Andrew: Hello, everyone, my name is Andrew Warner. I’m the founder of Mixergy, where I interview tech-entrepreneurs about how they built their businesses. And one of the things that we celebrate in the tech-world is the exit, you know, frankly if an entrepreneur e-mails me and says, “Hey, Andrew, I sold my business. I want to be on Mixergy.”
I almost always will say yes if they’re in the tech-space. And I think partially it’s the wrong way to think about business, how fast can you sell. And the truth is, it’s how great of a company can you build, how much impact can you have on the world, how much of a legacy can you leave behind. Those things are so much more valuable than the exit.
But frankly, partially I look at the exit because it tells me, “Hey, the guy crossed the finish line. Let’s talk about how he did it.” And partially because I feel like we’ve got a complete story, so we tell it.
Personally though, I’d rather run a company that has a lot of impact that I get to run for the rest of my life. Yeah, the day before the day I die I wouldn’t mind going into the office and doing something that I loved knowing that once I did die there was a legacy that was left behind.
Anyway, that’s why I’m so proud to have today’s guest on. He started back in the days of CD-ROMs, you know, those little CDs you used to stick in your computer? That’s when his business started and he’s still running it. He had a couple of challenges along the way that I want to find out about and he toughed it out and I’m curious about how he did it.
His name is . . . do you prefer to go by Pete or Peter?
Andrew: Pete. Yeah, I’ve got it like very formal here on my notes as Peter, but I’m noticing everywhere you write it, it’s Pete.
So his name is Pete Jordan. He is the founder of Knowledge Matters. They are the leading provider of the cloud based educational simulations for business, and we’re going to talk about what that means.
This interview was sponsored by two great companies. The first is this thing that I’ve been drinking, it’s called Athletic Greens, I’ll tell you about it. And the second is a company that I founded, it’s called Bot Academy, and I’ll tell you guys about that too.
First, Pete, good to have you on here.
Pete: Thank you. Good to be on. Looking forward to talking to you about a company that I still run.
Andrew: Yeah, man. Why didn’t you sell it? What happened?
Pete: You know, at some point I could. Don’t tell all your listeners or we never would.
Andrew: What year did you guys found the company?
Pete: We actually started the company in 1997. So this is our 20th year. And we have been serving students from high school to the college level, to corporations for the full 20-year run.
Andrew: And you’re the kind of person who remembers like coming across your first computer. I think most people today, I know my child saw a computer the day he was born, it was the iPhone that I took a picture of him with, right? But you remember it. You were in the ninth grade when you came across these microcomputers. What was it about them that excited you?
Pete: Yeah, we were very lucky. We had teachers who were on the forefront of that stuff. And one of them, my math teacher Mr. Markowitz, decided to bring in something that RadioShack had made called the TRS-80, affectionately known as the Trash-80. And he didn’t really know what to do with it.
And being students we had a lot more time than the teachers to play around with stuff. So you couldn’t look up how to do any programming on the internet, there was no internet. You had to rely on this little paper piece of documentation. And so we played with it.
And so one day he comes into me and he says, “Pete, you’re never going to guess what I’ve been able to do with it.” And I said, “Mr. Markowitz, what did you do?” And he says, “I created a game on the computer.” And he said, “This is a game where you can guess the number between 1 and 100, and it will tell you whether you’re too high or too low. And when you get to the right number it will tell you whether you’re right.” And I said, “That’s great.” And I played Mr. Markowitz’s game.
And then I said, “Do you want to see what some of the other guys and I have been doing?” And so we had been, we figured out how to do what they call peel and poke into memory, which is where you read and write directly into video memory. And there were no APIs for doing videos stuff in those days. So we were putting little Xs and Os, etc., into video memory which were showing up on the screen and scrolling it and made a little race car game out of it.
So I got him on there, and I said, “Come see my race car game,” and we raced through our couple of Le Mans courses and things like that.” And he said, “Okay.” So it was fun. It’s like the kids are today with phones, they know how to use them much better than we do. And back in those days we had the time to play on the computer.
Andrew: That’s really impressive though. At that point did you realize, “You know what? I’ve got a talent for this. This is the thing for me.”
Pete: You know, pretty much, yeah. I would say, and I’ve got kids who have gone through, you know, that age, the ninth grade, and I was lucky than I pretty much knew. And the thing that was cool about it was I never wanted to be a database program or anything like that. It was simply the idea that you could create. And in particular that you could create worlds and that you could make them behave and you could have people do different things in them. Gaming is one area, educational simulation is another.
Andrew: So then, how did you end up with this job? I saw the movie, “Up in the Air” with George Clooney, his whole job is to fly into different places and fire people. It looks so painful. How does the guy who knew how to create a racing car game back in the old TRS-80 days, end up at a job where you’re firing people, you’re like George Clooney in the movie, “Up in the Air.”
Pete: Yes. So basically, and for all your listeners and audience out there that are interested in entrepreneurship, you know, life comes on and it grabs you sometimes. So I came from a household where nobody was an entrepreneur. My father was an aerospace engineer right out of the mold of Fred MacMurray in “My Three Sons,” that’s what you did. So we were all supposed to get technical educations and we were all supposed to go on and work for big companies and be engineers of some sort.
Fortunately, my older brother decided to become a clown and a mime and a street performer in Europe. And my older sister decided to become a hippie and lived without electricity or running water in Oregon.
So by the time it came around to me having an interest in entrepreneurship, that didn’t look quite as bad today, at that point.
But even so, I went off, I got a degree in computer science, I knew I loved that stuff. But everybody was going to Wall Street, it was the middle of the ’80s, etc. And then I went there a little bit and then I went to business school. And I went to work for a big company and got promoted there until I was working for the office of the president. Then I was eventually, as you say, assigned to fly to France and fire about 3,000 people because the company was in financial trouble at their French subsidiary.
Andrew: I see.
Pete: Now, for anyone who knows anything about firing people, the one place in the world you don’t want to do it, is France. Here we think your company is there to make profits, maybe even, you know, have an exit strategy. Not so in France. Your job in France is to employ the people of France.
And so we got over there, I met with the head of the subsidiary. We walked out of a conference room. And literally we get about three steps down the hall and he yells, “Where’s your briefcase?” And I said, “It’s back in the conference room.” And he said, “Run.” And so we ran back, and we grabbed it. And we were being trailed by the unions who were going to grab the presentation that I had on the proposed downsizing and publish it in the French newspapers.
And so I’m sitting there in France in my little hotel room that night, and I’m thinking, “Now, somehow this has drifted too far away from where I want to be.” And it was at that point that I made the decision. It took me a little longer to actually pull the trigger. But I knew I wanted to do something creative, I wanted to be an entrepreneurial and I wanted to do it in tech.
Andrew: And SimCity is part of the inspiration that told you where to go and what to build. What was it about SimCity?
Pete: Yeah, I remember the day, I was sitting there in my corporate office cubicle, and one of the tech guys came in and he’s got a group of people around him and he said, “You got to see this thing.” And there it was. It was a simulation. And we have done simulations back in my business school days, but they were just a bunch of numbers in and numbers out and then the computer did a turn and you got your revenue back. This thing is visual. You can see the little city there. You can see all your little Sims running around, you can see your power plants, your roads, your traffic jams and everything you needed to do. And immediately that caught my attention.
I said, “If you can make these things visual like that then you’re going to pick up a whole bunch of learners that are visually oriented.” Most of us really are. And, you know, they’re not a spreadsheet, most people live their lives by spreadsheets. And that was what intrigued me the most.
Andrew: What do you mean? So the truth is, for me, I tried all the Sim games, I could never figure them out. And I’m a visual person to the point where people in the audience have said that I say the phrase “I see” a lot because I don’t fully understand something until I see it in my mind’s eye, I guess, and that’s why I use the phrase, “I see.”
What I don’t understand is, what was it about, how would you use the simulation to teach something? What’s a topic that back then you envisioned that could be taught better if people could visually see it as opposed to, I don’t know what, listening to it or seeing numbers on a screen? What’s it [inaudible 00:08:48]?
Pete: Yeah, I mean, being a student of business and having gone to business school, my immediate attention turned to businesses. They simulate well, they’re good systems, you’ve got customers coming in, you’ve got stuff you’re trying to get out, you’ve got people moving around, etc. You know, I actually did think about, could you actually teach city planning or something like that? But more people are interested in business than city planning.
So that’s why I turned to that. And we started with the very simplest store we could come up with, a little retail convenience store and tried to model that.
Andrew: Can you teach the person who runs the convenience store how to run it better with not another guidebook to running it, not another manual, but a visual simulation of the store and a task? Now I’m starting to imagine it, would be a set of tasks like, “Stock the shelves, make sure that you clean the floor.” Is that what you had in mind? No.
Pete: Yeah. It is. Literally being able to see every single product on the shelf, make decisions about where to place them, if they are disorganized or you don’t have the impulse product sitting in the front of the store, but in the back of the store and nobody ever goes to them. The ability to really manipulate a virtual world and to learn by doing that.
You might have heard the old, I think it’s a Chinese saying, and it applies to you’re seeing there, you know, “I hear, I forget. I see, I remember. I do, I understand.”
Andrew: Yeah. So you’re saying, “Look . . . ”
Pete: So you want them to do.
Andrew: And the convenience stores are not like the mom and pop owned one store, type of situation. You are imagining a chain like a 7-Eleven or some of the smaller ones like Am-Pm, am I right?
Pete: Yeah, we went out and interviewed a ton of people and found out all kinds of interesting things about, you know, how they actually operate. And we tried to put that kind of rich sort of detail into some of the simulations.
But it’s really about getting them in there and getting the students thinking, doing. But you’re right about not being able to succeed with like SimCity. It turns out that there’s a lot of things you have to do differently from a game.
In a game you’re trying to super challenge somebody, get hours of game play out of it whether it’s for advertising or because you’re charging money for it. With a simulation, the student has to be in a classroom. They have to be able to be successful within, you know, let’s say, an hour. And then they can be challenged further. So it’s turned out to be very different for [inaudible 00:11:08].
Andrew: Okay. That was the vision. The first step though was firing up Visual Basic. And I remember Visual Basic, I remember when my brother showed it to me for the first time. It was like drag and drop parts, right, on a screen that gave me the impression that coding would eventually become like Lego. But underneath it, it was more powerful than it seemed. And also more complicated than it seemed because you did still have to look at code screens, right?
Andrew: Because you could do things like say, I want to give the user a control, a slider, I’ll just drag the slider from, I don’t remember if it was on the left side or the right side of the screen, but from this tool box, drag it, put it on the screen. Now you double click it and you start to tell the system what it does, but you’ve visually laid it out, right?
Pete: Yeah, you’ve got it, I could tell.
Andrew: I looked over my brother’s shoulder as he did it and then I never got to do it myself. You fired it up and you said, “I’m going to do this.” You’ve set yourself up in a spare room of your house because you said I’m going to take this seriously and make it into a business. And, what did you create?
Pete: So basically what I had to figure out was, everybody was telling me, “If you’re going to do rich visuals, you’re going to need to program in some low level language, C++ or something like that, Visual Basic will never do it. It won’t refresh the screen fast enough, it’ll just be lame.”
But computers were getting faster and faster, so I thought, “Let’s try it.”
So the first thing I made was this wire frame cube. And put the geometry in there and then applied the matrix transformations to it to make it rotate and then expand. So one day I’m up there and I’m working on my cube and I’m making it look good, I’m making it smooth in the animations, etc.
And my wife walks in. And she says to me, literally, “You just quit a hundred thousand dollar plus corporate job to build an exploding cube?” And I said, “Isn’t it a great exploding cube?” She just walked out.
Andrew: How nervous were you guys at the time? We laugh about it in retrospect because things worked out, but you gave up a good amount of money, you also gave up security, you gave up this identity, how scary was it?
Pete: The great thing about, I think, humans, which is it was scary at the time. But if I think about it now, it should’ve been much scarier. So I think the things that I didn’t know and the fact that I was younger helped a lot. So sometimes you just dive in and you don’t know how scared you should be and that’s the way to be as an entrepreneur.
Andrew: How young where you?
Pete: Not that younger, I was probably 33, I think.
Andrew: Yeah, I thought so because you had a good experience behind you.
All right, at the same time though you did have some outside money, you applied for a grant, did you get it?
Pete: Yeah. So, somebody had told me, I had gone down to the MIT Enterprise Forum. I think they still run it where people talk about the different opportunities and somebody had mentioned the Small Business Innovation Research Grant, SBIR. So I wrote a contract for one of those. Got it. And that was the first $50,000 that got us off the ground.
Andrew: And you just apply for a grant and get it from the government? I never would think to do that.
Pete: I know. I was really surprised about it too, more people should give it a shot.
So with this program basically the idea was that some, you know, actual on our days, good in enterprising congress people, got the idea that all the big companies like my dad’s old aerospace company were getting so much research and development money that essentially underwrote their entire businesses that maybe small businesses should get some too.
So every government agency has to allocate a certain percentage of its research and development budget to small companies. And people should go after it.
Andrew: I had no idea. So now I’m Googling it, as we’re talking and there’s way more articles about this than I could read here during the interview. But I can see that that’s an option and there’s something called grants.gov which I guess is a place where you can find out about government grants.
Pete: Yeah, I did all this before the internet age so I’m sure it’s even better now. And it’s really, it’s a great program. And you have a contracting officer, you learn to work with the federal government. You get a federal government contracting number and all that stuff, which is very useful in the rest of your business.
Andrew: Because you could end up getting them as clients. So the grant means they give you money, you don’t have to give them a share your business, right?
Pete: Yeah, you do have to write a couple of reports but they’re not too bad.
Andrew: And then because you get the contracting relationship with the government you could potentially sell to them and they’re good customers if they buy.
Pete: Yeah, we wound up supplying educational simulations to all the Department of Defense schools around the globe.
Andrew: All right. I want to find out about that. Here’s what I want to know, we’ll talk about my sponsor now, but I want to know about, now that you had your money, you had the idea, you knew how to actually make something spin on a computer, what was the first version that you created? How did you get your first customers and then I want to see the evolution of the business to what it is today.
And I also want to ask you, since I’m in the educational space, I think more and more of us in one way or the other are in online education, even if it’s software that we’re selling, we have content marketing, we know that education is a way of promoting it, we’re all doing the same freaking thing that existed before the internet but we’re doing it online.
So we’re writing articles, which is basically like old magazine articles except they’re put on the internet, or we’re doing courses which is basically a guy talking to a group of people which is basically what we had back when our teachers taught us in school. I feel like there needs to be something different and there isn’t, and I want to pick your brain and see what you see for us that we could do.
But first, I’ve got to tell everyone about . . . is that reasonable, all these things fit your agenda?
Pete: That sounds good.
Andrew: Okay, great. So here’s what I want to tell people, a few months ago one of my past guests, the founder of Spartan Race, saw that I was drinking soda and offered to kick my ass. And I think it was he said, “Look, I fire people for drinking soda because I don’t believe in it.” And I committed not to drinking soda, but part of that commitment also was to eating healthier and I had a hard time doing it.
So what I did was, and partially frankly my problem was pizza in the middle of the day, I have a lot going on like you saw today, Pete, I was rushing to get to you because there was a Skype update that caused trouble. And so all this stuff cuts into my lunchtime, gives me a little anxiety, when I don’t have time, when I’m full of anxiety I eat junk food.
And so a friend of mine, Sachit Gupta who I work with, introduced me to Athletic Greens, he had a box of it sent to my office, a bunch of like everything from Athletic Greens. Protein, this and that. And I started drinking it. And the package says it is going to give you energy and it’s going to be great for your immunity. I don’t know if I could speak to all that. I will tell you this, I started to feel better because I was connecting with vegetables.
I started to feel better because it filled up the part of my diet that was getting full with soda and other unhealthy snacks. And as a result, it became this pivotal habit that then helped shift the rest of my eating. Instead of going down for pizza I realized, “You know what? It would only take an extra 10 minutes to have the quinoa at the corner store from . . .” I love Eatza, I get it from Eatza. It did make me say, “Why don’t you question what you put in your body?” And not have all the other junk stuff like potato chips became a big thing for me. I don’t have it nearly as often.
And so here’s the thing, Athletic Greens, it really tastes like having, not a smoothie, I guess a smoothie is usually fruit, right? It’s whatever the ground of vegetables are. That’s what it tastes like. That’s what it feels like. And then it starts to make you feel, I guess, for some people it makes them feel energized right away and build up their immunity. I don’t know if I have any of that.
I do know this, I drink this, I feel healthier. I drink this, and I start making better decisions. And I do like their basic premium super-food cocktail. It just tastes good. And I drink it instead of soda.
And I also like that since I’m a vegetarian I’m always aware of what my protein levels are. I think even meat eaters should be aware and they’ll realize you’re not taking in as much protein as you think. I like their vegetarian protein shake that tastes like chocolate.
If you want to try it, if you want to start to your new year with this stuff, I know it’s kind of weird for me to be talking about, but I’ve never expected to care about this stuff, I do. If you want to try it like me, go to athleticgreens.com/mixergy. I forgot to seal the package from the last time I drank it and now when I squeezed it there’s like powder in the air here.
Go to athleticgreens.com/mixergy. You’re going to see they have a hot model right on the cover, right the first thing we see. And then along with that hot model, hot model means they took a photo of me and they photo shopped it into their site, they also have a bunch of other people that you know and respect and know much more about nutrition than I do on that page like Tim Ferriss.
And you’ll get a 30% discount off your first order. So go to athleticgreens.com/mixergy, athleticgreens.com/mixergy.
All right. First, what do you think about that? I was watching you as . . .
Pete: It sounds good. It sounds good, I’m trying to get a few pounds down and get off the junk food and get skiing. We have 24 inches out here in the Northeast yesterday.
Andrew: What did you do? You look healthy. You look, not just healthy, you look younger than your age based on like your history, I’m seeing that . . . what was it that computer that you mentioned was from the ’70s. You don’t look like a guy who had been . . . am I right?
Pete: Ah, the only thing that I do is I have three kids, that helps. And then I play in an over 50 baseball league.
Andrew: That’s it? You’re not eating any better?
Pete: I try to. My wife would have me eat much better.
Andrew: All right. So now we know that you got some money. You had some programming experience, you had a vision for what you were going to do. What did the first version of all this look like?
Andrew: Tell me about that.
Pete: So basically, I didn’t really feel that I had enough money yet to hire a professional artist and I wanted to prove the concept first. But I’m a bad artist.
So what I discovered was, I started to make some of it different, what they called sprites, the things that would go on the screen and show the animations at a pretty reasonable size. And they were awful. They were just terrible. So I discovered that the smaller you make something, the easier it is to hide your bad artistic talent. So basically, I had these tiny little products and tiny little people running around my simulated stores. And it was still visual. And you could still figure out what was going on, but it hid the flaws. So that’s a good example for your audience, when you’re an entrepreneur you do kind of what you need to do.
Andrew: So, you know what it’s interesting? You actually did go out and you talked to store owners, you talked to the people in the store back then when it was unusual to do that. Most people would say, “If you have an idea, just go and build it.” You then went after them. I’m wondering why them first. And I’m wondering how you knew what to make these little ants do. So, why them? Why go after grocery store owners or grocery store employees?
Pete: Simply because I didn’t know that much about the business. And I knew that if the simulation was going to tell a story really, tell the life, the experience, the decisions, it had to be pretty rich with details. Like if you read a short story, think about that, and it’s just general, it says, “This person runs into a challenge. This person overcomes the challenge. He gets a buddy.” It’s boring, right? What is it that makes a story? The details make a story. And that’s really what we were trying to do.
So you know we would put pieces in there about, for instance, what do you think one of the most shoplifts items is from a small grocery store?
Pete: Close, but it’s related to that in a weird way. It’s actually kind of sad, but it’s baby food. It’s really small and very expensive. And that’s why nowadays you see it locked up in a lot of places.
So, you know, it’s that kind of detail that we put in there and our little students would come out, they put all their stuff out there and they would expect people to steal the candy. And then the baby food would be a missing.
Andrew: So one of the stories was, you’re here, you’re supposed to guard the store for the day, now what are you watching, and they pay attention to the candy. You can see that they’re clicking on that. But in reality, someone is stealing the food.
But that still doesn’t tell me why go after them. I don’t see anything in your background that tells me that your parents were working at grocery stores or you had any grocery store experience, nothing. Why them out of all the different store owners?
Pete: Because it seemed like a business that, let’s say we’re going to go after the high school business, I knew every high school kid had been in a convenience store. And a lot of them had their first jobs in retail. So if we could get them familiar with terms like gross margin, SKUs, things like that, I knew immediately when they went out to talk in an interview for a job, it would be useful. So they could talk the language of any store they went in to apply.
Andrew: I see. And you were thinking of this as something to sell to schools and they would offer it to their students as a way of helping them get jobs.
Pete: Essentially, yes. You got it.
Andrew: Okay. All right. So I get that. Now I see. I still actually, man, of all the things that you would teach a student. I would think it would be learn how to program using this or learn how to do a job interview or something more universally applicable than that.
Pete: Well, in a weird way we thought of it as the, you know, nowadays obviously retail is under a great deal of pressure. But I think I thought of it as the simplest business I could put out there. You buy stuff, you put it on a shelf, you mark up the price, somebody else buys it from you and you net the difference.
So in a way it was that super simple business. I could teach them about a profit and loss statement. I could teach them about the money they need to stock the shelves initially. I could teach them all the terms involved in it. I could teach them about meeting customer’s needs. I could do product, price, promotion, place, the four Ps, all in one really simple environment that everybody had been in.
Andrew: Who pays for this stuff? How did you find a school that would actually pay?
Pete: That was the question, initially was, could you actually make a business out of this stuff? And we were very lucky. We did find that schools would purchase this stuff. It turns out that there are certain things that have better funding than others. And in this country one of the ones that actually has pretty good educational funding is what they call Career and Technical Education. And we fall under that from a budget standpoint.
And so we were able to work with schools all across the country. We probably sold to between a third and half of all the high schools in the country. We price our things reasonably. We try to provide them with good value. But there is money out there if people have educational tools that they think will really help their students.
Andrew: You know what? I asked my team, whenever we have a potential guest to also come up with a good headline. And the one that they picked for you was, “How Pete Jordan bootstrapped Knowledge Matters to become a software company that serves a third of all high schools in the U.S.” And I thought, “Someone misread the data, there’s no way that the software is . . .” I don’t even know if computers are in a third of all high schools in the country, but I guess that’s true?
Pete: Yeah, we’re over 9,000 sites that we’ve deployed software in and depending on how you count the schools is probably closer to half that makes up.
Andrew: And was it you, Pete, calling up the local school saying, “Hey, I’ve got this thing that can help your students get jobs. Here’s how it works. Can I come in and demo it.” Was it that?
Pete: Well, as you said, you’re in the education business and you do not want to do that. So basically you need to find . . . you know, in this business it’s so fragmented. It doesn’t obey any 80-20 rules or anything like that. So what you need to do is, you need to find some sort of leverage points to work with.
In our case, we were really, really fortunate. And it happened by happenstance. I started out doing essentially as a marketing plan what you just talked about. We were going to, you know, go and call on them. But we were at a conference for a student organization called DECA, which trains kids that are interested in marketing, they’re a national organization. You know, probably people have heard of that one or Future Business Leaders of America, similar one.
And I was there with a partner who was a kindergarten friend of mine who decided to quit his banking job and join me when we first started selling. And I went to the bathroom. And I came back from the bathroom and he says, “I hope I did the right thing.” And I said, “What did you do?”
And he said, “Well, the executive director of this organization just came by and he said, ‘Can you run a competition for 200,000 students nationwide using your simulation software?’ And I said, ‘yes.'” And I said, “You did the right thing.” We had no idea how we were going to do it, it was due in about six months. We did that and today about, we finished up one a couple of weeks ago, about 40,000 students participate in our, for-free, challenges through that student organization.
And it’s things like that that nationally get the word out about products to the literally tens of thousands of schools that are out there.
Andrew: You know what? That is the one thing that caught my eye when you were suggested as a guest by Jeff Rutherford. He’s a longtime listener who’s helped out a lot with Mixergy. I had no idea this existed. He sent me like all this info about you, much more than is available about you online. I told you, I couldn’t find a LinkedIn profile for you.
But he said that every year, Knowledge Matters, runs a hugely popular virtual business challenge in partnership with DECA, a national high school organization, with the virtual business challenge thousands of high school students across the U.S. compete online. And then finalists compete head-to-head in a live virtual business challenge every spring.
The reason that stood out for me is, I was not a computer geek in school. I was a business geek in school, walked around with business books all the time, dreamt of starting a company, talked about this stuff nonstop. There was nothing in my school outside of . . . what was it? Oh, I forget the name of that program that . . . it was basically nothing in my school for teaching entrepreneurship or supporting business. I had no idea this even existed.
Pete: Oh, you meant to say Junior Achievement?
Andrew: Junior Achievement, that’s the phrase. Yeah, and that was the . . .
Pete: And they do a good job. They’re more oriented in economics. These organizations that we work with are more into actually like starting businesses and, you know, doing that sort of thing. So, yeah. And I didn’t have these in my high school. I didn’t know they existed.
Andrew: I would have loved it. And frankly, I know that everyone talks about losing music and art. I hated music and art. I’m not saying music and art stinks. I’m just saying for me it was personally painful, I did not enjoy as an adult or as a high school kid sitting in a music class. And you shouldn’t force someone to enjoy it. I would have loved this. This was a disappointment for me.
So what I’m curious about here is, the first version. Now you had this thing that you had to put together inside of six months, you’d never done it before, you weren’t even sure if you should have said yes to it or your friend wasn’t sure you guys should’ve said yes to it. What did that first version look like? How did you put it together for them?
Pete: I did manage to find an artist who was relatively inexpensive who would do some decent . . .
Andrew: No more ants?
Pete: No more ants. Who would do a decent sized art for me, you know, one of these things that comes up in business and you’ve got so many entrepreneur listeners there, I’m sure they’ll relate to this, the very first meeting we were supposed to have, he forgot it. He stood me up and I gave him one more shot. And we worked together for, I don’t know at least 12, 13 years after that. So that’s the way those things come about.
So we had a good looking one. We were able to do that. We flew computers into . . . yeah, we shipped them down there and put it on in their national conference in Louisville, Kentucky, right before the Kentucky Derby. And in those days, you had to ship full monitors, if you were going to do this. So we had like a truck full of stuff going out.
Andrew: A full monitor meaning not the flat panels that I’m [inaudible 00:31:50] right now.
Pete: Not the flat panels.
Andrew:Those big ones.
Pete: Yeah, like the big thing. So we have those all set up. And it worked out great until the very final competition. And at that point things basically busted. We had to improvise and kind of declare a winner. And as we were coming out of there I said, “Man, that’s like you would under par for 17 holes and then quadruple bogey 18.”
Andrew: You know what? When I saw that the first contest was for 200,000 students, I imagine. “All right, they’re all going to be online.” I totally forgot, they weren’t online back then. Right?
Pete: That’s correct. So what we did, there was internet, so they had to download a piece of software, install it on their computer and then run it and then upload a score. So they weren’t really online [inaudible 00:32:43] but they could upload, yeah.
Andrew: And that’s how you had national entrance. And then the winners of that came into the conference and competed with these computers that you had to ship in, is that right?
Andrew: So what was the competition? What were they supposed to do? They weren’t supposed to stock shelves and make sure people didn’t steal the baby food, right?
Pete: Essentially, they were.
Andrew: They were, so it was essentially the same thing that you created before but now you put points to it and you allow people to compete against each other?
Pete: Yeah, we just gave them an empty store. And actually we gave them an empty city. So the city actually looked a lot like SimCity, they had to pick a location and there was indications of where there were more customers than others. They had to start their store, arrange all their shelves, price all the products, decide what to carry, all within about 20 minutes.
Andrew: I see.
Pete: And the students always rise to the occasion, they have for 15 years I’ve been doing that.
Andrew: Who wrote this? You wrote the code?
Pete: I wrote the code on that piece, yep.
Pete: Yep. And then we’ve since added other great coders who’ve gone far beyond where I can. But I wrote the original pieces.
Andrew: That sounds really impressive. Is it as impressive looking back as it seems right now?
Pete: There’s something very nice when you’re starting a business about having your hands in it deep enough to be able to create the content. Like with your business, you know, when you know you need to create something and it’s got to be the way you want it and you got a vision for it to be able to just go out and do it, it’s really refreshing.
And that technical background I’m so glad I had. If I had to go out and hire a programmer and try to describe what I wanted to do, I don’t think it would have ever worked.
Andrew: All right. Things were working out and then you make this big mistake. That you only know is a mistake in retrospect. We’re going to talk about that in a moment.
First, let me talk about my second sponsor which is this thing that I’ve been doing on the side of Mixergy. Here’s the problem, a few years ago I realized that e-mail marketing was really powerful, and I don’t know why, I think one social media came up, Pete, I thought, “E-mail is dead. Let’s just focus on social media.” But I realized, “No, when someone comes to my site if I can get them on my e-mail list that’s the most powerful way for me to stay in touch with them.” And so we built our business for a while there based on email communication.
Then I realized that people weren’t opening e-mails as much. Not just mine, I thought it was me maybe our writers weren’t doing such a good job, or I wasn’t doing such a good job, or I don’t know, maybe I didn’t have a good list. But I started asking my friends who have email lists and I realized that they also didn’t have huge open rates, 20% was exciting, 25% was exciting. But it wasn’t the 50% that it used to be.
So I thought, “Why?” And as I talked about email with my team, I realized, oh, that’s why. No one here comes to the office in San Francisco. We’re all talking to each other, but we’re not using e-mail, we’re using a iMessage, we’re using . . . at the time we were using Slack a little bit. We’re using Facebook Messenger. All these different chat apps. Now I’m using Telegram with someone on the team because I want to see what would happens if you let the messages disappear. But it’s all different chat apps. And I thought, “Oh, of course people are spending more time in chat than they are in e-mail. E-mail feels a little antiquated right now.” So what if we could reach our people using messaging, would they like it?
So I ran an experiment, some of you might have seen that I did it. And man, there was so much excitement for it that I started teaching people how to do it for themselves. Then I started teaching people how to do it. And then get clients to pay them to build . . . these are called chatbots that allow you to message people on a regular basis. And that started to take off.
And so now I’ve got this side school where we teach people how to create chatbots and we show them how to get clients. And in many cases, we will even send clients to them. And if you want to check it out guys, see what this is like, go to this URL. There’s nothing to buy there, botacademy.com/mixergy, when you go there, I will by the time this interview is done, set something up, where you can actually experiment and see what a chatbot looks like.
And if you want to hire one of our graduates, we’ll enable you to do that, so you can get a chatbot built for you. Anyway, this I think is exciting, it’s the future. I’ve made a couple of angel investments in software companies that create chat. I’m so excited about it that I can’t wait for you guys to try it out. Go to botacademy.com/mixergy. See what our chatbot is like. Experience it. And if you want one, we’ll either teach you how to do it yourself or we’ll turn you on to one of our graduates, who will build it for you. Let me say it again clearly, bot as in robot, botacademy.com/mixergy.
I’m looking to my desk if I have the robot. No, I got rid of . . . here. Here, a bot like this. Like a robot.
Let’s go. It sounds like you know about chat bots, I was noticing as I said it. You’ve been thinking about this.
Pete: Well, no, but I thought it was really cool. We haven’t utilized them yet. So I will go on and check that out because I remember the day that I saw Google put that Promotions tab up there. I was like, email is dead.
Andrew: Yeah. And now we even like my co-worker Cam Pham who works with me on Bot Academy, when he emails me, he goes into the Promotions tab, I don’t know why, I just did as much as possible. I disable all those tabs for myself, but I know not everyone does that. And so that’s a problem.
Pete: I will check it out.
Andrew: Where could you see what you can do with chat bots, beyond just sending messages, the company that I invested in, one of them is Assist, the founder told me about all the clients that he got in New York and what they’re building and I said, “How about just come over to my house on Monday for a scotch, we’ll just sit, we’ll have a scotch, I haven’t had one in a long time, haven’t caught up with you. Just tell me what you’re doing behind the scenes.” That’s one of the things that I love about living in San Francisco, is people here, they’re doing clever things. Where are you guys based?
Pete: We are based in the middle of Massachusetts, out by Amherst College University of Massachusetts, Amherst Smith College. Surrounded by knowledge.
Andrew: Do you know how much we could do flies in the face of the tech world? Number one, bootstrap, right? Not outside funding, except for the grant money.
Andrew: Right. Number one, number two, you’re basically where you are is, I’m not saying the middle of nowhere, but it’s not the heart of Silicon Valley or New York or like right next door to MIT. And number three . . . number three, I forgot. Oh, you didn’t sell out.
No. Here’s number three, when I was trying to get a beat on how well you guys are doing, I look on LinkedIn and I saw there was like 11 people in the whole company. How small are you guys?
Pete: We have about 11, it might be 12. I think we’re just started advertising for three more spots. So we’re, you know, 15 people.
Andrew: Really small. That’s amazing you could do that. Don’t take that as an insult. That’s impressive.
Pete: Yeah. One of the things we do which has really been cool is, we’ve been around long enough that a lot of people who are teachers, new teachers find out about our stuff at conferences across the country, and almost exclusively it is ex-teachers or teachers who are out for the summer who represent us at those conferences on a per diem basis. So there’s a virtual workforce of customers that are out there talking about your product.
Andrew: So you don’t need to hire salespeople to do it, you hire teachers who are the people who care about this and know it. Wow, that’s impressive. How many of those do you have out there?
Pete: Well, probably have like 10 or so of those that operate in the different regions of the country.
Andrew: Impressive. What’s the title that you give a role like that?
Pete: I don’t actually know what it says on their business cards.
Andrew: Okay. I’m looking for someone who cannot do sales but just demo bots for our business, I’ll pay you, just demo bots for people. Show them what it’s like. We do one on one for businesses because once they see it they’re going to want one of our graduates to build it for them.
I’m just looking for the right title for it. I don’t want it to be a salesperson.
Okay, so you’re looking at this and you’re saying, “This is working. This is exciting. This is having impact. I could probably take these simulations and apply it to other things like . . .” what? Teaching, what?
Pete: Yeah, so, you know, everybody’s mistake is you think it worked once you can just do it again. So just like I had seen SimCity, and had that idea that it was a system that I could make it into a business simulation, I was looking at Civilization. Now, are you a gamer enough to know what Civilization was in the old days?
Andrew: I was enough to try it. And again, I get lost in these worlds for some reason. I don’t know why. So yes, I did try everything about, it feels really compelling to me and still, I didn’t know where to start, where to move, what to do when they just didn’t usher me in through it. And I guess I’ve such a short attention span for games that I gave up on it. But tell me a little bit more about it.
Pete: So basically for your younger listeners, it’s kind of a precursor to Clash of Clans or something like that. But basically you had your civilizations and you try to grow them and they covered all the ancient civilizations. So we said, “We’ll just take that.” And we know that kids in schools study social studies and they study ancient Egypt. Sometimes Ancient Greece and certainly Settling America here in the U.S.
And so we’ll just build simulations of those periods with the wars and the economy and everything and it will be great. Everybody will buy these things. So we built those three simulations, Egypt, Greece and Settling America. They were great simulations, teachers loved them, students loved them, and they sold like blank. It did not work at all. And obviously frustrating.
Andrew: Why? If they love them, why didn’t they sell?
Pete: So, you know, it’s always hard to pick it out but we identified finally three main reasons. One, the social studies teachers are not inherently techies. So they could look at it and say they loved it but when it came time to bring it into the classroom that was another thing. They also didn’t quite have the guts to tell the tech-guy in those days to install it on the computers because he or she was going to give them a dirty look, “Why do I have to have new software? It’ll bring viruses, blah, blah, blah, it looks like a game.” So that didn’t work.
And then there just really wasn’t funding. It turns out that social studies is kind of the low person on the totem pole in the U.S., you know, it comes sort of math first, then science, then maybe English, all the things that they test you on and then finally kind of down to social studies. So we did have to kill that one off. I would love to bring it back someday now that it’s so much easier to do things online.
Andrew: How long did you spend on that project before you said, “It’s not going to work out. We’ve got to move on?”
Pete: Certainly a full 2 years, probably 18 months in development and then probably another 12 months, you know, sort of actively selling it and then probably 6 months agonizing over it.
But I did find out one thing about entrepreneurship and business which is, unlike your kids, you can shoot the ones that don’t work out. And we did it. We moved on, past it. It turned out to be a great thing because the very next year somebody came to us and said, “Can you guys do a personal finance simulation?” So something that after this SimCity, you probably know The Sims came around and that was not a simulation of a city, it was a simulation of life and your little Sim people. And of course the little Sim people because it was a commercial game got less and less dressed and, you know, became hotter and hotter looking.
So they said, some people come to us and say, “Can you do the same type of thing where you live a life and have all your financials, but it’s usable in the classroom and everybody is getting naked?”
So we built that, and it’s become actually our best-selling Sim of them all. It’s a personal finance, you have a little Sim like person, you get apartments, you get education, you get jobs, you build your career, you file your taxes, you invest. It’s great simulation. It’s just teaches you everything there is about personal finance.
Andrew: And who’s paying for that?
Pete: That’s also by high schools. So that one is used, I think we had over 150,000 students run through that last year. So I think in terms of, you know, everybody says, “Students aren’t financially literate anymore.” You know or they’re not up to this stuff. I think probably we’re reaching as many as any other major piece of curriculum out there with them. And hopefully they’re learning from it because they’re actually doing something, not just reading about it.
Andrew: You have this phrase that you used with our producer when you talked, that I highlighted for myself. it was, “Had laser like focus with great peripheral vision.” I’m really good about the laser like focus, and I’m bad at the peripheral vision. Tell me about where that phrase came from and what you mean by that.
Pete: Oh, I wish I could attribute it to somebody because somebody did tell me that and I can’t remember who it was. But it’s been the best piece of advice that I ever got as an entrepreneur. So what I mean by that is, if you’ve got any kind of a good idea. Like, you know, your bot idea or any of the many things you’ve probably done. As you know, there’s so many different places you could apply that, to just all over the place. Especially nowadays, there’s so many things you can do with technology that you can become paralyzed.
I mean, when we started this people said, “You should do this with schools, you should do this with corporations, you should try to train in Walmart.” Etc. And you can get stuck or you can do everything really badly.
So with laser like vision, you focus on something and you just put your head down and you work at it trying to get it done. But the odds that you picked exactly the right thing where the best opportunity is, are essentially zero.
So it’s going to be something out the side of your vision. Like I told you I’d never heard of that DECA organization before I started marketing, and I would’ve done it all wrong. But while I was in the [inaudible 00:46:28] fortunately my friend had the peripheral vision. And he saw this thing off to the side and grabbed it. And that turned out to be one of the best relationships we’ve ever had.
So you can’t move unless you’ve got a stake in the ground and go for it. But it’s probably going to be some really cool to decide that’s going to wind up being your biggest opportunity.
Andrew: And you give the example about Walmart, someone’s going to say, “Why not do Walmart?” I thought that you guys only did schools because when I’m on knowledgematters.com the two columns that I see on the page are Virtual Business for High School and Virtual Business for College. I didn’t realize at the very top just three letters, “Pro, link me to the virtual experience employee training” how did you then end up with the employee training considering that it’s outside of your focus?
Pete: Totally inbound to us. We have never marketed towards it, but we have had companies contact us. We’ve worked with some great partners over the years, that had not only used some of our stuff but have helped to sponsor the schools. You know, one that we’ve worked a lot with and did great stuff is with Marriott Corporation. And so we’ve done it opportunistically. Great to work with. They all tend to be pretty custom, they tend to be pretty time consuming. You can imagine the way we try to run our operation lean, you know, with 12 people or so that, that can soak up a lot.
So we’ve done some, you know, we’ve talked to some of those mega retailers, etc. But my vision and my passion is really reaching a lot of people, not just doing the thing which might earn the most money in a narrow [inaudiblek 00:48:10].
Andrew: I see. So a third of all high school students in the country is exciting, but everyone at the local RadioShack is not really, it’s not big enough. Not that RadioShack even exists, but something like that would . . . I was looking for a good example with the screenshot that I have here in front of me. There’s one about how to set up a store with mini tablets, tablets, gTablets, home laptops, like it looks like a real store, except it’s all cartoony.
Pete: Yeah. And so that’s the environment that we train these people in, and we have done retail simulations for national franchise stores. I can’t name who they are. But yeah, it’s a great tool for training workforce people, but it is [inaudible 00:48:58].
Andrew: And it’s available like a la carte, so if I had a store and I wanted to do something on product placement that would cost $6.99, plus if I wanted to teach my people about consumer behavior, marketing ethics, all of that together it would end up costing me $19.92 per student.
Pete: That’s our college piece that you’re looking at now. And that’s a brand new piece. That piece we only released about three weeks ago. So we’ve done all these simulations, they’re really fun for the kids, but I really wanted to do something right for college. I didn’t just want to retread the high school stuff in there. So I went back to my business school days where I read over 900 case studies in business school, 900, I can’t believe I did that.
Andrew: That’s a lot. And I have to tell you, I loved those case studies. That was the best part of education for me.
Pete: Yeah, they’re great and they’re a wonderful, wonderful way to teach business. But I’ve always had this sort of a hollow feeling at the end of them that somehow just disgusting them and saying what I would have done wasn’t enough, that you ought to be able to jump into this world in some manner and try stuff and then read the reports that you’ve seen in the back, all those exhibits at the back of things. They would change based on what you did and then you’d figure out the right way to go forward.
And so that’s what we tried to do for college. We’ve taken a lot of our base technology but reposition it as what we call case simulations where it presents a student with a difficult problem and then they have to jump in there and they have to take action. They have to see what happened in their business and then they eventually hopefully have to sort it out. And as you say, we divided it up into those little pieces, product, placement, consumer behavior, even marketing ethics, pieces like that that are in there.
Andrew: Right. Let’s talk about what you told our producer was your lowest point and then we’ll get back to how big the business is today. And then finally, some advice for me and anyone else who wants to do online education about how to do it beyond like the offline stuff brought online.
So the lowest point you told our producer was online computing, I mean, cloud computing, the site one day went down, which happens to everyone. My site went down the other weekend. Thankfully, it was just for 10 minutes. But, what happened with you guys?
Pete: So this is back a while ago. This is before anybody called it cloud computing. It was probably the early 2000s, maybe 2003, somewhere in there. And being an entrepreneur I wanted to focus on the stuff that I wanted to do well, and I wanted to outsource everything out and let somebody else do that.
So we had somebody hosting our site. And as we started to have more than just a website, we started to, for instance, get those scores uploaded there from that competition that we mentioned. We built more stuff up there, we put our customer database up there, it was a simple SQL database. And all that was going great, the people were responsive.
And then one day the site went down, just like yours did. And we called, “When is it going to come back up?” And they said, “Shortly.” And then they said shortly again. And then they didn’t return the call. And then they went away, forever, 100% unreachable dark.
And so that night, and I drive by it every time I go home now because it’s still in the same direction, drove by the cement factory. And I distinctly remember I pulled off the road of my car because I couldn’t drive and think at the same time. I knew I had these people that I was responsible for, employees, I knew I had these customers out there. And everything was gone. Our customer records . . . It’s all on there.
Andrew: Oh, that’s so bad.
Pete: It was bad. And so, we got things together like you have to do. And we managed to quickly get some version of the site back up on another host. And then we actually pieced together all of those customer records from old purchase orders that were on paper in those days. And re-entered them.
So now in the world of cloud computing, we do use cloud computing, we’re using it more and more. We’re using AWS to serve some of our online stuff. And it’s great, but we do spread anything critical over several places and we have some physical backups on our own too. So, yeah, for all the wonders of cloud computing remember that it could actually disappear 100%.
Andrew: I keep getting this bill from WordPress which is what we use to backup our website. Why do I keep paying WordPress and a hosting company? We have backup from a hosting company, and I have to keep remembering because even the website could go down, I haven’t had a website disappear in my whole life. And they don’t seem to go down for long anymore. But, wow, that’s painful. I’ve got to remember that.
These days in my computer right here is now dead. The one that I use for day to day just died this week. But I don’t care because every single thing is in Google Drive, it automatically goes into Google Drive. I paid a $100 a month plan to have 10 terabytes.
And then I use something called Backupify, which I thought was going to kill it as a company, which backs up my Google Drive. But apparently, not enough people care to back up their Google Drive because they just count on it always working that Backupify, I think was sold once or twice and never became the huge company that I thought it would be.
Pete: Right. So, yeah, everybody should keep at least a little bit of backup out there somewhere. And I’m not exactly a disaster oriented person, but at some point, we will get a very serious cyber attack and so. It’s going to come.
Andrew: Okay. So how big is the business revenue wise, how much revenue did you guys do in 2017?
Pete: We don’t disclose our revenue, but we’re somewhere between the $2 and $15 million range.
Andrew: $2 and $15?
Andrew: That’s a pretty big band.
Pete: That’s why we don’t disclose it exactly.
Andrew: I see, why did you go with two versus one? Somewhere between $1 and $15, that seems like an odd band.
Pete: Yeah. Just simply because . . . I remember back when we were around one and just under one, and it felt different. There’s a little difference to a business when it gets into those ranges. And you just in general, you know, example of the reach, sort of, that we try for, I checked some of our recent numbers and with high schools, like I said, that’s a key driver for me. I like to reach people.
And so this year in one semester we will educate for business slightly more people than have ever passed through Harvard Business School in its history. And my goal for college very shortly is, each month we will reach more people than has ever passed through there in its history.
Andrew: Okay, so then, teach me a little bit, and I know we’re running overtime, so I won’t take up much more of your time, but teach me . . .
Pete: You’ll have to give me some of that good energy food you have if you could.
Andrew: Yeah, man, I’m telling, I’m shot out of a cannon. I’m trying to be calm here. I have so much energy. I’m standing on a treadmill right now. If you saw me kind of moved something earlier with my feet before we started it’s because usually the treadmill would be on I had to move the mat, so I could stand on a mat if I’m going to stand in place and have a little spring to my step.
So if we wanted to do online education, and I do, I don’t want to do the same thing where it’s just us talking and showing slides, I want to find something more interesting, what do you think is the right way to do that? What advice do you have for people who want to teach online?
Pete: I mean, obviously with our stuff we’ve leveraged the fact that kids love to interact with games. And they do it on their phones now and they still do it on some consoles, etc. So I would say look around at the people, particularly the young people and the kids, and see what they’re doing with their devices. And then try to form something around that interaction that can then be educational. So, you know, an example would be outside of what we do, you know, they’re obviously on there socially, I don’t know . . . do you have any kids?
Andrew: I do. But they are too young. They’re three and one.
Pete: Yeah, there are devices as you know, for three.
Pete: Okay. But nowadays . . .
Andrew: No devices, no TV and no meat. We have a very hippie mom. Yes.
Pete: Okay. So nowadays when students do their homework, they are on, you know, FaceTime and various other things and they’re doing it in a much more collaborative way than I would have ever done homework. And so it’s really, really useful. And I’ve got three kids, one through school and two in high school. And it’s a community learning sort of environment.
So I’d say look at the way that they’re using the technology and then form the types of experiences around that sort of use model. So you’re interested in business and teaching business stuff and entrepreneurship. You know, communities and group projects that they can do using that kind of sharing technology, potentially, globally is the type of thing that I think energize them. They got to be doing something and you got to leverage the things they naturally want to do.
Andrew: I see. So, based on what you’re saying it might be something like . . .
Pete: They can’t just be watching or reading.
Pete: They can’t just be watching or reading, that’s not going to . . .
Andrew: Right, so maybe it’s as simple as let’s do a screen share using Zoom where we all share our screens, we all share out videos and we’re doing this project together and building it right now. And it’s a set time where everyone’s doing it at the same time. I see. And that’s not as complicated as I imagine, it’s not even as tough as your V1 of the simulation.
Pete: Yeah, we bite off more than we might want to sometimes in building simulations. But yeah, anything that’s using the way that they want to interact but encouraging them to think that original thing that I saw with SimCity, we called it the look. They were like so in that thing, they weren’t over here like, you know, you probably lecture to students in that age group.
Andrew: Yeah, I’m like that, I go to conferences now and all I want to do is get on my phone and do other work while I’m kind of taking in the knowledge ambiently, but that’s not the way that I want the world to exist. That’s not the way that I think people can learn better. All right.
Pete: It’s really hard for professors nowadays to walk into a classroom, yeah. So anything that can take the natural way that they want to interact, they want to learn, they want to think, but it’s going to be largely through a screen and then just leverage that. The more you can do with that the better.
Andrew: The website is, it’s also a great domain, knowledgematters.com, found in 1997. No outside capital, still going strong, having a huge impact on students. And man, I wish that this existed when I was in school. Go check them out.
And I also want to thank my two sponsors. The first is this thing, I should tell you there are more options from Athletic Greens, they have these little packages, you have omega 3s, you have protein. All I care about is energy and protein. So that’s why I’m not telling anyone that they have other supplements and other things that you can buy. But frankly go check them out at athleticgreens.com/mixergy.
And if you want to check out chatbots and see a little bit about what the future is going to be, go to botacademy.com/mixergy.
Pete, thanks so much for being on here.
Pete: Andrew, thank you and I am going to check out the bots.
Andrew: Yeah, I think you’ll love them. And Jeff, dude, thanks for hooking us up. I never would have known how big this company was without you. Thanks, Jeff Rutherford.