Fitbit: James Park

In 2006, James Park had what he describes as a "lightning bolt" moment when he first used a Nintendo Wii. Fascinated by its motion-tracking controller, James wondered if you could take the technology out of the living room and into the streets. Three years later, he and co-founder Eric Friedman launched the Fitbit Tracker, which allowed users to track their steps and compare progress with others. Sales took off, and Fitbit dominated the wearables market until the Apple Watch came along, forcing James and Eric to re-imagine the brand. Today, against a cloudy economic backdrop, James hopes Fitbit can grow into its role as a health and wellness service. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Guy Raz?

  Hey, it's Guy here. And before we start this brand-new episode of How I Built This, I just wanted to let you know that we started a regular video conversation every week with different founders to talk about the creative ways that they're building resiliency in the midst of this crisis. Last week, I talked to six incredible chefs, from Daniel Hoom of 11 Madison Park, to Alice Waters of Chez Panis, and Jose Andres, who's been donating meals through his nonprofit World Central Kitchen. You can join the conversation and ask your questions by going to facebook.com/HowIBuiltThis, and you don't need a Facebook account to watch. This week, I'll be talking to Tim Brown and Joey Zwillinger, the founders of Allbirds, and also to Stuart Butterfield, the founder of Slack. You can join me on Wednesday and Friday

• 0:44Guy Raz?

  at noon Eastern, 9:00 AM Pacific, by going to facebook.com/HowIBuiltThis. And I hope to see you there.

• 0:54Speaker 01

  I was sitting in my hotel room in Singapore, and I was testing out one of the prototype builds. And the radio range was not good at all. It was supposed to have a range--

• 1:06Guy Raz?

  What, 10 feet or 15?

• 1:07Speaker 01

  That was the hope, that it would have 15 to 20 feet range, but the range was actually like 2 inches.

• 1:12Guy Raz?

  Oh, God.

• 1:13Speaker 01

  We've got to ship this holiday season. Like, I've got tens of thousands of these people waiting.

• 1:19Guy Raz?

  Oof.

• 1:19Speaker 01

  And I'm thinking, wow, this is it. We're done.

• 1:29Guy Raz?

  From NPR, it's How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 1:40Guy Raz?

  I'm Guy Raz, and on the show today, how the Nintendo Wii inspired James Park to build a device and then a company that would have a huge and lasting influence on the health and fitness industry: Fitbit.

• 1:56Guy Raz?

  So it's taken me a few weeks to get motivated about exercise. This whole pandemic thing just had me in a state of anxiety and it messed with my routine. But I was inspired to jump back into it about two weeks ago after watching my 11-year-old proudly announce his daily step count recorded on his Fitbit. Now, fitness isn't all that important to him. He's 11. But the gamification of fitness, the idea that it could be fun to hit 5,000 or 10,000 steps a day, that's what matters. This is the stroke of insight James Park had soon after he stood in line at a Best Buy in San Francisco to buy the brand-new video game system called Nintendo Wii.

• 2:38Guy Raz?

  And you'll hear James explain the story a bit later, but what he realized by playing the Wii is that you could actually change human behavior around exercise if you turned it into a game. And the thing is, up until James Park and his co-founder Eric Friedman founded Fitbit in 2007, there really weren't any digital fitness trackers that were designed that way. It took a few years for James and Eric to gain traction, but by 2010, 2011, Fitbit took off. At one point, their fitness devices accounted for nearly 70% of the market. And by 2015, the company was valued at more than $10 billion.

• 3:17Guy Raz?

  But that same year, the Apple Watch was released, and Fitbit and its market share got hammered. When I spoke to James Park a few days ago, he was in San Francisco, living in an Airbnb.

• 3:30Speaker 01

  I'm in a temporary Airbnb because the place that I typically live in has been flooded out by a malfunctioning washing machine. I woke up at 1:00 a.m.

• 3:40Guy Raz?

  In the middle of this whole thing? You had a flooded washing machine? Like, you woke up in the middle of the night and there was water everywhere?

• 3:46Speaker 01

  I know. Amazing timing. Yeah, I woke up at 1:00 a.m. and I just woke up to the sound of water gushing everywhere. It was coming through the ceiling. It was a massive flood.

• 3:58Guy Raz?

  Okay, so on top of sheltering in place and running his company remotely, James had to move out of his apartment in the middle of the night and then set up the microphone and gear we sent him for this interview. He started to tell us about his parents, who emigrated from Korea when James was four. Back in Korea, his dad had been an electrical engineer and his mom was a nurse. But as with many immigrants, they had a hard time getting those same jobs in the US. So instead, his parents became small business owners.

• 4:28Speaker 01

  The first conscious memory I have is my parents actually owned a wig shop in downtown Cleveland.

• 4:35Guy Raz?

  Wow. Yeah, how did they get into that? It was just a way to kind of earn a living?

• 4:39Speaker 01

  Yeah, I think a way to earn a living. And you know, the typical immigrant story is you have friends who live in the country that you're immigrating to. And I think my dad had a friend who worked in wig wholesaling. So that's where he started out. They were selling wigs to people who lived in downtown Cleveland, African Americans, mostly women. And I remember my mom, she'd spend a lot of time just looking through black fashion magazines, styling hair, beading them, et cetera.

• 5:08Guy Raz?

  Wow.

• 5:09Speaker 01

  They had a wig shop, dry cleaners, a fish market. At one point, we moved to Atlanta and they ran an ice cream shop there. We sold tracksuits, starter jackets, fitted baseball caps, thick old jeans.

• 5:24Guy Raz?

  Sort of hip hop, urban wear, right? Like FUBU and stuff like that.

• 5:27Speaker 01

  Yeah, they sold FUBU jeans. Yep, I remember that. And they could switch from one genre, one type of business to another and really not skip a beat.

• 5:36Guy Raz?

  Yeah. And were your parents, did they expect you to perform well at school? Was that just a given?

• 5:43Speaker 01

  You know, I think they had incredibly high expectations. And as a kid, I think I remember my mom telling me when I was pretty young, I don't know, five, six, seven, that she expected me to go to Harvard.

• 5:54Guy Raz?

  Wow.

• 5:56Speaker 01

  Yeah. I don't think I quite knew what that meant back then, but you could tell that their expectations were pretty high from the very beginning.

• 6:04Guy Raz?

  James did, in fact, meet his mom's expectations. He did go to Harvard. He put in three years studying computer science, but after his junior year, he got a summer internship at Morgan Stanley and then ended up deciding to start his own business. And though he had hoped to finish his college degree, he never went back.

• 6:24Speaker 01

  You know, I always had a little bit of a stubborn streak. And that was when I was trying to figure things out, tried to think of ideas. I think there was a lot of opportunity, a lot of problems to be solved. And I was also looking for a co-founder at the time. So those were two critical ingredients, an idea and a co-founder.

• 6:40Guy Raz?

  This is 1998. This is not 2015, when these kinds of conversations seemed so common. Like, this was unusual in 1998 for a young person. It was just less common for a young person to just sort of say, I'm going to look into a tech startup and try to find a co-founder and just take some time to think about these things. I would imagine your parents were nervous. I'd be nervous if my 20-year-old said to me, I'm not going to go back to college and I don't really know what I'm going to do, but I'm just going to think about it.

• 7:11Speaker 01

  Yeah, they were understandably pretty upset, angry even, I'd say. And you know, the irony is that they probably took a way more incredible personal risk moving from Korea to the United States and, you know, running these series of businesses, which are commonly done, but not easy in themselves and pretty high risk. But I do understand, obviously, the perspective at the time.

• 7:37Guy Raz?

  Okay, so you decide you want to start something up. And I think you eventually landed on e-commerce, right?

• 7:43Speaker 01

  Yeah, that was not a groundbreaking thing at the time. Obviously, Amazon was around, et cetera, a lot of e-commerce startups. But, you know, settled on this idea of making e-commerce a lot more seamless and frictionless and came up at this idea of an electronic wallet that would automatically make purchases for you. It could work with a lot of different e-commerce sites. And, you know, the goal there was that we would take a cut of every transaction.

• 8:11Guy Raz?

  Right. And what was the company called?

• 8:14Speaker 01

  That was interesting. We originally named it KapooF. That was how it was incorporated.

• 8:18Guy Raz?

  Yeah.

• 8:19Speaker 01

  Until a lot of people said, you know, that might not be the best name for a company. Sounds like, you know, we called it KapooF because it sounded like magic, et cetera. KapooF.

• 8:27Guy Raz?

  Right.

• 8:28Speaker 01

  Things were done. You know, your transaction was completed by KapooF.

• 8:31Guy Raz?

  Your money is gone.

• 8:32Speaker 01

  Yeah, exactly.

• 8:33Guy Raz?

  You have no more money.

• 8:35Speaker 01

  Exactly. Time of crazy names like Yahoo, et cetera. But we decided to change our name at some point and we changed it to Epacy, which was so healy for fast. And so that was the ultimate name of the company.

• 8:49Guy Raz?

  And you guys were actually able to raise a fair amount of money, right?

• 8:54Speaker 01

  We did. We ended up raising a few million dollars from some individuals and some from some venture capital firms as well. And we hired some people. We found a cool renovated firehouse. So that was a really, really amazing place to hang out in for many, many, many hours of the day. And we hired up to, it was close to about 30 people.

• 9:17Guy Raz?

  Wow. One super important thing that happened there was you met Eric Friedman, right? The guy that you would eventually launch Fitbit with.

• 9:25Speaker 01

  I did. And that's probably one of the more fortunate turns in my life. Eric, we didn't know each other at all before the company Epacy. He was actually just graduating from Yale in computer science. And I interviewed him. I liked him a lot. And he ended up ultimately becoming the first employee at the company.

• 9:46Guy Raz?

  Okay, so you hire Eric. And I think the company lasted like 18 months or a little less than two years.

• 9:53Speaker 01

  Yeah, about two years. And a lot of ups and downs during that period. And if I had to think back, I would attribute two thirds of the challenges and problems we faced as a business to myself, just because I had never managed people. I didn't really know how to run a business, even if it was only the technology side. And at some point, the dot com crash happened.

• 10:22Guy Raz?

  Yeah.

• 10:22Speaker 01

  And all of our potential customers, the whole industry, the whole economy started taking a downturn.

• 10:29Guy Raz?

  So this company sort of sputters out in 2001. And when that happened, were you, did you think, OK, I should go back to college now and finish my degree? Or I gotta start something else? Where was your head at that point?

• 10:45Speaker 01

  Well, it was a really challenging personal time for me. Towards the end of the company, we obviously had to lay off most of the company and trying to doing it in a way that was compassionate was really, really difficult. I don't think the thought of entering school or going back to school popped back into my head at all. And I don't know why. I think it was because despite this very emotional failure, I knew this was what I wanted to do. I had a firm conviction about that. And so I knew I wasn't going to go back.

• 11:22Guy Raz?

  So what'd you do?

• 11:24Speaker 01

  So we all ended up working at the same place, actually. It was a company, a pretty large company called Dun & Bradstreet at the time. Very stable company. And we were all pretty fortunate to be able to find work there as engineers.

• 11:39Guy Raz?

  So daytime, working at Dun & Bradstreet, and then, what, at night, sitting around?

• 11:44Speaker 01

  Brainstorming, yeah. It was, you know, we'd go into work during the daytime, and then we'd come home in the evenings, code different things, try different things out. So it was a pretty intense workday. I think in terms of the numbers of hours, I don't think anything changed from our first startup to trying to figure this next one out.

• 12:03Guy Raz?

  And before too long, you decide to do another startup, this time with Eric Friedman from your previous company, and then another guy named Gokhan Kudlu. I think this was, what, 2003, 2004?

• 12:15Speaker 01

  Yeah, 2000, this was about 2002, actually.

• 12:19Guy Raz?

  OK. And this time, the startup was like a photo editing kind of platform, like sharing platform? What was it called?

• 12:26Speaker 01

  Well, the company's name at the time was called Hapix. And the product itself was called Electric Shoebox because a lot of people put their old photos in shoeboxes, and this was just going to be a digital.

• 12:37Guy Raz?

  Yes, I still have them in shoeboxes.

• 12:39Speaker 01

  You'd digitize them, probably.

• 12:40Guy Raz?

  I should, I know.

• 12:41Speaker 01

  Yeah. And so Electric Shoebox is just going to be a digital version of your shoebox.

• 12:46Guy Raz?

  And what could you do?

• 12:48Speaker 01

  Well, there are digital cameras were coming about back then. It still wasn't easy to connect them, upload photos. Like, it was getting easier, but nowhere near what it is today, obviously. So, the whole idea of Electric Shoebox was to make the whole process of getting photos off your camera a lot easier. And more importantly, we wanted to make the process of sharing these photos with your friends and family a lot easier.

• 13:16Guy Raz?

  So, did you raise money for the product, for the Electric Shoebox?

• 13:20Speaker 01

  We did. We ended up raising money primarily from one of my friends from middle school, who was a mutual fund manager in Boston. And so, he put in a bit of money, not a lot. I think about, at least for him, it was about a hundred thousand. And we had a bunch of savings ourselves that we were going to use. And in anticipation, I also opened up a few more credit cards as well.

• 13:44Guy Raz?

  And it was just really the three of you, like, sitting at your computers and just tapping the keys, like, all night?

• 13:51Speaker 01

  You pretty much nailed it. I mean, all we did was, we would wake up in the morning, walk over to the third bedroom, and just start typing away for 12 hours. We'd take meal breaks. I remember Eric did a lot of cooking, so we'd eat our dinners on some TV stands, watching TV. That was a good break for us, watching Seinfeld. And then, go to bed, and then repeat it the following day.

• 14:16Guy Raz?

  All right, so you come up with this product. And by the way, how are you gonna make money off of this thing? This is a free service, a free... How are you gonna pay for it?

• 14:26Speaker 01

  It was, I guess what you call it, it would be called freemium software. So, it would be free for a period of time, and then the trial period would end, and then you'd have to submit your credit card information to continue using the software.

• 14:39Guy Raz?

  Got it, okay.

• 14:40Speaker 01

  And so, our primary goal was making sure that a lot of people knew about the software. So, we put it on shareware sites, etc. And then, we spent a lot of time debating, you know, should we send out a press release? And I remember, it was a huge debate, because sending out a press release was gonna be about $300. And that was a... That was the level of expense that required a vigorous debate at the time. So, we said, you know what? Without getting the product known, you know, how are we gonna be successful? So, we wrote up a press release.

• 15:12Speaker 01

  And we put it out. And actually, it was probably the most pivotal decision we ever made in that company's history. Yeah.

• 15:21Guy Raz?

  Because?

• 15:22Speaker 01

  The first email came in a few hours later. I think the second one came in a day later. But we got two emails, one from CNET, which is a huge digital publishing company. And then we got another email from Yahoo saying, hey, we just heard about this launch of this software product. And, you know, we'd like to talk to you guys more about it.

• 15:44Guy Raz?

  Wow.

• 15:44Speaker 01

  Exactly. This is coming from their corporate development arms, which typically, you know, deals with M and A, with buying companies. Yeah, exactly. We're like, whoa, this is magic. How did this happen?

• 15:58Guy Raz?

  2005, it gets purchased by CNET. They make an offer to buy this company, buy this product from you guys, and you sell it to CNET. Was that life-changing money? Did that mean that you never had to work again?

• 16:12Speaker 01

  It was definitely a good acquisition for all of us at the time. You know, remember, we were three guys working out of our apartments. I was, at the time, about $40,000 in credit card debt as well. So we were down to some desperate times. And we were negotiating numbers. And they threw out a number, which was, you know, their first offer was 4 million.

• 16:40Guy Raz?

  Wow.

• 16:40Speaker 01

  And we're like, whoa, that's...

• 16:41Guy Raz?

  That's amazing. Like, God, I can't believe we built something that's worth this much at the time. We were just stunned. And then we quickly got to, okay, how do we negotiate something better?

• 16:56Guy Raz?

  So you sell your company to CNET in 2005, and you've got some money in your pocket. And you moved to San Francisco to work for CNET. And did you enjoy it? I mean, it was probably like a huge company at this point, right?

• 17:11Speaker 01

  It was a huge company, but I think the moment, at least for me, that I moved to San Francisco, I instantly fell in love with the city. And CNET, even though it was a larger company, I actually found it to be an amazing time. I learned a lot. I got some management training. I ended up managing a small team of people, learned a lot about how technology scales to millions and millions of users, how you market products. So I really enjoyed my experience there. I think it was pretty formative.

• 17:44Guy Raz?

  So why did you leave CNET?

• 17:47Speaker 01

  So we left CNET just because of, I guess you could call it a bolt of lightning in some ways. It was December of 2006 and Nintendo had just announced the Nintendo Wii. And I remember coming home, putting it together. And at the time Nintendo had come up with this really innovative control system using motion sensors, accelerometers to serve as inputs into a game. And after using it, especially in Wii Fit, which was a sports game, I thought, wow, this is incredible. This is amazing. This is magical. Like you can use sensors in this way. You can use it to bring people together.

• 18:31Speaker 01

  And particularly for Wii Fit, it was a way of getting people active, of getting them moving together. And I was just blown away by this whole idea, really excited about it. I couldn't stop thinking about it. And after some time of playing Wii Fit and the Wii and a lot of other games, I thought, you know, this is great. It's in my living room, but what if I want to take this outside of the living room? And I kept thinking about that idea.

• 18:56Guy Raz?

  How do you take the Wii Fit outside?

• 18:59Speaker 01

  Outside, exactly.

• 19:00Guy Raz?

  Wow.

• 19:01Speaker 01

  So I couldn't let it go. And I ultimately ended up calling up Eric and we started talking about this idea for hours and hours and we couldn't stop talking about it. It's like, how do we capture this magic and make it more portable? How do we give it to people 24/7? And that was really the genesis of Fitbit.

• 19:24Guy Raz?

  So the technology, I mean, pedometers have been around forever, right? Was that your sort of where your head was going or thinking, OK, maybe we just create like an electronic pedometer? But I think even electronic pedometers were around in 2007, right?

• 19:40Speaker 01

  Yeah, pedometers were definitely around back then. Actually, they had been around for probably 100 years. One of the things, though, is that they weren't something that people would want to use or to wear.

• 19:52Guy Raz?

  Yeah.

• 19:53Speaker 01

  They were very big. They were pretty ugly. They looked like medical devices.

• 19:58Guy Raz?

  A lot of senior citizens were like, used them.

• 20:00Speaker 01

  Yeah, they weren't a very aspirational

• 20:02Guy Raz?

  Right.

• 20:03Speaker 01

  ...device. So, you know, it wasn't something that people were excited to use.

• 20:07Guy Raz?

  Right.

• 20:08Speaker 01

  And so I think that's why that whole category of device just never really had any innovation. And there were also much higher end devices. You could buy much fancier running watches, like GPS watches, et cetera. But those are really expensive for people. They were $300, $400 at the time.

• 20:25Guy Raz?

  Hmm. So you had this idea, and that means you had to raise money. And this is going to be the third time now that you've had to do that for a business. And I think I read that you raised like $400,000 to launch this. And I don't, I mean, I don't know a lot about hardware, but that doesn't seem like it was going to take you very far in like building a physical product.

• 20:48Speaker 01

  As we quickly found out, yes, we had grossly underestimated the cost of taking this to market.

• 20:56Guy Raz?

  And what did that initial amount of money, how far did that get you into actually conceiving of what this product was going to be?

• 21:05Speaker 01

  It got us to a prototype, write some rudimentary software, get some industrial design concepts done and some models.

• 21:14Guy Raz?

  And what did the prototype look like? Was it, did it look like a Fitbit?

• 21:18Speaker 01

  It looked absolutely nothing like a Fitbit. So there are two things. There was a actual somewhat working prototype. And then there was an industrial design model.

• 21:28Guy Raz?

  Which was a piece of plastic.

• 21:29Speaker 01

  Plastic and metal that was supposed to look like the ultimate product. And so that actually looked really, really nice.

• 21:36Guy Raz?

  But it didn't work.

• 21:37Speaker 01

  No, it was totally non-functional. And we'd always have to tell people before showing it, this doesn't work here. Because they get all excited looking at the model. Like, no, no, no, that doesn't work. The thing that actually worked looked like something that came out of a garage, literally.

• 21:51Guy Raz?

  What did it look like?

• 21:53Speaker 01

  It was a rectangular circuit board, a little bit smaller than your palm. And it had a motion sensor. It had a radio. It had a microcontroller, which was the brains of the product. And it had a room of entry case, which was a balsa wood box.

• 22:09Guy Raz?

  Wow. So you would take to investors a circuit board and a balsa wood box as your prototype?

• 22:16Speaker 01

  Yeah. That was the prototype. And actually, that was what we had demoed when we first announced the company. That was the prototype that was actually being used at the announcement.

• 22:27Guy Raz?

  Wow. How did you even get it to that point? Because you guys are both software engineers. How did you develop a physical product that even a sort of crude prototype could track movement? Did you have other people help you do that?

• 22:42Speaker 01

  You know, that was our big task, was to find the right people who could help us. So I knew the founder of a really great industrial design firm in San Francisco called New Deal Design. His name's Gadiyamit. And then on the algorithm side, because it was going to take a lot of sophisticated algorithms to translate this motion data to actual data that users would be able to understand, I ended up asking my best friend from college, Ed, because he was in grad school at Harvard at the time. And he said, wait, I think I might know somebody. And it ended up being his teaching fellow. His name was Shelton. And we talked and was like, wow, this guy's super smart. We need to get him working on our algorithms.

• 23:25Speaker 01

  So he ended up working on the side while doing his PhD, helping us out with a lot of the software.

• 23:31Guy Raz?

  So I mean, you leave CNET in 2007 and you've got 400,000 to come up with a prototype. Quickly you run out of that. So it's 2008 and you're trying to raise money. And how much did you raise?

• 23:44Speaker 01

  I think our first round was about $2 million.

• 23:47Guy Raz?

  Which was not going to take you that far if you wanted to develop a physical product that was super sophisticated, a piece of hardware.

• 23:54Speaker 01

  We thought we could do it. We thought we knew a little bit more about the hardware business. We put together another business plan, budget. It was actually a pretty challenging time to raise money as well.

• 24:05Guy Raz?

  Oh, the financial crisis, yeah.

• 24:07Speaker 01

  Exactly. It was the fall of 2008 when we were trying to raise money.

• 24:12Guy Raz?

  Yeah.

• 24:13Speaker 01

  And one of the, I guess, the good and bad things about VCs is the good thing about VCs, they're incredibly healthy people. They're super fit. But it also made it difficult for a lot of them to understand the value of the product because what we were trying to do was it wasn't a product meant for super athletic people. It was really meant to help normal people become more active, become healthier, et cetera. And it was hard for a lot of them to grasp why that was valuable. They'd ask, well, did it do X or did it do Y and did it do Z? And we'd say, no, it doesn't do any of that. And so it was very difficult for a lot of these super fit VCs to understand the value of the product, even though a lot of them claim they don't try to put their own bias on these products. It's naturally human to do that.

• 24:57Guy Raz?

  And did you know right away that this was going to be, I mean, now their Fitbits are watches mainly, right? That their wrists, they're on your wrist. But at that time, you were thinking that this was just going to be something you would clip to your clothing?

• 25:11Speaker 01

  Yeah, something to clip to your clothing for men. And then what we found out in talking to a lot of women was that they wanted to tuck it away somewhere hidden. They didn't want people to see it. And we said, okay, where would you want to put it? And they said, well, a lot of our pants don't have pockets, so it can't be in our pocket. And so the preferred place was actually on their bra.

• 25:33Guy Raz?

  Right.

• 25:34Speaker 01

  So a lot of the physical design that we had to think about in the early days was how to come up with a product that would be very slim, slender, and clipped people's bras.

• 25:44Guy Raz?

  And hidden.

• 25:45Speaker 01

  And hidden, and clipped the bras pretty easily.

• 25:46Guy Raz?

  And by the way, how did you come up with the name Fitbit?

• 25:49Speaker 01

  That was a, you know, it's never easy to name a company and it's even more challenging just because of domain names, right? That's some, that's typically a lot of the limiting factor in naming a great company. And so we would spend hours and hours and days just going through different permutations of names and some awful ones as well. Like at some point, we got onto a fruit theme. So we were thinking like Fitberry or Berryfit or Fitcado or, you know, just some, just some really awful names. And, you know, when you-

• 26:22Guy Raz?

  The Fitcado.

• 26:22Speaker 01

  The Fitcado, yes. History might've turned out a lot, lot differently, for sure. So I was just taking a nap in my office one afternoon. I think I was actually napping on the rug because I was so tired. And I woke up and it just hit me. It was, it was Fitbit. And the next challenge was actually the domain name. The domain name was not available and it was owned by this guy in Russia. And I'm like, oh my God, how are we gonna get this domain name? We'll just, we'll just email the guy and see what happens. And he said, well, how much are you willing to offer? And I said, oh God, I don't know. How about like a thousand bucks? And he's like, oof, how about 10,000?

• 27:07Speaker 01

  And I said, oh, I don't know. That sounds like a lot. How about 2,000? And he's like, oh, okay. 2,000, deal. I think it was literally like two or three emails that we sent back and forth in this negotiation.

• 27:19Guy Raz?

  Probably the best $2,000 you ever spent in your life, except for the 300 you spent on the press release a couple of years earlier.

• 27:25Speaker 01

  Definitely, definitely a good return.

• 27:28Guy Raz?

  You've probably spent many millions of dollars on other things in your life that were not as good of a deal as that $2,000.

• 27:33Speaker 01

  Yeah, it's tens of thousands on, you know, naming consultants and focus groups and-

• 27:38Guy Raz?

  Sure.

• 27:38Speaker 01

  -trademark searches and all of that. So it's, it's kind of funny.

• 27:42Guy Raz?

  Hey, as they say, small companies, small problems. Big company, big problems.

• 27:47Speaker 01

  Exactly.

• 27:48Guy Raz?

  So where do you begin? I mean, you gotta make it, you gotta find a factory, you gotta find designers. What do you, where do you go?

• 27:58Speaker 01

  Very good, very good question. So we obviously had zero connections. The challenge, though, was not actually the connections to the manufacturers, but finding a manufacturer who we could actually convince to build this product because we didn't have a background in hardware.

• 28:15Guy Raz?

  Yeah.

• 28:16Speaker 01

  And so would they actually want to work with us? That was the biggest concern at the time.

• 28:20Guy Raz?

  So how did you find them?

• 28:21Speaker 01

  We went out to China. We went out to Singapore. And we were never going to be able to get the Foxconn to work.

• 28:29Guy Raz?

  You had to go to a smaller place.

• 28:31Speaker 01

  We had to go to a smaller place who'd be more nimble, more flexible, who'd want to take a financial risk. And we finally found a great manufacturer based in Singapore called Racer Technologies. And the good thing is, actually, it was the best of all worlds. The headquarters was in Singapore. Most of the management team and the engineering staff was in Singapore, but they had manufacturing facilities that were in Indonesia. So the labor there was going to be lower cost than in Singapore.

• 28:58Guy Raz?

  All right. So 2008, you've got the name Fitbit. You go to TechCrunch to present, to kind of unveil this product. And what was the product that you were offering? You said, all right, we've got this thing called the Fitbit, and it does this. What did you say it did at that point?

• 29:17Speaker 01

  So our pitch to the crowd at TechCrunch, and ultimately to our consumers, was that it was a product that would track your steps, distance, calories, and how much you slept, and would answer some basic questions about your health. Was I active enough today? Did I get enough sleep? What do I need to do to lose weight, et cetera? And one of the more important aspects was this idea of a community as well. Join other people who own Fitbits, your friends and family, and you could compete with each other. And it was all wireless. You didn't really have to do anything. All you'd have to do is wear this device. Don't even think about it, and all this magic would happen. So that was the promise of Fitbit at the time.

• 29:59Guy Raz?

  There was a lot of excitement there. But I'm wondering, were you nervous to do these presentations? Did you have to prepare like crazy? Or... Or did you just find your ability to be this person you had to be onstage when you got up there?

• 30:14Speaker 01

  Yeah, I think there was no other choice. So it was just something we had to do. And I think--

• 30:21Guy Raz?

  Are you better at it than Eric? Or is Eric better at it than you?

• 30:24Speaker 01

  I think we're both good in our different ways. It just fell upon me. I don't even know how we decide those things. But actually, what was running through our minds was not what we were going to say and how we're going to say it, but whether the demo would actually work--

• 30:38Guy Raz?

  Oh, right.

• 30:38Speaker 01

  --onstage. Because, again, it was a little sketchy. It was still very early. It was still in the wooden box.

• 30:46Guy Raz?

  And the balsa wood box.

• 30:48Speaker 01

  Balsa wood box phase.

• 30:49Guy Raz?

  Right.

• 30:49Speaker 01

  So we're just worried that the demo would just fail or crash.

• 30:53Guy Raz?

  But it worked.

• 30:55Speaker 01

  It worked. And actually, it did crash in the middle of the presentation. Because the whole demo was about me walking onstage. The device would be collecting stats. And at one point, I would turn to Eric and say, "Hey, Eric, why don't you refresh the page and show that all the stats have been uploaded magically through this wireless connection?" And so the demo actually crashed while I was talking. And Eric was furiously trying to reboot his computer during this period. And I didn't even know anything about it. But ultimately, the demo did work. And so to many people, it seemed like magic.

• 31:25Guy Raz?

  Yeah.

• 31:25Speaker 01

  Literally, people started clapping. It was really amazing. So originally, right before TechCrunch, Eric and I, we made just a verbal bet. How many preorders are we going to get after this conference? And we announced and made the company public. And I think Eric said, "I think we'll get like five preorders." Because it's like, the device isn't even available. People are going to have to give us our credit card information. And I said, "You know what? I'm not as pessimistic. I think there's going to be like 10, 15, 20." And so we got offstage. And by the end of the day, we had about 2,000 preorders.

• 31:59Guy Raz?

  Wow.

• 32:02Guy Raz?

  When we come back in just a moment, James and Eric have a prototype in a balsa wood box. And they don't exactly know how they are going to get from there to filling thousands of preorders. But a lot of people are expecting them in time for Christmas. Stay with us. I'm Guy Raz, and you're listening to How I Built This from NPR.

• 32:28Guy Raz?

  Hey, welcome back to How I Built This from NPR. I'm Guy Raz. So it's 2008, and James and his co-founder Eric Friedman show off their Fitbit prototype at TechCrunch, and it makes a huge splash. Problem is, they have no finished product. They haven't even figured out how they're going to make it, and pre-orders are pouring in.

• 32:49Speaker 01

  And they just kept coming in. It was crazy. We're like, oh, my god. Now we got to-- it's not just dozens of these units we have to build. It's now thousands, and more and more every day. And so we were still thinking Christmas of that year, that we were going to start shipping out units. And it rapidly became clear to us that we weren't going to make Christmas. And so we're thinking, OK, how do we keep all these people happy while we pull this off? So this was before Kickstarter and Indiegogo and all that. So we kind of had to improvise. We're like, OK, why don't we just blog about the whole process and just be very open and transparent about it?

• 33:32Speaker 01

  So we started a blog, and I wrote maybe weekly updates on how things were going, challenges and delays that we're facing. And I was really surprised. Actually, it worked. It made people understand what we were going through. They were literally seeing the thing being made, the sausage being made, behind the scenes. And I think that kept people really engaged throughout the process.

• 33:58Guy Raz?

  So you have, basically, a bunch of contractors and freelancers, and you guys are going back and forth to Asia. And you've got people working on the software to transmit the data to the web. You've got some people working on the hardware, presumably in Singapore, trying to shrink down the motherboard into something that is 2 inches by 1 half inch. And were you just constantly running into failures? Like, you would think that, oh, here it is, and then, like, somebody would hit the go button, and then it would just fizzle out. It wouldn't work?

• 34:31Speaker 01

  Yeah, I can't even enumerate the number of challenges with the product that we had.

• 34:36Guy Raz?

  Please start.

• 34:37Speaker 01

  Yeah. You know, in some ways, a lot of people, I think, when you think about hardware, it's like, oh, I'll find a manufacturer in China.

• 34:44Guy Raz?

  Yeah.

• 34:44Speaker 01

  I'll throw over a design. They're just, they'll just run with it, you know?

• 34:48Guy Raz?

  And then they'll just give me the, send me the bill and then it's done.

• 34:51Speaker 01

  And they'll just crank out thousands, tens of thousands of this, but you know, that's, that's never.

• 34:55Guy Raz?

  And that works if it's a, like a suitcase, we've done Away, right? So, so it works if it's that thing.

• 35:01Speaker 01

  If it's that thing or something that, that's very similar to something that they've built before.

• 35:07Guy Raz?

  Right.

• 35:07Speaker 01

  Well, that's, that's, that's a different story than this thing that this manufacturer never had built before.

• 35:14Guy Raz?

  So they would send you things and say, yep, we got it. And then you would get it and it sucked. It just didn't work?

• 35:20Speaker 01

  Yeah, we wouldn't wait for them to send it. I mean, either myself or Eric would be in Indonesia or Singapore at, at any given time. We'd, we'd trade off different weeks and we were out there on the production lines pretty much inspecting every, every part of the process.

• 35:36Guy Raz?

  But were you convinced this thing was going to work or did you have doubt?

• 35:39Speaker 01

  I was, I was absolutely convinced that it was going to happen.

• 35:42Guy Raz?

  You had no doubts that this was, that this?

• 35:45Speaker 01

  I, I had no doubt because we were getting proof every day that this was something that was going to be big. And I think the first evidence of that was at TechCrunch where we had 2,000 pre-orders and we're getting pre-orders every day. I think by the summertime, we had, we had about 25,000 pre-orders. At a hundred dollars per unit, that's, that's a fair amount of revenue if we could ship these units.

• 36:09Guy Raz?

  And how much was it going to cost you to make each unit?

• 36:11Speaker 01

  That was a very good question. We didn't know that. Hopefully under a hundred dollars.

• 36:15Guy Raz?

  You didn't know? You were selling them for a hundred, but you didn't know how much it was going to cost you?

• 36:19Speaker 01

  We had, we had a sense of the bill of materials. I think we were trying to shoot for a gross margin of about 50%. So we're targeting, you know, the full cost of the product, including shipping, et cetera, being no more than $50. So that's what we're targeting.

• 36:33Guy Raz?

  Which is a lot. That's, that's high. It's a high cost.

• 36:36Speaker 01

  It's, it's a high cost, but you know, that was a cost at which we felt we could sustain ourselves as a business.

• 36:44Guy Raz?

  How did you and Eric manage your relationship and friendship? I mean, with the stress of this delay and inability to meet demand and all these, like, was there tension at all between the two of you? Or are you guys totally on the same page?

• 36:56Speaker 01

  You know, I don't, I don't think there was that much tension. I mean, a lot of stress, but not, not tension. I think we trust in our ability to, you know, help each other out. And there are periods when either of us would be pretty down on the company and the product. And luckily, we weren't down both at the same time. And that's why it helps, I think, to have a co-founder.

• 37:22Guy Raz?

  So there were times where you were really down and he could give you a pep talk and he was down.

• 37:27Speaker 01

  Yeah, exactly. And then I'd wonder why he wasn't down. And there's some pretty dark times right before we shipped. I remember we were months before we thought we could finally get the first unit off the production line. And I was sitting in my hotel room in Singapore and I was, I was testing out one of the prototype builds that, that Racer had produced. And the radio range was not good at all. It was supposed to have a range.

• 37:53Guy Raz?

  10 feet or 15 feet?

• 37:54Speaker 01

  Well, that was the hope, that it would have 15 to 20 feet range. But the range was actually like two inches.

• 37:58Guy Raz?

  Oh, God. Wait, so the antenna in the device had a two-inch range?

• 38:04Speaker 01

  Yeah, it would only work at two inches. And I'm thinking, we've got to ship this, this holiday season. Like, I've got tens of thousands of these people waiting.

• 38:15Guy Raz?

  Oh, God.

• 38:16Speaker 01

  And so I'm, I'm just freaking out in my hotel room.

• 38:19Guy Raz?

  You might as well just have a cord and just plug it in.

• 38:21Speaker 01

  Exactly, exactly. It's like, so I couldn't sleep that night, obviously. And I, I took the unit apart. Like, I had a multimeter and I was measuring different voltages and currents. And what I realized was, huh, the cable for the display was kind of flexible and long enough that maybe it was actually drooping down and touching the antenna. And that was causing the issue.

• 38:46Guy Raz?

  Oh, creating interference.

• 38:48Speaker 01

  Creating interference. And I could kind of see that when you put the whole thing together, that it might droop down. And I thought, okay, how do I create a shim that would prop the antenna up? So I went to the bathroom, grabbed some toilet paper, rolled a little bit of it in a ball and stuffed it between the antenna and the display cable.

• 39:06Guy Raz?

  Yeah.

• 39:07Speaker 01

  Put the device back together. And it started working.

• 39:11Guy Raz?

  Wow. So you had to separate one wire from the antenna and that was it? With toilet paper?

• 39:18Speaker 01

  With toilet paper, yeah. That was it. And I still couldn't sleep. So the next, as early as possible following morning, I raced into our manufacturing and said, okay, I think I found a problem. But obviously, toilet paper is not a scalable, high-volume situation. So they went back and figured out how they could make this manufacturable. So they ended up creating these little tiny die-cut pieces of rubber that they would glue onto the circuit board to keep the antenna away from the display cable.

• 39:52Guy Raz?

  Wow.

• 39:53Speaker 01

  Yeah.

• 39:54Guy Raz?

  Wow. So that was basically was just inserting something in there and then it worked?

• 39:59Speaker 01

  Yeah, it wasn't exactly duct tape, but that was the equivalent.

• 40:02Guy Raz?

  It was pretty close.

• 40:03Speaker 01

  It was pretty close, yeah.

• 40:04Guy Raz?

  All right. So you guys launched this product in Christmas of 2009 and it was a pretty successful product launch. You had 25,000 orders and it sounds like you're off to the races. But I guess even like with this success, when you went out to raise money, this is 2010, were investors more excited or was it still a challenge to get more investors in?

• 40:29Speaker 01

  It was still a challenge. And at the time, it wasn't, you know, okay, I guess you guys are having some success, like consumers are buying the product, et cetera. It's like, and they congratulated us on that. But they were very scared of hardware businesses. I think there had been a lot of really high-profile failures in the consumer electronics industry. And so it was very difficult for us to raise money. I remember, you know, we had a spreadsheet of target VCs. I think there are 40 names that we put on that list. And literally, we went to number 40 before we were able to raise money.

• 41:08Guy Raz?

  And just giving the same pitch again and again, answering the same questions.

• 41:12Speaker 01

  Same pitch, driving, you know, we're in San Francisco, driving down 101 to San Hill Road, constantly giving the same pitch to 40 VCs.

• 41:22Speaker 01

  You know, that's probably the one thing I didn't like about that whole time period was I hate giving the same pitch over and over and hearing the same questions and same objections, et cetera. So that was not a fun or stimulating time for me.

• 41:38Guy Raz?

  Yeah. All right. So eventually, the 40th investor does decide to give you some money. I think you raised about $8 million. And at this point, were you able to then have like a proper office and a staff? Were you able to kind of begin to recruit real, full-time engineers and developers and people like that?

• 41:59Speaker 01

  We were. We did that with the round that was right after our first $2 million institutional round. We hired a bunch of customer support personnel. I interviewed and hired our first head of sales. I interviewed and hired someone to finally run all of our manufacturing and operations, which was still a job that I was doing. Like, I was still issuing all the POs and managing the inventory. And I think we were really fortunate because the early management team that we hired in those days pretty much made it up to and past our IPO, which I think rarely happens.

• 42:37Guy Raz?

  It's so crazy to think about now, but I think early on, right? With Fitbit, the idea was to be part of a bigger community. So like, the data from your activity would be available. You would just go to a site and you could see, and you could see everybody else's because the idea was, we're all part of this together. But I think like, early on, right? Some users were tracking like, sex. And when you started to hear about these things, was your reaction like, oh my God, I never even thought about this being like a privacy thing. I always thought that people would just want to share stuff.

• 43:10Speaker 01

  Yeah, I think this was still kind of the early days of sharing, sharing things like that. And I found that about it because I saw this tweet about someone going, hey, if you do this Google search, you'll see, because Google was indexing all our public pages where people were logging things, that people had made public, you could find out all the sexual activities that people were logging on Fitbit. And I saw that, and I'm like, oh my God, this is not good.

• 43:39Guy Raz?

  Yeah.

• 43:40Speaker 01

  So that ended up being the first real PR crisis for the company. And it was happening over the Fourth of July weekend. So I had to call an emergency board meeting.

• 43:50Guy Raz?

  Oh, man.

• 43:51Speaker 01

  You know, we had to scramble to delete all that stuff, turn everything private.

• 43:56Guy Raz?

  Because the default setting initially when you go to Fitbit was it's not private. It's open. Because the idea was it was going to be a big community of people trying to get fit.

• 44:04Speaker 01

  Yeah, I mean, we made a lot of things private by default. So we made sure that people's weight was private because we thought that would be sensitive. But we didn't think that, oh, people's activities, you know, there wasn't any harm in doing that. And we just didn't realize that people would start to log things.

• 44:19Guy Raz?

  And just to be clear, like, people who logged sexual activity, this is not like a category that you offered up. It was just people were voluntarily deciding to just log that as one of their activities.

• 44:30Speaker 01

  Well, it was a category, but it wasn't something that we had realized. So we used this database from the government that was like thousands of different activities that people would do.

• 44:43Guy Raz?

  Oh, I see. I got you.

• 44:44Speaker 01

  And so it was an option. We just didn't think people would log that.

• 44:48Guy Raz?

  So you were just naive about that?

• 44:50Speaker 01

  We were naive. We were like, OK, this is this government database of activities. It must be fine. That was quite a shock and a wake up call for us.

• 45:00Guy Raz?

  So Fitbit for the first couple of years was, A, still a clip, mainly a clip. And then, I think, really 2011, you released the first product Christmas of 2009. You've got 2010. By 2011, I read that your just business exploded, like 5X growth from 2011 to 2012. You went from $15 million in revenue to $76 million in revenue. What was going on? Was it just this self-generating phenomenon? Like, were you surprised by it? Were you investing in marketing? Was it just unearned media, just people reporting on it? What was going on?

• 45:38Speaker 01

  I think the primary reason is, you know, because we had baked in this social element, this community element into it from the very beginning. It ended up being a very viral. Very viral product. So one family member would get it. And to really realize the potential, you know, the the community aspect and the competitive aspect, you had to have someone else as well. So they'd either buy it for their spouse or their parents, and they would start competing. And then they'd buy it for their friends, and they'd try to get their friends to buy the product.

• 46:11Guy Raz?

  So they could each see how many steps you were people. Because I remember this. I remember this at NPR. People were wearing Fitbits, and they were talking, and there was, I think there was even, people were encouraged to get Fitbits.

• 46:22Speaker 01

  Exactly. So it was, it was very driven by word of mouth. And this viral spread was, was a huge driver of our growth in those days.

• 46:31Guy Raz?

  I think by, by 2013, you had some competitors coming in. And Nike, Nike was making one, and Jawbone was making one. And, I mean, I remember going to the TED conference in 2013 and getting a Jawbone in my gift bag. Were you worried about the competition at that point, or not really?

• 46:54Speaker 01

  Yeah, at that time, I think people were looking at the success. And, you know, there was even a name coined for the whole category, which is quantified self, right? How do I use sensors, et cetera, to measure everything that I'm doing in my entire life? And so that attracted a lot of competition, as you said. And I'd have to say, the competitive aspect was, was definitely worrying at the time, especially with Nike and Jawbone.

• 47:19Guy Raz?

  Yeah, because they're so huge.

• 47:21Speaker 01

  They're huge. I mean, Nike, obviously, it's a multi-billion dollar, multinational company with a lot of media dollars. I remember when they announced the fuel ban, you know, they had all these celebrity athletes at the announcement, and we're like, whoa, god, that's insane.

• 47:36Guy Raz?

  And yet, by 2014, you had 67% of the activity-tracking marketplace, right? I mean, Fitbit was just totally dominating the marketplace. I mean, were you and Eric doing like victory laps and high-fiving each other and thinking back to all those, like, all those doubters? I mean, what was going on?

• 47:54Speaker 01

  I think we're still pretty, I don't know if scared is the right word, I think, still very, very cautious. You know, nothing was guaranteed.

• 48:05Speaker 01

  There was a lot of competition that was emerging. We started a lot of internal challenges in the business, scaling production, scaling the company, et cetera. So again, a lot of fires for us to be solving on a day-to-day basis. And I remember occasionally, we'd always check in and say, hey, when do you think we'll know, like, this is, we're gonna make it?

• 48:26Guy Raz?

  Yeah.

• 48:26Speaker 01

  And we'd say, I think we'll know in six months. And we kept saying that every six months. So it was pretty much an ongoing thing, pretty much up to the IPO.

• 48:40Guy Raz?

  2015 was a huge turning point for you in many ways. You go public, I think your market cap, I read, at a certain point reached $10 billion. That year, 2015, Apple, the Apple Watch is released, and they stop selling Fitbit in their stores. At the time, you were quoted as saying, you know, I don't really, not really worried about this because it's a huge market, it's a $200 billion market, you know, the Apple Watch is just crammed with a bunch of stuff, or smartwatches are crammed with a bunch of stuff, and what we're doing is something simpler. Was that what you were saying publicly? Because, I don't know, did you, you felt like you should be saying that, or did you really think that was true?

• 49:25Guy Raz?

  That the Apple Watch wouldn't actually have much of an impact?

• 49:30Speaker 01

  You know, we were definitely concerned with Apple. I mean, this was the preeminent technology and especially hardware company at the time with an amazing brand. We had faced off Philips and Nike and Jawbone, which were, you know, in their rights, very big competitors, especially Nike. We did feel very strongly that our product had very clear advantages. It was a simpler product. If you looked at the Apple Watch that was announced at that time, I think everyone will admit, maybe even Apple, that it was a product that they didn't quite know what it was supposed to be used for. So with the launch of the first Apple Watch, I don't really think that that had an actual impact on the trajectory of the business.

• 50:15Speaker 01

  It wasn't the product that it would later, later become. And the industry wasn't where it would eventually evolve either.

• 50:22Guy Raz?

  I mean, but eventually, the industry did change, right? I mean, I mean, Apple Watch got really popular, I think, like, by 2016.

• 50:32Guy Raz?

  Fitbit's stock had dropped by like 75% over the course of a year. I mean, you and Eric were running a publicly traded company and the stock was just like tumbling. So what did you think? I mean, I can't imagine that was pleasant for you.

• 50:48Speaker 01

  No, it was definitely a stressful, stressful period. And you could argue, well, we, maybe we shouldn't have been valued at 10 billion in the first place. And I think a lot of times it's a question of, you know, perception, right? If we had never hit that 10 billion and we had steadily grown into, you know, the 2 billion, I think people's perceptions and, you know, just psychology about the whole situation would have been different than going to 10 and falling to 2.

• 51:18Guy Raz?

  Yeah.

• 51:19Speaker 01

  And it was a very, you know, challenging period because as a private company, despite challenges, your valuation doesn't change very often. It only changes when you raise money, which could happen once a year, once every two years. So if you hit a bump in the road, your employees don't really feel it. We had a product recall where if we had been a public company, our valuation would have plummeted immediately. But at the time, we're private, so we just told the employees, hey, look, this is the challenge. It's pretty serious, but here are the steps that we're going to take to get through it. And everyone kind of rallied together. But when you're being measured every day in real time.

• 51:56Guy Raz?

  By the stock price.

• 51:57Speaker 01

  By the stock price. You're not really given a lot of breathing room to try to fix things.

• 52:03Guy Raz?

  Even though you were introducing new products, revenue was declining every year from the time you went public. And I read an article about something that you did in 2017. I'm really just curious to get your take on it because I actually think it's really courageous, but also probably super stressful and difficult, which is you asked your employees to submit a, an evaluation of the company and of you. And then you sat in front of them to hear the results of this evaluation and it wasn't good. You had, you even had some employees who wrote letters to the board asking that you be removed as CEO.

• 52:49Guy Raz?

  I can't imagine that was easy for you to hear.

• 52:54Speaker 01

  You know, I don't know if I heard that particular feedback directly, but clearly the survey results were not great. You know, I kind of half jokingly think, you know, probably used to hearing very critical feedback because of my parents. I don't think there was a moment where they were truly happy with anything that I did. I remember even when I took the SATs and I got my score back. It was a pretty good score, but my dad just honed in on clearly the areas that had not done well. So I don't think I have a huge ego. I mean, I do have an ego. I think it's human to have one.

• 53:29Guy Raz?

  Sure.

• 53:31Speaker 01

  My primary focus was how do I get things back on track?

• 53:36Guy Raz?

  You had, there was a quote from somebody in an article, it was an anonymous quote, said, you know, we were focused on, at a certain point, we were focused on the right things. We had the ability and have the ability to know a lot about our users, which you do. But our users don't want to be told what they did. In other words, they don't want to be told, hey, you exercised, you did 10 steps today. They want to be told what to do, like how to get better. So, and the quote was, this was the greatest missed opportunity. I know you've made a pivot since then, but was that a fair assessment at the time in 2017? That you were just, you were too focused on telling people what they've accomplished rather than telling them what they need to do?

• 54:20Speaker 01

  Yeah, I think there are ultimately kind of two big things that were driving the headwinds in the business. First of all, I think we were really behind in launching a competitive smartwatch at the time. Like people were.

• 54:35Guy Raz?

  Competitive to, to that?

• 54:36Speaker 01

  Competitive to Apple, yeah.

• 54:38Guy Raz?

  Yeah.

• 54:38Speaker 01

  It was clear that the industry, consumers were moving to that category and we were seeing that in our sales. So in a very short period of time, our tracker business fell by $800 million in revenue. And, you know, at the time, at our peak, we were doing about 2.1 billion in revenue. So we had an $800 million hole. And we finally launched our smartwatch, but it was only sufficient to fill that hole very barely. You know, we hadn't transformed our software into giving people guidance and advice. And it also ties to our failure at the time to quickly diversify a revenue stream

• 55:22Speaker 01

  beyond just hardware to a services business.

• 55:24Guy Raz?

  Like a subscription.

• 55:25Speaker 01

  Exactly. We were so focused on growing our hardware business because that was what was bringing in the money. That was what the retailers wanted, et cetera. And, you know, one of the mistakes I made was not setting up enough time and the focus to building the subscription part of the business that actually answered those pivotal questions for our users.

• 55:48Guy Raz?

  As many, many companies find themselves, you know, successful companies that have a successful legacy product, it's crazy talking about a legacy product for your company, which is only 10 years old or 12 years old. But, you know, you could argue that the Fitbit product is your legacy product, right? And that as any company with a legacy product realizes, they've got to make a pivot. Like for American Express, it was traveler's checks for 100 years, right? You know, that's how they made their money. And they had to pivot into other things, travel services, credit cards, and so on. It sounds like in 2019, you really made a pivot into thinking about Fitbit not as

• 56:30Guy Raz?

  a hardware company that makes like a tracker, watch or device, right? Smartwatch, but a company that really is about healthcare and is designed to kind of pivot into more into healthcare data and analysis. Is that fair? Is that right?

• 56:48Speaker 01

  Yeah, I think that's fair. I think we stopped thinking of ourselves as a device company and more of as a behavior change company because that's effectively what people were buying our products and services to do. Was to change their behavior in a really positive way. And not only, you know, individual people, but companies as well.

• 57:09Speaker 01

  Companies who, in the US especially, bear the direct costs of the healthcare of their employees. So we started thinking about ourselves as a behavior change company and figuring out what are the products and services that really deliver that, both to people and to businesses.

• 57:31Guy Raz?

  So we get to the end of last year where Google announces that they were going to buy Fitbit, $2.1 billion. We should mention that at the time of this recording, it hasn't closed yet. To me, it makes perfect sense. If I'm you or Eric, I would have done it. I would have said $2.1 billion. That's a very, that's great. That's a great outcome because now with Google, we've got access to their dollars and their research labs and all the, you know, the people who work there and the analytics and our ability to really go to the next level. Why did it make sense for, from your perspective, to sell to Google?

• 58:10Speaker 01

  Yeah, that's a very complicated and emotionally fraught question, but last year, our board met and it was pretty clear to everybody that we had a lot of challenges in the business. We weren't profitable. There was a lot of competition out there from the likes of Apple, from Samsung, some emerging Chinese competitors. But there was a lot of just great things going on in the company. Like, I was so excited about our product roadmap, about something, you know, things that were in our pipeline, all the advanced research that we're doing around health and sensors. Like, I would look at our product roadmap every day and just, you know, come away super excited about that and then also be, you know, confronted with a lot of the business

• 58:55Speaker 01

  challenges as well. And for me, most importantly, it was about a legacy and I wanted the Fitbit brand and what we did to continue onwards for a very, very long time. And we just had to figure out the best way to do it, whether it was as an independent company or within a larger company. That was really what was most important.

• 59:16Guy Raz?

  I imagine that there are some details you can't talk about for obvious reasons, but as of this recording, we're talking in mid-April.

• 59:28Guy Raz?

  There is a hold on the Google acquisition. The Department of Justice is doing an investigation because there's some interest groups who have said, hey, you know, we don't think that Google should have access to all this data. Fitbit has 20 million users, this incredible trove of health data. Is that causing you stress right now that there is this Justice Department hold up on the acquisition?

• 59:53Speaker 01

  No, and it's because, you know, sometimes the press does like to sensationalize things. But the process that we're undergoing right now with the Department of Justice and also with the EU and some other countries around the world is pretty normal for acquisitions of this size. In fact, it's required. Really, you know, the whole review is about the anti-competitive element and especially around the wearable market share. So that's just something that we have to convince regulators that, you know, this doesn't reduce competition in the marketplace.

• 1:00:24Guy Raz?

  As far as you know, the situation now with the lockdowns and the pandemic does not have any impact on Google's interest or commitment to making this happen?

• 1:00:35Speaker 01

  No, I think everyone's thinking towards the long term. Fingers crossed is that we do find ourselves through this COVID-19 situation and that there is life beyond that. Maybe it comes back slowly, but, you know, I think everyone is thinking, what does this whole category look like in time span of years out? And I think what, one of the things that COVID-19 has shown is that, especially if you look at healthcare, this idea of remote healthcare, remote monitoring, keeping people healthy outside of a hospital setting is actually really important.

• 1:01:08Guy Raz?

  Super. It's going to totally change. I've had, I've had a video call with my doctor, just for a quick question. You know, it's actually super convenient.

• 1:01:17Speaker 01

  Exactly. And if, during these telemedicine visits, if they have a snapshot and summary of what you've been up to and what your health has been outside of that visit, and almost be predictive in that way, I mean, I think that's, that can be really groundbreaking in terms of the way that's being practiced, in the way medicine gets practiced. And this whole time period is merely accelerating that transition.

• 1:01:40Guy Raz?

  When you think about all of the things that you have done professionally and your successes, and you made a lot of money. I mean, you're extremely wealthy. You're wealthier than your parents could have ever imagined you would be or they would be. They took a huge risk to come to the US and add all these little mom and pop stores. How much of that do you think is because of your intelligence and skill? And how much do you attribute to luck?

• 1:02:08Speaker 01

  Yeah, that's always a tricky, tricky question to answer. You know, I think very fortunate to have grown up with my parents, just having seen them persevere through life. You know, you get the realization that nothing really comes easy, that it does take a lot of, you know, just grinding away at things that at the time seemed kind of unpleasant. So I think those are good traits and very fortunate to have parents like that who sacrificed a lot to put me in some great schools over time, even though they started from some humble beginnings. But also have learned a lot of ways, gotten some lucky breaks where

• 1:02:50Speaker 01

  things could have gone the wrong way very, very quickly. Ultimately, I attribute it to a little bit of all of that. I think it's not fair to say that everything is luck, because then I think you start to discount the actual things, actions that you can take on your own to affect the future. And that's really important.

• 1:03:16Guy Raz?

  That's James Park, co-founder of Fitbit. And here's a number for you. 34,642,772. That is how many steps James has tracked since he first put on that balsa wood Fitbit prototype, at least as of this recording. That's about 15,430 miles, or 24,832 kilometers.

• 1:03:45Guy Raz?

  And thanks so much for listening to the show this week. You can subscribe wherever you get your podcasts. You can also write to us at [email protected]. And if you want to send a tweet, it's at howibuiltthis or at Guy Raz. This episode was produced by James Delahoussaye with music composed by Rameen Arablouei. Thanks also to Sarah Sarason, Candace Lim, Julia Carney, Neve Grant, Casey Herman, and Jeff Rogers. I'm Guy Raz, and you've been listening to How I Built This.

• 1:04:17Guy Raz?

  This is NPR.

• 1:04:22Speaker 02

  Not everybody wants to run around the White House or Congress all day. That's where the NPR Politics Podcast comes in. At 5 PM, NPR's best political reporters get together and break down the biggest political stories. No noise, just friends making sense of Washington. Listen to the NPR Politics Podcast every weekday.