reCAPTCHA and Duolingo: Luis von Ahn (2020)

In 2000, Luis von Ahn was starting his PhD in computer science when he attended a talk and happened to learn about one of Yahoo's biggest problems: automated bots were signing up for millions of free Yahoo email accounts, and generating tons of spam. Luis' idea to solve this problem became CAPTCHA, the squiggly letters we type into a website to prove we're human. He gave away that idea for free, but years later, that same idea had evolved into a new way to monetize language learning on the web, and became Duolingo. Today, Duolingo is a publicly-traded company with a market cap of $9 billion. This episode was produced by Casey Herman, with music composed by Ramtin Arablouei. It was edited by Neva Grant. You can follow HIBT on X https://twitter.com/HowIBuiltThis & Instagram https://www.instagram.com/howibuiltthis/, and email us at [email protected] mailto:[email protected]. 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?

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• 0:46Guy Raz?

  build the prototype, analyze the market, maybe even come up with the idea, what separates the people who actually build something from everyone else? I don't have a clean answer yet, so I've been sitting with it with Claude. There's hope in hard questions. Ask yours at claude.ai/hibt. We get support from U.S. Bank. A question I love asking founders. What's the one decision you almost didn't make? The one that changed everything? Because it's never the obvious stuff. It's never, I decided to start a company. It's the small, boring, Tuesday afternoon decision you barely remember making until you realize it's the reason everything after it either worked or didn't.

• 1:32Guy Raz?

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• 2:16Guy Raz?

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• 3:00Guy Raz?

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• 3:45Guy Raz?

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• 4:28Guy Raz?

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• 5:13Guy Raz?

  we've come to learn that there are certain episodes that just resonate with a huge number of people. And this one happens to be one of them. We first ran this back in 2020. And be sure to listen through to the very end to hear a quick update. And now, here it is.

• 5:33Speaker 01

  You know, I was feeling good. I thought, OK, well, we can continue raising money for a while. And at some point, we raised money from Google. Capital G is one of their investment arms. And the partner from that firm sat me down, and she said, "Nobody else will invest in this company if you don't figure out how to make money. You know, you're not going to find a bigger fool. We're the biggest fool." And that's when we started kind of freaking out and tried to figure out how we're going to make money. But we had no idea how we were going to make money.

• 6:08Guy Raz?

  Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 6:22Guy Raz?

  I'm Guy Raz, and on the show today, how a perfect storm of skill and luck drove Luis van An to create CAPTCHA, then reCAPTCHA, and then Duolingo, a foreign language app valued at $1.5 billion.

• 6:40Guy Raz?

  Think about the small moments or decisions in your life that actually had a huge impact on how your life turned out. Maybe it was a conversation you struck up with the person next to you on an airplane. Maybe it was a party you reluctantly went to only to meet the person you'd eventually marry. Or maybe it was a decision to stay on vacation an extra day that sparked a new idea. For Kevin Systrom, it was a random remark from his girlfriend that made him decide to use filters on Instagram. For Blake Mycoskie, it was a chance meeting with a group of young Argentinians who took him to the countryside where he saw "Kids with no shoes" that one day inspired him to create Toms. And for Luis van An, it

• 7:25Guy Raz?

  was a free lecture at Carnegie Mellon University in 2000. That single lecture would lead him to invent two ingenious new tools. The first was CAPTCHA. Yes, CAPTCHAs, those annoying, twisted, and blurred letters you have to type into a website to prove you're human. And the second one was Duolingo, now the biggest language learning app in the world. Both CAPTCHA and Duolingo were designed to harness the power of crowdsourcing to solve problems. And I'm going to blow your mind here. If you have ever typed in a CAPTCHA or used Duolingo, there's a good chance you've taken part in a massive online collaboration

• 8:07Guy Raz?

  that you probably weren't even aware of. And it's amazing how Luis came up with all this, but let's start at the beginning. Luis was born in Guatemala in the late 1970s. Both his parents were doctors, and though he was surrounded by poverty and violence in Guatemala City, Luis grew up in comparative privilege. And as a kid, he spent a lot of time hanging out at the family business.

• 8:32Speaker 01

  My mother's family, actually, had a candy factory. Everybody is always amazed at the fact that I grew up with a candy factory. And, you know, they think that it was like Willy Wonka or something. I was not all that much into the candy itself. I was into the machines because basically the candy is made by these gigantic machines that, you know, pump out, I don't know how many thousands of pieces of candy per hour. And basically, all my weekends, I spent playing at the candy factory. And I would take the machines apart and put them back together. There would be some extra pieces after I put them back together usually, and that would be a problem.

• 9:07Guy Raz?

  What kind of student were you? Was school pretty easy for you?

• 9:11Speaker 01

  Yeah, I was pretty nerdy. Basically, I was really good at math. Math was just easy to me. I, you know, what I would do during, in the summers is basically get either next years or, you know, a couple of years later, math books and basically do all the exercises.

• 9:25Guy Raz?

  Wow.

• 9:26Speaker 01

  It kind of came easy, but the way I really got good at it is by doing hundreds and hundreds of exercises.

• 9:31Guy Raz?

  That's what you would do in the summertime?

• 9:33Speaker 01

  Yeah, I kind of was bored. I mean, I was an only child. I didn't have that much to do. This is, remember, this is also pre-internet, pre-everything. So what was I gonna do?

• 9:42Guy Raz?

  Man.

• 9:42Speaker 01

  That's what I did.

• 9:43Guy Raz?

  I was putting playing cards in the spokes of my bicycle and buying Jolly Ranchers at 7-Eleven. Woo, should have done math books. So you were, did you just love math? I mean, was it, it sounds like kids don't think about their future. They're not like, I'm gonna study math so I can be in tech one day. Like, you must have really enjoyed it.

• 10:02Speaker 01

  I did, I enjoyed it. It was, it was like a puzzle for me. By the way, this is not the only thing I did. I mean, I also played a lot of video games, pirated video games in my Commodore 64.

• 10:11Guy Raz?

  Like floppy disks on floppy disks?

• 10:13Speaker 01

  Floppy disks, yeah, that's right. I wanted a Nintendo when I was eight. My mother would not get me a Nintendo. She instead got me a computer, a Commodore 64. And I couldn't figure out how to use it, but eventually I kind of, I read like the manual and stuff, and I figured out how to use it more. And then I figured out I could pirate other people's video games. And so I became a little hub in my, in my little neighborhood. But these were not other kids, these were adults or kind of, basically, young adults who had a computer and they would come to my house and... I would take their games and give them my games in exchange. So then I collected a pretty large number of video games.

• 10:49Guy Raz?

  But I should mention, right, that, I mean, because your childhood sounds pretty nice, but like as a kid, I guess, or even as a teenager, there was a civil war in Guatemala, right? I mean, we know that today, there's a lot of violence there. And obviously, there's violence in the US and in other countries, too. But Guatemala's been particularly hard hit. I mean, did it feel dangerous when you were a kid?

• 11:11Speaker 01

  Yes, it did. There was a civil war pretty much since I was born, in 79 to 1996. There was a civil war going on the whole time. It always felt dangerous. When I was 15 or so, my aunt was kidnapped for ransom. I mean, she was gone for seven or eight days.

• 11:27Guy Raz?

  Wow.

• 11:28Speaker 01

  People's cars would be stolen. I don't know, every couple of months, somebody's car would be stolen in my family. Going out past 7:30 PM was rare.

• 11:37Guy Raz?

  Yeah.

• 11:38Speaker 01

  You needed to go out in a large group if you were going to go out past 7:30 PM. And, you know, I did have my house had walls and barbed wire and, yeah, it felt dangerous. I mean, this is one of the, this is one of the reasons I came to the US, actually. I mean, I, you know, when I was, after my aunt was kidnapped, I thought to myself, I don't want to live here.

• 11:55Guy Raz?

  Yeah. And I guess you did end up leaving Guatemala for college, because you went to Duke in North Carolina.

• 12:04Speaker 01

  Mm-hmm.

• 12:04Guy Raz?

  And you described yourself as a, like a math nerd in school. And is that what you intended to do, like to do something in math?

• 12:13Speaker 01

  That's what I wanted to become, an academic, a math professor. I was pretty certain I wanted to become a math professor. You know, at the time, I thought the best thing that I can do is really learn a lot of math, and I really loved it. And I thought it was futile to learn how to deal with other people. And it is interesting, because my job these days is 100% just dealing with other people and people's problems.

• 12:35Guy Raz?

  Wait, I'm just trying to understand this. So by becoming a math professor, you thought, hey, I wouldn't have to deal with people? I would just deal with like facts and data and numbers?

• 12:44Speaker 01

  Yes, yes. And, you know, I'll do math research all day long. And every now and then, I'll teach a class, but whatever, that's like a tax. That's what I thought.

• 12:52Guy Raz?

  So, all right, so you are, so you get your degree, and you're following this path to go into academia, and you go into a PhD program at Carnegie Mellon.

• 13:01Speaker 01

  Correct.

• 13:01Guy Raz?

  And I guess you go into computer science, right?

• 13:04Speaker 01

  Yes, I changed from math to computer science because I visited a math grad school. And what people were saying, the professor was saying, oh, I'm working on this open problem that nobody's been able to solve for the last 300 years. And I thought, hmm, I don't think I'm smart enough. I mean, if you haven't done it and nobody's done it in 300 years, that's kind of not for me. Whereas when you're visiting computer science, I mean, this is crazy thing. People are like, oh, yeah, I solved an open problem yesterday.

• 13:29Guy Raz?

  Wow.

• 13:29Speaker 01

  It's a much younger field.

• 13:30Guy Raz?

  Yeah.

• 13:31Speaker 01

  And so that I thought that was much more exciting for me at least.

• 13:33Guy Raz?

  So you are, you started, this is your 2000, you start your PhD program at Carnegie Mellon. But I guess like really soon after you start, you go to some talk by someone from Yahoo, comes to campus to talk about Yahoo. Yahoo was a big deal in 2000. Who is that? What's the story?

• 13:51Speaker 01

  Yeah, that was serendipity again. Most of, most of the things that have happened in my life are serendipitous. I was a first year PhD student. I had been at Carnegie Mellon for maybe two months. I had, you know, the first thing you got to do when you become a PhD student is find an advisor. I had found myself an advisor and we went to a talk together. This guy from Yahoo, who was the chief scientist of Yahoo at the time, and like you said, Yahoo at the time was the, you know, the biggest tech company out there. And he came to give a talk at Carnegie Mellon and it was, the talk was basically 10 problems that they didn't know how to solve at Yahoo. And I was an enterprising PhD student and I thought I'm going to try to solve these problems.

• 14:28Guy Raz?

  And what was the problem that he said they had?

• 14:30Speaker 01

  Yeah, so the problem for this particular one was there were people who were writing programs to obtain millions of free email accounts. So Yahoo at the time gave out email accounts.

• 14:40Guy Raz?

  Sure.

• 14:41Speaker 01

  For free. And some people thought it would be good to send spam from Yahoo accounts. The problem is each Yahoo account only allowed you to send like 500 messages a day. So if you want to send 10 million spam messages per day, you just have to get a bunch of Yahoo accounts and from each one of them, you send 500 messages.

• 15:00Guy Raz?

  And this is the era, and I remember this, we all remember this. Where you would get hundreds of messages, spam messages about certain bodily enhancements. You would get messages about the hormone growth things. I mean baldness, I mean, it was endless.

• 15:16Speaker 01

  Canadian pharmacies selling you Viagra.

• 15:18Guy Raz?

  Right.

• 15:18Speaker 01

  Yeah, yeah, yeah.

• 15:19Guy Raz?

  Just spam. It was a huge problem.

• 15:21Speaker 01

  Yep.

• 15:22Guy Raz?

  And he was like, we can't figure out how to stop these computers or programmers from making, you know, just creating all these email accounts?

• 15:31Speaker 01

  Yeah. And so that was, that was the problem.

• 15:33Guy Raz?

  And just to be clear, these spammers were not physically setting up each individual email account?

• 15:39Speaker 01

  No, they had written programs that would just set up millions of email accounts a day, or however many per day. So I thought about it for weeks and months, and I talked about it with my PhD advisor Manuel. And together, we came up with a solution, which was, the thinking here is, look, computer programs can get a million email accounts per day because, well, computer programs can do things very fast.

• 16:00Guy Raz?

  Yeah.

• 16:00Speaker 01

  And it also doesn't get bored.

• 16:02Guy Raz?

  Right.

• 16:02Speaker 01

  Humans, a human can't get very many email accounts. So how about this? How about if we make sure that whatever's getting an email account is actually a human and not a computer program? Then we started thinking, okay, well, how can we distinguish between a human and a computer?

• 16:18Guy Raz?

  Yeah.

• 16:19Speaker 01

  And that's where this, this idea came, came about. It's this idea of a captcha, where it's basically these distorted characters that you have to type whenever you're buying tickets on Ticketmaster or getting, you know, an email account or stuff like that. The idea is that a computer can generate one of these. You know, basically take some, some letters, put them in an image, distort them, and then it can give them out. And it turns out that humans can read these. Well, at the time, humans could read these very well. They still can, but computers could not.

• 16:49Guy Raz?

  By the way, I can't read them. I'm the human that can't read them. I can't read captchas.

• 16:52Speaker 01

  Well, I don't know, I don't know how much of a human you are.

• 16:55Guy Raz?

  Now they're like, point to every stop sign. Point to every bridge.

• 16:58Speaker 01

  Yeah, yes, it's changed. But basically, at the time, the idea was, humans can read these distorted characters much better than computers. So let's give, basically, every time that somebody's trying to get an email account, let's give them a test to see if they're human or not.

• 17:10Guy Raz?

  And you just start doing this on your own? Like, did you tell Yahoo? Did you tell him? Or were you just like, this is fun. I just want to figure this out? Like, just working independently?

• 17:20Speaker 01

  Yeah, I mean, with my PhD advisor, it was, it was, it became our research, it became our research subject. And yeah, we did not tell Yahoo.

• 17:27Guy Raz?

  Because it sounds like here's the kid getting the math mathematics workbooks in the summer. It's like, you just seem like a fun thing to solve.

• 17:36Speaker 01

  Yeah, it was fun. But that's like, that's the core of the PhD program, I think. You know, you're, you're trying to find problems that, that others haven't solved.

• 17:43Guy Raz?

  I got you.

• 17:43Speaker 01

  And you're, this seems like a problem that other people hadn't solved, so we, we were working on it.

• 17:48Guy Raz?

  And you called it CAPTCHA. Did you name it CAPTCHA?

• 17:50Speaker 01

  Yes.

• 17:51Guy Raz?

  And what does that mean?

• 17:52Speaker 01

  It's an acronym.

• 17:53Guy Raz?

  Sounds like capture, to like, to capture.

• 17:55Speaker 01

  Yeah, yes. It's an acronym that sounds like capture, which, you know, the idea was to capture the, you know, the bot or the, the computer program. It stands for Completely Automated Public Turing Test to Tell Computers and Humans Apart. So, you know, it was just an acronym, but, but now, I think most people have heard of the word CAPTCHA, but do not know what it stands for.

• 18:14Guy Raz?

  And you come up with this thing, CAPTCHA, and what do you do? Do you like email this guy Yahoo and say, hey, I've got your solution for you?

• 18:20Speaker 01

  Basically, I mean, we emailed him and we said, hey, you know, we think we have a solution. Here's some code, you know, and we explained how it works. And what was amazing, and now that I know how large companies operate and how, how slow things move, what was amazing is, within about a week of when we sent them this,

• 18:36Guy Raz?

  Yeah.

• 18:37Speaker 01

  it was already functional.

• 18:38Guy Raz?

  Wow.

• 18:39Speaker 01

  You know, alive, it was live. So I guess the problem that they had was so big that when they saw this, they were like, okay, let's, let's do it.

• 18:46Guy Raz?

  So they saw this and they're like, oh my God, this is great. And so you must have just, I mean, you were like, what, 25, 26?

• 18:52Speaker 01

  20, 21, 21.

• 18:54Guy Raz?

  21, my God. So you, right, so all of a sudden, you're an overnight millionaire, multimillionaire.

• 18:59Speaker 01

  No, no, no, no, no, no money was, no money exchanged hands here.

• 19:03Guy Raz?

  Wait, you gave CAPTCHA to them? You just said, hey, here you go?

• 19:07Speaker 01

  Yep. I mean, listen.

• 19:09Guy Raz?

  You gave it to a multi-billion dollar company? You just gave them CAPTCHA?

• 19:13Speaker 01

  I didn't know how things worked. And, um, you know, the truth of the matter is, it's probably a good thing in retrospect. I, I mean, who knows what would have happened, but I, you know, I, I don't have regrets. But yes, that was, um, that's what started happening. And then basically every other website started, you know, they saw that it was in the, in the front page of Yahoo. So every other website started copying or making their own version. And within a couple of years. Pretty much everywhere on the web. You know, when you had to get an email account, when you had to enter a comment on a blog, whenever you had to buy tickets on Ticketmaster, you had to enter one of these.

• 19:46Guy Raz?

  You were the guy. You were the guy who made it really hard for dopes like me to get it right. I had to constantly.

• 19:52Speaker 01

  It was annoying. It was annoying to people. And every time that I would be at a party or something and, you know, they would ask me what I did and then they would get me to explain my research. I would explain that I had done that.

• 20:01Guy Raz?

  And they would say.

• 20:03Speaker 01

  What the hell?

• 20:04Guy Raz?

  They would kick you out of the party.

• 20:05Speaker 01

  Screw you. Screw you.

• 20:07Guy Raz?

  But some of the research you did, I mean, you did actually write some software that you sold for, I think for some money this time. I mean, just like, could you just briefly explain how that happened and what you were working on?

• 20:20Speaker 01

  Yeah, I mean, this is, it's funny. I mean, at the time, this was not called crowdsourcing, but my PhD research was basically on crowdsourcing. I had worked on CAPTCHA where the idea was that humans can do some things computers cannot.

• 20:30Guy Raz?

  Yep.

• 20:31Speaker 01

  So my PhD research was basically that finding things that computers could not yet do and then finding ways to get people to do them. And in particular, the main thing that I did in that time was a game. And people loved to play it, but as they were playing it, they were actually helping computers figure out what's inside an image.

• 20:51Guy Raz?

  How did the game work?

• 20:52Speaker 01

  The way the game worked was this. You went to a website and you got randomly paired with somebody else who had shown up to the website.

• 20:58Guy Raz?

  Got it.

• 20:59Speaker 01

  And you were both shown the same image.

• 21:01Guy Raz?

  Any image, a random image, like an elephant?

• 21:03Speaker 01

  An image from the internet, yes. And you were told, type whatever the other person's typing. Just start typing words and if you're, one of your words matches one of their words, you both get points.

• 21:13Guy Raz?

  Got it.

• 21:14Speaker 01

  What was interesting about this game is that the words that people typed, the only thing they had in common was the image. So the words that people typed were basically related to the image. Because if you're told to do this, what are you going to type? If it's a picture of an elephant, you're going to type elephant because you think the other person's also typing elephant. So those words were really good labels for the image. Were really good tags for the image, basically. So I put it online, I programmed it, millions of people played it. And this was a game that was helping label all images on the web. And at some point, actually, Google, in fact, bought it. They just bought the technology and then it got implemented. They changed the name from the ESP game, which I called it the ESP game because it's like extrasensory perception.

• 21:56Speaker 01

  The idea was like, try to think what the other person was thinking, to the very amazing name of the Google Image Labeler, which is much less interesting.

• 22:05Guy Raz?

  And so they bought this from you? And was that like life changing money? I mean, were you all of a sudden super rich?

• 22:12Speaker 01

  No, I was not super rich, but it was good.

• 22:15Guy Raz?

  Got it. Okay, so you went on to earn your PhD and you get a job at Carnegie Mellon.

• 22:20Speaker 01

  Correct.

• 22:21Guy Raz?

  You're a young professor, you're on tenure track. And by the way, early on in your academic career, I should mention this, you were granted a very, like, one of the most prestigious awards, the MacArthur Grant, known as the Genius Grant. Basically, they pick a few people a year and give them like half a million dollars of unrestricted money to work on whatever they want. I mean, it must have been mind blowing.

• 22:46Speaker 01

  Yeah, that was, you know, I've gotten a number of awards in my life. But I mean, that was a particular, that was probably the most impactful one in terms of just how I felt. And also, they do this crazy thing where they don't, you have no idea that you're being considered or anything and they call you randomly.

• 23:03Guy Raz?

  Yeah.

• 23:03Speaker 01

  They figure out your phone number, one day you pick up and then they just tell you, you know, have you ever heard of the MacArthur Fellowship? And, you know, you say yes, and then they just tell you and you're like, wow, what the hell? First, you think it's a prank. I thought it was a prank.

• 23:16Guy Raz?

  Yeah. And I guess like around this time too, I don't know if this is apocryphal or not, but I read that Bill Gates personally called you to try to convince you to leave your job at Carnegie Mellon and to go work for Microsoft. Is that true?

• 23:33Speaker 01

  That is true.

• 23:34Guy Raz?

  Like, what, you pick up your cellphone, it's like, please hold for Mr. Gates? Or was like, he on the line?

• 23:40Speaker 01

  It was pretty much like that. It was pretty much like that. I mean, it was somebody, you know, basically said that, please hold for Mr. Gates.

• 23:47Guy Raz?

  And you were like, okay? And he gets on the phone and he's like, Luis, it's Bill Gates here.

• 23:54Speaker 01

  That's exactly right. I had been an intern, I had been, like, a year and a half before that, I had been an intern at Microsoft. And so I had good ties with Microsoft and they really wanted to hire me for Microsoft research. And so that is, you know, Bill Gates spent, I don't know, 45 minutes to an hour trying to convince me to go there. I was very flattered, but, you know, at the time, I just wanted to do my own thing.

• 24:13Guy Raz?

  How do you say no to Bill Gates? What, you were like, oh, wow, thank Mr. Gates, he's really pretty, so nice, I'm so honored, but I just, you know, no.

• 24:22Speaker 01

  I didn't actually say no, I said I would think about it, and then, and then I said no to like, a recruiter. But, uh, yeah, it was not easy. I mean, he's a major hero of mine. I mean, he's, he's just an amazing human being. But I just wanted to be a professor at the time. I thought, I want to do my own thing, I want to be a professor, and that, that's, that's what I wanted to do.

• 24:39Guy Raz?

  Was money important to you? I mean, you know, was it important to you to?

• 24:43Speaker 01

  It mattered, and it, interestingly, I guess it mattered more than it does now. It was nice to know that, you know, I could, I could buy a nicer car, or get a nicer apartment or something. It was nice, but it was, it's never been my driving force, I would say.

• 24:55Guy Raz?

  Okay, so you decide, I'm not, Bill Gates, thank you, no thanks, I'm not going to Microsoft, I'm gonna stay doing this work. So you are now, um, were you lecturing? Were you teaching classes?

• 25:06Speaker 01

  I was teaching. I was teaching a huge class. It was called Great Theoretical Ideas in Computer Science. It's just a fancy name. It's basically a, a discrete math class. The people who don't do well there usually change majors.

• 25:17Guy Raz?

  And you're like, not like John Nash, but I'm thinking about that movie, you're in front of a, like, a big blackboard or a whiteboard and doing equations and problems in front of 250 kids?

• 25:26Speaker 01

  Yeah, slides had already been around, so I use, I use PowerPoint, I use PowerPoint.

• 25:31Guy Raz?

  I got you.

• 25:32Speaker 01

  It's not that old.

• 25:32Guy Raz?

  Right, I got you, yeah, you're right, okay. So you're teaching, and you had done CAPTCHA, and lots of people are saying, hey, It's annoying and you're like, yep, I hear you. And, and people kept saying that to you, like, kept hearing that?

• 25:46Speaker 01

  Yep, yep. And, and that's, that's when I started thinking, each time you do it, you waste about 10 seconds of your time. And I just started, this thought just came to me of, wow, how much time am I wasting of humanity? And, you know, I did a little back of the envelope calculation, realized about 200 million times a day, somebody types a captcha. And that's when you get 200 million times a day, times 10 seconds. So humanity as a whole is wasting about 500,000 hours a day typing these captchas. And, and that's when I started thinking, huh. Related to, you know, all my research that I have done, is there something we can get humans to do while they're typing a captcha that is also useful? And we get them to do something useful? And it occurred to me that, yeah, we could get them to help digitize books.

• 26:29Guy Raz?

  How did, sorry, pause. How did you come to that idea? So like, when you type in a random, random letters from a captcha, you were thinking, how wait, how do we have a secondary use for this? And maybe it's books, digitizing books? How did you even, how did that even occur to you?

• 26:47Speaker 01

  I, I was thinking for a long time, can we get people to do something, but at the same time, kind of extract valuable computational effort from it? Until it finally occurred to me, oh, there's all these projects out there trying to digitize all the world's books. Google had announced a really, um, at the time, it seemed kind of insane, an ambitious project that we're going to take all of the world's books, everything that's ever been written, it's 100 million books ever written, and we're going to put them online. This is what we're going to do. And now in this process, the way the process works is you take a book, a physical book, then you scan every page. And then the computer needs to be able to decipher all of the words in those photographs. Now, the problem is that computers cannot record, or at the time could not recognize many of the words, about 30% of the words computers could not recognize.

• 27:32Speaker 01

  And the reason for that, by the way, which is this amazing thing, is the same reason why computers could not read captchas. Basically, this looked kind of like distorted letters.

• 27:40Guy Raz?

  And, and distorted letters are just inherently difficult for computers to recognize? Like, that's the point of captcha?

• 27:46Speaker 01

  That's right. And so it occurred to me, oh, wow. What if we just take the words out of a book that the computer could not read? And then we send them to people while they're typing captures on the internet? So basically, next time you type a captcha, the words that you see are actually coming from a book. And whatever you enter is in fact used to help digitize a book.

• 28:04Guy Raz?

  Do you remember when you came upon that idea? Was it was it like in a flash or was it just like, did it occur to you like?

• 28:10Speaker 01

  I do remember I was I was driving from Washington DC back to Pittsburgh. Because I had been to some National Science Foundation panel or something like that. Then I spent the next, you know, few weeks just kind of going over it and going over it. And I thought, OK, this this will work. And, you know, I started building the system, but then I I recruited a guy who was his name is Ben Moore. He was maybe a freshman in computer science at Carnegie Mellon. He was one of my students. He was in my class, in my large class. He was the best student and I thought you you can help me build this. And so together we built a system that would take a scan of a book and extract all the words the computer could not recognize and then send them as a captcha.

• 28:54Speaker 01

  Now, we decided we're going to go to big websites and we're going to tell them, hey, look, we have this captcha service. It's free. It's better than yours. Yours is relatively crappy. This one's pretty good and we'll give it to you for free. But all we have to be able to do is see what your users can type are typing during this so that we get to digitize the books.

• 29:12Guy Raz?

  And did websites start like start to use this tool?

• 29:16Speaker 01

  You know, some small websites started using it. The first largest, it wasn't even large, the largest website for a while that was using us was called Online Booty Call.

• 29:25Guy Raz?

  Nice.

• 29:27Speaker 01

  And they were to get an account in Online Booty Call, you had to you.

• 29:32Speaker 01

  You had to type a captcha and it was our captcha. And every time, every person that was getting an account in Online Booty Call was starting to help digitize.

• 29:40Guy Raz?

  God bless them.

• 29:42Speaker 01

  God bless them indeed. And at some point, a website that was relatively new at the time decided they needed to put a captcha on their on their registration flow. And they called us up and it was it was a website called Facebook.com. And they they were relatively new and they were like, hey, listen, you know, we we saw that we came across it. It seems like you have a good captcha. Can we, you know, can we put it up?

• 30:05Guy Raz?

  This in 2007.

• 30:06Speaker 01

  Probably 2006, 2007, yeah. You know, we said, okay, cool. And they did it. And that website was growing very fast. And so pretty soon, we just had a ton of people using our thing. And then at some point, I was giving a talk somewhere in Dallas about this system and how we could digitize books, et cetera. And the guy who was the CTO of the New York Times was in the talk. And he said to me, hey, you know what? We have this archive of 130 years of content from the New York Times that we have not been able to digitize, particularly because computers cannot recognize the words. How about you digitize it for us? And I'm just out of curiosity. Eventually, I'm assuming you thought this could make money. We thought, we thought, but we really didn't.

• 30:50Speaker 01

  We kind of thought we could make money, but we didn't know how. And what happened is this guy, you know, he then sent me an email. He said, no, I was serious. Let's do it. How much would you charge me to do this? Charge them to do what? To digitize? To help digitize their content. The old New York Times. The entirety of the New York Times archive. And so, you know, we kind of scrambled and we had no idea how much to charge them. And then we just thought to ourselves, okay, how much would this person have to pay people to digitize? Because the only other solution is people. Yeah. So we came up with something and we said, okay, divide that by four. Yep. And that's what we'll charge you. And the number we came up with was for every year of content, we will charge you $42,000. For every year of content in the Times, okay? Yes, over every, if you take one year, all editions of that year, we will charge

• 31:34Speaker 01

  you $42,000 to digitize that whole thing. That's the number we came up with. And then they said yes. And how many years of that's like 120, 30 years of? Yes, this is several million dollars of a contract there. But they said, okay, we'll pay you per year. Let's do it one year, then another year, then let's see what happens. And so they sent us the first year, we did it. And it turns out because Facebook was already using our captcha, we actually were digitizing relatively fast. Like, how quickly would it take to digitize a year of? A year was being done in about a week. What? A week of people typing in captchas could digitize a whole year of the New York Times? Yes, so that's what was going on.

• 32:12Guy Raz?

  I'm just, here's a question, right? Which is, say I was getting on Facebook in 2000, this is like 2008, I think, when the Times approaches you, right?

• 32:19Speaker 01

  Yep.

• 32:20Guy Raz?

  So I'm on Facebook in 2008, and I sign up for it, and I gotta write a captcha, and the word that I've gotta decipher is anxiety. It's one of my favorite words. And I typed that in, but how do you know? How does captcha know that I did that accurately?

• 32:38Speaker 01

  Ah, that's a very good question. So what happens is, for you, we actually give you two words. We give you, one is the word anxiety. It's a new word that we just got out of whatever, the New York Times. And then the other word is a word that we already have digitized. We already know what the answer is for the other word. And then we don't tell you which one's which, we just tell you, please type both. And if you type the correct word for the one for which we already know the answer, we assume you're a human, and then we also get some confidence that you typed the other word correctly.

• 33:05Guy Raz?

  Got it.

• 33:06Speaker 01

  And if we give this new word to like 10 different people, and they all type the same, you know, the same word, they all type anxiety, then we agree.

• 33:13Guy Raz?

  Then you know it's right.

• 33:14Speaker 01

  Then we know it's right.

• 33:15Guy Raz?

  So your accuracy was pretty high?

• 33:16Speaker 01

  Very high, yeah.

• 33:18Guy Raz?

  Wow. So within a week or so, you get this first year of the New York Times digitized, and then presumably they're like, okay, let's keep going.

• 33:26Speaker 01

  That's right. And so what started happening is, they started sending us checks for $42,000 coming in pretty quickly.

• 33:33Guy Raz?

  Nice.

• 33:34Speaker 01

  And by the way, we had no company, we had nothing, and at some point Carnegie Mellon got wind of this. And they're like, wait a second, you're kind of running a company here, but not really, because there's not even a company. You gotta get out of here. They had a standard deal that says, okay, if you're gonna start a company based on something that you came up in your research, we'll take 5% of this company. And so that's what happened. So we just said, okay, how about you keep 5%, we'll start a company. And so we did. We started a company, I got a lawyer, we formed a company, and pretty soon we were making, you know, $42,000 every few days.

• 34:04Guy Raz?

  And did you call it Recaptcha?

• 34:07Speaker 01

  It was Recaptcha Inc.

• 34:08Guy Raz?

  And did you leave Carnegie Mellon? Or did you stay on as if ever?

• 34:11Speaker 01

  No, I stayed as a professor. This was really a side hustle. Everybody, I stayed as a professor. Ben, who was also working on it, stayed as an undergrad. He was like, by then, he was like a sophomore. He's like, he just stayed as an undergrad. I stayed as a professor. It was this side hustle. But it was making quite a bit of money for us not doing all that much in there.

• 34:26Guy Raz?

  It's incredible. I mean, you basically have a side hustle where all of the work is being done for you by people who aren't, don't even know and wouldn't really care because it takes them two seconds and they're getting a free Facebook account. Meantime, they're digitizing the Times and you're getting $42,000 checks every couple of days from the Times.

• 34:48Speaker 01

  Yep. That was the, that was what was going on.

• 34:51Guy Raz?

  It's like one of the most genius businesses ever. Like, can we, can you, we talk after this interview is over to figure out a thing like this? Because this is amazing. You don't, you don't have any employees. It's just incredible.

• 35:03Speaker 01

  Yeah, it was, it was pretty good. But then, you know, that went on for some time and then actually, Google, in fact, bought it for their own book digitization process.

• 35:13Guy Raz?

  Wait, hold on. They approached you, they saw this and they saw that this was really, and they, and they said to you, hey, we can use this for our books digitization.

• 35:22Speaker 01

  Yes.

• 35:22Guy Raz?

  And, and what, they like threw a number on the table?

• 35:26Speaker 01

  Yes, I mean, multiple numbers were thrown in and out. And in the end, we, we decided this was a good home for it. So we, you know, sold it to Google. And this time I did go to Google for two years. So I took a leave off of being a professor.

• 35:40Guy Raz?

  Okay. So you were running this company, this small business. Google buys it from you, which is just incredible. You're still, at this point, really young. This is really life-changing.

• 35:53Speaker 01

  Yeah, especially since we didn't have, we didn't have investors or anything. It's all the money went to us.

• 35:57Guy Raz?

  And, and your startup costs were relatively low.

• 36:00Speaker 01

  Yeah.

• 36:00Guy Raz?

  Wow. All right. So you get acquired by Google. You are still a professor at Carnegie Mellon in Pittsburgh, but, but you went to California, to Silicon Valley, to, to go work at Google?

• 36:12Speaker 01

  Google happens to have an office here in Pittsburgh.

• 36:14Guy Raz?

  Ah, okay, great.

• 36:15Speaker 01

  And so I was spending about half time here in Pittsburgh and half time in California.

• 36:18Guy Raz?

  And what were you doing at Google? Were you still just basically running Recaptcha?

• 36:22Speaker 01

  Well, the first order of business was to integrate Recaptcha into the Google infrastructure. That took about a year, but I was still a professor. And even though I was on leave, I still had PhD students. And towards the end of that first year, I started getting very, very interested in the project, which happened to turn into Duolingo.

• 36:40Guy Raz?

  And presumably, Luis, I mean, given that you'd already turned down Microsoft like four years earlier, you were not going to become a Googler. You really, I mean, this is part of the deal. You had to go-

• 36:50Speaker 01

  No, I wasn't.

• 36:51Guy Raz?

  Work with Google, make this happen. But it sounds to me like you're so restless, you were not going to just work in a big organization for the rest of your career.

• 36:58Speaker 01

  I wasn't going to do that. Yeah, it's not, it's not my thing. I mean, I kind of have to do my own thing.

• 37:04Guy Raz?

  What do you think the reason for that is?

• 37:08Speaker 01

  I don't know. I mean, I, you know, I probably because I'm an only child. I don't know.

• 37:11Guy Raz?

  Are you just restless?

• 37:14Speaker 01

  I'm restless and I'm also obsessive. I obsess on one thing. And this is, this is what happened with Google in the end. I mean, I was starting to get obsessed on this new project, Duolingo, and this, I just had to leave. And by the way, leaving cost me quite a bit of money because some of the recapture payment required that I stay there for three years. Yeah, and I did not stay for three years.

• 37:33Guy Raz?

  So, so you had to give up some of the money. But in the meantime, you're still at Carnegie Mellon teaching. And I guess you've got a graduate student there who would eventually become your co-founder at Duolingo. And I think his name is Severin Hacker. Is that right?

• 37:51Speaker 01

  Severin Hacker. Last name is Hacker.

• 37:53Guy Raz?

  I mean, it's like a movie name.

• 37:55Speaker 01

  And by the way, the way I met him, I was literally sitting in my office one day, minding my own business. And then this lanky guy shows up, super tall and super skinny. And he says, hi, I'm Severin Hacker. And I just said, what? They didn't even parse it. And then he just did hand gestures. Severin, he did a gesture that is like basically cutting his arm, as if he was severing it. And then Hacker, he just did like, as if he was like moving his fingers, like typing with a computer.

• 38:24Guy Raz?

  My god.

• 38:24Speaker 01

  And then I'm like, oh, Severin Hacker. Wow. And he said, yeah, I'm here and I would like to do research with you, kind of work with you. And I said to Kevin, sure. Your name's so amazing, I'll do it.

• 38:37Guy Raz?

  When we come back in just a moment, how Luis and, yes, Severin Hacker take the recapture business model and try to use it again to teach people foreign languages for free. And how they discover that particular model is just not going to work. Stay with us. I'm Guy Raz and you're listening to How I Built This.

• 39:11Guy Raz?

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• 39:52Guy Raz?

  The agents bring speed and scale, and people bring taste, judgment, and control. Learn how you can get more out of your site from a Framer specialist or get started building for free today at framer.com/built for 30% off a Framer Pro annual plan. That's framer.com/built. Rules and restrictions may apply. AI isn't just opening new business opportunities. It's changing the way businesses get work done. The questions they ask, the decisions they make, the routine tasks they can hand off. That's the idea behind NetSuite Next, the next generation of NetSuite with AI woven into the tools your business already relies on.

• 40:37Guy Raz?

  NetSuite Next surfaces insights exactly when you need them, puts agents to work on routine tasks and problems, and lets you ask Complex questions in plain language, like talking to a knowledgeable colleague. But technology is only part of the story. AI is also reshaping how people and teams work together. And that shift is already underway. That's why NetSuite wants to put a new expert-created business guide in your hands today. It's called Aligning for the Agentic Era: How AI is Changing Everyday Work. And right now, it's yours, absolutely free. Inside, you'll discover how AI could reshape work across your entire organization, and how to position your business to prosper from it.

• 41:22Guy Raz?

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• 41:42Speaker 02

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• 42:42Guy Raz?

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• 43:25Guy Raz?

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• 44:07Guy Raz?

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• 44:51Guy Raz?

  That means you can group speakers in different rooms and play music throughout your entire house. Head over to Sonos.com and enjoy up to 20% off the most-wanted speakers and sets. Offer valid through December 18th or while supplies last. One more thing before we get back to the show. Every time I run into a How I Built This fan, the first thing they want to do is tell me about their favorite episode, which is so awesome. So now I want to share your favorite episode with the millions of people who listen to this show. Episodes they might not have heard or might want to hear again. So here's what I want you to do. Grab your smartphone and record a short memo, short, like less than 30 seconds, and tell

• 45:33Guy Raz?

  us your name, where you live, and which episode is your favorite and why you loved it. So for example, I might say, hey, it's Guy Raz here in San Francisco, and my favorite episode of the show is the one about Hamdi Ulukaya and Chobani, because I learned so much about how to just push through and nothing seems to be working out. And it gave me a whole new perspective on being resilient. So that's it, something like that, you know? And by the way, that's not my favorite episode, I love them all equally. Anyway, once you're done with the recording, email or message it to us at [email protected], and we'll share your favorites right here in the ad breaks in future episodes. Thanks so much, you guys are the best.

• 46:25Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's around 2012, and Luis has been working at Google for two years, and he's got one more year to go to get fully paid out. But he's itching to get going on his next project, so he walks away from Google early.

• 46:44Speaker 01

  Interestingly, what motivates me started changing quite a bit after the Recapcha acquisition, because I really thought, okay, I'm in a really fortunate position in my life. I've now, you know, I don't particularly need to worry about money. Can I do something that helps people? And so I really started thinking about education. And Sever, unfortunately, was also very much into education. So we started thinking, can we do something with education that gives it away for free? And the thinking really was, there's all these people that I grew up with in Guatemala, very poor, and a lot of people talk about education as something that brings equality to different social classes, but I always saw it as the opposite, something that brings inequality, because what happened, at least, you know, in my case, those who have money

• 47:26Speaker 01

  can buy themselves the best education in the world, and those who don't barely learn how to read and write.

• 47:32Guy Raz?

  But you're thinking along the lines of like, what is something that can be free, but that would kind of be self-generating? So for example, many business models offer a free service with advertising. That's Facebook's model. That's Google's model. They capture your data, but you get this service in return. But you were thinking, how can I create something that doesn't cost people anything, but that can be sustainable?

• 47:56Speaker 01

  That's what I was thinking. I was thinking, can we make it sustainable? And can we make it free? And languages in particular changed. I mean, Duolingo is a way to learn languages. We ended up going to languages, particularly also because in both of our cases, we're not native English speakers.

• 48:12Guy Raz?

  Severin was not either?

• 48:13Speaker 01

  No, he's from Switzerland. He's a Swiss German native speaker. And so in both of our cases, learning English completely changed our lives. And I just knew, you know, when I was growing up, everybody in Guatemala wants to learn English. And nobody could afford it. And it turns out that in most countries in the world, if you know English, you can double your income potential. So we thought, OK, can we figure out a way to teach people, language in particular, teach you English in a way that's free and but also self-sustaining? Like, how can we make it so that it kind of pays for itself?

• 48:47Guy Raz?

  OK, so you've got this language. You think language is where it's going to be at because that's how we can actually help people increase their income, for example, especially in other countries. And then the next question is, OK, what does that thing look like?

• 49:02Speaker 01

  Yep, that's what we were thinking. And then eventually we came up with this idea, which is pretty similar to recaptcha. Turns out today, Duolingo does not work this way. It is a good idea, but it is a relatively impractical idea.

• 49:16Guy Raz?

  So what was it?

• 49:17Speaker 01

  So the idea was this. We're going to give the service entirely for free, but instead of having people pay us, we're going to get them to help us translate stuff. So look, there are all these companies that want to translate stuff. For example, CNN would like to translate all their news that they publish from English to Spanish. They're currently paying people to do that translation. We thought, OK, what if we get these people who are learning English on our platform? What if as a part of their way to practice, you know, after they learn some stuff, we tell them, hey, here's the CNN article. Can you translate it? It's in English. You're learning English. Can you translate it into Spanish? And then if we get multiple people to translate the same thing and they kind of collaborate

• 49:58Speaker 01

  with each other to make a translation, at the end, we'll, we'll get a translation. We thought, okay, we could sell that translation back to somebody like CNN and make money that way.

• 50:09Guy Raz?

  And, and you would use the same technique as used with Recapture, like if 10 people got, got the same exact sentence, you knew it was right?

• 50:15Speaker 01

  It had to be a little smarter than that. It turns out if you give a sentence to 10 people, they'll all translate it differently.

• 50:21Guy Raz?

  Okay, yeah, right.

• 50:22Speaker 01

  Generally, yes. I mean, we, we would use, you know, kind of, they had to be pretty close to each other. Then we also had another step where, and the exercise to the person wasn't translate this, but tell us whether the translation is right or wrong. So some people would, would check the translations. But in the end, we built the system, actually, that worked pretty well, that basically you could give it a text in English. There were people who were learning English or who could be learning English and then they would be, they would help translate it. And then the system would pop out a translation that was made by people and the translation was very good.

• 50:55Guy Raz?

  It's, instead of CNN paying some translation service, they could, would just pay you.

• 51:01Speaker 01

  Yes.

• 51:01Guy Raz?

  And you would, again, like the New York Times sending you 42,000 articles, you would just have your students learning a language, but they would also be translating these articles into their native language.

• 51:11Speaker 01

  That's exactly what the idea was.

• 51:13Guy Raz?

  So, okay, so you have this really great idea. By the way, and, and I'm assuming you're funding the whole project, right? Because...

• 51:20Speaker 01

  Yeah. It was a Carnegie Mellon project and it was being funded by a grant from the National Science Foundation and also from my MacArthur grant at Carnegie Mellon. And funding at the time, what it meant is basically paying for Severin's salary.

• 51:32Guy Raz?

  Yeah.

• 51:33Speaker 01

  Yeah.

• 51:33Guy Raz?

  And so at what point did you say to Severin, all right, let's spin this out and start a business and figure out who, you know...

• 51:41Speaker 01

  This was also an interesting thing. We, okay, we thought, okay, we're, let's do this. This is a good idea. We're convinced this is a good idea. Let's do this. But the first thing we need to do is hire more people because the two of us just can't do it. So we started hiring people, but all inside Carnegie Mellon. We realized actually hiring people was pretty expensive inside our university. And then we thought, okay, well, what I need to do is apply for a bigger grant from a National Science Foundation. And I started working on that. And these grant applications is like 30 pages long. And you have to wait like a year to hear whether you get it or not. And it's like a couple million dollars, maybe. And so I was working on that. And then suddenly I got connected to a venture capital firm, Union Square Ventures.

• 52:25Speaker 01

  And, you know, I talked to them about this and very quickly they get back to me and they're like, hey, we could fund this. I didn't have to write 30 pages. It was much easier to get that money. So we thought, okay.

• 52:38Guy Raz?

  They wanted to just, they wanted in on this because, well, first of all, you had a track record.

• 52:43Speaker 01

  It was mainly the track record. In retrospect, and you know, I now I'm have a relatively good relationship, like close relationship with the Union Square folks. I mean, they've now told me, look, we'd never thought this would work, but you had a really good track record, so why not?

• 52:55Guy Raz?

  They want to invest in you. So when they, they approached you, they said, we want to fund this. We want to invest in this. And at this point, you had not dealt with an outside investors.

• 53:03Speaker 01

  We had not. And also this, this was still not a company. So at that time, we just thought, okay, well, let's make it a company and let's take some funding. Yeah.

• 53:13Guy Raz?

  And how did you do that? Did you, was there, I mean Severin was your student. So was there an uncomfortable conversation or was it pretty clear? You're like, listen, that was my idea. I'm the boss, so I'm going to have X percentage.

• 53:22Speaker 01

  You know, Severin is just, I think it's partly because he's Swiss or because he's like a computer. He's like Mr. Spock. He had that conversation with me. I didn't have it. He sat down and he said, I want us to write a contract, but it's not a lawyer contract. I just want to write basically a word document that we write a few lines long that just basically says what our understanding is. And we're both going to sign it. And we wrote down a contract that was just really simple. It's like we'll go in it half and half. And all decisions related to hiring, we're going to do together. All decisions related to, I don't even remember what else, but there's like three or four bullet points. And then it just said his name and my name and we signed it and that was it.

• 54:08Guy Raz?

  So, all right, so you create a company and you've got some interested investors. And I think you raised like three plus million dollars from a bunch of different investors.

• 54:18Speaker 01

  It's 3.3 million, which at the time, this was a normal Series A. So it's $3 million from Union Square Ventures and $300,000 from a combination of Tim Ferriss and Ashton Kutcher.

• 54:31Guy Raz?

  Ashton Kutcher, he was like way ahead of the rest of Hollywood. Now, everybody wants to be Ashton Kutcher.

• 54:34Speaker 01

  Ashton Kutcher was a very smart guy in that respect.

• 54:37Guy Raz?

  Very smart guy.

• 54:37Speaker 01

  Yeah.

• 54:38Guy Raz?

  He's way ahead, he was way ahead of the game. I mean, everybody now wants to be an Ashton Kutcher. They're like, right, it's like there's LeBron James and there's Serena Williams and there's, anyway. All right, so Ashton Kutcher, with that money, did you get an office? Did you get a staff? And how many, were you able to hire a bunch of people?

• 54:55Speaker 01

  Yeah, we hired a few people. We did get an office very close to Carnegie Mellon campus. And, you know, we started working on it. And at the time, pretty much everybody told us, you're not going to be able to beat Rosetta Stone. Like, why would anybody use this? You know, we just kept on saying, well, because it's free. This is going to be free. Then that was our main selling point. We didn't know if it was going to work, but we, you know, we worked on it and we launched. We launched duolingo.com in 2012. And it was very fortunate that I had given a TED Talk about this. As soon as that went online, we got a ton of people come to duolingo.com.

• 55:32Guy Raz?

  To try it out.

• 55:33Speaker 01

  To try it out. And it started growing pretty fast because it was a free way to learn a language. And, you know, at the end of your lessons, we would say, hey, here's this article. You want to help us translate it? And we, we landed a contract with CNN and a contract with BuzzFeed, that we were going to translate all their news from English to Spanish.

• 55:54Guy Raz?

  How, by the way, how did you convince, I mean, was it, was it relatively easy?

• 55:58Speaker 01

  We were just cheaper. It didn't cost us any money to, to get the translations. Our users were doing it. We just said, oh, how much do you, you know, pay for? At the time, it was like they paid like 10 cents a word. We said, we'll do it for five. The five cents.

• 56:11Guy Raz?

  I got you.

• 56:12Speaker 01

  And it worked, but you know, the translations worked and everything. There was one problem. The amount of money that we were gonna make was actually relatively small. And it's because translations are, it's a pretty shitty business, translation.

• 56:25Guy Raz?

  Yeah.

• 56:25Speaker 01

  It's five cents a word, but then pretty soon, suddenly, you know, the, the people from BuzzFeed found somebody else that would do it for four cents a word because, and then we're like, fine, we'll do it for three.

• 56:35Guy Raz?

  It's a race to the bottom.

• 56:36Speaker 01

  It's a race to the bottom, and then computers are getting better at it.

• 56:39Guy Raz?

  And by the way, you, you, I'm assuming you didn't want to found a translation service. You were founding an education company.

• 56:45Speaker 01

  That's right. And when one thing we realized is, as we were executing on these contracts, we realized that's where the money's coming from. So we're spending more and more of our effort making sure the translations are accurate as opposed to teaching well.

• 56:57Guy Raz?

  And, and it was, there was no ads. It was just a website initially. And, uh, but you had a lot of people who signed up, right? Like a couple of million.

• 57:05Speaker 01

  Yeah, exactly. We were growing, it was good. But then a couple of things happened. The first thing that happened is we realized this was not gonna be a great business. The other thing that happened is, um,

• 57:16Speaker 01

  we hired, well, one engineer and a summer intern. They started on the same day on a summer. And we told them, hey, the two of you, you don't know each other. We've heard these apps are the thing now instead of websites, or they're starting to become the thing. Can you two make a companion app to Duolingo, to Duolingo.com? Let's try that. That's gonna be your, you know, kind of summer project. Let's make a companion app to Duolingo.com. They came back at some point, they said, you know what? It doesn't have to be a companion app. We can actually do all the functionality of Duolingo. We can fully learn a lot of aspects of the language from this app.

• 57:53Speaker 01

  So we developed it, we launched it, and we were at exactly the right time because there were other apps to learn a language in the App Store, but they were pretty crappy and also cost money. And so very quickly, this became the most downloaded education app of all apps.

• 58:09Guy Raz?

  Wow. And you guys were there like right as apps were like totally starting to explode.

• 58:15Speaker 01

  Yeah, that's right.

• 58:18Guy Raz?

  And how were you, I'm just curious, how were, I mean, you did not have, I mean, you're an educator, you're a professor, but how were you building a curriculum in different languages?

• 58:26Speaker 01

  This is great. I mean, we didn't, we had no idea. I mean, we went and read some books about how to teach languages. And first of all, most everybody does not agree on what the best way is to teach a language. And then, so we thought, okay, this is pretty hard. Let's just take what we can from the books and put it out there. So I made the first Spanish course myself, because I'm a native Spanish speaker. Severin made the first German course himself.

• 58:52Guy Raz?

  And this is going to be just like, kind of the gamification model where it was just level up, level up, level up, level up?

• 58:58Speaker 01

  That's the other thing that we realized in the process. When we started making the first versions of the courses, we had people try it out, and people would say, oh, my God, this is really boring. The hardest thing about learning, learning something by yourself is staying motivated. So let's make it fun. So fortunately, early on, we made something that was both fun and also taught you a language.

• 59:20Guy Raz?

  Got it. All right. So you, so you launched this thing. Is it pretty clear to you, you know, by the end of that year, by 2013, I mean, I think you got 15 million users by the end of that year?

• 59:32Speaker 01

  Yep.

• 59:34Guy Raz?

  Was it pretty clear to you that it was not going to make money? It was not going to be sustainable just by doing contracts with news organizations?

• 59:40Speaker 01

  It was, it was. And particularly because we couldn't figure out how to make the translation stuff work on our app. Just people couldn't type that much in the app, etc. So we just could not figure that out. And the majority of our users were in the app. So I made the difficult decision to cancel those contracts and forget about trying to make money and just raise more venture capital. And sure enough, we, we had some very good investors who decided to invest, and that's how we were sustaining ourselves.

• 1:00:07Guy Raz?

  So you're basically sustaining yourself off investment cash. But did you feel like you had to, you had to change your business model?

• 1:00:15Speaker 01

  I mean, that, you know, this, by the way, has been one of these biggest struggles with Duolingo. Our mission from the beginning has been to give free language education. This is why we started the company. That is the thing. There's an easy way to make money here, which is just charge for it. And so when we talk to investors, the first thing I would tell them is, look, the one thing that will not change is I'm not going to charge for people to learn a language here.

• 1:00:40Speaker 01

  And so, you know, people would invest and I think a lot of times they would invest and they would think, okay, eventually they're going to charge.

• 1:00:46Guy Raz?

  Yeah.

• 1:00:46Speaker 01

  But I told them, you know, I'm not going to charge. And so we, we raised funding, I mean, we raised, I don't know, at some point we had raised close to about $100 million.

• 1:00:57Guy Raz?

  Wow, wait, hold on, stop, pause. Hundred, I mean, you're not manufacturing a product in a factory. Why? I'm just thinking it's ones and zeros in a computer.

• 1:01:06Speaker 01

  You got.

• 1:01:08Guy Raz?

  Tell me why it's so expensive.

• 1:01:08Speaker 01

  Here's the thing. You want to hire really good engineers and really good designers and really good product managers, they are not cheap.

• 1:01:16Guy Raz?

  I got you.

• 1:01:16Speaker 01

  You gotta pay them. And that's, that's, that's the expense.

• 1:01:20Guy Raz?

  Right. These are the most expensive, software engineers are not the most expensive part of. And, but you're based in Pittsburgh. You're not based in California.

• 1:01:27Speaker 01

  Correct. And you would think that because we're based in Pittsburgh.

• 1:01:31Guy Raz?

  It'd be cheaper.

• 1:01:32Speaker 01

  Yeah, it's not true. There's a reason. From the beginning, we decided we're going to hire only the very best people. And the very best people have offers from companies in California. And they say, I have this offer that is for, you know, I'm just graduating from college. I have this offer that is for $130,000. Are you going to match it or not?

• 1:01:49Guy Raz?

  Yeah.

• 1:01:49Speaker 01

  And so, what do you do? But we had no idea how we were going to make money. I mean, the first way we tried, which was these translations, we had given up on. And at some point, we raised money from Google, capital G is one of their investment arms. We raised money from them. It was, I believe it's 45 million bucks that we raised from them.

• 1:02:11Guy Raz?

  Wow.

• 1:02:11Speaker 01

  You know, I was feeling good. I, I thought, okay, well, we can continue raising money for a while. Like, whatever, I don't know, I don't need to figure out how to make money. We can just continue raising money for a while. And the partner from that firm sat me down and she said, you know, you're not going to find a bigger fool. We're the biggest fool. And nobody else will invest in this company if you don't figure out how to make money. If you have zero plans to make money, nobody else is going to invest in this company.

• 1:02:35Speaker 01

  And that's when we, that's when we started kind of freaking out and tried to figure out how we're going to make money.

• 1:02:40Guy Raz?

  When we come back in just a moment, why Luis says no to one of the most obvious ways to make money and why he ultimately decides to say yes. Stay with us. I'm Guy Raz and you're listening to How I Built This.

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• 1:04:44Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2015 and Google has just invested $45 million in Duolingo, which is great, but Louis still doesn't know how it's going to make money. And one thing he doesn't want to do is sell ads.

• 1:05:03Speaker 01

  We were very precious about this. We cared a lot about the user experience in Duolingo. And we thought, first of all, we're never going to put ads in here. Secondly, we're never going to charge people. And basically, Leila from Google was like, well, I don't know how you're gonna make money because these are the standard ways of making money, but you gotta figure it out.

• 1:05:22Guy Raz?

  This is an important point because I think a lot of businesses start out this way with really strong principles that seem right. But when you say that, you actually kind of put your box yourself in because sometimes there are reasons to do some of those things in order to accomplish the bigger goal, for example, of delivering a free product.

• 1:05:43Speaker 01

  You are completely right.

• 1:05:45Guy Raz?

  So you had to basically do a 180. You had to have hard conversations with people and say, hey, you know, we gotta start thinking about maybe advertising on our site and maybe...

• 1:05:54Speaker 01

  We did. At the time, we had, I don't know how many employees, 60.

• 1:06:00Speaker 01

  But it's funny because the people we had hired early on, they had offers from, you know, companies that were, had much bigger names than us, Facebook, et cetera. And the reason they had come work for us is because they really believed in our mission of kind of giving free language education. So we had ended up with basically 60 to 70 zealots who all just wanted to get free education. Yeah, the mission, like, we're here for the mission. To this day, it is still like that, which is great. But we had a year of turmoil where basically we're like, okay, well, we need to figure out how we're gonna make this sustainable because we're not gonna be able to raise much more funding, you know, if we never make money. And so sorry, but there's gotta be a way to make money.

• 1:06:39Guy Raz?

  And if you don't have money, you don't, you don't have a business.

• 1:06:41Speaker 01

  If we don't have a business and we're not gonna be able to reach the number of people we want to reach. At some point, enough people got convinced that, okay, we'll put an ad at the end of every lesson.

• 1:06:52Speaker 01

  I remember we showed it to our head designer who, he almost vomited.

• 1:06:57Guy Raz?

  I get it. I mean, did people say to you, or did you get the feeling that like, I don't know, people thought that you were selling out?

• 1:07:05Speaker 01

  Yeah, I think so. And now, you know, I don't think it's too many people because I think I myself went through a transformation that took me, it took me several months to go through this transformation. And you know, we put the ad at the end of every lesson. And fortunately, that actually gave us quite a bit of money. I mean, as soon as we put that out, our run rate went from zero to like 10 million bucks a year. One tiny ad, it didn't even cover the whole screen.

• 1:07:28Guy Raz?

  What was the company?

• 1:07:29Speaker 01

  Oh, we, you know, we use Google Ads. So they came from everywhere, random, random places.

• 1:07:36Guy Raz?

  Not late night booty call.com, though, I hope.

• 1:07:39Speaker 01

  No. And soon after that, we got a bunch of people who would tell us, hey, I don't like ads. Can I pay you to turn off the ads? And we thought, okay. How about we launch the subscription service where the main thing is you can pay us to turn off the ads? It turned out, and this is just, we really just didn't realize this. Subscriptions made us a ton more money than the ads.

• 1:08:03Guy Raz?

  And what was it, what did it cost to subscribe?

• 1:08:06Speaker 01

  Nine ninety-nine per month.

• 1:08:08Guy Raz?

  Okay, so a little bit more than Spotify, but and but through that you could do any language you wanted, any course with no ads.

• 1:08:14Speaker 01

  Right. And if you didn't want to pay, you just had to watch, you know, see the ads at the end of a lesson.

• 1:08:20Guy Raz?

  And so all of a sudden you had people who were willing to pay some money. But still, I mean, we, of course, I know, we know the advertising model and podcasting and then it's still a small percentage of people. When you've got a freemium version, right? Even Spotify, most people are still getting it for free and dealing with the ads.

• 1:08:40Speaker 01

  Yes, so well, at first it was very few. By now, I mean, it's been a couple of years since we added our subscription. By now, 3% of our users pay for the subscription.

• 1:08:50Guy Raz?

  Which is a lot, because how many total users do you have?

• 1:08:52Speaker 01

  A lot, I mean.

• 1:08:54Guy Raz?

  Tens of millions.

• 1:08:55Speaker 01

  Yeah. I mean, active users right now, we have about 40 million monthly active users and about 3% of them are paying subscribers.

• 1:09:04Guy Raz?

  All right, now here comes the the tough part, which is Duolingo, of course, is free. So, you know, it's a free offering. But of course, even with free offerings, there's, there's going to be criticism. And, you know, there've been professors who specialize in this have said, you know, you can't really get that proficient with Duolingo. You know, I maybe I can learn some words or phrases, but it's not, doesn't really actually. Teach me a language. And before we dive into this, just in general, when you hear this criticism, does it make you defensive? Or does it make you think like, oh, maybe we gotta make this a little better?

• 1:09:41Speaker 01

  The truth is, there's a lot of marketing out there that tells you that you can learn a language in nine days. This is not true. Actually, learning a language takes years. This is the first thing to understand.

• 1:09:53Guy Raz?

  Yep.

• 1:09:54Speaker 01

  Secondly, there's various levels, of course. Duolingo teaches you pretty well from zero, so starting from the beginning, to about intermediate, depending on the language that you're learning.

• 1:10:06Guy Raz?

  Yep.

• 1:10:06Speaker 01

  If you wanna use Duolingo and start from zero and get to the point where you're the poet laureate of that country, that is unlikely to happen with Duolingo by itself. That's just not going to happen. But the way we see it is, A, we keep getting better and better. B, if you look at any single method, I mean, take, for example, the single method of US high school education.

• 1:10:29Guy Raz?

  Yep.

• 1:10:29Speaker 01

  It kinda doesn't work very well. How proficient are people who take Spanish throughout high school at the end of high school? On average, not that proficient.

• 1:10:38Guy Raz?

  Right.

• 1:10:39Speaker 01

  And our goal with Duolingo, and we're not there yet, but our goal is to get people from zero to a level of the language. It's a level called B2, which is where you can get a knowledge job in that language. You know, Google, for example, employs software engineers here in the United States whose English level is B2.

• 1:10:57Guy Raz?

  Okay.

• 1:10:58Speaker 01

  That is our goal. We're not there yet.

• 1:11:00Guy Raz?

  So we interviewed James Park, who created Fitbit. And Fitbit, the genius of Fitbit was it was like a gamified exercise, right?

• 1:11:06Speaker 01

  Yep.

• 1:11:06Guy Raz?

  People are like, ah, I did 10,000 steps today, or, you know, I made it. It's hard to get humans to change habits. So how do you get, let's say, a significant percentage of people to finish a language program?

• 1:11:18Speaker 01

  Yeah, this is what we spend a lot of our time on. And, you know, this is one of the things that, when we get criticisms, one of the things that they don't take into account is a lot of the research about how to teach a language is done with people who are, in some sense, held hostage in the classroom, right?

• 1:11:34Guy Raz?

  Yeah.

• 1:11:34Speaker 01

  The hardest thing about learning a language is staying motivated. So we spend a lot of effort trying to make Duolingo more motivating and more fun. And the way we do that is just by adding game elements. I mean, using Duolingo, a lot of people refer to it as playing Duolingo. It's just, it feels a lot like, like playing a game.

• 1:11:52Guy Raz?

  You get, you get rewards, you get like level up kind of thing.

• 1:11:55Speaker 01

  That's exactly right. And, and, and other things we do, for example, this is another interesting thing we do. We want you to use Duolingo every day. I mean, the truth is, if you actually want to learn a language, you got to turn it into a habit. One thing that is really powerful for us is send, we send you notifications. So we have a pretty sophisticated artificial intelligence system. It's one of the most sophisticated things we have that figures out when to send you a notification and what to say in them. And for example, one of the most powerful things we, you know, we've done is after about five days, if you haven't come back, we send you a notification that says, these notifications don't seem to be working. We're going to stop sending them for now. That turns out to be an extremely powerful way to get people to come back.

• 1:12:34Guy Raz?

  Huh.

• 1:12:35Speaker 01

  Because they feel guilty that we're stopping to send the notifications. So that gets them to come back.

• 1:12:40Guy Raz?

  Yeah. It's like, you got to hold people accountable.

• 1:12:43Speaker 01

  Yes.

• 1:12:43Guy Raz?

  Which is very hard. This is why people have personal trainers, because otherwise they won't go to the gym.

• 1:12:47Speaker 01

  Yeah.

• 1:12:48Guy Raz?

  But why would somebody pick Duolingo over any other language app? You mentioned Rosetta Stone, for example, right? And I'm, I'm sure you've looked at it and, I mean, obviously you're a competitor, but they probably do a decent job teaching languages. So why, why wouldn't you just like do that?

• 1:13:05Speaker 01

  Yeah, I mean, before we launched, Rosetta Stone was the biggest thing in the world. And everybody told us, you're not going to be able to beat them.

• 1:13:11Guy Raz?

  Yeah.

• 1:13:11Speaker 01

  By now, I, I would say we probably have 50 times more users than they do. Our revenue is probably 5X their revenue.

• 1:13:20Guy Raz?

  Oh my God.

• 1:13:20Speaker 01

  Something to that effect. There's a big reason it's the fact that we're free. And this is one of the things that, our mission, which is really giving free language education, I think is actually good for business. We don't spend very much in marketing. We have all these people, ninety-seven percent of our users don't pay us.

• 1:13:38Guy Raz?

  Yeah.

• 1:13:38Speaker 01

  So it's just, I think we just have this huge user base of people who are basically our marketing engine. But a lot of companies in education eventually turn into marketing companies.

• 1:13:50Guy Raz?

  Yeah.

• 1:13:51Speaker 01

  For the following reason, you realize, man, making improvements in how well you teach is hard, and it really is very hard. It takes years. So for every dollar you have, you quickly realize it's actually better to spend your dollar marketing your product rather than making your product better.

• 1:14:07Speaker 01

  I've been a hardliner on this. We spend all our effort just making the product better. And the main reason is, I think, we're really in it kind of for the long term. And I think in the long term, the better product will win. And this is why we don't spend so much money on marketing.

• 1:14:22Guy Raz?

  Luis, in December of 2019, your company was valued at 1.5 billion dollars.

• 1:14:30Guy Raz?

  So what's the exit? I mean, you got investors. Obviously, they convinced you were convinced that you had to keep it sustainable and to grow it, and you're now valued at 1.5 billion dollars. And it sounds like you're, you know, keeping the lights on pretty well. What's the end game? At some point, you know, it's sell or go public.

• 1:14:48Speaker 01

  The end game here is to go public. That's what we've been working towards. We have the revenue now to be able to go public. We are cash flow positive. And one of the things that I think is really important is, the way I see it, we have so much more still to go in terms of how much better we can teach. And also teaching all this stuff, we recently released an app to teach reading to young kids. It's called Duolingo ABC. I think there's a huge amount of impact that we can do with that.

• 1:15:18Guy Raz?

  Yeah.

• 1:15:19Speaker 01

  So, I mean, to me, it's just keep going with this. That's the goal.

• 1:15:24Guy Raz?

  Luis, given all of the things that have happened to you, I mean, your incredible success, how much of that do you attribute to your intelligence and how hard you worked, and how much do you think it's because you were lucky?

• 1:15:35Speaker 01

  I was definitely lucky. I mean, launching an app, at the time we launched the app, was exactly the right time. And launching an app in late 2012 was a really good time to launch an app. So, you know, I've been incredibly lucky. I think that, and I think just hard work on the same thing. I get obsessed with the same thing. I mean, I've been working on Duolingo for now eight years, and I'm pretty obsessive about it. So I think it's both.

• 1:16:06Guy Raz?

  That's Luis Van An, co-founder of Duolingo. We first ran this interview back in May of 2020, and a little over a year later, the company did, in fact, go public at a valuation of nearly $5 billion. And today, it's valued at nearly $9 billion.

• 1:16:25Guy Raz?

  Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And as always, it's totally free. This episode was produced by Casey Herman with music composed by Rumpin Arablui. It was edited by Niba Grant. Our production staff also includes J.C. Howard, Sam Paulson, Alex Chung, Malia Agudelo, John Isabella, Chris Messini, Carrie Thompson, Carla Estevez, and Catherine Seifer. I'm Guy Raz, and you've been listening to How I Built This.