Audible: Don Katz

Before mp3 players came along in the mid 1990's, listening to audiobooks was a pain. The number of titles was tiny, narration was dull, and if you wanted to listen on the go, you had to juggle a bunch of clunky cassettes. Don Katz faced these frustrations every day while jogging. He was an accomplished writer who thought there was something special and intimate about hearing an author's words spoken aloud. He wondered: what if audiobooks could be purchased online and downloaded onto a dedicated player? At the time, the concept was so new that few people knew what he was talking about. But in 1997, with no direct experience in tech, Don and his partners launched the first digital player for audiobooks. Audible was slow to gain traction and took a beating during the dot-com bust; but its luck changed with the release of the iPod and a timely partnership with Apple. In 2008, Amazon purchased Audible for $300 million, and today Audible has the largest audiobook catalog in the world, with over 600,000 titles. 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?

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• 1:32Guy Raz?

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• 2:14Guy Raz?

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• 2:58Guy Raz?

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• 3:40Guy Raz?

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• 4:23Guy Raz?

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• 5:07Guy Raz?

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• 5:12Guy Raz?

  So you guys go public in the fall of 1999. And by the spring of 2000, the dot-com bubble bursts. It crashes.

• 5:24Speaker 01

  Yeah, there were 1,500 public internet companies at the beginning of 2000 and 140 at the beginning of 2003. But it was that kind of decimation. And the stock price, which was once $29 or something, it went down to $0.04 at the end of 2000. $0.04.

• 5:59Guy Raz?

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

• 6:11Guy Raz?

  I'm Guy Raz, and on the show today, how, in the era of clunky cassette tapes, Don Katz created a whole new kind of audio experience, online and on-demand, with Audible.

• 6:28Guy Raz?

  Back in the mid 1990s, back before you could plug in a pair of earbuds and choose from hundreds of thousands of different books, millions of different podcasts, or tens of millions of different songs, back before any of that, a former journalist-turned-writer named Don Katz had a problem. During his daily jog in New York City, he would listen to books on tape, literally on tape, as in cassette tapes. And Don wondered, why do I have to lug around a cassette player and then flip the cassette to side B in the middle of my run? Surely, there must be an easier way, he thought. And in fact, at

• 7:08Guy Raz?

  the time, there was. MP3 technology existed, except almost no one used it. In the mid 1990s, compact disc sales were on a tear. It would take another seven years before CDs began to decline. But Don was optimistic. And at the age of 42, he decided to ditch his successful career as a writer and try to start something he knew nothing about: a tech company. A company that would create a digital audio catalog of books, and storytelling, and spoken word, and deliver those stories to users through a device specially designed

• 7:50Guy Raz?

  to play that audio. And, as you will hear, in the early days, not many people came to the party. The technology was way ahead of its time, probably too ahead of its time. In fact, Audible, the company Don founded, almost collapsed in the early 2000s, when its stock price hovered at around $0.04 a share. But today, of course, Audible holds the biggest audiobook catalog in the world. It dominates the space with a library of over 600,000 titles. And the company is now part of the Amazon family, which bought Audible

• 8:28Guy Raz?

  for $300 million in 2008. But getting to that point was painful and full of setbacks. And the story includes a cameo appearance from none other than Steve Jobs. Don Katz was a staff writer for Rolling Stone magazine during its heyday in the late 70s and 80s. He grew up in Chicago in the 50s and 60s and strongly identified with his dad, who owned a small business.

• 8:56Speaker 01

  So my father was just incredibly kind of smart, kind, and you know, it's a cliche, but he was one of these guys you would want to be your, your kind of, you know, best friend. I looked up to him. I probably wished he was home more because he was frankly, like I became, uh, someone who worked a lot. And he was also, um, he'd been a war hero. He, he ran away from home basically at seventeen and, uh, was, was behind enemy lines, highly decorated.

• 9:30Guy Raz?

  Where was he? Italy or, or?

• 9:31Speaker 01

  He was in the, he was in the Black Forest in Germany.

• 9:34Guy Raz?

  In Germany, wow.

• 9:35Speaker 01

  Yeah. And he didn't really talk about it. He wasn't one of those guys, but he had a different Purple Hearts. Every time I broke a leg in hockey or something, I would find, I would wake up and find the Purple Heart on my pillow.

• 9:46Guy Raz?

  Wow. And, and your dad, from what I understand, he, um, he had a music store in Chicago called, I guess called K Musical Instruments and it was?

• 9:54Speaker 01

  It was actually a guitar manufacturing company.

• 9:57Guy Raz?

  Guitar manufacturing.

• 9:58Speaker 01

  Yeah. My dad made, uh, made guitars. Uh, he made them for Sears, Silvertones. But I remember that there were some pretty great bands of the era, you know, one called Spirit that had a fantastic guitarist named Randy California who only would play, play K's and the like. But, but my dad's kind of claim to fame at that time was that he put chord books in guitars and started this whole idea that you too can play the guitar. And it alienated a lot of the musicians, including Barney Kessel and Les Paul and people that he was friends with, because they were infuriated to say that their instrument was any easier to play than a stra-, than a, than a violin. And of course, he said, yeah, but you know,

• 10:42Speaker 01

  it is. And so it ended up that my family was all in Newsweek magazine, taking our guitar lessons together because my dad had, uh, had decided to be part of this you too can play the guitar, which was part of the whole mid sixties folk music kind of, kind of movement. So, so I think back and he was definitely somebody who also liked to challenge the status quo, which I think I have come by honestly.

• 11:07Guy Raz?

  So was he financially successful?

• 11:10Speaker 01

  He was financially successful in the way of a rising entrepreneur of his time. But very tragically, he went out to play tennis at forty seven years old on a Saturday. And I got a call when I was in college saying that he died playing tennis.

• 11:29Guy Raz?

  Wow.

• 11:30Speaker 01

  Very suddenly of a massive heart attack.

• 11:32Guy Raz?

  Wow.

• 11:33Speaker 01

  And it really marked my life in so many ways. It was definitely a, you know, a formative experience. I've heard, and you probably have heard this too, that there's a lot of patterns of fatherlessness in highly entrepreneurial people, whether it's through abandonment or early death, including taking ridiculous risks as a journalist in the early part of my career, where I could have easily gotten killed several times. I think I was working out his heroism and other kinds of things. So, you know, you come to these things a little later in life, but it is interesting to reflect on it.

• 12:12Guy Raz?

  So for college, I know that you went to NYU and you majored in English. And from what I understand, Ralph Ellison, like the Ralph Ellison, the invisible man Ralph Ellison, was a professor there.

• 12:26Speaker 01

  Yeah.

• 12:27Guy Raz?

  And you kind of had an opportunity to sort of work with him, to be tutored by him.

• 12:31Speaker 01

  Right. He taught me how to read and what I fully didn't understand. And I knew that I loved more than anything the sound of literature. And I was just, and how it felt to me. But Ralph actually kind of flushed it out in a way that it became something that I was fully able to understand. He also gave me the, I think, the confidence to try to be a professional writer, which I proceeded to do for twenty years.

• 13:02Guy Raz?

  Was Ralph Ellison your, like, your thesis advisor?

• 13:07Speaker 01

  Yeah, he basically was. And Ralph was a deep and exacting intellectual, so I had to work really hard and read really hard. Anyways, it was an amazing experience. He would sit with a big stogie and he had this amazing storytelling voice with his Oklahoma. I've said that his voice was like a coal car coming out of a mine, and I would just be mesmerized. And he was a big supporter. And, you know, later, even the audible transition right at the time he died, he was incredibly supportive of what I did.

• 13:46Guy Raz?

  So you graduate from NYU, and you're sort of thinking that you want to be a writer, but it's not that easy to do so. And you did what lots of people do, which is you decide to go to graduate school to continue studying.

• 14:03Speaker 01

  Right.

• 14:04Guy Raz?

  I'm assuming you went to London, to the London School of Economics.

• 14:07Speaker 01

  Yeah.

• 14:08Guy Raz?

  Am I assuming correctly that you didn't really know what you wanted to do? You wanted to kind of buy some time?

• 14:13Speaker 01

  Absolutely. In fact, I thought, at the time, almost everybody thought if you didn't know what you should do, you should go to law school.

• 14:19Guy Raz?

  Yes, right.

• 14:20Speaker 01

  But I studied European economics and politics and international history. And I was living with my old friend Barbara, who was a rock writer. She had gone to be a rock and roll writer in London. And so we just paired up and shared a flat. And so I would come home and there would be, you know, Rod Stewart and Keith Richards. And so that's who she hung out with.

• 14:49Guy Raz?

  Wow. And your roommate Barbara, this is somebody you knew from college?

• 14:54Speaker 01

  From high school.

• 14:55Guy Raz?

  From high school, wow.

• 14:56Speaker 01

  And just to make money, Barbara got me Little Gigs reviewing albums for the British music press.

• 15:04Guy Raz?

  Like Melody Maker or NME?

• 15:06Speaker 01

  Yeah, exactly. New Musical Express, Sounds. And I'll never forget, I wrote one about Frankie Valli and the Four Seasons. I got to interview Frankie Valli and the like. And I was just kind of trying to figure it out. I matriculated for a PhD, but I just didn't know, you know, what I wanted to do.

• 15:25Guy Raz?

  All right, so you're doing a little writing and kind of getting into the music scene in London. And I guess one night, you're out at dinner and you meet a guy who winds up kind of launching your career in journalism. What's the story?

• 15:40Speaker 01

  Absolutely. Sitting next to a guy named Robert Greenfield, who introduces himself as a Rolling Stone writer. And we just get chatting. And I basically told him about some of the things that were going on, notably what was going on in Spain at the end of Franco. And I talked to him about what was going on in Northern Ireland, because I had a very different perspective on the world, because I was based in London and reading the European press. And he said, you know, you should package one of these things and write, this guy Jan Wenner, who I work with at Rolling Stone, a letter with some ideas, because you could just, you know, write about these are great stories you've got. And I went

• 16:22Speaker 01

  ahead and I sat down and I wrote this letter, had the two or three ideas.

• 16:26Guy Raz?

  And presumably this is a handwritten letter or typed letter that you write?

• 16:30Speaker 01

  No, no, I typed it up on my, you know, right, on my typewriter.

• 16:34Guy Raz?

  And you pitch an idea for an article, which was what? What did you write in the letter? What was the pitch?

• 16:39Speaker 01

  One of them was that at the point Franco, who was ancient, begins to die, the great dictator of Spain, it would be very interesting to illuminate the liberation movement of the ETA Basque separatists and the perspective of this last dictator going down. And that basically the last of the World War II era dictators, and it would be an interesting story. And I get a telegram saying, go to Spain. And I'm not so sure anyone I work with at Audible or my children know what a telegram even looks like.

• 17:14Guy Raz?

  Yeah.

• 17:15Speaker 01

  Because that was the fastest way to get to me, was to say, get out of here, go write the story. And it basically said, write, you know, write five to 7,000 words and we'll pay you $1,500 in reasonable expenses.

• 17:29Guy Raz?

  This sounds like a dispatch from Hunter Thompson, right? He would say, "Oh, and reasonable expenses from Jan Winter." But, I mean, you get this telegram from him. Just curious, did you have a mild panic attack as you were 23? And Rolling Stone was hugely influential by that point.

• 17:47Speaker 01

  Well, the attack that actually I think attacks all people who go way out with crazy ideas, whatever they are, which is that, "Oh, my God, I'm a fraud and they're about to find it out."

• 18:00Guy Raz?

  Yeah, right.

• 18:00Speaker 01

  That is exactly what happened. But it's not the only time of my life that I've had that feeling. So I had no idea what to do. And I got myself to Madrid. I knew I'd have to get basically credentialed to cover what was supposed to be a funeral. And so what happened was, all of the World War II era journalists who were still around, the wire service guys, they all descended on Madrid for almost like a last hurrah. And they took me under their collective wing and showed me a whole lot of stuff about how to be a more traditional journalist. And I sat down and I wrote this story.

• 18:43Speaker 01

  And it came out as I'd written it. And on the cover, it said, "Dispatch from the Valley of the Fallen", with my name on it, on Rolling Stone magazine. Now, I'm 23 years old. And I was like, "I can't believe this." And of course, because I really hadn't been a student journalist, I just wrote. I didn't know that, as it was explained to me later, that usually they like to edit these things a lot. But they didn't.

• 19:13Guy Raz?

  Sure.

• 19:15Speaker 01

  They didn't, they just put it in.

• 19:17Guy Raz?

  And so I guess, I mean, you start writing more and more pieces for Rolling Stone and then eventually some other publications. And you sort of travel more like to Northern Ireland. And I think you went to Ethiopia and a bunch of different war zones.

• 19:32Speaker 01

  Yeah.

• 19:33Guy Raz?

  But, I mean, you were also incredibly young when you were getting those bylines. I read a story, and I love this story, that you were so self-conscious about being like, quote, "found out", that, you know, because you were so young, that whenever one of your American editors would come to London, you would actually not be there deliberately? Like, so you wouldn't have to meet them face to face?

• 19:57Speaker 01

  I thought if they saw how young I I think I looked like I was 12 when I was 23 years old. I I was incredibly self-conscious and I did try to be out on assignment when the editors I was working with, you know, telephonically were in town for a while. And eventually, when I revealed myself and I met them, they did exactly what I expected. Oh, come on, you're you're not done, are you? Like, they were incredulous that I was putting out this precocious stuff.

• 20:29Guy Raz?

  Imagine. So I guess you stayed in Europe for for several years. And I guess by the what like the late 70s, you moved to New York to work at Rolling Stone. And and you I think and I think you also got married around then. How did you meet your wife?

• 20:46Speaker 01

  I met my wife, Leslie, in 1982 on a river raft trip in Pennsylvania out of Jim Thorpe, Pennsylvania. And we were both with different people and we kind of hit it off. And I went off to China for National Geographic and spent literally months traveling the Silk Road. It was incredible trip, but it was long. And when I got back, the relationship with my former girlfriend was over. And she said to me, I know who you're going to call one of the people that Leslie Larsen. And she was right.

• 21:29Guy Raz?

  Because you had connected with her on that on that river raft trip?

• 21:32Speaker 01

  Yeah, definitely. I thought she was great. So so and and life went on from there. And it's been an amazing marriage and just about nothing I can think of that that has been good for me. She hasn't been an amazing part of, including memorably referring to my sudden U-turn from writer to entrepreneur as a non-toxic midlife crisis.

• 21:59Guy Raz?

  Which we'll which we'll get to in a moment. But I mean, at that time, you were still a journalist for Rolling Stone. You got this great job. You're getting paid and a salary. When did you I know that you you wrote your first book, which was the story of Sears, the department store. I guess the history of Sears and then kind of like the rise and fall of it. And the book came out in like 87. Why did you want to write a book about Sears?

• 22:27Speaker 01

  Well, I kind of thought, how weird would it be to take this hippie counterculture storytelling and write about a big old American company and what happened to it? And I wrote another letter. I wrote a letter to the CEO and chairman of Sears, a guy named Ed Telling, who was famous for never having given an interview. Completely introverted guy. The beat reporters couldn't get anything out of Ed Telling. And basically, I said that if he can deal with the great American corporation of the 20th century changing itself so as to continue to be the most beloved and trusted company

• 23:10Speaker 01

  of the century, it's a matter of historical record. And he just decided that he'd let me in. And this was really rare, because as you all know, corporations tend to be Pentagon-like in their control over the truth. And so I proceeded to show up as a bearded, still-looking, quite young guy. And people who worked at Sears decided I was okay, because I had sold Ed Telling on something they never thought anybody would sell him on. So I was a salesman, in their eyes. And I just tried, you know, I spent years on this. And did I get an MBA in real time?

• 23:55Guy Raz?

  I'm wondering if Ed Telling, because he was widely reviled by the business press, right? He was considered to be a disastrous leader. In the end, one could argue, he redeemed himself. But do you think that he wanted you to write this book so he would come out being redeemed?

• 24:14Speaker 01

  I think he wanted to be part of history. I think he, like so many of these Sears guys, who they came and transferred their battlefield loyalties from World War II to this heartland corporation, they lived these lives where they would move 14, 16 times. I mean, that was part of a corporate life in those days. But boy, oh, boy, it was a pretty epic task to then turn it into this. You know, this tale of America, but it was a tale of hubris. It was a tale of the final founders sowing the seeds of the destruction of the company. I have a whole chapter, I remember, in there about the building of the Sears Tower.

• 24:53Speaker 01

  They had made this genius conception of every customer thought Sears was the friendly guy down the street, the member of the Kiwanis Club.

• 25:02Guy Raz?

  Yeah.

• 25:03Speaker 01

  And that Sears was this localized reality. And once they built that tower and said that they're one of the most powerful companies in the world, all the bad stuff started happening because it was just thought to be such a, you know, an unfortunate statement of their purpose. But that company's story is very much about the end of the, what ended up happening in the seventies, eighties is Americans realized that other countries actually sometimes were even more productive than they were. And all those, all that wake up call was part of that story.

• 25:39Guy Raz?

  You were a runner, right? Or were a runner or maybe still?

• 25:43Speaker 01

  Well, I'm a hockey player who runs or did run a lot so as to keep in shape. But I definitely liked to run. And my regimen when I was living in New York as a writer was to take off in Riverside Park and run several miles at the end of the day.

• 26:02Guy Raz?

  And while you ran, what would you listen to music?

• 26:07Speaker 01

  Well, I ran with a partner and we would just chat the whole time. Or I listened to the early audiobooks.

• 26:16Guy Raz?

  On cassette?

• 26:17Speaker 01

  On cassette.

• 26:18Guy Raz?

  In a Walkman.

• 26:19Speaker 01

  Painful it was, a Sony Walkman in a belly pack, knocking around. And I just remember the utter irritation of trying to change the tapes when you're aerobically taxed and how, because you rented them in these big brown boxes, that they would often not work at all, which was really irritating when you're a couple of miles from home. But I remember listening to, you know, John Reed's Ten Days That Shook the World. I would take on these long, you know, kind of... Books and jog along and listen, but at that point, I was the only person I knew who who did that.

• 26:57Guy Raz?

  Okay, so I think this is the early 1990s and during this time, I guess you're also researching another book, which I think it was a book about like the burgeoning tech industry.

• 27:09Speaker 01

  Yeah.

• 27:09Guy Raz?

  So at what point were you like, wait, I may have a business idea here. Like, how did that happen?

• 27:16Speaker 01

  So I had this book contract. I began to connect with people who were teaching me what I didn't know about technology. And one of the people who was my key contacts was my college roommate from NYU, Ed Lau, one of my close friends to this day, who was a computer friggin genius.

• 27:39Guy Raz?

  Hmm.

• 27:39Speaker 01

  And we were talking about signal compression, basically about analog to digital signal compression.

• 27:48Guy Raz?

  Hmm.

• 27:48Speaker 01

  And I was asking all these questions about how text fit through the internet, which was, wait for it, the phone lines. There was no broadband at all. And these discussions were happening in 93, 94. And he had this thought. He said, you know, you know, you could you could get voice through the phone line. It could be compressed. And we went back and forth. And I said, Ed, you know, if you could take audiobooks and send them through the phone line, the cost of the of the packaging and all those tapes wouldn't be there. You could lower the cost.

• 28:28Guy Raz?

  Hmm.

• 28:28Speaker 01

  I remember saying, we liberate the signal, meaning how do we get the audio into my belly pack?

• 28:34Guy Raz?

  Yeah.

• 28:35Speaker 01

  So I can watch, go around with it. Or how are we going to get it into cars?

• 28:40Guy Raz?

  Hmm.

• 28:41Speaker 01

  Because that's where people have have a lot of time. I remember thinking, if you took these audiobooks, you could actually liberate time for people. And we got kind of more excited about it. And I got more and more interested in what it would mean to do this because nobody else was doing it.

• 29:00Guy Raz?

  Hmm. Okay, so you're thinking of making some new type of digital device or like a system for playing audio. So what did you start to do?

• 29:09Speaker 01

  So throughout 1994, I spent time trying to find anyone I could find to talk about a future that involved these little devices that were filled with the soundscape of culture, basically the soundtrack of culture. I remember talking in various ways, or the sound of civilization. I remember all these things coming out, saying, can't you see it? And like, people thought I was out of my mind. I mean, I couldn't find anybody who knew what I was talking about, except for Ed. And we just decided to write it up into a business plan.

• 29:47Guy Raz?

  To do a business plan, to create?

• 29:49Speaker 01

  To create a company that we decided should be called Audible Words.

• 29:54Guy Raz?

  And it would be a company that made, what, books on tape that were digital?

• 30:00Speaker 01

  Believe it or not, Guy, it was actually a solid-state cassette. It was a cassette that you hooked to the phone line. That was the first patent. And that the idea was, you'd have the signal come over, you'd capture it in the cassette flash memory, you'd push it into the tape bed in your car, which, incidentally, everybody had at that point.

• 30:20Guy Raz?

  Yeah.

• 30:21Speaker 01

  And you'd be able to listen. And we just played with it. But I have to tell you, I wrote a business plan, and it was like a 110-page narrative.

• 30:32Guy Raz?

  What was the story? It was a narrative saying what?

• 30:36Speaker 01

  The story was that we would occupy this time of people's life, which was, and we said, when your eyes are busy, but your mind is free. We would create a higher level of purpose, that the AM/FM radio was for everybody. It wasn't just for you. And you would be able to program your own listening time in the future through digital technology. And that we would have a company that would sell a solid-state digital device as well as content. It would be about books and literature. It would allow you to listen to Fresh Air and Marketplace and all these shows that played at 2 o'clock in the afternoon.

• 31:21Guy Raz?

  Huh.

• 31:21Speaker 01

  And we got a patent together on a downloadable system for media that would be captured by a solid-state device. And I remember it was $14,000 that I put on my credit card.

• 31:37Guy Raz?

  Wow.

• 31:39Speaker 01

  And because, you know, what did we know? Now I know, of course, you know, without a portfolio, patents are worthless. But, you know, at that point, I didn't. So that was the first thing we did. But we actually started to get really excited about this.

• 31:50Guy Raz?

  So instead of terrestrial radio, you could get it delivered through the Internet instead of an audiobook on tape, or a book, or a speech on tape, or some kind of, you know, inspiring, I don't know, inspirational thing. You just basically say, this business is going to deliver this stuff to you through your phone line, through the Internet.

• 32:08Speaker 01

  I didn't play up the book part of it because the business itself was so infinitesimal and small. What I did was I realized through just basic journalistic research that 93 million Americans drove to work alone every morning. There were, at that point, only a Department of Transportation number, which you could extrapolate to hundreds of millions of hours of time people sit in traffic. I then matched it to sociological data that showed that the most frustrating time of people's days and least valuable time is sitting in traffic. And I basically just, we said, if we only penetrate 9% of them

• 32:50Speaker 01

  at $10 a month for a service that enriched their lives, here's how big the business would be.

• 32:56Guy Raz?

  Right.

• 32:57Speaker 01

  And that's how we were able to get, you know, what's now very small amounts of money, but was then, to us, a lot of money to make audible.

• 33:07Guy Raz?

  Before you went out to seek capital for this, right? Because you were writing a book. How did this idea just take over your mind and your life? Because all of us get ideas. We've all had a business idea. And sometimes it captures us for a week or two weeks. But this was really...

• 33:31Speaker 01

  I think I, there were multiple things inspiring me at the time. One was, I just thought it was interesting that I daydreamed about this more than I was daydreaming about the next paragraph or the next day's writing. The other thing was, I kept going to people who I otherwise respected, who thought I was crazy.

• 33:52Guy Raz?

  They thought you were crazy because you had a great gig and you were respected.

• 33:56Speaker 01

  They were so dismissive of it. Yeah, yeah, I mean, it was like, they just didn't get it. I mean, even people who took the time said, why don't you just package it and try to sell it to Sony for $25,000? It might be something they're interested in. It was such a dismissive reaction to it. And that made me more inspired.

• 34:17Guy Raz?

  Really?

• 34:18Speaker 01

  To go ahead and try, try to do it. Yeah.

• 34:22Guy Raz?

  Why don't we come back in just a moment. Turns out that building a new type of audio player and a new type of audio marketplace and a whole new type of audio experience is hard. And that's before the dot com bust. Stay with us. I'm Guy Raz and you're listening to How I Built This from NPR. Does your team want a website that looks and feels handcrafted but is still fast to ship? Well, Framer is built exactly for that. With Framer, you design on a visual canvas with responsive layouts, hosting, and a CMS built in, so the work is production-ready from day one. And you can get it done with help from Framer's AI agents.

• 35:07Guy Raz?

  Framer is the AI website builder that helps creators, teams, and businesses ship production-ready sites faster than ever while getting every detail right. Prompt, inspect, edit, and publish in one place at a whole new pace. AI agents and humans work together. 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.

• 35:50Guy Raz?

  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. 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,

• 36:35Guy Raz?

  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. If your revenues are at least in the seven figures, get NetSuite's free business guide, "Aligning for the Agentic Era: How AI is Changing Everyday Work", at netsuite.com/built. The guide is free to you at netsuite.com/built. netsuite.com/built. Stripe is built for whatever comes next because the pace of change

• 37:19Guy Raz?

  has never been faster than it is right now. New business models, new currencies, and new expectations for speed, reliability, and scale. Stripe builds financial infrastructure that helps businesses start, grow, and operate globally. From payments and billing to fraud protection and cross-border payouts, Stripe is built to support the new pace of commerce. They're trusted by the companies building at the frontier, from 86% of the Forbes AI 50 to global leaders like Salesforce and OpenAI. In fact, more than 1.6% of global GDP flows through Stripe, with Stripe's users

• 38:01Guy Raz?

  processing a combined $1.9 trillion last year. So if you're already thinking about what's next for your business, see what's possible at stripe.com.

• 38:21Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's around 1995, and Don Katz is trying to build an audio player and platform for audiobooks, interviews, comedy, and more. What will become Audible? But first, he has to raise money. And one of the first people he calls is a former source from the world of tech, a guy named Tim Mott.

• 38:45Speaker 01

  And Tim Mott was a great entrepreneur and is a great, great, great person. He was one of the founding people at Electronic Arts, the three people who developed Electronic Arts.

• 38:57Guy Raz?

  Yeah.

• 38:58Speaker 01

  And when Tim Mott read the primitive business plan, he called me up and said, "I would fund this. This is amazing."

• 39:04Guy Raz?

  Don, when you went to your wife and you said, "Hey, I want to do this. I want to start a business," what was her reaction? Was she like, "Go for it"?

• 39:13Speaker 01

  I think at one point she said it was a, it sounds a little sexist now, but she said it's better than a blonde. She'd already been such an amazing partner for someone who was willing to live without a net, because, you know, I was freelance and book writer and everything.

• 39:29Guy Raz?

  Yeah.

• 39:30Speaker 01

  But I was scared. I mean, I had three kids. I had a mortgage.

• 39:32Guy Raz?

  You were 43?

• 39:33Speaker 01

  I was 43 years old, and I took an 85% year-over-year pay cut to start Audible.

• 39:40Guy Raz?

  And meanwhile, from what I know of the story, you were looking for a business partner, and you wanted it to be Ed Lau, who's your former roommate, the guy who was that computer genius. But he wasn't able to join you, right? So you needed to find presumably someone else, right?

• 39:59Speaker 01

  Yeah. I went out to find a new, you know, science partner and found my lifelong friend and wonderful person, Guy Story, who was a senior person at Bell Labs. And Guy decided to, you know, hear the siren song, and he joined me early.

• 40:18Guy Raz?

  How did you convince him? How did you convince him?

• 40:20Speaker 01

  I basically said, "I don't know if we're going to overcome what a venture capitalist would call the tech risk, you know, and the execution risk. But whatever we build, we're going to put in front of consumers. And you'll get to say that."

• 40:35Guy Raz?

  Yeah.

• 40:36Speaker 01

  And I said, "You don't have to take the 85% year-over-year pay cut I took, but you have to take 60, and you're going to get all these options." And Guy jumped into the merry band.

• 40:46Guy Raz?

  Your initial backer, Tim Mott, put in, I think, like $400,000 in seed capital?

• 40:53Speaker 01

  Yep.

• 40:54Guy Raz?

  And what did you know at the time about how to, you know, like how to deal with equity and valuations? I mean, now, of course, every company, it doesn't matter what the company is. It seems like their perceived level of valuation is $20 million. Oh, my company is valued at $20 million. And you're like, what are you making? Nothing. We're giving ourselves a $20 million valuation. How did you know how to do that and how to, you know? Because-

• 41:20Speaker 01

  I literally trusted Tim and, you know, I was a fast study, as journalists are.

• 41:26Guy Raz?

  Yeah.

• 41:26Speaker 01

  So I was picking the stuff up and taking it in pretty quickly. And Tim's first round was, you know, allowed us to evolve the team. And we took over a doctor's office in Montclair, a single room, not far-

• 41:42Guy Raz?

  In New Jersey.

• 41:42Speaker 01

  Where I'm speaking, in New Jersey.

• 41:44Guy Raz?

  Yeah.

• 41:44Speaker 01

  And we painted it on a Sunday and moved in on a Monday. So now we've moved out of my attic and had a place to, you know, to gather.

• 41:54Guy Raz?

  Yeah.

• 41:55Speaker 01

  And then Tim and I hit the road for California-

• 41:59Guy Raz?

  To raise more money.

• 42:00Speaker 01

  To raise more money and also begin the process of building the first download system, the first way of actually securing the intellectual property. This was years before the terms about digital rights management were there.

• 42:12Guy Raz?

  Yep.

• 42:13Speaker 01

  Because I'd had so many Outside magazine articles ripped off on the Unix Internet and people put their own names on them and the like, that I kind of had this idea that this kind of professional-grade creativity might need to be protected.

• 42:27Guy Raz?

  Yeah.

• 42:28Speaker 01

  So a company, very well-known, called IDEO, which does industrial design, came in and they were totally excited about all this stuff, including everything from, you know, the idea of securing the IP and the download system and building a device with us. So that process started and yeah, we went out and spent a lot of time going up and down Sand Hill Road, getting to know people.

• 42:53Guy Raz?

  All right, so you're able to secure the capital, I think, I guess, a few million dollars to get an audio player built, but also, I mean, you've got to, you've got to get content for that audio player, and you were going to be the CEO of the company. You were going to manage people and manage a team, is that right?

• 43:10Speaker 01

  Yes, so I was president and CEO, and Tim was chairman, and we formed a board. And I believe this idea of seeing the future and seeing these opportunities and doing something that had been done and persuading people to be part of it was the most important thing. But it is also true that managing people is a different art and science.

• 43:35Guy Raz?

  Yes.

• 43:36Speaker 01

  But I did have all those years of watching both entrepreneurs and others lead.

• 43:42Guy Raz?

  It just, to me, it just sounds incredibly overwhelming, like an overwhelming amount of things to do. I understand that you had written books about leaders, but you'd never had like a leadership position at any of the publications where you worked. You weren't an editor at Rolling Stone. Were you nervous about becoming a manager of people in any way?

• 44:04Speaker 01

  I was definitely nervous, but I was on point. Look, I definitely felt more concerned about having put three and a half million dollars into play that was other people's money and feeling deeply responsible to them and to others, particularly people who left perfectly good jobs, because a lot of these people left really nice jobs to join this vision of the possible. So, yeah, it was incredibly stressful. But you did say that part of the thing was about getting the content, and I would argue that probably our original funders discounted how hard it was going to be to convince the gatekeepers of the content that existed.

• 44:51Speaker 01

  To see this particular, you know, future.

• 44:55Guy Raz?

  What was the content that you envisioned being on this player? Because you had two paths, right? You got two things you got to do at the same time. You've got one team building the actual device that's going to play the stuff. And then presumably another team getting the content. So what did you think the content was going to be?

• 45:13Speaker 01

  I thought the content would be frankly what it became. A mixture of literally the best possible public expression in words. You know, if the Churchill Club had profound speeches, I wanted to carry that.

• 45:30Guy Raz?

  Gotcha, okay.

• 45:31Speaker 01

  We turned the San Jose Mercury News into an audio program.

• 45:36Guy Raz?

  You have people reading the newspaper as content?

• 45:39Speaker 01

  Yeah.

• 45:40Guy Raz?

  Okay. So what else? What other kind of content?

• 45:43Speaker 01

  Well, we got some of your buddies at NPR. So we can have Car Talk or Marketplace.

• 45:50Guy Raz?

  Which Car Talk, which was owned by those guys. So you didn't have to deal with NPR.

• 45:53Speaker 01

  Right. By 99, I'd signed up Robin Williams to do original programming for us.

• 46:01Guy Raz?

  Right.

• 46:01Speaker 01

  And yes, we wanted the audiobooks too. But it was many, many years. We had much more content that was just different kinds of public content.

• 46:12Guy Raz?

  Whatever you could get.

• 46:13Speaker 01

  Yeah, that we either narrated or other things before we had a lot of books. But the first download, when it finally happened, was in October 31 of 97. It was Men Are From Mars and Women Are From Venus, the self-help book. And I remember it was to a customer in Cave Creek, Arizona. And that was, and it was done at the then pretty famous technology conference called The Agenda Conference, which is where we unveiled the service and gave everybody from, you know, Bill Gates to Steve Jobs and Michael Gell, this digital audio player we made.

• 46:53Speaker 01

  And I'm sure the majority of them were sawed in half back in various labs when people got home to see what's inside of them.

• 47:01Guy Raz?

  The idea was way ahead of its time. And often when that happens, businesses don't make it because they're too early.

• 47:10Speaker 01

  I think it's 95% of the time or something like that on the metrics. And we were, I think we were seven years before the vibrancy of the market. So it's a very unusual story to be alive that long.

• 47:25Guy Raz?

  So you have this device that comes out in 97. And how did the user experience this device? It was, you buy this thing, it's in a docking station. And then what? You go to the Audible website and there's a menu of things. You can get Car Talk, you can get the speeches from whatever, the Commonwealth Club, whatever it was. And you would à la carte buy those things. And then they would download to this device that was connected to your computer through a serial port. Am I, am I describing this right?

• 47:55Speaker 01

  That's exactly right. That's, that's how it worked. And now it did take a long time to come down. The internet was incredibly choppy over the phone lines before broadband. So we had really sophisticated Rezoom features, which ended up being another things people celebrated for our tech chops later because it would drop off. And that way, you know, it was always kind of waiting for you in the morning. And then you were supposed to drive to work and come home and put it back in the dock and get to work smarter than the guy in the next cube, as we used to say. And that was it. Now, it should be said, it sounded like crap. I mean, the audio quality was not good.

• 48:37Speaker 01

  It literally sounded like somebody talking to you with a COVID mask in the bottom of a bathtub or something. It was just not, it was not good audio. But we kept pushing the science forward. So Guy and I would go around and visit these rocket scientists who develop codecs.

• 48:58Guy Raz?

  Sure.

• 48:58Speaker 01

  And, and we would work with them.

• 49:00Guy Raz?

  The codecs is, I should say, I say sure because I'm in audio.

• 49:03Speaker 01

  Right. But it's, it's, it's basically a software algorithm that deals with the compression factor of the audio and gives you, you know, relative sound clarity versus not. And we did push the labs out there to make much better sounding audio, you know, even month over month, that allowed us to, the clarity to go up. But in the end, you know, the user experience was. Really clunky and primitive, to the point that when I meet people who are original customers, I always say, "We should have been paying you."

• 49:36Guy Raz?

  Don, when you pitched this idea to investors, you talked about 93 million commuters, people in their cars, not using that time valuably. Well, this device was not designed for the car. So who was... When this came out in November of 1997, did you sell any of them? Was it successful?

• 49:58Speaker 01

  We didn't sell many, but the people who got them, they did use them in their car. They just, they plugged them into a little speaker that sat on their seat.

• 50:08Guy Raz?

  Okay, I got you.

• 50:09Speaker 01

  We gave them a cassette converter that we had that would...

• 50:14Guy Raz?

  Ah, yes. You could put that in your cassette.

• 50:17Speaker 01

  Remember that?

• 50:17Guy Raz?

  Yes, and then it would play out of your speakers.

• 50:20Speaker 01

  Exactly.

• 50:20Guy Raz?

  And you could plug that into the output, yeah.

• 50:22Speaker 01

  But it cost us $208 to make that little device, and we tried to sell it for $215.

• 50:31Guy Raz?

  Wow.

• 50:32Speaker 01

  And that was a lot of money for people to get something that, you know, was of that quality, and mostly that they didn't even understand what it was.

• 50:43Guy Raz?

  So, I mean, it comes out in 97, and this is your product that all these investment banker, you know, venture capitalists and stuff have put money in, and it sounds like it was a bomb.

• 50:56Speaker 01

  It was kind of a bomb, but it didn't, we didn't ever stop to think that way. We just kind of went forward, thinking like, "What are we going to do now?" And of course, the tech deliverables were so difficult. I mean, I have to tell you, being in the hardware business to this day, if it's not an easy business, as anyone who makes hardware will tell you, but I just remember missing a milestone. There was a big milestone for another funding. And I get to this company called Flextronics, which is a very sophisticated contract manufacturing company that was making the player. And I just said, "What do you mean it's another three months?" He said, We're out of crystals.

• 51:39Speaker 01

  I said, what do you mean we're out of crystals? He said, do you know about crystals? I said, I think I know about crystals. He said, well, Don, you can't shit a crystal. He said, it's a, it turned, because they had to grow them. They had to grow the frigging crystals.

• 51:55Guy Raz?

  Wait, these are crystals for the, for the liquid crystal?

• 51:58Speaker 01

  Yeah, these were like traditional crystals that were in the, in the, you know, in the device and it, you know, you couldn't believe how, how, you know, how complicated it was to get this thing built.

• 52:09Guy Raz?

  Don, at a certain point, I guess, in the first years, you ended up bringing on a guy named Andrew Huffman to become the CEO. And he, he died, I mean, 1999, he was just there for a couple of years. What?

• 52:25Speaker 01

  Yeah, so Andy Huffman was a pure tech guy and, you know, really, really good guy, but he was absolutely a pure product and tech guy.

• 52:34Guy Raz?

  Yeah.

• 52:35Speaker 01

  And in that period, what I was doing, and I were talking 99, was convincing my venture capitalists that they weren't the cowboys anymore because what was going on was a bizarre situation in 98, 99, where companies like ours were going public and they were grabbing a whole lot of money. It was.

• 52:57Guy Raz?

  This was the boom, the dot com boom.

• 52:59Speaker 01

  Yeah, and it was very much a bubble, but it was a bubble that I did not want to miss because if nothing else, my London School of Economics training is like, when capital costs almost nothing, you probably should take it. So I just, we pushed forward.

• 53:16Guy Raz?

  You went to your, you went to your investors and you said, I want to go public.

• 53:19Speaker 01

  Yeah, and they, of course, you know, most of them said, what are you talking about? You know, you only have 3,800 customers, you know? So Robin Williams had come in and bought like 500,000 shares of common stock before we went public. He was part of the road show, you know? And he was, because he was a real techie guy and, and so it was a blast, actually, and the whole thing of, of selling, of going to Europe and selling this, it was, it was a real experience.

• 53:47Guy Raz?

  What did you do, by the way, when you went public?

• 53:49Speaker 01

  Great. We walked away with almost forty million dollars. We had fifty-seven hundred customers.

• 53:54Guy Raz?

  So the investors made a great return.

• 53:56Speaker 01

  Yeah. But in that year, a few months later, Andy, at thirty-nine years old, was a University of Maryland basketball star, was playing basketball on a Saturday with people like Ralph Sampson, who was a great NBA star from the past, and others in a New Jersey game, and he died of a brain aneurysm.

• 54:17Guy Raz?

  Wow.

• 54:18Speaker 01

  And this was, you know, one of those moments where I realized I was the only person of the thirty-eight of us who'd ever experienced sudden loss and trauma. And I brought in, actually, a great friend who was a grief counselor, and we kind of worked this through together. But it ended up, I think, stealing those of us who were left to a survivor mentality that, you know, probably served us well.

• 54:52Guy Raz?

  All right. So you guys go public in the fall of nineteen ninety-nine, and by the spring of two thousand, the dot-com bubble bursts. It crashes. So I think when a company goes public, the officers have to hold their stock, right? Like, they can't sell the stock immediately. So, I mean, did anybody make money off of Audible going public?

• 55:16Speaker 01

  Yeah, a bunch of venture capitalists certainly did because...

• 55:19Guy Raz?

  Because they could, yeah, because they could.

• 55:20Speaker 01

  Yeah, a couple of them, and here's the term in the day, was like, you know, yeah, I would never have sold. I mean, I thought, you know, I thought it was, you know, I was told it was immoral for a founder to sell a share of stock, and I took that fairly seriously. But some of our VCs, right after we went public, began to, as the term was, puke out their shares in very public filings. And they were right.

• 55:47Speaker 01

  Yeah, I mean, they made a lot of money off Audible because what happened next was not pretty. But, you know, I should say for context, I've heard that there were 1,500 public internet companies at the beginning of 2000 and 140 at the beginning of 2003. So there were combinations there. There were, you know, some takeovers. There were other things that went on. But it was that kind of, you know, of decimation. And the stock price, you know, which was once $29 or something, it went down to four cents at the end of 2000. Four cents.

• 56:32Guy Raz?

  When we come back in just a moment, how Don was able to chart a new path for Audible with help from one of the smartest and scariest people in Silicon Valley. Stay with us. I'm Guy Raz, and you're listening to How I Built This from NPR.

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• 58:27Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2001. The dot com bubble has burst. Audible's stock price has plummeted, and Don Katz is trying to stay calm.

• 58:41Speaker 01

  I was incredibly anxious, but I just kind of had an attitude about it because we weren't out of capital yet. And we had investors who had not given up hope. And it felt like there was just always another reason to keep fighting.

• 59:02Guy Raz?

  But still, Don, I mean, your stock was down. You guys weren't profitable yet. I mean, the market, for what you were making, hadn't really taken off. So how were you strategizing? I mean, how were you going to guide the company through such a tough time?

• 59:18Speaker 01

  Well, what happened during this period of time is we did hunker down. And when you went public, you had to basically be trained to say one thing to all the fund investors, which was, "We are technology agnostic." And what that was code for was that "We will not build," or you say the word "platform." Because the word was in the 90s, and life has changed a lot, is that if anyone said they were building a platform, Microsoft would make it their business to destroy your company.

• 59:51Guy Raz?

  Right.

• 59:51Speaker 01

  And so, which, you know, if you look at some of the suits against him and stuff, there was some pretty good evidence it was true.

• 59:58Guy Raz?

  Yeah.

• 59:58Speaker 01

  So, we decided to not be technology agnostic. And during this period when nobody was looking, we decided to take our pretty good science and, and call this the audible ready platform, which would be the de facto way that spoken word was transmitted and played back in the new generation of MP3 players that were coming out.

• 1:00:21Guy Raz?

  Okay.

• 1:00:22Speaker 01

  And we not only got all those deals done, we had Texas instrument chips that were already audible ready. So, when the dust started to clear a little bit and life started to get a little bit better, we come out with all these MP3 players, which people were buying at the time, with our bits inside the device and our marketing collateral inside the box. So, it kind of got hard to compete with us at that particular time because we were of all these different companies that wanted to be doing the same kind of thing in a pretty good position. So, that was one of those, you know, I always think, you know, you get to where we got by

• 1:01:04Speaker 01

  having about 51% of the things you're doing being smart. CNET named us the number one entertainment app on the web and, you know, things that made us feel pretty good. But as you, you know, also point out, the, the financial stuff got really dark. Being a public company was not fun.

• 1:01:26Guy Raz?

  Yeah. I mean, and, and I mean, it would still take a couple of years before MP3 players would take off. And of course, that happened with the iPod, which we'll get to in a moment.

• 1:01:35Speaker 01

  Yes.

• 1:01:35Guy Raz?

  But how were you getting rights for audiobooks? Because audiobooks were still books on cassette and books on CD. So, how were you getting the rights to get digital versions of that? Was it hard or was it pretty easy?

• 1:01:52Speaker 01

  No, it was definitely hard and it was, it was difficult to bridge a world that is very much not technology focused.

• 1:02:02Guy Raz?

  Publishing, no.

• 1:02:03Speaker 01

  Book publishing is, is, is people who love books, meaning that they're willing to get paid less or they have the wherewithal to not get paid a lot and, you know, and they go into a world and usually. They stand for the status quo and they usually resist, you know, technological change in particular and others. It's a longer story, but it's been like this forever. So it was difficult, but eventually we did start to break through and be able to carry these audiobooks at a different cost. And then the other thing that we did figure out was the subscription model.

• 1:02:43Guy Raz?

  Yeah, how did that, because from what I understand, it was up until this point, it was you buy a player, which you're asking a lot of people. You're asking them to spend 200 bucks on an MP3 player and then 10, $5 on a book. That's a lot to ask people, right?

• 1:02:57Speaker 01

  Yes, and that was the challenge. So what if you just got an audiobook a month and a player and you get a year's subscription? And that really helped. That helped a lot, particularly since at that point, we had these Audible Ready devices that other people, you know, bought. But we started giving away a little blue MP3 player called the Otis. We got rid of the Audible Mobile Player and let that become the artifact it needed to be.

• 1:03:28Guy Raz?

  And the Otis was free if you got a subscription?

• 1:03:31Speaker 01

  Yep, and we just gave them away.

• 1:03:33Guy Raz?

  And what was the commitment? You had to do a year's subscription or?

• 1:03:37Speaker 01

  It was a year commitment.

• 1:03:38Guy Raz?

  And what was the price?

• 1:03:39Speaker 01

  It was actually $9.95 for two audiobooks when we started.

• 1:03:43Guy Raz?

  Okay, a month.

• 1:03:44Speaker 01

  Yeah, a month. And it gained traction.

• 1:03:47Guy Raz?

  Yeah.

• 1:03:48Speaker 01

  And frankly, the phone call I got around this period from Cupertino, California, from Steve Jobs was a ray of hope that was really meaningful.

• 1:04:00Guy Raz?

  Okay, so let's talk about this. Steve Jobs calls you in 2001 and he said, hey, I like this thing you're making.

• 1:04:08Speaker 01

  He did. He said more than that. He said, tell me about this round tripping, how you bookmark the content. I said, he said, I want to hear more about this. And then he asked all sorts of questions about the tech and very enthusiastically, which was kind of ironic because, you know, Steve was kind of known for a, you know, not invented here view on tech.

• 1:04:27Guy Raz?

  Stealing stuff, yeah.

• 1:04:29Speaker 01

  So, so, but he was very, very focused on this. And, um, and he, he went on actually to talk in ways that we began to have fairly rich conversations because we shared this historic view of the interplay of technology and invention and culture.

• 1:04:49Guy Raz?

  Yeah.

• 1:04:50Speaker 01

  This whole idea that, you know, from chisels in caves to parchment, you have this amazing creative unleashing. He understood, I was surprised for what I thought would be a pure tech guy, the golden age of radio and how, you know, what that meant and how the music business exploded with creativity when it shifted from sheet music. I mean, so we talked about this kind of stuff. And he told me that he would weep copiously when he listened to Edmund White read Charlotte's Web. And he's, you know, he, so he just basically decided to tell me that he had this plan around this iPod. And that I went home and

• 1:05:29Speaker 01

  I remember telling my wife that Steve said he's going to spend $15 million marketing their audio player. And I said, can you imagine if we had $15 million to market, you know, at Audible? And this one thing led to another. And the second generation iPod came out. It worked commercially with Audible.

• 1:05:53Guy Raz?

  So basically you would plug in, because you used to have to plug in your iPod to your computer through that, you know, interface. And, and you would go to the Audible website and that would download directly to the iPod?

• 1:06:05Speaker 01

  Yep, and that was it. And so you would load up and they were these, you know, sweet little devices. They were very cool. The only thing we didn't get to do was put our marketing collateral in the boxes.

• 1:06:18Guy Raz?

  So it didn't say audible anywhere?

• 1:06:20Speaker 01

  It did say that it was audible ready, and that was that term that we'd kind of coined at the time and that it started to mean something, at least in the world of people buying MP3 players. So we were able to garner our cost structure to be for the stakeholders who were gonna get this.

• 1:06:37Guy Raz?

  Yeah.

• 1:06:38Speaker 01

  You know, so we were able to target market to the people buying these new-fangled, you know, players. And we were basically, you know, compatible with all of them. And once we started giving away minis instead of, you know, our own player, it started to get better.

• 1:06:56Guy Raz?

  All right. So just to be clear, instead of giving away your own devices as a way to get people to subscribe, you started to give away the Apple iPod, and I think you did that for several years. I mean,

• 1:07:09Speaker 01

  Right.

• 1:07:09Guy Raz?

  I mean, Steve Jobs kind of gave you a lifeline there. And so I'm assuming that pretty soon, you know, after that, you just kind of stopped being a hardware company? Like, because eventually, it would have been sort of pointless, right?

• 1:07:21Speaker 01

  No, that's absolutely right. And, you know, we were happy to get out of it and basically declare that, you know, hardware was a means to an end. There would be other transmission methodologies. You know, we had partnerships with everybody, including the companies that were making CD burners at the time and the like. So I always wanted it to be means to an end.

• 1:07:41Guy Raz?

  You had a, I think by 2005, so you're now completely out of the hardware business. You're focused mainly on licensing audio. And really, you pivot towards audiobooks. When did that happen? What was the thinking around that?

• 1:07:57Speaker 01

  I think it was just because it took off. 2007, we still had 20,000 audiobooks. Now, we have many, many hundreds of thousands, obviously. We had 20,000 audiobooks in 2007 and 45,000 other kinds of content, including Robyn's programs, Ricky Gervais's programs, the amazing Susie Bright erotica series, which was probably-

• 1:08:20Guy Raz?

  These were pre-podcast, basically.

• 1:08:22Speaker 01

  Yeah, it was before the term podcasts. Yeah, they were all short-form programs. Yeah, they were just part of the repertoire.

• 1:08:28Guy Raz?

  I mean, you became the global supplier of audiobooks to iTunes already in 2003. So by that point, it was clear that audiobooks was where you were headed towards. Do you remember what the pivot point was where you were like, okay, we've broken through the publishing industry is cooperating?

• 1:08:48Speaker 01

  Yeah. I think that the utility of the service, the idea of positioning this as a way to use your time. Now, it was also true that only about 15% of the books coming out were in audio. So our crusade was always to get more audiobooks made or to try to get the rights ourselves from the agent, the author, to get them made because we literally would run out of mysteries. And I would go, at one point, I remember, I would put my wallet on the desks of CEOs in the publishing industry. I said, "I need more content."

• 1:09:28Speaker 01

  So at that point, it wasn't coming, and we broke in to getting the rights ourselves and making a whole lot of audiobooks. We also figured out how to make an audiobook for about a 10th of the cost, just using technology. So we just started making a lot of audiobooks, and it got better and better. And there was something called Project Hollywood in 2011 and 2012, where we just said, "Let's just go find out what the greatest actors will do." And when I heard Kate Winslet do Theresa Rican, one of the darkest Zola novels of

• 1:10:08Speaker 01

  all the Zola novels, and people heard what she could do, I remember thinking, "We could take this whole thing to a new level and make this about acting as much as it's about writing."

• 1:10:21Guy Raz?

  Don, I think by 2005, this is like 10 years since you launched the business. You're 10 years in. It's the first year you actually turn a profit.

• 1:10:32Speaker 01

  Yep.

• 1:10:32Guy Raz?

  Just reflect on that. I just want to reflect on that for a moment because a lot of, I don't think enough people understand how long it can take, especially with a complex hardware slash content business like the one you created, how long it takes to actually make a profit. And even up until that point, I think 2005, you were still basically a small business, right? I mean, you only, you had fewer than 100 employees, I think, right?

• 1:10:59Speaker 01

  Yeah, that's probably about right.

• 1:11:01Guy Raz?

  You took an 80% pay cut to start this business in 1995. Until 2005, did you ever get back to what you were paid in 1995?

• 1:11:12Speaker 01

  In salary? Yeah, I definitely, I definitely did if you, if you look at the, you know, the vesting and the equity pieces and all that.

• 1:11:23Guy Raz?

  But did you have to like cut family expenses and things like that for a while?

• 1:11:26Speaker 01

  Yeah, there must have been some hairy moments. But the truth of the matter is, I, I said, I never really measured my ideas on money. I just, I always thought, you know, the number of customers, the retention rate, the kinds of amazing content we could make, including tons of original thinking. I don't know, that stuff turned me on more and, you know, I, I still probably approach things that way.

• 1:11:56Guy Raz?

  So it's interesting because we did a story about Lynda.com, which eventually sold to LinkedIn and their rise and your rise really mirror each other because you began around the same time. And I think, I think a lot of that has to do with broadband access.

• 1:12:13Speaker 01

  Yes, I mean, well, obviously broadband access that the download that system, they, you know, the trust of, of, you know, of everything about from the e-commerce system to

• 1:12:22Guy Raz?

  People using their credit cards, yeah.

• 1:12:24Speaker 01

  And then we just started to have, you know, which now we have this massive kind of brand momentum, brand equity and like, I mean, thing

• 1:12:31Guy Raz?

  Yeah.

• 1:12:32Speaker 01

  People started discovering this, this thing called Audible and we started to build up our teams, we started to expand internationally and kind of where, yeah, I admit it, I thought we'd be year three, which is why, you know, those survival years. But I got to tell you that the warrior spirit of those formative years, that is one of the reasons I still think we're so successful because the people who work at the company do try to see themselves as these kinds of people who want to invent and stay ahead as opposed to manage.

• 1:13:11Guy Raz?

  You had this business plan, right, which was audio delivered to people through the internet onto devices. But when you, when you think about that, right, do you almost wish that you would have, and there's no way to know, right, that businesses is, most businesses just evolve, like, there really is no master plan. Like Jeff Bezos kind of had a plan, but it unfolded in ways that he probably couldn't really have anticipated, although maybe he did. But when you, when you, when you look back, do you often sort of kick yourself and say, God, I should have known from the beginning this was going to be audiobooks and never have wasted my time on the devices, on making the devices and just focused on the audiobooks?

• 1:13:52Speaker 01

  No, because then you're, you're not going to be the leader unless you take the big risk at the point that people don't believe. And, you know, and then the question is how, how early is it? But I, you know, look, I am stunned by how quickly, you know, some of the companies formed after us did come together. But you know what? Most companies are based on productivity improvements. You, it's like Uber gets you from here to here like a taxi. But it just, it's better. Most businesses, you know, have some level of productivity improvement, like all software businesses and the like. That wasn't this idea. This was creating a media category.

• 1:14:35Speaker 01

  This was basically creating a spoken word category when it didn't exist in the country whose entire literary canon was based on how we talked and told stories. I wanted to basically say there would be a spoken word category, yeah, called audible, if it had to be, that sat next to all permutations of video and movies and TV. It sat next to books and it sat next to music. And we kind of pried this thing into the light. And that's just a little different than a better way to use your computer.

• 1:15:13Guy Raz?

  You know, we've told the story of Shopify, which was founded and continues to exist in Ottawa. And Lynda.com was in Ojai, California, and then Ventura, California. These were not in, not near Sand Hill Road in Silicon Valley or in Seattle. And you were based in Wayne, New Jersey, and then moved to Newark, which was not a place where companies were going. I mean, it was still, big parts of that city in 2007 were still boarded up. Parts of it are still boarded up today.

• 1:15:46Speaker 01

  I mean, you could just go all the way. Newark was thought to be a scary city. I mean, Newark was, everything you heard about Newark was that this was a place that, you know, time had forgotten and that it was just crime ridden and had nothing good going for it. That was the word. And frankly, that's why I wanted to move us there. When it came, we were outgrowing this very ramshackle headquarters, which instantly was $12 a square foot with furniture and wiring. Talk about, you know, you know, cost effective. We needed to go somewhere and I said, let's move to downtown Newark.

• 1:16:27Speaker 01

  And besides, we were becoming at that point the largest employer of actors in the New York area, which we've been for a while. And I said, the actors can jump on at Penn Station, they can get off at Broad Street Station. The board guys and the, and they, we had consultants said, you're out of your mind. You're gonna, you're gonna lose, we think 30% of your workforce simply by moving that far and, and all the fear factor. And, you know, we moved in with 120 people and nobody left. And we started to just try to create either models that other companies or other cities could use to just be part of a city's comeback.

• 1:17:11Guy Raz?

  So, so what kinds of things were you doing?

• 1:17:14Speaker 01

  So, one of the first things we did was just said, you can't be a nepotistic intern anymore. You, you gotta be a kid from Newark and you'll be a paid intern in our little world. So then you get like this carpet culture, which includes these incredible cutting edge technologists and all these English majors turned into business people like me. And then all the best, some of the best actors in the world hanging out and these kids and, and you start to realize that this is an unusually rich company culture. And, you know, we, we started paying our employees $500 after taxes rent to frame. And if they moved downtown Newark and to be part of the urban pioneers.

• 1:17:58Speaker 01

  I started Newark Venture Partners, which has become a, an international level of, you know, success, drawing companies from all over the world to Newark to an accelerator. It's anyways, it's just applying the kind of entrepreneurial thinking that gets to create an Audible to, to, you know, to, to social purpose.

• 1:18:19Guy Raz?

  In 2007, your annual revenue at Audible was like $110 million. And in January of 2008, Amazon announced that they would acquire Audible for $300 million in cash, which in retrospect, they got a great deal for, you look back on it, especially given that your revenue was 110 million the year before. Obviously you didn't control the company, you were a shareholder, but at the time, did you think it was the right move for Audible?

• 1:18:53Speaker 01

  At the time, I was the only one who thought it was the right move. So this was me. Look, it was a blast to be a NASDAQ CEO. Even all the trials and tribulations, there were things about it that I love because it was just another adventure into a new world. But by the time 2007, 2008 came along, I was really in a moral crossroads. Because, you know, if you read everything from the law to Milton Friedman, the only purpose of a CEO and a chair and CEO, as I was, is to enrich their shareholders.

• 1:19:32Guy Raz?

  Maximize shareholder profit.

• 1:19:34Speaker 01

  That's what it is. And so I was basically working for people that I stopped feeling like I was honestly waking up in the morning. I was caring about them. And it was very hard to because a lot of them were frigging computer programs that were whipping our stock around after hours in various complex, high-velocity models. And others were 100% speculators who could have cared less about being real investors. And I just wasn't into it. And on top of that, I knew that if I could hook back in with Jeff and with Amazon,

• 1:20:16Speaker 01

  we could have access to several hundred million people with credit cards who were likely to be our customers. We would grow even faster and we'd have that many more millions of people. The freedom to even do the things doing in Newark, that was meaningful to me. And it's somewhat rare. A lot of founders don't, you know, they go away as soon as a transaction happens. But in this case, it's an independent subsidiary that works.

• 1:20:46Guy Raz?

  You know, it's interesting. A lot of, Amazon has a lot of haters, right? Because it's the 800-pound gorilla on the block and it's just gonna happen. It's gonna be that way. But if you look at Amazon... Compared to other giants that acquire their companies, they really do, they have a great track record of allowing their acquisition companies to remain independent. I mean, look at Zappos. We had Tony, the late Tony Hsieh was a guest on our show, an amazing entrepreneur. I mean, that company was and is totally independent. Audible is an Amazon company, but it, I mean, it's, you stayed on, I think, I was thinking

• 1:21:25Guy Raz?

  about this, you stayed on as CEO of Audible after Amazon acquired you for as long as you were the head of the company when it was independent, when it was, so that alone suggests that it was a pretty good marriage.

• 1:21:44Speaker 01

  Yeah, it's a pretty unusual story, and I frankly can't believe that it's as now longer than my, than my writing career. And also, you know, come on, let's face it, most people know that, you know, senior people at Amazon get paid in Amazon stock.

• 1:22:02Guy Raz?

  Stock, yeah.

• 1:22:03Speaker 01

  And we did the transaction, the stock was like $50 a share. You might want to check out what it is now. So, one way or another, whatever happens from here, I'm, it's been an amazing adventure. And not many people I know had two careers where you get to turn ideas into reality. It's, I've been pretty, pretty lucky.

• 1:22:23Guy Raz?

  A lot of things happen to a lot of people that are lucky. I know you've mentioned meeting your wife, for example, as a lucky moment, and I would say the same about mine. I'm a have.

• 1:22:34Speaker 01

  That's good.

• 1:22:35Guy Raz?

  Or the fact that Jan Wenner said, go to, go to Spain and cover this thing, and you met all these, like, these guys who covered the, you know, the Spanish Civil War, and were like, hey, we'll show you the ropes here. You know, somebody who gave you a lucky break, or this guy Mott, who thought your idea was, was great when everyone else thought it was kooky. So there were a lot of lucky moments, but you also grinded and grinded and worked really hard. But when you think about this story that you've told me, and you reflect on it, how much of it do you think has to do with luck, and how much do you think has to do with the work you put in?

• 1:23:12Speaker 01

  I think it's something on the order of 50.5% to 51% purposeful, good calls and brave moments and times when you just didn't give up. The rest of it is definitely luck because otherwise, how could I have made so many stupid, boneheaded decisions along the way that didn't kill us? So I think there's a fine line. You're making calls all the time. And particularly if you're a leader, you kind of got to do it. But I don't know, I think about it, you know, about it all the time, but I feel, I was out there playing ice hockey last night and, you know, not many people my age get to play ice hockey. Is that luck?

• 1:23:57Speaker 01

  I think it's luck and I think it's also that I just made it my business to try to elongate my hockey career and I do a lot of stuff to make that real.

• 1:24:09Guy Raz?

  That's Don Katz, founder and executive chairman of Audible. By the way, a few years back, the company put together a list of some of its most popular audiobooks over the past 20 years. The bestselling memoir was Bossy Pants by Tina Fey. The bestselling business book, The Seven Habits of Highly Effective People. The most repeated listen was Harry Potter and the Sorcerer's Stone, which makes a lot of sense. And here's one that all of you can probably guess in advance. The most searched for author on Audible over the past 20 years was, of course, Stephen King.

• 1:24:49Guy Raz?

  Hey, thanks so much for listening to the show this week. If you don't follow our show, please do follow wherever you listen to podcasts. If you want to write to us, our email address is [email protected]. If you want to follow the show on Twitter, it's @howibuiltthis or my personal account, @guyraz. Our Instagram is @howibuiltthisnpr and mine is @guy.raz. This episode was produced by James Delahoussaye with music composed by Ramtin Arablouei. It was edited by Neva Grant with research help from Claire Murashima. Our production staff also includes Casey Herman, Liz Metzger, Farah Safari, J.C. Howard of Julia Carney and Elaine Coats. Our intern is Catherine Seifer. Jeff Rogers is our executive producer.

• 1:25:33Guy Raz?

  I'm Guy Raz and you've been listening to How I Built This.

• 1:25:38Guy Raz?

  This is NPR.