it off. So they diluted me [??].
Andrew: I see, so that’s how it could get done. I wanted to understand this because I’m a founder, we’re all founders here that are listening. It’s dilution that killed you, they came in, tell me more, tell me what happened?
John: Every time they went for even half a million dollars, or a million dollars, in extra financing there was more dilution, and more dilution, and then they roll it back again and then dilute again, and so by that time it came to the end, there wasn’t anything left for the folks that built it.
Andrew: Why are you saying that openly, why are you telling me the exact 5000, why don’t you leave in my audiences’ and the worlds imagination that this business that you founded sold for $295 million, and you must be one of the smartest, richest men on the planet.
John: I don’t know, I guess I’m probably too open about it. You know it gave me a really good insight into how the entire system operates. From the rise up, and entrepreneurs if you create stuff, if you create a consumer business or create a performance business, what ever come up with, it’s really not that valued in the system, it’s really the money.
Andrew: And you know what, I also find that, tell me if I’m wrong, that a lot of people who say that it’s not about the money, a lot of people who are there to send a message saying the money doesn’t matter are there to collect the money themselves and are using those statements to diluted you into not caring.
John: It was like watching the Social Network and watching that guy get squeezed out, that’s classic.
Andrew: I had a period where I got offers or $70 million for my company in the heyday, $100 million for my company. And then we ran into trouble because the economy, we ran into trouble internally with the business as a result of the economy as well. I remember walking into work after that feeling like what am I doing, what m I going to be doing next. Like my senses weren’t all fully alert, I was sleep walking into work. What did it feel like for you?
John: Well, I went to try something new. I just smelled out something that was new in the world…
Andrew: Did you have a depressed period, did you have a numb period? What was that like?
John: It was pretty gruesome.
Andrew: What was gruesome like, tell me to the extent that you feel comfortable sharing, I’d love to hear it, because I want to understand it when I go through this and we’ll all go through this at some point. That weren’t alone, and that we can kind of learn from your experience.
John: Well it’s a little worse than just having a company that doesn’t do well.
John: It’s like this stroke of lightening hit me, and you go from having a couple hundred million. I think the evaluation of the company when Merrill was thinking taking it was 3 and a half billion.
Andrew: Billion with a ‘B’?
John, Yes, and I had 10%, so there was going to be 300 some odd million once you go public, would’ve been able to convert most of that, and then going to a much small amount on the private side. But the thing is, so the impact was greater. The good thing is I think it’s probably one of the better things that ever happened to me.
John: Yes. Because I wasn’t ready for that kind of money.
Andrew: What do you think, how do you not be ready for that kind of money?
John: I spent most of my life not thinking about money, you know, in the military doing cool stuff, and then I went out and going to business school and getting slowly but surely more focused on the money near the end stages of that. And as sort of a score card for my creativity. The more I made, the more creative I was. And it wasn’t a really good thing to do. I think it would’ve been tough on the family, tough on me. I think my creativity would’ve slowed down. I wouldn’t have been in the blogging space and that whole social space. I wouldn’t have written a book and invented a new type of guerrilla warfare.
Andrew: I see.
John: I wouldn’t have been where I am today. Family wise and everything else I’m in the best place I could possibly be. So I don’t think I would’ve got there if I would’ve had the money. I would’ve focused on toys and trips and …
Andrew: : Did you have a toy in mind that you were thinking of?
John: Just, you know, there are houses and there’s cars and there’s airplanes, and there’s, you know, just on that kind of stuff, it really doesn’t matter. I mean, truly, in the long run and . . .
John: I think my creativity, my productivity as a human being probably would have tailed off pretty substantially. You made a lot of money, I guess?
Andrew: I did OK. I didn’t do the $100 million; I didn’t do the $70 million. You know what? For me, it was, in the end, I ended up where I would have been anyway. I look at my life and I say, “What did I want to do with the money?” You know what my dream was? It wasn’t about anything-, it was, I started to read Jack Kerouac’s “On the Road” and I said, “All this pressure from owning stuff and having people’s salaries beyond me and having the office be-, having the Internet in the office work or else it’s on my head in some way.” I said, “I don’t want any of it. I just want to give it all up and just go for a drive around the county and relax.” And you know what I realized? Even without $70 million I could do that kind of drive.
Andrew: And it took me awhile to finish because we still needed to finish off the last pieces of the company but it took me awhile to do it and then, at some point, maybe when I was in my 80’s, I’d do something like Mixergy, which is what I’m doing now. I get to do it earlier.
John: You know one thing I would have bought was Blizzard Entertainment.
Andrew: You would have bought it. You knew it ahead of time how well it was going to?
John: I had researched it and it was only being talked about. It was in the $50 million range in 2000 and I loved it. I thought it was a phenomenal company.
Andrew: I see. So you were going to, when it was $50 million, and you had 10% of a $3 billion company, you were going to go in there and be . . .
John: That was the only big toy that I was looking at . . .
Andrew: I like toys that.
John: . . . purchasing.
Andrew: I like toys like that. Those are good.
John: Anyway, it worked out and your path is your path, right?
Andrew: You know, I say, “I still love money as much as I did before, but I recognize that it’s not the most important thing.” In fact, I’m looking right here at an email from my broker saying, “Hey, Andrew, time to roll over this CD. Is that OK?” That’s basically all I have now, just all CD’s. I’m not looking to triple my money, I don’t care. I just want to enjoy the life that I have right now. Where before, I would have said, “You’d better study everything about stocks, you’d better make sure that you’re invested in the right place and property . . .
Andrew: . . . and every start-up needs to be invested in or passed on and I don’t care. I care about this. I want to pull out the best ideas and experiences that I can from . . .
John: You made the transition.
Andrew: . . . this and pass on.
John: Yeah, you’ve made a great transition. I don’t know if I would have. [laughter] I mean, I learned a lot and so, I am who am I today as a result. I don’t know if that’s good or bad, but I think it’s OK.
Andrew: It is good. And you know what? At the time, I don’t know how you feel, but there are times when you just feel like it’s all over. I felt it’s all over. And by “all”, I meant, I never took a vacation up until now, now I can never start another company because I’m going to go bankrupt. I thought, like, my head was going straight to bankruptcy. My head was then saying, “I’m going to have to work everyday in order to just survive, in order to feed myself. Who’s going to hire an entrepreneur who’s just a big pain in the butt because he has all these opinions and he has all these sense of entitlement from the world? And he doesn’t have any experience taking orders or doing any one specific thing . . . ”
John: Yeah, that is a problem, though. That is definitely a problem. Who does really want to hire an entrepreneur?
Andrew: So, you know what? Why don’t we skip over the other company that I mentioned, Hubcast and talk about how you and Dave Winer worked together. You’re the president of UserLand, right?
John: Yeah. I ended up being like the interim CEO of UserLand but . . .
John: I think he may have had a heart problem. So I have been corresponding with Dave Winer over at UserLand and he was doing some really cool stuff with personal publishing and I had written this report back in Forrester days called, “Personal Broadcasting [??]”. This idea that you would publish from your desktop and it would be things that people could subscribe to and I wrote that back in ’96. People were, like, walking around with this report and they were looking at PointCast and PointCast was a little like it but it really wasn’t, like, where I thought it could go. It took until talking to Dave and blogging and network blogging that I saw an opportunity to actually make that real. We talked a little bit and he said, “I need some help.” and I went over and it was a funky company, but it was a good place for me just to unwind . . .
Andrew: I see.
John: . . . and rebuild.
Andrew: So you essentially were an employee.
John: Yeah, I got some stock and all that but it wasn’t ever going to go anywhere.
Andrew: Tell me a little bit about that transition because you and I were just talking about how tough it is for an entrepreneur to go and to be an employee. Tell me.
John: It was kind of almost like a partnership. Dave was pretty much hands off and I just kind of ran the thing.
Andrew: I see.
John: You know how Kim gets stuff done. I pretty much ran the company solo. No, I had Robert Scopple as my marketing guy for a while. He had some problems with- I think there was a big layoff in one of the companies he was in, and picked him up for about a year. While he was getting his blogging chops. That was fun. It’s nice to be in the center of the conversation when things are kicking off.
I had the chance to do some deep thinking about blogging and I had a little Yahoo group called K-logs. It’s about network blogging back in 2001. People were like… It got to be big, and we were talking about how all these… using URS you can subscribe, and great knowledge networks, friend networks, and things like that. And all the stuff you see later, like Facebook, and things like that – it was really quite cool.
Andrew: You said it was also a place for you to relax a little. How? Why?
John: Yeah. No set schedule. Everything was online, it was completely a virtual business.
Andrew: You didn’t have to worry about an IPO, you didn’t have to worry about an investor who put in a million dollars. You could have had some beef with the SCC, it was just you’re inventing the future, you’re discussing the future, and you’re doing it in a forum where people are paying attention.
John: Yeah, and doing it in a way where we sold some software so we could pay ourselves. Not well, but pay ourselves. We tried to do the whole investor thing, just a little bit because we saw the space taking off. But the company was kind of funky, it’s been around a long time and sometimes it gets a history. You can’t do anything with the structure as it is.
It was a good place to… I got to meet a lot of people like Doc Sarles…
Andrew: These are the pioneers.
John: Yeah. I got to hang out with all these folks because Dave knew them all. And being an early blogger also put me on the map in terms of interacting with people who were pioneering new spaces.
Andrew: And you were one of the top 50 bloggers, and blogging was the future?
John: Yeah, it was weird. Because we were doing some of the first things. Trying to figure out how a blog is formatted. All of those basic things that ended up more popularly in Facebook and in Twitter, down the road.
Andrew: Right. HubCast, what was the original idea behind that?
John: I wanted to make a little bit more money than I was making in [??]. I was contacted by an entrepreneur who was running a printing company. So he’s a young guy who had been running a standard professional printing company. It’s five, seven million dollars a year. I really don’t know the details. But he had this dream of building a virtual printing system. Not like the stuff you see online that prints your business cards, but a network of all these mom and pop shops around… When I call mom and pop I’d say a five to seven million dollar business, maybe a two million dollar business.
All these different places around the world where they take these professional print orders and have them printed locally. So rather than spending $100 to print a short run of a print product and then spending $100 to ship it in a week via FedEx, you’d print it in Singapore that day and two hours later, they have two hour delivery in Singapore, it would be delivered two hours later for $10.
Andrew: So you’re going to put the printers all over the world instead of a few cities?
John: Yeah, it saved a lot on…
John: Exactly, it was a distributed print system. A distributed manufacturing system actually if you look at print as a manufacturing process. They had just gotten these new digital printers called Indigos, this $500,000 piece of equipment that did a lot of what the big rollers did. The old traditional printers did.
He didn’t know how to build it. So he talked to me and I built a plan, and I hired a team and we worked virtually for a while. Then we got an office and we built the system from scratch and learned a lot about how to build it. Nine months later we had a working system and it was cranking. It actually did some new stuff in terms of distributed print.
It’s tough to do because you need to measure the quality at every location. We’re talking about doing it with a bunch of different partners. So we worked out a testing system to insure that you get Coke Bottle Red in Singapore and Coke Bottle Red in Frankfurt.
Andrew: And they all match exactly.
John: Yeah. The quality was amazing.
Andrew: What happened to the company?
John: It’s still cranking along. I don’t know how well it’s doing, I haven’t really kept up with it. At the time, at the end at a little over a year the system was built, and they were just in operations mode, and it was time to go which was absolutely fine with me.
Andrew: Were you a shareholder in the business?
John: Yeah, I’m still a shareholder.
Andrew: Still a shareholder?
Andrew: Hopefully, they won’t dilute again and dilute and dilute.
John: I’m always taking that as an assumption. The money always wins.
Andrew: Finally, the book. You were the guy who people still turn to for ideas, for direction about where the future is going. It seems like your whole life, they’ve been doing that. And you see a danger in technology that you want us to be aware of, the way that we might have been aware of machine guns centuries ago.
John: Right. I saw the analysis coming out about the Iraq War and about terrorism in general. I had been thinking about warfare for a long time, and I had the operational chops to be in the special operations and talk about it. The analysis that was coming out was wrong. It looked a lot like what I was seeing online with open source development. As I dug into it and dug into the information and started to really analyze it, what I saw was a couple different trends. One was the organization was very different. It was a very open source organization.
Andrew: What do you mean by open source organizations and open source war is what you’re telling us we’ve got to watch out for.
John: Open source warfare. Like in Iraq, there wasn’t one monolithic guerrilla group.
Andrew: I see.
John: Typically, you’d have one big hierarchal structured guerrilla group, and there would be a leadership cadre, and it would go down in a pyramid. The way you’d roll it up is you’d flip somebody at the bottom of the pyramid and work your way all the way up.
Andrew: I see. Right.
John: They’d kill the cadre, and that would be it. In Iraq there were hundreds of different groups. There were different flavors of Jihadi. There were Nationalists, and there were Baathists who loved Saddam, and Baathists who didn’t love Saddam. There were criminal groups, and they all seemed to be able to work together.
They had cell phone service relatively quickly. It’s so easy to put up cell phone towers, and everyone was communicating. And they were proving to be very, very innovative, and their actions seemed to be coordinated. So, I worked out a methodology that explained that using open source techniques where the open source element here in warfare is the tactics and strategies and method of warfare, that anybody can come and contribute.
If somebody did an attack that worked, it was covered in the press, and everyone copied it. If somebody had a new IED design, they would just share it.
Andrew: Why would they share it? What’s the incentive for an individual to share what’s worked for him?
John: It’s the same kind of thing that held together the Tunisian open source protests, and the Egyptian open source protests because they were open source. Lots of different groups, lots of people with different motivations coming together. They were held together by the plausible promise.
It’s a very, very simple thing. In the Iraq War it was, “Get the U.S. out. Defeat the U.S.”
Andrew: I see. If you and I don’t have the same objective in the end, the fact that we both want the Americans out means that I have an incentive to tell you what’s working for me so you can go and use it.
John: Exactly. It worked in Egypt. Let’s get rid of Mubarak. That was the plausible promise, Mubarak out. Everything else that group tried to do, every time somebody tried to fork it, to talk about the constitution that knew war reform, they got lost attention. They weren’t part of the leadership group any more.
Andrew: I see.
John: It’s anyone who advanced the ball towards reaching the objective, got center stage, and everyone seemed to pay attention to him. It was the same thing in the Iraq War. This is the kind of protest you can see anywhere. It’s just not limited to areas that we’ve been in so far. It’s very, very simple. Once it reached its culmination, then it died out.
The other thing was system disruption. Everyone knows about sabotage and how that works, but in a networked age, in an age where we’re more dependent on systems than we ever were and the systems are inter-connected, it’s very, very easy to hit just one piece of a system and cause a cascading failure.
I predicted that these groups, these small groups, each individually would find their best bang for the buck, the best ROI from breaking system.
Andrew: I see.
John: And they did it. They started breaking oil systems in Iraq, and I saw it in Nigeria with a group called Men [??]. They knocked out about a million barrels a day of oil production, even took down a platform back in 2006 and ’07. A million barrels a day off that market drove the price of oil to $150 a barrel. In fact, the leader of Mann wrote me a fan mail. [??] me in Nigeria was like, ‘Hey, man I’m avid reader.
John: Yeah. But unfortunate, you know . . .
Andrew: I don’t know what to say about that, but that’s something.
John: Oh, I was feeling pretty safe in the sense that, you know, I had brief the CIA and the NSA teams and the DOD teams, so, no one is going to come in and arrest me for getting that email. But I’ve seen recently that Al Qaeda and Yeoman started doing ROI analysis on systems disruption.
John: So, they’re using my language it started becoming more popular with the Gorillas than it has with the DOD and that crowd.
Andrew: You’ve got a new book coming out, what’s that? And how can I find out the name of that book?
John: Yeah, I was thinking about calling it [The Resilient N Book]. It’s basically this idea that we’re going to go through a very, very difficult economic period that instability in the global financial system. The decline of the middle classes in the US and Europe which is one remedy decline because the medium income in the US hasn’t gone up in 35 years. Now it’s on a decidedly downward slope. We are going to see a long running depression.
On a [level] basis everybody suffers and the only way, I think, we’re going to see us emerging from it on the back side is that we move through resilient communities that produce as much as possible locally. It’s a variant local economy and that these communities network. So, there’s network resilient communities and there’s lots of different economic networks that you build on the internet using everything from [Bick] coin to, you know, just as a perfect concept of a new currency system. It’s pretty cool.
Andrew: So, you’re saying in order for the economy to do well a bunch of us need to create or all of us need to create smaller economies of our own and that makes the overall economy more stable.
John: Correct. It has resilient in it’s system. It has [ad scale inbearings]. Some odd years ago we produced most of what we needed locally and looked at the global system for just a small piece of the top of the pyramid. Now, we look to the global system for almost everything that we need. I mean it takes a whole global production system . . .
Andrew: I see.
John: . . . unstable system to produce it. And we only do a little bit locally. We’re seeing [??] more local production but all the tech necessary to do highly efficient, high quality production at the local is there in the food moving from organics to crima cultural . . .
Andrew: Why does me eating local make the economy . . . Oh, I see, because if I eat local and I decide that I’m afraid of what’s going on with my local economy I stop buying, maybe others in my local economy stop buying, but in California they’ve got their own little local economy and that’s doing better because they don’t have my same fears and they’re much more resilient, so they don’t have to worry about my price of food. I’m explaining this in a very poor way, aren’t I?
John: With disruptions when you have a global supply system of this complexity and it starts to break down, there’s bankruptcies, there’s failures as we move into a depression. You’ll get local disruption. You’ll get local shortages which then makes it seems like you just went through a natural disaster sometimes because the shelves in the supermarket will go bare really quickly. The other thing is that once a depression hits nobody spends. Every hoards money and there’s no local economy. You’re relying on dollars to come in but dollars are being held by people that . . .
Andrew: I see.
John: . . . live remote to you.
Andrew: So, let me ask you this, John. As an entrepreneur and as entrepreneurs in my audience, I’m sure they must be thinking this, what do we do about this? I mean how do we take advantage of this to make good things happen for the world and maybe even make some money for ourselves along the way?
John: Well, electrical stuff and food production.
Andrew: Food production?
John: Yeah, CFAs.
John: There’s lots of software that can make local food production better. I think Permacultural, if you’re familiar with Permacultural, it’s a low maintenance way of producing high volumes of food where the ecosystem design actually fertilizes it and keeps bugs away and it just constantly produces food.
Andrew: Then it’s not as much fun as making an iPhone app, I got to tell you.
John: Oh, but there’s design. That basically takes energy and work out of producing food and inserts intelligence of designing that network, designing that ecosystem. That’s a software problem. That’s cool.
Andrew: I see. All right. I like to take food for granted. I don’t like to even think about how to make food. I don’t want to think about how to get water in my house, how to get food in my system or other people, I want to think about what’s next.
John: Well, the next start is building ways of processing water. They are ways of producing energy at a local level.
Andrew: I see.
John: There’s 3-D fabbing; I mean, that’s probably the coolest thing they could come out with them.
Andrew: 3-D fabbing.
John: 3-D fabs, 3-D manufacturing.
Andrew: Yes. So I’d have a printer that would allow me to buy something from you but print it out in my house. Like, something like a cup or a little model airplane, etcetera.
John: Very similar to what we did at PupCast. You’d purchase a design or somebody would give you a design or share it with you. You do some modification on it and then you print it locally.
Andrew: I see.
John: So right now the printing is pretty rudimentary. We’re kind of still in the hobbyist stage, like the chaos, or not the chaos, the Homebrew Computer Club.
John: You remember, you know, [??] Club.
John: That’s where we’re at with 3-D printing, but it’s going to get really good very quickly. We’re going to get to end up within the next 20, probably with molecular level printing at a local level. So to start with a local shop . . .
Andrew: Now we’re talkin’!
John: And we’re talking hacker spaces; getting hacker spaces started locally where they can share that kind of equipment – laser cutters and a 3-D printing apparatus, and other things to do with production at a local level and try out new products.
There was a guy who just recently came up with new, kind of little product he did using 3-D fabbing.
John: It was for iPhone Holder.
John: So he could take pictures.
Andrew: I see.
John: And you mount it, put it on a mount. And then he went to KickStarter.
Andrew: Whoa, he did that as a – he printed that himself on one of those devices?
Andrew: I didn’t know that.
John: And then he wanted the extra money to do an actual mold. He needs 10,000 bucks to do like a high-production volume mold.
Andrew: I see, because that printer can only do so many.
John: It’s too expensive at the, yeah. So he went to KickStarter, set up a video pitch, and he sold (I think) 5 or 6,000 units right out of the pipe at 20 bucks a pop.
Andrew: That’s fantastic; those are so cool.
John: So it goes right to $130,000 in two weeks.
Andrew: Why can’t I think of the name of that thing? (It’ll come to me later which will be too late.)
John: That’s one of the success stories at KickStarter.
Andrew: Yeah. Someone will put it on the comments.
John: That’s a different kind of economy. So you produce stuff at the local level, you fabricate it, you work in your hacker space or whatever and then you go to the crowd for money – or basically early customers, which is a better way of doing it. And then you’re off to the races; you’re selling to everybody. It’s quite cool.
Andrew: You see, now we’re talkin’. I don’t want to think about how do I get food to myself, how do I get – there’s some reason food I want to take for granted – but maybe I shouldn’t.
John: Well, there’s folks who are, you know, love to do this stuff locally. And there’s some folks that like to compete in the global economy.
John: You can compete from a local center.
Andrew: It’s not those basics we should have taken care of, it’s the next step that we need to think about. How do we build the next iPhone? Or if we can’t build the next iPhone, how do we add to the quality of the iPhone by building the next app for the iPhone, or the next webpage to contribute to world knowledge?
John: And that seems so boring to me! You know, as an entrepreneur, if I was out starting companies from scratch my big goal wouldn’t be to make the next million, it would be to, ‘Now how do I figure out how to employ a million people.’
Andrew: How to employ a million people?
John: Yeah, that’s the coolest. If you could figure out how to employ a million people with a part-time – you know, part-time work that people could just pick off the web and do some manual or thinking activity, and get it done. You know, that’s the coolest thing.
I figured out that probably the only way to do that, where you can actually pay them high-quality income was if whatever they produced would have some kind of enduring value, and that they would get some portion of that enduring value.
Andrew: Oh, I see. So unlike Mechanical Turk where people do thing for a couple of cents and they just move on, you’re saying, ‘Get a piece of the action – be an owner.’
John: Right. And be an owner. If you could figure out how to do that . . .
Andrew: Make a million people into owners.
Andrew: I like that.
John: It’s like one of the ideas I came up with is that you would have a system that allowed people to take pictures of local businesses and local homes – every address in every other part of the world that is not covered by Google.
John: And they would also be at the same time, you know, doing geolocation GPS results.
Andrew: And they would all own the data and get a share of the revenue that comes from companies that use that data in proportion to how much they put in. Yeah, I love that.
John: That is, if you could work it correctly it would be 80% of the revenue of the company that would be flowing to them.
Andrew: See, we didn’t even get to talk about that, the idea of crowd-sourcing and paying the crowd instead of crowd-slaving.
Andrew: Which is what you seem to think a lot of crowd-sourcing is.
John: Which is like Facebook and everybody else too.
Andrew: Well let me say this: first of all, thank you for doing this interview, John. And for anyone who wants to follow up with John, apparently John, you don’t feel any hesitation about putting your email address online. People from all over the world (including shady parts of the world) are e-mailing you, so I’ll tell my audience where they can get in touch with you.
Andrew: First of all, John’s one of the early bloggers and you can tell based on the URL of his blog: it’s GlobalGuerrillas.typepad.com. You and Seth Godin and a bunch of other people who were blogging early have that. GlobalGuerrillas.typepad.com – and there you can find out, you get links every day (which I like, you actually keep up with the linking), but find out more about him. And if you go to the About Page you can find out his e-mail address and contact him directly. John, thanks for doing the interview.
John: Thanks, Andrew.
Andrew: Thank you, ‘bye.
John: It was fun, ‘bye.